Cordiant executives in line for pounds 100m

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Andrew Feinberg

White House Correspondent

Cordiant, the advertising group, yesterday unveiled a controversial incentive scheme which could see 140 executives sharing more than pounds 100m between them. The news came as the company split itself into two public quoted vehicles, Saatchi & Saatchi and Cordiant Communications Group (CCG).

Cordiant said 140 senior staff, 70 from each agency network, would buy pounds 6m worth of shares between them to "demonstrate their committment to the enterprise". If both networks meet targets based on earnings per share growth over a three year period, executives could share a paper profit of over pounds 100m.

A spokesman for Cordiant defended the scheme, saying it was virtually impossible the targets would be met. "These are Herculean hurdles, and would mean doubling the size of the business," he said.

However, one analyst, who did not want to be named, hit out at the incentives, especially as Cordiant ran into financial difficulties in the early Nineties. "On the face of it, it looks exceptionally generous," he said.

To receive the maximum incentives, both CCG and Saatchi have to report a 25 per cent annual growh in earnings per share for three years. In addition, both agencies have to be number one or two in the top ten league of global advertising networks.

City analysts were disappointed by the pounds 17.1m cost of the demerger, which was pounds 2m over budget. There were also worries that the margin target of 10 per cent had been deferred by a year. Shares, which have been slightly depressed since the demerger was announced earlier this year, added just 1.5p to end at 122p. However, Cordiant said yesterday that was simply a result of new trading agreements with Zenith Media, the media buyer which will be 50:50 owned by Saatchi and CCG after the demerger.

Observers were positive, though, that Bates Worldwide, which will now be part of CCG, would benefit from the demerger by being able to pitch for business which had previously conflicted with Saatchi. One analyst said: "Bates has up until now been conflicted out of ten per cent of the global advertising market through Saatchi having the Procter & Gamble account."

Michael Bungey, chief executive officer of CCG, said yesterday that Bates had already won new business from Cussons which it would not have been able to win if the old structure had remained intact.

But despite healthier prospects for Bates, which has recently lost key clients such as Miller Brewing, analysts said the demerger had put it in play. One said: "The big advertising networks such as WPP and Omnicom are getting to the stage where they need a third global network. Bates is sitting there - the number one in Asia Pacific, saying `please buy me'".

Cordiant yesterday reported a 30 per cent increase in pre-tax profit to pounds 20m for the six months to the end of June. Charlie Scott, chairman, who becomes non-executive chairman of both CCG and Saatchi, said the demerger would boost revenue growth.