Bottom Line: Ad agencies regain some swagger

BRUSH out those pony tails and polish up the red spectacles: shares in advertising agencies and public relations consultants have soared since the New Year.

Gold Greenlees Trott, Shandwick and Aegis, among others, have seen their market value climb by at least a quarter in the past fortnight.

Judging from the gains, you might think the boom days of telephone number salaries and champagne lunches are back.

But media men are a much chastened lot these days. Most media professionals believe this year will again be a tough one because the recovery in advertising spending by clients is only hesitant.

Few expect the rip-roaring boom conditions of the 1980s to be repeated this side of the millennium.

Sentiment, rather than fundamentals, seems to be driving the sector after four years in which agency stocks have suffered a savage derating. But after numerous refinancings and equity injections, many companies have shored up their finances sufficiently to inspire a modicum of confidence among investors.

Agency stocks also offer high operational gearing to an economic revival. That means much of the increased spending on advertising and marketing will flow through into profits.

Moreover, high takeover activity - as in the case of Paramount in the US and LWT Holdings in the UK - has placed high values on media stocks. This is spilling over in sympathy into the agency sector.

The much-heralded multimedia revolution has also led some to believe that advertising agencies and media owners will become part of one huge, vertically integrated industry in the long term.

This may sound like the dreamings of advertising copywriters and marketing men. But media and agency are flavour of the month. Such an investment view could reverse swiftly if economic recovery in the West falters. But the rally in media shares, still shadows of their boom-time selves, has much further to run for the time being .