Cordiant Communications Group PLC -'CCG'- Preliminary Results for the Year Ended 31 December 1998.LONDON--(BUSINESS WIRE)--March 10, 1999--Cordiant Communications Group ("CCG CCG Chicago CCG Collectible Card Game CCG Canadian Coast Guard CCG Country Commercial Guide CCG Children's Cancer Group CCG Commission Canadienne des Grains (Canadian Grain Commission) ") is a global creative communications group with 169 offices in over 70 countries and 7,450 employees (including affiliates). The Group comprises; Bates Bates , Katherine Lee 1859-1929. American educator and writer best known for her poem "America the Beautiful," written in 1893 and revised in 1904 and 1911. Worldwide, one of the largest advertising and integrated communications networks The transmission channels interconnecting all client and server stations as well as all supporting hardware and software. in the world; Scholz Scholz is a German surname.
ICM Integrated Crop Management ICM International Congress of Mathematicians ICM Information Classification and Management ICM Intelligent Contact Management (Cisco) ICM International Creative Management , specialising in live communications; a 30% shareholding in the Facilities Group, a pre-production agency; and a 50% shareholding in Zenith zenith, in astronomy, the point in the sky directly overhead; more precisely, it is the point at which the celestial sphere is intersected by an upward extension of a plumb line from the observer's location. Media Worldwide, the global specialist media services and planning agency.
-- Net new business wins more than doubled to $580 million (1997:
$250 million) for majority owned units. New business momentum
continued into 1999 with $100 million of wins in the first two
months of the year.
-- Revenues increased ahead of the market, up by 5% at constant
exchange rates. Reported revenues(pound)301.8 million (1997 Pro
forma:(pound)307.6 million).
-- Operating margins (excluding equity income) up to 8.6% (1997 Pro
forma: 7.8%) and on track to deliver 10% margins in 1999.
-- Operating profit (excluding equity income) increased by 15% at
constant exchange rates. Reported operating profits (excluding
equity income) (pound)26.0 million (1997 Pro forma: (pound)24.0
million, before exceptional items).
-- Pre tax profits up 19.9% at constant exchange rates to(pound)25.9
million (1997 Pro forma:(pound)23.0 million).
-- Headline earnings per ordinary share up to 6.8p (ADR 56c) from
Pro forma 5.9p (ADR 49c), up 15.3% (ADR 14.3%) or a 22.4%
increase at constant exchange rates.
-- Proposed dividend of 1.4p per Ordinary share, an increase of
16.7% on 1997.
Michael Bungey, Chief Executive of CCG plc, commented:
"We have flourished since demerger. We hit the ground running in
1998 and prospects are looking strong. Our new business record has
been outstanding, more than double that of 1997 and we are on track to
deliver 10% margins this year. We are achieving our strategic and
financial objectives."
10 March 1999
CORDIANT COMMUNICATIONS GROUP PLC
("CCG")
PRELIMINARY STATEMENT
Introduction
CCG has delivered a strong financial performance in its first
full year as an independent group. Good underlying revenue growth and
improved operating margins have combined to deliver significant
earnings growth.
CCG has had a record year in terms of new business with net new
billings of $580 million for majority owned units, and over $800
million including affiliates in 1998. This excellent performance has
continued into 1999 with net new billings in excess of $100 million in
the first two months of the year.
The Group has also made progress against each of its strategic
objectives:
-- Multinational business increased from 30% to 33% of Group
revenues, towards the target of 40% by 2000;
-- North American share of total revenues increased from 22% to 24%,
with 30% as our goal by 2000; and,
-- Diversified services increased from 20% to 22% of total revenues,
again with an initial target of 30% set for the year 2000.
