Aegis group plc
The public limited companies play a vital role in the economy. These public limited companies in the process of achieving the set objectives contribute to various economical factors. These companies not only make the proper utilization of the investments that are made by the investors but they also create employment opportunities too. This way they are also catering towards the society's development and in turn the nation's growth and development. One such public limited company is the aegis group public limited company. The aegis group plc is a media and the market research company. It is listed in the London stock exchange.
PERFORMANCE OF THE AEGIS GROUP PLC
The revenue of the company is 1,342 millions. The revenue of the company itself is a picture of its performance. The operating income of the aegis group plc is 136.4 million and the net income is 89.2 million. This states that the profit is almost 10% of the revenue. The aegis group plc has the following main businesses.
* Synovate: this division handles the market research activities. The business consulting activities are handled by Synovate business consulting
* Carat: the media communications specialist
* Isobar: a global digital marketing network
* Posterscope: an out-of-home media specialist
* Vizeum: a so-called challenger media brand
* PSI Advertising: a specialist in international airport advertising
It is only because of its diversified operations the aegis plc has been able to sustain in the market for a long run. This business has been established in the year 1968. The present share price of aegis plc is 118.40 pounds. This is quite healthy. It also makes the investors to buy the company shares. In this way the company can concentrate on its business activities that help them to generate more revenue. The company feels that their strategy to perform resiliently in a downturn has continued to deliver and that they are pleased to confirm further progress in a difficult and challenging market environment. As this company deals with the communication industry there is large scope of expansion and the probability of facing the risk is very low. The company with the help of the technology can implement innovative features that attract the people to view their channels and increase their profits. Though it possess the tag of the “media specialist” these expansion activities will further help them to maintain the tag rather than wiping that out and make the people to allocate the same to any other company.
The performance management report of the aegis group plc is as follows:
Total Group revenues for the first nine months of the year are up 1% on 2008 on a reported basis, a performance achieved against high prior year comparatives when Aegis Media revenue was up 26.1% on 2007 and Synovate gross revenue was up 12.8%.
Taking account of the effects of currency movements and acquisitions, Group organic revenue was down by 10.8% compared to prior year, in line with the trend for the first half. The split was 10.4% at Aegis Media and 11.5% at Synovate.
In Aegis Media, new business momentum remains strong going into Q4 and 2010, with year-to-date net new business wins of $2.4 billion (2008:$1.0bn), including Kellogg's, Beiersdorf, Credit Agricole, Société Générale and Nokia.
In Synovate, the trend in revenue and sales improved with a continuing strong sales order book at the end of the third quarter.
COST OF CAPITAL
The company while undertaking the expansion activities would definitely require certain capital for those activities. If the company has retained earnings with it then there won't be any problem. But if the retained earnings are not sufficient then it may have other sources. That may be by issuing the equity shares, the preference shares or even by issuing the debentures or it can also approach the banks to advance them the loans. The business activities are planned and the evaluation of the project is done to estimate the cost of the project. When the cost is estimated and if it plans to finance the project with the equity share capital, preference share capital or the debentures then enters the concept of the cost of capital. The cost of capital is defined as the minimum rate of return that is expected by its investors. The investors agree to invest in any company with the idea of generating certain income. This income is generated in the form of interest for the investments that they have made in the company for financing their activities. The cost of capital provides the company with various formulas to decide the interest rate that is payable to these investors. For the equity shares the cost of capital is calculated in different ways such as the dividend yield method, dividend yield plus growth in dividend method, earnings yield method and the realized yield method. For the preference share holders a fixed dividend is paid. The risk factor arises when the equity of the preference shareholders are not of domestic origin. If the company has global image then the investors from different companies would be interested to invest in the company.
The risk factor that may arise in this situation is the interest rate risk and also the currency risk. The risk arises because of the fluctuations in the currency. The risk may affect the company in the process when it ends up paying more amounts in the form of interest if the currency value increases. Hence the company should carefully evaluate the risk probability before selecting a particular source to finance its activities. Though the globalization concept has many advantages it has several disadvantages too. The company should always safeguard itself and should be in a position to face the risk that arises out of these situations. This can be handled if the company has retained earnings and also certain current assets which can be easily liquidated and the amount due to the investors can be paid off. This saves the company from the possibility of getting a negative image. If the company overcomes such situations more and more people will be interested to invest and the company may plan for more activities.
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