Good day and welcome to the Publicis First Quarter 2020 Revenue Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Arthur Sadoun. Please go ahead.
[foreign language] and welcome to the Publicis Groupe First Quarter 2020 call. I'm really sorry that we have a delay, as you have seen. It is due to a technical problem with our operator platform. Actually, in the world of the coronavirus, we have to adapt minute after minute, as you know, so we just changed the platform. Normally, everyone is on the line. We're going to check that. So we did a switch in exactly three minutes, so thank you for everyone that has helped. And more importantly, thank you all for being here in such short notice. I am Arthur Sadoun here in Paris, and with the current lockdown situation, our CFO, Jean-Michel Étienne, our Secretary General, Anne-Gabrielle Heilbronner, and Steve King, COO of Publicis Groupe, are all joining us by call from their home.
Again, hopefully, it will work when we go to the Q&A, but I'm pretty confident it will. So, as usual, we will take all of your questions all together after the presentation. We have also Alessandra Girolami, who is here, and will be available to take all of your questions offline after this session. We had planned to publish a bit later in this month. As everyone working remotely, we wanted to make sure we had all the figures on time. The good news is, thanks to our reliable system and, actually, more importantly, the outstanding effort of our teams, we were able to release our numbers earlier than expected. Following extraordinary meetings of the Directoire and the Board on Friday, we have brought forward our publication date to share with you immediately our numbers and decisions.
In such uncertain times, we believe it is critical that we give you the facts as soon as we have them. We will start this call with an overview of Q1 2020 highlights. Then, Jean-Michel will provide you all the details on our numbers, and I will conclude by sharing our three priorities to face this situation before, of course, we take all of your questions. Please take the necessary time to read the disclaimer, which is an important legal matter. Okay, let's dive into the presentation. We all know that we are living in an unprecedented crisis due to the coronavirus. More than half of the global population is confined. In this context, we will try to give you all the relevant information we have and share everything that we have seen through our numbers and all of our Q1 numbers.
But before anything, let me say that our thoughts and best wishes are for everyone who has been directly touched by the virus. I would like also to thank our people, our clients, and our partners who are working extremely hard in this tough period. The crisis we are all facing is unparalleled in terms of magnitude, complexity, and probably length. We don't know how long and how deep it will go. Despite the uncertainty at Publicis, we haven't waited to define our three priorities in those difficult times: protect our people, help our clients adapt, and take strong financial measures. I will come back on these priorities in the second part of the presentation. Now, I'll start by giving you the detail on our Q1 performance. Our Q1 organic number was -2.9%, showing sequential improvements.
This is in line with our pre-health crisis expectations, thanks to North America who's returning to growth. It is slightly awkward to share encouraging news at a time where we are preparing ourselves for tougher days, but we actually had a pretty good start during the first two months of the year. At the end of February, we recorded almost flat growth for the group despite double-digit decline in China. This was mostly driven by 5% organic growth in the U.S. on our creative and media business. The in-depth work we have been doing there, as well as the new business wins, was paying off. It is important noting that Epsilon 2.0, the core of their data and tech capabilities, representing 80% of the company, was also at plus 5% growth at the end of February.
The month of March was seriously affected by continuous decline in China and the abrupt deterioration in Europe due to the confinement measures. Our U.S. operations were impacted in March, but to a lesser degree, and remain encouraging. These two sides are visible in our performance per region for the quarter. In Q1, North America returned to growth, thanks to good performance in our communication and media activities in the U.S., as well as Publicis Sapient, which was slightly positive. This indicates that our model is working. Europe was down 9.2%, reflecting the impact from confinement measures that progressively extended across the region. This was mostly the case for France, the U.K., Italy, and Spain. Asia-Pacific was only down 1.9%, despite a double-digit drop in China over the quarter. This was achieved thanks to a very good performance in Southeast Asia and India.
In China, the performance deteriorated through the quarter, reflecting the consequences of the pandemic on the economy. Latin America was down 10.9%, largely explained by Brazil, which was also impacted by the virus in March. MEA was slightly positive, despite the strong contraction, notably at Publicis Sapient. During this quarter, we continued to win significant new business, such as Bank of America Global Creative with Leo Burnett, ADNOC, U.S. Cellular, Tailored Brands, and also Castorama in France. Most recently, we won the biggest part of the creative and media assignment for FCA in China, which demonstrates the relevance of our model there at the beginning of the recovery period. Of course, pitch activity has slowed down in the last weeks, but it has not dropped. It has not stopped, sorry.
We recorded a series of wins all around the world despite the lockdown that we largely conducted through video conference, like Enel in Italy or L'Occitane CRM business supported by Epsilon. The positive signs we see across the business, notably in the U.S., are an early indicator that the model we are building is what our clients need today and will need tomorrow. Now, Jean-Michel will detail our Q1 number, and then I will come back with our priorities for this time.
Thank you, Arthur. So good morning, everybody, and I hope that you and your families are well and safe in this terrible context. All my thoughts are with the people affected by the COVID-19. I will now detail the net revenues, the net debt, and our cash situation for the first quarter. I will then give the floor back to Arthur, who will go through our priorities in the current environment. Let's begin with the net revenue on page six. Regarding Q1 2020, net revenue is EUR 2,481 million, up 17.1% on a reported basis. I remind you that Epsilon numbers are not yet contributing to our organic growth, as the closing of this acquisition happened in July 2019. Currencies have a 1.7% positive impact. At constant currency, growth is plus 15.4%. Acquisitions have an 18.6% positive impact, largely reflecting the integration of Epsilon in our net revenue numbers.
All in all, organic growth is at minus 2.9% in Q1. On page seven, regarding Q1 net revenue by region, Europe is down 9.2% in the context of confinement that affected many countries in March and has increased the negative performance for the quarter. This is notably the case in Italy, Spain, France, the U.K., and Germany. North America is up by 0.5%, with notably a good performance in creative and media, as Arthur said already, driven by the 2019 media wins. I would also like to point out the early signs of improvements related to the repositioning of Publicis Sapient to full digital business transformation in the North America region. Asia-Pacific is down 1.9% despite a 15.3% negative organic growth in China. This was largely compensated by a strong performance in India and Southeast Asia, mostly Singapore and Thailand.
