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M&C Saatchi Backs Weak Profit View For H1, Sees Charges In FY19; Stock Dips

Shares of M&C Saatchi Plc (SAA.L) were losing around 21 percent in the early morning trading in London after the marketing services business Monday said it continues to expect year-on-year decline in first-half profit before tax as prior year's first half was unusually strong.

The company also expects a charge in the year 2019, excluding which the Board is confident to meet expectations of operating profit.

At an operating level, the company said it continues to perform well across the network, and that the prospects for trading in the second half are looking strong.

In its trading update, M&C Saatchi said that, following an internal accounting review of several of its UK units, it will report a one-off exceptional charge of 6.4 million pounds in 2019 results. This equates to 4.9 million pounds of specific issues identified in the review.

According to the company, its internal review 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.

The Group Finance Director, Mickey Kalifa, has 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.

M&C Saatchi said it is appointing independent advisors to undertake a review of all its accounts and accounting systems, as well as setting aside an extra 1.5 million pounds as a conservative measure to provide for any potential further items arising. The review is expected to be completed by November this year.

The company also said that as part of its ongoing assessment of its assets, it would make an adjustment of 1.4 million pounds in respect of its property-related assets as it is in the middle of an office refurbishment.

M&C Saatchi will report its interim results on September 24.

In London, M&C Saatchi shares were trading at 268 pence, down 20.94 percent.

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