Interim Results
M&C Saatchi PLC
14 September 2004
M&C SAATCHI PLC
INTERIM RESULTS
SIX MONTHS TO 30 JUNE 2004
M&C Saatchi plc, the international advertising agency with offices in 13
locations announces its interim results for the six months to 30 June 2004.
•Revenues (gross profit) up 10.0% to £29.8 million (2003: £27.1 million)
•Operating profit up 9.8% to £3.7 million (2003: £3.3 million)
•Profit before taxation up by 8.8% to £4.0 million (2003: £3.7 million).
•Solid performance in UK with good new business wins including Halfords,
London Olympics 2012, Thames Water, US Tourism and, in media, KFC and
Halfords
•Very strong growth in Asia & Australia with encouraging progress made in
America
•Earnings per share up 4.9% to 4.50 pence (2003: 4.29 pence)
Commenting on the results, David Kershaw, Chief Executive said:
'Following our recent IPO, we are pleased to report a 9% increase in first half
profits. We continue to make good progress with our organic growth strategy and
are encouraged by the new business performance in the first half of the year.'
For further information:
M&C Saatchi 020 7353 4200
David Kershaw
Tulchan Communications 020 7353 4200
Kate Inverarity
Alexia Latham
Except where otherwise stated, this report refers to the unaudited pro forma
profit and loss account of M&C Saatchi plc (the 'Group'). This has been prepared
to show, for illustrative purposes only, the Group's results as if the
reorganisation of the Group which occurred immediately prior to its admission to
trading on AIM on 14 July 2004 had occurred on 1 January 2003. Comparisons are
with the six months to 30 June 2003 unless stated otherwise.
Financial Review
Revenues in the period were 10.0% higher at £29.8 million, benefiting from new
client wins during the last six months of 2003 and in the early part of 2004.
Operating costs of £26.1 million increased by 10.0%, in line with revenues.
Operating profit rose by 9.8% from £3.3 million to £3.7 million. The operating
profit margin remained the same at 12.3% (full year 2003 11.6%).
Net interest receivable remained broadly flat at £332K.
Profit on ordinary activities before taxation rose by 8.8% to £4.0 million
(2003: £3.7 million).
The Group's tax rate increased slightly to 33.1% (2003: 32.5%) due to a greater
proportion of profits being earned in higher tax rate areas.
Minority interests increased by 53.5% to £238K (2003: £155K) as a result of a
strong performance from the Group's majority owned interests in Walker Media Ltd
and an increased contribution from the Malaysian subsidiary.
Group earnings per share rose by 4.9% to 4.50 pence (2003: 4.29 pence).
In the second half of the year, the Group expects to incur certain one off
charges relating to the IPO. In addition, there will be a less significant
increase in underlying costs associated with the recently acquired plc status.
The company also expects to see some costs associated with the international
expansion in the second half of the year.
Segmental Analysis
UK
Revenue at £17.6 million was broadly unchanged. This represented a strong new
business performance in the UK business, given the revenue lost from Matalan and
Rover, who both took their advertising in-house in mid 2003. The first half of
2004 saw new client wins in the UK Group including London Olympics 2012, US
Tourism, Thames Water, and, in media, KFC and Halfords.
Operating profit was broadly the same at £2.9 million. The operating margin fell
slightly to 16.6% (from 16.8%). Profit before tax was unchanged at £3.3 million.
In addition, the UK agency produced some notable campaigns for Transport for
London, British Airways and Royal Bank of Scotland. PR and sponsorship won new
projects for Orange and Adidas, and LIDA, the direct marketing business won new
projects from Group clients BA and RBS.
Asia and Australia
Revenue at £10.9 million increased 30.8%, with these businesses performing well
as a result of significant new business wins from Optus and Mediabank, and
buoyant market conditions across the region. Revenues also benefited from
contributions from Celcom and NTV7 in Malaysia. The Group's offices in China
continue to perform strongly, both in terms of new business and additional
revenue from existing clients.
Operating profit was £693K, a more than fourfold increase from £161K in 2003,
which was adversely affected by the costs associated with two large new business
wins. There was a consequent increase in operating margin to 6.3% in 2004, with
these businesses beginning to realise the benefit of the investment made in
prior years.
The Group has successfully grown its presence throughout Australia and Asia and
currently has 10 offices in the region. The Group will continue to look for
further opportunities to open new offices in the high growth markets in Asia.
