Full Year Results

M&C SAATCHI PLC

(the "Company", "M+C Saatchi" or the "Group")

Unaudited preliminary results for the year ended 31 December 2024

Strong performance in line with expectations

Strengthened foundations and improved resilience in a year of transformation

Further organic investment made in the second half to drive future growth

Full year financial performance highlights

[1] Like-for-Like (LFL) results adjust statutory results to reflect the underlying profitability of the business units, by excluding a number of items that are not part of routine expenses including one-off and exceptional items (defined as Headline Results), also excluding subsidiaries discontinued in 2023 and in 2024, and retranslating 2023 figures to 2024 FX rates. These adjustments are set out below. We provide commentary on LFL figures, where applicable, to provide a more comparable and better basis for understanding our current and future performance. LFL adjustments are summarised below in this section, in the Financial Review and at Note 1 of the financial statements. All figures are subject to rounding.

2 Refer to Notes for the definition of net revenue and net cash.

3LFL net cash is adjusted to add back £3.5 million of restricted cash. Net cash is £11.8 million.

4 Basic and diluted earnings per share are calculated by dividing the appropriate earnings metrics by the weighted average number of shares of the Company in issue during the year. Statutory basic EPS excludes the discontinued South Africa businesses; including them statutory EPS would have been 12.1p (2023: (2.9)p.)

· 3.7% LFL net revenue growth driven by strong 6.7% growth in Non-Advertising Specialisms, offsetting a modest Advertising decline of -1.9%

· Improvement in LFL profitability driven by the global cost efficiency programme, local cost actions, and improved mix:

o  5.2% LFL operating profit growth

o  LFL operating margins of 15.2% (+0.2pps), driven by higher margin Non-Advertising at 25.2% (2023: 23.3%) and improved Advertising at 11.2% (2023: 9.5%) with cost savings enabling continued organic investment. Group central costs increased, reflecting investment into centralised services for the Group

o  4.2% increase in LFL profit before tax  

· LFL earnings per share (basic) of 17.6p (2023: 16.6p) also reflects further reduction in put option liabilities, with minority interests now at 3.2% of earnings (2023: 9.1%), in addition to profitability improvement

· Adjusted net cash up 84% at £15.3 million (2023: £8.3 million), after put option settlements of £8.6 million, and operating cash conversion of 85%[1]

· Proposed increase in dividend of 21.9% to 1.95p (2023: 1.6p) reflecting our improved earnings performance and maintaining cover

· Statutory results:  £231.4 million net revenue (-2.2%), largely due to the discontinued South Africa businesses. Operating profit £22.5 million (2023: £5.7 million) due to significantly lower staff costs and the portfolio shift to higher-margin Non-Advertising Specialisms. Operating margin of 9.7% (2023: 2.4%). PBT £18.1 million (2023: £(0.8) million), due to lower staff costs, the reversal of an impairment and a decrease in finance expense (given reduced average borrowings)

Our ongoing operating model transformation

· The far reaching transformation of our operating model from federated to integrated is achieving substantial cost savings and reinforcing our Group-wide culture, delivering £10m of annualised savings

· Transformation investment, weighted to H2 2024, included key senior hires to reinforce creativity, our regional-first strategy, digital and data capability, and business development; our investment in Sports & Entertainment in the UAE, a key market in a fast-growing region; and in our Issues Specialism

· The new operating model including the restructuring of the back-office is facilitating:

o  Selling In, Up and Across through the agility of our newly integrated approach; early success in multi-specialism and cross-regional client wins, e.g. Allwyn Group

o  Shared Service Centre (SSC) now servicing 85% of in-scope revenue, liberating agencies from processes such as financial, IT, HR to focus on what they do best - creativity and client service. Remaining in-scope agencies to migrate in early 2025

o  System harmonisation, such as enterprise resource planning (ERP), people systems, and a client CRM system (HubSpot), enable the business to have full visibility on opportunities, as well as enhance our ability to clearly measure and steer the business for growth

o  New Intelligence Insight centre of excellence is in place and democratising our data capabilities, providing over 400 insight briefs to our global teams in 2024

· Phase Two of the operating model transformation planned for 2025 includes the restructuring of the middle office to deliver synergies across production, data and products. This is targeting a further annualised saving of £3 million by the end of 2025

Our new M+C Saatchi Cultural Power proposition

· The Cultural Power proposition, launched this March, is how we help clients harness cultural forces to fuel consumer desire, drive demand and deliver brand growth 

· The Cultural Power Index (CPI) is a proprietary AI-powered diagnostic tool that helps brands drive growth by identifying opportunities to build Cultural Power through improved marketing which drives sales growth

LFL operating performance highlights

· Significant shift of portfolio to higher-margin Non-Advertising Specialisms which now represent 67% of Group net revenue (2023: 60%), alongside Advertising which remains core to our offering

· Non-Advertising Specialisms[2]: the strong topline performance (+6.7%) was driven primarily by Issues, reflecting continued demand from securitised Government segments (+28%), and sustained growth in Media (+8%), offsetting macro challenges felt within the other Specialisms:

o  Net revenue of £153.7 million (+6.7%);

o  Operating profit of £38.8 million (+15.4%) and operating margin of 25.2%

· Advertising: operating profit grew +15.4% and margins improved considerably due to strong growth in Europe and UAE, combined with improved cost management globally, but the challenging economic environments in Australia and UK resulted in a small overall revenue drop (-1.9%):

o  Net revenue of £77.4 million (-1.9%)

o  Operating profit of £8.7 million (+15.4%) and operating margin of 11.2%

· Client retention remains strong: this year we retained clients who accounted for 92% of 2023 revenue

· Business wins, totalling over 140 in 2024, including Ferrari, Carlsberg, L'Oreal, Allwyn in H2 following the H1 wins of McDonalds, Ford, Danone, MTN, IKEA and Sony Pictures

· Organic investment into key geographies and specialisms to expand the portfolio coverage and increase resilience

Outlook in line with market expectationsWe are reaping the benefits of our ongoing transformation to an integrated global group. With the strong creative leadership we have appointed, the encouraging early success of our new operating model, and the strength and diversity of our portfolio in the face of continuing macro volatility, we are building a strong platform for future organic growth. This, combined with the next phase of our operating model transformation, gives the Board confidence that we can achieve results in line with the market's expectations for 2025[3]. We are also confident that, over the medium term, the platform we are building will underpin our growth ambitions.

