Chime Communications, the international advertising and PR group chaired by Baroness Thatcher’s former PR Svengali, Lord Tim Bell, admitted Thursday it is in breach of its banking covenants.
On the London Stock Exchange, Chime shares immediately went into freefall, losing 74.3% of their value, ending the day at just £0.09 ($0.14; €0.14). At 0845 GMT this morning (Friday), they had recovered slightly to £0.1212.
In a statement Thursday, Chime waned that restructuring charges of £12 million had caused it to breach its covenants. It also warned that the continued decline in advertising and financial PR would cause its full-year results to be “well below” market expectations.
Explains the stricken agency, whose portfolio includes ad shop HHCL and PR network Bell Pottinger : “In response to these conditions we have continued to cut costs, reduce our headcount and restructure our businesses to take account of adverse conditions.
“As a result we expect exceptional restructuring costs for the year to be £12m. This has caused us to be in breach of our banking covenants. We are in discussions with our bank which has said it continues to be supportive of our group.”
Added the statement: “Advertising has continued to decline, as has hi-tech public relations and financial public relations. Pressure on fees is extreme across the whole group.
“Our businesses remain competitive and we have won good new business in the second half, including Vauxhall, Deutsche Bank, the Dubai International Finance Centre and more business from Nestlé, British Gas and Norwich Union.”
According to some observers, Chime’s all-time stock low could present an opportunity too succulent for WPP’s Sir Martin Sorrell (an old colleague of Bell) to ignore.
Data sourced from: MediaGuardian.co.uk; additional content by WARC staff