Three privately-owned marketing agencies score top marks for financial credentials in awards

But general trend was one of slower growth, lower margins and tightened financial belts
By: Fintellect Publishing Ltd
 
 
Private Plums 2014: Top Five
Private Plums 2014: Top Five
BLOCKLEY, U.K. - Dec. 11, 2014 - PRLog -- Three privately owned marketing agencies have won the highest accolade for their financial credentials in this year’s survey of “Private Plums”, bucking the latest trend towards poorer financial performance evidenced by the survey as a whole.

The “Private Plums” scheme was launched by Marketing Services Financial Intelligence in 2002 to recognise good financial management among privately owned UK marketing agencies irrespective of size. Companies are awarded up to eight plums for meeting various financial criteria.

The three agencies that collected the full eight “plums” were healthcare agency Langland Advertising, Design and Marketing, digital agency Stickyeyes and The7Stars UK media agency.   All three were relatively small and/or recently established.

The general trend emerging from this survey of 72 privately owned UK agencies with gross income above £2.5 million was one of slower growth, lower margins and tightened financial belts.

Winners of a high number of plums are likely to become some of the juiciest targets for potential acquirers (assuming the owners want to sell), as demonstrated by the companies in last year’s survey that are no longer privately owned – companies like Inferno and Albion.  Beattie McGuinness Bungay also recorded a good performance before selling a further tranche of shares to Cheil Worldwide.

But the survey also found that an impressive past performance is not always easy to maintain.

“Inferno may have scored highly in last year’s survey on the back of healthy March 2012 accounts”, editor Bob Willott said, “but within a year the picture had changed dramatically, suggesting that the

DraftFCB sale was more akin to a rescue from distress.  Having doubled its turnover and profit between 2011 and 2012 after acquiring the Farm agency and rescuing Quiet Storm, Inferno went into a big decline in the following year as its troubled Nokia client cut its marketing spend and demanded more for the money it did spend.  Turnover fell back to near its 2011 level, but staff costs remained 27% ahead of those in 2011.”

Another surprise came from Essence Digital Group – winner of seven plums in last year’s survey and one of the best performers that year.   Its impressive profit growth rate was dented after acquiring the business of Black Bag Advertising and certain assets from Point Reach in North America.  During the first six months of ownership, those new acquisitions incurred an operating loss of £352,000, reducing the pre-tax profit of the group for the year from £3.1 million in the previous year to £2.9 million in the latest year, despite a 57% increase in gross income.   Fortunately the damage was not so great as to materially reduce the average overall operating profit margin for the two years.  Consequently Essence has still produced a crop of seven plums in this year’s survey.

There was a slight fall in the percentage of companies achieving most of the Private Plum criteria.  Only 21% of companies achieved compound gross income growth in excess of 15% per annum - down from 23% in the previous survey.Fewer agencies reported an average operating profit of £500,000 or more over the last two years and fewer were able to achieve an average operating profit margin of 15% or more.

With income growth being constrained, staff costs ate into a larger slice of that income at many agencies.  Only 26% of agencies kept staff costs within 55% of gross income, compared with 32% in the previous survey.

Tougher conditions or not, there will always be some agencies that make good progress.  Among those leaping up the rankings were Design Bridge (up from 39th place to 9th), Haygarth Enterprises (up from 47th place to 13th) and Hallco 990 (the parent company of Barrington Johnson Lorains that jumped from 50th place to 23rd).

There was greater emphasis on conserving profits in the latest survey.   Fewer companies were squandering operating profits on exceptional items or excessively high interest charges (leaving aside the impact of private equity shareholders – see table).  And a slightly greater proportion of companies were retaining the equivalent of three month’s operating costs (or £250,000 if greater) as working capital.   Even so, only 37% of companies passed the working capital test and some of the best scoring companies failed it – among them Essence Digital Group, CHI Partners Holdings, Accord Group and Fraser Scales Holdings.

Contact
Robert Willott
***@fintellect.com
End
Source:Fintellect Publishing Ltd
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Tags:Private Plums, Fintellect
Industry:Financial, Marketing
Location:Blockley - Gloucestershire - England
Subject:Reports
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