Market Report: M&C Saatchi shares hit a record high
Saturday 20 April 2013
M&C Saatchi chief executive David Kershaw is a big golfer and anyone who is playing 18 holes with him in the near future could be forgiven for feeling a twinge of envy. Shares in the advertising-agency group hit a record high yesterday, soaring 20.5p to 260p, as the annual report had a bullish forecast which boosted sentiment – not to mention the pay packets of the directors.
Mr Kershaw and his co-founders, Maurice Saatchi, Jeremy Sinclair and Bill Muirhead, each earned more than £600,000 in salary, benefits and dividends last year. They also received 886,000 shares apiece after hitting three-year performance targets in December 2012. Based on last night's close, those share awards are now worth over £2m a head.
What's more, the directors look likely to collect further share bonuses at the end of 2014 as the stock price only needs to stay above 198.9p, according to the annual report. The shares have jumped tenfold from a low in 2009.
The money-spinning goes on. The four directors owned the freehold of M&C's London headquarters through their own partnership, 36 Golden Square LLP, which received £2m in annual rent from the ad-agency group. They then made a huge profit by selling the freehold for £47.5m to Strathclyde Pension Fund in March.
There has been idle chatter in marketing circles in recent weeks that the ad-agency group might be on the receiving end of a takeover approach, but the annual report suggested the directors, who have been in charge for 18 years, are in no mood to retire as they focus on growth. "It is the board's ambition that, one day, we will open companies at the rate that our competitors buy them," declared chairman Jeremy Sinclair.
Over at Barclays, early retirement is what happened to bosses Rich Ricci and Tom Kalaris, who were shown the door by the chief executive, Antony Jenkins, this week. Some in the City see this as a buying opportunity as Barclays gets its house in order and the shares nudged up 2.6p to 286.35p.
Banking expert Ian Gordon rates it his "number one pick" with a 345p price target, arguing it isn't too late to buy the stock, which has climbed by nearly half since Mr Jenkins took over late last summer. With head of the investment bank Mr Ricci and head of the wealth and investment Mr Kalaris on their way out there will be "ongoing revenue delivery, but with lower costs", Mr Gordon reckons.
The FTSE 100 managed to move out of the red after five days in negative territory. It closed the day up 42.9 points at 6,286.59 – still well below the high of 6,534 touched in early March.
Energy and mining stocks, so often the bellwether for the Footsie, had a good day – buoyed by the takeover talk surrounding Eurasian Natural Resources Corporation, which soared 61.2p to 291p. ENRC's top shareholder is considering forming a consortium with two other founders and the Kazakh government to buy out the company. Vedanta, Evraz and Anglo-American all climbed in sympathy.
But after good news on Thursday on a lung drug, bad news hit GlaxoSmithKline, down 6p at 1,652p, when Britain's biggest pharmaceuticals firm was accused of market abuse by the Office of Fair Trading over sales of one of its best-selling medicines.
Among the FTSE 250, the worst faller was electrical engineering group Spectris, which revealed a 8 per cent fall in first-quarter sales and warned revenue growth in 2013 will be below its previous forecast. The shares, which have been on a good run, crashed 317p to 1,908p.
"The company has successfully negotiated previous downturns and the cost-reduction actions will help to underpin full-year profits," reckoned Investec.
Comparison site MoneySupermarket, up 6.4p to 197.9p, also got a mention from the same broker who said the group has now "transcended 'mere price comparison' to a sustainable, diversified online/consumer brand". Investec worries they might be "too late to the party", but the fact it has "taken on high-profile competitors" is a reason to still buy the shares which they gave a 215p price target.
Down among the minnows, Walker Greenbank, the luxury interior furnishings group behind upmarket wallpaper brands Sanderson and Harlequin, got a lift after Cazenove Capital Management upped its stake to 14.1 per cent. Walker Greenbank bounced up 0.75p to 96p – just short of its record high set earlier in the week – with a glossy £56m value.
Take a gamble on 888, Peel Hunt recommends. The broker reckons the online casino is simply "Yankee doodle dandy" and gives the shares, which are presently 168.5p, a target price of 181p. Peel says that "average daily revenues were up 8 per cent year on year for the first 10 weeks of the year" and its premium rating is justified given its position in the US.
Mears is expanding its care offering and Panmure Gordon feels this is a reason to dump shares in the social housing maintenance company. It says although Mears has done a good deal in buying ILS, it "continues to have concerns on the spending outlook". The shares are 335p with a 300p target.
"Hill climbing" is Canaccord Genuity's witty assessment of the bookie's latest update. The broker says that William Hill produced "strong" numbers "albeit with growth slowing from the first seven weeks, given some impact from race cancellations and a weaker Cheltenham". The shares are 409.1p with a 400p target and are worth hanging on to.
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