Stricken Cordiant deeper in red
CORDIANT spread further gloom in the world of advertising and marketing today when it said it had fallen deeper into the red with no recovery likely in the near future.
The group also said that its under-pressure chief executive Michael Bungey, 62, is to step down in March. David Hearn, chairman and chief executive officer of Bates Worldwide, Cordiant's main advertising arm, will take over. Bungey, paid more than £800,000 last year, is thought to be in line for a 'modest' pay-off, although negotiations are continuing.
'Depressed trading levels persist throughout our markets,' said Bungey. 'While conditions may have stabilised, I see no signs of a recovery anytime soon. Our cost-cutting exercises have been extensive and, where necessary, will continue.'
He said the market conditions were the worst he had known in 35 years in the industry. 'I don't see it getting any worse, but I don't see it getting any better either,' he said. Shares in the company fell 1p 46 1/2p. They peaked at 406p in early 2000 and have fallen from 115p since the start of the year.
In the first half of the year Cordiant made a pre-tax loss of £9.3m, compared with a restated £600,000 deficit for the same period last year. Before goodwill amortisation and one-off costs, pre-tax profits almost halved from £22.1m to £11.5m.
The company was hit by a savage downturn in advertising spending by its major clients with first-half revenues slumping nearly 10% to £277.1m. Cordiant has also been hit by the 'disappointing' loss of two of its biggest clients in America, the burger chain Wendys and the car maker Hyundai.
The account losses will reduce revenues 1.5% this year and 3% next year. Bungey said the company continued to strip out costs, with operating expenses down 8% in the first half. It has laid-off more than 1,000 workers and axed the dividend to conserve cash. The operating margin was 6.5% against 8.5% last year.
Cordiant also said it would bring together its operating units as Bates Group to create 'an integrated, broad-based communications capability.' Bungey said: 'This is what the clients tell me they want.î
Cost-cutting and the integration of Bates will lead to exceptional charges of £27m, which will be charged in the full-year accounts. The measures are expected to generate annual savings of £22m.
