RNS Number:5340P
Aegis Group PLC
09 September 2003
9 September 2003
For Immediate Release
Aegis Group plc
RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003
Aegis Group plc is a leading marketing services company employing approximately
8,000 staff in over 60 countries. Headquartered in London and listed on the
London Stock Exchange (AGS.L) the Group is structured around two core business
areas: Aegis Media, which includes Carat, Vizeum, and Posterscope and a range
of communication services businesses; and Synovate, which is a leading global
market research network.
ORGANIC GROWTH DRIVES REVENUE AHEAD OF MARKET
* Group revenue up 7.8% to #294.7m (2002: #273.3m)
* Organic revenue growth 2.7% (2002: 0.5%)
* Aegis Media turnover up 11.6% to # 3,371.0m (2002: #3,021.4m)
* Synovate revenues up 4.8% to #93.5m (2002: #89.2m)
* Underlying PBT* #30.9m (2002: #30.0m) before net exceptional credits of
#3.2m (2002: charges #2.5m)
* Underlying diluted EPS* 1.9p (2002: 1.8p)
Doug Flynn, chief executive of Aegis Group plc, commented:
"Despite patchy market conditions we continued to improve our revenues and
profits, reflecting good organic growth in both our media and research
divisions. This has been one of the busiest periods in the company's recent
history and in addition to improved results we launched a new media network,
consolidated our buying power, internationalized our interactive media network
and rebranded our research business.
We expect 2003 to be a satisfactory year and believe that 2004 will show further
improvement."
*Underlying PBT and EPS are before charging goodwill amortisation of #20.7m
(2002: #10.8m) and net exceptional credits of #3.2m (2002: charges of #2.5m). UK
GAAP diluted EPS is 0.3p (2002: 0.7p) and UK GAAP profit before tax is #13.4m
(2002: #16.7m). A reconciliation of the underlying profit to UK GAAP profit is
set out on page 7.
Enquiries:
Aegis Group plc +(44) 20 7070 7700 Financial Dynamics +(44) 20 7831 3113
Jeremy Hicks, Chief Financial Officer Tim Spratt
Doug Flynn, Chief Executive Officer Charles Palmer
Richard Walters, Head of Communications
For further investor information visit: www.aegisplc.com
High resolution photographs are available to download free of charge from
www.vismedia.co.uk
Underlying Unaudited Consolidated Profit And Loss Account*
Six months Six months 12 months
ended ended ended
30 June 2003 30 June 2002 31 Dec 2002
#'m #'m #'m
Turnover 3,464.5 3,110.6 6,233.8
Cost of sales - payments to the media (3,169.8) (2,837.3) (5,641.9)
Revenue 294.7 273.3 591.9
Cost of sales - other direct costs (31.5) (34.0) (76.8)
Gross profit 263.2 239.3 515.1
Underlying operating expenses* (229.7) (207.3) (438.5)
Underlying operating profit* 33.5 32.0 76.6
Net interest payable (2.1) (1.4) (4.4)
Associated undertakings (0.5) (0.6) (0.8)
Underlying profit before tax* 30.9 30.0 71.4
Basic earnings per share
- underlying* 1.9p 1.8p 4.4p
- FRS 14 0.3p 0.7p 1.2p
Diluted earnings per share
- underlying* 1.9p 1.8p 4.3p
- FRS 14 0.3p 0.7p 1.2p
Dividend per share
- interim 0.52p 0.50p 0.50p
- final n/a n/a 0.75p
- total n/a n/a 1.25p
*Underlying results are before charging goodwill amortisation of #20.7m (2002:
#10.8m) and net exceptional credits of #3.2m (2002: charges of #2.5m). UK GAAP
profit before tax is #13.4m (2002: #16.7m). A reconciliation of the underlying
profit to UK GAAP profit is set out on page 7.
GROUP OVERVIEW
The Group continued to outperform the market in the first six months of 2003 and
to develop further its media services and market research operations.
Considerable progress was made in both divisions during the period. Notably,
the Group launched Vizeum as a new media services network in June. Vizeum
combines the Group's existing independent national agencies into a strong
international network with billings in excess of $1.5 billion. Launched
initially in Europe it is intended that the network will eventually expand into
the US and Asia-Pacific. Vizeum will provide clients with more supplier choice
in an agency market that has undergone substantial consolidation.
To support the rapidly expanding range of media and communication service
businesses, in June the Group announced the establishment of Aegis Media as the
platform for its media operations, managing and supporting all of its media
brands.
Carat performed well in all three regions. Carat Europe increased its profits
in the face of static markets. Carat in Asia Pacific saw growth at every level
despite the impact of SARS in the second quarter and in the Americas, the USA
businesses performed well in a gradually improving environment.
The Group's market research network continues to grow and develop its operations
around the world and to win business from some of the world's largest
corporations. Launched under the Synovate brand name at the start of the year,
good progress has been made in melding the constituent parts into a cohesive
network of genuinely global scale with common tools, products and systems. One
of the more important initiatives to be developed in the period is a global
costing system, which provides consistency and efficiency in costing
multi-national mandates for clients. March saw the formation of Synovate's
global marketing team and the launch of its global marketing initiative with a
series of client meeting and roadshows in the US, Europe and Asia-Pacific. As a
result of this initiative there have been some early business development
successes with the extension of local accounts into other regions of the world.
