What Fueled Havas' Third-Quarter Surge

Q&A: CEO Rodés Vilà Says Account Wins, Decisions in Brazil Sparked 9.3% Growth

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NEW YORK (AdAge.com) – Following today's third-quarter earnings announcement by French holding company Havas -- parent of Euro RSCG, Arnold Worldwide and MPG -- that it posted its strongest quarterly performance since 2000, CEO Fernando Rodés Vilà talked with Ad Age about what spurred the growth and what's next on the horizon.
Ad Age: What spurred Havas's 9.3% organic growth this quarter?

Mr. Rodés Vilà: One quarter doesn't mean too much because it's a short period of time, but it does confirm the average for the year, which is good. There have been four factors that explain most of the growth. The first one is we are starting to enjoy the increasing new business that we gained in both 2006 and 2007. There are several new accounts such as Sears, Kraft, and many others. Secondly, [there's] the fact that most of the agencies that we had in red at the beginning of 2006 are now back in black. Third are some decisions we've made over the year, such as buying back some of our shares in Brazil. We had just a minority stake in our Brazil agency and now it's a fully owned subsidiary. And [last], some very good performance of specialty markets and disciplines [such as media and digital].

Ad Age: Have you noticed clients pulling back spending because of the financial tumult in the U.S.?

Mr. Rodés Vilà: I have to say that we have not yet felt that. At least we haven't had any cancellation of campaigns. But it's probably soon to tell.

Ad Age: How is Havas increasing its digital capabilities? What is your strategy? Are you looking for acquisitions in the future?

Mr. Rodés Vilà: Well, our strategy is to bet on the assets we already have -- especially two of them, Euro 4D and Media Contacts. Those are two superb assets that are showing wonderful growth. They are far ahead of the market average and we are upgrading our capabilities constantly, not only on the human but also the technological side and we are happy with them. And we will keep on betting strongly on them. We will also look at acquisitions. We have done some minor acquisitions, but we are not at this time starting any major operation in the same line of [other holding companies].

Ad Age: Why is that?

Mr. Rodés Vilà: It is a matter of proportion. When you do acquisitions of that size -- and we are talking about $2 billion or over -- on digital this has risk. And the risk is mainly associated with the speed of technology. ... Most of these assets are valuable because of the technology they have and we are again doing a value calculation that is more or less the one we did eight years ago before the [dot-com] bubble. More than evaluating this on pure economic profitability we are evaluating this on expected profitability and technology. We perfectly understand why some groups take the position [of making big acquisitions], but for us it's difficult because if we have a problem, this could jeopardize the whole group. There is not so much cushion. We think that some of the technology that we are seeing today will be gone in a couple years time. Now we will do some acquisitions, but clearly of a different proportion.

Ad Age: A lot of the growth in North America this quarter came from media and digital. Is this part of a specific strategy on the part of Havas to focus more on those disciplines than traditional advertising?

Mr. Rodés Vilà: The work here is in integration. In the U.S., teams on every agency are putting integration as a priority and this is having an effect on the way they do new business. We are launching integration globally, and the first four markets were the U.S., the U.K, France and Spain. And the U.S team has embraced that program. Now when you talk with the advertising agency, you talk media with them, which probably was not the case one-half year ago. But the [idea] for the advertising agencies is that they start their process discussing the message and the media input gets into the process from day one. And the arrival of Esther Lee is clearly fostering that.

Ad Age: MPG has a huge presence in Europe, would you like it become as big in the U.S.?

Mr. Rodés Vilà: We are more about quality. And we think that quality leads to size. Here in the U.S. we have been working very hard in the past to have a state of the art and the [best offering] in the market, and we think we have it today. We think that the MPG offer is unbeatable and the gains we had this year are based on that. And we will keep this up. And this is the result of the right people at the right time with the right tools and technology. And MPG in the U.S. is clearly leading the path.

Ad Age: There has been some talk that Havas will merge with London-based holding company Aegis. Do you have any thoughts on that?

Mr. Rodés Vilà: I can tell you the following: First, as you know, this is an initiative that doesn't come exactly from Havas but from its largest shareholder [Vincent Bollore]. And obviously at Havas, we are first very thankful, and second, we are going to be observing how things evolve, for one very good reason -- the enormous [faith] in collaboration that we have with Aegis and the many different industrial projects that we could build together. We have had with Aegis many conversations in the past. I am sure that one day or another we will talk again. The industrial logic is there and nobody argues that. And I think that one day we will have the dialogue, which is something that needs to happen before taking one side or another.
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