Latin America is down 10.9%, with a weak performance in Brazil, explained by 2019 contract losses, delayed current campaigns, and also the shutdown of an agency. Middle East and Africa are up at 0.6% despite the very strong comparable base in Q1 last year, mostly thanks to the performance of our digital business transformation activity. Overall, Q1 organic growth for the whole group is at -2.9%. On page eight, as usual, I will give you some color on our organic growth performance in some countries. I will only mention a few of them. Above 10%, for instance, we have mostly Saudi Arabia at +21.9% and India at +12.7%. Between +5% and +10%, Sweden is at +7.7% and Vietnam at +5.6%. Between 0% and +5%, United Arab Emirates are at 4.8%, and the U.S., per se, are at +0.2%.
In the current context, the decline in the performance of some countries has been significantly increased by the confinement measures declared by local authorities. That was the case in France: down 12.9%. The U.K.: down 9.6%, Italy at minus 6.1%, or Spain at minus 2.9%. China was down over 15%, with a further decline through March. Now, moving to the net financial debt on page nine. Q1 2020 average net debt is EUR 3,486 million, including the debt related to the acquisition of Epsilon in the calculation of the average versus no impact in Q1 2019. Net debt position at the end of March is at EUR 4,094 million. The net debt at the end of March is usually higher than at the end of December due to the seasonality of working capital.
We consider the management of cash matters of paramount importance at the moment, and we are monitoring our cash position on a day-to-day basis. To finish my presentation on page 10, our liquidity position remains very solid at 4.7 billion EUR, which is, as you can see on the slide, a similar level as a year ago before the acquisition of Epsilon. We are actively managing our liquidity and preventively drew our 2 billion EUR revolving credit facility with no impact on net debt at the end of March. We did it to face any potential short-term impact of the global pandemic on our activity. As I said before, we are monitoring our cash position on a daily basis, and I would like to thank our team, which is doing a terrific job at the moment.
I remain available for your question now at the end of the presentation, and I hand back to Arthur, who will continue with our priorities at the moment. Thank you.
[foreign language] Jean-Michel. As I said in the introduction, I will now give you more details on our three priorities in the current context: our people, our clients, and our financial resilience. Since the beginning of this crisis, our first priority has been the health and the safety of our employees. The group is actively accompanying those who are suffering from the virus, and we have taken strong measures to reduce the risk for our people. We put in place a dedicated global hotline to respond in real time to any issues or concerns our employees have around COVID-19. Thanks to Re:Sources, our shared services operation, we immediately activate the necessary infrastructure to allow everyone to work safely from home.
This means that today, thousands of meetings around the globe are taking place every hour across various platforms. We also acted against the negative effects of isolation. We have taken a series of local initiatives and advanced the global launch of our AI platform, Marcel, as it has never been so important to keep our team around the world connected and supported. Finally, because over-communicating is vital in these uncertain times, we send a video update to all Publicis employees every Sunday on the action taken by the group, and we hold a series of Q&A sessions every two weeks with 3,000 of our top leaders around the world. When it comes to our clients, they will clearly suffer a lot in the current context. Some sectors, such as travel, hospitality, or automotive, will be particularly affected. Of course, our industry will also take a hit.
As a company, our mission at this time is to be closer to our clients than ever and help them weather the crisis. Actually, despite the economic slowdowns, our teams have been working around the clock on their behalf, with a focus on three key actions. First, helping clients rethink their current and future commercial or corporate messaging to ensure it is sensitive and appropriate for today's environment. Second, working with them to realign their media plans to be much more dynamic in this new context and deliver short-term ROI. Third, accelerating their digital capabilities to drive growth and efficiencies and put their customers at the heart of their business. Our client organization is fully mobilized to deliver on these subjects and accompany our clients 24/7.
In this time of major disruption, we are actually demonstrating to our clients that we are a partner, not a supplier, and that we are uniquely placed to help them manage the crisis and be recovery-ready. As for our financial resilience, over the past years, Publicis Groupe has demonstrated its ability to manage costs and cash, particularly in negative growth environments and through several crises. This, along with our shared services backbone and the group's robust balance sheet, makes us confident in our ability to adapt and overcome this crisis. From the beginning, we immediately took steps to preserve our financial strength in this storm. First, at global level, we implemented a hiring freeze, significantly reduced freelancers, and paused internal promotion. We have asked every employee to take their vacation time during the lockdown period to ensure our teams are fully available when the rebound comes.
CAPEX spending was also reviewed to prioritize differently what we planned for 2020, but also for 2021. A reduction of CAPEX is, of course, to be expected. We also launched a systematic review to reduce third-party contracts and organize a drastic reduction in all non-client spend. We focus on responding to all client assignments with existing group resources. We are now entering the second phase of our cost reduction plan that will leverage the country model that we put in place last year. We have worked over the past weeks with our country management teams to establish plans that create solutions in line with what our client needs, our business needs, and, of course, what our people need. These country-led decisions take into account every possible and progressive solution from central staffing, shorter work weeks, furlough, and salary reduction as restructuring.
For those two steps, we will deliver EUR 500 million in cost reduction with full impact in 2020 in the current context. If the situation worsens, we will be in position to further reduce our cost base. Of course, every plan we are designing during this crisis will vary according to each country context, but they all have something in common: the need for commitment and solidarity. That spirit starts at the top of our group. This is why Maurice Lévy and myself have taken the decision to reduce our fixed remuneration by 30%. The Directoire and the management committee also took the personal and voluntary decision to reduce their fixed salaries by 20% for the next two quarters.
When the supervisory board met on Friday, it endorsed the decision of the director to ask shareholders for solidarity with the company and our people by cutting the proposed dividend by 50% from EUR 2.30 to EUR 1.15 to be paid exceptionally on September 28th. We are also encouraging shareholders to reinvest the dividend in the company by choosing the option of payment in shares. It is worth noting that despite the cuts, the dividend will represent a yield of 4%. Now, more than ever, we have a responsibility to closely manage our cash. We do not know how long and how deep this crisis will be, as it will depend on the evolution of the pandemic.
