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

The company will introduce reduced hours, furloughing and some job losses this week as a result of the coronavirus impact on the business.

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

Publicis Groupe has disclosed a 17.1% increase in net revenue to €2.5 billion (£2.1 billion/$2.7 billion) but a 2.9% fall in organic growth for Q1 2020 in its first set of results that show impact from the COVID-19 crisis.

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

Publicis does not break out numbers for MSL, its primary PR network. 

These measures include a €500 million cost-reduction plan. A raft of measures are expected to be introduced in network 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; 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 Levy, 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."

The company said the Q1 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 Covid-19.

"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 double-digit decline in China. March was seriously affected by the continuous decline in China and the abrupt deterioration in Europe, due to 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 U.K. recorded declines in organic net revenue of 12.9% and 9.6%; 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 COVID-19 pandemic throughout most of Q1, was severely impacted and was down by 15.3%. This negative growth has been compensated by a strong performance in other countries of the region, notably India with 12.7% organic and Southeast Asia countries 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 U.S.

The company’s performance has stuttered in the U.S. in recent years as CPG companies have trimmed spend, but the company said in Q1 2020, "the underlying trend is encouraging, particularly in the first two months of the year, when creative and media operations were up 5% in the U.S."

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 at -20.5% organic was the worst hit. The Middle East & Africa region reported a rise of 2.7% in net revenue, or +0.6% on an organic basis.

Announcing the results, Sadoun outlined three priorities amid the COVID-19 crisis.

"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."

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