Havas posts healthy income gains

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Havas Advertising, still believed in pursuit of Snyder Communications, saw its ambitious acquisition strategy pay off with a hefty 38% lift in gross income in 1999. The boost comes as Havas tries to claw its way up from the No. 6 advertising group worldwide to the No. 5 slot, now occupied by Y&R Advertising.

Last week WPP Group, ranked No. 3 behind Omnicom and Interpublic Group of Cos., respectively, also reported strong growth, with pre-tax profits up 20% to $414 million on 13% higher revenue of $3.52 billion, according to its preliminary results for 1999. The London-based group announced gross billings up 16.8% from the year before, to $15.1 billion.

STOCK SLUMPS

Despite the healthy leap in profits, the stock market's expectations for WPP are so high that the company's share price fell by 9.8% to $82.12 on Feb. 17.

Havas, which will disclose further financial information including 1999 profits on March 2, said in a statement that gross income grew from $874 million to $1.2 billion in 1999 as sales rose from $5.8 billion to $8 billion.

"Our stated objective is to be in the Top 5 by the end of 2001," said Alain Camon, Havas Advertising's financial director. "To get there, we have to meet our pledge to double 1998 gross income by 2001." That means, he said, adding about $300 million in gross income in 2000 and again in 2001.

Growth will come from planned acquisitions, primarily in the U.S., but Mr. Camon would not comment on whether Snyder Communications will be Havas Advertising's next deal. Havas "has looked at" Snyder, he said.

"We aim to continue pursuing external growth, via acquisitions, with a strategy of targeting activities that respond to the needs of our largest international clients," Mr. Camon said.

Havas Advertising includes the Euro RSCG Worldwide and Campus networks, and Media Planning, an international media planning and buying group.

Last year, acquisitions accounted for two-thirds of Havas Advertising's growth, as the Paris-based holding company snapped up Jordan McGrath Case & Partners and Devon Direct in the U.S., and added German hot shop Rempen & Partner to the Campus network and U.K. marketing services company Lopex to the Diversified Agencies stable.

Sixty percent of Havas Advertising's 1998 gross income came from Europe, including 25% from France alone. Latin America and Asia each accounted for less than 5% of gross income, a concern for Havas as major international marketers focus more on the developing world.

Havas Advertising is about to relaunch its 4-year-old second network, Campus, and expand it beyond Europe. Havas took a 40% stake in a Brazilian start-up called Age. and claims a U.S. agency for the Campus network is imminent.

NON-AD ACTIVITIES

At WPP, non-advertising activities grew to 53% of group revenue, the first year businesses like public relations, consultancies and branding and identity activities accounted for more of WPP's revenue than did advertising. The company said in a statement that net new billings were up $3.9 billion, or 35% above 1998.

The group also is starting to generate significant income from the Web. Pure Internet revenue for Web-based work hit $100 million during 1999. If branding work for dot-com clients is included, Internet revenue reached $500 million.

Copyright February 2000, Crain Communications Inc.

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