When it comes to our cash, as Jean-Michel told you, we have a very solid position with EUR 4.7 billion available in liquidities at the end of March. We have a healthy debt maturity with no covenant, which is key in this context. We are going through an unprecedented health crisis that will lead us to the greatest recession in living memory, as anticipated by many economists. It is too early to predict the full impact it will have on our clients and on our business, so we will not provide any guidance. We are monitoring our costs, our revenue, and our cash daily, and we will update you as soon as we have more concrete elements, as we are doing today.
But let's face it: even if we still cannot measure the full magnitude, which will mainly depend on the persistence of the pandemic, the quarter to come will be tough, maybe very tough. While we believe our first measures are proportionate to the current risk, we are prepared to take any further necessary decisions to diminish the impact on our operations if needed. We will be greatly helped by the action plan we have put in place with our management teams and the strength of our assets and systems. All of our countries, all of our activities will be impacted to different degrees. So our response to these situations needs to be structured, multifaceted, and rigorously executed. Our experience in managing costs and cash in times of crisis, our country model, and our strong balance sheet will help us to stand firm in this storm and prepare ourselves for recovery.
Thank you very much for listening, and we will now take all of your questions.
Thank you. If you would like to ask a question, please signal by pressing Star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is switched off to allow your signal to reach our equipment. Again, it is Star 1 to ask a question. We will take our first question from Julien Roch from Barclays. Please go ahead.
Yes, good morning. Can you hear me? I'll start with a good morning, Arthur, good morning, Jean-Michel. I'll start with three organic questions. What was China organic in January? Number one. What was group organic ex-China in January and February? Number two. And what was organic in Europe in January and February? Number three. And then a question on debt.
Your debt was EUR 4,094 million at the end of Q1, which compared with EUR 2,713 million at the end of Q4, i.e., a EUR 1,381 million increase. And last year, if you do the same, it was an increase Q1 over Q4 of EUR 1,081 million. So it looks like cash flow is EUR 300 million worse in the first quarter. Can you give a small color on that? I know, Jean-Michel, you say it was a seasonally weak working capital, but it was seasonally weak last year. So some color on why cash flow is EUR 300 million worse in Q1. Thank you.
Wow, that's a lot. We're going to start with Jean-Michel on debt, and then I will go on to, on to the other one.
Okay. Good question. What I can tell you is something that we are not usually giving at Q1, but it's a totally relevant question. First of all, as you have in your other system, in the net debt at the end of March, Q1 2019. What can you do with the free cash flow? The free cash flow at the end of March 2020, compared to end of March 2019 is slightly better. Okay? This is, I mean, not a lot, but slightly better than the one we had, at the end of Q1 2019. Am I answering your question, Julien?
So Jean-Michel, you said free cash flow because you were cutting. So you said free cash flow. I assume that's before working capital was slightly better. Then why was the net debt EUR 300 million worse?
Okay. Okay. It is exactly.
Jean-Michel, we hear you very badly.
Working capital is not decreasing, at the end of March 2020 versus end of March 2019. Am I clearer with that?
Julian, you got the answer. You I know the line was not great. Yeah? Good. So when it comes to China, I won't go into the detail of the number. What I can tell you is that we have seen a kind of mid-digit decline in January. And then February and March were roughly equal, getting to the number you have seen. So you can see it has accelerated quite steeply in terms of decline. And this is something that we have seen in March. I think that what is important to note here when you look at China is that now that it is reopening progressively, we see that some activities that have already reopened, like outlets or luxury, are actually going through a V-shape, which is good news. However, most of the industrial factories, if not all, are still in the lockdown.
So it's really, you know, focusing on a few activities that have already opened and that's really recovering. But overall, it's way too early to say what will be April. What you need to note is mid-single digit in January and then way higher and kind of same thing for January and February, well, for, sorry, for February and March. When you look at the organic growth of the group end of February, we were broadly flat. And that's thanks mainly to our performance in the U.S. I mean, it's interesting to see that we were broadly flat at global level while having a double-digit decline in China.
When you look at our operation in the U.S., what is very important to note is that at the end of February, media plus creative plus creative, which is the biggest bulk of our activities and where we have put our transformation in place, were actually at plus 5%, which again is a very significant number and shows all the efforts we have been doing in H2 2019. It's also important to mention that Epsilon, at the end of February, the core of Epsilon, 80% of the business, which is what we call Epsilon 2.0, where we have all our data activities, was also at plus 5%.
As Jean-Michel said, it doesn't count into our organic growth, but what is important to see here is that there is a positive momentum between our ability to reinforce our creative and media brand thanks to Epsilon and what those brands are bringing to Epsilon in terms of additional business. So again, we had a very good beginning of the year. We were feeling confident, until then March arrived. And I think that's a good way to talk about March is maybe around Europe. This was your other question. I mean, we have seen a slight decline of Europe at the end of February. You need to note also that we had a very strong comparable at this period.
But let me take the example of France because, again, our job here today, as we can't give you any guidance, is to give you facts that hopefully can help you for the future. And so take France, where we have revenues that are a bit particular, because we have a lot of production, we have a lot of events, we have the Drugstore, which is a restaurant. But nonetheless, if you look at our media and creative activities in France at the end of February, they were positive. While we were coming, if I remember well, in terms of comparable, last year, same time, around 4%-4.5%, something like this. So you can see that the momentum was there. And then significant drop in March that is reflected in every country in Europe.
So you can see, let's say, an okay/yeah, okay start in Europe, high comparable that is dropping significantly in March. And then in the U.S., you see really a good start that makes the demonstration that our model is, you know, coming to the good speed. And then the beginning of a drop, not as steep as what you can see in Europe, but meaning that we ended up the quarter for North America only at 0.5%. Of course, we're taking that as good news because you should remember that from memory again in Q4, we were around minus 4.5% or minus 5%. So it's a big gap, and it's showing what we are doing. But again, I think it's a quarter that should be split in two.
You had January and February, where we definitely started to have a good momentum, and we were feeling good about all the initiatives we have been taking. And then coming from China, we see the effect of the confinement, which has been very radical when it comes to Europe, and of course, starting to emerge in the U.S.
Okay. Very clear. Thank you. [foreign language]
Thank you.
The next question comes from Omar Sheikh from Morgan Stanley. Please go ahead.
