First-half 2020 results:
- Gross margin: €35.1m, up 8% proforma1
- EBITDAr: strong growth in results at €6m (17.0% of growth margin compared with 4.3% in H1 2019)
Q3 2020 results:
- Sustained activity driven by solid sales momentum Gross margin of €15.6m (+3% proforma)
- Growth expected to accelerate in the fourth quarter Upwards revision to FY20 guidance, EBITDAr margin > 15% (vs. > 10%)
- Artefact (FR0000079683 – ALATF – eligible for PEA-PME) has released its consolidated results for first-half 2020 and its gross margin for third-quarter 2020.
Guillaume de Roquemaurel & Vincent Luciani, co-CEOs of Artefact, comment on the half-year performance:
“The first-half results mark a real turning point in our journey and set us on a sustainable trajectory of growth and profitability. We now boast a unique positioning in the Data Marketing space that sets us apart from the major international players in the market. Our model, blending the best in digital, data and tech expertise, places us at the heart of the issues of international brands, which are required to reinvent themselves in order to forge lasting relations with their consumers. The health crisis has considerably accelerated this need to transform and stands as a fantastic opportunity that is beginning to show in our sales and financial performance. For Artefact, the story is barely beginning!”
Continued growth despite the health crisis
Artefact posted a gross margin of €35.1m in first-half 2020, up 8% in pro forma terms. The increase stands as a remarkable performance given the impact of the contraction in marketing investments in several sectors (including tourism, air transport and hospitality). Artefact made the difference by achieving solid growth and maintaining a high level of business activity (gross margin was stable in the second quarter after a 17% increase in the first).
The increase is first and foremost an illustration of the Group’s successful transformation, with the implementation of a new organisation system, reconfigured offers delivering strong added value, and established geographical positions on the strategic European and Asian markets.
The momentum is driven by the acceleration in the digital transformation of the Brands. This has become a priority issue, particularly with the strong growth in e-commerce during the crisis. It is set to become a long-term performance accelerator that will sustain future growth.
Through its powerful expertise in data marketing, which provides brands with direct access to consumers, Artefact is ready to accelerate by taking advantage of the considerable opportunities offered by the structural change in the market.
The two years of investments necessary to the Group transformation are now beginning to bear fruit, with a sharp increase in results.
In addition to the geographical refocus on high-potential regions and the completion of the structuring of the support functions, this performance results from three key drivers:
- the establishment of a strong brand across all geographies;
- the recruitment of Consulting teams to establish and market the new offering;
- the structuring of the data teams to build a library of algorithms and tools.
As a result, EBITDAr quadrupled to €6.0m, compared with €1.4m in first-half 2019. It accounted for 17.0% of pro forma gross margin for the period, versus 4.3% in first-half 2019. This sharp increase results mainly from the growth in gross margin and control on operating expenses over the period.
Personnel expenses were stable at €25.1m, representing 71.5% of total gross margin, compared with 76.9% in first-half 2019. This stability reflects the optimisation of the workforce in support functions, with the billable teams working on the development and loyalty of the customer portfolio having grown over the period.
This trend is entirely consistent with the objective to increase gross margin at a substantially superior pace to payroll.
Other operating expenses fell €2.1m in the first half to €4.0m, reflecting the end of the investments made over the last two years to structure the Brand and the processes now established at the Group.
All the Group’s regions contributed to the growth in results in the first half:
- In France, the Group’s leading country, EBITDAr increased 109% on first-half 2019. It came out at €4.6m, representing 26.3% of the gross margin for the period and rivalling the best levels in the sector.
- Results also improved in all the countries in the Rest of Europe and Other Markets. The two regions thus both became contributors, with EBITDAr of €1.3m, up €2.1m.
- Factoring in IFRS 2, IFRS 3R and IFRS 16 impacts, EBITDA totalled €6.5m, up €5.5m. Operating income was positive at €3.7m, compared with an operating loss of €1.5m in first-half 2019.
