EX-99.1 2 pressrelease.htm pressrelease.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing


                                                                                                                                             February 28, 2007

     
Annual Results -- 2006
Strong Performance In All Areas

•   Operating margin: 16.3%, +60 bp

•   Revenue: €4,386 million, +6.3%

•   Organic growth: +5.6%

•   Net income excluding minorities: €443 million, +15%

•   Free cash flow: €544 million, +14%

•   Average net debt: €636 million, down 31%

•   Diluted Headline EPS: €2.01, +24%

•   Dividend: €0.50, +39%


Commenting on these results, Publicis Groupe Chairman and CEO Maurice Lévy said:

“Publicis Groupe teams have not only kept all their commitments, but—once again—surpassed them.

Our 2006 results are further confirmation of the effectiveness of the strategy we have pursued over
recent years. Strong organic growth and net new business are especially satisfactory as they follow the
extraordinary records set in 2005. Operating margin came in at 16.3% of revenue, a record high for our
industry, while vigorous cash generation resulted in free cash flow of over €500 million.

The strength of our financial performance has allowed Publicis Groupe to engage in major strategic
moves, notably marked by the acquisition of Digitas. This vaults us to a leading global position in
digital and interactive communications.

Beyond the performance of the Digitas business itself, this new segment will be a driver for future
growth through additions to our worldwide offering and consolidation of our strengths as a world leader
in media services and healthcare communications.

Finally, we are well placed to make the most of robust growth in emerging markets, where we will be
continuing acquisitions as opportunities arise.

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The bulk of our revenue is now drawn from segments where growth is significantly higher than in the
worldwide advertising market. I am thus confident about the future of our Groupe, and in particular
about the 2007 fiscal year.”

A dividend of €0.50 per share, 39% higher than that distributed in 2006, will be submitted for the
approval of shareholders at the General Meeting to be held at 10 a.m. on Monday, June 4, 2007.

Maurice Lévy, Chairman and CEO, presented the financial statements and management report for 2006
to the Supervisory Board of Publicis Groupe at its meeting presided by Elisabeth Badinter on February
27, 2007.


    Key figures, € millions            
    2005   2006   Rise

                    Revenue   4, 127   4, 386   + 5.6%
            (organic)

                    Operating margin before   765   820   +7 %
                    depreciation and amortization                  
                    As a % of revenue   18.5%   18.7%    

                    Operating margin   649   713   +10%
                    As a % of revenue   15.7%   16.3%    

                    Net income excluding minority   386   443   + 15%
                    interests            

                    Diluted Headline EPS   €1.62   €2.01   + 24%

                    Proposed dividend per share   €0.36   €0.50   + 39%


I. Highlights of 2006

•           Firm organic growth

2006 revenue of €4,386 million were up 5.6% at constant scope of consolidation and exchange rates (i.e.,
organic growth), a solid and sustained increase. Significantly, all geographical regions contributed, with
organic growth 5% in Europe, 5.1% in North America, 5.3% in the Asia-Pacific area, 9.3% in Latin
America and 20% in Africa-Middle East.

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•           Satisfactory performance in net new business

Net new business won in 2006 came to $3.3 billion, with new accounts including Renault (extension to
seven new markets in Latin America and the Baltic countries), Sanofi-Aventis/Pasteur Vaccines (global)
Orange (Europe), Marriott (Asia), Kraft (marketing services, Europe), JC Penney (US), Wal-Mart (in-store
marketing, US), Sony Ericsson (global) and Crowne Plaza Hotels & Resorts (US) in advertising and
SAMS sectors, while in media buying and consultancy they included Washington Mutual (US), Oracle
(global), Avaya (global), Del Monte (Europe) and Beam Global Spirits & Wine (global).

•           Operating margin sets new record

Operating margin increased to 16.3% -- the strongest showing in the entire industry, representing a rise
of 60 basis points from 2005 level of 15.7%. This exceeded our targets, and reflects an overall
reduction in Groupe operating expense associated with rationalization of structures and a decline in
depreciation and amortization charges.

The rise was achieved despite an additional €28 million charge for Sarbanes-Oxley compliance.

