M&C Saatchi plans to expand its luxury goods advertising arm as consumers’ appetites for fine jewellery, handbags and luxury foods strengthens despite fears of a recession.

David Kershaw, the chief executive of the advertising group, which announced a 53 per cent boost to headline pretax profits yesterday, told The Times that a wealthy 10 per cent of the population were spending heavily on designer goods.

“Luxury goods are holding up very well and are proving extremely resilient. This year we are focusing on growing Provenance [its luxury goods arm] significantly,” Mr Kershaw said.

Mr Kershaw, who said that headline profits were up 53.2 per cent to £11.9 million on strong organic growth and acquisitions in Britain, Germany and Spain, also said that digital advertising now accounted for between 10 and 15 per cent of revenues, double what it was a year ago.

M&C Saatchi, which was founded by Maurice and Charles Saatchi, said that an acquisition of Yahoo! by Microsoft would be good for business and create healthy competition, highlighting Google’s dominance of the paid-for search market.

He said that he expected a more challenging year in the United States in 2008 as clients pulled back their spending. The group discerned no signs of an economic slowdown in Europe.

Mr Kershaw also said that the increase in colour advertising in national newspapers had made the medium a more attractive proposition in recent months. National newpapers experienced a 12 per cent increase in colour advertising in the month of January.

The advertising group, whose biggest client is Royal Bank of Scotland, said there was no sign of a decrease in advertising spend in the banking sector.

Shares in M&C Saatchi closed up by 1p at 113½p yesterday. The company’s share price has fallen by more than 30 per cent in the past year.

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