During the period the Group's continued investment in developing proprietary
research products means that less than 2% of research product revenues are now
derived from products licensed from third party suppliers.
Media
We saw the market begin to recover in the US from mid 2002 onwards, and Europe
stabilised compared with the poor conditions in the second half of the prior
year. In the US the television upfront commitments in 2003 somewhat
strengthened the outlook. However, the market in Europe has disappointed in
2003 and will end this year with little or no growth. In Asia-Pacific, SARS
affected the second quarter, but outside of Japan, the region has returned to
solid growth.
There were few large account reviews in the period. There were a number of
client consolidations and although these did not always go our way and there
were some client losses, net new business billings worth $522 million (2002:
$1,078 million) were won in the six months to the end of June. Major account
wins in the period included Pharmacia and XM Radio in North America and
Pan-European appointments for Arla, Bel, Diesel, DHL and JTI.
During the first half, Aegis Media's combined operations increased revenues by
9.2% (6.2% in constant currency) to #201.2 million from #184.2 million in 2002.
Turnover in the Americas increased by 13.6% compared with the first half of
2002. European turnover was up 9.4% compared with last year and Asia-Pacific
was up 46.0%.
Europe
Aegis Media's European operations worked hard to win clients in varied market
conditions. Net new business won in Europe was $167 million (2002: $284
million). A number of significant pan-European wins (noted above) reflected the
continued trend for clients to award international mandates. Notable national
wins included Cadbury (Belgium), Kia (Germany), Fastweb (Italy), Direct Line
(Spain), Pathe (France), Persee Medica (France) and Svenska Spei (Sweden).
Carat's strong position in the European media market will now be complemented by
Vizeum's growing network that was launched in June. We expect the good
performance of our European media businesses during the first half to be carried
through for the full year. This includes absorbing the investment costs
associated with the launch of Vizeum.
Americas
The US advertising environment showed modest recovery with client spending
continuing to improve at a gentle pace. With few large accounts up for pitch
Carat gained $238 million of net annualised new billings in the US and Latin
America in the first six months of 2003 (2002: $679million). These included
Pharmacia, XM Radio, Kyocera, Bang & Olufsen, Scotia Bank and Telecom Argentina.
Carat continues to seek new and innovative ways to market its services to
clients in the US. Carat Trade is a departure from mainstream media buying and
planning, facilitating the barter of clients' stock or other assets in return
for media space or airtime. Carat Affiliates is a business where Carat plans
and buys media for small creative boutique ad agencies around the country.
Carat Interactive delivered a strong new business performance in the period and
expanded its creative services through the acquisition of Freestyle Inc., a US
web design and development business.
In Latin America, Venezuela's political and economic problems continued and,
with no end in sight, Carat closed down its operation there during the period.
Argentina began to benefit from the first signs of economic recovery and Carat
saw some new business successes there including Telecom Argentina. This helped
to continue the recovery in its performance over the past two years. Carat
Mexico continues to make progress with Scotia Bank its major win in the period.
Asia-Pacific
Carat's operations in the region had a highly successful first half despite
concerns about the impact of SARS on trading. Once again a strong new business
performance was delivered with net new business billings of $117 million (2002:
$115 million). Major account wins included BMW in Japan, Carlsberg in Malaysia,
IAG and P&O in Australia, the Lotteries in Australia and Taiwan and Pernod
Rickard in China.
The acquisition of Chinese outdoor media specialist Asiaray at the end of 2002
continued the expansion of Posterscope in Asia-Pacific. Now branded Posterscope
China, the operation provides Aegis with a foothold in the rapidly growing
Chinese outdoor media market and represents another step along the road towards
building Posterscope into a global outdoor media network.
Market Research
In January 2003, the Group moved Copernicus, our US research-based marketing
consultancy from Synovate to Carat in order to maximise the synergies that we
believe can be achieved with MMA. After restating 2002 for this change, revenues
grew by 4.8% (13.3% in constant currency) to #93.5 million (2002: #89.2 million)
reflecting growth in all three regions. With the US accounting for over half of
Synovate's global revenues it is important that the business is structured to
align it closely with the global network. This required some changes in
personnel during the first-half, incurring a one-off cost of #1.5 million.
The Group's market research activities have now been developed into an
international research network with offices in 46 countries and over 2,900
employees. Synovate continues to improve its international capability with
global tools, systems and a dedicated global marketing team.
Americas
Synovate's operations in the US and Latin America increased market share in the
period. Against the backdrop of a static market, both sales and revenues showed
good growth in dollar terms and, encouragingly, the sales pipeline at the end of
the June was ahead of the previous year. Latin America is showing signs of
recovery and the newly acquired business in Brazil is on course to make a
positive contribution to profits in 2003. The specialist industry divisions,
especially Healthcare and Public Sector, have secured significant new or renewal
business in the first six months. Although profits in the first six months of
2003 have been held back by restructuring costs, the underlying performance of
the region has continued to improve.
Asia-Pacific
After a strong first quarter, the SARS health scare presented significant
problems for data gathering and cross border research projects in the latter
part of the period, holding back the rate of growth. Nevertheless, net revenues
for Synovate's Asia-Pacific operations increased satisfactorily. Hong Kong,
China, Japan, the Philippines and South Korea all performed strongly offsetting
a decline in Taiwan. Despite a particularly soft market and the impact of SARS,
China was Synovate Asia-Pacific's best performing operation and shows great
promise for the remainder of the year. At the end of June the sales pipeline
also showed a healthy improvement compared with last year.
