(News Bulletin 247) – The survey study group saw its activity contract in the first quarter. Its sales were penalized by the end of major Covid pandemic follow-up contracts and a demanding comparison effect with a quality first quarter of 2022.

The popularity rating of Ipsos is at its lowest on the Paris Stock Exchange, with a share that plunges by more than 11% to return to the lows of November 2022. The sharp decline in the file is to be put into perspective with income down in the first quarter of 2023.

Between January and March, the third largest polling institute in the world achieved a turnover down 2.9% over one year to 532 million euros. Organic growth was -2.8%.

This poor performance is not a surprise for Ipsos. The group had already put the perfume market on the occasion of the annual results and had indicated that its first quarter revenues were going to be penalized by strong unfavorable base effects.

A quarterly performance “to put into perspective”

Ipsos’ quarterly activity no longer benefits from major Covid pandemic follow-up contracts, which had again generated significant revenue at the start of 2022. The first quarter of 2023 also suffered from the comparison with the very strong organic growth of the first quarter of 2022 (12.3%) which resulted from the post-pandemic rebound, particularly in the Americas, and from the good activity in China before the 2022 lockdowns.

Beyond these base effects, activity in the 1st quarter was penalized by the wait-and-see attitude of certain large players, including those in the tech industry in the United States. The company also points to strong lag effects between the order book and Q1 revenues in China after the country’s economy restarted with the abandonment of the zero-Covid policy. “As proof, the group evokes a turnover Q1 (first quarter, editor’s note) in China down 3.9% but an order book up by more than 13% over the quarter” explains Sarah Thirion, Equity Strategist at TP ICAP Midcap.

This slowdown observed in the first three months of 2023 should be put into perspective for the analyst. Ipsos reminds that the revenue growth of this quarter is not representative of the overall performance of the year.

“The first quarter remains a small quarter on the scale of the group’s annual achievements (approximately 22% of annual turnover over the past four years), which allows us to put things into perspective”, specifies Sarah Thirion, who also notes that in absolute value, “this first quarter still represents the second best historical performance of the group. Indeed this first quarter is in organic growth of 9% at two years and 25% at four years”.

By region, Ipsos’ activity in the Europe, Middle East and Africa region posted an organic decline of 6%, penalized, as expected by the company, by the end of the major Covid contracts concentrated in this region and by the effects of the war in Ukraine. Excluding the effect of Covid contracts, the underlying organic activity grew by more than 1%, specifies Ipsos.

In Asia-Pacific, activity also fell by 2% organically, penalized by the effects of the zero Covid policy in China at the start of the year.

In the Americas, organic growth is 1%, illustrating “contrasting realities” between a “very good momentum” in Latin America (organic growth above 9%) and an overall stable activity in North America, after an excellent year 2022 “The order book in the United States is however growing organically by 3.3%, presaging better fortunes to come”, notes TP ICAP Midcap.

Prospects for 2023 confirmed

The decline in activity observed in the first quarter does not prevent Ipsos from confirming its outlook for 2023 despite a “context subject to the vagaries of global uncertainties” and beyond the unfavorable comparison effects with the first quarter 2022,

The company says it is confident in its ability to achieve organic growth of around 5% this year and an operating margin of around 13%, “secured by productivity gains linked to automation and digitalization. processes,” says Sarah Thirion.

According to the analyst, the 2023 financial year could however be less sustained “depending on the tenor of the global economy and the consumer branch in particular (44% of 2021 turnover)” but adds that the “inflationary context & the transformations post-covid societal impacts will support the market research segment more than advertising”. The design office “reasonably” anticipates an organic growth in turnover of 3% and a current operating margin of 12.5% ​​for the year 2023.

Sarah Thirion recalls in her note the company’s ambitions for the 2022-2025 period, namely average annual revenue growth of 5-7% and a current operating margin of 12-13% over the period (compared to 12.9% in 2021, 10.3% in 2020 and 9.9% in 2019).

“Beyond 2025, the group plans to aim for a current operating margin of 15%, which seems ambitious to us since the operating leverage should remain constrained, in our view, by the investments necessary to remain the best bidder in terms of technology and ‘data analysis’ adds the analyst.

On the sidelines of this point of activity, Ipsos recalls continuing the deployment of its strategic plan “The Heart of Science and Data”. As part of this roadmap, the company says it has identified “interesting targets” for acquisition, in the health and technology public affairs sectors, particularly in the United States. Ipsos will provide an update on the progress of this plan during the Investor Day on June 14.