After having fought off takeover bids over the last year, the £228m advertising and marketing group M&C Saatchi (LON:SAA) has defined its ‘Moving Forward’ strategy to deliver growth in its profits over the next couple of years.

Analyst Ciaran Donnelly, at the company’s brokers Liberum Capital, has upped his Target Price on the group’s shares to 260p. 

They closed last night at 186p after trebled dealing volume in the shares following a Capital Markets Day event for investors.

Established in 1995, the London-based M&C Saatchi group provides advertising and marketing services in the UK, Europe, the Middle East, Africa, Asia, Australia, and the Americas. 

It offers its services in the areas of media and performance, advertising and CRM, sponsorship, branding, and global and social issues. 

Last year it defeated takeover bids from NextFifteen and Advanced Advt.

Ahead of the group announcing its 2022 results on Thursday 23^rd March, Donnelly is estimating that the year will have seen revenues rise from £249m to £271m, with pre-tax profits having risen from £27.3m to £31.8m, generating earnings of 15.2p (10.0p) and enabling a return to dividend payments of 2.5p per share.

For the current year he is already going for £284m sales, £38.0m profits, 20.2p earnings and a 3.8p dividend.

The year to end December 2024 he forecasts could see £298m takings, creating £42.8m profits, with 24.7p of earnings and a 4.1p dividend.

Liberum Capital sees a 40% upside in the group’s share price as the new strategy shows through.

Barclays shares were reeling on Wednesday after the UK bank revealed a disappointing set of results for the 2022 full year. Fears of lower net interest margin and litigation costs were the source of investors discontent and shares in the bank fell over 8% in early trade.

Although Barclays top line income was 14% than last year at £25bn, increased costs due to litigation and impairment charges meant Barclays profit before tax fell 14% to £7bn.

Profit before impairment charges was £8.2bn but macroeconomic deterioration meant the bank set aside £1.2bn for credit impairments.

Barclays also incurred a £1.6bn charge due to the over-issuance of US securities.

“Barclays has bitterly disappointed the market with its full year numbers. Profits have been stunted partly because of a big increase in litigation costs relating to the over-issuance of US securities,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.

“This costly mistake has been known about for some time, but these are now the hard consequences biting the bottom line. Barclays is more than able to stomach this financially, the wider-reaching difficulties come from reputational damage. The tolerance margin for a similar mistake is now very thin.”

Net interest margins grew to 3.54% to 2022 but Barclays cast a doubt over the coming year’s earning potential as they said they expected Net Interest Margins would be above 3.20% – a target that could see Barclay’s NIM fall in the year ahead.

Barclays have increased their distributions to shareholders but the £500m buyback is below expectations.

Glencore shares were slightly weaker on Wednesday morning despite reporting a 60% increase in adjusted EBITDA for 2022, and an additional $1.5bn share buyback programme.

Glencore shares were off by 1.8% at the time of writing on Wednesday.

Unlike the other FTSE 100 diversified miners, Glencore operates a significant energy business and enjoyed the benefits of the elevated prices across hydrocarbons and coal last year.

Glencore’s decision to shrug of the pressure to become more environmentally friendly and push on with their coal business has provided a much needed source of revenue and earnings growth.

Indeed, it was the energy segment of Glencore’s business driving earnings growth in 2022. Their Industrial Assets unit saw EBITDA grow 59% to $27.3bn with energy products including coal adding $13bn to earnings.

Metals earnings were weaker across the board due to the impact of Covid-19 restrictions in China curtailing demand and trading activity.

“The top line may have missed market expectations, but Glencore’s taking full advantage of a messy energy market to line its coffers and there’s good news for shareholders as they get to share in the spoils, with a topped-up dividend and fresh $1.5bn buyback,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

“Glencore’s marketing business is perfectly poised for a scenario like this, fragmented energy markets due to the war in Ukraine meant there’s been an abundance of price discrepancies across multiple world markets – that’s exactly the scenario that makes this business unit tick.”

Glencore will distribute a total of $7.1bn to shareholders for 2022. This includes already announced distributions and a fresh $1.5bn buyback.

Strong corporates earnings and a buzz around potential M&A helped the FTSE 100 to a fresh all-time intraday high on Tuesday with Coca Cola HBC and Vodafone leading the gains.

The FTSE 100 hit 7,996 on Tuesday – an all-time record high for the FTSE 100.

However, the index eased off as the session progressed and we received the latest instalment of US CPI data.

The highly anticipated January US CPI came in slightly above expectations at 6.4%, versus economist expectations of 6.2%. The release will strengthen the argument for slower interest rate hikes as inflation rates are clearly falling, but the timing and pace of future hikes will be a source of uncertainty due to the inflation rate being higher than expected.

Markets will receive an insight into Federal Reserve thinking with a number of speakers lined up for the coming days.

A fractionally hotter inflation rate induced choppy trade global equities with US equity futures swinging from gains to losses. The FTSE 100 was trading at 7,968 at the time of writing.

In a week billed to be dominated by inflation data, it was individual names driving the FTSE 100 higher on Tuesday. Vodafone shot up 4% after Liberty Global took a 5% stake in the beleaguered telecoms group and Coca Cola HBC cheered strong results.

Vodafone

The acquisition of a 5% stake ignited speculation of a full takeover approach from Liberty Global, or indeed another telecoms group.

“Consolidation is the name of the game in the telecoms sector and Liberty Global is taking a £1.2 billion bet that Vodafone is going to be an important cog in the system,” said AJ Bell investment director Russ Mould.

“By acquiring nearly a 5% stake Liberty Global is essentially getting its foot in the door should any new deals start to emerge. The company says the stake is only for investment purposes, but it’s got form in seeking optionality for potential deals.