EMEA (Europe, the Middle-East and Africa)
Economic recession and the impact of the Iraqi war on business confidence meant
that the research markets barely grew in many of the key EMEA countries.
Nevertheless, Synovate EMEA performed well, helped by the new business
opportunities provided by Synovate's international network. A continued focus on
multi-country studies, key account management, aggressive marketing of
proprietary solutions and increased investment in regional business development
capability enabled Synovate EMEA to gain market share. The integration of one
of Spain's largest independent market research agencies, acquired in the latter
part of 2002, helped to strengthen the European network in 2003; the Group
continues to actively explore other acquisition opportunities in the region.
Investment in technology and the streamlining of operational processes are
expected to further strengthen margins during the balance of the year.
FINANCIAL RESULTS
The Group enjoyed a reasonably good first six months in financial terms with
profit before tax, goodwill and exceptional items growing by 3.0%. The
underlying position, however, is somewhat obscured by a number of non-trading or
external factors. The first-half of 2003 saw significant changes in the rates
of exchange between sterling and the Group's major trading currencies, the Euro
and the US dollar. The Euro's average exchange rate increased by 10% compared
with the first six months of 2002, whilst the dollar fell by 10%. Relative to
last year, the overall effect on turnover, revenue and gross profit was small,
but because of the high profit contribution of our European businesses, exchange
rate changes flattered the growth of our pre-tax profit by some #3.0 million.
Against this there were a number of one-off (but not exceptional) costs and
investment expenses in the first half which held back profit growth but the
majority of which are not expected to occur in the second half. These included
restructuring costs of #1.5 million at Synovate in the US; the #0.9 million of
costs associated with our unsuccessful bid for NFO Worldwide and start-up costs
of #0.9 million associated with Vizeum. Adjusting for these items and the
effect of the movements in exchange rates on last years comparative figures,
profit before goodwill and exceptional items grew by 3.9%.
UK GAAP
In this report, references to underlying figures mean figures excluding goodwill
amortisation and before exceptional items, as the board believes this gives a
better view of the underlying performance of the business. The reconciliation
of operating profit and pre-tax profit between the underlying figures and UK
GAAP is as follows:
Reconciliation of underlying to UK GAAP operating profit
Six months Six months Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
#'m #'m #'m
Underlying operating profit 33.5 32.0 76.6
Exceptional Items 5.2 (0.8) (9.5)
38.7 31.2 67.1
Amortisation of Goodwill (11.7) (10.8) (22.4)
UK GAAP operating profit 27.0 20.4 44.7
Reconciliation of underlying to UK GAAP profit before tax
Six months Six months Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
#'m #'m #'m
Underlying profit before tax 30.9 30.0 71.4
Exceptional Items 3.2 (2.5) (13.5)
34.1 27.5 57.9
Amortisation of Goodwill (20.7) (10.8) (23.2)
UK GAAP profit before tax 13.4 16.7 34.7
Turnover, Revenue & Gross Profit
Turnover was #3,464.5 million (2002: #3,110.6 million), an increase of 11.4% on
last year (9.7% in constant currency). Revenue for the period was #294.7
million, (2002: #273.3 million), a 7.8% increase (8.6% in constant currency), or
2.7% excluding the effect of acquisitions (3.5% in constant currency). Aegis
Media's revenues rose by 9.2% to #201.2 million (2002: #184.2 million) and
Synovate's revenues grew by 4.8% to #93.5 million (2002: #89.2 million) both of
which were ahead of the market rate of growth. Gross profit was #263.2 million
(2002: #239.3 million), a rise of 10.0%. The gross margin for the first half
fell to 7.6% compared with 7.7% in the first six months of 2002.
Operating Expenses
Underlying operating expenses rose by 10.8% to #229.7 million (2002: #207.3
million). Underlying operating expenses increased as the Group expanded to deal
with the new business won in 2002, as a result of acquisitions and of the #3.4
million in one-off and investment costs described above. In addition, there is
an exceptional credit of #5.2 million, relating to a court case against
International Media Services Inc. in the US. The Group has acquired the
business of International Media Services Inc. and therefore the provision for
the settlement cost of #5.2 million taken in last year's results is no longer
required.
As was announced in June this year, the Board has taken the view that the
Group's investment in Newworld IQ now has a negligible value. We have therefore
provided in full, as an exceptional item, against the amount receivable from
Newworld IQ of #2.0 million and have written down the goodwill of #8.9 million.
The Group's underlying results for the period also include Newworld IQ's trading
losses of which our share was #0.4 million.
Capital expenditure
Aegis invested #9.5 million in capital expenditure during the first six months
of 2003 (2002: #7.0 million). This includes a number of IT projects including
the development of call centre research systems for Synovate's subsidiary,
Viewscast and investment in media tools and technology.
Cash Flow and Treasury
Operating cash flow improved to 111% of underlying operating profits (2002:
108%). The Group continues to follow its programme of acquisition, with a net
cash outflow of #42.6 million on current and prior period acquisitions. The
Group's strong operating cash flow together with careful working capital
management resulted in net debt of #155 million compared with #151 million at
the same time last year.
