First Half 2018 Results

-    H1 results on track with our objective to improve organic growth and expand margin in 2018
-    Slowdown from a good Q1 to a negative Q2 partly due to health sector
-    27% growth on our strategic game changers and unprecedented new business track-record ramping up in H2 2018
-    Strong operating margin rate expansion of 60 basis points in H1 2018 allowing both investment in our transformation to build future growth and 13% headline EPS growth at constant currency
-    All numbers in value impacted by lower US Dollar and other currencies versus the euro

H1 2018 Results
           
"    (million euro)    H1 2018
before IFRS 16    2018 vs 2017
at constant exchange rates
before IFRS 16    2018 vs 2017
before IFRS 16
"    Net revenue (1) (2)    4,280    -0.5%    -8.2%
"    Organic growth    -0.4%       
"    Operating margin (1)    611    +5.6%    -4.2%
"    Operating margin rate    14.3%    +80bps    +60bps
"    Headline group net income (2)    450    +14.2%    +4.2%
"    Headline EPS, diluted (euro) (2)    1.94    +12.8%    +2.6%
           
(1)    in dollars US, Net revenue: + 2.6 % ; Operating margin: +7.1% (H1 2018 vs. H1 2017)
(2)    See definitions

Q2 2018
   
"    Net revenue    2,198
"    Reported growth    -8.3%
"    Growth at constant currency    -2.4%
"    Organic growth    -2.1%
   

Arthur Sadoun, Chairman and CEO of Publicis Groupe:

"First half of 2018 was a busy but very productive period for Publicis Groupe. We have focused on 3 main objectives directly in line with our 3-year transformation plan, Sprint To The Future.

First, we have set the financial conditions to deliver our full year 2018 targets of organic growth and margin expansion. First half organic growth was slightly negative as in 2017, but with an improvement in North America which turned positive. This is an encouraging sign as this is where our new model is the most advanced. We saw a slowdown from our good first quarter of +1.6% to a second quarter at -2.1%, mostly due to two conjunctural challenges - tougher basis of comparison and uncertainty relating to GDPR implementation impacting our net revenue in Europe - but also to one specific operational bump with our volatile health sales representatives business in the US. This bump represents the biggest share of our negative growth as the overall impact of our Publicis Health business was around 30 million euro.

Despite the environment, we showed a 60 basis point margin improvement and 40 basis points on a comparable basis at constant restructuring charges. This 40 basis point expansion actually includes +70 basis points thanks to cost savings and investment in our game changers representing 30 basis points. These reflect two important points: first, we are making progress in delivering on our efficiency plan, demonstrating our ability to reduce costs while providing more high value products and services to our clients. Second, we are investing in our key strategic capabilities to build the growth of the future.

Overall, our first half financial results, combined with our impressive new business wins that will start ramping up in the second half, make us confident to deliver our full year objective of improving growth and margin versus 2017.
 
Our second objective was to accelerate our transformation by scaling up our new model connecting data, creativity and technology to accelerate our organic growth.

During this semester, we continued to develop our global practices and simplify our structure in the countries where we operate and the way we work with our clients. We are on track and sometimes ahead on all the KPIs we communicated during the Investor Day in March 2018.

We are actually experiencing very high growth, above 25%, in what will be the core of our offer in the future: our strategic game changers, namely data, dynamic creativity and digital business transformation.

Being at the core of our client transformation has made us win like never before with our existing clients and in new business, be it globally with Daimler, Campbell's and Marriott, or locally with McDonald's, Macy's and Nestlé. The momentum is continuing in Q3, and only last week, we announced the wins of Lenovo media globally, P&G Shopper in the UK and Nestlé in the US.

I reiterate, if necessary, that our market has been facing major challenges and transformation has become a necessity for all. Initiatives we launched very early and acquisitions we made are bearing fruits: we are able to overcome unavoidable budget cuts and changes in marketing plans thanks to our assets and our organization that position us in the most competitive way possible.
 
Our third objective was to increase shareholder value to make sure we reward our shareholders for the trust they put in our transformation journey. During this semester, we were able to deliver strong financial results, beyond organic growth. We improved margin significantly, headline EPS went up 13% at constant currency, and our financial situation is stronger with a net debt reduction of almost 1 billion euros over the last 12 months.
 
No doubt, during H1, we have set the foundations to deliver our full year objectives and even more importantly our 3 years transformation plan. It will not be an easy journey as we must transform ourselves while facing some strong market headwinds. There could be some unexpected bumps in the road like the one we just experienced in the health sector. But we have an outstanding team, unmatched capabilities in data, creativity and technology and a proven winning model that make us very confident for the future."






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Publicis Groupe's Supervisory Board met on July 18, 2018, under the chairmanship of Maurice Lévy, to examine the accounts for the first half of 2018 presented by Arthur Sadoun, CEO and Chairman of the Management Board.


KEY FIGURES, IN EURO

EUR million,
except per share data and percentages    H1 2018 (1)
with IFRS 16    H1 2018
before IFRS 16    H1 2017
before IFRS 16
Data from the Income statement:           
Net revenue (3)    4,280    4,280    4,664
Pass-through revenue    445    445    457
Revenue (3)    4,725    4,725    5,121
Operating margin before Depreciation & Amortization    882    683    719
% of net revenue    20.6%    16.0%    15.4%
Operating margin    617    611    638
% of net revenue    14.4%    14.3%    13.7%
Operating income    458    452    604
Net income attributable to the Groupe    301    313    387
Earnings Per Share    1.33    1.38    1.72
Headline EPS, diluted (2)    1.89    1.94    1.89
Free Cash Flow before changes in working capital requirements    500    499    594
Data from the Balance sheet    June 30, 2018
with IFRS 16    June 30, 2018 before IFRS 16    Dec. 31, 2017
before IFRS 16
Total assets     24,591    22,833    23,780
Groupe share of Shareholders' equity    6,155    6,157    5,956
Net debt (Net cash)    1,044    1,136    727
(1)    Accounts as of June 30, 2018 have been established applying IFRS 16 accounting standard (use of prospective method).
(2)    Net income attributable to the Groupe after elimination of impairment charge/real estate consolidation charge, amortization of intangibles arising on acquisitions, the main capital gains (losses) on disposals, the impact of US tax reform and the revaluation of earn-out payments, divided by the average number of shares on a diluted basis.
(3)    Under IFRS 15 on revenue recognition, in force since January 1, 2018, comparative data from the previous period have been restated. Revenue is equal to net revenue after re-billable costs have been reintegrated.

