Aegis Group plc 2010 Full Year Results 2010 Full Year Results 17 March 2011
Agenda Introduction John Napier, Chairman Aegis Group overview Jerry Buhlmann, CEO Divisional review Aegis Media - Jerry Buhlmann, CEO Synovate Robert Philpott, CEO Synovate Financial Review Nick Priday, CFO Strategic update, summary & outlook Jerry Buhlmann, CEO Questions & Answers Aegis Group plc Page 2
Aegis Group Overview Jerry Buhlmann Jerry Buhlmann CEO
Aegis Group 2010 financial highlights Revenue of 1,459.4m - up 6.4% Organic revenue growth of 5.8% Operating profit of 192.2m - up 12.3% Operating margin to 13.2% - up 70 bps Underlying diluted earnings per share 10.1p up 4.1% Total dividend per share of 2.75p up 10% Aegis Group plc Page 4
Aegis Group 2010 overview Re-focused strategic approach & strengthened management teams at both businesses: Aegis Media outperformed the advertising market Synovate performance towards the top of its peer group Excellent performances in North America and faster-growing regions Strengthened financial position enabled re-focus on acquisitions Continued strong momentum at both businesses going into 2011 Aegis Group plc Page 5
Aegis Group Good performances from both businesses m 2010 2009 Change, % Constant currency change, % Revenue 886.8 825.2 7.5 6.8 Organic revenue change 5.7% (9.7)% Operating profit 164.7 150.4 9.5 9.9 Operating margin 18.6% 18.2% 40bps 60bps m 2010 2009 Change, % Constant currency change, % Gross revenue 572.6 521.3 9.8 5.7 Organic gross revenue change 5.9% (9.6)% Net revenue 350.7 321.8 9.0 5.3 Operating profit 45.6 36.9 23.6 19.4 Operating margin 8.0% 7.1% 90bps 90bps Aegis Group plc Page 6
Divisional Review Aegis Media Jerry Buhlmann Jerry Buhlmann CEO
Aegis Media 2010 results summary m 2010 2009 Change, % Constant currency change, % Revenue 886.8 825.2 7.5 6.8 Organic revenue change 5.7% (9.7)% Operating profit 164.7 150.4 9.5 9.9 Operating margin 18.6% 18.2% 40bps 60bps Strong global new business performance of $2.0 billion in billings (2009: $2.7 billion) - momentum carried into 2011 Excellent performances from businesses in North America and faster-growing regions Power Brand strategy implemented across the global network - further strengthened through Mitchell acquisition and Charm partnership 32% of revenue from digital (2009: 31%) Aegis Group plc Page 8
Aegis Media Quarterly performance Change % Q110 Q210 Q310 Q410 Organic revenue 3.0 3.6 8.5 7.4 H110 H210 FY10 3.4 7.8 5.7 As anticipated, continuing trend of improvement in H2 supported strong organic growth performance in 2010 Organic growth rate doubled in H2 from H1 Strong organic growth performance in both Q3 and Q4 Aegis Group plc Page 9
Aegis Media 2010 new business review: $2.0 billion in billings Geographic contribution to new business: 2007 2010 2007-2009 2010 Europe Americas APAC Aegis Group plc Page 10
Aegis Media 2010 geographic performance review Revenue ( m) 2010 2009 Change, % Constant currency change, % EMEA 579.7 585.3 (1.0) 0.4 Americas 189.4 158.6 19.4 14.5 Asia Pacific 117.7 81.3 44.8 34.4 Some strong performances across Europe, but Western European markets remain patchy Good performances across the Middle East and Africa Steady progress made in the Americas Significant operational momentum achieved in Asia Pacific Mitchell acquisition and Charm partnership strengthens position in Asia Pacific Aegis Group plc Page 11
