Interim Results
M&C Saatchi PLC
15 September 2005
M&C SAATCHI PLC
INTERIM RESULTS
SIX MONTHS TO 30th JUNE 2005
15 September 2005
M&C Saatchi plc, the international advertising agency with offices in 15
locations including London, Paris, New York and across the Asia Pacific region,
announces its interim results for the six months to 30th June 2005.
Financial Highlights:
•Revenues (gross profit) grow organically by 7.1% to £31.9 million (2004:
£29.8 million)
•Operating profit (before the impact of the European investment) up 11.3%
to £4.1 million (2004: £3.7 million)
•Operating Margin (before the impact of the European investment) up 0.5pts
to 12.8% (2004: 12.3%)
•Profit before tax (before the impact of the European investment) up 14.8%
to £4.6 million (2004: £4.0 million)
•Earnings per share (before the impact of the European investment) up
12.7% to 5.07 pence (2004: 4.5 pence)
•Operating profit (including European investment) down 2.8% to £3.6
million
•Profit before tax (including European investment) up 1.7% to £4.1 million
•Earnings per share (including European investment) down 2.9% to 4.37
pence (2004: 4.50 pence)
•Interim dividend 0.77 pence per share
Operational Highlights:
•New business wins in the first half included Ribena (GSK), ITV, Mini and
Tourism Australia
•New offices open in Paris and Bangkok
•On target to open second new office in Europe by the year-end
Note: Figures are reported before the Amortisation of Goodwill.
Commenting on the results, David Kershaw, Chief Executive said:
'The first half of the year has been encouraging, with good organic growth
driven by a healthy new business performance. The underlying business continues
to perform well but the outcome of the BA review could have a major influence on
the second half and beyond.'
For further information:
M&C Saatchi 020 7543 4500
David Kershaw
Tulchan Communications 020 7353 4200
Miranda Acland / Peter Hewer
Except where otherwise stated this report comments on the unaudited profit and
loss account of M&C Saatchi plc (the 'group') for the six months to 30 June 2005
compared with the unaudited pro forma profit and loss account for the same
period in 2004. The report also comments on the numbers before the impact of the
amortisation of goodwill. The report has been prepared to show for illustrative
purposes only, the results as if the reorganisation which occurred immediately
prior to its admission to trading on AIM on 14 July 2004, had occurred on 1
January 2004 (see note 4 for further details of the reorganisation). The
directors believe that the presentation of the financial highlights and the
financial report on this basis provide a clearer understanding of the Group's
results.
Financial Review
Revenue grew by 7.1% to £31.9 million with all our key markets recording organic
growth, driven by a healthy new business performance over the last 12 months.
This represents our 11th year of consistent organic revenue growth. Significant
wins have been Ribena (GSK), Mini, ITV, Weetabix and Tourism Australia. The
first half also benefited from a number of clients spending more of their annual
budgets in the first half when compared with previous years.
Our expansion into the key European markets is progressing well. We officially
opened the doors of our new office in Paris on the 1st September, and plans are
well advanced for the second office to be opened by the end of the year,
discussions are progressing well in both Spain and Germany. As previously
indicated our European investment will have a negative effect on the financial
performance in 2005 and 2006. As expected the impact of the investment in the
first half has been to reduce operating profit by £522k.
Excluding the impact of the European investment, operating profit increased by
11.3%, and the operating margin increased to 12.8% (2004: 12.3%), with
increasing revenues matched by careful cost control. The impact of the European
investment is to reduce the margin by 1.6pts.
Group net interest has increased by 95% to £647k (2004: £332K) resulting from
good cash flows in the Group and the interest on the proceeds of the float.
The reported group tax rate of 33.8% is above the prior year (33.1%). The
increase is due to the investment in Europe and a reduced contribution from low
tax rate territories.
Minority interests have increased as a percentage of profits from 8.9% to 12.1%,
due to the companies with substantial minorities outperforming the average
across the Group.
The impact of our European investment and the increased minority interest
contribution has led to a small decrease to our earnings per share to 4.37p
(2004: 4.50p).
