REG - M&C Saatchi PLC - Interim Results 2024
18/09/2024 07:00
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RNS Number : 5922E M&C Saatchi PLC 18 September 2024
M&C SAATCHI PLC
Unaudited results for the six months ended 30 June 2024
Strong performance, building foundations for future growth
Financial summary
Like-for-like (LFL) (1) results Statutory results((4))
H1 2024 H1 2023 H1 2024 H1 2023
£m £m % change £m £m % change
Revenue 211.5 202.9 4% 213.6 216.7 (1)%
Net revenue(2) 120.1 112.8 6% 120.4 120.4 0%
Operating profit 17.1 12.2 40% 14.1 (3.6) -
Operating profit margin 14.2% 10.8% +3.4ppts 11.7% (3.0)% +14.7ppts
Profit/loss before taxation 14.2 11.3 26% 11.3 (5.1) -
Net cash(2) 12.9 15.4 (16)%
EPS (Diluted) (3) 6.4p (5.2)p -
(( 1 )) Like-for-like (LFL) results adjust Headline results (Statutory results
excluding one-offs and exceptionals) to exclude subsidiaries discontinued in
2023 and in H1 2024 and retranslate 2023 figures to 2024 FX rates.
(2) Refer to Notes for the definition of Net revenue and net cash.
(3) Earnings are calculated after deducting tax and the share of profits
attributable to non-controlling interests. Please see note 5 for a detailed
view on Statutory vs. Headline EPS.
(4) Within statutory reporting, profitability includes the improved cost
management and mix benefits which are also in LFL, and, in addition, the
impact of the exit of loss-making businesses over the last twelve months.
The decrease in net cash reflects the short-term impact of the settlement of
put option liabilities.
Note: Note 1 of the financial statements reconciles Statutory results to
Headline results. In order to provide a better basis for understanding our
current and future performance, we provide commentary on LFL figures, where
applicable, instead of Headline figures. Headline results are covered in the
reports and accounts below and reflect the underlying profitability of the
business units, by excluding a number of items that are not part of routine
expenses.
Group performance - highlights
· Strong LFL Net revenue growth of 6%, driven by 7% growth in
Non-advertising Specialisms, largely Issues and Media, whilst Advertising grew
6%. Strong regional performances from the UK (+12.9%), Europe (+16.7%) and the
Middle East (+47.6%)
· Significant improvement in profitability driven by the global
cost efficiency program, local cost actions, loss making business exits
(particularly in Advertising), and improved mix:
o LFL operating profit grew 40%, primarily due to Advertising
o Operating margins of 14.2% (+3.4ppts), driven by higher-margin
Non-advertising Specialisms at 23.4% margin (+2.2ppts), and Advertising at
11.4% margin (+7.2ppts)
o LFL profit before tax increased 26%
· Statutory earnings per share at 6.4p (H1 2023: 5.2p loss)
reflects the underlying profitability improvement, assisted by a further
reduction in put option liabilities, with minority interests now at 6% of
earnings, down from 18% at H1 2023
· Cash generation: Net cash of £12.9 million (£-2.5 million
movement vs H1 2023), however, net cash improved by £4.6 million vs FY 2023
(£8.3 million) having settled £5.9 million of put options in H1 2024;
operating cash conversion rate was high at 98% 1 (#_ftn1)
· Global cost efficiency programme remains on track to deliver
annualised savings of £10 million by the end of FY 2024, having delivered
£4.5 million in H1 2024 on top of £3.9 million achieved in FY 2023
· Transformation investment continues with key hires to build the
team for the future, including high-profile joint Chief Creative Officers,
Global Head of Passions & PR, and the internal promotion of the UK Group
CEO
· Repeat business remains strong with c.75% of 2023 clients
choosing to spend in H1 2024; new wins across our geographies and Specialisms
include McDonalds, Ford, Danone, MTN, IKEA and Sony Pictures, adding to our
strong blue-chip client roster
Operational LFL performance - highlights
· Advertising: the significantly improved revenue growth was driven
by momentum in the US, Europe and the Middle East, particularly versus
difficult market conditions in H1 2023, while the closures of loss-making
businesses and our back-office cost savings drove enhanced profitability:
o Net revenue was £45.2 million (+6%), contributing 38% to Group Net
revenue
o Operating profit was £5.1 million (+183%)
o Operating margin was 11.4% (+7.2ppts)
· Non-advertising Specialisms 2 (#_ftn2) : the strong topline
performance was driven primarily by Issues reflecting growing demand from the
security and government segments (+30%) and some recovery in Media (+3%).
Profitability from the higher-margin Non-advertising Specialisms was also very
strong, reflecting our back-office cost savings programme and some exits from
loss-making businesses:
o Net revenue was £74.8 million (+7%), contributing 62% of the Group Net
revenue
o Operating profit was £17.5 million (+18%)
o Operating margin was 23.4% (+2.2ppts)
Transformation journey reinforcing creativity
· We are building a more efficient, stronger and scalable platform,
with senior regional leadership to drive regional-first go-to-market
· Our new structure with centralised services frees up creativity,
and we are developing a culture which preserves our entrepreneurial spirit.
Employee engagement metrics are steady, with the response rate well above the
benchmark level
· Our newly appointed high-profile, experienced leaders have
already boosted our talent and, critically, strengthened the foundations for
the next phase of our growth (with further new joiners in H2)
· We are democratising our data stack and technology, bringing
several new products to market and for internal use, including those powered
by AI
Outlook in line with market expectations
Our strong first half performance and solid Q3 trading to-date underpin our
confidence in delivering in line with FY 2024 market expectations, despite
continued market volatility, tougher H2 comparators and further investment in
talent expected in the second half.
Looking forward, we expect the increasing strength and diversity of our
portfolio, the progress in the execution of our cost efficiency programme, and
a more integrated and regional-first agile operating model, to provide
sustainable organic growth, as well as resilience in the continuing volatile
macro environment. Our transformation strategy continues, building foundations
for long-term sustainable growth and returns for shareholders.
Zaid Al-Qassab, Chief Executive Officer, said:
"I am delighted to present this strong set of results, my first as CEO, which
demonstrate the benefits of our ongoing transformation and diversity of our
specialisms. Whilst preserving creativity at the heart of all we do, and
leveraging the power of our global brand, we are creating a more agile,
integrated, regional-first operating model which focuses on growth.
"My first impressions of the Group are incredibly positive: from the diversity
of the businesses, operating from twenty-three geographies, the breadth of our
capabilities, and the fantastic global brand of M&C Saatchi, to the
creative and talented minds delivering inspiring work and outstanding service
to our clients.
"We continue to make great progress in building a strong platform to deliver
sustainable organic growth through our self-help initiatives and wider
transformation. Our increasingly diversified revenue provides greater
resilience against macro volatility, and our higher-margin businesses continue
to be our highest growth contributors. Whilst there is always more to do, we
are excited about the further potential we can unleash.
"Looking forward, despite continued volatility within our markets, we are
confident that we are on track to deliver against market expectations for FY
2024, whilst noting the tougher second half comparators. We will continue to
deliver on our cost saving programme whilst also making strategic investments
in the second half of the year to underpin our ambition of long-term
sustainable growth and delivering strong returns for shareholders."
M&C Saatchi 2024 Interim Results presentation
Zaid Al-Qassab, Chief Executive Officer, and Simon Fuller, Chief Financial
Officer, will host an in-person presentation for analysts and investors at
9.00am BST on 18 September 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/)
Investor Meet Company presentation
In addition, M&C Saatchi will be hosting a separate live presentation
hosted by Zaid Al-Qassab and Simon Fuller for retail investors via the
Investor Meet Company platform on the same day at 12.30pm BST.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event up until 9.00am BST the day before via the Investor
Meet Company dashboard or at any time during the live presentation.
