M&C group motors on despite London agency travails

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Revenues rose by 26 per cent to £225m last year at M&C Saatchi group as it capitalised on higher digital spending and direct marketing even as its flagship ad agency – also M&C Saatchi – dropped out of the UK top 20 with a 37 per cent fall in billings to £63m.

M&C Saatchi now consists of more than 20 operations around the world in which local management mostly owns a stake. The jewel in its UK crown is CRM agency LIDA.

Pre-tax profits fell 46 per cent to £6.8 per cent because of a £4m charge due to rise in value of shares held by managers. There were also £1.6m of restructuring charges which will cover the cost of M&C extricating itself from the disastrous deal to buy Lean Mean Fighting Machine and install its managers, notably former CEO Tom Bazeley, in charge of the London agency. The agency is still looking for a new CEO.

Earn-out costs are a worry as M&C founders Charles and Maurice Saatchi discovered when many of these became due at their former agency Saatchi & Saatchi when the global economy took a sharp downturn. But chairman David Kershaw says: “We have highly driven entrepreneurs rather than wage slaves running our businesses.”

M&C says “underlying” profits were £24m and raised the dividend accordingly. Even at £24m the company is a fraction of the size of WPP, run by former Saatchi and Saatchi finance director Martin Sorrell, which recently reported underlying profits of £2bn. Which probably wasn’t the plan when Charles and Maurice (Charles departed long ago) set up M&C agency as a rival to their old construct 20 years ago.

But it’s an impressive achievement all the same, achieved without the kind of big transformative deal that saw Sorrell’s WPP buy JWT, Ogilvy, Y&R and Grey in turn.

Now Kershaw and worldwide agency boss Moray MacLennan need to get the London agency motoring again (the UK still accounts for about two fifths of global revenues) and finding a smart CEO to join CCO Justin Tindall is key to that. But there are a number of UK agencies looking for one of those.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.