UPDATE 2-Aegis beats H1 forecasts, H2 caution knocks shares
(Adds comments by CEO, analyst; share price)
By Georgina Prodhan, European Media Correspondent
LONDON, Aug 28 (Reuters) - British marketing group Aegis (AEGS.L) expects its results this year to be at the top end of market forecasts, it said on Thursday, after comfortably beating expectations in the first half thanks to its digital business, emerging markets and cost efficiencies.
But the company sounded a note of caution about slowing business in some developed markets and said the outlook for the second half was less certain, knocking its shares down more than 3 percent.
Aegis reported that first-half organic sales grew 8.2 percent, with both its media-communications and market-research units ahead of their markets.
"We achieved these results despite a trading environment that is becoming tougher -- with signs of slowing demand, particularly in Spain, the U.S. and the UK," the company said, adding that it expected the market to slow in the second half.
"Nonetheless we remain confident of delivering a result for the year at the upper end of market expectations," Chief Executive Robert Lerwill added, saying the company would tighten its cost base in some markets.
Lerwill told reporters on a conference call he was referring to market expectations for a full-year pretax profit of 144 to 154 million pounds ($265 to $283 million).
Aegis's research arm Synovate cut its forecast for growth in the market-research industry in 2008 to 4.1 percent from 5.1 percent, a day after Aegis's media-buying unit Carat trimmed its forecasts for advertising industry growth.
By 0724 GMT Aegis's shares were down 2.8 percent at 112.25 pence, the leading decliners in a 0.8 percent weaker DJ Stoxx European media sector index .SXMP.
"Short-term investors are probably focusing on the cautious outlook and some references to a relatively weak net new business in the first half," said Panmure analyst Alex DeGroote, who has a "buy" recommendation and a price target of 135 pence.
"On a longer-term view, this company is hugely valuable," he added.
UBS analyst Alastair Reid also noted that enthusiasm about the strong first-half results may be dampened by the outlook comments but added: "We see longer-term value in Aegis once macro headwinds ease."
Aegis specialises in media communications and market research, protecting it to some extent from an economy-driven downturn that has hit advertising spending as customers seek to target better the smaller amounts they are spending on ads.
SYNOVATE NOT FOR SALE
In the first half Aegis's total sales rose 13.7 percent at constant currencies to 607.6 million pounds ($1.1 billion), an increase of 21.8 percent in reported terms as the company benefited from the strength of the euro.
Analysts had on average expected group sales of 580.6 million pounds, according to Reuters Estimates.
Underlying operating profit rose 16.7 percent at constant currencies to 65 million pounds, while underlying pretax profit rose 15.4 percent at constant currencies to 56.2 million. Both easily beat the Reuters Estimates average forecasts.
Aegis also raised its dividend by 14.3 percent to 0.96 pence per share.
UK rival Taylor Nelson Sofres TNS.L, whose share price has been boosted by competing takeover bids from advertising group WPP (WPP.L) and Germany's GfK in recent months, said on Wednesday it was on track to grow 2008 sales by 6 percent.
Aegis shares trade at 12.2 times expected 2009 earnings, according to Reuters Estimates, below TNS's 14.4 times but above French advertising group Havas's (EURC.PA) 13.3 times. Havas is due to report results after market close on Thursday.
Lerwill reiterated that Synovate was not for sale, amid heightened expectations of more deals in the sector. "We're interested observers to see what happens between WPP and TNS," he told reporters. (Editing by Mike Elliott, Greg Mahlich)
