Aegis Group goes back in the black

Aegis Group, the media buying specialist whose acquisitions spree in the 1980s nearly destroyed the company, announced it was back in the black in 1994, reporting a pre-tax profit of £20m, compared with a loss in 1993 of £18m.

Not counting restructuring costs of £7.3m, operating profits were £27.4m, on turnover of £2.7bn.

Crispin Davis, the chief executive appointed last October, said: "The company has been through hell but we are now in a turnaround situation."

Carat, Aegis Group's operating subsidiary, organises media buying for international clients such as Volkswagen, Asda and Philip Morris. It is Europe's leading media specialist, with billings in 1994 of $5.8bn and an 11 per cent share of the European display advertising market.

Aegis bought out competitors throughout Europe in the late 1980s, often promising large earnouts for executives of the acquired companies. It intended to build a full-service, global media-buying capability.

But an overhaul in French legislation covering the media sector in 1992 led to sharply lower profits in France, then 80 per cent of Aegis Group's business. Market capitalisation plummeted to as low as £25m from £193m in 1989, while the debt level soared. The company founder, Peter Scott, who tried to launch a cost-cutting programme in advance of the new law, was ousted in 1992 by the company's French shareholders, leaving with a £2m payout.

The company was bailed out by US investors, including Warburg Pincus, in 1993, and severe cost-cutting was imposed. Aegis was managed from France until last autumn, when Mr Davis, formerly managing director of United Distilleries, was appointed and headquarters moved to London.

Analysts said the turnaround looked complete but expected margins to drop again slightly in 1995. Northern Europe is expected to grow strongly but further pressures on margins are expected in France.

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