M&C Saatchi held off by “significant” hostile takeover costs, but advertiser profits still grow 50% on specializations
- M&C Saatchi is the subject of two acquisition approaches that are driving up its costs
- Weakness in advertising and CRM was offset by specialty business
M&C Saatchi’s progress in the first half was limited by the “significant” costs associated with the company being the target of two separate takeover attempts.
The advertising firm has faced hostile overtures from former board member Vin Murria this year and its investors were due to vote on a separate £310million bid from Next Fifteen Communications on August 19, but regulatory issues had to be postponed.
M&C’s Saatchi operating expenses rose 5.3 per cent to £111.3m in the six months ended June 30th, mainly due to a £9.5m loss from ‘significant costs associated with running takeover approaches”.
CEO Moray MacLennan said these are “results to be proud of under any circumstances”.
Despite the rise in costs, the group’s pre-tax profit soared 52.4% to £16m over the period, while net income rose 9.6% to £129.4m.
Growth was primarily driven by a strong performance from M&C Saatchi’s specialty businesses as a result of weakness in its core advertising and CRM businesses.
The group highlighted its global and social issues, as well as sponsorship and talent, after achieving growth of 29.7 and 20.2 percent, respectively.
M&C Saatchi’s board of directors reiterated its guidance of profit before tax of £31m for full year 2022 and £41m in 2023. Dividends are expected to be reintroduced at the end of the company’s full financial year.
Boss Moray MacLennan said these are “results to be proud of under any circumstances”, particularly “with the distraction of a hostile takeover”.
He added: “Looking ahead, the counter-cyclical nature of key growth companies combined with a global efficiency program gives confidence in our strong standalone future and outlook for the remainder of 2022 and into 2023.
“The plan is clear. The delivery is speeding up. Proven resilience.”
Despite that optimism, M&C Saatchi shares fell 7.5 percent to 150 pence by afternoon trade, bringing the year-to-date loss to 9.8 percent.
Analysts at Peel Hunt said: “The share price has remained weak as its future is in flux.
“During ours [profit before tax] For FY22E gaming management projections, our PBT for FY23E is £37m lower than the £41m.
“As of this writing, given the ongoing uncertainty about next year’s advertising spend, we are pleased with our numbers. The timing for shareholder voting will be announced in due course but is not expected until early Q4.’