REG-M&C Saatchi PLC Interim Results

Released : 15/09/2005 06:02

                                                                                                                       .
RNS Number:2924R 
M&C Saatchi PLC 
15 September 2005 
 
 
                                M&C SAATCHI PLC 
 
                                INTERIM RESULTS 
 
                          SIX MONTHS TO 30th JUNE 2005 
 
                               15 September 2005 
 
M&C Saatchi plc, the international advertising agency with offices in 15 
locations including London, Paris, New York and across the Asia Pacific region, 
announces its interim results for the six months to 30th June 2005. 
 
Financial Highlights: 
 
   -Revenues (gross profit) grow organically by 7.1% to £31.9 million (2004: 
    £29.8 million) 
   -Operating profit (before the impact of the European investment) up 11.3% 
    to £4.1 million (2004: £3.7 million) 
   -Operating Margin (before the impact of the European investment) up 0.5pts 
    to 12.8% (2004: 12.3%) 
   -Profit before tax (before the impact of the European investment) up 14.8% 
    to £4.6 million (2004: £4.0 million) 
   -Earnings per share (before the impact of the European investment) up 
    12.7% to 5.07 pence (2004: 4.5 pence) 
   -Operating profit (including European investment) down 2.8% to £3.6 
    million 
   -Profit before tax (including European investment) up 1.7% to £4.1 million 
   -Earnings per share (including European investment) down 2.9% to 4.37 
    pence (2004: 4.50 pence) 
   -Interim dividend 0.77 pence per share 
 
Operational Highlights: 
 
   -New business wins in the first half included Ribena (GSK), ITV, Mini and 
    Tourism Australia 
   -New offices open in Paris and Bangkok 
   -On target to open second new office in Europe by the year-end 
 
Note: Figures are reported before the Amortisation of Goodwill. 
 
Commenting on the results, David Kershaw, Chief Executive said: 
 
"The first half of the year has been encouraging, with good organic growth 
driven by a healthy new business performance. The underlying business continues 
to perform well but the outcome of the BA review could have a major influence on 
the second half and beyond." 
 
 
For further information: 
M&C Saatchi                        020 7543 4500 
David Kershaw 
 
Tulchan Communications             020 7353 4200 
Miranda Acland / Peter Hewer 
 
 
 
Except where otherwise stated this report comments on the unaudited profit and 
loss account of M&C Saatchi plc (the "group") for the six months to 30 June 2005 
compared with the unaudited pro forma profit and loss account for the same 
period in 2004. The report also comments on the numbers before the impact of the 
amortisation of goodwill. The report has been prepared to show for illustrative 
purposes only, the results as if the reorganisation which occurred immediately 
prior to its admission to trading on AIM on 14 July 2004, had occurred on 1 
January 2004 (see note 4 for further details of the reorganisation). The 
directors believe that the presentation of the financial highlights and the 
financial report on this basis provide a clearer understanding of the Group's 
results. 
 
 
 
 
Financial Review 
 
Revenue grew by 7.1% to £31.9 million with all our key markets recording organic 
growth, driven by a healthy new business performance over the last 12 months. 
This represents our 11th year of consistent organic revenue growth. Significant 
wins have been Ribena (GSK), Mini, ITV, Weetabix and Tourism Australia. The 
first half also benefited from a number of clients spending more of their annual 
budgets in the first half when compared with previous years. 
 
Our expansion into the key European markets is progressing well. We officially 
opened the doors of our new office in Paris on the 1st September, and plans are 
well advanced for the second office to be opened by the end of the year, 
discussions are progressing well in both Spain and Germany. As previously 
indicated our European investment will have a negative effect on the financial 
performance in 2005 and 2006. As expected the impact of the investment in the 
first half has been to reduce operating profit by £522k. 
 
Excluding the impact of the European investment, operating profit increased by 
11.3%, and the operating margin increased to 12.8% (2004: 12.3%), with 
increasing revenues matched by careful cost control. The impact of the European 
investment is to reduce the margin by 1.6pts. 
 
Group net interest has increased by 95% to £647k (2004: £332K) resulting from 
good cash flows in the Group and the interest on the proceeds of the float. 
 