The Group's policy is to borrow in local currency to act as a natural hedge
against the translation risk arising from its net investments overseas. There
has been, therefore, an increase in Euro debt, arising from the issuance of the
Convertible Bond in May 2002, used principally to finance European acquisitions.
The Convertible Bond carries a fixed interest rate which is slightly higher
than the current variable rates giving rise to a higher interest charge for the
period, excluding the amortisation of refinancing costs, of #1.6 million (2002:
#1.1 million).
Profit before Tax
Overall, underlying profit before tax was #30.9 million (2002: #30.0 million).
After exceptional items, but before goodwill amortisation, profit before tax was
#34.1 million (2002: #27.5 million). The estimated full year effective tax rate
is 30.2% based on underlying profits.
Earnings per Share
Underlying basic and diluted earnings per share were 1.9p (2002: 1.8p). After
exceptional items but before goodwill amortisation, basic earnings per share
were 2.1p (2002: 1.7p).
Dividends
The Board has declared an interim dividend of 0.52p per ordinary share (2002:
0.50p) to be paid on 3 October 2003 to shareholders on the register on 19
September 2003.
GROUP OUTLOOK
Aegis continues to pursue its strategy of building leading global positions in
the media services and market research markets. Throughout the downturn the
Group has continued to invest in the systems, people and infrastructure to
ensure that it maintains its competitive advantage and is well positioned to
benefit from a recovery in the markets it serves. Initiatives undertaken in the
first six months of 2003 have been long in planning and will be important for
the Group's growth over the next five years.
Overall, the global advertising market showed a slight recovery in the first six
months of 2003. While signs from the US TV market are encouraging, other forms
of US media are showing little improvement. The European market has been more
disappointing with gains in some markets offset by weakness in others. Whilst
the Japanese market remains flat, adspend in the rest of the Asia-Pacific region
returned to solid growth after the SARS affected second quarter. While the
second half of the year may see slightly better market conditions, it is likely
that the 2003 will show only a slight recovery. The Group's market predictions
however point to an increased rate of adspend growth in 2004.
Much was achieved in the first half of 2003 as the Group continued to develop
its media and market research businesses, the benefits of which are expected to
materialise in the current year and beyond. Trading continued to grow ahead of
the market in the first half of 2003 and the Board expects to see further
improvements in the second half. The seasonality of our business continues to
become more pronounced mainly as a result of performance related revenues
released towards the latter part of the year. If the present market conditions
continue we would expect that the Group will deliver satisfactory results for
the full year.
Unaudited consolidated profit and loss account
for the six months ended 30 June 2003
As As
restated restated
(note 1) (note 1)
Six months Six months Six months Year ended
ended ended ended 31
30 June 30 June 30 June December
2003 2003 2002 2002
Notes #'m #'m #'m #'m
Turnover:
- continuing operations 3,409.2 3,110.6 6,233.8
- acquisitions 55.3 - -
Turnover 2 3,464.5 3,110.6 6,233.8
Cost of sales - payments to the media (3,169.8) (3,169.8) (2,837.3) (5,641.9)
Revenue 294.7 273.3 591.9
Cost of sales - other direct costs (31.5) (31.5) (34.0) (76.8)
Cost of sales - total (3,201.3) (2,871.3) (5,718.7)
Gross profit 263.2 239.3 515.1
Operating expenses before amortisation of goodwill and
exceptional items (229.7) (207.3) (438.5)
Exceptional operating items 3 5.2 (0.8) (9.5)
Amortisation of goodwill (11.7) (10.8) (22.4)
Operating expenses (236.2) (218.9) (470.4)
Group operating profit:
- continuing operations 25.9 20.4 44.7
- acquisitions 1.1 - -
27.0 20.4 44.7
Group share of operating loss in associated undertakings before
goodwill amortisation and exceptional items (0.5) (0.6) (0.8)
Goodwill amortisation 3 (9.0) - (0.8)
Group share of operating loss in associated undertakings before
exceptional items (9.5) (0.6) (1.6)
Exceptional items 3 - (1.7) (4.0)
Group share of operating loss in joint venture and associated (9.5) (2.3) (5.6)
undertakings
Exceptional amounts written off investments 3 (2.0) - -
Interest and similar items:
- interest receivable 3.3 3.2 7.1
- interest payable 4 (4.9) (4.3) (10.8)
- amortisation of refinancing costs 4 (0.5) (0.3) (0.7)
Net interest payable (2.1) (1.4) (4.4)
Profit on ordinary activities before taxation 2 13.4 16.7 34.7
Tax on profit on ordinary activities 5 (9.6) (8.4) (20.2)
Profit on ordinary activities after taxation 3.8 8.3 14.5
Equity minority interests (0.8) (0.7) (1.4)
Profit attributable to members of the parent company 3.0 7.6 13.1
Ordinary dividends 6 (5.8) (5.5) (14.0)
Retained (loss)/profit for the financial period 9 (2.8) 2.1 (0.9)
Earnings per ordinary share - underlying 7
- basic* 1.9p 1.8p 4.4p
- diluted* 1.9p 1.8p 4.3p
Earnings per ordinary share - FRS 14 7
- basic 0.3p 0.7p 1.2p
- diluted 0.3p 0.7p 1.2p
*As detailed in note 7, underlying earnings per share excludes amortisation of
goodwill of #20.7 million (30 June 2002: #10.8 million; 31 December 2002: #23.2
million) and a #2.9 million credit (net of tax) of exceptional items in 2003 (30
June 2002: #1.6 million debit; 31 December 2002 #11.8 million debit), in order
to eliminate the effect of these distorting items.
