Aegis Touts Results, Gushes About Carat's Integration

Top executives at Aegis Group spoke enthusiastically Wednesday about early results and future prospects for the merger of traditional buying shop Carat with its eponymous online counterpart.

"We are producing truly groundbreaking work," said CEO Robert Lerwill on a conference call to discuss 2007 company results. CFO Alicja Lesniak said the "integration has gone well ... margins have improved."

Carat and Carat Fusion merged in mid-2007 amid the backdrop of the increased importance of digital initiatives in sync with traditional efforts.

For Aegis globally last year, organic revenue grew at a 9.8% clip, with total revenue coming in at $2.2 billion--up 14.2% (not accounting for currency fluctuations). Pre-tax profit climbed 16% to $262.8 million. Also, digital operations accounted for 26% of Aegis' total media revenues, up from 20% in 2006--with Aegis saying that's expected to increase again in 2008.

The company's 2007 performance may have been solid enough to deter its largest shareholder Vincent Bollore (with 29%) from ramping up his bid to gain two board seats en route to a possible acquisition. Bollore had said he would wait for results to decide whether to move forward. He is chairman of Havas, and a merger with Aegis has been speculated.



Lerwill said Wednesday that "an open pipeline" exists for discussion with Bollore about some sort of partnership, as long as there's a "clear commercial benefit," according to the Guardian newspaper in the UK. But Lerwill did not speculate on any potential combination with Aegis, the paper said.

In 2007, Aegis said its media operations in the Americas (it doesn't break out the U.S.) saw revenues increase 25% (not taking into account currency exchange fluctuations) to $304.4 million. But Aegis said that its U.S. media operations delivered "above-market organic growth, driven in particular by an exceptional performance in digital and another good year in out-of-home and sponsorship and entertainment marketing."

Carat USA's revenues were slowed by two major clients reducing budgets at the end of 2006, which carried over, the company said.

Out-of-home operations in the U.S. include Posterscope USA and HyperSpace, which is new to the market and works in the digital out-of-home area. Other operations include media agency Vizeum, digital shop Isobar and Vivid Marketing, an event-marketing company acquired in June.

Apparently on a worldwide level, Lerwill said this year Aegis will launch a "coordinated sponsorship and entertainment network, capitalizing on a capability in the field where we already have 500 specialists around the globe."

New business in 2007 came from Mattel's global account at Carat as well as Outback Steakhouse and Discover Financial Services in the U.S. Also, Vizeum garnered the Twentieth Century Fox business in 18 markets. Carat held onto the global Philips business and Pernod Ricard in the U.S., though it lost the Hyundai account.

The weak dollar hurt Aegis' performance, as the company said its sluggish performance cost it some $63.4 million in revenue, since two-thirds comes in British pounds and Euros.

Looking ahead, Lerwill said in a statement that Aegis is "cautious about the macro-economic outlook for 2008, but currently relatively optimistic about our own prospects, reflecting the investment we have made in our businesses and our market positions."

In 2007, Aegis made 17 acquisitions, and has completed four already this year.

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