Havas, Publicis see flat '03, true recovery for next year

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The French agency holding companies sounded cautiously optimistic last week, even as the weak U.S. dollar took a bite out of their first-quarter results.

Both Havas and Publicis Groupe posted negative organic growth-after factoring out acquisitions and the effect of exchange rates-but noted the drops were smaller than in previous quarters and the key North American region appears on the verge of showing positive numbers.

Havas-parent of Euro RSCG and Arnold Worldwide-posted $434.2 million in revenue, down 19.8% or a drop of 5.8% on an organic basis.

Publicis-parent of Saatchi & Saatchi and Leo Burnett Worldwide-posted $977.4 million in revenue, up 57.1%. The increase was mainly due to the acquisition of Bcom3 Group last September; on an organic basis, revenue dropped 1.2% The French companies report earnings twice a year, not on a quarterly basis.

"All the fears about the Iraqi war are over. ... We're more optimistic about the evolution of our environment, so consequently, we're more optimistic about our own evolution," said Alain de Pouzilhac, chairman-CEO, Havas.

The war hampered the U.S. market slightly in March, slowing what looked like an improving trend, said Maurice Levy, chairman of Publicis. Both CEOs noted the industry shows positive signs in the U.S., including improving consumer mood and signs of willingness to spend among advertisers.

Havas' North American revenue dropped 2.6% on an organic basis, while Publicis' was down 0.8%. Both companies reported that traditional advertising gains in the U.S. were offset by continued weakness in marketing services, mainly in the public relations and consumer relationship management disciplines, which remained weak but showed signs of improving.

But Havas President-Chief Operating Officer Bob Schmetterer warned the U.S. recovery remains tentative and depends on continued improvement in corporate earnings.

European drop

Havas reported a 10% drop in European revenue on an organic basis, while Publicis posted a 5.2% drop. The U.K., France, Germany, Spain and Italy are showing continued weakness, although traditional advertising and media has proved resilient in some markets, notably France and the U.K.

Management of both companies were reluctant to forecast revenue growth for the year, but said they expect 2003 revenue to be flat to slightly up and true recovery will come in 2004.

Separately, Grey Global Group reported improved results for the first quarter, thanks to gains in the U.S. market and the effects of currency overseas. Grey posted net income of $5.1 million, up 18.6% from the year-ago period. Revenues grew 4.2% to $297.6 million for the quarter. In a statement, management cited "modest growth in North America" as well as the favorable effect of the U.S. dollar's weakness against the Euro, which was partly offset by weakness among Latin American currencies.

Q1 Earnings

Publicis Groupe (PUB)

May 16 close: $27.60

52-week high/low: $31.50/$15.47

Market cap: $3.7 B

First quarter revenue, YOY change: $977.4 million +57.1%

Stock quote: Publicis' revenue rose due to its Bcom3 Group acquisition; it dropped 1.2% on an organic basis.

Havas Advertising (HAVS)

May 16 close: $4.70

52-week high/low: $7.88/$2.26

Market cap: $1.29 billion

First quarter revenue, YOY change: $434.2 million, -19.8%

Stock quote: Havas took a hit from the dollar's weakness against the Euro; revenue dropped 5.8% on an organic basis.

Grey Global Group (GREY)

May 16 close: $649.90

52-week high/low: $832/508

Market cap: $810.9 million

First quarter revenue, YOY change: $297.6 million, +4.2%

Net income, YOY change: $5.1 million, +18.6%

Stock Quote: Like most U.S.-based companies, Grey's revenue comparison benefited from the weak dollar and improving domestic business.

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