AGENCY PERFORMANCE LEAGUE

By Claire Beale, campaignlive.co.uk, Friday, 03 October 2003 12:00AM

The results of the top 50 agencies suggest early signs of a recovery in the industry, but it's too early to start popping the corks, Claire Beale says.

Advertising's in a recession, the industry's workforce has been culled, profits are being squeezed and clients are driving cost efficiencies harder than ever. So the latest corporate statistics filed by agencies at Companies House were never going to make for light reading.

The first financial results to really reflect the impact of the marketing downturn show a picture of a strained industry. Companies that last year seemed to be keeping their head above the recessionary tide are now gasping for respite. If you think the recession has been tough, here is the hard proof.

In these Sarbanes-Oxley times, with the industry driven back to using one-dimensional billings figures rather than declared income as a regular thermometer of health, filed accounts provide the only credible and robust view of agency performance. Yet the tardiness of accounts filing means that the current industry data spans several years of financial performance. A number of groups appear to have deferred filing accounts this year, possibly with the intention of putting off public exposure of bad news. Neither Saatchi & Saatchi Group nor Interpublic had filed accounts since December 2000 by the time this report was being compiled by Willott Kingston Smith. Even so, it is the most comprehensive gauge of the industry's momentum over the past few years.

And it's not all as gloomy as feared: the top 50 agencies overall managed to turn in a slight increase in income. And even an increase as slight as the 1 per cent recorded here is really very welcome indeed.

For the nimbler, younger agencies, start-up growth curves remain unbowed.

Mother, Delaney Lund Knox Warren, Fallon London and Miles Calcraft Briginshaw Duffy all reported increased income levels.

Mother recorded the most dramatic swing in income, up 41 per cent in its latest reporting year (to the end of 2001), buoyed by the work it did for ITV Digital, more briefs from Coca-Cola and a place on the Diageo roster.

Yet it was not just the new and fashionable that reported healthy income levels. Lowe, Publicis, Euro RSCG Wnek Gosper, Burkitt DDB and Robson Brown all reported an increase in income above 20 per cent.

Lowe's organic growth in 2001, including wins such as Diet Coke and HSBC, helped to drive income, though the agency made a dramatic plunge from the black into the red. An operating profit of £3.5 million became a loss of £3.1 million, but the accounts include £8.4 million in management charges as well as an additional £4.7 million in charges relating to the previous year.

Bartle Bogle Hegarty turned in a strong performance with gross income increasing by 7 per cent, operating profit by 52 per cent and pre-tax profits up by 42 per cent. M&C Saatchi, meanwhile, reported a 30 per cent increase in operating profit and pre-tax profit, up to £4.7 million and £4.9 million respectively.

Euro RSCG appears to have confounded the general squeeze on margins, since its growth in income comes despite a 4 per cent drop in turnover, suggesting that the agency has managed to gear up to higher-margin work.

The improvement also suggests that, in common with many other agencies, Euro RSCG has moved some media activity into another group company while retaining some income from the business.

Grey reported a return to profit. A fall in UK turnover was compensated for by a rise in turnover from Europe. But a 12 per cent reduction in staff costs will have helped enormously. It will be interesting to see how the subsequent hiring of the new chief executive Garry Lace, reputedly on a salary of footballer proportions, will affect those figures.

The study highlights difficulties at Roose & Partners, where income fell by 28 per cent, forcing redundancies and resulting in a loss for 2002.

Banks Hoggins O'Shea/FCB hived off its media division into Brand Connection but that still does not explain the company's 85 per cent fall in operating profits. The agency also had to make provisions of £785,000 for restructuring costs and £1.3 million against intragroup debts.

St Luke's reported a £1.2 million operating loss compared with a £1.9 million profit the year before. Yet the agency's highest paid - though undisclosed - director (Andy Law?) more than doubled his salary in the reporting period. Law was, of course, later forced out of St Luke's following a disagreement with the management team. In his chairman's report for this particular financial period, though, he explained that the operating loss was a result of continued investment and diversification.

