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TWST: Mr Flynn, shall we begin by providing our readers with an overview of the Aegis Group?
Mr. Flynn: Well very simply the two fundamental businesses the company is in are media services and market research. There are also two smaller business areas that we are involved in. One is in decision systems, marketing decision systems. This is, if you like, a fact-based, databased marketing consultancy. The fourth area of business is a 50/50 joint venture with Warburg Pincus that invests in new marketing services and enabling technologies. So they are the four business areas. And of those, both the media business and the research business are quite substantial operations. In the media business we are the largest independent media agency in the word. In market research, I think we are probably top ten in the world but still have quite a way to go. The strength of our media business is predominantly in Europe. And the strength of our market research business is in the US and in Asia. We are obviously working to build our global networks in both of those businesses. TWST: Your interest in the market research area has grown substantially over the last couple of years. Could you explain the strategy behind this interest and perhaps the synergies that exist with your media operation?
Mr. Flynn: Well let me talk about those two business areas generically first. Market research is quite a fragmented industry compared with media. And there is still a great deal of consolidation to happen in that industry. It is possible to have successful small market research business, and it is possible to have a successful very large market research business. So we are clearly going to be one of the aggregators in that sector. The first acquisition we made was Market Facts back in May of 1999 sorry. And we paid about $296 million for Market Facts. The second company we purchased was Asia Market Intelligence in April of 2000. We subsequently acquired Pegram Walters in the UK. And we will announce further two acquisitions, both in Europe, probably next week. We have made a couple of other smaller acquisitions in the United States as well in motor research and a marketing consultancy called Copernicus. So we have been clearly investing heavily in the market research business. I guess the other area we are investing in within the market research business is our the array of international research products with a view of forming a basis for a cohesive global research network. One of the drivers in the market research business is that clients are increasingly looking to issue international research mandates. That is one of the trends that will help us to form a global network. So the investment focus for us in market research has been about product, sector and geography. Looking at geography first, the next key area that we are trying to address in market research is Europe, followed by Japan, followed by Latin America. So those three very important markets have been in the areas we have been focusing on. If I turn to the media business, we have great strength in Europe. That business continues to take marketshare and continues to win a very large proportion of the new business that comes up. A key feature of what is happening in media in Europe has been the trend toward pan-regional consolidation of agency of record. That saw a very large amount of business coming into the group last year and we are seeing the trend continuing this year. Our expectation is that this trend will go on for some years to come and will eventually leading to the awarding of global appointments of agency of record. To put that into context, $1500 million of our new business last year came from European consolidation; that was out of $2 billion overall. So our focus in the media business has been on continuing to build our US operation and also to start to build up our Latin American business. In that regard, we have a significant business in Argentina; we commenced to build up a Chilean operation during last year; and we launched in Mexico formally two days ago. In North America, we have quite a substantial operation. And we recorded billings last year of $2.6 billion. But we are really operating at a run rate of just over $3 billion right now. So it is becoming a substantial part of the operation but still requires a great deal further work.
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