Agency Performance League

With profits creeping back up but margins still under pressure, the independents blazed a trail both in profitability and in staff retention and pay. Those of us who have been around for more than one advertising recession are used to the feast-and-famine cyclical roller-coaster of the advertising industry. But Willott Kingston Smith's latest annual survey of the financial performance of UK advertising agencies shows signs of a change in that pattern.

Revenue reached its nadir, profits are definitely on the way back, but margins still seem to be under heavier pressure than used to be the case.

This may be due to timing and nothing more: agencies are always best placed to negotiate better fees when the economy has been booming for a while and clients are ready to pay what it takes to get the best work in town.

But there may be other factors coming into play, such as clients whose procurement personnel treat creativity as a commodity bought by the hour at the lowest hourly rate possible.

Another interesting trend is the relative confidence and profitability of the maturing independents - those with a track record of a decade or so - some of which are now achieving better profitability statistics than subsidiaries of the lumbering global giants. Perhaps great ads still rate higher than global delivery.

Inevitably, much of the data collected by Willott Kingston Smith relates to a period ending about a year ago, when billings were still at a very low level and when gross income, net of bought-in media and other services, is estimated to have slipped by another 1 per cent after adjusting for distortions in the sample base. Among the big agencies that suffered a fall in gross income were The Ogilvy Group (Holdings), McCann Erickson Advertising, Saatchi & Saatchi and Abbott Mead Vickers BBDO. BMP DDB also lost £15 million of income, but that was simply given away to its media buying sister OMD UK. And the figures for McCann need to be viewed with some scepticism as the company has not yet managed to file its accounts for 2002. Perhaps the bean-counters are still having trouble making the figures add up?

On a more positive note, J. Walter Thompson put on a 14 per cent income spurt. Bigger growth rates were recorded by Bates UK (before its takeover by WPP) and Leo Burnett, but in both cases that was because of the absorption of other businesses within the same group.

Some of the outstanding performers were Fallon London (gross income up 59 per cent), Mother (up 38 per cent), Delaney Lund Knox Warren & Partners (up 34 per cent) and Miles Calcraft Briginshaw Duffy (up 31 per cent). At the time, they were all privately owned, although Fallon's management, including the managing partner Michael Wall, who has recently taken the role of president, international as well, has since sold out to the Publicis Groupe. Whether Clemmow Hornby Inge would have appeared among them must remain a secret, as its owners are very coy about filing any detailed accounts.

Growth is good, but profitable growth is even better - especially in times of recession. So what does the survey tell us about profit margins and output per employee? The news is very encouraging.

Profit margins (operating profit as a percentage of gross income) averaged 13 per cent, compared with a miserable 8.8 per cent in the previous year.

Admittedly, there is still some way to go to achieve an average of 15 per cent, which remains the accepted benchmark. According to the survey, margins of independent agencies averaged 13.8 per cent, whereas the subsidiaries of larger groups averaged only 12.8 per cent.

So how did agencies improve their margins so dramatically in one year?

The answer is all too well known - staff cuts, the cost of which had generally already been incurred in the previous year. Numbers dropped by 6 per cent, and average employment costs per head increased by only 2.1 per cent. The group-owned agencies were also able to cut 7 per cent off their other overheads.

There are some fascinating revelations about how the independent agencies behaved in the face of recession when compared with group-owned agencies.

Staff numbers were cut by 8 per cent at group-owned agencies, whereas their total gross income was down by about 2 per cent. By contrast, aggregate staff numbers at the independent agencies remained fairly constant and gross income actually rose by an impressive 7 per cent. The survey asks whether this implies that clients favour independents more than group agencies during recession, and then points to another interesting distinction: "Group-owned agencies cut staff numbers and froze salaries, whereas the independents stopped recruiting but paid more to the staff who had stayed with them through the difficult period."

All of this evidence highlights the freedom of choice that rests with the owner-managed business, free from the demand for stock market performance and from parent company demands. Within reason, it doesn't matter if a private company chooses to take a dip in profits if the payback is the retention, and better motivation, of top-class people, not to mention happier clients. But the striking message from the survey is that, in practice, the aggregate profits of the independents were not adversely affected by their seemingly more generous pay policies.

