CORDIANT IN CRISIS
Timeline of an Advertising Company Disaster
CORDIANT ANNOUNCES POSSIBLE SALE TALKS
Characterizes Discussions as 'Very Preliminary'
CORDIANT'S BATES LOSES ALLIED DOMECQ ACCOUNT
Holding Company May Suspend Trading
The troubled communications group, which announced its preliminary results today, has been given until July 15 to complete the sales of three major marketing agency holdings: PR agency Financial Dynamics; ad agency Scholz & Friends; and Australian ad agency George Patterson Bates.
Shares of Cordiant rose 70% on the news today in early trading. The company reported pre-tax losses for full-year 2002 of $365 million, down from $433 million in 2001; its net loss was $375 million, compared with $456 million. Revenues fell 11.3% to $852 million.
David Hearn, Cordiant's CEO, this morning said, "The results are in line with our February expectations. Despite all the noise, the underlying business is solid, with revenue decline in line with the market. The Bates Group performed very strongly and profits rose by 20% last year, indicating the strength of some of our assets."
Paul Richards, a media director at Numis Securities in London, said, "Most people were expecting a suspension today. It's a credit to the company that they have come to an arrangement with their lenders. It's not the right time for a fire sale -- it just isn't worth pulling the plug at this stage when they are so far down the track with three major disposals, with a fourth [the sale of its stake in Zenith Optimedia] planned for January."
$220 million in deals
The four sales are expected to fetch Cordiant around $220 million -- almost enough to pay off its debts -- provided there are no more major client losses before the deals are completed.
George Patterson Bates is awaiting the result of a review of the $40 million Optus account. M&C Saatchi and WPP Group's Young & Rubicam pitched against Bates for the business. A decision is expected May 5.
In the U.K., Andrew Cracknell, the creative director of Bates UK, announced he is stepping down. There are no immediate plans for a replacement.
It had been feared that Cordiant would be forced to suspend trading today after the loss of its $27 million Allied Domecq account last week. The global business, which includes brands such as Ballantine's whiskey, Tia Maria liqueur and Malibu rum, accounted for around 3.4% of the group's revenue in 2002.