Speaking at the Media Week conference sponsored by UBS Warburg, Mr. Bungey said
Cordiant added another 400 layoffs to 700 staff cuts announced in September when it expected revenue to drop 5% this year and increased an expected charge to earnings to $37 million from its initial estimate of $15 million.
Talking with bankers
Chief Financial Officer Art D'Angelo said Cordiant is holding talks with its bankers to review the covenants governing its credit agreements, but he stressed the company's results have not breached its covenants and it should have an agreement by the time it reports its year-end results in March.
"We are not expecting to run out of money," he said.
Cordiant has restructured so that it can merge or close lesser-performing operations and redundant back-office functions, including merging XM Interactive into its 141 Worldwide network; folding five Communicator units in the U.S. into one; and combining its European events businesses.
But, Mr. Bungey added, "We've closed what we're going to close."
Mr. Bungey denied that Cordiant's Bates Worldwide network's Hyundai business, which he said accounts for 7% of Cordiant's global revenue, is in jeopardy beyond the U.S. media review. He said the U.S. media business under review, which Bates has not been invited to re-pitch, is worth less than 1% of Cordiant's global revenue.
"There's no foundation to think it will go any further," he said.
Bates works with Hyundai, its largest client, in the U.S., South Korea, India, Australia and U.K., where it handles handles corporate work. Mr. Bungey said Hyundai tends to work in most countries through distributors that are not Hyundai-owned, making an agency switch more difficult.
In South Korea, where Cordiant in late 1999 bought the third-largest ad agency to cement its relationship with Hyundai, Mr. Bungey said that Diamond Ad (Bates) in Seoul has a five-year contract with Hyundai running until 2005. Half that agency's $519 million billings are from Hyundai business. Bates already had a smaller Seoul agency called Diamond Bates Korea that bills $43.5 million a year. As business has slid in Korea, Cordiant has closed several divisions there this year and reduced Korean staff by about 100 to 350, Mr. Bungey said.
In European activity, Cordiant acquired a 19% stake in United Visions Entertainment AG, a German producer of TV and internet programming, in June. Cordiant plans to merge its European network, Scholz & Friends Group GmbH, with the publicly traded UVE to create a public company 80% owned by Cordiant.
Scholz & Friends AG began trading in Frankfurt's Neuer Markt Nov. 26.