Morning, everyone, and thanks for taking the questions. I have three, if I could. Maybe if I could start with the cost savings target, so either for Jean-Michel or for Arthur. Could you just let us know what the base is for the EUR 500 million of savings that you're planning? Is that the EUR 500 million lower than you would otherwise have been? Or is there a base that we should think about? And you've given some color on a few of the areas where those savings might come from, but maybe you could just give us a bit more detail on how you might achieve that and the time scale. That would be very helpful. That's the first question.
Second question is for Jean-Michel on working capital, just following on from Julien's question. Could you just perhaps let us know whether, towards the end of the first quarter, whether you are seeing any delays in trade receivables, and whether or not you think the sort of generally neutral outcome for working capital for the year should still be our sort of central expectation? And then finally, Arthur, I just want to just delve into a little bit of about the outlook.
I mean, you've obviously not given a number for the year, but could you maybe just talk about how some of your different business lines might be impacted? And in particular, if you look at the new businesses that you've acquired more recently, so Epsilon and Sapient as well, could you just maybe tell us how you think those might be impacted relative to your traditional creative and media businesses? That would be helpful. Thanks very much.
No, thank you very much. What I would propose is we start with Jean-Michel with working capital. Then Jean-Michel, you can take the cost saving question on what is the basis, and I will follow up on what we're doing and then finish on the outlook. I would like to start with working capital.
So, regarding working capital, your precise question regarding the delays and payments for clients, we're not commenting on that. But I can reassure you, Omar, that we are managing working capital and these matters, these cash matters on a daily basis. And we have a cash position. We have a cash position every day, which is reported to Arthur every day. So if you see something, we are taking that extremely seriously. Of course, it is pretty much right to conclude on what could be the change in working capital at the end of the year. Of course, the objective is to be neutral this year. Frankly, it is a bit early to conclude on that. I will follow up on the question on the cost saving.
The basis for the EUR 500 million is 2019 calculated, or the OpEx for 2019 calculated on a comparable basis, okay, which is including Epsilon on 12 months and few other acquisitions, also, which have been realized in 2019. This is the way we have calculated that, and all the lines of the OpEx would be part of the focus to reduce the cost base.
Okay. Thank you. I will maybe continue on the cost savings. Omar, you have been following us for a while, and hopefully you have seen that we have a strong culture of managing our costs and our cash properly in good times but also in bad times. So the truth is, we didn't wait one second to apply the kind of recipe that, of course, will protect our people and our agencies and make sure that we are safe and secure economically in this crisis. And actually, we acted in two steps.
You need to know that we took our first decision exactly a month ago. At that time, the U.S. was not even confined, and we decided to take a global initiative, which means that it came from the group. It was explained through 3,000 of our leaders, through like nine or 10 VPs where they could ask any question. And we declared from one day that we have to stop every hire, that we have to reduce drastically freelancers, that we have to pause every internal promotion, that the vacation should be advanced if possible.
We engaged with a systematic review on third parties, contracts, as there were a lot of things that we were doing outside that could be done inside if we were organized properly. I mean, it's a lot of work, but the truth is, it has been done fast, and it has been done by people that are used to manage this properly and deliver on the margin, properly, even in the difficult years. We took a second step that we are making public. Actually, we made public yesterday to our people because the people that are going to deliver the savings are based in our agencies. So the first we need to communicate is them. And what is important to note here is the shift we have operated to our country model. The crisis we are going through is a lot going to be about talent allocation.
The worst will be to lose the good people, because their accounts are being more affected than others. And so the fact that we have moved into a country model where we can add resources on the account that are very active by taking people that are working on accounts that are being cut for good or bad reason makes a massive difference. But to do that, you need the tools, the platform we have put in place and enables us to manage that at a group level. But you also need to make sure that there is a single P&L at country level. And this enables us in the last three weeks or four weeks because we had actually two meetings a week with every country.
So I have to say that it has been very time-consuming, but it was the right thing to do to establish a plan where we say, "Okay, in your country, what are your specificities? What are the different scenarios? How do we make sure that we protect our people and our business?" and we come out with the list of initiatives that should be taken locally, depending on the local sensitivity that goes from central, staffing function, where honestly we developed in three weeks a platform where we can manage all of our resources in the U.S. and being able to give you an example. If there is a project in New York and you have someone that is free in Dallas, he can work on it. This was impossible before the confinement, but now it is possible.
That's the only good thing about the confinement: that we moved from roughly 100 offices to 24,000 offices, and you can be in Dallas and work in New York. That makes a big difference. We went through shorter work weeks, which will be employed in some countries. I won't give you the number, but some have decided that the best way to reduce cost is actually to work four days out of five, furlough, salary reduction, and what we call strategic restructuring, which is we want to make sure that during that time we put together the agencies or the competencies that make sense for the kind of new product we're going to invent for the future. That was not your question, so we'll park it there, but what you need to understand there is that we really went through a two-step process.
First day, we stopped everything that was coming from outside, and we made clear that everyone executes. We took three or four weeks to design a country plan thanks to our country model. This leads to the EUR 500 million. It's not a number that we are giving you randomly. It's a number that is precisely attributed to every other operation with the right model for them to deliver it. We did it. Again, it took a lot of time, so if there are some people that are listening at the moment, I think it's important that we did it with two objectives in mind. First, of course, weather the crisis, but also be recovery ready because in the new normal, we need to make sure that the kind of momentum we were seeing in January and February continue when the crisis is behind.
To do that, again, we need to protect our people, protect our operation, take what are tough decisions immediately, executing them well, and get recovery ready. When it comes to the guidance, I mean, again, the big difficulties in this crisis, and I'm not telling you anything that you don't know, is that it's not a traditional economic crisis. It is first a health crisis. So because its evolution will depend, first of all, on the evolution of the pandemic and the confinement, because we see a direct correlation between confinement and revenue drop, it's impossible to give you any guidance. The truth is, we are actually looking at the situation on a daily basis.
Every night, we have a call where we look at our cash, we look at our cost, we look at our revenue, and we make sure that we monitor it properly. And this is why, and sorry to have advanced this meeting, but believe me, for us, it was also a lot of work to spend the weekend preparing. But we feel that as we cannot give you any guidance, our role is to make sure that the second we have concrete facts that hopefully understand, help you understand the context we're in, we need to give it to you right away.
