Why M&C Saatchi is still a work in progress

mc-saatchi-6-12M&C Saatchi in London is going through a painful time with the loss of Dixons to AMV, worth around £50m in media terms, and Direct Line reviewing its huge account. Not a great start to 2014 for the boys and girls in Golden Square. However never underestimate M&C; they have a habit of pulling rabbits out of hats on a regular basis.

Their share price looks solid at around 320p, a whopping increase of 78 per cent since February 2013. It’s interesting how the City seems to ignore the short term wins and losses such as Dixons, as the share price hasn’t budged since the news broke. Unlike the advertising industry hanging on today’s news, the City takes a longer view on annual progress.

M&C has been developing its business with geographic expansion and broadening the skill base way beyond advertising. A little bird told me some time ago most of the UK profit is derived from non-advertising sources.

The current website is worth a look – as it doesn’t actually say very much. Lisa Thomas, UK group CEO, has a slightly overlong chat to camera and not a mention of anyone else. There isn’t a client list and there isn’t any creative work on display. It is hard to figure out what the deal is and certainly the historic pitch of iconic broadcast advertising is conspicuous by its absence.

Interestingly Ms Thomas has a strong direct marketing background having worked at Wunderman, then Craik Jones et al, then nicked by M&C to start their own DM agency LIDA, launched in 2000. I guess her success at making loads of dosh via the DM venture provided her with the route to the top job. By comparison Ogilvy One is now a similar size to O&M and the DM team at Ogilvy are basically in charge of the UK group and the global HQ in NYC.

saatchi-005At a corporate level M&C Plc have made some very smart moves such as selling their stake in Walker Media for £36m (they backed Christine Walker as a media start up); they also acquired the freehold of their HQ premises in Golden Square and then sold it again for £50m with a thumping capital gain.

By advertising agency standards they operate at a level most agency people never consider.

The sense of things looking from the outside – not having any insider perspective – is an advertising brand re-structuring, re-focusing, and altering the offering to match a changing world. The one example on the global website is a project based on social media reflecting a different view of the company. Moray MacLennan also does a chat to camera on this version and ends up saying the time is here for their original calling card of “Brutal Simplicity of Thought”.

If this observation about re-structuring is correct it would explain the websites: they feel transitional, leaving behind broadcast advertising as the lead shop window and moving to territory successfully established by Droga5 in New York. This may be the big white rabbit leaping out of the over-sized hat as M&C morphs into an integrated communications agency mopping up all that high margin work in non-conventional areas.

Based on my maths their pre-tax margin in 2012 was about six per cent, a fair way behind Sir Martin’s drive for margins in double digits at WPP. The Dixons account was no doubt big on turnover but very low on margin so maybe when we see their 2014 numbers the margin will go up as a consequence.

As I said earlier never underestimate the clever folk in Golden Square, I can’t believe for a second they are letting the grass grow under their feet.

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About Paul Simons

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Paul joined Cadbury-Schweppes in brand management and then moved to United Biscuits. He switched to advertising in his late 20s, at Cogent Elliott and then Gold Greenlees Trott. He founded Simons Palmer Denton Clemmow & Johnson in the late 80s, one of the leading creative agencies of the 90s. Simons Palmer then merged with TBWA to create a top ten agency. Paul then joined O&M as chairman & CEO of the UK group. After three years he left to create a new AIM-quoted advertising group Cagney Plc. He is now a consultant to a number of client companies. Paul also shares his thoughts on his blog. Visit Paul Simons Blog.