Media Square half-year profits up after restructure
LONDON - Media Square has reported pre-tax profit of £900,000 for the six months to August 31, a significant turnaround from its £13.2m pre-tax loss for the same period last year.
However, the marketing services group, which owns digital agency Twentysix London and direct marketing agency Clark McKay & Walpole, reported a 5% fall in revenues to £65.3m.
The company said much of the reduction was due to loss-making accounts being resigned by its constituent businesses and clients cutting marketing budgets, particularly across the banking, automotive and retailing sectors.
The earnings improvement was ascribed to the closure of loss-making business units and cost-cutting initiatives, including the sale of Coutts Retail Communications. The company has also reduced debt over the 12 months to August 31 to £17.1m, from £19.8m as at August 31 2007.
Roger Parry, Media Square's executive chairman, said: "Media Square is now a much simpler and stronger company than it was a year ago. We have a number of new people in place.
"The recent new business record has been encouraging. The group is well positioned to grow profitably on an organic basis."
In the past six months, the group has won accounts worth about £9m, including from advertisers Diageo, Epson, Friends Provident, Kraft, Marks & Spencer, Samsung and Mitsubishi.
However, the value of projects actually undertaken for new clients was outstripped by the spending cuts made by existing clients and the result of resigning accounts. The group said the financial benefit of many of the account wins would not become apparent until the second half of 2008 and during 2009.
The group has opened new offices during the six months to August 31: international advertising and communications network The Gate Worldwide opened an office in Edinburgh, and PR group Smarts opened a London office.
Media Square also sold its loss-making point-of-purchase promotions, as well as design specialist Coutts Retail Communications and its sister firm in Germany for £7.2m before costs (of about £1.6m).
Parry acknowledged the challenges presented by the economic climate in the UK and US, but was upbeat about prospects in China and the Middle East.
"Media Square has now recovered from its period of over-ambitious and over-rapid expansion," he said.
"Like other marketing communications companies, it faces difficult trading conditions and is taking action to ensure that the group is correctly positioned for such conditions.
"However, the fundamentals of strong business management and strong media agency brands are now in place and therefore the board is cautiously optimistic about future prospects."
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