Publicis Groupe Organic Revenue Dips 13% As It Weathers Pandemic

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Mattel

Publicis Groupe’s organic revenue declined by 13% year-on-year in the second quarter of 2020, underscoring the impact of Covid-19 lockdowns across the world on media and marketing budgets.

On Thursday (23 July) the French holding giant was the first of the big ad networks to reveal its financial results for the three months to June.

Amid an advertising freefall that has seen global brands like Coca-Cola and McDonald’s slash budgets, analysts had estimated a fall of 20% to the company’s underlying sales, so the drop of 13% was better than expected.

However, the numbers – particularly in Europe – still make for sobering reading for the wider industry.

The Drum explores the figures and what they mean.

What’s been the financial impact of Covid-19 on Publicis Groupe?

  • Publicis Groupe’s global organic revenue (a key metric) dropped 13% year on year over the second quarter of the year, to €2.29bn. This came in above analyst estimates.
  • The key metric benefited from the addition of large new clients in 2019, including Disney and Bank of America.
  • In Europe, however, the company posted a 23.5% fall in like-for-like revenues, countries such as France, Spain and Italy having imposed strict national lockdowns.
  • In North America, these fell by 7.6%. In APAC, by 5.7%. Latin America and the Middle East and Africa saw drops of 20.2% and 23.5% respectively.
  • Worldwide, net revenue for the group grew 2.6% in Q2 to €2.3m, and in Europe declined 23.1% to €510m.

What do the figures show?

  • Arthur Sadoun, chairman and chief exec of Publicis Groupe, said the results demonstrate that Publicis has “strong fundamentals to weather the crisis”.
  • “With our transformation almost complete, tailwind in the US and continued new business momentum, we were off to a good 2020,” he said in a statement.
  • He said it was anticipated that the business would be hit in Q2 by the first economic consequences of the coronavirus crisis, but credited Publicis‘s ‘Power Of One’ model – which blends creative, media, data and technology for clients – and its acquisition of data firm Epsilon as factors that helped reduce the impact of Covid-19 gales.
  • He added that the global roll-out of internal AI system Marcel has helped 60,000 employees around the world to share their expertise, learn, collaborate and contribute to client assignments remotely.

So far, so good?

  • Though Publicis has ducked the worst of analysts’ estimates for the period, Covid-19 headwinds look set to rumble on for the second half of the year.
  • A recent study from the World Federation of Advertisers (WFA) detailed how large global brands planned to cut spend through to the end of 2020. In the UK, the IPA’s Bellwether report found that over the past three months brands have slashed their budgets to their lowest ever levels.
  • Bellwether panellists remain pessimistic towards financial prospects in the second quarter of 2020, casting more downbeat assessments on both own-company and industry-wide finances.
  • Sadoun said that as Publicis Groupe heads into the latter half of the year, it is focused on “limiting the impact of the downturn, accelerating our new offering for our clients, while continuing to adapt our cost structure”.
  • Along with WPP and Omnicom, Publicis has already implemented a cost-cutting drive that squeezed out nearly €286m in savings from a recruitment freeze, elimination of freelance work and other cuts to general expenses.
  • Sadoun also said the group could “adapt its cost base“ as needed, meaning further freezes and cuts could be in the pipeline.

Credit: The Drum

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