Aren’t some Outdoor Plus shareholders compromised by a conflict of interest?

February 22, 2013

Marc MendozaThere’s a lot going on under the radar in OOH – or posters, as we anciently called it. And I’m not simply talking of Omnicom’s Eric Newnham-fronted effort to crash the charmed circle of UK specialist buyers – namely WPP-owned Kinetic and Aegis-owned Posterscope.

No, what caught my eye recently was something entirely different. It concerned premium digital site owner Outdoor Plus and its opening of yet another of the landmark London locations in which it specialises – in  this case The Spire, a 20 metre-high construct unmissably situated on the A40 exit from London.

The PR spiel, as conveyed in MediaWeek, was suitably gushing: access to a dedicated commuter and business audience; balanced male:female ratio; 60% ABC1; capable of targeting traffic both in and out of central London. What more could an advertiser ask for?

Very little, according to an excited Grant Branfoot, Outdoor Plus’s sales director: “The potential for advertisers is vast and through the addition of The Spire to our expanding digital portfolio (it includes The Eye in Holborn, the Euston Road Underpass and Vauxhall Cross), we think we can help advertisers exploit the immediacy, the creative possibilities and the opportunity for highly targeted messaging which is associated with large format outdoor digital screens.”

The potential for advertisers is vast, is it Grant? More correctly, the potential for some, carefully selected, advertisers is vast. Many will likely get scarcely a sniff of a placement. The reason is somewhat complicated, and to do with Outdoor Plus’s curious shareholding structure. But don’t go away, readers. It’s worth the wait, really.

Outdoor Plus is a reasonably sized, reasonably well-run private company founded in 2006 by Jonathan Lewis – who remains its managing director. Turnover was about £15.42m in the year to December 31, 2011 – the latest financial figures recorded in Companies House. Group operating profits – of which Outdoor’s comprised the vast majority – were £1.8m, allowing the six directors to award themselves collective “emoluments” (or fees) of about £770,000.

The roll-call of these directors makes interesting reading. Among them are Philip Andrew Georgiadis, daytime job: chairman of Walker Media; and Marc Sydney Benjamin Mendoza, better known as head of Havas Media UK. In other words, principals of notable media-buying organisations whose job it is, inter alia, to oversee without fear or favour the negotiation of the most advantageous placements for their clients on UK OOH sites.

Turn to the share structure of the company and things get even more interesting. It emerges that Georgiadis is also a 5.3% shareholder in Outdoor Plus. Mendoza (pictured) owns just a shade more. And then there’s Mendoza’s cousin and, technically, his boss, Havas Media UK group head Mark Craze, who owns 3.2%. But we’re not quite over yet, because Stephanie Gottlieb, wife of Colin Gottlieb – the EMEA chief executive of Omnicom-owned OMG – also owns 1%.

Now I’m not suggesting anything illegal is going on here. At one level, you have to tip your hat to Lewis, who has been extremely shrewd in persuading these media luminaries to come aboard, thereby – shall we say – reinforcing his revenue stream.

Indeed, even if the shareholding of the Havas, Walker and OMG representatives were to be combined, they could hardly be accused of concert-party style manipulation.

None of that, however, quite expunges the whiff of conflicting interest surrounding this cosy media buy-side/sell-side coalition. Clients whose accounts are not held by Havas, Walker or OMG may well be the losers. And those whose accounts are need to be assured that they are getting the very best deal for all the right reasons.

Senior media executives, like Caesar’s wife, should be above suspicion.

Another scandal at Aegis leaves Jerry Buhlmann looking like Mole Whacker

November 4, 2011

It’s lucky for Aegis Group – as my old chum Stephen Foster points out – that its financial performance continues to delight shareholders. Only the other day we had Quarter 3 numbers that revealed an astonishing 11% organic growth rate. And, a little earlier, Aegis managed with considerable aplomb to unload its margin-sapping research business Synovate on Ipsos. All of which reflects very favourably on CEO Jerry Buhlmann’s grasp of the Big Picture.

If I were him, though, I’d be a little worried about some of the Detail that keeps emerging. Granted media buying companies, with their inherent penchant for surcommission (backhanders), are more prone to financial shenanigans than other arms of the marketing services business; but let’s face it, Aegis seems more unfortunate than most. Maybe it’s simply that rivals are better at covering their tracks. Whatever, Buhlmann is beginning to look a bit of a Mole Whacker.

First we had the Ruzicka scandal, which resulted in the German head of Aegis going to jail for a number of years. Then the Rumasa affair, as a consequence of which the company had to write off over £25m it had failed to collect in time (which was rather careless, to say the least). Now comes news that 2 senior executives who used to work in its US outdoor operation, Posterscope USA, have been indicted for fraud by the federal government.

Briefly, the facts are as follows. Todd Hansen, former US division president, and James Buckley, former finance director, have been charged with a $19.75m accounting fraud that stretched over 5 years (from 2004 to 2009) apparently without being detected. The two are accused of deliberately and artificially inflating company revenues in order to meet personal performance targets involving higher salaries, bonuses and stock options. In all, Hansen is alleged to have illegally salted away an extra $1.1m, and Buckley $650,000. If convicted, they face up to 20 years in prison.

Presumably another Aegis financial restatement is on the way. Although its size is hardly likely to cause more than a ripple of embarrassment.

UPDATE: On this last point, apparently not. This is what Aegis has to say: “We can confirm that the events that led to this action will have no implications, financial or otherwise, for Aegis and its US business, as from an accounting perspective the matter was closed in 2009.” Aegis adds that it initiated the investigation into Hansen and Buckley.

%d bloggers like this: