Investment Column: Aegis finds itself a prime position

IN just a few years, media buying has gone from being the dull bit of advertising to a growth industry in its own right. Crispin Davis, the chief executive of Aegis, is fond of pointing out that whereas 20 years ago an advertiser could reach 30 per cent of the population by placing an ad in Coronation Street, matters are now more complex.

Faced with a proliferation of media outlets - an explosion of television channels, a growing number of magazines, not to mention the internet - planning and placing a media campaign has become an important skill.

Compared to the global advertising and media giants, though, media buying is still a fairly small industry. Aegis is the world's third-largest player, yet is capitalised at just pounds 589m. So it has some way to go before it carries as much clout as the companies it buys from.

Mr Davis, however, insists that there is no virtue in becoming large for the sake of it. Rather, his emphasis is on offering value-added services - basically providing research and data to help companies choose the best place for their advertising. That strategy is already working: gross margins last year improved from 5.2 to 5.6 per cent, and have further to go.

Currencies and exceptional items clouded Aegis's 1997 results, but strip those out and profits rose by 28 per cent on a 21 per cent rise in turnover. Helped by new business wins, bolt-on acquisitions and a market forecast to grow by 7 per cent, this year should offer more of the same. A deal with Zenith, the media buying business jointly owned by Saatchi & Saatchi and Cordiant, could happen but Aegis certainly doesn't need it.

In a sector where much of the talk of growth prospects is hype, Aegis is churning out consistent growth. Panmure Gordon, the stockbroker, forecasts profits of pounds 49.5m which puts the shares, down 0.5p yesterday at 71.5p, on a forward p/e ratio of 20. Good value.