M&C Saatchi’s profits boosted by sale of unprofitable businesses

M&C Saatchi posted stronger first-half profits after closing loss-making divisions amid tough times for the advertising industry.

The London-listed advertising agency reported comparable operating profit growth of 40 per cent to £17.1m in the six months to June.

On a statutory basis, the London-based company swung from a loss of £3.6m to a profit of £14.1m, largely due to cutting employee costs by more than £12m.

This followed the Group’s implementation of significant administrative cost savings and the closure or sale of unprofitable and non-core operations, including its businesses in Switzerland, Sweden and Hong Kong.

But its advertising division drove profitability growth, having endured tough conditions last year when new business volume was slowing.

The segment almost tripled its operating profit to £5.1m thanks to revenue growth in the US, Europe and the Middle East.

In comparison, M&C Saatchi’s non-advertising specialities largely boosted like-for-like sales, which rose 4 per cent to £211.5m, following strong demand from security and government organisations.

The company secured repeat business from about three-quarters of its 2023 customers and won major clients including fast-food giant McDonald’s, Ikea, Ford, Danone and Sony Pictures.

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

‘Our increasingly diversified revenues provide greater resilience to macroeconomic volatility, and our higher-margin businesses remain our largest contributors to growth.’

Al-Qassab joined as chief executive 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 UK managing director when it was created in 1995.

MacLennan became its global CEO in 2020, just as M&C Saatchi was reeling from an accounting scandal involving the company overstating its profits by £14m over many years.

His tenure as global CEO coincided with a time when the advertising industry was suffering a massive global crisis as the Covid-19 pandemic led companies to cut their marketing budgets.

M&C Saatchi was later the subject of failed takeover attempts by marketing consultancy Next 15 Communications and Vin Murray’s investment vehicle, Advanced AdvT.

M&C Saatchi, known for its long association with the Conservative Party, counts some of the biggest names in corporate governance among its clients, including Diageo, Amazon, Google and Foot Locker.

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