Interim Results 2008

RNS Number : 2607E

M&C Saatchi PLC

25 September 2008

 



M&C SAATCHI PLC

INTERIM RESULTS

SIX MONTHS TO

30 JUNE 2008

25 September 2008

M&C Saatchi plc 2008 Interim Results

Headline Results

• Revenue up by 38.8% to £51.8m (2007: £37.3m)

• Like for like revenue growth 18.7%

• Operating profit up by 174% to £7.7m (2007: £2.8m)

• Operating margin up to 14.9% (2007: 7.6%)

• Profit before tax up 107% to £8.0m (2007: £3.9m)

• Basic earnings per share up 147% to 8.62p (2007: 3.50p)

• Interim dividend held at 0.87p

The headline results referred to above are stated before accounting for the following items:

• Amortisation of acquired intangibles and goodwill write offs

• Fair value adjustment to minority put option liabilities

• Notional interest on deferred consideration

A reconciliation of the difference between the headline results and the statutory result is shown in note 4 to the interim statements. 

Like for like revenue is stated after excluding the impact of exchange, acquisitions and discontinued operations. 

Commenting on the results, David Kershaw the Chief Executive said: 

'We are pleased to report that M&C Saatchi saw a strong start to 2008 as we saw a good performance from both our organic and acquired businesses. There is no doubt the economic environment is increasingly challenging and we have felt the effects of this in the US and our Spanish business. Despite this, our global network remains strong and we have continued to win new business across our divisions. The outlook for the full year remains in line with management expectations.

At this time the uncertain economic environment leads us to be cautious about medium term visibility. However our balance sheet remains strong and we will continue to invest in markets which we believe will position us well for growth in the long term.' 

For further information please call:

M&C Saatchi plc                                  020 7543 4500

David Kershaw, Chief Executive

Tulchan Communications Ltd                020 7353 4200

Lizzie Morgan/Susanna Voyle

Numis Securities Ltd                            020 7260 1000

Lee Aston

Summary of results

We are pleased to report a strong set of results for the first six months of 2008 which saw revenue growth of 39% to £51.8m (2007: £37.3m). Like for like revenue growth which excludes the impact of exchange rate movements, acquisitions and discontinued operations increased by 18.7% to £43.1m. Clear Ideas, acquired in July 2007, contributed a further £6.1m. Revenue from operations closed in Singapore and Thailand during the period was £0.6m, and the balance of £2.0m resulted from currency gains.

Headline operating profit has increased by 174% to £7.7m (2007: £2.8m). Organic growth contributed £3.0m of the increase (an increase of 107%), Clear delivered a further £1.7m and the balance £0.2m came from exchange. The operating margin saw a substantial increase from 7.6% in 2007 to 14.9% this period. The increase comes from the improved performance of the Asia Pacific region, the continued growth of the Paris office and the contribution from Clear.  

The Group's share of profit after tax from its associates decreased from a contribution of £71k in 2007 to a loss of £100k in 2008. This is due in part to a change in the accounting treatment for Play, our UK based digital operation and in part to the disappointing performance of our Spanish associate, Zapping/M&C Saatchi.

The headline net interest earned has decreased to £0.3m (2007: £1.0m). The decrease is due to the interest which is now being paid on the Group debt which stood at £7.5m at the end of the period (2007: nil).

The profit after tax attributable to the Group's minorities reduced from £0.8m in 2007 to £0.3m this year. This is principally due to the acquisition of the minority in Walker Media. 19.5% of the remaining 25% minority in Walker Media was acquired in July 2007 and a further 5.5% in April 2008 taking the Group's holding to 100%.  

In May M&C Saatchi acquired the majority of digital advertising agency Play and from this point its results are fully consolidated (January to April 2008 profit £0.0m).

The headline profit attributable to the equity shareholders of the Group increased by 172% to £5.1m. 

Headline basic EPS has grown by 147% to 8.62p (2007: 3.50p). The group issued 6.7m new shares to satisfy the acquisitions of Clear and Walker Media. The number of shares in issue at the end of the period was 60.3m and the weighted average for the period was 59.1m (2007: 53.6m) a dilution of 10.3%.

