Interpublic concern over Octagon losses

This summer Interpublic placed all Octagon's sports and event management activities under the control of a new Sports & Entertainment Group, and has since been in the process of replacing its management team.

The motorsport division of Octagon consists of the Brands Hatch Leisure facilities in the UK (acquired in 1999 for £145m) and a joint project in Hong Kong [Oct 16], formed in 2000. In addition in 1999, Octagon secured the rights from Formula One Administration to promote the British GP until 2010 and, after failing to upgrade Brands Hatch in time, acquired a 15-year lease from the BRDC in order to stage the race on its Silverstone circuit. This lease is due to be reviewed by the Director General of Fair Trading before 2004. Octagon also committed itself to spending $20m on Silverstone's modernisation programme.

Orr continued: "Last quarter, we identified operating issues within Octagon's motorsport business. At the time, we believed these issues would have a negative impact on our 2002 earnings of 4c per share. More recent analysis indicates the negative impact will be 15-20c per share. In 2001, Octagon Motor Sports contributed 3c per share to Interpublic's earnings."

The new forecast by Interpublic, whose core business is in advertising and marketing, also takes into account general economic pressure and recent losses by other project-based businesses.