Those wishing to sign up and join the meeting online, can do so here:
https://www.investormeetcompany.com/mc-saatchi-plc/register-investor
(https://www.investormeetcompany.com/mc-saatchi-plc/register-investor)
Investors who already follow M&C Saatchi on the Investor Meet Company
platform will automatically be invited.
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
Jill Sherratt, Investor Relations
Headland Consultancy +44 (0)20-3805-4822
Rob Walker, Charlie Twigg, Tan Siddique
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
PERFORMANCE REVIEW
Financial performance highlights
Like-for-like (LFL)(1) Headline (2)
£m H1 2024 H1 2023 Change % H1 2024 H1 2023 Change %
Net revenue(3) 120.1 112.8 6% 120.4 120.4 0%
Operating profit 17.1 12.2 40% 17.5 10.0 75%
Operating profit margin 14.2% 10.8% +3.4ppts 14.5% 8.3% +6.2ppts
PBT 14.2 11.3 26% 14.6 8.8 66%
EBITDA(4) 21.5 14.5 48%
Net cash(3) 12.9 15.4 (16)%
EPS (Diluted)(5) 7.9p 4.5p
(( 1 )) Like-for-like (LFL) applies constant foreign exchange rates and
removes entities discontinued during 2023 and H1 2024 from Headline results.
(2) Headline results reflect the underlying profitability of the business
units, by excluding a number of items that are not part of routine expenses.
Note 1 of the financial statements reconciles Statutory results to Headline
results.
(3) Refer to Notes for the definition of Net revenue, and net cash.
(4) EBITDA is calculated excluding the income statement charges relating to
IFRS 16.
(5) Earnings are calculated after deducting tax and the share of profits
attributable to non-controlling interests. Please see note 5 for detailed view
on Statutory vs. Headline EPS.
This is a strong set of results which demonstrate both the fundamental
strengths of our business and the benefits of our ongoing transformation.
This includes the impact of our cost efficiency programme, Project Forward,
and the exit from loss-making businesses. As the financial benefit of the
latter is, by definition, excluded in the LFL measurement, the LFL results
provide a meaningful base for future performance.
Our improved LFL Net revenue growth of 6% has been underpinned by M&C
Saatchi's powerful, global brand, creativity, and our iconic and loyal client
base. We won repeat business from c.75% of 2023 clients in H1 2024 and
achieved significant new business wins.
Our profitability improvement is significantly driven by our transformation
initiatives. Cost savings achieved in H1 amounted to £4.5 million on an
annualised basis, on top of the £3.9 million annualised savings achieved in
FY 2023 and we are on track to deliver annualised savings of £10 million by
the end of 2024, as previously announced. Due to these cost saving
initiatives operating profit rose 40% and operating margin was 14.2%
(+3.4ppts). Headline EBITDA grew 48% to £21.5 million (H1 2023: £14.5
million). LFL PBT rose 26% while Headline PBT rose 66%.
Headline Diluted EPS at 7.9p (H1 2023: 4.5p), is largely a result of improved
profitability as well as the significant reduction in minorities to 6% of
earnings from 18% as a result of the continued reduction in put option
liabilities. We are well on track for minorities to be less than 5% of
earnings in H2, at the lower end of market expectations.
The settlement of put options absorbed £5.9 million of cash in H1 and net
cash stood at £12.9 million, down 16% or £(2.5) million vs. H1 2023 but up
55% or £4.6 million vs FY 2023. During H2 2024 we expect to settle a further
£2.9 million of put options, leaving us with a residual liability of c.£5.6
million at a 195p share price (the share price as at 30 June 2024). The
operating cash conversion rate was high at 98% and compares favorably to our
longer-term target of 80% cash conversion, allowing for some degree of
variability through the cycle.
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 the Australian Dollar and
Euro versus Sterling while the US Dollar was broadly flat.
OPERATIONAL REVIEW
Like-for-like reconciled to Headline summary
Net revenue Operating profit
H1 2024 H1 2023 Change H1 2024 H1 2023 Change
£m £m £m £m
Non-advertising Specialisms 74.8 70.0 7% 17.5 14.8 18%
Advertising 45.2 42.8 6% 5.1 1.8 183%
Group Central Costs 0 0 -5.6 -4.4 27%
Total LFL (excl. discontinued) 120.1 112.8 6% 17.1 12.2 40%
Restated FX 2.9 (0.1)
Discontinued 0.3 4.7 0.4 (2.1)
Total Headline 120.4 120.4 0% 17.5 10.0 75%
Non-advertising Specialisms delivered LFL Net revenue of £74.8 million (+7%),
contributing 64% of Group Net revenue, while Advertising delivered £45.2
million, (+6%), contributing to the balance.
Non-advertising Specialisms performance was fuelled by 30% growth in Issues,
highlighting our leading market position and the specific expertise that we
have developed in this field. Media showed some recovery (+3%) against the
more difficult year in 2023. Advertising grew 6%, thanks to good momentum in
the US, the Middle East and Europe.
Our higher-margin Non-advertising Specialisms delivered a significant increase
in operating profit, up 18%, with operating margin of 23.4% (+2.2ppts), with
good revenue growth, mix improvements and management of the cost base.
Advertising's 183% growth in operating profit, with operating margin at 11.4%
(+7.2ppts) was largely driven by strong management of the cost base as well as
the exit from loss-making businesses.
Group costs increased largely due to bonus accrual in H1 2024, after the more
challenging 2023 performance.
Individual Specialisms LFL performance
Advertising
38% of LFL Group Net revenue, in-line with in H1 2023
· LFL Net revenue of £45.2 million (+6%) (H1 2023: £42.8 million)
· Headline Net revenue of £45.2 million (+2%) (H1 2023: £44.3
million)
The first half of the year has shown an overall improvement in momentum across
multiple markets, albeit against a weaker H1 2023, with good revenue growth in
the US, Europe and the Middle East. This was driven by a combination of new
client wins as well as retained client work from 2023. Market conditions in
Australia and the UK remain challenging, largely due to subdued consumer
sentiment and macro challenges.
Issues
22% of LFL Group Net revenue, up from 19% in H1 2023
· LFL Net revenue of £27.0 million (+30%) (H1 2023: £20.7
million)
· Headline Net revenue of £27.0 million (+28%) (H1 2023: £21.0
million)
Strong growth continued in the first half, driven by a combination of
continued client work and new wins with multi-year engagements. We continue to
develop our expertise in this unique and deeply specialised field of work, and
see good momentum with a positive outlook for 2024.
Passions & PR
3 (#_ftn3)
16% of LFL Group Net revenue, up from 14% in H1 2023
· LFL Net revenue of £18.9 million (-4%) (H1 2023: £19.6 million)
· Headline Net revenue of £18.9 million (-5%) (H1 2023: £19.9
million)
Passions now includes our PR business which will benefit from greater
synergies (moved from Advertising after the management restructure in H1 2024
to reflect the "owned and earned" nature of these activities). This specialism
also encompasses our award-winning Sport & Entertainment and Talent
businesses. With management's focus on sustainable profitability, we are
actively managing the shape of our Passions client base. Without the PR
business, growth would have been slightly ahead of H1 2024, due to multi-year
client engagements and new client wins. The outlook for 2024 is affected by
the negative impact of the PR business.