As at the 30th June we estimated that a further 1.4m shares could be issued to satisfy obligations under the Group's long term incentive plans and a further 3.0m shares may be issued as a result of earn out commitments. The diluted EPS for the period is therefore 8.02 p (2007: 3.45p)

Review of operations

Overview

During the fist six months of 2008 we have seen strong performances from the majority of our operating divisions which have seen robust revenue growth and improvements in operating margins. Clear, the brand consulting business acquired in July 2007, has continued its good progress making a significant contribution to group earnings for the period. As anticipated, trading remained difficult in the USA since the second half of 2007 as a result of increasingly difficult market conditions. As reported the performance of our Spanish associate Zapping/M&C Saatchi has been disappointing , largely as a result of the well documented decline in Spain's economic conditions and there are no obvious signs of immediate improvement.

In March we reported that our loss making operations in Singapore and Thailand were under review. As a result we took the decision to close these offices, the combined cost of the closure process has been £0.6m in this period.

Review by Region

UK

The UK businesses all enjoyed an excellent first six months to the year. The like for like (excluding acquisitions) revenues and operating profit have increased by 14.4% to £25.2m and by 45.0% to £4.5m respectively. The operating margin has improved to 19.7% (2007: 14.0%). Brand consulting business Clear was acquired in July 2007 and is making a contribution to the period for the first time. Clear has continued the progress of the previous year with revenues of £4.7m and operating profits of £1.5m in the UK. Clear also has offices in Amsterdam and New York. The combined revenues and operating profit from Clear for the period were £6.1m and £1.7m respectively.

There has been good new business momentum across the UK businesses, the most important win being the governments anti obesity campaign. Other important wins have been East Midland trains and Hyundai.

Europe

We continue to see good growth in Europe. The like for like revenue has increased to £4.1m (2007: £2.1m) and operating profit has increased to £0.6m (2007: £0.0m). The operating margin has grown significantly to 12.9% (2007: 2.3%). Clear's Amsterdam office had a good first half with revenues of £0.8m, an operating profit of £0.1m and a margin of 15.5%.

The growth is being driven by the continuing success of the Paris office. Key to this period's growth was the excellent new business wins of Pages Jaunes and Jameson (Pernod Ricard) in the second half of 2007. This year the business has been moving forward by consolidating those account wins and extending the business into corporate PR and building their digital capabilities.

The Berlin office has also had a good first half benefiting from business won last year. Important wins were additional brands from Ferrero and the Green Party of Germany.  

As highlighted in the overview, the performance of Zapping/M&C Saatchi has been disappointing in line with the Spanish economy. The net contribution to profit after tax has been a negative £0.1m, below management expectations. We had previously reported that we would increase our investment in Zapping from the current 24% to 51% from July this year; however as a result of the subdued market we have mutually agreed to put those plans on hold for the near future.

Asia and Australia

Revenue grew 30.8% to £14.8m (2007: £11.3m) reflecting both strong underlying organic growth as well as the impact of the stronger Australian and Asian currencies which have strengthened approx 12% between the periods. The like for like revenue (having stripped out the effect of exchange and the closure of the Thailand and Singapore office) increased by 20.6% to £14.2m. The notable driver of the revenue growth has been the continued recovery of the Australian business following the loss of the IAG account at the end of 2006. Significant new business was won during the second half of 2007 and the business has continued to be very active on current clients through the first six month of 2008. While anticipated, it was a disappointment to lose the Australian Tourism business after the 3 year statutory review and a change of government. This loss will impact the fourth quarter.

The rest of the region contributed an overall revenue increase of 20% with our office in Malaysia leading the way.

The operating profit for the region improved from the loss of £0.4m reported in 2007 to a profit of £0.9m at a margin of 6.2% (2007: negative). As already reported our offices in Thailand and Singapore have now been closed resulting in a cost of £0.6m. Removing the impact of this loss the operating margin was 10.3%.

America

Revenue increased by £0.2m to £2.1m (2007: 1.9m) and the operating profit increased £0.2m to £0.3m (2007: £0.1m). On a like for like basis, after removing the impact of closing the New York office in April 2007 and the contribution from Clear the office in LA reported a revenue decline of 7% to £1.5m and an operating profit of decline of 46% to £0.2m.  

As reported in March the LA office started to feel the effects of the economic slowdown in the fourth quarter of 2007 as major clients began to reduce activity and cut their spending. Conditions continue to be challenging and to date we have seen no significant signs of improvement.

