M&C Saatchi warns on profits as accounting scandal drags on
Shares in M&C Saatchi hit a seven-year low this morning as the company warned that its operating profit for 2019 is expected to fall below expectations.
The ad men said that full-year operating profit was likely to land around five to 10 per cent lower than previously announced.
Read more: Shares in M&C Saatchi plunge after it announces £6.4m charge following accounting errors
The firm also said it had appointed accountants PwC to review its books after it was caught up in an accounting scandal earlier this year. It has admitted that accounting policies had been mis-applied, and has now restated its first half results, taking a £5.1m net charge.
Shares dropped nearly 13 per cent this morning, hitting 149p, their lowest point since July 2012.
It comes even as the company promised that revenue which had not materialised in the first six months of the year would fall into the second half. Adjusted profit before tax dropped 67 per cent in the first half of the year.
Revenues ticked up 0.7 per cent to £214.2m.
Chief executive David Kershaw blamed the number of new businesses which have become part of the group for weighing on results. He also said that revenue from contracts will come over the remaining months of 2019.
“Whilst this has had a short term impact on our results, we remain confident in and committed to our strategy of winning new business and investing in new, fast-growing businesses,” Kershaw said.
Read more: Advertising giant M&C Saatchi hikes profits as new business grows margins
The boss said M&C Saatchi has a strong pipeline of new business, and promised that its newest members are expected to “start making a meaningful contribution to the group”. However he did not specify when.
The firm’s profit took a £2.6m hit in the first half, year-on-year from its investment in new and start-up businesses which it is banking on for long-term growth.