Consulting
14% of LFL Group Net revenue, down from 15% in H1 2023
· LFL Net revenue of £16.6 million (-7%) (H1 2023: £17.8 million)
· Headline Net revenue of £16.6 million (-9%) (H1 2023: £18.3
million)
Broader market challenges continue in this sector, largely due to wider
economic pressures resulting in lower client budgets. We continue to develop
our M&C Saatchi Consulting branded proposition, offering clients
transformative growth via specialist expertise, supported by digital and data
solutions, including AI. We remain cautious on the market backdrop for 2024,
given sector challenges.
Media
10% of LFL Group Net revenue, consistent with H1 2023
· LFL Net revenue of £12.3 million (+3%) (H1 2023: £11.9 million)
· Headline Net revenue of £12.3 million (+2%) (H1 2023: £12.1
million)
This specialism registered a good recovery in the first half of 2024. While
2023 was held back by macro-economic slowdown, which adversely impacted
technology sector spend in particular, the start of the year has seen broad
client wins in other industries, across a range of geographies. We are
encouraged by recent momentum but remain cautious on the market backdrop for
2024.
SENIOR MANAGEMENT AND THE BOARD
The Board
As previously announced, Chief Executive Officer Zaid Al-Qassab was appointed
to the Company's Board of Directors as an Executive Director effective 16 May
2024. Concurrently, Zillah Byng-Thorne returned to her role as Non-Executive
Chair after serving as Executive Chair. Additionally, Simon Fuller was
appointed to the Board of Directors as an Executive Director on 1 July 2024,
alongside his appointment as Chief Financial Officer on the same date.
Bruce Marson, previously Chief Financial Officer, stepped down from the Board
on 30 June 2024 and reverted to the position of Deputy Chief Financial
Officer. The Board once again thanks Bruce Marson for the key role he has
played in the transformation of M&C Saatchi since he joined the Company in
October 2021, stepping up to Chief Financial Officer in March 2023.
Executive management
In the first half of the year, the Group has made several changes within the
senior management and wider senior leadership team, which prioritise growth
through creativity and talent.
As announced in recent months, the Group welcomes two industry titans, Rob
Doubal and Laurence (Lolly) Thomson, as new global joint chief creative
officers effective from 16 September 2024. Additionally, Jo Bacon, who
recently joined, was appointed CEO of M&C Saatchi's UK Group business, and
Nadja Bellan-White, CEO of SS+K, now represents the US on the Executive
Leadership Team. Finally, Robin Clarke has been appointed as Global CEO of
the Passions & PR specialism, effective October. With nearly 25 years of
experience in the sports and entertainment industry, he brings exceptional
leadership and his expansive network.
STRATEGIC UPDATE - PROGRESS ON TRANSFORMATION
Our transformation journey is founded on creativity, and, by leveraging the
global brand of M&C Saatchi, we are building a scalable, agile and
integrated platform to unleash the full potential of the Group. These
results demonstrate the effectiveness of this transformation.
New operating model
We have made good progress with building a simplified operating model which
places our regional focus and global specialist expertise at the heart of
everything we do. This is a client-focused model, providing integrated
solutions which cut through the complexity clients face every day.
By outsourcing many of our non-creative activities to our new service centres
(in South Africa and India), we have freed our people to focus on client
service, creativity and driving revenue. Overall, the structural improvement
delivered by these actions builds operational leverage into our model and
supports future margin accretion.
The mix and breadth of our diversified portfolio, combined with the broad
offering of creative solutions and Specialisms across the value chain,
geographies and capabilities, means that the Group is increasingly resilient
against cyclical exposure.
Cost savings
Operational cost savings have been a key focus for both 2023 and 2024 and most
recently include:
· People: continued optimisation and rationalisation of group
support functions, including Finance, IT and HR, by creating shared service
centres to support the Group on a global basis. While there is still more
work to be done, these structural changes to our cost base alongside our new
operating model are increasing our operational leverage potential which will
help support future margin expansion
· Procurement: rationalisation of our cost base via supplier
relationships such as IT service provision through group-wide deployments and
a global approach to provision (including common collaboration tools)
· Property: rationalising office space, particularly in the UK, the
US and Australia
Although there is still more to be done, we have made good progress, and
remain on course to deliver annualised savings of £10 million by the end of
2024, with £4.5 million annualised achieved in H1 2024 on top of the £3.9
million annualised achieved in FY 2023.
Rationalisation of our portfolio
We have continued to review our portfolio, in particular a number of non-core
or loss-making businesses. In 2023, the Group exited from businesses that, in
aggregate, represented a consolidated c.£9 million of revenue and c.£3
million of operating losses in 2023. Since then, the Group has:
· Sold the Swiss business in March 2024 which contributed £823k of
revenue in FY 2023 (£183k in H1 2024)
· Announced the divestment of its shares in the M&C Saatchi
South Africa Group with an expected close date of 30 September 2024. The cash
consideration for the shares of the M&C Saatchi South Africa Group of
£5.6 million will be retained by the Group. In the year ended 31 December
2023, the M&C Saatchi South Africa Group generated Net revenue of £16.1
million (£5.5 million Net revenue in H1 2024) and consolidated profit after
tax of £1.3 million (£0.7 million excluding minority interests)
For a number of the businesses that have been disposed of over the past 18
months, we have entered into agreements that enable these businesses to
continue to use the M&C Saatchi brand. These businesses will pay an
ongoing licence fee to the Group and remain connected to our global network.
This allows us to continue to offer global scale to clients, share in their
success as independent businesses, and transforms them into a profit
contributor for the Group.
Democratisation of data stack and technology
We have developed our existing suite of innovative new data and technology
solutions designed to meet growing client demand for services relating to
brand experience and strategy, audience acquisition and retention, and
campaign optimisation. Our innovative solutions capitalise on significant
breakthroughs in AI including (but not limited to) computer vision and large
language models and enable us to offer clients critical advantage in strategic
decision-making.
We have also simplified access to our fast-growing data and technology
services, both directly to clients and internally across our business
divisions. Our specialist data function is democratising access to this
advanced data stack across the organisation, ensuring all staff can leverage
best-in-class solutions to the benefit of all our clients globally.
Reduction of put option drag on cash and earnings
As of 30 June 2024, our minority interests stand at 6% of Group Headline
earnings, down from 18% in H1 2023. Based on the put option holders that have
exercised in 2024, around one-third of the remaining liability will be settled
in H2 2024. This is expected to reduce minority interests to below 5% of
Headline earnings in 2024, down from nearly 40% in 2019. This significantly
reduces the dilution to the Group's earnings.
Net cash at 30 June 2024 was £12.9 million (£8.3 million at 31 December
2023). During H1 2024, we cash-settled £5.9 million of put options. During H2
we expect to settle a further £2.9 million of put options, leaving us with a
residual liability of c.£5.6 million at a 195p share price (at 30 June 2024).
CAPITAL ALLOCATION
Our approach to capital allocation remains unchanged:
· 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 through 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
· Our strategy to evolve and grow M&C Saatchi will require
investment. We will seek to re-invest to drive long-term growth and to add
capability, capacity and scale in the parts of the Group that will generate
the greatest return. We will remain open to opportunities to accelerate that
through selective M&A, addressing gaps in our client-facing capabilities
and regional coverage
· We are comfortable operating with a net debt to EBITDA ratio not
exceeding 1.5 times, although we would allow for a temporary spike in the case
of a material acquisition
· By simplifying our Group, re-investing in growth, and selective
bolt-on acquisitions, we believe we can deliver a compelling proposition of a
robust, optimal balance sheet and returns to shareholders including capital
growth and a progressive year-end dividend
OUTLOOK
Our strong first half performance and solid Q3 trading to-date underpin our
confidence in delivering in line with FY 2024 market expectations, despite
continued market volatility, tougher H2 comparators and further investment in
talent expected in the second half.
