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New contracts boost M&C Saatchi's profits

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Advertising agency M&C Saatchi’s profits for the first half of the year are up by nearly a quarter after securing contracts with Google and Pernod Ricard.

Google asked the Soho-headquartered company, which was set up by Maurice and Charles Saatchi in 1995, to help rebuild its public image after online privacy issues surfaced last year. Pernod has turned to the agency to promote a new vodka brand it is introducing to Eastern Europe.

M&C Saatchi also won a contract from German engineering giant Siemens in Europe and computer manufacturer Lenovo in China. The advertising agency’s newly created data and social arm gained business from BMW, Boots and Wonga, the money lender.

Analysts said the results had beaten forecasts and shares have since gone up by five per cent. Like-for-like organic revenue growth increased by 21 per cent on the strength of the new business the company has secured.

In the six months to June 30, underlying profits increased from £6.3m to £7.7m, while sales were ahead by 23 per cent at £71.9m.

The profits generated by M&C Saatchi’s UK unit went up by 23 per cent to £6.5m, contributing the bulk of the firm’s profits after a “very good” half.

Profits fell in Asia and Australasia following pricing pressure in both Australasia and China, while the ANZ Bank account was lost, but the UK’s strong performance was supported by the rest of Europe, chief executive David Kershaw said.

“The results for the period show significant progress,” said Kershaw. “Trading has been strong in a tough market. We experienced good growth in our UK and other European businesses.

“The Asia and Australasia region had a more challenging half but we are pleased that our African and American operations are all moving towards profit. Revenue was 23 per cent up on the same period last year and profit before tax increased 24 per cent,” said Kershaw.

“The network is now in place and the new offices are all on course to be profitable by the end of the year. We have more multi-national clients as well as rolling out our higher growth companies,” he said. “We are confident about our progress but conscious of any macro effects beyond our control in 2012. We remain vigilant about costs and maintaining our strong balance sheet.”

Numis analyst Lorna Tilbian increased her profit forecast for the full year to £15m after seeing the figures, an increase of £500,000.

She said: “We believe that further market share gains in the US could help soften the impact of any potential weakness.”

Bottom-line profits increased to £7.1m from £4.8m.

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