Comparative Reporting To enable a meaningful comparison, the 1997 trading information is presented on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, reflecting the demerger demerger n (Comm) → Abspaltung f, Demerger m of Cordiant, in addition to the consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: amounts which include the whole of Cordiant to the date of demerger. This review compares 1998 to 1997 on a pro forma basis only. The strength of the sterling has continued to affect reported results, having appreciated by 15% against our major trading currencies in Asia Pacific and by 4% in Continental Europe Continental Europe, also referred to as mainland Europe or simply the Continent, is the continent of Europe, explicitly excluding European islands and, at times, peninsulas. . Operating performance, where appropriate, has been reviewed at constant exchange rates. Operating Performance Group revenues increased by 5% to (pound)301.8 million ($501.0 million) on a constant currency basis. Operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. increased by 15% at constant exchange rates to (pound)26.0 million ($43.2 million). Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: continue to improve, up from 7.8% last year to 8.6%. The Americas A·mer·i·cas , the See America. (24% of Group revenue) American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of revenues increased by 10.1% on a constant currency basis to (pound)73.5 million ($122.0 million). Operating profits for 1998 totalled (pound)8.2 million ($13.6 million) with operating margins improving to 11.2% from 9.3% in 1997. An excellent new business performance in 1998 will reinforce re·in·force v. 1. To give more force or effectiveness to something; strengthen. 2. To reward an individual, especially an experimental subject, with a reinforcer subsequent to a desired response or performance. 3. this positive momentum, with continued revenue growth and operating margin improvement expected in 1999. 1998 has been marked by expansion in the Americas, with acquisitions in diversified diversified (di·verˑ·s services in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , strengthening our business in Houston Houston, city (1990 pop. 1,630,553), seat of Harris co., SE Tex., a deepwater port on the Houston Ship Channel; inc. 1837. Economy The fourth largest city in the nation and the largest in the entire South and Southwest, Houston is a port of entry; and Atlanta Atlanta (ətlăn`tə, ăt–), city (1990 pop. 394,017), state capital and seat of Fulton co., NW Ga., on the Chattahoochee R. and Peachtree Creek, near the Appalachian foothills; inc. 1847. and the extension of our equity presence in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . During the year a Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. Amercian management team was established in Miami, with a new managing director and creative director appointed ap·point tr.v. ap·point·ed, ap·point·ing, ap·points 1. To select or designate to fill an office or a position: appointed her the chief operating officer of the company. 2. to lead our new business initiative in the region. United Kingdom (13% of Group revenue) Revenues increased by 2.6% to (pound)39.8 million ($66.1 million). Operating profits were down to (pound)4.5 million ($7.5 million) with operating margins falling to 11.3% from 16.2% last year. This anticipated decline reflects unusually high margins in 1997, which included a number of one-off (1) One at a time. CD-ROM recorders (CD-R drives) are commonly called one-off machines because they write one CD-ROM at a time. (2) Only once. Software that is written to solve a specific problem only one time is sometimes called a one-off. projects at HP:ICM. With client losses in 1997 now fully replaced, operations in the United Kingdom are performing well and further improvements in operating performance are expected in 1999. Continental Europe (36% of Group revenue) For the region as a whole, revenues increased 8.0% on a constant currency basis to (pound)108.4 million ($180.0 million). Operating profits increased to (pound)10.1 million ($16.8 million) with operating margins up to 9.3% from 7.6% in 1997. Revenues at Bates at bat or at-bat n. Baseball A player's official turn to bat, counted in figuring a batting average unless the catcher interferes or unless the player is hit by the ball, makes a sacrifice hit, or is walked. Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). increased by 5.1% at constant exchange
rates with operating margins advancing to 7.4% from 5.1% in 1997. Scholz
& Friends continues to perform well with revenue growth of 14.8% in
1998 at constant exchange rates and operating margins of 13.4% compared
to 13.3% in 1997. With Continental Europe representing 36% of revenues,
