M+C Saatchi’s numbers for the half year to June -- revenue down 5.1%, profit 36% -- would have looked respectable if it wasn't for "problem child" Australia.
The global advertising group, without a deep drop in Australia (-26.5%) weighing on the result, would have recorded an almost flat six months, like-for-like net revenue down just -0.7%.
CEO Zaid Al-Qassab, briefing market analysts, barely finished introductions before taking aim at Australia.
“We were not immune to the geopolitical and macroeconomic uncertainty in quarter two, particularly the ambiguity on tariffs, which led to client caution and project delays,” he said.
“Excluding Australia, net revenue was almost flat, down just 0.7%, which, given the macro environment, we believe was a solid result.
“Australia, however, was a particularly poor performer with macro headwinds causing client budget reductions, plus the flow-through of some prior year client losses.”
Analysts at investment bank Peel Hunt, in a note to clients, described Australia as the “problem child”.
M+C Saatchi has been trying to remedy the issues in Australia.
“We took responsive action to correct the margin in Australia, restructuring the local teams, hiring new leadership, closing the loss-making Bohemia Media brand and making significant property savings,” said Al-Qassab.
“In order to protect margins in a changeable environment, we accelerated our transformation program.”
Part of that is cost cutting. The company is forecasting total annualised savings for 2025 of GBP 12 million.
This will help bring in expected profit for the full year about the same as the previous 12 months.
“The fundamentals of the business remained strong: 171 business wins and excellent client retention,” said Al-Qassab.,
“Clients who represented 93% of our 2024 spending continued to spend with us in the first half.
“This puts us in a strong position for a profit recovery in the second half. If anything, the tricky market conditions have proven the robustness of our new model. We've continued investing in higher margin, faster growth areas, and new capabilities.”
He expects the company will exit the December quarter with profitability improved and margin enhanced without needing to make cuts to the capabilities required for future growth.
“In summary, we have a resilient portfolio which continues to improve operationally, delivers excellent client service and has a robust pipeline,” he said.
The focus in Australia is on improving the advertising and consulting sides of the business.
Al-Qassab, in briefing analysts, pointed to the new Australia CEO, Dani Bassil, and her experience leading a major digital agency, Digitas.
A big fall in Australia was on the advertising side. The company’s advertising revenue overall fell -9.5% but, without Australia, it would have been -2.5%.
The company highlighted what it called "significant" actions in Australia to reshape the business and support future profit.
This included new leadership, the closure of an "unprofitable full-service media business" Bohemia as well as restructuring.
A slide from the briefing:
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