SEC FILE NUMBER
333-02130
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 12b-25
NOTIFICATION OF LATE FILING
(Check one): [ ] Form 10-K [X] Form20-F [ ] Form 10-Q [ ] Form N-SAR
For Period Ended: December 31, 2002
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[ ] Transition Report on Form 10-K
[ ] Transition Report on Form 20-F
[ ] Transition Report on Form 11-K
[ ] Transition Report on Form 10-Q
[ ] Transition Report on Form N-SAR
For the Transition Period Ended:
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Read Instruction (on back page) Before Preparing Form. Please Print or Type.
Nothing in this form shall be construed to imply that the Commission has
verified any information contained herein.
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If the notification relates to a portion of the filing checked above, identify
the Item(s) to which the notification relates:
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PART I -- REGISTRANT INFORMATION
CORDIANT COMMUNICATIONS GROUP PLC
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Full Name of Registrant
CORDIANT PLC
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Former Name if Applicable
1-5 MIDFORD PLACE
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Address of Principal Executive Office (Street and Number)
LONDON W1T 5BH, ENGLAND
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City, State and Zip Code
PART II -- RULES 12b-25(b) AND (c)
If the subject report could not be filed without unreasonable effort or expense
and the registrant seeks relief pursuant to Rule 12b-25(b), the following should
be completed. (Check box if appropriate)
[X] (a) The reason described in reasonable detail in Part III of this form
could not be eliminated without unreasonable effort or expense
[X] (b) The subject annual report, semi-annual report, transition report on
Form 10-K, Form 20-F, Form 11-K or Form N-SAR, or portion thereof,
will be filed on or before the fifteenth calendar day following the
prescribed due date; or the subject quarterly report or transition
report on Form 10-Q, or portion thereof will be filed on or before the
fifth calendar day following the prescribed due date; and
[ ] (c) The accountant's statement or other exhibit required by Rule 12b-25(c)
has been attached if applicable.
PART III -- NARRATIVE
State below in reasonable detail why Forms 10-K, 20-F, 11-K, 10-Q, N-SAR, or the
transition report or portion thereof, could not be filed within the prescribed
time period.
(Attach extra Sheets if Needed)
As recently announced, the board of directors of Registrant has unanimously
recommended the proposed acquisition of Registrant by WPP Group plc ("WPP") by
means of a scheme of arrangement under Section 425 of the United Kingdom's
Companies Act of 1985. WPP is to offer new shares of WPP in exchange for
Registrant's issued and outstanding share capital. Prior to entering into such
acquisition negotiations, Registrant's management was heavily involved in
negotiations to refinance its debt.
The acquisition and refinancing negotiations, and issues arising in
connection therewith, have required the substantial attention and efforts of the
Registrant's management. These business diversions have resulted in delays in
completing the disclosures required to complete the Form 20-F.
Additionally, the Registrant is also evaluating the circumstances that
might occur if the scheme of arrangement is not approved at a meeting of the
Registrant's shareholders to vote on the scheme of arrangement. If this occurs,
the Registrant might be put into administration under Part II of the United
Kingdom's Insolvency Act of 1986. In light of this, the Registrant is exploring
what impact, if any, these possibilities may have on its financial statements
and independent auditors' report if they were to be included in the Form 20-F
filing and, consequently, is unable to finalize the Form 20-F at this time.
As a result of all of the foregoing, Registrant is unable to file its Form
20-F on the prescribed due date without unreasonable effort or expense.
PART IV -- OTHER INFORMATION
(1) Name and telephone number of person to contact in regard to this
notification
Tim Thimaya 44 20 7479 8427
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(Name) (Area Code) (Telephone Number)
(2) Have all other periodic reports required under Section 13 or 15(d) of the
Securities Exchange Act of 1934 or Section 30 of the Investment Company Act
of 1940 during the preceding 12 months or for such shorter period that the
registrant was required to file such report(s) been filed ? If answer is
no, identify report(s). Yes [X] No [ ]
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(3) Is it anticipated that any significant change in results of operations
from the corresponding period for the last fiscal year will be reflected by
the earnings statements to be included in the subject report or portion
thereof?
