It’s been a troubled few weeks for former IC buy tip M&C Saatchi (SAA). Back in August, the advertising group’s shares plunged after it revealed that an internal accounting review into several of its UK subsidiaries had led it to take a one-off exceptional charge of £6.4m. This included £4.9m of specific issues identified in the review, and an extra £1.5m as a “conservative measure”. It had also made a £1.4m adjustment pertaining to property-related assets, amidst its office refurbishment.
M&C’s shares fell again, this time by around a tenth, following the release of its half-year results to June. Management has warned that full-year operating profits and pre-tax profits will land 5-10 per cent below expectations – before exceptional items – and full-year earnings and EPS are likely to see a “relatively greater decline than operating profits”. That’s because a greater share of group profits currently stem from those companies with larger minority shareholdings, operating in higher-tax-rate jurisdictions.
As disclosed last month, the six months under review have seen profits dampened by investments in new businesses. The weighting of revenues has also shifted significantly towards the second half, after recent client wins and additional projects. Statutory profits benefited from an £11.6m gain on disposal of M&C’s remaining 24.9 per cent stake in Walker Media in February.
House broker Numis expects adjusted EPS of 22.8p for 2019, down from 22p in 2018.
| M&C SAATCHI (SAA) | ||||
| ORD PRICE: | 150p | MARKET VALUE: | £137m | |
| TOUCH: | 149-151p | 12-MONTH HIGH: | 405p | LOW: 150p |
| DIVIDEND YIELD: | 7.3% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 78p* | NET CASH: | £9.5m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 213 | 5.0 | 1.8 | 2.45 |
| 2019 | 214 | 9.4 | 9.6 | 2.45 |
| % change | +1 | +88 | +421 | - |
| Ex-div: | 24 Oct | |||
| Payment: | 8 Nov | |||
| *Includes intangible assets of £47.9m, or 52p a share | ||||
