Ad group M&C Saatchi forecasts weaker sales in 2025 on economic uncertainty

(Corrects year in headline to 2025, from 2024)

By DhanushVignesh Babu

(Reuters) - M&C Saatchi warned on Thursday its like-for-like sales would drop this year as its Australian business was particularly challenging against a tough economic backdrop and delayed spending by clients, sending its shares down 5%.  

The British advertising group joined other advertising firms which have spoken of near-term caution by clients pressured by economic uncertainty. Martin Sorrell’s S4 Capital on Monday cut its profit outlook, while WPP in August warned of weaker client spending after reporting a 48% drop in first-half profit.

"After a solid start to the year, we have not been immune to the market conditions of the wider industry, as clients reacted cautiously to the geo-political tensions and the unstable macro-economic environment," M&C Saatchi CEO Zaid Al-Qassab said in a statement.

M&C Saatchi, whose clients include Amazon, Meta, Adidas and Burberry,  expects its like-for-like sales to decline to mid-single digits for the year ending December 31, with annual profit roughly in line with last year due to cost-saving actions.

Analysts had expected the company's operating profit to increase 6.8% to 37.6 million pounds ($51.12 million) for 2025, according to a company-compiled consensus. 

Shares in the company, which have dropped 12.5% in the past 12 months, fell 5% to 159 pence by 0725 GMT.  

For the six-month period ended June 30,  like-for-like operating profit slumped 36% to 10.3 million pounds year-over-year, pressured by heavy investments in the first quarter and a drop in revenue in Australia.

The group's overall advertising revenue declined by 9.5% in the first half, with gains in the U.S., the UAE and Europe offset by the Australian decline, it said. Excluding Australia, overall advertising revenue would have been down 2.5%.

"We continue to like M&C due to the actions the new management team have taken to improve efficiencies across the group," Berenberg analysts said in a note.

The company has launched a restructuring of its Australian business, installed new leadership and closed an unprofitable full-service media operation in response to the weakness there.    

($1 = 0.7355 pounds)

(Reporting by DhanushVignesh Babu and Yadarisa Shabong in Bengaluru; Editing by Harikrishnan Nair, Sherry Jacob-Phillips and Sharon Singleton)