Yes [X] No [ ]
If so, attach an explanation of the anticipated change, both narratively
and quantitatively, and, if appropriate, state the reasons why a reasonable
estimate of the results cannot be made.
Registrant anticipates that it will report a pre-tax loss of approximately
(pound)228.2 million for the year ended December 31, 2002 as compared to the
pre-tax loss of (pound)270.8 million for the year ended December 31, 2001. The
primary reason for the increase in the 2002 fiscal period was that though
revenues declined by 11.3% on an underlying basis to (pound)532.7 million (as
opposed to (pound)605.0 million in 2001), principally as a result of the weak
trading condition across Registrant's major markets, a wide-ranging program to
reduce costs was implemented. Additional explanation of significant changes are
included in Annex A in this Notification.
CORDIANT COMMUNICATIONS GROUP PLC
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(Name of Registrant as Specified in Charter)
has caused this notification to be signed on its behalf by the undersigned
hereunto duly authorized.
Date June 30, 2003 By /s/
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INSTRUCTION: The form may be signed by an executive officer of the registrant or
by any other duly authorized representative. The name and title of the person
signing the form shall be typed or printed beneath the signature. If the
statement is signed on behalf of the registrant by an authorized representative
(other than an executive officer), evidence of the representative's authority to
sign on behalf of the registrant shall be filed with the form.
ATTENTION
Intentional misstatements or omissions of fact constitute
Federal Criminal Violations (See 18 U.S.C. 1001).
GENERAL INSTRUCTIONS
1. This form is required by Rule 12b-25 (17 CFR 240.12b-25) of the General
Rules and Regulations under the Securities Exchange Act of 1934.
2. One signed original and four conformed copies of this form and amendments
thereto must be completed and filed with the Securities and Exchange
Commission, Washington, D.C. 20549, in accordance with Rule 0-3 of the
General Rules and Regulations under the Act. The information contained in
or filed with the form will be made a matter of public record in the
Commission files.
3. A manually signed copy of the form and amendments thereto shall be filed
with each national securities exchange on which any class of securities of
the registrant is registered.
4. Amendments to the notifications must also be filed on Form 12b-25 but need
not restate information that has been correctly furnished. The form shall
be clearly identified as an amended notification.
5. Electronic Filers: This form shall not be used by electronic fliers unable
to timely file a report solely due to electronic difficulties. Filers
unable to submit reports within the time period prescribed due to
difficulties in electronic filing should comply with either Rule 201 or
Rule 202 of Regulation S-T (ss.232.201 or ss.232.202 of this chapter) or
apply for an adjustment in filing date pursuant to Rule 13(b) of Regulation
S-T (ss.232.13(b) of this chapter).
ANNEX A
Page 1
FINANCIAL REVIEW
In the sections that follow the revenue performance of Cordiant
Communications Group plc ("Cordiant") has been disclosed on a reported basis and
on an underlying basis, meaning at constant exchange rates and after comparing
revenues generated in the most recent year by acquired companies, to revenues
generated by such companies in the preceding year assuming that such companies
had been owned for an equivalent period in the preceding year.
Cordiant's percentage change in operating expenses has been disclosed
on a reported basis and on an underlying basis as defined above.
Cordiant Operating Performance
On a reported basis, operating profits increased by 1.4% to
(pound)37.0 million in 2002, despite revenues declining by 11.9% to (pound)532.7
million principally as a result of the weak trading conditions across Cordiant's
major markets. The modest operating profit improvement is attributable to a
significant reduction in Cordiant's operating expenses which declined by 12.8%
to (pound)495.7 million in 2002.
Management's action to restructure Cordiant's cost base successfully
countered the market downturn generating an improved operating margin of 6.9%,
up from 6.0% in 2001. On an underlying basis revenues decreased by 11.3% and
operating expenses by 12.2%.
Cordiant's operating loss after goodwill amortisation, exceptional
goodwill impairment charges and exceptional operating expenses was (pound)208.6
million, compared to a loss of (pound)260.0 million in 2001.
