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Hello, and welcome to the Ipsos 2022 Third Quarter Results. My name is George. I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I now hand the conference over to your host, Mr. Ben Page, to begin today's conference. Thank you.
Thank you, George, and my name is Ben Page. Good to meet you all again. My colleague, Dan Levy, our Financial Director, CFO, who's sitting here with me. It's our pleasure to take you through the third quarter results, which are, I think you'll find, are impressive.
So we'll look at the numbers. We'll look at the regions and the various activities of Ipsos, our diverse portfolio of services. And then we'd like to give you a bit of outlook for the rest of the year in terms of where we think we're heading now in light of the latest numbers.
So if we look at our revenue now, we're at EUR 1.7 billion, and our total growth so far this year is now at 13.4%, hurt by some currency effects, but the organic growth is 6.3%.
And importantly, remember, this is a year where we face a cliff edge with some major COVID contracts that now end this year. So the underlying business, net of removing all of the COVID effect, has actually grown at 9.2%.
If we look at Q3 in particular, what's encouraging about Q3 is that the growth in Q3 is actually double the growth in Q2. So it's 14.3% overall, organic at 5.3% and net of COVID effect, 6.9%. So again, we are very much encouraged by that despite all the headlines of [ unrest ], the business is in strong health. Dan?
Thank you very much, Ben. So let's go into a bit more detail. So starting with the revenue breakdown by region. Obviously, we see zero growth in the EMEA region for obvious reasons. It is the region which is the more impacted by the war in Ukraine but it is also the -- don't worry, you have all these COVID contracts that Ben just mentioned that are now over. If you takeout the effect of this big COVID contract, the growth, the other [ end ], organic growth would be above 5%, and we have particularly good performance in the zone, in the U.K., in France and in Italy.
Turning now to the Americas. Americas doing very good performance, both in North America and Latin America, with the 14% organic growth year-to-date.
So we have, as you know, U.S., which is our most important country and which is quite important as well because that's what are the most important priorities in our strategic plan for 2025, which makes very good results as well, particularly driven by our DIY platform Ipsos Digital, but are also our TMT clients and our business in public affairs.
Very good results as well in Asia Pacific with a 10% organic growth as well despite the headwinds in China and the lockdown that China is experiencing [indiscernible] and very good performance as well in the zone of India and Korea.
If we now turn to the breakdown by audience. We have a double-digit growth in our consumer bucket, 12.5%. This is double-digit growth in the service line that we're on [indiscernible] health for our clients.
It also reflects the fact that particularly for our strategic clients, which are growing well, they need to understand the change in consumer behavior in an inflationary world, and this is driving our business with consumers. Ben will come back to that a bit later.
On clients and employees, we have an 8% growth organic year-to-date. This is linked to the reopening of the economy, the reopening of hospitality, the resumption of travel but also an increasing interest in our clients to assess their own clients' experience.
We have obviously a decrease on citizens, minus 7.5% because of the end of the big COVID contract that we mentioned before. When you take out this effect of this big COVID contract, our citizens would be growing organically double digits.
And doctor and patients, we are experiencing a 3.5% growth year-to-date after a very good year in 2021. So we have an unfavorable basis effect, which explains the relatively low growth of 3.5% on doctors and patients.
Turning now to the new services, which is a slide that you are, I guess, used to look at. So we have a double-digit growth as well on new services, 11.5% organic. The new services now represent 21% of our revenue.
These new services, a reminder to you is about when listening Ipsos Digital, which is our DIY platform, data analytics and client advisory services.
Ipsos Digital, which is, as you know, one of our most important priority now of our strategic plan is growing very quickly, plus 90% organic growth year-to-date. We have so far a EUR 40 million revenue [ as set in ] September, and we target a EUR 60 million at the end of the year.
Looking at the usual slide on the data collection, we can see a continuity in the shift from offline to online. So it's used to be -- the online used to be 55% of our work in 2019. It's now 64% although in some countries like India, for instance, and then we'll come back to that shortly, our offline business is growing as well very quickly.
So now over to Ben to give a few highlights on geographies and sectors.
Thank you, Dan. So looking at our largest market, and of course, the largest market in the world for market research, we've got continued double-digit growth, which is great, heavily concentrated in areas like government, which, of course, as we said on the 14th of June is one of our key sectors and the American public sector is, of course, one of the largest in the world in health care, for tech clients and social media clients and also in gaming and streaming.
