First Quarter 2020
Revenue -
Solid numbers in challenging
environment
Strong actions to face current global
crisis
April 13,
2020
- Q1 reported net revenue up 17.1%, with the contribution
of Epsilon
- Organic growth at -2.9%, in line with expectations
established prior to the pandemic
- North America coming back to growth; China and Europe
already impacted by Covid-19
- Exceptional measures to face the coming recession and
preserve solid balance sheet
- €500M cost reduction plan to adapt to new context and
be recovery-ready
- Proposed dividend to be reduced by 50% to €1.15 per
share and to be paid in September
- 30% reduction in fixed compensation for both
Supervisory Board Chairman & Groupe CEO, 20% for the Management
Board members
- Taking into account the magnitude, the complexity and
the probable length of the crisis, no guidance given
Q1
2020
|
|
§
2020 Net revenue |
€2,481m |
§
2019 Net revenue |
€2,118 m |
§
Reported growth |
+17.1% |
§
Growth at constant rate |
+15.4% |
§
Organic growth |
-2.9% |
|
|
Arthur Sadoun, Chairman and CEO of Publicis
Groupe:
“ It is slightly awkward to share encouraging
news at a time when we are preparing ourselves for tougher days.
But we actually had a good start to the year, meeting our internal
objectives despite the impact of Covid-19, with an organic growth
at -2.9%.
At the end of February before the pandemic
started to spread, we recorded almost flat growth, despite
double-digit decline in China, mostly driven by 5% organic growth
in the U.S. on our creative and media business. It is worth noting
that Epsilon 2.0 was also growing at +5% growth at the end of
February.
The month of March was seriously affected by the
continuous decline in China and the abrupt deterioration in Europe,
due to Covid-19 confinement measures. This strong negative impact
was largely compensated by North America returning to growth,
including Publicis Sapient which is slightly positive in the US.
This performance demonstrates that our model is working.
But we are now all facing a crisis that will be
unparalleled in terms of magnitude, complexity, and probably
length. In these uncertain times, we haven’t waited to define our
three priorities.
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. We advanced the launch of
our global AI platform Marcel, as it has never been so important to
keep our teams across the world connected and fight the effects of
isolation.
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. We are implementing a 500 million euro cost-reduction plan
with full impact in 2020, to adapt and be recovery ready. We are
asking our shareholders for solidarity with our company and our
people by cutting dividends by 50% and exceptionally delaying
payment until the end of September. At the same time, the Groupe’s
management team has decided to reduce its fixed remuneration.
There is no doubt that we are going through an
unprecedented health crisis that will lead us to the greatest
recession in living memory.
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.
All of our countries, all of our activities will
be impacted to varying degrees. So our response to this situation
needs to be structured, multi-faceted 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.
Let me take a moment to say that our thoughts
are with all of those currently suffering with the virus. I would
also like to thank our clients for their partnership. And finally,
I would like to express my gratitude to our people, who have
demonstrated in the last weeks that we have an incredibly diverse
and united team, to come out of this crisis even stronger.”
*
*
*
Publicis Groupe’s Management Board and Supervisory Board
examined on Friday 10th April the following topics: the performance
of the first quarter of 2020; the early economic consequences of
the Covid-19 pandemic and of government containment measures in
several countries or States; the decisions taken by management to
face this situation and its possible developments, as well as the
2019 dividend, payable in 2020.
The Supervisory Board declared : “We were
very impressed by the strong measures implemented by the Management
Board to get through the crisis, by the exceptional mobilization of
the teams around the world, the demonstration of solidarity and the
spirit of collaboration at all levels, and wish to express our
warmest thanks to everyone. We want to reiterate our full support
to the Chairman of the Management Board and to the Group's
management teams, who were able to make the right decisions very
early on.”
On Friday, the Supervisory Board endorsed the
decision of the Directoire to ask shareholders for solidarity with
the company, by cutting the proposed dividend by 50% from
2.30 euros to 1.15 euro, to be paid exceptionally on September
28th, and encouraging shareholders to reinvest the dividend in the
company by choosing the option of payment in shares. The
dividend will be submitted to shareholders’ vote at the next AGM on
27 May 2020.
On top of that, individual and voluntary
decisions to temporarily reduce remuneration have been proposed.
Arthur Sadoun has decided to reduce his fixed remuneration by 30%
for the second and third quarter of the year, the members of the
Management Board and of the Management Committee have decided to
reduce their fixed compensation by 20% for the second and third
quarter of 2020. Maurice Lévy has decided to reduce his annual
compensation by 30 %.
