Final Results - 2007 Prelims
M&C Saatchi PLC
27 March 2008
M&C SAATCHI PLC
PRELIMINARY STATEMENT
FOR YEAR ENDED
31 DECEMBER 2007
GROUP HIGHLIGHTS
• Revenues up 15.5% to £87.6m (2006: £75.9m)
• Headline profit before tax up 53.2% to £11.9m (2006: £7.8m)
• Headline profit after tax up 66.6% to £8.2m (2006: £4.9m)
• Headline basic EPS up 78.3% to 12.55p (2006: 7.04p)
• Proposed full year dividend up 13.1% to 3.62p (2006: 3.20p)
The headline results referred to above are stated before taking account items
excluded from the statutory results. A summary reconciliation of the statutory
to headline results is presented on page 2.
Commenting on the results, David Kershaw, Chief Executive, said
'2007 was a very successful year for the Group in terms of revenue, profit and
executing our strategy for growth. The core business has continued to thrive and
we have made significant investments in higher growth, higher margin sectors.
We have made a good start to the year and the outlook for the rest of the year
remains in line with current expectations.'
For further information please call:
M&C Saatchi plc 020 7543 4500
David Kershaw, Chief Executive
Tulchan Communications 020 7353 4200
Celia Gordon Shute
Numis Securities
Charles Farquhar 020 7260 1233
Lee Aston 020 7260 1200
M&C SAATCHI PLC
SUMMARY OF RESULTS
INTRODUCTION
The reported statutory results for 2007 reflect the impact of the accounting
changes to which the Group has been subject as a result of adopting and
reporting IFRS (International Financial Reporting Standards) for the first time.
The board considers that these changes do not affect the underlying operating
performance or the cash flows of the Group. Therefore, and in common with our
peers, we have excluded those accounting charges which have materially altered
the results. Those accounting charges are:
•The amortisation of intangible assets under IAS 36.
•The revaluation of minority shareholder put options under IAS 32 & IAS 39.
•The fair value adjustment to deferred consideration (notional interest)
under IFRS 3 & IAS 39
This commentary reports on the financial results for the Group excluding the
impact of these accounting charges.
A reconciliation of the statutory to headline operating results is presented
below:
2007 2006
£000 £000
------- -------
Headline operating profit 10,222 6,274
Headline profit before taxation 11,926 7,786
Less items excluded from headline results
Amortisation of intangible assets - Group company 608 20
Amortisation of intangible assets - associate 53 -
Fair value adjustment of minority put options liabilities 3,052 8,970
Notional interest 257 -
------- -------
Statutory profit before taxation 7,956 (1,204)
------- -------
M&C SAATCHI PLC
SUMMARY OF RESULTS
These results show a very strong performance for 2007. Revenues increased by
15.5% to £87.6m (2006: £75.9m). Headline operating profits increased by 62.9% to
£10.2m (2006: £6.3m) and the headline profit before tax increased by 53.2% to
£11.9m (2006: £7.8m). The headline basic EPS increased 78.3% to 12.55p (2006:
7.04p).
This encouraging level of growth reflects a combination of strong organic growth
as well as the contributions from the acquisitions in the UK, Germany and Spain.
Our investment, expanding the business into continental Europe, which had a
negative impact on earnings in 2005 and 2006 is now making an important
contribution to profits. The contribution has come from a combination of the
organic start up in Paris in 2005 (which is reporting its first full year
profit), the acquisition made in Germany in July 2006, and from the initial 25%
investment in our Spanish associate in March 2007.
Additionally, our previously loss making operations in the US have moved into
profit.
In 2007 we made important steps in executing our strategy of moving the Group
into higher margin disciplines, with the acquisition of Clear Ideas Ltd (Clear).
We also acquired a further 19.5% of Walker Media. Both transactions took place
in July.
M&C SAATCHI PLC
FINANCIAL REVIEW
REVENUE
Revenue increased 15.5% in the year. Like-for-like revenue growth (excluding the
impact of acquisitions and reported at constant exchange rates) was 7.4%.
Inc / Dec
2007 2006 Reported Constant
£000 £000 rates rates
-------- ------- -------- --------
Organic
UK 48,284 44,352 8.9% 8.9%
Asia & Australia 24,663 25,638 (3.8)% (4.6)%
America 3,732 3,632 2.8% 11.5%
Europe 4,235 1,800 135.3% 134.5%
Acquired
Clear 5,454 - - -
Germany 1,252 471 - -
-------- ------- -------- --------
Total Revenue 87,620 75,893 15.5% 15.6%
-------- ------- -------- --------
The organic revenue growth in the UK was driven by the continued growth of
Walker Media and in particular its digital activities. The balance of the
business had a solid year and is in good shape to deliver the growth expected in
2008.
Clear was acquired in July and contributed £5.5m of new revenues from its
operations in the UK (£4.5m), Europe (£0.6m) and America (£0.5m).
The picture in the Asia Pacific region was mixed. The loss of the IAG account at
the end of 2006 in Australia was a setback and the most significant factor
affecting the revenue decline for the region. There were positive performances
from the offices in India, New Zealand and particularly Malaysia. The offices in
Singapore and Thailand did not perform well.
In May 2007 we reorganised our business in America. We shifted the focus of our
advertising activities to LA and ceased work on accounts that needed servicing
in New York. The LA office had an excellent year with revenue up 34.7% at
constant rates on the back of account wins in 2006. The impact of resigning the
New York business reduced the overall revenue growth 11.5% at constant rates.
2007 was a very good year for our European business. Our Paris office continues
its excellent progress winning the Pages Jaunes account. Together with the
contribution from the Berlin office and our Spanish associate (accounted for
under associates so no contribution to revenue) the contribution from our
expansion into continental Europe has been significant.
OPERATING PROFIT
2007 2006 Inc/Dec
£000 £000 £000 %
-------- -------- -------- -------
UK 8,369 6,323 2,046 32.4%
Asia Pacific 550 1,496 (946) (63.2)%
USA 581 (261) 842 -
Europe 722 (1,284) 2,006 -
-------- -------- -------- -------
Group Total 10,222 6,274 3,948 62.9%
-------- -------- -------- -------
The headline operating profit increased 62.9% to £10.2m (2006: £6.3m). The
headline operating margin increased to 11.7% (2006: 8.3%).
The key drivers of profit growth were the strong performance in the UK and the
significant improvements from a loss in 2006 to a profit in 2007 by the USA and
European businesses. Our Asia Pacific business had a disappointing first half
following the loss of the IAG business in Australia at the end of 2006. Trading
improved in the region in the second half, as Australia won significant business
from Westfield and Abu Dhabi Tourism.
