Aegis Media business review

Key performance drivers /

A number of fundamental drivers supported Aegis Media’s solid performance in 2010, including:

  • A re-focused strategic approach, based on the Power Brand strategy, with the five networks of Carat, Vizeum, Posterscope, isobar and iProspect providing clients with communications solutions focused on media, ideas, content creation and digital. These brands operate as one P&L per country providing one operating model and a full range of services that can be easily integrated, reflecting the needs of clients in an ever-changing media environment. The Power Brand strategy will continue to support our business going forward
  • Market-leading consumer insight and service solutions, including our CCS (Consumer Connection System), extended into 27 markets in 2010, provides clients with actionable single service brand and product consumer segments. This, in combination with our ICP (Integrated Communications Planning) process has been rigorously embedded across all the networks, providing real added value, insights and consistent best practice across the division
  • High quality digital capabilities, comprising isobar, our creative origination network, iProspect, our performance search marketing network, and our on-line planning and buying, mobile and social media housed within our media agencies. Revenues from these digital capabilities now account for 32% of Aegis Media’s revenue and they enable us to utilise a diverse range of platforms for clients
  • Data management and platforms are a key part of our digital strategy. The ever-changing media landscape for our clients has given rise to an increasing demand for improved accountability, performance measurement and returns on investment from their promotional campaigns. Consequently, we have ensured that data management and trading platforms continue to be fully integrated into our product and service offerings
  • Our geographic scale and network consistency offers opportunities to develop our international clients, providing them with scale, quality, best practice and a coherent approach across many markets. The acquisition of Mitchell in Australia and our joint venture and investment with Charm in China further strengthens our geographic reach, specifically in Asia Pacific, and provides additional opportunities to extend our services to our new clients in that region. In 2010, we won 99 additional market appointments from our major international clients, in new regions or through new service propositions, including Diageo, Disney, Nokia, Kellogg’s and Panasonic
  • An excellent new business performance during the year, with net new business wins of $2.0 billion of billings. Importantly, a vibrant contribution from our US business demonstrated the competencies of the new product strategy, providing a clearly differentiated service. 2010 also saw the emergence of an important trend in the drive to win new business, with media buying and planning starting to leverage opportunities for creative. In the past, new business initiatives were led by the creative advertising offering, with media being introduced to the client later on in the relationship to support a creative campaign. We are now seeing media buying and planning leading the way and leveraging opportunities for creative, as evidenced by isobar successfully winning the digital creative brief across Europe for Kellogg’s, which consolidated European media with Carat in 2009.

We are increasingly optimistic about the outlook for global advertising and media expenditure, based on our clients’ current indicated advertising budgets for the remainder of 2011. As evidence of this, in March 2011 Carat upgraded its global advertising expenditure growth forecast for 2011 to 5.7%, from their forecast of 4.7% published in August 2010.

Aegis Media EMEA /

EMEA revenue increased 0.4% at constant currency to £579.7m, supported by a number of strong performances from our businesses across the region, but demonstrating the patchy recovery in Western Europe. Our performance across Europe was bolstered by a number of pan-European account wins including Deutsche Bank, ING, De Agostini, Indesit, Kellogg’s digital creative account and Calvin Klein’s digital campaign.

The UK delivered good performances across the brands, in particular at our media businesses. The UK and Ireland secured a number of important client wins including Anheuser Busch InBev, Pfizer, Eircom, Disney Parks and Travelodge, as well as retaining British Gas, our largest client in the UK market, with a broadened remit to include digital creative. Our plans to consolidate our UK operations and our Group employees into one location remain on track and we expect this re-location to be completed during the second half of the year.

Growth in our media businesses in France remained limited during the year, but some of our diversified businesses performed well, including organic search and sponsorship. Our new business performance was robust, with new assignments for Cadom and Canal+, as well as the successful retention of our largest client, the Government of France, for another three years.

Germany delivered a decent performance during the year, particularly in the fourth quarter. Client wins during the year included the German government and GE Capital Bank.

Our businesses in Italy performed creditably in a challenging market, winning some significant in-country accounts including CoGeDi and teletu.

The Spanish market remained relatively muted during the course of 2010. However, our business closed the year with the retention of BMW and several new client wins including Grupo San Miguel/Mahou as well as France Telecom/Orange’s digital creative business. Negotiations continue with Nueva Rumasa, our former client which filed for pre-insolvency protection in Spain last month, to recover our outstanding debt.

There were strong performances across the board in the Nordic region, in particular in Sweden, Denmark and Finland. New business wins across the region included Sony Music, Citigroup and Risicum.

Central and Eastern Europe continued to perform well, particularly our businesses in Russia and Turkey. New business wins across the region included Russia Post, OBI, Ferrero, Samsung, Megafon and MTS.

The Middle East delivered strong results, supported by a new management team which restructured and revitalised our businesses there, winning a number of high profile local and multi-national clients in 2010. We secured several important regional extensions of existing international client accounts including Nokia across 19 markets across the Middle East and North Africa. We secured a number of other regional extensions of global clients in Africa, including Procter & Gamble and BMW. Across the region, South Africa performed particularly well, securing a good mix of international and local new business wins during the year.

Aegis Media Americas /

Revenues of £189.4m increased 14.5%, at constant currency, across North America and Latin America.

North America delivered an outstanding performance as a result of management actions which successfully revitalised the business. There was strong momentum at our Carat and iProspect brands, in particular, during the course of the year. A clear focus on implementing the new product range and a significant investment in new talent created a deliverable competitive advantage.

Consequently, there were a number of significant new business wins in 2010 including Smuckers, Beiersdorf, Sears’ search business, Red Bull, Relativity Media and Diageo. At the end of 2010, we successfully renewed our contract with Pfizer, our largest account in the region, following the addition of the Wyeth media account earlier in the year.

Latin America also produced a strong performance, driven by Mexico, which won the Electronic Arts account across the region, and by our creative origination business in Brazil.

Aegis Media Asia Pacific /

Our Asia Pacific businesses produced a strong set of results, with revenue up 34.4% at constant currency to £117.7m. Excluding the revenue contribution from Mitchell of £12.6m, revenue was up 20.0% at constant currency.

Our largest business in the region, China, was again a key driver of our performance, supported by another strong performance from our existing agencies there. In addition, the joint venture between Vizeum and Charm Communications Inc (“Charm”) started to gain traction. We won several important clients, including Xian Janssen Pharmaceuticals, Bulgari, Orion and Wyeth and retained the Kraft-Cadbury account.

Our business in Australia delivered strong results, winning some high profile accounts, including Kraft-Cadbury and Disney. In November, we completed the acquisition of Mitchell, Australia’s leading marketing communications agency, which transforms our market position to the number one player in Australia and to a competitive top three position across the Asia Pacific region.

We maintained a strong retention record across the region, extending our relationships with the likes of Procter & Gamble, Pernod Ricard and BMW.

Summary /

Our performance in 2010 benefited from a re-focused strategic approach, based on the Power Brand strategy, our strengthened geographic profile and our excellent new business performance during the year. This was supported by solid operational performances from our businesses in faster-growing regions and North America in particular.

As a consequence of our increasing confidence in the outlook for the sector, supported by the new business momentum achieved so far in 2011, we are increasingly optimistic about Aegis Media’s short term prospects.

Jerry Buhlmann
Chief Executive Officer, Aegis Media