Saatchi left with huge loss after pounds 600m write-off

Click to follow
The Independent Online
SAATCHI & SAATCHI yesterday closed the book on its hugely expensive attempt to rule the world of advertising in the 1980s, writing off pounds 600m against the goodwill value of its agencies.

The write-offs left the group with a pounds 595m pre-tax loss for 1992, more than 10 times higher than the previous year. Saatchi is passing its dividend for the third successive year and will make no payments for at least a further two years.

The move, foreshadowed by the Independent last month, is in effect an admission by Saatchi that it vastly overpaid for several big acquisitions that subsequently pushed the group to the brink of financial collapse.

The write-offs - which do not affect the group's cash position - mask a substantial improvement in the underlying performance. Trading profits improved by 60 per cent to pounds 34.2m after including pounds 10m costs of staff cuts, which reduced the total workforce by 1,000 to 12,000. In contrast, turnover improved marginally to pounds 748m last year.

Profits from the US jumped by two-thirds to pounds 16.4m but the deep recession at home pushed the UK operations into a pounds 1.8m trading loss, down from a pounds 2.3m loss in the previous year.

Net cash inflow amounted to pounds 11m, although adverse currency movements led to a rise in average debt from pounds 181m to pounds 194m. The group also owes a maximum pounds 70m over the next five years for acquisitions it has already made.

Charles Scott, who takes over as group chief executive from Robert Louis-Dreyfus, said that the company would not pay a dividend for at least another two years because it aims to reduce debts further. Mr Scott, who with his predecessor masterminded Saatchi's rescue, hopes to achieve a 6 per cent profit margin this year.

Analysts forecast that Saatchi would return to profits of pounds 25m this year, although the company expects little growth in revenues during 1993.

However, there is growing market speculation that Saatchi may also launch a rights issue to trim borrowings.

The shares rose 2p to 185p.

(Photograph omitted)

Comments