*
*
*
NET REVENUE IN Q1 2020
Publicis Groupe’s net revenue in Q1 2020 was
2,481 million euros, up 17.1% from 2,118 million euros in 2019.
Exchange rates had a positive impact of 33 million euros.
Acquisitions, net of disposals, accounted for an increase in net
revenue of 393 million euros, reflecting the contribution from
Epsilon, and to a lesser extent Rauxa, partly offset by the
disposal of PHS and Proximedia.
Organic growth stood at -2.9%, an encouraging
number supported by the performance in the U.S and despite the
impact of Covid-19.
Breakdown of Q1 2020 Net revenue by
region
EUR |
Net revenue |
Reported |
Organic |
million |
Q1 2020 |
Q1 2019 |
Growth |
Growth |
Europe |
578 |
633 |
-8.7% |
-9.2% |
North America |
1,555 |
1,139 |
+36.5% |
+0.5% |
Asia Pacific |
219 |
207 |
+5.8% |
-1.9% |
Latin America |
54 |
66 |
-18.2% |
-10.9% |
Middle
East & Africa |
75 |
73 |
+2.7% |
+0.6% |
Total |
2,481 |
2,118 |
+17.1% |
-2.9% |
Net revenue in Europe was down 8.7% or down 9.2%
on an organic basis. Several countries in the region were up
against tough comparables from the previous year, and experienced
abrupt decline in March as the pandemic spread and lockdowns
extended. France and the UK recorded declines in organic net
revenue, at 12.9% and 9.6% respectively in the quarter. Italy and
Germany were down 6.1% and 7.1% respectively.
North America net revenue was up by 36.5% in Q1
2020, including the contribution of Epsilon. On an organic basis,
the performance was +0.5%. This includes a resilient performance in
the US, up 0.2%, and good performance in Canada with a 3.1% organic
growth. 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. Beyond this good performance, Publicis
Sapient was slightly positive in the US in Q1, driven by the first
effects of its repositioning around full digital business
transformation. It is worth mentioning that Epsilon 2.0, the core
data and tech expertise representing 80% of their revenue, was flat
during the quarter, after a solid start to the year at +5% in the
first two months.
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
South East Asia countries as Thailand and Singapore.
Latin America recorded net revenue down 18.2% on
a reported basis, and down 10.9% on an organic basis. Most
countries in the region were down, but Brazil at -20.5% organic
explains the majority of the decline in the region, due to 2019
contract losses, client campaigns that have been delayed and the
closure of an agency in H1 2019.
The Middle East & Africa region reported a
rise of 2.7% in net revenue, or +0.6% on an organic basis despite
the strong comparables in the previous year, notably at Publicis
Sapient.
Breakdown of net revenue at March 31,
2020 by sector
On the basis of 3,078 clients representing 91% of net
revenue
Net debt and liquidity
Net debt totaled 4,094 million euros at the end
of March 2020, compared with 2,713 million euros at year-end 2019
and 885 at the end of March 2019, increase compared to last year is
mainly due to the aquisistion of Epsilon in July 2019. The Group’s
average net debt stood at 3,486 million euros in the first quarter
2020, compared to 229 million euros in the first quarter 2019.
The Groupe’s liquidity position remains very
solid, at 4.7 billion euros, which is a similar level as one year
ago, before the acquisition of Epsilon. The Groupe is managing
actively its cash and preventively drew its 2 billion euros
revolving credit facility, with no impact on the net debt at
end-March, to face any potential short-term impact of the global
pandemic on its activity.
Acquisitions and disposals
There were no major acquisitions or disposals
during the period.
Outlook
The health crisis facing the world will result
in a severe recession, the consequences of which are difficult to
reliably predict. We could experience rebound situations but also
more difficult moments. The Groupe is organized and ready for such
events. As already announced, the Groupe will not provide any
indication on its guidance, as this would be random and volatile by
nature.
New business
During this quarter, Publicis Groupe continued
to win significant New Business, such as Bank of America global
creative with Leo Burnett, ADNOC in Middle East, US Cellular,
Tailored Brands and also Castorama in France. Most recently,
Publicis Groupe won the biggest part of the creative and media
assignment for FCA in China, which demonstrates the relevance of
our model there, at the beginning of the recovery period.
Of course, the overall pitch activity has slowed
down in the last weeks, but it has not stopped. Publicis Groupe
recorded a series of wins all over the world despite the lockdown,
that it largely conducted through videoconference such as Enel
creative in Italy.
Nominations
In Q1 of 2020, Publicis Groupe continued to
attract key talent and promote a new generation of leaders in
strategic positions, across its most iconic brands, within its
biggest countries and for its top clients.
