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(Sharecast News) - Shares in M&C Saatchi came under pressure on Thursday, after the advertising agency cut its full-year guidance on the back of mounting economic headwinds and weaker client spending.
Net revenues at the AIM-listed business fell 7.7% in the six months to 30 June, to £103.8m, or by 5.5% on a like-for-like basis.
Operating profits sank 45.3% to £7.5m, while statutory pre-tax profits tumbled 60.2% to £4.3m.
The group, which also provides marketing and other media services, said a "solid" start to the year had been offset by a softer second quarter.
It said an "uncertain" macro environment had led to greater caution among clients, including deferred project spend. Its Australian business was especially hard hit, with underlying net revenues down 26.5% in the country.
As a result, M&C Saatchi downgraded its full-year like-for-like group revenue expectations, to a mid-single digits decline.
Full-year profits were forecast to be in line with the previous year. Analysts had been expecting a near 7% rise in full-year operating profits, to £37.6m.
The firm said it would continue to look at efficiencies in the second half, including cutting certain head office roles and replacing them overseas.
As at 1015 BST, shares in M&C Saatch were down 6% at 158.15p.
Zaid Al-Qassab, chief executive, said: "We have not been immune to the market conditions of the wider industry, as clients reacted cautiously to the geopolitical tensions and the unstable macroeconomic environment.
"While we expect continued macro uncertainty in the second half, we will focus on what is in our control, aiming to deliver on the improving pipeline momentum.
"In the medium term, we continue to improve our operating model, and the strength and diversity of our portfolio."
Berenberg, which has a 'buy' rating on the stock, said: "With the shares having de-rated by 13% over the last three months, we believe that he market was already factoring in some of this weakness.
"We continue to like M&C due to the actions the new management team have taken to improve efficiencies across the group, the focus on improving the mix to higher-growth, higher-margin divisions, and the capital allocation optionality provided by its improving free cash flow profile."
M&C Saatchi, which counts Burberry, Meta and Amazon among its clients, is the latest advertising firm to be hit by economic headwinds and weaker spending.
Earlier this week, Martin Sorrell's S4 Capital cut its profit outlook, while in August WPP posted a slide in interim earnings.