Inevitably, not every agency fitted in to the overall pattern described above. Some of the biggest increases in average employment costs per head were found among group-owned outfits such as Euro RSCG, Leo Burnett and WCRS (see table). But Fallon London, DLKW and MCBD were also up among the top payers. What's more, they offered some of the biggest average pay rises as well. The key question is whether the agencies that were generous with their employees also improved profits per head. Only Euro RSCG and MCBD failed to do so, and at MCBD the reason was simply because of the costs associated with moving to bigger premises.

Perhaps the most surprising entrant among agencies with the highest output (gross income) and profit per employee was Lowe & Partners, given its string of client losses in recent times. Close behind - and with more obvious justification - was Fallon London, with the second-highest profit per head and the tenth-highest profit margin.

So, with productivity and margins striding upwards, why should anyone be voicing concern about the antics of procurement managers? The fear is that any such improvement may be regarded by the clients' Rottweilers as a bad thing. Instead of basing remuneration on performance in the widest sense of the word, the procurement police will be striving to reduce their costs by reference to benchmarks based on the lowest common denominator they can find.

And despite the improving performance shown by the survey, all is not yet rosy on the global scene. More up-to-date figures on the performance of the eight biggest global groups show that their aggregate worldwide income last year recovered by only 7.7 per cent, despite Publicis enjoying the benefits of the Bcom3 acquisition for the full year. And their average operating profit margin actually slipped backwards from 12.3 per cent to 11.9 per cent.

Such was the impact of the declining dollar that, apart from WPP and Hakuhodo, only the US-based groups Interpublic and Grey enjoyed any profit margin increase. And, even despite the currency benefit, the omnipotent Omnicom suffered a serious drop in margins from 14.6 per cent to 13.5 per cent.

On the face of it, the global groups are still doing less well than the domestic independents. Have they sown the seeds of their own destruction by offering global economies of scale, only to find clients are expecting just that? "Economies" means lower costs, which usually means lower margins, albeit hopefully from a bigger slice of the market. The problem with this notion is that agencies are not selling cornflakes, but a creative product that depends on intellect and creativity rather more than the ability to beat up suppliers and distributors. Globalisation is no guarantee of financial success.

The one area where global scale is almost invariably a competitive advantage is in media buying, where volume brings genuine buying economies that can be shared with clients. All of the top-ten media buying agencies in the accompanying table are owned by global groups and their average operating margin of 15.3 per cent was well ahead of the 11.9 per cent their parent groups achieved globally from all activities last year.

However, as with any survey, a few caveats need to be noted. For example, the table relates to UK-based media buying companies, which are therefore not directly comparable with the worldwide margins of their parent groups (but nevertheless are still far better than the margins achieved by UK-based advertising agencies). And while the dominant Aegis Group does, in fact, enjoy global coverage, the reported figures also include its burgeoning (but under-performing) research operation.

Finally, there are two obvious distortions in the media buying table itself. Initiative Media London seems to make very little profit on its not inconsiderable income, either because it is not very efficient or perhaps because Interpublic allocates an unusually large chunk of its media income to other group companies. And the previous year's figures for OMD comprised minimal media income and no operating costs.

That has now changed with the absorption of BMP DDB's media operation.

No review of agency finances would be complete without a peep at what the highest-paid executives earned among the top 50 groups, irrespective of marketing discipline. Given all the publicity, no-one will be surprised to know that the WPP Group chief executive, Sir Martin Sorrell, earned nearly £2.5 million - a 27 per cent increase on the previous year. And he added a lot more to that recently when several of his long-term incentive rewards were paid out. It is less clear why Doug Flynn, Aegis Group's chief executive, enjoyed a 30 per cent uplift when operating profits increased by only 10 per cent from an unexcitingly low level. Chime's Lord Bell and Incepta Group's Anthony Carlisle both showed more restraint, in keeping with their companies' depressed performances.

More juicy titbits are found among the directors of privately owned companies, where profits can be paid out at the whim of the owners and in whatever form is most tax-efficient. The company with the fifth-highest-paid director was the direct marketing agency Billington Cartmell, where someone (presumably Ian Billington or Paul Cartmell) took home £850,000, more than double the package of the highest-paid director there last year.

- Bob Willott is the editor of Marketing Services Financial Intelligence (www.fintellect.com) and a special professor at the University of Nottingham Business School

The Financial Performance of Marketing Services Companies 2004 is available from Willott Kingston Smith (020 7566 3850) priced £325.

