REG - M&C Saatchi PLC - Full Year Results
27/03/2025 07:15
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RNS Number : 4664C M&C Saatchi PLC 27 March 2025
M&C SAATCHI PLC
(the "Company", "M+C Saatchi" or the "Group")
Unaudited preliminary results for the year ended 31 December 2024
Strong performance in line with expectations
Strengthened foundations and improved resilience in a year of transformation
Further organic investment made in the second half to drive future growth
Full year financial performance highlights
Like-for-like (LFL) (1) results Statutory results
2024 2023 2024 2023
£m £m % change £m £m % change
Revenue 392.5 391.1 0.4% 395.4 420.0 (5.8)%
Net revenue(2) 231.0 222.8 3.7% 231.4 236.7 (2.2)%
Operating profit 35.2 33.4 5.2% 22.5 5.7 294.7%
Operating profit margin 15.2% 15.0% 0.2pps 9.7% 2.4% 7.3pps
PBT 30.5 29.3 4.2% 18.1 (0.8) n.m.
Net cash(3) 15.3 8.3 84.3% 11.8 8.3 42.2%
EPS (basic) pence(4) 17.6p 16.6p 6.1% 9.6p (3.7)p n.m.
Dividends (pence per share) - - - 1.95p 1.6p 21.9%
(( 1 )) Like-for-Like (LFL) results adjust statutory results to reflect the
underlying profitability of the business units, by excluding a number of items
that are not part of routine expenses including one-off and exceptional items
(defined as Headline Results), also excluding subsidiaries discontinued in
2023 and in 2024, and retranslating 2023 figures to 2024 FX rates. These
adjustments are set out below. We provide commentary on LFL figures, where
applicable, to provide a more comparable and better basis for understanding
our current and future performance. LFL adjustments are summarised below in
this section, in the Financial Review and at Note 1 of the financial
statements. All figures are subject to rounding.
(2) Refer to Notes for the definition of net revenue and net cash.
(3)LFL net cash is adjusted to add back £3.5 million of restricted cash. Net
cash is £11.8 million.
(4) Basic and diluted earnings per share are calculated by dividing the
appropriate earnings metrics by the weighted average number of shares of the
Company in issue during the year. Statutory basic EPS excludes the
discontinued South Africa businesses; including them statutory EPS would have
been 12.1p (2023: (2.9)p.)
· 3.7% LFL net revenue growth driven by strong 6.7% growth in
Non-Advertising Specialisms, offsetting a modest Advertising decline of -1.9%
· Improvement in LFL profitability driven by the global cost efficiency
programme, local cost actions, and improved mix:
o 5.2% LFL operating profit growth
o LFL operating margins of 15.2% (+0.2pps), driven by higher margin
Non-Advertising at 25.2% (2023: 23.3%) and improved Advertising at 11.2%
(2023: 9.5%) with cost savings enabling continued organic investment. Group
central costs increased, reflecting investment into centralised services for
the Group
o 4.2% increase in LFL profit before tax
· LFL earnings per share (basic) of 17.6p (2023: 16.6p) also reflects
further reduction in put option liabilities, with minority interests now at
3.2% of earnings (2023: 9.1%), in addition to profitability improvement
· Adjusted net cash up 84% at £15.3 million (2023: £8.3 million),
after put option settlements of £8.6 million, and operating cash conversion
of 85% 1
· Proposed increase in dividend of 21.9% to 1.95p (2023: 1.6p)
reflecting our improved earnings performance and maintaining cover
· Statutory results: £231.4 million net revenue (-2.2%), largely due
to the discontinued South Africa businesses. Operating profit £22.5 million
(2023: £5.7 million) due to significantly lower staff costs and the portfolio
shift to higher-margin Non-Advertising Specialisms. Operating margin of 9.7%
(2023: 2.4%). PBT £18.1 million (2023: £(0.8) million), due to lower staff
costs, the reversal of an impairment and a decrease in finance expense (given
reduced average borrowings)
Our ongoing operating model transformation
· The far reaching transformation of our operating model from federated
to integrated is achieving substantial cost savings and reinforcing our
Group-wide culture, delivering £10m of annualised savings
· Transformation investment, weighted to H2 2024, included key senior
hires to reinforce creativity, our regional-first strategy, digital and data
capability, and business development; our investment in Sports &
Entertainment in the UAE, a key market in a fast-growing region; and in our
Issues Specialism
· The new operating model including the restructuring of the
back-office is facilitating:
o Selling In, Up and Across through the agility of our newly integrated
approach; early success in multi-specialism and cross-regional client wins,
e.g. Allwyn Group
o Shared Service Centre (SSC) now servicing 85% of in-scope revenue,
liberating agencies from processes such as financial, IT, HR to focus on what
they do best - creativity and client service. Remaining in-scope agencies to
migrate in early 2025
o System harmonisation, such as enterprise resource planning (ERP), people
systems, and a client CRM system (HubSpot), enable the business to have full
visibility on opportunities, as well as enhance our ability to clearly measure
and steer the business for growth
o New Intelligence Insight centre of excellence is in place and
democratising our data capabilities, providing over 400 insight briefs to our
global teams in 2024
· Phase Two of the operating model transformation planned for 2025
includes the restructuring of the middle office to deliver synergies across
production, data and products. This is targeting a further annualised saving
of £3 million by the end of 2025
Our new M+C Saatchi Cultural Power proposition
· The Cultural Power proposition, launched this March, is how we help
clients harness cultural forces to fuel consumer desire, drive demand and
deliver brand growth
· The Cultural Power Index (CPI) is a proprietary AI-powered diagnostic
tool that helps brands drive growth by identifying opportunities to build
Cultural Power through improved marketing which drives sales growth
LFL operating performance highlights
· Significant shift of portfolio to higher-margin Non-Advertising
Specialisms which now represent 67% of Group net revenue (2023: 60%),
alongside Advertising which remains core to our offering
· Non-Advertising Specialisms 2 : the strong topline performance
(+6.7%) was driven primarily by Issues, reflecting continued demand from
securitised Government segments (+28%), and sustained growth in Media (+8%),
offsetting macro challenges felt within the other Specialisms:
o Net revenue of £153.7 million (+6.7%);
o Operating profit of £38.8 million (+15.4%) and operating margin of 25.2%
· Advertising: operating profit grew +15.4% and margins improved
considerably due to strong growth in Europe and UAE, combined with improved
cost management globally, but the challenging economic environments in
Australia and UK resulted in a small overall revenue drop (-1.9%):
o Net revenue of £77.4 million (-1.9%)
o Operating profit of £8.7 million (+15.4%) and operating margin of 11.2%
· Client retention remains strong: this year we retained clients who
accounted for 92% of 2023 revenue
· Business wins, totalling over 140 in 2024, including Ferrari,
Carlsberg, L'Oreal, Allwyn in H2 following the H1 wins of McDonalds, Ford,
Danone, MTN, IKEA and Sony Pictures
· Organic investment into key geographies and specialisms to expand the
portfolio coverage and increase resilience
Outlook in line with market expectations
We are reaping the benefits of our ongoing transformation to an integrated
global group. With the strong creative leadership we have appointed, the
encouraging early success of our new operating model, and the strength and
diversity of our portfolio in the face of continuing macro volatility, we are
building a strong platform for future organic growth. This, combined with the
next phase of our operating model transformation, gives the Board confidence
that we can achieve results in line with the market's expectations for
2025 3 . We are also confident that, over the medium term, the platform we are
building will underpin our growth ambitions.
Zaid Al-Qassab, Chief Executive Officer, said:
"2024 was an important and successful year for M+C Saatchi. Our strong
results, with growing LFL net revenue, profitability and cash generation, were
broad-based and reflect the health of the business. Since Simon Fuller and I
joined as CFO and CEO, our focus has been laying the foundations for long-term
profitable growth. We are confident that our world-leading creativity, global
reach, and specialist capabilities, is the combination desired by clients.
Higher margin specialist services now account for two-thirds of our business
and Advertising one third, reflecting the direction of our growth strategy,
which is reinforced by our continued transformation programme.
"We have increased our resilience through further diversification of our
portfolio, without over-exposure to any particular segment, and we are
encouraged that we have the right model for future top-line growth and strong
sustainable returns for shareholders. In the near-term, while remaining
mindful of ongoing macro volatility, the Board is confident that we are on
track to meet market expectations for 2025.
"I'd like to thank all our colleagues at M+C Saatchi for their commitment
during this transformative year, which included welcoming new creative,
regional and specialist leadership."
M+C Saatchi 2024 results presentation
Zaid Al-Qassab, Chief Executive Officer, and Simon Fuller, Chief Financial
Officer, will host an in-person presentation, which can also be joined online,
for analysts and investors at 9.00am BST on 27 March 2024 at 36 Golden Square,
London W1F 9EE
(https://www.bing.com/ck/a?!&&p=1f50cdf5de3e04aeJmltdHM9MTcyNTQ5NDQwMCZpZ3VpZD0xOGZiNzk4NS1lMDAzLTZlNGItMTg0Yy02ZGJhZTEyOTZmYTgmaW5zaWQ9NTQ4OQ&ptn=3&ver=2&hsh=3&fclid=18fb7985-e003-6e4b-184c-6dbae1296fa8&u=a1L21hcHM_Jm1lcGk9MTA5fn5Ub3BPZlBhZ2V-QWRkcmVzc19MaW5rJnR5PTE4JnE9TSUyNkMlMjBTYWF0Y2hpJTIwVGFsayZzcz15cGlkLllOMTAyOXg5NTgzMjU5NDc2MzYyMjI1OTIxJnBwb2lzPTUxLjUxMTk3NDMzNDcxNjhfLTAuMTM3NjQ4MDAxMzEzMjA5NTNfTSUyNkMlMjBTYWF0Y2hpJTIwVGFsa19ZTjEwMjl4OTU4MzI1OTQ3NjM2MjIyNTkyMX4mY3A9NTEuNTExOTc0fi0wLjEzNzY0OCZ2PTImc1Y9MSZGT1JNPU1QU1JQTA&ntb=1)
. To register your interest, please contact Headland Consultancy at
MCSaatchi@headlandconsultancy.com (mailto:MCSaatchi@headlandconsultancy.com)
.
A replay will be also available on the Company's website following the event
at https://mcsaatchiplc.com/ (https://mcsaatchiplc.com/)
Further information
M+C Saatchi +44 (0)20-7543-4500
Zaid Al-Qassab, Chief Executive Officer
Simon Fuller, Chief Financial Officer
Tom Fahey, Head of Investor Relations
Headland Consultancy +44 (0)20-3805-4822
Rob Walker, James Waters
Panmure Liberum - Nominated adviser and joint broker +44 (0)20-3100-2000
Max Jones, Edward Mansfield, Will King
Deutsche Numis - Joint broker +44 (0)20-7260-1000
Nick Westlake, Iqra Amin
Preliminary announcement
This preliminary announcement was approved by the board of directors on 26
March 2025. It is not the Group's statutory accounts. Copies of the Group's
audited statutory accounts for the year ended 31 December 2024 are expected to
be available at the company's website in the coming days, and a printed
version will be dispatched to shareholders thereafter.
Group performance
Financial performance highlights
Like-for-like (LFL) (1) results Statutory results
2024 2023 2024 2023
£m £m % change £m £m % change
Net revenue(2) 231.0 222.8 3.7% 231.4 236.7 (2.2)%
Operating profit 35.2 33.4 5.2% 22.5 5.7 n.m
Operating profit margin 15.2% 15.0% 0.2pps 9.7% 2.4% 7.3pps
PBT 30.5 29.3 4.2% 18.1 (0.8) n.m
EBITDA (3) 42.0 41.0 2.3% 29.7 14.6 n.m
Net cash(4) 15.3 8.3 84.3% 11.8 8.3 42.2%
EPS (basic) pence 17.6p 16.6p 6.1% 9.6p (3.7)p n.m
Dividends (pence per share) - - - 1.95p 1.6p 21.9%
( )
(( 1 )) Like-for-Like (LFL) results adjust statutory results to reflect the
underlying profitability of the business units, by excluding a number of items
that are not part of routine expenses including one-off and exceptional items
(defined as Headline Results), also excluding subsidiaries discontinued in
2023 and in 2024, and retranslating 2023 figures to 2024 FX rates. These
adjustments are set out below. We provide commentary on LFL figures, where
applicable, to provide a more comparable and better basis for understanding
our current and future performance. LFL adjustments are summarised below in
this section, in the Financial Review and at Note 1 of the financial
statements. All figures are subject to rounding.
