M&C Saatchi swings to a loss as tech firms slash ad budgets

M&C Saatchi swung to a first-half loss following a significant decline in spending by the ad group’s technology clients in the UK and US.

The advertising agency posted a £5.1million statutory pre-tax loss for the six months ending June, compared to a £305,000 profit in the same period last year.

Net revenue fell by 7 per cent to £120.4million as a weaker economic environment hit businesses with greater exposure to the technology sector or whose clients had more discretion over expenditure.

Results: M&C Saatchi posted a £5.1million statutory pre-tax loss for the six months ending June, compared to a £305,000 profit in the same period last year

This particularly impacted Saatchi’s media specialism, which saw turnover plunge by almost a third despite winning new contracts with the likes of Sega, Amazon and ticket exchange marketplace TickPick.

At the same time, net sales dropped by 16 per cent to £50.1million in the company’s advertising division due to the volume of new business wins moderating and weaker results in countries such as China and Germany.

Because of the subdued market backdrop, the group is adopting a more cautious outlook for the second half of the year.

While it has noted ‘improving momentum’ since the beginning of July, it expects a modest single-digit fall in net revenue over the latter six months of 2030.

Zillah Byng-Thorne, executive chair of M&C Saatchi, said: ‘The second half of the year is about growth, execution, and efficiency.

‘Whilst some economic headwinds are likely to continue, we are focused on what we can control: continued connectivity of our business, elevating our highest-margin businesses in resilient segments, underpinned by tight cost management.’

Saatchi’s interim results are set to be the last under the leadership of chief executive Moray MacLennan, who is due to step down at the end of this month.

MacLennan co-founded the company in 1995 after brothers Maurice and Charles Saatchi were ousted in a boardroom coup from another firm they had co-founded, Saatchi & Saatchi.

His promotion to the top role came on the heels of an accounting scandal, where the London-based business admitted to overstating profits by some £14million.

Troubles worsened during his first year in charge as the Covid-19 pandemic caused a worldwide downturn for the advertising industry.

But trading recovered very strongly after lockdown restrictions were loosened, and the group was able to fight off takeover bids by Next Fifteen Communications and Vin Murria’s Advanced AdvT investment vehicle.

Well-known for its longstanding association with the Conservative Party, Saatchi’s clients comprise some of the most prominent corporate names, including Diageo, Coca-Cola, Adidas, and Google.

M&C Saatchi shares were 1.5 per cent, or 2p, down at 128p on late Thursday afternoon and have dropped by around 17 per cent since the beginning of the year.

This post first appeared on Dailymail.co.uk