M&C SAATCHI PLC
INTERIM RESULTS
SIX MONTHS ENDED
30 JUNE 2017
25 September 2017
M&C SAATCHI PLC
Interim results for the six months
ended 30 June 2017
25 September 2017
Strong revenue and earnings growth
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Financial Highlights 2017 |
Growth versus 2016 |
Revenue |
£121.0m |
+ 21% (2016: £100.2m) |
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Revenue in constant currencies Like-for-like Revenue Operating Profit |
£13.3m |
+ 12% + 10% + 17% (2016: £11.3m) |
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Profit Before Tax |
£13.3m |
+ 17% (2016: £11.4m) |
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Earnings EPS |
£9.1m 11.94p |
+ 18% (2016: £7.7m) + 11% (2016: 10.71p) |
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Dividend |
2.13p |
+ 15% (2016: 1.85p) |
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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 very well:
° UK: like-for-like revenues up 5%
° Europe: like-for-like revenues up 15%
° Middle East and Africa: like-for-like revenues up 9%
° Asia and Australasia: like-for-like revenues up 12%
° Americas: like-for-like revenues up 14%
· Net borrowing of £3.9m with increased working capital pressure (£8.5m net borrowing at 30th June 2016)
· Interim dividend increased 15% to 2.13p
Commenting on the results, David Kershaw, Chief Executive, said:
"Growth across the Group remains strong with excellent revenue and earnings increases over the first half of 2017.
"In line with our long-term strategy, we have been busy starting new businesses and opening new offices. This is the fuel for growth in years to come.
"The second half has started well with trading in line with expectations."
For further information please call:
M&C Saatchi +44 (0)20-7543-4500
David Kershaw
Tulchan Communications +44 (0)20-7353-4200
Tom Murray
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 and acquired intangibles, but excluding software) acquired in business combinations, changes to deferred and contingent consideration and other acquisition related charges taken to the income statement; impairment of investment in associate; profit/loss on disposal of associates; and income statement impact of put option accounting (whether accounted under IFRS2 or IAS39). See Note 4 for reconciliation between the Group's statutory results and the 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 and corporate acquisitions and disposals.
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 2017 compared with the unaudited consolidated income statement for the same period in 2016.
SUMMARY OF RESULTS
The first six months of 2017 saw strong revenue momentum and earnings growth. Actual revenues grew by 21%, with constant currency revenues increasing by 12% and like-for-like revenues by 10%. Excluding new start-ups, we returned a headline operating margin of 11.5%, up from 11.3% in 2016. The headline profit before tax advanced 17% to £13.3m and headline net earnings rose 18%. Statutory profit before taxation was down 10% from £10.7m to £9.7m, primarily due to increased charges for put options accounted for as conditional share awards.
UK
We posted an increase in UK revenues of 5%, with our CRM, Mobile, PR and Sport & Entertainment divisions continuing to trade particularly positively.
We returned a good run of account wins across our group of businesses in the first half, including Dreams, Visit Britain, The Body Shop, Costa Coffee and Clinique.
Our PR operation was awarded Outstanding Large Public Relations Consultancy, Mobile won Most Effective Mobile Agency and Sport & Entertainment were Sponsorship Agency of the Year.
In July, Giles Hedger joined as CEO of the London advertising agency, completing the new management team, who have been incentivised under our owner/driver model. The new team is working well and attracting new business.
M&C Saatchi Merlin, our talent management agency which flourished in the first six months, launched a social influencer division in May. We also started Re UK in June, importing our successful Sydney brand design consultancy.
The UK headline operating profit was 6% up on 2016 and the headline operating margin increased to 13.2% compared with 2016's 13.0%. These margins exclude the impact of Group costs.
Europe
We made excellent progress in Europe with like-for-like revenues up 15%. Headline operating profit was up 22%, with a headline operating margin of 15.0% (2016: 16.2%).
Sweden maintains its strong new business performance, winning the property company AMFF and the engineering client PE Consulting.
Both Germany and Italy continue to thrive. Mobile opened in Berlin whilst Italy was appointed by Sisal, a gaming company, in addition to being reappointed by Unicredit. In France, advertising is still slow but our agency did win some Haribo business and the energy company Sowee. Madrid is developing well and we have started a Spanish sponsorship operation.
