In their presentations executives from Havas, parent of advertising agency networks Euro RSCG Worldwide and Arnold Worldwide and media buying company MPG, emphasized 2004's positive trends, which included a nearly 5% increase in organic growth for the fourth quarter from the prior year, and a 2% rise in organic growth for the full year.
Havas will present full-year 2004 earnings results in March.
The overall picture at Havas today is murkier than the rosy wrap-up presented by management.
Havas in January lost two major pieces of business -- the $300 million global Intel account and U.S. media-buying and -planning responsibilities for Volkswagen of America. Euro and MPG pulled out of the Intel review, which began last fall, and Volkswagen of America moved its $430 million account from MPG to Grey Global Group's MediaCom.
"The figures today are good, above expectations. Now the question is, How much will the loss of Intel affect organic growth for 2005?" one analyst said.
Also clouding the picture are the intentions of French corporate raider Vincent Bollore, who, with a 20% stake in Havas, is the company's largest shareholder. Mr. Bollore began buying shares of Havas last summer and currently holds 86.4 million shares. He has requested two seats on Havas board and has also pushed for the creation of a supervisory board to oversee Havas' current directors and management. Before deciding whether to grant those requests, Havas had said it wants more information from Mr. Bollore on his intentions.
A Havas spokeswoman did not return calls for comment today.
Mr. Bollore's plans for his stake in Havas are the subject of intense industry speculation. In December, the investor consolidated all the shares he owned but held under various entities, and then used those shares as collateral for a $272 million bank loan. The money, said a spokesman for Mr. Bollore, will be used to invest in media-related businesses.
Future as a stand-alone company
Havas' ability to continue as a stand-alone entity is also being closely watched. Since losing out this past summer in a bid to buy Grey Global Group to WPP Group, the company faces a future in which it is much-diminished, compared to its closest competitors. When the Grey/WPP deal is completed next month, Havas will be well behind the industry's top four holding companies in terms of revenue. Post-deal, Havas will be the world's sixth-largest ad company, based on 2003 revenues, with $1.88 billion in revenue, compared to Dentsu, its next closest competitor, with $2.55 billion. (Omnicom Group, WPP, Interpublic Group of Cos. and Publicis Groupe are the big four.)
Particularly in media buying, size is increasingly important, because scale brings cost efficiencies, negotiating strength and the ability to invest in research and tools. On the creative side, for publicly traded companies, the loss of revenue from a large global account presents a serious challenge: Revenues must be replaced quickly to preclude management from having to cut staff and resources to keep Wall Street happy.
After a difficult 2003, Havas management undertook a dramatic restructuring, which included laying off hundreds of employees and selling off or closing poorly performing businesses. The effort yielded positive results by mid-2004, when the company reported solid results-operating margins for the first half of 12.2% compared to 8.2% the year-ago period, and profits of $17 million in 2004's first half vs. a loss of $70 million in the prior year.