Zaid Al-Qassab, Chief Executive Officer, said:

"2024 was an important and successful year for M+C Saatchi. Our strong results, with growing LFL net revenue, profitability and cash generation, were broad-based and reflect the health of the business. Since Simon Fuller and I joined as CFO and CEO, our focus has been laying the foundations for long-term profitable growth. We are confident that our world-leading creativity, global reach, and specialist capabilities, is the combination desired by clients. Higher margin specialist services now account for two-thirds of our business and Advertising one third, reflecting the direction of our growth strategy, which is reinforced by our continued transformation programme.

"We have increased our resilience through further diversification of our portfolio, without over-exposure to any particular segment, and we are encouraged that we have the right model for future top-line growth and strong sustainable returns for shareholders. In the near-term, while remaining mindful of ongoing macro volatility, the Board is confident that we are on track to meet market expectations for 2025.

 "I'd like to thank all our colleagues at M+C Saatchi for their commitment during this transformative year, which included welcoming new creative, regional and specialist leadership."

M+C Saatchi 2024 results presentation

Zaid Al-Qassab, Chief Executive Officer, and Simon Fuller, Chief Financial Officer, will host an in-person presentation, which can also be joined online, for analysts and investors at 9.00am BST on 27 March 2024 at 36 Golden Square, London W1F 9EE. To register your interest, please contact Headland Consultancy at [email protected]. 

A replay will be also available on the Company's website following the event at https://mcsaatchiplc.com/

Further information

Preliminary announcement

This preliminary announcement was approved by the board of directors on 26 March 2025. It is not the Group's statutory accounts. Copies of the Group's audited statutory accounts for the year ended 31 December 2024 are expected to be available at the company's website in the coming days, and a printed version will be dispatched to shareholders thereafter.

Group performance

Financial performance highlights

[1] Like-for-Like (LFL) results adjust statutory results to reflect the underlying profitability of the business units, by excluding a number of items that are not part of routine expenses including one-off and exceptional items (defined as Headline Results), also excluding subsidiaries discontinued in 2023 and in 2024, and retranslating 2023 figures to 2024 FX rates. These adjustments are set out below. We provide commentary on LFL figures, where applicable, to provide a more comparable and better basis for understanding our current and future performance. LFL adjustments are summarised below in this section, in the Financial Review and at Note 1 of the financial statements. All figures are subject to rounding.

2 Refer to Notes for the definition of net revenue, and net cash. Net cash includes £3.5 million of restricted cash.

3 EBITDA is calculated excluding the income statement charges relating to IFRS 16.

4 LFL net cash is adjusted to add back £3.5 million of restricted cash. Net cash is £11.8 million.

Our results are testament to the core strengths of our business and the success of our ongoing transformation, reflecting the positive impact of our global cost efficiency programme, with the like-for-like (LFL) results demonstrating a solid foundation for future growth. The additional benefits of the exit from loss-making operations are, by definition, excluded from the LFL measurement, but also their removal has resulted in a higher quality, higher margin business.

Our LFL net revenue growth of 3.7% demonstrates the strength of M+C Saatchi's global brand, creative capabilities, and loyal, iconic client base.

The improvement in profitability and mix is largely driven by our operating model transformation initiatives. Cost savings achieved in 2024 totalled £6.1 million on an annualised basis, adding to the £3.9 million from 2023 and therefore achieving the annualised savings of £10 million we targeted by the end of 2024. These initiatives allowed reinvestment into the business and contributed to a 5.2% rise in LFL operating profit and a 0.2 percentage point improvement in operating margin to 15.2%, while also enabling us to invest for future growth in the second half. LFL EBITDA grew by 2.3%, while LFL PBT rose by 4.2%.

Basic LFL EPS of 17.6p (2023: 16.3p) was driven by enhanced profitability, and a substantial reduction in minorities. The remaining put option liabilities are expected to reduce further over the short term, with a current residual liability of £3.7 million at a 170p share price (as at 31 December 2024).

The settlement of put options absorbed £8.6 million of cash in 2024, leaving adjusted net cash up 84% to £15.3 million, including restricted cash of £3.5 million, thanks to our continued focus on cash management and improved working capital. Operating cash conversion was strong at 85%, in-line with our long-term target of 80%, which allows for some variability over the cycle.

Reconciliation of LFL to statutory results

The Group remains exposed to foreign currency exchange rate (FX) movements impacting the translation of its overseas operations. LFL results are presented using constant FX from the current period to ensure comparability with the prior period. Key Group currency movements reflected weakness in most Group international currencies, particularly the Australian Dollar and Euro versus Sterling.

The table below sets out the reconciliation of LFL results to statutory results, showing the forex and discontinued business effect. 

Operating review

Non-Advertising Specialisms delivered a 6.7% increase in LFL net revenue to £153.6 million and contributed 67% of Group net revenue, while Advertising delivered £77.4 million (-1.9%).

The overall performance of our Non-Advertising Specialisms was fuelled by continued strong growth of 27.6% in Issues, underlining our leading market position working with the governments of Western democracies alongside charity foundations and NGOs, and highlighting the specific expertise that we have developed in this highly specialised field, mainly public sector. Media built on its first half recovery, following a more difficult 2023, ending the year +8.2%. Advertising declined -1.9% largely due to a tougher second half environment, particularly Australia and the UK.

