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Cordiant sees little growth
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August 13, 2001: 3:33 a.m. ET
UK ad firm pessimistic, cuts more jobs; France's Publicis sees rosier outlook
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LONDON (CNN) - UK advertising company Cordiant delivered more bad news for the industry, saying on Monday it saw little immediate prospect for growth.
The company also said it would cut more jobs, adding to the 400 layoffs unveiled earlier this year. It didn't give an exact number for the new job losses, but said it would shave payroll costs by five percent this year.
Cordiant, ranked ninth by size among world marketing communications firms, issued the gloomy outlook as it reported that earnings for the first six months of the year rose 25 percent, helped by acquisitions.
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Trading conditions remain difficult ... We see little immediate prospect for growth in our markets.
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Cordiant Communications |
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Net income rose to £13.1 million ($18.7 million), or 3.3 pence a share, from £10.5 million, or 3.8 pence, a year earlier. Sales rose to £308.8 million, up 45.2 percent assuming no changes in exchange rates.
"Trading conditions are likely to remain difficult, with the slowdown in North America now affecting economic growth in Europe and Asia Pacific," the company said. " We see little immediate prospect for growth... underlying revenues are expected to be flat at the best for the year as a whole."
Cordiant (CRI), which employs 10,000 staff in 80 countries and counts Coca-Cola, DaimlerChrysler and Deutsche Lufthansa among its customers, said profit was reduced by £10 million as a result of the cost of cutting staff. Of that amount, Cordiant spent £2.7 million in the six months to June 30, with the rest of the charge covering future expenditure.
The company's ad agency Bates Worldwide, which generates 85 percent of Cordiant's revenue, said in June it planned to axe 400 posts. Advertising companies around the world are cutting jobs to cope with the economic slowdown.
U.S. advertising firm True North Communications (TNO: Research, Estimates), which is merging with Interpublic Group of Cos (IPG: Research, Estimates)., warned in June that its second-quarter income could drop, saying it would look for opportunities to cut costs, including more staff reductions.
Cordiant stock rose slightly to 151 pence in London on Monday morning, after touching a two-year low of 149.5 pence on Friday.
Victim of dot.com decline
The shares have languished as the climate for advertising has worsened. The industry has been one of the main casualties of the decline of the dot.com boom: Internet companies had spent heavily on marketing before reality forced them to rein in expenditure.
London-based Cordiant said "substantial declines in spending from technology clients have impacted underlying revenue growth in North America. Revenues declined by 6 percent on an underlying basis.
Pretax profit rose to £22.1 million in the first-half from £17.8 million in 2000. Analysts polled by Reuters forecast pretax profit of around £22.4 million.
In contrast to Cordiant's pessimism, its French rival Publicis (PPUB) said it expected to see some growth in certain advertising markets in the remainder of 2001.
The company, which acquired Britain's Saatchi & Saatchi and Nelson Communications in the second half of 2000, said six-month turnover jumped to  7.54 billion from 4.57 billion a year ago -- a rise of 65 percent on a published basis. Excluding acquisitions, sales rose 6.3 percent.
Chairman Maurice Levy said that performance was "quite satisfactory" given global growth in the industry of less than two percent.
"In an unfavourable economic context, our commercial performances, in particular winning new budgets, assure us of growth that will largely exceed that of the market," Levy said.
Levy predicted a recovery in advertising investment in some economic sectors in the second half of 2001, notably in retailing, automobiles and common consumer goods. 
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