M&C SAATCHI PLC
INTERIM RESULTS
SIX MONTHS ENDED
30 JUNE 2014
11 September 2014
M&C Saatchi PLC
Interim results for the six months ended 30 June 2014
11 September 2014
Strong revenue momentum and earnings growth
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Financial Highlights 2014 |
Growth versus 2013 |
Revenue |
£82.6m |
+ 3% (2013: £80.1m) |
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Revenue in constant currencies Operating Profit |
£8.0m |
+ 11% + 17% (2013: £6.8m) |
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Profit Before Tax |
£8.5m |
+ 17% (2013: £7.3m) |
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Earnings EPS |
£5.1m 7.96p |
+ 23% (2013: £4.1m) + 24% (2013: 6.41p) |
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Dividend |
1.40p |
+ 15% (2013: 1.21p) |
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The highlights are headline results, see note on next page for definition.
Operational Highlights
· Successful first half with strong revenue momentum and earnings growth
· Global Network performed well:
° UK: revenues up 17%, with CRM and mobile continuing to excel
° Europe: like-for-like revenues up 14%
° Middle East and Africa: like-for-like revenues up 11%
° Asia and Australasia: like-for-like revenues down 3%
° Americas: like-for-like revenues up 57%
o Continued investment in New York office
o Clear: profitability down off slightly lower revenues
o Strong balance sheet maintained with net cash of £9.6m
o Interim dividend increased 15% to 1.40p
Commenting on the results, David Kershaw, Chief Executive, said:
"Our results for the first six months of 2014 showed continued revenue momentum and excellent earnings growth and give us confidence for a successful full year outcome.
"This success is based upon a combination of new business wins in our core operations and a growing contribution from our developing new businesses.
"Most of these have yet to reach their full potential and we are anticipating even better returns in 2015."
For further information please call:
M&C Saatchi +44 (0)20-7543-4500
David Kershaw
Tulchan Communications +44 (0)20-7353-4200
Lucy Legh
Victoria Huxster
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 and fair value gains and losses on liabilities caused by our put and call option agreements. Headline results have been restated to reflect the Discontinued Operation (note 2) so that it is shown as if Walker Media had always been discontinued. See note 4 for a reconciliation of non-headline to headline results.
Like-for-like
The like-for-like revenue comparisons referred to in this report are stated after excluding the impact of foreign currency movements.
Periods compared
This report comments on the unaudited consolidated income statement of M&C Saatchi plc (the "Group") for the six months to 30 June 2014 compared with unaudited consolidated income statement for the same period in 2013.
SUMMARY OF RESULTS
The first six months of 2014 saw strong revenue momentum and earnings growth. Like-for-like revenues increased 11% and we returned a headline operating margin of 9.7%, up from 8.5% in 2013. The headline profit before tax advanced 17% to £8.5m and headline net earnings rose 23%.
UK
We posted an excellent revenue increase in the UK of 17%, with our CRM and mobile operations continuing to do well. We experienced a favourable run of account wins across our group of businesses in the first half, including Land Rover, John Lewis, Ballantine's, Foot Locker, FCA, NFA and Doddle, as well as winning the global account of Doewe Egberts. In April, we bolstered our digital capabilities by acquiring Lean Mean Fighting Machine, a highly respected and much awarded online agency. Following the successful exporting in recent years of our Mobile and Sport & Entertainment ventures to our overseas offices, we are now also rolling out internationally LIDA, our acclaimed CRM agency together with M&C Saatchi PR. In addition, we are also exploring a new business in content creation. As ever, we retained a careful watch on costs to support margins. This resulted in the headline operating margin holding at 16.8% (2013: 17.7%, both margins exclude the impact of Group recharges). The UK headline operating profit improved a positive 11% on 2013.
Europe
We made further notable progress in Europe with like-for-like revenues up 14%. Headline operating profit was up 17%, with a headline operating margin of 12%. Stockholm have maintained their impressive revenue momentum with a stream of good new business wins in the period. Both Germany and Italy again produced first-rate performances. The French economy remained sluggish but our agency had a positive new business run, winning McCain and Thomas Cook as well as a place on the EDF roster. Spain struggled in a difficult market but as an associate our investment there is just 25%.
Middle East and Africa
Like-for-like revenues in the Middle East and Africa were up 11%, with exceptional growth in both Cape Town and Johannesburg; key wins in the period came from Pepsico and Deloitte Consulting. Our unit to service the African market is working well, winning projects for Amstel in Cameroon and Guinness in Ghana. Abu Dhabi continues to build revenues beyond Etihad and won projects from new clients. Overall this resulted in an excellent financial performance in the region with operating profit up 72% and headline operating margin up from 6.4% to 12.0%.
