Aegis Group, the media buying, planning and research company, is beginning to look plain unlucky. Late last year, it had to eat humble pie after the much-trumpeted £200m deal with Mitchell Communications went sour. Aegis was forced to restate Mitchell revenue figures – downwards.
Now Aegis’ Spanish subsidiary has been landed with a bad debt of £25m, which will have to be written off against the 2010 profit and loss account. The cause of this debt is one of its former Spanish clients, Nueva Rumasa. It’s an industrial conglomerate – owned by the billionaire Ruiz Mateos family – which has been in financial trouble for some time. Which is why it has gone into the Spanish version of Chapter 11, a form of protected bankruptcy.
Note the “former”. Extraordinarily, Aegis appears to have extended Nueva Rumasa 24 months’ credit. Not, you might say, the usual terms.
Aegis will publish its annual figures on March 17 and says the bad debt will have no effect on its underlying performance. It will, however, likely affect the dividend. Earnings per share will have 20% lopped off them. City analysts had been forecasting EPS of 10p per share, pre-adjustment.
UPDATE 1/03/11: Financial expert Bob Willott asks how a public company like Aegis could have allowed a £25m debt to roll up, apparently unmonitored. How indeed? Lax Spanish practices seems to be the answer. Willott calls for heads (or a head at any rate) to roll. He’s probably right to do so. But I doubt they will. There’s more on the Rumasa bad debt in Willott’s Financial Intelligence newsletter...
… and in my Marketing Week column this week.