KEY FIGURES, IN US DOLLARS

USD million,
except per share data    H1 2018
before IFRS 16    H1 2017
before IFRS 16    H1 2018
vs. H1 2017
before IFRS 16
Net revenue (1)    5,179    5,046    +2.6%
Operating margin    739    690    +7.1%
Headline group net income    545    467    +16.7%
Headline EPS, diluted (2)    2.35    2.04    +15.2%
(1)    Under IFRS 15 on revenue recognition, in force since January 1, 2018, comparative data from the previous period have been restated. Revenue is equal to net revenue after re-billable costs have been reintegrated.
(2)    Net income attributable to the Groupe after elimination of impairment charge/real estate consolidation charge, amortization of intangibles arising on acquisitions, the main capital gains (losses) on disposals, the impact of US tax reform and the revaluation of earn-out payments, divided by the average number of shares on a diluted basis.

Nota bene: All comparisons of H1 2018 numbers with H1 2017 numbers are done before impact of
IFRS 16 accounting standard.


IFRS 15 ON "REVENUE"

Publicis Groupe has applied IFRS 15, the accounting standard on revenue recognition, since it became effective on January 1, 2018.  The 2017 financial statements have therefore been restated for the purposes of comparison with revenue since the standard came into force.  This accounting standard increases IFRS revenue insofar as certain costs re-billed directly to clients are excluded from revenue. These costs mainly concern production activities as well as various expenses incumbent on clients.

In this context, as the items that can be re-billed to clients do not come within the scope of assessment of operations, Publicis Groupe has decided to use a different indicator, i.e. net revenue , which is a more relevant indicator to measure the operational performance of the Groupe's activities. 

The table below provides a detailed account of revenue reported for 2017 before the impact of IFRS 15, as well as the 2017 figures restated after applying IFRS 15, i.e. net revenue and revenue.

EUR million    Q1 2017    Q2 2017    Q3 2017    Q4 2017    2017
Before IFRS 15                   
Reported revenue     2,328    2,515    2,264    2,583    9,690
                   
With IFRS 15                   
    Net revenue    2,267    2,397    2,185    2,483    9,332
+   Pass-through revenue    222    235    206    251    914
=    IFRS revenue    2,489    2,632    2,391    2,734    10,246

Details of 2017 net revenue by quarter and by geography, and the main items of 2017 half year and full year results before and after IFRS 15 impact, have been disclosed in a press release dated July 6, 2018 (available on our website: www.publicisgroupe.com).



IFRS 16 ON "LEASES"

Publicis has decided to early adopt IFRS 16 accounting standard as of January 1, 2018.

This accounting standard considers all lease contracts under a single model by which a lease contract is accounted for as a liability (discounted future payments), and a right of use is accounting for as an asset. The right of use will be amortized over the period of the lease contract (taking into account option periods during which the exercise is reasonably certain).

Contracts committed by Publicis for which this accounting standard applies, are:
-    Mainly, real-estate leases: Publicis is a tenant of the offices in most cities where the Groupe operates,
-    And to a lesser extent, outdoor activities: the Groupe has committed to advertising contract concessions in its advertising sales activity where minimum guarantees apply, as well as vehicles and IT hardware leases.

Publicis has retained the "prospective method" allowed by the accounting standard by which the cumulative effect of the standard will be accounted for as an adjustment to the opening equity, considering the "right of use" asset equals the amount of the lease commitment, adjusted for rents paid in advance.  The opening balance sheet at January 1, 2018, after application of IFRS 16, is presented in the press release dated July 6, 2018 (available on our website: www.publicisgroupe.com).  Furthermore, the 2017 consolidated income statement will not be restated.  The Groupe will communicate 2018 half-year and full-year results including IFRS 16 and will provide those financial items excluding IFRS 16.


Q2 2018 REVENUE

Publicis Groupe's net revenue in Q2 2018 was 2,198 million euro, i.e. an 8.3% decline from 2,397 million euro in 2017.  At constant exchange rates, growth was -2.4% after a 145 million euro negative impact of currency (-6.0% impact).  Net acquisitions contributed a negative 5 million euro to net revenue in Q2 2018 following the deconsolidation of Genedigi from January 1, 2018. 

Organic growth was -2.1% in Q2 2018.  This is a slowdown by comparison with the +1.6% recorded in Q1 2018 due to the strong comparable period in 2017, especially in North America.  The Groupe has yet to register the benefits of the accounts won in the first quarter, which will only contribute to organic growth from Q3 2018 onwards.  Furthermore, organic growth was affected by implementation of GDPR (General Data Protection Regulation) in Europe which caused several campaigns to be temporarily suspended at the initiative of clients but also at the initiative of Publicis due to uncertainties surrounding the obtaining of consumer consent via the websites on which these campaigns are rolled out.  Mention should also be made of the difficulties encountered in the healthcare sector, notably concerning the activities of Contract Sales Organizations (see paragraph below).


Breakdown of Q2 net revenue by region

EUR     Net revenue    Organic
million    Q2 2018    Q2 2017    growth
Europe    641    670    -3.6%
North America    1,179    1,300    -2.3%
Asia Pacific    224    261    -2.1%
Latin America    86    96    +7.2%
Middle East & Africa    68    70    +4.5%
Total    2,198    2,397    -2.1%


H1 2018 REVENUE

Publicis Groupe's net revenue in H1 2018 was 4,280 million euro, down 8.2% from 4,664 million euro in H1 2017.  At constant exchange rates, growth was -0.5%, after exchange rates adversely affected net revenue by 362 million euro (-7.8% impact).  Net acquisitions contributed a negative 6 million euro to net revenue in H1 2018 following the deconsolidation of Genedigi from January 1, 2018.  Organic growth was -0.4% in H1 2018.

In US dollars, Publicis Groupe net revenue was up 2.6%.

Breakdown of net revenue in H1 2018 by sector

 

The healthcare sector is undergoing radical transformation everywhere in the world.  At a time when medical research and sales have moved on from the blockbuster era to an era of more specialized therapies, it has become necessary to adapt the marketing and propose measures that target patients and prescribers much more specifically.  Publicis Health, Publicis Groupe's solution hub in healthcare, has developed an offering aligned with these needs - which revolves around data, dynamic creativity and digital business transformation.

Beyond creative and media activities, Publicis Health has a very distinctive positioning in the healthcare communications sector with Publicis Health Solutions (PHS).  This entity supplies CSOs (Contract Sales Organizations), a line of business that does not exist in other healthcare communications networks and where our competitors are mostly specialized in outsourcing.  By its very nature, this business is highly volatile and developments in the healthcare sector have led clients to make last-minute adjustments, leading to the postponement or even the cancellation of campaigns.

Publicis Health saw its revenue decline in the first half year, particularly that of PHS, its outsourcing business.  Publicis Health remains committed to providing its clients with the best and this will require investing in health-related consulting, data and technology, in order to continue providing our clients with cutting-edge expertise for their digital transformation.  The Groupe will continue to look at every opportunity to create as much value as possible from all its operations, for the greater benefit of all stakeholders.

