Carat forecasts profits 'in a few years' despite heavy investments in China

<p>Just months after announcing the launch of offices in secondary </p><p>cities in China, Carat expressed confidence that it would be running a </p><p>profitable operation in the country within a few years. </p><p><BR><BR> </p><p>Mr Douglas Flynn, chief executive of Aegis Group, which is Carat's </p><p>parent company, said the media independent is the first media agency to </p><p>establish a network of offices outside the key cities of Guangzhou, </p><p>Shanghai and Beijing. </p><p><BR><BR> </p><p>He acknowledged that this "looked like a recipe for disaster", however, </p><p>the Aegis chief said the expansion was necessary because China was such </p><p>a fragmented market that it was essential to have local presence in </p><p>secondary cities. </p><p><BR><BR> </p><p>"In Asia-Pacific, media specialists are accepted most in China, </p><p>Australia and Japan. With China, the country is so complex - just look </p><p>at the number of television stations and publications at the provincial </p><p>and city level which you have to look at, not to mention the mushrooming </p><p>number of websites - and you know you cannot run the whole of the </p><p>country out of a few offices," Mr Flynn told MEDIA. </p><p><BR><BR> </p><p>The move into secondary cities is also accompanied by the fact that </p><p>significant disposable incomes are no longer only found in the key </p><p>coastal cities. </p><p><BR><BR> </p><p>Wealth is filtering into secondary cities, making more localised </p><p>targeting more important. </p><p><BR><BR> </p><p>Carat Asia chief executive officer David Liu said that while the message </p><p>is always important, in China the medium is more important. </p><p><BR><BR> </p><p>"More importance is placed on the delivery than the packaging. This is </p><p>underlined by the fact that clients are more worried about which </p><p>channels are being used to get the message across. </p><p><BR><BR> </p><p>"This has been the situation in China for a long time. As a result, you </p><p>can say that China started out as being media-driven and not, as in most </p><p>other countries, creative-driven." </p><p><BR><BR> </p><p>The China operation currently employs more than 90 people and more will </p><p>be hired on a needs basis, said Mr Liu. </p><p><BR><BR> </p><p>Carat, meanwhile, has also started new ventures in Japan and New </p><p>Zealand. </p><p><BR><BR> </p><p>In Japan, it has acquired a majority stake in Tokyo-based Strategic </p><p>Planners International (SPI), an independent media planning and </p><p>consultancy business, and renamed it Carat SPI KK. </p><p><BR><BR> </p><p>Mr Flynn said the agency "would give us a good 'look see' into the </p><p>market place". However, he ruled out acquiring a media buying company or </p><p>setting up a full Carat office in Japan for the time being. </p><p><BR><BR> </p><p>"Every idea has its time. This is the right time for what we've </p><p>done. </p><p><BR><BR> </p><p>We might buy some time in the future but it's not about burning </p><p>money. </p><p><BR><BR> </p><p>We're taking a step-by-step approach," he said. </p><p><BR><BR> </p><p>In New Zealand, Carat has purchased the country's largest locally-owned </p><p>media independent, Strategic Media. </p><p><BR><BR> </p><p>The new company will be known as Carat New Zealand. </p><p><BR><BR> </p><p>"We have worked closely with Strategic Media for many years and share </p><p>the same culture of innovation - openly challenging conventional media </p><p>solutions," Mr Flynn said. </p><p><BR><BR> </p><p>"This acquisition is a natural step and establishes Carat New Zealand as </p><p>a major force in this market." </p><p><BR><BR> </p><p>The new developments in China, Japan and New Zealand reflect the fact </p><p>that Carat is stepping up its bid to be the leading player in the media </p><p>specialism field. </p><p><BR><BR> </p><p>"Although we came to Asia a bit late, we now have a comprehensive </p><p>geographic network, but there are challenges ahead," Mr Flynn said. </p><p><BR><BR> </p><p>These include introducing more of its network clients to the </p><p>Asia-Pacific region, making the China operation profitable, determining </p><p>the next step in Japan and how to enter the Korean and Indonesian </p><p>markets. </p><p><BR><BR> </p>