ASSOCIATES
The Group's share of headline profit after tax (excluding the amortisation of
intangibles) from its associates increased to £334k (2006: £5k). In March 2007
we acquired an initial 25% of Spanish agency group Zapping/M&C Saatchi. The
contribution from Zapping for the 9 month period was £309k. The balance of £25k
is from our UK based digital business Play London Ltd.
NET INTEREST
The headline net interest contribution (after excluding the notional interest of
£0.3m, on the estimated deferred consideration and the fair value adjustment to
minority shareholder put option liabilities of £3.2m) declined to £1.4m (2006:
£1.5m). The Group earned £1.8m (2006: £1.5m) on the positive operating cash
flows and paid £0.4m (2006: £Nil) on the Group's borrowings which stood at £8.6m
at 31 December 2007.
HEADLINE TAX RATE
The Group's headline tax rate reduced to 31.1% (2006: 36.7%). The reduction is
due to the significant reduction in the unutilised losses that was incurred in
New York, Asia and France in 2006. We expect the tax rate to stabilise around
30% to 31% based on the current operating mix.
MINORITY INTERESTS
The profit after taxation attributable to the Group's minority shareholders
increased marginally to £1.2m (2006: £1.1m). More significantly the proportion
of the headline profit after taxation attributable to the minority shareholders
decreased to 14.2% (2006: 23.3%). This was due to the acquisition of 19.5% of
the remaining 25% minority in Walker Media in July and to the significant
reduction in the operating losses incurred in the USA, Europe and parts of Asia
Pacific, all of which are attributable to the Group's equity shareholders.
CASH FLOW AND GROUP DEBT
In 2007 the headline profit before tax before associates was £11.6m and the
provision for depreciation and the share based incentive plans was £2.0m. The
tax paid in the period was £4.1m and the amount spent on capital expenditure,
excluding acquisitions, was £1.5m. There was a reduction in the positive
contribution to working capital of £3.2m and the dividends paid to the Group's
equity and minority shareholders was £3.2m. The net cash inflow was £1.5m.
The net cash consumed by the Group's acquisitions was £24.6m and this was funded
from a combination of existing Group cash reserves and facilities provided by
RBS. The maximum facility available from RBS is £13m of which £8.6m was being
utilised at the 31 December 2007.
DIVIDEND
The board is proposing a final dividend of 2.75 pence per share (2006: 2.43
pence), giving a full year dividend of 3.62 pence (2006: 3.20 pence), and an
increase of 13.1%. The dividend will be paid on the 7 July 2008 to shareholders
on the register as at the 6 June 2008.
OPERATING REVIEW
STRATEGY
At the time of the float in July 2004 we set out our ambitions to grow M&C
Saatchi into a global network, extending our marketing services into higher
margin and higher growth disciplines and extending our geographic reach into
continental Europe. This year has been a very important one in realising these
goals.
We now have a strong network across the world. This year, our business in
Continental Europe has exited from the investment phase and has made a profit
contribution to the Group. Our US business is now stabilised, contributing a
profit from a previously loss making position. Asia and Australia have had a
tough first half, but ended the year well following some important clients wins.
2007 was a very important year in consolidating the Group's move into attractive
growth markets and higher margin categories. We purchased a further 19.5% of
Walker Media which takes our ownership to 94.5% and further strengthens our
position in this profitable marketplace. Additionally, we acquired Clear in the
first half of the year, which takes us into the growing brand consultancy market
in the UK, Europe and America.
M&C SAATCHI PLC
REVIEW BY REGION
THE UK
It was a very encouraging year for our UK businesses with revenues up by 18.9%
to £52.8m (2006: £44.4m), incorporating organic growth of 8.9%. The operating
profit increased 32.4% to £8.4m (2006: £6.3m). The operating margin increased to
15.9% (2006: 14.3%). Clear made a contribution to revenue of £4.5m in the UK.
2007 was a second successive year of strong growth for Walker Media coming from
both traditional media assignments and from the digital arm Walker-i. The
balance of the business in the UK had a solid year. There were important wins
from Vodafone and Findus by LIDA (our direct and digital business), new
advertising assignments from Ladbrokes and GlaxoSmithKline (Macleans). A new and
growing stream of business this year has been assignments from clients based in
the Middle East but handled out of the UK.
In July we acquired brand consultancy group, Clear. Clear's offering includes
brand strategy, growth mapping, innovation and training and engagement. The
addition of the business to the Group is consistent with our strategy to move
into higher margin and more profitable areas of the marketing services arena.
Additionally, early indications suggest that there will be numerous
opportunities to refer clients to and from the Clear business within the
network.
In July last year Christine Walker who founded Walker Media with Phil Georgiadis
in 1997 chose to retire and step down as Chairman of the business. At this point
the Group acquired her remaining minority shareholding in Walker Media. Phil
Georgiadis also chose to sell half of the equity he owned. M&C Saatchi now holds
94.5% of the equity of Walker Media. Phil Georgiadis has advised the company
that he will exercise his put option over his remaining shares, ahead of the
changes to CGT rules on 5 April. The consideration will be approximately £4.8m
of which 80% will be paid in cash and remaining 20% settled by the issue of new
plc shares.
Phil Georgiadis has taken over as Chairman and the business remains in excellent
shape.
EUROPE
After two years of significant investment our European businesses have made
positive contributions to Group profits. The businesses delivered revenues of
£6.1m (2006: £2.3m) and an operating profit of £0.7m (2006: £(1.3)m), with an
operating margin of 11.9% (2006: (5.7)%).
Our French office which opened in 2006 continues its excellent progress with
very significant new business wins from Pages Jaunes and Jameson (Pernod
Richard). They have also extended their offering with a move into Corporate PR.
2007 is the first full year which includes a contribution from our German
business, based in Berlin, with important client wins from Coca Cola
(Apollinaris Water) and the Green Party of Germany.
In March we extended our European reach into Spain following the acquisition of
an initial 25% of Madrid based agency, Zapping. We will acquire a further 26% in
2008 and a final 24% in 2009.
The acquisition of Clear gives the Group a presence in Amsterdam. The office was
opened 2005 and contributed £0.6m of revenues in the second half.
ASIA AND AUSTRALIA
Performance in the Asia Pac region was mixed, the first half was disappointing
followed by a more stable second half (and the retention and win of some
important clients for the region). Revenue was down by 3.8% and operating
profits were down to £0.6m (2006: £1.5m). The operating margin declined to 2.2%
(2006: 5.8%).