Looking forward, we expect the increasing strength and diversity of our
portfolio, the progress in the execution of our cost efficiency programme, and
a more integrated and regional-first agile operating model, to provide
sustainable organic growth, as well as resilience in the continuing volatile
macro environment. Our transformation strategy continues, building foundations
for long-term sustainable growth and returns for shareholders.
FINANCIAL REPORT
Headline results H1 2024 H1 2023 FY 2023
Net revenue 4 120,406 120,391 252,765
Operating profit 4 17,467 9,980 32,436
Profit before tax 4 14,558 8,848 28,669
Profit after tax attributable to equity shareholders of the Group 4 10,026 5,462 18,545
EBITDA 4 21,467 14,524 41,544
This report covers the key items presented in the following financial
statements.
Income Statement
· Statutory Profit Before Tax
Statutory profit before tax was £11.3m (H1 2023: £5.1m loss). This profit
was primarily driven by reduced staff costs in 2024.
· Taxation
The effective tax rate for H1 2024 has increased to 27.8% (H1 2023: 23.7%).
This is mainly due to the increase in corporation tax rate in the UK from 19%
to 25% in April 2023.
· Earnings
The Headline earnings increased, and minority interests were further reduced
in H1 to 6% (from 18% in H1 2023).
Balance sheet and cashflow
· Cash and Borrowings
Operating cash inflow before movements in working capital was £13.2 million,
which was higher than last year (£4.2 million in H1 2023), in line with the
higher profitability.
We invested £0.9 million, similar to last year, buying replacement IT
equipment, fit-outs for new offices in the US and South Africa. We paid out
£5.9 million to settle put options and reduce our minority interests (with
more to come in H2). We also paid what was due on our property leases (£2.8
million), down from £4.4 million last year.
Cash net of bank borrowings at 30 June 2024 is £12.9 million, compared to
£8.3 million of net cash at 31 December 2023 and £15.4 million of net cash
at 30 June 2023.
· Working Capital Movement
Trade and other receivables decreased by £2.5 million (2%) between 30 June
2023 and 30 June 2024, driven by lower levels of prepaid balances outstanding
from clients and lower overall billings due to timing of projects. Trade and
other payables decreased by £3.1 million (2%) between 30 June 2023 and 30
June 2024, driven by the phasing of payments.
Net working capital improved by £2.1 million since the beginning of the year.
This has been driven predominantly by improved cash collection and increased
cost accruals in Non-advertising Specialisms, in line with increased activity.
· Other Balance Sheet Movements
The other movements include the revaluation of investment properties of £0.4
million and the reversal of impairment of right-of-use assets of £0.6
million. This is in relation to properties that were vacated in 2023 or
earlier. Tenants have been secured and the sublease agreements signed or heads
of terms agreed.
EXPLANATORY NOTES
Company
M&C Saatchi plc, a company incorporated and domiciled in England and Wales
with company number 05114893, listed on the AIM Market of the London Stock
Exchange plc.
Group
The Company and its subsidiaries.
Like-for-Like results: Like-for-like (LFL) results adjust Headline results
(Statutory results excluding one-offs and exceptionals) to exclude
subsidiaries discontinued in 2023 and in H1 2024 and retranslate 2023 figures
to 2024 FX rates.
Headline results
A self-defined alternative measure of profit that provides a different
perspective to the Statutory results. The Directors believe it provides a
better view of the underlying performance of the Company, because it excludes
a number of items that are not part of routine business income and expenses.
These Headline figures are a better way to measure and manage the business and
are used for internal performance management and reward. "Headline results" is
not a defined term in IFRS.
Headline results represent the underlying trading profitability of the Group
and excludes:
• 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.
A reconciliation of Statutory to Headline results is presented in Note 4.
Foreign Exchange
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 the Australian Dollar and
Euro versus Sterling while the US Dollar was broadly flat.
Key H1 2024 currencies and average FX rates used H1 2024 to retranslate H1
2023
Currency Jun-24 Dec-23 Sterling
Stronger/(weaker)
United Arab Emirates Dirham AED 4.68 4.64 0.7%
Australian $ AUD 1.90 1.87 1.5%
Euro € EUR 1.18 1.15 2.3%
US $ USD 1.26 1.27 (0.7%)
South African Rand ZAR 23.0 23.3 (1.2%)
Operating profit margin
Operating profit margin refers to the percentage calculated through dividing
operating profit by net revenue.
Net cash
Net cash refers to cash and cash equivalents, less borrowings of the Group,
excluding lease liabilities.
Net revenue
Net revenue is equal to revenue less project cost / direct cost. It is not an
IFRS defined term. It is, however, used as a key performance indicator by the
Group.
Revenue
Revenue comprises the total of all gross amounts billed, or billable, to
clients in respect of commission-based, fee-based and any other income where
we act as principal and our share of income where we act as an agent. The
difference between Billings and Revenue is represented by costs incurred on
behalf of clients with whom we operate as an agent, and timing differences
where invoicing occurs in advance or in arrears of the related revenue being
recognised.
EBITDA
EBITDA is earnings before depreciation, amortisation, finance expense and
taxation, and excludes any charges relating to IFRS 16. It is not an IFRS
defined term. It is, however, used as a key performance indicator by the
Group.
Billings
Billings comprise all gross amounts billed, or billable to clients in respect
of commission-based and fee-based income, whether acting as agent or
principal, together with the total of other fees earned, in addition to those
instances where the Group has made payments on behalf of customers to third
parties. It is stated exclusive of VAT and sales taxes.
Minority interests and non-controlling interests
Within the Group, there are a number of subsidiary companies and partnerships
in which employees hold a direct interest in the equity of those companies.
These employees are referred to as minority shareholders. Of these subsidiary
companies and partnerships, most account for the shareholding of their
minority shareholders as a management incentive (through the award of
conditional shares) and are 100% consolidated in the Group's financial
statements. The remaining four subsidiary companies (including one without a
put option) account for their minority shareholders as non-controlling
interests, a defined IFRS term, with their share of the Group's profits being
shown separately on the Income Statement.
