28th Sep 2006 07:02
M&C Saatchi PLC28 September 2006 M&C Saatchi plc Interim Results for the Six Months Ended 30 June 2006 M&C Saatchi plc, the international marketing communications group, todayannounces its interim results for the six months ended 30 June 2006. Group Highlights - Revenues (gross profit) up 8.7% to £34.7m (2005: £31.9m) - Strong organic growth from all regions driven by significant new business wins - Successful launch of second continental European office, M&C Saatchi Germany - Profit before tax* down 29.8% to £2.9m (2005: £4.1m) following short-term investment to support revenue growth - Interim dividend per share held at 0.77 pence - Full year profit expectations significantly ahead * excluding amortisation Commenting on the results, David Kershaw, Chief Executive, said: "This has been an encouraging year with the business showing real momentum. Wehave seen strong organic revenue growth driven by several new business wins andour continued expansion into new markets. Although our profits have beenimpacted by further investment to support revenue growth and expansion into newmarkets, this leaves us well placed to build on our position. The new businesspipeline remains strong and we expect profits for the full year to besignificantly ahead of our previous expectations. The outlook into 2007 isgood." For further information please contact M&C Saatchi plc 020 7543 4500David Kershaw, Chief Executive Tulchan Communications 020 7353 4200Miranda AclandPeter Hewer Overview The Group has made good progress during the last six months, winning newbusiness and growing revenues across all regions. Group revenues were up 8.7% to£34.7m (8.0% on a constant currency basis), comfortably replacing the lostrevenue from British Airways. The UK has been the strongest driver of growth, particularly from the mediaplanning and buying, direct marketing and PR businesses. Our offices inAustralia and Los Angeles also provided good growth and our France office is nowmaking a contribution. In July, we opened the doors to M&C Saatchi Germany,adding to our European offering. New business performance from many of oursmaller Asia Pacific offices has also been strong in the first half. Group profits have been impacted temporarily by increased costs to support ournew offices in India, Thailand and Europe and our offices in New Zealand andSingapore which have been effected by account losses. This profit impact isexpected to reverse in the second half, and we are confident that profits forthe full year will be significantly ahead of our previous expectations. Financial review Reported revenues (gross profit) increased by 8.7% to £34.7m (8.0% on a constantcurrency basis). All regions reported an increase in revenues - the UK up 6.6%to £20.3m, Asia and Australia up 7.2% to £12.3m, America up 11.3% to £1.6m andEurope at £0.5m. Revenues in the UK have shown strong organic growth. The growth has been mostnotable at Walker Media, but we have also seen strong growth from our directmarketing and PR businesses. The growth in Asia and Australia is being driven by Malaysia (up 35%) but moresignificantly in terms of absolute contribution, from Australia on the back ofthe Tourism Australia account won in the second half of last year. The newoffices in Thailand and India are making a revenue contribution for the firsttime, adding £0.3m. Overall growth in the Asia and Australia region has beensignificantly held back by account losses in New Zealand (following the TourismAustralia win) and Singapore, reducing year on year growth across the region toa net 5.7%. Our office in Los Angeles has maintained its new business momentum into thefirst half of 2006. Revenue is up 43%, more than offsetting the loss of the BArevenue suffered in New York. We opened the first of our planned new offices in continental Europe in Francein September last year. It has had an excellent start with revenues in thefirst half of 2006 at £0.5m. The first half profitability has been impacted by the investments we have madeto support our future revenue growth. The most significant of these are thestart up costs associated with opening new offices in India, Thailand and France, but we have also needed to support short term losses in our Singapore and NewZealand offices. The Board has declared an interim dividend of 0.77 pence per share (2005: 0.77pence) to be paid on 25th October 2006 to shareholders on the register as at 6thOctober 2006. Review of Operations UK The UK operations have reported an excellent first half performance, benefitingfrom several account wins during 2005 and in the first half of 2006. Revenuesfrom the UK Group are up 6.6%, comfortably replacing lost revenues from BritishAirways, giving an organic growth rate of over 14% when adjusted to excludethese revenues. New business growth has exceeded our expectations and we are ontrack to deliver revenue growth for the full year despite the significant lossof revenues from British Airways. The table below list some of our new account wins during 2005 and 2006 whichwill be contributing to revenue growth during this year. 2005 2006 to date------ -------------- Direct