Australia is the biggest market in the region with 63% of the revenue share. It
has been one of our most dynamic markets over the last 13 years; the office has
consistently won significant accounts and has award winning creative
credentials. As previously reported the business lost a critical client, IAG at
the end of 2006. Following this disappointment, the business won significant new
business from Westfield and from Abu Dhabi Tourism, which provides encouragement
for the current year. The office has been very successful at retaining and
growing business from other important clients, particularly Optus and we believe
they begin 2008 in good shape with a focus on new business and improving the
operating margin.
The Asian businesses are now being managed by new regional CEO, Chris Jaques
hired in December 2007 and as a result, our strategy has been under review. We
are working to build on the good regional performers such as Hong Kong, India
and Malaysia while developing new approaches in the other key markets.
AMERICA
In May 2007 we reorganised our business in America and now our advertising
activities are now based in LA. Our other marketing service activities in the
region are based in New York which includes Clear. We incurred reorganisation
costs of £0.3m. The Clear office was opened 2007 and is ahead of budget, revenue
were £0.4m from July.
Our refocused business in LA had an excellent year with revenues up by 34% (at
constant rates). The operating profit for the region increased by £0.9m to £0.6m
(2006: £(0.3)m) and the operating margin increased to 14.1% (2006: (7.2)% ). In
the fourth quarter we observed trading conditions soften, and a tightening of
fees with a resulting negative impact on revenues. While the year ended well,
full year operating profits fell below our own expectations.
OUTLOOK
The prospects for our UK business are good, particularly in the higher margin
areas such as Clear and Walker Media. Our UK based advertising and marketing
services business is also performing well in a very competitive market having
risen to third in the Campaign ranking for 2007. We expect our European
businesses to progress, as they continue to move out of investment phase.
Conditions look more challenging in America as the economic sentiment continues
to weaken. The early signs in Australia are positive and we have plans underway
to strengthen the Asian business.
Overall 2008 has started well and the outlook for the full year remains in line
with current expectations.
M&C SAATCHI PLC
UNAUDITED STATUTORY CONSOLIDATED INCOME STATEMENT
2007 2006
Year ended 31 December Note £000 £000
Billings 412,746 368,645
---------------------------------- ----- -------- --------
Revenue 3 87,620 75,893
---------------------------------- ----- -------- --------
Operating costs 4 (78,006) (69,639)
---------------------------------- ----- -------- --------
Operating profit 2,3 9,614 6,254
---------------------------------- ----- -------- --------
Share of results of associates 5 281 5
Finance income 6 1,809 1,540
Finance costs 7 (3,748) (9,003)
---------------------------------- ----- -------- --------
Profit / (loss) before taxation 2,3 7,956 (1,204)
---------------------------------- ----- -------- --------
Taxation on profit / (loss) 8 (3,530) (2,857)
---------------------------------- ----- -------- --------
Profit / (loss) for the year 4,426 (4,061)
---------------------------------- ----- -------- --------
Attributable to:
Equity shareholders of the Group 2 3,258 (5,209)
Minority interests 1,168 1,148
---------------------------------- ----- -------- --------
Profit / (loss) for the year 4,426 (4,061)
---------------------------------- ----- -------- --------
Earnings per share
Basic 2 5.80p (9.70)p
Diluted 2 5.59p (9.70)p
Headline results
Headline operating profit 2 10,222 6,274
Headline profit before tax 2 11,926 7,786
Headline profit after tax attributable to equity
shareholders 2 7,046 3,781
M&C SAATCHI PLC
UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Year ended 31 December 2007 2006
£000 £000
Profit for the year 4,426 (4,061)
Currency translation differences 828 (410)
Tax effect on gains and losses recognised directly in
equity (145) -
Gains from exercising put options in minority 8,353 -
interests
---------------------------------- -------- --------
Total recognised income and expenses for the year 13,462 (4,471)
---------------------------------- -------- --------
Attributable to:
Equity shareholders of the Company 12,294 (5,619)
Minority interests 1,168 1,148
---------------------------------- -------- --------
13,462 (4,471)
---------------------------------- -------- --------
M&C SAATCHI PLC
UNAUDITED CONSOLIDATED BALANCE SHEET
At 31 December Notes 2007 2006
£000 £000
Non current assets
Intangible assets 61,409 15,357
Investments in associates 10 4,086 -
Plant & equipment 3,954 3,531
Deferred tax assets 2,034 1,676
Other non current assets 565 460
---------------------------------- ----- -------- --------
72,048 21,024
---------------------------------- ----- -------- --------
Current assets
Trade and other receivables 74,872 48,321
Current tax assets 519 88
Cash and cash equivalents 16,895 31,284
---------------------------------- ----- -------- --------
92,286 79,693
---------------------------------- ----- -------- --------
Current liabilities
Trade and other payables (86,850) (66,510)
Current tax liabilities (1,610) (1,036)
Other financial liabilities (18) (34)
Deferred and contingent consideration 11 (9,811) (67)
Minority shareholder put option liabilities (6,854) (11,077)
---------------------------------- ----- -------- --------
(105,143) (78,724)
---------------------------------- ----- -------- --------
Net current (liabilities) / assets (12,857) 969
Total assets less current liabilities 59,191 21,993
Non current liabilities
Deferred tax liabilities (1,604) (141)
Other financial liabilities (8,531) (29)
Deferred and contingent consideration (8,325) -
Minority shareholder put option liabilities (3,691) (11,211)
Other non current liabilities (1,142) (862)
---------------------------------- ----- -------- --------
(23,293) (12,243)
---------------------------------- ----- -------- --------
Total net assets 35,898 9,750
================================== ===== ======== ========
Equity
Equity attributable to shareholders of the parent
Share capital 12 597 542
Share premium 12 12,758 9,618
Merger reserve 12 20,285 14,756
Treasury reserve 12 (792) (792)
Minority interest put option reserve 12 (6,876) (13,318)
Foreign exchange reserve 12 318 (371)
Retained earnings / (loss) 12 9,053 (1,261)
---------------------------------- ----- -------- --------
35,343 9,174
---------------------------------- ----- -------- --------
Minority interests 12 555 576
---------------------------------- ----- -------- --------
Total equity 35,898 9,750
================================== ===== ======== ========
UNAUDITED CONSOLIDATED CASH FLOW
Year ended 31 December Notes 2007 2006
£000 £000
Cash generated from operations 13 8,991 18,716
Tax paid (4,092) (3,408)
---------------------------------- ----- -------- --------
Net cash flow from operating activities 4,899 15,308
---------------------------------- ----- -------- --------
Cash generated from investing activities
Acquisitions 14 (24,602) (635)
Proceeds from sale of plant and equipment 23 16
Purchase of plant and equipment (1,401) (1,707)
Purchase of capitalised software (107) -
---------------------------------- ----- -------- --------
Net cash from investing activities (26,087) (2,326)
---------------------------------- ----- -------- --------
Cash generated from financing activities
Dividends paid to equity holders of the company (1,813) (1,377)
Minority dividend paid (1,404) (1,004)
Purchase of own shares - (792)
Repayment of finance leases (39) (108)
Inception of bank loans 13,000 -
Repayment of bank loans (4,514) -
Interest paid (437) (20)
Interest earned from trading entities 1,553 1,085
Interest received on centrally held cash 256 455
Interest on finance leases (2) (13)
---------------------------------- ----- -------- --------
Net cash from financing activities 6,600 (1,774)
---------------------------------- ----- -------- --------
Net (decrease) / increase in cash and cash (14,588) 11,208
equivalents
---------------------------------- ----- -------- --------
Cash and cash equivalents at the beginning of the 31,284 20,457
period
Effect of exchange rate changes 199 (381)
---------------------------------- ----- -------- --------
Cash and cash equivalents at the end of the period 16,895 31,284
---------------------------------- ----- -------- --------
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes
1. Basis of preparation
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.