As restated As restated
(note 1) (note 1)
Notes Six months Six months Year ended
Ended ended 31 December
30 June 30 June 2002
2003 2002
#'m #'m #'m
Profit for the financial period 3.0 7.6 13.1
Currency translation differences on foreign currency net 9 (4.0) (4.4) (24.1)
investments
Total recognised (loss)/profit for the financial period (1.0) 3.2 (11.0)
Prior year adjustment 1,9 (4.9) - -
Total (losses)/gains recognised since last annual report (5.9) 3.2 (11.0)
Unaudited consolidated reconciliation of movements in equity shareholders' funds
for the six months ended 30 June 2003
As restated As restated
(note 1) (note 1)
Six months Six months Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
#'m #'m #'m
Profit for the financial period 3.0 7.6 13.1
Ordinary dividends (5.8) (5.5) (14.0)
Retained (loss)/profit for the financial period (2.8) 2.1 (0.9)
Issue of shares by the Company 1.0 1.8 1.9
Currency translation differences on foreign currency net investments (4.0) (4.4) (24.1)
Net decrease in equity shareholders' funds (5.8) (0.5) (23.1)
Opening equity shareholders' funds (originally #118.1 million before
deducting prior year adjustment of #4.9 million) 113.2 136.3 136.3
Closing equity shareholders' funds 107.4 135.8 113.2
Unaudited note of historical cost profits and losses
for the six months ended 30 June 2003
There is no material difference between the reported results for the six months
ended 30 June 2003 and 30 June 2002 and the year ended 31 December 2002 and the
results for those periods restated on an unmodified historical cost basis.
Unaudited consolidated balance sheet
at 30 June 2003
As restated As restated
(note 1) (note 1)
30 June 30 June 31 December
2003 2002 2002
Notes #'m #'m #'m
Fixed assets
Intangible assets 8 384.3 368.3 374.9
Tangible assets 53.0 56.8 52.1
Investment in joint ventures:
- Share of gross assets 1.6 17.6 17.7
- Share of gross liabilities (0.1) (4.4) (6.7)
1.5 13.2 11.0
Investments in associated undertakings 3.9 12.2 8.2
Other fixed asset investments 2.8 2.8 2.8
445.5 453.3 449.0
Current assets
Debtors 1,103.3 1,005.5 1,010.7
Stock: work in progress 6.6 6.1 5.2
Cash at bank and in hand 77.4 104.4 122.2
1,187.3 1,116.0 1,138.1
Creditors: amounts falling due within one year 10 (1,293.7) (1,196.8) (1,230.3)
Net current liabilities (106.4) (80.8) (92.2)
Total assets less current liabilities 339.1 372.5 356.8
Creditors: amounts falling due after more than one year 10 (226.2) (231.6) (238.1)
Provisions for liabilities and charges (1.1) (1.1) (1.6)
Net assets 111.8 139.8 117.1
Capital and reserves
Issued, allotted, called up and fully paid share 9 55.3 55.2 55.2
capital
Share premium account 9 200.7 199.7 199.8
Capital redemption reserve 9 0.2 0.2 0.2
Profit and loss account 9 (148.8) (119.3) (142.0)
Equity shareholders' funds 107.4 135.8 113.2
Equity minority interests 4.4 4.0 3.9
Total capital employed 111.8 139.8 117.1
Douglas Flynn (Director)
Jeremy Hicks (Director)
9 September 2003
Unaudited consolidated cash flow statement
For the six months ended 30 June 2003
Six months Six months Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
#'m #'m #'m
Net cash flow from operating activities 37.3 32.1 109.3
Returns on investments and servicing of finance
Interest received 3.3 3.1 7.0
Dividends received from associated undertakings 0.3 - -
Interest paid (4.9) (4.6) (9.9)
Dividends paid to minority interests (1.2) (0.3) (1.0)
Net cash outflow for returns on investments and servicing of finance (2.5) (1.8) (3.9)
Taxation (7.8) (11.1) (24.2)
Capital expenditure and financial investment
Purchase of tangible fixed assets (9.5) (7.0) (15.8)
Sale of tangible fixed assets 0.8 0.2 0.7
Loans made to Newworld IQ (2.0) - -
Sale of investments - 0.1 -
Net cash flow for capital expenditure and financial investment (10.7) (6.7) (15.1)
Acquisitions and disposals
Purchase of subsidiary undertakings and minority interests (note 8) (18.8) (18.7) (33.4)
Net cash/(debt) acquired on purchase of subsidiary undertakings (note 3.3 (0.3) 0.2
8)
Investment in associated undertakings (0.3) (3.0) (4.9)
Deferred consideration on prior period acquisitions (26.8) (17.6) (19.9)
Net cash flow for acquisitions and disposals (42.6) (39.6) (58.0)
Equity dividends paid (8.3) (7.9) (13.6)
Cash flow before management of liquid resources and financing (34.6) (35.0) (5.5)
Management of liquid resources
Sale of investments - 1.9 2.1
Net cash flow for management of liquid resources - 1.9 2.1
Financing
Issue of ordinary share capital 0.2 1.0 1.2
Net increase in debt due within one year 8.7 - -
Net decrease in debt due after more that one year (3.5) (11.1) (7.8)
Issue of unsecured loan notes (net of issue costs) - 99.8 100.4
Capital element of finance lease rental payments (0.3) (0.3) (0.4)
Net cash flow from financing 5.1 89.4 93.4
(Decrease)/Increase in cash in the period (29.5) 56.3 90.0
Notes to this unaudited consolidated cash flow statement are provided overleaf.
