REG-M&C Saatchi PLC Interim Results 2008 - Part 1
Released : 25/09/2008 06:01
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RNS Number : 2607E
M&C Saatchi PLC
25 September 2008
M&C SAATCHI PLC
INTERIM RESULTS
SIX MONTHS TO
30 JUNE 2008
25 September 2008
M&C Saatchi plc 2008 Interim Results
Headline Results
* Revenue up by 38.8% to £51.8m (2007: £37.3m)
* Like for like revenue growth 18.7%
* Operating profit up by 174% to £7.7m (2007: £2.8m)
* Operating margin up to 14.9% (2007: 7.6%)
* Profit before tax up 107% to £8.0m (2007: £3.9m)
* Basic earnings per share up 147% to 8.62p (2007: 3.50p)
* Interim dividend held at 0.87p
The headline results referred to above are stated before accounting for the
following items:
* Amortisation of acquired intangibles and goodwill write offs
* Fair value adjustment to minority put option liabilities
* Notional interest on deferred consideration
A reconciliation of the difference between the headline results and the
statutory result is shown in note 4 to the interim statements.
Like for like revenue is stated after excluding the impact of exchange,
acquisitions and discontinued operations.
Commenting on the results, David Kershaw the Chief Executive said:
"We are pleased to report that M&C Saatchi saw a strong start to 2008 as we saw
a good performance from both our organic and acquired businesses. There is no
doubt the economic environment is increasingly challenging and we have felt the
effects of this in the US and our Spanish business. Despite this, our global
network remains strong and we have continued to win new business across our
divisions. The outlook for the full year remains in line with management
expectations.
At this time the uncertain economic environment leads us to be cautious about
medium term visibility. However our balance sheet remains strong and we will
continue to invest in markets which we believe will position us well for growth
in the long term."
For further information please call:
M&C Saatchi plc 020 7543 4500
David Kershaw, Chief Executive
Tulchan Communications Ltd 020 7353 4200
Lizzie Morgan/Susanna Voyle
Numis Securities Ltd 020 7260 1000
Lee Aston
Summary of results
We are pleased to report a strong set of results for the first six months of
2008 which saw revenue growth of 39% to £51.8m (2007: £37.3m). Like for like
revenue growth which excludes the impact of exchange rate movements,
acquisitions and discontinued operations increased by 18.7% to £43.1m. Clear
Ideas, acquired in July 2007, contributed a further £6.1m. Revenue from
operations closed in Singapore and Thailand during the period was £0.6m, and the
balance of £2.0m resulted from currency gains.
Headline operating profit has increased by 174% to £7.7m (2007: £2.8m). Organic
growth contributed £3.0m of the increase (an increase of 107%), Clear delivered
a further £1.7m and the balance £0.2m came from exchange. The operating margin
saw a substantial increase from 7.6% in 2007 to 14.9% this period. The increase
comes from the improved performance of the Asia Pacific region, the continued
growth of the Paris office and the contribution from Clear.
The Group's share of profit after tax from its associates decreased from a
contribution of £71k in 2007 to a loss of £100k in 2008. This is due in part to
a change in the accounting treatment for Play, our UK based digital operation
and in part to the disappointing performance of our Spanish associate,
Zapping/M&C Saatchi.
The headline net interest earned has decreased to £0.3m (2007: £1.0m). The
decrease is due to the interest which is now being paid on the Group debt which
stood at £7.5m at the end of the period (2007: nil).
The profit after tax attributable to the Group's minorities reduced from £0.8m
in 2007 to £0.3m this year. This is principally due to the acquisition of the
minority in Walker Media. 19.5% of the remaining 25% minority in Walker Media
was acquired in July 2007 and a further 5.5% in April 2008 taking the Group's
holding to 100%.
In May M&C Saatchi acquired the majority of digital advertising agency Play and
from this point its results are fully consolidated (January to April 2008 profit
£0.0m).
The headline profit attributable to the equity shareholders of the Group
increased by 172% to £5.1m.
Headline basic EPS has grown by 147% to 8.62p (2007: 3.50p). The group issued
6.7m new shares to satisfy the acquisitions of Clear and Walker Media. The
number of shares in issue at the end of the period was 60.3m and the weighted
average for the period was 59.1m (2007: 53.6m) a dilution of 10.3%.
As at the 30th June we estimated that a further 1.4m shares could be issued to
satisfy obligations under the Group's long term incentive plans and a further
3.0m shares may be issued as a result of earn out commitments. The diluted EPS
for the period is therefore 8.02 p (2007: 3.45p)
Review of operations
Overview
During the fist six months of 2008 we have seen strong performances from the
majority of our operating divisions which have seen robust revenue growth and
improvements in operating margins. Clear, the brand consulting business acquired
in July 2007, has continued its good progress making a significant contribution
to group earnings for the period. As anticipated, trading remained difficult in
the USA since the second half of 2007 as a result of increasingly difficult
market conditions. As reported the performance of our Spanish associate
Zapping/M&C Saatchi has been disappointing , largely as a result of the well
documented decline in Spain's economic conditions and there are no obvious signs
of immediate improvement.