The 2007 preliminary financial statements were approved for issue on 26 March
2008.
The financial information included in this report does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985, and is unaudited.
The comparative figures for the year ended 31 December 2006 do not constitute
the Group's statutory accounts for that financial year. Those accounts, which
were prepared under UK GAAP, have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The auditor's report on those statutory
accounts was unqualified, did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their report, and
did not contain a statement under section 237(2) or (3) of the Companies Act
1985.
The unaudited financial information presented in this document has been prepared
in accordance with International Financial Reporting Standards (IFRS) adopted by
the European Union and therefore the Group financial statements comply with
Article 4 of the EU IAS Regulation.
As this report is the Group's first IFRS report IFRS 1, First-time Adoption of
International Financial Reporting Standards, has been applied. The financial
statements should be read in conjunction with the Group's statement on the
impact of IFRS on financial statements, which was published on 21 September
2007, along with note 16 which shows an explanation of how the transition to
IFRS has affected the reported financial position, financial performance and
cash flows of the Group. This Statement includes reconciliations of equity and
profit or loss for comparative periods reported under UK GAAP to those reported
for those periods under IFRS.
The Group has adopted all of the standards and interpretations that were
mandatory for accounting periods beginning on or after 1 January 2007 that are
relevant to the operations of the Group.
Headline results
The directors believe that the headline results and headline earnings per share
provide additional useful information on the underlying performance trends of
business to shareholders. In addition the headline result is used for internal
performance management and the calculation of rewards in the Group's Long Term
Incentive Plan (LTIP) scheme. The term headline is not a defined term in IFRS.
The items that are excluded from headline results are the fair value gains and
losses on liabilities caused by our put option agreements, amortisation of
intangible assets created in business combinations and charges as a result of
goodwill impairment.
Accounting Policies
The accounting policies adopted are consistent with those set out in the
statement on the impact of IFRS on financial statements issued on 21 September
2007.
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
2. HEADLINE RESULTS AND EARNINGS PER SHARE
The analysis below provides a reconciliation between the Group's statutory
results and the headline results with the associated earnings per share
calculations.
Basic and diluted earnings per share is calculated by dividing profit
attributable to equity holders of the Group by the average number of shares in
issue during the year.
Year ended 31 December 2007 Reported Amortisation of Fair value Notional Headline
results acquired adjustments to interest on results
intangibles minority put deferred
option consideration
liabilities
£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 shareholders
of the Group 3,258 479 3,052 257 7,046
---------------- -------- --------- -------- --------- ----------
EARNINGS PER SHARE
Basic earnings per share
Weighted average number
of shares (thousands) 56,163 56,163
---------------- -------- --------- -------- --------- ----------
BASIC EARNINGS PER
SHARE 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
- 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 - 2007 PRELIMINARY STATEMENT
Notes - Continued
2. HEADLINE RESULTS AND EARNINGS PER SHARE (continued)
Year ended 31 December 2006 Reported Amortisation of Fair value Headline
results acquired adjustments to results
intangibles minority put
option
liabilities
Note £000 £000 £000 £000
---------------- ----- -------- --------- -------- ----------
Revenue 75,893 - - 75,893
---------------- ----- -------- --------- -------- ----------
Operating
profit 6,254 20 - 6,274
---------------- ----- -------- --------- -------- ----------
Share of results of
associates 5 - - 5
Net interest (7,463) - 8,970 1,507
---------------- ----- -------- --------- -------- ----------
Profit before taxation (1,204) 20 8,970 7,786
---------------- ----- -------- --------- -------- ----------
Taxation (2,857) - - (2,857)
---------------- ----- -------- --------- -------- ----------
Profit after taxation (4,061) 20 8,970 4,929
---------------- ----- -------- --------- -------- ----------
Minority interests 1,148 - - 1,148
---------------- ----- -------- --------- -------- ----------
Profit attributable
to equity shareholders
of the Group (5,209) 20 8,970 3,781
---------------- ----- -------- --------- -------- ----------
EARNINGS PER SHARE
Basic earnings per share
Weighted average number
of shares (thousands) 53,677 53,677
---------------- ----- -------- --------- -------- ----------
BASIC EPS (9.70)p 7.04p
---------------- ----- -------- --------- -------- ----------
Diluted earnings per share
Weighted average number
of shares (thousands)
as above 53,677 53,677
Add
- Sharesave options 259 259
- Options 411 411
---------------- ----- -------- --------- -------- ----------
Total 54,347 54,347
---------------- ----- -------- --------- -------- ----------
DILUTED EARNINGS PER
SHARE (9.70)*p 6.96p
---------------- ----- -------- --------- -------- ----------
* Due to losses the numerical calculation of diluted earnings per share results
is a figure which is more than the basic earnings per share. As such the diluted
figure has been reported as equal to the basic figure.
