More on Aegis
Aegis: full year results
Aegis has performed well as would be expected given its market and the sector recovery. Potential acquirors seem to have lost interest for the moment but it remains a potential target.
Second half growth at media buying specialist Aegis was only slightly slower in the second half of the year and organic revenue growth for the full year was a healthy 7.2%. The revenue growth was much as we would expect given the recovery in ad spend, but it was accompanied by an 80 basis point improvement in operating margin.
The margin improvement was in part driven by a gross margin expansion that came from a shift in the mix towards higher margin services.
Aegis’ digital media buying and market research services have been particularly fast growing and both of these are areas where we expect market growth to be sustainable.
Aegis is a major player in media buying and its wide range of services is a competitive advantage given the wide range of digital media available and the fragmentation of existing media channels.
The biggest potential threat to media buying comes from new entrant with automated or bid based distribution systems (such as Google), however it is still too early to assess the likely impact of these threats, and they are not likely to have much effect for many years.
Aegis has stated that 2006 has “started well” and the company’s comments on outlook for the year are fairly optimistic. At 133p it is trading on a prospective PE of 19×. This is not cheap and the 1.1% yield provides little support. However the high growth does justify a premium to both the market and the sector, although it is difficult to imagine the rating becoming much higher.
The possibility of future bids from ad agencies does add value. As the largest independent media buyer in the world, which makes it an attractive target for the ad agencies.
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