M&C Saatchi PR shops outperform as CEO downplays short-term Brexit impact

M&C Saatchi's PR agencies continued to outperform the business overall in the first half of 2016, as parent company CEO David Kershaw says he doesn't predict the EU Referendum to hit the business in the next two to three years.

M&C Saatchi's PR agencies have outperformed the overall business in the first half of 2016 (©Thinkstockphotos)
M&C Saatchi's PR agencies have outperformed the overall business in the first half of 2016 (©Thinkstockphotos)

M&C Saatchi group-wide revenue rose 15 per cent in the first half of 2016, to £100.2m ($130.1m), the firm reported this morning.

Figures for its PR agencies M&C Saatchi PR and M&C Saatchi Sport & Entertainment – both among the world's 120 biggest PR firms globally - are not given, but PRWeek understands growth was around 20 per cent.

"There’s no doubt they are one of the strongest elements of the group," Kershaw told PRWeek.

He cited the growth in global networks at the PR agencies – M&C Saatchi PR now has a presence in around 10 countries. Further expansion is planned, particularly in the US.

"They’ve truly established themselves as an international network, which is terrific. We will encourage both parts within that group to keep opening new companies, because the underlying philosophy of the whole group is to start new companies.

"We’re looking at expanding our US presence beyond New York. The West Coast is certainly an area that for PR and Sport & Entertainment is very interesting, Sport in particular. It’s about finding the right local entrepreneurs to do it with."

M&C Saatchi also owns Talk PR.

In terms of new accounts in the period, Kershaw highlighted Bentley in the Americas for M&C Saatchi PR as a "significant win". Others included a pan-European brief with Casper Mattress, and continued work with large companies including Dixons Carphone and Carnival.

M&C Saatchi, which is headquartered in London, said this morning that it had "not seen any impact as a result of the Brexit decision, other than a positive foreign currency impact".

Kershaw told PRWeek: "I’m not concerned [about Brexit] in the short term because I think brands have to keep spending, and it’s about this quarter’s P&L [profit and loss].

"I’m still of the view... that in the longer term, on balance, I don’t think it’s a great thing for the UK economy. But I think we’ve got some time, because the real impact of new trading agreements aren’t going to be kicking in for another three to four years. In terms of our two- to three-year time horizon, I don’t think it’ll have a noticeable impact."

Overall, M&C Saatchi reported a 19 per cent rise in pre-tax profit to £11.4m ($14.8m) in H1, with operating profit up 22 per cent to £11.3m ($14.7m). Like-for-like revenue rose six per cent.

Regional performance

However, UK revenue fell one per cent. The firm cited client losses in its ad agency, despite its two PR shops and research business The Shop performing "strongly", and its CRM and mobile operations "returning good increases".

Headline operating profit (which excludes factors such as impairment of assets) fell 10 per cent in the UK, although it grew two per cent excluding ad agency restructuring costs of £660,000 ($778,941).

Like-for-like revenue in the Americas grew 27 per cent, with operating profit up 95 per cent to £3.4m ($4.4m), buoyed by its mobile business and ad agency SS+K.

In Europe, like-for-like revenue rose 12 per cent, with headline operating profit up 51 per cent. Germany and Italy "maintained their strong performance", and although advertising in France remained "sluggish", it cited wins with YouTube and Google there. "Our associate in Spain continues to tick up after a challenging few years," the company added.

Like-for-like revenue in the Middle East and Africa grew 19 per cent, with a "slow start" but stronger second half expected.

In Asia and Australasia, like-for-like revenue increased five per cent in the half year, with wins in Australia including Woolworths, BBQ Galore, eBay and Menulog. Its associate in China, Aeiou, "continues to perform favourably and impress network clients", although Japan "continues ti underperform" – the company has reduced its holding there to 10 per cent.

Kershaw said H2 has "started well" with trading "in line with expectations".

"Momentum across the group remains strong, producing positive revenue and earnings growth over the first six months of 2016. We are well positioned and see significant opportunities from our breadth of offer in the fastest growing segments."

M&C Saatchi increased its dividend by 15 per cent to 1.85p. Earnings per share rose 20 per cent to 10.71p.

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