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
3. Segmental information
The Group's primary reporting format for reporting segments is by geographical
market
Year ended 31 December 2007 UK Asia and America Europe Total
Australia
Note £000 £000 £000 £000 £000
---------------- ----- -------- --------- -------- --------- ----------
REVENUE 52,765 24,663 4,132 6,060 87,620
---------------- ----- -------- --------- -------- --------- ----------
Operating profit 7,761 550 581 722 9,614
---------------- ----- -------- --------- -------- --------- ----------
LESS excluded items
- Amortisation of intangibles 608 - - - 608
---------------- ----- -------- --------- -------- --------- ----------
HEADLINE OPERATING
PROFIT 8,369 550 581 722 10,222
---------------- ----- -------- --------- -------- --------- ----------
Share of results of associates 25 - - 309 334
Net interest 6,7 1,448 10 2 (90) 1,370
---------------- ----- -------- --------- -------- --------- ----------
HEADLINE PROFIT BEFORE
TAXATION 9,842 560 583 941 11,926
---------------- ----- -------- --------- -------- --------- ----------
ADD BACK excluded items
- 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 after taxation 3,092 192 376 766 4,426
---------------- ----- -------- --------- -------- --------- ----------
Minority interests 997 59 67 45 1,168
---------------- ----- -------- --------- -------- --------- ----------
Profit attributable to
equity shareholders of
the Group 2,095 133 309 721 3,258
---------------- ----- -------- --------- -------- --------- ----------
LESS excluded items
- Headline adjustments above 3,917 - - 53 3,970
- Deferred tax on amortisation
of acquired intangibles (182) - - - (182)
---------------- ----- -------- --------- -------- --------- ----------
HEADLINE PROFIT
ATTRIBUTABLE TO EQUITY
SHARE HOLDERS OF THE
GROUP 5,830 133 309 774 7,046
---------------- ----- -------- --------- -------- --------- ----------
HEADLINE EPS 12.55p
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
3 Segmental information (continued)
Year ended 31 December 2006
UK Asia and America Europe Total
Australia
Note £000 £000 £000 £000 £000
---------------- ----- -------- --------- -------- --------- ----------
REVENUE 44,352 25,638 3,632 2,271 75,893
---------------- ----- -------- --------- -------- --------- ----------
Operating profit 6,323 1,496 (261) (1,304) 6,254
---------------- ----- -------- --------- -------- --------- ----------
LESS excluded items
- Amortisation of
intangibles - - - 20 20
---------------- ----- -------- --------- -------- --------- ----------
HEADLINE OPERATING
PROFIT 6,323 1,496 (261) (1,284) 6,274
---------------- ----- -------- --------- -------- --------- ----------
Share of results of
associates 5 - - - 5
Net interest 6,7 1,455 62 7 (17) 1,507
---------------- ----- -------- --------- -------- --------- ----------
HEADLINE PROFIT BEFORE
TAXATION 7,783 1,558 (254) (1,301) 7,786
---------------- ----- -------- --------- -------- --------- ----------
ADD BACK excluded items
- Amortisation of intangibles - - - (20) (20)
- Fair value adjustments to
minority put option
liabilities (8,970) - - - (8,970)
- Notional interest on
deferred consideration - - - - -
---------------- ----- -------- --------- -------- --------- ----------
Total of headline
adjustments (8,970) - - (20) (8,990)
---------------- ----- -------- --------- -------- --------- ----------
Profit before taxation (1,187) 1,558 (254) (1,321) (1,204)
---------------- ----- -------- --------- -------- --------- ----------
Taxation (2,373) (598) (128) 242 (2,857)
---------------- ----- -------- --------- -------- --------- ----------
Profit after taxation (3,560) 960 (382) (1,079) (4,061)
---------------- ----- -------- --------- -------- --------- ----------
Minority interests 1,042 31 67 8 1,148
---------------- ----- -------- --------- -------- --------- ----------
Profit attributable to
equity shareholders of
the Group (4,602) 929 (449) (1,087) (5,209)
---------------- ----- -------- --------- -------- --------- ----------
LESS excluded items
- Headline adjustments above 8,970 - - 20 8,990
---------------- ----- -------- --------- -------- --------- ----------
HEADLINE PROFIT
ATTRIBUTABLE TO EQUITY
SHARE HOLDERS OF THE
GROUP 4,368 929 (449) (1,067) 3,781
---------------- ----- -------- --------- -------- --------- ----------
HEADLINE EPS 7.04p
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
4. Operating costs
Year ended 31 December 2007 2006
£000 £000
Total staff costs 53,763 47,949
Other costs 24,243 21,690
------------------------- -------- --------
Total costs 78,006 69,639
------------------------- -------- --------
Other costs include
Amortisation of intangibles
- Acquired intangibles 608 20
- Capitalised software 106 61
Depreciation of plant equipment 1,463 1,151
Losses on disposal of fixed assets 36 5
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
5. SHARE OF ASSOCIATES
Year ended 31 December 2007 2006
£000 £000
Share of associates' profit before taxation 491 7
Share of associates' taxation (157) (2)
Amortisation of intangible (53) -
------------------------- -------- --------
281 5
------------------------- -------- --------
6. FINANCE INCOME
Year ended 31 December 2007 2006
£000 £000
Bank interest receivable 1,771 1,540
Other interest receivable 38 -
------------------------- -------- --------
Total finance income 1,809 1,540
------------------------- -------- --------
7. FINANCE EXPENSE
Year ended 31 December 2007 2006
£000 £000
Bank interest payable (403) (3)
Interest payable on finance leases (2) (13)
Other interest payable (34) (17)
------------------------- -------- --------
Total interest payable (439) (33)
------------------------- -------- --------
Notional interest on deferred consideration (257) -
Fair value adjustments to minority shareholder put options
liabilities (3,052) (8,970)
------------------------- -------- --------
Total finance expense (3,748) (9,003)
------------------------- -------- --------
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
8. TAXATION
Year ended 31 December 2007 2006
£000 £000
Current taxation
Taxation in the year
- UK (3,223) (2,280)
- Overseas (1,119) (916)
Withholding taxes payable (7) -
Utilisation of previously unrecognised tax losses 128 -
Adjustment for over provision in prior periods 138 68
------------------------- -------- --------
Total (4,083) (3,128)
------------------------- -------- --------
Deferred taxation
Origination and reversal of temporary timing differences 606 271
Effect of changes in tax rates (53) -
------------------------- -------- --------
Total 553 271
------------------------- -------- --------
Total taxation (3,530) (2,857)
------------------------- -------- --------
The difference between the actual tax and the standard rate of corporation tax
in the UK applied to profits for the year are as follows:
Year ended 31 December 2007 2006
£000 £000
Profit / (loss) before taxation 7,956 (1,204)
Taxation at UK Corporation tax rate of 30% (2,387) 361
Tax effect of associates 93 1
Expenses not deductible for tax (212) (249)
Different tax rates applicable in overseas jurisdictions (93) (56)
Effect of changes in tax rates on deferred tax (53) -
Withholding taxes (7) -
Utilisation of previously unrecognised tax losses 128 -
Adjustment for over provision in prior periods 138 68
Tax losses for which no deferred tax asset was recognised (145) (291)
Adjustment for (over) provision in prior periods (915) (2,691)
Tax losses for which no deferred income tax asset was
recognised (77) -
------------------------- -------- --------
(3,530) (2,857)
------------------------- -------- --------
9. DIVIDENDS
Year ended 31 December 2007 2006
£000 £000
2006 final dividend 2.43p (2005 1.78p) 1,300 965
2007 interim dividend 0.87p (2006 0.77p) 513 412
------------------------- -------- --------
1,813 1,377
------------------------- -------- --------
Proposed 2007 final dividend of 2.75p £1,642k.
