Havas Aktie

Hello, everyone, and welcome to the Havas Third Quarter 2026 Revenue Conference Call. The speaker today is Francois Laroze, Chief Financial Officer and Chief Operating Officer. Please note, this conference is being recorded. [Operator Instructions]

I will now hand you over to your host, Francois Lose, to begin the conference. Thank you.

Good evening, everyone. Thank you for joining us and for taking time. Welcome to Havas Q3 2026 Revenue Presentation. I'm with Delphine Maillet, Group Head of Investor Relations. Just a rapid second to ask you to take a moment to read the disclaimer as usual.

And now during this conference, I will cover three topics: the Q3 and nine months financial performance, the key business highlights during this third quarter, and finally, the outlook with confirmation of our 2026 guidance. Then we'll have the usual Q&A session at the end of this conference.

So let's start with the performance of the third quarter. Havas delivered a net revenue of EUR 703 million, representing a reported growth of 7.2%, coming from 2.4% for the organic growth, which is fully consistent with our full year guidance range and which demonstrates clearly the resilience of our business model despite the environment that remains quite uncertain. The acquisition contributed 3.2% to the growth, reflecting the continued execution of our bolt-on strategy. And concerning the ForEx for the first quarter, we are in positive figures with 1.6% positive contribution of the ForEx to the growth of the group. Therefore, this quarter illustrates the balance of our model, combining resilient organic growth and disciplined M&A execution in a more favorable current currency environment during this third quarter.

Now let's have a look at the performance of the organic by region. North America delivered a very solid quarter with the organic growth of 7.5%. Both Creative and Media continued to benefit from the client budget wins that you have commented earlier. Nevertheless, during this quarter, Healthcare growth was weaker than the other business, impacted by fewer new molecule launches. Europe posted an organic growth of 1.7%, supported by France, Spain and Poland, when U.K. was slightly below the performance of the other countries. For this reason, we have recently implemented a new London Village leadership organization to strengthen a little bit more the collaboration and execution among the different agencies. Asia Pacific and Africa declined by 6.7%, reflecting the weakness in China and the continued impact of the geopolitical situation in the Middle East. During the third quarter, the performance of Middle East deteriorated a little bit compared to the first half 2026, notably in Saudi Arabia. Latin America was down by 4.3% due to Mexico and Peru performance, while Brazil and Chile remain strong. Overall, we're quite satisfied by the very strong performance of our main region in the third quarter, and we remain confident for the region that has underperformed during the quarter.

Now let's turn to the first nine months performance. The revenue growth is 3.1%, including 2.5% of organic growth, in line with the level achieved during the first half 2026. The scope contributed positively by 2.5%. And for ForEx, we are still in the negative figures with 1.9% despite the very favorable impact observed during the third quarter that I've just commented. At the end of September, we are in the middle of the full year 2026 organic growth guidance in the range from 2% to 3%. Same exercise by region with North America still very strong in cumulative figures, 7.1%. Europe, 1% with a gradual improvement over the course of the year. And Asia Pacific, still negative at minus 5.5%. So I will give you some few words on the Middle East. As you know, the exposure of Havas in the Middle East is quite limited. And we confirm that the events have no material impact on the financial statement of the group. Nevertheless, the ongoing conflict continues to clearly affect the activity in the region and somehow create uncertainty for other agencies serving Middle Eastern clients, agency based in France, in the U.K. or in China.

If you take the performance of the region, Asia Pacific during the first nine months, we need to have in mind that roughly half of the counter performance comes from the evolution of Middle East, the other half coming from China performance. Nevertheless, we have to remind the very good performance of India since the beginning of the year. Now India is our first country of the region ahead of China, which was not the case before. In Latin America, despite the softer third quarter remains in positive figures for the cumulative nine months.