Progress on the Horizon Program for the rationalization of business structures across units continued
during the year.

•           Net income up 14.8%

Net income increased 14.8% to €443 million in 2006, while headline net income rose an even stronger
28% to €452 million.

This performance was essentially attributable to vigorous improvement in operating margin and a steep
€42 million reduction in net interest and related expense. At the same time, reorganization of the
Groupe's legal structure and a reduction in the number of entities helped to bring the effective tax rate
down from 32% to 30.2%, meeting the Groupe's target one year ahead of schedule.

•           Diluted Headline EPS up 24%

Diluted headline EPS increased 24% to €2.01 in 2006, while diluted EPS rose 12% from €1.76 to
€1.97.

•           Further steep decline in average net debt

The Groupe's average net debt in 2006 was cut by a third, to €636 million. This was achieved on top of
the €200 million paid out for the redemption of 80% of the equity warrants issued in connection with the
Bcom3 acquisition in 2002. The ratio of net debt to equity was unchanged from the end of the previous
year at 0.10.

•           Free cash flow over $500 million

As already announced, the Groupe continued its Focus on Cash program to generate free cash flow of
€544 million before changes in working capital requirement. This strong performance, a 13.8%
increase over 2005 levels, reflects strong growth in cash flow from

Page 3 of 14

operations and tight control of capital expenditure. It demonstrates the Groupe's ability to consistently
generate free cash flow of at least €400 million to €500 million a year before changes in working
capital requirement.


•           Steep dividend Increase of 39%

The proposed dividend to be submitted to shareholders at the General Meeting on June 4 is €0.50
per share, 39% more than in 2005, and setting the payout ratio at 24%. The dividend will be made
payable on July 4, 2007.


II. Strategy and outlook

•           A major strategic move into digital/interactive communications

Digital communications generally and interactive communications in particular are now omnipresent in
consumers' daily lives, creating new challenges and opportunities for local and global brands. To help
clients meet these challenges, Publicis Groupe has made winning a leading position in digital
communications worldwide a top strategic priority.

This means integrating digital capabilities at every level of the Groupe’s activities, with action focused
on:

-  Acquisitions to accelerate worldwide deployment of business strength and expertise

-  Bolstering support for in-house development of new highly innovative competencies

-  Deriving 25% of total revenue from digital, interactive and mobile activities by 2010


-->        Digitas acquisition—the cornerstone for the construction of Publicis Groupe' worldwide
digital offering

The acquisition of Digitas finalized at the end of January 2007, gives Publicis Groupe an ideal base
for expansion in digital communications, and will provide critical expertise for the Groupe's holistic
offering around the world.

Under the leadership of David Kenny, Digitas CEO and a member of the Publicis Groupe Executive
Committee, worldwide growth in digital and interactive business will be driven by:

- Training and recruitment of new digital talent

- An active policy of targeted acquisitions, particularly in Europe and Asia.


-->        Consolidating leadership in media agencies, a key strength for expansion in digital
communications

Publicis Groupe has successfully anticipated the shift to digital communications in an increasingly
complex and fragmented media landscape. In line with this trend, consultancy services account for a
growing proportion of the Groupe's media revenue, reflecting the need for highly specialized
expertise as information flows take ever more varied routes.

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In addition to ongoing investment in proprietary resources, Publicis Groupe's media businesses are
continuing to expand in digital communications through innovative entities such as Denuo, Moxie
interactive or Pôle Nord.

Media agencies now represent 26% of Groupe revenue and is set for further strong growth. An
unprecedented amount of new business won at the beginning of 2007, including Wal-Mart, Fox
Entertainment and Wendy's, is further reinforcing Publicis Groupe's global lead in media buying and
consultancy.


-->        Healthcare communications reinforce digital offerings

Operating in a segment where demand for digital and interactive marketing services is particularly
strong, Publicis Healthcare Communications Group (PHCG) has consolidated its position as global
leader in healthcare communications. The already sizeable digital component in the PHCG offering
will be further reinforced by leveraging the capabilities of Digitas and its Medical Broadcasting
Company (MBC) agency. This will lead to new and innovative responses to the needs of large
pharmaceutical firms, which continue to drive demand. PHCG intends to further strengthen the
competitive advantages of its global leadership in the sector through pursuing targeted acquisitions.