the Group is well positioned to capitalise Verb 1. capitalise - supply with capital, as of a business by using a combination of capital used by investors and debt capital provided by lenderscapitalize on the opportunities presented by increasing European integration European integration is the process of political, legal, economic (and in some cases social and cultural) integration of European states, including some states that are partly in Europe. . Asia Pacific (27% of Group revenue) Asia Pacific revenues fell by 1.8% on a constant currency basis to (pound)80.1 million ($133.0 million). Reported operating profits totalled (pound)3.2 million ($5.3 million), an increase of 19.7% at constant exchange with operating margins up to 4.0% from 3.6% in 1997. Australasian Aus·tral·a·sia 1. The islands of the southern Pacific Ocean, including Australia, New Zealand, and New Guinea. 2. Broadly, all of Oceania. Aus revenues were unchanged on a constant currency basis, with operating margins up to 9.9% from 8.4%. Australasia Australasia (ôstrəlā`zhə, –shə), islands of the South Pacific, including Australia, New Zealand, New Guinea, and adjacent islands. The term is sometimes used to include all of Oceania. represents 63% of revenues in Asia Pacific and 17% of the Group. Prospects for the Australasian advertising market remain strong with Zenith forecasting market growth in excess of 6% per annum Per annum Yearly. over the next two to three years. Greater China showed revenue growth of 4.2% on a constant currency basis in 1998. We continue to invest in this important market, developing a full service network across mainland Mainland. 1 Island (1991 pop. 14,150), 178 sq mi (461 sq km), N Scotland. The largest of the Orkney Islands, it is also called Pomona. Kirkwall, the seat of the Orkney Islands council area, is on the island. China. South East Asia East Asia A region of Asia coextensive with the Far East. East Asian adj. & n. represents approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 8% of Asia Pacific revenues and 2% of Group revenues. Management has taken steps to rationalise Verb 1. rationalise - structure and run according to rational or scientific principles in order to achieve desired results; "We rationalized the factory's production and raised profits" rationalize costs, with overall staff levels in Asia being reduced by 16% in 1998. We believe that our businesses across Asia Pacific are now on a sound footing and that the region will be a source of growth over the longer term. Operating costs operating costs npl → gastos mpl operacionales The average number of staff employed by the Group rose by 2.7% to 4,784 from 4,660 in 1997, with increases in staff levels in Europe and America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. being offset by reduction in Asia. Revenue per head was (pound)63,000 in 1998, an increase of 2.2% at constant exchange rates, staff costs per head remain constant at (pound)35,000 on the same basis. The Group's staff cost to revenue ratio (including temporary staff and freelancers) fell from 60% in 1997 to 59% in 1998. We will continue to target further improvements in the staff cost to revenue ratio as a key driver of profitability. Joint venture & associates The Group's share of operating profits, primarily from Zenith and The Facilities Group, increased to(pound)2.6 million ($4.3 million), up 37% on 1997. Financial items, taxation and returns attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to shareholders In 1998, net interest payable and similar items were (pound)2.7 million ($4.5 million) with net interest cover of 10.6 times operating profit. CCG incurred a net interest charge due to the geographical distribution the natural arrangements of animals and plants in particular regions or districts. See under Distribution. See also: Distribution Geographic of borrowings and deposits. The Group has made significant progress in the areas of cash management in 1998 and further progress is expected in 1999. The tax charge for the year of (pound)9.2 million ($15.3 million) represents an effective tax rate of 35.5% down from 40.5% in 1997. Equity minority interests totalled (pound)1.7 million ($2.8 million), a reduction of 9.5% on last year, mainly due to the acquisition of the 24.9% minority interest in our Australian Australian pertaining to or originating in Australia. Australian bat lyssavirus disease see Australian bat lyssavirus disease. Australian cattle dog a medium-sized, compact working dog used for control of cattle. business. Earnings attributable to Ordinary shareholders totalled (pound)15.0 million ($24.9 million), an increase of 45.6% at constant exchange rates. Headline earnings Headline Earnings A basis for measuring earnings per share implemented by the Institute of Investment Management and Research. This method accounts for all the profits and losses from operational, trading, and interest activities, that have been discontinued or acquired at any per share totalled 6.8p (ADR ADR - Astra Digital Radio 56c) compared to 5.9p (ADR 49c) in 1997, representing a reported increase of 15.3% (ADR 14.3%) for the year and 22.4% on a constant currency basis. Dividend The Board proposes the payment of a dividend of 1.4p per Ordinary share, an increase of 16.7% on 1997. The Board has set the dividend in light of the financial results for the year and the Group's ongoing growth prospects. Cash flow As at 31 December December: see month. 