Our higher-margin Non-Advertising Specialisms delivered a 15.2% increase in operating profit, with an operating margin of 25.2% (+1.9ppts) reflecting strong revenue growth, continued mix improvements and proactive management of the cost base. Advertising's 15.2% growth in operating profit, with operating margin at 11.2% (+1.7ppts), was largely driven by management of the cost base as well as the exit from loss-making businesses. 

Group central costs increased overall in 2024, largely due to the creation of the SSC with back-office costs now centrally held and managed to drive Group-wide effectiveness, versus locally by each agency (with a net reduction for the Group). In addition, senior leadership appointments and management incentives contributed to increased central costs. As a result, Group central costs increased to £12.3 million, from £7.7 million in 2023. 

Specialisms LFL performance

Advertising

· 33% of LFL Group net revenue (2023: 40%)

· LFL net revenue of £77.4 million -1.9% (2023: £78.9 million)

The more muted 2024 performance reflected improved momentum in the first half across multiple markets and continued efforts to improve profit through margin and cost discipline. A weaker second half was largely driven by the UK and Australian markets where macro conditions remain challenging but was significantly offset by continued growth in the UAE, Europe and the US (through a combination of new client wins and repeat business). The reduction in Advertising Group net revenue share versus 2023 was largely driven by the disposal of the South African businesses, which were largely Advertising. The outlook for 2025 reflects a consistent pattern, with subdued market conditions in Australia, stabilization in the UK, and stronger demand in Europe, the US and the UAE.

Issues

· 25% of LFL Group net revenue (2023: 20%)

· LFL net revenue of £57.9 million +27.6% (2023: £45.4 million)

Continued strong performance was driven by a combination of existing client work and new wins with multi-year framework agreements. The Group has made significant investment into this Specialism, enhancing our non-UK footprint, our data security capabilities and talent. We continue to develop our expertise in this unique and highly specialised field, with strong barriers to entry, a broadened client list and good momentum continuing into 2025.

Passions & PR[4]

· 16% of LFL Group net revenue (2023: 16%)

· LFL net revenue of £36.4 -6.5% (2023: £38.9 million)

This was a year of change with the inclusion of our PR business into this Specialism and the full reshaping of its client base for improved profitability. The award-winning Sport & Entertainment businesses, under the new leadership of CEO Robin Clarke, continued to reshape their client roster for improved profitability, focusing on higher-quality mandates across multi-year engagements and to improve service output. The outlook for 2025 is more encouraging, although PR continues to be affected by our exposure to the relatively weaker UK market.

Consulting

· 14% of LFL Group net revenue (2023: 14%)

· LFL net revenue of £32.5 million -6.7% (2023: £34.9 million)

Our M+C Saatchi Consulting branded proposition launched in 2024 as our complete end-to-end offering. Our digital and data solutions expertise in Fluency will maximise opportunities and play a crucial role in the Group's Cultural Power proposition, alongside our new Intelligence Insight centre of excellence. We remain somewhat cautious on the market backdrop for 2025, as sector challenges continue, largely due to wider economic pressures resulting in delays to project start dates and deferral of client spend; however, we are seeing an improving pipeline.

Media

· 12% of LFL Group net revenue (2023: 10%)

· LFL net revenue of £26.8 million +8.2% (2023: £24.8 million)

Media grew revenue through client wins and retained work in APAC, a core region for the specialism, and the US. Following the impact of the macro-economic slowdown in 2023, affecting technology spend in particular, we are encouraged by recent momentum and continued development of our digital expertise, including e-retail. Whilst we remain cautious on the market backdrop for 2025, we are encouraged by recent wins, our healthy pipeline and improving momentum on the back of our strong client offer.

Regional performance

The breadth of our geographic mix is a strength, and under our new Regional-First approach will, in the future, more simply reflect the way we manage the Group. The UK remains our biggest region, driven by the growth of Issues. APAC is predominantly Australia, while Americas is dominated by the US market. In Europe, the two largest markets are Italy and Germany. Since the sale of the South Africa businesses, we no longer have an owned business in Africa. LFL regional performance was as follows:

· UK: +9% with positive momentum in our specialist Issues business and Media, while Advertising was down reflecting market dynamics

· APAC: -9% in a weak Australian environment, notably in Advertising, as the cost of living and high interest rates discouraged spending and dampened consumer confidence

· Americas: -3% decline largely due to client delays in Consulting, offsetting growth in US Advertising

· Europe: +14% good growth across the board, particularly Advertising and Passions & PR through a combination of retained work and new business wins

· Middle East: +59% thanks to strong Advertising growth in the UAE and significant strength in construction and real estate as well as the launch of our S&E offering

Review of strategy

Review of our transformed operating model

The strength of these results derives directly from the early success of the transformation. This comprises the global efficiency programme, the introduction of the new integrated group operating model, including the creation of the SSC, and the shift in culture from a federated approach to a Group-wide one. Phase One of this change began in the second half of 2023 and we continued it throughout 2024 with only a small amount of the back-office left to complete. It has been transformative on every level of our operations, with Phase Two, which includes our middle office operations, now well underway.

The following table sets out our transformation goals and our recent successes:

Transformation Phase Two Our transformation during 2023 and 2024 has been significant, but there is, as we have previously said, more to do. Our 2025 transformation goals aim to set us up for future growth, alongside ensuring efficiency and effectiveness. Our 2025 objectives are to:

1. Unite behind Cultural Power, our proposition to capitalise on our unique understanding of the forces which drives purchase behaviour and brand growth, delivered through Cultural Power and helping our clients to navigate a fragmented consumer landscape

2. Bring the integrated, regional-first model to life, completing the transition to the integrated suite of systems and digital tools in early 2025, and evolving the organisational design and incentives for greater simplicity and accountability

3. Restructure the Middle Office capabilities with systems and services for shared production, data and products, unlocking further efficiencies and contributing to annualised cost savings of c.£3million in 2025

4. Complete and improve our shared services in finance, HR, property, IT, and procurement to simplify and improve revenue and profitability allowing our people to do what they do best - creativity for clients

Cultural Power proposition - thriving in the complex and fragmented media landscape The Cultural Power proposition, launched this March 2025, is the advantage we offer clients to help them harness cultural forces to fuel desire, drive demand and deliver brand growth. 

