Last close As at 05/08/2026
GBP1.37
▲ −3.50 (−2.49%)
Market capitalisation
GBP166m
Research: TMT
M&C Saatchi’s (M&C) H123 results reflect the more challenging agency trading environment, with revenue and operating margin both dipping in the period. Management’s global efficiency programme, implemented in Q1, achieved £0.5m of costs savings in H123 and is expected to deliver annualised savings of £3.8m in FY23, with a target of £10m by end-FY24. The leadership structure has been simplified and M&C continues to invest in its focused specialisms to drive revenue growth. Management remains cautious on the trading outlook for H223, but with the cost savings helping margin momentum through the reminder of the year and through FY24.
M&C Saatchi |
Margin momentum into H223
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15 September 2023 |
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M&C Saatchi’s (M&C) H123 results reflect the more challenging agency trading environment, with revenue and operating margin both dipping in the period. Management’s global efficiency programme, implemented in Q1, achieved £0.5m of costs savings in H123 and is expected to deliver annualised savings of £3.8m in FY23, with a target of £10m by end-FY24. The leadership structure has been simplified and M&C continues to invest in its focused specialisms to drive revenue growth. Management remains cautious on the trading outlook for H223, but with the cost savings helping margin momentum through the reminder of the year and through FY24.
Cost savings help to mitigate revenue decline
The first half results reflected a reduction in client marketing budgets while lead times for new projects widened. Net revenue fell by 7% y-o-y to £120.4m (H122: £129.4m), driven by the 16% fall in Advertising net revenue. Specialisms remained flat year-on-year. Within this, however, Issues and Passions both delivered doubledigit net revenue growth, offsetting the decline in Media, as tech clients reduced their marketing budgets. Operating profit margins fell to 8.3% (H122: 14.0%), reflecting the reduction in the top line, but with the swift cost-saving measures actioned in Q1, the Q2 operating margin improved to 12% and further margin recovery is anticipated in H2. Reported PBT swung to a loss of £5.1m (H122: profit £0.3m). During the period, M&C settled £3.3m of put options in cash, discussed below, and had a working capital outflow of £6.8m, reducing net cash to £15.4m (end-FY22: £30.0m).
Progress against capital markets day targets
At February’s capital markets day, management articulated its strategy to deliver digital-led and high-margin growth, focusing on building its capabilities in data and tech, pursuing M&A and partnership opportunities, and improving internal efficiency. M&C has made solid progress in H123, particularly in its data operations under its Fluency brand. With a significant number of put options settled in H123, management now expects to reduce the put option liability by a further 50% by endFY23, so that minority interests account for just 10% of headline earnings (FY22: 25%). This should provide greater headroom for future M&A.
Valuation: Discount to peers
M&C’s share price has come down c 15% year-to-date, approximately double the median share price decline of 7% for the wider UK advertising sector. It now trades at discounts of 41% on FY23e EV/EBITDA and 34% on FY23e P/E multiples versus our UK peer group.
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Consensus estimates
Source: Refinitiv (priced at 15 September 2023) |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: Investment Companies
The managers of Baillie Gifford US Growth Trust (USA), Gary Robinson and Kirsty Gibson, aim to invest in exceptional US businesses with the potential to grow substantially faster than the market and deliver exceptional returns over the long term. Businesses capable of such growth tend to operate at the cutting edge of technology-led change, and USA has exposure to companies focused on artificial intelligence, space travel and drone delivery. The fluctuating fortunes of growth stocks over the past couple of years, combined with some de-rating of USA’s unlisted holdings, mean that USA’s performance has undershot market returns during the first five years since inception. Cumulative returns over the five years ended August 2023 totalled 49.1% in NAV terms, lagging the market return of 73.8%. However, the managers believe the ‘phenomenal’ fundamental performance of many portfolio holdings, combined with their very good growth prospects, augur well for the company’s ability to realise its return target over the longer term.