M&C Saatchi warned that full year global profits will be significantly below forecasts made in September due to "weaker than expected" trading and higher costs.
Underlying profit before tax for the full year to December for the advertising agency is now expected to be down 22% to 27% on the £29.5 million of 2018.
"Underlying profit before tax, before exceptional costs, is expected to be significantly below the levels expected at the time of the company's interim results due to weaker than expected trading in the final quarter of the year and higher than expected central costs," says M&C Saatchi
It is the company's second profit warning in less than three months. Just two months ago, the company was forecasting global full year profit to be down on expectations by 5% to 10%.
The company is restructuring its UK office to improve performance and position the division for long-term growth. It says: "The company has incurred significant additional central costs in its UK business."
M&C Saatchi shares fell in London by 46% overnight.
The Australian arm of M&C Saatchi, which industry insiders say is having its best year in two decades, is isolated from the fallout in the UK.
The industry sources say: "Australia is doing really well. They're winning business and 2019 is its best year. Over the last six years M&C Saatchi Australia has had compound growth of 10% to 15% per annum."
Global CEO David Kershaw says the reduction in forecasts makes for very difficult reading.
"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," he said in a trading update.
"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."
The company also announced a £11.6 million hit following as review by PwC into “misapplication of accounting policies”.
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