Notes to the unaudited consolidated cash flow statement
for the six months ended 30 June 2003
As restated As restated
(note 1) (note 1)
Six months Six months Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
#'m #'m #'m
Reconciliation of operating profit to operating cash flow
Group operating profit 27.0 20.4 44.7
Amortisation of goodwill 11.7 10.8 22.4
Depreciation charges 10.6 10.8 21.6
Loss on disposal of tangible fixed assets - - 0.7
(Increase)/decrease in debtors (75.6) 33.3 17.9
(Increase)/decrease in work in progress (1.4) (1.1) 0.4
Decrease/(increase) in creditors 65.0 (42.1) 1.6
Net cash flow from operating activities 37.3 32.1 109.3
Subsidiary undertakings acquired in the period contributed #1.2 million to the
Group's net cash flow from operating activities.
Six months Six months Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
Reconciliation of net cash flow to movement in net debt #'m #'m #'m
(Decrease)/increase in cash in the period (29.5) 56.3 90.0
Cash inflow from increase in debt (5.2) (91.4) (95.2)
Cash inflow from decrease in liquid resources - (1.9) (2.1)
Cash outflow from finance lease payments 0.3 0.4 0.4
Cash outflow from issue costs of debt - 2.7 2.6
Change in net debt resulting from cash flows (34.4) (33.9) (4.3)
Amortisation of refinancing costs (0.5) (0.3) (0.7)
Other non cash changes (1.0) - (1.2)
Effect of foreign exchange rate changes 1.0 8.9 11.9
Movement in net debt in the period (34.9) (25.3) 5.7
Net debt at 1 January (120.3) (126.0) (126.0)
Net debt at period end (155.2) (151.3) (120.3)
Other Exchange
non-cash
1 January Cash flow changes movement 30 June
2003 2003
Analysis of net debt #'m #'m #'m #'m #'m
Cash at bank and in hand 122.2 (50.0) - 5.2 77.4
Overdrafts (28.2) 20.5 - 0.6 (7.1)
94.0 (29.5) - 5.8 70.3
Debt due within one year (3.8) (8.7) - 0.1 (12.4)
Debt due after more than one year (212.5) 3.5 (1.0) (4.9) (214.9)
Net debt before finance lease (122.3) (34.7) (1.0) 1.0 (157.0)
obligations
Finance lease obligations (1.1) 0.3 - - (0.8)
Issue costs of debt 3.1 - (0.5) - 2.6
Total (120.3) (34.4) (1.5) 1.0 (155.2)
There were bank loans and overdrafts of #3.3 million within subsidiaries
acquired in the period.
Notes to the unaudited interim statement
for the six months ended 30 June 2003
1. Accounting policies
Except as noted below, the consolidated interim statement for the six months
ended 30 June 2003 has been prepared applying the accounting policies set out in
the Group's 31 December 2002 report and accounts. These statements are
unaudited but have been reviewed by the auditors and their report is set out on
page 22.
Change in accounting policy
From 1 January 2003 the Group has changed its accounting policy in respect of
goodwill. In order to better reflect the circumstances of the Group, goodwill
is now treated as a local currency asset and is therefore retranslated on
consolidation at the exchange rate prevailing at each balance sheet date. This
accounting policy is considered to be more appropriate for the circumstances of
the Group. The effect of this change in accounting policy is to increase
goodwill amortisation by #0.1 million in the six months to 30 June 2003, by #0.3
million in the six months ended 30 June 2002 and by #1.0 million in the year
ended 31 December 2002. In addition, this change in accounting policy has
increased goodwill by #16.9 million at 30 June 2002 and reduced goodwill by #4.9
million at 31 December 2002. Comparative period results have been restated to
reflect this change in accounting policy.
2. Segmental reporting
The Group operates in two business sectors: media communications and market
research. An analysis of turnover by geographical area and business sector is
set out below. The analysis by geographical area and business sector reflect
the regions by which the Group is managed. Comparative figures have been
restated on a similar basis.
Six months Six months Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
#'m #'m #'m
Europe 2,353.0 2,144.8 4,231.1
Americas 938.3 841.5 1,752.5
Asia Pacific 173.2 124.3 250.2
Total turnover 3,464.5 3,110.6 6,233.8
Media communications 3,371.0 3,021.4 6,031.2
Market research 93.5 89.2 202.6
Total turnover 3,464.5 3,110.6 6,233.8
There is no material difference between turnover determined by origin and that
determined by destination.