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 3 The Ogilvy Group

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

3 2 McCann Erickson

Advertising 31/12/01 45,020 49,173 -8.45

4 8 J. Walter Thompson Group 31/12/03 44,311 38,776 14.27

5 4 TMP Worldwide 31/12/02 40,425 49,155 -17.76

6 9 Lowe & Partners 31/12/02 39,842 37,458 6.36

7 - Bates UK 31/12/02 38,919 30,431 27.89

8 5 Saatchi & Saatchi Group 31/12/02 37,550 42,444 -11.53

9 10 Bartle Bogle Hegarty 31/12/02 35,246 32,805 7.44

10 15 Leo Burnett 31/12/03 34,143 22,140 54.21

11 11 Abbott Mead Vickers BBDO 31/12/02 32,493 34,017 -4.48

12 12 Publicis 31/12/02 31,636 30,887 2.42

13 13 M&C Saatchi 31/12/02 31,034 30,509 1.72

14 6 BMP DDB 31/12/02 29,371 44,158 -33.49

15 - McCann Erickson

Manchester 31/12/02 26,072 23,058 13.07

16 14 TBWA\London 31/12/02 25,050 24,725 1.31

17 16 Grey Advertising 30/09/02 22,830 22,962 -0.57

18 17 Euro RSCG Wnek Gosper 31/12/02 20,934 20,305 3.10

19 19 WCRS 31/12/02 18,677 18,342 1.83

20 - Accord Holdings 31/03/04 16,610 14,475 14.75

21 20 Leagas Delaney London 31/12/01 13,090 13,598 -3.74

22 22 Golley Slater Group 30/11/02 11,591 11,399 1.68

23 25 Delaney Lund Knox

Warren & Partners 31/12/03 10,962 8,162 34.31

24 31 Fallon London 31/12/03 10,888 6,833 59.34

25 23 BDH\TBWA 31/12/03 10,375 8,734 18.79

26 21 Banks Hoggins O'Shea/FCB 31/12/02 10,103 12,477 -19.03

27 24 St Luke's Holdings 31/12/03 8,043 8,625 -6.75

28 28 Senior King

Communications Group 31/12/03 7,977 7,110 12.19

29 33 Mother 31/12/02 7,683 5,580 37.69

30 18 HHCL/Red Cell 31/12/03 7,651 8,561 -10.63

31 27 Citigate Albert Frank 28/02/03 6,656 7,238 -8.04

32 26 Partners BDDH 31/12/02 6,552 7,916 -17.23

33 32 Advertising Principles

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

34 30 CheethambellJWT 31/12/03 5,775 6,892 -16.21

35 42 Miles Calcraft

Briginshaw Duffy 30/06/03 5,582 4,267 30.82

36 36 Bray Leino 31/12/03 5,581 5,093 9.58

37 39 BRAHM 31/07/03 5,463 4,953 10.30

38 35 DFGW 30/09/02 5,249 4,979 5.42

39 - Wieden & Kennedy UK 31/12/03 5,149 3,967 29.80

40 43 Poulter Group 31/07/03 4,605 4,226 8.97

41 29 Burkitt DDB 31/12/03 4,436 6,036 -26.51

42 38 Mustoe Merriman Levy

Group Holdings 31/12/03 4,351 5,034 -13.57

43 40 Robson Brown 28/02/03 4,323 4,653 -7.09

44 45 Cdp-travissully 31/12/02 4,058 3,961 2.45

45 47 Maher Bird Associates 31/12/03 3,868 3,174 21.87

46 41 Camp Chipperfield

Hill Murray 30/04/03 3,838 4,396 -12.69

47 - Barrington Johnson

Lorains & Partners 30/06/03 3,774 3,647 3.48

48 46 Roose & Partners

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

49 49 Interfocus Technology 31/12/02 3,417 6,500 -47.43

50 48 BCMB 31/12/02 3,412 3,463 -1.47

Rank Rank Agency Year end Operating profit

per head

latest prev Latest Previous Chg

(pounds) (pounds) (%)

