Shandwick gets connected

The Investment Column

Investors who bought shares in Shandwick International, the public relations firm, at just a little more than 4p back in the nadir days of 1992 have reason to be grateful for the company's return to favour since the recession. That is not much consolation, of course, for those who have been on the shareholder register since the heady days of late 1991, when the thrusting, globe-trotting firm was being built, and the shares soared as high as 136p.

Today, at a price of 50p, it looks like the bad old days are gone even if the pre-recession heights will not be scaled any time soon. Unveiling sparkling results yesterday for the first half of 1996, with pre-tax profits ahead nearly 11 per cent to pounds 3.6m on revenues 12.6 per cent up to pounds 58.8m, the company confidently predicted double-digit growth in the second half and beyond. The impetus is a roster of leading clients, and the prospect of even more business from truly global customers, who want to take advantage of Shandwick's expensively built network in Europe, Asia Pacific, the UK and the US.

Indications that there are, indeed, such global clients were proved by two key account wins: Digital Equipment and MasterCard. Both see Shandwick, the world's largest "independent" PR firm, as being capable of providing full-service public relations in all the key markets in which they operate.

Big spenders like this can be crucial to future growth. The average spend of all clients is a modest pounds 60,000 a year. The big three, however should account for pounds 2m or more a year each, helping to drive revenues forward nicely.

Shandwick has also branched out impressively into Internet-related services (building web pages, for example), having followed customer demand.

Looking ahead, full-year pre-tax profits ought to reach pounds 9m, climbing to pounds 10m in 1997. With current year earnings per share likely to hit 4.7p, the stock is on an undemanding multiple of about 11 times. As a company that this past year outperformed the market by 25 per cent in earnings terms but underperformed by 25 per cent in share price terms, there appears to be ample room for growth.