Cordiant Prepares To Cut More Jobs As Profits Fall Flat

In a statement in June, Cordiant announced that the global ad downturn would impact on profits and jobs within the group (see Economic Downturn Hits Cordiant Jobs And Profits) and cut 400 jobs in its worldwide operations. It is now thought that further cuts will be made as Cordiant prepares to absorb a total of £10 million in severance pay this year.

The group has been hardest hit in its American divisions where the downturn in the technology markets has further impacted on the advertising sector, underlying revenues for the US were down 6%. In the UK, underlying revenues increased by 1.2% with operating margins up from 9.8% to 10.6%. This relative success was down to the margin contribution from Specialist Communications operations and an ‘improved’ performance by the group’s advertising agencies.

Advertising and Integrated Marketing revenues increased by 19.1% at constant exchange rates and by 1.8% on an underlying basis to reach £229.8 million. Operating profits within this sector totalled £19.9 million with operating margins falling to 8.7% compared to 8.9% in 2000.

In July, the media buying agencies Optimedia and Zenith Media were merged by their parent companies, Publicis and Cordiant respectively, creating the world’s fourth-largest media communications group (see Optimedia And Zenith Merged By Parent Companies). Cordiant expects that this transaction will be completed in September 2001. Cordiant’s profits from Zenith increased to £3.7 million from £3.1 million in 2000. Despite the difficult market conditions, Zenith has produced revenue growth of 25% the first six months of the year.

Michael Bungey, chief executive of Cordiant, commented “Since this management team took control of the Group three years ago, we have all but trebled both revenues and operating profits and aim to have nearly doubled margins by 2004. The current severe downturn in our markets requires that we continue to closely manage our cost base. The business climate may have changed; the quality and hence profit potential of the portfolio of companies that we have assembled has not. We are better positioned than many to take advantage swiftly of the upturn when it comes.”

At 11.30am shares in Cordiant had risen to 158½p from an opening price of 149½.