M&C Saatchi Regulatory News (SAA)

15 Sep 2005 07:02

M&C Saatchi PLC15 September 2005 M&C SAATCHI PLC INTERIM RESULTS SIX MONTHS TO 30th JUNE 2005 15 September 2005 M&C Saatchi plc, the international advertising agency with offices in 15locations including London, Paris, New York and across the Asia Pacific region,announces its interim results for the six months to 30th June 2005. Financial Highlights: •Revenues (gross profit) grow organically by 7.1% to £31.9 million (2004: £29.8 million) •Operating profit (before the impact of the European investment) up 11.3% to £4.1 million (2004: £3.7 million) •Operating Margin (before the impact of the European investment) up 0.5pts to 12.8% (2004: 12.3%) •Profit before tax (before the impact of the European investment) up 14.8% to £4.6 million (2004: £4.0 million) •Earnings per share (before the impact of the European investment) up 12.7% to 5.07 pence (2004: 4.5 pence) •Operating profit (including European investment) down 2.8% to £3.6 million •Profit before tax (including European investment) up 1.7% to £4.1 million •Earnings per share (including European investment) down 2.9% to 4.37 pence (2004: 4.50 pence) •Interim dividend 0.77 pence per share Operational Highlights: •New business wins in the first half included Ribena (GSK), ITV, Mini and Tourism Australia •New offices open in Paris and Bangkok •On target to open second new office in Europe by the year-end Note: Figures are reported before the Amortisation of Goodwill. Commenting on the results, David Kershaw, Chief Executive said: "The first half of the year has been encouraging, with good organic growthdriven by a healthy new business performance. The underlying business continuesto perform well but the outcome of the BA review could have a major influence onthe second half and beyond." For further information:M&C Saatchi 020 7543 4500David Kershaw Tulchan Communications 020 7353 4200Miranda Acland / Peter Hewer Except where otherwise stated this report comments on the unaudited profit andloss account of M&C Saatchi plc (the "group") for the six months to 30 June 2005compared with the unaudited pro forma profit and loss account for the sameperiod in 2004. The report also comments on the numbers before the impact of theamortisation of goodwill. The report has been prepared to show for illustrativepurposes only, the results as if the reorganisation which occurred immediatelyprior to its admission to trading on AIM on 14 July 2004, had occurred on 1January 2004 (see note 4 for further details of the reorganisation). Thedirectors believe that the presentation of the financial highlights and thefinancial report on this basis provide a clearer understanding of the Group'sresults. Financial Review Revenue grew by 7.1% to £31.9 million with all our key markets recording organicgrowth, driven by a healthy new business performance over the last 12 months.This represents our 11th year of consistent organic revenue growth. Significantwins have been Ribena (GSK), Mini, ITV, Weetabix and Tourism Australia. Thefirst half also benefited from a number of clients spending more of their annualbudgets in the first half when compared with previous years. Our expansion into the key European markets is progressing well. We officiallyopened the doors of our new office in Paris on the 1st September, and plans arewell advanced for the second office to be opened by the end of the year,discussions are progressing well in both Spain and Germany. As previouslyindicated our European investment will have a negative effect on the financialperformance in 2005 and 2006. As expected the impact of the investment in thefirst half has been to reduce operating profit by £522k. Excluding the impact of the European investment, operating profit increased by11.3%, and the operating margin increased to 12.8% (2004: 12.3%), withincreasing revenues matched by careful cost control. The impact of the Europeaninvestment