M&C Saatchi misses reporting deadline - shares suspended
30 Sep 2020
M&C Saatchi is set to miss the deadline for filing its financial results as it seeks to unravel the details of accounting misstatements identified at the end of last year and now put at £14m, meaning its shares will be temporarily suspended
30 Sep 2020
In a regulatory update the advertising group said the audit of the financial results for the year ended 31 December 2019 is expected to be complete within a matter of weeks, but not before the filing deadline of 30 September, despite being granted a three-month Covid-19 extension to the filing deadline.
M&C Saatchi said: ‘The 2019 audit process has taken longer than had been expected as a result of the desire of the company and its auditors to conduct significant testing in the context of the company's historical accounting misstatements in 2018 and prior years, in addition to the impact on working practices enforced by the Covid-19 pandemic.
‘The audit process is in its final stages and the company and its auditors now expect that audited financial results for the year ended 31 December 2019 will be published within a matter of weeks. ‘However, the Company and the auditors consider that it will not be possible to publish the 2019 audited financial results by the 30 September 2020 deadline.’
M&C Saatchi said it was able to release its preliminary unaudited non-statutory results for the year which show net revenue of £256.4m (2018 restated: £250.3m), unaudited headline profit before tax of £18.3m (2018 restated: £23.5m) and unaudited statutory loss before tax of £8.6m (2018 restated: £6.3m loss).
The unaudited results also indicate a total accounting adjustment to historical headline profit before tax (2018 and prior years) of £14m, compared to the previously identified total of £11.6m.
There are additional adjustments of £11.3m to historic accounts (2018 and prior years) due to change in accounting policy for put options held by its employees (£8.5m), and goodwill impairments (£2.8m). M& C Saatchi said these are non-cash adjustments and have no impact on headline profit.
The total negative impact on statutory profit after tax of the prior period adjustments is £25.8m. These adjustments are all historic (2018 and prior years).
KPMG, which was appointed as M&C Saatchi’s external auditor in 2012, initially flagged up concerns in August of last year, when an internal review confirmed instances of misapplication of accounting policies in some of its UK subsidiaries, mostly relating to the timing of revenue recognition and incorrect accounting of some assets and liabilities.
Subsequently PwC conducted an independent review which identified additional issues. The firm took over as the company’s auditor at the end of the year.
In its latest statement, M&C Saatchi said: ‘Following the discovery of the 2018 accounting irregularities, the company moved quickly to conduct an independent accounting review and strengthen internal processes to ensure not only that all the facts were known, but also that the right resource, skills and systems were put in place to ensure that it never happens again.
‘The company has a new finance team, improved financial and accounting systems and compliance rules, and a simplified group structure.
‘In addition, in the first quarter of 2020 four new independent non-executive directors were appointed to the board of directors of the company to provide the highest level of governance and corporate expertise.
‘The company and its newly appointed auditors have worked relentlessly on the 2019 audit and the board is confident that the audit process has been extensive and thorough.
‘The board regrets that the audit has not been completed on schedule but believes the extent of the audit testing should give shareholders confidence in the financial position of the company, so that all our stakeholders can look to the future with renewed confidence.’
Given the delay, M&C Saatchi noted its shares will be temporarily suspended with effect from 07.30 on 1 October 2020 until publication of the 2019 audited financial results.
At the beginning of the year the Financial Conduct Authority announced an investigation into M&C Saatchi’s accounting adjustments.