It is supported by the Cultural Power Index (CPI), a product which is a proprietary AI-powered diagnostic tool that helps brands drive growth by harnessing the power of culture. Its unique and proprietary methodology enables us to identify where there are opportunities to build Cultural Power for clients, allowing them to:

· Understand brands' cultural relevance compared to competitors.

· Pinpoint specific levers they should pull to enhance their Cultural Power and drive business growth

· Track shifts in cultural perception to stay ahead of trends

Intelligence Insight - a new centre for our data excellence

The newly created Intelligence Insight team gives the Group a further centre of excellence to raise the quality, visibility and application of data and insight throughout the work we do. We are now doing for ourselves what we always did brilliantly for clients. This helps ensure that the best insight is open to everyone internally, and we believe this capability will bolster and differentiate the Group's pitches. The Intelligence Insight team delivered over 400 briefs to support our global teams in 2024. The Intelligence Insight team's objectives are to:

· Democratise highest-quality data by sourcing and providing data and insights throughout the Group 

· Upskill our internal teams on data, taking advantage of our Intelligence team's expertise in diverse data sources

· Provide relevant, tailored and timely insights to our agencies in a client-friendly format to enable award-winning creativity and seize revenue-generating opportunities 

We see AI as a tool to enhance our core offering of creative solutions, through better, faster intelligence and through more efficient and effective execution. In 2024, we ran more than 20 AI pilots across the Group to assess and develop the best AI tools in order to expand them more widely in a rapid but appropriately-controlled way.

The Intelligence Insight team aligns with Fluency, our data consultancy agency within the Consultancy Specialism. Fluency leverages M+C Saatchi's central intelligence data stack and cutting-edge analytics capabilities to generate opportunities for clients directly, as well as for the benefit of the Group. We are realising its potential to be a market-leading data and tech consultancy.  Its client-facing services are consumer profiling; trends by category, generation or country; market and segment information; social listening and influencer understanding; website analytics; media data and marketing best practice. 

Shared Service Centre (SSC) The SSC in Cape Town, South Africa, was established in May 2024. The hub reports functionally to the CFO and Chief People and Operating Officer. Its staff of circa 60 employees across three departments are already delivering high-quality support for the Group, providing transactional processing and specialist support to the global Finance, HR and IT functions alongside new areas such as Treasury and ESG.

The benefits are evident in the balanced and consistent approach to end-to-end service delivery, the achieved cost savings, the improved management information that is increasingly available on a centralised and comparable basis, and the freeing up of the creative agencies from those processes now undertaken by the centre.

The focus for 2025 is to continue to standardise global business processes, improve both efficiency and the underlying control environment, and extend service provision to those not currently onboard. 

Our people and culture As a people business, our culture and ability to attract and retain high-quality people are critical. Our culture has creativity, innovation and entrepreneurship at its heart. We apply this to our entire business right across all our functions, Specialisms and geographies.

The commitment of our people is as high as ever, despite market volatility and organisational change. They have reacted positively to the challenges that have arisen through the transformation. Employee engagement has remained broadly level at 71 (2023: 72), and the response rate in our employee survey was very high at 80% (2023: 76%). We are comfortable with our voluntary UK churn rate of 19% (2023: 18%) which is in-line with industry averages and is a proxy for the rest of the Group. This also ensures the right level of new talent and expertise coming in.

The Board We would like to acknowledge Zillah Byng-Thorne, Executive Chair from September 2023 to June 2024, for her vision for M+C Saatchi and for initiating the transformation programme during her successful leadership. This has been reinforced and expanded since Zaid Al-Qassab joined as CEO in May 2024. We also welcomed Simon Fuller, who joined as CFO in July 2024, taking over from Bruce Marson. The Group has improved financial processes, systems and discipline with a focus on optimisation and investment to support growth, increase margin and generate cash. The success of the SSC's finance function is a tribute to the quality of planning and execution.

We welcomed Non-Executive Directors, Dame Heather Rabbatts on 22 January 2024 and Georgina Harvey on 1 October 2024. Dame Heather is Senior Independent Director (SID) and Georgina became Chair of the Remuneration Committee from 1 January 2025. We are benefitting from both their highly relevant experience and expertise across their portfolio of companies.  Louise Jackson will step down from the Board at the 2025 Annual General Meeting (AGM), having joined in March 2020. We thank her for her valuable contribution to the Company.

Capital allocation focused on organic growth M+C Saatchi is a capital light business which, over the medium term, is capable of converting at least 80% of its operating profits into cash, subject to some degree of variability of the cycle. Our streamlined portfolio of businesses, our new operating model, and our go-to-market strategy give us a high degree of confidence in the potential for sustainable and growing free cash generation.

· The organic growth and evolution of the Company will require investment. Our policy is to re-invest to drive long-term growth and to add capability, capacity and scale where we can generate the greatest return. This lower-risk strategy ensures that we invest to drive revenue growth in priority geographies and in capabilities where we have the right to win. 

· We are open to accelerate this progress through selective M&A, to address gaps in our capabilities or regional coverage. Whilst our near-term focus is likely to be more bolt-on type opportunities, we are comfortable operating with a net debt to EBITDA ratio of up to 1.5 times in the event of M&A, which is well within our financial covenants within the Facility.  

