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True North Communications has given up plans to buy a third network, but will continue to buy agencies in Europe and the rest of the world to fill in gaps, said Chairman-CEO David Bell.

The world's seventh-largest ad group wants to increase revenues by at least 7% to $1.3 billion this year -- with 3% derived from new business and 4% from acquisitions. That's a tall order, representing a growth rate double that turned in by True North last year.

It also would surpass predicted industry ad spending growth of 6%. With a month left to go in the quarter -- Mr. Bell's first at the helm -- TN is believed to have racked up more than $300 million in new business, equal to the company's total in second quarter 1998.

The goal is also somewhat lofty for a company with limited international presence, said Prudential Securities analyst Jim Dougherty.

"What they're saying is that 'We're going to do the same thing other agencies have done for years,' " Mr. Dougherty said.


Boosting that international presence is a top priority for Mr. Bell. Europe now accounts for 14% of TN revenues, a figure Mr. Bell wants to double. He gave no timetable for doing that, but said the holding company will bulk up existing offices and buy smaller shops rather than open new offices of Foote, Cone & Belding or Bozell Worldwide.

"We really are in the places we need to be," he said. "Our issue is not coverage. It's critical mass."

The company now has more cash to spend on such deals. Last week, it sold its 8.8% stake in ex-partner Publicis for an estimated $140 million. The sale, originally intended to boost TN's European coverage, ends one of the most bitter unions in industry history.

Merrill Lynch & Co. analyst Lauren Rich Fine applauded Mr. Bell's European emphasis and said he should be looking for 30% of revenues to come from there eventually.

"When Europe represents as much as it does of global spending, you need to be there," she said.

True North also has been criticized for low profit margins and higher staff costs than other industry players. Mr. Bell said the company improved operating margins from 8.4% in 1997 to 10.6% last year. Leading holding companies such as Omnicom Group and Interpublic Group of Cos. tend to post margins of 10% to 15%.

Mr. Bell also said TN will bring staff costs into line by adding new business and reducing hiring, rather than through layoffs.

"This is not to say that somebody somewhere [in the TN network] isn't" laying off employees, he said, "but we don't have any True North layoff plans."

Among other goals, Mr. Bell also wants True North to expand its sales promotion

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