More on Aegis
Aegis
Media buying (i.e. ad space buying) agency and market researcher Aegis continued to grow faster than its markets in 2004 (year end 31st December) with organic revenue growth of 8.4% at CER.
The out-performance in media buying (+8.5% organic CER) can probably be explained by the faster growth of the media buying market than ad spend as a whole - media buying market growth is not driven just by ad spend growth but also increases in the complexity of the market. Aegis and its peers have benefited from the fragmentation of the some types of media (e.g. TV) and the emergence of new media which makes the process of buying more complex. Their opportunity lies in helping clients purchase the most cost effective exposure across different media.
The out-performance in market research is more impressive as Aegis’ organic growth rate of 8.3% is clearly ahead of market growth.
Margins are not greatly different with profits (before exceptionals and goodwill rising broadly in lien with turnover at all levels, with the difference much as expected given high organic growth and acquisitons that added c12% to turnover.
Aegis is well positioned in a market that is driven by advertising but which is expected to growh much faster than overall ad spend - thus it benefits from both the advertising recovery and from growth in the proprotion of ad spend that goes to media buying agencies. However with a prespective PE of 17× the current rating needs a fair amount of growth to justify. With this rating it is hard to see much room for upward re-rating, but there is room for earnings growth driven by growing markets.
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