Companies

M&C Saatchi reveals £6.4m accounting error

International advertising agency network M&C Saatchi has announced that its board has made the decision to take a one-off exceptional charge of £6.4m to the company’s 2019 results.

It comes following an internal accounting review of several of the company’s UK subsidiaries, and the figure equates to £4.9m of specific issues identified in the review.

The firm believes it has 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.

It expects 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 originally published in the Annual report on 29 May 2019.

The company said 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.

A statement by M&C Saatchi read: “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.”

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