Dividends relate to the profit of the following years:
Year ended 31 December 2007 2006
£000 £000
Interim dividends 513 412
Final dividends 1,642 1,300
------------------------- -------- --------
2,155 1,712
------------------------- -------- --------
Headline dividend cover 3.2 2.2
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
10. ACQUISITIONS
CLEAR IDEAS LTD
On 12 July 2007 the Group acquired 100% of the share capital of Clear Ideas Ltd
(Clear). The acquisition was satisfied with an initial cash payment of £13.2m
and an issue of 3,444,791 shares. Deferred contingent consideration will be paid
over the period 2008 to 2011 subject to the performance of the business. As at
31 December 2007 the value of contingent consideration is £11.9m.
For the year ending 31 December 2007 Clear had revenues of £10.8m and an
operating profit of £2.4m.
Book & fair
value
£000
Non current assets
Intangibles 23
Property, Plant and equipment 423
------------------------- --------
446
------------------------- --------
Current assets
Trade and other receivables 4,034
Other current assets 864
Cash and cash equivalents 776
------------------------- --------
5,674
Current liabilities (2,263)
Non current liabilities -
------------------------- --------
3,857
------------------------- --------
M&C SAATCHI BERLIN (2006 ACQUISITION)
On 24 July 2006 the Group acquired 80% of 03 International Projects GmbH
(renamed M&C Saatchi Berlin GmbH). In 2007 final consideration of £358k was paid
(2006 contingent consideration £67k).
EXERCISE OF PUT OPTIONS
In July 2007 the Group acquired 19.5% of the share capital of Walker Media
Holdings Ltd from its minority shareholders satisfied by an initial payment of
£8.8m cash and an issue of 1,888,236 shares.
In May 2007 the Group acquired 6.3% of the share capital of Talk PR Ltd from the
company's minority shareholders with an issue of 105,956 shares.
ZAPPING / M&C SAATCHI
On 8 March 2007 the Group acquired 25% of the Zapping Publicidad SA group of
companies, with a commitment to acquire a further 26% on 1 July 2008 and 24% on
1 July 2009.
ACCOUNTING METHODS
IFRS 3 requires the acquiree's identifiable assets and liabilities to be
recognised at fair value at the acquisition date. The acquisition of Clear Ideas
Ltd in 2007 and M&C Saatchi Berlin GmbH in 2006 fall within the scope of IFRS3.
The acquisition of additional shares in Walker Media Holdings Ltd and Talk PR
Ltd due to the exercise of put options does not change the nature of our
control. The transactions fall outside the scope of IFRS3 business combinations.
Goodwill arose on the exercise of these put options, being the excess of the
fair value of the consideration over the Group's interest in the value of the
identifiable net assets acquired.
The acquisition of 25% of Zapping / M&C Saatchi is accounted for as an
associate.
INVESTMENT IN SUBSIDIARIES
Clear Walker Media Talk PR Contingent Total 2006
consideration
paid
£000 £000 £000 £000 £000 £000
Consideration,
satisfied by:
Cash 13,948 8,799 - 383 23,130 674
Fair value of
deferred and
contingent
consideration 10,535 5,127 - (67) 15,595 67
Shares issued 5,563 2,964 175 - 8,702 -
--------------- -------- -------- -------- -------- -------- -------
30,046 16,890 175 316 47,427 741
--------------- -------- -------- -------- -------- -------- -------
Direct costs
of acquisition 559 123 3 12 697 67
--------------- -------- -------- -------- -------- -------- -------
30,605 17,013 178 328 48,124 808
--------------- -------- -------- -------- -------- -------- -------
LESS
- Fair value
of net assets
/(liabilities) 3,857 (275) - - 3,582 39
- Intangible
assets acquired 5,833 - - - 5,833 20
- Deferred tax
acquired (1,648) - - - (1,648) -
--------------- -------- -------- -------- -------- -------- -------
Goodwill created 22,563 17,288 178 328 40,357 749
--------------- -------- -------- -------- -------- -------- -------
Goodwill acquired 23 - - - 23 -
--------------- -------- -------- -------- -------- -------- -------
Goodwill
additions 22,586 17,288 178 328 40,380 749
--------------- -------- -------- -------- -------- -------- -------
Goodwill represents the value of our staff and our investments in potential
future profits.
Investment in Associate
2007
Zapping / M&C Saatchi £000
Consideration, satisfied by:
Cash 1,368
Fair value of deferred consideration 2,216
--------------------- --------
3,584
--------------------- --------
Direct costs of acquisition 219
--------------------- --------
3,803
--------------------- --------
LESS
- Fair value of net assets 131
- Intangible assets acquired 95
--------------------- --------
Goodwill created 3,577
--------------------- --------
11. Deferred and Contingent consideration
2007 2006
£000 £000
Amounts falling within one year
- Deferred (7,311) -
- Contingent (2,500) (67)
------------------------- -------- --------
(9,811) (67)
------------------------- -------- --------
Amounts falling after one year
- Contingent (8,325) -
------------------------- -------- --------
(18,136) (67)
------------------------- -------- --------
2007 2006
£000 £000
------------------------- -------- --------
1 January (67) -
------------------------- -------- --------
Exchange difference (6) -
Acquisitions (17,879) (67)
Notional interest charge (257) -
Paid 351 -
Adjustment to prior period estimate (278) -
------------------------- -------- --------
31 December (18,136) (67)
------------------------- -------- --------
Contingent consideration is estimated based on projections.
