Brexit is having 'no effect' on ad market, M&C Saatchi chief claims

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M&C Saatchi, the ad agency group that worked on the ill-fated Remain campaign last year, has seen "no Brexit effect at all" on its UK business since the vote.

David Kershaw, the chief executive, who reported an 18 percent surge in headline profits to $29.4 million globally last year, is bullishly predicting strong growth in 2017 too. Group revenues rose 9 percent on a like-for-like basis in 2016.

He said the independent ad agency group has "a pretty wide client base" and it has seen no impact from Brexit except for one client that cancelled "a very Europe-related project" with Clear, its strategy consultancy.

"Anyone using it" as an excuse for a slowdown, he said, referring to Brexit, "I don’t believe them." However, he added: "I’m not saying there won’t be [an impact in future]."

He said the group’s growth has been powered by its long-term strategy of expanding its network of agencies, which include sport and entertainment marketing, mobile, PR and CRM, in more markets around the world.

"Most of it is opening lots of line extensions for existing companies in new territories," he said, referring to how M&C Saatchi Mobile has been launching in New Delhi and Bangalore, and M&C Saatchi Entertainment, which has been expanding in Madrid, Los Angeles and South Africa.

Most of these agencies were started in London and exported to new markets but, in a first, M&C Saatchi is bringing an overseas agency to the UK as it plans for its Australian brand identity agency, Re, to launch in Britain.

"The model is usually ‘start here and export.’ It’s the other way round," Kershaw said.

Management often has an equity stake in each local agency. "That’s why, year after year, we grew twice the rate of the competition," he said.

The UK business increased revenues only 5 percent and profits were dragged down because of the under-performing ad agency.

Kershaw said M&C Saatchi’s search for a new chief executive of the UK creative shop is down to two external candidates.

The London ad agency is "less than 10 percent of the group" but "from an emotional point of view, it’s very important that it’s sorted," Kershaw said.

M&C Saatchi’s previous decision to recruit a UK management team from Lean Mean Fighting Machine is widely regarded as having been unsuccessful.

M&C Saatchi has no plans to sell down its 24 percent stake in Blue 449 after off-loading three-quarters of the business to Publicis Groupe in 2013.

Blue 449 grew strongly last year by winning Asda.

"It’s been a really good transaction all round," Kershaw said, suggesting Publicis Groupe, Blue 449’s management and M&C Saatchi "are all very happy."

Asked if there have been any talks on a sale of the stake in the media agency, he said, "Absolutely none."

Kershaw, who sits on Blue 449’s board, declined to comment on whether the agency should adopt ISBA’s media framework contract. "It’s not for me to tell them what to do with their contracts," he said.

M&C Saatchi acted for David Cameron’s Conservatives at the 2010 and 2015 General Elections but doesn’t tend to work for the party outside elections and isn’t working for Theresa May’s team at the moment.

"One would hope that given our track record, we’d have a chance of doing the next election," he said. "We’d certainly like to."

Statutory pre-tax profits fell to $8.4 million from $15.4 million, partly because of an accounting adjustment for the potential value of futue earn-outs.