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

2 3 The Ogilvy Group

(Holdings) 31/12/02 2,090 10,232 -79.57

3 2 McCann Erickson

Advertising 31/12/01 23,479 21,053 11.52

4 8 J. Walter Thompson

Group 31/12/03 11,347 11,872 -4.42

5 4 TMP Worldwide 31/12/02 10,819 49 22,065.76

6 9 Lowe & Partners 31/12/02 26,482 (9,440) 380.53

7 - Bates UK 31/12/02 18,508 2,521 634.08

8 5 Saatchi & Saatchi

Group 31/12/02 391 579 -32.36

9 10 Bartle Bogle Hegarty 31/12/02 18,708 11,972 56.27

10 15 Leo Burnett 31/12/03 13,594 6,918 96.51

11 11 Abbott Mead Vickers

BBDO 31/12/02 15,150 9,223 64.27

12 12 Publicis 31/12/02 21,920 13,776 59.11

13 13 M&C Saatchi 31/12/02 13,830 15,019 -7.92

14 6 BMP DDB 31/12/02 9,465 10,616 -10.85

15 - McCann Erickson

Manchester 31/12/02 21,612 20,931 3.25

16 14 TBWA\London 31/12/02 20,333 10,962 85.49

17 16 Grey Advertising 30/09/02 1,426 (6,185) 123.05

18 17 Euro RSCG Wnek Gosper 31/12/02 903 3,000 -69.91

19 19 WCRS 31/12/02 18,000 9,782 84.01

20 - Accord Holdings 31/03/04 14,184 14,599 -2.84

21 20 Leagas Delaney London 31/12/01 11,127 3,975 179.93

22 22 Golley Slater Group 30/11/02 15,281 11,286 35.40

23 25 Delaney Lund Knox

Warren & Partners 31/12/03 12,674 10,600 19.57

24 31 Fallon London 31/12/03 26,160 19,583 33.58

25 23 BDH\TBWA 31/12/03 9,842 8,274 18.95

26 21 Banks Hoggins

O'Shea/FCB 31/12/02 7,333 4,339 69.00

27 24 St Luke's Holdings 31/12/03 (406) (8,344) 95.13

28 28 Senior King

Communications Group 31/12/03 3,071 3,355 -8.44

29 33 Mother 31/12/02 19,938 17,105 16.56

30 18 HHCL/Red Cell 31/12/03 8,282 (12,729) 165.06

31 27 Citigate Albert Frank 28/02/03 7,782 9,612 -19.04

32 26 Partners BDDH 31/12/02 (6,183) 13,294 -146.51

33 32 Advertising Principles

(Group) 31/03/03 3,009 (792) 479.88

34 30 CheethambellJWT 31/12/03 10,033 13,442 -25.37

35 42 Miles Calcraft

Briginshaw Duffy 30/06/03 8,128 11,268 -27.87

36 36 Bray Leino 31/12/03 18,118 8,814 105.55

37 39 BRAHM 31/07/03 4,152 3,430 21.06

38 35 DFGW 30/09/02 13,440 13,125 2.40

39 - Wieden & Kennedy UK 31/12/03 3,786 (10,189) 137.15

40 43 Poulter Group 31/07/03 4,407 4,625 -4.71

41 29 Burkitt DDB 31/12/03 (102) (11,012) 99.07

42 38 Mustoe Merriman Levy

Group Holdings 31/12/03 12,096 25,170 -51.94

43 40 Robson Brown 28/02/03 8,884 3,860 130.16

44 45 Cdp-travissully 31/12/02 8,872 14,189 -37.47

45 47 Maher Bird Associates 31/12/03 19,500 10,067 93.71

46 41 Camp Chipperfield

Hill Murray 30/04/03 5,429 12,543 -56.72

47 - Barrington Johnson

Lorains & Partners 30/06/03 5,475 7,763 -29.47

48 46 Roose & Partners

Advertising 31/12/02 16,342 26,209 -37.65

49 49 Interfocus Technology 31/12/02 (10,426) (7,107) -46.69

50 48 BCMB 31/12/02 12,050 11,186 7.72

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

Companies House, covering periods ending in 2001, 2002, 2003 and 2004.

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 Revenue

Latest Change

(£000s) (%)

1 Omnicom 5,225,093 14.4

2 WPP Group 4,106,000 5.1

3 Interpublic 3,553,576 2.2

4 Publicis Groupe 2,682,639 32.0

5 Dentsu 1,487,768 -3.8

6 Havas Advertising 1,059,099 15.8

7 Grey 792,282 9.0

8 Hakuhodo 469,121 -1.9

Average for above 2,421,947 7.7

Average for UK top-50 groups 141,469 7.5

Rank Group Operating profit

Latest Change

(£000s) (%)

