Chairman’s statement.

John Napier, Chairman, Aegis Group plc. “We believe the strategic and operational benefits from being purely focused on media and digital activities are significant. We are confident that we are moving in the right strategic and operational direction.”
It has been a busy year for your Board and Company and a successful one. In his first full year our capable Chief Executive, Jerry Buhlmann, has planned and executed a series of acquisitions, business development and strategic reshaping of your Company into a focused media and digital service provider with an enhanced global footprint.

At the same time we have continued to add to our range of products and services and maintain significant new business and organic growth momentum. In short, the major achievements include:

Increasing the rate of group organic revenue growth on a “like for like” basis, up to 9.9% in the full year compared to 2010
Achieving new business wins at record levels in 2011
Announcing in January 2012 our appointment as the global media partner for General Motors Co, a major business win
Integrating and delivering the benefits of the Mitchell acquisition in Australia, completed in November 2010
Continuing our programme of geographic in-fill and product and service innovations by related acquisitions, spending around £75m in initial consideration with a balance dependent on results achieved
Successfully selling our Synovate market research business, allowing us to return £200m to shareholders via a special dividend and further strengthening our balance sheet.

In terms of overall 2011 financial performance we have not been immune from the varying economic circumstances of the global economy. For Aegis, this broadly divides into three geographic sectors – faster-growing regions, North America and the traditional Western European trading block, of which the UK is part. In general, we have:

Continued to increase our exposure to faster-growing regions and North America
Further increased the proportion of our revenues from digital activities
Across EMEA offset the effect of below prior year performances in certain Western European markets with other improved regional results to increase our overall level of profit.

Given the sale of Synovate and our focus on media and digital solutions it is appropriate to restate the 2010 results on what is called for 2011 a “Retained Group” basis. This allows our 2010 performance to be made comparable to 2011 and will be the ongoing basis for the business in the future. On that basis, and in challenging global market circumstances, we have performed very well. The detailed results are set out more fully in the Chief Executive’s, Business and Financial Review sections of this report. To give some headline numbers on underlying results:

Group operating profit up 30.6%
Pre-tax profit up 32.3%
Diluted EPS up 29.5%.

We have also further strengthened our balance sheet position, despite acquisition spend of around £75m, due to the sale of Synovate. Our net debt position of £128.4m at year end improved from £331.3m at the end of 2010. We also remain comfortably within our financial covenants, with undrawn facilities totalling £450m at the end of the year.

There has been one Board change in the year with the retirement of Robert Philpott who was the Executive Director responsible for our Synovate market research business. Over the last three years Robert has done an outstanding job in difficult and demanding circumstances. In that time he was responsible for improving and developing Synovate into an attractive business asset. He retires from the Company with the best wishes of the Board for his future success on the basis of a job well done.

Going forward we believe the strategic and operational benefits from being purely focused on media and digital activities are significant. We will continue to push forward and accelerate our digital profile, service and new product capability across all regions. We plan to increase our exposure to faster-growing regions and North America.

Our new business success and growth is built on focusing on what our media and digital services clients need in changing economic, competitive and demanding markets in order to optimise expenditure and consumer response in a changing media world. Our strategy is further evidenced by the announcement made in February of the acquisition of Roundarch in North America. This acquisition will further add products and services and increase our digital profile.

Apart from revenue growth the scope for improved margins arises with changes in work mix and with an expected recovery in certain Western European operations. We have already announced the very significant new business award from General Motors which will come into effect in 2012. We have an expectation that underlying operating profit will improve further in 2012, subject to a necessary qualification that if there is further unexpected economic turbulence and instability it will be more difficult. Putting aside that consideration our outlook is to continue to grow relatively and outperform the market.

Given our confidence in the Company’s future prospects, the Board maintains a progressive dividend policy and has recommended a total dividend of 3.20p per share for 2011, excluding the special dividend paid on 2 November 2011, compared to 2.75p in 2010. This dividend increase reflects the progression in our underlying pro forma diluted earnings per share in 2011.

In conclusion I would like to close by personally endorsing the thanks made to our clients and our people on behalf of the Board and the management team by the CEO. We remain dedicated to the concept of being the leading player in this global marketplace. We are confident that we are moving in the right strategic and operational direction. In the end, however, it is the recognition from our clients and their willingness to do business with us that will determine the success of our strategies and actions. Our clients, our people and our shareholders will continue to be our key focus.

John Napier
Chairman, Aegis Group plc

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“Given our confidence in the Company’s future prospects, the Board maintains a progressive dividend policy.”