General Meeting Nobodys Unpredictable Paris, 18 May 2005 Contents - - PowerPoint PPT Presentation

General Meeting

Nobody’s Unpredictable Paris, 18 May 2005

What is she going to say? What is he going to hear? What does he have in mind?

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Contents

Ipsos and its market Transition to IFRS

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Ipsos and its market

4

2003: a market worth USD18,922 million(1)

2004: = 5% growth at constant exchange rates (2) An expanding market:

Strong momentum in major markets in 2004 US: up 9.9% France: up 5.6% UK: up 5.4% Strong impetus in emerging markets Asia, Latin America and Eastern Europe Strong drive in certain sectors IT, telecoms, corporate and media

1 - Sources: Esomar 2004; 2 – Ipsos estimate

A buoyant research market

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11%

• 10%

329 297 340 365 NOP 10 4% 7% 9,330 8,930 9,089 8,687 Top 10 combined 49% 321 300 625 480 539 1,131 1,316 913 2,697

2001

9 8 7 6 5 4 3 2 1

• 56%

53% 51% % of global market

• 3%

3% 330 338 364 Westat 27% 34% 401 316 338 Synovate 0%

• 22%

490 490 590 Information Resources 6% 26% 606 570 538 Ipsos 12% 24% 671 596 563 GfK 8%

• 3%

1,098 1,017 1,099 Kantar Group 3%

• 5%

1,255 1,223 1,297 IMS Health 1% 53% 1,393 1,385 966 TNS 2% 2% 2,757 2,697 2,994 VNU

% change

• ver 1 year

% change

• ver 3 years

2004 2003 2002 Revenues in millions of euros

Research market in 2001-04 / General rankings

(1) (2) (1) Pro forma total (TNS +NFO) for 2003 (Esomar) - (2) Ipsos estimate for 2004 - Source: Companies for 2004 (2)

A consolidating market

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42% 40% 38% 37% % of global market 1%

• 11%

865 860 988 975 TNS +NFO 5% 7% 4,603 4,310 4,413 4,313 Top 10 combined

• 496

498 NFO

• 254

219 365 321 300 450 480 477 949

2001

9 8 7 6 5 4 3 2 1

• 2%
• 7%

237 242 264 Arbitron 17% 49% 327 280 274 GfK 11%

• 10%

329 297 340 NOP

• 2%

3% 330 338 303 Westat 27% 34% 401 316 338 Synovate 5%

• 9%

410 390 416 VNU 6% 26% 606 570 538 Ipsos 1% 81% 865 860 492 TNS 8% 16% 1,098 1,017 952 Kantar

% change

• ver 1 year

% change

• ver 3 years

2004 2003 2002 Revenues in millions of euros

Survey-based research market in 2001-04

(1) (2) (1) Pro forma total (TNS +NFO) for 2003 (Esomar) - (2) Ipsos estimate for 2004 - Source: Companies for 2004

A consolidating market

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A fast-moving market

Three key positives

More multi-country research Stronger operating performance More value:

Expertise Local presence Commitment Reputation

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Ipsos in 2005: Robust growth in the first quarter

North America Latin America Asia-Pacific and Middle East Total Europe 52.2 10.9 15.1 143.5 65.3

Q1 2005

• rganic growth

+6% +22% +17% +7.5% +6%

2004

• rganic growth

+7.5% +25% +7.5% +8.2% +6.5%

Q1 2005 revenues in millions of euros

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Ipsos in 2005: firm growth in all areas of specialisation

Marketing Research Media Research Opinion & Social Research

Total

Advertising Research CRM-CSM

Other 78.1 11.8 7.6 143.5 31.5 +7% +2% +5% +7.5% +13% 13.9 +9% 0.6 NM

in millions of euros

+7% +1% +13% +8.2% +15% +8% NM

Q1 2005

• rganic growth

2004

• rganic growth

Q1 2005 revenues

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Transition to IFRS

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Contents

1 – Background 2 – Main IFRS impacts 3 – Summary Appendices

• Stable platform
• Minor impacts
• 2004 financial statements restated under IFRS

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Background

13

Background

Regulatory framework

European Commission regulation no. 16606/2002 of 19 July 2002 on the application of international accounting standards

As from 1 January 2005, all listed EU companies are required to apply IFRS (International Financial Reporting Standards) to their consolidated financial statements. IFRS is optional for unlisted companies. IFRS does not apply to individual company financial statements in France.

The 'stable platform' comprises 36 IFRS standards, including 31 former IAS standards and their interpretations (IFRIC: International Financial Reporting Interpretations Committee)

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Background

IFRS transition work carried out by Ipsos

1998 (run-up to IPO): Ipsos accounting principles brought in line with IAS (International Accounting Standards) by adopting most of the recommended treatments laid down in CRC regulation 99-02. The main changes were in the following areas:

• Revenue recognition
• Provisions for pension obligations
• Finance lease adjustments
• Amortisation of business goodwill and acquisition goodwill over 20 years.