is to reduce the margin by 1.6pts. Group net interest has increased by 95% to £647k (2004: £332K) resulting fromgood cash flows in the Group and the interest on the proceeds of the float. The reported group tax rate of 33.8% is above the prior year (33.1%). Theincrease is due to the investment in Europe and a reduced contribution from lowtax rate territories. Minority interests have increased as a percentage of profits from 8.9% to 12.1%,due to the companies with substantial minorities outperforming the averageacross the Group. The impact of our European investment and the increased minority interestcontribution has led to a small decrease to our earnings per share to 4.37p(2004: 4.50p). The board has declared an interim dividend of 0.77 pence per share, payable on21st October 2005 to shareholders on the register as at 23rd September 2005. Segmental Analysis UK Revenue in the UK increased by 7.9% to £19.0 million as a result of a healthynew business performance across all sectors and a number of one off projects inthe first half. Notable wins were: •Advertising: Ribena (GSK), ITV, Cadbury Muller •Direct Marketing (LIDA): Mini, NatWest Mortgages •Sponsorship: Carlsberg, Reebok •Media (Walker Media) Isolagen, Appletiser and more recently Weetabix •PR (Talk): Ingenue, Perrier Jouet, Ovaltine •Digital (Play) has won assignments from ITV, Privilege, The Link and Tourism Australia The operating margin in the UK (before the impact of the group recharges) hasincreased by 0.5pts to 17.1%. Asia and Australia Our Asia Pacific region has seen revenue grow by 4.6% to £11.5 million (2004:£10.9 million). The most significant new client is Tourism Australia, which is amajor new account for the group as a whole. The benefit from this win will bemainly felt in 2006. Other new clients across the region are Spirit of Tasmania,eBay, Microsoft, Vogue, and SIC (Malaysia F1). The operating margin has increased by 4.1pts to 10.5% (2004: 6.3%) (before theimpact of the Group recharges). The increase in the margin is due to both areduction in the cost base and a change in the half on half revenue profile. As already announced our new office in Bangkok has formally opened. The focus isnow on India and Indonesia and talks are continuing with potential partners. America We continue to make good progress in America. Revenue has grown 18.6% to £1.4million (2004: £1.2 million). The growth has come from clients won late in 2004including San Diego Zoo and the Beverly Hills Conference Centre, and in 2005Ghirdardelli chocolates. Before Group recharges (£101k) and one off restructuring costs incurredfollowing management changes (£98k), the region made an operating profit of £50k(2004: £38k). Europe M&C Saatchi GAD, our French office opened their doors on the 1st September. Thenew management team of Gilles Masson, Antoine Barthuel and Daniel Fohr who havejoined from Leo Burnett in Paris is in place and we are optimistic of achievingsome early new business wins. As already mentioned discussions continue withpartners in both Germany and Spain. Outlook The first half has been encouraging with steady organic growth driven by ahealthy new business performance and continued international expansion. Theoutlook for the full year is positive and in line with our expectations.However, the outcome of the review of the BA account could have a majorinfluence on performance in the second half and beyond. The outcome of thereview is due to be announced in mid October. M&C SAATCHI PLCCONSOLIDATED PROFIT AND LOSS ACCOUNT OF THE GROUPSIX MONTHS ENDED 30 JUNE 2005 UNAUDITED UNAUDITED UNAUDITED AUDITED PRO FORMA Six months Six months Six months Year ended ended ended ended 30 June 2005 30 June 2004 30 June 2004 31 December 2004 Note £'000 £'000 £'000 £'000 Turnover 2 128,172 126,546 54,056 215,184 Cost of sales (96,290) (96,779) (27,089) (155,807) -------- -------- -------- -------- Gross profit 2 31,882 29,767 26,967 