Moving now to the Q3 business highlights. We have made a selection of our recent budget wins over the third quarter. The business momentum remains very solid during this third quarter as it was during the first half. We have reminded some nice wins in creativity with CaixaBank in Spain, with Peroni the beer in the U.K., Monoprix, the retailer in France, with Media also NordVPN, which is a software company in the U.S. and Europe, but also AS Switzerland and in U.K., Lionsgate in Europe. We are also very proud of the awards we have won during this period, especially with the D&AD in which Uncommon got Black Pencil and has been awarded Creative Agency of the Year, again and at LIA, London International Award, Havas received 48 awards, including 3 Grand Prix. Just to remind you how important the creativity is in the Havas strategy, and we are very pleased to have had this success during the quarter.

In terms of M&A, our bolt-on acquisition remains very active. Since the beginning of the year, we have completed eight acquisitions, including one during the third quarter, which is SportVibes. This strengthened the strategic capabilities such as Havas Play and Havas Advisors, as you see on the chart, with acquisitions coming in the Havas Play vertical. As usual, this acquisition expands both our expertise and geographical footprint while bringing highly entrepreneurial management teams into the group. As we have previously communicated, this strategy contributes around EUR 40 million to EUR 50 million of annual revenue and is generally executed at profitability level above the group average. So M&A remains an important contributor to the future growth, but also to the future margin expansion of the group.

Now to look on the full year guidance and the road map of the group. I will enter into detail in the road map. Just reminding you that new business, retention and cross-fertilization of the existing clients is really at the core of our model. And during the last months, we have really accelerated in cross-selling around the new core services such as Havas Play that I already commented or Prose on Pixel on the production.

The second pillar is the dynamic bolt-on strategy focused on targeted acquisition. Since the beginning of the year, our scope is at 2.5% impact on the growth of the group, ahead of our 1.5% target we gave earlier this year. And the EBIT margin of the acquisition is in the range of 15% to 25%.

The third pillar is still our cost management with continued focus on headcount control, efficiency across the group and the leverage of investment in tool and AI. The monitoring of the headcount remains a priority. And at the end of the quarter 3, the headcounts of the group are declining organically, which confirm a very good performance of our productivity at group level. In short, we remain focused on the same priority around organic growth, accretive bolt-on strategy and managing of our cost seriously.

In terms of guidance, to conclude this presentation, we confirm the guidance with an organic growth between 2% and 3%. We confirm the adjusted EBIT margin improvement with a target between 13.2% to 13.5%, which is an increase by 30 to 60 basis points and the dividend payout ratio around 40%. We also confirm our midterm objective for 2028, including the adjusted EBIT in the range from 14% to 15% and this payout ratio around 40%.

I thank you all for your attention. And now I'm ready to answer any of your questions.

[Operator Instructions] The next question comes from Annick Mass from Bernstein.

My first question is on M&A. Can you give us an idea of how many deals you're currently working on, which should still feed through in this year, please?

Second one, on North America and the Horizon JV, can you just give us an indication of how much actually of the Q3 or nine months performance is coming from co-pitching versus you guys doing it by yourself?

And then the third one is on the Middle East. I guess you said performance has deteriorated over the third quarter. You had some major plans to expand in the Middle East. Have you already -- midterm, have you already revised those? Or you're still on track to expand despite the uncertainties that we are seeing at the moment?

Thank you, Annick, for your questions. On M&A, we -- as I said, we have finalized eight acquisitions during the first nine months. We are seeing some of them in the pipe. We should finalize some of them before the end of the year. And we have also some acquisition that should take some more time and that we could close during the first quarter 2027. But I would say that the pace is as before, and our ambition is still to be in around 10 acquisitions during this year, which would be in terms of revenue, one of the record years. But we have many, many operations under study.

On the U.S., the Horizon JV, there is nothing really new compared with our previous communication. We have won several small and midsized clients over the last few months, one bigger one on which -- that we commented. And we are still working today with two global clients, which are under review at the JV level. And also U.S. client, which could complement. So compared with the previous communication, we have no major wins in the JV, but we are quite an active pipe, and we are very confident and pleased with the performance of the JV, and we should have more wins in the coming quarters.

