By Yadarisa Shabong
(Reuters) - Shares in M&C Saatchi Plc <SAA.L> plunged around a half in value on Wednesday after the ad agency issued its second profit warning in less than three months due to an accounting scandal.
The accounting review related to several units in the company's UK business overstating income and receivables, among others, and M&C said it would restructure its UK operations.
"This restatement of our numbers and the reduction in forecasts make for very difficult reading," said Chief Executive David Kershaw.
The company said an independent audit review by PWC had identified further adjustment to be made to its financials, totalling 11.6 million pounds ($14.88 million).
M&C said such adjustments may have occurred in half year reports since 2014, however noting that the full-year audits had "clean full-year audit opinions".
"This bad news is compounded by a pretty serious looking profit warning, and the company’s reliance on fourth quarter trading is proving to be an Achilles heel," said Russ Mould, investment director at AJ Bell.
The company - founded by brothers Maurice and Charles Saatchi in 1995 after they were ousted from Saatchi & Saatchi - had initiated an internal accounting review of the UK subsidiaries in August.
M&C Saatchi, whose clients include Shell <RDSa.L>, Unilever <ULVR.L>, Christie's New York and the Premier League, also blamed a weak fourth quarter, as well as significant additional head office-related costs in the UK business for the latest profit warning.
The company said its adjusted underlying pretax profit for the full year could tumble between 22% and 27%, on a like-for-like basis, from the 32.2 million pounds reported in 2018.
In September, M&C said it expected annual profit to come in 5%-10% below estimates.
"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," Kershaw added on Wednesday.
Those measures include a tighter control on cash management, reorganising the finance function, implementing of a cloud-based accounting and forecasting system, among others steps.
Shares of the London-listed firm recouped some of the losses to be down 43% at 83 pence in morning trade.
(Reporting by Yadarisa Shabong in Bengaluru, Editing by Sherry Jacob-Phillips, Sriraj Kalluvila and Christina Fincher)