Publicis pays back Covid salary sacrifices after encouraging Q4

Publicis Groupe is to hand back the salary reductions that 6,000 of its higher-earning staff voluntarily took during the worst of the coronavirus downturn.

Some executives took reductions of up to 20% of salary for six months between April and September, although the sacrifice varied by market.

Publicis Groupe’s decision to repay the money means some higher earners will receive an unexpected windfall worth more than one month’s pay.

An executive who usually earned €100,000 a year could hypothetically expect to get back €10,000.

Arthur Sadoun, the global chief executive, said the group was able to pay back the money and boost the annual bonus pool because it performed better than expected last year—with the organic revenue decline improving to 3.9% in Q4.

The US, the company’s biggest market, was the best performer and turned positive with growth of 0.5%, thanks to Epsilon, Publicis.Sapient and the healthcare division, all of which increased revenues.

Europe fell 9.1%, including the UK down 11% and France 7.2%, and Asia-Pacific 8.6% in the final quarter.

Sadoun said: “Thanks to the collective and extraordinary performance of our people in these difficult times, we have been able to post results that are above industry averages, allowing us to repay the salary sacrifice and set aside a higher bonus pool to fairly reward and recognise our teams.”

He won approval to repay executives from the supervisory board yesterday, ahead of today's results, because the decision to repay the undisclosed sum will have reduced the company's profit margin.

Sadoun took a 30% temporary reduction himself, but he and other members of the Directoire, the top management board—which includes Steve King, the chief operating officer—won't get back their sacrificed salary because their pay was fixed at the annual general meeting last year.

He added he felt it was important to thank staff and "show we care".

In a video message to staff, he said: "Now you know, that when we fight as one, when we outperform as one, as we have today, we win as one."

Improving revenue trend

Publicis Groupe, the first of the big agency groups to report during the current earnings season, has been one of the best performers during the coronavirus downturn—second only to Interpublic.

Revenues fell 13% in Q2 and 5.6% in Q3, while the Q4 performance was a further improvement and beat expectations.

Publicis Groupe had warned in October that Q4 could “fall below” Q3.

The annual results show organic revenues fell 6.3% to €9.71 billion (£8.6 billion), operating income dropped 22% to €983 million and operating margin slipped to 16% against 16.9% in 2019.

The company made €467 million of cost reductions, including cutting freelance expenditure, shorter working weeks and freezing hiring, plus job losses.

Sadoun said: “Our long-term investment in data and technology, our country model and our platform Marcel, have enabled us to stay strong by containing our revenue decline and maintaining best-in-class financials.

“This is the result of our ability to capture the shift in our clients’ investment towards digital channels, ecommerce and direct-to-consumer, which intensified throughout the year.

“It is particularly visible in the US, where Epsilon delivered growth of 5.5% in Q4, enabling our most important country to be slightly positive. This was also the case for Publicis Sapient.”

Publicis Groupe expects Q1 2021 will be “negative” but should turn positive in Q2 against some easy comparisons.

The share price rose 7% to €47 in early trading following the results.

Morale boost

Colin Fleming, chief operating officer of Connor Broadley, a wealth management firm and employee benefit consultancy that advises agencies, said a number of companies are looking to pay back salary sacrifices to staff at the moment, linked to many financial years ending in December or March.

“Making such reversals boils down to two things—owner appetite to pay and their ability to pay,” he said. “Employees' expectations are low. They are acutely aware of the financial challenges agencies endured in 2020, so any reversals are unexpected bonuses in the true sense of the word.

“Their payment is both a morale and loyalty booster and sends employees a message that their agency is well managed and financially robust.”

He added: “More than ever doing the right thing by your employees is becoming a competitive advantage and Publicis’s actions, if not followed by others, will no doubt be a positive for them.”