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M&C Saatchi’s 2020 financial results show drop in AU revenue, but positive outlook for 2021

M&C Saatchi has released its unaudited financial results for the year ended 31 December 2020.

According to the report, the company demonstrated resilience and agility in a “challenging environment during 2020” and announces that trading is ahead of expectations for the first five months of 2021.

M&C Saatchi release financial results for the year ended 31 December 2020

Financial performance in Australia included a net revenue declined of 6% like-for-like, down to £47.4 million from £50.6 million in 2019. Headline operating profit reduced by 41% to £3.1 million from  £5.2 million in 2019. However, the business did make a 12% reduction in headline operating costs.

Commenting on current performance and outlook, chief executive officer, Moray MacLennan, said: “2020 was undoubtedly a watershed year for the company. We went into the year confronted by COVID- 19 and ended with a new strategy and the unswerving support of the group’s employees and a new structure in place for 2021.

MacLennan continued: “Profit in all five of the new divisions has grown in 2021 through meeting new client demands in the new digital landscape. This initial success and our continued focus on innovation, technology and data, combined with creativity, which is at our core, gives us confidence for the remainder of the year and beyond.”

Key Global updates:

  • 2020 headline profit before tax £8.3m (2019: £17.2m). Ahead of expectations, reflecting strong client retention and new business performance.
  • Headline operating profit margin 5.3% (or over 7.5% excluding losses from entities that were disposed of/divested); H1 2021 current run rate 10%+.
  • Strong client retention and new business performance. New appointments and assignments from clients including Tik Tok, Lexus, HM Government and Tinder.
  • Net cash: £33.0m (2019: £16.6m). A new three year £47m revolving credit facility with National Westminster Bank plc and Barclays Bank PLC was agreed post year end.
  • Simplification programme: 34% reduction in the number of operating units 2019-2021.
  • Business transformation programme including new divisional structure introduced in 2021delivering strong digital growth.
  • Trading ahead of expectations for first five months of 2021. Half year headline profit before tax expected to be in excess of £10m.

Financial results for the year to 31 December 2020. Source: M&C Saatchi

Commenting on the 2020 results, Gareth Davis, chairman said: “I am pleased to report that 2020 proved to be a year of resilient business performance. Whilst the COVID-19 pandemic disrupted all of our lives, both personally and professionally, the business rose to the challenge.

“We aggressively addressed the need to simplify the group’s operating structure. We drove efficiencies through a robust cost reduction programme. We strengthened the business through the introduction of greater central controls, new processes and systems. These measures, together with a focus on corporate governance and the introduction of a new strategy have laid firm foundations for renewed growth in the coming year,” Davis said.

2021 trading and outlook: strong financial performance in 2021 to date:

  • Strong growth in net revenue and headline profit before tax in the first five months of 2021.
  • Headline operating margin for the first five months exceeds 10%.
  • Headline profit before tax for the first six months is expected to be around £10m (H1 2020: £2m).
  • Strong performance across all divisions driven by new business wins against a more positive market
  • backdrop, especially in recent weeks.
  • Continued balance sheet strength, with net cash of £32m as at 31 May 2021.

A new strategy and operating model were introduced in January 2021, the three key elements of which were:

  • A move from being primarily a local and siloed group to one that is connected across disciplines and geographies, fuelled by data and technology.
  • A new proposition: to navigate, create and lead Meaningful Change.
  • Restructure: simplify into five new divisions to make the Group easier to understand, operate and grow with. These divisions to be fuelled by enhanced technology, digital proficiency, data capabilities and sustainability expertise.

2020 regional results

America

  • Like-for-like net revenue declined by 17% (2020: £34.6m 2019: £41.6m).
  • Headline operating profit reduced by 19% (2020: £2.5m 2019: £3.1m).
  • Headline operating costs reduced by 12%.

Asia

  • Like-for-like net revenue declined by 25% (2020: £10.5m 2019: £13.9m).
  • Headline operating profit reduced by 287% (2020: -£0.8m 2019: £0.4m).
  • Headline operating costs reduced by 10%.

Europe

  • Like-for-like net revenue in Europe declined by 7% (2020: £28.4m 2019: £30.5m).
  • Headline operating profit declined by 51% (2020: £1.5m 2019: £3.0m).
  • Headline operating costs reduced by 2%.
  • Middle East and Africa
  • The Middle East and Africa region performed well. Like-for-like net revenue was down by just 6% (2020: £15.6m 2019: £16.6m).
  • Headline operating profit declined by 55% (2020: £0.7m 2019: £1.5m).
  • Headline operating costs remained flat.

UK

  • Like-for-like net revenue in the UK declined by 14% (2020: £88.9m 2019: £103.2m).
  • Headline operating profit was up 21% (2020: £16.4m 2019: £13.5m).
  • Headline operating costs decreased by 19%.
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