Havas figures that simply don’t add up

Here’s an arithmetical problem for City analysts. Why don’t marketing services group Havas’ splendid Quarter 3 figures actually add up properly?

First, a bit of background. Agency holding company performance has continued in strong recovery mode, despite the rest of the world economy going to blazes. Organic growth, which is seen as the purest underlying growth indicator because it strips out acquisitions, has been particularly vigorous at Aegis, which has just reported a Q3 surge of over 11%. But Interpublic, Publicis Groupe and Omnicom have all reported sparkling figures, with WPP trailing among the big boys on a still respectable 4.9%.

Havas delivered its best quarterly sales in 3 years, beating analysts expectations, with a sterling like-for-like (ie organic) growth rate of 7.3%, thanks to strong performance in North America, Asia and Latin America. Not unnaturally, the Havas share price surged on publication of these figures.

I have no doubt that Havas did indeed perform very well. The trouble is, the regional figures broken out in Havas’ own analysis, when added up and averaged, don’t hit 7.3%. They reach nearly 6.4%.

Let’s get technical for a moment. The method used, so far as I know, by all parent companies for arriving at a global organic growth figure is to multiply the share of each region by that region’s growth rate and then add up the resulting figures to give a global total.

In Havas’ case the declared figures are as follows. Europe, 51.6% (ie 0.516 of the whole), growing at 1.8%, gives us a figure of 0.93%; North America, 34.5% at 8.2%, gives us 2.83%; and Rest of World, 13.9% at 18.7%, gives us 2.6%. Now add up 0.93%, 2.83% and 2.6%. You get 6.36%, which rounds up to 6.4%.

Not 7.3%. Which is quite a difference when it comes to investors assessing the future performance of a company and making their bets accordingly.

My question is: where has the rest of Havas’ growth come from? Answers in my mailbox please.

One Response to Havas figures that simply don’t add up

  1. Gessa says:

    The organic growth calculations published by Havas last week use a clear methodology to calculate the figures.
    We have always published the methodology and it is well understood by analysts and similar to the methodology used by WPP. Being a public company, any figures that we publish have to be 100% accurate.

    Organic growth figures strip out the effects of currency changes and acquisitions on a company’s performance to give an accurate read of true organic growth. It is slightly more complicated to calculate. To take out the effect of acquisitions, one needs to re-state Havas’s previous year’s income taking into account the performance of the acquired companies in that year in order to calculate a ‘pure’ like for like organic growth figure. To strip out the effects of currency, one needs to balance the differing currency changes by region (comparing Q3 2011 with Q3 2010)

    Havas has been absolutely consistent in the way it has calculated this – and it is in line with normal international accounting practice. The methodology does not change. And as a publicly quoted company we have the highest standards of accuracy and transparency.


    Lorella Gessa (Communications Director Havas)

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