•           Growth in emerging markets continues

With growth rates double the Groupe average, our activities in emerging markets are a powerful
driver for Publicis Groupe. This presence is marked by:

- 15,000 staff members, representing nearly all Group competencies

- Strong market positions in China, Russia, Turkey, Mexico and Brazil.

Publicis Groupe aims to accelerate growth in these markets through the pursuit of targeted
acquisitions focusing on marketing services, healthcare communications and interactive
communications,

Publicis Groupe aims to generate 25% of its annual revenue in emerging markets by 2010.




III. Outlook for 2007

•           A promising start for the year in net new business

Net new business booked in January alone totalled almost $2 billion, the strongest start of a year in
the Groupe’s history.

•           Favorable growth prospects

As already announced on publication of 2006 revenue, the growth of business in Europe and the US
should be comparable to levels recorded in 2006, while growth in emerging markets is expected to
show further acceleration in 2007.

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•           2008 operating margin target confirmed

Following a renewed rise in 2006, Publicis Groupe confirms its target for operating margin rate at
16.7%, including allowance for the impact of the Digitas acquisition, in 2008.






*        *

*


Publicis Groupe (Euronext Paris: FR0000130577 and NYSE: PUB) is the world’s fourth largest communications group, as well as world’s second
largest media counsel and buying group. Its activities span 104 countries on five continents.
The Groupe’s communication activities cover advertising, through three autonomous global advertising networks: Leo Burnett, Publicis, Saatchi &
Saatchi, as well as through its two multi-hub networks Fallon Worldwide and 49%-owned Bartle Bogle Hegarty; media consultancy and buying
through two worldwide networks ZenithOptimedia and Starcom MediaVest Group; and marketing services and specialized communications including
direct marketing, public relations, corporate and financial communications, event communications, multicultural and healthcare communications
with a worldwide leadership.
Web sites: www.publicisgroupe.com and www.finance.publicisgroupe.com



Publicis Groupe Contacts:

     Pierre Bénaich, Investor Relations: +33 1 44 43 65 00
Eve Magnant, Corporate Communications: +33 1 44 43 70 25

Page 6 of 14

Consolidated Financial Statements
Year ended December 31, 2006
 
 
Consolidated Income Statement            
 
Millions of euros   2006   2005   2004
 
Revenue   4,386                    4,127                    3,832
Personnel expenses   (2,630)   (2,454)   (2,271)
Other operating expenses   (936)   (908)   (862)
Operating margin before depreciation and amortization   820                    765   699
Depreciation and amortization expense (excluding intangibles arising      
on acquisition)   (107)     (116)    (119)
Operating margin   713                    649   580
Amortization of intangibles arising on acquisition   (22)                      (23)                      (29)
Impairment   (31)                      (33)   (215)
Non-current income (expense)   29   59                      (10)
Operating income   689                    652   326
Cost of net financial debt   (36)                      (78)   (108)
Other financial income (expense)   (14)                      (14)   (6)
Income of consolidated companies before taxes   639                    560   212
Income taxes   (192)   (157)   (112)
Net change in deferred taxes related to the OBSA/CLN transactions            
and deferred tax assets related to the conversion to IFRS   -   -   198
Net income of consolidated companies   447                    403   298
Equity in net income of non-consolidated companies   22   11   6
Net income   469                    414   304
Net income attributable to minority interests   26   28   26
Net income attributable to equity holders of the parent   443                    386   278

Per share data (in euros)

            
Number of shares   209,611,690   210,415,990   210,535,541
Net earnings per share              2.11            1.83          1.32
Number of shares – diluted   240,064,428   233,816,994   233,984,337
Net earnings per share – diluted              1.97            1.76          1.29
       

  


         Page 7 of 14


Consolidated Balance Sheet, Dec. 31              
 
Millions of euros   2006   2005(1)   2004(1)
 