Outlook

These results show that the Group is in good shape. We have enjoyed a period of strong organic growth and our investments in new markets and new businesses have added to the potential and the diversity of the Group.  

The economic environment is increasingly challenging and we have felt the effects of this in the US and our Spanish business. Despite this, our global network remains strong and we have continued to win new business across our divisions. The outlook for the full year remains in line with management expectations. At this time the uncertain economic environment leads us to be cautious about medium term visibility. However our balance sheet remains strong and we will continue to invest in markets which we believe will position us well for growth in the long term.' 

This report comments on the unaudited consolidated income statement of M&C Saatchi plc (the 'Group') for the six months to 30 June 2008  compared with unaudited consolidated income statement for the same period in 2007. The report also comments on the numbers before the impact of fair value adjustments to minority shareholder put option liabilities and amortisation of intangible assets (headline numbers). 

M&C SAATCHI PLC

UNAUDITED CONSOLIDATED INCOME STATEMENT

AT 30 JUNE 2008

			Six months ended  30 June 2008				Six months ended  30 June 2007		Year ended 31 December  2007
	Note		£'000				£'000		£'000
Billings			222,753				182,791		412,746
Revenue	5		51,769				37,309		87,620
Operating costs			(44,514)				(34,487)		(78,006)
Operating profit	5		7,255				2,822		9,614
Share of results of associates			(114)				54		281
Finance income			744				964		1,809
Finance costs	6		(338)				(508)		(3,748)
Profit before taxation	5		7,547				3,332		7,956
Taxation on profits	7		(2,470)				(1,215)		(3,530)
Profit for the financial period			5,077				2,117		4,426
Attributable to:
Equity shareholders of the Group	4		4,763				1,356		3,258
Minority interests			314				761		1,168
			5,077				2,117		4,426
Earnings per share	4
Basic			8.06p				2.53p		5.80p
Diluted			7.50p				2.50p		5.59p
Headline results	4
Operating profit			7,721				2,822		10,222
Profit before tax			7,962				3,850		11,926
Headline profit attributable to equity shareholders			5,096				1,874		7,046
HEADLINE Earnings per share	4
Basic			8.62p				3.50p		12.55p
Diluted			8.02p				3.45p		12.09p

M&C SAATCHI PLC

UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

AT 30 JUNE 2008

			Six months ended  30 June 2008				Six months ended  30 June 2007		Year ended 31 December  2007
			£'000				£'000		£'000
Profit for period			5,077				2,117		4,426
Currency translation differences			463				111		689
Total recognised income and expenses for the period			5,540				2,228		5,115
Attributable to:
Equity shareholders of the Company			5,222				761		3,947
Minority interests			318				1,467		1,168
			5,540				2,228		5,115

M&C SAATCHI PLC

UNAUDITED CONSOLIDATED BALANCE SHEET

AT 30 JUNE 2008

			30 June 2008				30 June 2007		31 December  2007
	Note		£'000				£'000		£'000
NON CURRENT ASSETS
Intangible assets			63,568				15,486		61,409
Investments in associates			4,098				1,646		4,086
Plant and equipment			3,943				3,541		3,954
Deferred tax assets			2,078				1,582		2,034
Other non current assets			544				518		565
			74,231				22,773		72,048
CURRENT ASSETS
Trade and other receivables			64,088				40,969		74,872
Current tax assets			206				421		519
Cash and cash equivalents			1,980				25,820		16,895
			66,274				67,210		92,286
CURRENT LIABILITIES
Trade and other payables			(70,360)				(55,743)		(86,850)
Current tax liabilities			(1,904)				(537)		(1,610)
Other financial liabilities			(13)				(14)		(18)
Deferred and contingent consideration	10		(112)				-		(9,811)
Minority shareholder put options liabilities			(1,983)				(16,828)		(6,854)
			(74,372)				(73,122)		(105,143)
Net current liabilities			(8,098)				(5,912)		(12,857)
Total assets less current liabilities			66,133				16,861		59,191
Non current liabilities
Deferred tax liabilities			(1,526)				(150)		(1,604)
Other financial liabilities			(7,468)				(22)		(8,531)
Deferred and contingent consideration	10		(4,917)				-		(8,325)
Minority shareholder put options liabilities			(3,268)				(8,196)		(3,691)
Other non current liabilities			(1,344)				(972)		(1,142)
			(18,523)				(9,340)		(23,293)
Net assets			47,610				7,521		35,898

