Global advertising and marketing group, Havas, is expected to report first quarter revenues down by 13.3% in a statement that will focus on continued weakness in Europe and marketing services, with an uncertain outlook for 2003. This is according to analysts at Morgan Stanley.
The broker has reduced its full-year 2003 revenue growth from -4.5% to -8.4%, mainly due to currencies. It views the European media industry as cautious, with limited opportunities for upgrades.
Marketing services provide breadth Morgan Stanley says that since its acquisition of Snyder in 2000, Havas has been viewed by the market as the ‘poor relation’ of the top four agency giants – WPP, Omnicom, Interpublic and Publicis. “This negative view comes from the relative size of the Havas group, its relatively weak creative and media presence and its revenue dependence on marketing services,” it says.
Whilst Havas has concentrated on marketing services, most other major advertising agencies are dominated by long-standing creative brands, notes the broker. However, the current weak conditions may lend support to Havas’ decision to back a marketing services model.
“[Havas’] business model should be regarded as prescient of a broader change in the agency business model. We believe that agencies have responded to this downturn in advertising spend by increasing their breadth of service as much as possible, in order to increase their share of falling marketing budgets,” says the note.
As an example, the broker cites Havas’ direct marketing strategy. With this, it can extend a successful creative idea (the campaign for Peugeot 206, for example) into a direct mail campaign and thereby increase the share of total Peugeot spend to around 50% (with 70% as a target).
“This broadening of service should therefore ensure that Havas is well placed to benefit from any increase in ad spend volumes,” says Morgan Stanley.
Havas releases its Q1 2003 results on 15 May; Morgan Stanley expects them to be the weakest quarter of the year. In 2002, the group outperformed the industry, reporting an improvement in earnings and profits (see Havas Returns To Profit In 2002).