Assets
            
Goodwill, net,   2,840   2,883   2,623
Intangible assets, net   693   763   740
Property and equipment, net   511   580   609
Deferred tax assets   186   230   373
Investments accounted for by the equity method   44   33   17
Other financial assets   118   118   143
Non-current assets   4,392   4,607   4,505
 
Inventory and costs billable to clients   688   580   437
Accounts receivable   4,214   4,145   3,368
Other receivables and other current assets   413   446   364
Cash and cash equivalents   1,920   1,980   1,186
Current assets   7,235   7,151   5,355
 

Total assets

   11,627   11,758   9,860
 
Liabilities and shareholders’ equity
            
Capital stock   79   79   78
Additional paid-in capital and retained earnings                                               2,001   1,977   1,543
Shareholders’ equity   2,080   2,056   1,621
Minority interests   27   20   31
Total equity   2,107   2,076   1,652
 
Long-term financial debt (more than 1 year)   1,911   1,913   1,492
Deferred tax liabilities   216   220   365
Long-term provisions   509   582   550
Non-current liabilities   2,636   2,715   2,407
 
Accounts payable   5,192   5,030   4,000
Short-term financial debt (less than 1 year)   203   224   273
Income taxes payable   149   263   206
Short-term provisions   116   120   106
Other creditors and other current liabilities   1,224   1,330   1,216
Current liabilities   6,884   6,967   5,801
 
Total liabilities and shareholders’ equity   11,627   11,758   9,860

(1)    after changes in accounting policies in respect of :
         - recognition of actuarial gain and losses on pension obligations
         - classification of receivables and payables on media buying transactions

Page 8 of 14

Consolidated Cash Flow Statement            

 

Millions of euros

   2006        2005  

     2004


I- Cash flows from operating activities            
       Net income   469        414        304
       Income taxes   192        157        (86)
       Cost of net financial debt   36        78        108
       Capital (gains) losses on disposal (before tax)   (27)        (58)        10
       Depreciation, amortization and impairment on property and                
       equipment and intangible assets   160        172        363
       Non-cash expenses on stock options and similar items   16        20        20
       Other non-cash income and expenses   11        11        13
       Equity in net income of unconsolidated companies   (22)        (11)        (6)
       Dividends received from equity accounted investments   19        9        7
       Restructuring expenditure   (18)        (30)        (79)
       Taxes paid   (229)        (167)        (114)
       Interest paid   (85)        (93)        (73)
       Interest received   74        44        46
       Change in working capital requirements (1)   (3)        74        264
Net cash provided by operating activities   593        620        777
II- Cash flows from investing activities            
       Purchases of property and equipment and intangible assets   (81)        (83)        (104)
       Proceeds from sale of property and equipment and intangible                
       assets   32        8        3
       Proceeds from sale of investments and other financial assets, net                                        (3)        7        468
       Acquisitions of subsidiaries   (58)        (71)        (124)
       Disposals of subsidiaries   11        98        -
Net cash flows provided by (used in) investing activities   (99)        (41)        243
III- Cash flows from financing activities            
       Dividends paid to parent company shareholders   (66)        (55)        (47)
       Dividends paid to minority shareholders of subsidiaries   (23)        (19)        (23)
       Cash received on new borrowings   19        747        455
       Reimbursement of borrowings   (52)        (460)        (1,307)
       Net (purchases)/sales of treasury stock and equity warrants   (264)        7        (9)
       Cash received on hedging transactions   36        -        -
Net cash flows provided by (used in) financing activities   (350)        220        (931)
IV- Impact of exchange rate fluctuations   (139)        72        (39)
Net change in consolidated cash flows (I + II + III + IV)   5        871        50
       Cash and cash equivalents at January 1    1,980           1,186        1,415
       Bank overdrafts at January 1   (95)         (172)         (451)
       Net cash and cash equivalents at beginning of year    1,885          1,014        964
 
       Cash and cash equivalents at December 31    1,920           1, 980        1,186
       Bank overdrafts at December 31   (30)         (95)         (172)
       Net cash and cash equivalents at end of year    1,890          1,885        1,014
Net change in cash and cash equivalents   5        871        50

