FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the Month of February 2003
CORDIANT COMMUNICATIONS GROUP PLC
-----------------------------------------------
(Translation of registrant's name into English)
121-141 Westbourne Terrace
London W2 6JR
England
-----------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
--- ---
If "Yes" is marked, indicate below the File Number assigned to the registrant in
connection with Rule 12g3-2(b): _________.
FORWARD LOOKING AND CAUTIONARY STATEMENTS
This report contains certain "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Generally, the
words "believe," "may," "will," "estimate," "continue," "anticipate," "intend,"
"expect" and similar expressions identify forward looking statements. The
Registrant has based these forward looking statements largely on its current
expectations and projections about future events and financial trends affecting
its business. These forward looking statements include statements relating to
trends in the advertising and marketing services industry, particularly with
respect to anticipated advertising expenditures in the world's advertising
markets. Actual advertising expenditures may differ materially from the
estimates contained therein depending on, among other things, regional, national
and international political and economic conditions, technological changes, the
availability of media and regulatory regimes in the world's advertising markets.
Additionally, this report contains a number of "forward looking statements"
relating to the Registrant's performance. The Registrant's actual results could
differ materially from those anticipated, depending on, among other things,
gains to or losses from its client base, the amount of revenue derived from
clients, the Registrant's exposure to changes in the exchange rates of major
currencies against the pound sterling (because a substantial portion of its
revenues are derived and costs incurred outside of the United Kingdom), the
general level of advertising expenditures in the Registrant's markets referred
to above and the overall level of economic activity in the Registrant's major
markets as discussed above. The Registrant's ability to reduce its fixed cost
base in the short term is limited and therefore its trading performance can be
significantly affected by variations in the level of its revenues.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CORDIANT COMMUNICATIONS GROUP PLC
(Registrant)
By: /s/ Michael Bungey
-------------------------------------
Title: Director and Chief Executive
Officer
Date: February 20, 2003
Exhibit 1
CORDIANT COMMUNICATIONS GROUP PLC
("Cordiant")
- 2002 performance in line with market expectations
- Cost savings of (Pound Sterling)45m exceed previous estimate of (Pound
Sterling)27m
- Focus on core Bates Group businesses, representing 85% of Group revenues
- Disposal of non-core businesses: considerable expressions of interest
- Disposals to achieve significant debt reduction; renegotiating covenants
In line with the strategic decision to focus its business on the Bates Group
announced with the Group's interim results last September, the Board of Cordiant
announces the proposed disposal of certain non-core businesses which will
strengthen the Group's balance sheet. These disposals will focus the Bates Group
into a single, integrated communications offering comprising Bates Advertising,
marketing services network 141, branding and design group Fitch and specialist
network Healthworld.
2002 PERFORMANCE
The Board also confirms that the Group's headline unaudited operating results
for the year ended 31 December 2002 are in line with market expectations.
Operating profits for the year ended 31 December 2002, before exceptional items
and goodwill amortisation, are expected to be (Pound Sterling)37m. This result
was achieved despite revenues significantly reduced by 11% to (Pound
Sterling)533m, due to the continuance of extremely difficult market conditions
and key account losses in the US. The Group's operating margin improved from
6.0% in 2001 to 6.9% in 2002 as a result of strong cost control, particularly in
the second half.
This aggressive cost containment was central to the Group's restructuring
strategy announced in September that has now been completed. The annual cost
savings achieved of over (Pound Sterling)45m significantly exceed the initial
estimate of (Pound Sterling)27m, and position the Group well for the future. The
cost saving initiative has resulted in a larger than anticipated 2002
exceptional charge, now expected to be approximately (Pound Sterling)45m. These
charges are fully covered by the Group's current financial arrangements.
A full review of the carrying value of goodwill is currently being undertaken
and the Board anticipates that an exceptional non-cash charge for the impairment
of goodwill in the region of (Pound Sterling)155m will be included in the 2002
accounts. Gross borrowings for the Group at 31 December 2002 were (Pound
Sterling)249m and average gross borrowings for the year were (Pound
Sterling)220m. Average net borrowings for the year were (Pound Sterling)172m.
The Group operated within the terms of its financial covenants with respect to
the year ended 31 December 2002.
DISPOSALS
With its cost restructuring satisfactorily completed, the Group is now embarking
on a programme
of disposals of certain non-core businesses both to enhance the operations of
its core business and to strengthen its balance sheet. The core Bates Group
businesses, which account for approximately 85% of total revenues, performed
solidly in 2002 versus the prior year and, despite difficult market conditions,
enjoyed their best new business gains for over two years in the final quarter of
2002.
The businesses being considered for disposal by the Group, assuming satisfactory
terms can be agreed, are its 77% stake in Scholz & Friends, Financial Dynamics
International and, in line with other global marketing communications groups, a
majority interest in the Group's Australian operations. The Group has already
received significant interest in all of these assets. Therefore the Board is
confident that transactions can be completed that will be in the best interests
of shareholders, clients and staff. The Board will also consider the exercise of
its option to sell its 25% stake in the Zenith Optimedia Group in January 2004.
BORROWINGS
These proposed disposals will strengthen the Group's balance sheet considerably
by reducing the Group's debt. The terms agreed with the Group's principal
lenders early in 2002 included progressively more demanding financial covenants,
in anticipation of the then widely predicted recovery in the advertising and
marketing services sector. Accordingly, in the light of the continuing adverse
market conditions, and bearing in mind the effect of the planned disposal
programme, Cordiant has commenced the renegotiation of certain of its financial
covenants (but not the total amount of its facilities) from 31 March 2003.
Although at an early stage, the Board expects that these discussions will be
concluded on a satisfactory basis.
David Hearn, Chief Executive of Cordiant said:
'Market conditions remain depressed and we see little prospect of revenue growth
this year. We've aggressively driven costs down by a further (Pound Sterling)45m
into 2003 and are now focussing the Group on its core strengths. This will also
rebuild our balance sheet. We are creating a leaner, stronger Group better
placed to win revenue in the future'.
20 February 2003
ENQUIRIES:
Cordiant
Tel: +44 (0)20 7262 4343
David Hearn, Chief Executive
Andy Boland, Finance Director
College Hill
Tel: +44 (0)20 7457 2020
Alex Sandberg
Adrian Duffield