BoAML: Havas organic growth and margins well ahead

Bank of America Merrill Lynch describes Havas Media’s latest financial figures as showing a “healthy” 0.5% organic growth; and is very positive about the business’ future prospects.

Organic growth accelerated from -0.9% in Q1 to 1.7% in Q2, with reported revenues growing 1% to €837 million.

Havas margins increased to a record high of 13%, driving 10% growth in earnings before interest and taxes to €109 million. BoAML points out that there is still room for expansion (WPP margins are at 15.5% and Publicis at 16.1%).

BoAML reports that trends in Europe improved relative to Q1, however the overall picture still remains mixed by market, with Germany and Italy positive, and Portugal in decline.

North America improved from -3.9% in Q1 to 0.2% in Q2, while Asia moved from 1% in Q1 to -2.6% in Q2. Growth in Latin America was stronger than expected at 15.1%, compared with 8.6% in the first quarter.

“Furthermore, we expect strong new business (Total, Dove, LG Electronics, Emirates) and improved momentum in continental Europe to drive a further acceleration in growth to 3.8% in 2014,” said the bank.

“Havas is one of our key picks in the sector given our belief that it is the agency with the greatest exposure to a cyclical recovery in Europe (40% of revenues), the most scope for margin expansion… benefits from a strong balance sheet and an undemanding valuation, trading on 13.1x 2014 EPS.”