Leagas Delaney reported increased operating and pre-tax profits of £1.3 million but its parent's accounts suggest that the group continued to struggle, reporting an increased operating loss of £1.9 million and a pre-tax loss of £4.8 million.

Income fell by 25 per cent at Collett Dickenson Pearce which, combined with a tough rental review, forced the agency to cease trading at the end of 2001. Golley Slater was another agency to take a hit. Business from the US had accounted for 12 per cent of the agency's turnover, but that fell away and UK income also dropped. Oddly, though, the agency took on more staff, recruiting more sales and administration people, but reduced numbers in the creative department.

BMP DDB finally transferred out its media planning and buying business, OMD, at the end of 2001 - the last year for which the agency has filed accounts. So that doesn't explain BMP's 12 per cent fall in operating profit across the year.

On average, profit margins improved across all agencies, with the crucial operating profit margin on gross income rising slightly from 6.9 per cent to 7 per cent. But Willott Kingston Smith believes agencies should be capable of achieving operating margins of 15 to 20 per cent. Only ten managed this.

While Fallon tops the productivity tables, it did not have such a good year in terms of profitability, with a drop in operating profit margin from 22.7 per cent to 13.8 per cent. Although the agency increased its income by a healthy 26 per cent, staff costs slightly exceeded this and non-staff overheads were up a whopping 64 per cent.

Gross income per head across the board was up by 2.4 per cent and operating profit per head up by 2.8 per cent. At the same time, despite redundancy costs, employment costs per head were up by only 2 per cent.

On average, staff working at the top 50 agencies handled £89,708 of income each, though Willott Kingston Smith believes a benchmark of £100,000 would be healthier. Fallon tops the chart here, with an impressive £142,354 per head, though staff are clearly rewarded for the effort that this figure implies; the agency also has one of the highest employment costs per head: £73,583.

The sector as a whole managed to notch up operating profits per head of just £6,245, well below the £15,000 target that Willott Kingston Smith believes that a well-run company should be capable of achieving. Top of this league was Mustoe Merriman, with a whopping £25,170 per head.

On average, staff at the largest agencies pocketed £52,416 in salaries, a rise of 2 per cent on the previous study. The figure is, though, perhaps distorted by an enviable average at CDP of more than £100,000, influenced in part by redundancy payments.

Key individuals enjoyed significant financial boosts. Euro RSCG's highest-paid director received £959,000; Aegis paid compensation to the departing Ray Kelly of £449,000; and Leagas Delaney's highest-paid director (Tim Delaney, perhaps?) received a 30 per cent rise to £584,000.

Hardly any agency has survived the past two years without having to make some tough decisions on staff levels. Six agencies between them forked out almost £5 million in redundancy costs: HHCL (£1.3 million), Roose (£666,000), Partners BDDH (£562,000), Saatchi & Saatchi (£386,000), CDP (£1.5 million), and Citigate (£163,000). Not surprisingly this was reflected in agencies' bottom lines. HHCL saw its operating profit fall 73 per cent (nearly £3.5 million) while BDDH's operating profit tumbled 53 per cent.

The ratio of gross income to employment costs currently stands at 1.71:1, or 171 per cent, for the top 50 as a whole. Willott Kingston Smith claims the figure can, and should, be nearer to 200 per cent for well-run agencies.

Mother is one of the few to break the 200 per cent mark. Given Mother's rapid growth rate, it would be easy for overheads, particularly employment costs, to soar. And since the agency has no problem attracting some of the best staff - which come, of course, at a price - it's also interesting to note that the agency is well into the lower half of the employment costs per head table.

There's comfort, too, from the fact that overall the top 50 agencies had net current assets of £289.6 million, up from £276.7 million for the previous year. However, only 36 of the top 50 had net current assets; the rest had liabilities which means a reliance on external support to remain solvent.

The balance sheet of the sector as a whole improved. As far as agencies' net cash balance sits, the filed accounts can be misleading as holding companies siphon off excess cash. However, overall there was a lot more cash in the agencies than a year ago - £209 million compared with £73 million. Ogilvy boosted its net cash balance by almost £50 million thanks in part to repayments made by other group companies. Its sister WPP agency JWT also enjoyed £20 million, while Y&R netted almost £16 million, though most of this came from operating activities. Saatchi & Saatchi received nearly £20 million from payments from sister companies.