line - Advertising Allied Bakeries - AdvertisingRBS Retail - Advertising Lucozade Energy - AdvertisingNatWest mortgages - Advertising CB Richard Ellis - AdvertisingRibena - Advertising Swiss One - Direct MarketingMini - Direct Marketing Cosmopolitan - Talk PRWeetabix - Walker MediaInd' News and Media - Walker MediaHalfords - Walker Media Growth in the first half has been driven by our businesses outside the creationof advertising, particularly media planning and buying (Walker Media), DirectMarketing (LIDA) and PR (Talk PR). Around 47% (2005: 40%) of the UK's revenuesare now derived from these businesses. Digital and on-line activities arebecoming increasingly important and have been driving growth in both LIDA andWalker Media, following the launch of Walker-i last year. The overall advertising environment in the UK remains challenging andcompetition is intense. We continue to see downward pressure exerted by theprocurement community on prices and consequently margins, and expect to see thiscontinue for the foreseeable future. Asia and Australia The Asia and Australia region has had a mixed performance. Revenues in thisregion were up 7.2%, with particularly strong growth in Australia and Malaysia.New account wins included Sydney Water, KFC Hong Kong and Pizza Hut New Zealand.However, performance from our New Zealand and Singapore offices has beenimpacted by the loss of some key accounts, including the award-winning TourismNew Zealand account which had to be sacrificed as a result of winning theAustralia Tourism account last year.These offices are strategically important - New Zealand to support trans Tasmanbusiness, and Singapore as an Asian hub. We have therefore not reducedoperating costs in response to the loss of revenue, and because these officesare relatively small this has had a significant impact on short termprofitability. Following a change in management New Zealand is making goodprogress and Singapore will be back into profit in the second half. Profitability has also been impacted by our investment in new offices inThailand and India which will support further growth opportunities. The new business performance in the first half has been very encouraging and weare confident that the second half will show a significant recovery. America The headline numbers for America, which show an operating loss of £0.2m onrevenues of £1.6m, hide the significant progress that has been made to offsetthe impact of the loss of BA last year. Revenue has grown by 11.3%, driven by significant account gains. In Los Angeles,important wins have been City National Bank and Network Omni, while New York isalso making steady progress with important contributions coming from PODS, wonin June 2005, and AIG, won in May 2006. More recently Los Angeles has won the$30 million Petco account and an assignment from the John Paul Getty Trust. Profitability of the region is being impacted by our continued investment in theNew York office, which is offsetting the excellent performance in Los Angeles. Based on the success of the Los Angeles office we believe that the US marketstill offers significant growth opportunities for the Group. Europe M&C Saatchi GAD, our first office in continental Europe, opened in France inSeptember last year and has made an excellent start with revenues of £0.5m inthe first half. Amongst their key new business wins, Pernod Ricard in particularis proving to be a strong pan-European account which can be serviced from France. Other wins include S'miles, Branly Museum, Bordeaux Wines and more recentlyYves Rocher. In July, we launched our second European office, M&C Saatchi Germany, followingthe acquisition of a majority stake in local agency International GMBH.International was founded by Todd Schulz in 2003 and has already built up animpressive array of clients including K-Swiss Europe, Coca-Cola, Ferrero forvarious KINDER products, MTV, VIVA and HypoVereinsbank. In Spain we are in negotiation with our preferred partners. These negotiationsare unlikely to be completed before the end of this year. The setting up of our continental European business has been led by Nick Hurrell, Chairman, Europe. Nick is leaving M&C Saatchi at the end of October to starthis own agency, and we wish him well. Europe including the UK will now bemanaged as one region under the leadership of Moray MacLennan, Chairman, UKGroup. This will further facilitate our ability to pitch for pan-Europeanaccounts. Outlook As we approach the fourth quarter we now have good visibility through to the endof the year. New business performance continues to be strong across the Group, with organicgrowth rates which are comfortably offsetting the loss of the BA account lastNovember. In the Asia and Australia region, start-up losses in India and Thailand shouldreduce in the second half, while our offices in Singapore and New Zealand arenow making significant progress. In America our office in Los Angeles is doing well, and we are planning tostrengthen the team in New York to capitalise on the potential we see there. In continental Europe our French office is making good progress in winning newbusiness, our German