AEGIS GROUP PLC
2008 ANNUAL RESULTS
19 March 2009
AGENDA
OVERVIEW OF RESULTSJohn Napier
FINANCIAL REVIEW Alicja LesniakAlicja Lesniak
OUTLOOKJohn Napier
Q&A
Aegis Group plc | Page 2
OVERVIEW OF RESULTS
John Napier,
chairman and interim CEO
PRIORITIES
Review of operating performance
• Two well-managed businesses, history of strong growth
• Some commitment to cost ahead of secured revenue
• Keynesian ‘stickiness’ of variable wage and performance pay• Keynesian ‘stickiness’ of variable wage and performance pay
Response to changing market conditions
Investment in services to meet client needs
Reporting, treasury and cash management
Aegis Group plc | Page 4
FinancialHIGHLIGHTS
£m 2008 2007 Change, %
Constant currency
change, %
Revenue 1,342.0 1,106.4 21.3 10.1
Organic revenue growth (%) 4.6 9.8
Operating profit 185.4 146.2 26.8 10.7Operating profit 185.4 146.2 26.8 10.7
Profit before interest and tax 188.1 149.4 25.9 10.1
Profit before tax 166.8 132.7 25.7 9.3
Earnings per share 10.3p 8.2p 25.6 9.6
Dividends 2.50p 2.30p 8.7
Aegis Group plc| Page 5
AdditionalFACTORS
Currency strongly positive
Improved gross-to-net conversion in Synovate
54% of constant currency growth from acquisitions; 20 acquisitions in the yearthe year
Geographic split consistent with prior year
Aegis Group plc | Page 6
£m 2008 2007 Change, %
Constant currency
change, %
EMEA 588.1 471.1 24.8 11.5
Americas 167.3 153.7 8.8 0.2
Asia-Pacific 68.4 48.6 40.7 26.0
Aegis MediaRESULTS
Worldwide 823.8 673.4 22.3 10.0
Operating profit 157.9 134.4 17.5 3.0
Operating margin 19.2% 20.0%
Aegis Group plc| Page 7
• Good growth, organic revenue growth of 6.1%
• Acquisition contribution
• Digital 29% of revenue
• Impact of Carat US
• Higher central costs, since addressed
£m 2008 2007 Change, %
Constant currency
change, %
Revenue 588.1 471.1 24.8 11.5
Aegis Media EMEA
• Currency factors, particularly Euro strength
Aegis Group plc| Page 8
• Currency factors, particularly Euro strength
• Excellent UK result despite tough trading in out-of-home
• Good organic growth across Eastern Europe and Russia
• France and Germany strong relative to market
• Continued progress in Nordics
• Weaker conditions in Spain and Italy
£m 2008 2007 Change, %
Constant currency
change, %
Revenue 167.3 153.7 8.8 0.2
Aegis MediaAMERICAS
• Impact of Carat US client churn
Aegis Group plc| Page 9
• Action to address resource levels
• New Carat US president
• Positive new business and new hires
• Other businesses performing well
• US remains a key market
£m 2008 2007 Change, %
Constant currency
change, %
Revenue 68.4 48.6 40.7 26.0
Aegis MediaASIA-PACIFIC
• Excellent growth in revenue and operating profit
•
Aegis Group plc| Page 10
• Results driven by China, Taiwan and Australia
• Further business development in Hong Kong and Singapore
• Steady growth in India, Malaysia and Thailand
• Some specialist agency issues in Japan and Korea
• Good overall progress
• Performance step-up demonstrating market potential
Aegis MediaSUMMARY
Good performance in a changing year
Strategy to take advantage of geographic footprint
Maintain and develop in EMEA
Fix Carat USFix Carat US
Prioritise Asia-Pacific
Aegis Group plc | Page 11
Aegis MediaSUMMARY
Continued development and innovation in digital; largest network in the world
Growth strategy supported by combination of organic development and acquisitions
Effective balance of local and global strengths
Excellent new business start to 2009
Aegis Group plc | Page 12
£m 2008 2007 Change, %
Constantcurrency
change, %
EMEA 248.4 206.4 20.3 11.2
Americas 145.2 132.5 9.6 1.4
Asia-Pacific 124.6 94.1 32.4 20.7
Worldwide gross revenue 518.2 433.0 19.7 10.3
SynovateRESULTS
Worldwide gross revenue 518.2 433.0 19.7 10.3
Net revenue 329.2 273.2 20.5 11.3
Operating profit 42.2 34.9 20.9 13.1
Operating margin 8.1% 8.1%
Aegis Group plc| Page 13
• Further growth in revenue and operating profit
• Better gross-to-net conversion in US
• Net revenue a key indicator of performance
