More on Aegis
Aegis H1 results
Aegis continues its strong growth with organic revenue growth of 7.5% in the six months (acquisitions added another 7%). This is a little ahead of growth in ad spend. Media buying grew a little more slowly than ad spend (+4.5% organic). The smaller market research business Synovate (37% of revenues) added almost as much to revenues. However market research remains much lower margin and media buying remains the main driver of profit growth.
Although gross margin has improved, operating margin is little changed. Net profits have also improved little (6%, which implies almost no organic growth) partly because of the rise in interest payments - Aegis’s acquisitiveness appears to be beginning to tell. The sharp rise in EBITDA, from £39m to £55m does suggest that the underlying trend is still strongly positive.
Aegis is expensive with a prospective PE of 20× (at119p) and it is likely to yield well under 2%, (despite the 13% rise in the interim dividend). However most ad driven media stocks are expensive, and Aegis will both benefit from cyclical recovery and has better prospects of sustainable growth than most ad driven businesses (the ad agencies for example).
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