Havas Promises Sweeping Reorganization

BOSTON–Havas Advertising will absorb most of the 70 shops that comprise its Diversified Agencies Group into its three other operating units in an effort to save money, simplify its operating structure and strengthen the integrated offerings of its global advertising and media networks.

“We have moved from a situation of lack of visibility in our markets to a significantly increased likelihood of recession,” said Havas chairman/CEO Alain de Pouzilhac in a statement. “In order to be recession-resistant … Havas is going to further refocus on its existing businesses, reinforce its powerful brand potential and create even stronger synergies. This will enable us to plan for mid term profitability equal to or better than 15 percent.”

Paris-based Havas, which ranks fifth among global communications holding companies, posted net income of $64 million for the first half of 2001 compared with $40 million for the same period a year ago, based on the current rate of exchange. Adjusted to reflect Havas’ late-2000 acquisition of Snyder Communiucations, those numbers yield an increase of 16 percent. But further adjusted to take into account second-quarter exceptional items and charges — such as 1,200 layoffs–Havas posted a first-half loss of more than $6 million.

Net earnings per share in the first half of 2001 were about 23 cents, a 13 percent improvement compared to the same period a year ago.

Havas also claimed revenue of approximately $980 million for the first half of 2001 on global billings of $6.4 billion, an increase of 5 percent over the same period a year ago, based on the current rate of exchange and adjusted to reflect the Snyder acquisition.

The intended integration of much of the DAG units into its other divisions should create savings of $120 million over the next two years, according to Havas.

DAG comprises 70 shops — offering mainly direct marketing, public relations and interactive capabilities — in 14 countries with some 8,000 employees. Most of those holdings will be merged into Havas’ Euro RSCG and Arnold worldwide agency networks or its global Media Planning Group. “Only certain specialized agencies, provided they are in dynamic niches, are highly profitable and do not fit strategically with the other three divisions, will be maintained independently,” Havas said in statement.

Direct marketing shop Brann Worldwide, Deerfield, Ill., added in the Snyder acquisition, is by far the largest DAG holding, claiming billings of about $1 billion.

Havas will by month’s end disclose where the various DAG agencies will end up, according to company representative Simon Gillham. The DAG designation will no longer be used and group CEO Jean-Michel Carlo is now in talks with de Pouzilhac about his future with Havas, Gillham said.

“We’re doing the evaluation [now] — meeting the people” from DAG shops, said Arnold CEO Ed Eskandarian, who predicted that details will be worked out within four to six weeks. “You have to have the right units in the right divisions and make sure there’s a cultural fit.”

Apart from the savings, the goal of integrating DAG operations into other Havas units is twofold. The company is looking to bolster Boston-based Arnold and New York’s Euro RSCG in the areas of direct marketing, sales promotion, database services and interactive marketing. It is also seeking to strengthen Barcelona-based Media Planning and make it one of the Top 5 global networks by 2003. In recent days, Havas let lapse its bid to acquire U.K. media company Tempus and competitor WPP is now expected to add Tempus, perhaps as soon as year’s end.

At market close on Tuesday, Havas shares on the Nasdaq were trading at $5.00. The previous 52-week low close was $5.55; the 52-week high was 17.20