Challenging conditions dent annual profits at M&C Saatchi

Shares in advertising agency M&C Saatchi fell on Wednesday after the company reported a 10% drop in annual profits which it blamed on "challenging market dynamics", though it said it first-quarter trading had been encouraging.

Scaled-back client marketing budgets during 2023 meant that group revenues were down 2% at £453.9m, though strict cost control and the exit of non-core business resulted in a "material" profit improvement in the second half, which helped to mitigate the impact on the bottom line.

Pre-tax profit declined to £28.7m, from £31.8m, but operating profits were up 30% year-on-year in the second half. The company realised £3.9m of annualised cost savings and exited non-core businesses representing £9m of revenue of £3m of operating losses.

The operating margin averaged 12.8% for the year, but jumped from just 8.3% in the first half to 16.9% in the second.

The company, who is set to welcome new the former marketing head at Channel Four, Zaid Al-Qassab, as its new chief executive in May, is ready for "its next phase of growth, building on a simplified operating model and supported by our exceptional leaders", according to executive chair Zillah Byng-Thorne.

"We are encouraged by our performance in the start to the year, and while macro-economic uncertainty across our markets remains, our continuing transformation, which is already delivering, underpins our confidence that we will meet expectations," Byng-Thorne said.