Solid numbers in challenging
environment
Strong actions to face current global
crisis
Regulatory News:
Publicis Groupe (Paris:PUB):
- 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.
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 acquisition 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 leadership 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!
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%
1) Acquisitions (Digitas AffinityID, Soft Computing, Rauxa, E2
Media, Epsilon, RDL, SearchForce, McCready Bale Media, Sapienti7,
Third horizon), net of disposals
2) 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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Publicis Groupe Delphine Stricker Corporate
Communications + 33 (0)6 38 81 40 00
delphine.stricker@publicisgroupe.com Alessandra Girolami Investor
Relations + 33 (0)1 44 43 77 88
alessandra.girolami@publicisgroupe.com Brice Paris Investor
Relations + 33 (0)1 44 43 79 26 brice.paris@publicisgroupe.com
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