Sparks - M&C Saatchi

M&C Saatchi’s first-half results show that it’s not immune to the difficulties in the global advertising sector, with project deferrals and reduced budgets in the face of an uncertain macroeconomic backdrop. Its Australian operations are also acting as a considerable drag on performance. The Issues (largely public sector) practice is doing well (+6. 3%), as is Media (+5.4%), but not sufficient to counter soft markets elsewhere. Net revenue expectations for the full year are being pulled back, but – importantly – the group expects to maintain profitability at the prior year level as savings from last year’s reorganisation programme and moves made in the year to date to drive efficiency kick in, with savings coming through at a higher rate than originally anticipated. The group has a strong balance sheet and inherently good cash conversion, meaning that it can fund the investment it needs to continue its programme of restructuring, and build its operational leadership team, with a return to strategic bolt-on M&A in the first half.