The reported group tax rate of 33.8% is above the prior year (33.1%). The 
increase is due to the investment in Europe and a reduced contribution from low 
tax rate territories. 
 
Minority interests have increased as a percentage of profits from 8.9% to 12.1%, 
due to the companies with substantial minorities outperforming the average 
across the Group. 
 
The impact of our European investment and the increased minority interest 
contribution has led to a small decrease to our earnings per share to 4.37p 
(2004: 4.50p). 
 
The board has declared an interim dividend of 0.77 pence per share, payable on 
21st October 2005 to shareholders on the register as at 23rd September 2005. 
 
 
Segmental Analysis 
 
UK 
 
Revenue in the UK increased by 7.9% to £19.0 million as a result of a healthy 
new business performance across all sectors and a number of one off projects in 
the first half. 
 
Notable wins were: 
 
   -Advertising: Ribena (GSK), ITV, Cadbury Muller 
   -Direct Marketing (LIDA): Mini, NatWest Mortgages 
   -Sponsorship: Carlsberg, Reebok 
   -Media (Walker Media) Isolagen, Appletiser and more recently Weetabix 
   -PR (Talk): Ingenue, Perrier Jouet, Ovaltine 
   -Digital (Play) has won assignments from ITV, Privilege, The Link and 
    Tourism Australia 
 
The operating margin in the UK (before the impact of the group recharges) has 
increased by 0.5pts to 17.1%. 
 
Asia and Australia 
 
Our Asia Pacific region has seen revenue grow by 4.6% to £11.5 million (2004: 
£10.9 million). The most significant new client is Tourism Australia, which is a 
major new account for the group as a whole. The benefit from this win will be 
mainly felt in 2006. Other new clients across the region are Spirit of Tasmania, 
eBay, Microsoft, Vogue, and SIC (Malaysia F1). 
 
The operating margin has increased by 4.1pts to 10.5% (2004: 6.3%) (before the 
impact of the Group recharges). The increase in the margin is due to both a 
reduction in the cost base and a change in the half on half revenue profile. 
 
As already announced our new office in Bangkok has formally opened. The focus is 
now on India and Indonesia and talks are continuing with potential partners. 
 
America 
 
We continue to make good progress in America. Revenue has grown 18.6% to £1.4 
million (2004: £1.2 million). The growth has come from clients won late in 2004 
including San Diego Zoo and the Beverly Hills Conference Centre, and in 2005 
Ghirdardelli chocolates. 
 
Before Group recharges (£101k) and one off restructuring costs incurred 
following management changes (£98k), the region made an operating profit of £50k 
(2004: £38k). 
 
Europe 
 
M&C Saatchi GAD, our French office opened their doors on the 1st September. The 
new management team of Gilles Masson, Antoine Barthuel and Daniel Fohr who have 
joined from Leo Burnett in Paris is in place and we are optimistic of achieving 
some early new business wins. As already mentioned discussions continue with 
partners in both Germany and Spain. 
 
 
Outlook 
 
The first half has been encouraging with steady organic growth driven by a 
healthy new business performance and continued international expansion. The 
outlook for the full year is positive and in line with our expectations. 
However, the outcome of the review of the BA account could have a major 
influence on performance in the second half and beyond. The outcome of the 
review is due to be announced in mid October. 
 
 
 
 
 
M&C SAATCHI PLC 
CONSOLIDATED PROFIT AND LOSS ACCOUNT OF THE GROUP 
SIX MONTHS ENDED 30 JUNE 2005 
 
                         UNAUDITED     UNAUDITED      UNAUDITED       AUDITED 
                                       PRO FORMA 
                        Six months    Six months     Six months          Year 
                             ended         ended          ended         ended 
                      30 June 2005  30 June 2004   30 June 2004   31 December 
                                                                         2004 
               Note          £'000         £'000          £'000         £'000 
 
Turnover          2        128,172       126,546         54,056       215,184 
 
Cost of sales              (96,290)      (96,779)       (27,089)     (155,807) 
                           --------      --------       --------      -------- 
 
Gross profit      2         31,882        29,767         26,967        59,377 
 
Administrative 
expenses 
- ordinary                 (28,263)      (26,100)       (24,063)      (52,907) 
- exceptional                    -             -              -        (2,795) 
- options                      (56)            -              -             - 
- amortisation of goodwill    (821)         (827)             -          (777) 
                            --------     --------       --------      -------- 
Operating profit  2          2,742         2,840          2,904         2,898 
                            --------     --------       --------      -------- 
 