Aegis Media Summary Strong results, supported by excellent new business performance Strengthened management team and new strategic focus Excellent performances from North America and faster-growing regions Geographic profile strengthened through acquisitions in Asia Pacific Outperformed advertising sector growth in 2010 Increasingly optimistic about the outlook for Aegis Media Aegis Group plc Page 12
Divisional Review Synovate Robert Philpott Robert Philpott CEO, Synovate
Synovate 2010 results summary m 2010 2009 Change, % Constant currency change, % Gross revenue 572.6 521.3 9.8 5.7 Organic gross revenue change 5.9% (9.6)% Net revenue 350.7 321.8 9.0 5.3 Operating profit 45.6 36.9 23.6 19.4 Operating margin 8.0% 7.1% 90bps 90bps Excellent performance in 2010 with substantial growth in revenue and profitability Sales increased 6.7%, gross organic revenue growth up 5.9% Continued management discipline on overheads underpinning the growth Strong profit performance - up 19.4% Contribution to performance from vast majority of business units across the Synovate global network Aegis Group plc Page 14
Synovate Revenue performance Change % Q110 Q210 Q310 Q410 Organic gross revenue (1.9) 6.5 11.5 6.3 H1 10 H2 10 FY10 2.8 8.4 5.9 Excellent organic growth performance in H2, well ahead of industry growth Healthy orders on hand position increased 8.8% at end of 2010 Aegis Group plc Page 15
Synovate Geographic performance review Gross revenue ( m) 2010 2009 Change, % Constant currency change, % EMEA 239.2 234.4 2.0 0.6 Americas 175.4 151.1 16.1 13.1 Asia Pacific 158.0 135.8 16.3 6.1 North America delivered an exceptional performance, driven forward by global clients reinstating major programmes Growth in Western Europe remained inconsistent but profitability improved significantly Solid performances across faster-growing regions, particularly in Asia Pacific FMCG was the strongest performing sector Aegis Group plc Page 16
Synovate Summary Excellent 2010 results reinforced by a focus on driving profitable sales and improving efficiencies Synovate out-performed industry growth in 2010 Management confidence to re-invest in the business through acquisitions, including COMCON which transforms our position in Russia Re-focused strategy being implemented in 2011 Expected 4% industry growth in 2011 but increasingly optimistic about the outlook for Synovate to again outpace the market Aegis Group plc Page 17
Financial Review Nick Priday Nick Priday CFO
Income Statement Underlying m 2010 2009 Change, % Constant currency change, % Revenue 1,459.4 1,346.5 8.4 6.4 Gross profit 1,237.5 1,147.0 7.9 6.4 Overheads (1,045.3) (976.7) (7.0) (5.3) Operating profit 192.2 170.3 12.9 12.3 Associates 4.0 (0.3) Profit before interest and tax 196.2 170.0 15.4 14.5 Net interest (33.8) (19.6) Profit before tax 162.4 150.4 8.0 7.0 Operating margin 13.2% 12.6% 60bps 70bps Aegis Group plc Page 19
Net interest 19.6m 4.4m 4.7m 1.2m 2.6m 1.3m 33.8m 2009 Private placement Convertible bond Increase in avg net debt Other interest rate effects Other items 2010 Aegis Group plc Page 20
Eps and dividend 2010 2009 Underlying diluted earnings per share 10.1p 9.6p Total dividend per share 2.75p 2.50p Dividend payout ratio 27.2% 26.0% Dividend cover (underlying) 3.7x 3.8x Aegis Group plc Page 21
Operating profit Reconciliation to statutory m 2010 2009 Change % Underlying operating profit 192.2 170.3 12.9 Adjusting items: Restructuring costs - (30.5) Amortisation of purchased intangible assets (26.5) (24.2) Disposals of subsidiaries (13.9) (1.0) Acquisition costs (4.5) - Exceptional debtor impairment (37.0) - UK property move costs (8.8) - Statutory operating profit 101.5 114.6 (11.4) Aegis Group plc Page 22