So that's, I think, again, very encouraging. And just by news that you may have heard about major tech companies, we are not seeing any slowdown in our tech, media and telecom's work at all.
Overall, when we have triple-digit growth in some areas like Ipsos Digital, which is our software as a service offering for our clients, but also in a range of complex data analytics type products, so things like our real-time multisource project monitoring that we do.
So for example, in Ukraine, where we're filming real-time data using drones, measuring social media, et cetera, to understand the level of damage that's taken place inside Ukraine as well as interviewing the citizens.
So there's a range of new services that we're developing in America as well as what my colleagues there described is very differentiated and scalable new offerings.
And two of those are, for example, the work that we've done with the Association of National Advertisers in the United States to look at how women are basically being portrayed in the media in advertising. So it's creating a scoring model for gender equality.
And what we can now do with their endorsement is add that to our Ipsos Digital platform to allow advertisers to check exactly where they performed in terms of gender equality measures. And with the rising importance of ESG for all of our -- for many of our clients, that's particularly attractive.
Another example is using tools to measure the digital ecosystem among -- in terms of pharma and health care products. So we're understanding how doctors and patients are talking about kidney disease, mapping, hauling the patient journey, how they talk about it, looking at different types of data, both in social media and on the web generally and then bringing all that together to get a full picture.
So we've got more and more of these offerings that we've developed that we can scale and employ both in the United States and elsewhere, and thank you to my U.S. colleagues. In Asia, we have seen with the reopening of the economy, some really great growth this year.
And besides China being impacted, we have double-digit growth or more in both India and Korea. I've just come back from Mumbai, really impressive in terms of the energy and diversity of what we're doing there. We're diversifying our top 10 client list.
We've always been strong in CPG, consumer packaged goods, in the Indian market. We're now seeing very strong growth in tech, in telecom and also in the public sector.
And of course, India is an incredibly diverse country. We interviewed in up to 37 different languages, offline interviewing in a country that still has very high rates of illiteracy is still important in a country like India.
And just as some examples of that as part of our growth that work for the government there is now expanding rapidly. We've just completed 2 major projects: one, looking at sanitation in 4,000 towns and cities across India; another looking at the water quality and cleanliness right across the country, and that was released on Mahatma Gandhi's birthday by the President of India just a few weeks ago.
So those projects really make a difference. And the fact that our Indian team is trusted to do that type of work by the Indian government is again, I think, testimony to our strength in that market.
In Korea, we have a new strong female country manager, who's doing brilliantly in our work with Samsung but also across the tech automotive and government sector. And so a really impressive performance.
One example of that is our multi-country studies, launched from Korea looking at shopper experience. And one of those is for Samsung, a major, of course, Korean company.
But looking at how people are shopping for mobile phones, the merchandising, the shopper experience, ask what the salespeople are actually doing in the store and bringing all those things together. So again, really positive growth in Asia despite the headwinds that Dan has talked about in China.
If we look at the government generally, we've seen very good growth this year, although we're showing at the headline level, the numbers going backwards. Of course, that's just because we have huge growth in 2020, 2021. And if you look at the underlying business, again, we have double-digit growth.
Governments all over the world tackling problems like inflation, obviously, poverty and inequality and unemployment, which we are tracking in our What Worries the World Survey.
But underneath all this, as government budgets remain under pressure as expectations of governments remain high everywhere, government needs help on things like policymaking, how to spend money, the return on the money that they do spend from taxpayers, of course, who are not particularly happy about paying more taxes in those countries.
So 2 examples of the type of work that we're doing there, a major study for the Department of Veterans Affairs in the United States. We're looking at 1.8 million veterans and the quality of care and satisfaction with health care that they're receiving.
Or if you go across the Atlantic to Europe, the European Commission is a major client for us. And one of the studies we're doing for them, among many, is looking at quality of life across 84 European cities, are basically these are urban policy working in Europe.
And we know and we can see that our government work will continue to grow in future. Government in some ways is catching up with the rest of the world.
And then finally, brand health tracking, this is originally one of our sort of core businesses, how our brand -- how the brands that we work for express themselves and then how they're recognized by the public.
We've got over 20% growth in our tech, retail, e-commerce and financial services work and brand tracking. And the great thing, of course, about -- for us as a business about brand tracking is these are long-term relationships. As it says here, over 60% recurring business.
Some of these clients, we've actually worked for since the 1970s. We're bringing together both tracking data from people, from humans, but also passive data from what people are saying online from social media and using machine learning and artificial intelligence then to really analyze and drive that data.