In March we reported that our loss making operations in Singapore and Thailand
were under review. As a result we took the decision to close these offices, the
combined cost of the closure process has been £0.6m in this period.
Review by Region
UK
The UK businesses all enjoyed an excellent first six months to the year. The
like for like (excluding acquisitions) revenues and operating profit have
increased by 14.4% to £25.2m and by 45.0% to £4.5m respectively. The operating
margin has improved to 19.7% (2007: 14.0%). Brand consulting business Clear was
acquired in July 2007 and is making a contribution to the period for the first
time. Clear has continued the progress of the previous year with revenues of
£4.7m and operating profits of £1.5m in the UK. Clear also has offices in
Amsterdam and New York. The combined revenues and operating profit from Clear
for the period were £6.1m and £1.7m respectively.
There has been good new business momentum across the UK businesses, the most
important win being the governments anti obesity campaign. Other important wins
have been East Midland trains and Hyundai.
Europe
We continue to see good growth in Europe. The like for like revenue has
increased to £4.1m (2007: £2.1m) and operating profit has increased to £0.6m
(2007: £0.0m). The operating margin has grown significantly to 12.9% (2007:
2.3%). Clear's Amsterdam office had a good first half with revenues of £0.8m, an
operating profit of £0.1m and a margin of 15.5%.
The growth is being driven by the continuing success of the Paris office. Key to
this period's growth was the excellent new business wins of Pages Jaunes and
Jameson (Pernod Ricard) in the second half of 2007. This year the business has
been moving forward by consolidating those account wins and extending the
business into corporate PR and building their digital capabilities.
The Berlin office has also had a good first half benefiting from business won
last year. Important wins were additional brands from Ferrero and the Green
Party of Germany.
As highlighted in the overview, the performance of Zapping/M&C Saatchi has been
disappointing in line with the Spanish economy. The net contribution to profit
after tax has been a negative £0.1m, below management expectations. We had
previously reported that we would increase our investment in Zapping from the
current 24% to 51% from July this year; however as a result of the subdued
market we have mutually agreed to put those plans on hold for the near future.
Asia and Australia
Revenue grew 30.8% to £14.8m (2007: £11.3m) reflecting both strong underlying
organic growth as well as the impact of the stronger Australian and Asian
currencies which have strengthened approx 12% between the periods. The like for
like revenue (having stripped out the effect of exchange and the closure of the
Thailand and Singapore office) increased by 20.6% to £14.2m. The notable driver
of the revenue growth has been the continued recovery of the Australian business
following the loss of the IAG account at the end of 2006. Significant new
business was won during the second half of 2007 and the business has continued
to be very active on current clients through the first six month of 2008. While
anticipated, it was a disappointment to lose the Australian Tourism business
after the 3 year statutory review and a change of government. This loss will
impact the fourth quarter.
The rest of the region contributed an overall revenue increase of 20% with our
office in Malaysia leading the way.
The operating profit for the region improved from the loss of £0.4m reported in
2007 to a profit of £0.9m at a margin of 6.2% (2007: negative). As already
reported our offices in Thailand and Singapore have now been closed resulting in
a cost of £0.6m. Removing the impact of this loss the operating margin was
10.3%.
America
Revenue increased by £0.2m to £2.1m (2007: 1.9m) and the operating profit
increased £0.2m to £0.3m (2007: £0.1m). On a like for like basis, after removing
the impact of closing the New York office in April 2007 and the contribution
from Clear the office in LA reported a revenue decline of 7% to £1.5m and an
operating profit of decline of 46% to £0.2m.
As reported in March the LA office started to feel the effects of the economic
slowdown in the fourth quarter of 2007 as major clients began to reduce activity
and cut their spending. Conditions continue to be challenging and to date we
have seen no significant signs of improvement.
Outlook
These results show that the Group is in good shape. We have enjoyed a period of
strong organic growth and our investments in new markets and new businesses have
added to the potential and the diversity of the Group.
The economic environment is increasingly challenging and we have felt the
effects of this in the US and our Spanish business. Despite this, our global
network remains strong and we have continued to win new business across our
divisions. The outlook for the full year remains in line with management
expectations. At this time the uncertain economic environment leads us to be
cautious about medium term visibility. However our balance sheet remains strong
and we will continue to invest in markets which we believe will position us well
for growth in the long term."
This report comments on the unaudited consolidated income statement of M&C
Saatchi plc (the "Group") for the six months to 30 June 2008 compared with
unaudited consolidated income statement for the same period in 2007. The report
also comments on the numbers before the impact of fair value adjustments to
minority shareholder put option liabilities and amortisation of intangible
assets (headline numbers).