The board has declared an interim dividend of 0.77 pence per share, payable on
21st October 2005 to shareholders on the register as at 23rd September 2005.
Segmental Analysis
UK
Revenue in the UK increased by 7.9% to £19.0 million as a result of a healthy
new business performance across all sectors and a number of one off projects in
the first half.
Notable wins were:
•Advertising: Ribena (GSK), ITV, Cadbury Muller
•Direct Marketing (LIDA): Mini, NatWest Mortgages
•Sponsorship: Carlsberg, Reebok
•Media (Walker Media) Isolagen, Appletiser and more recently Weetabix
•PR (Talk): Ingenue, Perrier Jouet, Ovaltine
•Digital (Play) has won assignments from ITV, Privilege, The Link and
Tourism Australia
The operating margin in the UK (before the impact of the group recharges) has
increased by 0.5pts to 17.1%.
Asia and Australia
Our Asia Pacific region has seen revenue grow by 4.6% to £11.5 million (2004:
£10.9 million). The most significant new client is Tourism Australia, which is a
major new account for the group as a whole. The benefit from this win will be
mainly felt in 2006. Other new clients across the region are Spirit of Tasmania,
eBay, Microsoft, Vogue, and SIC (Malaysia F1).
The operating margin has increased by 4.1pts to 10.5% (2004: 6.3%) (before the
impact of the Group recharges). The increase in the margin is due to both a
reduction in the cost base and a change in the half on half revenue profile.
As already announced our new office in Bangkok has formally opened. The focus is
now on India and Indonesia and talks are continuing with potential partners.
America
We continue to make good progress in America. Revenue has grown 18.6% to £1.4
million (2004: £1.2 million). The growth has come from clients won late in 2004
including San Diego Zoo and the Beverly Hills Conference Centre, and in 2005
Ghirdardelli chocolates.
Before Group recharges (£101k) and one off restructuring costs incurred
following management changes (£98k), the region made an operating profit of £50k
(2004: £38k).
Europe
M&C Saatchi GAD, our French office opened their doors on the 1st September. The
new management team of Gilles Masson, Antoine Barthuel and Daniel Fohr who have
joined from Leo Burnett in Paris is in place and we are optimistic of achieving
some early new business wins. As already mentioned discussions continue with
partners in both Germany and Spain.
Outlook
The first half has been encouraging with steady organic growth driven by a
healthy new business performance and continued international expansion. The
outlook for the full year is positive and in line with our expectations.
However, the outcome of the review of the BA account could have a major
influence on performance in the second half and beyond. The outcome of the
review is due to be announced in mid October.
M&C SAATCHI PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT OF THE GROUP
SIX MONTHS ENDED 30 JUNE 2005
UNAUDITED UNAUDITED UNAUDITED AUDITED
PRO FORMA
Six months Six months Six months Year
ended ended ended ended
30 June 2005 30 June 2004 30 June 2004 31 December
2004
Note £'000 £'000 £'000 £'000
Turnover 2 128,172 126,546 54,056 215,184
Cost of sales (96,290) (96,779) (27,089) (155,807)
-------- -------- -------- --------
Gross profit 2 31,882 29,767 26,967 59,377
Administrative
expenses
- ordinary (28,263) (26,100) (24,063) (52,907)
- exceptional - - - (2,795)
- options (56) - - -
- amortisation of goodwill (821) (827) - (777)
-------- -------- -------- --------
Operating profit 2 2,742 2,840 2,904 2,898
-------- -------- -------- --------
Share of operating (loss)
/ profit of associates (143) - 352 352
Interest receivable 657 356 225 800
Interest payable (10) (24) (24) (30)
-------- -------- -------- --------
Profit on ordinary
activities
before taxation 2 3,246 3,172 3,457 4,020
Taxation on profits from
ordinary activities (1,373) (1,323) (1,150) (2,033)
