Sector-leading margins and cross referrals between thriving group companies underscore the investment case at communications buy and build Cagney, which joined AIM in February 2006 with an acquisitive flurry.

Pro-forma figures for the year to December revealed underlying operating profits for trading companies increasing from £400,000 to £1.5m, growth of more than 250%, from turnover of £8.2m.

Paul Simons, chief executive, was keen to flag up the successful integration of the four founding businesses – brand consultancy business BrandAid, advertising and design outfit Chick Smith Trott, promotional marketing concern Cubo, and PR firm The Media Foundry – and pointed out that 37 new clients were won during a successful 2006.

As well as good levels of organic growth, Simons highlighted excellent operating margins (before Plc costs) of 25%, ahead of many sector peers and driven by the enhancement of the performance of acquisitions and resultant ‘natural collaboration between our businesses’.

Recent campaign highlights include Chick Smith Trott’s successful advertising drive for National Savings & Investments (a campaign featuring Alan Sugar) and the re-launch of BWIA as Caribbean Airlines, which took place in January 2007. ‘That was a great feather in the cap for us’, explained Simons, ‘as we worked with top-level management to re-brand the airline, getting involved with everything from brand strategy to the design of the aircraft.’

Since year-end, Cagney has completed the earnings-enhancing acquisition of consumer research agency Tree, which combines data analysis with psychological research, allowing clients such as O2 to predict consumer behaviour.

‘The customer information side of life is becoming more important’, Simons told GCI, ‘and data analysis knowledge is power.’ He continues to search for further sensibly priced acquisitions, with digital advertising, media buying and direct marketing targets under consideration.

His vision is to build a portfolio of ten to 12 businesses representing ‘the waterfront of marketing services specialisations’, with this portfolio approach reducing exposure to any single revenue stream, de-risking Cagney as an investment. It also brings ‘multiple-entry points’ to a client, providing Cagney cross-referral opportunities to bag a greater share of customers’ marketing budget. Though still very small – and small usually equals risk – Cagney punches above its weight in terms of clients and margins.