• Organic net revenue growth of 5.1%; benefit of acquisitions
• Continued investment in efficiency and service initiatives
• Programme to address resource expansion
£m 2008 2007 Change, %
Constantcurrency
change, %
Gross revenue 248.4 206.4 20.3 11.2
Net revenue 147.6 124.2 18.8 10.1
SynovateEMEA
•
Aegis Group plc| Page 14
• Good growth
• Russia and Africa the strongest markets, followed by Middle East
• Germany and Scandinavia more challenging
• Performance improvements in France and Spain
• UK integration complete; good business wins offset disruption
£m 2008 2007 Change, %
Constantcurrency
change, %
Gross revenue 145.2 132.5 9.6 1.4
Net revenue 100.5 83.2 20.8 11.7
SynovateAMERICAS
• Net revenue up strongly: offshoring benefits, offsetting weaker US
Aegis Group plc| Page 15
• Net revenue up strongly: offshoring benefits, offsetting weaker US market
• Significant growth in US operating profit
• Strong organic growth in Latin America
£m 2008 2007 Change, %
Constantcurrency
change, %
Gross revenue 124.6 94.1 32.4 20.7
Net revenue 81.1 65.8 23.3 12.8
SynovateASIA-PACIFIC
• Strongest regional growth in revenue and profit
Aegis Group plc| Page 16
• Strongest regional growth in revenue and profit
• Strong result in Japan after 2007 reorganisation
• Good growth in Australia
• South Asia solid throughout; particularly India and Singapore
• Innovation in products and data collection
• Data efficiencies offsetting China earthquake and Olympics disruption
Important for sector focus and excellence
Healthcare: slow first half, good second half
• Good profit growth and margin improvement
• Syndicated, Asia and Europe all strong
SynovateVERTICALS
Motor: strong year despite industry challenges
• Benefits from emerging markets and customer satisfaction
Retail data and analytics: further strong growth
• Increased share in established markets
• Investment in product and international expansion
• Entry to UK convenience
Aegis Group plc | Page 17
A good year, continuing to move forward
A new business with a global presence
Responding to challenges of rapid expansion and changing markets
Continued investment in product and services
Synovate
SUMMARY
Continued investment in product and services
Continued focus on operational efficiency, marketing and delivery
Further efficiencies from cost reduction programme
Aegis Group plc | Page 18
CostREDUCTION PROGRAMME
Phase 1 in US completed
Phase 2 set out today
• 780 people in >40 countries
Total cost of £39.4mTotal cost of £39.4m
• £27.4m in 2008 and £12.0m in 2009
• £22.5m in Aegis Media, £14.2m in Synovate, £2.7m in head office
Expected savings of £20m pa
Full-year run-rate from mid-2010
Contingency review of variable costs
Aegis Group plc | Page 19
GroupSUMMARY
Changing market environment
Good revenue and profit performance
Strategic agenda
• Building capability• Building capability
• Improving efficiency
• Meeting clients’ needs
• Acquisitions
Prepared for 2009
Good progress so far; more work to do
Aegis Group plc | Page 20
FINANCIAL REVIEW
Alicja Lesniak
chief financial officer
UnderlyingINCOME STATEMENT
£m 2008 2007 Change, %
Constant currency
change, %
Turnover 10,413.8 9,351.2 11.4 0.3
Revenue 1,342.0 1,106.4 21.3 10.1
Gross profit 1,153.0 946.6 21.8 10.4
Operating profit 185.4 146.2 26.8 10.7
Associates 2.7 3.2 (15.6) (18.2)
Profit before interest and tax 188.1 149.4 25.9 10.1
Net interest (21.3) (16.7) (27.5) (16.9)
Profit before tax 166.8 132.7 25.7 9.3
Aegis Group plc| Page 22
Reconciliation to statutoryPROFIT BEFORE TAX
£m 2008 2007 Change, %
Constant currency
change, %
Underlying profit before tax 166.8 132.7 25.7 9.3
Adjusting items:
Reorganisation costs (27.4) -
Write-off of software (4.4) -
Amortisation ofpurchased intangibles
(17.2) (3.0)
Non-recurring reconciling items - 0.3
IAS 39 adjustments 6.8 1.7
Statutory profit before tax 124.6 131.7 (5.4) (17.7)
Aegis Group plc| Page 23
BALANCE SHEET
£m 2008 2007 Change %
Goodwill 1,114.6 796.6 40.0
Intangible assets 104.9 49.2 113.2
Property, plant and equipment 73.5 53.8 36.6
