Havas posts sluggish revenue growth amid industry-wide slowdown

Havas experienced a 1.9% revenue increase in the first half of 2017, down from 5.2% 12 months earlier, with the Paris-based firm's results published today (August 25) the latest indication of an industry-wide squeeze on ad spend.

The holding company’s organic growth took a hit in the first half of this year, with Havas posting an organic growth decrease of 0.4%, down from last year’s 3% increase during the same period.

Both Europe and North America experienced a 0.4% dip in organic growth, while APAC and Africa saw a 0.6% drop and Latin America’s fell by 0.8%. In North America, Havas pinned the downturn on the “low level of new business wins in the last quarter of 2016” and reduced ad spend among certain clients.

In the UK, the slowdown was blamed on Unilever’s decision to cut ad spend and the loss of certain media accounts. Meanwhile, in its native France, Havas posted strong performance for the first half of the year with organic growth of 5.4%, which it said was bolstered by BETC Paris, Havas Media and Ekino.

In a statement, chief executive of Havas Yannick Bolloré pegged the overall global slowdown on a number of factors.

“Although the Group’s momentum is positive, Havas’ financial performance in the first half of 2017 suffered a slowdown which affected the industry as a whole and led to revenue and profitability below our expectations,” he said.

“This can be explained mainly by a greater than expected decline in investment from advertisers, increasing pressure on our margins during contract negotiations and renegotiations and the macroeconomic downturn in high-growth markets such as Brazil and Mexico where the Group has a large presence, as well as in India and China.”

The figures come just months after French media and entertainment company Vivendi acquired the 60% majority stake in Havas held by Bolloré Group for $2.5bn, a move that has proved to be controversial within the industry due to the conflicts of interest that could arise given Havas' media buying capabilities.

The merger has also been looked at with a wary eye since Havas chief executive Bolloré is the son of Vincent Balloré, chairman and leading shareholder of Vivendi.

In addition to commenting on the financial figures, Balloré sought to quell concerns of the freshly inked deal by stating that joining forces with Vivendi is an “exciting” opportunity for Havas.

“Vivendi will provide us with the strategic and financial means for us to develop during a time where the industry is undergoing rapid consolidation and is threatened by increasing competition from companies coming from other sectors,” he said in a statement.

“We are working with Vivendi to create synergies and open a new chapter in the history of our Group. A project which creates value for our clients, our talent and our shareholders.”

In a call with analysts, Bolloré detailed some of the wins and losses that the holding company has experienced this year, namely the fact that Havas Media Group recently picked up media duties for pharma giant Sanofi in the US. He also mentioned that Havas-owned creative shop Arnold recently lost Carnival Cruise Line, an account that had been with the Boston-based agency for nearly 10 years.

Earlier this year, Dos Equis dropped Havas Worldwide, the agency that created its iconic ‘Most Interesting Man in the World’ character, to move the brand's creative account to Droga5.

Havas isn't the only holding company to post less-than-stellar results as of late. Earlier this week, WPP called the first half of 2017 “much tougher” than anticipated as it cut its growth forecast for the year.

Agency networks across the industry are under pressure as marketing departments at blue-chip brands are increasingly required to demonstrate a tangible return-on-investment from their media spend. This subsequently involves many corporations' procurement departments getting involved in marketing decisions (principally around budget allocation).

As a result, many marketers are adopting what is popularly termed as a zero-based budgeting approach towards their ad spend, with big spending advertisers such as Unilever publicly commenting on how this has governed their budgeting spend recently.

Leading advertising industry analyst Brian Wieser of Pivotal Research recently explained the rationale behind such budgeting decisions when he said: "This concept of zero-based budgeting or 'forgetting about everything you did last year and look at everything from scratch' tends to mean lower spending on marketing and paid media."

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