Advertising company M&C Saatchi (SAA:AIM) has sunk yet lower, falling 8.6% to 101p, on news the Financial Conduct Authority is investigating the company’s high profile accounting errors.
The FCA has notified M&C Saatchi of the probe, which it notes follows the completion of an independent forensic review commissioned by its board.
This eventually revealed an £11.6m black hole in the accounts, after a £6.4m disparity had initially been identified in August 2019.
The company says it ‘will co-operate fully with the FCA’. In the wake of the escalating scandal founder Maurice Saatchi and three other non-executive directors stood down in December. In their resignation letter these three directors said senior management had backtracked on pledges to set up an independent committee to look at the episode.
On 28 January the company announced some new board appointments with DS Smith (SMDS) chairman Gareth Davis coming in as deputy chair and Centaur Media (CAU) chair Colin Jones joining as a non-exec.
The company plans to appoint more directors and once this process is complete, Davis will be given the task of leading a full review of the firm’s governance.
Shareholders have been left badly bruised by the affair with the shares now worth less than a third of what they were before the scandal broke.
As is often the case the accounting issues were revealed during a period of weak trading for the business.
For now longstanding chief executive David Kerslake remains in post as the company looks to institute necessary changes such as having proper financial controls in place and rejigging and reshaping its portfolio of businesses - for example merging creative agency M&C with customer agency Lida.
A simplified structure, and the very depressed share price, could make the company attractive to an industry bidder, although the corporate governance issues might make any prospective purchaser think twice.