office is now fully operational, and negotiations in Spainare continuing. The growth of M&C Saatchi is a function of our ability to win new clients andadditional assignments from existing clients, to expand our range of servicesand to expand the geographical footprint to enable us to compete for regionaland global business. We are making good progress on all counts. In summary, the business has regained momentum, and we now expect profits forthe full year to be significantly ahead of our previous expectations. Theoutlook into 2007 is good. M&C SAATCHI PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT OF THE GROUPSIX MONTHS ENDED 30 JUNE 2006 UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 Note £'000 £'000 £'000 Turnover 2 150,255 128,172 298,284 Cost of sales (115,600) (96,290) (230,283) -------- -------- -------- Gross profit 2 34,655 31,882 68,001 Administrative expenses- ordinary (32,275) (28,263) (61,639)- share based payment (188) (56) (185)- amortisation of goodwill (854) (821) (1,688) -------- -------- -------- (33,317) (29,140) (63,512) -------- -------- --------Operating profit 2 1,338 2,742 4,489 -------- -------- -------- Share of operating profit /(loss) of associates 3 (143) (75)Interest receivable 675 657 1,384Interest payable (14) (10) (29) -------- -------- -------- Profit on ordinary activitiesbefore taxation 2 2,002 3,246 5,769 Taxation on profits fromordinary activities (1,293) (1,373) (2,690) -------- -------- -------- Profit on ordinary activitiesafter taxation 709 1,873 3,079 Minority interests (445) (326) (663) -------- -------- -------- Profit for the financial 264 1,547 2,416period ======== ======== ======== Earnings per share 3- Basic 0.49p 2.85p 4.46p- Diluted 0.48p 2.83p 4.41p All amounts relate to continuing activitiesThe accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCSTATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESSIX MONTHS ENDED 30 JUNE 2006 UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Profit for the financial period- Group 261 1,690 2,497- Associates 3 (143) (81) -------- -------- -------- 264 1,547 2,416 Exchange adjustments on foreigncurrency net investments (272) (158) (50) -------- -------- --------Total recognised gains and lossesfor the financial period (8) 1,389 2,366 ======== ======== ======== Consolidated reconciliation of movement in shareholders' funds UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Profit for the financial period- Group 261 1,690 2,497- Associates 3 (143) (81)Dividend (965) (629) (1,045) -------- -------- -------- (701) 918 1,371Exchange differences (272) (158) (50)Non cash share based incentiveplans (including options) 119 28 85 Net (reduction) / addition toshareholders' funds (854) 788 1,406Opening shareholders' funds 31,616 30,210 30,210 -------- -------- --------Closing shareholders' funds 30,762 30,998 31,616 ======== ======== ========The accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCBALANCE SHEETAT 30 JUNE 2006 UNAUDITED UNAUDITED AUDITED 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000Fixed assetsIntangible assets 13,773 15,119 14,592Tangible assets 3,363 3,048 3,194Investments 55 15 100 -------- -------- -------- 17,191 18,182 17,886 Current assetsWork in progress 1,759 1,890 3,277Debtors - within one year 40,654 26,434 50,552Debtors - greater than one year 819 817 578Cash in hand and bank 23,742 25,314 20,486 -------- -------- -------- 66,974 54,455 74,893 Creditors: amounts falling duewithin one year (51,327) (39,967) (58,969) Net current assets 15,647 14,488 15,924 Total assets less currentliabilities 32,838 32,670 33,810 Creditors: amounts falling dueafter more than one year (568) (758) (868)Provisions for liabilities andcharges (556) (241) (404) -------- -------- --------Net assets 31,714 31,671 32,538 ======== ======== ======== Capital & reservesShare capital 542 542 542Share premium 9,618 9,618 9,618Merger reserve 14,144 15,361 14,756Share option reserve 718 542 599Profit & loss account 5,740 4,935 6,101 -------- -------- --------Equity shareholders' funds 30,762 30,998 31,616 Equity minority interests 952 673 922 -------- -------- -------- 31,714 31,671 32,538 ======== ======== ======== The accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCCONSOLIDATED CASH FLOW STATEMENTSIX MONTHS ENDED 30 JUNE 2006 UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Operating profit 1,338 2,742 4,489Amortisation on intangible fixedassets 854 821 1,688Depreciation 573 558 1,183Loss on sale of tangible fixedassets 1 57 59Decrease in work in progress 1,394 1,575 224Decreases / (Increase) in debtors 9,356 20,212 (3,003)(Decrease) / Increase in creditors (7,262) (16,383) 2,399Non cash share based incentiveplans (including options) 119 - 85Exchange differences (19) (105) (78) -------- -------- -------- Cash inflow from operatingactivities 6,354 9,477 7,046 Returns on investment and servicingof financeInterest received 675 657 1,384Interest paid (9) (2) (8)Interest element of finance leaserental payments (5) (8) (15)Minority interest dividend paid (471) (232) (428) Taxation (1,130) (926) (2,544) Capital expenditure and financial