NEW YORK Aegis Group said it would take an “exceptional charge” of $15 million against earnings this year to accelerate the ongoing reorganization at its struggling Carat USA division. Layoffs, the relocation of the shop’s New York offices and investments in new talent are included in that figure.
The company did not go into detail about how many staffers would be cut or where those cuts would be made.
Aegis disclosed the charge in its first-half earnings report issued today.
Overall, the global media company reported a 14 percent first-half revenue gain to slightly more than $1.1 billion, with organic growth of 8.2 percent, which company CEO Robert Lerwill said “remained ahead of the wider industry.” Pre-tax profit was flat for the period at $86.5 million.
Lerwill described the company’s financial performance in the first half as “good,” but said it was achieved in a “trading environment that is becoming tougher, with signs of slowing demand, particularly in Spain, the U.S. and the U.K.” As a result, he said, the holding company’s outlook for the second half is “less certain.”
He said growth would be lower in the second half and that Aegis was taking “early steps to tighten our cost base in a number of markets.” That said, he added full-year results at least for now are expected to be “at the upper end of market expectations.”
Carat USA was buffeted in the first half by a couple of big client losses, including its estimated $800 million Hyundai car account, which shifted to Initiative in January after a review, and its estimated $200 million New Line account, which shifted to MediaCom after the film studio merged with sibling Warner Bros.
The company also said its U.S. shop was hit by “a more challenging business environment” in which some clients cut their media spending “and we experienced a further decline in both revenue and profit at Carat.”
On the plus side, a strong performance in digital helped Aegis Media Americas post a healthy 13 percent revenue gain to $145 million. The company’s sports and experiential marketing businesses also performed strongly, Aegis said. Media revenue in the Asia-Pacific region was up 31 percent, and Latin America also “continued to grow well,” Aegis said.
Revenue at research arm Synovate was up 10 percent overall to $406 million, with a 5.2 percent organic growth rate, which Aegis said was ahead of the market. In the U.S., conditions were “softer,” particularly in the healthcare sector, the company reported.