Asia and Australasia
In Asia and Australasia, like-for-like revenue decreased 3% in the period. Australian revenues were down without the account of David Jones in 2014, which was lost in the third quarter of last year. However, our Australian offices have had an outstanding new business run in the first half, winning IAG, Lexus, A2, Wotif and Cricket Australia, which we expect will make favourable contributions to the second half. Revenues were also impacted by a series of account losses in New Zealand, which meant we took the strategic decision to close the office. Otherwise, the relationship with our new associate in China, aeiou, is working well and they picked up some Microsoft business. Malaysia made an outstanding contribution, maintaining their excellent performance. In India, we replicated our Chinese investment acquiring 20% of February, a Delhi based agency. Singapore was appointed on an Asian regional basis for Jaguar and continues to win Government assignments. The headline regional operating margin was up two points from 9.9% to 11.9%, with operating profit down just 1%.
Americas
In the Americas our like-for-like revenues were up 57%. The first half saw further investment in New York where conversion of new business proved slow, which led us to implement a management restructure. We are now also looking at an associate investment to enhance our presence and accelerate growth. Our office in Los Angeles made notable progress, winning UGG's social media business across the US and the Sylvester Cancer Centre. We are still looking to upgrade our Sao Paulo presence, replicating the investment approach we took in China. Overall, the operating loss decreased from £580k to £458K.
Clear
Clear's like-for-like revenues decreased 3%. The Clear US operation performed well but both the UK and Australia experienced a slow second quarter with thinner new business pipelines. The UK is now focusing on building revenues through recruiting outstanding consultants with proven revenue track records. The UK operation has also moved to be located alongside our other UK companies around Golden Square and will now look to work more closely with them. The operating profit fell 36% and the headline operating margin fell from 13.2% to 9.1%.
Outlook
Our results for the first six months of 2014 showed continued revenue momentum and excellent earnings growth and give us confidence for a successful full year outcome.
This success is based upon a combination of new business wins in our core operations and a growing contribution from our developing new businesses.
Most of these have yet to reach their full potential and we are anticipating even better returns in 2015.
M&C SAATCHI PLC
UNAUDITED CONSOLIDATED INCOME STATEMENT
ENDED 30 JUNE 2014
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Six months
ended
30 June 2014 |
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Six months
ended
30 June 2013 |
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Year
ended
31 December 2013 |
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Note |
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£000 |
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£000 |
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£000 |
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Billings |
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158,614 |
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146,883 |
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320,288 |
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Revenue |
4 |
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82,616 |
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80,143 |
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162,039 |
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Operating costs |
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(74,980) |
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(73,668) |
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(149,282) |
Operating profit |
4 |
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7,636 |
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6,475 |
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12,757 |
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Share of results of associates |
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573 |
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7 |
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163 |
Finance income |
6 |
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5,386 |
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152 |
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376 |
Finance costs |
7 |
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(193) |
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(4,873) |
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(15,852) |
Profit before taxation |
4 |
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13,402 |
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1,761 |
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(2,556) |
Taxation on profits |
8 |
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(2,331) |
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(2,327) |
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(4,207) |
Profit AFTER taxation |
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11,071 |
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(566) |
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(6,763) |
Profit from discontinued operations, net of tax |
8 |
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- |
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1,864 |
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10,093 |
Profit for the financial period |
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11,071 |
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1,298 |
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3,330 |
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Profit attributable to: |
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Equity shareholders of the Group |
4 |
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10,065 |
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589 |
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1,483 |
Non controlling interest |
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1,006 |
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709 |
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1,847 |
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11,071 |
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1,298 |
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3,330 |
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Earnings per share |
4 |
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Basic |
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15.76p |
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0.91p |
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2.24p |
Diluted |
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14.89p |
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0.85p |
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2.11p |
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Reconciliation of the above numbers to the Headline numbers, discussed in the front of this report, can be found in note 4 page 17 to 19.
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.
This consolidated half-yearly financial information was approved for issue on
10 September 2014.
These results do not constitute the Group's statutory accounts. The information presented in relation to 31 December 2013 is extracted from the statutory financial statements for the year then ended and which have been delivered to the Registrar of Companies. The auditor's report on the statutory financial statements for the year ended 31 December 2013 was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report(s) and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.
2. Basis of preparation
This consolidated half-yearly financial information for the half-year ended 30 June 2014 has been prepared in accordance with the AIM Rules for companies. The half-yearly consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2013.
The annual financial statements for year ended 31 December 2013 treats Walker Media Limited, due to the disposal of 75.1% of its equity on 28 November 2013, as a discontinued operation. The comparative consolidated half-yearly financial information for the half-year ended 30 June 2013 have been restated to reflect this discontinuance.
3. Accounting policies
The financial information in these interim results is that of the holding company and all of its subsidiaries (the Group). It has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted for use in the EU (IFRSs). The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2013 and which will form the basis of the 2014 financial statements.