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Havas APAC ‘bounces back’ in Q2 following period of negative growth

Agency holding company Havas Group has singled out economic downturns in India and China as contributing to its meagre second quarter results released last week.

The French advertising and media giant said it would abandon its forecast of organic growth of 2-3 percent for 2017 due to declining investment from advertisers and increasing margin pressure.

Meanwhile, a downturn in high-growth markets, such as those in Asia and South America, bore heavily on the first-half revenue.

In total, the holding company reported revenue of 1.11 billion euros (S$1.8bn) down 0.4 percent organically. Meanwhile, the sixth-largest holding company said its first-half operating income declined 27 percent to 100 million euros.

In the Asia-Pacific and Africa region, the company posted negative growth in the first quarter of 2017. However, Havas said the region had “bounced back with a strong performance” in the second quarter with a 3.2 per cent rise in organic growth.

The company cited Asian markets such as China, South Korea, Hong Kong and India as the biggest contributors to these regions’ growth, aided by “renewed strength following the Swarovski and BMW [Korea] account wins and increased spending by clients”.

Havas also recently stepped up its presence in China by signing a joint-venture with marketing communications group Guangdong Advertising Group. The company also bought Indian-based health agency Sorento, which will be merged into Havas’ health unit.

However, despite these promising moves, Havas Group chief executive officer Yannick Bollore said recent downturns in previously high-growth markets was a factor in the company’s financial performance.

He said: “Although the Group’s momentum is positive, 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.

“This can be explained mainly by a greater than expected decline in investment from advertisers, increasing pressure on our margins during contract negotiations and renegotiations and the macroeconomic downturn in high-growth markets such as Brazil and Mexico where the Group has a large presence, as well as in India and China.

“Even if this negative impact logically weighs on our organic growth and profitability, we decided to continue investing in our talent. Investment in new villages and in innovation have also contributed substantially to our costs this year, but are key to reaching our mid-term objectives.”

Earlier this year, French media giant Vivendi’s put in a bid to acquire Havas, which is expected to close in early October. The owner of French film and television studio and distributor, Canal, and Universal Music, Vivendi is expected to merge the two companies should the deal go through.

Havas Group recently also merged its media, creative and healthcare divisions to become business units under one P&L in the Asia-Pacific region, with the creative group’s chief executive Mike Amour being appointed CEO for the whole business across the region.

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