PubliGroupe feels the effects of economic downturn
Intensification of ongoing cost reduction program – 2008 annual results well below expectations – Publicitas reviews its business model
The economic downturn triggered by the crisis on the financial and capital markets is already having a noticeable effect at PubliGroupe, which as the leading marketer of commercial communications in Switzerland is particularly sensitive to economic trends. Results at the Search & Find, Custom Publishing and Digital & Marketing Services business segments have met expectations so far; but the important Media Sales business segment, which focuses mainly on the marketing of press, TV, radio, cinema and online advertising under the Publicitas brand, is having to cope with sharply falling demand. Consequently, PubliGroupe has intensified the cost reduction program it started in the summer. This will cut costs within Media Sales Switzerland and International and at PubliGroupe's Central Services by about CHF 40 million rather than the CHF 10 million originally envisaged. About CHF 10 million of these savings will have an impact in 2008 and another approximately CHF 30 million will impact on the 2009 results, representing an overall group-wide cost saving of around 10%. The profound changes confronting the media market now and over the long term, which are being exacerbated by the current financial crisis, have also prompted PubliGroupe to review its Media Sales business model. The results of this review will be available in spring 2009. The continuing fall in turnover in this business segment, together with the foreseeable influence of the financial crisis on PubliGroupe's financial results, will mean that EBIT and the net result for the current financial year are well below expectations.
"Advertising expenditure always reacts very quickly to economic developments. The rapidly spreading crisis on the global financial markets and growing fears of recession are already having an effect on the advertising business, which is very important to us," comments Hans-Peter Rohner, PubliGroupe's CEO. "Since the summer we have noticed an accelerating and now substantial fall-off in job advertising and commercial advertisements in important client segments such as the retail trade and the car industry. Rapid capacity adjustment in PubliGroupe's Media Sales and Central Services is essential in this situation if we are to secure a satisfactory level of long-term profitability for the group.“ This requires a group-wide reduction of 250 jobs compared with the headcount at the beginning of 2008. In Switzerland, much of the reduction has already happened or is in progress. It is being achieved mainly through natural fluctuation, but in fewer than 50 cases further redundancies will be unavoidable. Implementation of this programme at the international level will follow in the next few months. Staff reductions will mainly occur in back-office areas, while sales capacities should remain at more or less their current level. As well as these staffing measures, Media Sales activities that are not among the company's core activities will be dropped, the implementation of any project that is not urgently required will be suspended, and infrastructural and administrative expenditure will be trimmed to match the reduced capacities. However, Publicitas continues to guarantee the highest level of service to its clients and partners.
Current changes in media consumption habits, and the resulting developments within the advertising and media business, are profound and lasting. They are being accentuated by the equally profound changes in the financial and capital markets. Services that have been successful in the past may not be appropriate now. Against this background, PubliGroupe has launched a comprehensive project to analyze in detail the consequences and opportunities that these changes will bring for Media Sales. This will form the basis of a thorough evaluation of the business model currently used by Publicitas in its role as a partner of the national and international publishing and advertising sector - and will provide pointers to any changes required. PubliGroupe will announce the outcome of this work in spring 2009. However, PubliGroupe is continuing with the overall strategy that it defined last year and that it has been implementing since the start of this year: its other business segments are developing satisfactorily, with new jobs created in 2008, especially in the Digital & Marketing Services segment.
For further information:
PubliGroupe Ltd.
Hans-Peter Rohner, CEO
Tél. : + 41 21 317 72 02
Fax : + 41 21 317 72 22
e-mail : hprohner(at)publigroupe.com
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