Balance Sheet m 2010 2009 Change % Goodwill 1,331.1 1,010.9 31.7 Intangible assets 112.5 85.5 31.6 Property, plant and equipment 61.9 59.9 3.3 Investments in associates & joint ventures 48.5 3.3 1,469.7 Other non-current assets 74.1 41.1 80.3 Net payables (441.0) (309.3) (42.6) Net debt (331.3) (257.2) (28.8) Earn-out liabilities (63.7) (70.2) 9.3 Liabilities in respect of put options (34.5) (31.4) 9.9 Other (89.2) (88.1) 1.2 Net assets 668.4 444.5 50.4 Aegis Group plc Page 23
Cash flow statement Underlying m 2010 2009 Operating profit 192.2 170.3 Depreciation and amortisation 31.6 32.1 Net interest paid (26.6) (18.7) Tax paid (47.6) (34.2) Share-based incentives and other non-cash movements 8.2 8.2 Net cash generated 157.8 157.7 Aegis Group plc Page 24
Cash flow statement Uses of cash flow m 2010 2009 Net cash generated 157.8 157.7 Net capital expenditure (28.1) (26.0) Acquisitions initial cash (117.8) (12.6) Acquisitions earnout payments (38.8) (60.9) Net cash after capex and acquisitions (26.9) (58.2) Net change in borrowings 70.6 (23.2) Purchase of own shares (16.8) - Dividends paid (29.4) (28.5) Other movements 0.6 (2.1) Net cash before net working capital movements 1.9 4.4 Underlying working capital inflows 18.2 27.0 Underlying cash flow 16.3 31.4 Aegis Group plc Page 25
Net debt & funding profile m 31 Dec 2010 30 June 2010 31 Dec 2009 Gross debt including overdrafts (725.7) (731.7) (648.3) Cash 394.4 333.3 391.1 Net debt (331.3) (398.4) (257.2) Convertible Bond launched in March, raising 190.6m - due in April 2015, with a coupon of 2.5% Revolving credit facility re-financed in July, with tenure lengthened until 2015 Aegis Group plc Page 26
Renewed focus on acquisitions Looking for potential acquisitions that provide: Scale In-fill Innovation Targeting bolt-ons small, medium and relatively large Focus on faster-growing regions, digital, as well as media & research in-fill targets Acquisitions subject to criteria Integration of Mitchell progressing well expected to be earnings accretive in 2011 by low to mid single digits Aegis Group plc Page 27
Strategic update, summary & outlook Jerry Buhlmann Jerry Buhlmann CEO
Increasing exposure to faster-growing regions across the Group Aegis Group revenue breakdown: 2005-2010 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 18% 20% 22% 26% 31% 33% 28% 26% 24% 20% 19% 20% 54% 54% 54% 54% 50% 47% 2005 2006 2007 2008 2009 2010 Faster Growing Regions North America Western Europe Faster-growing regions comprise Latin America, Central and Eastern Europe, Asia Pacific, the Middle East and Africa 2009 numbers reported on a constant currency basis
Re-focused strategic approach at Aegis Media re-defining media start from a different place putting people and brands together like never before performance marketing specialists out of home market leaders
Strategic priorities at Aegis Media Increase exposure to faster-growing regions Ensure full service of digital and media propositions across brands Develop international clients and target profitable new business Increase digital profile and capability Build on leading positions in top 20 markets, especially the US Broaden service offering across existing and new clients Aegis Group plc Page 31
Increasing exposure to digital at Aegis Media Aegis Media revenue breakdown: 2005-2010 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 74% 71% 69% 68% 80% 86% 26% 29% 31% 32% 20% 14% 2005 2006 2007 2008 2009 2010 Traditional Digital