Breakdown of H1 net revenue by region

EUR     Net revenue    Organic
million    H1 2018    H1 2017    growth
Europe    1,255    1,289    -1.7%
North America    2,321    2,574    +0.1%
Asia Pacific    423    499    -3.3%
Latin America    158    173    +9.1%
Middle East & Africa    123    129    +4.6%
Total    4,280    4,664    -0.4%

Europe posted negative growth of -2.6%.  With acquisitions and exchange rates factored out, organic growth stood at -1.7%.  In addition to the loss of a few accounts, this weak growth should be seen in the perspective of a difficult comparable period as growth in H1 2017 was +4.3%.  Furthermore, there were the induced effects of the GDPR (General Data Protection Regulation) in Europe which caused several campaigns to be temporarily suspended, at the initiative of clients but also at the initiative of Publicis, due to uncertainties about obtaining consumer consent via the websites on which these campaigns are rolled out.  Given this general context, the main countries are down in Q2 year-on-year (France, Spain and Switzerland). Among the main markets mention should be made of the good performance of the UK (+1.7% in H1, +2.2% in Q2) and the sharp decline in Germany (-8.3%) where the comparable period in 2017 saw particularly strong growth.

North America achieved organic growth of +0.1% in H1 2018, shored up by accounts won in 2017 (including McDonald's, Diesel, Lionsgate, Molson Coors and Southwest).  The region is affected by the difficulties encountered by Publicis Health whose net revenue declined by some 30 million euro over the first six months of 2018.  Given the impact of exchange rates, North America's revenue fell by 9.8% compared with 2017.

Asia Pacific saw its net revenue decline by 15.2 % and its organic growth drop 3.3% over the period. This negative performance is largely attributable to Australia (-10.8%) which has been impacted by the discontinuation of the Qantas call center contract.  China posted satisfactory growth, returning to positive territory (+0.4%) despite the impact of accounts lost.  Singapore saw its net revenue rise by +6.3%.

Latin America reported net revenue down 8.7% but organic growth of +9.1%.  In Brazil, net revenue progressed by 7.6% thanks to the gain of the Petrobras and Bradesco accounts.  Mexico continued to record sustained growth at +9.7%.

The Middle East & Africa reported a decline of 4.7% but organic growth of +4.6% driven by South Africa (+11.1%) and the United Arab Emirates (+6.2%).


ANALYSIS OF THE KEY FIGURES

Unless otherwise stated, figures are presented before impact of IFRS 16.

Income statement

The operating margin before depreciation & amortization was 683 million euro in H1 2018, down 5.0% from 719 million euro in 2017, i.e. a percentage margin of 16.0% of net revenue (vs. 15.4% in 2017):
-    Personnel costs totaled 2,834 million euro at June 30, 2018, down 8.4% from 3,095 million euro in 2017.  Fixed personnel costs amounted to 2,507 million euro, i.e. 58.6% of net revenue versus 58.7% in 2017. Freelance costs were down to 187 million euro in 2018, after 199 million in 2017.  Restructuring costs totaled 36 million euro in 2018 (down from 52 million euro in 2017) as the Groupe reorganizes around The Power of One which increasingly integrates structures and activities.  Numerous investments (organization by country, development of production platforms, on-going regionalization of the Shared Services Centers, as well as various technological developments) will all help improve operational efficiency.
-    Other operating costs (excluding Depreciation & Amortization) amounted to 1,208 million euro, compared to 1,307 million euro in 2017.  When pass-through costs are factored out, these costs stand at 17.8% of net revenue (versus 18.2% in 2017).

Depreciation & Amortization for the period amounted to 72 million euro in 2018, down 11.1% by comparison with H1 2017.

The Operating margin was 611 million euro, i.e. a 4.2% decrease from 638 million euro in 2017.  At constant exchange rates, the Operating margin rose by 5.6%.  Operating margin rate was 14.3%, up 60 basis points over 2017.  On a like-for-like basis (constant exchange rates and constant scope of consolidation), it was 70 basis points higher than in 2017.  This improvement was due to the downswing in restructuring costs (for 30 basis points), and to the impact of the cost savings program over the last 18 months (for 70 basis points), despite the investments made to accompany growth of game changers (for -30 basis points) .

By region, the operating margin was 12.2% in Europe, 17.3% in North America, 9.7% in Asia Pacific, 8.2% in Latin America and 1.6% in the Middle East & Africa.

Amortization of intangibles arising on acquisitions totaled 34 million euro in H1 2018, versus 35 million euro in 2017.  Impairment - Real estate consolidation totaled 107 million euro that was mainly due to real estate restructuring costs incurred by our real estate program "All in One" commenced in early 2018.  In addition, non-current income and expense was a charge of 18 million euro (compared with 1 million euro in H1 2017) which corresponds to 17 million euro of capital loss for Genedigi before the sale of this entity was completed at the start of April 2018.

Operating income totaled 452 million euro in H1 2018, after 604 million euro in H1 2017.

Financial income (expense), comprised of the cost of net debt and Other financial income and expenses, amounted to an expense of 13 million euro in H1 2018, down from an expense of 38 million euro for the corresponding period in 2017.  The cost of net debt was 15 million euro in H1 2018, after 32 million euro in 2017.  Other financial income and expenses netted out at income of 2 million euro after an expense of 6 million euro in H1 2017.

The revaluation of earn-out payments amounted to an expense of 11 million euro in H1 2018, down from an expense of 22 million in 2017.

Income tax for the period was 114 million euro, stemming from the application of a forecast effective tax rate of 25.9% for 2018, after 151 million euro in H1 2017, corresponding to a forecast effective tax rate of 26.7%.

The Associates share of profit was 1 million euro, compared with a loss of 2 million in H1 2017.  Minority interests totaled 2 million euro in H1 2018 after 4 million in 2017.

Overall, net income attributable to the Groupe amounted to 313 million euro at June 30, 2018, versus 387 million at June 30, 2017.

When IFRS 16 is applied, the Operating margin stands at 617 million euro, and the percentage operating margin for the period is 14.4%.   By region, the Operating margin then becomes 12.4% in Europe, 17.4% in North America, 9.9% in Asia Pacific, 8.2% in Latin America and 1.6% in the Middle East & Africa.

The Operating income was 458 million euro in H1 2018.

After IFRS 16, Financial income (expense) was an expense of 36 million euro in H1 2018 after inclusion of lease obligations totaling 29 million euro.

Income tax was 109 million euro when the 2018 forecast effective tax rate of 25.9% was applied.

Overall, net income attributable to the Groupe amounted to 301 million euro (after IFRS 16) at June 30, 2018.

Free Cash Flow

The Groupe's free cash flow, before application of IFRS 16 and excluding variations in working capital requirements, decreased by 16% compared with the previous period to stand at 499 million euro. At constant exchange rates, it fell 8%.  This decline was due to higher capex and the higher level of tax paid.  Investments rose to 86 million euro versus 37 million euro in the first half of 2017.  The increase in H1 2018 includes investments made under the All in One real estate program.  Income tax paid rose from 115 million euro in H1 2017 to 149 million euro in H1 2018.  Also, while the Groupe received a tax refund in H1 2017, the first half of 2018 marked the first payment of the toll charge (payment spread over an eight-year period) for 18 million euro.  After application of IFRS 16, free cash flow amounted to 500 million euro.