59,377 Administrativeexpenses- ordinary (28,263) (26,100) (24,063) (52,907)- exceptional - - - (2,795)- options (56) - - -- amortisation of goodwill (821) (827) - (777) -------- -------- -------- --------Operating profit 2 2,742 2,840 2,904 2,898 -------- -------- -------- -------- Share of operating (loss)/ profit of associates (143) - 352 352 Interest receivable 657 356 225 800Interest payable (10) (24) (24) (30) -------- -------- -------- --------Profit on ordinaryactivitiesbefore taxation 2 3,246 3,172 3,457 4,020 Taxation on profits fromordinary activities (1,373) (1,323) (1,150) (2,033) -------- -------- -------- --------Profit on ordinaryactivitiesafter taxation 1,873 1,849 2,307 1,987 Minority interests (326) (238) (420) (531) -------- -------- -------- --------Profit for thefinancial period 1,547 1,611 1,887 1,456 Dividends - - - (2,942) -------- -------- -------- -------- Retained profit/ (loss) for the period 1,547 1,611 1,887 (1,486) ======== ======== ======== ======== Earnings pershare 3- Basic 2.85p 2.97p 5.81p 3.42p- Diluted 2.83p 2.95p 5.81p 3.41p All amounts relate to continuing activitiesThe accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCCONSOLIDATED PROFIT AND LOSS ACCOUNT OF THE GROUPSIX MONTHS ENDED 30 JUNE 2005 STATEMENT OF RECOGNISED GAINS AND LOSSES UNAUDITED UNAUDITED AUDITED Six months Six months Year Ended ended ended 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000 Profit for the financial year- Group 1,690 1,572 1,140- Associates (143) 315 316 -------- -------- -------- 1,547 1,887 1,456 Exchange adjustments onforeign (158) 43 260currency net investments -------- -------- --------Total recognised gains andlosses 1,389 1,930 1,716for the financial period ======== ======== ======== CONSOLIDATED RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000 Profit for the financial year- Group 1,690 1,572 1,140- Associates (143) 315 316Dividend - - (2,942) -------- -------- -------- 1,547 1,887 (1,486)Exchange (158) 43 260differencesIssue of shares - - 27,155Share issue cost - - (835)Issue of options 28 - 514 Net addition/(reduction) to 1,417 1,930 25,608shareholders'funds Opening shareholders'funds 29,581 3,973 3,973 -------- -------- -------- Closing 30,998 5,903 29,581shareholders'funds ======== ======== ======== All amounts relate to continuing activitiesThe accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCBALANCE SHEETAT 30 JUNE 2005 UNAUDITED UNAUDITED AUDITED 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000Fixed assetsIntangible assets 15,119 - 16,158Tangible assets 3,048 3,301 3,047Investments 15 1,271 15 -------- -------- -------- 18,182 4,572 19,220 Current assetsWork in progress 1,890 1,056 3,368Debtors - within one year 26,434 17,927 46,374Debtors - greater than one 817 212 731yearCash in hand and bank 25,314 7,115 17,323 -------- -------- -------- 54,455 26,310 67,796 Creditors: amounts fallingdue (39,967) (23,170) (55,980)within one year Net current assets 14,488 3,140 11,816 Total assets less currentliabilities 32,670 7,712 31,036 Creditors: amounts fallingdue (758) (831) (774)after more than one yearProvisions for liabilitiesand (241) (99) (218)charges -------- -------- --------Net assets 31,671 6,782 30,044 ======== ======== ======== Capital & reservesShare capital 542 12 542Share premium 9,618 - 9,618Merger reserve 15,361 - 15,959Share option reserve 542 - 514Profit & loss account 4,935 5,891 2,948 -------- -------- --------Equity shareholders' funds 30,998 5,903 29,581 Equity minority interests 673 879 463 -------- -------- -------- 31,671 6,782 30,044 ======== ======== ======== All amounts relate to continuing activitiesThe accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCCONSOLIDATED CASH FLOW STATEMENTSIX MONTHS ENDED 30 JUNE 2005 UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000 Operating profit 2,742 2,904 2,898Amortisation on intangiblefixed assets 821 - 777Non cash flow