StockMarketWire.com - Advertising company M&C Saatchi said it would take a £6.4m charge in its upcoming annual results due to accounting errors.

The sum included £4.9m worth of specific issues identified in a review and another £1.5m to provide for further potential issues that may arise.

The internal review found instances of misapplication of accounting policies, mostly relating to the timing of revenue recognition and incorrect accounting of some assets and liabilities.

M&C Saatchi said it had also decided to make an adjustment of £1.4m in respect of its property-related assets, because it was in the middle of an office refurbishment.

The company's board had appointed independent advisors to undertake a review of all of its accounts and accounting systems, which was expected to be completed by November.

It had set up the previous internal review following an independent auditor's report by KPMG, which raised concerns about accounting controls, reinforcing similar concerns raised by the company's audit committee.

'To help prevent this recurring, our recently appointed group finance director, Mickey Kalifa, has also appointed a new finance director for the UK division, together with additional senior finance staff,' M&C Saatchi said.

'He is about to appoint the company's first group treasurer.'

'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.'

Separately, in a trading update, M&C Saatchi said its interim results would show an expected year-on-year decline in pre-tax profit, due to the unusually strong first-half in the prior year.

'However, the prospects for trading in the second half are looking strong,' it added.

'As a result, before the exceptional charge referred to above, the board is confident that it will meet expectations of operating profit for the year.'



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