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The Epsilon Impact: Publicis

23 July 2020 by jbchevrel

Publicis Groupe SA (PUBFP) is a communication group based in Paris that provides advertising and communications services organized into 4 segments: Communications, Media, Sapient (digital transformation services) and Health (health and wellness business transformation). Today cash rallied between 1pt and 2pt on better than expected revenue for PUBFP, thanks to the US segment. The 5y CDS tightened by roughly -20bp to close roughly at 80bp. Indeed, Revenue was reported E5.3B in H1-2020 vs E4.9B for the period H1-2019. Acquisitions (net of disposals) have had a chunky contribution of +E743M, most of it being related to the acquisition of Epsilon. In organic terms, the growth is -8% for H1-2020. The acquisition explained the +30% optical growth in the US, while US organic growth is also negative (-4%) although less than Europe (-17%). EBITDA came E923M in H1-2020 vs E885M for the period H1-2019. That is including the contribution of Epsilon. The impact of the cost reduction plan announced in April was E286M in H1-2020. Free Cash Flow before change in working capital requirements has been reported a tad below +E500M, almost exactly in line with the number reported for the period H1-2019. From EBITDA E923M, -E81M interest has been paid, -E234M in leases, -E74M in tax, -E73M in fixed-asset investment. Some tax due for H1-2020 has been delayed (for ref., PUBFP had paid -E190M tax in H1-2019). Noteworthy that Operating income was down -50% compared to H1-2019, and Net income was down -60%. Net Debt as of the end of June 2020 was reported at E3.2B from E2.7B as of the end of December 2019. PUBFP average Net Debt in H1-2020 was E3.7B compared to E0.6B in H1-2019, reflecting the financing linked to the acquisition of Epsilon for $4.5B.