· Our overall goal is to deliver a compelling combination of a robust, optimal balance sheet and returns to shareholders including a growing dividend.

· Alongside dividends, the Board will also consider share buyback relative to other uses of cash as a means of creating shareholder value.

Outlook in line with market expectations We are reaping the benefits of our ongoing transformation to an integrated global group. With the strong creative leadership we have appointed, the encouraging early success of our new operating model, and the strength and diversity of our portfolio in the face of continuing macro volatility, we are building a strong platform for future organic growth. This, combined with the next phase of our operating model transformation, gives the Board confidence that we can achieve results in line with the market's expectations for 2025. In addition, we are also confident that, over the medium term, the platform we are building will underpin our growth ambitions.

Financial review

Group results

Note: Like-for-Like (LFL) results adjust statutory results to reflect the underlying profitability of the business units, by excluding a number of items that are not part of routine expenses including one-off and exceptional items (defined as Headline Results), excluding subsidiaries discontinued in 2023 and in 2024, and retranslating 2023 figures to 2024 FX rates. These adjustments are set out below. We provide commentary on LFL figures, where applicable, to provide a more comparable and better basis for understanding our current and future performance. LFL adjustments are summarised below in this section, in the Financial Review and at Note 1 of the financial statements. Statutory profit for the year excludes results from discontinued South Africa business.

The Group generated £231.0 million of LFL net revenue in 2023, up 3.7% on last year, driven by 6.7% growth in Non-Advertising Specialisms, offsetting Advertising decline of 1.9%.

Like-for-like EBITDA grew by 2.3% to £42.0 million (2023: £41.0 million) and LFL operating profit was £35.2 million, up 5.2%. Our profitability benefited from the new operating model which allowed the partial reinvestment of the £10 million annualised savings generated by our global efficiency programme. LFL operating profit margin was 15.2% (2023: 15.0%), driven by the strong performance of the higher-margin Non-Advertising Specialisms and their increasing weight in the portfolio. LFL profit before tax was £30.5 million, up 4.2%. 

Separately disclosed one-off items, mainly relating to our global efficiency programme, were £7.2 million (mainly people restructuring) as we continue to implement the SSC transformation plan and rationalise our footprint to maximise efficiency.

LFL profit after tax attributable to shareholders was £21.4 million (2023: £20.3 million), reflecting the cash settlement of put options. LFL basic earnings per share were up 6.1 % to 17.6p (2023: 16.6p).

The Group delivered adjusted net cash of £15.3 million (2023: £8.3 million) after £8.6 million of put option payments (2023: £15.4 million). Working capital absorbed £6.4 million (2023: £14.5 million absorption), an improvement over last year driven by better payment terms and improved cash management.

Statutory results

The Group generated £231.4 million of net revenue, a decline of 2.2%, largely due to discontinued businesses, particularly the South Africa businesses. Statutory operating profit grew 294.7% to £22.5 million, due to significantly lower staff costs and the portfolio shift to higher-margin Non-Advertising Specialisms. This led to an increased statutory operating margin of 9.7% (2023: 2.4%). PBT grew to £18.1 million (2023: £(0.8) million), due to lower staff costs, the reversal of an impairment and a decrease in finance expense (given reduced average borrowings).

LFL Specialisms and regional review 

The strength derived from the Group's diverse portfolio of Specialisms and regions is key to our stability and resilience as well as our future growth. We believe that our new regional-first approach will be better able to realise the value of the breadth and quality of our capabilities within our regions and globally. We are therefore now managing our business by regions, but continue to report across these by Specialism. In future, we will increasingly focus reporting on a regional basis.

We reported strong regional performances in the Middle East (+58.9%), Europe (+14.0%) and the and the UK (+8.7%); and by Specialism for Issues (+27.6%) and Media (+8.2%). Elsewhere the performance was impacted by continuing macro-economic volatility. More detail of operational performance is provided in the operating review. 

Revenue share shifts in Specialism and region over time

1 The Group disposed of the South Africa businesses on 30 September 2024, going forward there will be no segmental reporting for this region

Central costs

The Group LFL operating margin of 15.2% (2023: 15.0%) reflects a continued shift towards the higher-margin, Non-Advertising Specialisms and the success of the global efficiency programme which has enabled further investment in creativity and future growth. 

Group central operating costs increased from £7.7 million in 2023 to £12.3 million in 2024, reflecting investment into centralised services for the Group, including the SSC which has reallocated costs from the individual agencies to the centre (saving on a combined basis).

Our global efficiency programme achieved annualised savings of a total of £10 million at the end of 2024, including annualised savings of £6.1 million in 2024 and £3.9 million in 2023.

Like-for-like reporting

Like-for-Like (LFL) results adjust statutory results to reflect the underlying profitability of the business units, by excluding a number of items that are not part of routine expenses including one-off and exceptional items (defined as Headline adjustments), excluding subsidiaries discontinued in 2023 and in 2024, and retranslating 2023 figures to 2024 FX rates. These adjustments are set out below. We provide commentary on LFL figures, where applicable, to provide a more comparable and better basis for understanding our current and future performance. LFL adjustments are summarised below and at Note 1 of the financial statements.

Management considers LFL figures are a better way to measure and manage the business and they are used for internal performance management and reward. LFL results is not a defined IFRS term and is not intended to be a substitute for, or be superior to, any IFRS measures of performance. 

The table below summarises the reconciliation from LFL to statutory results for 2024 and 2023, excluding Company-specific adjustments which are set out below.

