Gurjit Degun
Dec 5, 2019

M&C Saatchi shares crash 40% after US$15.2 million adjustment to results

Investigation into accounting errors by PwC also found 2018 half-year reported profit was adjusted by about $8.3 million.

Kershaw: predicts stronger trading performance in 2020
Kershaw: predicts stronger trading performance in 2020

M&C Saatchi’s shares crashed by more than 40% Wednesday morning after it was forced to make adjustments of £11.6 million (US$15.2 million) to its results following an investigation into accounting errors.

The business first revealed the mistake over the summer and appointed PwC to carry out an independent review, which also found that there are errors dating back to 2014.

Following the review, adjustments of £11.6 million will be made, "apportioned between its 2018 and 2019 financial results".

Separately, PwC found that the agency's 2018 half-year reported profit was adjusted by around £6.4 million (US$8.3 million).

The trading update added: "Such adjustments may have occurred in half-year reports since 2014." M&C Saatchi said that it has had "clean full-year audit opinions" for those years, however.

As a result of the accounting woes, the business announced plans for "tighter control and greater focus on cash and cash management", reorganising its group finance function, creating new accounting policies and implementing an Oracle cloud-based accounting and forecasting system.

The trading update added that M&C Saatchi will also be restructuring its London office, which will result in an exceptional charge of £2.5 million for the year ending 31 December. However, this is expected to lead to annual savings of £6 million from 2020 onwards.

Campaign reported earlier this week that M&C Saatchi’s advertising arm has offered voluntary redundancy to all of its 178 staff after the loss of the NatWest business, one of its biggest accounts.

As a result of the accounting errors, M&C Saatchi expects underlying profit before tax for 2019 to be between 22% and 27% below 2018 on a like-for-like basis.

David Kershaw, chief executive of M&C Saatchi, said: "This restatement of our numbers and the reduction in forecasts make for very difficult reading – both for us as a management team and for all of our stakeholders.

"The only positives that we can offer are that a robust review has been undertaken and we have, under our new group finance director, started implementing processes and procedures to prevent such issues arising again.

"The trading performance in the second half of this year is disappointing. However, our operating businesses remain strong, creative and competitive, and we expect that, when combined with the impact of our restructuring coming through, we will have a stronger trading performance in 2020."

Source:
Campaign UK
Tags

Related Articles

Just Published

7 hours ago

40 Under 40 2022: Mo Moubayed, Veridooh

He entered the media industry and founded Veridooh to revolutionise out-of-home advertising, advocating for it to be more people-, data- and environment-centric.

9 hours ago

Move and win roundup: Week of January 30, 2023

Kickstart your week with news of people moves from Ogilvy Indonesia, Grab, Kantar, SevenRooms and more, in our weekly roundup.

9 hours ago

ChatGPT in advertising: Will clients pay the same ...

ChatGPT is being hailed as the future of digital advertising, but experts warn that it may be an overstatement at this stage. How should agencies and their clients approach ChatGPT?

20 hours ago

Global CCO Alex Lopez to leave McCann as Harjot ...

Changes announced by Daryl Lee.