When it comes to the activities, again, it's too early to tell you the impact it will have on any of the activities because it will depend on the country, it will depend on the clients, it will depend on the position of our agencies there. But what is certain, and you can start to feel it when you look at where the marketing is going in the last three or four weeks, is we do have the assets that our client will need. I mean, if there is any doubt for anyone that we're going to go through a world that would be more personalized, where digital experience will matter even more because people would have learned to work like this for months, I think it's becoming obvious. This will have some impact on our activities that hopefully we have anticipated.
The first is on our creative work and our ability to deliver work that is more personalized and contextualized. We have discussed a lot about that. It's becoming even truer, and this is a big part of what we are doing at the moment with our clients. The second is our media leadership. And this is very important because media leadership means that we can reallocate the investment of our clients in the right way and faster. And the way we have worked with our clients in the last six weeks to make sure that, again, those that need to really change the way they are operating in terms of media to go for shorter ROI, we could help them. It's going to be a world that will be driven by personalization at scale and both through data.
And the kind of thing we are doing with Epsilon now are pretty amazing, and we will come back to that very soon. But we're going to live in a world that is going to be outcome-based, where our clients for months will need to see immediate results because they will need efficiency. This is what we bring when we start by first-party data. And last but not least, when you look at what we do with Sapient, the way we will have to digitalize the experience because people will be ready means that our asset will be ready. Now, don't get me wrong, huh? We're going to go through a tough time for every of those expertise in the coming quarter, no doubt.
But again, we will be recovery ready if we make sure that we adapt our offer to the new norm, and hopefully we are a bit in advance into that.
Absolutely. Thank you very much. It's very clear.
Thank you.
The next question comes from Tom Singlehurst from Citi. Please go ahead.
Good morning. It's Tom here from Citi. Thank you very much for doing the call and getting the numbers done so quickly. First question, qualitative. Can you, can you just talk about the tone of conversations with advertisers? I mean, you talked about China seeing elements of a V-shaped recovery, but, you know, from what you're hearing in the U.S. and Europe, you know, should we just think about some of this spend being deferred till later in the year? Or do you think at this stage 2020 is just a sort of write-off?
And then linked to that, you talked about the cost saves coming in this year. In terms of making sure you truly are sort of recovery ready, should we assume that the cost saves come back out next year, i.e., that there will be sort of a sort of bounce back in costs as well as revenues? And I'm particularly focused on this point about making sure that you don't end up taking out capacity so that when recovery does come, it's you just don't have the staff to facilitate it. And then, coming back, final question. Omar mentioned it, and I don't think you answered it specifically, but maybe a bit more sort of, you know, specific work on business transformation and first-party data.
Is that, is that kind of work just ongoing in the current environment, or do you think it will be even more discretionary than sort of media spend and, and traditional creative? Thank you.
Thank you very much. I'm going to start with the last. I'm going to give the word to Steve to talk to you about the tone with advertisers, and then we'll end up with the cost saving and Jean-Michel. Okay. Again, will it be a business transformation or current data? It's obvious that this is the kind of capabilities that our clients are going to need for the reason I just mentioned. Now, again, because we owe you all the transparency we can to give you hard facts, you look at Epsilon 2.0 +5% at the end of February, roughly flat, a bit better at the end of the quarter. Why? Very simple.
Non-food retailers stopping their investments, and automotive, of course, stopping part of their investments. So you understand immediately that on one side we're going to be affected on the short run. You can also understand that there is an opportunity, and it's very difficult to talk about opportunity at the moment where people are dying, but there is an opportunity to come back with products and services that are more outcome-based, which means that, and that's a very important notion, and it will go, I guess, from what Steve will tell you later, is that, I don't know if it's going to be a V-shape, a W-shape, a L-shape. What is certain is whatever it is, our clients, in terms of cost management, won't recover overnight. When you have your factories that are closed for weeks, it takes time to recover. And efficiencies is going to be extremely important.
Let me give you one example. You are a mid-size restaurant chain in the U.S., okay? You have been closed for two months. You have to reopen. There is no way you're going to have a customer if you don't advertise. But you need to make sure that every dollar you put in the business is having an ROI. We have a solution for that because when you cross Epsilon and what we know about Americans with our leadership in media in the U.S. that enables us to bring the scale to personalization at scale, we have a solution for that. So again, don't get me wrong, and this is why I'm transparently giving you the number of Epsilon that was having a great start and the problem they just faced in March. It's not going to be now. It's not going to be easy.
But what I can tell you, and I'm almost anticipating your last question, we are getting ready to be recovery ready. And we will let you know in due time, in the coming weeks, every initiative we are taking there to find new sources of revenues that our clients will need for the future. Maybe I will let Steve take the question on the tone with advertisers.
Thank you, Arthur. Hi, Tom. I hope you're keeping well, and I hope you can hear me okay. I think one of the reasons that we are in such a difficult situation about providing full guidance is this crisis is affecting everybody so differently. It's affecting markets differently, and the tone among our clients is, you know, varies dramatically. If you look, first of all, at the markets, obviously we had some early indicators what was happening in China.
Of course, none of the media vendors really anywhere have yet published or given any guidance on what's happening on Q1 revenues. We know indicatively, if we see what was happening from some of the guidance, what was happening in China with partners like Baidu and Alibaba and Weibo, etc., you know, we saw that the digital spends clearly were impacted, not really in January, but certainly in February and March. And Arthur has already talked about some of the declines there. And then we've, of course, as this is, this pandemic has broadly moved from east to west and is now definitely a global pandemic. You know, one of the challenges is, of course, one of the challenges we have is, of course, we have no idea how long this lockdown is going to take place.
It's difficult to predict the level of bailouts that's going to be present in each of the markets. And of course, we don't know whether there might potentially be a second wave. We've seen Singapore, for example, which seemed to be clear and has now gone back into lockdown in the last week. On a client basis, it's again, it's different by sector. We have some clients, for example, where, you know, they're looking at their activities, and they have become much more focused. And they're, while all of the plans have changed, their absolute spend has largely maintained. And these, of course, are areas like groceries. There are some areas indeed where we've actually seen an uptick like online gaming and, as you'd expect, food delivery, and some, but not all, e-commerce. Of course, health is another category where investments and plans seem to be quite focused.