1 Omnicom 705,864 5.5

2 WPP Group 493,000 9.5

3 Interpublic 318,788 3.7

4 Publicis Groupe 384,028 28.9

5 Dentsu 245,011 -17.0

6 Havas Advertising 76,688 -37.0

7 Grey 45,248 41.5

8 Hakuhodo 49,163 10.6

Average for above 289,724 4.5

Average for UK top-50 groups 16,543 8.9

Rank Group Operating profit margin

Latest (%) Change

(%)

1 Omnicom 13.51 -7.8

2 WPP Group 12.01 4.2

3 Interpublic 8.97 1.5

4 Publicis Groupe 14.32 -2.4

5 Dentsu 16.47 -13.7

6 Havas Advertising 7.24 -25.2

7 Grey 5.71 29.9

8 Hakuhodo 10.48 12.7

Average for above 11.96 -3.0

Average for UK top-50 groups 11.69 1.8

The survey confirms WPP's global position as second only to Omnicom, with worldwide revenue of £4.1 billion putting it well ahead of Interpublic.

But Omnicom widened its lead, winning market share at the expense of lower profit margins. That picture is almost certain to be reversed in 2005, when WPP will enjoy the extra revenue from its acquisition of Grey Global.

However, Grey's revenue alone would not be quite enough to enable WPP to overtake Omnicom.

Currency movements can play havoc with the reported figures of global players, depending on where the parent company is located and on where the main sources of profit are earned around the world. Last year, US-based groups benefited at the expense of virtually all others, allowing Omnicom and Grey, in particular, to wage successful economic warfare on euroland operators.

Havas was particularly disadvantaged, with revenue falling by 15.8 per cent and operating profit before goodwill and exceptional costs down by 37 per cent - as if business was not hard enough without adverse currency movements being compounded by a mass of exceptional costs and heavy interest charges. Publicis suffered also, but was able to hide the impact behind the first full year's contribution from Bcom3. However, even including Bcom3, Publicis' margins fell and post-tax profits were stagnant.

The Japanese groups Dentsu and Hakuhodo also suffered modest revenue falls, and Dentsu experienced a 17 per cent fall in operating profit as margins dropped by 2.6 per cent.

The acid test of success is the profit generated for the company per employee. Despite falling margins, Omnicom processed more business per employee, earned the highest profit margin on that business (outside Japan) and inevitably achieved the highest profit per head. By contrast, Grey and Havas earned little more than one-third of the profit earned by employees of Omnicom.

MEDIA BUYING AGENCIES

Rank Agency Year end Gross income

Latest Change (%)

(£000s)

1 Aegis Group PLC 31/12/2003 572,500 11.1

2 ZenithOptimedia Group 31/12/2002 147,759 41.3

3 MediaCom UK 30/09/2003 27,628 20.4

4 MindShare UK 31/12/2002 23,788 3.3

5 Starcom Motive 31/12/2002 16,630 3.0

6 PHD Media Limited 31/12/2002 16,413 -2.9

7 OMD UK Limited 31/12/2002 13,942 443.8

8 Media Planning Limited 31/12/2002 13,845 30.1

9 Initiative Media London 31/12/2002 13,730 13.8

10 Manning Gottlieb OMD 31/12/2002 10,360 3.0

Rank Agency Year end Operating profit

Latest Change (%)

(£000s)

1 Aegis Group PLC 31/12/2003 84,200 9.9

2 ZenithOptimedia Group 31/12/2002 20,548 28.4

3 MediaCom UK 30/09/2003 4,858 20.3

4 MindShare UK 31/12/2002 3,259 43.6

5 Starcom Motive 31/12/2002 5,057 8.7

6 PHD Media Limited 31/12/2002 4,522 -9.6

7 OMD UK Limited 31/12/2002 2,806 28.6

8 Media Planning Limited 31/12/2002 3,111 57.8

9 Initiative Media London 31/12/2002 239 299.2

10 Manning Gottlieb OMD 31/12/2002 2,740 29.9

Rank Agency Year end Operating profit margin

on gross income

Latest (%) Change (%)

1 Aegis Group PLC 31/12/2003 14.7 -1.1

2 ZenithOptimedia Group 31/12/2002 13.9 -9.1

3 MediaCom UK 30/09/2003 17.6 -0.1

4 MindShare UK 31/12/2002 13.7 39.0

5 Starcom Motive 31/12/2002 30.4 5.5

6 PHD Media Limited 31/12/2002 27.6 -6.9

7 OMD UK Limited 31/12/2002 20.1 -76.3

8 Media Planning Limited 31/12/2002 22.5 21.3

9 Initiative Media London 31/12/2002 1.7 275.0

10 Manning Gottlieb OMD 31/12/2002 26.5 26.1

The overall trend among the larger media buying agencies during the period was one of increased volume at lower margins - a trend that is more likely to continue than not. Staff costs grew faster than income and that was in lean times, so pressure on margins is unlikely to abate in the short term.