- Overall, Group net income improved considerably, amounting to €2.0m compared with a loss of €2.9m in 2019
The second half opened with a third quarter featuring growth and solid sales momentum, which is expected to accelerate in the coming months. After a 17% increase in the first quarter and a stable second quarter, pro forma gross margin rose 3% to €15.6m in the third quarter.
France was central to this growth, with a third-quarter increase of 26% to €7.4m. The Rest of Europe also posted an improvement, with a limited 10% contraction in pro forma gross margin (to €4.9m), compared with an 18% contraction for the entire first half.
Other Markets were down 13% to €3.3m, owing primarily to the considerable base effect and the loss of a customer in China in the duty-free sector, which was logically impacted by air travel restrictions. But this economic situation does not call into question the momentum of these markets, which delivered a 40% increase in gross margin in the first half.
Key assets for the transformation initiated by the Brands
Artefact is now in a position to accelerate thanks to a unique model underpinned by four key assets:
- Innovative solutions focused on the use of data.
With the competition still largely represented by specialists from the consultancy or advertising sectors, Artefact boasts unique expertise (in technology, artificial intelligence, data processing, creativity and digital marketing) rolled out through three offers that constitute decisive competitive strengths: Data Consulting (data transformation consulting), Data Marketing (supporting marketing departments in the adoption of new data tools), and Digital Activation (consulting and execution of digital ad campaigns).
- Focus on the priority consumer challenges of large brands.
Thanks to this positioning, Artefact can now focus its growth momentum on large brands, most of them global. It has already built long-standing relations with many of these players, which today are forced to revise their model for attracting and gaining the loyalty of customers by making consumer knowledge and direct access a core priority. As an indication of the importance of these issues for large brands, the Group now has 15 clients generating a gross margin of over €1m each. The potential for extending the scope of intervention with these partners and the opportunities for gaining new clients are considerable, as illustrated by the strong growth in the sales pipeline that will bolster growth in the coming months.
- Global geographical coverage refocused on high-potential regions.
Following the refocusing made in the last few months, Artefact is now concentrating its efforts on two high potential geographical regions.
- In Europe, Artefact benefits from a strong foothold in France, where numerous luxury and consumer brands are headquartered. In the other countries, the implementation of the model is now at a considerably advanced stage, also offering solid growth prospects.
- In Asia, Artefact today ranks as one of the few players to have established a lasting and significant position. In a strategic market for local and international brands, this position was illustrated once again recently with the certification obtained from Alibaba to become a service provider of Brand Databank, the database on consumers in the ecosystem of the Chinese e-commerce giant. Artefact is the first data marketing agency to obtain this certification, which offers major potential with brands operating in the Alibaba ecosystem.
- An established and international brand with a proven ability for attracting the best talents
Artefact’s final advantage is its ability to attract the best talents in a market where expertise in the fields of data and artificial intelligence is actively contested. Thanks to the efforts rolled out in the last two years, the brand Press release – October 2020 5/5 now has a reach enabling it to meet this challenge, as shown in the 107 recruitments made in the first half concerning high-level profiles in consulting, engineering and data.
Growth expected to accelerate in the fourth quarter
Armed with these assets, Artefact is approaching the coming months with confidence. The sales momentum achieved in the third quarter is expected to intensify, with accelerated growth expected in the fourth quarter.
This favourable business outlook should be accompanied by a strong increase in results, following on from the performance generated in the first half. Consequently, Artefact is making an upward revision to its annual guidance on EBITDAr margin. The group is confident in its ability to achieve a 2020 EBITDAr margin of over 15% (compared with an initial objective in July of over 10%).
With a business model that is beginning to take full effect in terms of growth and profitability, Artefact is committed to a sustainable performance trajectory enabling it to rapidly take its place among the leading international players in data marketing.
To achieve that goal, Artefact can continue to count on a solid financial situation, with a cash position at endJune 2020 of €18.4m (compared with €14.7m at end-December 2019).