Notes to the unaudited interim statement
for the six months ended 30 June 2003
2. Segmental reporting (continued)
An analysis of operating profit by geographical area and business sector is set
out below:
As restated As restated
(note 1) (note 1)
Six months Six months Six months Six months Year ended
ended ended ended ended 31 December
30 June 2003 30 June 2003 30 June 2003 30 June 2002
2002
Underlying Exceptional Total Total Total
items
#'m #'m #'m #'m #'m
Europe 28.2 - 28.2 24.4 54.5
Americas 3.8 5.2 9.0 5.1 8.5
Asia Pacific 1.5 - 1.5 1.7 4.1
Total operating profit (before goodwill 33.5 5.2 38.7 31.2 67.1
amortisation)
Media communications 31.1 5.2 36.3 27.6 55.0
Market research 2.4 - 2.4 3.6 12.1
Total operating profit (before goodwill 33.5 5.2 38.7 31.2 67.1
amortisation)
Group share of operating loss in associated
undertakings
(0.5) - (0.5) (2.3) (4.8)
Amounts written-off investments - (2.0) (2.0) - -
Net interest payable (2.1) (1.4) (4.4)
Profit on ordinary activities before 34.1 27.5 57.9
taxation and goodwill amortisation
Goodwill amortisation (20.7) (10.8) (23.2)
Profit on ordinary activities before 13.4 16.7 34.7
taxation
3. Exceptional items
Six months ended 30 June 2003:
The following exceptional items are included in the Group's results for the six
months ended 30 June 2003:
a. In the year to 31 December 2002, the Group made a provision for an adverse
legal judgement relating to court action brought by Independent Media
Services Inc. In the six months to 30 June 2003, the Group reached
agreement to purchase the business of Independent Media Services Inc. As a
result, the provision of #5.2 million has been released.
b. During the period, the Group has written down the value of its investment in
Newworld IQ. This has resulted in an additional goodwill charge of #8.9
million. In addition, loans made to Newworld IQ have been written off,
resulting in an exceptional charge of #2.0 million.
In total, these exceptional items give rise to corporation tax debit of #0.3
million in the period.
Notes to the unaudited interim statement
for the six months ended 30 June 2003
Six months ended 30 June 2002:
The following exceptional items are included in the Group's results for the six
months ended 30 June 2002:
a. In 2001, the Group initiated a restructuring programme resulting in
significant costs arising in the second half of the year. This restructing
continued into 2002 resulting in further costs, principally severance, of
#2.5 million.
b. In 2001, the Group established a provision to cover potential bad debts in
Argentina. #1.7 million of this provision was no longer required and was
therefore written back through the profit and loss account in the six months
to 30 June 2002.
c. In addition, the Group established a provision of #1.7 million to reduce the
carrying value of its investment in eVerger. This provision represents
eVerger's write down to net realisable value of one of its underlying
investments.
In total, these exceptional items gave rise to a corporation tax credit of #0.9
million and a cash outflow of #2.5 million.
Year ended 31 December 2002:
The following exceptional items are included in the Group's results for the year
ended 31 December 2002:
a. In 2001, the Group initiated a restructuring programme resulting in
significant costs arising in the second half of the year. This
restructuring continued in 2002 resulting in a further exceptional
reorganisation charge of #7.2 million relating to severance (#6.2 million)
and property vacation costs (#1.0 million).
b. The Group provided in full for the adverse judgement in legal action brought
by Independent Media Services Inc. The total cost of #6.5 million
represented a #5.2 million provision in respect of the judgement and #1.3
million of legal costs.
c. In 2001, the Group created a provision to cover potential bad debts in
Argentina. #4.2 million of this provision was no longer required and was
written back through the profit and loss account in 2002.
d. During the year the Group created a further #4.0 million provision to reduce
the carrying value of its investment in eVerger. This provision was
required to write down the net realisable value of two of its underlying
investments.
In total, these exceptional items gave rise to a corporation tax credit of #1.7
million and a cash outflow of #6.4 million in the year.
4. Interest payable and similar charges
Six months Six months Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
#'m #'m #'m
Interest payable:
On bank loans and overdrafts 0.5 0.4 0.7
On other loans 0.4 3.4 7.9
Interest payable under finance lease and hire purchase contracts - 0.1 0.1
Other charges 4.0 0.4 2.1
4.9 4.3 10.8
Amortisation of refinancing costs 0.5 0.3 0.7
5.4 4.6 11.5
Notes to the unaudited interim statement
for the six months ended 30 June 2003
5. Tax on profit on ordinary activities
The tax charge of #9.6 million for the six months ended 30 June 2003 is based on
the estimated effective rate for the full year of 30.2% applied to underlying
profits before amortisation of goodwill and exceptional items (note 3) (six
months ended 30 June 2002: 31.0% and year ended 31 December 2002: 30.6%).
6. Dividends
Six months Six months Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
Ordinary shares of 5p each
Dividend rate per share 0.52p 0.50p 1.25p
Dividend for ordinary shares #5.8m #5.5m #14.0m
The interim dividend will be paid on 3 October 2003 to all ordinary shareholders
on the register at 19 September 2003.
7. Earnings per ordinary share
As restated As restated
(note 1) (note 1)
Six months Six months Year ended
ended ended 31 December
30 June 2003 30 June 2002 2002
Earnings per ordinary share is calculated as follows:
Basic
Profit for the period #3.0m #7.6m #13.1m
Underlying profit for the period #20.8m #20.0m #48.1m
Weighted average number of ordinary shares in issue 1,105.0m 1,102.9m 1,103.6m
Basic earnings per share 0.3p 0.7p 1.2p
Underlying basic earnings per share 1.9p 1.8p 4.4p
Diluted
Profit for the period #3.0m #7.6m #13.1m
Underlying profit for the period #20.8m #20.0m #48.1m
Weighted average number of dilutive securities: options 1.5m 6.5m 3.5m
Weighted average number of ordinary shares in issue and the weighted 1,106.5m
average number of dilutive securities 1,109.4m 1,107.1m
Diluted earnings per share 0.3p 0.7p 1.2p
Underlying diluted earnings per share 1.9p 1.8p 4.3p
The calculation of basic and diluted earnings per share is based on profit after
tax and minority interests.