(1) Breakdown of change in working capital requirements

            
       Change in inventory and costs billable to clients   (152)        (97)        (47)
       Change in accounts receivable and other receivables   (338)        (391)        76
       Change in accounts payable, other creditors and provisions   487        562        235
       Change in working capital requirements   (3)        74        264
       

  Page 9 of 14

Statement of Changes in Consolidated Shareholders’ Equity

                    Gains and            
    Millions of euros       Additional   Reserves   losses   Shareholders’         Minority   Total equity
Number of       Capital   paid-in   and retained         recognized   equity   interests    
shares       stock   capital   earnings   through            
                    equity            
182,365,864   January 1, 2004 after deduction of treasury stock   78   2, 557   (1, 291)   154   1 ,498   28   1, 526
    Gains and losses recognized through equity               (124)   (124)   (1)   (125)
    Net income for the year           278       278   26   304
    Total recognized income and expenses for the year           278   (124)   154   25   179
92,808   Increase in capital stock of Publicis Groupe SA                            
    Dividends paid            (20)   (27)       (47)   (23)   (70)
    Share-based compensation           20       20       20
    Effect of changes in scope of consolidation and of commitments                        
    to purchase minority interests                       1   1
    Reversal of Saatchi & Saatchi provisions           2       2       2
    Reversal of Italian Bond provisions           3       3       3
(370,454)   Purchases/sales of treasury stock           (9)       (9)       (9)
182,088,218   December 31, 2004 after deduction of treasury stock   78   2, 537   (1, 024)   30   1 ,621   31   1, 652
    Gains and losses recognized through equity               88   88   5   93
    Net income for the year           386       386   28   414
    Total recognized income and expenses for the year           386   88   474   33   507
1,637,949   Increase in capital stock of Publicis Groupe SA   1   47   (48)                
    Dividends paid           (55)       (55)   (19)   (74)
    Share-based compensation           20       20       20
    Buyback of equity warrants (BSA)           (2)       (2)       (2)
    Additional interest on Oranes           (2)       (2)       (2)
    Partial early redemption of the 2018 Oceane (equity component)           (9)       (9)       (9)
    Effect of changes in scope of consolidation and of commitments                        
    to purchase minority interests                        (25)     (25) 
343,079   Purchases/sales of treasury stock           9       9       9
184,069,246   December 31, 2005 after deduction of treasury stock   79   2, 584   (725)   118   2, 056   20   2 ,076
    Gains and losses recognized through equity               (103)   (103)   (4)   (107)
    Net income for the year           443       443   26   469
    Total recognized income and expenses for the year           443   (103)   340   22   362
1,600,219   Increase in capital stock of Publicis Groupe SA   -   47   (47)                
    Dividends paid           (66)       (66)   (23)   (89)
    Share-based compensation           16       16       16
    Buyback of equity warrants (BSA)           (201)       (201)       (201)
    Additional interest on Oranes           (1)       (1)       (1)
    Effect of changes in scope of consolidation and of commitments                        
    to purchase minority interests                       8   8
(2,065,587)   Purchases/sales of treasury stock           (64)       (64)       (64)
183,603,878   December 31, 2006 after deduction of treasury stock   79   2, 631   (645)   15   2, 080   27   2,107

Page 10 of 14

Definitions and Notes

Net Debt to Equity ratio: net debt at year end as a percentage of shareholder’s equity including minority interests.

Average net debt: yearly average of net debt of each month for the year.

Free cash flow: cash flow from operations after net capital expenditure, excluding acquisitions.

 

  

2005

  

     2006

    Cash Flow from operations   593          620
    Capital expenditures    (52)        (68)
    Free Cash Flow    541        552
    Deduction of change in WCR    3        (74)
    Free Cash Flow excluding change                                                  
    in WCR		  

_________ 
544

 _________ 
       478

Net New Business: this figure does not result from financial reporting, but is based on an estimate of annualized
advertising media spending on new business, net of losses, from new and existing clients.




2005 Revenue   4,127
Currency Impact   (8)
Acquisitions / disposals                                                                   32
2005 Revenue @ 2006    
rates and structure (a)   4,151
2006 Revenue (b)   4,386
Organic Growth (b)/(a)   5.6%


Operating margin rate: operating margin as a percentage of revenue.

