Leap Losses Bring Cost Cutting

The Leap Group’s $5.6 million net loss in its most recent fiscal year forced budget cuts that included slashing its core ad agency’s staff by 40 percent and cropping executive salaries by a total of $1 million, according to the company’s annual report.
Even with the cutbacks, Leap Group’s financial troubles may not be over. According to the report, a joint client of Leap-owned ethnic agencies YAR Communications and Kang & Lee that represented 36.3 percent of the company’s total revenues plans “across-the-board reductions in its marketing programs” in 1998. An agency representative declined to name the client, although AT&T is listed in the report as one both shops share.
Leap Group paid $23.4 million for YAR Communications in April, and $1.4 million for Kang & Lee in November. Both are in New York.
Leap Group revenues for the year ending Jan. 31 totalled $30.6 million, with the company recording a loss of 41 cents per share, according to the report.
The report, filed May 1 with the Securities and Exchange Commission, documents Leap Group’s efforts to stanch the financial hemorrhaging that has contributed to its stock’s nosedive. Under chief executive officer Fred Smith, the company cut staff at The Leap Partnership in Chicago by 40 percent in the latter part of the year, resulting in savings of $1.4 million. Executive pay was trimmed by $1 million, as “certain key executives” agreed to salaries this year of $52,000.
Leap said it expects to save $3.5 million through the restructuring of its Santa Monica, Calif., operation, which recorded an operating loss for the year of $4.3 million. Leap fired the office’s management in October and now plans to sell the Santa Monica building, for which it paid $2 million. It plans to retain a presence in the Los Angeles area.