M&C Saatchi’s shares fell about seven percent on Tuesday to 136.73p after half-year results showed like-for-like operating profit down 31.7 percent to £6.2 million, the operating margin down 3.1 points to 7.2 percent, and a statutory pretax loss of £161,000 against a £4.3 million profit a year earlier, after £3.7 million of restructuring, transformation and acquisition costs.
Like-for-like net revenue fell 1.4 percent to £86.2 million. The regional split is where the damage sits: UK up 5.9 percent, Americas down 8.7, Europe and the Middle East down 19.4, Asia-Pacific broadly flat. Passions and PR fell to £12.7 million from £15.2, mainly because of the Middle East conflict’s effect on its Sport and Entertainment business in the UAE. Consulting dropped to £8.3 million from £9.9 on project deferrals.
The largest business, Issues, grew to £30.0 million from £27.5. Media grew to £11.7 million from £10.6. Net cash fell to £2.5 million from £8.7 after £2.2 million of buybacks and £0.7 million tied to disposing of the Malaysia business. The Australia and New Zealand operation, classified as discontinued, posted a £4.2 million loss and its planned management buyout is no longer progressing.
Dame Heather Rabbatts, executive chair since April, said the group is confident of delivering like-for-like net revenue and operating profit growth for the full year, supported by its position in government and citizen-focused work and its data-led capabilities, with full-year results expected in line with market expectations.
She is executive chair on an interim basis, because global chief executive Zaid Al-Qassab stepped down on 31 March. Six months later, nobody has replaced him.
That is the part doing most of the work in the share price, and it is worth understanding as a general rule rather than a comment on this company.
A business can survive bad numbers. What it cannot easily survive is bad numbers with nobody standing behind them. When results disappoint under a permanent chief executive, the market gets a plan, a person attached to the plan, and a date by which they can be held to it. When they disappoint during an interim arrangement, there is nobody who will still be there to answer for it.
Every operator has felt the smaller version. The shop runs fine with the manager on holiday for two weeks. Run it on a rota of stand-ins for six months and something different happens. Not disaster, just drift: decisions get deferred because nobody wants to make a call their successor will inherit, and the deferrals accumulate into a position.
The portfolio surgery here is real and it is generating genuine one-off costs. The Issues business growing to £30 million and UK revenue up 5.9 percent are solid results inside a difficult half.
The buyback completed on 15 September and the group is evaluating an extension.
The chair is filled on an interim basis. The market priced the interim.
Source: Investing.com, “M&C Saatchi first-half profit falls 32% as Middle East conflict hits revenue”
