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(Alliance News) - Ad agency M&C Saatchi on Wednesday revealed it will make downward adjustments of GBP11.6 million following an independent review by PwC, and warned that profit for 2019 is expected to be significantly below forecasts.
M&C in September engaged PwC's Forensic Services group to perform a review of issue identified by an internal review of several UK subsidiaries. Following the review, the company judged it would take adjustments of GBP11.6 million.
Of the total proposed adjustments, GBP9.6 million is considered to relate to 2018 and will be treated as a prior period adjustment, and GBP2.1 million to 2019. The company said it will be taking action to ensure that the accounting misstatements which led to the review do not recur.
Separately, the company, which emerged from Saatchi & Saatchi in the 1990's, said underlying pretax profit for 2019 is expected to be "significantly lower" than expected at the time of its interim results release and, in addition, the company has incurred substantial central costs in its UK business.
Underlying pretax profit for 2019 is expected to be 22% to 27% below 2018 on a like-for-like basis.
"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.
The stock was down 43% early Wednesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.1% at 7,150.75
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Hang Seng: down 1.2% at 26,063.81
Nikkei 225: closed down 1.1% at 23,135.23
DJIA: closed down 280.23 points, 1.0%, at 27,502.81
S&P 500: closed down 0.7% at 3,093.20
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GBP: soft at USD1.2988 (USD1.2999)
EUR: down at USD1.1077 (USD1.1089)
Gold: up at USD1,483.21 per ounce (USD1,480.64)
Oil (Brent): up at USD61.16 a barrel (USD60.96)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
0930 GMT UK CIPS-Markit services purchasing managers' index
0930 GMT UK official holdings of international reserves
0955 CET Germany services PMI
1000 CET EU eurozone services PMI
0700 EST US MBA weekly mortgage applications survey
0815 EST US ADP national employment peport
0945 EST US services PMI
1000 EST US ISM non-manufacturing report on business
1030 EST US EIA weekly petroleum status report
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Boris Johnson has maintained he wants global tech giants to pay a greater amount of tax in the UK, despite similar action by France intensifying a trade war with the US. The UK prime minister stuck by the Conservative Party's election commitment to implement a "digital services tax" to ensure major multinational companies pay their "fair share" of tax. The US has threatened 100% tariffs on French cheese, Champagne and other products, a move described by France as an attack on all of Europe. The proposed tariffs by the US would be on USD2.4 billion of goods and is in retaliation for a French tax on global tech giants including Alphabet's Google, Amazon.com and Facebook.
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Business activity in Ireland's service sector expanded at the fastest pace in the past quarter, according to a survey released. The AIB services purchasing managers' index rose to 53.7 in November from 50.6 in October, signalling the fastest rise in business activity in three months. AIB registered activity growth across all four broad sectors, but the fastest growth was recorded among financial services companies. The composite output index posted 52.0 in November, up from 50.6 in October, signalling the fastest rise in business activity since June.
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US legislation seeking to hold China accountable over alleged violations of human rights against Muslim minorities in its Xinjiang region "encourages terrorism," a Chinese legislative advisory body said. The National Committee of the Chinese People's Political Consultative Conference defended China's campaign against ethnic minorities, including Uighurs, in Xinjiang. Detention centres that have been described by survivors and in leaked internal documents as de-facto internment camps are "vocational education and training schools," the CPPCC said, hours after the US House of Representatives passed a bill seeking to hold Beijing accountable over the camps. It added that the US bill "encourages terrorism" and interferes with China's internal affairs. The bill already passed in the Senate in September with support from both major parties, sailing through unanimously. The Chinese Foreign Ministry on Wednesday criticized the passing of the bill and urged the US to prevent it from becoming law.
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China's total business activity in November expanded at a 21-month high pace. The Caixin China composite output index for November reached 53.2 from the 52.0 reported in October, indicating the highest rate of growth since February 2018. The services business activity index rose to 53.5 from 51.1 in October, a seven-month high. Companies widely commented on planned company expansions, new projects and an improvement in overall demand conditions, Caixin said of the survey results.
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Japan's private sector decline slowed somewhat in November thanks to a slight expansion in services activity, but remained below the neutral 50.0 mark for the second month in a row. The Jibun Bank Japan composite purchasing managers' index reading for November was 49.8, up from 49.1 in October. While this was a month-on-month improvement, it also represented the second consecutive month of contraction given that 50.0 is the neutral value. The seasonally adjusted services business activity index crept over the 50.0 mark, though at 50.3 signalled only marginal growth. This compares to October's figure of 49.7.