So, overall, the prognosis is not quite as bad as it could be. Agencies have taken some very tough decisions on employment levels and tightened up their trading practices. But a word of caution before everyone rushes to reintroduce the weekly Champagne budget. Half of the agencies in the top 50 have still not filed accounts for last year; Willott Kingston Smith's 2004 report will no doubt reflect what is (hopefully) the concluding instalment in advertising's current recession story.

The Financial Performance of Marketing Services Companies 2003 is available from Willott Kingston Smith (020 7566 3850) priced £345.

TOP 50 AGENCIES

Rank Rank Agency Year end Gross income

latest prev Latest Previous Chg

(pounds (pounds (%)

000s) 000s)

1 1 Young & Rubicam Group 31/12/02 93,278 90,494 3.08

2 2 McCann-Erickson UK

Group 31/12/00 82,739 72,926 13.46

3 3 The Ogilvy Group

(Holdings) 31/12/02 59,994 70,589 -15.01

4 9 TMP Worldwide 31/12/01 49,155 43,178 13.84

5 6 Saatchi & Saatchi

Group 31/12/00 47,360 49,392 -4.11

6 5 BMP DDB 31/12/01 44,158 47,896 -7.80

7 8 D'Arcy Masius Benton

& Bowles 31/12/01 44,052 40,410 9.01

8 4 J. Walter Thompson

Group 31/12/02 38,776 41,288 -6.08

9 13 Lowe & Partners 31/12/01 37,458 30,905 21.20

10 12 Bartle Bogle Hegarty 31/12/02 35,246 32,805 7.44

11 10 Abbott Mead Vickers

BBDO 31/12/01 34,017 34,388 -1.08

12 7 Publicis 31/12/01 30,887 25,555 20.86

13 14 M&C Saatchi 31/12/01 30,509 29,856 2.19

14 15 TBWA\London 31/12/01 24,725 27,626 -10.50

15 17 Leo Burnett 31/12/01 24,471 23,578 3.79

16 16 Grey Advertising 30/09/02 22,830 22,962 -0.57

17 20 Euro RSCG Wnek

Gosper 31/12/01 20,305 16,881 20.28

18 18 Howell Henry

Chaldecott Lury 31/12/01 18,707 20,858 -10.31

19 19 WCRS 31/12/01 18,342 18,660 -1.70

20 23 Leagas Delaney

London 31/12/01 13,090 13,598 -3.74

21 21 Banks Hoggins

O'Shea/FCB 31/12/01 12,477 15,370 -18.82

22 22 Golley Slater

Group 30/11/01 11,399 14,297 -20.27

23 27 BDH\TBWA 31/12/02 8,734 8,254 5.82

24 25 St Luke's Holdings 31/12/01 8,546 10,557 -19.05

25 29 Delaney Lund Knox

Warren & Partners 31/12/02 8,162 7,528 8.42

26 28 Partners BDDH 31/12/01 7,916 8,722 -9.24

27 26 Citigate Albert

Frank 28/02/02 7,238 8,828 -18.01

28 31 Senior King

Communications Group 31/12/02 7,110 7,366 -3.48

29 36 Burkitt DDB 31/12/01 6,913 5,471 26.36

30 34 Cheetham Bell JWT 31/12/02 6,892 6,477 6.41

31 37 Fallon London 31/12/02 6,833 5,409 26.33

32 32 Advertising

Principles (Group) 31/03/03 6,088 5,572 9.26

33 35 Mother 31/12/01 5,580 3,955 41.09

34 30 Collett Dickenson

Pearce UK

Advertising 31/12/01 5,538 7,416 -25.32

35 40 DFGW 30/09/02 5,249 4,979 5.42

36 41 Bray Leino 31/12/02 5,093 4,954 2.81

37 46 Faulds Advertising 31/12/01 5,037 4,887 3.07

38 43 Mustoe Merriman Levy

Holdings 30/06/02 5,034 4,665 7.91

39 42 BRAHM 31/07/02 4,953 4,725 4.83

40 48 Robson Brown 28/02/02 4,700 3,555 32.21

41 44 Camp Chipperfield

Hill Murray 30/04/02 4,396 4,363 0.76

42 45 Miles Calcraft

Briginshaw Duffy 30/06/02 4,267 3,369 26.65

43 - Poulter 31/07/02 4,226 3,730 13.30

44 39 Masius 31/12/01 4,049 5,042 -19.69

45 47 CDP-Travissully 31/12/01 3,961 3,567 11.05

46 38 Roose and Partners

Advertising 31/12/02 3,547 4,927 -28.01

47 49 Maher Bird

Associates 31/12/01 3,537 2,967 19.21

48 - BCMB 31/12/01 3,463 3,270 5.90

49 33 Interfocus

Technology 31/12/02 3,417 6,500 -47.43

50 - Cogent Elliott 31/12/01 2,955 3,150 -6.19

Rank Rank Agency Year end Operating profit per head

latest prev Latest Previous Chg

(pounds (pounds (%)

000s) 000s)

