4th Dec 2019 09:04
(Alliance News) - Shares in advertiser M&C Saatchi PLC slumped Wednesday as the company warned annual profit is set to be well below the prior year.
The shares were 43% lower in early trade in London at a price of 84.06 pence each. A year ago, they were worth 314.00p.
M&C Saatchi also is to record a GBP11.6 million negative adjustment to 2019 results following an internal accounting review.
On the trading front, the company said the last quarter of the year is always its most significant in terms of profitability, but M&C Saatchi said due to "weaker than expected trading", and higher central costs, underlying pretax profit is set to fall 22% to 27% from 2018's figure. The broad guidance range reflects the importance of December to trading.
In 2018, M&C Saatchi posted a pretax profit of GBP17.6 million, with no underlying figure given.
This is the firm's second such warning in the quarter. In September, M&C Saatchi warned 2019 profit could be as much as 10% lower than expected.
"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," said Chief Executive David Kershaw.
Turning to accounting, in August the firm announced finding various accounting errors, which led to an internal review and a strengthening of its finance team.
It will now be booking a GBP11.6 million charge following the review, having said in August it would be taking a GBP4.9 million impact. Some GBP9.6 million relates to 2018's accounts, and the rest will fall in 2019.
M&C Saatchi is now taking a number of actions to prevent this happening again, it said. A new finance chief, Mickey Khalifa, joined earlier in the year.
CEO Kershaw commented: "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."
M&C Saatchi also will restructure its UK office, which will lead to an extra GBP2.5 million charge in 2019, but it expects this to save around GBP6 million a year from 2020 onwards.
By George Collard; [email protected]
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