1. Company adjustments (Headline adjustments)

These comprise:

• Separately disclosed items that are one-off in nature and are not part of running the business

• Impairment of non-current assets

• Amortisation of acquired intangibles

• Gains or losses generated by disposals of subsidiaries and associates

• Fair value adjustments to unlisted equity investments, acquisition related contingent consideration, investment properties and put options

• Dividends paid to IFRS 2 put option holders

2. Foreign exchange adjustments ("FX")

The Group is exposed to movements in foreign currency exchange rates on the translation of the results of its overseas businesses. The LFL basis applies the constant foreign exchange applicable for the current period to the comparative period in order to present the results on a comparable basis. Key Group currency movements reflected weakness in all key Group international currencies, particularly the Australian Dollar and Euro versus Sterling.

Key 2024 currencies and average FX rates used to retranslate 2023

3. Discontinued businesses

During 2024 we disposed of the agencies comprising the South Africa businesses, which was treated as a discontinued operation and excluded from the statutory results of the Group. Up to the date of the disposal these businesses contributed net revenue of £11.9 million (2023: £16.1 million), operating profit of £3.5 million (2023: £1.6 million) and profit before tax of £3.5 million (2023: £1.5 million). These 2024 results include the relevant gain on disposal of £2.1 million within operating profit.

During 2023 and 2024 we also exited from a number of other marginal or loss-making businesses. In 2024, these businesses contributed net revenue of £0.4 million (2023: £9.1 million), negligible operating profit (2023: loss of £2.9 million), negligible PBT (2023: loss of £3.1 million).

In 2024, disposals comprised shares in the agencies comprising the South African businesses, the Company's creative agencies in Indonesia and Switzerland, and certain French associate investments. 

In some cases, these businesses continue to operate under licence, providing a fee for the use of our brand. Licensees as at the end of 2024 comprise: Japan, Lebanon, Spain, South Africa, Sweden and Thailand (also an Associate).

Financial income and expense  

The Group's financial income and expense includes bank interest, lease interest and fair value adjustments to minority shareholder put option liabilities (IFRS 9). Bank interest payable for the year was £2.2 million (2023: £2.3 million).

The interest on leases increased to £3.4 million (2023: £2.9 million). The fair value adjustment of put option liabilities created a debit of £0.2 million (2023: £2.1million).

TaxLFL tax: Our LFL tax rate was 27.4% (2023: 23.7%). The increase in the LFL tax rate is due to less current year benefit from our historic tax provisioning, reduction in partnership minorities and an increase in UK tax rates. The variation to Statutory tax is due to significant items that LFL excludes such as share-based payments, disposals and put options being non-deductible against corporation tax.

Statutory tax: The Statutory tax rate was 21.5% (2023: 493.3%). We have experienced large variations in Statutory tax rates, because items such as goodwill impairments and put options arising from investments in subsidiaries are non-deductible against corporation tax due to their being capital in nature.

Non-controlling interests (minority interests) 

LFL non-controlling interest share of the Group's profit represents the minority shareholders' share of each of the Group's subsidiaries' profit or loss for the year. The share of profits attributable to non-controlling interests reduced to £0.7 million (2023: £2.0 million) reflecting a reduction in minority interests to 3.2% (2023: 9.1%) of profit after tax. This reflects a reduction during the year in the minority interest shareholdings in several Group entities, as a result of the settlement of put options.

Statutory non-controlling interests excludes any minority interests which relate to IFRS 2 put option holders (holders of put options that are contingent on being employed by the relevant company). Their share of the entity's Statutory profit is paid as dividends each year, which are reported as staff costs in the Statutory results.

Dividends 

The Company paid dividends in 2024 of £1.9 million (1.6p per share). We are committed to returning capital to shareholders, and, given the growing earnings performance during the year, the Board is recommending the payment of an increased final dividend of 1.95p pence per share.

Subject to shareholder approval at the Annual General Meeting, to be held on 15 May 2025, the dividend will be paid on 11 June 2025 to shareholders on the register at 9 May 2025. The shares will go ex-dividend on 8 May 2025. For the purpose of the dividend the Company's TIDM is SAA and ISIN is GB00B01F7T14.

Cash flow

Total gross cash (excluding bank overdrafts) at 31 December 2024 was £25.9 million (2023: £24.3 million), excluding restricted cash of £3.5 million. Cash net of bank borrowings (net cash excluding restricted cash) was £11.8 million (2023: £8.3 million).

The Group generated operating cash from trading (before working capital) of £29.3 million (2023: £15.1 million) before dividends to IFRS 2 put option holders of £5.8 million (2023: £14.6 million) and £2.8 million of payments to acquire non-controlling interests (2023: £0.8 million). There was a £3.6 million net outflow from working capital excluding transfers to restricted cash (2023: outflow of £14.5 million). Lease payments were £8.5 million (2023: £9.1 million).

Net operating cash flow (operating cash generated from operations (excluding put option payments and non-adjusted cash costs) net of purchases of intangible / tangible fixed assets and the principal payment on leases) for the year was £25.6 million (2023: £15.6 million) which represents a cash conversion from LFL operating profit of 85%. This is in-line with our target of 80%.

Movement in net cash 

The following table sets out the key movements in net cash during 2024:

Banking arrangements 

On 7 March 2024, the Company refinanced its previous facility by entering into a new revolving multicurrency facility agreement with National Westminster Bank Plc, HSBC UK Bank plc and Barclays Bank PLC for up to £50m (the "Facility"), with a further £50m extension if required for strategic acquisitions. The Facility is provided on a three-year term with two one-year extensions, the first of which was Board granted on 20th March 2025, extending the Facility until 7 March 2028. The primary purpose of the Facility is to provide the Group with additional liquidity headroom to support any variations in working capital and provide funding for selective bolt-on acquisitions. At 31 December 2024, £14.0 million was drawn on the Facility compared to £16.0m drawn on the previous facility at 31 December 2023.

Capital expenditure 

Total capital expenditure including software acquired increased to £2.9 million (£1.8 million). This included £0.3 million on furniture, fittings and other equipment, £1.0 million on computer equipment, £0.4 million on leasehold improvements, and £1.2 million on software and film rights (2023: £0.7 million, £0.6 million, £0.5 million, and £0.0 million respectively).

