Aegis hit by new business fears despite record profit

Aegis, the media group, yesterday declared an end to the savage downturn in advertising revenues, predicting that spending would grow "solidly" this year and in 2005.

Aegis, the media group, yesterday declared an end to the savage downturn in advertising revenues, predicting that spending would grow "solidly" this year and in 2005.

However, shares in the group, which advises companies on booking advertising, closed down more than 8 per cent on concerns over the amount of new business it won last year. The shares sell-off came despite a 13 per cent rise in 2003 profits, reported yesterday, to a record for the company of £80.5m.

Although revenues grew last year, analysts pointed out that just $206m (£112m) of new business was won in the second half of 2003, compared with $533m won in the first half. The full-year net new business billings figure, of $728m, was less than half the $1.5bn increase in billings reported in 2002 for the company's core media buying business.

Paul Richards, an analyst at Numis, said: "On the new business, they need to turn that around and quickly."

Aegis said this year, there had been "a rise in the number of new business pitches and increased activity is expected in 2004". The company put out bullish predictions for media spending for 2004 and 2005 "based on what brand owners tell us they intend to spend".

"As we enter 2004 we believe that the advertising recession, which ended in the US and Asia-Pacific in 2003, is largely over in Europe, although Germany and France are set to recover at a slower rate," Aegis said.

The company predicted that in 2004, global spending on advertising would rise by 5.3 per cent, compared with a 3.4 per cent increase in 2003. Within that, the US market is anticipated to grow by 5.3 per cent this year and Europe is forecast to return to real growth with ad spend rising by 4 per cent. Asia-Pacific is the region expected to grow most strongly with ad spend up by 6.1 per cent.

For 2005, Aegis forecast slower but still healthy growth of 4.4 per cent, which was more optimistic than a recent analysis by rival WPP's Sir Martin Sorrell.

As well as "macro events", such as the Olympic Games, Doug Flynn, chief executive of Aegis, said the growth would be based on companies wanting to get their corporate messages across to consumers.

"Companies have sorted out profitability issues and are finally getting back to driving the top line," said Mr Flynn.