1 1 Young & Rubicam Group 31/12/02 15,151 11,436 32.48

2 2 McCann-Erickson UK

Group 31/12/00 13,243 11,809 12.15

3 3 The Ogilvy Group

(Holdings) 31/12/02 2,090 10,215 -79.54

4 9 TMP Worldwide 31/12/01 64 (17,756) 100.36

5 6 Saatchi & Saatchi

Group 31/12/00 (17,858) (25,269) 29.33

6 5 BMP DDB 31/12/01 10,616 12,428 -14.58

7 8 D'Arcy Masius Benton

& Bowles 31/12/01 2,966 (5,203) 157.01

8 4 J. Walter Thompson

Group 31/12/02 11,872 18,024 -34.13

9 13 Lowe & Partners 31/12/01 (9,440) 11,344 -183.21

10 12 Bartle Bogle Hegarty 31/12/02 18,708 11,972 56.27

11 10 Abbott Mead Vickers

BBDO 31/12/01 9,463 5,460 73.31

12 7 Publicis 31/12/01 13,776 14,430 -4.53

13 14 M&C Saatchi 31/12/01 15,019 11,673 28.66

14 15 TBWA\London 31/12/01 11,648 15,717 -25.89

15 17 Leo Burnett 31/12/01 6,668 (371) 1,897.50

16 16 Grey Advertising 30/09/02 1,426 (6,185) 123.05

17 20 Euro RSCG Wnek

Gosper 31/12/01 2,814 1,676 67.88

18 18 Howell Henry

Chaldecott Lury 31/12/01 6,973 24,808 -71.89

19 19 WCRS 31/12/01 9,782 14,134 -30.79

20 23 Leagas Delaney

London 31/12/01 11,127 3,975 179.93

21 21 Banks Hoggins

O'Shea/FCB 31/12/01 4,339 23,139 -81.25

22 22 Golley Slater

Group 30/11/01 11,280 18,240 -38.16

23 27 BDH\TBWA 31/12/02 8,274 6,075 36.21

24 25 St Luke's Holdings 31/12/01 (9,620) 16,229 -159.28

25 29 Delaney Lund Knox

Warren & Partners 31/12/02 10,533 16,040 -34.33

26 28 Partners BDDH 31/12/01 6,682 13,977 -52.19

27 26 Citigate Albert

Frank 28/02/02 7,694 23,261 -66.92

28 31 Senior King

Communications Group 31/12/02 2,362 4,744 -50.21

29 36 Burkitt DDB 31/12/01 19,440 7,826 148.41

30 34 Cheetham Bell JWT 31/12/02 13,442 10,881 23.54

31 37 Fallon London 31/12/02 19,583 31,538 -37.91

32 32 Advertising

Principles (Group) 31/03/03 3,009 (800) 476.08

33 35 Mother 31/12/01 17,105 19,641 -12.91

34 30 Collett Dickenson

Pearce UK

Advertising 31/12/01 (71,656) 553 -13,048.32

35 40 DFGW 30/09/02 13,440 13,125 2.40

36 41 Bray Leino 31/12/02 8,814 5,612 57.07

37 46 Faulds Advertising 31/12/01 7,092 6,744 5.17

38 43 Mustoe Merriman Levy

Holdings 30/06/02 25,170 25,865 -2.69

39 42 BRAHM 31/07/02 3,430 3,525 -2.69

40 48 Robson Brown 28/02/02 3,860 2,000 92.99

41 44 Camp Chipperfield

Hill Murray 30/04/02 12,543 21,846 -42.59

42 45 Miles Calcraft

Briginshaw Duffy 30/06/02 11,268 9,636 16.94

43 - Poulter 31/07/02 4,625 2,605 77.53

44 39 Masius 31/12/01 (1,340) 17,604 -107.61

45 47 CDP-Travissully 31/12/01 14,189 12,429 14.17

46 38 Roose and Partners

Advertising 31/12/02 (14,079) 26,698 -152.73

