Lord Bell’s marketing services group Chime Communications has been forced to cut staff and take an unplanned restructuring charge, after its biggest PR contract with the US government finished earlier than expected.
Chime, reporting a financial update for the period 1 July to 8 November, also warned investors on Tuesday not to expect 2011 to show the bumper rate of growth the company has reported over the past six years.
“Because of the weak global economy we continue to expect growth, but not at the same rate as the last few years,” said Bell. “We expect to return to higher growth rates in future years.”
Chime put a brave face on the loss of the US government contract; the company said that overall its PR businesses, which include Bell Pottinger, Harvard and Good Relations, “continue to perform well and grow”.
The company would not state the level of impact on its Bell Pottinger PR business, although Chime said it was forced to “move quickly to reduce costs, mainly people and property”.
Chime added that it will now take a one-off charge for restructuring costs this year which will hit its bottom line, and said that for trading profit to be in line with budgets and market expectations this will need to be stripped out.
The loss of the PR contract is significant enough that Lord Bell said that it expects the “balance of our four divisions” – PR, sports marketing, advertising and research – to change.
“Sports marketing [will become] a higher proportion of our business and, because of the ending of the US contract, our public relations division to be a lower proportion of our business,” said Bell.
The PR operation has traditionally been Chime’s largest division, accounting for almost 50% of total revenues.
Bell admitted that Chime needed to focus investment on the PR business in order to get it on track, including acquisitions, although he said that the division will continue to show organic growth.
“We are at that point in the cycle where we need to make some investments particularly in public relations,” he added. “Chime is a growth-orientated business and our strategy is to focus on growth in areas of marketing services that will show the strongest growth, like sports marketing and digital.”
Sports marketing, which includes businesses such as Fast Track, has been growing rapidly driven by a number of acquisitions in markets such as Brazil ahead of the football World Cup in 2014 and the 2016 Rio Olympics.
Bell said Chime’s advertising and marketing division – which includes VCCP, the ad agency behind Comparethemarket.com’s TV ads featuring meerkat Aleksandr Orlov – did well during the period.
“Our advertising and marketing services business continues to do very well, building on its strong creative reputation and client wins,” said Bell.
He added that the its research operation, Opinion Leader, “is continuing to recover”.
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