(2) Refer to Notes for the definition of net revenue, and net cash. Net cash
includes £3.5 million of restricted cash.
(3) EBITDA is calculated excluding the income statement charges relating to
IFRS 16.
(4) LFL net cash is adjusted to add back £3.5 million of restricted cash. Net
cash is £11.8 million.
Our results are testament to the core strengths of our business and the
success of our ongoing transformation, reflecting the positive impact of our
global cost efficiency programme, with the like-for-like (LFL) results
demonstrating a solid foundation for future growth. The additional benefits
of the exit from loss-making operations are, by definition, excluded from the
LFL measurement, but also their removal has resulted in a higher quality,
higher margin business.
Our LFL net revenue growth of 3.7% demonstrates the strength of M+C Saatchi's
global brand, creative capabilities, and loyal, iconic client base.
The improvement in profitability and mix is largely driven by our operating
model transformation initiatives. Cost savings achieved in 2024 totalled £6.1
million on an annualised basis, adding to the £3.9 million from 2023 and
therefore achieving the annualised savings of £10 million we targeted by the
end of 2024. These initiatives allowed reinvestment into the business and
contributed to a 5.2% rise in LFL operating profit and a 0.2 percentage point
improvement in operating margin to 15.2%, while also enabling us to invest for
future growth in the second half. LFL EBITDA grew by 2.3%, while LFL PBT rose
by 4.2%.
Basic LFL EPS of 17.6p (2023: 16.3p) was driven by enhanced profitability, and
a substantial reduction in minorities. The remaining put option liabilities
are expected to reduce further over the short term, with a current residual
liability of £3.7 million at a 170p share price (as at 31 December 2024).
The settlement of put options absorbed £8.6 million of cash in 2024, leaving
adjusted net cash up 84% to £15.3 million, including restricted cash of £3.5
million, thanks to our continued focus on cash management and improved working
capital. Operating cash conversion was strong at 85%, in-line with our
long-term target of 80%, which allows for some variability over the cycle.
Reconciliation of LFL to statutory results
The Group remains exposed to foreign currency exchange rate (FX) movements
impacting the translation of its overseas operations. LFL results are
presented using constant FX from the current period to ensure comparability
with the prior period. Key Group currency movements reflected weakness in most
Group international currencies, particularly the Australian Dollar and Euro
versus Sterling.
The table below sets out the reconciliation of LFL results to statutory
results, showing the forex and discontinued business effect.
Net revenue Operating profit
£m 2024 2023 Change 2024 2023 Change
Total LFL 231.0 222.8 3.7% 35.2 33.4 5.2%
Current currency adjustment 4.7 0.3
Exiting agencies 0.4 9.1 0.0 -2.9
Company adjustments -12.7 -25.1
Total Statutory 231.4 236.7 -2.2% 22.5 5.7 294.7%
Operating review
Net revenue Operating profit
£m 2024 2023 Change 2024 2023 Change
Non-Advertising Specialisms 153.6 143.9 6.7% 38.8 33.6 15.4%
Advertising 77.4 78.9 -1.9% 8.7 7.5 15.4%
Group central costs 0.0 0.0 - -12.3 -7.7 -
Total LFL 231.0 222.8 3.7% 35.2 33.4 5.2%
Non-Advertising Specialisms delivered a 6.7% increase in LFL net revenue to
£153.6 million and contributed 67% of Group net revenue, while Advertising
delivered £77.4 million (-1.9%).
The overall performance of our Non-Advertising Specialisms was fuelled by
continued strong growth of 27.6% in Issues, underlining our leading market
position working with the governments of Western democracies alongside charity
foundations and NGOs, and highlighting the specific expertise that we have
developed in this highly specialised field, mainly public sector. Media built
on its first half recovery, following a more difficult 2023, ending the year
+8.2%. Advertising declined -1.9% largely due to a tougher second half
environment, particularly Australia and the UK.
Our higher-margin Non-Advertising Specialisms delivered a 15.2% increase in
operating profit, with an operating margin of 25.2% (+1.9ppts) reflecting
strong revenue growth, continued mix improvements and proactive management of
the cost base. Advertising's 15.2% growth in operating profit, with
operating margin at 11.2% (+1.7ppts), was largely driven by management of the
cost base as well as the exit from loss-making businesses.
Group central costs increased overall in 2024, largely due to the creation of
the SSC with back-office costs now centrally held and managed to drive
Group-wide effectiveness, versus locally by each agency (with a net reduction
for the Group). In addition, senior leadership appointments and management
incentives contributed to increased central costs. As a result, Group central
costs increased to £12.3 million, from £7.7 million in 2023.
Specialisms LFL performance
Advertising
· 33% of LFL Group net revenue (2023: 40%)
· LFL net revenue of £77.4 million -1.9% (2023: £78.9 million)
The more muted 2024 performance reflected improved momentum in the first half
across multiple markets and continued efforts to improve profit through margin
and cost discipline. A weaker second half was largely driven by the UK and
Australian markets where macro conditions remain challenging but was
significantly offset by continued growth in the UAE, Europe and the US
(through a combination of new client wins and repeat business). The reduction
in Advertising Group net revenue share versus 2023 was largely driven by the
disposal of the South African businesses, which were largely Advertising. The
outlook for 2025 reflects a consistent pattern, with subdued market conditions
in Australia, stabilization in the UK, and stronger demand in Europe, the US
and the UAE.
Issues
· 25% of LFL Group net revenue (2023: 20%)
· LFL net revenue of £57.9 million +27.6% (2023: £45.4 million)
Continued strong performance was driven by a combination of existing client
work and new wins with multi-year framework agreements. The Group has made
significant investment into this Specialism, enhancing our non-UK footprint,
our data security capabilities and talent. We continue to develop our
expertise in this unique and highly specialised field, with strong barriers to
entry, a broadened client list and good momentum continuing into 2025.
Passions & PR 4
· 16% of LFL Group net revenue (2023: 16%)
· LFL net revenue of £36.4 -6.5% (2023: £38.9 million)
This was a year of change with the inclusion of our PR business into this
Specialism and the full reshaping of its client base for improved
profitability. The award-winning Sport & Entertainment businesses, under
the new leadership of CEO Robin Clarke, continued to reshape their client
roster for improved profitability, focusing on higher-quality mandates across
multi-year engagements and to improve service output. The outlook for 2025 is
more encouraging, although PR continues to be affected by our exposure to the
relatively weaker UK market.
Consulting
· 14% of LFL Group net revenue (2023: 14%)
· LFL net revenue of £32.5 million -6.7% (2023: £34.9 million)
Our M+C Saatchi Consulting branded proposition launched in 2024 as our
complete end-to-end offering. Our digital and data solutions expertise in
Fluency will maximise opportunities and play a crucial role in the Group's
Cultural Power proposition, alongside our new Intelligence Insight centre of
excellence. We remain somewhat cautious on the market backdrop for 2025, as
sector challenges continue, largely due to wider economic pressures resulting
in delays to project start dates and deferral of client spend; however, we are
seeing an improving pipeline.
Media
· 12% of LFL Group net revenue (2023: 10%)
· LFL net revenue of £26.8 million +8.2% (2023: £24.8 million)
Media grew revenue through client wins and retained work in APAC, a core
region for the specialism, and the US. Following the impact of the
macro-economic slowdown in 2023, affecting technology spend in particular, we
are encouraged by recent momentum and continued development of our digital
expertise, including e-retail. Whilst we remain cautious on the market
backdrop for 2025, we are encouraged by recent wins, our healthy pipeline and
improving momentum on the back of our strong client offer.
Regional performance
The breadth of our geographic mix is a strength, and under our new
Regional-First approach will, in the future, more simply reflect the way we
manage the Group. The UK remains our biggest region, driven by the growth of
Issues. APAC is predominantly Australia, while Americas is dominated by the US
market. In Europe, the two largest markets are Italy and Germany. Since the
sale of the South Africa businesses, we no longer have an owned business in
Africa. LFL regional performance was as follows:
· UK: +9% with positive momentum in our specialist Issues business and
Media, while Advertising was down reflecting market dynamics
· APAC: -9% in a weak Australian environment, notably in Advertising,
as the cost of living and high interest rates discouraged spending and
dampened consumer confidence
· Americas: -3% decline largely due to client delays in Consulting,
offsetting growth in US Advertising
· Europe: +14% good growth across the board, particularly Advertising
and Passions & PR through a combination of retained work and new business
wins
· Middle East: +59% thanks to strong Advertising growth in the UAE and
significant strength in construction and real estate as well as the launch of
our S&E offering
Review of strategy
Review of our transformed operating model
The strength of these results derives directly from the early success of the
transformation. This comprises the global efficiency programme, the
introduction of the new integrated group operating model, including the
creation of the SSC, and the shift in culture from a federated approach to a
Group-wide one. Phase One of this change began in the second half of 2023 and
we continued it throughout 2024 with only a small amount of the back-office
left to complete. It has been transformative on every level of our
operations, with Phase Two, which includes our middle office operations, now
well underway.
The following table sets out our transformation goals and our recent
successes:
Strategic goal Transformation objectives and achievements
Retain clients, generate leads and cross-sell (Selling In, Up, and Across) by · Putting in place the new operating model and Cultural Power
creating an integrated, agile, regional-first go-to-market approach proposition
· Recognising the value of our Advertising brand as an entry-point
for clients
· Enabling global elevation for regional clients
· Easing access to our full range of Specialisms in each region
Grow revenue and profitability through new Group-focused incentives and · Replacing the federated approach to growth with the Group-wide
culture integrated model
· Removing the structural and cultural restrictions on cross-sell
· LTIP programme with Group-focused targets for both long and
short-term incentives
Free up creativity and focus on client service through providing shared admin · Unleashing creativity, the core to our success, by reducing the
services administrative burden on creative leaders through the new SSC in Cape Town for
support in finance, HR, property, IT, and procurement
· Moving to a single system for people management (Workday) and
communications (MS 365) to facilitate creative operations and increased use of
AI tools
Ensure greater understanding and controls through better operational · Installing NetSuite, a finance information system to enable
information systems unified reporting protocols
· Initiating our CRM tool, HubSpot, to facilitate cross-Specialism
and cross-regional work
Leverage our internal capabilities, such as data · Created an Intelligence Insight central centre of excellence to
democratise our data capabilities
· Cross-regional use of creative resources
Improve governance efficiency by simplifying and rationalising the Group · Exited marginal and loss-making businesses in 2023 and 2024
structure
· Our simplified our structure has 22 in-market operations
including licensees
· Executive Leadership Team is built around five regions and five
Specialisms
Improve margins through cost efficiency · Executed our global back-office efficiency programme focusing on
finance, HR, property, IT, and procurement and people during 2023 and 2024 and
delivered annualised cost savings of £10 million from the end of 2024
· Phase Two is expected to deliver an additional £3m annualised
savings and shifts focus to the middle office
Achieve an overall high-margin, relatively lower cyclical profile by continued · Non-Advertising Specialisms are now 67% (2023: 58%) of LFL net
diversification of the portfolio revenue with Advertising now accounting for 33% (2023: 42%)
· Advertising, with its greater cyclicality and structurally lower
margins, retains its marketing power for our world-famous brand
· Maintaining strong growth in low and anti-cyclical Issues
Specialism by investing in data secure solutions
Strengthen cash delivery with target of at least 80% operating cash conversion · Refocusing the Group on cash through working capital optimisation
and improved global cost management
· £8.6 million of put options cash settled during 2024, with only
£3.7 million remaining
· Operating cash conversion of 85% due in part to a capital-light
model
Provide returns for shareholders · Achieved strong relative share price performance in view of the
challenging equity market conditions
· Continue to focus on returning cash income to shareholders with a
growing dividend policy
Our new client-centric operating model, achieved through the transformation,
has provided a platform for:
An agile, integrated go-to-market approach in the "Goldilocks Zone"
In choosing a partner, our clients are faced with a spectrum of options,
spanning from giant HoldCos, whose creativity is often outweighed by their
bureaucracy, to niche players whose exciting offering lacks reach and breadth
of capability. And then there is M+C Saatchi. We are "just-right", in 'The
Goldilocks Zone' with the creative flair and agility clients desire, a trusted
brand, the insight of our regional perspective, combined with our integrated
global capabilities and reach. We are the creatively exciting and reliable
partner to deliver breakthrough work.
A focus of future revenue growth - selling in, up and across
With our revised, integrated operating model in place, we are now in a
position to promote cross-sell and joint pitches. This is a significant shift
from the old fragmented and federated model where the client engaged
separately with a specific agency within M+C Saatchi. All client service,
creative solutions and production and billing was then managed by that agency.