At 30 June 2003, there were 1,106.0 million (30 June 2002: 1,104.1 million; 31
December 2002: 1,104.5 million) ordinary shares in issue and 113.5 million (30
June 2002: 105.2 million; 31 December 2002: 98.3 million) options outstanding.
The total proceeds that would be received on exercise of the outstanding options
at 30 June 2003 was #126.4 million (30 June 2002: #121.8 million; 31 December
2002: #114.2 million).
Underlying profits are calculated by adding back amortisation of goodwill of
#20.7 million for the six months ended 30 June 2003 (six months ended 30 June
2002: #10.8 million; year ended 31 December 2002: #23.2 million). In addition,
an exceptional credit of #2.9 million (net of tax) has been added back to
calculate underlying profits for the six months ended 30 June 2003 (six months
ended 30 June 2002: #1.6 million debit; year ended 31 December 2002: #11.8
million debit).
Notes to the unaudited interim statement
for the six months ended 30 June 2003
8. Goodwill on acquisitions
During the period, the Group acquired subsidiaries (all acquisition accounted
for) as detailed below:
Company Country of Incorporation % Acquired Date of Acquisition
(Total Group Holding)
Archi d'Alembert France 100% April 2003
Carat China China 25% (75%) March 2003
Carat Indonesia Indonesia 75% January 2003
Carat Russ Media Russia 17% (95%) March 2003
Carat SPI Japan 25% (100%) February 2003
Freestyle US 100% May 2003
IMS US 100% April 2003
Institutionelle Voyages France 100% January 2003
Viewscast UK 59.67% (100%) March 2003
Initial consideration totalled #18.2 million with contingent deferred
consideration of #0.9 million payable between 2004 and
2005, subject to performance criteria. A summary of the net assets acquired and
goodwill arising is given below.
Net assets/(liabilities) acquired: Book value Fair value Fair value of
acquired adjustments net assets/
(liabilities)
#'m #'m
Fixed assets 0.6 - 0.6
Debtors 10.1 - 10.1
Cash at bank and in hand 5.4 - 5.4
Creditors (14.7) (0.2) (a) (14.9)
1.4 (0.2) 1.2
Goodwill capitalised in the period 18.5
Consideration 19.7
Satisfied by:
Initial consideration 18.2
Direct costs of acquisition 0.6
Deferred consideration (note 10) 0.9
19.7
Provisional adjustments have been made as follows:
(a) Provision has been made to accrue for pre-acquisition
related liabilities.
Notes to the unaudited interim statement
for the six months ended 30 June 2003
9. Reserves
Capital
Note Share Share Redemption Profit &
premium
capital account reserve loss
account
#'m #'m #'m #'m
At 1 January 2003 as previously reported 55.2 199.8 0.2 (137.1)
Prior year adjustment 1 - - - (4.9)
At 1 January 2003 as restated 55.2 199.8 0.2 (142.0)
Retained loss for the financial period - - - (2.8)
Issue of shares by the Company 0.1 0.9 - -
Currency translation differences on foreign currency net - - - (4.0)
investments
At 30 June 2003 55.3 200.7 0.2 (148.8)
Goodwill arising on acquisitions up to 31 December 1997 of #563.9 million, which
has been written off immediately to reserves, is included within the Profit and
Loss account reserve at 30 June 2003.
Prior year adjustment
The prior year adjustment relates to a change in the Group's accounting policy
in respect of goodwill as detailed in note 1.
10. Contingent liabilities
Deferred consideration
Deferred consideration, which has been provided for in creditors, may be paid to
the vendors of certain subsidiary undertakings in the years to 2005. Such
payments are either fixed under the terms of the acquisition or are contingent
on future financial performance. The directors estimate that, at the rates of
exchange ruling at the balance sheet date, the liability for payments that may
be due is as follows:
30 June 2003 30 June 2002 31 Dec 2002
#'m #'m #'m
Within one year 19.9 35.6 33.0
Between one and two years 11.2 7.7 12.6
Between two and five years - 6.7 10.2
31.1 50.0 55.8
All of the contingent payments noted above are dischargeable in cash except for
#0.7 million, which is payable in shares or loan notes at the option of the
Group. The minimum liability is #2.8 million and the maximum potential liability
is #93.4 million.
11. Companies Act 1985, section 240
Copies of the interim statement for the six months ended 30 June 2003 are being
sent to all shareholders and are also available from the Company's registered
office.
Aegis Group plc is registered in England and Wales, Number 1403668. Its
registered office is at 43-45 Portman Square, London W1H 6LY.
Independent review report to Aegis Group plc
for the six months ended 30 June 2003
Introduction
We have been instructed by the company to review the financial information which
comprises the consolidated profit and loss account, the consolidated balance
sheet, the consolidated cash flow statement, the consolidated statement of total
recognised gains and losses and the related notes. We have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
the Listing Rules of the Financial Services Authority and for no other purpose.
We do not, in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
PricewaterhouseCoopers LLP
Chartered Accountants
London
9 September 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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