Concerning the Middle East, Middle East, today, for us, it's roughly 60% to 70% coming from Dubai, the remaining coming mainly from Saudi and to a lower extent, Oman and Israel. What we saw during the third quarter is quite strong deterioration of the Saudi performance, but also a heavy resilience of the Dubai operation. So we are quite pleased by the ability of Dubai to really protect their revenue and EBIT during this crisis. In Saudi, as you may know, we have some clients which are directly impacted by the crisis, especially in tourism. And as you can imagine, tourism today is strong in Saudi. And therefore, we are not extremely confident on the coming quarter.

Nevertheless, to answer which I think was one of your question, our ambition remains totally the same. We consider that Saudi will be an area of growth in the coming years. And even if they could struggle during the coming weeks or months, we consider that we'll keep on invest in Saudi as we do in Dubai and other Middle East countries. But yes, Saudi will struggle and will bounce back, and we want to keep on investing in this region and in Saudi, especially.

The next question comes from Conor O'Shea from Kepler Cheuvreux.

Three questions from my side as well. First question, just on -- coming back to the performance in North America. So you mentioned, Francois, that the health care activity was -- grew below average again this quarter, but I think that's a U.S. heavy activity in terms of concentration. So can you just give us a little bit more color on the drivers of growth in the U.S. by activity, media versus creative and maybe the contribution already from net account wins this year in rough terms?

Secondly, could we have on the recent acquisition of Canal+ shares. What's the thinking there? And following on from the similar amounts invested in Louis Hachette? And could we see more of that in Q4?

And then the last question, yes, just on the Healthcare business, as you said, below average growth in Q3 again. you're expecting any change in that in Q4 or into 2027 in terms of catching up on growth at the group level?

Thank you, Conor for these question. One and three will be -- maybe I will answer both questions in only one answer. Give you some flavor of what happened in North America with very strong performance during the quarter, very strong performance on cumulative figures coming mainly from our creative business. You may know that we have acquired Uncommon in the U.K. two years ago, which have launched operation in the U.S. 1.5 years ago and which is doing very well. And we've attracted new clients, some of which we can't disclose because for confidential reasons, but they are really doing very well. Same for our New York operation with the wins we've commented, which are sometimes integrated wins, which contribute to the performance. So first in the U.S. creativity; second, the media, which is doing well as well.

And as I did for health, it has been more difficult during this quarter, mainly due to some launches of new molecules, which have been stopped by some of our clients. As you may know, this molecule, the process is quite long, and there is the day when the label decides to go to FDA or not to go, depending on the performance of the test they've made with the data. And unfortunately, this year and in this quarter also, we have faced some decision of major label, including Sanofi, but not only not to go further for some molecules, reminding that the launch of new molecules is, I would say, an important business for Havas Health, roughly representing, let's say, 20% of the business of the division. So that's clearly what explained this performance.

And to answer the third question you make around health, the performance of the health, the performance of the Q4 should be in line. We don't see any strong bounce back during the fourth quarter. And for 2027, it's too early, but we are working hard with the teams to mitigate this negative impact of the molecules, which have not been launched, but it's too early to confirm the performance of health in 2027.

Now I come back to question 2, which is question around Canal+ and LHG. To remind you that we have purchased EUR 43 million of shares in LHG for 2.6%. We have acquired very recently for EUR 30 million of shares of Canal+ for a little bit more than 1.2% of the capital. Clearly, these are opportunistic financial investments. And because they operate in sectors that we know quite well around broadcasting, publishing, media. And clearly, this investment can be made because Havas is in a very, I would say, healthy financial position and can afford this kind of investment.

Nevertheless, we have to remind that these investments are absolutely no impact on our ambition in terms of M&A. As I commented earlier, we have many agencies under review to acquire in the coming months and quarters. So this has no impact at all on the M&A and the clear focus of Havas it's really its priority to continue developing this existing business is operational. So let's sum up telling that it's really opportunistic and financial investment that we have decided to do without any impact on our existing strategy.

To answer your question on the future, I can't elaborate on the future. These are public companies, and we do not disclose and have not made any decision on the new acquisition we could do in the coming months.

The next question comes from Adam Berlin from Goldman Sachs.