47 49 Maher Bird

Associates 31/12/01 11,784 13,633 -13.57

48 - BCMB 31/12/01 11,186 15,171 -26.27

49 33 Interfocus

Technology 31/12/02 (10,426) (7,107) 46.69

50 - Cogent Elliott 31/12/01 1,854 (6,902) -126.86

Source: Willott Kingston Smith has used the latest figures filed at

Companies House, covering periods ending in 2000, 2001, 2002 and 2003.

Definitions: gross income - turnover less direct costs of sales, if any;

employment costs - the total of gross salaries, employers' NIC and

pension costs; operating profit - pre-tax, excluding the amortisation of

goodwill from acquisitions of other businesses, exceptional items,

income from (or losses of) related companies and interest receivable and

other investment income less interest payable.

COMMUNICATIONS GROUPS

Rank Group Turnover Gross income

Latest Chg Latest Chg

(pounds (%) (pounds (%)

000s) 000s)

1 Omnicom 33,276,257 9.4 4,988,944 9.4

2 Interpublic 27,391,773 -8.7 4,106,713 -8.7

3 Publicis Groupe 15,582,347 48.5 1,842,105 20.2

4 Dentsu 9,528,701 -1.4 1,565,120 -2.6

5 Grey 5,297,268 -1.4 794,193 -1.4

6 Havas Advertising 3,962,862 -6.1 1,264,570 -7.4

7 Hakuhodo 3,779,271 -1.7 474,632 -1.9

Average for above 14,116,926 5.1 2,148,040 1.2

WPP Group 18,028,700 -13.7 3,690,100 -2.6

Aegis 6,099,000 0.1 515,100 17.9

Cordiant Communications 2,435,000 4.0 605,000 11.2

Average for UK

top 50 groups 758,107 -1.6 146,060 0.3

Rank Group Operating profit margin

Latest (%) Change (%)

1 Omnicom 14.65 4.3

2 Interpublic 8.79 -36.6

3 Publicis Groupe 14.66 4.3

4 Dentsu 19.09 -6.3

5 Grey 4.40 164.3

6 Havas Advertising 9.15 -16.6

7 Hakuhodo 10.48 12.7

Average for above 12.38 2.0

WPP Group 12.20 -11.1

Aegis 14.87 -3.1

Cordiant Communications 6.03 -49.6

Average for UK

top 50 groups 6.78 -16.5

As was widely predicted, 2002 was at best a flat year for the worldwide marketing services industry, with income levels at the international groups increasing only slightly. The cost of generating this income increased, especially staff costs, with the result that operating profits declined overall. By the time interest and exceptional items are taken into account, pre-tax profits declined by almost 18 per cent overall.

The relentless focus of most clients on cost and the ascendancy of the procurement function have compounded the effects of the depressed state of the global economy. What is clear from the latest results is that most of the international groups have suffered a decline in existing business.

