Claire Beale
Apr 14, 2020

Publicis Groupe reports 3% fall in organic revenue and plans cuts amid COVID-19

Company will introduce reduced hours, furloughing and some job cuts this week.

Publicis Groupe reports 3% fall in organic revenue and plans cuts amid COVID-19

Publicis Groupe has announced a 17.1% increase in net revenue to €2.5bn (US$2.7bn) but a 2.9% fall in organic growth for the first quarter of 2020, in its first set of results that show some impact from the COVID-19 crisis.

Alongside the results, the company announced "exceptional measures" to deal with what chairman and chief executive Arthur Sadoun described as "a crisis that will be unparalleled in terms of magnitude, complexity and probably length".

These measures include a €500m (US$546m) cost-reduction plan. A raft of measures are expected to be introduced in Publicis companies around the world this week, including reduced hours, furloughing and some job losses.

Other cost-cutting measures include a proposal to reduce shareholder dividend by 50% to €1.15, to be paid in September and to encourage shareholders to reinvest the dividend in the company by choosing the option of payment in shares; and a 30% reduction in fixed remuneration for Sadoun and 20% for management board and committee members for the second and third quarters.

In addition, Maurice Lévy, chairman of the supervisory board, is taking a 30% cut in his annual remuneration.

Sadoun said the coronavirus crisis "will lead us to the greatest recession in living memory", but added: "It is too early to predict the full impact it will have on our clients and our business, so we will not provide any guidance."

Publicis said the first-quarter decline in organic growth was in line with expectations before the global pandemic, but that the results in China and Europe already show the impact of the coronavirus crisis.

"It is slightly awkward to share encouraging news at a time when we are preparing ourselves for tougher days," Sadoun commented. "But we actually had a good start to the year, meeting our internal objectives despite the impact of Covid-19."

He said that at the end of February, before the pandemic started to spread, the group recorded almost flat growth, despite a double-digit decline in China. March was seriously affected by the continuous fall in China and the abrupt deterioration in Europe, as a result of Covid-19 confinement measures.

Reported growth in Europe for the quarter was down 8.7% and organic growth was down 9.2%. France and the UK recorded declines in organic net revenue of 12.9% and 9.6% respectively; Italy and Germany were down 6.1% and 7.1% respectively.

Net revenue for Asia-Pacific was up 5.8% on a reported basis and down 1.9% on an organic basis. China, which was the first country impacted by the pandemic throughout most of the first quarter, was severely impacted and down by 15.3%. This negative growth was compensated by a strong performance in other countries of the region, notably India with 12.7% organic and countries in south-east Asia such as Thailand and Singapore.

North America reported a 36.5% increase in reported growth (including the performance of data services company Epsilon, which Publicis acquired last year) and a 0.5% increase in organic growth, including 0.2% growth in the US.

The company’s performance has stuttered in the US in recent years as FMCG companies have trimmed spend, but the company said in the first quarter "the underlying trend is encouraging, particularly in the first two months of the year, when creative and media operations were up 5% in the US".

Net revenue in Latin America fell 18.2% on a reported basis and fell 10.9% on an organic basis. Most countries in the region were down, but Brazil, with an organic fall of 20.5%, was the worst hit. The Middle East and Africa region reported a rise of 2.7% in net revenue or up 0.6% on an organic basis.

Announcing the results, Sadoun outlined three priorities amid the outbreak: "First and foremost, we have been focusing on protecting our people. We immediately acted to put in place the necessary infrastructure to enable all of our employees to work safely from home. We took a series of measures for their health and well-being to keep everyone supported.

"Second, we have worked around the clock to help our clients adapt to this situation. We reviewed their current and future commercial and corporate messages. We realigned their media plans to be much more dynamic, deliver short-term ROI and proposed some outcome-based products we have developed for this new market context. We are also helping them accelerate their digital capabilities to drive growth and efficiencies.

"Last but not least, we are taking exceptional measures to face the coming recession and preserve a solid balance sheet."

Sadoun added: "All of our countries, all of our activities will be impacted to varying degrees. So our response to this situation needs to be structured, multifaceted and rigorously executed. Our experience in managing cost and cash in times of crisis, our country model and our strong balance sheet will help us to stand firm in this storm and prepare ourselves for recovery."

(This article first appeared on CampaignLive.co.uk)

Source:
Campaign India