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
12. RESERVES
Share Share Merger Treasury Minority Foreign Retained Subtotal Minority Total
capital premium reserve reserve interest put exchange earnings interests
option reserve
reserve
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000
--------------- ------ ------ ------ ------ ------ ------ ------ ------- ------ ------
1 January 2006 542 9,618 14,756 - (13,219) - 4,800 16,497 549 17,046
Exchange
differences - - - - - (371) - (371) (39) (410)
Capital additions - - - - - - - - 90 90
Deferred tax
on options - - - - - - 36 36 - 36
Equity settled
share based payments - - - - - - 246 246 - 246
New minority shareholder
put options issued - - - - (99) - - (99) - (99)
Transfer between
majority and
minority reserves - - - - - - 213 213 (213) -
Dividends - - - - - - (1,377) (1,377) (959) (2,336)
Purchase of
own shares - - - (792) - - - (792) - (792)
Loss for the year - - - - - - (5,179) (5,179) 1,148 (4,031)
--------------- ------ ------ ------ ------ ------ ------ ------ ------- ------ ------
31 December 2006 542 9,618 14,756 (792) (13,318) (371) (1,261) 9,174 576 9,750
--------------- ------ ------ ------ ------ ------ ------ ------ ------- ------ ------
Issue of shares for
acquisitions 55 3,140 5,529 - - - - 8,724 - 8,724
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 reserves - - - - - - (350) (350) 350 -
Other - - - - - - 434 434 (134) 300
Equity settled
share based payments - - - - - - 432 432 - 432
Profit for the year - - - - - - 3,258 3,258 1,168 4,426
Dividends - - - - - - (1,813) (1,813) (1,404) (3,217)
--------------- ------ ------ ------ ------ ------ ------ ------ ------- ------ ------
31 December
2007 597 12,758 20,285 (792) (6,876) 318 9,053 35,343 555 35,898
--------------- ------ ------ ------ ------ ------ ------ ------ ------- ------ ------
The definitions of the reserves reported in the above note can be found in Note 15.
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
13. Cash generated from operations
2007 2006
£000 £000
Revenue 87,620 75,877
Operating expenses (78,006) (69,639)
------------------------- -------- --------
Operating profit 9,614 6,238
------------------------- -------- --------
Adjustments for:
Depreciation of plant and equipment 1,463 1,212
(Profit) / losses on sale of plant and equipment (36) 5
(Profit) on sale of software intangibles (2) -
Amortisation of acquired intangible assets 608 20
Amortisation of capitalised software intangible assets 106 -
Non cash share based incentive plans 432 213
------------------------- -------- --------
Operating cash flow before movements in working capital
and provisions 12,185 7,688
------------------------- -------- --------
(Increase)/decrease in debtors (22,064) 4,146
Decrease in creditors 18,870 6,882
------------------------- -------- --------
Net cash flow from operating activities 8,991 18,716
------------------------- -------- --------
14. Cash consumed by acquisitions
2007 2006
£000 £000
Initial cash consideration including capitalised
acquisition costs
- Clear Ideas Ltd (14,508) -
- Walker Media Ltd (8,922) -
- Talk PR (3) -
- M&C Saatchi Berlin Gmbh (358) (748)
------------------------- -------- --------
(23,791) (748)
------------------------- -------- --------
Less cash and cash equivalents acquired 776 113
------------------------- -------- --------
(23,015) (635)
------------------------- -------- --------
Purchase of associate (Zapping) (1,587) -
------------------------- -------- --------
(24,602) (635)
------------------------- -------- --------
15. DEFINITION OF TERMS
Ordinary share capital
Total issued share capital at nominal value.
Share premium
Premium paid for shares above share capital, where that premium was not taken to
merger reserve.
Merger reserve
Premium paid for shares above share capital, caused by the acquisition of more
than 90% of subsidiaries shares, less any impairment or amortisation of the
investment (which is released to retained earnings).
Treasury Reserve
Amount paid for own shares acquired.
Minority Interest put Option reserve
Corresponds to related debit to the initial fair value of the liability in
respect of the put options at creation. When the put option is exercised the
related amount in this reserve is taken to goodwill.
Foreign Exchange reserve
Gains and losses on translating net assets of overseas operations.
Retained Earnings
Cumulative gains and losses recognised.
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
16. First Time adoption of international financial reporting standards
This is the first year that the Group presents its financial statements in
accordance with IFRS as adopted by the European Union. The following disclosure
is required in the transition year, as the last Group financial statements were
for the year ended 31 December 2006 and the date of transition is 1 January
2006.
The 2006 comparatives in the financial statements have been revised so that they
are compliant with the IFRS based Group accounting policies in note 1. The
following reconciliation show the impact of the transition from UK GAAP to IFRS.
FiRst time adoption exemptions taken (IFRS 1)
• We have not restated any business combinations prior to 1 January 2006
(IFRS 3).
• Translation differences on all foreign operations as at 1 January 2006 are
treated as nil (IAS 21).
Reconciliation from UK GAAP to IFRS
The following reconciliations are presented below in order to explain the effect
of the transition to IFRS and to show how the comparative results have been
restated:
• Reconciliation of profit for the year ended 31 December 2006;
• Reconciliation in movements of 1 January 2006 balance sheet; and
• Reconciliation in movements of 31 December 2006 balance sheet.
The IFRS adjustments included within these reconciliations are explained below.
Reconciliation of Profit for the Year Ended 31 December 2006
UK GAAP IFRS 3 IAS 32 & IAS 39 IAS 39
(IFRS format) Acquisitions Put options Liability Other IFRS
recognition
£000 £000 £000 £000 £000 £000
note a note b note c note d
--------------- ------- -------- -------- -------- ------ ---------
Billings 369,490 - - - (845) 368,645
--------------- ------- -------- -------- -------- ------ ---------
Revenue 75,877 - - 16 - 75,893
Operating costs (71,354) 1,735 - - (20) (69,639)
--------------- ------- -------- -------- -------- ------ ---------
Operating profit 4,523 1,735 - 16 (20) 6,254
--------------- ------- -------- -------- -------- ------ ---------
Share of results of
associates 15 - - - (10) 5
Finance income 1,540 - - - - 1,540
Finance costs (41) - (8,970) - 8 (9,003)
--------------- ------- -------- -------- -------- ------ ---------
Profit / (loss)
before taxation 6,037 1,735 (8,970) 16 (22) (1,204)
--------------- ------- -------- -------- -------- ------ ---------
Taxation on
profits (2,886) - - (5) 34 (2,857)
--------------- ------- -------- -------- -------- ------ ---------
Profit / (loss)
after taxation 3,151 1,735 (8,970) 11 12 (4,061)
--------------- ------- -------- -------- -------- ------ ---------
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
