Profits and morale soar at Saatchi: Cut in costs pushes advertising group to 68 per cent rise despite revenue dip

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HARMONY and optimism prevailed at Saatchi & Saatchi yesterday as the advertising group reported a 68 per cent jump in first- half pre-tax profits to pounds 15.3m, prompting a 15p rise in its share price to 176p.

Charles Scott, chief executive, said that morale at the company was higher than at any time since he joined as finance director in 1990. Maurice Saatchi, chairman, said he had a 'magnificent relationship' with Mr Scott despite reports of tension between the two in recent months over cost-cutting and Mr Saatchi's revised remuneration and contract terms.

'I've had more arguments with my wife than with Maurice - and we've only been married for four weeks,' Mr Scott said.

Saatchi's improved profits stemmed mainly from a 6 per cent - or pounds 23m - cut in operating expenses, together with lower interest charges following last year's pounds 73m rights issue.

As foreshadowed, group revenues declined from pounds 404.1m to pounds 379.4m. Businesses sold and the loss of large accounts with Chrysler and Helene Curtis each reduced revenue by pounds 17m. Exchange rate losses were pounds 3.7m.

Operating profits from continuing operations rose by 15 per cent to pounds 21.7m, with margins increasing from 4.4 per cent to 5.7 per cent. Mr Scott said the target was a 10 per cent margin by 1996.

Mr Saatchi said large clients were expected to step up spending on media advertising. One client was planning to lift media spending from 30 per cent of its marketing budget to 47 per cent by 1999.

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