The new integrated model allows a client to engage with M+C Saatchi as a
whole, accessing us from whichever agency they know, or through our
Advertising "front door" with its world-famous brand. We can then offer a more
holistic solution, bringing in the benefits of all our Specialisms supported
by other capabilities, such as data and intelligence, and across all regions.
Our integrated model allows us to take a more client-centric approach,
responding to briefs with a flexible solution and an agile team of experts
needed to deliver on our clients' specific needs:
· Selling In: New business wins through extraordinary creative
thinking and solutions, supported by AI-powered customer platform, HubSpot
· Selling Up: Serving clients brilliantly, enabling longstanding and
expanded relationships with support from new product development and
innovation.
· Selling Across: Full integration across one team to offer a wider
range of services across Specialisms and regions
Our new operating model enables our clients to access all our Specialisms and
capabilities throughout all our regions, meeting client needs and giving us
the potential to pitch more effectively and cross-sell with holistic
solutions. Internally, we no longer bear the complexities and cost of separate
administrative processes as it can now be consolidated by the SSC, which is
better for our clients, and lowers the burden and overhead for us.
In addition, our leadership incentivisation is now focused on Group-wide as
well as local/regional performance.
A complete offering: the breadth and depth of our Specialisms
We offer high-quality creative output across a breadth of marketing services.
Our work with clients spans the strategic planning stage, through the creation
and execution of their marketing plans, to measurement and evaluation.
Consultancy, Advertising, Passions & PR, and Media reflect this breadth of
requirements, and broadly fit these different stages of the client's journey.
Issues offers this full span of services but focuses on the specific demands
of its largely public sector clients. Our newly integrated operating model
will allow the Group to engage more than ever before with clients across a
range of Specialisms in the marketing chain, enabling cross-sell
opportunities.
All of this is underpinned by our new operating model
Our new operating model reduces the complexity for clients and, internally,
for us, thereby ensuring that our teams can focus on client solutions and
delivery. Creativity and innovation is the spearhead of everything we do,
focusing on where we have the right to win. Our agile, regional-first
go-to-market approach, powered by specialist expertise and global networks,
opens cross-sell opportunities, and enables us to partner local and
regional-heroes and challenger brands as they need wider capabilities and
broader reach. The planned transformation of the middle office of shared
capabilities is designed to facilitate cost-effective, high-quality solutions
based on Group-wide expertise.
Supporting all of this is our back-office of Group-wide services provided
efficiently and systemically by the SSC in South Africa. These services
include finance, HR, property, IT, and procurement alongside some smaller
specialist functions such as Treasury and ESG.
Transformation Phase Two
Our transformation during 2023 and 2024 has been significant, but there is, as
we have previously said, more to do. Our 2025 transformation goals aim to set
us up for future growth, alongside ensuring efficiency and effectiveness.
Our 2025 objectives are to:
1. Unite behind Cultural Power, our proposition to capitalise on our
unique understanding of the forces which drives purchase behaviour and brand
growth, delivered through Cultural Power and helping our clients to navigate a
fragmented consumer landscape
2. Bring the integrated, regional-first model to life, completing the
transition to the integrated suite of systems and digital tools in early 2025,
and evolving the organisational design and incentives for greater simplicity
and accountability
3. Restructure the Middle Office capabilities with systems and services
for shared production, data and products, unlocking further efficiencies and
contributing to annualised cost savings of c.£3million in 2025
4. Complete and improve our shared services in finance, HR, property,
IT, and procurement to simplify and improve revenue and profitability allowing
our people to do what they do best - creativity for clients
Cultural Power proposition - thriving in the complex and fragmented media
landscape
The Cultural Power proposition, launched this March 2025, is the advantage we
offer clients to help them harness cultural forces to fuel desire, drive
demand and deliver brand growth.
It is supported by the Cultural Power Index (CPI), a product which is a
proprietary AI-powered diagnostic tool that helps brands drive growth by
harnessing the power of culture. Its unique and proprietary methodology
enables us to identify where there are opportunities to build Cultural Power
for clients, allowing them to:
· Understand brands' cultural relevance compared to competitors.
· Pinpoint specific levers they should pull to enhance their
Cultural Power and drive business growth
· Track shifts in cultural perception to stay ahead of trends
Intelligence Insight - a new centre for our data excellence
The newly created Intelligence Insight team gives the Group a further centre
of excellence to raise the quality, visibility and application of data and
insight throughout the work we do. We are now doing for ourselves what we
always did brilliantly for clients. This helps ensure that the best insight is
open to everyone internally, and we believe this capability will bolster and
differentiate the Group's pitches. The Intelligence Insight team delivered
over 400 briefs to support our global teams in 2024. The Intelligence Insight
team's objectives are to:
· Democratise highest-quality data by sourcing and providing data and
insights throughout the Group
· Upskill our internal teams on data, taking advantage of our
Intelligence team's expertise in diverse data sources
· Provide relevant, tailored and timely insights to our agencies in a
client-friendly format to enable award-winning creativity and seize
revenue-generating opportunities
We see AI as a tool to enhance our core offering of creative solutions,
through better, faster intelligence and through more efficient and effective
execution. In 2024, we ran more than 20 AI pilots across the Group to assess
and develop the best AI tools in order to expand them more widely in a rapid
but appropriately-controlled way.
The Intelligence Insight team aligns with Fluency, our data consultancy agency
within the Consultancy Specialism. Fluency leverages M+C Saatchi's central
intelligence data stack and cutting-edge analytics capabilities to generate
opportunities for clients directly, as well as for the benefit of the Group.
We are realising its potential to be a market-leading data and tech
consultancy. Its client-facing services are consumer profiling; trends by
category, generation or country; market and segment information; social
listening and influencer understanding; website analytics; media data and
marketing best practice.
Shared Service Centre (SSC)
The SSC in Cape Town, South Africa, was established in May 2024. The hub
reports functionally to the CFO and Chief People and Operating Officer. Its
staff of circa 60 employees across three departments are already delivering
high-quality support for the Group, providing transactional processing and
specialist support to the global Finance, HR and IT functions alongside new
areas such as Treasury and ESG.
The benefits are evident in the balanced and consistent approach to end-to-end
service delivery, the achieved cost savings, the improved management
information that is increasingly available on a centralised and comparable
basis, and the freeing up of the creative agencies from those processes now
undertaken by the centre.
The focus for 2025 is to continue to standardise global business processes,
improve both efficiency and the underlying control environment, and extend
service provision to those not currently onboard.
Our people and culture
As a people business, our culture and ability to attract and retain
high-quality people are critical. Our culture has creativity, innovation and
entrepreneurship at its heart. We apply this to our entire business right
across all our functions, Specialisms and geographies.
The commitment of our people is as high as ever, despite market volatility and
organisational change. They have reacted positively to the challenges that
have arisen through the transformation. Employee engagement has remained
broadly level at 71 (2023: 72), and the response rate in our employee survey
was very high at 80% (2023: 76%). We are comfortable with our voluntary UK
churn rate of 19% (2023: 18%) which is in-line with industry averages and is a
proxy for the rest of the Group. This also ensures the right level of new
talent and expertise coming in.
The Board
We would like to acknowledge Zillah Byng-Thorne, Executive Chair from
September 2023 to June 2024, for her vision for M+C Saatchi and for initiating
the transformation programme during her successful leadership. This has been
reinforced and expanded since Zaid Al-Qassab joined as CEO in May 2024. We
also welcomed Simon Fuller, who joined as CFO in July 2024, taking over from
Bruce Marson. The Group has improved financial processes, systems and
discipline with a focus on optimisation and investment to support growth,
increase margin and generate cash. The success of the SSC's finance function
is a tribute to the quality of planning and execution.
We welcomed Non-Executive Directors, Dame Heather Rabbatts on 22 January 2024
and Georgina Harvey on 1 October 2024. Dame Heather is Senior Independent
Director (SID) and Georgina became Chair of the Remuneration Committee from 1
January 2025. We are benefitting from both their highly relevant experience
and expertise across their portfolio of companies. Louise Jackson will step
down from the Board at the 2025 Annual General Meeting (AGM), having joined in
March 2020. We thank her for her valuable contribution to the Company.
Capital allocation focused on organic growth
M+C Saatchi is a capital light business which, over the medium term, is
capable of converting at least 80% of its operating profits into cash, subject
to some degree of variability of the cycle. Our streamlined portfolio of
businesses, our new operating model, and our go-to-market strategy give us a
high degree of confidence in the potential for sustainable and growing free
cash generation.
· The organic growth and evolution of the Company will require
investment. Our policy is to re-invest to drive long-term growth and to add
capability, capacity and scale where we can generate the greatest return. This
lower-risk strategy ensures that we invest to drive revenue growth in priority
geographies and in capabilities where we have the right to win.
· We are open to accelerate this progress through selective M&A, to
address gaps in our capabilities or regional coverage. Whilst our near-term
focus is likely to be more bolt-on type opportunities, we are comfortable
operating with a net debt to EBITDA ratio of up to 1.5 times in the event of
M&A, which is well within our financial covenants within the Facility.
· Our overall goal is to deliver a compelling combination of a robust,
optimal balance sheet and returns to shareholders including a growing
dividend.
· Alongside dividends, the Board will also consider share buyback
relative to other uses of cash as a means of creating shareholder value.
Outlook in line with market expectations
We are reaping the benefits of our ongoing transformation to an integrated
global group. With the strong creative leadership we have appointed, the
encouraging early success of our new operating model, and the strength and
diversity of our portfolio in the face of continuing macro volatility, we are
building a strong platform for future organic growth. This, combined with the
next phase of our operating model transformation, gives the Board confidence
that we can achieve results in line with the market's expectations for 2025.
In addition, we are also confident that, over the medium term, the platform we
are building will underpin our growth ambitions.
Financial review
Group results
LFL results Statutory results
£m 2024 2023 Change 2024 2023 Change
Revenue 392.5 391.1 0.4% 395.4 420.0 (5.8)%
Net revenue 231.0 222.8 3.7% 231.4 236.7 (2.2)%
EBITDA 42.0 41.0 2.3% 29.7 14.6 102.9%
Operating profit 35.2 33.4 5.2% 22.5 5.7 294.7%
Profit before taxation 30.5 29.3 4.2% 18.1 (0.8) n.m.
Profit/(loss) for the year 22.1 22.3 (0.9)% 11.7 (3.9) n.m.
Non-controlling interests 0.7 2.0 (65.0)% 0.0 0.6 n.m.
Profit attributable to equity shareholders of the Group 21.4 20.3 5.4% 11.7 (4.5) n.m.
Basic earnings/(loss) per share 17.6p 16.6p 6.1% 9.6p (3.7)p n.m.
Operating profit margin % 15.2% 15.0% 0.2 pps 9.7% 2.4% 7.3pps
Dividends per share 1.95p 1.6p 21.9%
Note: Like-for-Like (LFL) results adjust statutory results to reflect the
underlying profitability of the business units, by excluding a number of items
that are not part of routine expenses including one-off and exceptional items
(defined as Headline Results), excluding subsidiaries discontinued in 2023 and
in 2024, and retranslating 2023 figures to 2024 FX rates. These adjustments
are set out below. We provide commentary on LFL figures, where applicable, to
provide a more comparable and better basis for understanding our current and
future performance. LFL adjustments are summarised below in this section, in
the Financial Review and at Note 1 of the financial statements. Statutory
profit for the year excludes results from discontinued South Africa business.
The Group generated £231.0 million of LFL net revenue in 2023, up 3.7% on
last year, driven by 6.7% growth in Non-Advertising Specialisms, offsetting
Advertising decline of 1.9%.
Like-for-like EBITDA grew by 2.3% to £42.0 million (2023: £41.0 million) and
LFL operating profit was £35.2 million, up 5.2%. Our profitability benefited
from the new operating model which allowed the partial reinvestment of the
£10 million annualised savings generated by our global efficiency programme.
LFL operating profit margin was 15.2% (2023: 15.0%), driven by the strong
performance of the higher-margin Non-Advertising Specialisms and their
increasing weight in the portfolio. LFL profit before tax was £30.5
million, up 4.2%.
Separately disclosed one-off items, mainly relating to our global efficiency
programme, were £7.2 million (mainly people restructuring) as we continue to
implement the SSC transformation plan and rationalise our footprint to
maximise efficiency.