Net debt

At June 30, 2018, net debt totaled 1,136 million euro, up from 727 million euro at December 31, 2017.  The substantial debt reduction (close to 1 billion euro) over the last 12 months can be attributed to strong cash flow generation combined with very strict control of variations in working capital requirements.  In fact, the increase in working capital requirements was limited to 889 million euro in H1 2018, after an increase of 1,013 million euro in H1 2017.  In H1 2018, the Groupe's average net debt stood at 1 405 million euro, after 1,993 million euro in the first half of 2017.



HIGHLIGHTS FROM H1 2018

Sprint To The Future

Since 2014 and the acquisition of Sapient, Publicis Groupe has been undergoing a deep transformation and is now uniquely positioned thanks to three key differentiation points:
-    The vision: the technology provided by Publicis.Sapient gives the Groupe the expertise to combine marketing and digital business transformation, connected with data.  Thanks to these unparalleled assets, Publicis Groupe is able to engage with both Chief Marketing Officers (CMOs) and Chief Information Officers (CIOs).
-    The model: The Power of One gathers all the Groupe's capabilities under one roof, putting clients at the core of its organization.  It has led to the deployment of Global Client Leaders (GCLs) and the implementation of our country model under one leader and a unified executive team drawing from all the expertise of the Groupe to break down silos and improve efficiency.
-    The governance: the Groupe has successfully completed its management succession and has reinforced its decision-making committees, with a strong focus on the execution of strategy.

Sprint To The Future is Publicis Groupe's strategy and execution plan for 2018-2020 and is based on three pillars:
1.    To provide each client with the keys to its future success: one-to-one consumer engagement at scale, and three strategic game changers, namely data, dynamic creativity and digital business transformation expertise.
2.    A sprint to accelerate the Groupe's transformation, notably through the deployment of Global Client Leaders, the roll-out of a country-by-country organization, and an "invest in growth" plan funded by a major cost-cutting program.
3.    Greater value to shareholders during the transformation, by accelerating organic growth and the percentage operating margin.

For further details, see the Groupe's press release dated March 20, 2018:

http://www.publicisgroupe.com/en/news/press-releases/publicis-2020-sprint-to-the-future-en-1

First results are very encouraging.  net revenue of Strategic Game Changers is up 27% in the course of the first 6 months of 2018, validating the strategic decisions of the Groupe. Net revenue generated with the first 100 clients of the Groupe amounted to 450 million, representing 18% of net revenue of the top 100 clients.

Publicis Groupe appointed 46 Global Client Leaders as of June 30, compared with 35 end 2017 and an objective of 100 by 2020. The objective to achieve 100% of net revenue under country model was reached at the end the first half of 2018, with the implementation around 8 key markets: France, United Kingdom, DACH (Germany, Austria, Switzerland), Central & Northern Europe, Southern Europe, North America, Latin America, Asia Pacific & Middle East / Africa. This organization will aim at accelerating Groupe's growth and delivering efficiency gains.

Headcount in global delivery platform was 9,100 at end June, versus 8,700 end 2017.

All the energy of the Groupe is mobilized to execute its strategy and to deliver greater value to its clients, its people and its shareholders. A dedicated incentive plan, fully aligned with the objectives presented during the investor day, will be implemented for the group of executives in charge of the execution of the plan.

Disposal

Publicis Groupe finalized the disposal of Genedigi during the second quarter of 2018.


OUTLOOK

Publicis Groupe remains focused on three priorities: to deliver the results announced year after year, to accelerate its transformation by rolling out its model at scale, and to create shareholder value throughout the period.  The first half-year 2018 yielded a marked improvement of its percentage margin, double-digit growth (at constant exchange rates) of headline EPS, and a strengthening of its financial position.  Business gains in the first quarter should lead to higher organic growth than in 2017.  Concerning the margin, cost saving efforts will be continued, and part of the savings achieved will be reinvested to establish the basis for sustained future growth.  Overall, the margin can be expected to increase by 30 to 50 basis points in 2018.

In the longer term, Publicis Groupe intends to deliver greater value to shareholders by accelerating the growth of its headline diluted EPS over 2018-2020, using three levers:
-    accelerated organic growth,
-    improved margins,
-    bolt-on acquisitions.

The objective is to accelerate organic growth over 2018-2020 with the ambition of achieving +4% by 2020.

Publicis Groupe is also aiming to increase its percentage operating margin by 30 to 50 basis points per annum between now and 2020.  This objective includes a 450-million euro cost savings plan fully aligned with the Groupe's strategy.  This cost savings plan will serve to fund a 300-million euro operational investment program spanning 2018-2020, a plan that is primarily dedicated to the Groupe's talent through hiring, training, development and re-skilling.

Publicis Groupe is targeting 5% to 10% annual growth of its headline diluted EPS, ramping up over the next three years, at constant exchange rates, through continuous enhancement of its organic growth, improved margins and the contribution of acquisitions to earnings.

Free cash flow generation is expected to remain strong and the Groupe's balance sheet will remain solid. With a payout ratio in the region of 45%, dividend growth can be expected to accelerate over the next three years.

This enhanced financial performance will place Publicis Groupe at the forefront of the market in marketing and business transformation.



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Disclaimer

Certain information contained in this document, other than historical information, may constitute forward-looking statements or unaudited financial forecasts.  These forward-looking statements and forecasts are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements and forecasts are presented as at the date of this document and, other than as required by applicable law, Publicis Groupe does not assume any obligation to update them to reflect new information or events or for any other reason.  Publicis Groupe urges you carefully to consider the risk factors that may affect its business, as set out in the Registration Documents filed with the French Autorité des Marchés Financiers (AMF) and which is available on the website of Publicis Groupe (www.publicisgroupe.com), including an unfavorable economic climate, an extremely competitive market sector, the possibility that our clients could seek to terminate their contracts with us at short notice, the fact that a substantial part of the Group's revenue is derived from certain key clients, conflicts of interest between advertisers active in the same sector, the Group's dependence on its directors and employees, laws and regulations which apply to the Group's business, legal action brought against the Group based on allegations that certain of the Group's commercials are deceptive or misleading or that the products of certain clients are defective, the strategy of growing through acquisitions, the depreciation of goodwill and assets listed on the Group's balance sheet, the Group's presence in emerging markets, exposure to liquidity risk, a drop in the Group's credit rating and exposure to the risks of financial markets.

Publicis Groupe has applied IFRS 15 "Revenue" accounting standard since January 1, 2018. Details of 2017 quarterly and full year revenue before and after IFRS 15 impact, 2017 net revenue by quarter and by geography, and the main items of 2017 half year and full year results before and after IFRS 15 impact, have been disclosed in a press release dated July 6, 2018.