Share of operating (loss) 
/ profit of associates        (143)            -            352           352 
 
Interest receivable            657           356            225           800 
Interest payable               (10)          (24)           (24)          (30) 
                            --------     --------       --------      -------- 
Profit on ordinary 
activities 
before taxation   2          3,246         3,172          3,457         4,020 
 
Taxation on profits from 
ordinary activities         (1,373)       (1,323)        (1,150)       (2,033) 
                            --------     --------       --------      -------- 
Profit on ordinary 
activities 
after taxation               1,873         1,849          2,307         1,987 
 
 
Minority interests            (326)         (238)          (420)         (531) 
                            --------     --------       --------      -------- 
Profit for the 
financial period             1,547         1,611          1,887         1,456 
 
Dividends                        -             -              -        (2,942) 
                            --------     --------       --------      -------- 
 
Retained profit 
/ (loss) for the period      1,547         1,611          1,887        (1,486) 
                            ========     ========       ========      ======== 
 
Earnings per 
share             3 
- Basic                       2.85p        2.97p          5.81p         3.42p 
- Diluted                     2.83p        2.95p          5.81p         3.41p 
 
All amounts relate to continuing activities 
The accompanying notes form part of the unaudited financial statements 
 
 
M&C SAATCHI PLC 
CONSOLIDATED PROFIT AND LOSS ACCOUNT OF THE GROUP 
SIX MONTHS ENDED 30 JUNE 2005 
 
STATEMENT OF RECOGNISED GAINS AND LOSSES 
                                UNAUDITED      UNAUDITED       AUDITED 
                               Six months     Six months          Year 
                                    Ended          ended         ended 
                             30 June 2005   30 June 2004   31 December 
                                                                  2004 
                                    £'000          £'000         £'000 
 
Profit for the financial year 
- Group                             1,690          1,572         1,140 
- Associates                         (143)           315           316 
                                   --------       --------      -------- 
 
                                    1,547          1,887         1,456 
 
Exchange adjustments on 
foreign                              (158)            43           260 
currency net investments 
                                   --------       --------      -------- 
Total recognised gains and 
losses                              1,389          1,930         1,716 
for the financial period           ========       ========      ======== 
 
 
CONSOLIDATED RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS 
 
                                  UNAUDITED    UNAUDITED       AUDITED 
                                 Six months   Six months          Year 
                                      ended        ended         ended 
                               30 June 2005 30 June 2004   31 December 
                                                                  2004 
                                      £'000        £'000         £'000 
 
Profit for the financial year 
- Group                               1,690        1,572         1,140 
- Associates                           (143)         315           316 
Dividend                                  -            -        (2,942) 
                                    --------     --------      -------- 
                                      1,547        1,887        (1,486) 
Exchange                               (158)          43           260 
differences 
Issue of shares                           -            -        27,155 
Share issue cost                          -            -          (835) 
Issue of options                         28            -           514 
 
Net addition/ 
(reduction) to                        1,417        1,930        25,608 
shareholders'funds 
 
Opening              
shareholders'funds                   29,581        3,973         3,973 
                                    --------     --------      -------- 
 
Closing                              30,998        5,903        29,581 
shareholders'funds                  ========     ========      ======== 
 
All amounts relate to continuing activities 
The accompanying notes form part of the unaudited financial statements 
 
 
 
M&C SAATCHI PLC 
BALANCE SHEET 
AT 30 JUNE 2005 
 
                                UNAUDITED      UNAUDITED       AUDITED 
                             30 June 2005   30 June 2004   31 December 
                                                                  2004 
                                    £'000          £'000         £'000 
Fixed assets 
Intangible assets                  15,119              -        16,158 
Tangible assets                     3,048          3,301         3,047 
Investments                            15          1,271            15 
                                   --------       --------      -------- 
                                   18,182          4,572        19,220 
 
Current assets 
Work in progress                    1,890          1,056         3,368 
Debtors - within one year          26,434         17,927        46,374 
Debtors - greater than one            817            212           731 
year 
Cash in hand and bank              25,314          7,115        17,323 
                                   --------       --------      -------- 
                                   54,455         26,310        67,796 
 
