Havas Plans Sweeping Layoffs, Shop Closures

BOSTON French holding company Havas on Thursday said that it will sell or close 20 of its businesses and lay off 850 employees as part of a broad restructuring plan. The moves follow a dismal first-half performance.

Havas’ revenue for the first half dipped about 20 percent (8 percent on a constant currency basis) to $945 million, down from nearly $1.2 billion for the same period in 2002.

Operating profit plunged 41 percent to $77 million in the first half. Net income was nearly halved to $28 million before goodwill write-downs. After goodwill, the company reported a net loss of $65 million, compared with a net profit of $17 million for the same period a year ago. Goodwill amortization includes a onetime charge of $56 million for disposal of assets.

As part of an ongoing reorganization, Havas said it will integrate 17 agencies, mainly operated under the Arnold worldwide network, into its Euro RSCG operation [Adweek Online, July 31]. Shops making that transition include dircect marketing agency Brann Worldwide and public relations company Magnet.

The company blamed its struggles on the weak European economy and currency exchange rates, as well as on the poor performance of its marketing services agencies.

Havas chief executive Alain de Pouzilhac said the cost of corporate restructuring will prevent Havas from posting an operating profit in 2003 compared with 2002. He declined to give guidance about margin growth.

In a conference call with analysts on Thursday, Havas did, however, supply more details about its $203 million reorganization plan. As a part of that initiative, Havas will cut an additional 850 jobs by the end of 2005.

The company said it already cut more than 4 percent of its global workforce, 750 people, during the first half. Those cuts for the most part were made in Europe and among back-office staff. Overall, Havas will lay off 8-9 percent of its workforce this year.

De Pouzilhac said 50 of the company’s 350 operating units, mostly in the marketing services area, are showing double-digit negative organic growth and negative profitability. The CEO said that without these companies, Havas’s first half results would be in line with its industry peer group.

Havas’ debt stood at $807 million at the end of June.