Several have made up for this through acquisition, but overall turnover fell at most of the groups, with only Omnicom and Publicis reporting growth.

At both groups, this was largely attributed to growth from acquisitions made during the year. Publicis acquired, among others, BCom3.

Perhaps the best all-round results were reported by Omnicom. Its income and profits were boosted thanks to growth in the US, although it had to rely more heavily on freelance staff to service the additional work. Publicis Groupe is now a much larger entity, but it is too soon to see how the acquisition of BCom3will affect the fortunes of the group. What is clear is that the enlarged group needs to operate at a healthy margin if Publicis is to make a good rate of return on its investment.

By contrast, Interpublic has had a fairly torrid time recently, with a 13.6 per cent drop in gross income over the past two years, principally in the US, and is forecasting further decline in 2003. Havas also reported disappointing results following a decline in income from the US and France, although it reported gains in the rest of Europe.

MEDIA BUYING AGENCIES

Rank Agency Year end Gross income

Latest Change (%)

(£000s)

1 Aegis Group 31/12/02 515100 18.1

2 ZenithOptimedia Group 31/12/01 104608 55.0

3 MindShare Media UK 31/12/01 23035 21.2

4 MediaCom UK 30/9/02 22944 19.9

5 Starcom Motive 31/12/02 16630 3.0

6 PHD Media 31/12/02 16413 -2.9

7 Initiative Media London 31/12/01 12065 -0.5

8 Optimedia International 31/12/01 10797 12.9

9 Media Planning 31/12/01 10640 9.4

10 Manning Gottlieb OMD 31/12/01 10063 12.3

Rank Agency Year end Operating profit

Latest Change (%)

(£000s)

1 Aegis Group 31/12/02 76600 7.7

2 ZenithOptimedia Group 31/12/01 16002 76.4

3 MindShare Media UK 31/12/01 2270 47.1

4 MediaCom UK 30/9/02 3793 63.0

5 Starcom Motive 31/12/02 5057 8.7

6 PHD Media 31/12/02 4522 -9.6

7 Initiative Media London 31/12/01 -210 -128.0

8 Optimedia International 31/12/01 1670 5.6

9 Media Planning 31/12/01 1971 -35.2

10 Manning Gottlieb OMD 31/12/01 2110 -15.3

Rank Agency Year end Operating profit margin

on gross income

(£000s) Change (%)

1 Aegis Group 31/12/02 14.87 -8.8

2 ZenithOptimedia Group 31/12/01 15.30 13.8

3 MindShare Media UK 31/12/01 9.85 21.4

4 MediaCom UK 30/9/02 16.53 35.9

5 Starcom Motive 31/12/02 30.41 5.5

6 PHD Media 31/12/02 27.55 -6.9

7 Initiative Media London 31/12/01 -1.74 -128.1

8 Optimedia International 31/12/01 15.47 -6.5

9 Media Planning 31/12/01 18.52 -40.8

10 Manning Gottlieb OMD 31/12/01 20.97 -24.6

As recorded above, Aegis has put in a strong performance in its latest accounts, underpinned by organic growth. Part of this is the result of an improvement in gross margins, reflecting the increased mix of higher- margin services.

The increased contribution from its market research division, Synovate, and an underlying increase in growth margin at Carat were matched by management efforts to improve revenue generation and increase the efficiency of the company's global operations, according to the chief executive, Doug Flynn.

Zenith and Optimedia are reported separately on the table but both were incorporated into a new operation, ZenithOptimedia Group, in July 2001. The Publicis accounts suggest that pre-tax profits nearly doubled from £13.7 million to £22 million for the media group.

Starcom Motive, now joined at the hip with its sister media agency MediaVest, turned in a stunning performance in operating profit and margin on gross income terms. The agency's operating profit margin on gross income is roughly double that of many of its competitors, though interestingly it's MediaCom, which has probably had the best new- business success rate of the lot, that has driven this margin up the most, by almost 36 per cent.

This is backed by an impressive 63 per cent hike in operating profits across the period, which coincided with wins such as the £40 million GlaxoSmithKline centralisation and the £16 million Egg account.

