MDC: Cutbacks In Traditional Media Spend

Money-DownClients are starting to blink amid the macroeconomic uncertainties -- if just a little. That was the word from MDC Partners today on a conference call to discuss third-quarter earnings.

Executives at the Toronto-based agency holding company reported that some clients were cutting back a little on spending --  mostly in traditional media like print and radio, but not TV.

And clients have also deferred or put on hold some $25 million in projects originally set for the fourth quarter. Much of that business will be implemented in the first quarter of 2011, the executives said.

“The continuing economic uncertainties have led a small number of clients to slow down some ongoing projects and the start of some assignments until early next year,” said company CEO Miles Nadal.  “It’s a question of when they will start.”



Nadal said the cuts did not represent “a larger trend across clients, but will have a modest impact on our profitability this year.” And Nadal insisted that just about all clients remained on track with their core marketing plans and that the cutbacks had more to do with “marginal projects.”

MDC Chief Financial Officer David Doft added that clients were not cutting back on holiday marketing efforts, but were putting off some new product launches along with “a couple of straight-out cuts.”

As a result of those client pullbacks, coupled with heavier-than-anticipated investment spending by the company, full-year pre-tax operating profits (EBITDA) could total $22 million less than initially anticipated, according to revised company guidance. In the fourth quarter, “the numbers will be impacted,” acknowledged Doft.

That said. the company continues to be the industry leader in terms of organic revenue growth (ORG), which was up nearly 18% in the third quarter. Growth including acquisitions was up 33% to $238 million.

For the first nine months, revenues were up 44% to $696 million, with ORG of nearly 22%. Revenues for the full year are now expected to be in the range of $915 million to $930 million.

Investment spending for the year will be between $30 million and $35 million -- about $10 million more than initially budgeted for and about $15 million of it coming in the fourth quarter, said Nadal.

The money is being spent on overseas offices in Europe, where clients are giving the company increasing amounts of new business (MDC is also looking at a likely acquisition in Brazil), along with investments in analytics platforms and consumers' insights tools.

Those investments, said Nadal, “will drive future growth.” He noted that slightly over half of the company’s revenues are now derived from digital and social media channels.

MDC had $76 million in new business wins during the first nine months of the year and $29 million in the third quarter. New assignments came from BMW, Activision and Under Armour, among others. 












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