America
Revenues in the US business increased to £1.2 million. This in large part
reflects new opportunities generated from foundation clients in the Los Angeles
office, namely Ketel One Vodka and Crystal Cruises. The New York office also had
some good new business wins including a high profile assignment for the National
Football League's season opening.
Operating profit of £38K (2003: £207K) fell as a result of investment in
additional creative and client handling resource in the New York office.
Europe
An important part of the company strategy is to grow the business throughout the
major European markets, namely France, Germany, Italy and Spain. Over the summer
progress has been made with exploratory work in the European markets. The
approach is one of organic growth, so the focus at this stage is on finding the
right people to spearhead the establishment of offices in these markets.
Outlook
The company has made a solid start to the second half of the year with new
business wins including Harrods and, in media, Drambuie, together with further
assignments from RBS and ANZ, and remains comfortable with expectations for the
full year
Approved 13 September 2004
M&C SAATCHI PLC
UNAUDITED PRO FORMA CONSOLIDATED PROFIT AND LOSS ACCOUNT OF THE GROUP
SIX MONTHS ENDED 30 JUNE 2004
The following unaudited pro forma profit and loss account of the Group have been
prepared for illustrative purposes only to provide information about the impact
of the Reorganisation, the Placing and Admission of the Group and because of its
nature may not give a true reflection of the results of the Group. It has been
prepared on the basis that the Reorganisation, the Placing and Admission had
effect from 1 January 2003 and on the basis set out in the notes. (Note 3)
Six months Six months Year ended
ended ended 31 December
30 June 2004 30 June 2003 2003
£'000 £'000 £'000
Turnover 126,546 108,345 253,947
Cost of sales (96,779) (81,275) (194,629)
-------- -------- ---------
Gross profit
(refered to as Revenue in
commentary) 29,767 27,070 59,318
Administrative expenses (26,106) (23,735) (52,483)
Other operating income 6 5 35
-------- -------- ---------
Operating profit 3,667 3,340 6,870
Interest receivable 356 345 686
Interest payable (24) (9) (56)
-------- -------- ---------
Profit on ordinary
activities before taxation 3,999 3,676 7,500
Taxation on profits from
ordinary activities (1,323) (1,195) (2,368)
-------- -------- ---------
Profit on ordinary
activities after taxation 2,676 2,481 5,132
Minority interests (238) (155) (424)
-------- -------- ---------
Profit for the financial period 2,438 2,326 4,708
======== ======== =========
All amouts relate to continuing activeties.
The accompaning notes form part of the unaudited finacial statements.
M&C SAATCHI PLC
UNAUDITED PRO FORMA CONSOLIDATED PROFIT AND LOSS ACCOUNT OF THE GROUP
SIX MONTHS ENDED 30 JUNE 2004
Six months Six months Year ended
ended ended 31 December
30 June 2004 30 June 2003 2003
£'000 £'000 £'000
Gross profit
Gross profit arises
from the principal
activity of the Group.
By origin
UK 17,635 17,704 36,465
Asia and Australia 10,953 8,375 20,891
America 1,179 991 1,880
Other 0 0 82
-------- -------- --------
29,767 27,070 59,318
======== ======== ========
Operating profit / (loss)
By origin
UK 2,936 2,972 5,187
Asia and Australia 693 161 1,934
America 38 207 (251)
Other 0 0 0
-------- -------- --------
3,667 3,340 6,870
======== ======== ========
Profit / (loss) before taxation
By origin
UK 3,262 3,286 5,796
Asia and Australia 700 185 1,956
America 37 205 (252)
Other 0 0 0
-------- -------- --------
3,999 3,676 7,500
======== ======== ========
M&C SAATCHI PLC
THE REORGANISATION
This Interim Report is prepared under the requirement of the AIM rules as M&C
Saatchi plc is listed on AIM and the most recent financial information provided
in the previously published Admission Document was as at 31 December 2003. As at
