Aegis Improvement 'Driven by Synovate Recovery'

Aegis Group plc has announced a significant improvement in its 2010 interim results. Total revenue rose 4.2% to £663.3m, representing organic growth of 3.2%. The upturn in large part reflects a rebound at MR arm Synovate.

Group underlying operating profit increased 19.6% to £61.1m and underlying operating margin by 120 basis points to 9.2%, largely due to Synovate's return to profitability from loss in H1 2009.

Aegis increased its interim dividend 6.8% to 1.025p, having strengthened its balance sheet with the launch of a convertible bond in April to raise £190.6m and re-financed to establish a £450m revolving credit facility on a five-year term.

Synovate returned to profitability from a loss-making position in the prior year period. Sales increased 4.4%, with organic gross revenue up 2.8% thanks to a strong revenue performance towards the period end.

Aegis has defined a new classification, 'Faster-growing regions', comprising Latin America, Central and Eastern Europe, Asia Pacific, the Middle East and Africa, and will make it a strong priority to enhance its business here. The regions already represent 30% of Group revenue, up from 27% in 2009.

In the first half of the year, the group returned to the acquisition trail in Asia Pacific, taking a shareholding in Charm Communications Inc in China and proposing the acquisition of Australia's Mitchell Communication Group. In a conference call, Buhlmann told journalists they 'may see some slightly larger acquisitions' in the near future, in fast-growing markets and digital media.

CEO Jerry Buhlmann, appointed on 1st May, says his first set of results with the company 'produced a strong performance... confirming our expectations of a return to growth. This was driven by good performances from our businesses in faster-growing regions, Synovate's return to profitability and strong net new business wins totalling $1 billion of billings from Aegis Media.'

Looking ahead, Buhlmann said there were signs of a rebound in both the advertising and market research sectors but it was too early to predict a sustained longer-term recovery. For 2010 as a whole he expects modest improvement in Group operating margin, and a continuing trend of improvement in organic growth in both businesses in the second half.

Predicting major changes in both the advertising and market research sectors in the next three to five years, based around advertisers' growing need to understand what drives and motivates more media-savvy consumers, Buhlmann said Synovate was well positioned to take advantage and build longer term relationships with clients looking to consolidate their base of suppliers. He cites the firm's 'unique borderless corporate structure' and an experienced, capable management team.

Synovate's priorities include a continued drive for more efficient working; focus on market-leading specialist capabilities; increasing presence in faster-growing regions and markets, in particular China and Russia; building long term relationships with clients; and increased focus on acquisitions. Buhlmann says he expects Synovate to deliver 'a continuing trend of improvement in organic growth' in the second half, compared to the first half, but warns that 'the profit comparators at Synovate during the second half become more challenging.'

Web sites are at www.aegisgroupplc.com and www.synovate.com .

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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