LFL profit after tax attributable to shareholders was £21.4 million (2023:
£20.3 million), reflecting the cash settlement of put options. LFL basic
earnings per share were up 6.1 % to 17.6p (2023: 16.6p).
The Group delivered adjusted net cash of £15.3 million (2023: £8.3 million)
after £8.6 million of put option payments (2023: £15.4 million). Working
capital absorbed £6.4 million (2023: £14.5 million absorption), an
improvement over last year driven by better payment terms and improved cash
management.
Statutory results
The Group generated £231.4 million of net revenue, a decline of 2.2%, largely
due to discontinued businesses, particularly the South Africa businesses.
Statutory operating profit grew 294.7% to £22.5 million, due to significantly
lower staff costs and the portfolio shift to higher-margin Non-Advertising
Specialisms. This led to an increased statutory operating margin of 9.7%
(2023: 2.4%). PBT grew to £18.1 million (2023: £(0.8) million), due to lower
staff costs, the reversal of an impairment and a decrease in finance expense
(given reduced average borrowings).
LFL Specialisms and regional review
The strength derived from the Group's diverse portfolio of Specialisms and
regions is key to our stability and resilience as well as our future growth.
We believe that our new regional-first approach will be better able to realise
the value of the breadth and quality of our capabilities within our regions
and globally. We are therefore now managing our business by regions, but
continue to report across these by Specialism. In future, we will increasingly
focus reporting on a regional basis.
LFL Results
Net revenue by Specialism £m 2024 2023 % change
Advertising 77.4 78.9 (1.9)%
Issues 57.9 45.4 27.6%
Passions & PR 36.4 38.9 (6.5)%
Consulting 32.5 34.9 (6.7)%
Media 26.8 24.8 8.2%
Group 231.0 222.8 3.7%
LFL Results
Net revenue by region £m 2024 2023 % change
UK 109.1 100.3 8.7%
APAC 53.9 59.0 (8.7)%
Americas 44.2 45.5 (2.9)%
Europe 12.2 10.7 14.0%
Middle East 11.6 7.3 58.8%
Group 231.0 222.8 3.7%
We reported strong regional performances in the Middle East (+58.9%), Europe
(+14.0%) and the and the UK (+8.7%); and by Specialism for Issues (+27.6%) and
Media (+8.2%). Elsewhere the performance was impacted by continuing
macro-economic volatility. More detail of operational performance is provided
in the operating review.
Revenue share shifts in Specialism and region over time
LFL net revenue
share by Specialism Advertising Issues Passions Consulting Media Total
2024 33% 25% 16% 14% 12% 100%
2023 42% 20% 14% 14% 10% 100%
2022 46% 15% 12% 14% 13% 100%
2021 51% 14% 10% 12% 13% 100%
2020 61% 13% 8% 8% 10% 100%
LFL net revenue
share by region UK APAC Americas Africa(1) Europe Middle East Total
2024 47% 23% 19% 1% 5% 5% 100%
2023 40% 26% 19% 6% 6% 3% 100%
2022 36% 29% 20% 6% 6% 2% 100%
2021 39% 30% 17% 6% 6% 2% 100%
2020 39% 26% 15% 5% 13% 2% 100%
(1) The Group disposed of the South Africa businesses on 30 September 2024,
going forward there will be no segmental reporting for this region
Central costs
The Group LFL operating margin of 15.2% (2023: 15.0%) reflects a continued
shift towards the higher-margin, Non-Advertising Specialisms and the success
of the global efficiency programme which has enabled further investment in
creativity and future growth.
Group central operating costs increased from £7.7 million in 2023 to £12.3
million in 2024, reflecting investment into centralised services for the
Group, including the SSC which has reallocated costs from the individual
agencies to the centre (saving on a combined basis).
Our global efficiency programme achieved annualised savings of a total of £10
million at the end of 2024, including annualised savings of £6.1 million in
2024 and £3.9 million in 2023.
LFL 2024 Advertising Non-advertising Group central costs Total
£m
Net revenue 77.4 153.6 - 231.0
Operating profit / (loss) 8.7 38.8 (12.3) 35.2
Operating profit margin 11.2% 25.2% - 15.2%
Profit / (loss) before tax 8.2 36.8 (14.4) 30.5
LFL 2023 Advertising Non-advertising Group central costs Total
£m
Net revenue 78.9 143.9 - 222.8
Operating profit / (loss) 7.5 33.6 (7.7) 33.4
Operating profit margin 9.5% 23.3% - 15.0%
Profit / (loss) before tax 7.6 29.9 (8.2) 29.3
Like-for-like reporting
Like-for-Like (LFL) results adjust statutory results to reflect the underlying
profitability of the business units, by excluding a number of items that are
not part of routine expenses including one-off and exceptional items (defined
as Headline adjustments), excluding subsidiaries discontinued in 2023 and in
2024, and retranslating 2023 figures to 2024 FX rates. These adjustments are
set out below. We provide commentary on LFL figures, where applicable, to
provide a more comparable and better basis for understanding our current and
future performance. LFL adjustments are summarised below and at Note 1 of the
financial statements.
Management considers LFL figures are a better way to measure and manage the
business and they are used for internal performance management and reward. LFL
results is not a defined IFRS term and is not intended to be a substitute for,
or be superior to, any IFRS measures of performance.
The table below summarises the reconciliation from LFL to statutory results
for 2024 and 2023, excluding Company-specific adjustments which are set out
below.
2024 LFL Exiting agencies Company adjustments Statutory
£m
Revenue 392.5 2.9 - 395.4
Net revenue 231.0 0.4 - 231.4
Operating profit 35.2 - (12.7) 22.5
Operating profit margin 15% (1)% - 10%
PBT 30.5 - (12.4) 18.1
2023 LFL Exiting agencies Company adjustments Constant currency adjustment Statutory
£m
Revenue 391.1 20.2 - 8.8 420.0
Net revenue 222.8 9.1 - 4.7 236.7
Operating profit 33.4 (2.9) (25.1) 0.3 5.7
Operating profit margin 15% - - - 2%
PBT 29.3 (3.1) (27.2) 0.2 (0.8)
1. Company adjustments (Headline adjustments)
These comprise:
• Separately disclosed items that are one-off in nature and are not part of
running the business
• Impairment of non-current assets
• Amortisation of acquired intangibles
• Gains or losses generated by disposals of subsidiaries and associates
• Fair value adjustments to unlisted equity investments, acquisition related
contingent consideration, investment properties and put options
• Dividends paid to IFRS 2 put option holders
2024 2023
£000
Statutory profit before taxation 18,131 (777)
Separately disclosed items 7,248 7,652
Put option accounting - IFRS 9 and IFRS 2 (1,006) 6,316
Dividends paid to IFRS 2 put option holders 866 2,499
FVTPL investments under IFRS 9 3,813 4,254
Impairment of intangible assets 1,634 4,794
Impairment of non-current assets (658) 2,004
Amortisation of acquired intangibles 335 537
Revaluation of associates on disposal - (133)
Gain on disposal of subsidiaries and associates 230 (782)
Exiting agencies (11) 3,116
Foreign exchange difference - (207)
Headline profit before taxation 30,496 29,273
2. Foreign exchange adjustments ("FX")
The Group is exposed to movements in foreign currency exchange rates on the
translation of the results of its overseas businesses. The LFL basis applies
the constant foreign exchange applicable for the current period to the
comparative period in order to present the results on a comparable basis.
Key Group currency movements reflected weakness in all key Group international
currencies, particularly the Australian Dollar and Euro versus Sterling.
Key 2024 currencies and average FX rates used to retranslate 2023
Currency Dec-24 Dec-23 Vs. Sterling
stronger / weaker
United Arab Emirates Dirham AED 4.5984 4.5685 Weaker
Australian $ AUD 2.0228 1.8736 Weaker
Euro € EUR 1.2087 1.1501 Weaker
US $ USD 1.2516 1.2438 Weaker
South African R ZAR 23.5705 22.9623 Weaker
3. Discontinued businesses
During 2024 we disposed of the agencies comprising the South Africa
businesses, which was treated as a discontinued operation and excluded from
the statutory results of the Group. Up to the date of the disposal these
businesses contributed net revenue of £11.9 million (2023: £16.1 million),
operating profit of £3.5 million (2023: £1.6 million) and profit before tax
of £3.5 million (2023: £1.5 million). These 2024 results include the
relevant gain on disposal of £2.1 million within operating profit.
During 2023 and 2024 we also exited from a number of other marginal or
loss-making businesses. In 2024, these businesses contributed net revenue of
£0.4 million (2023: £9.1 million), negligible operating profit (2023: loss
of £2.9 million), negligible PBT (2023: loss of £3.1 million).
In 2024, disposals comprised shares in the agencies comprising the South
African businesses, the Company's creative agencies in Indonesia and
Switzerland, and certain French associate investments.
In some cases, these businesses continue to operate under licence, providing a
fee for the use of our brand. Licensees as at the end of 2024 comprise:
Japan, Lebanon, Spain, South Africa, Sweden and Thailand (also an Associate).
Financial income and expense
The Group's financial income and expense includes bank interest, lease
interest and fair value adjustments to minority shareholder put option
liabilities (IFRS 9). Bank interest payable for the year was £2.2 million
(2023: £2.3 million).
The interest on leases increased to £3.4 million (2023: £2.9 million). The
fair value adjustment of put option liabilities created a debit of £0.2
million (2023: £2.1million).
Tax
LFL tax: Our LFL tax rate was 27.4% (2023: 23.7%). The increase in the LFL tax
rate is due to less current year benefit from our historic tax provisioning,
reduction in partnership minorities and an increase in UK tax rates. The
variation to Statutory tax is due to significant items that LFL excludes such
as share-based payments, disposals and put options being non-deductible
against corporation tax.
Statutory tax: The Statutory tax rate was 21.5% (2023: 493.3%). We have
experienced large variations in Statutory tax rates, because items such as
goodwill impairments and put options arising from investments in subsidiaries
are non-deductible against corporation tax due to their being capital in
nature.
Non-controlling interests (minority interests)
LFL non-controlling interest share of the Group's profit represents the
minority shareholders' share of each of the Group's subsidiaries' profit or
loss for the year. The share of profits attributable to non-controlling
interests reduced to £0.7 million (2023: £2.0 million) reflecting a
reduction in minority interests to 3.2% (2023: 9.1%) of profit after tax.
This reflects a reduction during the year in the minority interest
shareholdings in several Group entities, as a result of the settlement of put
options.
Statutory non-controlling interests excludes any minority interests which
relate to IFRS 2 put option holders (holders of put options that are
contingent on being employed by the relevant company). Their share of the
entity's Statutory profit is paid as dividends each year, which are reported
as staff costs in the Statutory results.
Dividends
The Company paid dividends in 2024 of £1.9 million (1.6p per share). We are
committed to returning capital to shareholders, and, given the growing
earnings performance during the year, the Board is recommending the payment of
an increased final dividend of 1.95p pence per share.
Subject to shareholder approval at the Annual General Meeting, to be held on
15 May 2025, the dividend will be paid on 11 June 2025 to shareholders on the
register at 9 May 2025. The shares will go ex-dividend on 8 May 2025. For the
purpose of the dividend the Company's TIDM is SAA and ISIN is GB00B01F7T14.
Cash flow
Total gross cash (excluding bank overdrafts) at 31 December 2024 was £25.9
million (2023: £24.3 million), excluding restricted cash of £3.5 million.
Cash net of bank borrowings (net cash excluding restricted cash) was £11.8
million (2023: £8.3 million).
The Group generated operating cash from trading (before working capital) of
£29.3 million (2023: £15.1 million) before dividends to IFRS 2 put option
holders of £5.8 million (2023: £14.6 million) and £2.8 million of
payments to acquire non-controlling interests (2023: £0.8 million). There was
a £3.6 million net outflow from working capital excluding transfers to
restricted cash (2023: outflow of £14.5 million). Lease payments were £8.5
million (2023: £9.1 million).
Net operating cash flow (operating cash generated from operations (excluding
put option payments and non-adjusted cash costs) net of purchases of
intangible / tangible fixed assets and the principal payment on leases) for
the year was £25.6 million (2023: £15.6 million) which represents a cash
conversion from LFL operating profit of 85%. This is in-line with our target
of 80%.
