M&C Saatchi PR shops outperformed in 'outstanding' 2016

M&C Saatchi's PR agencies outperformed the company as a whole in 2016, which it labelled an "outstanding year" as pre-tax profit grew 18 per cent to £23.7m ($29.1m).

CEO David Kershaw: Company's PR agencies performed 'absolutely ahead of the average'
CEO David Kershaw: Company's PR agencies performed 'absolutely ahead of the average'

Revenue in the holding company’s PR shops - M&C Saatchi PR, M&C Saatchi Sport & Entertainment and Talk PR – are thought to have grown around 20 per cent in 2016.

Across the group, revenue in 2016 rose 26 per cent to £225.3m ($276.3m), rising nine per cent on a like-for-like basis. Revenue on a constant currency basis grew 19 per cent to £213.1m ($261.3m). In the UK, however, operating profit fell 12 per cent due to restructuring costs in its ad agency.

M&C Saatchi CEO David Kershaw told PRWeek the three PR shops are in the "top quartile of growth" across the group. "They are absolutely ahead of the average."

He said margins in the PR agencies "don’t seem to be under attack". They are "pretty constant… about average for the group". Kerhsaw said the PR bosses have "the confidence to charge the right amount rather than have to discount".

Asked to explain the success of the PR agencies, Kershaw said: "Without doubt the quality of the leadership and the example they set." He took a swipe at the ownership model of what he called "mega conglomerates" in the industry.

"We have our fundamental philosophy here that the people who run businesses should have ownership of the businesses, rather than in the big groups where they are bonus wage slaves. And it makes a fundamental difference to how people are motivated and motivate.

"If you look at the leaderships of both Sport & Entertainment and PR, they generally see it as their businesses; even though we might own the majority of the companies, they have a big interest in it themselves. And they treat it like their own business. It’s the most fundamental difference between us and the mega conglomerates that just churn people in and out."

M&C Saatchi this morning said Sport & Entertainment is to open an office in Los Angeles in the first half of 2017. Sport & Entertainment is also in the process of acquiring an agency called Levergy in South Africa, to add to its offices in London, Sydney, New York and Berlin.

"It’s really become a proper worldwide network," said Kershaw.

M&C Saatchi PR also recently opened an office in Paris and "built up teams" in Spain, Germany and Italy. "Molly [Aldridge, M&C Saatchi PR CEO] has great imperial tendencies and obviously we’re very keen on starting businesses. We support her on doing that all the way," said Kershaw.

He added: "Both PR and Sport & Entertainment are growing as rapidly as they can and we encourage them to do so."

Meanwhile, Kerhsaw said there had been "no indication of any adverse effect" from the EU Referendum in the UK, and there is "more economic optimism" in the US due to President Trump’s tax-cutting agenda.

He stated: "2016 was an outstanding year for M&C Saatchi. We continue to roll out our proven strategy of winning new business and starting new businesses and see positive momentum across our global network and business channels. The year has started well and we are confident that we will continue to make good progress in 2017 and beyond."

Regional breakdown for the group

In the UK, like-for-like revenue rose five per cent, with the Sport & Entertainment arm, along with CRM and Mobile, "continuing to perform particularly positively". Operating profit fell 12 per cent due to restructuring costs in its ad agency.

Like-for-like revenue across Europe also grew five per cent, with operating profit up 10 per cent in the region.

In the Americas, major investment in its New York operations caused revenues to grow 97 per cent on a constant currency basis, while operating profit rose 118 per cent. Like-for-like revenue was up 18 per cent.

Like-for-like revenue in the Middle East & Africa and Asia & Australasia rose 23 and 13 per cent respectively. Operating profit in the former region grew four per cent, compared to growth of 37 per cent in Asia & Australasia.

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