Cost Controls and Restructuring Credited for Gains

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NEW YORK (AdAge.com) -- French ad holding company Havas reported improved earnings, which management credited to cost controls and cutbacks in 2001 and 2002, but warned that its key European region remains weak.

Havas posted net income of $25.8 million for the year, up from a loss of $63.5 million in 2001. Chairman-CEO Alain de Pouzilhac said the company is seeing the benefits of restructuring in late 2001, as well as cost cuts during 2002.

Revenues were down
Havas, parent of advertising agency networks Euro RSCG and Arnold Worldwide, last month reported revenues of $2.15 billion for 2002, down 7.7% from 2001 or a drop of 5.8% on an organic basis, after adjusting for acquisitions and the effects of currency.

Revenue growth is beginning

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to show improvement in North America, where revenue was down 1.5% in the fourth quarter, said Bob Schmetterer, Havas' president and chief operating officer. Europe was down 11.4% in the fourth quarter, mainly due to lower marketing services revenue in the U.K., Mr. Schmetterer said. He speculated the cuts came from clients looking to improve year-end results by shifting marketing expenses to the next quarter.

North America's 'normalcy'
North America is seeing "more normalcy of client spending," Mr. Schmetterer said, and that Havas is also seeing increased new-business activity in North America and Europe in the first quarter of 2003, another positive sign.

Management would not give analysts guidance on 2003's expected results, citing the uncertain economic and geopolitical situation. Mr. de Pouzilhac said the company plans to continue its focus on reducing debt and increasing margins and cash flow.

Despite the lack of guidance, investors were impressed. Havas stock, which has been hovering at all-time lows for months, closed at $2.77, up 13.5%, in the Paris Bourse today.

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