Initiative's figures reveal one of the more difficult years among the top ten - while income was down only marginally, the agency recorded an operating loss of £210,000. Havas' Media Planning, thwarted in its attempts to secure a partnership with CIA Medianetwork, saw its operating profits tumble by more than 35 per cent. The agency also lost £35 million of billings during the year, with account losses including Microsoft and UIP.

TOP TEN BY OPERATING PROFIT MARGIN ON GROSS INCOME (revenue)

Rank Agency Latest Previous Change

(%) (%) (%)

1 Mustoe Merriman Levy Holdings 26.50 28.83 -8.1

2 Burkitt DDB 23.62 9.87 139.3

3 Cheetham Bell JWT 20.28 16.97 19.5

4 Golley Slater Group 18.70 22.84 -18.1

5 McCann-Erickson UK Group 17.53 16.58 5.7

6 Mother 17.47 19.37 -9.8

7 Bray Leino 16.79 11.67 43.9

8 Bartle Bogle Hegarty 16.35 11.57 41.3

9 Young & Rubicam Group 15.64 11.80 32.5

10 M&C Saatchi 15.36 11.96 28.4

It's interesting to note that MMLH's sterling performance in terms of

operating profit margin on gross income coincided with the period in

which it sold to Hakuhodo, a clear indication of what a purchaser is

looking for in an agency.

BOTTOM TEN BY OPERATING PROFIT MARGIN ON GROSS INCOME (revenue)

Rank Agency Latest Previous Change

(%) (%) (%)

41 The Ogilvy Group (Holdings) 2.24 10.68 -79.1

42 Grey Advertising 1.51 -7.00 -121.6

43 TMP Worldwide 0.08 -27.63 -100.3

44 Masius -1.65 18.50 -108.9

45 Lowe & Partners -8.19 11.31 -172.4

46 St Luke's Holdings -13.62 18.14 -175.1

47 Interfocus Technology -14.34 -9.18 56.1

48 Roose & Partners Advertising -15.08 23.30 -164.7

49 Saatchi & Saatchi Group -23.30 -32.13 -27.5

50 Collett Dickenson Pearce UK

Advertising -78.93 0.77 -10368.9

Dentsu's decision to pull the plug on CDP and merge it into CDP-

travissully is given a clear perspective from these figures. But Saatchi

& Saatchi continues to be a persistent offender again hovering near the

bottom of this table of agencies.

TOP TEN BY GROSS INCOME (revenue) per head

Rank Agency Latest Previous Change

(pounds) (pounds) (%)

1 Fallon London 142,354 138,692 2.6

2 Camp Chipperfield Hill Murray 125,600 167,808 -25.2

3 J. Walter Thompson Group 121,175 112,196 8.0

4 Lowe & Partners 115,255 100,341 14.9

5 Bartle Bogle Hegarty 114,435 103,486 10.6

6 Leagas Delaney London 110,932 113,317 -2.1

7 Delaney Lund Knox Warren & Partners 108,827 100,373 8.4

8 Banks Hoggins O'Shea FCB 108,496 106,736 1.6

9 Leo Burnett 108,279 95,073 13.9

10 EURO RSCG Wnek Gosper 108,005 95,915 12.6

It's interesting to note that while Fallon has managed to drive gross

income per head well beyond the industry average (and beyond WKS's

suggested benchmark of £100,000), it also has one of the highest

employment costs per head (see table).

BOTTOM TEN BY GROSS INCOME (revenue) per head

Rank Agency Latest Previous Change

(pounds) (pounds) (%)

41 St Luke's Holdings 70,628 89,466 -21.1

42 Faulds Advertising 66,276 62,654 5.8

43 Cheetham Bell JWT 66,269 64,129 3.3

44 Golley Slater Group 60,312 79,872 -24.5

45 Bray Leino 52,505 48,097 9.2

46 Advertising Principles (Group) 52,483 44,576 17.7

47 Senior King Communications Group 50,426 46,038 9.5

48 Brahm 46,290 46,782 -1.1

49 Robson Brown 43,925 37,421 17.4

50 Poulter 33,016 32,719 0.9

It's worth noting that the three agencies that failed to even generate

£50,000 per head on average are all of a similar size, with

between 100 and 130 employees. Perhaps the agencies find it difficult to

operate at this size and need to scale down or reorganise.

