The holding companies of both agencies, Cordiant and WPP, don't expect any recovery in adspend this year. Which explains the high-level management changes that have been implemented to improve their fortunes in Asia-Pacific.
WPP's first quarter revenue also fell 2.1 per cent to £945.8 million, (US$1.4b) but its Asia-Pacific revenue rose more than three per cent.
Compounding Cordiant's woes in this region, the company belatedly released its 2001 profit results at the end of April, which showed a £278 million loss last year, compared to a £27.7 million gain the year before. Despite an 18 per cent revenue gain to £605 million last year, revenue was expected to decline by two to three per cent this year, according to Cordiant chief executive Michael Bungey. Cordiant's shares have slumped by 70 per cent and it renegotiated the terms of its US$225 million bank loan, after agreeing to restrictions on the use of its cash flow. In the Asia-Pacific and Latin American markets (which Cordiant lumps together), revenue increased by 3.5 per cent to £152 million. But its says growth in Bates Asia was offset by difficult conditions in Australia and Korea.
Still, Bates new global chairman and chief executive officer David Hearn, who was previously with Goodman Fielder in Australia, and Bates Asia-Pacific regional president Ian Smith have their work cut out for them. Smith, who only just got back to Sydney from New York, was forced to immediately defend Patterson and its CEO Ian Elliot. The rumour mill cranked up again to say Elliot would be removed after losing his successor McLennan to a rival agency - something that has never happened at Patterson.
His immediate focus has to be fixing what has been Cordiant's jewel in the crown - Patterson. The agency has always been a big profit spinner, but the loss of key clients Ansett and HIH has cost it dearly - including, for the second year, its number one position in Australia. Smith has pointed the finger at rivals' rumour-mongering to create instability. Others in the agency say he has been frustrated by Cordiant's financial woes, which have led to hiring freezes and the abolition of bonuses.
But it is known that McLennan and Elliot clashed, particularly with Elliot saying one week that McLennan would become CEO imminently and another that he was only deputy and would be for some time. So - even after 17 years at the agency - McLennan cut his losses and accepted the Y&R offer.
His role at Y&R is also a difficult one but a definitive sign that WPP is trying to breathe new life into the agency, which has had flagging fortunes in Sydney. After appointing joint regional chairmen, regional incumbent Peter Steigrad will now only focus on Australia and New Zealand and will work a short week. Steigrad has hinted at retirement, but says he will work with McLennan to ensure a smooth transition.
McLennan also has to watch the advances of STW Communications, owners of Singleton Ogilvy & Mather and 49 per cent of J. Walter Thompson in Australia. Since taking a stake in JWT, the local executives have wasted no time in implementing cost-cutting and cutting short some high profile careers. The group, which is 33.3 per cent owned by WPP, has intimated that it would like to also take on Y&R's local operations. Y&R says it won't happen, industry observers aren't so sure.
After all, in Asia WPP has given O&M's global creative director Neil French additional duties as regional creative director of Dentsu Young & Rubicam. Smith says STW's advances could present McLennan with an opportunity.
"(STW) is a major player in this part of the world and some (executives) are getting towards the end of their careers. For Hamish it's a great opportunity.