1998 the Group had a net cash balance of (pound)4.6 million ($7.6 million) and average net cash for the year was (pound)4.9 million ($8.1 million). Net operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. for the Group (defined as operating profit plus depreciation, less returns on investment and servicing of finance and taxation paid) totalled (pound)22.5 million ($37.4 million). Capital expenditure totalled (pound)7.4 million ($12.3 million). Net cash outflows from acquisitions and disposals were (pound)7.4 million ($12.3 million). Property provisions totalled (pound)7.0 million ($11.6 million) and (pound)8.2 million ($13.6 million) was paid in relation to demerger costs. Acquisitions The Group has made a number of acquisitions during the year in support of its strategic objectives. Initial consideration in respect of these acquisitions totalled (pound)7.5 million ($12.5 million) in cash and (pound)3.4 million ($5.6 million) in shares. The Group's diversified services capabilities have been enhanced in North America with the acquisition of Churchill Churchill. 1 River, c.600 mi (970 km) long, issuing as the Ashuanipi River from Ashuanipi Lake, SW Labrador, N.L., Canada, and flowing in an arc north, then southeast through a series of lakes to Churchill Falls and McLean Canyon. Group Inc, a business to business PR, advertising and research company based in Houston, and Criterion
The acquisition of 32% of Newcomm in Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. and the acquisition and subsequent merger of Verdino Bates and Fernando Fernandez Fernando Fernandez (c.1850 – 1940), born in Bayamon, Puerto Rico, was the founder of the oldest rum manufacturing company in Puerto Rico. Start of a dynasty in Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. have further strengthened CCG's equity presence in Latin America. During the year CCG acquired the remaining 24.9% minority interest in TCG (Trusted Computing Group, Beaverton, OR, www.trustedcomputinggroup.org) The successor to the Trusted Computer Platform Alliance (TCPA), announced in 2003 by founding members AMD, HP, IBM, Intel and Microsoft. , the holding company for our Australian operations. TCG comprises George Patterson George Patterson may refer to:
In the first two months of 1999 we have made further acquisitions in Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. , Sweden Sweden, Swed. Sverige, officially Kingdom of Sweden, constitutional monarchy (2005 est. pop. 9,002,000), 173,648 sq mi (449,750 sq km), N Europe, occupying the eastern part of the Scandinavian peninsula. , Belgium Belgium (bĕl`jəm), Du. België, Fr. La Belgique, officially Kingdom of Belgium, constitutional kingdom (2005 est. pop. 10,364,000), 11,781 sq mi (30,513 sq km), NW Europe. and the Middle East. Outlook In our first full year as an independent business, we have won record new business, delivered a strong financial performance in terms of both revenue and margin growth, and made progress against our strategic objectives. Our financial goals for 1999 are to deliver a 10% operating margin and revenue growth at least in line with the market. We remain committed to achieving operating performance comparable with that of our best performing competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. . With significant new business momentum and stringent cost control, the outlook for CCG is one of continued progress. The current year has got off to an excellent start. CCG is in excellent shape to achieve its objectives and the Board views the future with considerable optimism Optimism See also Hope. Bontemps, Roger personification of cheery contentment. [Fr. Lit.: “Roger Bontemps” in Walsh Modern, 66] Candide beset by inconceivable misfortunes, hero indifferently shrugs them off. [Fr. .
CORDIANT COMMUNICATIONS GROUP PLC
("CCG")
UNAUDITED CONSOLIDATED AND PRO FORMA
PROFIT & LOSS ACCOUNTS
Year ended 31 December
1998 1997 1997
Group Pro forma Group
Notes (pound) m (pound) m (pound) m
(Audited)
----------------------------------------------------------------------
Group revenue 2 301.8 307.6 736.1
Net operating expenses (275.8) (285.8) (680.5)
-----------------------------