Business Segment Analysis
Advertising and Integrated Marketing
Advertising and Integrated Marketing operating expenses were cut by
11.8% on an underlying basis to counter the 9.0% underlying revenue decline in
2002. The benefits of the restructuring action are clearly evident as reported
operating profits increased 60.4% to (pound)27.1 million. Operating margins
improved to 6.6% from 3.7% in 2001. On a reported basis, revenues declined by
10.5% and operating expenses were reduced by 13.2%.
Advertising and Integrated Marketing represents the combined results
of Bates Worldwide, 141 Worldwide and Scholz & Friends.
Specialist Communications
Specialist Communications revenues decreased by 18.1% on an underlying
basis to (pound)122.6 million, reflecting reduced activity levels in branding
and design, pricing pressure in healthcare in North America, and the impact of
reduced capital markets activity on project-related assignments in business
communications. Despite the steps taken to reduce operating
ANNEX A
Page 2
expenses by 13.8% on an underlying basis, the significant revenue decline
resulted in reported operating profits decreasing to (pound)9.9 million from
(pound)19.6 million in 2001. Operating margins fell to 8.1% from 13.3% in 2001.
On a reported basis, revenues declined by 16.6% and operating expenses declined
by 11.5%.
Specialist Communications represents the combined results of
Healthworld, Fitch:Worldwide and FD International.
Geographical Analysis
2002 witnessed an unprecedented second year of declining marketing
expenditures in the majority of the world's markets. The industry slowdown is
clearly evident in the revenue decline in each of the Group's geographical
regions. However, significant management action throughout 2002 to restructure
Cordiant's cost base successfully countered the challenging market conditions
and enabled Cordiant to report an improvement in operating profit and margin. In
North America, extensive cost reductions only partially mitigated the impact of
both client losses and the prevailing macroeconomic factors.
United Kingdom
Reported revenues declined by 6.9%, and by 10.5% on an underlying
basis, to (pound)110.4 million, principally due to reduced activity at
Cordiant's branding, design, business communications and field marketing
operations, which was only partly offset by growth from the advertising and
sales promotion agencies.
Operating expenses decreased by 8.5% to (pound)96.0 million. On an
underlying basis, operating expenses decreased by 11.2%. Operating profits
totalled (pound)14.4 million, with operating margins of 13.0% up from 11.6% in
2001 as a result of tight cost control.
North America
Reported revenues decreased by 25.0%, and by 21.9% on an underlying
basis, to (pound)142.8 million, primarily as a result of the lower levels of
activity in the Specialist Communications businesses and the impact of client
losses in the advertising business.
Operating expenses fell by 23.7%, and by 20.7% on an underlying basis,
to (pound)135.8 million. Operating profits totalled (pound)7.0 million with
operating margins decreasing to 4.9% from 6.5% in 2001. While margins have
declined in the year, the significant reduction in operating expenses is
expected to improve operating margins in 2003.
Continental Europe
Reported revenues declined by 5.8% to (pound)135.2 million. On an
underlying basis revenues declined by 8.6%, reflecting significant reductions in
client spending in response to the difficult macroeconomic conditions
experienced by the region in 2002.
Operating expenses decreased by 4.8%, and by 7.8% on an underlying
basis, to (pound)131.2 million. Operating profits totalled (pound)4.0 million,
with operating margins decreasing to
3.0% from 4.0% in 2001 principally due to reduced profitability at Scholz &
Friends, and losses in Cordiant's Scandinavian operation. As a result,
Cordiant's Scandinavian business was restructured during the year and operating
expenses substantially reduced.
Asia Pacific and Latin America
Reported revenues decreased by 5.4%, and by 1.4% on an underlying
basis, to (pound)144.3 million. Growth in Brazil and many Asian markets has been
offset by reduced spending in Korea and Greater China.
Operating expenses decreased by 10.2% to (pound)132.7 million. On an
underlying basis operating expenses were reduced by 7.4%. Operating profits
totalled (pound)11.6 million, with operating margins up to 8.0% from 3.1% in
2001, primarily reflecting cost reductions in Cordiant's Australian and Korean
operations.