Movement in net cash
The following table sets out the key movements in net cash during 2024:
2024 2023
£m £m
Net cash at the beginning of the year 8.3 30.0
Increase in cash from trading 35.1 29.8
Dividends paid to IFRS 2 put option holders (5.8) (14.6)
Operating cash from trading 29.3 15.1
Decrease in cash from working capital movements (3.6) (14.5)
Movement to restricted cash (3.5) -
Tax paid (3.0) (4.2)
Net cash inflow from disposal of subsidiaries and associates 2.7 (0.2)
Purchases of intangible/tangible fixed assets (2.9) (1.8)
Payment of lease liabilities and interest (8.5) (9.1)
Dividends paid to Company shareholders (1.9) (1.8)
Cash consideration for non-controlling interest acquired (2.8) (0.8)
Net interest paid (2.0) (1.5)
(Repayment of) / proceeds from bank loans (2.0) 9.0
FX movement on cash held (0.3) (2.2)
Other movements 2.0 18.7
Net cash at the end of the year 11.8 8.3
Restricted cash 3.5 -
Adjusted net cash held in bank 15.3 8.3
Banking arrangements
On 7 March 2024, the Company refinanced its previous facility by entering into
a new revolving multicurrency facility agreement with National Westminster
Bank Plc, HSBC UK Bank plc and Barclays Bank PLC for up to £50m (the
"Facility"), with a further £50m extension if required for strategic
acquisitions. The Facility is provided on a three-year term with two one-year
extensions, the first of which was Board granted on 20(th) March 2025,
extending the Facility until 7 March 2028. The primary purpose of the
Facility is to provide the Group with additional liquidity headroom to support
any variations in working capital and provide funding for selective bolt-on
acquisitions. At 31 December 2024, £14.0 million was drawn on the Facility
compared to £16.0m drawn on the previous facility at 31 December 2023.
Capital expenditure
Total capital expenditure including software acquired increased to £2.9
million (£1.8 million). This included £0.3 million on furniture, fittings
and other equipment, £1.0 million on computer equipment, £0.4 million on
leasehold improvements, and £1.2 million on software and film rights (2023:
£0.7 million, £0.6 million, £0.5 million, and £0.0 million
respectively).
Financial Statements
Unaudited Consolidated Income Statement
2024 2023
Total Total
Year ended 31 December Note £000 £000
Billings (unaudited) 610,084 526,013
Revenue 4 395,418 420,046
Project cost / direct cost (164,008) (183,361)
Net revenue 3 231,410 236,685
Staff costs (163,791) (176,402)
Depreciation (6,535) (8,018)
Amortisation (600) (830)
Impairment charges (890) (6,798)
Other operating charges (32,864) (34,506)
Other gains /(losses) (3,813) (4,898)
Loss allowance (192) (348)
Gain / (loss) on disposal of subsidiaries (230) 782
Operating profit 22,495 5,667
Share of results of associates - 121
Other non-operating income 60 -
Finance income 878 648
Finance expense (5,302) (7,213)
Profit before taxation 18,131 (777)
Taxation (6,394) (3,100)
Profit/(loss) for the year from continuing operations 11,737 (3,877)
Profit for the year from discontinued operations, net of tax 3,068 1,075
Total profit for the year 14,805 (2,802)
Total profit from continuing operations 11,737 (3,877)
Attributable to:
Equity shareholders of the Group 11,717 (4,497)
Non-controlling interests 20 620
Profit/(loss) for the year 11,737 (3,877)
Earnings per share
Basic (pence) 1 9.63 (3.68)
Diluted (pence) 1 9.42 (3.68)
Total profit from discontinued operations 3,068 1,075
Attributable to:
Equity shareholders of the Group 3,011 968
Non-controlling interests 57 107
Profit/(loss) for the year 3,068 1,075
Earnings per share
Basic (pence) 1 2.48 0.79
Diluted (pence) 1 2.42 0.79
Total profit for the year 14,805 (2,802)
Attributable to:
Equity shareholders of the Group 14,728 (3,529)
Non-controlling interests 77 727
Profit/(loss) for the year 14,805 (2,802)
Earnings per share
Basic (pence) 1 12.11 (2.89)
Diluted (pence) 1 11.84 (2.89)
Like-for-like results 1
Operating profit 1 35,170 33,434
Profit before taxation 1 30,496 29,273
Profit after tax attributable to equity shareholders of the Group 1 21,443 20,312
Basic earnings per share (pence) 1 17.63p 16.61p
Diluted earnings per share (pence) 1 17.24p 15.75p
EBITDA 1 42,013 41,026
Consolidated Income Statement of other comprehensive income
2024 2023
Year ended 31 December £000 £000
Profit/(loss) for the year 14,805 (2,802)
Other comprehensive profit/(loss)*
Exchange differences on translating foreign operations 527 (4,287)
Historic translation reserve on disposal of subsidiaries (1,464) -
Other comprehensive profit/(loss) for the year net of tax (937) (4,287)
Total comprehensive profit/(loss) for the year 13,868 (7,089)
Total comprehensive profit/(loss) attributable to:
Equity shareholders of the Group 13,790 (7,816)
Non-controlling interests 77 727
Total comprehensive profit/(loss) for the year 13,867 (7,089)
* All items in the consolidated statement of comprehensive income may be
reclassified to the income statement.
Unaudited Consolidated Balance Sheet
2024 2023
At 31 December £000 £000
Non-current assets
Intangible assets 32,318 34,593
Investments in associates 138 138
Plant and equipment 6,002 7,007
Right-of-use assets 25,544 33,772
Investment properties 1,244 2,369
Other non-current assets 5,282 2,302
Deferred tax assets 4,840 6,036
Financial assets at fair value through profit or loss 668 7,227
Deferred consideration - 738
76,036 94,182
Current assets
Trade and other receivables 126,298 123,686
Current tax assets 1,390 4,321
Restricted cash 3,462 -
Cash and cash equivalents 25,855 24,326
157,005 152,333
Assets held for sale 2,717 780
159,722 153,113
Current liabilities
Trade and other payables (131,536) (133,850)
Provisions (90) (1,050)
Current tax liabilities (1,626) (743)
Borrowings (43) (15,943)
Lease liabilities (5,014) (5,751)
Minority shareholder put option liabilities (525) (9,891)
(138,834) (167,228)
Net current liabilities 20,888 (14,115)
Total assets less current liabilities 96,924 80,067
Non-current liabilities
Deferred tax liabilities (1,032) (1,235)
Corporation tax liabilities - -
Borrowings (13,399) -
Lease liabilities (37,230) (43,692)
Minority shareholder put option liabilities (3,132) (3,525)
Other non-current liabilities (2,020) (2,079)
(56,813) (50,531)
Total net assets 40,111 29,536
Equity
Share capital 1,227 1,227
Share premium 50,327 50,327
Merger reserve 37,554 37,554
Treasury reserve (2,698) (550)
Minority interest put option reserve (1,175) (2,506)
Non-controlling interest acquired (34,428) (33,168)
Foreign exchange reserve 1,414 2,351
Accumulated losses (12,198) (26,232)
Equity attributable to shareholders of the Group 40,023 29,003
Non-controlling interest 88 533
Total equity 40,111 29,536
These financial statements were approved and authorised for issue by the Board
of Directors on 26 March 2025 and signed on its behalf by:
Simon Fuller
Chief Financial Officer
M&C Saatchi plc
Company number 05114893
Unaudited Consolidated statement of changes in equity
Share capital Share premium Merger reserve Treasury reserve MI put option reserve Non-controlling interest acquired Foreign exchange reserves Retained earnings / (accumulated losses) Sub total Non-controlling interest in equity Total
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
At 31 December 2022 1,227 50,327 37,554 (550) (2,896) (32,984) 6,638 (21,303) 38,013 173 38,186
Share option charge - - - - - - - 434 434 - 434
Exercise of put options - - - - 390 (184) - - 206 (206) -
Dividends - - - - - - - (1,834) (1,834) (161) (1,995)
Total transactions with owners - - - - 390 (184) - (1,400) (1,194) (367) (1,561)
Total profit for the year - - - - - - - (3,529) (3,529) 727 (2,802)
Total other comprehensive income for the year - - - - - - (4,287) - (4,287) - (4,287)
At 31 December 2023 1,227 50,327 37,554 (550) (2,506) (33,168) 2,351 (26,232) 29,003 533 29,536
Share option charge - - - - - - - 1,030 1,030 - 1,030
Share option exercise - - - 342 - - - (342) - - -
Tax on share options - - - - - - - 35 35 - 35
Exercise of put options - - - - 1,000 (1,000) - - - - -
Purchase of own shares - - - (2,490) - - - - (2,490) - (2,490)
Disposal of subsidiaries - - - - 331 (260) - 209 280 (522) (242)
Revaluations - - - - - - - 415 415 - 415
Tax on revaluations - - - - - - - (93) (93) - (93)
Dividends - - - - - - - (1,948) (1,948) - (1,948)
Total transactions with owners - - - (2,148) 1,331 (1,260) - (694) (2,771) (522) (3,293)
Total profit for the year - - - - - - - 14,728 14,728 77 14,805
Historic translation reserve on disposal of subsidiaries - - - - - - (1,464) - (1,464) - (1,464)
Total other comprehensive income for the year - - - - - - 527 - 527 - 527
At 31 December 2024 1,227 50,327 37,554 (2,698) (1,175) (34,428) 1,414 (12,198) 40,023 88 40,111
Unaudited Consolidated cash flow statement
Year ended 31 December 2024 2023
£000
£000
Operating profit from continuing operations 22,495 5,667
Operating profit from discontinued operations 3,526 1,608
Total operating profit 26,021 7,275
Adjustments for:
Depreciation of plant and equipment 2,107 2,573
Depreciation of right-of-use assets 4,995 6,243
Impairment (reversal) of right-of-use assets (297) 1,884
Loss on sale of plant and equipment - 271
Impairment of plant and equipment - 132
Impairment reversal of assets held for sale (86) -
Impairment reversal of investment properties (361) -
Revaluation of financial assets at FVTPL 4,277 4,722
Revaluation of deferred consideration (464) 176
Amortisation of acquired intangible assets 336 1,764
Impairment of goodwill and other intangibles 1,634 3,733
Impairment and amortisation of capitalised software intangible assets 278 138
Exercise of put options (5,780) (14,637)
Purchase of own shares (2,490) -
Gain on disposal of discontinued operation (2,084) -
Equity settled share-based payment expenses 1,195 841
Operating cash before movements in working capital 29,281 15,115
Decrease/(increase) in trade and other receivables (5,589) 9,924
Increase/(decrease) in trade and other payables 2,961 (24,437)
Transfer to restricted cash** (3,462) -
(Decrease) / increase in provisions (960) (6)
Cash (consumed by)/generated from operations 22,231 596
Tax paid (3,019) (4,156)
Net cash from operating activities 19,212 (3,560)
Investing activities
Disposal of subsidiary (net of cash disposed of) 1,926 (209)
Disposal of associate (net of cash disposed of) 856
Investment loans 148 (608)
Proceeds from sale of unlisted investments 642 49
Proceeds from sale of plant and equipment 31 -
Proceeds from sale of software intangibles 52 -
Purchase of plant and equipment (1,718) (1,827)
Purchase of capitalised software (1,214) (19)
Interest received 106 831
Net cash consumed by investing activities 829 (1,783)
Net cash from operating and investing activities 20,041 (5,343)
Financing activities
Dividends paid to equity holders of the Company (1,948) (1,834)
Dividends paid to non-controlling interest - (161)
Cash consideration for non-controlling interest acquired and other options (2,811) (785)
Payment of lease liabilities (5,167) (6,228)
Proceeds from bank loans - 9,000
Repayment of bank loans (2,000) (164)
Borrowing costs (795) -
Interest paid (2,140) (2,318)
Interest paid on leases (3,351) (2,876)
Net cash consumed by financing activities (18,212) (5,366)
Net decrease in cash and cash equivalents 1,829 (10,709)
Effect of exchange rate fluctuations on cash held (300) (2,186)
Cash and cash equivalents at the beginning of the year 24,326 37,221
Total cash and cash equivalents at the end of the year 25,855 24,326
Net debt reconciliation
Cash and cash equivalents 25,855 24,326
Bank overdrafts - -
Total cash and cash equivalents at the end of the year 25,855 24,326
Bank loans and borrowings* (14,043) (16,043)
Net cash 11,812 8,283
* Bank loans and borrowings exclude the lease liability of £42,244k
(2023: £49,443k) .
** Cash and cash equivalents at the balance sheet date excludes £3,462k
held in Chinese Yuan, which has been classified as restricted cash after the
funds were frozen by the Chinese Government due to ongoing litigations. The
balance has been classified as a current asset on the face of the balance
sheet.