investmentPurchase of tangible fixed assets (760) (591) (1,289)Sale of tangible fixed assets - 44 37 Acquisitions & disposalsInvestment in subsidiary (8) - (369)Cash acquired with subsidiaryundertaking - - 187 Equity dividends paid (965) (629) (1,045) -------- -------- -------- Net cash inflow before financing 3,681 7,790 2,956 FinancingShares issued to minorities - 116 124Repayment of overdraft (29) - -Capital elements of finance leaserental payments (53) (57) (142) -------- -------- -------- Increase in cash in the period 3,599 7,849 2,938 ======== ======== ======== The accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCCONSOLIDATED CASH FLOW STATEMENT (continued)SIX MONTHS ENDED 30 JUNE 2006 UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000Reconciliation of net cash flow to movement in net funds Increase in cashin the period 3,599 7,849 2,938Cash outflowfrom payment ofoverdraft 29 - -Cash outflowfrom decrease inlease finance 53 57 142Inception offinance leases (15) (15) (14)Exchangedifferences (337) 132 184 -------- -------- --------Movement in netfunds in theperiod 3,329 8,023 3,250 Net funds atstart of year 20,329 17,079 17,079 -------- -------- --------Net funds at endof period 23,658 25,102 20,329 ======== ======== ======== Analysis of changes in net funds Balance at 1 Cash Finance Exchange Balance at 30 January 2006 inflow lease Movements June 2006 £'000 £'000 £'000 £'000 £'000 Cash at bankand in hand 20,486 3,599 - (343) 23,742Overdraft (29) 29 - - -Finance leases (128) 53 (15) 6 (84) -------- ------ ------ -------- ---------- Total 20,329 3,681 (15) (337) 23,658 ======== ====== ====== ======== ========== The accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCNOTES TO THE FINANCIAL STATEMENTSSIX MONTHS ENDED 30 JUNE 2006 1. Accounting policies The financial information included in this report does not constitute statutoryaccounts as defined in section 240 of the Companies Act 1985. The interimaccounts for the six months to 30 June 2006 and 30 June 2005 are unaudited. Thefinancial information for the year ended 31 December 2005 has been extractedfrom the statutory accounts for that period, a copy of which has been deliveredto the Registrar of Companies.The interim accounts for the six months ended 30 June 2006 have been prepared onthe basis of the accounting policies set out in the statutory accounts for theyear ended 31 December 2005. 2. Profit and net assets UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000TurnoverTurnover arises from the principal activity of the Group.An analysis by geographical market.By origin UK 118,339 101,840 245,926Asia and Australia 27,201 23,352 45,636America 3,341 2,980 6,417Europe 1,374 - 305 -------- -------- -------- 150,255 128,172 298,284 ======== ======== ======== The accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCNOTES TO THE FINANCIAL STATEMENTSSIX MONTHS ENDED 30 JUNE 2006 UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2006 £'000 £'000 £'000 Gross profit (Revenue)An analysis by geographical market.By origin UK 20,278 19,026 39,470Asia and Australia 12,281 11,458 25,084America 1,556 1,398 3,211Europe 540 - 236 -------- -------- -------- 34,655 31,882 68,001 ======== ======== ======== Operating profit / (loss) before amortisation of goodwill An analysis by geographical market.By origin UK 3,376 3,352 5,811Asia and Australia 9 882 2,117America (238) (149) (322)Europe (955) (522) (1,429) -------- -------- -------- 2,192 3,563 6,177 ======== ======== ======== Operating profit / (loss)An analysis by geographical market.By origin UK 2,522 2,531 4,123Asia and Australia 9 882 2,117America (238) (149) (322)Europe (955) (522) (1,429) -------- -------- -------- 1,338 2,742 4,489 ======== ======== ======== Profit before taxation (before amortisation of goodwill)An analysis by geographical market.By origin UK 3,988 3,816 7,006Asia and Australia 64 921 2,202America (234) (148) (319)Europe (962) (522) (1,432) -------- -------- -------- 2,856 4,067 7,457 ======== ======== ======== Profit before taxationAn analysis by geographical market.By origin UK 3,134 2,995 5,318Asia and Australia 64 921 2,202America (234) (148) (319)Europe (962) (522) (1,432) -------- -------- -------- 2,002 3,246 5,769 ======== ======== ======== The accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCNOTES TO THE FINANCIAL STATEMENTSSIX MONTHS ENDED 30 JUNE 2006 UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Net assetsAn analysis by geographical market.By origin UK 34,409 31,466 32,008Asia and Australia 2,668 3,143 3,646America (3,377) (2,514) (1,950)Europe (1,986) (424) (1,166) -------- -------- -------- 31,714 31,671 32,538 ======== ======== ======== 3. Earnings per share UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2006 30 June 2005 31 December 2005 Earning per share before amortisation of goodwill- Basic 2.06p 4.37p 7.57p- Diluted 2.04p 4.33p 7.50p Earnings per share- Basic 0.49p 2.85p 4.46p- Diluted 0.48p 2.83p 4.41p The accompanying notes form part of the unaudited financial statements This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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