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Dispute with network eats into profits at CIA

A dispute with the ITV network and a disposal costing pounds 2.6m forced annual pre-tax profits at CIA, the advertising space and airtime buyer, down 26 per cent to pounds 4.9m. However, underlying pre-tax profits were up 12 per cent to pounds 7.5m and the group said it was confident about prospects.

The group reached a pounds 2m settlement with the ITV network after it committed itself to deals it could not fulfil. It is understood the settlement was less than the value of the deals.

Chris Ingram, chairman, said the dispute was costly both in terms of senior management time and money, but added: "It's very much behind us now. We have made changes to ensure it does not happen again. The experience has not been without some benefit."

The disposal of the group's interest in Mansfield Lang Direct Media cost pounds 600,000.

Turnover in 1996 jumped 28 per cent to pounds 774m in a global market estimated to have grown by 7 per cent. Overseas turnover climbed 69 per cent to make up two-fifths of the total.

The total volume of billings placed by the group was up 27 per cent to pounds 1.15bn. Overseas operating profits grew 23 per cent, while UK operating profits grew 9 per cent before exceptional costs.

"It was a solid UK performance, but it was not a storming year," said Mr Ingram. "Overseas turnover will grow faster than UK turnover, but we still expect growth in the UK market."

CIA said it aimed to make the world's top six media buyers within four years. It is currently 14th and has a market share of less than 5 per cent.

"It is an expensive market to enter. This will result in a period of consolidation. We are in an exceptionally strong position," Mr Ingram said.

CIA would buy other media independents and reduce its dependence on the traditional media buying business, he said.

Investment activities include CIA Televisual, which develops the television version of "advertorials", programmes where the advertiser has a say in the programme's content. It is also developing web site marketing.

Television advertisements were becoming less influential with the growth of programme sponsorship and subscription television, Mr Ingram said. CIA was in the process of becoming an all-round, international media communications agency rather than a media buyer.

"We could wait to see what other people do, but we want to use the new technology first."

Earnings per share were down 58 per cent to 3.23p, but the final dividend was raised from 1.62p to 1.77p, slashing retained profits from pounds 2.2m to pounds 360,000. Shares closed up 5p at 161.5p.