30 June 2004, M&C Saatchi plc had yet to be admitted to AIM, had yet to acquire
the M&C Saatchi Worldwide group, and was a 'shell' company. The financial
position of M&C Saatchi plc at that date was £2 issued share capital, and £2
debtors, being unpaid share capital. Included within this document is financial
information for M&C Saatchi Worldwide Limited group ('the Worldwide Group') as
at 30 June 2004. The Worldwide Group was subsequently acquired by M&C Saatchi
plc on 14 July 2004. The accounts shown below are the accounts for the M&C
Saatchi Worldwide Group, the pro forma accounts shown above are for the Group
(i.e. with Walker Media Holdings Ltd fully consolidated). Further information on
the reorganisation is given in the post balance sheet note (Note 3)
M&C SAATCHI WORLDWIDE LTD
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
SIX MONTHS ENDED 30 JUNE 2004
Note Six months Six months Year ended
ended ended 31 December
30 June 2004 30 June 2003 2003
£'000 £'000 £'000
Turnover 2 54,056 44,648 101,219
Cost of sales (27,089) (20,120) (47,608)
-------- -------- --------
Gross profit 2 26,967 24,528 53,611
Administrative expenses (24,069) (21,727) (48,194)
Other operating income 6 5 35
-------- -------- --------
Operating profit 2 2,904 2,806 5,452
Share of operating profit of
associates 352 246 652
Interest receivable 225 229 457
Interest payable (24) (9) (55)
-------- -------- --------
Profit on ordinary activities
before taxation 2 3,457 3,272 6,506
Taxation on profits from
ordinary activities (1,150) (1,062) (2,117)
-------- -------- --------
Profit on ordinary activities
after taxation 2,307 2,210 4,389
Minority interests (420) (466) (944)
-------- -------- --------
Profit for the financial period 1,887 1,744 3,445
Dividends 0 (2,000) (4,641)
-------- -------- --------
Retained (loss) / profit
for the period 1,887 (256) (1,196)
======== ======== ========
All amouts relate to continuing activeties.
The accompaning notes form part of the unaudited finacial statements.
M&C SAATCHI WORLDWIDE LTD
UNAUDITED CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
SIX MONTHS ENDED 30 JUNE 2004
Six months Six months Year ended
ended ended 31 December
30 June 2004 30 June 2003 2003
£'000 £'000 £'000
Profit for the financial
year
- Group 1,572 1,504 2,812
- Associates 315 240 633
-------- -------- --------
1,887 1,744 3,445
Exchange adjustments on
foreign currency
net investments 43 194 526
-------- -------- --------
Total recognised gains and
losses for the
financial period 1,930 1,938 3,971
======== ======== ========
All amouts relate to continuing activeties.
The accompaning notes form part of the unaudited finacial statements.
M&C SAATCHI WORLDWIDE LTD
UNAUDITED CONSOLIDATED BALANCE SHEET
30 JUNE 2004
Six months Six months Year ended
Ended Ended 31 December
30 June 2004 30 June 2003 2003
£'000 £'000 £'000
Fixed assets
Tangible assets 3,301 3,001 3,453
Investments 1,271 1,391 985
-------- -------- --------
4,572 4,392 4,438
Current assets
Work in progress 1,056 1,162 1,334
Debtors - within one year 17,927 15,917 16,028
Debtors - greater than one year 212 1,029 1,061
Cash in hand and bank 7,115 3,539 5,047
-------- -------- --------
26,310 21,647 23,470
Creditors: amounts falling due
within one year (23,170) (19,217) (21,367)
Net current assets 3,140 2,430 2,103
Total assets less current
liabilities 7,712 6,822 6,541
Creditors: amounts falling due
after more than one year (831) (858) (950)
Provisions for liabilities and
charges (99) (258) (208)
-------- -------- --------
Net assets 6,782 5,706 5,383
======== ======== ========
Capital & reserves
Share capital 12 12 12
Profit & loss account 5,891 4,569 3,961
-------- -------- --------
Equity shareholders' funds 5,903 4,581 3,973
Equity minority interests 879 1,125 1,410
-------- -------- --------
6,782 5,706 5,383
======== ======== ========
All amouts relate to continuing activeties.
The accompaning notes form part of the unaudited finacial statements.
