Clearly the global impact of the tragic covid-19 pandemic has overtaken our stellar results for 2019 and any commentary in this annual report, writes Sir Martin Sorrell. I would therefore like to provide a brief update on our response to covid-19, and its impact on the business.
Our Coronavirus Crisis Group (‘CCG’) has been meeting online every day to assess impact and actions on our people, clients and finances. It consists of the seven Executive Directors of S⁴Capital plc and Michel de Rijk, CEO of Asia Pacific.
Firstly, and most importantly, our 2,500 people and their families in 30 countries are predominantly healthy and safe. Our people, who are digital natives and used to 24/7 agility and flexibility, are practiced in working remotely and didn’t need to adapt like others. We are keeping a close eye on the implications of working from home, with a particular focus on any mental health and childcare issues.
On clients, we have seen limited impact on revenue and gross profit at the end of Q1 2020. Our Content Practice (70% of our business) is resilient and relatively untouched so far, maybe down 5-10%. Our Data, Analytics & Programmatic practice (the other 30%) is more affected, around 10-15% down from budget. Having said that, I expect Q2 to be very difficult for our clients, with historically huge and unprecedented falls in GDP and employment and Q3 to also be difficult (although less so). However, I think Q4 and Q1 2021 will signal a significant recovery, where our digital strengths and abilities will shine through.
Our results for Q1 2020 have shown little impact, with gross profit up 19% like-for-like, and understandably reflecting the impact of covid-19 on Asia Pacific and the beginnings of its impact on Western Europe and the Americas. Our finances remain strong. We remain cash positive with little or no debt. All non-essential costs have been reduced and the CCG has agreed to reduce its salaries by a minimum of 50% from 1 April 2020, with no cash bonuses for 2019.
In summary, whilst we’re concerned about the short term, we’re optimistic about the medium to long term. Our Q1 2020 Trading Update covers the situation in more detail.