Publicis Groupe to cut costs by €500m to face ‘the coming recession’
Publcis Groupe – responsible for agencies including Starcom, Zenith, Spark Foundry and Saatchi & Saatchi – has reported its financial results for Q1 of the calendar year, noting the impacts of COVID-19 (coronavirus) are already being felt.
The holding group said it would be implementing exceptional measures to face the coming recession including a €500m (AU$854.85m) cost reduction plan and compensation reductions.
Publicis is preparing for the worst
The supervisory board chairman, Maurice Lévy, and Groupe CEO, Arthur Sadoun will take a 30% reduction in fixed compensation, while the management board members will take 20%. Dividends will be cut by 50%.
Sadoun said the group hadn’t wasted any time defining its priorities during the crisis.
“First and foremost, we have been focusing on protecting our people,” he said in a statement. “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 wellbeing, 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.”
In addition, he said the company had reviewed clients’ current and future messaging, and realigned their media plans to be “much more dynamic, [and] deliver short-term ROI”.
Sadoun said he could not provide any guidance for the future as the full impact of COVID-19 on his business and its clients is not yet known.
“There is no doubt that we are going through an unprecedented health crisis that will lead us to the greatest recession in living memory,” he said.
Sadoun and Levy are taking pay cuts
“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 strong balance sheet will help us to stand firm in this storm and prepare ourselves for recovery.”
Despite the doom and gloom, Publicis Gorupe reported net revenue was up 17.1% for Q1, and North America had been heading back into growth.
The end of February saw the group record almost flat growth, despite the double-digit decline in China, mainly driven by improvements in the US.
Sadoun noted the complex timing.
“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 organic growth at -2.9%.”
Dividends will be cut by 50%. Sounds like your investors are being prioritised, not your people.
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In 2009, I worked for a Publicis Group agency. After many people had been made redundant during the Great Recession or the GFC as it’s known in Australia, an email was sent out by head office in Paris. It said that all those who worked with them through that crisis would be issued with shares of Publicis to the value of about $2,000. It went to everyone around the world. They never delivered on their promise. I don’t work for them now. I’ve never forgotten it.
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