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US Democrats presented a forceful case for impeaching and removing President Donald Trump from office Tuesday in a report detailing "overwhelming evidence" of misconduct in office and obstruction. Immediately dismissed by the White House as the product of a "one-sided sham process," the House Intelligence Committee report accused Trump of subverting national security as he pressured Ukraine for dirt on a Democratic election rival. Behind closed doors late Tuesday, the Democratic-led panel voted 13 to 9, along strict party lines as expected, to officially adopt and issue the report to the House Judiciary Committee, which is tasked with drafting articles of impeachment against the president.
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BROKER RATING CHANGES
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MAINFIRST STARTS BP WITH 'OUTPERFORM' - PRICE TARGET 620 PENCE
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RBC CUTS SEGRO TO 'UNDERPERFORM' ('SECTOR PERFORM') - TARGET 725 (750) PENCE
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BARCLAYS CUTS AVIVA TO 'EQUAL WEIGHT' ('OVERWEIGHT') - TARGET 461 (551) PENCE
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COMPANIES - FTSE 100
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Rio Tinto said it has decided to curtail operations at Richards Bay Minerals in South Africa due to violence in the area. "There has been an escalation of criminal activity towards RBM employees and one was shot and seriously injured in the last few days. As a result, all mining operations at RBM have been halted and the smelters are operating at a reduced level, with a minimum number of employees now on site. Construction of the Zulti South project has also been temporarily paused," the miner explained. Titanium dioxide slag production for 2019 is now expected to be at the bottom end of guidance of between 1.2 and 1.4 million tonnes.
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Wm Morrison Supermarkets said it has promoted Trevor Strain to chief operating officer and Michael Gleeson to chief financial officer. Strain is currently chief financial & commercial officer, and his responsibilities in the new role will include commercial, manufacturing, supply chain, logistics, operations development, online and wholesale. Gleeson is currently trading director responsible for ambient grocery, frozen, dairy, fuel and services.
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Vodafone said it is collaborating with Amazon Web Services to make AWS Wavelength available in Europe. AWS Wavelength provides developers the ability to build applications that serve end users with single-digit millisecond latencies over the 5G network. "With Europe's largest 5G network across 58 cities and as a global leader in IoT with over 90 million connections, Vodafone is pleased to be the first telco to introduce AWS Wavelength in Europe," said Vinod Kumar, chief executive of Vodafone Business. AWS Wavelength will be available first in the UK and Germany on the Vodafone 5G network, expanding to other Vodafone markets across Europe.
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COMPANIES - OTHER MAIN MARKET AND AIM
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Stock Spirits reported a rise in both revenue and profit for its recently ended financial year. Revenue surged to EUR312.4 million for the financial year to September 30 from EUR193.8 million a year ago. On a proforma basis - due to the fact Stocks Spirits has changed its year-end to September from December - revenue was EUR282.4 million in the 2018 financial year, up 11%. The central and eastern Europe-focused alcohol maker reported pretax profit rose 24% proforma to EUR38.2 million from EUR30.7 million. Volumes were up 8.5% on a proforma basis to 14.4 million nine-litre cases. "While there are challenges in certain areas of our business, notably in managing any impact that might result from the proposed excise tax increases in the Czech Republic and Poland, we remain confident in the strength of our brands, the quality of our people and the viability of our strategy. As a result, we feel well positioned for future success," the company said.
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COMPANIES - INTERNATIONAL
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US carrier United Airlines has ordered 50 new long-haul jets from European manufacturer Airbus, in a blow to US competitor Boeing. United Airlines Holdings will be retiring its existing fleet of Boeing 757-200 aircraft and replacing them with new Airbus A321XLR planes, which they will begin taking delivery of in 2024, the airline said in a statement on Tuesday. The purchase could cost as much as USD7 billion, but bulk buying often gets airlines hefty discounts.
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Chinese internet services firm Tencent and video game maker Nintendo on Wednesday announced plans to launch the Japanese company's popular Switch console in China from next week. Expectations for the console's launch in the world's largest games market has helped to push up Nintendo's share price this year. The console will be sold in China from December 10 for CNY2,099, about USD297, the companies said at a launch event in Shanghai.
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Wednesday's Shareholder Meetings
Ceres Power Holdings
Spectris (re 2020 renumeration policy)
Aberdeen Standard Asia Focus
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By Tom Waite; thomaslwaite@alliancenews.com
London Briefing is available to subscribers as an email newsletter. Contact info@alliancenews.com
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