Exceptional Operating Expenses
In September 2002, Cordiant announced a wide-ranging programme to
reduce costs and the formation of the Bates Group. These initiatives have
delivered cost savings through reduced staff costs, the co-location of
operations, elimination of duplicated support functions and the closure or sale
of under-performing operations.
As a result of the Bates Group integration and other cost reduction
actions, Cordiant incurred exceptional operating expenses of (pound)45.6
million. Exceptional operating expenses include (pound)21.6 million of severance
costs, including costs related to senior management changes, (pound)20.5 million
attributable to relocation costs, property provisions, asset write-downs,
disposals and closure costs, and (pound)3.5 million relating to exceptional
financing expenses from the refinancing that was completed in April 2002.
Of the exceptional expense incurred in the year ended 31 December
2002, the total cash impact is expected to be (pound)41.9 million. The cash
outflow with respect to the 2002 exceptional expense was (pound)12.8 million in
2002, with (pound)21.1 million expected in 2003 and (pound)8.0 million expected,
in total, in 2004 and subsequent years.
Goodwill Amortisation and Impairment
The full year goodwill amortisation charge in 2002 was (pound)28.9
million. In addition to an annual amortisation charge, Cordiant has conducted a
review of the carrying value of goodwill on its balance sheet. The impact of a
second year of economic slowdown on the marketing communications sector has
resulted in the carrying value of goodwill capitalised in respect of certain
acquisitions being impaired. The exceptional goodwill impairment charge for 2002
was (pound)171.1 million.
The net carrying value of purchased goodwill at 31 December 2002
amounted to (pound)263.5 million. Purchased goodwill is amortised on a
straight-line basis over its useful economic life of up to twenty years.
ANNEX A
Page 4
Operating Costs
The number of staff employed by Cordiant as at 31 December 2002 was
8,019, compared to 9,099 at the start of the year, showing a net decrease of
11.9%. During the year, gross headcount reductions through severance were 894,
which represented 9.8% of opening headcount. Revenue per head was (pound)62,000
in 2002, a decrease of 1.4% at constant exchange rates. Total staff costs per
head (excluding severance) were (pound)39,900 in 2002, a decrease of 3.3% at
constant exchange rates.
Cordiant's total staff cost to revenue ratio, excluding severance,
decreased to 64.4% in 2002, from 65.6% in 2001. Fixed staff costs as a
proportion of revenue decreased to 59.3% in 2002, from 60.3% in 2001. In 2002
variable staff costs as a proportion of revenue decreased to 5.1% from 5.3% in
2001.
Joint Ventures and Associates
Cordiant's share of joint ventures' and associates' operating profits
(before goodwill amortisation of (pound)1.9 million) was (pound)5.3 million in
2002. Cordiant's share of Zenith Optimedia's operating profits decreased to
(pound)3.8 million from (pound)5.1 million in 2001.
Financial Items, Taxation and Returns Attributable to Shareholders
Net financing costs totalled (pound)21.4 million, and include
Cordiant's share of joint venture and associated undertakings interest income,
and imputed interest charged in accordance with FRS 12. The 26.6% increase on
2001 is primarily due to the increased financing costs arising from the
renegotiation of Cordiant's banking arrangements in April 2002.
The tax charge for the year was (pound)1.4 million. Equity minority
interests totalled (pound)4.0 million up from (pound)2.3 million in 2001, due to
an improved result in Korea and Brazil.
The reported loss, after goodwill amortisation, exceptional goodwill
impairment charges and exceptional operating expenses, attributable to
shareholders of Ordinary Shares of Cordiant was (pound)233.6 million. Earnings
attributable to shareholders of Ordinary Shares of Cordiant before goodwill
amortisation, exceptional goodwill impairment charges, amounts written off
investments and tax-effected exceptional operating expenses were (pound)14.4
million. Adjusted headline earnings per share were 3.6p in 2002, compared to
3.6p in 2001. In accordance with FRS 14 "Earnings per share", share options and
contingent consideration have no dilutive effect as a result of the basic loss
per share.