'It's all gone terribly wrong but I'm still smiling'

RUNNING a global marketing monolith in the teeth of the worst advertising downturn for a generation can take it out of you. Just ask Michael Bungey.

The chief executive of Cordiant, one of the world's top ten advertising agencies, has been left a little battered and bruised of late, in more ways than one. Results due out next month are expected to show that Cordiant has plunged into the red and could write off up to £200m on failed acquisitions. Bungey won't be around to present the figures himself because he is recovering from a hip replacement operation.

'Last year was an awful year,' he admits. 'It knocked everything off course.'

Not even renewed talk of a takeover by one of its bigger rivals lifted the share price. It has plunged from 406p two years ago to less than 100p, valuing the company at about £350m. Meanwhile, Bungey, 62, has said goodbye to 1,200 staff - more than a tenth of the workforce - while debts have ballooned to more than £200m. And the company has just reached agreement with its banks over rearranging the terms of its borrowings.

To add to Bungey's woes, two senior financial public relations executives, Nick Miles and Hugh Morrison, split from the company in a bitter dispute that looked liked being played out in court before it was resolved last week.

Despite all the setbacks, Bungey has confounded critics who predicted that Cordiant would sink without trace when the agency emerged from the wreckage of the Saatchi & Saatchi empire in 1997 after a shareholder rebellion saw founder Maurice Saatchi ousted.

Cordiant now sat alongside the new Saatchi & Saatchi, which concentrated on advertising, and to the palpable relief of its directors, sold out at the top of the market two years ago to another Maurice - Maurice Levy of French agency Publicis.

Bungey took a different route. He built Cordiant into a smaller version of diverse marketing services companies such as WPP and Omnicom, which dominate the world's advertising industry. His aim was to offer clients such as Pfizer, British American Tobacco, Microsoft and Exxon more than just 30-second television commercials.

'I had a different view of life from Saatchi & Saatchi, though I never spent much time chatting to Bob Seelert [Saatchi's chairman] about it,' Bungey recalls. 'Clients were spending their money on different ways to reach consumers, and we wanted to be a part of that.'

About 80% of Cordiant's revenue used to come from conventional advertising, but that now makes up only about half the business. The rest comes from marketing services, including online agencies, design companies and public relations businesses. 'I think the strategy has proved sound and we've gone a long way towards achieving our aims,' he says.

This is true up to a point; up to last year, in fact, when, as Bungey admits, it all seemed to go terribly wrong. He remembers all too well what happened. 'We started to see some weaknesses in the US very early last year. At the start of the year, global advertising was expected to grow by 6%, but by October what was plus 6% was minus 6%. It was the worst decline since the Second World War.'

So did the strategy of diversification prove worthless when the going got tough? It involved spending £600m on acquisitions including Lighthouse, owners of Miles and Morrison's City spin-doctors, Financial Dynamics.

Bungey says: 'With Lighthouse, we would make that same acquisition again because we got an extremely good business from it. Most of our acquisitions were made using paper and our share price was extremely high at the time.'

And he argues that Cordiant was hit harder than most because many of its companies work on a project basis and projects are easily cancelled. Cordiant was also hit when one of its major clients, the Korean car maker Hyundai, took away its US media-buying account from the agency.

Bungey has been in the business for nearly 40 years, including a stint running his own successful agency. Friends say he is a born optimist. 'For Michael, the glass is always half full,' says one.

Right now, it is the kind of perspective he needs.