  M&C SAATCHI PLC

UNAUDITED CONSOLIDATED BALANCE SHEET (CONTINUED)

AT 30 JUNE 2008

			30 June 2008				30 June 2007		31 December  2007
	Note		£'000				£'000		£'000
Equity	11
Equity attributable to shareholders of the parent
Share capital			610				543		597
Share premium			13,694				9,794		12,758
Merger reserve			20,749				14,756		20,285
Treasury reserve			(792)				(792)		(792)
Minority interest put option reserve			(4,436)				(15,628)		(6,876)
Foreign exchange reserve			777				(260)		318
Retained earnings			16,552				(1,015)		9,053
Total shareholders' equity			47,154				7,398		35,343
Minority interestS			456				123		555
TOTAL EQUITY			47,610				7,521		35,898

M&C SAATCHI PLC

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHS ENDED 30 JUNE 2008

			Six months ended 30 June 2008				Six months ended  30 June 2007		Year  ended 31 December  2007
	Notes		£'000				£'000		£'000
Cash generated from operations	12		2,960				589		8,991
Tax paid			(2,159)				(2,245)		(4,092)
Net cash flow from operating activities			801				(1,656)		4,899
Acquisitions	13		(14,122)				(1,542)		(24,602)
Proceeds from sale of plant and equipment			4				20		23
Purchase of plant and equipment			(627)				(738)		(1,401)
Purchase of capitalised software			(41)				-		(107)
Interest earned from cash held by trading entities			737				707		1,553
Interest received on centrally held cash			8				257		256
Dividends received from associates			56				-		-
Net cash consumed by investing activities			(13,985)				(1,296)		(24,278)
Dividends paid			-				(1,300)		(1,813)
Minority dividend paid			(496)				(1,209)		(1,404)
Issue of own shares			-				3		-
Repayment of finance leases			(10)				(22)		(39)
Inception of bank loans			10,722				-		13,000
Repayment of bank loans			(11,780)				(6)		(4,514)
Interest paid			(403)				(5)		(437)
Interest on finance leases			-				(3)		(2)
Net cash consumed from financing activities			(1,967)				(2,542)		4,791
Net decrease in cash and cash equivalents			(15,151)				(5,494)		(14,588)
Cash and cash equivalents at the beginning of the period			16,895				31,284		31,284
Effect of exchange rate changes			236				30		199
Cash and cash equivalents at the end of the period			1,980				25,820		16,895

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

1.    GENERAL INFORMATION

The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is 36 Golden Square, London W1F 9EE.

The Company has its primary listing on the AiM market of the London Stock Exchange.

This condensed consolidated half-yearly financial information was approved for issue on 25 September 2008.

This interim report does not constitute the company's statutory accounts. The information presented in relation to 31 December 2007 is extracted from the statutory financial statements for the year then ended and which have been delivered to the  Registrar of Companies. The auditors report on the statutory financial statements for the year ended 31 December 2007 was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report(s) and did not contain statements under S237(2) or (3) of the Companies Act 1985.

2.    basis of preparation

This condensed consolidated half-yearly financial information for the half-year ended 30 June 2008 has been prepared in accordance with the AiM Rules for companies. The half-yearly condensed consolidated financial report should be read in conjunction with the annual financial statements for the year ended 31 December 2007.

3.    Accounting policies

The accounting policies adopted are consistent with those set out in financial statements for the year ended 31 December 2007 and that are to apply for the year ended 31 December 2008.

Taxes on income in the interim periods are accrued using the tax rate that would be anticipated to be applicable expected to total annual earnings.

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

4.    Earnings per share and reconciliation between headline and statutory results

Six months ended 30 June 2008		Reported results	Amortisation of acquired intangibles & write off of goodwill	Fair value adjustments to minority put option liabilities	Notional interest on deferred consideration	Headline results
		£000	£000	£000	£000	£000
Revenue		51,769	-	-	-	51,769
Operating profit		7,255	466	-	-	7,721
Share of results of associates		(114)	14	-	-	(100)
Net interest		406	-	(234)	169	341
Profit before taxation		7,547	480	(234)	169	7,962
Taxation		(2,470)	(82)	-	-	(2,552)
Profit AFTER taxation		5,077	398	(234)	169	5,410
Minority interests		(314)	-	-	-	(314)
Profit attributable to equity holders of the Group
		4,763	398	(234)	169	5,096
BASIC EARNINGS PER SHARE
Weighted average number of shares (thousands)		59,085				59,085
BASIC EPS		8.06p				8.62p
Diluted earnings per share
Weighted average number of shares (thousands) as above		59,085				59,085
Add
- Float options		411				411
- LTIP Options		995				995
- Contingent consideration		3,047				3,047
Total		63,538				63,538
DILUTED EARNINGS PER SHARE		7.50p				8.02p

