M&C Saatchi shares fell by almost a fifth on Wednesday after it warned that revenues would be lower in 2023 because of a tough start to the year for its advertising and media operations.
The UK-based advertising group said it now expected a “small decline in like-for-like net revenue” for the full year.
The announcement shows the extent of the challenges for incoming chair Zillah Byng-Thorne, the former boss of magazine group Future, who will start at M&C Saatchi this week. In April, M&C said that “for the first time, in a long time, we have a clear runway ahead of us”.
Analysts at Peel Hunt said the slowdown in advertising was caused mainly by its businesses in Australia and Asia, which the company said in April had been particularly affected by a slowdown in spending by clients in the technology sector.
But M&C added it was confident in delivering headline growth in profit before tax and operating margin, partly through cost savings. This would mainly be achieved in the second half of the year, the company said in a trading statement before its annual shareholder meeting today.
Shares dropped 19 per cent in early morning trading after the unexpected warning over its full-year revenues, giving it a market capitalisation of about £175mn.
In a statement to the market on Wednesday, M&C said “the more challenging trading environment has continued, and has impacted the pace of business into the second quarter, particularly in the advertising and media specialisms”.
Advertising remains the largest part of the company’s business, contributing about 46 per cent of total net revenue in 2022.
The company said it was benefiting from its wide range of businesses however, with other areas such as consultancy continuing to perform strongly.
It added: “The board remains confident in its strategy and the medium-term growth targets set out at the Capital Markets Day held in February 2023, driven by the quality of its diverse set of businesses.”
Peel Hunt analysts said: “Whilst it is not ideal that trading has been challenging for advertising and media . . . we were encouraged to see the other verticals . . . performing well and providing diversification within the portfolio.”
It added: “Management’s focus on internal efficiencies should start to bear fruit this year, which we believe will benefit the group over the longer term.”
In its previous set of financial results in April, the company said it expected profit before tax for 2023 to be in line with market expectations of £36.5mn-£38mn, a 15-19 per cent increase on record profits of 2022.
Last year, the company was subject to two competing takeover bids.