UNAUDITED CONSOLIDATED INCOME STATEMENT
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended 31 December 2023
Headline results
Note £000 £000 £000
Billings 243,982 250,448 526,013
Revenue 213,554 216,672 453,913
Project cost / direct cost (93,148) (96,281) (201,148)
Net revenue 120,406 120,391 252,765
Staff costs (86,583) (99,030) (187,621)
Depreciation (3,809) (4,458) (8,816)
Amortisation (366) (397) (841)
Impairment reversal / (charges) 720 (426) (6,798)
Other operating charges (16,053) (17,731) (36,876)
Other gains / (losses) 339 (1,922) (4,898)
Loss allowance (192) - (422)
Gain / (loss) on disposal of subsidiaries (315) 304 782
Operating profit/(loss) 14,147 (3,269) 7,275
Share of results of associates and joint ventures (26) (14) 121
Other non-operating income 27 - -
Finance income 278 874 831
Finance costs (3,172) (2,650) (7,512)
Profit/(loss) before taxation 11,254 (5,059) 715
Taxation (3,127) (1,223) (3,517)
Profit/(loss) for the period 8,127 (6,282) (2,802)
Attributable to:
Equity shareholders of the Group 8,113 (6,376) (3,529)
Non-controlling interests 14 94 727
Profit/(loss) for the period 8,127 (6,282) (2,802)
Earnings per share
Basic (pence) 5 6.64p (5.22)p (2.89)p
Diluted (pence) 5 6.40p (5.22)p (2.89)p
Headline results
Net revenue 4 120,406 120,391 252,765
Operating profit 4 17,467 9,980 32,436
Profit before tax 4 14,558 8,848 28,669
Profit after tax attributable to equity shareholders of the Group 10,026 5,462 18,545
4
EBITDA 21,467 14,524 41,544
UNAUDITED CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
Six months ended 30 June 2024 Six months ended Year ended
30 June 2023 31 December 2023
£000 £000 £000
Profit/(Loss) for the period 8,127 (6,282) (2,802)
Other comprehensive income/(loss)
Exchange differences on translating foreign operations before tax 146 (3,657) (4,287)
Other comprehensive income/(loss) for the period net of tax 146 (3,657) (4,287)
Total comprehensive income/(loss) for the period 8,273 (9,939) (7,089)
Total comprehensive income/(loss) attributable to:
Equity shareholders of the Group 8,259 (10,033) (7,816)
Non-controlling interests 14 94 727
Total comprehensive income/(loss) for the period 8,273 (9,939) (7,089)
UNAUDITED CONSOLIDATED BALANCE SHEET
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£000 £000 £000
Non-current assets
Intangible assets 34,128 39,812 34,593
Investments in associates and JVs 113 177 138
Plant and equipment 6,887 7,793 7,007
Right-of-use assets 30,219 39,191 33,772
Investment properties 2,134 - 2,369
Other non-current assets 3,503 1,290 2,302
Deferred tax assets 6,015 5,878 6,036
Financial assets at fair value through profit or loss 7,215 10,796 7,227
Deferred and contingent consideration 253 738 738
90,467 105,675 94,182
Current assets
Trade and other receivables 127,517 130,054 123,686
Current tax assets 3,969 5,274 4,321
Cash and cash equivalents 31,915 27,393 24,326
163,401 162,721 152,333
Assets held for sale - - 780
163,401 162,721 153,113
Current liabilities
Trade and other payables (139,477) (142,649) (133,850)
Provisions (32) (487) (1,050)
Current tax liabilities (2,662) (2,551) (743)
Borrowings (199) (157) (15,943)
Lease liabilities (5,759) (6,003) (5,751)
Minority shareholder put option liabilities (4,412) (21,578) (9,891)
(152,541) (173,425) (167,228)
Net current (liabilities) / assets 10,860 (10,704) (14,115)
Total assets less current liabilities 101,327 94,971 80,067
Non-current liabilities
Deferred tax liabilities (920) (1,939) (1,235)
Borrowings (18,797) (11,795) -
Lease liabilities (41,024) (45,890) (43,692)
Minority shareholder put option liabilities (3,482) (5,075) (3,525)
Other non-current liabilities (1,988) (3,566) (2,079)
(66,208) (68,265) (50,531)
Total net assets 35,116 26,706 29,536
Equity
Share capital 1,227 1,227 1,227
Share premium 50,327 50,327 50,327
Merger reserve 37,554 37,554 37,554
Treasury reserve (1,666) (550) (550)
Minority interests put option reserve (2,175) (2,506) (2,506)
Non-controlling interests acquired (33,119) (33,251) (33,168)
Hedging reserve 201 - -
Foreign exchange reserve 2,497 2,981 2,351
Accumulated loss (20,228) (29,092) (26,232)
Equity attributable to shareholders of the Group 34,618 26,690 29,003
Non-controlling interests 498 16 533
Total equity 35,116 26,706 29,536
UNAUDITED CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Merger reserve Treasury reserve MI put option reserve Non-controlling interests acquired Hedging reserve Foreign exchange reserves Retained earnings/ (accumulated losses) Subtotal Non-controlling interests in equity Total
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
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 - - - (1,116) - - - - 104 (1,012) - (1,012)
Hedge revaluation - - - - - - 201 - - 201 - 201
Disposal of subsidiaries - - - - 331 49 - - (265) 115 (49) 66
Dividends - - - - - - - - (1,948) (1,948) - (1,948)
Total transactions with owners - - - (1,116) 331 49 201 - (2,109) (2,644) (49) (2,693)
Total profit for the period - - - - - - - - 8,113 8,113 14 8,127
Total other comprehensive loss for the period - - - - - - - 146 - 146 - 146
At 30 June 2024 1,227 50,327 37,554 (1,666) (2,175) (33,119) 201 2,497 (20,228) 34,618 498 35,116
Share capital Share premium Merger reserve Treasury reserve MI put option reserve Non-controlling interests acquired Foreign exchange reserves Retained earnings/ (accumulated losses) Subtotal Non-controlling interests 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 Minority Interest 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 (loss) for the year - - - - - - - (3,529) (3,529) 727 (2,802)
Total other comprehensive income for the period - - - - - - (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
UNAUDITED CONSOLIDATED CASHFLOW STATEMENT AND ANALYSIS OF NET CASH
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended
31 December 2023
£000 £000 £000
Operating profit/(loss) 14,147 (3,573) 7,275
Adjustments for:
Depreciation of plant and equipment 1,145 1,250 2,573
Depreciation of right-of-use assets 2,664 3,208 6,243
Impairment (reversal) of right-of-use assets (633) 463 1,884
Loss on sale of plant and equipment (2) 22 271
Impairment of plant and equipment - - 132
Loss on sale of software intangibles - 1 -
Revaluation of investment properties (361) - -
Revaluation of financial assets at FVTPL 22 1,922 4,722
Revaluation of contingent consideration - - 176
Amortisation and impairment of acquired intangible assets 176 296 1,764
Impairment reversal of associates and investments (87) - -
Impairment of goodwill and other intangibles - - 3,733
Impairment and amortisation of capitalised software intangible assets 190 101 138
Exercise of IFRS 2 put options (3,004) - (14,637)
Purchase of shares (EBT) (1,116) - -
Equity settled share-based payment expenses 104 491 841
Operating cash before movements in working capital 13,246 4,181 15,115
Decrease/(Increase) in trade and other receivables (1,700) 2,486 9,924
(Decrease)/Increase in trade and other payables 3,996 (8,683) (24,437)
(Decrease)/Increase in provisions (1,018) (569) (6)
Working capital movement 1,278 (6,766) (14,519)
Cash generated from operations 14,524 (2,585) 596
Tax paid (710) (1,812) (4,156)
Net cash (used in)/generated from operating activities 13,814 (4,397) (3,560)
Investing activities
Disposal of subsidiary (net of cost disposed of) (81) (44) (209)
Investment loans 148 - (608)
Proceeds from sale of unlisted investments 638 - 49
Proceeds from assets held for sale 857 - -
Exercise of IFRS 9 put options (2,863) - -
Purchase of plant and equipment (942) (1,402) (1,827)
Purchase of capitalised software (89) (212) (19)
Interest received 278 302 831
Net cash (used in)/generated from investing activities (2,054) (1,356) (1,783)
Net cash (used in)/generated from operating and investing activities 11,760 (5,753) (5,343)
UNAUDITED CONSOLIDATED CASHFLOW STATEMENT AND ANALYSIS OF NET CASH
Six months ended Six months ended 30 June 2023 Year ended
30 June 2024 31 December 2023
£000 £000 £000
Financing activities
Dividends paid to equity holders of the company (1,948) - (1,834)
Dividends paid to non-controlling interests - (128) (161)
Cash consideration for non-controlling interests acquired - (3,264) (785)
Payment of lease liabilities (2,692) (3,051) (6,228)
Proceeds from bank loans 2,887 5,000 9,000
Repayment of bank loans (33) (106) (164)
Borrowing costs (795) - -
Interest paid (1,385) (821) (2,318)
Interest paid on lease liabilities (1,588) (1,474) (2,876)
Net cash used in financing activities (5,554) (3,844) (5,366)
Net (decrease)/ increase in cash and cash equivalents 6,206 (9,597) (10,709)
Effect of exchange rate fluctuations on cash held 1,184 (285) (2,186)
Cash and cash equivalents at the beginning of the year 24,326 37,221 37,221
Total cash and cash equivalents at the end of period 31,716 27,339 24,326
Cash and cash equivalents 31,915 27,393 24,326
Bank overdrafts 4 (#_ftn4) (199) (54) -
Total cash and cash equivalents at the end of period 31,716 27,339 24,326
Bank loans and borrowings (18,797) (11,898) (16,043)
Net cash 12,919 15,441 8,283
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. General information
The Company is a public limited company incorporated and domiciled in the UK.
