Shares in M&C Saatchi fell more than 20 per cent this morning after it announced a £6.4m charge after discovering accounting errors.
The advertising agency network said that following an internal accounting review it had set aside £4.9m related to specific issues identified within its accounts and £1.5m “as a conservative measure to provide for any potential further items arising”.
The company said it is appointing independent advisers to review its accounts and accounting systems to ensure it has identified all possible problems.
It said it expects the independent review to be completed by November.
The company said it was also making a £1.4m adjustment relating to its property assets as it is in the middle of an office refurbishment.
It set up an internal review into its accounting following a report from its auditor KPMG which raised concerns about accounting controls across the group in late May 2019.
“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,” the company said.
M&C Saatchi said its recently appointed finance director Mickey Kalifa has appointed a new finance director for its UK division together with additional finance staff.
The company is also set to appoint its first treasurer.
Four senior M&C Saatchi executives bought shares in the company today.
Chair Jeremy Sinclair, chief executive David Kershaw and executive director Bill Muirhead bought 37,314 shares for just over £100,000 and finance director Kalifa bought 27,985 shares for £75,000.
"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," M&C Saatchi said.
Shares fell nearly 22 per cent to 265p this morning.