Aegis Group plc - Media Digital Communications | Dentsu ... /media/Files/A/Aegis-Group-Plc/reports-and...Outcome Aegis strategy model – delivering on the opportunity Aegis Group

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  • Aegis Group plc

    Jerry Buhlmann, CEO

    Opportunity in a two speed world

    24 April 2012

  • Agenda

    An evolving market

    Market opportunities

    Our vision, strategy and operating model

    Delivering on our strategy

    Acquisitions support our strategy

    Q&A

    Aegis Group plc | Page 2

  • A two speed world

    Ad-spend forecast year-on-year growth 2012

    10.7%

    9.5%

    1.5%

    14.7%

    5.0%

    Source: Aegis Media estimates

  • Emerging markets will continue to drive growth

    However, North America will remain the worlds largest ad market

    Source: Aegis Media

  • GDP vs. ad-spend growth in 2011

    De-coupling effect in faster-growing regions

    Source: Aegis Media estimates

  • Global internet & mobile advertising spend

    Share of digital spend will continue to grow

    0.0%

    5.0%

    10.0%

    15.0%

    20.0%

    25.0%

    0

    20000

    40000

    60000

    80000

    100000

    120000

    140000

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

    % o

    f gl

    ob

    al a

    d s

    pe

    nd

    Ad

    vert

    isin

    g sp

    en

    d ($

    m)

    Paid Search Online Display Online Video Global Internet as % of total global advertising

    Source: Aegis Media estimates

  • CONVERGENCE EVERYTHING INTERCONNECTED

    INTERDEPENDENT AND TRANSPARENT

  • Time and Effect Exponentially Increases

    Earned

    Media

    Bought

    Media

    Owned

    Media

  • How marketing budgets changed in 2011

    2011 vs 2010 US clients

    Source: Marketing Sherpa

  • SUPPLY DEMAND

    ACCESS

    EASE

    CONTROL

    Drivers of success in emerging media ecosystem

    Consumers access to online content

    CAPACITY

    SCALABILITY

    SPEED

  • Emerging media ecosystem

    Media ownership model changing

  • Key conclusions of market evolution

    Two speed world for next 5 years

    US and China will dominate scalable industry developments

    Digital technologies and convergence key drivers for growth

    Social media important to consumers and brands

    New media owners attempting to capture total value chain

    Rate of consumer adoption variable by age/geography/access

  • Impact of market evolution

    Potential opportunity for agencies

    Consumers assimilating scaled technologies at a rapid pace

    Evolving complexity creates opportunity

    Specialist and integrated required to reflect client needs

    Interconnected communication ecosystem creates redefinition of effectiveness

    and value

    Convergence will require new trading platforms, data management skills and

    constant innovation

    Emergence of global media and global brands enhances the oppportunities for

    networks

  • Development of the market and Aegis

    2010 - 2012

    Major market trends 2010 2012e

    Two speed world Initiated Sustainable

    Convergence Initiated Accelerating

    Aegis Group * 2010 2012e

    Media 42% ~ 60%

    Digital 19% ~ 40%

    Market research 39% 0%

    Faster-growing regions 33% > 34%

    * % of Aegis Group revenue

  • Aegis Group in 2012

    Brands and structure aligned with convergence and client need

    1 P&L per

    country

    Specialist Integrated

    1 operating

    model per

    country

  • Objectives

    Aegis vision & strategy the opportunity

    Aegis Group plc | Page 16

    Vision Re-inventing the way brands are built

    1. Increase exposure to faster growing regions

    2. Grow our digital profile and capability

    3. Broaden our service offering across all our clients

    4. Grow our international client and new business profile

    5. Strengthen leading position in top 20 markets (inc. China and US)

    Strategy accelerated by targeted acquisitions

    Offer

  • Outcome

    Aegis strategy & model delivering on the opportunity

    Aegis Group plc | Page 17

    Model Scaled media and digital group with a

    specialist and integrated approach

    1. Increased exposure to faster-growing regions

    2. Increased proportion of revenues from digital

    3. Increased proportion of revenues from international clients

    4. Ongoing out-performance of peer group organic revenue growth

    5. Improved gross and operating margins

    Offer

  • Delivering on our strategy

    Aegis 2011 financial results - highlights

    Aegis Group plc| Page 18 All references to Aegis Group relate to the Retained Group, which comprises Aegis Media, Aztec and the corporate centre

    2011 2010 Reported change

    Revenue 1,135.0m 941.0m 20.6%

    Operating profit 197.4m 151.1m 30.6%

    Underlying operating margin 17.4% 16.1% 130 bps

    Underlying pro forma diluted eps 10.7p 8.6p 24.4%

    Total dividend per share 20.28p 2.75p n/a

  • Delivering on our strategy

    Sector-leading organic growth performance in 2011

    Good progression in organic growth from H1 to H2

    Particularly strong performance in Q4, our largest quarter of the year

    Momentum continues into 2012

    Aegis Group plc| Page 19

    Change % Q111 Q211 Q311 Q411

    Organic revenue 10.1 6.1 11.2 12.0

    H111 H211 FY11

    7.8 11.7 9.9

  • Delivering on our strategy

    $6bn of net new business won in the last 18 months

    General

    Motors

    Co.

    North

    America

    Network

    development

    $3bn of billings in over 80 markets

    around the world

    $1.5bn of

    additional

    billings

    $1bn of

    additional

    billings from

    55 market

    appointments

    http://www.relativitymediallc.com/default.asp

  • Improving our business mix

    Increasing exposure to North America and faster-growing regions

    Aegis Media revenue breakdown: 2005 2011

    Aegis Group plc | Page 21

    32% 34% 36% 36% 37%

    43%

    50%

    68% 66% 64% 64% 63% 57% 50%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    2005 2006 2007 2008 2009 2010 2011

    North America & Faster-growing regions Western Europe

  • Improving our business mix

    Increasing exposure to digital

    Aegis Media revenue breakdown: 2005 2011

    14% 20%

    26% 29% 31% 32% 35%

    86% 80%

    74% 71% 69% 68% 65%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    2005 2006 2007 2008 2009 2010 2011

    Traditional

    Digital

    Aegis Group plc | Page 22

  • Receipt of proceeds from sale of Synovate, the market research business:

    Improved our FY11 net debt position

    Returned 200m to shareholders via a special dividend in November 2011

    Record total dividend of 20.28p per share for the year

    Remaining proceeds being utilised on acquisitions and investments

    Covenant position remains comfortable supports our financial flexibility

    m 31 Dec 2011 30 June 2011

    31 Dec 2010

    Gross debt including overdrafts (754.5) (714.8) (725.7)

    Cash 626.1 321.5 394.4

    Net debt (128.4) (393.3) (331.3)

    Sale of Synovate in October 2011 for 525m

    Further strengthened our balance sheet

    Aegis Group plc| Page 23

  • Acquisitions will help to accelerate our strategy

    Successful record in making acquisitions

    Spent over 760m on around 85 acquisitions and investments since 2005

    Including c.150m in initial consideration on 22 acquisitions and investments in 2011 and so far in 2012

    Focused on a range of capabilities and geographies

    Scale, in-fill and innovation

    North America, particularly the US, and faster-growing regions, particularly China

    Strong track record of integration and management retention

    70% retention rate since 2005

    Continued focus on acquisitions in 2012

    Roundarch in the US and digital acquisitions in faster-growing regions

    Aegis Group plc | Page 24

  • Consistent delivery of acquisition execution

    14% ROIC from acquisitions, 2005 - 2011

    An industrialised acquisition process:

    Targets identified by local management teams

    Supported by central M&A team

    Monthly review by Acquisition Committee

    Maintain pipeline of 50 60 acquisition targets

    Measure acquisitions against strict investment criteria:

    Deliver returns of at least WACC plus a margin of 30%

    Earnings enhancement in Year 1

    Strong discipline to be maintained

    Acquisitions structured to minimise risk to Aegis:

    Initial consideration limited

    Vendors occasionally retain a minority stake

    Aegis Group plc | Page 25

  • Summary

    Optimistic about Aegiss future prospects

    Unique focus as a media and digital specialist

    Operating model fully aligned to market evolution

    Peer group-leading revenue exposure to digital and faster-growing regions

    Strong acquisition track record, supported by robust process

    Positive momentum being achieved across our networks

    Organisational strength:

    One-company culture and clear vision & values

    Aegis Group plc | Page 26

  • Q & A