expensesassociated - - 460with reorganisationDepreciation 558 584 1,167Loss / (Profit) on sale oftangible fixed assets 57 14 (34)Decrease in work in progress 1,575 189 (2,062)Decrease / (Increase) in debtors 20,212 (1,735) (16,233)Increase / (decrease) increditors (16,383) 2,506 17,902Exchange differences (105) 85 78 -------- -------- -------- Cash inflow / (outflow) fromoperating activities 9,477 4,547 4,953 Dividend received from - - 728associates Returns on investment and servicing of financeInterest received 657 113 687Interest paid (2) (9) (3)Interest element of financelease rental payments (8) (15) (27)Minority interest dividendpaid (232) (938) (1,296) Taxation (926) (900) (1,800) Capital expenditure and financial investmentPurchase of tangible fixed assets (591) (569) (922)Sale of tangible fixed assets 44 98 417Sale of part share ofsubsidiary undertakings - - 527 Acquisitions & disposalsInvestment in subsidiary - - (382)Cash acquired withsubsidiary undertaking - - 2,243 Equity dividends paid (629) - (2,313) -------- -------- --------Net cash inflow / (outflow)before financing 7,790 2,327 2,812 FinancingShare placement - - 10,537Share placement costs - - (835)Shares issued to minorities 116 - 107Repayment of bank loans - (20) (21)Capital elements of financelease rental payments (57) (144) (225) -------- -------- --------Increase /(Decrease) in cashin the perio 7,849 2,163 12,375 ======== ======== ======== All amounts relate to continuing activitiesThe accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCCONSOLIDATED CASH FLOW STATEMENT (continued)SIX MONTHS ENDED 30 JUNE 2005 UNAUDITED UNAUDITED AUDITED Six months Six months Year ended ended ended 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000Reconciliation of net cash flow to movement in net debt Increase /(decrease) incash in the year 7,849 2,163 12,375Cash outflowfrom decrease inlease finance 57 144 225Inception offinance leases (15) (45) (31)Exchange differences 132 (63) (87)Cash out flowfrom repaymentof bank loan - 20 21 -------- -------- --------Movement in netfunds in theyear 8,023 2,219 12,503 Net funds atstart of year 17,079 4,576 4,576 -------- -------- --------Net funds at endof year 25,102 6,795 17,079 ======== ======== ======== Analysis of changes in net funds Balance at 1 Cash Finance Exchange Balance at 30 January 2005 inflow lease Movements June 2005 £'000 £'000 £'000 £'000 £'000 Cash atbank 17,323 7,849 - 143 25,315and inhand Debt - - - - -duewithinoneyear Finance (244) 57 (15) (11) (213)leases -------- ------ ------ -------- ----------Total 17,079 7,906 (15) 132 25,102 ======== ====== ====== ======== ========== All amounts relate to continuing activitiesThe accompanying notes form part of the unaudited financial statements M&C SAATCHI PLCNOTES TO THE FINANCIAL STATEMENTSSIX MONTHS ENDED 30 JUNE 2005 1. •Accounting policies The financial information included in this report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the year ended 31 December 2004 has been extracted from the statutory accounts for that period, a copy of which has been delivered to the Registrar of Companies. The interim accounts for the six months to 30 June 2005 are unaudited. •FRS 20 (Share based payment) has been adopted for the first time for the period under review. •In accordance with FRS 21 (Events after balance sheet date), the interim dividend is not included in these financial statements. With these exceptions the interim accounts for the six months ended 30 June 2005 have been prepared on the basis of the accounting policies set out in the statutory accounts for the year ended 31 December 2004. 