The address of its registered office and the Company is 36 Golden Square,
London W1F 9EE.
The Company is listed on the AIM market of the London Stock Exchange.
This consolidated half-yearly financial information was approved for issue on
18 September 2024.
The comparative financial information for the year ended 31 December 2023 in
these interim financial statements does not constitute statutory accounts for
that year.
The statutory accounts for the year ended 31 December 2023 have been delivered
to the Registrar of Companies. The auditors' report on those accounts was
unqualified, did not draw attention to any matters by way of emphasis, and did
not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
2. Basis of preparation
This consolidated half-yearly financial information for the six months ended
30 June 2024 has been prepared on the going concern basis, in accordance with
the AIM Rules for companies. The interim financial statements do not include
all of the information required in annual financial statements in accordance
with IFRS and should be read in conjunction with the consolidated financial
statements for the year ended 31 December 2023.
3. Use of judgements and estimates
In the course of preparing the interim financial statements, management
necessarily makes judgements and estimates that can have a significant impact
on the interim financial statements. These estimates and judgements are
continually evaluated based on historical experience and other factors,
including expectations of future events that are believed to be reasonable
under the circumstances.
Significant accounting judgements
Management has considered the following judgements, which have the most
significant effect in terms of the amounts recognised, and their presentation,
in the interim financial statements. These are the same accounting estimates
and judgements the Group has applied in its financial statements for the year
ended 31 December 2023:
Non-controlling interests 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.
· 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 have concluded that such an indication of
impairment exists, then the recoverable amount of the asset is assessed.
For the interim financial statements, management have concluded that no such
indication of impairment exists.
Significant estimates and assumptions
The areas of the Group's interim financial statements 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 are described below. The
Group has based its assumptions and estimates on information available when
the interim 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 it assesses whether it is probable that future
taxable profits will be available against which the attribute can be utilised.
· Fair value measurement of financial instruments
The Group holds certain financial instruments which are recorded on the
balance sheet at fair value at the point of recognition and remeasured at the
end of each reporting period. At the period end these relate to:
(i) equity investments at FVTPL in non-listed limited companies; and
(ii) certain contingent consideration.
No formal market exists to trade these financial instruments and, therefore,
their fair value is measured by the most appropriate valuation techniques
available, which vary based on the nature of the instruments. The inputs to
the valuation models are taken from observable markets where possible, but
where this is not feasible, judgement is required to establish fair values.
· Share-based incentive arrangements
Share-based incentives are valued at the date of the grant, using stochastic
Monte Carlo pricing models with non-market vesting conditions. Typically, the
value of these awards is directly related to the performance of a particular
entity of the Group in which the employee holds a minority interest. The key
inputs to the pricing model are risk-free interest rates, share price
volatility and expected future performance of the entity to which the award
relates. Management apply judgement to these inputs, using various sources of
information, including the Company's share price, experience of past
performance and published data on risk-free interest rates (government gilts).
· Leasing estimates
Anticipated length of lease term - IFRS 16 defines the lease term as the
non-cancellable period of a lease, together with the options 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.
4. Headline results
Headline results - Six Months Ended 30 June 2024
Statutory results Separately disclosed items Gain/loss on disposal of subsidiaries Amortisation of acquired intangibles Impairment of intangible assets Impairment of non-current assets FVTPL investments under IFRS 9 Revaluation of investment properties Dividends paid to IFRS 2 put holders Put option accounting Headline results
Six months ended 30 June 2024 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 213,554 - - - - - - - - - 213,554
Net revenue 120,406 - - - - - - - - - 120,406
Staff costs (86,583) 1,825 - - - - - - 694 648 (83,416)
Depreciation (3,809) - - - - - - - - - (3,809)
Amortisation (366) - - 178 - - - - - - (188)
Impairments 720 - - - (87) (633) - - - - -
Other operating charges (16,053) 715 - - - - 4 - - - (15,334)
Other gains/(losses) 339 - - - - - 42 (381) - - -
Loss allowance (192) - - - - - - - - - (192)
Gain/(loss) on disposal of subsidiaries (315) - 315 - - - - - - - -
Operating profit 14,147 2,540 315 178 (87) (633) 46 (381) 694 648 17,467
Share of results of associates and JV (26) - - - - - - - - - (26)
Other non-operating income 27 - - - - - - - - - 27
Finance income 278 - - - - - - - - - 278
Finance expense (3,172) - - - - - - - - (16) (3,188)
Profit before taxation 11,254 2,448 315 178 (87) (633) 46 (381) 694 632 14,558
Taxation (3,127) (655) - (58) - - - - - - (3,840)
Profit for the year 8,127 1,885 315 120 (87) (633) 46 (381) 694 632 10,718
Non-controlling interests 14 - - - - - - - 678 - 692
Profit attributable to equity holders of the Group 8,113 1,885 315 120 (87) (633) 46 (381) 1,372 632 10,026
Headline results - Six Months Ended 30 June 2023
Statutory results Separately disclosed items Impairment of non-current assets Dividends paid to IFRS 2 put holders Put option accounting Headline results
Amortisation of acquired intangibles Gain/loss on disposal of subsidiaries FVTPL investments under IFRS 9
Six months ended 30 June 2023 £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 216,672 - - - - - - - 216,672
Net revenue 120,391 - - - - - - - 120,391
Staff costs (99,030) 954 - - - - 3,668 6,156 (88,252)
Depreciation (4,458) - - - - - - - (4,458)
Amortisation (397) - 296 - - - - - (101)
Impairment charges (426) - - 463 - - - - 37
Other operating charges (17,731) 423 - - - (329) - - (17,637)
Other gains/(losses) (1,922) - - - - 1,922 - - -
Operating profit (3,573) 1,377 296 463 - 1,593 3,668 6,156 9,980
Share of results of associates and JV (14) - - - - - - - (14)
Gain/(loss) on disposal of subsidiaries 304 - - - (304) - - - -
Finance income 874 - - - - - - - 874
Finance expense (2,650) - - - - 365 - 293 (1,992)
Profit before taxation (5,059) 1,377 296 463 (304) 1,958 3,668 6,449 8,848
Taxation (1,223) (363) (72) - - (514) - - (2,172)
Profit/(Loss) for the year (6,282) 1,014 224 463 (304) 1,444 3,668 6,449 6,676
Non-controlling interests (94) - - - - - (1,120) - (1,214)
Profit attributable to equity holders of the Group (6,376) 1,014 224 463 (304) 1,444 2,548 6,449 5,462
Headline results - Year Ended 31 December 2023
Statutory Separately disclosed items Gain/loss on disposal of subsidiaries Revaluation of associates on transition to assets held for sale Impairment of intangible assets Impairment of non-current assets Dividends paid to IFRS 2 put holders Put option accounting Headline results
2023
Amortisation of acquired intangibles FVTPL investments under IFRS 9
Year ended 31 December 2023 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 453,913 - - - - - - - - - 453,913
Net revenue 252,765 - - - - - - - - - 252,765
Staff costs (187,621) 6,908 - - - - - - 2,499 4,203 (174,011)
Depreciation (8,816) - - - - - - - - - (8,816)
Amortisation (841) - - - 537 - - - - - (304)
Impairments (6,798) - - - - 4,794 2,004 - - - -
Other operating charges (37,298) 744 - - - - - (644) - - (37,198)
Other losses (4,898) - - - - - - 4,898 - - -
Gain on disposal of subsidiaries 782 - (782) - - - - - - - -
Operating profit 7,275 7,652 (782) - 537 4,794 2,004 4,254 2,499 4,203 32,436
Share of results of associates and JV 121 - - (133) - - - - - - (12)
Finance income 831 - - - - - - - - - 831
Finance expense (7,512) - - - - - - 813 - 2,113 (4,586)
Profit before taxation 715 7,652 (782) (133) 537 4,794 2,004 5,067 2,499 6,316 28,669
Taxation (3,517) (1,821) - - (198) (28) (536) (1,178) - (65) (7,343)
Profit for the year (2,802) 5,831 (782) (133) 339 4,766 1,468 3,889 2,499 6,251 21,326
Non-controlling interests 727 - - - - - - - 2,054 - 2,781
Profit attributable to equity holders of the Group (3,529) 5,831 (782) (133) 339 4,766 1,468 3,889 4,553 6,251 18,545
5. Earnings per share
Earnings per share - Six Months Ended 30 June 2024
Basic and diluted earnings per share are calculated by dividing appropriate
earnings metrics by the weighted average number of the Company's ordinary
shares in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted average
number of the Company's shares in issue on the assumption of conversion of all
potentially dilutive ordinary shares. The dilutive effect of unvested
outstanding put options is calculated based on the number that would vest had
the balance sheet date been the vesting date. In 2023, since the Company made
a Statutory loss, no diluted earnings per share is calculated.