2003-04: differences with respect to IFRS compiled by an international in-house team, assisted by a specialist consultancy. September 2004: first estimate of IFRS impact. 2005 General Meeting: presentation of IFRS impact on 2004 financial statements. First-half 2005: publication of first IFRS-compliant financial statements (including IFRS reclassifications and additional disclosures required in the notes to the financial statements).

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Background

IFRS 1: rules for first-time adoption For consolidated financial statements, retrospective application of IFRS from 1 January 2004 However, IFRS 1 allows for certain exceptions and provides

• ptions for alternative treatments. For the Ipsos Group, these
• ptions apply to the following areas:

Goodwill adjustments Treatment of foreign exchange gains and losses Asset valuations Stock option valuations Financial instruments

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Background

• IFRS 2: Share-based payment
• IAS 1: Presentation of financial statements
• IAS 7: Cash flow statements
• IAS 12: Income taxes

IAS 33: Earnings per share

• IAS 21: Effects of changes in foreign exchange rates

Minor impact

• IAS 37: Provisions, contingent liabilities and contingent assets
• IAS 32 and 39: Financial instruments
• IFRS 3: Business combinations

Significant impact Some impact

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Background

• IAS 36: Impairment of assets
• IAS 14: Segment reporting (single business only)
• IAS 17: Leases
• IAS 7: Inventories
• IAS 24: Related-party disclosures
• IAS 19: Employee benefits
• IAS 18: Revenue
• Minor

impact

IAS 38: Intangible assets IAS 16: Tangible assets

Significant impact Some impact

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Background

To sum up...

The presentation that follows details the adjustments (= impacts to net profit or shareholders’ equity) to be made by Ipsos as a result of applying IFRS rules. Overall, the adjustments made to Ipsos' 2004 financial statements have a positive impact on:

Net profit Shareholders' equity

The adoption of IFRS has no impact on the Group's cash flow

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Main IFRS impacts

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Options available:

1) Restatement of business combinations that occurred prior to the date of first-time adoption under IFRS 3 2) Application of IFRS 3 as from the date of first-time adoption, with no retrospective restatement

Option 1 selected by Ipsos

• Retrospective restatement of business combinations that have occurred since

1 January 1997 (date of changeover to IAS)

• Application of IFRS 3 as if this method had always been used
• Impact: for acquisitions made since 1997, the relevant IFRS rules for valuing

each business combination are applied retrospectively. For Ipsos, the main rules are:

• IAS 16 and 38 (recognition of assets) and IAS 36 (impairment of assets)
• IFRS 3 and IAS 37 (recognition of provisions for restructuring)

Treatment of goodwill Options for first-time adoption (IFRS 1)

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Treatment of goodwill Business combinations (IFRS 3)

General rules for treating goodwill

Acquisition goodwill no longer amortised (retroactive to 1997) Expected earn-out payments stated at their present fair value together with repurchase agreements (see IAS 32-39). (Under French GAAP, earn-outs are indicated in the notes to the financial statements) Formal application of impairment tests (IAS 36). The recoverable amount of goodwill should be measured as the higher of fair value (selling price) and value in use (present value of estimated future cash flows)

• No impairment provision is required

Impact of impairment tests

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Treatment of goodwill

Effects of changes in foreign exchange rates (IAS 21)

Exchange rate applicable

French GAAP: two options

• Foreign currency-denominated goodwill is translated at

the year-end exchange rate or historical exchange rate

• Ipsos had opted for the historical exchange rate

IFRS: foreign currency-denominated goodwill is translated using the year-end exchange rate Differences between the historical exchange rates used by the Group and the year-end exchange rates for various currencies (in North America and Latin America) give rise to a foreign exchange loss.

The above figures are unaudited

• €23.528m

Impact of exchange rates

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Treatment of goodwill Provisions (IFRS 3 and IAS 37)

Two-fold impact

1) Restatement of provisions for restructuring costs 2) Retrospective application of IAS 37

Provisions for restructuring

French GAAP: any provisions for restructuring arising from a business combination are recognised as identifiable liabilities and are included in the goodwill calculation. IFRS:

• Only provisions for restructuring within the scope of IAS 37 and

previously recognised by the acquired company may be considered as identifiable liabilities when calculating goodwill.

• All provisions arising from a business combination must be

recognised in the income statement.

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Treatment of goodwill Provisions (IFRS 3 and IAS 37)

Retrospective application of IAS 37

Provisions recognised under French regulations do not meet the recognition criteria specified by IAS 37, notably provisions for restructuring programmes connected with acquisitions

• €9.696m

Impact of provisions for restructuring since 1997

The above figures are unaudited

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The above figures are unaudited 23,590 Minority buyout agreements 10,075 Earn-out payments IFRS restatements Impact of impairment tests

• 23,528

Impact of exchange rates 372,698 IFRS goodwill (net value)

• 80

Other restatements

• 9,696

Restatement of provisions for restructuring 81,220 Writeback of all amortisation charges since 1997 291,117 Goodwill (net value) French GAAP in thousands of euros as at 31 Dec 2004

Treatment of goodwill Summary of restatements

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Stock options Choices for first-time adoption (IFRS 1)

Options available:

1) Application of IFRS 2 to all stock options outstanding on the date of first-time adoption 2) Application of IFRS 2 confined to stock options granted after 7 November 2002 and still outstanding at the date of first-time adoption Option 2 selected by Ipsos

Application of IFRS 2 to stock options granted after 7 November 2002 and not yet vested at 31 December 2003

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Stock options Share-based payment (IFRS 2)

General rules for treating stock option plans

Plans measured at fair value Verified by independent experts Expensed over the remaining vesting period

The above figures are unaudited

• €1.068m

Impact on 2004 profit

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Financial instruments Options for first-time adoption (IFRS 1)

Options available:

1) Continued application of French GAAP to 2004 financial statements

• Application of IAS 32 and 39 as from 1 January 2005
• Expected impact to be disclosed in the notes to the financial

statements as at 31 December 2004

2) Early application of IAS 32 and 39 as from 1 January 2004 Option 2 selected by Ipsos

Application of IAS 32 and 39 from 1 January 2004

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Financial instruments (IAS 32 and 39)

General rules for treating financial instruments

Measured and recognised on an amortised cost basis (issue expenses and fees are taken into account when calculating the rate applied) Recognised on a historical cost basis (issue expenses and fees are recognised in the income statement and spread over a fixed period) Debt Measured at fair value, with positive or negative changes recognised in the income statement IAS 39 Recognised as off balance- sheet commitments French GAAP Derivatives

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Financial instruments (IAS 32 and 39)

Ipsos hedging transaction

• Fixed-rate loan partially hedged by an interest rate swap
• Effective hedge

The above figures are unaudited

+€0.005m Change in fair value to be recognised in income statement

• €0.394m
• €0.399m

Swap value at end-December 2004 Swap value at end-December 2003 Minority buyout agreements must be restated as debt, even if they take the form of options (French GAAP: recognised under off-balance sheet commitments) +€1.931m Elimination of minority interests from income statement

• €4.753m

Decrease in minority interests (=shareholders' equity)

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Income taxes (IAS 12)

Goodwill amortisation is now prohibited under IFRS 3 However, tax legislation in certain countries still allows companies to deduct these amortisation charges This change (which mainly affects US companies) requires the recognition of deferred tax liabilities. This has an impact

• n the 'effective tax rate' in the income statement due to the

reduction in tax savings The actual pay-out tax rate remains unchanged.

The above figures are unaudited

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Income taxes (IAS 12) Summary of IFRS impact

The above figures are unaudited

21.27% Actual pay-out tax rate 32.15% Effective tax rate under IFRS in the income statement as at 3 Dec 2004 4.89% Impact of deferred tax liability arising from non-tax deductibility of goodwill amortisation 5.99% Other impacts (mainly recognition of stock option valuation and provisions for restructuring) 21.27% Effective tax rate under French GAAP as at 31 Dec 2004

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Earnings per share (IAS 33)

Calculating the number of shares

French GAAP: treasury shares held in connection with stock option plans are not deducted from the EPS denominator IFRS: all treasury shares are deducted from the EPS denominator

+8.16% Increase in basic earnings per share 6,494,894 Weighted average number of shares under IFRS 7,072,214 Number of shares Weighted average number of shares under French GAAP

The above figures are unaudited

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Summary

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Summary: Impact on key indicators

€25.630m €3.95 Net profit Earnings per share €11.682m €1.65 €53.179m €47.651m Operating profit before exceptional items Operating profit after exceptional items €54.678m €51.540m 67.0% Net gearing

(interest-bearing debt/equity)

78.5% €237.751m

• IFRS

Shareholders' equity €201.605m

• French GAAP

The above figures are unaudited

up 139%

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Appendices

Stable platform Minor IFRS impacts 2004 financial statements restated under IFRS

37

38

Minor IFRS impacts Treatment of foreign exchange gains and losses (IAS 21)

Options for first-time adoption:

1) Continue to show foreign exchange gains and losses as a separate item under shareholders' equity

• These gains and losses result from the translation of

foreign currency-denominated financial statements for the purposes of consolidation

2) Transfer foreign exchange gains and losses to consolidated reserves Option 2 selected by Ipsos

• Foreign exchange gains and losses reset to zero

39

Minor IFRS impacts Asset valuations

Options for first-time adoption:

1) Retrospective application of IAS 16 (tangible assets) and IAS 38 (intangible assets)

• Assets recognised based on historical cost
• Assets depreciated over their useful life

2) ‘Estimated cost' method used to restate certain tangible and intangible assets at their fair value as at the transition date Option 1 selected by Ipsos

The application of IFRS 1, IAS 16 and IAS 38 only has a minor impact, as Ipsos already started bringing its accounting principles in line with IFRS in 1997.

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Other minor impacts

Start-up costs Deferred charges Foreign exchange gains and losses Leases

41

Financial statements restated under IFRS Balance sheet assets at end-Dec 2004

42

Financial statements restated under IFRS Balance sheet liabilities at end-Dec 2004

43

Financial statements restated under IFRS 2004 profit & loss account

Note: Financial statements currently under review by the auditors