Only a few months ago, the AIM listed US-based internet advertising sales company Burst Media was hoping to be propositioned as a worthy bride. Then it changed its mind and started playing hard to get, spurning approaches with the not altogether convincing comment that on reflection it was happier living alone (see The Burst "not for sale" game continues).
Today another potential suitor got the brush off. This time the unfortunate victim was a US competitor called Cyberplex. It offered a seductive 12p per share, almost twice the previously quoted share price, but was sent packing with words like "opportunistic" and complaints that the offer was not reflective of Burst's true worth, whatever that might be. Certainly Cyberplex sought to present itself in a highly favourable light after announcing a pre-tax profit of over $4 million for the first quarter of 2009, compared with just $51,000 in the same quarter last year.
Burst's apparent disdain may be partially justified by its sizeable dowry of uncommitted cash that deserves to be recognised by any respectable suitor, but its own past behaviour has been somewhat erratic (it lost money again last year) and may deter Cyberplex from being over keen to achieve a conquest.
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Private equity house ISIS EP has added a further parcel of shares to its holding in WIN, the AIM-liisted provider of interactive mobile entertainment and information (see Investors add to their WIN stakes). By Monday of this week ISIS had acquired 11.5% of WIN's shares, up from the 10.3% reported yesterday.
Gary Stevens, founder of the digital agency HSM and its associated lead generation business Inbox both of which were acquired by Digital Marketing Group when launched in 2006, has sold one-third of his 5% shareholding in the group for nearly £500,000.
The sale is slightly surprising as DMG's shares have lost two-thirds of their value over the last two years, albeit in line with the sector index. Today they are worth little more than half their flotation price. However, Gary and Helena Stevens collected an initial cash payment of £4 million between them when they sold their business to DMG and so they are unlikely to be living on the bread line.
Stevens relinquished his management role in Inbox last year to concentrate on the main HSM business, recently rebadged as GasboxDMG. Then, in March this year, both he and Helena Stevens resigned as directors of HSM. Profits earned by HSM in the year to March 2008 were broadly in line with those of the previous year at around £800,000 before charging the cost of share-based payments.
Meanwhile private equity house ISIS EP has continued to acquire shares in WIN, the AIM-listed provider of interactive mobile entertainment and information (see Investors add to their WIN stakes). ISIS now holds more than 10% of WIN's shares.
Revenues earned by The Interpublic Group of Companies in the first half of 2009 fell 15.7% by comparison with the same period last year, mirroring the 15.8% fall already reported by Omnicom Group. If adverse currency effects are excluded both groups experienced an 8.5% fall in revenues.
Interpublic managed to report a modest $21 million post-tax profit for the latest quarter, reducing the cumulative loss for the half year to $53 million. That loss was influenced by further massive staff severance costs of $71.5 million and finance costs of almost $78 million. The operating profit margin for the half year was a meagre 0.5%
Companies in which WPP Group has either a controlling or a minority share stake will own 45% of Dentsu's search engine marketing subsidiary with effect from 1 October.
Under the terms of a deal announced by Dentsu today, the publicly listed Japanese marketing group Asatsu-DK, in which WPP has a 24% shareholding, is to acquire a 20% stake in Dentsu's search engine marketing subsidiary Dentsu Search & Link ("DSL"). The shareholding will complement the 25% stake in DSL acquired by WPP's subsidiary 24/7 Real Media when it merged its Japanese business with Dentsu's Cyber Communications in January this year.
Following the share transfer, Dentsu's Cyber Communications subsidiary will retain a 51% stake in DSL and Dentsu will retain a 4% direct shareholding.
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Dentsu is pulling together companies that embrace all of its main European operations under a new holding company Dentsu UK to be chaired by Jim Kelly. Kelly co-founded Rainey Kelly Campbell Roalfe and sold out to Young & Rubicam in 1999.
UK companies involved are the profitable Leeds-based design consultancy Attik and the rather less profitable London advertising agency cdp travissully (to be renamed Dentsu London). Other European operations owned by Dentsu Holdings Europe will also come under Kelly's oversight, including the Cayenne advertising network in continental Europe.
Companies owned by Dentsu Holdings Europe, other than Attik, made an operating profit of £1.4 million in 2008 on revenues of £22.6 million - an operating margin of only 6%. That profit figure was probably distorted by intra-group charges from other countries. Attik reported an exceptionally large operating profit of £479,000 in 2008 on revenues of just £1.1 million.