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

Six months ended 30 June 2007		Reported results	Amortisation of acquired intangibles	Fair value adjustments to minority put option liabilities		Headline results
		£000	£000	£000		£000
Revenue		37,309	-	-		37,309
Operating profit		2,822	-	-		2,822
Share of results of associates		54	17	-		71
Net interest		456	-	501		957
Profit before taxation		3,332	17	501		3,850
Taxation		(1,215)	-	-		(1,215)
Profit after taxation		2,117	17	501		2,635
Minority interests		(761)	-	-		(761)
Profit attributable to equity holders of the Group
		1,356	17	501		1,874
BASIC EARNINGS PER SHARE
Weighted average number of shares (thousands)		53,577				53,577
BASIC EPS		2.53p				3.50p
Diluted earnings per share
Weighted average number of shares (thousands) as above		53,577				53,577
Add
- Sharesave options		257				257
- Float options		411				411
- LTIP options		-				-
- Contingent consideration		-				-
Total		54,245				54,245
DILUTED EARNINGS PER SHARE		2.50p				3.45p

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

Year ended 31 December 2007		Reported results	Amortisation of acquired intangibles	Fair value adjustments to minority put option liabilities	Notional interest on deferred consideration	Headline results
		£000	£000	£000	£000	£000
Revenue		87,620	-	-	-	87,620
Operating profit		9,614	608	-	-	10,222
Share of results of associates		281	53	-	-	334
Net interest		(1,939)	-	3,052	257	1,370
Profit before taxation		7,956	661	3,052	257	11,926
Taxation		(3,530)	(182)	-	-	(3,712)
Profit after taxation		4,426	479	3,052	257	8,214
Minority interests		(1,168)	-	-	-	(1,168)
Profit attributable to equity holders of the Group
		3,258	479	3,052	257	7,046
BASIC EARNINGS PER SHARE
Weighted average number of shares (thousands)		56,163				56,163
BASIC EPS		5.80p				12.55p
Diluted earnings per share
Weighted average number of shares (thousands) as above		56,163				56,163
Add
- Sharesave options		159				159
- Float options		411				411
- LTIP options		975				975
- Contingent consideration		595				595
Total		58,303				58,303
DILUTED EARNINGS PER SHARE		5.59p				12.09p

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

5.    SEGMENTAL INFORMATION

      Segmental analysis is provided by reference to the geographical origin of business

The directors believe that the underlying performance of the reported geographical segments is more clearly understood by reporting their performance before amortisation and put option charges. A reconciliation to IFRS GAAP reported operating profit and profit before tax is provided in each case.

Six months to 30 June 2008		UK		Asia & Australia		America		Europe		Total
		£000s		£000s		£000s		£000s		£000s
REVENUE		29,933		14,789		2,108		4,939		51,769
OPERATING PROFIT		5,625		740		252		638		7,255
Add
- Amortisation of intangibles		287		179		-		-		466
HEADLINE OPERATING PROFIT		5,912		919		252		638		7,721
Share of result of associates		-		-		-		(100)		(100)
Net interest		394		36				(89)		341
Headline profit before Taxation		6,306		955		252		449		7,962
Less
- Amortisation of intangibles		(287)		(179)		-		(14)		(480)
- Fair value adjustments to minority put option liabilities		234		-		-		-		234
- Notional interest on deferred consideration		(169)		-		-		-		(169)
Total of headline adjustments		(222)		(179)		-		(14)		(415)
Profit before Taxation		6,084		776		252		435		7,547
Taxation		(1,730)		(567)		(100)		(73)		(2,470)
Profit for the period		4,354		209		152		362		5,077
Minority interests		175		92		17		30		314
Profit attributable to Equity holders of the Group		4,179		117		135		332		4,763
Add
- Headline adjustments above		222		179		-		14		415
- Deferred tax on amortisation of acquired intangibles		(82)		-		-		-		(82)
Headline profit attributable to Equity holders of the Group		4,319		296		135		346		5,096
Headline BASIC EPS										8.62p