To give you a practical example of that, the Pernod Ricard, where we've built them a brand tracking framework. It brings together key brand KPIs, so how each brand is doing, links that to social media data.
And then across 35 countries is looking at consumer behavior, consumer sentiments and looking at what's driving motivations and preferences on a real-life, real-time basis. So again, really encouraging to see the double-digit growth in brand health tracking, one of our key businesses.
And we don't know what will happen in 2023. We can see lots of uncertainties out there. I think the key point to remember though is that many of those uncertainties, whether it's geopolitical tensions, I mean we are doing research in Ukraine that we would never have imagined a year ago to be quite honest.
Work around inflation, it's obviously a challenge, and we believe our business is dealing with it well. We'll talk about that in a second. But also of course it's triggering endless studies about how consumers are behaving, the pandemic in China, the climate change and technology tipping points.
All of those things are challenges, but they are also opportunities for us because it triggers the need on the part of our clients to know. And that's what Ipsos is built for.
So I think as we go into 2023, we should remind -- it's important to remember that one of the reasons for our strength this year has been our diversity, both in terms of our geographic footprint and the spread of clients. It's an old saying that, war in Europe means the business is good in Latin America. So that certainly seems to be the case now.
I think we've seen in the last 24 months, China doing well -- doing less well, Asia Pacific doing less well, but then actually now is that part of the -- except in China has now taken off again. So we slowed down in Europe but we've taken off in Asia.
And that's -- a spread of countries and regions that we represent means that we're, in a sense, well placed for whatever happens in the global economy. We're not too dependent on any one client. Only about 17% of our revenue comes from our top 10 clients, only 1/4 from our top 20 clients.
So again, we want to build strong relationships with all our clients, but we are not too dependent on any single one. And when you look at the different sectors that we're present in, and again, this is a deliberate strategy as we discussed on our Investor Day on the 14th of June.
We are not just concentrating like some competitors very heavily on the consumer packaged goods, important though they are and marketing tech. But our pharma business is growing at a compound rate of 9% a year. It's become 16% of our revenue now back -- compared to 12% back in 2014.
The public sector has grown from 6% to 11% of our revenues, and it's pretty much countercyclical. We have seen for years and years, and it's my personal background, it's countercyclical in a recession, 20% compound growth over the last few years.
Our work for what we call our booster clients, Google, Amazon, Facebook, Apple, et cetera, growing by 15% compound growth over the last 3 years. And again, from only 1% back in 2014 to 6% now, those individual clients.
And consumer package goods are still a very important part of the sectors that we work in. It's historical. It's resilient. People always need soap, toothpaste, et cetera.
So the fact that it's diminished slightly as part of our portfolio, in some sense, it's just protected in some ways, but overall 5% compound growth. So again, we're in a range of sectors that mean that we feel that we're ready for whatever comes next in the global economy.
And when we look at going forward into 2023, at this point, our order book for 2023 compared to last year at this point is up 8%. So again, we feel reasonably confident about the future.
I said that we'd talk about the outlook for the rest of the year. And I think all the signals that we've seen, I mean that we could now say that it's almost -- we are pretty certain that our organic growth will be closer to 6% than the 5% we were talking about at the beginning of the year.
The operating margin is holding up well. It will be comparable to last year. And I think the key point for experienced Ipsos watchers, Dan and I were just discussing this, what's clear is that we are now -- we have now moved to a new level of operating margin that we are able to maintain that is significantly above where we were 4 or 5 years ago. And of course, we continue to aim for our 15%.
But that is where we are. We feel pretty confident about the rest of '22 and actually confident about 2023. So thank you for listening. I think you can dial in if you want to ask any questions, and we remain at your disposal, frankly.
[Operator Instructions] Your first question comes from Emmanuel Matot calling from ODDO.
Do you hear me?
Yes. Yes. We hear you.
Okay. So I have several questions. First, you are talking about an order book of 8% higher than last year at end of September for 2023. What does the order book level at the end of September means in terms of percentage of sales?
Good question. It's about -- I think from memory, around 30%, 20% to 30% of the actual work that we will tend to do each year.
So it's 20% to 30% of the order book of the beginning of the year, so what we have so far would be roughly 10% of the whole year 2023. Is that clear, Emmanuel?
Okay. That's clear. Yes, that's very clear, very useful. Second question, still about the order book. Can we have the level of growth at the end of September for 2022?
