For the year ending December 2018, M&C Saatchi (SAA) saw net revenues (after cost of sales) climb 4 per cent at constant currencies. In the UK, and driven by the sports and entertainment, and performance divisions, like-for-like net revenues increased by 2 per cent. Excluding costs passed directly to customers, the headline operating profit margin here rose from 16 per cent to 17.6 per cent.
Like-for-like revenues for the Americas were up 3 per cent, representing an improvement from last year. Chief executive David Kershaw noted that the group had been focusing increasingly on commercial work over governmental and political projects. The region’s headline operating margin improved from 9.9 per cent to 14.2 per cent (excluding start-up costs), while headline operating profits climbed 43 per cent.
Elsewhere, in the Middle East and Africa, net revenues rose by 11 per cent. That said, operating profits here declined by a quarter – albeit as the company expected – and the headline operating margin dropped from 10.9 per cent to 7.6 per cent, after investment in new business costs. The group notes that this investment “will be returned in 2019 with enhanced net revenue”.
M&C continues to rely on organic growth, rather than acquisition-led expansion – something that could underpin its resilience, as traditional advertising agencies continue to face off against tech giants including Google (US:GOOGL) and Facebook (US:FB). Rather than a threat, management views such new technologies as additional marketing channels for the company’s creativity. Launched in September 2018, Send Me A Sample is “the world’s first voice-activated product trialling platform”, running on Amazon’s (US:AMZN) Alexa and Google’s Assistant platform.
For Mr Kershaw, setting up new ventures within the group permits a competitive advantage over larger peers, which typically wait for acquisitions. The £25m proceeds from the sale of M&C’s remaining 24.9 per cent stake in Walker Media is to be used to continue this start-up philosophy.
House broker Numis expects adjusted pre-tax profits of £33.6m and EPS of 22.8p in 2019, against £29.9m and 22p in last year.
| M&C SAATCHI (SAA) | ||||
| ORD PRICE: | 376p | MARKET VALUE: | £ 334m | |
| TOUCH: | 374-379p | 12-MONTH HIGH: | 411p | LOW: 253p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 38 | |
| NET ASSET VALUE: | 92p* | NET DEBT: | 2.5% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 169 | 6.2 | -0.2 | 6.27 |
| 2015 | 179 | 12.5 | 9.1 | 7.21 |
| 2016 | 225 | 6.8 | 0.2 | 8.29 |
| 2017 | 251 | 9.3 | 3.4 | 9.53 |
| 2018 | 255 | 17.6 | 9.8 | 10.96 |
| % change | +2 | +89 | +185 | +15 |
| Ex-div: | 05 Jun | |||
| Payment: | 05 Jul | |||
| *Includes intangible assets of £50m or 56p a share | ||||
