M&C Saatchi records strong growth from media and consultancy
LONDON - M&C Saatchi's diversification and expansion plans have paid off, with the group posting an increase in pre-tax 2007 profits to £8m from the previous year's loss of £1.2m.
The group put its rise down partly to the addition of brand consultancy business Clear Marketing last June and the contribution of UK media agency Walker Media, in which it last year increased its ownership. Its European and US businesses also turned 2006's losses to profit, although Asia's performance was disappointing.
By the group's preferred adjusted figures, its headline pre-tax profit jumped 53.2% to £11.9m.
Total billings rose from £369m to £413m, among them a £34m global Jameson advertising account win, while revenues climbed 15.5% to £87.7m.
David Kershaw, chief executive, said: "2007 was a very successful year for the group in terms of revenue, profit and executing our strategy for growth. The core business has continued to thrive and we have made significant investments in higher growth, higher margin sectors."
The acquisition of brand consultancy Clear added £5.4m in revenues to the group and is expected to provide "numerous opportunities" to refer clients to other parts of the business.
Organic revenue growth in the UK was driven by Walker Media and its digital arm Walker-i, while the creative side of the group was mixed. M&C Saatchi London resigned its £15m ITV account, but won the first TV work for Ladbrokes in 2007.
Asia, which is seen as a fast-growing region, was a problem area for the group, generating operating profits of just £550,000 from revenues of £24.7m. Operating profits were down almost two-thirds from last year.
Kershaw told Brand Republic that he sees no downturn in budgets yet, but he had seen clear signs clients are more nervous about the future and he stood ready to reduce costs.
He said: "I think you've just got to take it quarter by quarter, it's hard to know. The first quarter has been good. We've got no reason to think that the second quarter won't be. Clients are thinking more short-term because they are obviously worried in case they see consumers starting to stop spending.
"I wouldn't dream of trying to call what's going to happen in a year's time. I think you've just got to keep going month by month and quarter by quarter and be ready to manage your costs if things start going softer than they appear to be at the moment. We're certainly not looking at boom times."
He views online as still the key growth sector, but is cautious about the "hype" about social networking sites.
"Online is still in a big growth period there's no question about that at all. I'm sure that will continue because it's fundamentally a young medium, attracting money where people can go see good very measurable paybacks. I'm sure that will continue.
"I think with online advertising you've just got to be very careful because already you start seeing softness in some social networking brands like Facebook. The trick is not to be suckered by the hype all the time but I think fundamentally online will keep growing. Paid search continues to go from strength to strength."
The AIM stock market reacted positively to the group's performance, sending its shares up 0.89% to 113.5p. Over the past 12 months, its shares have slid from around 170p to as low as 100p in February.
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