French Ad Company Says Worst Has Passed

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NEW YORK (AdAge.com) -- Restructuring costs caused Havas to post a large loss for 2003, but the company's management said the pain is already passing and the French advertising company could show growth in the first quarter.

Havas, parent of Euro RSCG Worldwide,

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Arnold Worldwide Partners and Media Planning Group, posted a net loss of $496.95 million in 2003, compared to net income of $24.59 million in 2002. Revenues totaled $2.1 billion, down 17.3%, or 5.7% on an organic basis, after factoring out currency fluctuations, acquisitions and dispositions.

Restructuring plan
The loss was mainly due to a restructuring plan begun last year, Chief Financial Officer Jacques Herail said. In a conference call with analysts, he noted the items include $216 million in costs due to staff reductions and the elimination of some real estate and another $64 million cash payment to convertible bondholders in exchange for not exercising their option to sell their holdings back to the company.

The results were "disappointing, no question about it," Chairman-CEO Alain de Pouzilhac said. But he argued the weakness is "exceptional, not structural." He said Havas is seeing results from the restructuring, which focused on strengthening the integrated capabilities of Euro RSCG and reducing the company's costs. Havas has nearly completed the disposal or consolidation of 50 underperforming units: 19 have been integrated into Euro RSCG, seven have been reorganized, eight were closed and 16 are close to a sale, Mr. de Pouzilhac said.

Regional improvement
The changes should begin to show results this year, as the U.S. recovery continues and Havas' key markets in the U.K., France and the rest of continental Europe begin to show improvement, said Mr. de Pouzilhac. The U.K. remains disappointing, but France and Europe showed improved revenue in the fourth quarter over the third, he said.

"I see momentum in parts of the world were we had issues last year," said Jim Heekin, chairman-CEO of Euro RSCG Worldwide.

Mr. de Pouzilhac noted Havas' revenue is showing organic growth during the first quarter and new business has picked up since the beginning of the year, with wins in high-profile pitches such as Arnold's defense of the Fidelity Investments account.

Stock price boost
The news gave a strong boost to Havas' embattled stock. Share prices rose 6.82% in the Paris Bourse to close at 4.70 euros, or $5.73. American depositary receipt shares on the Nasdaq closed at $5.66, up 6.99%.

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