The Week In Review: Boutique status gives M&C Saatchi room to grow

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The Independent Online

The Saatchi brothers, Maurice and Charles, are pursuing a very different strategy with their current advertising venture, M&C Saatchi.

The Saatchi brothers, Maurice and Charles, are pursuing a very different strategy with their current advertising venture, M&C Saatchi.

The company, where Maurice is an executive director (Charles is not involved in the running of it), reported its first results yesterday since listing in July - although the figures refer to a period when it was still a private company.

Unlike Saatchi & Saatchi, where the brothers made their name before being ousted in the early 1990s, M&C Saatchi is resolutely not prepared to expand by acquisition. Neither is it interested in opening offices all over the globe, just to have a presence in as many markets as possible. M&C Saatchi's pitch to clients is all about the fact that it is independent and its expansion plans are all about remaining small enough to be entrepreneurial.

An independent agency means clients do not have to worry about conflicts of interest - integrated media groups also have media buying, PR businesses and so on to flog to their customers. M&C Saatchi purely does the creative work. Although it does not have the world-conquering ambitions, it is now about to expand in Continental Europe, where a greater presence ought to help it win more business.

The interim results were promising, with turnover up 10 per cent and pre-tax profit 9 per cent higher. Buy.

HISCOX

While Hiscox, the Lloyd's of London insurer, has gone from strength to strength, in spite of fears over softening premiums, its share price consistently refuses to respond. This week, it announced another impressive set of interim results - including an increase in net assets per share of 20 per cent, and a 61 per cent rise in earnings per share. Since the start of 2003, during which time the industry has been enjoying the peak in its cycle, Hiscox's shares have risen just 6.5 per cent. Buy.

CAFFE NERO

The nation's addiction to lattes, espressos and cappuccinos has led to profits "cascading" into the cups of Caffè Nero, the high street coffee chain said as it announced a 127 per cent leap in annual profits. Caffè Nero is making money thanks to its focus on a streamlined head office, regional management, supply chain and distribution infrastructure. This means Caffè Nero can now open new stores with little extra expense and get plenty of extra profit. It has also become self-financing, with its cash flow now more than paying for its expansion costs. Buy.

DMGT

The advertising rebound is coming along nicely, according to Daily Mail & General Trust. DMGT has a strong national newspaper division, led by the Daily Mail and Mail on Sunday titles. Display advertising was up 8.5 per cent for the 11 months to the end of August at the nationals. The regional papers continue to perform healthily, with advertising up particularly in the recruitment and property areas. The regionals saw ad sales improve by 5.8 per cent for the 11-month period. But the shares are fully valued. Hold.

RESTAURANT GROUP

The Restaurant Group announced record interim results, with profits up 40 per cent to £9.8m. Trading is continuing to improve, with sales up 5 per cent in the second half so far. This is thanks mainly to the Frankie & Benny's outlets, which enjoy key positions in leisure parks. There is a similarly captive and hungry customer base at airports, where The Restaurant Group has a number of food concessions. Trading has been more difficult though at its high street, Garfunkels, Est Est Est and Caffe Uno. Buy.

UNITE

Student digs are hardly renowned as the most salubrious of locations. Which may help to explain the stock market's relative antipathy towards Unite, a company whose main purpose is to provide accommodation for the country's million-plus student population. As Unite staggers towards its target of reaching profitability by 2005, it has struggled to persuade investors that it can fund its own growth However, the half-year results went a long way towards soothing those fears. Not only did the group manage a maiden interim profit - £400,000 against a £3.5m loss the previous year - but it also unveiled a new seven-year £300m banking facility. Buy.

AB FOODS

Associated British Foods is a sugar-to-clothing conglomerate spanning four businesses. The secret to its success lies partly in its hotchpotch format and partly in the sterling work the management is doing to revive tired brands such as Ryvita. It hardly matters if the group is making less bread from its Australian bakery business if its cheap and cheerful Primark clothing chain is topping analysts' forecasts by shifting mountains of strappy summery vests. The group said second-half operating profits' growth would match the 10 per cent achieved in its first half. Buy.

ALBEMARLE & BOND

Albemarle & Bond, the pawnbroker, announced a 13 per cent increase in pre-tax profits and a proposed annual dividend up 24 per cent yesterday, proving that demand for small, short-term loans is as strong as ever. People without a current account who need cash loans against monthly pay cheques or who want to borrow £100 for a week are not served by banks, building societies or personal loan companies. Albemarle now has a £4.2m loan book in addition to the £9.8m pawnbroking business, which lends against gold jewellery. Hold.

TELEVISION CORPORATION

This independent production company involved with the celebrity reality show Hell's Kitchen has had its demons. But after three years of losses, it yesterday announced a £300,000 profit for the first six months of 2004. This marks the end of its disastrous foray into broadcasting powerboat racing, which proved unpopular. A share placing last year has strengthened its balance sheet and it is now ready to exploit the opportunities of the new Communications Act, which forces public service broadcasters to outsource at least 25 per cent of their programmes to independents. But most of the upside is in the price. Avoid.

GEEST

Geest is in a pickle. The bully boys of food retailing are squeezing the profit margins of food manufacturers, even ones that produce tasty, fresh food like Geest. Its menu of bagged salads, chilled ready meals and wholesome soups was once a recipe for success, appealing to time-pressed, cooking-shy mums and investors alike. But then someone turned up the competition among the supermarket chains, who responded by ordering suppliers such as Geest and Northern Foods to cut their prices. What's more, raw material costs started rising, just when suppliers had no one to pass them on to. Avoid.

West African oil reserves fuel Premier's share surge

Premier Oil has its eyes on prospects in Mauritania, an obscure West African state that is getting the energy industry excited. The City's interest in Thursday's half-year results was firmly focused on Mauritania.

Over half the company's drilling programme for the next 12 months will be in Mauritania and there is at least 25 million barrels of oil that will be booked for Premier's offshore interests there (included in the chart). There are, of course many companies exploring the country's potential.

Premier rather neatly solved several problems through a restructuring a year ago, paying off all debt by selling some assets to two companies that owned half the group (they exchanged their holding), leaving it with a strong balance sheet and an ownership structure more attractive to the City.

Thursday's half-year results showed the impact of the restructuring, with the headline numbers well down on last year. However, taking only continuing operations into account, net profits were up by £1.7m to £14.5m, and production was flat. Like all energy companies, it has benefited from the high oil price. There was some concern that second-half profits would be hit by the pace of development of a field in Indonesia but this was something of a technicality.

Premier shares have motored ahead over the last 12 months. However, Mauritania could add 100p a share to the company's net asset value. Buy.

The above is a selection from the daily Investment Column

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