M&C Saatchi profits down a third but business is 'stable'
LONDON - M&C Saatchi has reported a 32.7% year-on-year fall in pre-tax profits to £5.4m, but the ad firm said trading had stabilised against the second half of last year and that it will continue to invest "where the possibility exists".
In its interim report, M&C said that revenues during first six months of 2009, to the end of June, fell by 3.8% year-on-year to £49.8m. On a like-for-like basis, eliminating the positive impact of exchange rate movements on the overseas revenue, the reduction was 7.5%.
David Kershaw, M&C chief executive, said: "Group trading has stabilised against the second half of last year and the business remains in good shape with strong cash flows and balance sheet.
"As always, we remain focused on providing a great service to our clients, winning new business and managing costs. Where the possibility exists for significant returns, we will continue to invest in order to provide the basis for future growth.
"Accordingly, we have opened three new offices this year and we are also extending our current brands into new markets. The outlook for the full year remains in line with management expectations."
The group's UK revenues declined by 6% to £23.8m due to what it termed a marked reduction in clients' communication budgets. M&C said it was continuing to reduce costs, having already reduced them by 3.3% compared to the same period last year.
In Europe, M&C said the market was as "tough" as in the UK, with clients cutting activity, however the weakness of sterling caused a revenue increase of 8.7% to £4.5m. Using constant rates the revenue actually reduced by 4.9%.
The US business, based in LA, experienced a 36% decline in revenue on a like-for-like basis. M&C said the US was one of the first to suffer from the economic downturn and "it remains difficult" as clients have continued to reduce spend and it lost valuable client Ketel One following the sale of the brand to Diageo.
However, Asia and Australia increased revenues by 1.5% year on year, which M&C said was a "comparatively strong performance from this region". Australia's like-for-like revenue increased by 7%, boosted by new wins including Freedom Furniture, Mitre 10, KR Castlemaine and Deacons.
M&C said its offices in Hong Kong and Shanghai were gaining momentum and reported a like-for-like revenue increase of 9%.
The group continued to expand its global network during the period and opened new offices in Geneva, Sao Paulo and Tokyo. M&C said the early signs of these businesses are promising, but it expects that they will incur losses in the first two years of operation.
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