A Paris Surprise

The fourth quarter proved to be a tale of two cities for the industry’s Paris-based holding companies which reported their 2004 revenue numbers last week.

Havas exceeded expectations, reporting a 4.6 percent increase in organic growth while Publicis disappointed some financial observers as it said organic growth climbed 2.4 percent over the year-earlier quarter.

Havas said all of its operating regions posted organic growth gains. In the USA, for instance, “organic growth turned positive at +3.4 percent, an excellent performance, ahead of expectations, mainly due to record new business at Arnold, MPG and in healthcare and marketing services at Euro RSCG,” the company said.

Publicis blamed its growth rate on comparisons with the year-earlier period when it posted a 5.2 percent rise and on the loss of two key Q4 marketers: Miramax, in the U.S., which typically has high-profile Christmas movie releases, and Tylenol, in the U.S. and Europe, which is a big spender in cold and flu season. Publicis CEO Maurice Lévy suggested that without these losses, organic growth would have been in line with previous quarters, at more than 4 percent.

Nonetheless, Havas’ numbers underscore the difficulties it still faces in its turnaround efforts and ability to remain independent: In Q4, revenue dropped 7 percent to $522.3 million; for 2004, it fell 9 percent to $1.9 billion. (Organic growth, at constant currency, climbed 2 percent.) Havas added $1.93 billion in new business in 2004. It plans to release full results in early March.

While observers appreciate that Havas has jettisoned underperforming assets, they’re still not sure the agency has changed course.

“We believe figures ‘without the bad stuff’ are bound to be good,” said Steve Liechti, an analyst at Merrill Lynch, London. “Clearly the test from here is whether new ‘bad stuff’ appears, something we are still unwilling to rely on given the group’s checkered past.”

Havas’ numbers don’t reflect the loss, for instance, of $300 million in Intel global billings, after Havas’ Euro RSCG withdrew as the incumbent from the client’s review last month, nor the loss, at the same time, of $430 million of Volkswagen’s U.S. media billings, which were consolidated at Grey Global’s MediaCom.

Publicis said Q4 revenue dropped 2 percent to $1.35 billion. For the year, revenue—hurt by the weak dollar—slipped 1 percent to $4.93 billion. At constant exchange rates and “scope of consolidation,” organic growth climbed 4 percent, the firm said. New business wins in 2004 totaled $4.4 billion. Full results will be released in early March as well.

In Q4, Publicis tallied $1.8 billion in new business, then $800 million in January account wins, all of which lifts Lévy’s outlook for 2005. On a conference call with investors, he said marketers are taking more aggressive initiatives, including a renewed focus on mergers and acquisitions. “I feel growth will be there,” he said. “All [client] indications have given us a good level of confidence.”