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The Observer: And they call this the silly season? “Corporate giants like Vodafone, Rolls-Royce, BP, Shell, and AstraZeneca all came out with results that were - with the exception of beleaguered Shell - rather better than the market had a right to expect.”: Sunday July 31, 2005


Frank Kane


Whoever called it the silly season? It's the end of July, just when businessmen, investment bankers and fund managers are supposed to be heading to the beach, but just look at the wall of corporate and investment news that hit us last week, when newspapers - business sections included - are supposed to be screaming for an event, any event, to fill up the space.


Corporate giants like Vodafone, Rolls-Royce, BP, Shell, and AstraZeneca all came out with results that were - with the exception of beleaguered Shell - rather better than the market had a right to expect. All paid top-notch dividends, to shareholders' delight.


The media groups were not left out. Reuters, Pearson and Reed Elsevier produced figures that belied fears of a lengthening recession. In the case of Reuters, which promised shareholders a £1 billion return of capital as well as a sound investment strategy, the reaction of the market was difficult to comprehend. Some of the losses were justifiably pulled back by the end of the week.


The financials were also represented. Long-suffering Prudential gave the market a pleasant surprise, and when the City scribblers had fully digested Lloyds TSB figures they were not as bad as first impressions suggested. Once again, higher dividends were the reward for shareholders.


But they got capital growth too. The FTSE surged to a three-year high on Friday, until an afternoon security scare brought it back to reality. I fear this will be the pattern in weeks to come too.


While all this was going on there was a hectic bout of executive musical chairs in progress, sparking an outburst of corporate speculation. Sir Tom McKillop stepped down from AstraZeneca, supposedly to take the chair at Royal Bank of Scotland.


There, if the rumours from the Orient were to be believed, his first duty would be to welcome the Bank of China as a partner of the Edinburgh group. There may be more news on RBS's Chinese ambitions this week, though the word from north of the border is not to hold your breath.


Then, after a five-month search, Pearson appointed an unknown as its new chairman. Those who suggested Glen Moreno sounded like the scion of a Scotch whisky dynasty were put firmly in their place with a reminder of the 62-year-old's track record - he 'retired' when he was 48, and presumably regards chairing Pearson the way that some look forward to the little bungalow in Eastbourne.


Does his appointment make a sale of the Financial Times more or less likely? I would say marginally more, but only after Marjorie Scardino has decided to call it a day. Dame Marjorie will think about that only when she has received a few shareholder plaudits for turning Pearson around again.


As if all the above were not enough, late on Friday saw the second of Rupert Murdoch's grown-up children walk out on the family business. Lachlan's shock decision to go back to Australia gave the Murdochologists so much food for thought that it will take them probably most of next week, to consume. But here is an extra morsel: James is the only Murdoch left with a chance of inheriting operational control of the News Corp business, but the general view is that he is too young, so Peter Chernin, the president, will take over as regent to James.


Still in the wings, however, is the shadowy figure of John Malone, a 19 per cent shareholder of News Corp shares. Now, with the family weakened and a non-Murdoch on the ascendant, is the time for Malone to do the peace deal with Murdoch that will ensure James's future involvement. Or maybe that's just speculative space-filling.


Adland braced for the next revolution


There is a revolution under way in the advertising industry, and it threatens to strip the margins of the big global conglomerates like WPP, Publicis and Omnicom at a time when they can least afford it.


The outlook for adland is suddenly looking gloomy again. Zenith, one of the big media buyers, has had to scale down its forecasts dramatically this year, with the US and Europe particularly depressed.


Remember Sir Martin Sorrell's famous bath? The WPP boss likened the ad recovery to a bathtub, with a long, low U-shape ending in an upturn. Well, judging by Zenith, it now looks as though Sir Sozza, as he is affectionately known in the City, is climbing back into the bath.


But do not dwell too long on that image. The other big challenge to the ad giants is from clients who believe there are better ways to do business than the 'one-stop-shop' advertising conglomerate that handles everything from creative work to production.


As the corporates get increasingly cost-conscious, they are looking for ways to trim their ad budgets. Media buying was the first area in which this pressure was felt, leading to the creation of companies like Zenith and Aegis. Now the screws are on the production side. In the past two years, production agencies have sprouted up, offering clients a cost-effective way of making advertising content.


It is a valuable market. Industry estimates put the spend on production in the UK alone at close on £700m, and the bulk of this still goes to the traditional big agencies. But three key players have elbowed their way in and are looking to make the market gap bigger.


Vertis PRS, The Adplates Group and Seven Worldwide have seen a market, and are going for it. In particular, US-owned Vertis has global ambitions with multinational clients like Canon, Glaxo, Shell and Nokia. It promises savings of up to 50 per cent on their production bills. The days of the ad production agency are with us.,,1539428,00.html


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