AIM listed The Mission Marketing Group reported today that profits for the half year to 30 June have been adversely affected by "industry wide pricing pressure" and the continued deterioration in the economy. Cost-cutting initiatives have also involved one-off expenditure that will hit first half profits.
The company believes that revenues in the second half of the year are likely to be similar to those achieved in the first six months, but expects profitability to improve "significantly" against the depressed results experienced in the first half.
The first of the global groups' financial results for the half year to 30 June reflect the harmful impact of the recession on revenues and profit margins. While Publicis Groupe was able to claim almost unchanged revenues, these benefited from favourable exchange rate movements and also appear to have been maintained at the expense of profit margins. The operating margin for the six months after all amortisation and impairment charges fell to 11.6% from 14.3% in the corresponding period of 2008.
Omnicom Group suffered a much bigger fall in revenue - down 15.8% on the corresponding period in 2008 - but suffered less margin erosion. Its operating margin was 12.1% compared with 13.0% on the same period last year.
While movements in exchange rates helped to reduce the impact of the revenue decline at Publicis by 5.7%, they had the opposite effect on Omnicom and contributed about one half of its revenue decline. On a common currency basis there would have been far less of a variation in the performance of the two groups.
Taxation took a bigger slice of Omnicom's profit than those of Publicis. As a consequence post-tax profit for the six months at Omnicom amounted to $397.9 million while at Publicis the post-tax profit was $235 million.
The estimated exposure of Publicis Groupe agencies to the General Motors ("GM") bankruptcy has been reduced dramatically as the weeks have passed and the financial fog has cleared. At the time of bankruptcy Publicis agencies (mainly Starcom Mediavest) were owed $127 million, but by June 4 the estimated maximum loss was put at $78 million (see Interpublic well prepared to minimise damage from US car bankruptcies?). This morning Publicis announced that it expected its eventual loss to be no more than $12.7 million.
As with many bankruptcies where the core business continues under the ownership of a successor company, Publicis has succeeded in negotiating a transfer of some of its contractual relationships from the bankrupt GM to its successors and has also been able to take advantage of the "sequential liability" regime in the US whereby contracts with media owners often oblige them to pursue agencies' clients where those clients have not already paid the agency. Most importantly, Publicis said that it had now received payment of the "bulk of the fees" due at the date of bankruptcy.
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A £457,000 foreign currency gain helped Ebiquity transform the previous year's £1.3 million loss into an £89,000 post-tax profit for the year to 30 April 2009, reported today. Nevertheless the underlying business improved sufficiently to generate an operating profit of almost £1 million before including the currency gain. If it had not been for an exceptionally high tax charge, much of that operating profit would have flowed through to the year's more modest post-tax profit.
Ebiquity is the media intelligence business now run by Mike Greenlees and Nick Manning that was formerly known as Thomson Intermedia and also includes the Billett media audit consultancy.
Revenue for the year improved by 7% to £18.4 million and the group's balance sheet remained solid at the year end. In announcing the results Greenlees made positive noises about future prospects, while warning that margins would suffer in the short term as the group invested in developing the business.
Cosmos Capital placed a value of Canadian $80 million on the Canadian publicly listed marketing group Cossette in yesterday's bid to acquire it at a price of $4.95 per share. Cosmos is controlled by François Duffar who resigned as Cossette's vice chairman in March. The bid is said to be backed by private equity capital and the plan would be to take Cossette private. The Cosmos offer comes at a time when Cossette's financial performance has been badly hit by problems in North America. Cossette's UK operations include Miles Calcraft Briginshaw Duffy, Elvis Communications, Band and Brown, Dare and Identica. However, the bid may not be all plain sailing. An unusual share structure gave Cossette's chairman Claude Lessard voting control over the group when it went public on the Toronto Stock Exchange in 1999 and, according to a statement issued by Cossette earlier this year, Lessard would still have been able to control 77% of all votes (including 41% of the voting rights owned personally) after Duffar's departure had been reflected in a revised share structure that would come into effect from 31 August.
But that protective shareholding scenario was transformed yesterday when Cosmos claimed that another Cossette shareholding executive - senior vice president Georges Morin - had joined its team. Cossette promptly confirmed Morin's departure with immediate effect.
The effect of Morin's departure on Lessard's voting position is potentially dramatic as it will almost certainly trigger an unravelling of the share structure that previously gave Lessard control. If that happens, Lessard will finish up with less than 14% of the votes and current Cosmos supporters would then control about 38% of the votes. If not, Lessard would continue to retain control.
