Publicis announces Q1 results, cost-cutting plan

Strong performance in North America comes as the holding company implements measures to cut $762.5 million.
sadoun

Publicis Groupe has included a plan to cut €500 million, or $762.5 million CAD, in costs from its operations as part of its quarterly results for Q1 2020.

For the quarter ending March 31, Publicis Groupe had a net revenue increase of 17.1% thanks to the contribution of digital transformation agency Epsilon. However, organic growth – which excludes the contributions of acquisitions like Epsilon – was down -2.9%, although that is in line with the company’s expectations prior to the pandemic.

Publicis cited strong performance in the U.S. creative and media operations, strong new business across North America and digital division Publicis.Sapient as bright spots in its results (there was a 36.5% increase in net revenue for the region, with 0.5% organic growth). Though the company did not specify results for its Canadian operations, it did list Canada among the regions that experienced between 0% to 5% organic revenue growth in Q1, along with the U.S., Japan and UAE. Regions experiencing negative growth were Germany, Brazil and Australia, as well as the countries hit hardest and earliest by COVID-19, including China, Italy, France, Spain and the U.K. The end of the quarter in particular was impacted by the pandemic in these regions.

CEO Arthur Sadoun said it was “slightly awkward to share encouraging news when we are preparing ourselves for tougher days,” but said it had a good start to the year and was now working to implement measures to protect its employees, help clients adapt to the current situation and “preserve a solid balance sheet” while facing a looming recession.

The company’s Q1 results were released 10 days earlier than planned, and came with an outline of a €500 million ($762.5 million CAD) cost-cutting plan it began implementing this week.

At the group level, Publicis has instituted a hiring freeze, paused promotions and cut all freelance costs. It has also encouraged employees to take vacation now if they are able, and is conducting a “systematic review” of its third-party contracts.

Sadoun, along with chairman Maurice Levy, will take 30% cuts to their compensation during the second and third quarters of 2020, while members of the company’s management committee will reduce their salaries by 20%.

According to Publicis regulatory filings, Sadoun’s fixed salary is €1 million (roughly $1.5 million CAD), with a variable portion that could be worth as much as 200% of his fixed compensation based on meeting financial and performance goals; the company’s 2019 registration document will be posted later this month, but in 2018, the variable portion of Sadoun’s salary was worth €1.4 million (or $2.1 million CAD). Based on his 2018 earnings, 30% of Sadoun’s salary would be €720,000 (or $1.1 million CAD), leaving him with almost €1.7 million (or $2.7 million CAD).

On a country level, this week Publicis will also be introducing salary reductions, but did not specify which staff would take cuts or by how much. It also plans furloughs (beginning with those who are unable to work from home), shorter work weeks and an unspecified “restructuring.”

Cutting salaries has become a common tool for companies looking to save on costs during the economic uncertainty brought on by the pandemic, with Dentsu reducing salaries by an unspecified amount and WPP implementing a 20% salary and fee reduction to executive committee and board members.

In media, the executive team at Torstar has taken a 20% pay cut, though the editor of CanadaLand recently pointed out that they would still be earning an average of $760,000 each after having to lay off 85 staff. Stingray has reportedly implemented a 10% pay cut for most employees and a 75% cut for CEO Eric Boyko, however it has also come with temporary layoffs of almost 90 staff. Buzzfeed is implementing pay cuts of 5% to 25% on a sliding scale depending on salary level and position, with CEO Jonah Peretti not taking a salary until the crisis has passed.

With 80,000 employees now working from home, Publicis has also fast-forwarded the launch of Marcel, an AI-powered personal assistant and collaboration tool that had not been present in the company’s quarterly updates for more than a year, despite the investment and initial hype the company put behind it. Marcel launched in the U.S. last week after a test phase in the U.K., and will roll out to the rest of its agencies “in the coming weeks.”