M&C Saatchi Regulatory News (SAA)

COVID-19 update

M&C Saatchi plc provides the following update on the impact of COVID-19.

Trading in the first two months of 2020 was in line with the Board's expectations. We began to feel the impact of COVD-19 in March, with a reduction in activity in several of our markets following government restrictions on movement and the consequent reduction in economic activity.

The Group's priorities since the start of the pandemic have been the safety of employees, the delivery of excellent work for clients, maintaining close controls on the cost base and the preservation of cash. The Board has been undertaking strenuous stress-testing of the financial models under different scenarios (and will continue to do so) and remains confident about the liquidity status of the Group for the foreseeable future. We would like to thank our employees for the courage, dedication and ingenuity they have shown during these past few weeks.

All Group companies continue to operate and serve our clients, with the majority of offices currently operating a remote working policy. Whilst we have seen a sharp drop in demand across the group, we continue to pitch for new business and there are still some areas where demand for our services remains steady, e.g. our talent and influencer businesses.

As a result, our performance was substantially weaker in March than in January and February. It is clear that COVID-19 will continue to have an impact on the business. At this stage, however, it is not possible to accurately predict the scale or duration of the impact. As a result, we are not providing financial guidance for 2020. We will provide an update when appropriate.

We are taking wide-ranging action to mitigate the financial impact of the crisis and maintain a strong liquidity position in anticipation of a further deterioration in the business environment.

The Group had approximately £45m of cash worldwide as at 23rd March 2020. This includes a fully drawn revolving credit facility (RCF) with NatWest of £36m, leaving a net cash position of £9m. Although the Group is in a net cash position, the RCF and cash is typically required for working capital purposes. The £36m RCF and £5m overdraft facility (which is undrawn), was recently extended through to 31 July 2021, and has a 2.5x Gross Borrowings / Adjusted EBITDA covenant and a 5x Adjusted PBIT / borrowing costs (interest cover) covenant. Despite the increased pressure on cash, the company forecasts it has sufficient liquidity and expects to be able to continue to operate within these covenant levels for the foreseeable future.

We are reducing costs in a number of areas, including the elimination of significant rent, IT and travel expenditure and reduced capital expenditure in the London head office. In addition, we have improved the Group's cashflow and working capital through deferrals of tax and rent through instituting a daily review of cash outflows and receipts and working with our clients to ensure payments are received on a timely basis.

Where appropriate, the Group is seeking to apply for additional government business support initiatives worldwide. We are focused on protecting our employees as much as possible and will be securing government support to furlough staff in the UK, the US and Australia. For a very large proportion of higher paid, non-furloughed staff we are reducing salaries. The Group's Board and senior management team have already committed to a 20% reduction in their salaries. We regretfully commenced consultation with a number of employees across the Group about possible redundancy before the recent escalation in the Covid-19 crisis and this process will continue.

Given the current circumstances, the Board has decided to suspend shareholder distributions until further notice. This includes the final dividend for the year ended 30 December 2019.

The Group expects to announce its Full Year Results for the year ended 31 December 2019 in May 2020 on completion of the 2019 audit.

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For further information please call:

M&C Saatchi +44 (0)20-7543-4500David Kershaw, Mickey Kalifa

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

Numis Securities +44 (0)20-7260-1000Nick Westlake, Hugo Rubinstein, NOMADCharles Farquhar, Corporate Broking