-------- -------- -------- --------
Profit on ordinary
activities
after taxation 1,873 1,849 2,307 1,987
Minority interests (326) (238) (420) (531)
-------- -------- -------- --------
Profit for the
financial period 1,547 1,611 1,887 1,456
Dividends - - - (2,942)
-------- -------- -------- --------
Retained profit
/ (loss) for the period 1,547 1,611 1,887 (1,486)
======== ======== ======== ========
Earnings per
share 3
- Basic 2.85p 2.97p 5.81p 3.42p
- Diluted 2.83p 2.95p 5.81p 3.41p
All amounts relate to continuing activities
The accompanying notes form part of the unaudited financial statements
M&C SAATCHI PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT OF THE GROUP
SIX MONTHS ENDED 30 JUNE 2005
STATEMENT OF RECOGNISED GAINS AND LOSSES
UNAUDITED UNAUDITED AUDITED
Six months Six months Year
Ended ended ended
30 June 2005 30 June 2004 31 December
2004
£'000 £'000 £'000
Profit for the financial year
- Group 1,690 1,572 1,140
- Associates (143) 315 316
-------- -------- --------
1,547 1,887 1,456
Exchange adjustments on
foreign (158) 43 260
currency net investments
-------- -------- --------
Total recognised gains and
losses 1,389 1,930 1,716
for the financial period ======== ======== ========
CONSOLIDATED RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
UNAUDITED UNAUDITED AUDITED
Six months Six months Year
ended ended ended
30 June 2005 30 June 2004 31 December
2004
£'000 £'000 £'000
Profit for the financial year
- Group 1,690 1,572 1,140
- Associates (143) 315 316
Dividend - - (2,942)
-------- -------- --------
1,547 1,887 (1,486)
Exchange (158) 43 260
differences
Issue of shares - - 27,155
Share issue cost - - (835)
Issue of options 28 - 514
Net addition/
(reduction) to 1,417 1,930 25,608
shareholders'funds
Opening
shareholders'funds 29,581 3,973 3,973
-------- -------- --------
Closing 30,998 5,903 29,581
shareholders'funds ======== ======== ========
All amounts relate to continuing activities
The accompanying notes form part of the unaudited financial statements
M&C SAATCHI PLC
BALANCE SHEET
AT 30 JUNE 2005
UNAUDITED UNAUDITED AUDITED
30 June 2005 30 June 2004 31 December
2004
£'000 £'000 £'000
Fixed assets
Intangible assets 15,119 - 16,158
Tangible assets 3,048 3,301 3,047
Investments 15 1,271 15
-------- -------- --------
18,182 4,572 19,220
Current assets
Work in progress 1,890 1,056 3,368
Debtors - within one year 26,434 17,927 46,374
Debtors - greater than one 817 212 731
year
Cash in hand and bank 25,314 7,115 17,323
-------- -------- --------
54,455 26,310 67,796
Creditors: amounts falling
due (39,967) (23,170) (55,980)
within one year
Net current assets 14,488 3,140 11,816
Total assets less current
liabilities 32,670 7,712 31,036
Creditors: amounts falling
due (758) (831) (774)
after more than one year
Provisions for liabilities
and (241) (99) (218)
charges
-------- -------- --------
Net assets 31,671 6,782 30,044
======== ======== ========
Capital & reserves
Share capital 542 12 542
Share premium 9,618 - 9,618
Merger reserve 15,361 - 15,959
Share option reserve 542 - 514
Profit & loss account 4,935 5,891 2,948
-------- -------- --------
Equity shareholders' funds 30,998 5,903 29,581
Equity minority interests 673 879 463
-------- -------- --------
31,671 6,782 30,044
======== ======== ========
All amounts relate to continuing activities
The accompanying notes form part of the unaudited financial statements
M&C SAATCHI PLC
CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHS ENDED 30 JUNE 2005
UNAUDITED UNAUDITED AUDITED
Six months Six months Year
ended ended ended
30 June 2005 30 June 2004 31 December
2004
£'000 £'000 £'000
Operating profit 2,742 2,904 2,898
Amortisation on intangible
fixed assets 821 - 777
Non cash flow expenses
associated - - 460
with reorganisation
Depreciation 558 584 1,167
Loss / (Profit) on sale of
tangible fixed assets 57 14 (34)
Decrease in work in progress 1,575 189 (2,062)