Creditors: amounts falling 
due                               (39,967)       (23,170)      (55,980) 
within one year 
 
Net current assets                 14,488          3,140        11,816 
 
Total assets less current 
liabilities                        32,670          7,712        31,036 
 
Creditors: amounts falling 
due                                  (758)          (831)         (774) 
after more than one year 
Provisions for liabilities 
and                                  (241)           (99)         (218) 
charges 
                                   --------       --------      -------- 
Net assets                         31,671          6,782        30,044 
                                   ========       ========      ======== 
 
Capital & reserves 
Share capital                         542             12           542 
Share premium                       9,618              -         9,618 
Merger reserve                     15,361              -        15,959 
Share option reserve                  542              -           514 
Profit & loss account               4,935          5,891         2,948 
                                   --------       --------      -------- 
Equity shareholders' funds         30,998          5,903        29,581 
 
Equity minority interests             673            879           463 
                                   --------       --------      -------- 
                                   31,671          6,782        30,044 
                                   ========       ========      ======== 
 
All amounts relate to continuing activities 
The accompanying notes form part of the unaudited financial statements 
 
 
 
 
 
M&C SAATCHI PLC 
CONSOLIDATED CASH FLOW STATEMENT 
SIX MONTHS ENDED 30 JUNE 2005 
                                UNAUDITED      UNAUDITED       AUDITED 
                               Six months     Six months          Year 
                                    ended          ended         ended 
                             30 June 2005   30 June 2004   31 December 
                                                                  2004 
                                    £'000          £'000         £'000 
 
Operating profit                    2,742          2,904         2,898 
Amortisation on intangible 
fixed assets                          821              -           777 
Non cash flow expenses 
associated                              -              -           460 
with reorganisation 
Depreciation                          558            584         1,167 
Loss / (Profit) on sale of 
tangible fixed assets                  57             14           (34) 
Decrease in work in progress        1,575            189        (2,062) 
Decrease / (Increase) in debtors   20,212         (1,735)      (16,233) 
Increase / (decrease) increditors (16,383)         2,506        17,902 
Exchange differences                 (105)            85            78 
                                   --------       --------      -------- 
 
Cash inflow / (outflow) from 
operating activities                9,477          4,547         4,953 
 
Dividend received from                  -              -           728 
associates 
 
Returns on investment and servicing of finance 
Interest received                     657            113           687 
Interest paid                          (2)            (9)           (3) 
Interest element of finance 
lease rental payments                  (8)           (15)          (27) 
Minority interest dividend 
paid                                 (232)          (938)       (1,296) 
 
Taxation                             (926)          (900)       (1,800) 
 
Capital expenditure and financial investment 
Purchase of tangible fixed assets    (591)          (569)         (922) 
Sale of tangible fixed assets          44             98           417 
Sale of part share of 
subsidiary undertakings                 -              -           527 
 
Acquisitions & disposals 
Investment in subsidiary                -              -          (382) 
Cash acquired with 
subsidiary undertaking                  -              -         2,243 
 
Equity dividends paid                (629)             -        (2,313) 
                                   --------       --------      -------- 
Net cash inflow / (outflow) 
before financing                     7,790          2,327         2,812 
 
Financing 
Share placement                         -              -        10,537 
Share placement costs                   -              -          (835) 
Shares issued to minorities           116              -           107 
Repayment of bank loans                 -            (20)          (21) 
Capital elements of finance 
lease rental payments                 (57)          (144)         (225) 
                                   --------       --------      -------- 
Increase /(Decrease) in cash 
in the perio                        7,849          2,163        12,375 
                                   ========       ========      ======== 
 
All amounts relate to continuing activities 
The accompanying notes form part of the unaudited financial statements 
 
 
 
M&C SAATCHI PLC 
CONSOLIDATED CASH FLOW STATEMENT (continued) 
SIX MONTHS ENDED 30 JUNE 2005 
 
                        UNAUDITED            UNAUDITED         AUDITED 
                       Six months           Six months            Year 
                            ended                ended           ended 
                     30 June 2005         30 June 2004     31 December 
                                                                  2004 
                            £'000                £'000           £'000 
Reconciliation of net cash flow to movement in net debt 
 