Publicis Groupe has applied IFRS 16 "Leases" accounting standard in advance, as of January 1, 2018. Publicis has retained the "prospective method" allowed by the accounting standard by which the cumulative effect of the standard will be accounted for as an adjustment to the opening equity, considering the "right of use" asset equals the amount of the lease commitment, adjusted for rents paid in advance. The opening balance sheet with the application of IFRS 16 as of January 1, 2018 have been disclosed in a press release dated July 6, 2018. Besides, the 2017 consolidated income statement will not be restated. The Groupe will communicate 2018 half-year and full-year results including IFRS 16 and will provide those financial items excluding IFRS 16.




About Publicis Groupe - The Power of One
Publicis Groupe [Euronext Paris FR0000130577, CAC 40] is a global leader in marketing, communication, and digital transformation, driven through the alchemy of creativity and technology. Publicis Groupe offers its clients seamless access to its tools and expertise through modular offering. Publicis Groupe is organized across four Solutions hubs: Publicis Communications (Publicis Worldwide, Saatchi & Saatchi, Leo Burnett, BBH, Marcel, Fallon, MSL, Prodigious), Publicis Media (Starcom, Zenith, Spark Foundry, Blue 449, Performics, Digitas), Publicis.Sapient (SapientRazorfish & Sapient Consulting) and Publicis Health. Present in over 100 countries, Publicis Groupe employs nearly 80,000 professionals.
www.publicisgroupe.com | Twitter:@PublicisGroupe | Facebook | LinkedIn | YouTube | Viva la Difference!

Contacts Publicis Groupe
Peggy Nahmany    Corporate Communications    + 33 (0)1 44 43 72 83    peggy.nahmany@publicisgroupe.com

Jean-Michel Bonamy    Investor Relations    + 33 (0)1 44 43 77 88    jean-michel.bonamy@publicisgroupe.com

Chi-Chung Lo    Investor Relations    + 33 (0)1 44 43 66 69    chi-chung.lo@publicisgroupe.com


Appendices

Net revenue (1): organic growth calculation

(million euro)    Q1    Q2    H1        Impact of currency
at end June 2018
(million euro)
2017 net revenue (1)    2,267    2,397    4,664        GBP (3)    (10)
Currency impact (3)    (217)    (145)    (362)        USD (3)    (262)
2017 net revenue (1) at 2018 exchange rates (a)    2,050    2,252    4,302        Others    (90)
2018 net revenue before acquisition impact (2) (b)    2,083    2,203    4,286        Total    (362)
Net revenue from acquisitions (2)    (1)    (5)    (6)   
2018 net revenue (1)    2,082    2,198    4,280   
Organic growth (b/a)    +1.6%    -2.1%    -0.4%   


(1)    Revenue less pass-through costs. See definition in appendix

(2)    Acquisitions (Ardent, The Abundancy, The Herd Agency, Ella Factory, SFR Studio, Translate Plus, Plowshare, Harbor & Village, Optix, Independent Ideas, Domaines Publics), net of disposals.

(3)    EUR = USD 1.210 on average in H1 2018 vs. USD 1.082 on average in H1 2017
EUR = GBP 0.880 on average in H1 2018 vs. GBP 0.860 on average in H1 2017





New Business: Main wins in H1 2018

 
Mercedes-Benz (Global), Campbell Soup Company (USA), Ricola (Global), Swarovski (France), Zhuyeqing Tea (China), Carrefour (China), Luzhou Laojiao, Whitail (China), Adobe (India), Asics (Singapore), P&O Ferries Holdings (UK), Department of Transport and Main Roads - Queensland Government (Australia), Lapp Holding AG (Germany), Hotwire (USA), Sentosa (Singapore), ABInBev (USA), Muthoot Pappachan Group (India), Kraft Heinz (China), Tourism Fiji (Global)
 
Almara (Middle East), Campbell's Arnott (Australia), Campbell's Soup Company (North America), Clas Ohlson (Norway), Didi Chuxing (China), Etisalat Misr (Egypt), Henryk Kania (Poland), Iberdrola (Norway), LT Grp (Philippines), Lucano Group (Italy), Marriott International (Global), Maspex (Poland), Mcdonald's (Middle East), Mondelez International (North America), NBC Universal/Telemundo (USA), Ola (India), Pirelli  (Global), Pizzardi Editore (Italy), Red Bull (USA), The Body Shop (Singapore), ZEE5 (India), Banyan Tree (Singapore), Coty (China & South East Asia), Dunkin' Donuts (USA), Glovo (Italy), IKEA (MENA), L'Oreal (Mexico), Macy's (USA), McDonald's (France & Latin America), NBCU Universal Kids (USA), Nonno Nanni (Italy), Sensee (France)
 
Carrefour (Global), Marriott International (Global), Mercedez Benz (Global)


 
Marriott International (LATAM), Mercedes Benz (Colombia, Argentina, Regional), Daimler (Korea, Greece, Hungary, Czech republic, Turkey, Belgium), Hochalnd (Romania), Central Beverage Company (Israel), Mercedes (Portugal), Eviso (Belgium), VISA (Argentina), Nestlé (Chile), McDonalds (LATAM- Regional), IKEA (South Korea), Petronas (Malaysia), Kering (Japan)

 
Alexion Pharmaceuticals (USA), AVANIR Pharmaceuticals (USA), DBV Technologies (USA), Eli Lilly & Co. (USA), Galderma (USA), ParatekPharmaceuticals (USA), Pfizer Inc. (UK & USA), Roche (USA), Astrazeneca (USA), Bayer (USA), Bristol-Myers Squibb (USA), EyePoint Pharmaceuticals (USA), Masimo Corporation (USA), Merck & Co. (USA), Novo Nordisk (USA), Merz Aesthetics (USA), Proctor & Gamble (USA), Rhythm Pharmaceuticals (Europe), Sarepta Therapeutics (USA)
2018 press releases