There are other categories, of course, like automotive, transportation, bricks and mortar, and of course, most, most violently in terms of between travel and hospitality. Some very, very different plans and reaction. I mean, one thing I would characterize this, and I think back to the crisis in 2009, Tom, is that we are having closer relationships and more dialogue with our clients than ever before because first phase is that they are realigning their media plans. They're trying to make sure that their spend is cognizant geographically and by target audience. And then what they're looking at is how can we focus to get more outcome-based activities. And this is where the, you know, sort of benefit of having Sapient providing a business transformation and the connectivity with data is really beginning to have a, I think, a positive impact to us.
I'd say, just finally, while it's difficult to know the longevity of this crisis or how it will look, I think you mentioned previous crisis. If you think about 2009 and the steps that we took, we actually came out of that crisis actually in a stronger position. I think the type of partnerships that we're having with clients, we are there for those clients every day. As I said, we are talking to our clients more regularly. I think that they can see that we are going to become a more long-term partner than perhaps they might have thought of us going into the crisis. I hope that answer helps, Tom. Very much. Thank you.
Tom, maybe I move fast on the last one because I want to make sure that we can address everything. So on the cost exercise we are doing and the cost reduction exercise we're doing versus being recovery ready and having the right talent, I want to be clear on something is that we have taken from day one all the measures to fight hard to protect our people's job s as much as we can.
So what we have in mind, and this is when, why we went so fast in taking those global measures that are now followed with local measures, is that we want to make sure that we adapt to the crisis and that we do it by, of course, preserving the jobs of our people. What is important to note when we talk about recovery ready is that, yes, it's about adapting our cost structure, and this is the purpose of the call today.
But there are two other elements that are absolutely critical. The first is to make sure that we prepare well our assets. And this, we will give you more information around the time. And as you just described, we can't afford to compromise on talents. And this comes back on resource allocation. I don't have time to talk about Marcel and what we are doing in the U.S. at the moment, but when you see how we are able to use our best people on projects that are far from home to make sure that everyone keeps busy and that we are protecting our job for the future, honestly, it's pretty encouraging. I'm going to stop there if you don't mind because I want to make sure that we can take every question. And I see that it's already an hour.
So, I know you have a lot to do, and it was a short notice. So.
T hank you.
We will now take the next question from Richard Eary from UBS. Please go ahead.
Good morning, everyone. And thank you very much for the call. Just a number of questions actually for me. Just the first one, I don't know whether Arthur, whether you can sort of elaborate on the March exit rates. Obviously, things have deteriorated as we've gone through the quarter, but it'd be interesting to try and get a March exit rate if you can provide that just to see how we think about things going into the second quarter. The second question is just on the EUR 500 million cost- out, you've been sort of specific about those numbers. But what I was trying to get to understand is that what are the assumptions in terms of the longevity of the crisis are? And so is that, you know, how do we think about EUR 500 million on a sort of quarterly run rate basis?
Is that EUR 250 million per quarter, or is it EUR 500 million spread across the remaining three quarters of the year? And so just give us an indication of, of obviously how we should think about that. The third question, maybe for Steve, just to, you touched on basically tone of client spend, but maybe you can just elaborate a little bit more on media allocation in terms of what you're seeing across networks, platforms, of whether there's been a bigger concentration of media spend or whether it's been broad-based reductions.
So just better understanding around that. And then lastly, maybe just on the U.S. U.S. has obviously been a very pleasing performance. I don't know whether you can talk about how much of that is due to account wins or how much of that is due to actually underlying organic growth in the actual networks, internally. Sorry, a lot of questions there.
Thank you very much, Richard. I guess we're going to start with Steve and the media allocation, and then I will take the three others.
Okay. Hi, Richard. Hope you're well. The, yeah, I mean, I think the, when you're looking at the, the shift, I guess you're talking about between different media types, different platforms. Is that, I'm sure I've got that question correct?
Yeah, that's correct, Steve.
Yeah. Yeah. So, I mean, look, I mean, I think the, the reality is this is, this is a, a crisis that's affecting every media platform. I think you could suggest that there are certain types of platforms which are faring less poorly or less badly. But obviously, the impacts we saw, you know, certainly in China, we saw that in the end of January, February, and March. And now, obviously, we're right in the teeth of this in all of the European markets and, of course, U.S. as well.
Our spend is probably not what's happening in the market as a whole. You know, certainly, if you go back to the last crisis, we saw the, you know, advertising expenditure was down something like 10%. This is in 2009 on a global basis. But we saw quite a big shift into digital. I mean, one of the disparities this time is, of course, that digital has a very high proportion of smaller advertisers, SMBs.
In many cases, of course, you know, those businesses have literally gone dark, and they've been shut down. Of course, digital is easier media to cancel and postpone. Our spend is likely to be more heavily skewed into much more personalized media. It's much more likely to be in the area of digital. That's not necessarily going to be indicative and flow through to the platforms as a whole, television as a whole, of course, as everyone can imagine, all of us, I'm sure, you know, television viewing is massively up. You've seen the numbers, I'm sure. I think Nielsen in the U.S. said the amount of content that we're watching is something like 60% up. I think that seems very believable.
But of course, television advertising spend is down across all of the markets, although probably falling not as badly as perhaps some of the other media. Out of home, obviously, advertising, particularly, as you can imagine, in major urban cities where out of home is generally focused and airports, one can imagine that is, that is a media that is, that is going to be most adversely affected. So I don't know if that helps, Richard, in terms of your answer. Hope it does.
No, no, that's fine. That's helpful. I mean, it's largely what I thought. But yes, thanks. That's helpful, Steve.
Thank you very much. On the March exit rate, I can't give you more facts. The only thing I can tell you is that, as you have seen, there is a strong deterioration. Again, we did something that we never did before, which is to cut the quarter in two to give you some indication. But this is the maximum we can do because then we're getting into local differences that makes it very difficult. But in this case, hopefully, you could see through the number that we are giving you that March is, of course, strongly deteriorating.
On the 500 million, it is on an annual basis for 2021. Again, we can't give you, we can't give you per quarter. What I can give you is more colors on the U.S. So, what I said again is that we had a solid Q1. If you look at North America at +0.5%, it has to be compared with a Q4 that was at -4.5%. So you can see the kind of difference we are making.
