M&C Saatchi held back by ‘significant’ hostile takeover spend, but advertiser profits still jump 50% on specials
- M&C Saatchi is the subject of two takeover approaches, increasing its costs
- Weakness in advertising and CRM was compensated by specialized business
M&C Saatchi’s progress in the first half was limited by “significant” costs related to it being the target of two separate takeover attempts.
The advertising firm has been the target of hostile approaches from former board member Vin Muria this year and its investors were due to vote down Next Fifteen Communications’ £310m separate bid on 19 August. but it had to be delayed due to regulatory issues.
M&C Saatchi’s core operating expenses rose 5.3 per cent to £111.3m in the six months to June 30, mainly due to a £9.5m increase from “significant costs associated with ongoing takeover approaches” .
CEO Moray McLennan said these were “results to be proud of under any circumstances”.
Despite rising costs, group pre-tax profits rose 52.4 per cent to £16m in the period, while net profit jumped 9.6 per cent to £129.4m.
The growth was primarily driven by strong performance in M&C Saatchi’s “specialist” businesses as a result of weakness in key advertising and CRM divisions.
The group highlighted its global and social issues and sponsorship and talent divisions after growing 29.7 percent and 20.2 percent respectively.
M&C Saatchi’s board confirmed its forecast for pre-tax profits of £31m for the full year 2022 and £41m for 2023. The dividend is expected to be reinstated at the end of the firm’s full financial year.
Boss Moray McLennan said these were “results to be proud of under any circumstances”, especially “with the distraction of a hostile takeover”.
He added: “Looking ahead, the counter-cyclical nature of key emerging businesses, together with a global efficiency program, provides confidence in our strong autonomous future and outlook through the end of 2022 and into 2023.
“The plan is clear. Shipping is expedited. Durability is proven.”
Despite this optimism, Shares in M&C Saatchi fell 7.5 percent to 150 pence by afternoon trade, bringing its year-to-date losses to 9.8 percent.
Analysts at Peel Hunt said: “The share price remains weak and its future is changing.
“So far ours [profit before tax] for FY22E is in line with management’s forecast, our PBT for FY23E is lower at £37m compared to their £41m.
“At this stage, we are comfortable with our numbers given the continued uncertainty around ad spend next year. The schedule for the shareholder vote will be announced in due course, but is expected no earlier than the beginning of the 4th quarter.”
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