Cordiant spreads advertising gloom as revenues slide

Cordiant Communications, the advertising agency rocked by profits warnings, yesterday echoed the gloomy prognosis of the industry from its larger rival WPP, reiterating that it does not expect trading conditions to improve before 2003.

In a trading update issued at its annual meeting, Cordiant said that on a like-for-like basis, revenues were expected to decline this year. It added that underlying revenues in the first five months of the year had fallen by 11 per cent – in line with expectations. But analysts were reassured that the group, which has become a bid target, did not revise expectations further down.

"The group's target remains a 50 per cent improvement in operating margin in 2002," Charles Scott, the chairman, said. Cordiant's shares, which came under pressure this week after WPP warned it would probably miss its profit margin target, recovered from earlier losses to close 2.5p lower at 79p.

Cordiant said the decline in revenues reflected the "relatively high levels of activity" in the first five months of 2001 compared with 2002. Despite this, it said cost savings had helped it to meet its internal profitability targets. In the past year, Cordiant has axed 10 per cent of its staff, leaving it with about 10,000. There are no plans for any further job cuts, it added.

"Trading conditions are still challenging. We do not expect our markets to return to growth until 2003," Mr Scott said, repeating the warning made at the group's half-year results in April.

Despite speculation that Active Value – the activist shareholder fund run by Julian Treger and Brian Myerson that has recently built up a 5 per cent stake in Cordiant – would push for a restructuring of the group at yesterday's shareholder meeting, it passed uneventfully, a spokesman said.

Michael Bungey, Cordiant's chief executive who presided over a series of expensive acquisitions made at the height of the media boom, was re-elected to the board, the spokesman added.

WPP, the world's biggest advertising and marketing group, said on Monday that it had seen "few, if any" signs of recovery in the industry. Sir Martin Sorrell, its chief executive, said a "pronounced recovery" was unlikely until 2004.