Havas advertises small upturn in results

3rd August 2004, Comments 0 comments

PARIS, Aug 3 (AFP) - Havas, the sixth-biggest advertising group in the world, signalled a sharp recovery of results on Tuesday because of restructuring and rising business, but analysts showed disappointment with sales growth.

PARIS, Aug 3 (AFP) - Havas, the sixth-biggest advertising group in the world, signalled a sharp recovery of results on Tuesday because of restructuring and rising business, but analysts showed disappointment with sales growth.

Havas, based in France, forecast a strong improvement in performance this year after reporting a small rise in underlying advertising revenue in the first half of the year and a big increase in margins to about 12.0 percent.

Overall sales revenue fell by 10.3 percent from the equivalent figure last year to EUR 750 million (USD 902 million) owing to asset sales but so-called organic, or internally driven, sales edged up by 0.6 percent.

The company, which began restructuring last year to emerge from weak performance, said that in the second quarter the group had raised organic sales for the second quarter in a row after several quarters of declines.

But the price of Havas shares were off 0.98 percent at EUR 4.03 in midday Paris trading because revenue performance was weaker than analysts had estimated.

Advertising is widely regarded as an early indicator of the economic cycle, suffering quickly when downturn begins and companies and individuals cut back on activity and therefore advertising, and as an early beneficiary of upturn as activity increases.

The company introduced a deep restructuring plan in September involving the closure or disposal of more than 20 companies.

The company said that on the basis of performance in the first half it was standing by its forecast of a "strong increase in profits" for the full year.

In the first half, profitability had increased strongly to about 12 percent from a margin of 8.3 percent in 1983, a bad year for the group resulting in a net loss of EUR 396 million and a 17.2-percent fall in sales.

Chairman Alain de Pouzilhac said that precise figures would be published on September 16 along with half-time results, but he added that an increase of four percentage points in profitability was "enormous".

He said that "strategic reorganisation and restructuring" had resulted in a sharp turnaround after a fall of 6.3 percent in organic growth in 2003.

Analysts said they were slightly disappointed that the growth of organic sales had edged down in the second quarter. They had expected six-month sales of 753 million euros and growth of 1.0 percent instead of 0.6 percent.

Brokers Aurel Leven said the figures showed that organic growth in the second quarter was 0.5 percent after 0.7 percent in the first quarter.

Deutsche Bank said that on another calculation, excluding the performance of companies sold during the first half, organic growth had been 1.1 percent which was lower than that achieved by competitors and notably Publicis which had achieved sales growth of 4.5 percent.

CM-CIC Securities also commented that the figures showed encouraging signs in Europe and notably in Britain but difficult trading in the United States.

Commenting on talks that Havas has been holding with US advertising agency Grey Global with a view to buying the business, de Pouzilhac said that further talks were needed before any decision on a bid.

"Grey makes sense in strategic and financial terms, but now we need to move on to the next stage," he said in an interview with AFP after the publication of the results.

He said Havas now needed to find out if Grey's perspective on a merger corresponded with its own.

French brokerage Fideuram Wargny pointed out that Havas had lined up financial partners if it decided to pursue Grey.

"If there is an offer, for us it would be an interesting strategic opportunity (to reach a critical mass) even if the move would pose problems for the profitability of the group," the brokerage said.© AFP

Subject: French news

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