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Ipsos in 2014 - STABILITY CONFIRMED

Organic growth of +0.8% in Q4, +0.3% for the year

Paris, 24 February 2015 – In the fourth quarter of 2014, Ipsos posted revenue of €500.7 million, up 2.2% compared to the same period in 2013. This timid return to growth reflects the more favourable foreign exchange trends (+1.5%), which had been very negative in 2013 and the first half of 2014, and slight organic growth (+0.8%). While this growth is not spectacular, it confirms the Ipsos teams' ability to bring back stability, even before the first effects of "The New Way" project.

For 2014 as a whole, Ipsos recorded revenue of €1,669.5 million, down 2.5% on the previous year. These annual figures still bear the scars of negative foreign exchange trends (2.2%) and negative scope effects (0.6%), only partially offset by the small organic growth of 0.3%.

Overall, 2014 was an unsatisfactory year, despite the slight rebound at the year end. Over the past three years, Ipsos hasn't progressed in financial terms, making a transformation effort necessary. This is being carried out through "The New Way" project, whose main lines are presented below and based on which Ipsos expects a return to growth.

OUTLOOK FOR 2015
2014 will not go down in history as a happy year in which a long-awaited return to growth gave citizens new impetus, a spirit of openness, and the confidence without which nothing solid – either in the private sector or government activities – can be built.
2014 will go down as a complex, unclear year. It wasn't totally deprived of good news, as the drop in oil and gas prices shifted more than one trillion dollars from the few producing and exporting countries to a much larger number of importing countries. Low interest rates alleviated the debt of numerous countries, as well as those of households and businesses. The total amount of savings generated by maintaining interest rates at very low rates represent several hundred billion dollars. Will these amounts be invested, saved, or spent? Over the year, exchange rate fluctuations were quite favourable for most companies, except of course for those who report their earnings in dollars.

Why this mixed impression? Firstly, money isn't everything, even though it's a very important factor. As we pointed out a year ago, the transformation of our environment, which is increasingly global, technological and finance-led, exacerbates the anxiety associated with the changes. This acts as fertile breeding ground for the spread of xenophobic, fundamentalist and violent ideologies which cannot be contained, given the tenuous legitimacy of political authorities. Furthermore, abundant, easy money can only support demand – and consequently the economy – if it is appropriately distributed, which is not the case today. The governments which have given a lot since 2008 have reached their limits and can no longer borrow, except for the Greeks – our best debtors. In developed countries, the middle classes are waiting in vain for the return of inflation, which would whittle down their debts and prompt them to bring forward their purchases.

Most significantly, there is no respite from the continuous pressure on prices. Who could have imagined that the drop in the value of the euro against the dollar, pound sterling and Chinese yuan wouldn't generate a bit of imported inflation, but would instead be concomitant with a drop in the general price index?

The dice have been thrown but have not yet settled. How will Europe, and other world regions in its wake, avoid the fatal triggering of a deflationary process? How can the spread of deflationary expectations be avoided, in an economy characterised by hyper-competitiveness, the constant questioning of consumers and clients as to the value of what they buy, the availability of price comparers, and the reduction of public spending (or at least its control)? 2015 will provide us with some answers. The conditions are in place for vigorous economic recovery, except for weak demand. We now know that productivity gains (which are very disappointing) and population growth (which is fortunately decelerating) will not be sufficient to ensure sustainable economic growth. Households will need to play their part.

As for businesses, aren't they in the best position to spur demand by making their offer more attractive? We are currently in a sluggish environment. Yet, there are impressive examples of success on the part of certain brands which have distinctive offerings and rely on strong, persistent communication. Unfortunately, these successful cases of strong offering supported by effective marketing are concentrated in a few sectors: luxury products, online retail, and local brands (or those considered as such by consumers).

It's a start, but insufficient to spur companies to turn their brands into the spearhead of their growth.

Admittedly, marketers and communicators do not have an easy task. They have to deal with (perhaps overly) well-informed clients and consumers of fragmented media, too expensive when they are "traditional", perhaps not sufficiently monetised when they are digital and mobile, competitors who are better at imitating than innovating, and a wealth of contradictory, confusing information. They must also work under pressure from cash flow fanatics who, through their zeal, ultimately slow down decision-making, making actions less risky, sure, but often less effective. Together these factors hinder the deployment of an attractive offering, engaging communications and optimal media choices.

Our industry needs to do more to help its corporate and institutional clients. Ipsos has decided to transform itself through its "New Way" programme.

Between now and 2017, we want to usher in change. We want to help our clients be better informed and more certain of their sources, so that they can make faster, better decisions about their products, services and brands.
To that end, we have adopted a new tagline, "GAME CHANGERS", as a sign of our commitment. We intend to muster all our resources, energy and know-how to deliver on our pledge of changing, so that we can help our clients change too.

The New Way programme was launched in the summer of 2014. Although its principles have already been decided on, the precise definition and implementation of all the changes that these principles entail will take place over the next three years.

Around 20 key measures have already been identified. and are in the process of being implemented. These revolve around four key themes:

  • Simplifying our organisational structure and governance.+
  • Clarifying our priorities and values, together with an overhaul of the performance evaluation systems of teams and individuals and, consequently, of the criteria for awarding performance-related compensation (cash and free shares).
  • Redoubling our efforts to develop solutions linked with the issues of market digitisation, notably with the creation of Ipsos Connect which coordinates Ipsos’ competences and services in the measurement of media, communications and brands. Ipsos Connect will manage all issues related to the interactions of content/channels.
  • Increasing and rechannelling investment expenditure to bring "new services" and services managed centrally, at least in their launch and maturity phases, to market more quickly.

We also want to be more present with pharmaceutical companies, financial services and vehicle manufacturers, national and international governmental or non-governmental institutions, and the media. Of course, these new and centrally managed services are, for the most part, tailored to the needs of our different client bases.

We intend to leverage our competitive advantages: our size, presence in all major markets, both developed and emerging, our market knowledge and client relations, the diversity and expertise of our staff, our ability to innovate and our values of integrity, curiosity, collaboration, client focus and, of course, entrepreneurial spirit. We are confident in our ability to showcase our skills, experience, objectivity and flexibility, and to deliver reliable, real-time, clear and insightful information.

The New Way programme will not have a dramatic impact in the short term, but should allow Ipsos to return to real, albeit modest, organic growth of 1-2% in 2015, increasing to 2-5% in 2016 and 2017.
Our profitability in 2015 will be affected by additional capital expenditure and restructuring costs in the region of €20 million, with an operating margin of 10%. This target will be increased in 2016, reaching 11-12% in 2017, as previously announced.

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