Other non-current assets 52.7 39.1 34.8
Aegis Group plc | Page 24
Other non-current assets 52.7 39.1 34.8
Net receivables/(payables) (356.9) (168.8) 72.5
Net debt (297.5) (245.2) 21.3
Earn-out liabilities (197.4) (116.7) 69.2
Liabilities in respect of put options (41.3) (22.0) 87.7
Other 7.2 (79.7) (26.3)
Net assets 459.8 306.3 46.1
Euro +23.3% and US dollar +26.6% vs sterling compared to 31 December 2007
NET DEBT
£m 2008 2007
Gross debt including overdrafts 710.2 602.0
Cash 412.7 356.8
Net debt 297.5 245.2
Aegis Group PLC | Page 25
Net debt increase due to FX £69.9m
CASH FLOW
£m 2008 2007
Operating profit 136.4 140.3
Depreciation, amortisation and impairment 51.7 30.5
Other non-cash movements 18.6 10.5
Net movement in working capital 54.9 (6.3)
Operating cash flow 261.6 175.0
Tax paid (46.1) (38.8)
Net interest paid (19.4) (14.7)
Aegis Group plc | Page 26
Dividends paid to equity holders (27.4) (22.7)
Other activities (7.9) 13.7
Cash flow before acquisitions and capex 160.8 112.5
Net spend on acquisitions/disposals (103.3) (124.3)
Net capital expenditure (39.6) (27.2)
Net cash before movement in borrowings 17.9 (39.0)
Net movements on borrowings (22.1) 92.0
Net cash movement (4.2) 53.0
COVENANTS AND HEADROOM
£m 2008 2007
Covenants
Net debt / EBITDA (<3 times) 1.2 1.2
EBITA / gross interest (>4 times) 6.0 6.0
RCF drawn (£m) 277.9 264.4
Aegis Group plc | Page 27
RCF drawn (£m) 277.9 264.4
RCF availability (£m) 172.1 185.6
EPS AND DIVIDEND
Pence 2008 2007 Change, %
Underlying diluted earnings per share 10.3 8.2 25.6
Statutory diluted earnings per share 7.3 7.8 (6.4)
Interim dividend 0.96 0.84 14.3
Final dividend 1.54 1.46 5.6
Aegis Group plc | Page 28
Final dividend 1.54 1.46 5.6
Dividend per share 2.50 2.30 8.7
Dividend cover (underlying) 4.1 3.6 11.1
OUTLOOK
OUTLOOK
Aegis
• Too early for a full-year outlook
Aegis Media
• Record year-to-date new business of over $1bn
• Start 2009 in a good position
Synovate
• Secured net revenue holding up well
• Product launches planned
• Greater importance of second half
Aegis Group plc | Page 30
OUTLOOK
Difficult to forecast market environment
Country by country GDP variations
Future relationship between GDP and media expenditure
Marketing mixMarketing mix
• Brand
• Media reach
• Below-the-line
Well-placed for both traditional and new approaches
Aegis Group plc | Page 31
OUTLOOK
Focusing on what we can control
• Service standards and competitive action
• Cost reduction programme
• Further variable cost flexibility built in
•• Organic investment in services and products
• Acquisition strategy to support growth
Well-positioned for challenging market conditions
Tighter organisation with cost flexibility
Management capability to react to opportunity
Expect a resilient performance in more difficult markets
Aegis Group plc | Page 32
Q & A
APPENDIX
Aegis Group PLC | Page 34
CURRENCY IMPACT
Exchange rates£/€ Change % £/$ Change %
2008 average 1.2574 14.0 1.8519 7.5
2008 y/e 1.0442 23.3 1.4754 26.6
Aegis Group plc| Page 35
% € $ £ Other
2008 32.3 26.0 15.1 26.6
Revenue by currency
TAX
£m 2008 2007 Change, %
Constant currency
change, %
Underlying PBT 166.8 132.7 25.7 9.3
Underlying tax charge 43.1 35.2 22.4 6.4
Effective tax rate 25.8 26.5 (70)bps
Aegis Group plc| Page 36
Effective tax rate 25.8 26.5 (70)bps
Effective statutory tax rate on statutory profits: 28.4% (2007: 29.2%)
MATURITY PROFILE
£m Principal
Debt due after 1 year
2009 -
2010 28.4
2011 308.6
Aegis Group plc | Page 37
2012 109.1
2014 51.5
2015 81.1
2017 78.9
657.6
Overdrafts and rollable short-term loans 52.6
710.2
As at 31 December 2008
ACQUISITIONS
£m 2008 2007
Initial consideration on acquisitions 61.4 79.8
Deferred consideration on prior year acquisitions 47.8 48.3
Other non-cash consideration 0.0 4.7
Total consideration paid in period 109.2 132.8Total consideration paid in period 109.2 132.8
Future estimated deferred consideration on current period acquisitions 79.3 48.8
Aegis Group plc | Page 38
* Cash consideration is before cash acquired