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M&C Saatchi warns on profits and accounting errors

The advertising agency is the latest listed entity to reveal accounting errors
December 4, 2019

The share price of M&C Saatchi (SAA) clicked into reverse after it revealed that it will make adjustments amounting to £11.6m - apportioned between its 2018 and 2019 financial results – as the result of accounting errors that have come to light through an independent review of the company's accounts by PwC.

IC TIP: Hold at 82.8p

Management had foreshadowed a restatement of 2018’s results ahead of the RNS release, but matters were made worse by a separate announcement that full-year profits will be “significantly lower than expected at the time of the interim results”, with the underlying pre-tax figure coming in between 22 and 27 per cent below 2018 on a like-for-like basis. Earnings are forecast to fall at a greater rate than pre-tax profits due to the changing composition of profits, specifically a higher proportion of non-controlling interests and the effect of higher tax rate jurisdictions. Broker Peel Hunt estimated profits would come in at £21m in 2019, versus previous forecasts of £32.6m.