The figures were the poorest recorded by any of the holding companies this year-Interpublic Group of Cos, the next worst, recorded a loss of $22.1 million.
The biggest surprise in the announcement-some elements of the restructuring plan were uncovered previously by Advertising Age in its Sept. 8 issue-was the extent of the layoffs, with the company announcing that it plans to cut another 850 jobs this year.
"It's not what we wanted or expected," said Bob Schmetterer, president and chief operating officer of Havas and chairman-CEO of Euro RSCG Worldwide. "The reason is that 50 of 340 [Havas-owned] companies had very poor results for the first half. These are the companies we are selling or closing or merging."
He said 20 companies, mostly marketing services and European businesses, will be sold or closed; the sale of the first one, a telemarketing operation, is due to be announced this week. Iain Ferguson, CEO of Euro RSCG Marketing Services, will move to Havas as exec VP to oversee the sale and shuttering of the underperforming companies.
Mr. Schmetterer said one-quarter of the 850 redundancies yet to come this year, following 750 in the first half, will be in North America and two-thirds will come from Europe, in what he described as largely back office positions.
In the restructuring, Arnold Worldwide Partners was stripped of 10 marketing services companies including Brann Worldwide that now join Havas's only global network, Euro RSCG Worldwide, whittling Arnold down to a strong U.S. creative agency with eight overseas offices. Ed Eskandarian, Arnold's chairman-CEO, said Arnold will continue to have a U.K. agency but wouldn't comment on the plans of its London agency, WCRS, to buy itself back from Havas.
"We're dramatically changing our cost structure," Mr. Schmetterer said. "The people part is less than 15%. The vast majority is writing off real estate."
Havas said the pre-tax cost of the reorganization will total close to $200 million, including $39 million for layoffs and $110 million in real estate write-offs on vacant space. Annual savings from the reorganization are estimated at almost $100 million.
Havas also claimed that its Media Planning Group will double in size with the objective of being among the five leading media groups within the next 12 months, an ambitious goal for a media specialist that ranks 10th with billings of $8.5 billion, according to media tracking group RECMA. Mr. Schmetterer said Havas may do joint-ventures to grow MPG or make acquisitions.
contributing: emma hall and claire atkinson