Berenberg lowers target price on M&C Saatchi as tariff fallout hits guidance

(Sharecast News) - Analysts at Berenberg lowered their target price on advertising agency M&C Saatchi from 240p to 200p on Thursday following the group's interim results, released earlier in the morning. Berenberg stated that due to client caution in Q2 following Donald Trump's "liberation day" tariff announcement, M&C had downgraded its like-for-like revenue guidance to a mid-single digit decline.

Berenberg noted that due to swift action taken on costs, M&C now expects full-year underlying earnings to be in line with last year, which resulted in an 8% downgrade to its underlying earnings forecast.

However, the German bank also said that with the shares having derated by 13% over the last three months, it believes that the market was already factoring in some of this weakness.

Berenberg said: "We continue to like M&C due to the actions the new management team have taken to improve efficiencies across the group, the focus on improving the mix to higher-growth, higher-margin divisions, and the capital-allocation optionality provided by its improving free cash-flow profile," said Berenberg.

"For its outlook statement, the company notes that it now expects FY25 LFL revenue will be down mid-single digits and is targeting FY25 EBIT to be in line with last year. We now forecast LFL revenue growth of -5% (versus our prior forecast of 2%), and our net revenue forecast falls 8% to £216m."

Berenberg added that M&C currently trades on a full-year price-to-earnings ratio of 9.4x, and a free cash flow yield of 5.5% on its new numbers.

Reporting by Iain Gilbert at Sharecast.com