Print Published 16th Mar 2017, 19:33

M&C Saatchi profits hit by profitable subsidiaries

Stock market listed M&C Saatchi increased its revenue (gross income) by 26% last year, but its post-tax profit was slashed to £144,000 primarily – and ironically – because investments in partially owned subsidiaries like its mobile business, its CRM agency LIDA and its Australian subsidiary performed better than expected.

Such is the bizarre nature of accounting rules that, if a company acquires a majority shareholding in another company that proves to be more successful than initially anticipated, and the vendors have put options over the rest of their shares, the group’s profits have to be reduced by the estimated increase in the present value of the future cost of acquiring those remaining shares.

As a result, M&C Saatchi’s profit for 2016 was reduced by £8.3 million.