Favourable currency movements, acquisitions and an impressive emerging markets performance has propelled revenue growth at marketing and communications group, Aegis. But tougher trading conditions have prompted management to implement a cost-cutting scheme which will see the company axe 5 per cent of its workforce. That should save £20m by mid-2010.
Acquisitions lifted revenues by £67m in the period, while favourable currency movements bolstered the figure by £112.5m - leaving organic revenue growth at a reasonable 4.6 per cent. Restructuring has chipped into group pre-tax profits, with £27.4m spent last year, and another £12m to be charged in 2009. Acquisitions and currency movements have also bolstered the group's debt burden, and net debt grew by £52.3m in the period to £297.5m. However, Aegis remains comfortably within its banking covenants, with the debt-to-earnings ratio at a comfortable 1.2 times (against a covenant requirement of less than three times).
At the divisional level, revenues from the largest group's unit - Aegis Media - increased 22.3 per cent in the period, to £828.3m, with organic revenues there up by a respectable 6.1 per cent. Adjust for currencies and sales from Europe, Middle East and Africa (EMEA) and Asia Pacific grew 11.5 per cent and 26 per cent, respectively, to £558m and £68.4m. This has helped to mitigate a poor US performance, where client losses have resulted in flat sales growth. Management says net new business was down, but adds that there were more "defensive pitches" around - with Aegis retaining a number of key clients such as Disney Europe and Santander UK.
Meanwhile, Aegis' market research and business intelligence operation, Synovate, benefited from a growing international presence. On a constant currency basis, Synovate's revenues from the EMEA region, and Asia Pacific, rose 11.2 per cent and 20.7 per cent, respectively, in 2008, to £248.4m and £124.6m. Again, that helped mitigate Synovate's weaker US revenues, which inched up just 1.4 per cent to £145.2m.
Analyst Alex DeGroote of broker Panmure Gordon is expecting a pre-tax profit of £150m for 2009, giving EPS of 7.99p (8.85p in 2008).
AEGIS (AGS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 77p | MARKET VALUE: | £892.3m | |
| TOUCH: | 76-77p | 12-MONTH HIGH: | 134p | LOW: 45p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 42p* | NET DEBT: | 65% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2004 | 7.60 | 91.9 | 5.50 | 1.45 |
| 2005 | 8.08 | 94.0 | 5.60 | 1.65 |
| 2006 | 8.23 | 114 | 6.80 | 1.90 |
| 2007 | 9.35 | 132 | 7.90 | 2.30 |
| 2008 | 10.4 | 125 | 7.30 | 2.50 |
| % change | +11 | -5 | -6 | +9 |
Ex-div: 29 Apr Payment: 28 May *Includes intangible assets of £1.2bn, or 105p a share | ||||
Click for a guide to the terms used in IC results tables
For more analysis of company results as they're released, go to www.investorschronicle.co.uk/results
