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M&C Saatchi delivers underlying growth

The group's international expansion seems to be paying off
March 20, 2017

Advertiser M&C Saatchi 's (SAA) growth plan paid off in 2016, provided you pull out all of the nasties. The group increased underlying operating profit by 24 per cent to £23m for 2016, after revenue rose just more than a quarter. This was driven by a combination of international expansion and contract wins, with operations in the UK - it worked on the Remain campaign ahead of the EU referendum - as well as Europe, Australasia and the Americas all announcing new accounts. The latter was the standout performer, almost doubling revenue at constant currencies on the back of acquisitions. The group also increased its stake in New York-based SS+K from 33 per cent to 51 per cent. It is also planning to open an office in Mexico and expand in Los Angeles.

IC TIP: Buy at 353p

Restructuring the UK advertising agency cost the group £1.6m, pushing the headline operating margin down to 10.2 per cent for 2016, from 10.4 per cent in 2015. The group said margins increased to 10.9 per cent if the cost of restructuring is excluded. Costs associated with amortisation of intangibles, impairments and liabilities relating to put options used by the company in its expansion strategy sapped £16.4m from the headline operating profit.

Analysts at Numis are forecasting adjusted pre-tax profit of £26.5m in 2017, giving headline diluted EPS of 23.6p in 2017 (from £23.8m and 20.6p in 2016).

M&C SAATCHI (SAA)
ORD PRICE:353pMARKET VALUE:£269m
TOUCH:351-363p12-MONTH HIGH:384pLOW: 275p
DIVIDEND YIELD:2.3%PE RATIO:na
NET ASSET VALUE:56p*NET CASH:£3.6m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20121545.3-2.34.95
2013162-2.6-13.05.45
20141696.2-0.26.27
201517912.59.17.21
20162256.80.28.29
% change+26-46-98+15

Ex-div: 8 Jun

Payment: 7 Jul

*Includes intangible assets of £51m, or 67p a share