Preliminary announcement
This preliminary announcement was approved by the board of directors on 26
March 2025. It is not the Group's statutory accounts. Copies of the Group's
audited statutory accounts for the year ended 31 December 2024 are expected to
be available at the company's website in the coming days, and a printed
version will be dispatched to shareholders thereafter.
Basis of preparation
The financial statements have been prepared in accordance with UK adopted
international accounting standards, in conformity with the requirements of the
Companies Act 2006.
The financial statements are presented in pounds sterling and, unless stated
otherwise, rounded to the nearest thousand. They have been prepared under the
historical cost convention, except for the revaluation of certain financial
instruments.
Going concern
These financial statements have been prepared on the going concern basis, as
set out in the Directors' Report and the report of the Audit and Risk
Committee.
The Board has concluded that under the most likely going concern scenarios,
the Group will have sufficient liquidity and headroom under the financial
covenants in the Facility (the "Covenants") to continue to operate for a
period of not less than a year from approving the financial statements.
The Board has formed its opinion after evaluating four different severe but
plausible forecast scenarios and a reverse stress test, extending to 31
December 2027. The four scenarios comprise:
1. A significant reduction in new business wins.
2. A significant increase in wage inflation.
3. A significant number of top clients are lost.
4. A significant economic downturn.
These severe but plausible scenarios are assumed to materialise from the first
quarter of 2025 onwards. The estimated decline in EBITDA ranges from £10
million to £26 million compared to the base case plan for the cumulative
period ending 31 December 2026, including a £5 million to £13 million
decline in EBITDA in 2025.
The reverse stress test case evaluates how extreme conditions would need to be
for the Group to break the Covenants within the going concern review period.
The conditions go significantly further than the severe but plausible
scenarios and reflect a scenario that the Directors consider to be highly
unlikely.
The Directors have also considered the impact of climate change on going
concern, taking into account the Company's support for Ad Net Zero (the
industry initiative to tackle climate change led by the Advertising
Association and its members), and do not believe that there is a significant
financial impact.
The Board has concluded that, under all scenarios modelled by management,
the Company will have sufficient liquidity to operate and will not breach the
Covenants.
In their review of the severe but plausible scenario, the Directors have also
considered several mitigations that would help maintain headroom on the
Covenants under the Facility, and are at their discretion, including but not
limited to:
· Reduction or postponement of dividend payments
· Reduction of bonus payments
· Reduction of overheads and operating expenses
· Renegotiate terms of the Facility including Covenant relaxation.
· Closure of now loss-making entities
· Reduction of staff levels in line with revenue reduction.
The Board is satisfied that the Group's forecasts, which take into account
reasonably possible changes in trading performance, show that there are no
material uncertainties over going concern, and that, even under the severe but
plausible scenarios, the Group will continue to have sufficient liquidity and
headroom to operate within the Covenants. The Board, therefore, have concluded
the going concern basis of preparation continues to be appropriate.
Like-for-like results
As stated in the Financial Review, the Directors believe that the
Like-for-like results and Like-for-like earnings per share (see Note 1 of the
financial statements) provide additional useful information on the underlying
performance of the business. The Like-for-like (LFL) results reflect the
underlying profitability of the business units, by excluding a number of items
that are not part of routine business income and expenses.
In addition, the LFL results may be used for internal performance management
and reward. The term 'Like-for-like' is not a defined term in IFRS. Note 1
reconciles Statutory results to LFL results and the segmental reporting (Note
3 of the financial statements) reflects LFL results, in accordance with IFRS
8.
The items that are excluded from LFL results are:
· Separately disclosed items that are one-off in nature and are not
part of running the business.
· Revaluation of associates on transition to assets held for sale.
· Impairment of assets held for sale, right-of-use assets,
leasehold improvements, acquired intangibles and goodwill.
· Gains or losses generated by disposals of subsidiaries.
· Fair value adjustments to unlisted equity investments,
acquisition-related deferred consideration and put options.
· Dividends paid to IFRS 2 put option holders. However, in
non-controlling interest, we deduct profit share attributable to IFRS 2 put
option holders.
· Results of subsidiaries which management has or intends to exit
in the current and prior year.
· Effects of foreign exchange movements on the underlying results,
by retranslating prior year figures using current year foreign exchange rates.
Consolidation
Where a consolidated company is less than 100% owned by the Group, the
treatment of the non-controlling interest share of the results and net assets
is dependent on how the non-controlling interests' equity is accounted for.
Where the equity is accounted for as a share-based payment award under IFRS 2,
all dividend outflow is taken to staff costs, and there is no non-controlling
interest. In all other cases, the non-controlling interest share of the
results and net assets is recognised at each reporting date in equity,
separately from the equity attributable to the shareholders of the Company.
Material accounting policies
Certain of the Group's accounting policies are considered by the Directors to
be material due to the level of complexity, judgement or estimation involved
in their application and their potential impact on the financial statements.
The critical accounting policies are listed below and explained in more detail
in the relevant notes to the financial statements.
Revenue recognition
The Group's revenue is earned from the provision of advertising and marketing
services, together with commission-based income in relation to media spend and
to talent performance. Revenue from contracts with customers is recognised as,
or when, the performance obligations present within the contractual agreements
are satisfied. Depending on the arrangement with the client, the Group may act
as principal or as agent in the provision of these services.
See Note 4 of the financial statements for a full listing of the Group's
revenue accounting policies.
Put option accounting (IFRS 2 and IFRS 9)
Some of our equity partners in the Group's subsidiaries hold put options over
their equity, such that they can require the Group to purchase their
non-controlling interest for either a variable number of the Company shares or
cash. Dependent on the terms and substance of the underlying agreement, these
options are either recognised as a put option liability under IFRS 9 or as a
put option under IFRS 2 - see significant judgements below.
An IFRS 9 scheme should be considered as reward for future business
performance and is not conditional on the holder being an employee of the
business. These instruments are recognised in full at the amortised cost of
the underlying award on the date of inception, with both a liability on the
balance sheet and a corresponding amount within the minority interest put
option reserve being recognised. At each period end, the amortised cost of the
put option liability is calculated in accordance with the put option
agreement, to determine a best estimate of the future value of the expected
award. Resultant movements in the amortised cost of these instruments are
charged to the income statement within finance income/expense. The put option
liability will vary with both the Group's share price and the subsidiary's
financial performance. Upon exercise of an award by a holder, the liability is
extinguished and the associated minority interest put option reserve is
transferred to the non-controlling interest acquired reserve.
An IFRS 2 scheme should be considered as reward for future business
performance and is conditional on the holder being an employee of the
business. These schemes are recognised as staff costs over the vesting period
(if equity settled) or until the option is exercised (if cash settled). In
September 2021, the Board made the decision to move to cash settlement of
these put options going forward. This required a fair value assessment on the
day of the modification and a movement between reserves and liabilities.
Unlisted investments
The Group holds certain unlisted equity investments which are classified as
financial assets at fair value through profit and loss (FVTPL). These
investments are initially recognised at their fair value. At the end of each
reporting period, the fair value is reassessed, with gains or losses being
recognised in the income statement.
Assets held for sale
The Group classifies assets as held for sale where it is highly probable that
they will be recovered primarily through sale rather than through continuing
use.
Significant accounting judgements and key sources of estimation uncertainty
In the course of preparing financial statements, management necessarily makes
judgements and estimates that can have a significant impact on the financial
statements. The estimates and judgements that are made are continually
evaluated, based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the
circumstances. The estimates and judgements that have a significant risk of
causing a material adjustment to the financial statements within the next
financial year are outlined below:
Significant accounting judgements
Management has made the following judgements, which have the most significant
effect in terms of the amounts recognised, and their presentation, in the
financial statements.
Impairment - assessment of CGUs and assessment of indicators of impairment
Impairment reviews are undertaken annually, or more frequently if events or
changes in circumstances indicate a potential impairment. Assets with finite
lives are reviewed for indicators of impairment (an impairment "trigger") and
judgement is applied in determining whether such a trigger has occurred.
External and internal factors are monitored by management, including: a)
adverse changes in the economic or political situation of the geographic
locale in which the underlying entity operates; b) heightened risk of client
loss or chance of client gain; and c) internal reporting suggesting that an
entity's future economic performance is better or worse than previously
expected. Where management has concluded that such an indication of impairment
exists, then the recoverable amount of the asset is assessed.
The Group assesses whether an impairment is required by comparing the carrying
value of the CGU assets (including the right-of-use assets under IFRS 16) to
their value-in-use. Discounted cash flow models, based on the Group's latest
budget and three-year financial plan, and a long-term growth rate, are used to
determine the recoverable amount for the CGUs. The appropriate estimates and
assumptions used require judgement and there is significant estimation
uncertainty.
The Group has recognised a total impairment charge of £890k in the year
(2023: £6,798k), of which £361k relates to impairment reversal of investment
property (2023: nil) and £297k relates to the impairment reversal of
right-of-use assets (2023: impairment of £1,872k). There was an impairment of
£1,634k in the year of intangibles (2023: £4,794k) and nil in plant and
equipment (2023: £132k). There was an impairment reversal of £86k in the
year of associate investments held in assets held for sale (2023: nil).
Non-controlling interest put option accounting - IFRS 2 or IFRS 9
The key judgement is whether the awards are given beneficially as a result of
employment, which can be determined where there is an explicit service
condition, where the award is given to an existing employee, where the
employee is being paid below market value or where there are other indicators
that the award is a reward for employment. In such cases, the awards are
accounted for as a share-based payment in exchange for employment services
under IFRS 2.
Otherwise, where the holder held shares prior to the Group acquiring the
subsidiary, or gained the equity to start a subsidiary using their unique
skills, and there are no indicators it should be accounted for under IFRS 2,
then the award is accounted for under IFRS 9.
Significant estimates and assumptions
Some areas of the Group's financial statements are subject to key assumptions
and other significant sources of estimation uncertainty at the reporting date
that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year. The Group
has based its assumptions and estimates on parameters available when the
financial statements were prepared.
Deferred tax assets
The Group assesses the future availability of carried forward losses and other
tax attributes, by reference to jurisdiction-specific rules around carry
forward and utilisation, and whether it is probable that future taxable
profits will be available against which the attribute can be utilised. Changes
in such assessments would allow unrecognised deferred tax to be recognised and
vice versa.
Leasing estimates
IFRS 16 defines the lease term as the non-cancellable period of a lease,
together with the option to extend or terminate a lease if the lessee is
reasonably certain to exercise that option. Where a lease includes the option
for the Group to extend the lease term, the Group takes a view, at inception,
as to whether it is reasonably certain that the option will be exercised. This
will take into account the length of time remaining before the option is
exercisable, current trading, future trading forecasts and the level and type
of any planned capital investment. The assessment of whether the option will
be exercised is reassessed in each reporting period. A reassessment of the
remaining life of the lease could result in a recalculation of the lease
liability and a material adjustment to the associated balances.
Notes to the financial statements
1. Like-for-like results, earnings per share and EBITDA
The analysis below provides a reconciliation between the Group's Statutory
results and the LFL results for the current year.
Statutory Separately disclosed items Exiting agencies Gain/loss on disposal of subsidiaries Amortisation of acquired intangibles Impairment of assets held for sale Impairment of goodwill Impairment of non-current assets FVTPL investments under IFRS 9 *** Dividends paid to IFRS 2 put holders Put option accounting Like-for-like results
2024
(Note 2)
*
Year ended 31 December 2024 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 395,418 - (2,869) - - - - - - - - 392,549
Cost of sales (164,008) - 2,464 - - - - - - - - (161,544)
Net revenue 231,410 - (405) - - - - - - - - 231,005
Staff costs (163,791) 5,776 444 - - - - - - 866 (712) (157,417)
Depreciation (6,535) - 2 - - - - - - - - (6,533)
Amortisation (600) - - - 335 - - - - - - (265)
Impairments (890) - - - - (86) 1,634 (658) - - - -
Other operating charges (32,864) 1,472 (237) - - - - - - - - (31,629)
Other gains/losses (3,813) - - - - - - - 3,813 - - -
Loss allowance (192) - 201 - - - - - - - - 9
Gain on disposal of subsidiaries (230) - - 230 - - - - - - - -
Operating profit 22,495 7,248 5 230 335 (86) 1,634 (658) 3,813 866 (712) 35,170
Share of results of associates - - - - - - - - - - - -
Other non-operating income 60 - (15) - - - - - - - - 45
Finance income 878 - (6) - - - - - (872) - - -
Finance expense (5,302) - 5 - - - - - 872 - (294) (4,719)
Profit before taxation 18,131 7,248 (11) 230 335 (86) 1,634 (658) 3,813 866 (1,006) 30,496
Taxation (6,394) (1,824) (242) - (107) - - 219 - - - (8,348)
Profit for the year 11,737 5,424 (253) 230 228 (86) 1,634 (439) 3,813 866 (1,006) 22,148
Non-controlling interests 20 - - - - - - - - 685 - 705
Profit attributable to equity holders of the Group** 11,717 5,424 (253) 230 228 (86) 1,634 (439) 3,813 181 (1,006) 21,443
* The non-controlling interest charge is moved to operating profit
due to underlying equity being defined as an IFRS 2 put option.
