OPINION: Cash angle gives edge to Cordiant’s demerger

The passing of the holding company, Cordiant plc (Campaign, last week), will be mourned by few in the industry. From 15 December, subject to shareholder approval, Cordiant Communications Group (new home to Bates Worldwide and Scholz & Friends) and Saatchi and Saatchi plc will start on the road to proving their individual worth. With their respective levels of debt, it will be quite a challenge.

The passing of the holding company, Cordiant plc (Campaign, last

week), will be mourned by few in the industry. From 15 December, subject

to shareholder approval, Cordiant Communications Group (new home to

Bates Worldwide and Scholz & Friends) and Saatchi and Saatchi plc will

start on the road to proving their individual worth. With their

respective levels of debt, it will be quite a challenge.



The talk at Bates and Saatchis is already less of demerging but more of

motivating, as the groups will have in place generous incentive packages

that could make millionaires of 140 top staff - if they do their jobs;

for half of the potential rewards will depend on total shareholder

return measured against nine peer companies. As Bob Seelert, the chief

executive of Cordiant, who will be executive director of the demerged

Saatchi group, told Campaign frankly last week: ’If it falls on its

arse, it will be our money down the drain.’



Personal fortunes aside, the benefits of the demerger continue to be

less obvious for Zenith, which will be owned 50-50 by the demerged

companies.



However, the first encouraging signs have already occurred within the

advertising networks - with Cussons’ decision to go with the Bates

network despite Saatchis’ long-standing and crucial Procter & Gamble

connections.



Elsewhere in this issue, it is encouraging to be able to report,

courtesy of Willott Kingston Smith, that the advertising industry has

enjoyed its best year since the start of the decade, with better profit

levels and more staff employed (see feature, p44).



Although these figures do not approach anything like the incredible

levels of the 80s, our survey reveals that gross income of the top 50

agencies has risen 9.8 per cent year on year and operating profit levels

rose by an even more impressive 22.5 per cent as overheads were kept in

check.



Happy days.