Shares in advertising agency M&C Saatchi (SAA) are collapsing, down 42.1% to 85p, as it warns on profit and reveals troubling results from a review of its accounting.
Problems were first flagged in August and, following a probe by PwC, the company is to make a combined £11.6m adjustment to its 2018 and 2019 results.
Separately, M&C Saatchi says its annual underlying pre-tax profit is expected to be 'significantly below' the levels expected at the time of its interim results.
Underlying pre-tax profit for 2019 is seen falling 22%-to-27% on a like-for-like basis, excluding the impact of Walker Media profits in 2018.
The company pins the warning on weaker-than-expected trading in the final quarter of the year and higher-than-expected central costs.
M&C Saatchi says it is restructuring its UK office to improve performance, resulting in a one-off charge of £2.5m and annual savings of around £6m in 2020 and onwards.
AJ Bell investment director Russ Mould says: ‘It may be a fabled name in UK advertising circles but M&C Saatchi would have a really tough time selling its own update this morning. A mess would be a polite description.’
Mould points out that at least finance director Mickey Kalifa is new enough, having been appointed at the end of March, not to be tainted by the accounting problems.
He adds: ‘The remedies look like things you would expect any decent-sized company to be doing already. Having a proper management structure in the finance function, standardised accounting policies and platforms, and tight control of cash hardly looks like rocket science.
‘Longstanding chief executive David Kerslake, a founding director of the company, may take more of the flak given the problems arose under his watch.’