Decrease / (Increase) in debtors 20,212 (1,735) (16,233)
Increase / (decrease) increditors (16,383) 2,506 17,902
Exchange differences (105) 85 78
-------- -------- --------
Cash inflow / (outflow) from
operating activities 9,477 4,547 4,953
Dividend received from - - 728
associates
Returns on investment and servicing of finance
Interest received 657 113 687
Interest paid (2) (9) (3)
Interest element of finance
lease rental payments (8) (15) (27)
Minority interest dividend
paid (232) (938) (1,296)
Taxation (926) (900) (1,800)
Capital expenditure and financial investment
Purchase of tangible fixed assets (591) (569) (922)
Sale of tangible fixed assets 44 98 417
Sale of part share of
subsidiary undertakings - - 527
Acquisitions & disposals
Investment in subsidiary - - (382)
Cash acquired with
subsidiary undertaking - - 2,243
Equity dividends paid (629) - (2,313)
-------- -------- --------
Net cash inflow / (outflow)
before financing 7,790 2,327 2,812
Financing
Share placement - - 10,537
Share placement costs - - (835)
Shares issued to minorities 116 - 107
Repayment of bank loans - (20) (21)
Capital elements of finance
lease rental payments (57) (144) (225)
-------- -------- --------
Increase /(Decrease) in cash
in the perio 7,849 2,163 12,375
======== ======== ========
All amounts relate to continuing activities
The accompanying notes form part of the unaudited financial statements
M&C SAATCHI PLC
CONSOLIDATED CASH FLOW STATEMENT (continued)
SIX MONTHS ENDED 30 JUNE 2005
UNAUDITED UNAUDITED AUDITED
Six months Six months Year
ended ended ended
30 June 2005 30 June 2004 31 December
2004
£'000 £'000 £'000
Reconciliation of net cash flow to movement in net debt
Increase /
(decrease) in
cash in the year 7,849 2,163 12,375
Cash outflow
from decrease in
lease finance 57 144 225
Inception of
finance leases (15) (45) (31)
Exchange differences 132 (63) (87)
Cash out flow
from repayment
of bank loan - 20 21
-------- -------- --------
Movement in net
funds in the
year 8,023 2,219 12,503
Net funds at
start of year 17,079 4,576 4,576
-------- -------- --------
Net funds at end
of year 25,102 6,795 17,079
======== ======== ========
Analysis of changes in net funds
Balance at 1 Cash Finance Exchange Balance at 30
January 2005 inflow lease Movements June 2005
£'000 £'000 £'000 £'000 £'000
Cash at
bank 17,323 7,849 - 143 25,315
and in
hand
Debt - - - - -
due
within
one
year
Finance (244) 57 (15) (11) (213)
leases
-------- ------ ------ -------- ----------
Total 17,079 7,906 (15) 132 25,102
======== ====== ====== ======== ==========
All amounts relate to continuing activities
The accompanying notes form part of the unaudited financial statements
M&C SAATCHI PLC
NOTES TO THE FINANCIAL STATEMENTS
SIX MONTHS ENDED 30 JUNE 2005
1. •Accounting policies
The financial information included in this report does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. The
financial information for the year ended 31 December 2004 has been extracted
from the statutory accounts for that period, a copy of which has been
delivered to the Registrar of Companies. The interim accounts for the six
months to 30 June 2005 are unaudited.
•FRS 20 (Share based payment) has been adopted for the first time for the
period under review.
•In accordance with FRS 21 (Events after balance sheet date), the interim
dividend is not included in these financial statements.
With these exceptions the interim accounts for the six months ended 30 June
2005 have been prepared on the basis of the accounting policies set out in
the statutory accounts for the year ended 31 December 2004.
2. •Profit and net assets
UNAUDITED UNAUDITED UNAUDITED AUDITED
PRO FORMA
Six months Six months Six months Year
ended ended ended ended
30 June 2005 30 June 2004 30 June 2004 31 December
2004
£'000 £'000 £'000 £'000
Turnover
Turnover arises from the principal activity of the Group.
An analysis by geographical market.