Financial Statements

Unaudited Consolidated Income Statement

Consolidated Income Statement of other comprehensive income

* All items in the consolidated statement of comprehensive income may be reclassified to the income statement.

Unaudited Consolidated Balance Sheet

These financial statements were approved and authorised for issue by the Board of Directors on 26 March 2025 and signed on its behalf by:

Simon Fuller

Chief Financial Officer

M&C Saatchi plcCompany number 05114893

Unaudited Consolidated statement of changes in equity

Unaudited Consolidated cash flow statement

* Bank loans and borrowings exclude the lease liability of £42,244k (2023: £49,443k) .

** Cash and cash equivalents at the balance sheet date excludes £3,462k held in Chinese Yuan, which has been classified as restricted cash after the funds were frozen by the Chinese Government due to ongoing litigations. The balance has been classified as a current asset on the face of the balance sheet.

Preliminary announcement

This preliminary announcement was approved by the board of directors on 26 March 2025. It is not the Group's statutory accounts. Copies of the Group's audited statutory accounts for the year ended 31 December 2024 are expected to be available at the company's website in the coming days, and a printed version will be dispatched to shareholders thereafter.

Basis of preparation

The financial statements have been prepared in accordance with UK adopted international accounting standards, in conformity with the requirements of the Companies Act 2006.

The financial statements are presented in pounds sterling and, unless stated otherwise, rounded to the nearest thousand. They have been prepared under the historical cost convention, except for the revaluation of certain financial instruments.

Going concern

These financial statements have been prepared on the going concern basis, as set out in the Directors' Report and the report of the Audit and Risk Committee.

The Board has concluded that under the most likely going concern scenarios, the Group will have sufficient liquidity and headroom under the financial covenants in the Facility (the "Covenants") to continue to operate for a period of not less than a year from approving the financial statements.

The Board has formed its opinion after evaluating four different severe but plausible forecast scenarios and a reverse stress test, extending to 31 December 2027. The four scenarios comprise:

1. A significant reduction in new business wins.

2. A significant increase in wage inflation.

3. A significant number of top clients are lost.

4. A significant economic downturn.

These severe but plausible scenarios are assumed to materialise from the first quarter of 2025 onwards. The estimated decline in EBITDA ranges from £10 million to £26 million compared to the base case plan for the cumulative period ending 31 December 2026, including a £5 million to £13 million decline in EBITDA in 2025.

The reverse stress test case evaluates how extreme conditions would need to be for the Group to break the Covenants within the going concern review period. The conditions go significantly further than the severe but plausible scenarios and reflect a scenario that the Directors consider to be highly unlikely.

The Directors have also considered the impact of climate change on going concern, taking into account the Company's support for Ad Net Zero (the industry initiative to tackle climate change led by the Advertising Association and its members), and do not believe that there is a significant financial impact.

 The Board has concluded that, under all scenarios modelled by management, the Company will have sufficient liquidity to operate and will not breach the Covenants.

In their review of the severe but plausible scenario, the Directors have also considered several mitigations that would help maintain headroom on the Covenants under the Facility, and are at their discretion, including but not limited to:

· Reduction or postponement of dividend payments

· Reduction of bonus payments

· Reduction of overheads and operating expenses

· Renegotiate terms of the Facility including Covenant relaxation.

· Closure of now loss-making entities

· Reduction of staff levels in line with revenue reduction.

The Board is satisfied that the Group's forecasts, which take into account reasonably possible changes in trading performance, show that there are no material uncertainties over going concern, and that, even under the severe but plausible scenarios, the Group will continue to have sufficient liquidity and headroom to operate within the Covenants. The Board, therefore, have concluded the going concern basis of preparation continues to be appropriate.

Like-for-like results

As stated in the Financial Review, the Directors believe that the Like-for-like results and Like-for-like earnings per share (see Note 1 of the financial statements) provide additional useful information on the underlying performance of the business. The Like-for-like (LFL) results reflect the underlying profitability of the business units, by excluding a number of items that are not part of routine business income and expenses.

In addition, the LFL results may be used for internal performance management and reward. The term 'Like-for-like' is not a defined term in IFRS. Note 1 reconciles Statutory results to LFL results and the segmental reporting (Note 3 of the financial statements) reflects LFL results, in accordance with IFRS 8.

The items that are excluded from LFL results are:

· Separately disclosed items that are one-off in nature and are not part of running the business.

· Revaluation of associates on transition to assets held for sale.

· Impairment of assets held for sale, right-of-use assets, leasehold improvements, acquired intangibles and goodwill.

· Gains or losses generated by disposals of subsidiaries.

· Fair value adjustments to unlisted equity investments, acquisition-related deferred consideration and put options.

· Dividends paid to IFRS 2 put option holders. However, in non-controlling interest, we deduct profit share attributable to IFRS 2 put option holders.

· Results of subsidiaries which management has or intends to exit in the current and prior year.

· Effects of foreign exchange movements on the underlying results, by retranslating prior year figures using current year foreign exchange rates.

Consolidation

Where a consolidated company is less than 100% owned by the Group, the treatment of the non-controlling interest share of the results and net assets is dependent on how the non-controlling interests' equity is accounted for. Where the equity is accounted for as a share-based payment award under IFRS 2, all dividend outflow is taken to staff costs, and there is no non-controlling interest. In all other cases, the non-controlling interest share of the results and net assets is recognised at each reporting date in equity, separately from the equity attributable to the shareholders of the Company.

Material accounting policies

Certain of the Group's accounting policies are considered by the Directors to be material due to the level of complexity, judgement or estimation involved in their application and their potential impact on the financial statements. The critical accounting policies are listed below and explained in more detail in the relevant notes to the financial statements.

