Last checked at 12 Aug 2019 07:00
Accounting Review and Trading Update
M&C Saatchi announces that, following an internal accounting review of several of the Company's UK subsidiaries, the Board has made the decision to take a one-off exceptional charge of £6.4m to the Company's 2019 results. This equates to £4.9m of specific issues identified in the review. We believe we have discovered the full extent of the issues, but to be doubly sure, the Board is appointing independent advisors to undertake a review of all the Group's accounts and accounting systems, as well as setting aside an extra £1.5m as a conservative measure to provide for any potential further items arising. We expect the independent review to be completed by November this year.
In addition, as part of the Company's ongoing assessment of its assets, it has decided to make an adjustment of £1.4m in respect of its property-related assets as it is in the middle of an office refurbishment.
The Board set up the internal review following the Independent Auditor's Report which raised concerns about the accounting controls across the Group, reinforcing similar concerns raised by the Audit Committee. That was in late May 2019, and was published in the Annual report on 29th May. The internal review confirmed KPMG's concerns and found instances of misapplication of accounting policies in the division, mostly relating to the timing of revenue recognition and incorrect accounting of some assets and liabilities.
To help prevent this recurring, our recently appointed Group Finance Director, Mickey Kalifa, has also appointed a new Finance Director for the UK division, together with additional senior finance staff. He is about to appoint the Company's first Group Treasurer.
We are determined that our strategy of winning new business by starting new businesses will not be undermined by this, but recognise that having so many young companies in the group requires extra vigilance.
Current Trading
At an operating level, the Company continues to perform well across the network. The 2019 interim results will show an expected year-on-year decline in profit before tax due to the unusually strong first half in the prior year. However, the prospects for trading in the second half are looking strong. As a result, before the exceptional charge referred to above, the Board is confident that it will meet expectations of operating profit for the year.
The Group's Interims will be announced on 24th September.
For further information please call:
M&C Saatchi +44 (0)20-7543-4500
David Kershaw
Tulchan Communications +44 (0)20-7353-4200
Tom Murray
Numis Securities +44 (0)20-7260-1000
Nick Westlake, NOMAD