Cordiant Makes Further Jobs Cuts As 2001 Revenue Predictions Fall Further
In a pre-conference trading statement today, Cordiant Communications revealed that underlying profits were likely to decline by around 9% for the full year, compared to previous expectations of 5% (see Shares Slump As Cordiant Issues Profits Warning). The group says that market conditions remain “exceptionally difficult” and that the acceleration of decline in the second half of 2001 has led to a further reduction in profit expectations for the year.
In August, Cordiant announced a wide-ranging cost reduction programme (see Cordiant Prepares To Cut More Jobs As Profits Fall Flat) which included a £10 million charge in severance pay signalling more job losses on top of 400 jobs which were cut in June 2001.
Now Cordiant says that “additional headcount reductions” are to be made, along with other cost reduction initiatives, resulting in a total charge of £25 million for the year (including the previous £10 million). Total job losses for the year are now expected to exceed 1,100.
Other cost-saving initiatives include “the merger or consolidation of a number of the Group’s operating units around the world, the establishment of local cost elimination targets in all of the Group’s operating units” and “the closure or re-organisation of certain loss making operations”. CCG.XM, Cordiant’s interactive arm, has been reduced and will be absorbed into marketing services network 141 Worldwide.
Comment
As with many other media companies, Cordiant claims that even short term visibility is hard to predict and says that current actions are being taken in order to “position the Group to benefit when more normal market conditions return”.
Recent forecasts from Zenith Optimedia provided some hope for the ad industry, forecasting as they did ad revenue growth of 2% in 2002. Across the Atlantic, however, Jack Myers was being characteristically pessimistic (see Forecasts).
The specialists are clearly being hit harder than those with wide reaching, diverse operations and cost cutting measures now are being made to avoid greater losses in 2002 rather than recoup losses made in 2001.
As late as October 2000, Optimedia was forecasting media growth rates of around 5% for the next three years (see Forecasts). Had the analysts painted a more foreboding picture it possible that companies could have instigated cost-saving measures earlier in order to prevent heavy losses in 2001. The events of 11th September, however, could not have been predicted and losses as a result of the attacks, £70 million at News Corp for example (see News Corp Loses £69m Following Attacks), have undoubtedly had a severe impact on the economy.