Group operating profit
-----------------------------
Trading profit 3 26.0 24.0 57.8
Exceptional operating expenses 4 - (2.2) (2.2)
-----------------------------
26.0 21.8 55.6
Share of operating profits of
joint ventures and
associated undertakings 5 2.6 1.9 -
-----------------------------
Total operating profit 28.6 23.7 55.6
Profit on disposal of
businesses - - 20.8
Fundamental reorganisation -
demerger - - (33.0)
-----------------------------
Profit on ordinary activities
before interest
and taxation 28.6 23.7 43.4
Net interest payable and
similar items (2.7) (0.7) (8.8)
-----------------------------
Profit on ordinary activities
before taxation 25.9 23.0 34.6
Tax on ordinary activities 6 (9.2) (10.2) (17.5)
-----------------------------
Profit on ordinary activities
after taxation 16.7 12.8 17.1
Equity minority interests (1.7) (1.8) (2.0)
-----------------------------
Profit attributable to
Ordinary shareholders 15.0 11.0 15.1
Dividends - cash 7 (3.1) (2.7)
Dividends - demerger - 134.6
-----------------------------
Retained profit 11.9 147.0
=============================
----------------------------------------------------------------------
Basic earnings per Ordinary
share 8 6.7p 5.0p 3.4p
Diluted earnings per Ordinary
share 8 6.7p 4.9p 3.4p
IIMR Headline earnings per
Ordinary share 8 6.8p 5.9p 6.6p
Dividend per Ordinary share 1.4p - 1.2p
----------------------------------------------------------------------
CORDIANT COMMUNICATIONS GROUP PLC
("CCG")
UNAUDITED CONSOLIDATED AND PRO FORMA
PROFIT & LOSS ACCOUNTS
Year ended 31 December
1998 1997 1997
Group Pro forma Group
FIGURES IN US$ (a) US$ m US$ m US$ m
(Audited)
----------------------------------------------------------------------
Group revenue 501.0 504.4 1,207.2
Net operating expenses (457.8) (468.7) (1,116.0)
-----------------------------
Group operating profit
-----------------------------
Trading profit 43.2 39.3 94.8
Exceptional operating expenses - (3.6) (3.6)
-----------------------------
43.2 35.7 91.2
Share of operating profits of
joint ventures and
associated undertakings 4.3 3.2 -
-----------------------------
Total operating profit 47.5 38.9 91.2
Profit on disposal of
businesses - - 34.1
Fundamental reorganisation -
demerger - - (54.1)
-----------------------------
Profit on ordinary activities
before interest and taxation
47.5 38.9 71.2
Net interest payable and
similar items (4.5) (1.2) (14.5)
-----------------------------
Profit on ordinary activities
before taxation 43.0 37.7 56.7
Tax on ordinary activities (15.3) (16.7) (28.7)
-----------------------------
Profit on ordinary activities
after taxation 27.7 21.0 28.0
Equity minority interests (2.8) (3.0) (3.2)
-----------------------------
Profit attributable to
Ordinary shareholders 24.9 18.0 24.8
Dividends - cash (5.1) (4.4)
Dividends - demerger - 220.7
-----------------------------
Retained profit 19.8 241.1
=============================
----------------------------------------------------------------------
Basic earnings per ADR (b) 56c 41c 28c
Diluted earnings per ADR 56c 40c 28c
IIMR Headline earnings per ADR 56c 49c 54c
Dividend per ADR (c) 11.6c - 9.8c
----------------------------------------------------------------------
(a) For illustrative purposes only, prepared under UK GAAP
(b) One American Depository Receipt (ADR) is equivalent to five
ordinary shares
(c) 1998 dividend calculated at 31 December 1998 exchange rate of
US$1.66 = (pound)1.00
Average exchange rate conversion: US$ equivalent: $1.66 = (pound)1.00
in 1998, $1.64 = (pound)1.00 in 1997
CORDIANT COMMUNICATIONS GROUP PLC
("CCG")
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December
1998 1997
(pound) m (pound) m
Note (Audited)
----------------------------------------------------------------------
Reconciliation of operating
profit to net cash
inflow from operating
activities
Operating profit 26.0 55.6
Depreciation charge 9.7 26.2
Movements in working
capital (8.8) (2.3)
Utilisation of property
provisions (7.0) (19.2)
Others (0.1) 1.4
-----------------------
Net cash inflow from operating
activities 19.8 61.7
Net cash outflow arising from
external demerger costs (8.2) (13.8)
Dividends from associated
undertakings 0.2 -
Returns on investment and
servicing of finance (4.9) (12.3)
Taxation paid (8.3) (15.1)
Capital expenditure and
financial investment (7.4) (22.5)
Acquisitions and disposals (7.4) (11.6)
Equity dividends paid (2.7) (4.4)
-----------------------
Cash outflow before financing (18.9) (18.0)
-----------------------
Issue of ordinary share
capital 0.5 0.1
External loans drawn less
repaid 8.6 17.3
Other movements (0.2) (0.3)
-----------------------
Net cash inflow from financing 8.9 17.1
-----------------------
Decrease in cash and
overdrafts for the year (10.0) (0.9)
=======================
Reconciliation of net cash
