M&C Saatchi Reports H1 2025 Profit Drop Amid Australia Weakness, Targets Cost Savings for Recovery

H1 2025: profits dented by Australia, cost savings primed for H2

M&C Saatchi posted a softer first half as a weak Q2 and a sharp downturn in Australia dragged Group performance. On a like-for-like (LFL) basis – which strips out one-offs, disposals and fixes FX to 2025 rates – net revenue fell 5.1% to £103.8 million and operating profit dropped 36.0% to £10.3 million, taking the LFL operating margin to 9.9% (down 4.8 percentage points).

Statutory net revenue was £103.8 million (-7.7%) with statutory operating profit of £7.5 million (-45.3%). Management is targeting full-year profit in line with last year, underpinned by at least £12 million of annualised cost savings being actioned now.

Metric (H1)	LFL 2025	LFL 2024	Change
Net revenue	£103.8m	£109.4m	-5.1%
Operating profit	£10.3m	£16.1m	-36.0%
Operating margin	9.9%	14.7%	-4.8 pps
PBT	£6.9m	£13.3m	-48.1%
EBITDA	£13.8m	£19.6m	-29.6%
Net cash (LFL)	£11.2m	£12.9m	-13.2%
Basic EPS (LFL)	4.21p	7.80p	-46.2%

Quick jargon check: LFL removes one-offs, exited businesses and FX swings to show the underlying trend. Net revenue is revenue after project costs. Margin is operating profit divided by net revenue.

Where the slowdown hit: Australia and a cautious Q2

The Group had a decent start to the year but Q2 turned softer as clients delayed projects amid wider macro and geopolitical jitters. Australia was the clear outlier: APAC LFL revenue fell 22.7%, with 83% of that decline attributed to Australia, which also annualised prior year client losses. Excluding Australia, Group LFL net revenue was broadly flat at -0.7%.

By specialism, the mix story matters:

• Issues grew 6.3% to £28.1 million – this is the public-sector and societal communications work that tends to be less cyclical.
• Media rose 5.4% to £12.1 million, helped by North America.
• Passions & PR declined 8.8% to £16.2 million as brands trimmed campaign spend, particularly in the UK.
• Consulting fell 16.8% to £13.4 million, with 62% of the decline linked to Australia and macro-driven project deferrals.
• Advertising was down 9.5% to £33.9 million, but only -2.5% if you exclude Australia.

Regional winners and laggards

• Middle East: +46.6% – standout growth, led by UAE Advertising and a newer Sports & Entertainment offering.
• Europe: +5.7% – ongoing momentum across Advertising and Sports & Entertainment.
• UK: -3.0% – Issues and Media grew, offset by softer Advertising and Consulting.
• Americas: -3.0% – Consulting delays offset US Advertising growth.
• APAC: -22.7% – Australia weakness the dominant factor.

Decisive actions: reshaping Australia and accelerating the transformation

Management moved quickly in Q2 to address the Australian drag and protect margins:

• New leadership for AUNZ and the closure of an unprofitable full-service Media business, alongside broader restructuring.
• Phase Two of the global transformation programme increased its savings target from £3 million to £5 million annualised via “Middle Office” efficiencies (shared production, data and products).
• Australian restructuring is expected to add at least £7 million annualised savings. Combined, the Group is set to deliver at least £12 million annualised savings in FY25, with at least half in-year.

The strategy also leans into growth areas: the Cultural Power proposition and its AI-driven Cultural Power Index now spans over 4,000 brands; cross-sell under the integrated regional model is gaining traction with clients such as Meta, Aldar and CommBank.

Selective M&A and portfolio pruning

• First deal in seven years: Dune 23, a sports agency in Dubai and Abu Dhabi, acquired in May for initial consideration of £778,210 (net cash outflow £717,358), building in the fastest-growing region.
• Further streamlining: progress on divesting Malaysia, Pakistan and Mexico to licence arrangements, while remaining in discussions to acquire the final tranche of put options for M+C Saatchi (Santa Clara) Brazil in H2.

Cash, dividend and balance sheet discipline

Despite lower profits, cash generation held up. Operating cash conversion was 137% (excluding items related to bonus), helping to fund the FY24 final dividend of 1.95p per share paid in May, the Dune 23 acquisition and put option settlements.

• LFL net cash stood at £11.2 million, including £2.5 million of restricted cash; statutory net cash was £8.7 million.
• Statutory basic EPS was 2.6p (H1 2024: 6.6p). The effective tax rate rose slightly to 27.1%.
• Residual put option liability is £3.5 million at a 170p share price, expected to reduce further in the near term.

Client-stickiness remains a bright spot: clients that represented 93% of spend in 2024 also spent in H1 2025, and there were 171 business wins, including Stockland, Screwfix, Lionel Messi energy drink Mas+, GoPuff and the US Soccer Federation.

Outlook: revenue down, profits targeted to hold the line

The Group now expects FY LFL revenue to be down around mid-single digits given macro headwinds and the Australian reset. Nevertheless, management is targeting full-year profit in line with last year, leaning on the cost programme, flexible variable costs, and the seasonal H2 margin step-up common to the industry.

Medium term, the aim is a return to growth at improved margins, driven by the mix shift toward higher-margin specialisms, the Regional-first operating model, and the Cultural Power proposition.

My take: the good, the bad, and what matters

• Positives: decisive cost action in Australia; strong growth in Middle East and Europe; Issues and Media resilience; 93% client retention and 171 wins; robust cash conversion at 137% giving headroom for dividends and small bolt-ons.
• Negatives: steep drops in Advertising and Consulting where Australia bites; LFL operating margin down to 9.9%; EPS halved on both LFL and statutory bases; UK and Americas still subdued; FX headwinds present.
• Why it matters: the 2025 investment case hinges on executing the £12 million savings and the mix shift to higher-margin specialisms. If those land while Australia stabilises, margins should rebuild in H2 and into 2026.

What to watch in H2 2025

• Australia turnaround: evidence that the closures and leadership changes translate into fewer losses and better win rates.
• Delivery of at least £12 million annualised cost savings, with at least half in-year – a key support for flat FY profit.
• Momentum in Issues and Media, and recovery signs in Consulting and PR as clients release deferred projects.
• Pipeline conversion from notable wins and extensions (e.g., JP Morgan, adidas, Ballantine’s) into billable work.
• Cash discipline: sustaining strong working capital and cash conversion while funding put option settlements and selective M&A.
• Portfolio moves: progress on Malaysia, Pakistan and Mexico licence transitions and the Brazil put option discussions.

Bottom line

This is a reset half-year: profit is down and Australia hurts, but management has swung the axe where needed and boosted the savings target. If H2 brings the usual seasonal uplift and the cost actions flow through, holding FY profit flat against a weaker top line looks achievable. Execution is everything now; watch the Australia numbers, the cost run-rate, and whether Issues and Media keep compounding.