M&C Saatchi working on Tory ad campaign

The Conservatives have rekindled their relationship with M&C Saatchi, more than a decade after the ad agency last worked for the party in the runup to the 1997 general election with the Tony Blair "demon eyes" campaign.

David Kershaw, the M&C Saatchi chief executive, confirmed today that the agency was working on a Tory advertising campaign for the impending general election, as the firm reported a 27% fall in pre-tax profits to £10.3m in 2009.

M&C Saatchi's co-founders, brothers Charles and Maurice Saatchi, have had a relationship with the Conservatives going back more than 30 years, having developed the "Labour Isn't Working" slogan that helped carry Margaret Thatcher to victory in 1979 at their previous agency, Saatchi & Saatchi.

M&C Saatchi was set up in 1995 by the brothers and other former Saatchi & Saatchi executives including Kershaw.

The agency itself has not worked with the party on an advertising campaign since the 1997 general election, although the Conservatives' advertising account was handled by a subsidiary, the Immediate Sales Company, during the 2005 election.

M&C Saatchi's controversial 1996 poster advertising campaign portraying Blair with red "demon eyes" won industry awards but drew criticism from the Advertising Standards Authority.

"We have had a relationship with the Tories for the past 32 years so it seems natural to be drafted onto the team," said Kershaw. "We are actively working on assignments now."

Euro RSCG is the Tories' main advertising agency, but a Conservative spokesman confirmed that the party was also working with M&C Saatchi again. "The party has been working with [the Saatchi brothers] off and on since 1978 and they are also part of the team working to help us kick out Labour in this campaign," he said. "Euro RSCG are our main advertising agency. We're delighted with the contribution they've made and will continue to make as we near the general election."

Saatchi & Saatchi, which no longer has any connection with the brothers, was appointed in 2007 to handle the Labour account.

Maurice Saatchi, a director at M&C Saatchi, was co-chairman of the Conservative party between 2003 and 2005, but has had no formal role since the last election.

In 2006 Charles Saatchi sold his 7% stake in M&C Saatchi. He held the role of board director from the formation of the agency until 2004, whereupon he became a "sleeping partner" until effectively ending his relationship with the business completely with the sale of his stake.

M&C Saatchi today reported a 25% fall in operating profits year on year to £10.4m for 2009. The agency also announced that it was selling a 20% stake in its Australian office to the local management for AUS$5m (£3m).

Overall the group reported a 5% year-on-year fall in revenues on a constant currency basis to £103.4m. Operating margin fell from 13.2% to 10%. The company said that the strongest performances came from the Australia and Asian regions which reported year-on-year revenue growth of 12%.

The worst performer, by some stretch, was the Los Angeles office, which reported a 37% year-on-year fall in revenue.

Australia and Malaysia, the strongest growth performers, showed showed like-for-like revenue growth of 8% year on year.

The European operation reported a 3% year-on-year fall in like for like revenues, with a 6% fall in the UK market. The agency's consulting business, Clear, suffered steep revenue declines of 18% year on year.

"Despite the year-on-year decline in the financial results the underlying financial health of the group has not suffered," the company said, attributing a significant portion of the operating profit slump to a £1.4m investment in three new offices. "The board believes that the business is in good shape and we are confident that the group has significant opportunity for growth."

M&C Saatchi invested £1.4m in startup costs to push into new markets by opening offices in Switzerland, Brazil and Japan. This year it has also opened offices in South Africa and China and is also pushing into the Middle East and North Africa.

"The entry into new markets is still in the investment phase but is expected to move into profitability towards the end of the year," said Kershaw. "We expect returns on these investments in 2011."

The company said that it had reduced debt from £6.7m to £4.4m and that the total dividend for 2009 will be 3.62p a share.

"2010 has started well both operationally and financially and the group is well positioned to meet any pick up in demand. Visibility remains an issue, but we remain confident in our business model," said Kershaw.

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