M&C Saatchi profits slide as ad market continues to suffer

M&C Saatchi’s profits fell last year following a slowdown in marketing spending by large technology businesses.

The advertising agency’s headline pre-tax profits declined by 10 per cent to £28.7million in 2023, as higher interest rates and an absence of pandemic-related restrictions slowed the technology sector’s growth.

This particularly impacted the company’s performance in the first half of the year, when it swung to a £5.1million statutory pre-tax loss, while its media specialism also struggled.

M&C Saatchi’s independent directors have unanimously recommended a cash and share offer by London-listed advertising and marketing company Next Fifteen 

Trading was further impacted by weak results in the Asia-Pacific and Americas regions, where revenue plummeted by 21 and 38 per cent, respectively.

Its overall net revenue dropped by 7 per cent to £252.8million, but contracted by just 2 per cent when excluding the impact of divesting from non-core businesses.

However, Saatchi’s margins more than doubled between the first and second half of 2023, from 8.3 to 16.9 per cent, thanks to the closure or sale of loss-making divisions and cost-reduction measures.

Zillah Byng-Thorne, executive chairman of M&C Saatchi, said: ‘We have begun to transform into a leaner and more agile business laying the groundwork for sustained growth and improved profitability ahead.’

Despite significant economic uncertainty, the London-listed firm expects full-year profit to align with forecasts following ‘encouraging first-quarter momentum’.

Saatchi’s results come a month before Channel 4’s outgoing marketing boss, Zaid Al-Qassab, is due to start as the group’s new chief executive.

He will replace Moray MacLennan, who stood down last September, having worked at the ad giant since its breakaway from Saatchi & Saatchi in 1995.

MacLennan became CEO in 2020 in the wake of an accounting scandal, which saw the firm admit to overstating profits by around £14million.

His tenure included the Covid-19 crisis, which caused Saatchi’s trade to slump significantly during MacLennan’s first year in charge, although it recovered strongly when lockdown restrictions were loosened.

Saatchi also rejected takeover bids from Next Fifteen Communications and Vin Murria’s Advanced AdvT investment vehicle.

Known for its longstanding connection with the Conservative Party, Saatchi’s clients comprise some major corporate names, including Amazon, Coca-Cola, Adidas, and McDonald’s.

Analysts at Peel Hunt said Al-Qassab will begin ‘at a time when the trading backdrop remains challenging. For the shares to take a step up, we will need to see positive momentum in top-line growth.’

M&C Saatchi shares were 2.9 per cent lower at £1.70 on Wednesday morning, but they have risen by around a quarter over the past six months.