There is one big reason for that, the strong performance of our creative and media operation. And again, it's very interesting to see that the plus 5% we are actually posting for creative and media at the end of February equal the same 5% that we are not counting of Epsilon. And as you can imagine, there are here a good dynamic. But there are mainly four reasons why we are doing this performance. The first is pretty obvious. It is our new business ramping up. As you know, we ended up the year number one again on new business. And this is compensated some attrition that we are still seeing. And actually, on the top of attrition, tough months of March. But new business is helping.
The second thing that is very important and actually was incredibly encouraging is that we are starting to see the benefit of the U.S. ComEx we have put in place and particularly the Growth ComEx where you have our 10 key leaders from our 10 biggest operation meeting before the crisis once a month and since the crisis once a week, and making sure that we seize any kind of opportunity, will it be to win smaller account, will it be to cross-fertilize, and this was really starting to pay off. You have to know that every Monday we have a Commercial Pulse where we review all the initiatives that are taken, and that was before the crisis, and you can see the dynamic.
The third thing, I don't want to go too much in detail because it's something that I can't share if there is competition on the line. But the truth is, the kind of product we are building at the moment between Epsilon and Publicis Media is starting to be encouraging and hopefully will be in the future. And then it's important to note also, I don't think it is related to the crisis, and maybe it will in the future, but our health practice has done very well with high single-digit growth, which is a good thing. So that explained most of the performance. Now, there is another encouraging side, but it's too early to draw any conclusion. That Publicis Sapient is coming back to flat territory in the U.S., actually slightly positive.
So it is the Sapient that is focusing on business transformation through industry verticals. And so I won't take that as definitive because, again, it's too early. But you can see there that things are moving in the right direction too. Now, I want to be very clear on something, is that even though we already see, coming back to your other question, a kind of drop in the revenue in March, we are definitely only at the beginning of the crisis in the U.S. So what is, of course, a bit frustrating for us is this kind of dynamic is definitely going to be stopped. But to come back to the question we had with Tom before, believe me in something, not only are we going to preserve it for the recovery, but we're going to accelerate it. And this goes a lot through people.
And the kind of, you know, solidarity and team spirit that is being created in the US at the moment is pretty unique. It's. We have this growth Comex every Wednesday night. For me, it's a bit late, but it's good to be there, and you see those 10 leaders working together, putting plans together, and again, you're going to see things that they have produced in the last weeks that are pretty encouraging, but let's be clear on that.
We're going to have a tough quarter there as we're going to see it everywhere. No, that's super helpful. Thank you very much, guys. The next question comes from. I'm sorry, time's flying so I don't know if we have time for all questions. I don't know how many questions there are, but I'm very conscious of your time. Alessandra is telling me that we can continue. So it's Alessandra deciding anyway. So let's go on.
The next question comes from Conor O'Shea from Kepler Cheuvreux. Please go ahead.
Yes, sir. Thank you for taking my questions. Morning, everybody. So, yes, sir, three quick questions. Arthur, just to follow up, from what you were saying about the U.S., and I understand there's no specific guidance about the second quarter. But, from what you're saying, some of the factors you mentioned, are there reasons to believe that the U.S. might perform better than Europe in the second quarter, or, you know, better than Europe has in March or China, you know, so 20%-30% down in the second half of the quarter? Are there reasons to believe that the U.S. could perform better than that, or is it just a question of timing of the lockdown?
Second question, just on Epsilon. I know you've given some qualitative statements about the model, but just wondering whether, you know, the data part of the model, what the kind of mix is between transactional revenues and subscription, you know, bearing in mind that, you know, other media companies have highlighted subscription has been more resilient. And then a final question, just on the cost savings, the EUR 500 million, is there any part of that that relates to state aid for partial unemployment or whatever? Are you eligible for that in some of your markets? Are you likely to make use of that as a saving as well? Thank you.
Okay. So maybe I'll start, actually, with the last question about the state aid. I mean, what is important to understand, and again, it comes back to the question we had earlier, one of our main missions at the moment is to protect the job of our people because, again, it's our responsibility, and you can see the momentum, and what you need to understand is from day one, we took all the possible measures and everything that was offered to us in every country, and when it comes to the help of the government, in terms of furloughs, yes, we have in some very specific cases. Let me give you one example. When our restaurant, that I guess you know, the Drugstore on Champs-Élysées closed, of course, we put them in what we call the chômage partiel, and you will find that here and there.
But what you need to understand is many, if not the vast majority of our people are still working day and night at the moment. It's pretty amazing to see. It's actually something that concerned me is that there is no limit to what you can work. And this is, there is some on the call. I thank them again because everything is more complicated. By the way, this is also one of the reasons why we sent you the press release yesterday because we considered that this morning at 7:00 A.M., maybe you have to take care of your family or do something, and you have to adapt to new things. We took the decision to send it yesterday because we didn't know at what time you would be able to read it and come with questions.
So we have to adapt this to every environment. On the U.S. performance, better on the second quarter, I mean, what can I say? What I found absolutely incredible in this crisis, and I'm going to tell you things that you know, but still, this is how I'm thinking about it now, is that we don't know neither the magnitude nor the complexity, and even less, even less the length. So at this stage, speculating on which country is going to do better than others, it's impossible. And it will be honestly irrelevant. What I can tell you, and hopefully you will see towards what we are doing, is we are trying to give you all the facts and information we've got. We are taking all the necessary action, and we have set a lot of them already. We are getting ready if things go worse.
We are getting ready if things go better. And we are managing it on a daily basis. Will it be for our cost? Will it be for our cash? Will it be for our revenue? And so again, don't ask me to tell you what I don't know because, honestly, no one knows. On Epsilon, I find you a bit hard with me, because I didn't give you any qualitative, but I give you a strong quantitative. Again, spreading the quarter in two gives you a strong indication, again, on what we are doing. So I won't go into specific activities because you're right. There are activities that are more resilient than others.
But what matters the most at the moment is to make sure that what is 80% of what we acquired a year ago, that is in itself an activity that needs to grow, but also an activity that should allow us to grow with others, as you have seen at the beginning of the year, is, of course, very preserved, that we continue to make the right investments, and we continue to break the silos between our different activity in data, in media, in creative, and with Sapient. And again, if there is one good news about the crisis, it's the level of solidarity and the team dynamics that we are bringing at the moment.