That's an interesting one. I think -- I mean, I think basically, we are saying that we are absolutely confident that...
I was actually about to point that out.
Yes. If you -- I mean, if we can do the math, that we are absolutely confident about 6% organic growth this year around the range closer to 6% than 5% as we've been saying. So we're not at all worried about the last quarter.
Okay. Can you also remind us your exposure to the U.K. market? And if we have to be worried for your business in that country following the political instability and the financial crisis, but that may be also an opportunity at least in the short term.
Yes. So as we showed you, I'll go back -- I don't know if you can still see the slides as well as -- I don't know if you still have vision. It's about 16% of our revenue this year. Actually, the business is performing very strongly.
So although the U.K. is one of the countries that has a strong COVID effect in its numbers, the underlying business is in double-digit growth and is in one of our strongest countries.
And I think, to be honest, a bigger upset is actually a general election and a change of government than anything else because the other thing you should remember about the U.K. business and indeed the U.K. stock market is, of course, that a lot of our business in the U.K. is not about the U.K. economy or even in the U.K.
A very large part of it is colleagues based in the United Kingdom, but actually working and doing research for global clients around the world because London is one of the global cities in this industry, and that's one of the reasons why we have such a strong U.K. business.
So I'm not too worried about the state of the U.K. economy and its impact on our U.K. numbers, to be honest.
Okay. My next question about M&A, some negotiations progressing well. Are you confident to achieve some promising deals in the near future? I mean, the next 12 to 18 months. I saw you have just appointed a new head of mergers and acquisition at Ipsos.
Yes. Well, precisely, his task is to help achieve that. So we do have some things that we will -- we think we'll be able to announce very soon. We have a pipeline of over 20 companies that we're talking to, and we will -- it's certainly one of our top priorities, and we'll keep working hard on it.
So we have more than 20 targets. There are small things, bigger things and things which are more advanced than others, and we should probably be able to announce something at some point.
The next question is coming from Guillaume Muros from Societe Generale.
Congratulations for the results and thanks a lot for the very clear presentations. I do have some questions though, some have already been answered.
And perhaps on -- you elaborated a bit on these uncertainties becoming opportunities for your business. Would we try to quantify a bit, these new contracts related to war, inflation in terms of their share of revenues for Ipsos? That's the first question.
Yes. I don't think we are going to be able to give you that level of -- we don't publish that level of granularity to be honest.
But I think just as a very dramatic example, the fact that we were able to only shrink by 6.5% in the first year with COVID, and then in the second year of COVID 2021 to grow by 17.9%, that is actually a dramatic example of how the pandemic actually, for example, created a demand for work that we would never have anticipated.
So it's hard to be specific. Each situation is different. But we have a -- one of the strengths of Ipsos is the diversity of the services it provides.
The fact that we have physical infrastructure in many countries that allow us to do things that actually a competitor like [indiscernible] couldn't even begin to think about to be quite honest, means that the spread of countries, the spread of sectors, means that I think we are as confident as we can be about the future.
And to give you one more data point on that, we were just looking at what happened after the global financial crash. And actually, we shrank much less than we did during the pandemic. We only shrank by 3.5%.
So the spread of countries, the spread of services, yes, it's -- I don't think it means that growth is going to take off in 2023. We're not saying that, and we'll come to our predictions for 2023 in due course, but it does mean that we are a resilient company that is able to pivot quickly and also is very experienced in controlling its costs.
And so going on to 2023, you just mentioned that you're confident in 2023. What should we take as a reference point, although maybe it's a bit early, too early to tell? But can we just base ourselves on the 2022-2025 plan of 5% to 7% organic growth for 2023?
Exactly. I think -- yes, exactly. And we have absolutely no reason, as we say in the press release, to believe that we are not on track. We are on track to deliver that plan, and that's what we expect to happen in 2023.
And another one then on revenue diversification, which -- it was quite impressive to see that your top 10 client share has been decreasing constantly over the last 2 years or at least over the last 2 years, maybe perhaps more.
Can you elaborate a bit on who -- how are you diversifying with new clients -- for your new clients? Are they only coming from new services? Or...
Guillaume, it's across the piece. So we -- it's partly a reflection of our strategy of focusing on not just on the private sector, but also in the public sector. So there are public services all over the world that we add to our portfolio of major clients.
It's also our focus on, particularly in the United States on tech and media clients, which is at the -- if you look at the long run, you're seeing a business that 10 or 12 years ago was heavily focused on consumer packaged goods and has moved with the growth of the tech sector to have more clients in that sector.
