M&C Saatchi makes losses when technology companies cut back on advertising budgets
M&C Saatchi makes losses when technology companies cut back on advertising budgets
- The advertising agency posted a pre-tax loss of £5.1 million for the six months to June
- Saatchi’s half-year results will be the last with Moray MacLennan as CEO
- Diageo, Coca-Cola and Adidas are among the company’s prominent corporate clients
M&C Saatchi posted a first-half loss after a significant drop in spending by the ad group’s technology clients in Britain and the US.
The advertising agency posted a statutory pre-tax loss of £5.1 million for the six months ended June, compared with a profit of £305,000 in the same period last year.
Net sales fell 7 percent to £120.4 million as a weaker economic environment hit companies with greater exposure to the technology sector or whose customers had more control over their spending.
Results: M&C Saatchi made a statutory pre-tax loss of £5.1 million for the six months ended June, compared with a profit of £305,000 in the same period last year
This mainly had consequences for Saatchi’s media specialism, which saw turnover fall by almost a third despite winning new contracts with Sega, Amazon and ticket exchange marketplace TickPick, among others.
At the same time, net sales fell 16 percent to £50.1 million in the company’s advertising division, due to moderating new business volumes and weaker results in countries such as China and Germany.
Due to the moderate market conditions, the group has a more cautious outlook for the second half of the year.
While the company has seen an “improvement in momentum” since early July, the company expects a modest single-digit decline in net revenue in the final six months of 2023.
Zillah Byng-Thorne, executive chairman of M&C Saatchi, said: “The second half of the year is about growth, execution and efficiency.
“While some economic headwinds are likely to persist, we are focused on what we can control: continued connectivity of our business, elevating our highest-margin businesses in resilient segments, supported by tight cost management.”
Saatchi’s interim results will be the last under the leadership of CEO Moray MacLennan, who will step down at the end of this month.
MacLennan co-founded the company in 1995 after brothers Maurice and Charles Saatchi were ousted from another company they co-founded, Saatchi & Saatchi, in a boardroom coup.
His promotion to the top role came after an accounting scandal, with the London-based company admitting it had overestimated profits by around £14 million.
The problems worsened during his first year as director, when the Covid-19 pandemic caused a global downturn for the advertising industry.
But trading rebounded very strongly after lockdown restrictions were eased, and the group was able to fend off takeover bids from Next Fifteen Communications and Vin Murria’s Advanced AdvT investment vehicle.
Saatchi is known for its long association with the Conservative Party and includes some of the most prominent corporate names including Diageo, Coca-Cola, Adidas and Google.
M&C Saatchi shares were 1.5 percent, or 2 cents, lower at 128 cents late Thursday afternoon and have fallen about 17 percent since the start of the year.