flow to movement in net
funds:
Decrease in cash and
overdrafts for the year (10.0) (0.9)
Cash inflow from debt (7.8) (17.0)
Other movements - demerger - 84.6
Translation difference and
non-cash movements (2.3) (13.5)
-----------------------
Movement in net funds in the
year (20.1) 53.2
Net funds at beginning of year 24.7 (28.5)
-----------------------
Net funds at end of year 9 4.6 24.7
=======================
CORDIANT COMMUNICATIONS GROUP PLC
("CCG")
UNAUDITED CONSOLIDATED BALANCE SHEET
Year ended 31 December
1998 1997
(pound) m (pound) m
Notes (Audited)
----------------------------------------------------------------------
Fixed assets
Goodwill 16.2 -
Tangible assets 22.7 24.5
Investments 4.0 3.5
-----------------------
42.9 28.0
-----------------------
Current assets
Work in progress 15.4 18.1
Debtors - due within one year 246.3 254.3
Debtors - due after one year 18.3 15.5
Investments 1.5 0.2
Cash at bank and in hand 62.3 61.7
-----------------------
343.8 349.8
Creditors amounts falling due
within one year (313.7) (331.5)
-----------------------
Net current assets 30.1 18.3
-----------------------
Total assets less current
liabilities 73.0 46.3
Creditors amounts falling due
after more than one year (76.1) (53.8)
Provision for joint venture
deficit
----------------------------------------------------------------------
Share of gross assets 83.6 51.6
Share of gross liabilities (98.3) (65.9)
----------------------------------------------------------------------
(14.7) (14.3)
Provisions for liabilities and
charges 10 (53.4) (57.8)
-----------------------
Net liabilities (71.2) (79.6)
=======================
Capital and reserves
Called up share capital 11 112.7 111.0
Share premium account 11 2.3 -
Special reserve 11 25.7 25.7
Profit and loss account 11 (214.5) (222.4)
-----------------------
Equity shareholders' deficit 11 (73.8) (85.7)
Equity minority interests 2.6 6.1
-----------------------
Total capital employed (71.2) (79.6)
=======================
CORDIANT COMMUNICATIONS GROUP PLC
("CCG")
Notes
1. Accounting policies and presentation
The financial information set out above and in these notes does
not constitute the company's statutory accounts for the years ended 31
December 1998 or 1997. The Group financial information for 1997 is
derived from the statutory accounts for 1997, which have been
delivered to the registrar of companies. The auditors have reported on
the 1997 accounts; their report was unqualified and did not contain a
statement under section 237(2) or (3) of the Companies Act 1985. The
statutory accounts for 1998 will be finalised on the basis of the
financial information presented by the directors in this preliminary
announcement and will be delivered to the registrar of companies.
Additional 1997 comparative information for the full year of the
Profit & Loss account is presented using pro forma figures. In the
opinion of the directors these provide the most meaningful comparison
as they reflect the changes that have occurred to the structure of
CCG, the current trading arrangements with Zenith and the present
financial arrangements for both CCG and Zenith, together with the
resulting interest and tax implications. The basis of the preparation
of the pro forma results is set out on page 51 of the CCG 1997 Report
and Accounts.
The unaudited preliminary consolidated financial statements
comply with relevant accounting standards (UK GAAP) and have been
prepared on the basis of accounting policies set out on pages 62 to 63
of CCG's 1997 Report and Accounts. During 1998 the Group has adopted
FRS 10 (Goodwill and Intangible Assets), FRS 11 (Impairment of Fixed
Assets and Goodwill) and FRS 14 (Earnings per share).
Purchased goodwill arising in respect of acquisitions before 1
January 1998, when FRS10 was adopted, was written off to reserves in
the year of acquisition. If a subsequent disposal on termination were
to occur any related goodwill previously written off to reserves would
be written back to the profit and loss account as part of the profit
or loss on disposal.
Purchased goodwill arising from acquisitions on or after 1
January 1998 is capitalised as an intangible fixed asset. The
directors are of the opinion that the intangible fixed assets of the
Group have an indefinite economic life and as such, the goodwill
related to acquisitions to date has not been amortised, but is subject
to annual review for impairment. This is due to the durability of the
Group's brand names, their ability to sustain long term profitability
and CCG's commitment to develop and enhance their value. The
acquisitions of the Group are intended to enhance the long term value
of the Group's networks. The individual circumstances of each
subsequent acquisition the Group makes will be assessed to determine
the appropriate treatment of any related goodwill.
