M&C Saatchi’s shares crashed by more than 40% this morning after it was forced to make adjustments of £11.6m to its results following an investigation into accounting errors.
The business first revealed the mistake over the summer and appointed PwC to carry out an independent review, which also found that there are errors dating back to 2014.
Following the review, adjustments of £11.6m will be made, "apportioned between its 2018 and 2019 financial results".
Separately, PwC found that the agency's 2018 half-year reported profit was adjusted by around £6.4m.
The trading update added: "Such adjustments may have occurred in half-year reports since 2014." M&C Saatchi said that it has had "clean full-year audit opinions" for those years, however.
As a result of the accounting woes, the business announced plans for "tighter control and greater focus on cash and cash management", reorganising its group finance function, creating new accounting policies and implementing an Oracle cloud-based accounting and forecasting system.
The trading update added that M&C Saatchi will also be restructuring its London office, which will result in an exceptional charge of £2.5m for the year ending 31 December. However, this is expected to lead to annual savings of £6m from 2020 onwards.
Campaign reported earlier this week that M&C Saatchi’s advertising arm has offered voluntary redundancy to all of its 178 staff after the loss of the NatWest business, one of its biggest accounts.
As a result of the accounting errors, M&C Saatchi expects underlying profit before tax for 2019 to be between 22% and 27% below 2018 on a like-for-like basis.
David Kershaw, chief executive of M&C Saatchi, said: "This restatement of our numbers and the reduction in forecasts make for very difficult reading – both for us as a management team and for all of our stakeholders.
"The only positives that we can offer are that a robust review has been undertaken and we have, under our new group finance director, started implementing processes and procedures to prevent such issues arising again.
"The trading performance in the second half of this year is disappointing. However, our operating businesses remain strong, creative and competitive, and we expect that, when combined with the impact of our restructuring coming through, we will have a stronger trading performance in 2020."