The operating margin is equal to revenue after deducting personnel costs, freelancers costs, other operating costs (excluding other non-current income and expenses described below) and depreciation and amortization expense (excluding intangibles from acquisitions). The operating margin, which represents operating income expressed as a percentage of net revenue, is an indicator used by the Groupe to measure the performance of cash-generating units and of the Groupe as a whole.
Other non-current income and expenses include few, well-identified, non-recurring and significant income and expenses. This line item mainly includes gains and losses on the disposal of assets.
The financial debt income and expenses mainly include interest income on cash and cash equivalents, interest expenses on loans and bank overdrafts and as well as income and expenses related to debt-related derivatives.
Other financial income and expenses mainly comprise interest expense on lease liabilities, the impact of unwinding discounts on long-term vacant property provisions, pension commitments, and other long-term benefits (net of return on assets), the revaluation of earn-out commitments on acquisitions, changes in the fair value of derivatives (excluding debt-related derivatives), changes in the fair value of financial assets, and foreign exchange gains and losses.
Net income for the period is taxed based on the tax laws and regulations in force in the respective countries where the income is reported. Deferred taxes are reported using the balance sheet liability method for temporary differences between the tax value and the carrying amount of assets and liabilities at the reporting date.
Deferred tax assets are recognized for deductible temporary differences, tax loss carryforwards and unused tax credits to the extent that it is probable that there will be taxable income for the period (either from the reversal of the temporary differences or a taxable profit generated by the entity) against which such items can be charged in future years. The time horizon used for the recognition of deferred tax assets related to tax loss carryforwards is three years.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced if it is no longer probable that there will be sufficient taxable income for the period to take advantage of all or part of this deferred tax asset. Deferred tax assets that are unrecognized are measured on every reporting date and recognized if it is likely that they will be usable against future taxable income for the period.
Deferred tax assets and liabilities are measured on the basis of tax rates expected to be applicable in the year in which the asset is realized or the liability settled. The tax rates used are those that have been enacted, or virtually enacted, at the reporting date.
Uncertain income tax liabilities are recognized under current income tax liabilities.
The basic earnings per share are calculated by dividing the net income for the financial year attributable to ordinary shares by the weighted average number of ordinary shares outstanding during the financial year.
Diluted earnings per share are calculated by dividing net income for the financial year attributable to ordinary shares, after cancellation of interest on bonds redeemable for, or convertible into, ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year adjusted to reflect the effect of all potentially dilutive instruments. For the Groupe, the only dilutive instruments are the stock options and warrants outstanding as well as free shares granted.
Stock options
The dilutive effect of these instruments is determined according to the share buyback method (theoretical number of shares that may be purchased at market price, determined on the basis of the average price of the Publicis share over the period, based on the proceeds from the expertise of stock options). Under this method, stock options are considered potentially dilutive if they are “in-the-money” (the exercise price considered including the fair value of services rendered determined in accordance with IFRS 2 “Share based payment”).
Free shares
To calculate the diluted earnings per share, the free shares awarded are considered as having been effectively vested.
In addition to these earnings per share (base and diluted), the Groupe calculates and regularly releases a “current” base and diluted EPS, similar to the one described above, except with respect to the earnings figure used, which excludes:
