M&C Saatchi PLC
Final Results for the year ended 31 December 2012
18 March 2013
Strong results, with continued revenue momentum and earnings growth
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Financial Highlights 2012 |
Growth versus 2011 |
Revenue |
£169.5m |
+11% (2011: £153.1m) |
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Operating Profit |
£17.1m |
+11% (2011: £15.4m) |
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Profit Before Tax |
£17.2m |
+10% (2011: £15.6m) |
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EPS |
15.10p |
+6% (2011: 14.30p) |
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Dividend |
4.95p |
+10% (2011: 4.50p) |
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The highlights are headline results, see note on next page for definition.
Operational Highlights
· Further strong growth in both revenue and earnings, driven by new business wins and new businesses
· Global Network performed well across all geographies:
° UK: revenues up 13%, with CRM and mobile performing particularly well, operating profit up 17%
° Europe: revenues up 11%, operating profit up 14%, in spite of macro-economic challenges
° Middle East and Africa: revenues up 121%, well positioned to take advantage of growing African market
° Asia and Australasia: revenues up 8%, operating profit up 46%
° Americas: revenues up 19% with our New York agency relaunched in Q4
° Clear had a disappointing year and have restructured (resulting in a good start to the year)
· We continue to invest and build for the future: three offices added (Abu Dhabi, Singapore and Stockholm) together with a relaunch of New York
· Strong balance sheet maintained, focus on cash control with net cash of £17.9m
· Final dividend increased 10% to 3.85p, which takes the full-year dividend up 10% to 4.95p
Commenting on the results, David Kershaw, Chief Executive, said:
"M&C Saatchi has made very good progress in 2012. The Group returned double digit revenue and operating profit growth. This arose from new business success, increasingly international and integrated, the profitable growth of new businesses in the mature markets and the rolling out of proven models across the network. This was whilst continuing to invest in further new offices and businesses.
"Looking ahead, we are confident that we will continue to make progress in 2013 and beyond. The strategy continues to deliver. "
For further information please call:
M&C Saatchi +44 (0)20-7543-4500
David Kershaw
Tulchan Communications +44 (0)20-7353-4200
Lucy Legh
Susanna Voyle
Numis Securities +44 (0)20-7260-1000
Nick Westlake, NOMAD
Charles Farquhar, Corporate Broking
Notes to Editors
Headline results
The term headline is not a defined term in IFRS. The items that are excluded from headline results are the amortisation or impairment of intangible assets (including goodwill, but excluding software) acquired in business combinations, changes to contingent and deferred consideration taken to the income statement; impairment of investment in associate; and fair value gains and losses on liabilities caused by our put and call option agreements (note 11).
SUMMARY OF RESULTS
2012 saw another good performance with further revenue momentum and earnings growth. Revenues increased 11% and we maintained a double digit headline operating margin of 10.1% (post central costs), notwithstanding an investment in the year of just under £1.5m in three offices (Abu Dhabi, Singapore and Stockholm) and the relaunch of our New York office. Excluding this investment, the like-for-like margin increased from 10.1% to 10.9%. These impressive results were despite a previously flagged disappointing performance from Clear whose PBT fell from £2m to £0.3m. We have restructured Clear, redefined their offer and taken out significant cost so that they are trading more buoyantly in 2013. The overall Group headline profit before tax advanced 10% to £17.2m. Headline net earnings rose 7% to £9.6m suppressed by an increased corporation tax rate (32.4% in 2012, compared with 31.0% in 2011), a function of non-deductible losses from the new office investments.
UK
Revenue in the UK was up 13% from £67.0m to £75.4m, with our CRM and Mobile businesses performing strongly. We also had a strong run of wins across all of our businesses, including Ballantine's, Center Parcs, National Trust, Harveys, Peroni, Intercontinental Hotels, Viking and Virgin Holidays. Importantly, we are seeing an increasing number of integrated wins across communication channels. We continue to roll out proven new channel models across the network. We are now exporting CRM and PR to our overseas offices, alongside Sport & Entertainment and Mobile. We are making further investment in new businesses. In January 2013, we acquired 60% of a UK-based talent management agency Merlin Elite. This will become part of the Group's successful Sport & Entertainment division. We maintain a tight control on costs and margins. This resulted in the headline operating margin increasing to 20.2% (2011: 19.5%, both margins exclude the impact of Group recharges). The UK headline operating profit improved a positive 17% on 2011.
Europe
Despite the economic backdrop, positive progress was made in Europe with revenues up 11% and headline operating profit up 14%. Germany, Italy and Switzerland all performed well. Sport & Entertainment, launched in Germany and Switzerland, won some new business from Nestlé. In France, whilst advertising remains slow, we are benefiting from our diversification and were pleased to retain La Banque Postale, a major client. The headline operating margin was up from 14.1% to 14.4%, with some drag from our investment in Stockholm. Spain continued to underperform in a very difficult market but as an associate, our investment there is just 25%.
Middle East and Africa
We experienced further good growth in Cape Town and Johannesburg. Revenues more than doubled from £3.0m to £6.6m and key wins in the period were Edgars Department Stores and Nedbank's promotional account. Additionally, Sport & Entertainment and Mobile were both launched in Johannesburg in the second half. There was also some infrastructure investment needed in our offices to enhance systems and support for the larger clients we have been winning recently. Elsewhere in the region, we opened an Abu Dhabi office on the back of our Etihad win. With the investment in the new office and the new businesses, the headline operating margin consequently fell from 9.2% to 2.1% but will rebuild as these operations come on tap in profit terms.
Asia and Australasia
In Asia and Australasia, revenue increased 8% year-on-year and headline operating profit was up a very favourable 46%. The key driver for this was Australia. We won Commonwealth Bank early in the year and also retained Optus after a lengthy repitch; both are Group top ten accounts. New Zealand was impacted by two of their main clients suspending media spends for most of the year. There was another excellent performance from Malaysia. China underperformed but we have now agreed heads of terms and are already working with a respected partner, which will provide a more sustainable presence. Japan and India were both profitable, albeit relatively small. We reopened our Singapore office in February 2012 and they have achieved good new business momentum. The regional headline operating margin was 6.4%, compared with 2011's 4.7%.
Americas
In New York, we completed our executive management team line up in September and relaunched the operation in the fourth quarter. The office is now busy pitching and building relationships with new business intermediaries. Revenues were up 19% to £8.0m and the region overall broke even in profit terms, with our offices in Los Angeles and Sao Paulo and our other New York businesses (Mobile and PR), covering the advertising investment in New York.
Clear
Clear had a very tough year, with revenues slowing as nine of their top ten clients cut spending by 50% mainly due to budget cuts or restructuring programmes. Clear's headline operating profit reduced from £2m to £0.3m. We have significantly downsized Clear's New York and Asian operations, as well as undertaking some extensive cost cutting across the board, yielding a 31% cost saving. Clear's offering has been simplified and the new business programme boosted. New business wins came through in the fourth quarter including Bacardi, Novartis, Samsung and Pepsico and subsequently we expect the 2013 first quarter profitability to be much improved.
Outlook
M&C Saatchi has made very good progress in 2012. The Group returned double digit revenue and operating profit growth. This arose from new business success, increasingly international and integrated, the profitable growth of new businesses in the mature markets and the rolling out of proven models across the network. This was whilst continuing to invest in further new offices and businesses.
Looking ahead, we are confident that we will continue to make progress in 2013 and beyond. The strategy continues to deliver.
M&C SAATCHI PLC
AUDITED CONSOLIDATED INCOME STATEMENT
Year ended 31 December |
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2012 |
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2011 |
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Note |
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£000 |
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£000 |
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Billings |
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502,738 |
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520,017 |
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Revenue |
3 |
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169,486 |
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153,133 |
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Operating costs |
3 |
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(153,731) |
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(139,040) |
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Operating profit |
3 |
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15,755 |
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14,093 |
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Share of results of associates |
5 |
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91 |
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115 |
Impairment of associate |
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(1,552) |
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- |
Finance income |
6 |
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422 |
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2,199 |
Finance costs |
7 |
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(4,835) |
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(370) |
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Profit before taxation |
3 |
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9,881 |
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16,037 |
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Taxation |
8 |
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(5,357) |
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(4,589) |
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Profit for the year |
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4,524 |
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11,448 |
Profit attributable to: |
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Equity shareholders of the Group |
3 |
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2,463 |
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9,599 |
Non controlling interests |
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2,061 |
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1,849 |
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4,524 |
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11,448 |
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Earnings per share |
3 |
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Basic |
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3.89p |
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15.39p |
Diluted |
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3.59p |
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15.07p |
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Headline results |
3 |
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Operating profit |
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17,068 |
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15,399 |
Profit before tax |
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17,182 |
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15,562 |
Profit after tax attributable to equity shareholders |
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9,560 |
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8,918 |
Headline basic earnings per share (pence) |
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15.10p |
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14.30p |
M&C SAATCHI PLC
NOTES TO THE PRELIMINARY STATEMENTS
YEAR ENDED 31 DECEMBER 2012
1. GENERAL INFORMATION
The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is 36 Golden Square, London W1F 9EE.
The Company has its primary listing on the AIM market of the London Stock Exchange.
These 2012 audited preliminary financial statements were approved for issue on 15 March 2013.
The financial information set out below does not constitute the company's statutory accounts for 2011 or 2012. Statutory accounts for the years ended 31 December 2011 and 31 December 2012 have been reported on by the Independent Auditors. The Independent Auditors' Reports on the Annual Report and Financial Statements for 2011 and 2012 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2011 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2012 will be delivered to the Registrar in due course.
Headline results
The directors believe that the headline results and headline earnings per share provide additional useful information on the underlying performance of the business. In addition, the headline results are used for internal performance management, the calculation of rewards in the Group's Long Term Incentive Plan (LTIP) schemes and minority shareholder put option liabilities. The term headline is not a defined term in IFRS.
Our segmental reporting reflects our headline results in accordance with IFRS 8.
The items that are excluded from headline results are the amortisation or impairment of intangible assets (including goodwill, but excluding software) acquired in business combinations, changes to contingent and deferred consideration taken to the income statement; impairment of investment in associate; and fair value gains and losses on liabilities caused by our put and call option agreements.
2. Accounting policies
The financial information set out in these final results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in these final results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 December 2012. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2011.