There was further bad news from the advertising industry yesterday when WPP, the world's second-largest advertising group warned of a slow recovery this year after a weak 2001. Separately Cordiant, which owns the Bates Worldwide agency, reported a £270m loss after heavy exceptional items, axed the dividend and forecast no revenue growth this year. Its results had been delayed by several weeks while the struggling group organised fresh financing.
As the advertising sector struggles to shake off the impact of a collapse in demand after the 11 September terrorist attacks, Sir Martin Sorrell, WPP's chief executive, said: "We are coming out of recession slowly rather than quickly. It's going to be a gradual improvement."
Sir Martin said 2003 should show further recovery with 2004 boosted by the US presidential elections and the Athens Olympics. He said there was a "little bit of a structural shift" away from television advertising to other media such as outdoor, cable and satellite.
WPP's first-quarter trading update showed that revenues fell by more than 2 per cent. Stripping out acquisitions, underlying revenue fell by 9 per cent. Net new billings totalled £500m.
Cordiant, which was hit by three profits warnings in the last four months of 2001, claimed it had now "rebased the business for a lower revenue level."
Operating profits plunged to £36.5m for the year to December from £61.4m the previous year. But £224m of goodwill write-offs, of which £157m was for the value of its Lighthouse PR and branding business bought two years ago, pushed the group into a heavy loss. There was also a £27m charge to cover the cost of a restructuring programme which has cost 1600 jobs.
Michael Bungey, chief executive, admitted that Cordiant had paid too much for some of its deals. "Hindsight is a wonderful thing. We did buy at the top of the market but there were much bigger deals done at the time and at much higher prices. But strategically it was absolutely the right thing to do. We'd do it again, only not at those prices." He said the deal had taken Cordiant into more media areas such as PR, design and branding.
Asked if the advertising market was getting any better he said: "It seems that things aren't getting any worse. In the US there is a bit of an uptick in TV and radio advertising."
Cordiant shares closed 2p lower at 78p. WPP closed 6.5p lower at 770p.Reuse content