M&C Saatchi profits fall as advertising market continues to suffer

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

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

This particularly affected the company’s performance in the first half of the year, when it suffered a pre-tax statutory loss of £5.1m, while its media specialty also struggled.

Trade was further affected by weak results in the Asia-Pacific and Americas regions, where revenues plunged 21 percent and 38 percent, respectively.

Its overall net income fell 7 per cent to £252.8 million, but contracted just 2 per cent when excluding the impact of divestment in non-core businesses.

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

Zillah Byng-Thorne, chief executive of M&C Saatchi, said: “We have begun to transform into a more efficient and agile business, laying the foundations for sustained growth and greater profitability in the future.”

Despite significant economic uncertainty, the London-listed company expects full-year profits to be in line with forecasts following “encouraging momentum in the first quarter.”

Saatchi’s results come a month before Channel 4’s outgoing marketing chief Zaid Al-Qassab takes over as the group’s new chief executive.

He will replace Moray MacLennan, who resigned last September, having worked at the advertising giant since its separation from Saatchi & Saatchi in 1995.

MacLennan became chief executive in 2020 in the wake of an accounting scandal, in which the company admitted overstating profits by around £14m.

His tenure included the Covid-19 crisis, which saw Saatchi’s trading fall significantly during MacLennan’s first year in office, although it rebounded strongly when lockdown restrictions were eased.

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

Known for his long-standing connection with the Conservative Party, Saatchi’s clients include some big corporate names, including Amazon, Coca-Cola, Adidas and McDonald’s.

Analysts at Peel Hunt said Al-Qassab will begin “at a time when the business environment remains challenging.” For the stock to take a step higher, we will need to see positive momentum in revenue growth.”

M&C Saatchi shares They were down 2.9 per cent to £1.70 on Wednesday morning, but have risen by around a quarter in the last six months.