But there were some exceptions. Starcom Motive improved its operating profit margin by 5.5 per cent when revenue increased by only 3 per cent.

That was before it merged with Mediavest. Further down the table (not shown here), The Allmond Partnership doubled its operating margin after its buyout from Omnicom's Manning Gottlieb OMD. Generally, the independently owned buying houses were able to improve gross margins and operating profits while group-owned agencies saw gross margins decline and operating profits climb less significantly.

All this provides further evidence that the big global players are winning volume at the expense of margins while the smaller agencies are generating a bigger proportion of higher margin turnover that includes more consultancy and similar services and/or they are working for clients that are more interested in the value received than the absolute cost of services provided.

Some of the biggest growth in gross income came from mergers - Zenith had the benefit of a full year's merger with Optimedia, and OMD UK had the benefit of all of BMP DDB's media throughout for the first time. However, the sizeable leap in income at Mediacom UK and at Media Planning appears to have been generated exclusively from organic growth.

Interest income continues to be an essential component of media buyers' profits, contributing 23 per cent overall if Aegis (a net borrower) is excluded. Cash balances at media buying agencies had grown by about 67 per cent in the two previous surveys, but this time the growth was just 4 per cent.

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

Rank Agency Latest Previous Change

(%) (%) (%)

1 Bray Leino 30.2 16.8 79.8

2 McCann Erickson Manchester 27.4 26.3 3.9

3 Accord Holdings 26.4 28.9 -8.8

4 Golley Slater Group 24.4 18.7 30.3

5 McCann Erickson Advertising 23.9 21.8 9.8

6 Lowe & Partners 20.5 -8.2 350.8

7 Bates UK 18.5 2.7 574.9

8 Publicis 18.2 13.6 33.9

9 TBWA\London 18.0 10.5 72.2

10 Fallon London 18.0 13.8 31.0

The performance of the now-defunct Bates suggests why the agency was an

attractive proposition for the acquisition-hungry WPP. Lowe's massive

improvement reflects a better corporate health than its recent account

losses might suggest.

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

Rank Agency Latest Previous Change

(%) (%) (%)

41 Advertising Principles (Group) 5.7 -1.8 422.6

42 Wieden & Kennedy UK 3.1 -9.5 132.5

43 The Ogilvy Group (Holdings) 2.2 10.7 -79.1

44 Grey Advertising 1.5 -7.0 121.6

45 Euro RSCG Wnek Gosper 0.8 2.8 -71.3

46 Saatchi & Saatchi Group 0.5 0.7 -33.4

47 Burkitt DDB -0.1 -15.0 99.2

48 St Luke's Holdings -0.5 -12.7 96.0

49 Partners BDDH -6.7 14.3 -146.9

50 Interfocus Technology -14.3 -9.2 -56.1

It's interesting to note that Burkitt DDB was the second-best performer

in terms of operating profit margin on gross income in last year's

table; now it is one of the worst. Meanwhile, Lowe has gone the other

way, from one of the worst to one of the best.

TOP TEN BY GROSS INCOME (REVENUE) PER HEAD

Rank Agency Latest Previous Change

(pounds) (pounds) (%)

1 Fallon London Limited 145,173 142,354 2.0

2 Leo Burnett Limited 136,028 114,124 19.2

3 J. Walter Thompson Group Limited 130,326 121,175 7.6

4 Lowe & Partners Limited 128,939 115,255 11.9

5 Maher Bird Associates Limited 128,933 105,800 21.9

6 Wieden & Kennedy UK Limited 122,595 107,216 14.3

7 Publicis Limited 120,748 101,602 18.8

8 Delaney Lund Knox Warren & Partners 119,152 108,827 9.5

9 Miles Calcraft Briginshaw Duffy 118,766 104,073 14.1

10 Mother Limited 118,200 97,895 20.7

Fallon continues to top the chart of revenue per head, with a 2 per cent

improvement on its previous figures. However, in this year's report it

has also become the ad agency with the highest employment costs per

head, up 19 per cent to £88,213.

