M&C Saatchi PLC (LON:SAA) has suspended its dividend and withdrawn guidance for the coming year as the coronavirus pandemic caused a “sharp drop in demand” across its business.
The advertising agency said as a result of the slower uptake of its services its performance in March was “substantially weaker” than in January and February.
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“It is clear that [coronavirus] will continue to have an impact on the business. At this stage, however, it is not possible to accurately predict the scale or duration of the impact”, the company said, adding that as a result, it will not be providing financial guidance for 2020.
Saatchi also said it is taking “wide-ranging action” to mitigate the impact of the pandemic as it anticipated “a further deterioration in the business environment”.
The company said it has eliminated “significant rent, IT and travel expenditure” as well as deferring tax and rent payments.
However, as a result of the current circumstances, the company said it had decided to “suspend shareholder distributions until further notice”, including its final dividend for the year ended 30 December 2019.
In a note on Thursday, analysts at Peel Hunt said the actions to scrap the payment and guidance were “no surprise” and placed their forecasts and target price under review.
"This company was addressing its own internal issues, which were themselves significant. To now face an external economic shock of this nature is extreme. This may allow for faster and more draconian restructuring, but overall it is hard to think of a tougher time for this company", the broker said.
Despite a negative start, the company's shares recovered and were up 9.8% at 34.6p in mid-morning trading.
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