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

Six months to 30 June 2007		UK		Asia & Australia		America		Europe		Total
		£000s		£000s		£000s		£000s		£000s
Revenue		22,014		11,306		1,917		2,072		37,309
OPERATING PROFIT		3,077		(360)		58		47		2,822
Headline Operating Profit		3,077		(360)		58		47		2,822
Share of result of associates		(56)		-		-		127		71
Net interest		951		12		2		(8)		957
Headline profit before Taxation		3,972		(348)		60		166		3,850
Less
- Fair value adjustments to minority put option liabilities		(501)		-		-		-		(501)
- Amortisation of intangibles		-		-		-		(17)		(17)
Total of headline adjustments		(501)		-		-		(17)		(518)
Profit before Taxation		3,471		(348)		60		149		3,332
Taxation		(1,034)		(39)		(141)		(1)		(1,215)
Profit for the period		2,437		(387)		(81)		148		2,117
Minority interests		683		32		43		3		761
Profit attributable to Equity holders of the Group		1,754		(419)		(124)		145		1,356
Add
- Headline adjustments above		501		-		-		17		518
Headline profit attributable to Equity holders of the Group		2,255		(419)		(124)		162		1,874
Headline bASIC EPS										3.50p

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

Year to 31 December 2007		UK		Asia & Australia		America		Europe		Total
		£000s		£000s		£000s		£000s		£000s
Revenue		52,765		24,663		4,132		6,060		87,620
OPERATING PROFIT		7,761		550		581		722		9,614
Add
- Amortisation of intangibles		608		-		-		-		608
Headline Operating Profit		8,369		550		581		722		10,222
Share of result of associates		25		-		-		309		334
Net interest		1,448		10		2		(90)		1,370
Headline profit before Taxation		9,842		560		583		941		11,926
Less
- Amortisation of intangibles		(608)		-		-		(53)		(661)
- Fair value adjustments to minority put option liabilities		(3,052)		-		-		-		(3,052)
- Notional interest on deferred consideration		(257)		-		-		-		(257)
Total of headline adjustments		(3,917)		-		-		(53)		(3,970)
Profit before Taxation		5,925		560		583		888		7,956
Taxation		(2,833)		(368)		(207)		(122)		(3,530)
Profit for the period		3,092		192		376		766		4,426
Minority interests		997		59		67		45		1,168
Profit attributable to Equity holders of the Group		2,095		133		309		721		3,258
Add
- Headline adjustments above		3,917		-		-		53		3,970
- Deferred tax on amortisation of acquired intangibles		(182)		-		-		-		(182)
Headline profit attributable to Equity holders of the Group		5,830		133		309		774		7,046
Headline BASIC EPS										12.55p

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

6.    Finance costs

		Six months ended  30 June 2008				Six months ended  30 June 2007		Year  ended 31 December  2007
		£'000				£'000		£'000
Finance costs
Bank interest chargeable		(395)				(7)		(403)
Interest payable on finance leases		-				-		(2)
Other interest payable		(8)				-		(34)
Total interest payable		(403)				(7)		(439)
Notional interest on contingent consideration		(169)				-		(257)
Fair value adjustments to minority shareholder put option liabilities		234				(501)		(3,052)
Total		(338)				(508)		(3,748)

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

7.    Taxation

Income tax expenses are recognised based on management's best estimate of the average annual income tax expected for the full financial year.

The estimated effective annual tax rate for the period to 30 June 2008 is 32.7% (30 June 2007: 36.5%).

The headline average annual tax rate used for the period to 30 June 2008 is 32.1% (30 June 2007: 31.6%). 

The increase in the headline average annual tax rate is mainly due to closing offices reporting losses with no associated tax credits, partly offset by the reduction in the UK Corporation taxation rate, applicable from April 2008, from 30% to 28%.

The difference between the headline and statutory tax rates is caused by a difference in the profit before tax as neither the impact of fair value adjustments to minority shareholder put option liabilities or amortisation of intangible assets has any effect on the tax charge. 

