Financial Focus: Publicis Records Growth, Havas Promises Some

As one French holding company reports strong organic revenues to finish off last year, another sees a return to positive territory in 2004.

The two companies, Publicis Groupe SA and Havas, have been going in opposite directions financially in the advertising recovery. Publicis--which owns media shops Starcom MediaVest Group and Zenith Optimedia--emerged from the recession with positive, if slight, organic growth in the second quarter of 2003. Publicis' growth accelerated in the second half to complete 2003 with a 2 percent increase for the full year. Havas, which owns MPG and Euro RCSG, hasn't done as well. But Havas, too, is seeing a silver lining, with a 3.8 percent drop in organic revenue in the fourth quarter of 2003 compared to the same period a year ago. That compares to a 6.8 percent drop in the first half and a 6.4 percent drop decline for January-September compared to 2002.

Publicis has been winning new business and accolades for its work in 2003. It snagged $1.35 billion in net new business in the fourth quarter-67 percent in advertising--and $4 billion for all of 2003, 56 percent in advertising. Its net new business wins led brokerage house Lehman Brothers to give Publicis its top ranking. Starcom MediaVest Group was named media agency of the year by MEDIA Magazine, published by MediaPost Communications, and by Advertising Age. Organic revenues are important, particularly for holding companies, because they exclude the impact of acquisitions that can inflate results. Publicis' fourth-quarter total revenues were 3.86 million Euros, up 32 percent from the same period a year ago. Publicis purchased Bcom3 in 2002. Organic growth rose 5.2 percent in the fourth quarter, compared to the fourth quarter of 2002.

North America led the way in the fourth quarter, as it has all year. North American organic revenue rose 6.6 percent in the fourth quarter compared to the fourth quarter of 2002.

"The growth in the U.S. that has been the engine for the past nine months have consolidated further," said Maurice Levy, chairman and chief executive of Publicis. "We have seen solid growth for the full year in the U.S."

Publicis said $600 million in media planning and buying was included in the $1.35 billion in net new business.

At Havas, which like Publicis is headquartered in Paris, there were $13.7 billion in billings and $2 billion in revenues. In North America, there was $883.4 million in revenues--down 4.3 percent compared to the fourth quarter of 2002. Net new media business for Havas included Polaroid and Fidelity.

In a prepared statement, Havas said it should be able to return to positive organic growth and a "strong improvement in profitability" in 2004.

"The company expects the market to be stronger than in 2003," Havas said.

Levy, the head of Publicis, figured that the first quarter of 2004 wouldn't be as strong for organic growth as the fourth quarter of 2003. He said the impact of the new business would continue to be felt into 2004, but that comparisons were stronger to the first quarter of 2003.

Publicis and Havas were the first two advertising holding companies to report on the fourth quarter. Omnicom is scheduled to release its quarterly earnings this morning.

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