M&C SAATCHI PLC
UNAUDITED CONSOLIDATED INCOME STATEMENT
AT 30 JUNE 2008
Six months Six months Year
ended ended ended
30 June 2008 30 June 2007 31 December
2007
Note £'000 £'000 £'000
Billings 222,753 182,791 412,746
Revenue 5 51,769 37,309 87,620
Operating costs (44,514) (34,487) (78,006)
Operating profit 5 7,255 2,822 9,614
Share of results of associates (114) 54 281
Finance income 744 964 1,809
Finance costs 6 (338) (508) (3,748)
Profit before taxation 5 7,547 3,332 7,956
Taxation on profits 7 (2,470) (1,215) (3,530)
Profit for the financial period 5,077 2,117 4,426
Attributable to:
Equity shareholders of the Group 4 4,763 1,356 3,258
Minority interests 314 761 1,168
5,077 2,117 4,426
Earnings per share 4
Basic 8.06p 2.53p 5.80p
Diluted 7.50p 2.50p 5.59p
Headline results 4
Operating profit 7,721 2,822 10,222
Profit before tax 7,962 3,850 11,926
Headline profit attributable to equity shareholders 5,096 1,874 7,046
HEADLINE Earnings per share 4
Basic 8.62p 3.50p 12.55p
Diluted 8.02p 3.45p 12.09p
M&C SAATCHI PLC
UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
AT 30 JUNE 2008
Six months Six months Year
ended ended ended
30 June 2008 30 June 2007 31 December
2007
£'000 £'000 £'000
Profit forperiod 5,077 2,117 4,426
Currency translation differences 463 111 689
Total recognised income and expenses for the period 5,540 2,228 5,115
Attributable to:
Equity shareholders of the Company 5,222 761 3,947
Minority interests 318 1,467 1,168
5,540 2,228 5,115
M&C SAATCHI PLC
UNAUDITED CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2008
30 June 2008 30 June 2007 31 December
2007
Note £'000 £'000 £'000
NON CURRENT ASSETS
Intangible assets 63,568 15,486 61,409
Investments in associates 4,098 1,646 4,086
Plant and equipment 3,943 3,541 3,954
Deferred tax assets 2,078 1,582 2,034
Other non current assets 544 518 565
74,231 22,773 72,048
CURRENT ASSETS
Trade and other receivables 64,088 40,969 74,872
Current tax assets 206 421 519
Cash and cash equivalents 1,980 25,820 16,895
66,274 67,210 92,286
CURRENT LIABILITIES
Trade and other payables (70,360) (55,743) (86,850)
Current tax liabilities (1,904) (537) (1,610)
Other financial liabilities (13) (14) (18)
Deferred and contingent consideration 10 (112) - (9,811)
Minority shareholder put options liabilities (1,983) (16,828) (6,854)
(74,372) (73,122) (105,143)
Net current liabilities (8,098) (5,912) (12,857)
Total assets less current liabilities 66,133 16,861 59,191
Non current liabilities
Deferred tax liabilities (1,526) (150) (1,604)
Other financial liabilities (7,468) (22) (8,531)
Deferred and contingent consideration 10 (4,917) - (8,325)
Minority shareholder put options liabilities (3,268) (8,196) (3,691)
Other non current liabilities (1,344) (972) (1,142)
(18,523) (9,340) (23,293)
Net assets 47,610 7,521 35,898
M&C SAATCHI PLC
UNAUDITED CONSOLIDATED BALANCE SHEET (CONTINUED)
AT 30 JUNE 2008
30 June 2008 30 June 2007 31 December
2007
Note £'000 £'000 £'000
Equity 11
Equity attributable to shareholders of the parent
Share capital 610 543 597
Share premium 13,694 9,794 12,758
Merger reserve 20,749 14,756 20,285
Treasury reserve (792) (792) (792)
Minority interest put option reserve (4,436) (15,628) (6,876)
Foreign exchange reserve 777 (260) 318
Retained earnings 16,552 (1,015) 9,053
Total shareholders' equity 47,154 7,398 35,343
Minority interestS 456 123 555
TOTAL EQUITY 47,610 7,521 35,898
M&C SAATCHI PLC
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHS ENDED 30 JUNE 2008
Six monthsended Six monthsended Year
30 June 2008 30 June 2007 ended
31 December
2007
Notes £'000 £'000 £'000
Cash generated from operations 12 2,960 589 8,991
Tax paid (2,159) (2,245) (4,092)
Net cashflow from operating activities 801 (1,656) 4,899
Acquisitions 13 (14,122) (1,542) (24,602)
Proceeds from sale of plant and equipment 4 20 23
Purchase of plant and equipment (627) (738) (1,401)
Purchase of capitalised software (41) - (107)
Interest earned from cash held by trading entities 737 707 1,553
Interest received on centrally held cash 8 257 256
Dividends received from associates 56 - -
Net cash consumed byinvesting activities (13,985) (1,296) (24,278)
Dividends paid - (1,300) (1,813)
Minority dividend paid (496) (1,209) (1,404)
Issue of own shares - 3 -
Repayment of finance leases (10) (22) (39)
Inception of bank loans 10,722 - 13,000
Repayment of bank loans (11,780) (6) (4,514)
Interest paid (403) (5) (437)
Interest on finance leases - (3) (2)
Net cash consumed from financing activities (1,967) (2,542) 4,791
Net decrease in cash and cash equivalents (15,151) (5,494) (14,588)
Cash and cash equivalents at the beginning of the period 16,895 31,284 31,284
Effect of exchange rate changes 236 30 199
Cash and cash equivalents at the end of the period 1,980 25,820 16,895
M&C SAATCHI PLC
NOTES TO THE INTERIM STATEMENTS
SIX MONTHS ENDED 30 JUNE 2008
1. GENERAL INFORMATION
The Company is a public limited company incorporated and domiciled in the UK.
