Saturday 24 February 2018

Havas the latest advertising giant to be hit by cutbacks and tech disruption

 

'Havas, which was little changed Friday at €9.24 before the report, is up 15pc this year.' Photo: Getty
'Havas, which was little changed Friday at €9.24 before the report, is up 15pc this year.' Photo: Getty

Alexandre Boksenbaum-Granier

Advertising agency Havas confirmed the industry slowdown signalled by WPP earlier this week, abandoning its full-year revenue forecast as clients pull back and agencies slash prices to win assignments or renew deals.

Chief executive Yannick Bollore joined WPP's Martin Sorrell in citing a slew of problems affecting the advertising industry, from declining investment by clients, an economic downturn in higher-growth markets such as Brazil and Mexico, and hard bargaining as agencies fight for business.

"While we hope that growth and profitability will slightly improve in the second half of the year, these combined factors mean that we are unable to confirm our forecast of organic growth between 2pc and 3pc announced at the beginning of the year," Bollore said in a statement.

First-half net income declined 34pc to €54m, Havas said after the close of trading in Paris on Friday. Revenue advanced 1.9pc to €1.11bn, though organic sales fell 0.4pc.

The results are the first since Vivendi in July acquired the majority stake in Havas that was previously owned by Bollore Group.

"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," Bollore said.

Havas, which was little changed Friday at €9.24 before the report, is up 15pc this year. Vivendi, led by chairman Vincent Bollore, agreed to buy the company in June. Advertising companies worldwide are being hit as big clients focus on cost-cutting to cope with sluggish global economic growth and technological disruption.

On Wednesday, London-based WPP suffered its biggest drop in 17 years after it cut its full-year revenue forecast amid lower spending by customers, in particular consumer-goods manufacturers.

Havas' release reflects trends highlighted by US competitor Interpublic Group, which last month reported second-quarter earnings were hurt by lower client spending.

US clients in particular are spending cautiously, ceo Michael Roth said as organic revenue increased 0.4pc, missing the 3pc to 4pc goal for 2017. The decline isn't only from the consumer goods sector. "It's more general," Bollore said, citing decreases in the telecom and car industries.

While clients are cutting back, traditional ad agencies are fighting off a challenge from consultants and digital platforms. Internet giants like Google and Facebook now provide many of the services needed for online marketing, putting pressure on traditional advertising companies.

Bloomberg / See page 9

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