Highlighting Publicis Groupe’s commitment to the
strength and breadth of its successful PO1 model for clients,
Publicis Groupe UK promoted David Hackworthy to the
newly-created CSO position, where he is responsible for
helping clients unlock new ways to grow. Further recognising the
importance of creative firepower for clients across Publicis Groupe
UK, several creative appointments were made this year
including Stephen De Wolf, CCO, BBH London; Remco
Graham, Creative Director of BBH London ; Rodrigo
Castellari, Creative Director of Saatchi & Saatchi London;
and Mark Elwood, ECD of Leo Burnett London working closely
with CCO Chaka Sobhani. Again to strengthen its country model,
Publicis Groupe UK also appointed Marcos Angelides, as
Chief Innovation Officer and Head of Strategy, Spark Foundry,
responsible for combining the agency’s data technology capabilities
with designers and creatives.
Publicis Groupe Spain appointed a new CEO for
Zenith, Abelardo Ibáñez, who, with strong data-driven and digital
expertise, is charged with leading the agency to a new level of
personalisation at scale. Gastón Guetmonovitch was
promoted to CCO for Leo Burnett Spain and Miguel
Esteban promoted to Chief Strategy Officer for the Power of
One, responsible for unlocking the growth of agencies and clients
by re-engineering their business models and customer
experience.
Highlighting the Groupe’s focus on providing
end-to-end solutions in the country model, Publicis Groupe Italy
appointed Massimo Baggi, Chief Commerce Officer, to
support clients with driving the critical processes of omnichannel,
digital innovation and the presence of their brands across various
online sales channels. In Germany, we promoted Olivier
Korte and Katja Reis to the respective roles of CEO
and COO, Publicis Media Germany.
As we start to see our teams in China fully back
at work now, we have prioritised appointing leaders who focus on
key products and expertise to support our clients and drive optimum
business impact for them in these markets, through cross-team
solutions that bring together the power of data, creativity and
technology. As a result, Publicis Groupe has appointed Sapna
Nemani, to the newly created role of Chief Product & Solution
Officer, Publicis Groupe APAC, to lead the product, solution and
data-lead intelligence initiatives for clients; Ching Ian,
takes on the role of CEO of PMX APAC, and is tasked with expanding
our regional media partnerships and investment practices. Ed
Booty, currently Chief Strategy Officer of Publicis Communications
APAC, will take on the newly created role of Chief Strategy Officer
of Publicis Groupe APAC. In his role he will lead our strategic
engagement with clients, bringing together the talents of our
strategists from across the Groupe. He will continue to be based in
Singapore.
Publicis Groupe has also appointed new country
leadersip teams in North Asia for Japan and Korea: Nicole Roe,
former Managing Director of Leo Burnett Korea has been promoted to
CEO Publicis Groupe Korea and Gareth Mulryan has been
appointed as CEO, Publicis Groupe Japan and is charged with the
acceleration of digital, commerce, data and business transformation
consulting solutions for our clients. Publicis Groupe APAC has made
further leadership appointments across the region
including: Unny Radhakrishnan, CEO, Digitas
India, Nick Keenan, CEO, Starcom Australia and Ian
Loon, CEO, Publicis Media Singapore.
Publicis Groupe US further grows its creative
leadership talents with the appointments of Rafael
Rizuto to CCO, BBH NY, and Daniel Lobatón, Chief
Creative Officer, Saatchi & Saatchi New York.
Publicis Groupe has further grown its global
experience team at Publicis Sapient with Karin
Giefer and Quinnton Harris appointed to the
respective roles of SVP, Experience, and Global Creative Director,
Experience. The global experience team blends data, machine
learning and creativity to craft customer-centric experiences that
deliver value to clients and support their digital transformation
efforts.
Additional US creative hires
include Nathalie Huni, who previously held creative leadership
roles at R/GA London, McCann NY and Huge, joining as EVP, Head of
Design, NA, Digitas USA, leading product design, brand experiences
and identity and visual narrative as well as Dwayne Koh,
previously with Huge, joining as SVP/ECD, West Coast, Digitas USA;
and Adriano Matos, formerly with Grey Brazil, appointed
EVP/ECD, Leo Burnett Chicago.
Other US C-suite appointments through elevations
include Ronnie Dickerson Stewart, prior SVP of Career
Advancement & Inclusion at Digitas USA, appointed Chief
Diversity Officer, Publicis Groupe US, and Susan Manber,
previously Chief Strategy Officer at Digitas Health, appointed
Chief Patient Officer, Publicis Health North America. In
addition, Jodi Robinson elevated to CEO, Digitas USA
and Jonathan Tatlow to Chief Strategy Officer, Digitas
USA; Loch Rose, to Chief Analytics Officer, Conversant
USA; Chad Peplinski to Chief Media Officer, Epsilon
USA; and Maureen Glure to Chief Client Officer,
Starcom USA.