Statutory Headline
2024 2024
Profit attributable to equity shareholders of the Group (£000) 8,113 10,026
Basic earnings per share
Weighted average number of shares (thousands) 122,101 122,101
Basic earnings per share 6.64p 8.21p
Diluted earnings per share
Weighted average number of shares (thousands) as above 122,101 122,257
Add:
- LTIP 2,373 2,373
- Put options (payable in cash) 2,365 2,365
Total 126,839 126,839
Diluted EPS 6.40p 7.90p
Excluding the put options (payable in cash) (2,365) (2,365)
Weighted average numbers of shares (thousands) including dilutive shares 124,474 124,474
Diluted EPS - excluding items the Group intends and is able to pay in cash 6.52p 8.05p
Earnings per share - Six Months Ended 30 June 2023
Statutory Headline
2023 2023
Profit attributable to equity shareholders of the Group (£000) (6,376) 5,462
Basic earnings per share
Weighted average number of shares (thousands) 122,257 122,257
Basic (loss)/earnings per share (5.22)p 4.47p
Diluted earnings per share
Weighted average number of shares (thousands) as above 122,257 122,257
Diluted (loss)/earnings per share (5.22)p 4.47p
Earnings per share - Year Ended 31 December 2023
Statutory Headline
2023 2023
Year ended 31 December 2023
Profit attributable to equity shareholders of the Group (£000) (3,529) 18,545
Basic earnings per share
Weighted average number of shares (thousands) 122,257 122,257
Basic EPS (2.89)p 15.17p
Diluted earnings per share
Weighted average number of shares (thousands) as above 122,257 122,257
Add
- LTIP - 1,500
- Put options - 5,247
Total 122,257 129,004
Diluted EPS (2.89)p 14.38p
Excluding the put options (payable in cash) - (5,247)
Weighted average numbers of shares (thousands) including dilutive shares 122,257 123,757
Diluted EPS - excluding items the Group intends and are able to pay in cash (2.89)p 14.99p
6. Separately disclosed items
Separately disclosed items include significant one-off, non-recurring revenues
or expenses. These are shown separately and are excluded from Headline profit
to provide a better understanding of the underlying results of the Group.
30 June 2024
Separately disclosed items for the six months ended 30 June 2024 comprise the
following:
Staff costs Operating costs Taxation Total
£000 £000 £000 £000
Restructuring - ongoing businesses 1,200 10 (317) 893
Restructuring - global cost efficiency programme 248 252 (123) 377
Transformation project costs 535 453 (255) 733
Other (158) - 40 (118)
Total separately disclosed items 1,825 715 (655) 1,885
The Group has been pursuing a strategy to simplify its operating structure and
improve efficiency across the Group. This restructuring programme continued
into 2024:
· 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 seven 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 £1,200k of redundancy costs included within
non-Headline restructuring for ongoing businesses, and £174k of redundancy
costs are included within the Headline staff costs.
· The Group's global cost efficiency programme has continued to
identify and reduce specific central HQ and local support function roles,
which will be replaced overseas to save cost. The redundancy costs associated
with this restructuring programme have been treated as an exceptional
non-Headline cost, as they are one-off exit costs.
In H2 2022, the Group commenced a global cost efficiency programme. The staff
costs of the project team dedicated to this transformation project (£535k)
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. The programme's operating costs mainly relate
to recruitment costs for roles in our new overseas service centres, travel
costs relating to the programme, and service charges and rates for the 30
Great Pulteney Street office in London, which has been fully vacated.
Other includes CEO compensation credit relating to the over-accrual of 3
months of staff costs in 2023 which arises from the gardening leave of the
former CEO which was legally committed by the business, but had no benefit for
the business. The cost was treated as an exceptional non-Headline cost in
2023 and the reversal of this over-accrual has also been treated as an
exceptional item in 2024.
30 June 2023
Separately disclosed items for the six months ended 30 June 2023 comprise the
following:
Staff costs Operating costs Taxation Total
£000 £000 £000 £000
Global cost efficiency programme 106 421 (132) 395
Local strategic review and restructuring 848 2 (231) 619
Total separately disclosed items 954 423 (363) 1,014
PricewaterhouseCoopers LLP assisted with the global cost efficiency programme
which commenced in H2 2022. The professional and legal fees and staff costs
incurred in relation to this project were classified as non-Headline (£527k).
In addition, within nine of the agencies in the Group, a strategic review has
been commenced which has resulted in staff redundancy costs in the period. The
strategic review and 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 £848k of redundancy costs included within non-Headline
strategic review and restructuring, and £150k of redundancy costs are
included within the Headline staff costs.
7. Segmental information 5 (#_ftn5)
The Group's operating segments are aligned to those business units that are
regularly evaluated by the chief operating decision maker ("CODM"), namely the
Board, in making strategic decisions, assessing performance and allocating
resources.
We primarily assess the Group's performance by division, namely Advertising,
Non-advertising Specialisms and Group Central Costs. The segmental information
is reconciled to the Headline results in Note 4.
Please note that prior year comparatives have been restated according to the
updated division and geographic segments. A summary of relevant changes
between 2023 and 2024 is included in a table below.
