All eyes will be on London this summer as it plays host to the Olympic Games. And, with the 2008 Beijing Olympics capturing the attention of 70 per cent of the world's population, it will be a marketer's dream – just right for Chime Communications.
- Set to benefit from the Olympics effect
- Strong international presence
- Growing sports marketing offering
- Plans to double profits
- Restructuring costs to hit 2011 profits
- PR side flat
Public relations (PR) and marketing specialist Chime has long held a strong foothold in PR, but the group has been building a sports marketing operation since 2007 via acquisitions across the globe. Chime's sports marketing business currently accounts for 25 per cent of revenues and is now the world's fourth-largest sports marketing operation. The unit derives revenue streams from sponsorship consultancy, rights sales, events management, experimental marketing and event bidding, leaving Chime well positioned to benefit from what chief executive Christopher Satterthwaite dubs the "Olympics effect".
And, reassuringly, the division's performance in between mega-events (the other global event being football's World Cup) is underpinned by long-term contracts pegged to regular big events, such as cricket's The Ashes, rugby's Tri-Nations and football's UEFA Champions League. Thanks to these multi-year deals, Chime has already secured 80 per cent of the division's expected revenues in 2012, and even 40 per cent of 2013's forecast revenues. Chime has also started to build a presence in Brazil in anticipation of new mandates in the run up to the 2014 World Cup.
CHIME COMMUNICATIONS (CHW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 183p | MARKET VALUE: | £148m | |
| TOUCH: | 181-183p | 12-MONTH HIGH: | 302p | LOW: 163p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 194p | NET CASH: | £6.9m | |
| Year to 31 Dec | Operating income (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 97 | 13.8 | 17.2 | 3.50 |
| 2008 | 112 | 16.3 | 20.2 | 4.72 |
| 2009 | 123 | 18.8 | 22.5 | 5.10 |
| 2010 | 149 | 26.5 | 25.5 | 6.05 |
| 2011* | 167 | 31.0 | 26.2 | 6.96 |
| % change | +12 | +17 | +3 | +15 |
Normal market size: 5,000 Matched bargain trading Beta: 0.8 *Numis Securities forecasts | ||||
This also highlights Chime's strong and widening geographical diversification. By the end of 2011, it had 24 offices outside the UK, with international business generating half of group income. Revenues from outside the UK should continue to rise and could account for 60 per cent of income within the next two years.
This should help to offset any weaknesses in its PR business, which recorded a 5 per cent contraction in sales in the first half of 2011 on the back of an earlier than expected axing of a sizeable US government contract. In order to minimise the effect, Chime's bosses restructured the unit, meaning £1m to £2m of one-off charges in 2011. Reassuringly, Chime's sports marketing business subsequently won a key contract to "dress" all the 2012 Olympics cities, which should make up most of the shortfall in PR revenue. This high-profile contract could pave the way for Chime to secure similar contracts ahead of the World Cup and maybe even the 2016 Olympics.
As such, Chime is still on track to achieve its widely publicised target of doubling profits over the next four years. Certainly, City analysts think the target is realistic and, considering Chime's highly acquisitive nature and its success in integrating acquisitions, it appears within reach.
