Aegis Discloses Severance Costs, Payouts To Verklin, Other Departing Managers

Aegis Group paid out about $34 million in severance costs related to layoffs and the restructuring of its operations during 2008, according to annual results released this morning. More than half of those payments - about $20 million - were attributable to Aegis' media operations, and nearly half of that - $8 million - was due to cuts made in Carat's U.S. operations. The total cost associated with Aegis' 2008 restructuring charges, including property costs, was about $40 million.

Among the payouts made to senior departing executives during 2008, was $1.1 million to former Aegis Media Americas chief David Verklin, who left in October after 10 years at Aegis, and is now CEO of the U.S. cable TV industry's Canoe Ventures.

Mainardo de Nardis, who stepped down as CEO of Aegis Media in September, and who has joined OMD as worldwide CEO, received $0.6 million, while former Aegis CEO Robert Lerwill received more than $2 million.

Despite the payouts and severance charges, Aegis reported strong profits and revenue growth from a mix of acquisitions and "organic" growth.

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Revenue grew 10.1%, operating profit climbed 10.7% and pre-tax profit increased 9.3% during 2008.

Aegis Media, which includes Carat, and digital media unit Isobar, saw revenues rise 10%, while pre-tax profits climbed 10.1%. Organic revenues fro the division grew 6.1%, which was offset by declines in Carat's U.S. operations. Aegis attributed a reduction of three percentage points of Aegis Media's 2008 organic growth to declines in Carat's U.S. operations.

"A disappointing new business performance at Carat U.S. led to a small revenue and profit decline in our total North American business in 2008," Aegis Chairman and Interim CEO John Napier said in the earnings release. "The loss of Hyundai in the first quarter, and additional losses, which included the consolidation of New Line Cinemas into its parent company's media agency, impacted both revenue and profit at Carat."

He added that Carat's U.S. operations remain "fundamentally sound, with particular strength in insight and digital."

But the real sweet spot for Aegis continues to be digital media and marketing services network Isobar, which Aegis claims is still the "single biggest" in the world, even though a recent RECMA report shows it dropping to second place behind WPP's Ogilvy Interactive division.

Aegis reported that digital media and marketing services now account for about 29% of its total revenues.

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