Increase / 
(decrease) in 
cash in the year            7,849                2,163          12,375 
Cash outflow 
from decrease in 
lease finance                  57                  144             225 
Inception of 
finance leases                (15)                 (45)            (31) 
Exchange differences          132                  (63)            (87) 
Cash out flow 
from repayment 
of bank loan                    -                   20              21 
 
                           --------             --------        -------- 
Movement in net 
funds in the 
year                        8,023                2,219          12,503 
 
Net funds at 
start of year              17,079                4,576           4,576 
                           --------             --------        -------- 
Net funds at end 
of year                    25,102                6,795          17,079 
                           ========             ========        ======== 
 
                   Analysis of changes in net funds 
        Balance at 1   Cash     Finance        Exchange   Balance at 30 
        January 2005   inflow     lease       Movements       June 2005 
             £'000      £'000       £'000         £'000           £'000 
 
Cash at 
bank        17,323      7,849           -           143          25,315 
and in 
hand 
 
Debt             -          -           -             -               - 
due 
within 
one 
year 
 
Finance       (244)        57         (15)          (11)           (213) 
leases 
           --------     ------      ------      --------      ---------- 
Total       17,079      7,906         (15)          132          25,102 
           ========     ======      ======      ========      ========== 
 
 
All amounts relate to continuing activities 
The accompanying notes form part of the unaudited financial statements 
 
 
M&C SAATCHI PLC 
NOTES TO THE FINANCIAL STATEMENTS 
SIX MONTHS ENDED 30 JUNE 2005 
 
 1. -Accounting policies 
 
    The financial information included in this report does not constitute 
    statutory accounts as defined in section 240 of the Companies Act 1985. The 
    financial information for the year ended 31 December 2004 has been extracted 
    from the statutory accounts for that period, a copy of which has been 
    delivered to the Registrar of Companies. The interim accounts for the six 
    months to 30 June 2005 are unaudited. 
 
   -FRS 20 (Share based payment) has been adopted for the first time for the 
    period under review. 
   -In accordance with FRS 21 (Events after balance sheet date), the interim 
    dividend is not included in these financial statements. 
 
    With these exceptions the interim accounts for the six months ended 30 June 
    2005 have been prepared on the basis of the accounting policies set out in 
    the statutory accounts for the year ended 31 December 2004. 
 
 2. -Profit and net assets 
                   UNAUDITED        UNAUDITED        UNAUDITED         AUDITED 
                                    PRO FORMA 
                  Six months       Six months       Six months            Year 
                       ended            ended            ended           ended 
                30 June 2005     30 June 2004     30 June 2004     31 December 
                                                                          2004 
                       £'000            £'000            £'000           £'000 
    Turnover 
    Turnover arises from the principal activity of the Group. 
    An analysis by geographical market. 
    By origin 
    UK               101,840          104,351           31,861         168,809 
    Asia and 
    Australia         23,352           20,019           20,019          41,736 
    America            2,980            2,176            2,176           4,639 
    Europe                 -                -                -               - 
                    --------         --------         --------        -------- 
 
                     128,172          126,546           54,056         215,184 
                    ========         ========         ========        ======== 
 
M&C SAATCHI PLC 
NOTES TO THE FINANCIAL STATEMENTS 
SIX MONTHS ENDED 30 JUNE 2005 
 
                   UNAUDITED        UNAUDITED        UNAUDITED         AUDITED 
                                    PRO FORMA 
                  Six months       Six months       Six months            Year 
                       ended            ended            ended           ended 
                30 June 2005     30 June 2004     30 June 2004     31 December 
                                                                          2004 
                       £'000            £'000            £'000           £'000 
 
    Gross profit (Revenue) 
    An analysis by geographical market. 
    By origin 
    UK                19,026           17,635           14,835          33,717 
    Asia and 
    Australia         11,458           10,953           10,953          23,126 
    America            1,398            1,179            1,179           2,534 
    Europe                 -                -                -               - 
                     --------         --------         --------        -------- 
 
                      31,882           29,767           26,967          59,377 
                     ========         ========         ========        ======== 
 