Middle East and Africa
Like-for-like revenues in the Middle East and Africa were up 9%. Both our UAE and South African offices are rebuilding following account losses last year (Etihad and Edgars). The operating profit was consequently down 8% and the headline operating margin dipped from 7.9% in 2016 to 5.4%.
Our South African offices were appointed by Windhoek and Heineken Export. We also acquired the Johannesburg based Sport & Entertainment company Levergy. UAE recorded some good wins in the period; Aldar Properties, UAE Banks Federation and Unilever's Lipton account. M&C Saatchi PR opened in the UAE and have since won the Abu Dhabi Motors Rolls-Royce account.
Our office in Tel Aviv is building an exciting offer and was appointed by Jaguar.
Asia and Australia
In Asia and Australasia, like-for-like revenues were up 12% on the same period last year. The headline regional operating margin was 12.0% (2016: 11.9%), with the headline operating profit up a remarkable 37% on the same period last year.
Our Australian offices are doing very well and continue to widen their offer. In February, we acquired Bohemia, a media buying and planning operation, which positions us favourably for satisfying the needs of our clients, who are increasingly seeking a closer relationship between their media agency and the content and creative providers. In March, we launched The Source, our successful UK research operation, in Melbourne.
Our associate in China, aeiou, continues to grow positively and was appointed by the car account SGMW and the walnut drinks provider New Farm. Malaysia is still shining and was awarded Social Media Agency of the Year. Singapore is developing encouragingly and won Bridgestone and the Bank of Singapore. We are looking to open a new office in Indonesia before the end of the year.
Americas
Like-for-like revenues increased 14%. There was an 8% increase in operating profit to £3.6m and a headline operating margin dip from 17.1% in 2016 to 14.7%. This was after new start-up costs, which when excluded restates the first half margin at 17.1%, as last year.
Mobile continues to excel and has a very impressive business in the US. LIDA New York opened for business and was appointed by Aston Martin.
Our Los Angeles office made impressive progress and was appointed by Pacific Life. We launched both Sport & Entertainment and Clear there in the first half.
Within a challenging economic environment, trading in Brazil remains difficult. We have opened a new office in Mexico City.
Balance sheet and cash
Our net borrowing at the half-year was £3.9m, which compares with £8.5m of borrowing at the same stage last year. We continue to experience enhanced pressure from clients on payment terms over the last six months, particularly with our growing revenues in the US. We are putting in place strategies to redress this.
Outlook
Growth across the Group remains strong with excellent revenue and earnings increases over the first half of 2017. In line with our long-term strategy, we have been busy starting new businesses and opening new offices. This is the fuel for growth in years to come. The second half has started well with trading in line with expectations.
M&C SAATCHI PLC
UNAUDITED CONSOLIDATED INCOME STATEMENT
ENDED 30 JUNE 2017
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Six months
ended
30 June 2017 |
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Six months
ended
30 June 2016 |
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Year
ended
31 December 2016 |
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Note |
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|
£000 |
|
£000 |
|
£000 |
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Billings |
|
|
|
|
261,194 |
|
217,222 |
|
458,180 |
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|
|
|
|
|
|
|
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Revenue |
4 |
|
|
|
121,035 |
|
100,219 |
|
225,387 |
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Operating costs |
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|
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|
(115,699) |
|
(93,180) |
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(218,738) |
Operating profit |
4 |
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|
|
5,336 |
|
7,039 |
|
6,649 |
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Share of results of associates |
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|
531 |
|
405 |
|
1,530 |
Finance income |
6 |
|
|
|
4,520 |
|
3,797 |
|
440 |
Finance costs |
7 |
|
|
|
(710) |
|
(512) |
|
(1,828) |
Profit before taxation |
4 |
|
|
|
9,677 |
|
10,729 |
|
6,791 |
Taxation on profits |
8 |
|
|
|
(2,023) |
|
(1,667) |
|
(3,451) |
Profit for the financial period |
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|
|
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7,654 |
|
9,062 |
|
3,340 |
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Profit attributable to: |
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Equity shareholders of the Group |
4 |
|
|
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6,838 |
|
8,094 |
|
144 |
Non controlling interest |
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|
|
|
816 |
|
968 |
|
3,196 |
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|
|
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|
|
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|
7,654 |
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9,062 |
|
3,340 |
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Earnings per share |
4 |
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Basic |
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8.98p |
|
11.24p |
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0.20p |
Diluted |
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8.74p |
|
11.20p |
|
0.19p |
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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 on pages 17 to 19.