Job cuts to drain ad group interims

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The Independent Online
THE advertising giants WPP Group and Saatchi & Saatchi have quietly shed about 500 jobs in Europe and the US, for which substantial provisions will have to be made in results due over the next fortnight.

The redundancies, mostly on the Continent, are expected to result in severance charges of at least pounds 10m in the first-half results to 30 June.

The cutbacks are expected to contribute to a sharp fall in Saatchi's interim profits, due on Tuesday, from pounds 11m to about pounds 9m before tax.

WPP's profits, due to be reported in two weeks'time, are expected by some analysts to increase about 10-fold to about pounds 20m. But its redundancy bill is understood to amount to between pounds 3m and pounds 5m, considerably higher than the pounds 1.4m charge taken at the same time last year. The company is thought to have cut 250 jobs from its continental Europe agency network because of a downturn in economic conditions and uncertainty due to proposed new legislation affecting French advertising.

However, the group's overall staff numbers are expected to be little changed at around 12,500 as it has been expanding into new territories such as Latin America, the Far East and eastern Europe.

WPP's cuts are understood have been concentrated at the US operations of Hill & Knowlton, the global public company that has been one of its poorest performers. In addition, Ogilvy & Mather, one of WPP's two global agency networks, has reduced staff at some European units.

With more rationalisation planned later in the year, its restructuring charges for 1993 are expected to jump to about pounds 15m.

The cutbacks have come to light amid growing fears that WPP's banking syndicate is preparing for a huge sale of the company's shares. Under the terms of a pounds 200m debt-for-equity swap last year, next month they can convert 25 per cent of their preference stock into 66 million ordinary shares. Last week, most of them told Martin Sorrell, WPP's chief executive, that they would convert to 58 million ordinary shares - a move many believe could lead to massive profit-taking.

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