Okay. Many thanks, Arthur.
Thank you.
We will now take the next question from Adrien de Saint Hilaire from Bank of America. Please go ahead.
Yes, good morning, everyone, and I hope you can hear me well. Thank you for taking some time this morning. So a few questions for me, please. First of all, if we look at what's been said in the trade press, it seems that the advertising markets in the U.S. and Europe can be down as much as 30% or sometimes 50% for Q2. Do you think that's a good benchmark for your own revenue growth in your media activities or maybe at the group level for Q2? Second question, so you said that you've drawn on the revolving credit facility for EUR 2 billion. Can you give us a bit more details as to why you've done it? Because you still have about EUR 2 billion of cash, gross cash, I think, at the end of Q1. So, give us a bit more details here.
Lastly, Arthur, I think presumably the pace of account reviews is going to slow down in 2020. Do you think it's good news, or do you think it's bad news given you've done so well on net new business in the last couple of years, and it has helped on your organic sales growth in Q1, for example? Thank you very much.
I'll start with the last one. Is account review a good news or a bad news? It's both, actually. Honestly, it's a good news because we have been winning a lot, as you know, and it gives us time to you know really put the team in place, do the right thing, which is something that we would have done anyway, because we step up on some pitches to make sure that we can deliver on what we promised.
There is nothing more important than to deliver on what we promise on the pitch. The good example of that is what we did with GSK. We won it a year ago, and just a year after, we got Pfizer that came as a consolidation only because we had delivered on the first year. So this is, of course, our priority. In a way, it is good news that it's slowing down a bit. Of course, in a way, it's bad news because we have the model that is in advance on our competition, and we could have won more. But overall, I think that, I mean, we know exactly, and I'm talking before the crisis. We had a plan that just needed to be executed on a basis that was starting to work well.
And so, new business was extremely important at the beginning of our journey because it was a way to test our model and to make sure that when you stand in front of a big client that wants to transform, we have by far the best proposal. This buzz, this stickiness, our biggest question now, and it comes back to what we talked about attrition on our last call, is to make the same thing with every of our clients. So honestly, the fact that account reviews are slowing down is not that much of a problem.
What I will tell you on what you are reading on the trade press is we won't make any comments in terms of guidance and what happened on media could have an impact on our business because you need to understand, by the way, that our business is very spread. Take the U.S., huh? The U.S., we have today 25% of our revenue in creative, 25% in media, 25% in data, 25% in tech and engineering. So as you can imagine, the impact is different in our case. Having said that, maybe Steve can quickly, please, Steve, give us a few colors on this question to make sure we answer it, and then I will finish with the revolving credit.
Actually, I'm not going to add much to that, Adrien, because I'm just going to say pretty much the same thing. I think the, you know, as you've looked back to previous crises and today, you know, that there is much more of a decoupling between our expenditure and our revenues, as you've said. Second thing is that we are, I think today's the 14th of April, I believe. So if you're asking about Q2, I don't know how anybody anywhere is able to predict what is happening.
We are really only at the beginning of the financial impact of this crisis just for this quarter. So, even if we were able to give guidance, I honestly think it's impossible, which is why most of the forecasts you've seen are speculation. I'm sure by the time we come back to do our Q2 report, we will have a much better, objective view. But at the moment, it's just too early to say. I'm sorry not to be able to give you more guidance or clarity.
The only guidance we gave, and that I gave yesterday with the agreement of Steve, is that we believe that in terms of media spend, the decline we will see in 2020 will be more important than the one we have seen in 2009. This is why I don't think you can compare one with the other. But I would like to take very quickly the revolving credit question. I mean, what you need to understand here, and this is very important because it tells you a lot about how we are managing this crisis, is it is purely preventive.
Hopefully, you will recognize that we have a strong culture of very rigorous cost management and that we have proved that again over the year in time of crises and also in time of organic growth decline in the last year sometimes. So what is important to take out of this is that we are taking all the measures to protect our business and pass the crisis in the best way because, again, we were making the demonstration that we had the right model and it was working. We need to, you know, spend this time on the crisis doing two things: managing the short term and preparing the long term. And this goes through making sure that we take all the preventive measures, whatever happens, because we don't know. And as I said previously, we are taking those cost initiatives.
We are, if the thing were to worsen, ready to take more, and we have the organization to take to do so. But for the moment, we think we're on track.
I really appreciate it, Arthur. If I can just squeeze in a very short one, what is the typical lag between your own revenues and media spending? Is it, is it a month? Is it a quarter? Or is it, is it more? Or, or is it similar?
It's becoming, it's becoming every day more difficult to correlate one with the other. It shows the general trend, the mood of advertisers, the way the economy is going. If I will be too. I will use it as more as a KPI for a general business situation more than for organic revenue for agencies, knowing that, by the way, you look at the revenue stream of the different agencies. It's becoming more different every day, so I think, and again, this is the difficulties of the exercise we are doing.
Believe me, if we had an idea, we would tell you it would be simpler. It's just that at this stage, we are monitoring things daily. We are giving you the facts as they are as fast as we can, even if we have to sacrifice any time with anyone else than the people that are on that phone, and as the minute we know more, we'll tell you.
Thank you very much, Arthur.
Okay. I think we're going to have to stop here, if it's fine for you, because it's almost an hour and a half. Again, I'm very sorry for the short delay we had. As I was telling, we are adapting everything real time, and we had to do this exercise again today. I would like to thank you again for taking the time to join this call. Hopefully, it was useful in some area. And as you have seen, we have tried to decompose the things, to give you a more precise flavor. And we thought, and we took the decision, actually, at the minute we had the number, we thought it was important in this uncertain time to try to bring some certainty on what has happened in the past. I would like to thank the team that has been putting this presentation together.
I know they are listening, and I would actually, in particular, thank Jean-Michel, who actually has just recovered from COVID-19. So you see that that is healthy and in good shape, but he went through that during the very busy period. I will leave you hoping that you and your family are safe, and wishing you to take very good care of you and your family in this difficult period. So thank you very much, and talk to you soon. [foreign language]
That will conclude today's call. Thank you for your participation. You may now disconnect.