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Marketing agency Media Square, still undergoing a rigorous restructuring under executive chairman Roger Parry, is facing fragile conditions in its markets including a likely ongoing squeeze on advertising spending.

Parry, the BBC journalist-turned-turnaround specialist who took the reins at the overstretched group last year, recently delivered his first full-year results, saying ‘stage one’ of the turnaround is complete. These numbers, for the year to March, revealed a 4% drop in like-for-like turnover to £155.8m and a very significant widening of the pre-tax loss from £2.2m to £25m.

A £20m chunk of exceptional costs did weight heavily, made up of £4.1m relating to restructuring costs and an £16.8m impairment of goodwill carrying values built up by the previous management’s endless acquisitions. Parry has reduced the group’s structural complexity from its 30 multifarious business units into three divisions: advertising, marketing and design. The new management team, focused on organic growth, has a new incentive structure and has driven through some new business wins including Bank of China and Marks & Spencer).

Media Square continues to generate cash from operations, and Parry is confident that the turnaround is on track. But the first months of the new financial year have seen some clients reduce their marketing budgets, and he variously describes the outlook as ‘challenging’, ‘cautious’ and ‘fragile’.

Parry, who has proved his credentials at outdoor advertiser More Group and radio stations LBC and Jazz FM, may well deliver his accustomed turnaround, but the black cloud that once hung over the company has widened to the whole media sector.

The shares, some way from their 31.5p five-year peak in 2005, have come up from a recent all-time low of 5.12p, yet remain risky fare. Avoid for now.

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Media Square	AIM	£4.35m	13.50p	-1.00p
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