M&C SAATCHI WORLDWIDE LTD
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHS ENDED 30 JUNE 2004
Six months Six months Year ended
ended ended 31 December
30 June 2004 30 June 2003 2003
£'000 £'000 £'000
Operating profit 2,904 2,806 5,452
Depriceation including permanent
diminution in value 584 516 1,141
Loss / (Profit) on sale of tangible
fixed assets 14 1 (1)
Decrease in work in progress 189 753 463
(Increase) in debtors (1,735) (2,906) (2,998)
Increase / (decrease) in creditors 2,506 (6,852) (4,183)
Exchange differences 85 214 265
-------- -------- --------
Cash inflow / (outflow) from
operating activities 4,547 (5,468) 139
Dividend received from associates 0 0 810
Returns on investment and servicing
of finance
Interest received 113 123 261
Interest paid (9) (7) (7)
Interest element of finance
lease rental payments (15) (2) (45)
Minority interest
dividend paid / reserves retained (938) (536) (743)
Taxation (900) (623) (1,739)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (569) (467) (1,591)
Sale of tangible fixed assets 98 0 133
Acquisitions & disposals 0 0 1
Equity dividends paid 0 (2,000) (4,641)
-------- -------- --------
Net cash inflow / (outflow) before
financing 2,327 (8,980) (7,422)
Financing
Shares issued to minorities 0 6 6
Repayment of bank loans (20) (17) (34)
Capital elements of finance lease
rental payments (144) (108) (165)
-------- -------- --------
Increase /(decrease)
in cash in the period 2,163 (9,099) (7,615)
======== ======== ========
All amouts relate to continuing activeties.
The accompaning notes form part of the unaudited finacial statements.
M&C SAATCHI WORLDWIDE LTD
UNAUDITED NOTES TO CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHS ENDED 30 JUNE 2004
Note Six months Six months Year ended
Ended ended 31 December
30 June 2004 30 June 2003 2003
£'000 £'000 £'000
Reconciliation of net cash flow
to movement in net debt
Increase / (decrease)in cash
in the year 2,163 (9,099) (7,615)
Cash outflow from repayment of
bank loans 20 17 34
Cash outflow from decrease in
lease finance 144 108 165
Change in net funds resulting
from cash flows 2,327 (8,974) (7,416)
Inception of finance leases (45) (8) (96)
Exchange differences (63) 208 228
-------- -------- --------
Movement in net funds in the year 2,219 (8,774) (7,284)
Net funds at start of year 4,576 11,860 11,860
-------- -------- --------
Net funds at end of year 6,795 3,086 4,576
======== ======== ========
Analysis of changes in net funds
Balance at 1 Cash Finance Exchange Balance at 30
January 2004 Movements June 2004
inflow lease
£'000 £'000 £'000 £'000 £'000
Cash at bank
and in hand 5,047 2,163 0 (95) 7,115
Debt due
within one year (20) 20 0 0 0
Finance leases (451) 144 (45) 32 (320)
-------- ------ ------ -------- ---------
Total 4,576 2,327 (45) (63) 6,795
======== ====== ====== ======== =========
M&C SAATCHI WORLDWIDE LTD
UNAUDITED NOTES TO INTERIM FINANCIAL STATEMENTS
SIX MONTHS ENDED 30 JUNE 2004
1. Accounting policies
The information contained in this interim report does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985.
The comparatives for the full year ended 31 December 2003 are not the
company's full statutory accounts for that year. A copy of those statutory
accounts has been delivered to the Registrar of Companies. The auditors'
report on those accounts was unqualified and did not contain a statement
under Section 237 (2)-(3) of the Companies Act 1985.
The financial information has been prepared under the historical cost
convention and in accordance with applicable accounting standards. The
following principal accounting policies have been applied consistently in
dealing with items which are considered material in relation to the
financial information:
Basis of consolidation
The consolidated financial information incorporates the results of M&C
Saatchi Worldwide and all of its subsidiary and associated undertakings made
up to the relevant balance sheet dates. The Group has used the acquisition
method of accounting to consolidate the results of subsidiary undertakings.
The results of subsidiary undertakings have been included from the date of
acquisition.
An entity is treated as an associated undertaking where the Group has a
participating interest and exercises significant influence over its
operating and financial policy decisions.
In the financial information interests in associated undertakings are
accounted for using the equity method of accounting. The consolidated profit
and loss account includes the Group's share of the operating results,
interest, pre tax results and attributable taxation of such undertakings
based on unaudited financial statements for the relevant year. In the
consolidated balance sheet, the interests in associate undertakings are
shown as the Group's share of the net assets.
Turnover
Turnover represents amounts invoiced to clients, excluding sales taxes, for
services provided to clients. Commissions are recognised when charges are
made to clients, usually when advertisements appear in the media, or when
production work is completed. Fees are recognised over the period of the
relevant assignments or agreements.