05-01-2018    Publicis Groupe half-year financial statement liquidity contract
22-01-2018    Nick Law Joins Publicis as Chief Creative Officer of Publicis Groupe and President of Publicis Communications
23-01-2018    Carrefour group signs strategic partnership with Publicis.Sapient to accelerate its digital transformation
23-01-2018    Press release "Anonymous Letter"
29-01-2018    Publicis Groupe and Microsoft Announce Partnership for Marcel AI Platform
01-02-2018    Publicis Groupe Announces Global Leadership Promotions Across its Solutions & Regions
01-02-2018    Loris Nold appointed to the newly created role of CEO of Publicis Groupe APAC
01-02-2018    Alexandra von Plato Appointed Chief Executive Officer of Publicis Health
08-02-2018    Publicis Groupe : 2017 Annual Results
14-02-2018    Viva Tech 2018
14-02-2018    Leo Burnett Chicago Names Kieran Ots EVP, Executive Creative Director
26-02-2018    Robett Hollis and FrontSide join Saatchi & Saatchi New Zealand
28-02-2018    Saatchi & Saatchi New Zealand wins global Tourism Fiji account
05-03-2018    Brill and Crovitz announce launch of NewsGuard to fight fake news
20-03-2018    Publicis 2020: Sprint To The Future
27-03-2018    Publicis Groupe Named 2018 Adobe Experience Cloud Partner of the Year
29-03-2018    Publicis Media launches Global Commerce capability to manage the intersection of media and marketplaces
10-04-2018    Leo Burnett wins international Betfair account
19-04-2018    Publicis Groupe: Q1 2018 revenue
23-04-2018    2017 Registration Document available
25-04-2018    Publicis Groupe appoints leadership team to lead Indian market
30-04-2018    Publicis Media aligns EMEA & APAC markets under unified leadership
24-05-2018    Publicis Groupe unveils Marcel
28-05-2018    Combined General Shareholders' Meeting
13-06-2018    Tom Kao appointed as Publicis Groupe Hong Kong CEO
22-06-2018    Publicis Groupe clients champion creativity in Cannes
26-06-2018    Publicis Groupe appoints Raja Trad to the newly created role of Chairman Middle East


Definitions
Net revenue or Revenue less pass-through costs: Pass-through costs mainly concern production and media activities, as well as various expenses incumbent on clients. These items that can be re-billed to clients do not come within the scope of assessment of operations, net revenue is a more relevant indicator to measure the operational performance of the Groupe's activities.
Organic growth: Change in net revenue excluding the impact of acquisitions, disposals and currencies.
EBITDA: Operating margin before depreciation.
Operating margin: Revenue after personnel costs, other operating expenses (excl. non-current income and expense) and depreciation (excl. amortization of intangibles arising on acquisitions).
Operating margin rate: Operating margin as a percentage of revenue.
Headline Group Net Income: Group net income after elimination of impairment charges, amortization of intangibles arising from acquisitions, main capital gains (or losses) on disposals, effect of US tax reform and revaluation of earn-out payments
EPS (Earnings per share): Group net income divided by average number of shares, not diluted.
EPS, diluted (Earnings per share, diluted): Group net income divided by average number of shares, diluted.
Headline EPS, diluted (Headline Earnings per share, diluted): Group net income after elimination of impairment charges, amortization of intangibles arising from acquisitions, main capital gains (or losses) on disposals, effect of US tax reform and revaluation of earn-out payments, divided by average number of shares, diluted.
Capex : Net acquisitions of tangible and intangible assets, excluding financial investments and other financial assets.
Free Cash Flow before changes in working capital requirements: Net cash flow from operating activities less interests paid & received, repayment of lease liabilities & related interests and changes in WCR linked to operating activities
Net Debt (or financial net debt): Sum of long and short financial debt and associated derivatives, net of treasury and cash equivalents.
Average net debt: Average of monthly net debt at end of month.
Dividend pay-out: Dividend per share / Headline diluted EPS.

Consolidated income statement
(in millions of euros)    Notes    30
June 30, 2018
(6 months)  
(6mois)    June 30, 2017
(6 months)      December 31, 2017
(12 months)2
restated
Net Revenue         4 280    4 664    9 332
Pass-through costs        445    457    914
Revenue     2    4 725    5 121    10 246

Personnel expenses
Other operating expenses
    5
    (2 834)
(1 009)    (3 095)
(1 307)    (5 977)
(2 603)
Operating margin before depreciation and amortization        882    719    1 666

Depreciation and amortization expense
(excluding intangibles from acquisitions)
    6    (265)    (81)    (161)
Operating Margin        617    638    1 505
Amortization of intangibles from acquisitions   
6   
(34)   
(35)   
(73)
Impairment     6    (107)    -    (115)
Non-current income and expenses
    7
    (18)
    1
    (1)

Operating income         458    604    1 316
Financial expenses
Financial income
Cost of net financial debt
Revaluation of debt related to acquisitions of shareholdings
Other financial income and expenses
   

8
8
8    (40)
31
(9)
(11)
(27)    (54)
22
(32)
(22)
(6)    (101)
50
(51)
(66)
(10)
Pre-tax income of consolidated companies        411    544    1 189
Income taxes
    9    (109)    (151)    (312)
Net income of consolidated companies        302    393    877
Share of profit of associates
    12    1    (2)    (5)
Net income        303    391    872
Of which :
- Net income from non-controlling interests
        2    4    10
Net income attributable to equity holders of the parent company        301    387    862


Per share data (in euros) - Net income attributable
to equity holders of the parent company
   
10           
Number of shares        226 898 746    224 581 868    226 384 707
Earnings per share        1,33    1,72    3,81
               
Number of diluted shares        231 379 546    228 808 205    230 673 578
Diluted earnings per share        1,30    1,69    3,74

Consolidated statement of comprehensive income
(in millions of euros)        June 30, 2018
(6 months)     June 30, 2017
(6 months)    December 31, 2017
(12 months)
restated
Profit (loss) for the period (a)        303    391    872
               

Comprehensive income that will not be reclassified to income statement
               
- Actuarial gains (and losses) on defined benefit plans         14    6    13
- Deferred taxes on comprehensive income that will not be reclassified to income statement        (6)    (18)    28

Comprehensive income that may be reclassified to income statement
               
- Revaluation of available-for-sale investments and hedging instruments        20    (20)    (9)
- Consolidation translation adjustments        17    (358)    (597)
Total of other elements of comprehensive income (b)           45    (390)    (565)
               
Total comprehensive income for the period (a) + (b)        348    1    307
Of which :               
- Total comprehensive income attributable to non-controlling interests
        2    2    5
- Total comprehensive income attributable to equity holders of the parent company
        346    (1)    302

Consolidated balance sheet

(en millions d'euros)    Notes    June 30, 2018 1    December 31, 2017 2
Assets           
Goodwill, net    11    8 563    8 450
Intangible assets, net        1 119    1 124
Right-of-use asset related to leases     17    1 777    -
Property, plant and equipment, net        555    590
Deferred tax assets         142    130
Investments in associates     12    64    64
Other financial assets    13    203    169
Non-current assets        12 423    10 527

Inventories and work in progress           
        417    385
Trade receivables        8 199    8 907
Assets on contracts        1 017    843
Other receivables and current assets        723    649
Cash and cash equivalents        1 812    2 407
Assets held for sale        -    62
Current assets        12 168    13 253
           
Total assets        24 591    23 780

Equity and liabilities           
Share capital        94    92
Additional paid-in capital and retained earnings, Group share         6 061    5 864
Equity attributable to holders of the parent company    14    6 155    5 956
Non-controlling interests        (1)    2
Total equity        6 154    5 958

