Argentina crisis knocks Aegis for £10m as 120 more staff are axed

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Aegis, the media buying group, has taken a £10m hit to profits from the economic crisis in Argentina, the company revealed yesterday, along with the news that it had made another 120 workers redundant.

The group said that the "deepest advertising recession in living memory" was continuing to see a sliding market. New billings in the first half of 2001 were $1,149m (£798m) but the company added just $391m in new business in the following five months.

However, Jeremy Hicks, chief financial officer, said the rate of deterioration was now slowing. "Things are still getting worse but the gap with the previous year is getting smaller ... This recession will be more sustained and geographically co-ordinated than what we saw in the early Nineties."

Aegis, which books and plans advertising for clients, joined other marketing forecasters, such as Zenith, in predicting a recovery from the third or fourth quarter of this year. Overall, Aegis said this year would be flat or slightly negative, compared with 2001, but it would still be well below levels of business seen in 2000, which was an exceptionally buoyant year. Year-on-year growth is forecast to return in 2003.

Mr Hicks said that Aegis had been forced to write off £10m of outstanding bills in Argentina because there is no prospect of those being paid. "There has been a cessation in normal business activity in Argentina. Companies don't want to advertise and those that do, don't have the money," he said.

Aegis entered Argentina through an acquisition two years ago and its business had, until recently, been profitable there. The scale of the loss in Argentina, which will feed straight through to the group's bottom line, was greater than expected by analysts. Merrill Lynch immediately reduced its full-year 2001 pre-tax profit estimate from £54.5m to £47m.

At the interim results in September, Aegis said 180 redundancies had occurred in 2001. Yesterday it reported that 300 employees had lost their jobs last year. Unless the upturn fails to appear later this year, only a few more redundancies are expected.