We haven't been able to take payment
You must update your payment details via My Account or by clicking update payment details to keep your subscription.
Act now to keep your subscription
We've tried to contact you several times as we haven't been able to take payment. You must update your payment details via My Account or by clicking update payment details to keep your subscription.
Your subscription is due to terminate
We've tried to contact you several times as we haven't been able to take payment. You must update your payment details via My Account, otherwise your subscription will terminate.
author-image
TEMPUS

Should you buy shares in M&C Saatchi: Here are the pros and cons

The problem facing new chief executive Zaid Al-Qassab is how to apply business disciplines to an industry continually challenging budgets with original ideas

The Times

M&C Saatchi is a name that harks back to a golden age of British advertising, when the brothers Maurice and Charles Saatchi bestrode 1980s London. In a backhanded compliment, the Labour party recently stole the famous “Labour Isn’t Working” poster, created by their previous agency Saatchi & Saatchi, that helped propel Margaret Thatcher into Downing Street and used it to level the same accusation at the Sunak government.

Charles sold out years ago but though Maurice, ennobled in 1996, no longer has a management role he still holds 4.1 million shares in M&C Saatchi, 3.4 per cent of the total, worth £7.3 million. He must have watched horrified as the share price fell to 29p at the outbreak of Covid, but they have since touched 213p and are now at 180p.

Georgina Harvey, a new non-executive director, said last week that the group was going through “an exciting period of transformation”. Arguably that began two years ago when the biggest shareholder, the computer millionaire Vin Murria with a 22 per cent stake, launched a speculative takeover bid for the firm. That failed, and Murria was removed as a director, but she has kept her shares and has a representative on the board.

This year the company recruited a finance director, Simon Fuller, and a new chief executive, Zaid Al-Qassab, former marketing chief at BT and Channel 4. Fuller was previously at Tesco and Reach, the Express and Mirror newspaper publisher, so they both have a feel for the client side of marketing and advertising. They joined another non-executive, Zillah Byng-Thorne, who transformed Future from an ailing magazine publisher into a broadly based media group.

Al-Qassab has sensibly started with the housekeeping chores of cutting costs and selling under-performing operations or turning them into royalty-generating franchises. He is trying to manoeuvre M&C into what he characterises as a Goldilocks position, neither sucking clients into a monster machine nor being too niche to offer a range of services. However, that can also become a squeezed middle that doesn’t offer enough of anything.

Advertisement

The firm’s clients include McDonald’s, the Premier League and Coca-Cola, with a geographical spread that extends to the US, Africa, Asia-Pacific and the United Arab Emirates. Apart from Advertising, the operations are divided into Consulting, Media, Issues and the quirkily named Passions, which covers marketing and public relations.

As Maurice and Charles would be the first to agree, advertising has changed out of recognition since their day. Even though billboards and ads in hard-copy newspapers and magazines still have a place, the cutting edges now are social media, product placement and targeted messaging, where success owes more to data geeks than trendy creatives. Truly the media is the message, as the late Marshall McLuhan observed. But although the answers have changed, the questions for Al-Qassab are the same: how to apply business disciplines to an industry continually challenging budgets with original ideas.

In the half-year to 30 June, like-for-like gross revenue rose 4 per cent to £211.5 million, pre-tax profit was 26 per cent higher at £14.2 million, but net cash fell from £15.4 million to £12.9 million. Diluted earnings per share were 6.4p against a negative 5.2p before. Al-Qassab said “While preserving creativity at the heart of all we do, and leveraging the power of our global brand, we are creating a more agile, integrated, regional-first operating model which focuses on growth. We are excited about the potential we can unleash.” He is still on the lookout for more cost savings, but also planning to make strategic investments by year-end.

Peel Hunt has upgraded its recommendation from hold to add on the back of a 10.8 price to earnings ratio for this year, falling to 8.8 for 2026. People businesses such as Saatchi are always more lowly rated because of their perceived volatility, but that looks fair value. The dividend yield is likely to stay around 1.5 per cent because of the current need to invest in the business.

This is a company looking to get back on track. That always carries risks, but the new regime shows every sign of heading in the right direction within a more stable framework.

Advertisement

Advice Buy

Why The share price does not yet take account of the new management blueprint

CVS Group

Turning pets virtually into people is a little-understood phenomenon that has been growing at an astonishing rate in the past 50 years or so. As a result of more small families, single-person homes and an older population, pets have often become almost full family members, with all that that implies.

In the 1970s, many pets lived on scraps, dogs were confined to kennels and medical care was uncommon. Now diets, medicines and surgery are approaching human levels of sophistication and expense, while kennels lie empty.

This is, of course, sweet music to CVS, the giant of the UK veterinary industry. David Wilton, the chairman, said: “The fundamentals of our sector remain very strong with an increased population of pets post the Covid pandemic, with pet life expectancy increasing and the humanisation of pets resulting in owners generally willing to spend on veterinary care for their animals, albeit subject to cost of living pressures.” The business has expanded to include laboratories, out-of-hours surgeries and, inevitably, crematoria.

Advertisement

The pandemic prompted a burst of demand for puppies and kittens to combat stress and loneliness in lockdown, and those animals are reaching the age when they will need more frequent expert attention.

However, the dominance of a few large players has prompted the Competition and Markets Authority (CMA) to investigate the sector. Faced with limits on domestic expansion, CVS has been scratching at the door to get into other countries. After unsuccessful forays into Ireland and the Netherlands, next stop is Australia and then maybe the US. Too early to tell how well that will work out.

This column rated the shares a hold last January at £16.29, and they rose to £17 but tumbled ahead of the CMA investigation announcement in March. The following month the company revealed a cyberattack had disrupted its operations, after having been without a head of cybersecurity. The shares hit 922p but have since recovered, touching £12 a couple of times without being able to maintain that level.

There is a lot going on, and investors are plainly wary, but the analyst James Bayliss at Berenberg considers the shares undervalued, and the recent slump a buying opportunity.

Advice Buy
Why Long-term prospects attractive

PROMOTED CONTENT