Aegis Posts 20% Increase in Pretax Profit for First Half

North America, China, Brazil and Russia Driving Growth

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Jerry Buhlmann
Jerry Buhlmann Credit: Art Beaulieu
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Aegis Group has reported a 20% rise in pretax profits to $96 million in the first half of 2011, with organic revenue up 7.3% to $1.2 billion.

Second-quarter revenue growth was 5.9%, down from 9.1% in the first quarter.

U.K.-based Aegis Group, which owns media-buying agencies Carat and Vizeum, digital networks Isobar and iProspect, and out-of -home specialist Posterscope, sold its market-research division, Synovate, to French group Ipsos in July for $860 million.

The sale is expected to complete at the end of September, when $327 million will be distributed to shareholders, of which Vincent Bollore, chairman of French rival Havas, stands to pocket around $86 million. He is Aegis Group's largest shareholder, with a 26.5% stake in the company.

The remaining proceeds from the sale -- which was approved by Aegis shareholders Aug. 16 -- will be spent on acquisitions, focusing on the faster-growing regions (China, Brazil and Russia) and North America, and on digital.

Aegis Group's top-line growth is still being driven by North America, which contributed 52% of group revenue (excluding Synovate) in the first half of the year, up from 46% across the whole of 2010. China, Brazil and Russia also contributed significantly to growth.

Revenue from Aegis Group's digital business grew 34% during the first half of 2011, up from 32% at the end of 2010. Overheads were up 13.7% -- driven by staff costs -- and profit margins were up 26.5% year on year to $126 million across the group as a whole.

For the first half of the year, Aegis Media revenue in the Americas was up 15.3% to $160 million and in Europe, it was up 3.3% to $475 million. Asia/Pacific revenue -- up 108.7% to $161 million -- was inflated due to the acquisition of Australia's largest marketing company, Mitchell Communications, for $340 million last July.

Jerry Buhlmann, CEO of Aegis Group, said in a statement, "The sale of Synovate represents the largest structural change in the history of Aegis Group. Once the sale is completed, Aegis will become a more focused group, with the opportunity to accelerate ... growth and the financial flexibility to make targeted acquisitions."

Aegis also announced the acquisition of Russian out-of -home agency Master Ad, based in Moscow, which it claimed is the leading specialist in the Russian outdoor media market. Aegis has paid $21 million up front, and will pay a maximum of $144 million for the company if it reaches all its targets by 2014. Master Ad's profit for 2010 was $7 million euros after tax.

So far Aegis has spent $106 million on 11 acquisitions this year, including MediaVest (Manchester) in the U.K., Creative Media Services UAB in Lituania, Clickthinking Online in South Africa, ICUC Moderation Services and Riber Sports Marketing Group in North America, Filefix in Japan and Pjure in Austria.

Significant new-business wins in the first half of the year included Home Depot, Disney, Sears and Target in North America; Bosch in Latin America; Wal-Mart-owned Asda, Timberland and Red Bull in Europe; and Kellogg in Asia Pacific. Aegis claimed total new billings of $275 million for the period.

Synovate's sales were up 4.4% during the first half of 2011, with operating margins up to 2%.

Carat today released its global ad spending forecasts, predicting 5% growth for 2011 -- down from the 5.7% predicted in March -- and 6% for 2012, boosted by factors such as the 2012 Olympics, the UEFA European Football Championship and the US presidential elections.

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