Saatchi Considers Spinoff of Its Consulting Business

Saatchi & Saatchi Co., the world’s largest advertising firm, said Wednesday that it is considering selling or spinning off its consulting unit, possibly signaling its departure from a business it entered with high hopes five years ago. The announcement came on the heels of a sharp drop in earnings.

In a statement, the company said it had appointed a U.S. investment bank, the Blackstone Group, to develop proposals to float stock or sell the unit.

Saatchi entered the consultancy business in 1984 and last year said the division was the world’s 10th largest in that business.

But the advertising group was said to be increasingly disappointed with the consulting unit’s results, and its sale has been rumored.

“Recently, the company has received a number of unsolicited approaches concerning the consulting unit, as well as interesting proposals concerning a flotation of the business as a separate listed company,” it said.

The company’s financial results, released Wednesday, showed a sharp drop in earnings as pretax profit after exceptional items plunged to $30.7 million (20.2 million British pounds) in the six months ended March 31 from $95.9 million (63.1 million pounds) a year earlier.

The consulting unit’s sales were up 37% to $180.1 million (118.5 million pounds). But operating profit declined 12.5% to $11.7 million (7.7 million pounds).

“Although the good growth prospects in the consulting industry have been confirmed by the increased revenues this year, we believe it is inappropriate under market conditions to maintain our aim for world leadership in this sector,” Saatchi said.