Havas contemplates future in sixth place

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By Sept. 21, financier Vincent Bollore must reveal his plans regarding Havas, in which he has amassed more than a 10% stake. But the French government will not be alone in looking for clues about the future of the mid-tier holding company.

Just days after his bid to buy Grey Global Group failed, Havas Chairman-CEO Alain de Pouzilhac put on a brave face before analysts and reporters at a Paris meeting to discuss the advertising holding company's solid first-half 2004 results.

Mr. de Pouzilhac put a positive spin on the role of Mr. Bollore, now Havas' largest shareholder, who has been offered two seats on Havas' board. "Potentially, he represents a factor of stability," said Mr. de Pouzilhac. But Mr. Bollore's opposition to Havas' Grey bid was widely reported, and speculation remains as to whether he might advocate for management change. He has a history of buying undervalued companies and pushing through restructuring. A representative for Mr. Bollore would not comment.

size matters

Havas has in fact made strides in its turnaround, but it could be too little, too late. Now the world's sixth-largest advertising holding company, with 2003 worldwide revenue of $1.88 billion, after the WPP Group-Grey merger Havas (and its closest competitor, Dentsu, with $2.55 billion in worldwide revenue) will be well behind the industry's top four holding companies.

In the advertising industry today, size matters, because it enables holding companies to bring clients efficiency in scale, particularly in media buying.

Following a radical restructuring undertaken nearly a year ago that included cutting staff, closing offices and selling underperforming companies, Havas is showing stronger results. Operating margins of 12.2% for this year's first half-a significant improvement compared with the 8.2% of the same period last year-put Havas in the neighborhood of competitors Omnicom Group and WPP. Though first-half revenue fell 10.3% to $911 million dollars vs. $1.01 billion the prior-year period, Havas returned to profitability, with net income of $17 million compared to a $70 million loss in last year's first half. Mr. de Pouzilhac set as a goal for the coming year of exceeding a 15% operating margin.

The company is also refinancing nearly $800 million in convertible bonds with proceeds gained by issuing additional shares.

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