MDC FOURTH-QUARTER, YEAR-END PROFITS DOWN

Holding Company to Sell off Non-marketing Unit

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NEW YORK (AdAge.com) -- After a substantial delay, MDC Partners, the Canadian-based advertising holding company that has been on an agency buying spree in the past year, delivered its fourth-quarter and year-end 2004 financial results late yesterday.
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Earnings loss
MDC reported a fourth-quarter earnings loss of $8.6 million, or 39 cents a share, compared with a year-ago loss of $7.7 million. For the year, the company lost $2.2 million, or 9 cents a share, from earnings of $12.4 million, or 65 cents a share, for 2003.

The company said revenues for the quarter rose 41% to $91.6 million from $64.9 million during the year-ago period; revenues for the year ended Dec. 31 increased 14% to $317 million, compared with revenues of $279 million for 2003.

Earnings report delayed twice
MDC management sought to calm investors' concerns over the delays in reporting -- which were put off twice in recent months -- calling them unacceptable and promising to "report in a timely manner in the future," said Steve Berns, MDC's vice chairman and executive vice president.

MDC, which operates two business units, marketing communications and secure products, had several other challenges in 2004 in addition to reporting financial results on time. While revenue for the marketing communications group, whose members include high-profile ad agencies such as Crispin Porter & Bogusky, which handles advertising for Burger King Corp. and the BMW Mini Cooper, increased 50% from 2003, the secure products unit's revenue decreased 39%.

That unit includes companies ranging from stamp maker Ashton Potter to Metaca, a provider of smart-card services. Problems there included management changes at Metaca.

Selling off the division
For 2005, MDC expects to sell the secure products unit and focus fully on marketing communications. Earlier this month, MDC announced its biggest marketing acquistion to date, a 62% stake in Atlanta-based marketing strategy firm Zyman Group, headed by a former Coca-Cola Co. chief marketing officer, Sergio Zyman, author of several best-selling business tomes, including The End of Marketing as We Know It.

This year "will be a validation of their strategy," said Jeff Tkachuk, an analyst for Nesbitt Burns. "The majority of their growth has been bought. They've not had the opportunity to show that these purchases create incremental value."

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