M&C Saatchi earnings boosted by sale of unprofitable companies

M&C Saatchi scored stronger earnings in the first half of 2024 after closing loss-making divisions amid tough times for the advertising industry. 

The London-listed advertising agency reported like-for-like operating profit growth of 40 per cent to £17.1million in the six months ending June.

On a statutory basis, the London-based company swung from a £3.6million loss to a £14.1million profit, primarily due to cutting employee costs by over £12million.

Good performance: Advertising agency M&C Saatchi reported its like-for-like operating profits jumped by 40 per cent to £17.1million in the six months ending June

This followed the group enacting significant back-office cost savings and shutting down or selling unprofitable and non-core operations, including its Swiss, Swedish and Hong Kong businesses.

But its advertising arm drove profitability growth, having endured difficult conditions last year when the volume of new business wins was slowing.

The segment nearly tripled its operating profits to £5.1million on the back of revenue growth in the United States, Europe, and the Middle East.

By comparison, M&C Saatchi’s non-advertising specialisms largely bolstered like-for-like sales, which rose by 4 per cent to £211.5million, following robust demand from security and government organisations.

The firm gained repeat business from around three-quarters of its 2023 clients and won major customers such as fast food giant McDonald’s, Ikea, Ford, Danone, and Sony Pictures.

Zaid Al-Qassab, chief executive of M&C Saatchi, said: ‘We continue to make great progress in building a strong platform to deliver sustainable organic growth through our self-help initiatives and wider transformation.

‘Our increasingly diversified revenue provides greater resilience against macro volatility, and our higher-margin businesses continue to be our highest growth contributors.’

Al-Qassab joined as CEO in May after spending five years as Channel 4’s chief marketing officer, having also worked at BT Group and Procter & Gamble.

He succeeded Moray MacLennan, who joined the firm as its UK chief executive when it was set up in 1995.

MacLennan became its worldwide CEO in 2020 just as M&C Saatchi was undergoing the fallout from an accounting scandal involving the business overstating profits by £14million over many years.

His term as worldwide CEO coincided with the advertising sector suffering a massive global downturn when the Covid-19 pandemic led to companies slashing their marketing budgets.

Later on, M&C Saatchi was the target of failed takeover approaches from marketing consultancy Next 15 Communications and Vin Murria’s investment vehicle, Advanced AdvT. 

Well-known for its longstanding association with the Conservative Party, M&C Saatchi’s clients comprise some of the most prominent corporate names, including Diageo, Amazon, Google, and Foot Locker.

M&C Saatchi shares rose 2.9 per cent to 197p on Wednesday morning, taking their gains over the past year to around 44 per cent.