8.   Dividends

		Six months ended  30 June 2008				Six months ended  30 June 2007		Year  ended 31 December  2007
		£'000				£'000		£'000
2007 final dividend 0.00*p (2006 2.43p)		-				1,300		1,300
2007 interim dividend - (2006 0.77p)		-				-		513
		-				1,300		1,813

*The 2007 final dividend of £1,658k (2.75p per share) was paid in July 2008 and therefore not included in the income statement covering the period to 30 June 2008.

The directors propose an interim dividend of 0.87 pence per share (2007: 0.87  pence per share) payable on 21 November 2008 to shareholders who are on the register at 10 October 2008. This interim dividend, amounting to £524k (2007: £513k) has not been recognised as a liability in this half-yearly financial report.

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

9.    ACQUISITIONS

On 12 Feburary 2008 the Group acquired control of F5, a French digital Agency through the acquistion of 82% of its equity. Deferred consideration of £45k will be settled in July 2008, with an estimated contingent payment of £100k to be settled in 30 June 2009.

On 1 May 2008 the Group acquired a further 30% of Play London Ltd (Play), a digital agency, for £43k. The Group had previously held 50% of the equity of Play and accounted for the investment as an associate.

Exercise of put options

On 2 April 2008 the Group acquired the remaining 5.5% of the share capital of Walker Media Holdings Ltd for a cash payment of £3,854k and an issue of 854,978 shares.

On 9 April 2008 the Group paid £5,369k being the contingent consideration on the purchase of the 2007 purchase of 19.5% of the share capital of Walker Media Holdings Ltd

Clear Ideas Ltd

On 16 June 2008, the Group paid contingent consideration of £1,750k in cash, issued 466,867 shares and paid deferred consideration of £686k in cash.

Investment in subsidiaries 

			Clear		Walker Media		F5 (digital France)		PLAY (digital UK)
			£000		£000		£000		£000
Consideration, satisfied by:
Cash paid for acquisition			-		3,854		-		43
Cash settle prior period deferred and contingent consideration			2,436		5,369		-		-
Fair value of deferred and contingent consideration			-		-		145		-
Shares issued			469		945		-		-
			2,905		10,168		145		43
Direct costs of acquisition			-		44		19		-
			2,905		10,212		164		43
LESS
- Fair value of net assets / (liabilities) acquired			-		(70)		-		(29)
- settlement of prior period deferred  and contingent consideration			2,500		5,127		-		-
- adjustment to prior period estimate of contingent consideration			3,580		-		-		-
Goodwill (eliminated) / created			(3,175)		5,155		164		72

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

10.    Deferred and contingent consideration

			Six months ended  30 June 2008				Six months ended  30 June 2007		Year  ended 31 December  2007
			£'000				£'000		£'000
Amounts falling within one year
Deferred			(112)				-		(7,311)
Contingent			-				-		(2,500)
			(112)				-		(9,811)
Amounts falling after one year
Contingent			(4,917)				-		(8,325)
			(5,029)				-		(18,136)

			Six months ended  30 June 2008				Six months ended  30 June 2007		Year  ended 31 December  2007
			£'000				£'000		£'000
Brought forward			(18,136)				(67)		(67)
Exchange difference			-				-		(6)
Acquisitions			(145)				-		(17,879)
Notional interest charge			(169)				-		(257)
Settled
- Cash			10,181				-		351
- Shares			469				-		-
Adjustment to prior period estimate			2,771				67		(278)
Carried forward			(5,029)				-		(18,136)