“Liberty Global has been quietly sitting on a 9.9% stake in ITV for some time, while it also has positions in various telecoms and media groups including Virgin Media O2 and All3Media.”

Vodafone shares have suffered dearly over the past five years and some investors may be hoping they are put out of their misery by a takeover.

Coca Cola HBC

Far from the most glamorous FTSE 100 constituent, Coca Cola HBC was the top riser on Tuesday after the bottling company revealed another strong period of growth.

In the 2022 full year, organic revenue excluding Russia and Ukraine was up 22.7% and comparable EBIT jumped 11.9% to €929.7m.

Coca Cola HBC shares were 6.6% higher to 2,067p at the time of writing.

Leading homewares group UP Global Sourcing (LON:UPGS) put on a good trading performance in its first half-year to end January 2023. Demand remained buoyant for its energy efficient and money saving products.

Encouragingly, the level of general retailer overstocking experienced during 2022 which, along with the challenging macroeconomic environment, caused retailer customers to be cautious in the size of their forward orders, is now reducing in the UK and more normal patterns of order placing have recommenced.

The 2% increase in the period to £87.6m sales was also driven by the group’s online channels.

Ultimate Products sells to over 300 retailers across 38 countries and specialises in five product categories: Small Domestic Appliances; Housewares; Laundry; Audio; and Heating and Cooling. 

Its brands include Salter, Beldray, Progress, Kleeneze, Petra and Intempo, while it also has the cookware licence for Russell Hobbs.

The £136m capitalised company’s products are sold to a broad cross-section of both large national and international multi-channel retailers as well as smaller national retail chains, incorporating discount retailers, supermarkets, general retailers and online retailers.

Group CEO Simon Showman stated that:

“Amidst a tough economic climate, we are delighted that our products, especially those that are energy efficient and money saving, continue to resonate strongly with consumers. Global supply chain disruption has now eased, which has improved stock availability and supported the growing demand from our online customers. 

Looking ahead, we expect that the current softness in global shipping pricing, as well as the partial recovery in Sterling, will provide additional relief against the ongoing inflationary backdrop.

We are increasingly excited by the positive impact that our robotics process automation programme is having on our business. Our bottom-up, demand-led approach to automation enables us to concentrate efforts on the items that can most improve productivity, and this will ultimately enhance operating margins and drive an even better customer experience.”

Analysts Opinions – 250p ‘fair value’ per share

Clive Black and Darren Shirley, sector analysts at Shore Capital, have estimates for the current year to end July for £169.1m (£154.2m) sales, with adjusted pre-tax profits of £17.0m (£15.8m), worth 14.6p (14.3p) in earnings and a dividend per share of 7.3p (7.1p).

For the coming year they go for £179.2m revenues, £18.4m profits. 15.5p earnings and a 7.8p per share dividend.

Over at Equity Development Chris Wickham and Hannah Crowe are looking for £163.4m sales for this year and £173.3m next year and give a ‘fair value’ rating of 250p on the shares.

They are looking for £16.9m profits, 15.1p earnings and a 7.5p dividend for 2023, then for £173.2m sales, £18.5m profits, 15.6p earnings and a 7.8p dividend for the 2024 trading year.

Conclusion – 200p soon

The continued resilience of group sales was actually quite impressive and displays the wide spread of customers taking its products.

The group’s shares eased 8% to 153p on the news, but have performed very well since we featured the group in late October last year, when its shares were defined as ‘looking too cheap’ at just 95p.

I see the shares now basing before a rise to 200p gets underway.

Yet another profits upgrade has been guided by the global promotional products Altitude Group (LON:ALT)for the year to end March 2023.

The company continues to deliver on its strategy and has been experiencing continued robust trading via expansion of its Services and Merchanting programmes. As a result of the strong trading and underlying performance noted in November which has continued into 2023 the group’s board anticipates that FY23 trading will be materially ahead of current market expectations.

CEO Nichole Stella stated that:

“Following a number of positive market updates earlier in the year, we are delighted with this continued progress and are expecting to achieve record year-end results. In addition to our improved trading so far this year, we have invested in growing market share and have a reassuringly strong pipeline of opportunities. We look forward to updating the market further in the forthcoming months and to the next financial year with great enthusiasm.”

The Sheffield-based Altitude Group (LON:ALT) owns and develops the technology solutions and services in North America and the UK.

The £23.7m capitalised company offers patented technology platform to its network with a built-in supply chain, as well as combines an e-commerce trading platform with a cloud-based CRM and order management system for business intelligence requirements; e-commerce website solutions with in-built patented online designer and pre-loaded product databases; patented online design solutions; and virtual sample services that allow personalized design on a product with imprint technique. 

It also provides various services, such as supplier relations, negotiated group discounts, events and exhibitions, catalogues, artwork services, and marketing programmes. 

In addition, the company provides various design tools, applications, and web site pop-up stores for promotional product distributors and suppliers. 

Analyst Opinion – 52p share valuation

Analysts Andy Hanson and Carl Smith at NOMAD and Broker Zeus Capital upgraded their current year estimates.

They are estimating end March 2023 sales of £17.3m (£11.9m), adjusted pre-tax profits of £0.8m (£0.1m), lifting earnings to 1.3p (0.5p) per share.

For the coming year they see £24.4m sales, £1.1m profits and 1.5p per share in earnings.

They have a discounted cash flow valuation of 52p on the group’s share.

Conclusion – good upside

Building up a good market showing, with regular profit upgrades is very positive.

The group’s shares responded to the good news, leaping 20% to 40p. 

When they ease back after initial euphoria the shares will offer good upside to patient investors.