TOP TEN BY EMPLOYMENT COSTS PER HEAD

Rank Agency Latest Previous Change

(%) (%) (%)

1 Collett Dickenson Pearce UK

Advertising 103,098 46,058 123.8

2 Fallon London 73,583 70,128 4.9

3 Euro RSCG Wnek Gosper 71,314 60,597 17.7

4 Delaney Lund Knox Warren & Partners 67,973 57,960 17.3

5 Camp Chipperfield Hill Murray 67,086 74,923 -10.5

6 J. Walter Thompson Group 66,391 63,938 3.8

7 The Ogilvy Group (Holdings) 64,313 62,877 2.3

8 WCRS 63,707 60,149 5.9

9 Leagas Delaney London 63,686 66,192 -3.8

10 Banks Hoggins O'Shea FCB 62,243 51,917 19.9

CDP's figures are perhaps skewed by redundancy payments, but Fallon is

clearly rewarding its staff well for their impressive productivity

levels (see table). On average staff at the top 50 largest advertising

agencies earned £52,416 each.

BOTTOM TEN BY EMPLOYMENT COSTS PER HEAD

Rank Agency Latest Previous Change

(%) (%) (%)

41 Cogent Elliott 37,488 35,000 7.1

42 Advertising Principles (Group) 36,000 31,680 13.6

43 Bray Leino 34,021 32,534 4.6

44 Cheetham Bell JWT 33,885 30,683 10.4

45 Golley Slater Group 33,820 45,520 -25.7

46 Senior King Communications Group 33,135 28,038 18.2

47 Poulter 32,281 28,842 11.9

48 Brahm 31,318 30,089 4.1

49 BCMB 30,000 32,029 -6.3

50 Robson Brown 27,804 28,474 -2.4

It's perhaps not surprising that the agencies at the bottom of this

table are generally regional ones. Outside of London, staff have a

slightly lower cost of living in terms of housing and basic goods,

although the north/south differential is narrowing.

GROUPS' HIGHEST-PAID DIRECTORS

Rank Group Director Latest Previous1 Chg

(pounds (pounds (%)

000s) 000s)

1 WPP Group Martin Sorrell 1,930 1,212 59.2

2 Aegis Group Douglas Flynn 1,149 835 37.6

3 Cordiant Communications

Group Bill Whitehead 994 835 19.0

4 Havas Group of Companies

in UK Not disclosed 959 780 23.0

5 Carlson Marketing Group

(UK) Not disclosed 808 388 108.3

6 Chime Communications Lord Bell 780 719 8.5

7 Abbott Mead Vickers Group Not disclosed 645 1,828 -64.7

8 Publicis Group of

Companies in UK Not disclosed 629 827 -23.9

9 Incepta Group Anthony Carlisle 533 387 37.7

10 Leagas Delaney Group Not disclosed 584 450 29.8

1. Previous figures relate to the highest-paid director for that company

in the previous year, irrespective of who that may have been.

During this period Sorrell waived his cash bonus in exchange for

restricted shares. Flynn's success with Aegis' latest impressive results

reflects his remuneration.

TOP TEN GROUPS BY CASHFLOW

Rank Group Cash inflow

(£000s)

1 WPP Group 235,600

2 Aegis Group 90,000

3 BBH Holdings 10,081

4 Next Fifteen Communications Group 3,078

5 MediaVest (Manchester) 2,830

6 DMB&B Holdings 2,312

7 Jones Knowles Ritchie 1,251

8 New Media Industries 1,098

9 Freud Communications 1,060

10 C. A. Coutts Holdings 758

Many of the communications groups improved their working capital

management and sought to strengthen their cash position further with

external funding from long-term loans, Eurobond issues and capital

injections from foreign parents.

This article was first published on campaignlive.co.uk

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