The financial statements depart from the specific requirement of
companies legislation to amortise goodwill over a finite period in
order to give a true and fair view. The directors consider this to be
necessary for the reasons given above. Because of the indefinite life
of these intangible assets, it is not possible to quantify the impact
of this departure.
The impact of FRS 14 is to change the method of calculating
diluted earnings per share. The basis of calculation is given in Note
8.
2. Revenues by region
Year ended 31 December 1998 1997 Change Change
Group Pro forma(a) Reported Constant
currency
(pound) m (pound) m % %
----------------------------------------------------------------------
United Kingdom 39.8 38.8 2.6 2.6
The Americas 73.5 67.8 8.4 10.1
Continental Europe 108.4 104.5 3.7 8.0
Asia Pacific 80.1 96.5 (17.0) (1.8)
---------------------------------------
Total 301.8 307.6 (1.9) 5.0
=======================================
(a) For a reconciliation of geographical analysis shown in the 1997
Report and Accounts to pro forma see Note 12.
3. Operating profit and operating margin by region
Year ended 31 December 1998 1997 1998 1997
Group Pro forma Operating Operating
(1) & (2) Margin Margin
(pound) m (pound) m % %
----------------------------------------------------------------------
United Kingdom 4.5 6.3 11.3 16.2
The Americas 8.2 6.3 11.2 9.3
Continental Europe 10.1 7.9 9.3 7.6
Asia Pacific 3.2 3.5 4.0 3.6
-----------------------------------------------
Total 26.0 24.0 8.6 7.8
===============================================
(1) For reconciliation of geographical analysis per 1997 Report and
Accounts to pro forma, see note 12.
(2) 1997 profit is before exceptional operating costs of (pound)2.2
million, see note 4.
4. Exceptional items - within operating activities
The exceptional operating expense in the year ended 31 December
1997 related to a write off of goodwill in respect of the Group's
Indonesian subsidiary. The decision to write off this goodwill was
taken in view of the economic uncertainty in that country.
5. Joint ventures and associated undertakings
Year ended 31 December 1998 1997
Group Proforma
(pound) m (pound) m
-------------------------------------
Group share of revenue (a)
- Joint ventures (a) 14.2 11.5
-------------------------------------
Group share of operating profit
- Joint ventures 1.4 1.5
- Associated undertakings 1.2 0.4
-------------------------------------
2.6 1.9
=====================================
(a) The Group's share of joint venture revenue is not included in the
Group revenues disclosed in the consolidated profit and loss
account.
6. Taxation
The tax charge for both years comprises principally overseas
taxation. Taxation relating to joint ventures and associates amounted
to (pound)0.9 million (1997: (pound)0.6 million).
7. Dividends
The Board has recommended a final dividend of 1.4p per Ordinary
share (1997: 1.2p). The final dividend is expected to be paid on 2
June 1999 to shareholders on the register at 23 April 1999.
The 1997 demerger dividend reflected the shares in Saatchi &
Saatchi plc, which were distributed to CCG shareholders on 14 December
1997. The amount shown comprises the net liabilities of the demerged
business at the time of demerger after financial restructuring.
8. Earnings per share : basis of calculation
Basic EPS Group Pro forma Group
1998 1997 1997
---------------------------------------------------------------------
Profits attributable to
Ordinary shareholders (pound)15.0m (pound)11.0m (pound)15.1m
Weighted average no. of
shares 222.4m 221.9m 443.8m
Basic EPS 6.7p 5.0p 3.4p
=====================================================================
Diluted EPS Group Pro forma Group
1998 1997 1997
---------------------------------------------------------------------
Profits attributable to
Ordinary shareholders (pound)15.0m (pound)11.0m (pound)15.1m
Weighted average no. of
shares 222.4m 221.9m 443.8m
Dilutive effect of options 0.9m 1.0m 2.0m
-------------------------------------
Diluted weighted average no. 223.3m 222.9m 445.8m
of shares
--------------------------------------
Diluted EPS 6.7p 4.9p 3.4p
=====================================================================
IIMR Headline EPS (a) Group Pro forma Group
1998 1997 1997
----------------------------------------------------------------------
Profits attributable to
Ordinary shareholders (pound)15.0m (pound)11.0m (pound)15.1m
Adjustments:
Goodwill written off, profit
on disposal of operations
and demerger costs (pound)0.2m (pound)2.2m (pound)14.4m
-------------------------------------
Headline earnings (pound)15.2m (pound)13.2m (pound)29.5m
-------------------------------------
Diluted weighted average no.