Long-term borrowings   
16    2 364   
            2 780
Long-term lease liability    17    1 667    -
Deferred tax liabilities        423    419
Long-term provisions    15    587    591
Non-current liabilities        5 041    3 790

Trade payables           
        10 497    11 541
Liabilities on contracts        366    423
Short-term borrowings    16    505    350
Short-term lease liability    17    364    -
Income taxes payables        172    204
Short-term provisions    15    117    107
Other creditors and current liabilities
Liabilities held for sale        1 375    1 391
16
Current liabilities        13 396    14 032
           
Total equity and liabilities        24 591    23 780

Consolidated statement of cash flows
(en millions d'euros)    June 30, 2018
(6 months)    June 30, 2017
(6 months) (2)    December 31, 2017
(12 months) (2)

Cash flows from operating activities           
Net income     303    391    872
Neutralization of non-cash income and expenses :           
Income taxes    109    151    312
Cost of net financial debt    9    32    51
Capital (gains) losses on disposals (before tax)    18    -    -
Depreciation, amortization and impairment loss on property, plant and equipment and intangible assets    406    116    349
Share-based compensation     32    28    55
Other non-cash income and expenses    42    25    74
Share of profit of associates    (1)    2    5
Dividends received from associates    2    1    2
Taxes paid    (149)    (115)    (264)
Change in working capital requirements (1)    (890)    (1 013)    69
Net cash flows generated by (used in) operating activities (I)    (119)    (382)    1 525
Cash flows from investing activities           
Purchases of property, plant and equipment and intangible assets    (95)    (39)    (136)
Disposals of property, plant and equipment and intangible assets    9    2    5
Purchases of investments and other financial assets, net     (11)    (6)    2
Acquisitions of subsidiaries    (91)    (176)    (289)
Disposals of subsidiaries    25    2    1
           
Net cash flows generated by (used in) investing activities (II)    (163)    (217)    (417)
Cash flows from financing activities           
Dividends paid to holders of the parent company     -    -    (170)
Dividends paid to non-controlling interests    (5)    (5)    (10)
Proceeds from borrowings     10    25    19
Repayment of borrowings    (178)    (22)    (27)
Repayment of lease liabilities    (175)    -    -
Interest paid on lease liabilities    (29)    -    -
Financial interest paid (2)    (13)    (26)    (90)
Financial interest received (2)    32    26    52
Net purchases of non-controlling interests    (17)    (23)    (35)
Net (purchases)/sales of treasury shares and warrants    22    (287)    (291)
Net cash flows generated by (used in) financing activities (III)    (353)    (312)    (552)

Impact of exchange rate fluctuations (IV)
    35    (166)    (379)
Change in consolidated cash and cash equivalents (I + II + III + IV)    (600)    (1 077)    177
Cash and cash equivalents on January 1    2 407    2 228    2 228
Bank overdrafts on January 1    (27)    (25)    (25)
Net cash and cash equivalents at beginning of year (V)    2 380    2 203    2 203
Cash and cash equivalents at closing date     1 812    1 151    2 407
Bank overdrafts at closing date    (32)    (25)    (27)
Net cash and cash equivalent at end of year (VI)    1 780    1 126    2 380
Change in consolidated cash and cash equivalents (VI - V)    (600)    (1 077)    177
(1)  Breakdown of change in working capital requirements           
Change in inventory and work in progress    (14)    (44)    (17)
Change in trade receivables and other receivables    545    424    (693)
Change in accounts payables, other payables and provisions    (1 421)    (1 393)    779
Change in working capital requirements    (890)    (1 013)    69

(2)  As disclosed in note 1, the financial interests have been reclassified to net cash flows generated by financing activities.
 




Consolidated statement of changes in equity

Number of outstanding shares    (in millions of euros)    Share capital
    Additional paid-in capital    Reserves and earnings brought forward    Translation reserve
    Fair value reserve    Equity attribuable  to the holders of the parent company    Non-controlling interests     Total equity
                                   
                                   
226 295 805    December 31, 2017    92    3 680    2 326    (337)    195    5 956    2    5 958
    First application of IFRS 16            10            10        10
226 295 805    January 1, 2018    92    3 680    2 336    (337)    195    5 966    2    5 968
    Net income             301            301    2    303
    Other comprehensive income, net of tax                17    28    45        45
    Total income and expenses for the period            301    17    28    346    2    348
4 323 480    Dividends    2    243    (455)            (210)    (5)    (215)
210 612    Share-based compensation, net of tax            32            32        32
    Effect of acquisitions and commitments to buy-out non-controlling interests            (1)            (1)        (1)
87 984    Equity warrant exercise        3                3        3
498 177    (Purchase)/sales of treasury shares            19            19        19
231 416 058    June 30, 2018    94    3 926    2 232    (320)    223    6 155    (1)    6 154





Number of outstanding shares    (in millions of euros)    Share capital
    Additional paid-in capital    Reserves and earnings brought forward    Translation reserve
    Fair value reserve    Equity attribuable  to the holders of the parent company    Non-controlling interests     Total equity
                                   
                                   
225 367 784    January 1, 2017    90    3 429    2 118    255    163    6 055    10    6 065
    Net income             387            387    4    391
    Other comprehensive income, net of tax                (355)    (33)    (388)    (2)    (390)
    Total income and expenses for the period            387    (355)    (33)    (1)    2    1
3 992 216    Dividends    2    242    (414)            (170)    (5)    (175)
383 457    Share-based compensation, net of tax            30            30        30
    Effect of acquisitions and commitments to buy-out non-controlling interests            (9)            (9)    5    (4)
298 085    Equity warrant exercise        9                9        9
(3 754 991)    (Purchase)/sales of treasury shares            (296)            (296)        (296)
226 286 551    June 30, 2017    92    3 680    1 816    (100)    130    5 618    12    5 630


 
Impacts of IFRS 16 on the opening balance sheet

(in millions of euros)    Information
December 31, 2017
restated    First
application
of IFRS 16    Information
January 1, 2018
with IFRS 16
Assets           
Right-of-use related to leases    -    1,906    1,906
Property, plant and equipment, net    590    (43)    547
Other financial assets    169    23    192
Other non-current assets    9,768    -    9,768
Other receivables and current assets    649    (4)    645
Other current assets    12,604    -    12,604
Total assets    23,780    1,882    25,662
           
Equity and liabilities           
Total equity    5,958    10    5,968
Long-term borrowings    2,780    (89)    2,691
Long-term lease liabilities    -    1,681    1,681
Long-term provisions    591    (11)    580
Others    419    -    419
Non-current liabilities    3,790    1,581    5,371
Short-term lease liabilities        356    356
Short-term provisions    107    (4)    103
Other creditors and current liabilities    1,391    (61)    1,330
Others    12,534    -    12,534
Current liabilities    14,032    291    14,323
           
Total equity and liabilities    23,780    1,882    25,662


The impacts of the first application of IFRS 16 on the opening balance sheet are the following:
-    the accounting of the right-of-use assets and lease liabilities ;
-    the reclassification of recognized assets and liabilities related to existing financing leases as of December 31, 2017;
-    the reclassification of lease incentive benefits in addition to the right-of-use assets;
-    the reclassification of provisions for vacant space provision in reduction of the right-of-use assets;
-    the reclassification of rents paid in advance in addition to the right-of-use assets;
-    the reclassification of right-of-use assets as financial assets in the case of sub-leases granted for the residual duration of the leases concerned. In addition, the re-valuation of these receivables impacts the opening shareholders' equity, taking into consideration sub-leases for an amount greater than that of the main agreement.

