Final Results 2011

Released : 20/03/2012 07:00

RNS Number : 6353Z

M&C Saatchi PLC

20 March 2012

M&C SAATCHI PLC

FINAL RESULTS

YEAR ENDED

31 DECEMBER 2011

20 MARCH 2012

M&C Saatchi PLC

Final Results for the year ended 31 December 2011

20 March 2012

Strong results, with continued revenue momentum and earnings growth

Highlights

The highlights are headline results, see note 1 for a definition.

Strategy working

·     Best year-on-year revenue growth since flotation in 2004

·     Group Revenues up 22% to 153.1m (2010: £125.1m); up 20% using constant currencies

·     Group reaping the benefits of expanding global network and the continued roll-out of high-growth diversified businesses

·     Headline profit before tax up 17% to £15.6m (2010: £13.3m)

·     Strong balance sheet and positive cashflow

·     Headline basic earnings per share up 14% at 14.30p (2010: 12.59p)

·     Final dividend of 3.50p per share (2010: 3.03p); total dividend up 15.4% to 4.50p (2010: 3.90p)

·     Global Network performed well across all geographies:

o  UK: like-for-like revenues up 25%, with mobile performing particularly well

o  Europe: like-for-like revenues up 23%, in spite of challenging trading conditions

o  Asia and Australasia: like-for-like revenues up 6%

o  Africa's revenues up fivefold to £3m

o  Sao Paulo acquisition  driven up Americas' revenues 65%

·     Clear performed well following restructuring with like-for-like revenue up 11% and operating profit up 2%

·     Strong new business performance - particular success in with multinational clients

·     Start-ups in data and social media making good progress

Commenting on the results, David Kershaw, Chief Executive, said:

"M&C Saatchi has produced another strong performance and has made further excellent progress indelivering the best year-on-year growth in revenue since our flotation in 2004.

"We are reaping the benefits of our growing global network and the roll-out of our growth specialist businesses such as M&C Saatchi Sport & Entertainment and M&C Saatchi Mobile.

"2012 has started well. Despite uncertainty with the macro environment we are benefitting from new revenues from the significant wins last year, such as O_2. In addition, we have already had further new business success with Eithad, the Commonwealth Bank of Australia and Edgars in South Africa.

"Our successful strategy remains the same. We will continue to build scale through work with multi-national clients; we will invest in high-growth new businesses in mature markets; we will increase our presence in desirable markets; and we will roll out proven models across the network. This strategy is producing strong financial results and the Board is confident that it will continue to do so in 2012 and beyond."

For further information please call:

M&C Saatchi +44 (0)20-7543-4500

David Kershaw

Tulchan Communications +44 (0)20-7353-4200

Susanna Voyle

Lucy Legh

Numis Securities +44 (0)20-7260-1000

Richard Thomas, NOMAD

Charles Farquhar, Corporate Broking

Notes to Editors

Headline results

The term headline is not a defined term in IFRS. The items that are excluded from headline results is the amortisation or impairment of intangible assets (including goodwill) acquired in business combinations, changes to contingent and deferred consideration taken to the income statement; and fair value gains and losses on liabilities caused by our put and call option agreements

SUMMARY OF RESULTS

2011 was another good year for the Group with strong revenue momentum and earnings growth. Like-for-like revenues increased 20% and we maintained a double digit headline operating margin of 10%, in spite of the drag from new businesses. The headline profit before tax advanced 17% to £15.6m and headline net earnings rose 15%. Cash flows remain positive and our balance sheet continues to be strong.

UK

We experienced excellent like-for-like revenue growth in the UK of 25%, with our mobile business doing particularly well. We also won significant international and regional business and this has continued into 2012, with us winning the Etihad and Loewe global accounts. Our differentiated integrated offer is key to both these wins and the revenue growth from existing clients.

Media buying remains a highly competitive market and we lost the Barclays account in the second half in a procurement driven pitch. However, we believe Walker Media offers a unique combination of bespoke communications planning and buying value and this is being seen in a healthy new business pipeline. We retain a close watch on costs as well as margins which continue to be eroded by the pressure on media buying remuneration. This resulted in the headline operating margin dipping from 20.5% to 19.5% (excluding the impact of Group recharges). The UK headline operating profit improved an impressive 18% on 2010.

Europe

Despite the economic backdrop, we feel we are making excellent progress in Europe. Like-for-like revenues increased 23%. Headline operating profit was up 30%. Germany, Italy and Switzerland all performed well. In France, new business proved slow on the advertising front but we benefited from direct marketing, digital and PR contributions.

Africa

Both Cape Town and Johannesburg were profitable in their second year of trading. Revenues were up from £0.6m to £3m and key wins in the year were Heineken, Nedbank, Nestlé and Samsung. We believe our offices are well positioned to take advantage of a developing African market. The growth has continued into 2012 with the win of Edgars Department Stores and we are projecting a staff head count of over 100 by the end the year.

Asia and Australasia

2011 was a more testing year for Asia and Australasia. Having held several very large clients for many years, Australia experienced significant client churn but also delivered one of their best new business years, with CPA, Dick Smith, EFTPOS, Google, Lend Lease and Masters all coming on board. This enormous amount of new business activity inevitably suppressed margins. Australia has started 2012 favourably and recently picked up the Commonwealth Bank account, which will be a Group top ten account. Sydney is also diversifying and acquired a small PR company in January 2012.