The unravelling is a legal requirement if the number of shares in a special "management" class (each carrying 10 times as many votes as an ordinary share and hitherto dominated by Lessard, Duffar, Morin and Pierre Delagrave) falls below 3,894,600, as will be the case in October following Morin's departure unless his shares are bought by the remaining members of the management group.
Cossette reported a post-tax profit of $8.9 million for the year to September 2008, but the group only managed to earn a post-tax profit of $1 million for the half-year to 31 March 2009. The value being placed on Cossette by the Cosmos offer represents a multiple of about nine times the post-tax profits earned for Cossette shareholders in 2008 (after deducting exceptional goodwill impairment charges and minority interests), five times the equivalent profits in 2007 or a considerably higher multiple of the depressed results reported for the last six months.
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Another non-executive director has been appointed at Progressive Digital Media Group, the AIM-listed digital media and marketing group where Mike Danson is the executive chairman and dominant shareholder. The new director is Bernard Cragg, a chartered accountant who was previously a close colleague of Danson at Datamonitor between 2003 and 2007 and its chairman when it was sold to Informa for £502 million.
The appointment of additional non-executive directors followed concerns expressed about the ongoing trading relationships between Progressive and other companies owned by Danson (see Progressive Digital Media Group to ensure Danson transactions at arm's length). Progressive announced on 25 June that it would be appointing two additional non-executive directors by 25 September, bringing the total number of non-executive directors to three. The first such new appointment was announced on 13 July.
Progressive also announced on 25 June that it had entered into an agreement with Danson to ensure that all transactions between the company and Danson will be conducted on arm's length terms.
Shareholders in AIM listed market research group Optimisa approved the cancellation of the company's stock market listing yesterday. No further announcement was made about the company's presumably unsuccessful attempt to sell its US operation Nxt:MOVE Corporation by 30 June or its ability to satisfy its banking covenants (see Optimisa seeks privacy as it wrestles to remain going concern after £4.5 million loss), but clearly the company is still trading and presumably enjoys the continuing support of its bankers.
Dealings in Optimisa shares will conclude on 24 July.
Today's announcement that Aegis Group's chief financial officer Alicja Lesniak will be leaving the company in October is the latest of the moves made by part-time chairman and interim chief executive John Napier to "complete the major part of the reorganisation of the Aegis Board" since arriving last year. Curiously it doesn't seem to have occurred to him that his own all-powerful dual role is inconsistent with present-day practice.
Lesniak has a long track record of serving quality companies in the marketing services sector and will be succeeded by the internal promotion of Nick Priday.
The other major board changes announced today include the departure of heavyweight non-executive Dr Brendan O'Neill - formerly chief executive of Guinness Brewing and ICI - who will leave in October. Three other non-executives left the board earlier this year - see Half the non-executive directors leave Aegis at AGM.
Three newly appointed directors will result in the majority of the board again being made up of non-executives, this time with most having backgrounds in finance, consultancy, human resources, and information technology. The one outstanding exception among the continuing non-executives is Charles Strauss who has been on the Aegis board since 2003, is a US national and has 35 years' international executive experience in consumer products businesses, including 18 with Unilever.
None of the five ongoing non-executives appears to have any first-hand executive experience in the media or marketing sectors, albeit at one stage in his career newcomer John Brady headed up McKinsey's European retail and marketing consultancy practice. So the future strategy of the group is likely to be overseen and therefore influenced by people with limited knowledge of the business and no executive responsibility for it - a current fashion that is evident too at WPP (although its non-executives have greater and more relevant experience) and is widespread in the United States.
How such a group of non-executives would respond to any future overtures from people like Vincent Bolloré remains to be seen. Fortunately he has declared himself to be a more passive investor than on first arrival, but nothing is forever and the risk remains that the new board would give greater weight to short-term investor pressures than to building Aegis into an even more successful independent business.
Large parcels of shares have been changing hands recently at WIN, the AIM-listed provider of interactive mobile entertainment and information that suffered a £364,000 loss last year after writing down the value of acquisitions and other assets by nearly £1.4 million.
Private equity house ISIS EP has increased its shareholding from 4.93% in February to 9.57% today while institutional investor AXA Framlington has increased its stake from 16.17% to 20.93%.
WIN's share price has been hovering around a lowly 50p for some weeks after reaching 316p in May 2006. Perhaps ISIS and AXA know something that we don't or WIN's trading prospects have simply improved. Last month chairman Richard Joyce said the group was profitable with an excellent customer base and a strong cash position. He added that progress already made in the year to date allowed him to be "confident for the remainder of 2009".
In April WIN ended talks with a potential bidder.
BOB WILLOTT
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