** Like-for-like earnings are profit attributable to equity holders of
the Group after adding back the adjustments noted above.
*** Included in this adjustment is £872k of group interest in Saatchinvest,
which is treated as non-like-for-like given the nature of the entity's
activities and the existing intention to sell the subsidiary at 31 December
2024.
The analysis below provides a reconciliation between the Group's Statutory
results and the LFL results for the prior year.
Statutory Separately disclosed items Gain/loss on disposal of subsidiaries Revaluation of associates on transition to assets held for sale Amortisation of acquired intangibles Impairment of intangible assets Impairment of non-current assets FVTPL investments under IFRS 9 Dividends paid to IFRS 2 put holders Put option accounting Exiting agencies Constant currency adjustment Like-for-like results
2023
(Note 2)
*
Year ended 31 December 2023 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 420,046 - - - - - - - - - (20,159) (8,808) 391,079
Cost of sales (183,361) - - - - - - - - - 11,034 4,098 (168,229)
Net revenue 236,685 - - - - - - - - - (9,125) (4,710) 222,850
Staff costs (176,402) 6,908 - - - - - - 2,499 4,203 9,250 2,913 (150,629)
Depreciation (8,018) - - - - - - - - - 538 166 (7,314)
Amortisation (830) - - - 537 - - - - - - 3 (290)
Impairments (6,798) - - - - 4,794 2,004 - - - - - -
Other operating charges (34,506) 744 - - - - - (644) - - 2,239 1,332 (30,835)
Other losses (4,898) - - - - - - 4,898 - - - - -
Loss allowance (348) - - - - - - - - - - - (348)
Gain on disposal of subsidiaries 782 - (782) - - - - - - - - - -
Operating profit 5,667 7,652 (782) - 537 4,794 2,004 4,254 2,499 4,203 2,902 (296) 33,434
Share of results of associates 121 - - (133) - - - - - - - - (12)
Other non-operating income - - - - - - - - - - - - -
Finance income 648 - - - - - - (813) - - (55) 220 -
Finance expense (7,213) - - - - - - 813 - 2,113 269 (131) (4,149)
Profit before taxation (777) 7,652 (782) (133) 537 4,794 2,004 4,254 2,499 6,316 3,116 (207) 29,273
Taxation (3,100) (1,821) - - (198) (28) (536) (987) - (65) (407) 209 (6,933)
Profit for the year (3,877) 5,831 (782) (133) 339 4,766 1,468 3,267 2,499 6,251 2,709 2 22,340
Non-controlling interests 620 - - - - - - - 2,054 - (420) (226) 2,028
Profit attributable to equity holders of the Group** (4,497) 5,831 (782) (133) 339 4,766 1,468 3,267 445 6,251 3,129 228 20,312
* The non-controlling interest charge
is moved to operating profit due to underlying equity being defined as an IFRS
2 put option.
** Like-for-like earnings are profit
attributable to equity holders of the Group after adding back the adjustments
noted above.
Earnings per share
Basic and diluted earnings per share are calculated by dividing the
appropriate earnings metrics by the weighted average number of ordinary shares
of the Company in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted average
number of the Company's ordinary shares in issue on the assumption of
conversion of all potentially dilutive ordinary shares. Anti-dilutive
potential ordinary shares are excluded. The dilutive effect of unvested
outstanding options is calculated based on the number that would vest had the
balance sheet date been the vesting date. Where schemes have moved from equity
to cash payment and vice versa, the potential dilution is calculated as though
they had been in their year-end position for the whole year.
Continuing operations Discontinued operations Total Like-for-like
Year ended 31 December 2024 2024 2024 2024 2024
Profit attributable to equity shareholders of the Group (£000) 11,717 3,011 14,728 21,443
Basic earnings per share
Weighted average number of shares (thousands) 121,616 121,616 121,616 121,616
Basic EPS 9.63p 2.48p 12.11p 17.63p
Diluted earnings per share
Weighted average number of shares (thousands) as above 121,616 121,616 121,616 121,616
Add
- LTIP 2,042 2,042 2,042 2,042
- Put options 751 751 751 751
Total 124,409 124,409 124,409 124,409
Diluted EPS 9.42p 2.42p 11.84p 17.24p
Excluding the put options (payable in cash) (751) (751) (751) (751)
Weighted average number of shares (thousands) including dilutive shares 123,658 123,658 123,658 123,658
Diluted EPS - excluding items the Group intends and is able to pay in cash 9.48p 2.43p 11.91p 17.34p
Continuing operations Discontinued operations Total Like-for-like*
Year ended 31 December 2023 2023 2023 2023 2023
Profit attributable to equity shareholders of the Group (£000) (4,497) 968 (3,529) 20,312
Basic earnings per share
Weighted average number of shares (thousands) 122,257 122,257 122,257 122,257
Basic EPS (3.68)p 0.79p (2.89)p 16.61p
Diluted earnings per share
Weighted average number of shares (thousands) as above
Add
- LTIP - - - 1,500
- Put options - - - 5,247
Total 122,257 122,257 122,257 129,004
Diluted EPS (3.68)p 0.79p (2.89)p 15.75p
Excluding the put options (payable in cash) - - - (5,247)
Weighted average number of shares (thousands) including dilutive shares 122,257 122,257 122,257 123,757
Diluted EPS - excluding items the Group intends and is able to pay in cash (3.68)p 0.79p (2.89)p 16.41p
* Restated to be Like-for-like
As 2023 basic EPS is negative, no adjustment has been made for LTIP and put
options in the dilutive EPS calculation, as these would be anti-dilutive, i.e.
would increase EPS had they been included.
Like-for-like earnings before interest, tax, depreciation and amortisation
(EBITDA)
2024 2023
£000 £000
Profit before tax (LFL) 30,496 29,273
Add Back:
LFL Depreciation & amortisation (incl. IFRS 16) 6,798 7,604
LFL Finance expense (incl. IFRS 16) 4,719 4,149
LFL Finance income - -
EBITDA 42,013 41,026
2. Separately disclosed items
Policy
Separately disclosed items include one-off, non-recurring revenues or
expenses. These are shown separately and are excluded from LFL profit to
provide a better understanding of the underlying results of the Group.
Analysis
Separately disclosed items for the year ended 31 December 2024 comprise of the
following:
2024 Staff costs Operating Taxation After tax
£000 costs £000 total
£000 £000
Restructuring - discontinued businesses 58 - (17) 41
Restructuring - ongoing businesses 3,403 62 (841) 2,624
Restructuring - global efficiency programme 983 571 (295) 1,259
CEO/Executive Chair compensation (158) - 40 (118)
People costs - additional headcount 767 - (192) 575
Transformation project costs 723 839 (519) 1,043
Total separately disclosed items 5,776 1,472 (1,824) 5,424
The Group has been pursuing a strategy to simplify its operating structure and
improve efficiency across the Group. This programme continued into 2024:
Staff costs
· Local businesses within the Group have continued to review their
own future, permanent operational structures, following market changes, which
has resulted in staff redundancy costs in the period across nine ongoing
businesses across the Group. The restructuring costs are treated as separately
disclosed items only when a role has been permanently eliminated from the
business (there should be no intention for the role to be replaced in the next
12 months). There are £3,403k of redundancy costs included within non-LFL
restructuring for ongoing businesses, and £430k of redundancy costs are
included within the LFL staff costs.
· The Group's global efficiency programme has continued to identify
and reduce specific central HQ roles, which will be replaced overseas to save
cost. The redundancy costs associated with this restructuring programme
(£983k) have been treated as an exceptional non-LFL cost, as they are one-off
exit costs relating to compensation to employees for periods not worked.
· Additional headcount costs (£767k) relate to Shared Service
Centre salaries where there was non-productive duplication of roles during the
transition. These costs are treated as separately disclosed items as they are
one-off costs relating to the period of overlap of local with newly created
central roles, in relation to those functions being moved to the Shared
Service Centre.
· CEO compensation (credit of £158k) relates to the over accrual
of three months of costs in 2023 relating to the gardening leave of the former
CEO, which was not worked.
· In 2022, the Group commenced a global efficiency programme. The
staff costs of the project team dedicated to this transformation project
(£723k) have been classified as separately disclosed items in line with the
treatment in 2022 and in 2023. The project team will continue to manage the
project through to conclusion in 2025.
Operating costs
The operating cost mainly relate to recruitment costs for roles that are being
moved to the Shared Service Centre and service charges and rates for the
vacant 30 Great Pulteney Street office in London.
Separately disclosed items for the year ended 31 December 2023 comprise of the
following:
2023 Staff costs Operating Taxation After tax
£000 costs £000 total
£000 £000
Restructuring - discontinued businesses 1,481 18 (340) 1,159
Restructuring - ongoing businesses 3,200 85 (810) 2,475
Restructuring - global efficiency programme 438 251 (160) 529
CEO/Executive Chair compensation 1,514 - (355) 1,159
Transformation project costs 275 390 (156) 509
Total separately disclosed items 6,908 744 (1,821) 5,831
The Group has been pursuing a strategy to simplify its operating structure and
improve efficiency across the group. In 2023, three programmes of
restructuring were undertaken:
· The Group shut down certain loss-making overseas and UK
subsidiaries and incurred redundancy costs as part of the agreement with the
disposed or closed businesses. This programme continued throughout 2024.
· The Group's global efficiency programme identified and reduce
specific central HQ roles, which will no longer be required in the Group. This
programme continued throughout 2024.
· Local businesses within the Group reviewed their own future,
permanent operational structures, following market changes, which resulted in
staff redundancy costs in the period across 28 ongoing businesses across the
Group. The restructuring costs were treated as separately disclosed items only
when a role has been permanently eliminated from the business (there should be
no intention for the role to be replaced in the next 12 months). These local
programmes have been completed, but new programmes may be undertaken in
future, depending on local market conditions.
The staff costs associated with these restructuring programmes were treated as
an exceptional non-Like-for-like cost, as they were one-off exit costs
relating to compensation to employees for periods not worked.
CEO compensation related to the 12 months of staff costs relating to the
gardening leave of the former CEO, which was not worked. These were been
treated as an exceptional non-like-for-like cost, as these costs were legally
committed by the business, but with no benefit to the business.
The Executive Chair fulfilled the CEO role, which triggered the repayment of
compensation from their previous employment, which the Company agreed to bear.
These were treated as an exceptional non-like-for-like cost, as these costs
related the Executive Chair's performance in another business.
In H2 2022, the Group commenced a global efficiency programme, with the
assistance of PricewaterhouseCoopers LLP. PWC's professional fees (£390k) and
the staff costs of the project team dedicated to this transformation project
(£275k) were classified as separately disclosed items in line with the
treatment in 2022, as this is a strategic, one-off project with a finite end
that is not part of the underlying operations of the business. PWC have
completed their work, but the project team will continue to manage the project
through to conclusion in 2025.
Other separately disclosed items included the future rates and service charges
for the 30 Great Pulteney Street office in London, which was vacant at the
balance sheet date (£233k) and legal fees (£18k) incurred in relation to a
put option dispute.
3. Segmental information
Like-for-like segmental income statement
Segmental results are reconciled to the income statement in Note 1 of the
financial statements. The Board reviews LFL results.
The Group's operating segments are aligned to those business units that are
evaluated regularly by the chief operating decision maker (CODM), namely the
Board, in making strategic decisions, assessing performance and allocating
resources.
Liabilities are not regularly reported to the Board and so are not presented
here by operating segment.
The operating segments have historically comprised of individual country
entities, the financial information of which is provided to the CODM and is
aggregated into specific geographic regions on a LFL basis, with each
geographic region considered a reportable segment. Each country included in
that region has similar economic and operating characteristics. The products
and services provided by entities in a geographic region are all related to
marketing communications services and generally offer complementary products
and services to their customers.
The Group's performance is also assessed under a structure of specialisms, and
this is reported under two segments: Advertising and Non-Advertising
Specialisms, excluding Group central costs.