*
*
*
Disclaimer
Certain information contained in this document,
other than historical information, may constitute forward-looking
statements or unaudited financial forecasts. These
forward-looking statements and forecasts are subject to risks and
uncertainties that could cause actual results to differ materially
from those projected. These forward-looking statements and
forecasts are presented as at the date of this document and, other
than as required by applicable law, Publicis Groupe does not assume
any obligation to update them to reflect new information or events
or for any other reason. Publicis Groupe urges you carefully
to consider the risk factors that may affect its business, as set
out in the Registration Documents filed with the French Autorité
des Marchés Financiers (AMF) and which is available on the website
of Publicis Groupe (www.publicisgroupe.com), including an
unfavorable economic climate, an extremely competitive market
sector, the possibility that our clients could seek to terminate
their contracts with us at short notice, the fact that a
substantial part of the Group’s revenue is derived from certain key
clients, conflicts of interest between advertisers active in the
same sector, the Group’s dependence on its directors and employees,
laws and regulations which apply to the Group’s business, legal
action brought against the Group based on allegations that certain
of the Group’s commercials are deceptive or misleading or that the
products of certain clients are defective, the strategy of growing
through acquisitions, the depreciation of goodwill and assets
listed on the Group’s balance sheet, the Group’s presence in
emerging markets, exposure to liquidity risk, a drop in the Group’s
credit rating and exposure to the risks of financial markets.
This press release contains inside information as per the
definition of article 7 of Regulation n°596/2014
About Publicis Groupe - The Power of One
Publicis Groupe [Euronext Paris FR0000130577,
CAC 40] is a global leader in communication. The Groupe is
positioned at every step of the value chain, from consulting to
execution, combining marketing transformation and digital business
transformation. Publicis Groupe is a privileged partner in its
clients’ transformation to enhance personalization at scale. The
Groupe relies on ten expertise concentrated within four main
activities: Communication, Media, Data and Technology. Through an
unified and fluid organization, its clients have a facilitated
access to all its expertise in every market. Present in over 100
countries, Publicis Groupe employs around 83,000 professionals.
www.publicisgroupe.com | Twitter:@PublicisGroupe
| Facebook | LinkedIn | YouTube | Viva la Difference!
ContactsPublicis
Groupe |
|
Delphine StrickerAlessandra Girolami |
Corporate CommunicationsInvestor Relations |
+ 33 (0)6 38 81 40 00+ 33 (0)1 44 43 77 88 |
delphine.stricker@publicisgroupe.comalessandra.girolami@publicisgroupe.com |
Brice Paris |
Investor Relations |
+ 33 (0)1 44 43 79 26 |
brice.paris@publicisgroupe.com |
Appendices
Net revenue: organic growth
calculation
(million euro) |
Q1 |
|
Impact of currency at end March 2020
(million euro) |
2019 net revenue |
2,118 |
|
GBP (2) |
3 |
Currency impact (2) |
33 |
|
USD (2) |
33 |
2019 net revenue (1) at 2020 exchange rates (a) |
2,151 |
|
Others |
(3) |
2019 net revenue before acquisition impact (b) |
2,088 |
|
Total |
33 |
Net revenue from acquisitions (1) |
393 |
|
|
2020 net revenue |
2,481 |
|
|
Organic growth (b/a) |
-2.9% |
|
|
- Acquisitions (Digitas AffinityID, Soft Computing, Rauxa, E2
Media, Epsilon, RDL, SearchForce, McCready Bale Media, Sapienti7,
Third horizon), net of disposals
- EUR = USD 1.102 on average in Q1 2020 vs. USD 1.136 on average
in Q1 2019
EUR = GBP 0.861 on average in Q1 2020 vs. GBP 0.872 on average
in Q1 2019
Definitions
Net revenue or Revenue less pass-through
costs: Pass-through costs mainly concern production and
media activities, as well as various expenses incumbent on clients.
These items that can be re-billed to clients do not come within the
scope of assessment of operations, net revenue is a more relevant
indicator to measure the operational performance of the Groupe’s
activities.
Organic growth: Change in net
revenue excluding the impact of acquisitions, disposals and
currencies.
Net Debt (or financial net
debt): Sum of long and short financial debt and associated
derivatives, net of treasury and cash equivalents.
Average net debt: Average of
monthly net debt at end of month.
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