Impacts of IFRS 16 on the consolidated balance sheet

(in millions of euros)    Information
June 30, 2018
with IAS 17    Application
of IFRS 16    Reported
June 30, 2018
information
Assets           
Right-of-use related to leases    -    1,777    1,777
Property, plant and equipment, net    597    (42)    555
Deferred tax assets    138    4    142
Other financial assets    180    23    203
Other receivables and current assets    727    (4)    723
Others    21,191    -    21,191
Total assets    22,833    1,758    24,591

Equity and Liabilities           
Total shareholders' equity    6,156    (2)    6,154
Long-term borrowings    2,456    (92)    2,364
Long-term lease liabilities    -    1,667    1,667
Long-term provisions     617    (30)    587
Others    423    -    423
Non-current liabilities    3,496    1,545    5,041
Short-term lease liabilities    -    364    364
Short-term provisions    156    (39)    117
Other creditors and current liabilities    1,485    (110)    1,375
Others    11,540    -    11,540
Current liabilities    13,181    215    13,396
           
Total equity and liabilities    22,833    1,758    24,591


Impacts of IFRS 16 on the consolidated income statement

(in millions of euros)    Information
June 30, 2018
with IAS 17    Application
of IFRS 16    Reported
June 30, 2018
information
Revenue    4,725    -    4,725
Personnel expenses    (2,834)    -    (2,834)
Depreciation and amortization expense
(excluding intangible arising from acquisitions)    (72)    (193)    (265)
Other operating expenses    (1,208)    199    (1,009)
Operating margin    611    6    617
           
Operating income    452    6    458
Cost of net financial debt    (15)    6    (9)
Revaluation of debt related to acquisitions of shareholdings    (11)    -    (11)
Other financial income and expenses     2    (29)    (27)
Pre-tax income of consolidated companies    428    (17)    411
Income taxes    (114)    5    (109)
Net income of consolidated companies    314    (12)    302
Share of profit of associates    1    -    1
Net income    315    (12)    303
Of which:
- Net income from non-controlling interests    2    -    2
Net income attributable to equity holders of the parent company    313    (12)    301


Impacts of IFRS 16  on the consolidated statement of cash flows   

(in millions of euros)    Information
June 30, 2018
with IAS 17 (1)    Application
of IFRS 16    Reported
June 30, 2018
information
June 30, 2018           
           
Cash flow from operating activities           
Net income    315    (12)    303
Neutralization of non-cash income and expenses:           
            Income taxes    114    (5)    109
            Cost of net financial debt    15    (6)    9
            Depreciation, amortization and impairment loss    126    280    406
            Other non-cash income and expenses    100    (58)    42
Others    (98)    -    (98)
Change in working capital requirements     (889)    (1)    (890)
Net cash flows generated by (used in) operating activities (I)    (317)    198    (119)
Cash flow from investing activities           
Net cash flows generated by (used in)  investing activities (II)    (163)    -    (163)
Cash flow from financing activities           
Repayment of lease liabilities    -    (175)    (175)
Interest paid on lease liabilities    -    (29)    (29)
Financial interest paid    (19)    6    (13)
Others    (136)    -    (136)
Net cash flows generated by (used in)  financing activities (III)    (155)    (198)    (353)
Impact of exchange rate fluctuations (IV)    35    -    35
Change in consolidated cash flow (I+ II+ III+ IV)    (600)    -    (600)
(1) Starting from January 1, 2018, the financial interest have been reclassified to the net cash-flow from financing activities

Earnings per share (basic and diluted)

(in millions of euros, except for share data)          June 30, 2018    June 30, 2017

Net income used for the calculation of earnings per share            
Group net income    A    301    387
Impact of dilutive instruments:            
-    Savings in financial expenses linked to the conversion of debt instruments,
net of tax         -    -
Group net income - diluted    B    301    387

Number of shares used to calculate earnings per share            
Number of shares at January 1         230,627,725    225,945,387
Shares created over the period        194,528    344,728
Treasury shares to be deducted (average for the period)        (3,923,507)    (1,708,247)
Average number of shares used for the calculation    C    226,898,746    224,581,868
Impact of dilutive instruments:             
- Free shares and dilutive stock options(1)         3,936,357    3,588,145
- Equity warrants(1)         544,443    638,192
Number of diluted shares    D    231,379,546    228,808,205
(in euros)            
Earnings per share    A/C    1.33    1.72
           
Diluted earnings per share    B/D    1.30    1.69
(1)    Only stock options and warrants with a dilutive impact, i.e. whose strike price is lower than the average strike price, are included in the calculation. For H1 2018 and 2017, all stock options and warrants not yet exercised at the reporting date had a dilutive impact.
Headline earnings per share (basic and diluted)
(in millions of euros, except for share data)         June 30, 2018    June 30, 2017

Net income used to calculate headline earnings per share (1)            
Group net income         301    387
Items excluded:            
- amortization of intangibles from acquisitions, net of tax         28    23
- impairment loss (2), net of tax        81    -
- Revaluation of earn-out payments         11    22
- Main capital gains (losses) on disposal of assets, net of tax        17    -
Headline Group net income    E    438    432
Impact of dilutive instruments:            
-    Savings in financial expenses linked to the conversion
of debt instruments, net of tax         -    -
Headline Group net income, diluted    F    438    432
             
Number of shares used to calculate earnings per share             
Number of shares at January 1         230,627,725    225,945,387
Shares created over the period        194,528    344,728
Treasury shares to be deducted (average for the period)        (3,923,507)    (1,708,247)
Average number of shares used for the calculation    C    226,898,746    224,581,868
Impact of dilutive instruments:            
- free shares and dilutive stock options         3,936,357    3,588,145
- equity warrants         544,443    638,192
Number of diluted shares
(in euros)    D    231,379,546    228,808,205
Headline earnings per share (1)    E/C    1.93    1.92
           
Headline diluted EPS (1)    F/D    1.89    1.89
(1)    EPS after elimination of the impairment losses, amortization of intangibles from acquisitions, the main capital gains and losses on disposal of assets and the revaluation of earn-out payments.
(2)    As of June 30, 2018 this amount corresponds exclusively to an impairment loss of right-of-use related to lease contracts

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