Demand for mobile advertising and social media marketing services helped M&C Saatchi to more than double its pre-tax profits last year.
The London-based agency group also saw a boost from newer international offices in South Africa, the US and Latin America, which became profitable.
Revenues rose 22 per cent to £153.1m in the year to December 31, with pre-tax profits jumping from £7.8m in 2010 to £16m.
David Kershaw, M&C Saatchi’s chief executive, said that 2012 had “started well”.
“We see pretty good growth,” said Mr Kershaw. “We are looking at double-digit earnings growth next year and going into 2013.”
M&C Saatchi acquired Inside Mobile, an agency dedicated to creating applications and other forms of smartphone marketing, in 2010. The mobile group has contributed 15-20 per cent of M&C Saatchi’s UK profits, doing work for brands including the O2 arena and Speedo. “It tends to be higher margin,” Mr Kershaw said of the group’s mobile work.
Advertisers are seeking advice from agencies as they navigate this fast-changing sector, he said, with much of M&C Saatchi’s mobile revenues coming from existing clients.
“There’s an inverse relationship between client knowledge and agency margin,” said Mr Kershaw. “At the moment, client understanding of mobile is in the foothills, which means there’s a greater dependence on experts. There is not an oversupply of experts yet, which means you get a healthy margin. The next two or three years should be very healthy.”
Advertising spending on mobile devices leapt by 157 per cent last year to £203.2m in the UK, according to figures published on Tuesday by the Internet Advertising Bureau and PwC.
● FT Comment
M&C Saatchi was hit by some big client losses, particularly in Australasia, but won back in other fast-growing areas, such as mobile, where smaller agencies feel they have an entrepreneurial advantage over their larger rivals. As analysts at Numis Securities note: “For smaller agencies, growth is more a function of product, people and clients, than the macroeconomic climate.” After starting the year at 115p, shares in M&C Saatchi fell 2½p on Tuesday to 152½p, leaving them trading at 10 times Numis’ forecast 2012 earnings, appealing for an upwardly mobile agency.
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