M&C Saatchi has said its simplification strategy has got “traction” as the agency group has cut the number of its subsidiaries by 34%, reduced its property footprint in London by 30% and seen trading continue to perform “ahead of expectations” in the first five months of 2021.
Moray Maclennan, who took over as chief executive of the listed company in January, delivered the upbeat assessment as he delivered 2020's results, although the financial numbers were “unaudited”, because M&C Saatchi’s delayed 2019 annual report was published only in December 2020.
Maclennan has reorganised M&C Saatchi, a network of dozens of agencies around the world, into five divisions to simplify the group, which suffered from accounting irregularities in 2018 and 2019 – partly because of its complexity.
He described it as “a move from being primarily a local and siloed group to one that is connected across disciplines and geographies, fuelled by data and technology”, and shut 20 loss-making subsidiaries.
All five divisions have been profitable since the start of 2021. Maclennan cited strong client retention and growth in several areas, including the global and social issues division, the performance media division and passion marketing, which he described as “connecting direct to consumers through their passions and using data and creativity to do that”.
Maclennan, who has been at M&C Saatchi since it was founded in 1995, went on: “It has got traction – the reformatting and the repositioning of our businesses within those divisions. It’s a very different-sounding company than it was in the past.”
The unaudited 2020 results showed M&C Saatchi’s revenues fell 12.1% to £225.4m on a headline basis and it made a pre-tax loss of £8.5m, roughly in line with 2019.
However, the headline profit before exceptional items was “ahead of expectations” and the company ended 2020 with net cash of £33m.
That has allowed M&C Saatchi to take the relatively recent decision to repay £1m of furlough money that it took from the government last year, Maclennan said.
Reducing office space
The company is also cutting about 17,000 square feet or 30% of the group's real estate in London because it is “now surplus to requirements and we are actively marketing the space”.
M&C Saatchi is keeping its flagship London office at 36 Golden Square in Soho but plans to exit two other sites at 2 and 15 Golden Square, which should produce “significant savings”.
The company needs less space primarily because of “new ways of working”, rather than cuts, and is working towards a 3:2 model in terms of days spent in the office versus home after the pandemic, Maclennan said, predicting “more communal working and less fixed space”.
In a sign that he wants the M&C Saatchi brand to be more visible, he has implemented new company signage in the previously sparsely decorated reception at 36 Golden Square.
Maclennan conceded the auditing of the 2020 accounts has run later than would be expected but said the “knock-on effect” of the late reporting of the 2019 financials and the pandemic were partly to blame.
He is also “actively considering” changing the way M&C Saatchi rewards agency leaders, who will often have minority stakes in their local agency through so-called put options.
In the past, M&C Saatchi has tended to settle those options by issuing shares when they vest – a move that dilutes other shareholders – but it could offer more in cash instead.
Hypothetically, it could reduce the expected dilution of shareholders from 19% to 5% in the coming years, the company estimated.