Reconciliation in movements in 1 January 2006 Balance Sheet
UK GAAP IAS 32 & IAS 39 IAS 39
(IFRS format) Put options Liability
recognition Other IFRS
£000 £000 £000 £000 £000
note b note c note d
--------------- ------- -------- -------- ------ ---------
Non current assets
Intangible assets 14,592 - - - 14,592
Investments in associates 81 - - (81) -
Plant, equipment 3,194 - - - 3,194
Deferred tax assets 354 - 959 (36) 1,277
Other non
current assets 243 - - - 243
--------------- ------- -------- -------- ------ ---------
18,464 - 959 (117) 19,306
--------------- ------- -------- -------- ------ ---------
Current assets
Work in progress 3,277 - - (3,277) -
Trade and other receivables 49,953 - - 3,277 53,230
Current tax assets 599 - - - 599
Cash and cash equivalents 20,486 - - - 20,486
--------------- ------- -------- -------- ------ ---------
74,315 - - - 74,315
--------------- ------- -------- -------- ------ ---------
Current liabilities
Trade and other payables (56,088) - (3,196) - (59,284)
Current tax liabilities (2,760) - - - (2,760)
Other financial
liabilities (121) - - - (121)
Minority shareholder
put option liabilities - (5,540) - - (5,540)
--------------- ------- -------- -------- ------ ---------
(58,969) (5,540) (3,196) - (67,705)
--------------- ------- -------- -------- ------ ---------
Net current assets 15,346 (5,540) (3,196) - 6,610
--------------- ------- -------- -------- ------ ---------
Total assets less current
liabilities 33,810 (5,540) (2,237) (117) 25,916
--------------- ------- -------- -------- ------ ---------
Non current liabilities
Deferred tax liabilities (21) - - - (21)
Other financial liabilities (36) - - - (36)
Minority shareholder
put option liabilities - (7,679) - - (7,679)
Other non current
liabilities (1,215) - - 81 (1,134)
--------------- ------- -------- -------- ------ ---------
(1,272) (7,679) - 81 (8,870)
--------------- ------- -------- -------- ------ ---------
Total net
assets 32,538 (13,219) (2,237) (36) 17,046
=============== ======= ======== ======== ====== =========
Equity
Share capital 542 - - - 542
Share premium 9,618 - - - 9,618
Merger reserve 14,756 - - - 14,756
Minority interest put
option reserve - (13,219) - - (13,219)
Retained earnings 6,700 - (1,864) (36) 4,800
--------------- ------- -------- -------- ------ ---------
31,616 (13,219) (1,864) (36) 16,497
--------------- ------- -------- -------- ------ ---------
Minority interests 922 - (373) - 549
--------------- ------- -------- -------- ------ ---------
Total equity 32,538 (13,219) (2,237) (36) 17,046
=============== ======= ======== ======== ====== =========
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
Reconciliation in movements of 31 December 2006 Balance Sheet
UK GAAP IFRS 3 IAS 32 & IAS 39 IAS 39
Liability
(IFRS format) Acquisitions Put options recognition Other IFRS
£000 £000 £000 £000 £000 £000
note a note b note c note d
--------------- -------- -------- -------- -------- ------ --------
Non current assets
Intangible assets 13,555 1,735 - - 67 15,357
Investments in
associates 81 - - - (81) -
Plant equipment 3,618 - - - (87) 3,531
Deferred tax
assets 693 - - 954 29 1,676
Other non
current assets 460 - - - - 460
--------------- -------- -------- -------- -------- ------ --------
18,407 1,735 - 954 (72) 21,024
--------------- -------- -------- -------- -------- ------ --------
Current assets
Work in progress 2,416 - - - (2,416) -
Trade and other
receivables 45,900 - - - 2,421 48,321
Current tax
assets 88 - - - - 88
Cash and cash
equivalents 31,284 - - - - 31,284
--------------- -------- -------- -------- -------- ------ --------
79,688 - - - 5 79,693
--------------- -------- -------- -------- -------- ------ --------
Current liabilities
Trade and
other payables (63,330) - - (3,180) - (66,510)
Current tax
liabilities (1,036) - - - - (1,036)
Other financial
liabilities (34) - - - - (34)
Deferred
consideration (67) - - - - (67)
Minority shareholder
put option liabilities - - (11,077) - - (11,077)
--------------- -------- -------- -------- -------- ------ --------
(64,467) - (11,077) (3,180) - (78,724)
--------------- -------- -------- -------- -------- ------ --------
Net current assets 15,221 - (11,077) (3,180) 5 969
-------------- -------- -------- -------- -------- ------ --------
Total assets
less current
liabilities 33,628 1,735 (11,077) (2,226) (67) 21,993
--------------- -------- -------- -------- -------- ------ --------
Non current liabilities
Deferred tax
liabilities (141) - - - - (141)
Other financial
liabilities (29) - - - - (29)
Minority shareholder
put option liabilities - - (11,211) - - (11,211)
Other non current
liabilities (938) - - - 76 (862)
--------------- -------- -------- -------- -------- ------ --------
(1,108) - (11,211) - 76 (12,243)
--------------- -------- -------- -------- -------- ------ --------
Total net assets 32,520 1,735 (22,288) (2,226) 9 9,750
=============== ======== ======== ======== ======== ====== ========
Equity
Share capital 542 - - - - 542
Share premium 9,618 - - - - 9,618
Merger reserve 13,553 1,203 - - - 14,756
Treasury reserve (792) - - - - (792)
Other reserves - - (13,318) - - (13,318)
Foreign exchange
reserve - - - - (371) (371)
Retained
earnings / (loss) 8,437 532 (8,970) (1,640) 380 (1,261)
--------------- -------- -------- -------- -------- ------ --------
31,358 1,735 (22,288) (1,640) 9 9,174
--------------- -------- -------- -------- -------- ------ --------
Minority interests 1,162 - - (586) - 576
-------------- -------- -------- -------- -------- ------ --------
Total equity 32,520 1,735 (22,288) (2,226) 9 9,750
=============== ======== ======== ======== ======== ====== ========
M&C SAATCHI PLC - 2007 PRELIMINARY STATEMENT
Notes - Continued
Notes to IFRS adjustments
a) IFRS 3 Business combinations
Under IFRS goodwill is not amortised, instead annual impairment reviews are
conducted. As the Group has elected not to apply IFRS 3 (business combinations)
retrospectively, the only adjustment is to reverse the 2006 amortisation charge.
b) IAS 32 & IAS 39 Minority shareholder put options
IAS 32 & IAS 39 requires a valuation of the liability Group companies have to
minority shareholders that have the right to exchange their minority
shareholdings in the subsidiary companies for shares in M&C Saatchi plc (a put
option) at their creation (or at the Group's transition to IFRS) and then at
each reporting date. The movement in the valuation of the liability is charged
to the income statement (there is no revaluation of the reserve).
c) IAS 39 Liability recognition
IAS 39 requires a liability to be recognised based on the legal obligation to
pay; UK GAAP recognises a liability where there is a reasonable expectation that
the liability will be paid. Many of our contracts are formed verbally and this
gives rise to uncertainty which is treated differently by UK and IFRS GAAP.
d) Other
Other adjustments have been made in respect of IAS 38 intangible assets, IAS 1
and IAS 39 presentation of financial statements (associates), IAS 12 deferred
tax, IAS 21 creation of a foreign currency reserve and IAS18 billings
recognition.
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