Publicis Groupe's Arthur Sadoun: 'economic consequences' of Covid-19 will last a long time

Publicis Groupe Chief, Arthur Sadoun: ‘The economic consequences of what is happening now will last a long time’

Publicis Groupe’s chief executive Arthur Sadoun has outlined how he believed clients will need to operate in the future as a consequence of the Covid-19 pandemic. He has also revealed that the senior management team of the company is to take a pay cut of 30% over the coming months as it aims to cut costs across the business up to €500m.

In announcing its first-quarter financial revenue for 2020, which saw organic growth slow in-line with expectations at -2.9%, the advertising holding company saw a double-digit decline in China but a 5% increase in the US before the end of February, with net revenue growing to €2,481m from €2,118m during the same period in 2019.

North American organic revenue grew during Q1 to €1,555m (+0.5%) while Europe fell significantly to €578m (-9.2%), Asia Pacific declined to €219m (-1.9%), LATAM was down to €54m (-10.9%) although Middle East & Africa climbed to €75m (+0.6%).

As part of the aim to cut costs, shareholders will see a proposed dividend reduced by half and paid in September, while chief executive Sadoun and chairman Maurice Levy will take cuts to their ‘compensation’ of 30% during the second and third quarters and the management committee will reduce their salaries by 20%. The Drum understands that furloughs have taken place for those who are unable to work from home, while freelance costs have been cut entirely and all hiring has been frozen across the entire network.

Speaking to The Drum, Sadoun admitted that making long-term plans around the economic uncertainty internationally was “absolutely impossible” citing the magnitude of the pandemic’s reach and the length of time that it will take to solve and cure as key issues.

“You need to focus on your priorities which, in our case are; health and safety of our employees, being closer than ever to our clients, taking strong measures to protect our people and our agencies, and then we won’t try to control the uncontrollable,” he outlined.

Asked whether it was inevitable that clients would need to push their digital transformation needs forward quicker, to help escape long-term financial risks, he agreed but added creativity was key in order to retain brand value.

“If you are not able to justify the premium of your product, it will become very difficult to sell it, and the big difference is that they are going to have to go for something that is more personalised than it has been in the past,” he advised in supporting the need for creativity.

Sadoun then focused on the economic consequences, which he said would last “a long time” and would see clients look for efficiencies: “Our ability to bring an outcome-based model that will guarantee results from their marketing spend is going to be absolutely key.”

Finally, he spoke about digital transformation, citing his oft-used mantra of delivering “personalisation at scale” and stated that the move from 100 offices to 80,000 staff working at home worldwide as an example of Publicis’ own ability to pivot digitally.

“Every person is becoming even more individual than they were before, so we will have to translate the digital experience for the customer’s own experience, which we are going to have to enrich and this is what we are going to do with Sapient.”

In his statement on the financial results, Sadoun admitted that he felt “slightly awkward” sharing what he felt was “a good start” to the year despite the impact of Covid-19.

“At the end of February before the pandemic started to spread, we recorded almost flat growth, despite a 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,” he added before admitting that March had been “seriously affected” by the spread across Europe of the virus and the resulting 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.”

Within the statement, he also cited the full roll-out of long-running in-development artificial intelligence platform, Marcel to the whole company globally by the end of April following a trial period at the end of last year in the UK, and in the US earlier this month, as a method in which the business would stay connected.

Last week, WPP chief executive Mark Read spoke to The Drum about his own ways of running the business during the global crisis and how digital transformation was aiding both his own company and clients to continue to operate.

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