Photon writes down DBS investment but flags healthy growth for group

photon2Australian-based marketing services group Photon has announced a lower profit figure after writing down the value of its investment in Brisbane-based internet company Dark Blue Sea which it failed to take over in 2007.  

As a result of marking down the value of its investment in DBS, the company said in its half yearly results that it was announcing a profit of just over $5m, down 39% on the same period a year before.

But despite the move – based on accountancy best practice – the company said that overall it was on track, with revenues and underlying profits up and several of its agencies outperforming their competitors. The company said revenue had increased 36% to $333m and underlying net profit after tax had increased 10% to $9.5m.

Chairman Tim Hughes told Mumbrella: “We’re streetfighters, and that’s reflected in our results. It’s all about market share at the moment.”

He said that field marketing was going well because marketers were switching from branding to direct sales. And he predicted that social media would see further growth. Last year the company launched The Population which focuses on social media. He said: “They’re going well. They’re getting some very good, big brand clients on board although it’s not going to happen overnight.”

But he expressed scepticism about Photon becoming a big player in the media agency space. As Mumbrella revealed in January, Photon’s communications strategy hotshop Bellamy Hayden plans to launch into media. Hughes told Mumbrella: “I’ve never been a big fan of media buying because it’s commodotised. But if our clients want us to do media planning then we will.”

The update also revealed that Photon has made 129 redundancies across weaker parts of the group – mainly in promotional advertising and research – in preparation for tougher times ahead. Hughes indicated he did not anticipate making further custs on that scale. He said: ‘We attacked that back in June and July although we are always striving to be more efficient.”

He said that one reason the group appears to be outperforming the market is the indvidual agency teams. He added: “We were very careful about what we acquired. A lot of these businesses have really strong managements.”

Among the best known Australian agencies included within the Photon Group are BMF, Naked, CPR and Bellamy Hayden.

Photon’s first attempts to brief investors and journalists on the company results in a teleconference this morning began in farcical fashion with CEO Matt Bailey and Hughes being drowned out by loud jazz on the line a few moments into the briefing. Hughes told Mumbrella the problem was caused when one of those dialling in for the teleconference put their call on hold, leaving everyone listening to the sax-based hold music.

After initially dipping about 5%, by lunchtime Photon’s shares were up by about 10% on their opening.

The report also reveals an intriguing shopping list of what Photon has paid for its investments in the second half of 2007:

  • SMS company Messagenet – $6m plus deferred payments;
  • Promo and marketing agency ISS – $5m, deferred payments and Photon shares;
  • Markson Sparks – $3m plus deferred payments;
  • REL Field Marketing – $17.8m plus  deferred payments;
  • Remaining 60% of Bellamy Hayden – $4.7m plus shares and deferred payments;
  • Club Sales – $7.4m plus shares and deferred payment;
  • Corporate Edge – $13.9m plus deferred payments;
  • BMF – $21.8m plus shares and deferred payments;
  • Found Agency – $1.9m plus deferred payments;
  • Frank PR – $17.7m plus loan notes and deferred payments;
  • Hotwire and Skywrite – $21m plus loan notes and deferred payments;
  • Sledge – $9.2m plus deferred payments;
  • Findology – $19.4m plus shares and deferred payments

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