Aegis to profit from pick-up in American advertising market

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The Independent Online

The media-buying group Aegis provided a shot in the arm for the beleaguered advertising sector yesterday after it said that a further bounce in the US broadcast media market meant that its full-year results would be "significantly" better than last year.

The media-buying group Aegis provided a shot in the arm for the beleaguered advertising sector yesterday after it said that a further bounce in the US broadcast media market meant that its full-year results would be "significantly" better than last year.

In a trading update, the group, which last month had hinted at tentative signs of recovery in the region, said it had seen "further clear improvements" in US television advertising. Its shares closed 8 per cent higher at 69.5p.

But while Aegis, which is run by the chief executive, Doug Flynn, is expecting full-year results to be "significantly" better than 2001, pre-tax profits would be held back by a "somewhat higher level of restructuring and other exceptional costs" than previously anticipated.

Jeremy Hicks, the finance director, said the restructuring costs would cover some additional job cuts, although he declined to be specific. "Restructuring is a process, not an event. We are continually looking at improving our efficiency," he said.

In 2001, the group reported pre-tax profits before exceptionals of £63.3m, a 19 per cent rise on the previous year.

Aegis's upbeat comments echoed those made earlier this month by Rupert Murdoch's News Corp and Mel Karmazin's Viacom. Mr Murdoch said his group's US television stations had seen "four solid months" of improved advertising.

However, Aegis's outlook contrasted sharply with the picture painted by Sir Martin Sorrell's WPP last week, as it issued the latest in a string of downbeat assessments about the potential for advertising revenues to recover alongside another profits warning. Sir Martin insists any bounce-back in US broadcast media reflects seasonal political advertising and a slew of promotions from the car industry, which is itself having a hard time.

Analysts said that while the bulk of WPP's revenue is based on fixed fees, Aegis's was more reliant on commissions, which means that its top line will pick up quicker once advertising spending eventually recovers.

Aegis, which buys advertising space for companies such as McDonald's and Coca-Cola, was less upbeat about trading in Europe and Asia-Pacific, which it said continued to trade in line with expectations of a six-month lag to any pick up in the US.

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