M&C Saatchi PR and Sport & Entertainment report 'stellar' FY revenue growth

M&C Saatchi's two biggest PR agencies again outperformed the business as a whole in 2017, with "stellar" revenue increases of around 18 per cent, although growth was flat at Talk PR.

The growth rate at M&C Saatchi PR and M&C Saatchi Sport & Entertainment compares to that of 12 per cent across the marcoms holding company.

M&C Saatchi this morning reported revenue of £251.5m ($355.6m) in 2017 across the group; growth was seven per cent, excluding the impact of currency fluctuations. Pre-tax profit rose 16 per cent to £27.7m ($39.2m).

M&C Saatchi CEO David Kershaw told PRWeek that the PR and Sport & Entertainment businesses were "stars" in 2017 and described their performance as "pretty stellar". Margin growth at the agencies was in the "healthy mid-teens".

Significant wins at M&C Saatchi PR included tea brand Lipton, Virgin Active, Puma and PepsiCo in the UK, and the FT in the US. In newer markets, M&C Saatchi picked up Paris Saint-Germain Football Club and QVC in Paris, and Rolls Royce and the Discovery Channel in Dubai. The agency also launched its ‘influencer squad’ offer.

"There are a lot of good things happening in the company and they’re riding the positive trends in the industry," said Kershaw.

He said Sport & Entertainment had an "amazing year", with revenue from its top five clients - Adidas, Coke, Ballantine's, NatWest and 02 - growing organically by 50 per cent. The agency also won an account with Heineken’s F1 business.

However, revenue at Talk PR was flat after it stopped working with a number of Procter & Gamble brands, which were sold.

Kershaw called 2017 a "tricky transitional year" for Talk PR, but said growth is forecast in 2018. The agency has also won Johnson & Johnson’s beauty portfolio in the UK. Other recent client wins include Chivas XV, Unique UK, Avery Dennison and Murphy & Partners

Global plans

Kershaw confirmed that further global openings are expected at PR and Sport & Entertainment.

Regarding the latter agency, he stated: "We’re in very early days but certainly Shanghai, China, is something that we’re looking at - nothing imminent. We might look at France but I wouldn’t expect that this calendar year."

He said the focus this year would be bedding in Sport & Entertainment’s business in South Africa – last year it acquired a 60 per cent stake in South African agency Levergy.

Regarding new openings at M&C Saatchi PR, which opened in the UAE last year, Kershaw said: "I wouldn’t want to name specific markets but I can’t believe that someone of [global CEO Molly Aldridge’s] appetite will not be coming with some further suggestions."

The company has also announced today that UK-based account director Serena Thynne has moved to its Los Angeles office in the role of vice-president.

Kershaw was upbeat about the prospects for the holding company’s PR businesses. The PR side of the business also outperformed the company as a whole in 2016.

"I think traditional advertising is certainly under more pressure than PR businesses because PR has redefined itself as something much more. If I was to look at M&C Saatchi PR five years ago, it was knocking out press releases and persuading editors to run things. Now they’ve got a full studio, filming content, managing social media channels. It’s a different business, and in an area of the market that clients are very fond of pursuing."

Kershaw said he expected more growth overall in 2018, at roughly double the two per cent industry average growth in marcoms spending expected this year.

Regional performance

UK revenue rose six per cent, with Sport & Entertainment, PR and Mobile "continuing to trade particularly positively". Operating profit in the UK rose 46 per cent, excluding one-off restructuring costs in the London ad agency in 2017. UK margins also rose significantly, from 11.7 per cent to 16.1 per cent.

A slowdown in ad revenue in New York hit the company’s performance in the Americas, where revenue fell three per cent and operating profit declined by 53 per cent. Margins fell from 15.5 per cent to 7.4 per cent. However, the Los Angeles office, where Sport & Entertainment launched in the first half of 2017, "had a better year".

European revenue increased 26 per cent in 2017, with operating profit up 30 per cent and operating margin moving from 15.1 per cent to 15.3 per cent. M&C Saatchi cited the "dynamic new business performance" in Stockholm and said Germany and Italy "continue to excel". France "remains challenging", although new projects were won in H2, and the Madrid office is "much improved".

Revenue is the Middle East and Africa grew 26 per cent, with operating profit in the region up 45 per cent. In Asia and Australia, revenue rose 23 per cent and operating profit was up 37 per cent.

Analyst Paul Richards of Numis said the results were "slightly ahead of our estimates" of £27m pre-tax profit.

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