Our other key challenge within the region has been China, where severe pricing pressure made for a difficult market. We closed our Guangzhou office and struggled in Hong Kong. Otherwise, there was another outstanding performance from Malaysia. New Zealand, Japan and India were all profitable, albeit relatively small. We have reopened our Singapore office in February 2012 with an experienced and promising team.

Like-for-like revenues rose 6% year-on-year whilst profits declined 35%, depressed by Australian and Chinese decreases, which left a headline operating margin of 4.7%, which compares with 2010's 8.2%.

Americas

In New York, we housed our Sport & Entertainment, Mobile and Clear operations under one roof in November. We have this year recruited a Chief Executive, Jeff Brooks, who joined in February and will expand our offer in the US. He will be hiring a chief creative officer and a head of planning to complete the management team, so there will be some investment this year.

Our Los Angeles office made a small profit. In São Paulo, the acquisition completed in March 2011 is now fully integrated and working well. Bradesco, a leading Brazilian bank has become a key Group client and new clients have  been won, including Minerva and Tetra Pak. Like-for-like revenues rose 65% year on year. The 2011 headline operating profit was £0.1m, which compares with a loss of £0.3m in 2010.

Clear

Clear had a slow start in Europe but following some restructuring performed well. Clear Asia and Australia are both growing rapidly, whilst Singapore was profitable in its first year of trading. Clear USA is flourishing and returned 93% year on year revenue growth. The San Francisco office opening is now scheduled for the middle of this year. New clients in Europe were Asics and Wrigley, whilst Asia added Bacardi, De Beers, Fonterra and Revlon and the USA, PepsiCo, GSK, Vans, Australia EFTPOS and Goodman Fielder.

Like-for-like revenue was up 11% on 2010, the headline operating margin slipped from 17.9% to 16.5% due to pricing pressure in Europe, leaving headline operating profit advancing 2% year on year.

Outlook

2012 has started well. Despite uncertainty with the macro environment we are benefitting from new revenues from the significant wins last year, such as O₂. In addition, we have already had further new business success with Eithad, the Commonwealth Bank of Australia and Edgars in South Africa.

Our successful strategy remains the same. We will continue to build scale through work with multi-national clients; we will invest in high-growth new businesses in mature markets; we will increase our presence in desirable markets; and we will roll out proven models across the network. This strategy is producing strong financial results and the Board is confident that it will continue to do so in 2012 and beyond.

M&C SAATCHI PLC

AUDITED CONSOLIDATED INCOME STATEMENT

M&C SAATCHI PLC

AUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

M&C SAATCHI PLC

AUDITED CONSOLIDATED BALANCE SHEET

M&C SAATCHI PLC

AUDITED CONSOLIDATED BALANCE SHEET (CONTINUED)

M&C SAATCHI PLC

AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

The reclassification of share to cash based options is due to the Group paying cash equal to the employment tax payable and issuing a reduced number of shares on exercise of its employee share options.
The reclassification of cash to share based options is due to a reclassification of share based options which had previously been held as a liability.

M&C SAATCHI PLC

AUDITED CONSOLIDATED CASH FLOW STATEMENT

M&C SAATCHI PLC

NOTES TO THE PRELIMINARY STATEMENTS

YEAR ENDED 31 DECEMBER 2011

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.

These 2011 audited preliminary financial statements were approved for issue on 19 March 2012.

The financial information set out below does not constitute the company's statutory accounts for 2010 or 2011. Statutory accounts for the years ended 31 December 2010 and 31 December 2011 have been reported on by the Independent Auditors. The Independent Auditors' Reports on the Annual Report and Financial Statements for 2010 and 2011 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 December 2010 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2011 will be delivered to the Registrar in due course.

Headline results

The directors believe that the headline results and headline earnings per share provide additional useful information on the underlying performance of the business. In addition, the headline results are used for internal performance management, the calculation of rewards in the Group's Long Term Incentive Plan (LTIP) scheme and minority shareholder put option liabilities. The term headline is not a defined term in IFRS.

Our segmental reporting reflects our headline results in accordance with IFRS8.

The items that are excluded from headline results are the amortisation or impairment of intangible assets (including goodwill) acquired in business combinations, changes to contingent and deferred consideration taken to the income statement, and fair value gains and losses on liabilities caused by our put and call option agreements.

2.   ACCOUNTING POLICIES

The financial information set out in these final results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in these final results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 December 2011. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2010.

3.   EARNINGS PER SHARE AND RECONCILIATION BETWEEN HEADLINE AND STATUTORY RESULTS

4.   SEGMENTAL INFORMATION

This segmental information is reconciled to the statutory results in Note 3.

SEGMENTAL INCOME STATEMENT TRANSLATED AT 2010 EXCHANGE RATES

It is normal practice in our industry to provide like for like results. In the year we had not acquired any significant new businesses therefore the only difference in our like for like results is the impact from movements in exchange rates. Had our 2011 results been translated at 2010 exchange rate then our results would have been:

MARKET RISK

5.   OPERATING COSTS
 

6.   SHARE OF ASSOCIATES
 

7.   FINANCE INCOME
 

8.   FINANCE COSTS

9.   TAXATION
 

10. DIVIDENDS

Proposed final dividend of 3.50p totalling £2,199k. Subject to shareholders approval on 14 June 2012, the dividend is payable on 6 July 2012 to shareholders on the register 8 June 2012.

The dividend relates to the following years:

Headline dividend cover is calculated by taking headline profit after tax attributable to equity shareholders and dividing it by the total dividends that relate to that year's profits. The Group seeks to maintain a long term headline dividend cover of between 3 and 4.

11. CASH GENERATED FROM OPERATIONS