M&C Saatchi lifts profit outlook as advertising spend recovers


M&C Saatchi stock has jumped on an upgraded profit outlook, after the advertising agency pointed to an “encouraging” performance on the back of new clients and a recovery in global ad spend.

The London-based group hailed a “stronger than anticipated” first four months of the year, adding that profit for 2021 would be “ahead of consensus expectations” of £11.2m in earnings before interest, taxes, depreciation and amortisation.

Shares were up as much as 13 per cent in morning trading on Tuesday before falling back to sit 8.7 per cent higher by midday in London.

Moray MacLennan, M&C Saatchi chief executive, said the agency’s performance so far this year had been “encouraging”, adding that the company had benefited from an “unexpectedly lively new business market” in the first quarter. M&C Saatchi’s new clients include the UK census campaign, Tinder in south-east Asia and Origin, an Australian energy company.

“For reasons of morale, momentum, headlines and reputation, the new business wins . . . are very important,” said MacLennan, adding that it might have been “very easy for [a potential client] to say let’s just leave M&C Saatchi off the list” after the reputational damage from the company’s 2019 accounting scandal.

MacLennan, who took over as CEO in November after more than two decades with the company, has had to chart a path for M&C Saatchi out of twin crises: the accounting scandal and the slump in global advertising spend brought on by the pandemic.

M&C Saatchi shares have rallied from a nadir of 28.9p on April 3 last year, less than a fortnight after the UK entered a nationwide lockdown. But the stock remains down on a high point of 394p in 2019 before the accounting scandal hit and the company’s founder, Lord Maurice Saatchi, resigned along with half of the board.

READ  Zuckerberg announces Facebook users will be able to send messages between Messenger, Instagram and WhatsApp

MacLennan said the “silver lining” of the “double blows” from the two crises was that the agency was “ready to adjust” when the pandemic hit. “In some ways, the need for change was so obvious that we reacted quickly because of that double hit,” he said. “It did force action early . . . in terms of cutting costs, examining the business model, examining the strategy.”

Johnathan Barrett, an analyst at Panmure Gordon, said the trading update signalled “an impressive turnround” both for M&C Saatchi and the wider advertising market.

“For an agency to be upgrading at this stage of the year — at what are usually the quietest months — is a very good sign,” he said, adding that he expected earnings to be at least 10 per cent ahead of previous expectations.

Barrett added that the £47m loan facility issued by NatWest Bank and Barclays to M&C Saatchi was a “big vote of confidence” in the business.



READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here