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Business News/ Companies / Aegis raises outlook after outperforming peers
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Aegis raises outlook after outperforming peers

Aegis raises outlook after outperforming peers

File photo of the Publicis Group SA offices in Paris, France. Bloomberg.Premium

File photo of the Publicis Group SA offices in Paris, France. Bloomberg.

London: British group Aegis expects to fend off any potential buyers after growing rapidly in its new guise as a smaller, more focused media buyer, which helped it to smash third-quarter forecasts and raise its outlook.

Aegis, which closed the sale of its Synovate market research unit for £529 million in October, said it had taken market share off rivals, with strong performances in Asia, North America and within its digital division.

The group on Tuesday posted organic revenue growth up 11.2%, compared with a Reuters poll of analysts forecasting 7.5% growth, and the range achieved by its larger rivals of 4.7% to 8.7% growth.

“We’re making good progress on all fronts at Aegis and the business has considerable momentum," chief executive Jerry Buhlmann told reporters, adding that a takeover of the group was not on his agenda.

Aegis said it expected its organic revenue growth rate to slow in the fourth quarter and noted that, as was historically the case, revenue would be weighted towards that period.

It also said some staff costs had risen, which would keep underlying operating profit in line with forecasts.

“Despite these factors, we remain positive about Aegis’s prospects," it said. “We expect organic revenue growth for the retained group for 2011 to be ahead of the level achieved by the group in 2010, when it was 5.8%."

The retained group achieved nine-month organic revenue growth of 8.9 %, meaning most analysts had already factored in a beat on the full-year target.

Shares in the group were down 2% on Tuesday, dragged down by a lower FTSE 100 Index and after it rallied almost 20% leading up to its results.

The performance puts Aegis in a strong position compared with peers in terms of organic revenue growth, a key industry metric which strips out acquisitions and currency fluctuations.

File photo of the Publicis Group SA offices in Paris, France. Bloomberg.

The ad agencies have performed solidly in 2010 and 2011 but with their output closely linked to the economic cycle, analysts and investors have been focusing on the outlook for the fourth quarter and 2012.

Buhlmann said the group was benefiting from new systems and management put in place which had energised the firm. He said he also expected their ability to take work off rivals and its presence in faster-growing regions to help it through 2012.

It also has a lengthy list of acquisitions that it is working on after completing 15 deals in 2011.

The businesses in North America, China, Brazil and Russia delivered double-digit organic revenue growth during the first nine months of the year, while Australia posted a strong output in the third quarter.

It said it had performed relatively well in western Europe despite the more challenging market conditions, although France struggled. Aegis Media delivered total net new business wins of $2.4 billion during the first nine months of the year, compared with $1.6 billion a year earlier.

Analysts welcomed the solid organic growth but noted that the strong performance could also make the group more attractive to large buyers such as Omnicom, WPP and Publicis when markets improve.

“The shares have reacted well over the period of the special dividend and the consolidation," said Malcolm Morgan at Peel Hunt. “With momentum really building in the business, the cautious stance on the final quarter will be interpreted as prudence rather than concern. We put our target price under review."

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Published: 01 Nov 2011, 03:41 PM IST
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