ANALYSIS: Optimism abounds for OneMonday - Amid tumbling tech fee income and the imminent loss of its brand, Chris Scott finds analysts and directors surprisingly upbeat about the future of OneMonday Group

One would expect that a listed firm that relies on tech PR in the US and UK for the bulk of its revenue would be a pariah among investors.

Yet analysts are remarkedly gung-ho about the future of OneMonday, despite the announcement of a 79 per cent slump in revenues for the six months to January, and the continuing scarcity of business in the tech sector.

Significant drops in fee income last year were recorded in most of its businesses. August.One (21 per cent), Text 100 (nine per cent) and Joe Public Relations (21 per cent) all suffered from this, with only Bite Communications bucking the trend at 26 per cent up.

That PricewaterhouseCoopers paid $5m for the name - to eliminate confusion having spun off its Consulting arm as Monday - came as relief to shareholders, with stock rising almost ten per cent on the news. They have seen their investment soar then collapse since the flotation in December 1999. Floated at 85p, it touched 250p in Q1 2000, before sliding down to a last-six-month average of just over 30p per ordinary share. With analysts predicting a pre-exceptional profit of almost £1m for the current year, they seem a decent bet in a depressed market.

Analysts are convinced by the firm's cost-cutting, which by April had seen one in five staff culled, to a head count of barely 600. Many now predict further attrition in staff numbers before the year is out, yet believe that, by doing so, the company will be well placed to take advantage of a recovery.

Finance director David Dewhurst concedes that OneMonday losing staff is an unpleasant necessity: 'We found it difficult losing staff because we grew organically. It's difficult to tell people who have been here some time they are not needed.'

Although the tech market may have bottomed out, problems remain. Sources say the group's global nature is a double-edged sword. The different agencies have a presence in Europe, north America, India, Africa and Asia-Pacific.

It also operates with a disparate management structure as San Francisco-based CEO Tim Dyson and UK-based chairman Tom Lewis operate across an eight-hour time difference.

The global spread has helped the firm to pick up multi-territory accounts such as IBM. But it is also the source of frustration at the processes followed before decisions are made. One source admitted it was 'infuriatingly difficult' to get decisions turned around in a short space of time.

Dewhurst disagrees: 'We have a tight management team at the top. Tim has only a handful of direct reports from the CEOs of the four companies,' adding that Dyson operates from the US headquarters of Text 100.

Many analysts have expressed concern at the firm's perceived over-reliance on its contract with IBM. It is estimated the contract accounts for 40 per cent of OneMonday's annual US revenue, and with IBM already having reviewed the extent of its PR spending once in the past year, there is nothing to prevent it doing so again.

Dewhurst attributes the dramatic collapse in income at the end of last year to the effects of this contract: 'We won IBM in August and didn't start until November, but the clients that competed with them left straight away. As we were having to recruit people, we took a double hit waiting for business to begin.'

August.One remains 'guardian' of the Microsoft account, but CEO Stuart Handley says the agency's focus now is to generalise away from tech: 'In the grand scheme of things we're not a Hill & Knowlton, but we try to offer more than just media relations to tech firms,' citing the retention of the agency's first general consumer clients -TotalFina Elf and Whirlpool - last year.

JPR has also tried to shield itself from the tech slump, according to MD Matthew Wood: 'Eighteen months ago about 60 per cent of our clients were dot.coms. Now they make a small part of our business and they're the good ones, such as eBay.'

According to Lewis, the future lies in its tradition of organic growth: 'One of the uses to which we will be putting the PwC windfall is to accelerate the rate of organic growth. It may be through new businesses and new brands.' When this happens, attanetion will need to go to the positioning of any brand created - the last new offerikng, tech startup PR specialist Evus, folded after less than two years.

'We wouldn't rule out acquisitions but never go on an acquisition spree.

The only reason we would buy would be to strengthen the market position of one of our brands where it would yield a quick return. It's more likely in the US than in Europe,' he adds, in a reference to an expected expansion of the US JPR office. Growth is on the cards for Text, too which will look to build its Hong Kong presence and press into China over the next year.

Lewis remains convinced the bulk of growth will be organic: 'We've been going for 21 years and we've seen some of the difficulties with growth by acquisition. There are immense difficulties with building teams when you are bringing them in with the chequebook. Growing organically takes longer but you avoid a debt mountain.'

What is certain is that in one year the One.Monday name will cease to exist. A team has been assembled to come up with a 'neutral' brand and shareholders will be hoping the optimism it inherits in its financial health is not misplaced.

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