Page 11 of 14

Headline Net Income


Page 12 of 14

Earnings Per Share and Diluted Earnings Per Share

            2006   2005   2004
 
Net income used for the calculation of                
earnings per share                
(Millions of euros)                
        a            
Net income attributable to equity holders of the parent       443   386   278
Impact of dilutive instruments:                
- Savings in financial expenses related to the conversion of                
debt instruments, net of tax (1)      

31

   25   23
Net income attributable to equity holders of the parent -   b            
diluted           474   411   301


Number of shares used for the calculation of                
earnings per share                
Average number of shares in circulation       183,576,207   182,818,378   182,410,541
Shares to be issued to redeem the Oranes       26,035,483   27,597,612   28,125,000
        c            
Average number of shares used for the calculation       209,611,690   210,415,990   210,535,541

Impact of dilutive instruments: (2)
                
- Effect of exercise of dilutive stock options       1,736,783   228,591   276,383
- Effect of the exercise of the equity warrants       59,208   -   -
- Shares resulting from the conversion of the convertible                
bonds (1)       28,656,747   23,172,413   23,172,413
        d            
Number of shares - diluted       240,064,428   233,816,994   233,984,337
(en euros)                
Earnings per share   a/c   2.11   1.83   1.32
Earnings per share – diluted   b/d   1.97   1.76   1.29
(1)   In 2004 and 2005, only the 2008 Oceanes are taken into account for the calculation of diluted earnings per share; in 2006, both the 2008
    and 2018 Oceanes are taken into account in the calculation;                
(2)   Only the equity warrants and stock options with a dilutive effect, being those whose exercise price is greater than the average share price
    for the year, are taken into consideration.                

Page 13 of 14

Headline earnings per share (basic and diluted)

        2006   2005   2004
Net income used for the calculation of headline (1)                
earnings per share                

(Millions of euros)
                
Net income attributable to equity holders of the parent       443   386   278
Items excluded:                
- Amortization of intangibles arising on acquisition, net of tax       13   14   18
- Impairment, net of tax       23   24   164
- Sale of the Saatchi & Saatchi building (Ile de la Jatte)       (27)   -   -
- Capital gains, net of tax, on the sale of JCDecaux Netherlands,                
VKM, Sopact and 33 % of Metrobus.       -   (87)   -
- Capital loss on the early redemption of the Oceane 2018, net of                
tax       -   16   -
- Capital gains on the OBSA/CLN transactions, net of tax       -   -   (134)
- Deferred tax assets related to conversion to IFRS       -   -   (57)

Adjusted net income attributable to equity holders of the parent   e   452   353   269
Impact of dilutive instruments:
                
- Savings in financial expenses related to the conversion of debt                
instruments, net of tax       31   25   23
Headline net income attributable to equity holders of the parent –                
diluted   f   483   378   292
 
Number of shares used for the calculation of                
earnings per share                
 
Average number of shares in circulation       183,576,207   182,818,378   182,410,541
Shares to be issued to redeem the Oranes       26,035,483   27,597,612   28,125,000

Average number of shares used for the calculation   c   209,611,690   210,415,990   210,535,541

 

Impact of dilutive instruments:
                
- Effect of exercise of dilutive stock options       1,736,783   228,591   276,383
- Effect of the exercise of the equity warrants       59 208   -   -
- Shares resulting from the conversion of convertible bonds       28,656,747   23,172,413   23,172, 413

Number of shares - diluted   d   240,064,428   233,816,994   233,984,337
(In euros)                
Headline earnings per share   e/c   2.16   1.68   1.28
Headline earnings per share - diluted (1)   f/d   2.01   1.62   1.25
             (1) Earnings per share before amortization of intangibles arising on acquisition, impairment, capital gain (loss) on the disposals of the Ile
                 de la Jatte building, JCDecaux Netherlands and 33 % of Metrobus/ redemption of Oceane 2018/ the OBSA/CLN transactions (net of
                 tax) and the recognition of deferred tax assets related to conversion to IFRS.            

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