Bates Dorland has slashed its directors’ bonuses following a stream of account losses which have squeezed its profits.
According to industry sources, bonuses worth an estimated 4m to 6m, which are usually considered sacrosanct, have been frozen.
Graham Hinton, chairman of Bates Dorland, comments: “We have a profit target to meet set by Cordiant Communications Group [Bates’ parent] out of which there is a ‘residue’ given as bonuses to directors.
“As revenue fluctuates, so does the ‘residue’,” he adds.
“The pressure to deliver profits has been greater since the demerger [with Saatchi & Saatchi] than in recent years.”
Cordiant’s first set of full-year results since the split from Saatchi at the end of 1997 showed global pre-tax profits up 20 per cent to 25.9m.
But UK revenues increased three per cent on operating margins down 16.2 per cent to 11.3 per cent, and operating profits plunged from 6.3m to 4.5m.
Panmure Gordon media analyst Lorna Tilbian says: “Bates in the UK has not had a wonderful year. If profits fall by more than a third then bonuses disappear.”
Andrew Boland, head of investor relations at Cordiant, denies the cuts affect the whole group.
He says bonuses fluctuate according to regional, local and individual unit performance.
He adds: “There are one or two places which did not do fantastically well. Cordiant is like any other holding company – we’re tough task masters.”
Bates Worldwide has lost out to Leo Burnett in HJ Heinz’s advertising globalisation.
This week it emerged that it has lost the 50m beans, soups and pasta accounts, on top of losing the 90m Tomato Ketchup account last September.
Recent losses affecting Bates in the UK include Compaq’s 33m account, plus Texaco, P&O and Nicorette.
However, these losses were partly offset by the gain of Allied Domecq’s 25m Ballantine’s whisky account last September.