Two questions if I could. One is you upgraded, I think, the guidance on M&A contribution for this year. Can you just talk a little bit about what's happened this year? Has it just been able to close deals faster than you expected? Is there quite a lot of pipeline people selling? Like why is it that you've been able to do more M&A than you expected through this year so far? And do you think that continues going forward?

And then secondly, can you just give us a view on where you think you are in terms of wins and losses for 2026 versus where you think you're going to be for 2027 based on the kind of wins and losses you've had year-to-date?

Thank you, Adam, and welcome to this conference. We're very happy to have you in charge of Havas with you, Goldman.

Thank you.

Why so many acquisitions? I think I would say that it's more phasing. As you say, we have been able to close quite rapidly. And the pace of the fourth quarter won't be the same than the first three quarters. That's why you can't elaborate and the pace will be lower during the fourth quarter. And today, even it's a bit too early, our forecast is that we should be in around 2% of overall impact for 2026 being at 2.4% today. So it's -- but we have many operations which have been closed rapidly and the one we are reviewing today will take a little bit more time. So it's more around phasing.

In terms of wins and losses, as I said, we have had some nice wins I've commented. The main losses we have already commented during the previous call with the Sanofi media assignment, which was -- which remains a pill, but we have to deal with it. And clearly, we are working hard with the teams, and I refer to the new U.K. organization. I could have commented also the appointment of a new CEO in Italy that will join Havas early November for supervising the whole operation in Italy. So more and more, we'll have a region manager, and we'll ask them to focus on cross-fertilization on integration, creative and media. And I would say the ambition in terms of news is really attracting this new integrated clients that give to Havas all the assignment from media to production, including creativity, data, PR or event. So that's clearly the ambition, and that's the pipe we have today in terms of news we should have in the coming quarters.

But again, as we always comment, we put, I would say, the ambition in terms of cross-selling at a higher level maybe that our competitors. Cross-selling is our first priority, and we focus as much as possible into fostering it in the coming weeks.

[Operator Instructions] The next question comes from Davide Amorim from Berenberg.

Davide from Berenberg. Three for me, please. Looking at your new business since Q2 and pipeline, how confident are you that you can offset the loss of the Sanofi U.S. media account in 2027?

Secondly, you have been very active on M&A this year. How do position compare with the rest of the group in terms of profitability? And do they have any impact on your full year 2026 guidance?

And thirdly, in Latin America, we are seeing a sequential slowdown compared to with Q2. Could you explain a bit more what is going on there? And should we expect the same trend for Q4?

Thank you very much. Yes, on the Sanofi, yes, obviously, we are working hard to mitigate in terms of billing. That's not an easy one because it was a big client. But we have had some recent win that we commented from insurance, and we'll have some other. And I'm quite confident that we'll be able to mitigate maybe not in a few months, but at least in a few quarters, the impact of Sanofi.

On the M&A, as we always comment that the agency that we acquire are most of them more profitable than the Havas Group average because they are at a different moment of their life, I would say. And that contributes really, it's part of the explanation of our ability to keep on increasing the profitability ratio quarter after quarter. The impact on the guidance, I confirm again the guidance on which we committed for the EBIT ratio. And we are very confident. And yes, we can say that these acquisitions have been part of the explanation, but not only, but we are extremely confident on this 30 basis points that we can consider as rock solid.

On LatAm, the performance is low on the quarter, still positive in cumulative figures. Let's remind that we have lived over the last few years, a very strong growth of our operation in Latin America. It has been double-digit growth several years in a row. And today, we are a little bit plateauing. We have also suffered some, not losses of clients, but some decision of clients to withdraw as Telefonica did. As you may know, Telefonica withdraw from the Latin American continent. So they sold part of the agency. They closed some others. So we have been impacted by the Telefonica decision. We have been impacted by the very solid growth of the previous year. But we remain very confident Latin America, Mexico is doing well. Brazil is doing well and the secondary countries are doing well. So I think we can be confident on the future growth of Latin America.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to Francois Laroze for any closing remarks.

Thank you for your attention. We remain with Delphine at your disposal if you have any follow-up questions in the coming hours or days. And we wish you a nice evening, and thank you again for having been part of this conference call. Bye, bye.