CITY WATCH

Advertising and media planning group Aegis has risen impressively from near collapse two years ago and is now the focus of persistent takeover speculation

The first bid speculation of the autumn season in media stocks surrounds advertising and media planning group Aegis, which has risen phoenix-like from near-collapse two years ago. Brokers’ analysts speak of it as a recovery stock, which less politely means that it is a cheap opportunity to acquire a company that has been impressively turned around by chief executive Crispin Davis and his team.

Aegis’s shares have been as high as 66p, having risen 20 per cent over the past two months and only eased a couple of points on profit-taking, as rumours of imminent takeover persisted. WPP Group is said to be in the frame as a possible bidder, but probably only on the back of encouraging performance from the conglomerate.

Aegis turned in an interim rise in pre-tax profits last week of 15 per cent to 18.7m and a return to the dividend list after four years. Particularly impressive was an increase in higher-margin strategic services from around 4 per cent of sales two years ago to 15 per cent. With the market now mature, margin improvement in higher value-added services must be the way forward.

Fellow media-buying group CIA Group continues to be troubled by the spat between founder Chris Ingram and vice-chairman Marco Benatti, who has threatened to sell his 14.6 per cent stake. The City is sanguine – CIA is fundamentally sound, its profits record is very good and the shares trade firmly around the 166p mark.

As to the performance of supposed Aegis predator WPP, one of the most accurate indicators should be the balance of the higher-rate deposit account of chief executive Martin Sorrell.

Last week, Sorrell received 1.2 million shares, worth some 2.8m, because WPP’s share price has exceeded 198p for 60 consecutive trading days.

His shareholders’ and his own wealth are inextricably linked. His incentive plan could be worth 14m at the top trigger price of 304p and his total package could be worth 25m over five years.

Against the background of Greenbury and the fat-cat furore, it is worth recalling the principle that if institutional shareholders are made wealthy by directors who take a cut by way of incentive, then everyone is a winner.

Sorrell’s wealth is consequently a reflection of the increase in market capitalisation of WPP, in which institutional fund managers share. The City understands that, even if politicians don’t.

United News & Media shares were consistently buoyant last week, breaking through the 700p threshhold to finish the week at about 712p. This reflects not just the bloodletting rationalisation at Express Newspapers, but the first fruits of Lord Hollick’s management style showing through – 221m has been raised, for instance, through the selling of peripheral businesses. There is plenty of scope for acquisitions, with a debt-free balance sheet, but don’t hold your breath – United has a long way to go before it emerges as a focused and new-wave media group.

One of the City’s most well-flagged tips came to pass last week. Reuters Holdings announced its intention of handing 613m to its shareholders over three years through the issue of a new class of special dividend shares. The ordinary shares rose 14p to 764p in response.

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