By origin
UK 101,840 104,351 31,861 168,809
Asia and
Australia 23,352 20,019 20,019 41,736
America 2,980 2,176 2,176 4,639
Europe - - - -
-------- -------- -------- --------
128,172 126,546 54,056 215,184
======== ======== ======== ========
M&C SAATCHI PLC
NOTES TO THE FINANCIAL STATEMENTS
SIX MONTHS ENDED 30 JUNE 2005
UNAUDITED UNAUDITED UNAUDITED AUDITED
PRO FORMA
Six months Six months Six months Year
ended ended ended ended
30 June 2005 30 June 2004 30 June 2004 31 December
2004
£'000 £'000 £'000 £'000
Gross profit (Revenue)
An analysis by geographical market.
By origin
UK 19,026 17,635 14,835 33,717
Asia and
Australia 11,458 10,953 10,953 23,126
America 1,398 1,179 1,179 2,534
Europe - - - -
-------- -------- -------- --------
31,882 29,767 26,967 59,377
======== ======== ======== ========
Operating profit / (loss) before amortisation of goodwill
An analysis by geographical market.
By origin
UK (1) 3,352 2,936 2,173 789
Asia and
Australia 882 693 693 2,686
America (149) 38 38 200
Europe (2) (522) - - -
-------- -------- -------- --------
3,563 3,667 2,904 3,675
======== ======== ======== ========
Operating profit / (loss)
An analysis by geographical market.
By origin
UK 2,531 2,109 2,173 12
Asia and
Australia 882 693 693 2,686
America (149) 38 38 200
Europe (2) (522) - - -
-------- -------- -------- --------
2,742 2,840 2,904 2,898
======== ======== ======== ========
Profit before taxation (before amortisation of goodwill)
An analysis by geographical market.
By origin
UK (1) 3,816 3,262 2,720 1,862
Asia and
Australia 921 700 700 2,736
America (148) 37 37 199
Europe (2) (522) - - -
-------- -------- -------- --------
4,067 3,999 3,457 4,797
======== ======== ======== ========
Profit before taxation
An analysis by geographical market.
By origin
UK 2,995 2,435 2,720 1,085
Asia and
Australia 921 700 700 2,736
America (148) 37 37 199
Europe (2) (522) - - -
-------- -------- -------- --------
3,246 3,172 3,457 4,020
======== ======== ======== ========
(1) Amortisation of goodwill of £821k was charged in the UK segment in the
six month period to 30 June 2005, £777k in second half of 2004. There was an
extrapolated amortisation of goodwill of £827k charged to the UK segment in
the pro forma six month period to 30 June 2004.
(2) £522k of European investigative costs have been incurred in six month
period to 30 June 2005. £70k of European costs were incurred and reported in
the UK segment, in the second half of 2004.
M&C SAATCHI PLC
NOTES TO THE FINANCIAL STATEMENTS
SIX MONTHS ENDED 30 JUNE 2005
UNAUDITED UNAUDITED AUDITED
Six months Six months Year
Ended ended ended
30 June 2005 30 June 2004 31 December
2004
£'000 £'000 £'000
Net assets
An analysis by geographical market.
By origin
UK 31,466 7,583 29,945
Asia and 3,143 1,024 2,466
Australia
America (2,514) (1,825) (2,367)
Europe (424) - -
-------- -------- --------
31,671 6,782 30,044
======== ======== ========
3. •Earnings per share
UNAUDITED UNAUDITED UNAUDITED AUDITED
PRO FORMA
Six months Six months Six months Year
ended ended ended ended
30 June 2005 30 June 2004 30 June 2004 31 December
2004
Earning per share before amortisation of goodwill
- Basic 4.37p 4.50p 5.81p 4.12p
- Diluted 4.33p 4.46p 5.81p 4.09p
Earnings per share
- Basic 2.85p 2.97p 5.81p 3.42p
- Diluted 2.83p 2.95p 5.81p 3.42p
4. •Flotation
M&C Saatchi plc was admitted to AIM on 14 July 2004. Immediately prior to
the 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 were set out in the admission
document.
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