Re-focused strategic approach at Synovate Increasing traction and building momentum with key global clients Providing competitive differentiation through operational excellence Prioritising investment in key gateway markets for international research. These would include US, UK, Germany, Gt. China, India & Russia Expanding existing capabilities in key industrial verticals and research methodologies across all of our geographies Securing Synovate s position as a leader in the custom research industry. Aegis Group plc Page 33
Advertising sector outlook increasingly optimistic Updated Carat adspend forecasts published today Year on year growth at current prices (%) Year 2010 2011 2012 actuals forecast forecast Global 5.4 (3.9) 5.7 (4.7) 6.2 USA 3.0 (1.1) 3.7 (1.7) 5.9 Western Europe 3.9 (1.3) 3.5 (2.7) 3.3 Central & Eastern Europe 7.4 (5.0) 9.5 (10.2) 11.9 Asia Pacific 7.7 (8.2) 8.0 (7.6) 7.0 Latin America 12.3 (11.2) 13.0 (14.0) 12.9 Figures in brackets show previous Carat forecasts from August 2010 Source: Carat ad spend forecasts, March 2011 Aegis Group plc Page 34
2011 Outlook Momentum achieved at Aegis Media and Synovate in 2010 continues this year Clients current indicated budgets for 2011 suggest positive year-onyear trend 2011 Group organic revenue growth to be at least in line with last year Underlying operating profit expected to improve further in 2011 Aegis Group plc Page 35
Aegis 2010 results Summary Re-focused strategic approach at both businesses Aegis Media outperformed the advertising market Synovate performance towards the top of its peer group Excellent performances in North America and faster-growing regions Strengthened geographic profile, supported by targeted acquisitions Strong momentum at both businesses going into 2011 Aegis Group plc Page 36
Q & A
Appendices
Maturity profile m Debt term 2011 (H2) 51.4 2012 125.5 2014 48.1 2015 242.6 2017 110.3 2019 105.8 683.8 Overdrafts and short-term loans 41.9 725.7 Aegis Group plc Page 39
Covenant position 31 Dec 2010 30 June 2010 31 Dec 2009 Covenants - Net debt / EBITDA (<3 times) 1.5 1.9 1.2 - EBITDA / net interest (>4 times) 8.2 8.9 10.8 - EBITDA / gross interest (>4 times) n/a 6.9 6.0 RCF drawn ( m) - - 113.6 RCF availability ( m) 450.0 450.0 336.4 Total central facility headroom ( m) 450.0 450.0 376.4 Aegis Group plc Page 40
Currency impact Exchange rates / Change % /$ Change % 2010 average 1.1663-3.7 1.5457 1.3 2010 period end 1.1665-3.4 1.5591 3.6 Revenue by currency % $ Other 2010 27.2 19.3 13.3 40.2 Aegis Group plc Page 41
Cash flow statement Underlying m 2010 2009 Operating profit 192.2 170.3 Depreciation, amortisation and impairment 31.6 32.1 Other non-cash movements 8.2 8.2 Net movement in working capital 18.2 27.0 Operating cash flow 250.2 237.6 Tax paid (47.6) (34.2) Net interest paid (26.6) (18.7) Dividends paid to equity holders (29.4) (28.5) Other activities (16.2) (2.1) Cash flow before acquisitions and capex 130.4 154.1 Net spend on acquisitions/disposals (156.6) (73.5) Net capital expenditure (28.1) (26.0) Net cash before movement in borrowings (54.3) 54.6 Net movements on borrowings 70.6 (23.2) Net cash movement 16.3 31.4 Aegis Group plc Page 42
Reconciliation of Mitchell revenue 2009 & H1 2010 For 12 months ending 31 Dec 2009 ( m) As per scheme booklet Aligned presentation* Revenue 119.8 56.3 Gross profit 56.3 56.3 Operating profit 14.6 14.6 Profit before tax 14.0 14.0 Profit after tax 9.9 9.9 * At average exchange rate of A$1.9814: 1 For 6 months ending 30 June 2010 ( m) As per scheme booklet Aligned presentation** Revenue 81.1 36.7 Gross profit 36.7 36.7 Operating profit 9.9 9.9 Profit before tax 9.3 9.3 Profit after tax 6.5 6.5 ** At average exchange rate of A$1.7082: 1 Aegis Group plc Page 43