Work in progress
Work in progress comprises all outlays incurred on behalf of clients which
have still to be recharged, and is stated at cost less any provisions for
any amounts that may not be recovered.
Pensions
The Group does not operate any company pension schemes. The Group makes
payments to certain employees to enable them to contribute to their personal
pension plans. Payments are charged to the profit and loss account in the
period in which they are due.
Foreign currency
Foreign currency transactions arising from normal trading activities are
recorded in local currency at average exchange rates.
Monetary assets and liabilities denominated in foreign currencies at year
end are translated at the year end exchange rate.
Foreign currency gains and losses are credited or charged to the profit and
loss account as they arise.
The balance sheets of overseas operations are translated at the closing rate
of exchange and the results are translated at the average rate. Exchange
differences which arise from translation of the opening net assets and
results of foreign subsidiary undertakings are taken to reserves.
M&C SAATCHI WORLDWIDE LTD
UNAUDITED NOTES TO INTERIM FINANCIAL STATEMENTS
SIX MONTHS ENDED 30 JUNE 2004
2. Profit and net assets
Six months Six months Year ended
Ended ended 31 December
30 June 2004 30 June 2003 2003
£'000 £'000 £'000
Turnover
Turnover arises from the principal
activity of the Group.
By origin
UK 31,861 28,004 56,716
Asia and Australia 20,019 15,157 41,928
America 2,176 1,487 2,575
Other 0 0 0
-------- -------- --------
54,056 44,648 101,219
======== ======== ========
Gross profit
By origin
UK 14,835 15,162 31,004
Asia and Australia 10,953 8,375 20,805
America 1,179 991 1,802
Other 0 0 0
-------- -------- --------
26,967 24,528 53,611
======== ======== ========
Operating profit / (loss)
By origin
UK 2,173 2,438 3,769
Asia and Australia 693 161 1,934
America 38 207 (251)
Other 0 0 0
-------- -------- --------
2,904 2,806 5,452
======== ======== ========
Profit before taxation
By origin
UK 2,720 2,882 4,802
Asia and Australia 700 185 1,956
America 37 205 (252)
Other 0 0 0
-------- -------- --------
3,457 3,272 6,506
======== ======== ========
Net assets
By origin
UK 7,583 6,198 6,055
Asia and Australia 1,024 1,182 1,957
America (1,825) (1,674) (2,629)
Other 0 0 0
-------- -------- --------
6,782 5,706 5,383
======== ======== ========
M&C SAATCHI WORLDWIDE LTD
UNAUDITED NOTES TO INTERIM FINANCIAL STATEMENTS
SIX MONTHS ENDED 30 JUNE 2004
3. Post balance sheet events
M&C Saatchi plc was admitted to AIM on 14 July 2004. Immediately prior to
admission the Worldwide Group undertook an internal reorganisation.
Reorganisation included the acquisition of M&C Saatchi Worldwide Ltd by M&C
Saatchi plc, and the acquisition of a further 29% of Walker Media Holdings
share capital resulting in a 75% holding. At the same time a number of key
executives who held shares in their operating companies had their interest
acquired by M&C Saatchi plc. Full details are set out in the Admission
document.
4. No account has been taken of:
- dividends of £2.313 million that were paid by M&C Saatchi Worldwide
Ltd prior to Admission and acquisition by M&C Saatchi plc.
- net dividends of £2.100 million M&C Saatchi (UK) Ltd of which £0.377
million was paid to minorities.
- the proceeds from placing £10 million, less the estimated expenses of
the placing £2.799 million. (Some of these expenses had been incurred
prior to 30 June 2004 but have been excluded from the 30 June 2004
results.)
- proceeds from the sale of interests in a freehold property and
repayment of loans of £1.146 million.
The total cash effect of the above is to increase the cash reserves of
the Group by £5.657 million. On the 31 August 2004, with most of the
float expences, paid M&C Saatchi plc had £9 million on deposit.
5. No account has been taken of Walker Media group's cash deposits at 30 June
2004 of £10.870 million nor the subsequent dividends out of Walker Media
group companies of £2.500 million (£0.728 million of which was paid to M&C
Saatchi Worldwide Ltd).
Had account been taken of the items in note 4 & 5 then the unaudited cash
balance of the combined Group at 30 June 2004 would have been £21.142 million.
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