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

11.    RESERVES

	Share capital	Share premium	Merger reserve	Treasury reserve	Minority interest put option reserve	Foreign exchange reserve	Retained earnings	Subtotal	Minority interests	Total
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
31 December 2006	542	9,618	14,756	(792)	(13,318)	(371)	(1,261)	9,174	576	9,750
Reserve movements for the Six month ending 30 June 2007
Issue of shares	1	176	-	-	-	-	-	177	-	177
Exchange rate movements	-	-	-	-	-	111	-	111	(5)	106
New minority shareholder put options	-	-	-	-	(2,310)	-	-	(2,310)	-	(2,310)
Equity settled share based payments	-	-	-	-	-	-	190	190	-	190
Dividends	-	-	-	-	-	-	(1,300)	(1,300)	(1,209)	(2,509)
Profit for the period	-	-	-	-	-	-	1,356	1,356	761	2,147
30 June 2007	543	9,794	14,756	(792)	(15,628)	(260)	(1,015)	7,398	123	7,521
31 December 2006	542	9,618	14,756	(792)	(13,318)	(371)	(1,261)	9,174	576	9,750
Reserve movements for the Year ending 31 December 2007
Issue of shares for
- acquisitions	55	3,118	5,529	-	-	-	-	8,702	-	8,702
- share save	-	22	-	-	-	-	-	22	-	22
Exchange rate movements	-	-	-	-		689	-	689	(1)	688
Exercise of minority put options	-	-	-	-	8,741	-	8,353	17,094	-	17,094
New minority shareholder put options	-	-	-	-	(2,299)	-	-	(2,299)	-	(2,299)
Transfer between majority and minority reverses	-	-	-	-	-	-	(191)	(191)	191	-
Other	-	-	-	-	-	-	275	275	25	300
Equity settled share based payments	-	-	-	-	-	-	432	432	-	432
Dividends	-	-	-	-	-	-	(1,813)	(1,813)	(1,404)	(3,217)
Profit for the year	-	-	-	-	-	-	3,258	3,258	1,168	4,426
31 December 2007	597	12,758	20,285	(792)	(6,876)	318	9,053	35,343	555	35,898
Reserve movements for the Six months ending 30 June 2008
Exchange differences	-	-	-	-	-	459	-	459	4	463
Issue of shares for acquisitions	13	936	464	-	-	-	71	1,484	-	1,484
Exercise of minority put options	-	-	-	-	2,440	-	2,619	5,059	-	5,059
Equity settled share based payments	-	-	-	-	-	-	125	125	-	125
Transfer between majority and minority reverses							(79)	(79)	79	-
Dividends	-	-	-	-	-	-	-	-	(496)	(496)
Profit for the period	-	-	-	-	-	-	4,763	4,763	314	5,077
30 June 2008	610	13,694	20,749	(792)	(4,436)	777	16,552	47,154	456	47,610

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

12.   Cash generated from operations

			Six months ended  30 June 2008				Six months ended  30 June 2007		Year  ended 31 December  2007
			£'000				£'000		£'000
Revenue			51,769				37,309		87,620
Operating expenses			(44,514)				(34,487)		(78,006)
Operating Profit			7,255				2,822		9,614
Adjustments for:
Depreciation of plant and equipment			724				759		1,463
Losses on sale of plant and equipment			13				9		(36)
(Profit) on sale of intangible assets			(4)				-		(2)
Amortisation on acquired intangible assets			466				-		608
Amortisation of capitalised software intangible assets			37				-		106
Non-cash share based incentive plans			125				190		432
Operating cash flow before movements in working capital and provisions			8,616				3,780		12,185
Decrease / (increase) in trade and other receivables			12,216				7,555		(22,064)
(Decrease) / increase in trade and other payables			(17,872)				(10,746)		18,870
Net cash inflow from operating activities			2,960				589		8,991

M&C SAATCHI PLC

NOTES TO THE INTERIM STATEMENTS

SIX MONTHS ENDED 30 JUNE 2008

13.    Cash consumed by acquisitions 

			Six months ended  30 June 2008				Six months ended  30 June 2007		Year  ended 31 December  2007
Acquisitions			£'000				£'000		£'000
Initial cash consideration
- Clear Ideas Ltd			-				-		(14,508)
- Walker Media Holdings Ltd (19.5% acquisition)			-				-		(8,922)
- Walker Media Holdings Ltd (5.5% acquisition)			(3,898)						-
- Talk PR Ltd			-				-		(3)
- M&C Saatchi Berlin Gmbh			-				-		(358)
- Play London Ltd			(43)				-		-
			(3,941)				-		(23,791)
Cash and cash equivalents acquired			-				-		776
			(3,941)				-		(23,015)
Purchase of associate (Zapping, Spain)			-				(1,542)		(1,587)
Deferred and contingent consideration paid
- Clear Ideas Ltd			(2,436)				-		-
- Walker Media Holdings Ltd     (19.5% share acquisition)			(5,369)				-		-
- Zapping (Associate, Spain)			(2,376)				-		-
Total			(10,181)				(1,542)		-
Total payments made in the period relating to acquisitions			(14,122)				(1,542)		(24,602)

14.    Capital Commitments 

The only significant capital commitment is our agreement to acquire a further 50% of Zapping Publicidad, S.A and its group over the next three years.

 

END

 

 

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