Last close As at 06/08/2026
GBP1.37
▲ −3.50 (−2.49%)
Market capitalisation
GBP166m
M&C Saatchi has reset its proposition under new CEO, Moray MacLennan, outlined at a capital markets day (CMD), with speakers from across the group’s activities and geographies. With eight agency mergers and 14 loss-making entities closed and much-strengthened governance, the group is now well placed to build on its strengths, aligning creative with technology and data. The financial upheaval has not affected client retention or restrained new business performance, which has been strong. The five-year plan sets out targets for 6% revenue CAGR to FY25, with an increase in the operating margin to 18%, three times the current level. Year-end net cash was £33m.
M&C Saatchi |
Making meaningful change
|
Media |
QuickView
1 February 2021 |
Share price graph
Share details
Business description
Bull
Bear
Analyst
|
||||||||||||||||||||||
M&C Saatchi has reset its proposition under new CEO, Moray MacLennan, outlined at a capital markets day (CMD), with speakers from across the group’s activities and geographies. With eight agency mergers and 14 loss-making entities closed and much-strengthened governance, the group is now well placed to build on its strengths, aligning creative with technology and data. The financial upheaval has not affected client retention or restrained new business performance, which has been strong. The five-year plan sets out targets for 6% revenue CAGR to FY25, with an increase in the operating margin to 18%, three times the current level. Year-end net cash was £33m.
New strategy, operating model and growth drivers
M&C Saatchi was effectively an international federation, reported geographically. The new operating model is arranged in five divisions: Global & Social Issues, Brand Experience & Innovation, Connected Creativity, Performance Media and Passion Marketing. Of these, Brand Experience is expected to grow fastest, at a CAGR of 13%, with Connected Creativity, the largest segment by revenue, growing more sedately at +3%. The UK and Australian businesses (the largest by revenue) are targeted to grow at 5% and 4% respectively, with Asia the fastest growing region, at a 13% CAGR, all through to FY25. To achieve these targets, the group needs to work far more collaboratively and make better use of its technological capabilities, data analytics and digital innovation. An emphasis on sustainability and focus on diversity and inclusion also form an integral part of the plan.
Benefits of restructure weighted later in plan
£15m of FY19 revenue was earned in businesses discontinued in FY20, so the FY20 revenue forecasts confirm the resilience of the group over the COVID-19 pandemic. The five-year plan envisages a revenue CAGR of 6%. To achieve the targeted adjusted operating margin of 18% by FY25 requires an operating profit CAGR of over 25%. Some of this can be achieved by the elimination of the loss-making businesses (£4m) and lower cost base (£30m), but it also depends on driving the mix towards higher-margin activities. We would therefore expect the greater benefits to be weighted towards the later stages of the plan period.
Valuation: Yet to reflect ambition of the plan
Consensus forecasts are yet to be fully updated to reflect the content of the CMD. EPS progress will be diluted by the increasing share count due to option liabilities (effectively deferred consideration), but we regard the valuation to be overstating the execution risk, especially as 29% of the market capitalisation is currently cash.
|
Consensus estimates
Source: Refinitiv |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
|
||||||||||||
|
||||||||||||
Research: Real Estate
Triple Point Social Housing REIT (SOHO) has grown its portfolio strongly since IPO, bringing a much-needed new supply of supported housing to market and building its base of secure income. We expect acquisitions, rent indexation and the completion of forward-funded developments to drive further strong earnings growth in FY20 and FY21 and, with rent collection unaffected by the COVID-19 pandemic, further growth in DPS.