But we have -- the other thing is that some of our new services offer -- while offering us very good margins, so something like Ipsos Digital, they also open up a new addressable market of sometimes national rather than international clients who previously may have regarded us as too expensive, but now can buy Ipsos expertise at a slightly cheaper price, but actually, it's a better margin to us.
And so all of those things together are driving our diversification of our client base.
Just 2 other questions for me. One of them is that I saw that you scheduled a new Investor Day for June 2023. Should we expect a new financial plan or only you deep diving into the new service lines and so on and so forth?
At the moment, I think we're sticking with the plan that's less than 6 months old on the 14th of June. Yes. And yes, so no, I think we might give you more detail on the services. And particularly, we want to talk about our focus on ESG.
You mentioned the appointment of Jean-Michel Mabon as our new Head of Mergers and Acquisitions.
But we've also appointed one of our most senior executives, Lauren Demar, to lead and to help focus our work on ESG, which is also important, both to us as a company, but also in terms of the services we provide to our clients, who are increasingly, of course, interested in that.
And the financial services sector is one of the sectors where our clients are particularly interested, of course.
That's clear. And the last one. Regarding inflation and wage growth, when we see WPP third quarter results, they were a bit less optimistic on operating margins and inflation pressures. Could you comment and perhaps elaborate a bit on that? Have you passed on wage or salary increase for 2023?
So well, I mean, again, we're not going to give details on 2023 right now. But what we've been able to hold down our costs as more than -- less than our prices have gone. In other words, the costs are rising less quickly than our prices, if you see what I mean.
So our margins are protected. We are passing on inflation. Remember, as we've discussed on these calls before, 1/3 of our projects last only 3 months. So we have a continual, in a sense, it's a bit like an aircraft carrier. There's planes coming in, there's planes taking off. We're able to review our pricing on a very regular basis on a substantial part of our portfolio.
Another 1/3 of our contracts have inflation baked in, CPI or otherwise. And another 1/3, of course, we will be negotiating.
It's something that we are acutely sensitive to, and of course, the fact that we operate in a very wide range of countries, including countries like Turkey and Argentina, means that we have a lot of very practical experience of dealing with the type of environment that we're moving into.
And we have deliberately used that experience in markets that where the many staff are less used to that type of environment. So, so far, it's not having an adverse effect on our margin, and we obviously intend to continue that way.
[Operator Instructions] We do have a question coming from Stephen Benhamou BNP Paribas.
Hello, do you hear me?
Yes.
Actually, I just would like a follow up on one of your comments. This is about the first question regarding your order book, which is up -- for 2023, which is up by 8%. I'm not sure if I well understand your comment about the 20% or 30% thing that you should recognize in 2023. If you can just be more clear on what does it mean?
I'll give that one to Dan.
So it just means that the share of the order book that we -- during 2023 that we have so far at the end of September is 30% of the whole order book that we will have at the end of the year for 2023. Is that clear?
Yes, much better.
[Operator Instructions] We do not appear to have any further questions at this time. I'll turn the call over back over to the meeting organizers for -- sorry, sir, [ they are ] making a liar out of me. We have Emmanuel Matot calling in. Please go ahead.
Sorry, just to follow up. On Ipsos Digital, the platform, is that correct expectation for this year a little bit lower than previous expectations? If I'm right, you don't expect sales growth in H2 compared to H1 for this Ipsos Digital platform.
Well, I don't exactly -- I think said something -- as I said, we target EUR 60 million for 2022. We have a 9% organic growth. And so your point is do you want to add a...
It's all in the first half.
It seems you expect exactly the same level of sales in H2 compared to H1, EUR 30 million [indiscernible] -- sorry, Ipsos Digital. It means no further growth -- it seems a little bit soft compared to the expectations for this year.
So we have EUR 40 million year-to-date. So we are at the end of September, and we expect EUR 60 million at the end of the year. So that's roughly, I think, consistent with the 90% plus in growth.
I think it works. But so, [ 2022 ] will still be on the numbers, they are absolutely no [ slowdown ], on the contrary, it's growing very quickly.
We're adding new countries and new services to the platform all the time. So no, it's growing.
It's growing very quickly.
At this time, we do not have any further questions. Thank you.
Thank you, everybody. We will see you next time.
Thank you.
Ladies and gentlemen, that does conclude today's conference. Thank you so much for your attendance. You may now disconnect.