Cordiant Shares Bounce Back As Short-Term Funding Is Agreed

Earlier in the week Cordiant was hit by news of the impending loss of one its major clients, drinks group Allied Domecq (see Cordiant Shares Nose-Dive As Major Client Walks). Shares in the already-ailing business plummeted and only the next day potential suitors were said to be circling the group (see Potential Buyers Circle Crisis-Ridden Cordiant).

The loss of the Allied Domecq contract is expected to cost Cordiant around £18 million in 2003 and will significantly impact operating profits from 2004. Based on 2002’s figures, Allied’s contribution to Cordiant’s revenues would have been approximately 3.4%.

It was anticipated that the news might prevent Cordiant from releasing its year-end results on schedule today. However, the results statement was posted this morning saying that discussions with lenders have progressed well and financing has been agreed until 15 July. In the interim period the Board is to continue to look at ‘various strategic options’ and will attempt to agree new financing terms on that basis.

The results show underlying revenues down by 11.3% in 2002 to £532.7 million, whilst pre-tax loss came in at £228.2 million, slightly below 2001’s £270.8 million. Operating expenses were cut by 12.2% and operating profits rose by 1.4% to £37.0 million.

Prior to Allied’s decision, the group was already in the process of restructuring its operations and planned to make a number of disposals to alleviate debt and concentrate on its Bates Group network. This disposal programme will continue as the group looks at other options, it said today.

Shares had bounced back to 11.5p by mid-morning today.