(Reuters) - M&C Saatchi Plc (SAA.L) said Britain’s financial watchdog had started an investigation after the advertising agency revealed an accounting scandal last year, which led to profit warnings and the exit of co-founder Maurice Saatchi.
The advertising agency, founded in 1995 by brothers and advertising moguls Maurice and Charles Saatchi after they were ousted from Saatchi & Saatchi, has seen its shares slump more than 70% since it first revealed the announting blunder in August last year.
M&C Saatchi’s shares were 8.6% lower at 101 pence at 0832 GMT, after falling to a low of 93 pence, a far cry from its peak of 430 pence in March last year.
The advertising firm said on Friday that the Financial Conduct Authority’s (FCA) investigation also followed the completion of an independent forensic review commissioned by M&C’s board.
An accounting review found several units of the company’s UK business overstating income and receivables and M&C had said it would restructure its UK operations.
An independent audit review by PWC also identified adjustment to be made to its financials, totaling 11.6 million pounds ($15.25 million).
The original Saatchi business, led by the Saatchi brothers, made a name for itself with its “Labour isn’t working” campaign poster for Margaret Thatcher showing a queue of people snaking out from an unemployment office and disappearing into the distance.
M&C Saatchi has created advertising campaigns for a number of Conservative elections including the “demon eyes” advertisements that ran in 1997 showing Tony Blair with glowing red eyes.
Since the accounting woes, however, M&C has seen Maurice Saatchi step down from the board along with House of Cards author Michael Dobbs and two other non-executive directors and has issued two profit warnings in less than three months.
A source with knowledge of the matter said then that Saatchi’s exit came after disagreements on areas of actions the company should take in terms of strengthening its governance.
M&C Saatchi, whose clients include Coca-Cola (KO.N), Unilever (ULVR.L), Christie’s New York and Britain’s football Premier League, has started a process to reconstruct its board with new independent directors, with a mandate to conduct a full review of all aspects of its governance.
The company named former Imperial Brands (IMB.L) chief executive officer Gareth Davis as its deputy chairman earlier this month.
M&C said it would co-operate with the FCA. The watchdog did not immediately respond to a request for comment.
Reporting by Noor Zainab Hussain in Bengaluru; Editing by Shounak Dasgupta and Nick Macfie