Segmental information by geography
UK Americas APAC Middle East Europe Group Central Costs LFL Total
Year ended 31 December 2024 £000 £000 £000 £000 £000 £000 £000
Net revenue 109,113 44,177 53,912 11,606 12,197 - 231,005
Operating profit / (loss) 27,243 6,228 9,529 2,255 2,180 (12,265) 35,170
Operating profit margin 25% 14% 18% 19% 18% - 15%
Profit / (loss) before tax 26,072 5,877 8,616 2,198 2,174 (14,441) 30,496
UK Americas APAC Middle East Europe Group Central Costs LFL total
Year ended 31 December 2023 £000 £000 £000 £000 £000 £000 £000
Net revenue 100,275 45,518 59,046 7,309 10,702 - 222,850
Operating profit / (loss) 22,098 6,690 9,317 1,318 1,670 (7,659) 33,434
Operating profit margin 22% 15% 16% 18% 16% - 15%
Profit / (loss) before tax 20,517 5,642 8,450 1,270 1,631 (8,237) 29,273
Included within the Group's revenues is a customer that makes up more than 10%
of total net revenue, contributing £36.8m (2023: £28.5m). This is included
within the UK and within the Non-Advertising Specialisms.
Segmental information by specialism
Advertising Non- Advertising Specialisms Group Central Costs LFL Total
Year Ended 31 December 2024 £000 £000 £000
Net revenue 77,342 153,663 - 231,005
Operating profit / (loss) 8,678 38,757 (12,265) 35,170
Operating profit margin 11% 25% - 15%
Profit / (loss) before tax 8,164 36,773 (14,441) 30,496
Advertising Non- Advertising Specialisms Group Central Costs LFL Total
Year Ended 31 December 2023 £000 £000 £000
Net revenue 78,848 144,002 - 222,850
Operating profit / (loss) 7,519 33,574 (7,659) 33,434
Operating profit margin 10% 23% - 15%
Profit / (loss) before tax 7,595 29,915 (8,237) 29,273
Non-current assets other than excluded items:
2024 2023
As at 31 December £000 £000
UK 35,195 40,386
APAC 11,891 16,127
Americas 17,680 15,315
Europe 4,239 4,735
Africa - 2,696
Middle East 1,523 1,660
Total non-current assets other than excluded items 70,528 80,919
Non-current assets excluded from analysis above:
Deferred tax assets 4,840 6,036
Other financial assets 668 7,227
Total non-current assets per balance sheet 76,036 94,182
Allocation of non-current assets by country is based on the location of the
business units. Items included comprise fixed assets, intangible assets, IFRS
16 assets and equity accounted investments.
4. Revenue from contracts with customers
Billings comprise all gross amounts billed, or billable, to clients and is
stated exclusive of VAT and sales taxes. Billings is a non-GAAP measure and is
included as it influences the quantum of trade and other receivables
recognised at a given date. The difference between billings and revenue is
represented by costs incurred on behalf of clients with whom entities within
the Group operate as an agent and timing differences, where invoicing occurs
in advance or in arrears of the related revenue being recognised.
Net revenue is a non-GAAP measure and is reviewed by the CODM and other
stakeholders as a key metric of business performance (Note 3 of the financial
statements).
Revenue recognition policies
Revenue is stated exclusive of VAT and sales taxes. Net revenue is exclusive
of third-party costs recharged to clients, where entities within the Group are
acting as principal.
Performance obligations
At the inception of a new contractual arrangement with a customer, the Group
identifies the performance obligations inherent in the agreement. Typically,
the terms of the contracts are such that the services to be rendered are
considered to be either integrated or to represent a series of services that
are substantially the same, with the same pattern of transfer to the customer.
Accordingly, this amalgam of services is accounted for as a single performance
obligation.
Where there are contracts with services that are distinct within the contract,
then they are accounted for as separate obligations. In these instances, the
consideration due to be earned from the contract is allocated to each of the
performance obligations, in proportion to their standalone selling price.
Further discussion of performance obligations arising in terms of the main
types of services provided by the Group, in addition to their typical pattern
of satisfaction, is provided below.
Measurement of revenue
Based on the terms of the contractual arrangements entered into with
customers, revenue is typically recognised over time. This is based on either
the fact that (i) the assets generated under the terms of the contracts have
no alternative use to the Group and there is an enforceable right to payment,
or (ii) the client exerts editorial oversight during the course of the
assignment such that they control the service as it is provided.
Principal vs agent
When a third-party supplier is involved in fulfilling the terms of a contract,
then, for each performance obligation identified, the Group assesses whether
the Group is acting as principal or agent. The primary indicator used in this
assessment is whether the Group is judged to control the specified services
prior to the transfer of those services to the customer. In this instance, it
is typically concluded that the Group is acting as principal.
When entities within the Group act as an agent, the revenue recorded is the
net amount retained. Costs incurred with external suppliers are excluded from
revenue. When the Group acts as principal the revenue recorded is the gross
amount billed, and when allowable by the terms of the contract, out-of-pocket
costs, such as travel, are also recognised as the gross amount billed with a
corresponding amount recorded as an expense.
Treatment of costs
Costs incurred in relation to the fulfilment of a contract are generally
expensed as incurred if revenue is recognised over time.
Disaggregation of revenue
The Group monitors the composition of revenue earned on a geographic basis and
by specialism.
LFL
2024 2023 2024 vs 2023
Revenue £m £m Movement
Specialism
Advertising 154.5 146.9 5%
Issues 109.5 98.3 11%
Passions & PR 62.5 78.9 -21%
Consulting 40.3 41.1 -2%
Media 25.7 25.9 1%
Group 392.5 391.1 1%
LFL
2024 2023 2024 vs 2023
Revenue £m £m Movement
Region
UK 191.4 199.2 -4%
APAC 77.7 83.4 -7%
Americas 73.3 68.6 7%
Middle East 25.9 16.3 59%
Europe 24.2 23.6 3%
Group 392.5 391.1 1%
Assets and liabilities related to contracts with customers
Contract assets and liabilities arise when there is a difference (generally
due to timing) in the amount of revenue that can be recognised and the amount
that can be invoiced under the terms of the contractual arrangement.
Where revenue earned from customers is recognised over time, many of the
Group's contractual arrangements have terms that permit the Group to remit
invoices for the amount of work performed to date on a specific contract
(described in the accounting policies as "right-to-invoice"). Where the terms
of a contractual arrangement do not carry such right to invoice, then a
contract asset is recognised over time, as work is performed until such point
that an invoice can be remitted.
Where revenue earned from customers is recognised at a point in time, then
this will be dependent on satisfaction of a specific performance obligation.
At such point, it is usual that there are no other conditions required to be
met for receipt of consideration and, as such, a trade receivable should be
recognised at the point the entity's right to consideration is unconditional,
which normally will be at the time the purchase order is satisfied (which may
not be the same as when an invoice is raised).
Contract liabilities arise where a customer has made payments relating to
services prior to their provision. Where payments are received in advance,
IFRS 15 requires assessment of whether these cash transfers contain any
financing component. Under the terms of the contractual arrangements entered
into by entities within the Group, there are no instances where such financing
elements arise. This is the case even for those arrangements where the Group
receives monies more than a year in advance by virtue of the terms of the
contractual agreement so entered into.
The Group operates a standard 30-day credit terms policy. All contract
liabilities and contract assets (other than receivables per Note 21 of the
financial statements) brought forward from the previous year have been
realised in the current period.
Revenue recognition policies and performance obligation satisfaction by
category of services performed
Further details regarding revenue recognition and performance obligations of
the Group's main service offerings are summarised below.
Provision of advertising and marketing services
The provision of advertising and marketing services to clients typically meets
the criteria identified above for revenue to be recognised over time. The
quantum of revenue to be recognised over the period of the assignments is
either based on the "right-to-invoice" expedient or as the services are
provided, depending on the contractual terms. In measuring the progress of
services provided in an assignment, the Group uses an appropriate measure
depending on the circumstances, which may include inputs (such as internal
labour costs incurred) or outputs (such as media posts). Where projects are
carried out under contracts, the terms of which entitle an entity within the
Group to payment for its performance only when a discrete point is reached
(such as an event has occurred or a milestone has been reached), then revenue
is recognised at the time that payment entitlement occurs, i.e. at a point in
time.
The provision of advertising and marketing services can encompass provision of
a range of media deliverables in addition to development and deployment of a
media strategy. Often the range of services provided within these arrangements
is considered to be integrated to an extent that no separable performance
obligations can be identified other than a single over-arching combined
performance obligation relating to the delivery of the project. In these
instances, revenue is recognised over time as the performance obligation is
being satisfied depending on the circumstances, which may include inputs (such
as internal labour costs incurred) or outputs (such as media posts).
When services provided are considered separable, and not integrated, then
multiple performance obligations are recognised. In these scenarios the
conceptual preparation element and the deliverable are concluded as forming
separate performance obligations with the revenue and corresponding cost of
sales (typically third-party pass-through costs) assigned to the obligation to
which they relate.
In instances where revenue cannot be recognised over time, the element of the
transaction price assigned to each performance obligation (in proportion to
stand-alone selling prices) is recognised as revenue once an obligation has
been fully satisfied, for example an event has occurred or a milestone has
been reached.
Some entities within the Group enter into retainer fees that relate to
arrangements whereby the nature of the entity's contractual promise is to
agree to 'stand-ready' to deliver services to the customer for a period of
time rather than to deliver the goods or services underlying that promise.
Revenue relating to retainer fees is recognised over the period of the
relevant assignments or arrangements, typically in line with the "stand-ready"
incurred costs.
Where fees are remunerated to the agency in excess of the services rendered,
then a contract liability is recognised. Conversely, where the services
rendered are in excess of the actual fees paid, then a contract asset is
recognised when there is a right to consideration.
Certain of these arrangements have contractual terms relating to the agency
meeting specific customer identified KPIs. As a result, the overall level of
consideration can vary by increasing or decreasing as a result of performance
against these KPI metrics. To reflect this variability in the overall level of
consideration, the most likely outcome is estimated by management and then
that outcome is reflected in the revenue recognised as the performance
obligation(s) of the contract are satisfied. When determining the likely
outturn position, the estimated consideration is such that it is highly
probable there will not be significant reversal of the revenue in the future.
The estimated portion of the variable element is recalculated at the earlier
of the completion of the contract or the next reporting period and revenue is
adjusted accordingly. These estimates are based on historical award
experience, anticipated performance and best judgement at the time.
Commission based income in relation to media spend
The Group arranges for third parties to provide the related goods and services
to its customers in the capacity of an agent. Revenue is recognised in
relation to the amount of commission the Group is entitled to. Often
additional integrated services are provided at the same time with regard to
the development and deployment of an overarching media strategy. Due to the
integration of the services provided under the terms of the contract,
management judgement is applied to assess whether there is a single combined
performance obligation.
The performance obligation for media purchases is considered to have been
satisfied when the associated advertisement has been purchased. In the
majority of instances where the Group purchases media for clients, the Group
is acting as agent.
Commission based income in relation to talent performance
Revenue in relation to talent performance involves the Group acting as agent.
Typically, such arrangements have a single, or a sequence, of specific
performance obligations relating to the talent (or other third party)
providing services. The performance obligations are generally satisfied at a
point in time once the service has been provided, at which point, revenue is
recognised. The consideration for the services is normally for a fixed amount
(as a percentage of the talent's fee) with no degree of variability.
Recognition of supplier discounts and rebates as revenue from contracts with
customers
The Group receives discounts and rebates from certain suppliers for
transactions entered into on behalf of clients, which the clients have agreed
the Group can retain. When the contractual terms of the agreements entered
into are such that the Group acts as agent in these instances, then such
rebates are recognised as revenue from contracts with customers. By contrast,
when the contractual terms of the agreements are such that the Group is acting
as principal, then such rebates are recognised as a reduction in direct costs.
Certain of the Group's clients, however, have contractual terms such that the
pricing of their contracts is structured with the rebate being passed through
to them.
1 Conversion of LFL operating profits into adjusted operating cash (operating
cash generated from operations (excluding put option payments and non-Headline
cash costs) net of purchases of intangible/tangible fixed assets and the
principal payment of leases).
2 Non-Advertising Specialisms comprise Issues, Passions & PR, Consulting
and Media.
3 Market consensus: https://www.mcsaatchiplc.com/analysts/consensus
4 Passions includes the PR business (moved from Advertising) as of 2024,
with the prior year restated.
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