The address of its registered office is 36 Golden Square, London W1F 9EE.
The Company has its primary listing on the AiM market of the London Stock
Exchange.
This condensed consolidated half-yearly financial information was approved for
issue on 25 September 2008.
This interim report does not constitute the company's statutory accounts. The
information presented in relation to 31 December 2007 is extracted from the
statutory financial statements for the year then ended and which have been
delivered to the Registrar of Companies. The auditors report on the statutory
financial statements for the year ended 31 December 2007 was unqualified, did
not include references to any matters to which the auditors drew attention by
way of emphasis without qualifying their report(s) and did not contain
statements under S237(2) or (3) of the Companies Act 1985.
2. basis of preparation
This condensed consolidated half-yearly financial information for the half-year
ended 30 June 2008 has been prepared in accordance with the AiM Rules for
companies. The half-yearly condensed consolidated financial report should be
read in conjunction with the annual financial statements for the year ended 31
December 2007.
3. Accounting policies
The accounting policies adopted are consistent with those set out in financial
statements for the year ended 31 December 2007 and that are to apply for the
year ended 31 December 2008.
Taxes on income in the interim periods are accrued using the tax rate that would
be anticipated to be applicable expected to total annual earnings.
M&C SAATCHI PLC
NOTES TO THE INTERIM STATEMENTS
SIX MONTHS ENDED 30 JUNE 2008
4. Earnings per share and reconciliation between headline and statutory
results
Six months ended 30 June 2008 Reported results Amortisation of acquired intangibles & write off of Fair value adjustments to minority put option liabilities Notional interest on deferred consideration Headline results
goodwill
£000 £000 £000 £000 £000
Revenue 51,769 - - - 51,769
Operating profit 7,255 466 - - 7,721
Share of results of associates (114) 14 - - (100)
Net interest 406 - (234) 169 341
Profit before taxation 7,547 480 (234) 169 7,962
Taxation (2,470) (82) - - (2,552)
Profit AFTER taxation 5,077 398 (234) 169 5,410
Minority interests (314) - - - (314)
Profit attributable to equityholders of the Group
4,763 398 (234) 169 5,096
BASIC EARNINGS PER SHARE
Weighted average number of shares (thousands) 59,085 59,085
BASIC EPS 8.06p 8.62p
Diluted earnings per share
Weighted average number of shares (thousands) as above 59,085 59,085
Add
- Float options 411 411
- LTIP Options 995 995
- Contingent consideration 3,047 3,047
Total 63,538 63,538
DILUTED EARNINGS PER SHARE 7.50p 8.02p
M&C SAATCHI PLC
NOTES TO THE INTERIM STATEMENTS
SIX MONTHS ENDED 30 JUNE 2008
Six months ended 30 June 2007 Reported results Amortisation of acquired intangibles Fair value adjustments to minority put option liabilities Headline results
£000 £000 £000 £000
Revenue 37,309 - - 37,309
Operating profit 2,822 - - 2,822
Share of results of associates 54 17 - 71
Net interest 456 - 501 957
Profit before taxation 3,332 17 501 3,850
Taxation (1,215) - - (1,215)
Profit after taxation 2,117 17 501 2,635
Minority interests (761) - - (761)
Profit attributable to equity holders of the Group
1,356 17 501 1,874
BASIC EARNINGS PER SHARE
Weighted average number of shares (thousands) 53,577 53,577
BASIC EPS 2.53p 3.50p
Diluted earnings per share
Weighted average number of shares (thousands) as above 53,577 53,577
Add
- Sharesave options 257 257
- Float options 411 411
- LTIP options - -
More to follow