Revenue recognition

The Group's revenue is earned from the provision of advertising and marketing services, together with commission-based income in relation to media spend and to talent performance. Revenue from contracts with customers is recognised as, or when, the performance obligations present within the contractual agreements are satisfied. Depending on the arrangement with the client, the Group may act as principal or as agent in the provision of these services.

See Note 4 of the financial statements for a full listing of the Group's revenue accounting policies.

Put option accounting (IFRS 2 and IFRS 9)

Some of our equity partners in the Group's subsidiaries hold put options over their equity, such that they can require the Group to purchase their non-controlling interest for either a variable number of the Company shares or cash. Dependent on the terms and substance of the underlying agreement, these options are either recognised as a put option liability under IFRS 9 or as a put option under IFRS 2 - see significant judgements below.

An IFRS 9 scheme should be considered as reward for future business performance and is not conditional on the holder being an employee of the business. These instruments are recognised in full at the amortised cost of the underlying award on the date of inception, with both a liability on the balance sheet and a corresponding amount within the minority interest put option reserve being recognised. At each period end, the amortised cost of the put option liability is calculated in accordance with the put option agreement, to determine a best estimate of the future value of the expected award. Resultant movements in the amortised cost of these instruments are charged to the income statement within finance income/expense. The put option liability will vary with both the Group's share price and the subsidiary's financial performance. Upon exercise of an award by a holder, the liability is extinguished and the associated minority interest put option reserve is transferred to the non-controlling interest acquired reserve.

An IFRS 2 scheme should be considered as reward for future business performance and is conditional on the holder being an employee of the business. These schemes are recognised as staff costs over the vesting period (if equity settled) or until the option is exercised (if cash settled). In September 2021, the Board made the decision to move to cash settlement of these put options going forward. This required a fair value assessment on the day of the modification and a movement between reserves and liabilities.

Unlisted investments

The Group holds certain unlisted equity investments which are classified as financial assets at fair value through profit and loss (FVTPL). These investments are initially recognised at their fair value. At the end of each reporting period, the fair value is reassessed, with gains or losses being recognised in the income statement.

Assets held for sale

The Group classifies assets as held for sale where it is highly probable that they will be recovered primarily through sale rather than through continuing use.

Significant accounting judgements and key sources of estimation uncertainty

In the course of preparing financial statements, management necessarily makes judgements and estimates that can have a significant impact on the financial statements. The estimates and judgements that are made are continually evaluated, based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that have a significant risk of causing a material adjustment to the financial statements within the next financial year are outlined below:

Significant accounting judgements

Management has made the following judgements, which have the most significant effect in terms of the amounts recognised, and their presentation, in the financial statements.

Impairment - assessment of CGUs and assessment of indicators of impairment

Impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. Assets with finite lives are reviewed for indicators of impairment (an impairment "trigger") and judgement is applied in determining whether such a trigger has occurred. External and internal factors are monitored by management, including: a) adverse changes in the economic or political situation of the geographic locale in which the underlying entity operates; b) heightened risk of client loss or chance of client gain; and c) internal reporting suggesting that an entity's future economic performance is better or worse than previously expected. Where management has concluded that such an indication of impairment exists, then the recoverable amount of the asset is assessed.

The Group assesses whether an impairment is required by comparing the carrying value of the CGU assets (including the right-of-use assets under IFRS 16) to their value-in-use. Discounted cash flow models, based on the Group's latest budget and three-year financial plan, and a long-term growth rate, are used to determine the recoverable amount for the CGUs. The appropriate estimates and assumptions used require judgement and there is significant estimation uncertainty.

The Group has recognised a total impairment charge of £890k in the year (2023: £6,798k), of which £361k relates to impairment reversal of investment property (2023: nil) and £297k relates to the impairment reversal of right-of-use assets (2023: impairment of £1,872k). There was an impairment of £1,634k in the year of intangibles (2023: £4,794k) and nil in plant and equipment (2023: £132k). There was an impairment reversal of £86k in the year of associate investments held in assets held for sale (2023: nil).

Non-controlling interest put option accounting - IFRS 2 or IFRS 9

The key judgement is whether the awards are given beneficially as a result of employment, which can be determined where there is an explicit service condition, where the award is given to an existing employee, where the employee is being paid below market value or where there are other indicators that the award is a reward for employment. In such cases, the awards are accounted for as a share-based payment in exchange for employment services under IFRS 2.

Otherwise, where the holder held shares prior to the Group acquiring the subsidiary, or gained the equity to start a subsidiary using their unique skills, and there are no indicators it should be accounted for under IFRS 2, then the award is accounted for under IFRS 9.

Significant estimates and assumptions

Some areas of the Group's financial statements are subject to key assumptions and other significant sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The Group has based its assumptions and estimates on parameters available when the financial statements were prepared.

Deferred tax assets

The Group assesses the future availability of carried forward losses and other tax attributes, by reference to jurisdiction-specific rules around carry forward and utilisation, and whether it is probable that future taxable profits will be available against which the attribute can be utilised. Changes in such assessments would allow unrecognised deferred tax to be recognised and vice versa.

Leasing estimates

IFRS 16 defines the lease term as the non-cancellable period of a lease, together with the option to extend or terminate a lease if the lessee is reasonably certain to exercise that option. Where a lease includes the option for the Group to extend the lease term, the Group takes a view, at inception, as to whether it is reasonably certain that the option will be exercised. This will take into account the length of time remaining before the option is exercisable, current trading, future trading forecasts and the level and type of any planned capital investment. The assessment of whether the option will be exercised is reassessed in each reporting period. A reassessment of the remaining life of the lease could result in a recalculation of the lease liability and a material adjustment to the associated balances.

Notes to the financial statements

1. Like-for-like results, earnings per share and EBITDA

The analysis below provides a reconciliation between the Group's Statutory results and the LFL results for the current year.