Publicis Reports Gains for Quarter; Havas Remains Hopeful

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NEW YORK (AdAge.com) -- The two French holding companies posted diverging results for the third quarter, but both noted the U.S. market and traditional advertising continue to lead the recovery.

"We see some reasonable optimism in North America, we see the growth continuing in Asia/Pacific, and Europe is still a concern," said Maurice Levy, chairman-CEO of Publicis Groupe.

$1.06 billion
Publicis -- parent of Saatchi & Saatchi and Fallon Worldwide -- posted revenue of $1.06 billion for the quarter, up 55.8% from the same time last year. The change was mainly due to the acquisition of Leo Burnett Co. parent Bcom3 Group on September 2002.

Publicis' revenue was up 2% on an organic basis, after factoring out acquisitions and the effects of currency. The North American region, Publicis' largest revenue producer, showed 4.1% organic growth for the quartrer, while Europe was down 3.3%.

In a conference call with analysts, Mr. Levy said the U.S. continues to show strength, especially in advertising and media, while specialized communications are still "patchy," with public relations still the weakest discipline. In Europe, he noted the U.K. market is performing well, Germany and Spain are stabilizing and other markets continue to show a "worrying" decline.

Down, but improved
Rival Havas reported $432.6 million in revenue for the third quarter, down 15.8%, or a drop of 5.5% on an organic basis, although the company noted that is an improvement over the first and second quarters. Traditional advertising was the better performer, down 2.6% on an organic basis, while marketing services dropped 8.3%.

The French companies report full results twice annually and don't report net income on a quarterly basis.

In a conference call, executives noted that the numbers are still an improvement over the second quarter. Chairman-CEO Alain de Pouzilhac said the revenue figure would have been down only 2% if it had factored out several units marked for disposal or consolidation. Havas announced in September it would reorganize around its Euro RSCG network in an effort to reduce costs and improve operations.

Eye toward 2004
Although Havas executives said the fourth quarter is shaping up, they added they don't expect significant improvement until 2004, thanks to the restructuring and improved market conditions.

"There appears to be some strengthening, but it is far from buoyant. The reality is the market remains depressed," said President and Chief Operating Officer Bob Schmetterer.

Havas also announced plans to offer some bondholders a cash payment in exchange for not exercising their option to sell their holdings back to the company on January 2006. The $1.39-per-bond cash payment, worth a total $58 million, will help Havas avoid redeeming up to $522 million in convertible bonds.

Refinancing options
The move is "competitive" with other refinancing options available, and Havas may try other strategies as it continues to restructure its debt, said Chief Financial Officer Jacques Herail. The same strategy was used twice this year by Omnicom to postpone "put" options on its debt.

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