BOTTOM TEN BY GROSS INCOME (REVENUE) PER HEAD

Rank Agency Latest Previous Change

(pounds) (pounds) (%)

41 CheethambellJWT 62,772 66,269 -5.3

42 Golley Slater Group 62,654 60,312 3.9

43 Barrington Johnson Lorains & Partners 61,869 61,814 0.1

44 Bray Leino 60,011 52,505 14.3

45 Accord Holdings 53,754 50,436 6.6

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

47 BRAHM 52,029 46,290 12.4

48 Senior King Communications Group 51,799 50,426 2.7

49 Robson Brown 50,267 43,486 15.6

50 Poulter Group 32,893 33,016 -0.4

Poulter is again the worst offender, with its gross income per head down

on even last year's lowly figure. Again, the regional agencies and those

of a similar, medium, size dominate, suggesting that this type of agency

model needs some reconfiguring.

TOP TEN BY EMPLOYMENT COSTS PER HEAD

Rank Agency Latest Previous Change

(pounds) (pounds) (%)

1 Fallon London 88,213 73,583 19.9

2 Wieden & Kennedy UK 87,667 88,838 -1.3

3 Euro RSCG Wnek Gosper 77,324 71,314 8.4

4 Leo Burnett 75,809 67,995 11.5

5 WCRS 71,044 63,707 11.5

6 Delaney Lund Knox Warren & Partners 70,913 64,267 10.3

7 J. Walter Thompson Group 69,550 66,391 4.8

8 Miles Calcraft Briginshaw Duffy 66,851 58,561 14.2

9 Maher Bird Associates 66,267 60,700 9.2

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

Despite the recessionary pressures on remuneration, Fallon's staff

appear to be handsomely rewarded for their ever-impressive levels of

productivity. Euro RSCG and MCBD failed to translate their generosity

into improved profits per head.

BOTTOM TEN BY EMPLOYMENT COSTS PER HEAD

Rank Agency Latest Previous Change

(pounds) (pounds) (%)

41 Poulter Group Limited

(prev. Poulter Ltd) 36,557 32,281 13.2

42 BCMB 36,100 30,000 20.3

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

44 BRAHM 35,524 31,318 13.4

45 Bray Leino 34,333 34,021 0.9

46 Senior King Communications Group 33,968 33,135 2.5

47 CheethambellJWT 33,772 33,885 -0.3

48 Golley Slater Group 33,341 33,820 -1.4

49 Robson Brown 30,663 27,804 10.3

50 Accord Holdings 26,748 25,178 6.2

As with last year's table of the worst performers by employment costs

per head, it's the regional agencies that dominate. The differences in

salaries between the regions and the capital, though, are narrowing,

with some significant rises in this table.

GROUPS' HIGHEST-PAID DIRECTORS

Rank Group Director Latest Previous1 Chg

(pounds (pounds (%)

000s) 000s)

1 WPP Group PLC Sir Martin Sorrell 2,454 1,930 27

2 Aegis Group PLC Douglas Flynn 1,491 1,149 30

3 Havas Group of

Companies in UK Not disclosed 1,069 959 11

4 Publicis Group of

Companies in UK Not disclosed 910 629 45

5 Billington Cartmell

Limited Not disclosed 850 342 149

6 Chime Communications PLC Lord Bell 782 780 0

7 TBWA UK Group Limited Not disclosed 687 n/a n/a

8 Abbott Mead Vickers

Group Not disclosed 649 645 1

9 Incepta Group PLC Anthony Carlisle 582 599 -3

10 Leagas Delaney Group

Limited Not disclosed 584 450 30

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

the previous year, irrespective of who that may have been. No surprises

that WPP's Sir Martin Sorrell and Aegis' Doug Flynn continue to top this

particular chart, though increases are more muted than in last year's

report.

TOP TEN GROUPS BY CASHFLOW

Rank Group Cash inflow

(£000s)

1 WPP Group PLC 234,400

2 BBH Holdings 10,081

3 M&C Saatchi Worldwide 5,184

4 Chime Communications PLC 3,218

5 Face Communications 2,660

6 The Imagination Group 2,637

7 Fallon London 2,353

8 Media Square PLC 2,117

9 Creston PLC 1,568

10 Mediavest Manchester 1,062

There continues to be a prudent focus on improving working capital

management, and long-term loans and foreign capital injections from

overseas parents provide external funding to shore up cash positions.

WPP retains its number-one position.