2. •Profit and net assets UNAUDITED UNAUDITED UNAUDITED AUDITED PRO FORMA Six months Six months Six months Year ended ended ended ended 30 June 2005 30 June 2004 30 June 2004 31 December 2004 £'000 £'000 £'000 £'000 Turnover Turnover arises from the principal activity of the Group. An analysis by geographical market. By origin UK 101,840 104,351 31,861 168,809 Asia and Australia 23,352 20,019 20,019 41,736 America 2,980 2,176 2,176 4,639 Europe - - - - -------- -------- -------- -------- 128,172 126,546 54,056 215,184 ======== ======== ======== ======== M&C SAATCHI PLCNOTES TO THE FINANCIAL STATEMENTSSIX MONTHS ENDED 30 JUNE 2005 UNAUDITED UNAUDITED UNAUDITED AUDITED PRO FORMA Six months Six months Six months Year ended ended ended ended 30 June 2005 30 June 2004 30 June 2004 31 December 2004 £'000 £'000 £'000 £'000 Gross profit (Revenue) An analysis by geographical market. By origin UK 19,026 17,635 14,835 33,717 Asia and Australia 11,458 10,953 10,953 23,126 America 1,398 1,179 1,179 2,534 Europe - - - - -------- -------- -------- -------- 31,882 29,767 26,967 59,377 ======== ======== ======== ======== Operating profit / (loss) before amortisation of goodwill An analysis by geographical market. By origin UK (1) 3,352 2,936 2,173 789 Asia and Australia 882 693 693 2,686 America (149) 38 38 200 Europe (2) (522) - - - -------- -------- -------- -------- 3,563 3,667 2,904 3,675 ======== ======== ======== ======== Operating profit / (loss) An analysis by geographical market. By origin UK 2,531 2,109 2,173 12 Asia and Australia 882 693 693 2,686 America (149) 38 38 200 Europe (2) (522) - - - -------- -------- -------- -------- 2,742 2,840 2,904 2,898 ======== ======== ======== ======== Profit before taxation (before amortisation of goodwill) An analysis by geographical market. By origin UK (1) 3,816 3,262 2,720 1,862 Asia and Australia 921 700 700 2,736 America (148) 37 37 199 Europe (2) (522) - - - -------- -------- -------- -------- 4,067 3,999 3,457 4,797 ======== ======== ======== ======== Profit before taxation An analysis by geographical market. By origin UK 2,995 2,435 2,720 1,085 Asia and Australia 921 700 700 2,736 America (148) 37 37 199 Europe (2) (522) - - - -------- -------- -------- -------- 3,246 3,172 3,457 4,020 ======== ======== ======== ======== (1) Amortisation of goodwill of £821k was charged in the UK segment in the six month period to 30 June 2005, £777k in second half of 2004. There was an extrapolated amortisation of goodwill of £827k charged to the UK segment in the pro forma six month period to 30 June 2004. (2) £522k of European investigative costs have been incurred in six month period to 30 June 2005. £70k of European costs were incurred and reported in the UK segment, in the second half of 2004. M&C SAATCHI PLCNOTES TO THE FINANCIAL STATEMENTSSIX MONTHS ENDED 30 JUNE 2005 UNAUDITED UNAUDITED AUDITED Six months Six months Year Ended ended ended 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000 Net assets An analysis by geographical market. By origin UK 31,466 7,583 29,945 Asia and 3,143 1,024 2,466 Australia America (2,514) (1,825) (2,367) Europe (424) - - -------- -------- -------- 31,671 6,782 30,044 ======== ======== ======== 3. •Earnings per share UNAUDITED UNAUDITED UNAUDITED AUDITED PRO FORMA Six months Six months Six months Year ended ended ended ended 30 June 2005 30 June 2004 30 June 2004 31 December 2004 Earning per share before amortisation of goodwill - Basic 4.37p 4.50p 5.81p 4.12p - Diluted 4.33p 4.46p 5.81p 4.09p Earnings per share - Basic 2.85p 2.97p 5.81p 3.42p - Diluted 2.83p 2.95p 5.81p 3.42p 4. •Flotation M&C Saatchi plc was admitted to AIM on 14 July 2004. Immediately prior to the admission the Worldwide Group undertook an internal reorganisation. Reorganisation included the acquisition of M&C Saatchi Worldwide Ltd by M&C Saatchi plc and the acquisition of a further 29% of Walker Media Holdings share capital resulting in a 75% holding. At the same time a number of key executives who held shares in their operating companies had their interest acquired by M&C Saatchi plc. Full details were set out in the admission document. This information is provided by RNS The company news service from the London Stock Exchange