M&C Saatchi expects challenging year in U.S

LONDON (Reuters) - UK advertising firm M&C Saatchi SAA.L said on Thursday its first quarter was on track after it enjoyed a good 2007, but it expects a more challenging year in the United States in 2008 as clients pull back their spending.

The group, which was founded by Maurice and Charles Saatchi, reported a 53 percent increase in its 2007 headline profit before tax to 12 million pounds ($24.1 million) on strong organic growth and acquisitions in the UK, Germany and Spain.

Speaking on a conference call, Chief Executive David Kershaw said the group had not seen any signs of an economic slowdown in Europe but said the United States faced a more challenging year because of the tougher consumer environment.

“Overall we remain happy, the outlook remains in line with current expectations,” he said.

“But America is the area where (we) have seen the consumer pulling back more dramatically and so clients have followed suit in terms of their budget, but we haven’t seen that spread into the UK or the rest of Europe,” he said, adding that the United States made up less than 5 percent of group revenues.

“The first quarter has been good and there’s no indication of the second quarter collapsing ... and we’re not seeing budgets being slashed anywhere in Europe.”

M&C said its organic revenue growth in Britain had been driven by a strong performance from the planning and buying agency Walker Media and particularly its digital division.

It also benefited from the investment in Europe which had had a negative impact on earnings in 2005 and 2006.

Analysts at Numis said they believed a substantial cyclical downside had already been priced into the shares and they expected the group to perform better in a downturn than current ratings suggest.

Shares in the group rose 0.9 percent to 113.5 pence.

Reporting by Kate Holton