    Operating profit / (loss) before amortisation of goodwill 
    An analysis by geographical market. 
    By origin 
    UK (1)             3,352            2,936            2,173             789 
    Asia and 
    Australia            882              693              693           2,686 
    America             (149)              38               38             200 
    Europe (2)          (522)               -                -               - 
                     --------         --------         --------        -------- 
 
                       3,563            3,667            2,904           3,675 
                     ========         ========         ========        ======== 
 
    Operating profit / (loss) 
    An analysis by geographical market. 
    By origin 
    UK                 2,531            2,109            2,173              12 
    Asia and 
    Australia            882              693              693           2,686 
    America             (149)              38               38             200 
    Europe (2)          (522)               -                -               - 
                     --------         --------         --------        -------- 
 
                       2,742            2,840            2,904           2,898 
                     ========         ========         ========        ======== 
 
    Profit before taxation (before amortisation of goodwill) 
    An analysis by geographical market. 
    By origin 
    UK (1)             3,816            3,262            2,720           1,862 
    Asia and 
    Australia            921              700              700           2,736 
    America             (148)              37               37             199 
    Europe  (2)         (522)               -                -               - 
                     --------         --------         --------        -------- 
 
                       4,067            3,999            3,457           4,797 
                     ========         ========         ========        ======== 
 
    Profit before taxation 
    An analysis by geographical market. 
    By origin 
    UK                 2,995            2,435            2,720           1,085 
    Asia and 
    Australia            921              700              700           2,736 
    America             (148)              37               37             199 
    Europe (2)          (522)               -                -               - 
                     --------         --------         --------        -------- 
 
                       3,246            3,172            3,457           4,020 
                     ========         ========         ========        ======== 
 
    (1) Amortisation of goodwill of £821k was charged in the UK segment in the 
    six month period to 30 June 2005, £777k in second half of 2004. There was an 
    extrapolated amortisation of goodwill of £827k charged to the UK segment in 
    the pro forma six month period to 30 June 2004. 
    (2) £522k of European investigative costs have been incurred in six month 
    period to 30 June 2005. £70k of European costs were incurred and reported in 
    the UK segment, in the second half of 2004. 
 
 
M&C SAATCHI PLC 
NOTES TO THE FINANCIAL STATEMENTS 
SIX MONTHS ENDED 30 JUNE 2005 
 
 
                                UNAUDITED            UNAUDITED         AUDITED 
                               Six months           Six months            Year 
                                    Ended                ended           ended 
                             30 June 2005         30 June 2004     31 December 
                                                                          2004 
                                    £'000                £'000           £'000 
 
            Net assets 
            An analysis by geographical market. 
            By origin 
            UK                     31,466                7,583          29,945 
            Asia and                3,143                1,024           2,466 
            Australia 
            America                (2,514)              (1,825)         (2,367) 
            Europe                   (424)                   -               - 
                                  --------             --------        -------- 
 
                                   31,671                6,782          30,044 
                                  ========             ========        ======== 
 3. -Earnings per share 
                   UNAUDITED        UNAUDITED        UNAUDITED         AUDITED 
                                    PRO FORMA  
                  Six months       Six months       Six months            Year 
                       ended            ended            ended           ended 
                30 June 2005     30 June 2004     30 June 2004     31 December 
                                                                          2004 
 
    Earning per share before amortisation of goodwill 
    - Basic             4.37p            4.50p            5.81p           4.12p 
    - Diluted           4.33p            4.46p            5.81p           4.09p 
 
    Earnings per share 
    - Basic             2.85p            2.97p            5.81p           3.42p 
    - Diluted           2.83p            2.95p            5.81p           3.42p 
     
 
 4. -Flotation 
 
    M&C Saatchi plc was admitted to AIM on 14 July 2004. Immediately prior to 
    the admission the Worldwide Group undertook an internal reorganisation. 
    Reorganisation included the acquisition of M&C Saatchi Worldwide Ltd by M&C 
    Saatchi plc and the acquisition of a further 29% of Walker Media Holdings 
    share capital resulting in a 75% holding. At the same time a number of key 
    executives who held shares in their operating companies had their interest 
    acquired by M&C Saatchi plc. Full details were set out in the admission 
    document. 
 
 
 
 
                      This information is provided by RNS 
            The company news service from the London Stock Exchange 
 
END