M&C Saatchi is a buy as it advertises rising profits and earnings per share

M&C Saatchi, the ad agency that is home to British Airways and Dixons, was popping Champagne corks yesterday and not just because it has signed up Krug as one of its recent account wins.

M&C Saatchi, the ad agency that is home to British Airways and Dixons, was popping Champagne corks yesterday and not just because it has signed up Krug as one of its recent account wins.

The creative home of the Saatchi brothers published its first full-year results since last July's stock market float and the company was able to advertise a set of decent figures.

One advantage M&C Saatchi has is its size. Although it carries a big name, its operations are small compared with the global titans of the advertising world, such as WPP or Havas. While most famous names in advertising have been swallowed by one of the big agency networks, M&C Saatchi remains independent but with plenty of big name clients. It is forecasting growth in the advertising market of 4-4.5 per cent this year but is able to attack its bigger rivals' market shares while the giants of the industry are playing a defensive game. This can be an advantage when the advertising cycle turns down.

That said, it is likely to witness bid speculation that could help drive the share price in future. Management owns more than 50 per cent so the price would have to be high, but in the long term a deal seems plausible.

In 2004 the company produced fee income of £62.2m, up 4.8 per cent, while operating profit was £7.2m, up 5.3 per cent. Pre-tax profit was up 8.5 per cent to £8.1m and earnings per share were up 6.8 per cent to 9.3p. It trades on a comfortable price earnings multiple of 15 times. Buy.