Cordiant Shares Nose-Dive As Major Client Walks

Drinks group Allied Domecq has said that it will end its relationship with Cordiant as of October this year. Allied is one of Cordiant’s most major clients and its anticipated £18 million contribution in 2003 would have accounted for around 3.4% of the group’s revenues, based on 2002 figures.

The news comes as a blow to an already ailing business, which has begun a programme of disposals in order to alleviate debt in excess of £200 million (see Cordiant Revenues Dip 11% In 2002, Disposals Underway). Cordiant also lost a number of key accounts in the US during the course of last year and appears now to be trapped in a cycle of negative newsflow and subsequent client departures.

In a statement this morning, Cordiant said that the loss of Allied Domecq would not materially impact 2003’s revenues, although there will be a substantial impact on operating profit from 2004 onwards.

A further repercussion for the group is that its shares may well be suspended from the 1 May 2003 if it is unable to release year-end financial results at this time. Cordiant says it is evaluating whether it can still meet this release date.

The company says that it is now looking at ‘alternative strategic options’ for the business, in addition to the disposal programme already underway. This programme will see the company concentrating on its Bates Group network and will include the sale of the Financial Dynamics PR firm, a 77% stake in German advertising group Scholz & Friends and a majority interest in the group’s Australian operations (see Cordiant Revenues Dip 11% In 2002, Disposals Underway).

Today’s statement said: “Cordiant continues to have the support of a coordinating committee of its banks and noteholders and is working constructively with its lenders to amend the financing terms.”

Shares in Cordiant Communications were down by 61.8% at 10.5p by late morning today.