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M&C Saatchi restructures

Management team at its UK advertising business has been reshaped, while other divisions are increasingly pulling their weight
September 22, 2016

Advertising and PR group M&C Saatchi (SAA) has yet to fully recover the loss of clients Direct Line (DLG) and Transport for London last year. The UK advertising division has not fully bounced back, but there is promising performance in newer service areas such as customer relationship management (CRM), which uses data to help businesses better communicate with their customers, and public relations work. UK-centric sales fell just 1 per cent during the first half. Chief executive David Kershaw highlighted recent CRM client additions, including chemist Boots, mobile operator O2 and furniture group Ikea, as well as the Open University. Progress in these areas, as well as in mobile and sports, means there's solid growth on the cards.

IC TIP: Buy at 378p

UK operating profits fell 10 per cent, including £660,000-worth of restructuring costs, but rose 2 per cent without them. The company had sold a 30 per cent stake in its domestic advertising agency to a new management team in a bid to shake-up the division, too. Mr Kershaw said this structure, where group companies are partly owned by their respective management teams, leads to "consistent outperformance" against its rivals.

Elsewhere, like-for-like sales in the US rose 27 per cent, with mobile services performing particularly well. Analysts at N+1 Singer expect pre-tax profit of £23m in the year to December 2016, leading to EPS of 20p, compared with £20.1m and 18.5p in 2015.

 

M&C SAATCHI (SAA)
ORD PRICE:378pMARKET VALUE:£276m
TOUCH:367-378p12-MONTH HIGH:378pLOW: 275p
DIVIDEND YIELD:2.0%PE RATIO:29
NET ASSET VALUE:59p*NET CASH:£26.4m

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201587.68.47.41.61
2016100.210.711.21.85
% change+14+28+53+15

Ex-div: 27 Oct

Payment: 11 Nov

*Includes intangible assets of £47.5m, or 65p a share