Segmental Information by Division
Advertising Non-advertising Specialisms Group central Costs Local Central Costs Discontinued subsidiaries Total
Six Months Ended 30 June 2024 £000 £000 £000 £000 £000 £000
Net revenue 45,235 74,832 - - 340 120,406
Operating profit/(loss) 5,133 16,319 (5,558) 1,167 405 17,467
Operating profit margin 11% 22% - - 119% 14%
Profit/(loss) before tax 4,775 17,168 (7,002) (789) 405 14,558
Advertising Non-adverting Specialisms Group Central Costs Local Central Costs Discontinued subsidiaries Total
Six Months Ended 30 June 2023 (restated) £000 £000 £000 £000 £000 £000
Net revenue 44,259 71,321 - - 4,811 120,391
Operating profit/(loss) 1,818 13,183 (4,356) 1,521 (2,185) 9,980
Operating profit margin 4% 19% - - (45%) 8%
Profit/(loss) before tax 1,700 13,371 (2,455) (1,435) (2,333) 8,848
Advertising Non-advertising Specialisms Group Central Costs Local Central Costs Discontinued subsidiaries Total
Year Ended 31 December 2023 (restated) £000 £000 £000 £000 £000 £000
Net revenue 93,752 149,567 - - 9,446 252,765
Operating profit/(loss) 9,105 33,234 (7,642) 652 (2,913) 32,436
Operating profit margin 10% 22% - - (31%) 13%
Profit/(loss) before tax 8,864 34,555 (7,396) (4,179) (3,176) 28,669
Segmental Information by Geography
UK Europe Middle East Africa Asia Pacific (APAC) Americas Group Central Costs Discontinued Total
Six Months Ended 30 June 2024 £000 £000 £000 £000 £000 £000 £000 £000 £000
Net revenue 52,460 5,823 4,532 7,991 27,171 22,090 - 340 120,406
Operating profit/(loss) 13,522 1,157 736 994 3,820 2,391 (5,558) 405 17,467
Operating profit margin 26% 20% 16% 12% 14% 11% - 119% 14%
Profit/(loss) before tax 12,622 1,162 707 956 3,304 2,403 (7,002) 405 14,558
UK Europe Middle East Africa Asia Pacific (APAC) Americas Group Central Costs Discontinued Total
Six Months Ended 30 June 2023 (restated) £000 £000 £000 £000 £000 £000 £000 £000 £000
Net revenue 46,827 5,112 3,148 7,792 30,232 22,468 - 4,811 120,391
Operating profit/(loss) 9,121 866 259 774 3,662 1,840 (4,356) (2,185) 9,980
Operating profit margin 19% 17% 8% 10% 12% 8% - (45%) 8%
Profit/(loss) before tax 8,104 845 242 2,204 3,158 598 (2,455) (2,333) 8,848
UK Europe Middle East Africa Asia Pacific (APAC) Americas Group Central Costs Discontinued Total
Year Ended 31 December 2023 (restated) £000 £000 £000 £000 £000 £000 £000 £000 £000
Net revenue 101,080 11,005 7,509 16,080 60,733 46,913 - 9,446 252,765
Operating profit/(loss) 21,982 1,716 1,343 1,869 9,326 6,755 (7,642) (2,913) 32,436
Operating profit margin 22% 16% 18% 12% 15% 14% - (31%) 13%
Profit/(loss) before tax 20,404 1,676 1,294 1,753 8,426 5,688 (7,396) (3,176) 28,669
The changes to segmental reporting divisions and regions are summarised as
follows:
Agency Previous Division New Division
M&C Saatchi World Services Pakistan (PVT) LTD Issues Advertising
Talk PR LTD Advertising Passions
The Source (W1) LLP Advertising Consulting
The following agencies are included in the Discontinued subsidiaries column:
Agency Division Region Year discontinued
M&C Saatchi (Switzerland) SA Advertising Europe 2024
M&C Saatchi Accelerator Limited Advertising UK 2023
M&C Saatchi Advertising GMBH Advertising Europe 2023
M&C Saatchi Digital GMBH Advertising Europe 2023
M&C Saatchi Spencer Hong Kong Limited Advertising Asia 2023
M&C Saatchi (Singapore) PTE LTD Advertising Asia 2023
The Source (Malaysia) Advertising Asia 2023
AEIOU Shanghai Advertising Asia 2023
AEIOU Hong Kong Advertising Asia 2023
M&C Saatchi Indonesia Advertising Asia 2023
Majority LLC Advertising US 2023
Thread Innovation LTD Consulting UK 2023
M&C Saatchi Life Limited Consulting UK 2023
M&C Saatchi Holdings Asia PTE LTD Local Central Costs Asia 2023
8. Net finance income / (expense)
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended
31 December 2023
£000 £000 £000
Bank interest receivable 149 189 412
Other interest receivable 129 682 414
Sublease finance income - 3 5
Finance income 278 874 831
Bank interest payable (1,385) (788) (2,318)
Amortisation of loan costs (133) (95) (190)
Other interest payable (37) - (14)
Interest on lease liabilities (1,580) (1,474) (2,876)
Amortisation adjustment to minority shareholder put option liabilities 16 (293) -
Exchange difference on financing activities (53) - -
Valuation adjustment to IFRS 9 put option liabilities - - (2,114)
Finance expense (3,172) (2,650) (7,512)
Net finance expense (2,894) (1,776) (6,681)
9. Taxation
Income tax expenses are recognised based on management's estimate of the
average annual income tax rate expected for the full financial year.
The estimated effective Headline annual tax rate used for H1 2024 is 26.4% (H1
2023: 23.7%; Full Year 2023: 25.6%).
We expect smaller variations in future statutory tax rates due to lower
amounts of significant non-deductible items such as share-based payments (put
option charges) and dividends that are payable to minority shareholders that
are defined as a staff cost.
10. Dividends
The Board believes that the Group has significant growth potential.
Accordingly, the Board believes that the Group would be best served, and this
potential realised, from investing annual profits back into the business and
into new growth initiatives.
However, the Board recognises the importance of dividends within the Company's
capital allocation policy, alongside the settlement of put options and
investment in growth initiatives. The Board therefore decided to resume the
payment of dividends in 2023 and intends to adopt a progressive dividend
policy in the future.
The Board declared a final dividend of 1.6 pence per ordinary share for the
financial year ended 31 December 2023 (1.5 pence in 2022), which was paid in
June 2024.
11. Share-based payments
In 2021, the Board made the decision that all put options would be settled in
cash. However, the optionality remains to issue shares in the Company to
settle put options in the future, should circumstances warrant.
Total future expected put option liabilities at 30 June 2024
Potentially payable
Paid Payable 2025 2026 2027 2028 2029 Total
H1 2024 H2 2024
£000 £000 £000 £000 £000 £000 £000 £000
At 195p
IFRS9 put option schemes* 2,863 - - 2,701 - - - 2,701
IFRS2 put option schemes** 3,004 2,907 574 2,298 - - - 5,779
Total 5,867 2,907 574 4,999 - - - 8,480
* At 30 June 2024 IFRS9 put option schemes includes a £514k fair value
discount for time.
** At 30 June 2024 99% of IFRS2 put option schemes by value were vested. The
balance sheet liability at 30 June 2024 is £5,703k.
Put option holders are not required to exercise their put options at the first
opportunity. Many do not and prefer to remain shareholders in the subsidiary
companies they manage. As a result, some put option holders may not exercise
their put options on the dates estimated in the table above. If the Company in
the future decides to settle these put options with the Company's shares, then
the amount of Company shares that will be provided is equal to the liability
divided by the Company's share price at the date of settlement.
For illustrative purposes, we show the settlement values at a share price of
250p. These would be £2,912k for H2 2024; £684k for 2025; and £5,761k for
2026.
Of the amount payable in H2 2024, £2,897k has already been agreed to be paid.
12. Events after the balance sheet date
The Directors are not aware of any other events since 30 June 2024 that have
had, or may have, a significant impact on the Group's operations, the results
of those operations, or the state of affairs of the Group in future years.
1 (#_ftnref1) Conversion of Headline 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 (#_ftnref2) Non-advertising Specialisms comprise Issues, Passions &
PR, Consulting and Media.
3 (#_ftnref3) Passions includes the PR business (moved from Advertising)
as of FY 2024, with the prior year restated.
4 (#_ftnref4) These overdrafts are legally offset against balances held in
the UK; however, they have not been netted off in accordance with the
requirements of IAS32.42.
5 (#_ftnref5) The segmental reporting reflects Headline results
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