Advertising and public relations firm, Chime Communications, saw its pre-tax profits fall by 57% in 2002, from £16.3 million in 2001 to £7.0 million this time.
Lord Bell, Chime’s chairman, described 2002 as a ‘very poor year’, with operating profits down by 50%. “Our market has been in reverse for 18 months and the effect has been very marked. However I am pleased we have reached a good new agreement with our bank. The market seems to have bottomed out. We must now wait for a return to growth and meanwhile strive to increase our market share,” he said.
These results are the ninth full-year figures since the company joined the Stock Market in 1994. In the previous eight years Chime has posted double-digit growth in operating profits; this time they halved. Operating income declined by 26% to £70.4 million in 2002 and costs were cut by 20% to £62.0 million in response.
There are a number of reasons for the severe drop in Chime’s operating profits. These include budget cuts, cancellation and postponement of projects and reduction in the number of employees. These developments have occurred across the company’s entire range of services – public relations, advertising and marketing services; the only exception was research.
These measures have been instigated following difficult market conditions. Chime says that it has been adversely affected, amongst other things, by the absence of M&A activity, a reduction in consumer marketing and a virtual collapse of the hi-tech sector.
Overall, the advertising business has been “hit very hard, not just because of the market downturn but also the loss of major clients through change of client management, international realignment and changes of fashion,” says the statement.
In January this year, Chime agreed to sell 49% of its HHCL ad agency to WPP (see Chime Communications Sells 49% Of HHCL To WPP). The group has the option of selling the remaining 51% of WPP after the beginning of next year.
Shares in Chime Communications were unchanged at 10.5p by mid-morning today.