of shares 223.3m 222.9m 445.8m
IIMR Headline EPS 6.8p 5.9p 6.6p
=====================================================================
(a) The definition of Headline Earnings is given in the Statement
of Investment Practice No.1 published by the Institute of Investment
Management and Research (IIMR). This excludes impact of disposals,
including related costs, the cost relating to fundamental
reorganisation and items relating to goodwill.
9. Analysis of net debt
At Cashflows Exchange At
1 January & 31 December
1998 non-cash 1998
(pound) m (pound) m (pound) m (pound) m
----------------------------------------------------------------------
Cash at bank and in hand 61.7 2.6 (2.0) 62.3
Cash deposits - 0.8 - 0.8
Bank overdrafts (7.7) (13.4) (0.1) (21.2)
---------------------------------------------
Cash 54.0 (10.0) (2.1) 41.9
---------------------------------------------
External debt due
within one year (0.7) (0.4) 0.6 (0.5)
External debt due after
one year (28.4) (8.2) 0.2 (36.4)
Finance leases (0.2) 0.2 (0.4) (0.4)
---------------------------------------------
Financing (29.3) (8.4) 0.4 (37.3)
---------------------------------------------
Net funds 24.7 (18.4) (1.7) 4.6
=============================================
10. Provisions for liabilities and charges
These include property provisions of (pound)33.2 m (1997: (pound)40.2
m).
11. Movement in shareholders' deficit
Profit & Total
Share Share Special Loss
capital premium Reserve Account
(pound) m (pound) m (pound) m (pound) m (pound) m
-----------------------------------------------------------------------
At 1 January 1998 111.0 - 25.7 (222.4) (85.7)
Issues of Ordinary
shares net of
expenses 1.7 2.3 - - 4.0
Goodwill arising on
acquisitions made
in previous periods - - - (2.2) (2.2)
Profit retained for
the period - - - 11.9 11.9
Translation
adjustment - - - (1.8) (1.8)
-----------------------------------------------
At 31 December 1998 112.7 2.3 25.7 (214.5) (73.8)
===============================================
(a) The 1997 closing goodwill reserve has been combined with the
Profit & Loss account in accordance with FRS 10.
12. Reconciliation of 1997 geographical analysis of ongoing operations
to pro forma geographical analysis
Year ended 31 December 1997 Ongoing Adjustments(a) Pro forma
operations
per 1997
accounts
----------------------------------------------------------------------
(pound) m (pound) m (pound) m
----------------------------------------------------------------------
Revenue
UK 39.0 (0.2) 38.8
America 67.7 0.1 67.8
Continental Europe 105.0 (0.5) 104.5
Asia Pacific 96.5 - 96.5
========================================
308.2 (0.6) 307.6
========================================
Year ended 31 December 1997 Ongoing Adjustments(a) Pro forma
operations
per 1997
accounts
----------------------------------------------------------------------
(pound) m (pound) m (pound) m
----------------------------------------------------------------------
Operating profit/(loss)
UK 6.5 (0.2) 6.3
America 6.3 - 6.3
Continental Europe 8.3 (0.4) 7.9
Asia Pacific 1.3 2.2 3.5
========================================
22.4 1.6 24.0
========================================
(a) Pro forma adjustments to effect new trading arrangements with
Zenith and exceptional operating expense.
13. Year 2000
The Group's Year 2000 project is based upon a plan to have all
the Group's business critical systems compliant well before the end of
1999. Based upon the work carried out so far, the Group believes that,
once the plan is completed, internal systems will not give rise to
significant operational problems. The major risks are expected to come
from the Group's dependence on key suppliers and the Group is
examining ways to reduce these risks. Contingency plans will be
developed to reflect the expected results from the correction, testing
and implementation phases of the project.
-0-
Cordiant Communications Group plc is registered in England and
Wales (Number 1320869) and its registered office is 121 - 141
Westbourne Terrace, London, W1A 4XA.
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