M&C Saatchi (SAA) continues to defy the downturn in the global advertising market. An 8 per cent increase in like-for-like gross profits and a 19 per cent leap in headline operating profits aren't to be scoffed at, particularly at a time when demand for traditional media buying is diminishing.
Management credits this success to its broad client base, which means Saatchi is not dependent on “pressured multinational goods companies”. New customer wins in the period ranged from the Football Association to Legal & General and Limerick County Council to Twinings.
There’s also something to be said for the group’s adoption of modern marketing methods. Buying just over half of two social influencer agencies in the reported period and launching a new voice activated product trialling platform will increase its exposure to digital trends. Chief executive David Kershaw says these newer businesses command higher margins as clients are less familiar with the technologies. Indeed, headline operating margins expanded by 3.3 percentage points to 16.5 per cent in the reported period.
In fact, the only dark spot in an otherwise excellent set of half-year results was weakness in the US, where operating profits fell by a tenth. But Mr Kershaw says the division is back on track, and broker Numis has maintained its annual pre-tax profit and EPS forecasts of £30.5m and 25.5p, respectively (from £27.6m and 23.1p in 2017).
| M&C SAATCHI (SAA) | ||||
| ORD PRICE: | 380p | MARKET VALUE: | £327m | |
| TOUCH: | 378-382p | 12-MONTH HIGH: | 430p | LOW: 293p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 189 | |
| NET ASSET VALUE: | 93p* | NET CASH: | £4.4m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 121 | 9.7 | 8.98 | 2.13 |
| 2018 | 215 | 11.0 | 7.59 | 2.45 |
| % change | +78 | +13 | -15 | +15 |
| Ex-div: | 25 Oct | |||
| Payment: | 9 Nov | |||
| *Includes intangible assets of £51.5m, or 60p a share | ||||
