AGENCY PERFORMANCE LEAGUE: The Willott Kingston Smith survey of agency profitability reveals that the industry entered the recession in pretty good shape. Bob Willott reports

Agency employees handle more of their clients' money per head than

any other marketing services business. But those same agencies make less

profit per employee than any other sector.



That's probably not news to anyone who follows the financial statistics

of the industry. But the continuing decline in agencies' financial

efficiency should be causing more concern than their bosses seem to

show, especially as the latest figures precede the current downturn.



According to Willott Kingston Smith's latest annual survey, average

agency profits earned per head fell by a further 10 per cent in the

period covered by the latest accounts filed at Companies House to just

£5,986.



At the same time, profits per head at media buying agencies climbed

still further to £13,489, now more than double what ad agencies

achieved.



Is this polarisation of profit a crude indicator that clients value

media buying more than creativity? Probably not. Are media buyers

naturally better fee negotiators than traditional agencies? Undoubtedly

so. Are traditional agencies less ably managed than media buyers? Almost

certainly.



The starting point for the defence revolves around the immense cost of

servicing their clients from prestigious and accessible West End

locations.



And it's easy to sympathise with the burden of client service that's

expected in comparison with that of a media buying shop.



But does that justify the resultant poor profits - with average margins

on gross income wallowing at around 7 per cent when the benchmark used

to be (and theoretically still is) 15 per cent? After all, 36 per cent

of the agencies in the survey actually exceeded the 15 per cent

margin.



And those performers included many better-known agencies such as WCRS,

HHCL & Partners, Mustoe Meriman Levy, Golley Slater, Delaney Lund Knox

Warren & Partners, Mother, St Luke's, Banks Hoggins O'Shea/FCB, Partners

BDDH and McCann-Erickson.



Rainey Kelly Campbell Roalfe also achieved a splendid 21.9 per cent

margin before merging with Young & Rubicam, and therein lies a clue. Y&R

itself made a loss, and not for the first time. So did Grey Worldwide

London. So did Saatchi & Saatchi.



Bates UK, D'Arcy, Leagas Delaney, Lowe Lintas & Partners and TBWA/

London were among other well-known agencies that could not earn a profit

margin of even 5 per cent. And, to make matters worse, some of those

agencies also incurred heavy reorganisation costs.



Others probably need to. TBWA/London spent £3.6 million on

reorganisation costs. Y&R spent £1.8 million on integrating Rainey

Kelly plus another £6.2 million in subsidising share options that

were exercised in the period.



Consistent with its healthy margins, WCRS reported an operating profit

per head of £29,957 - almost five times the average, closely

followed by Citigate Albert Frank, which handles a lot of financial

advertising, and HHCL.



It would be tempting to assume that agencies with the best profit per

head were those that kept staff numbers to the minimum, paid them as

little as possible and worked them as hard as possible.



If that were so, the poor performers would be able to claim that they

were generous, caring employers that put people before profit. Alas,

without profit, the job security of the people is very limited.



It seems inconceivable that Publicis will tolerate a headcount at

Saatchi & Saatchi that resulted in a loss per head of more than £25,000. Small wonder that senior personnel have been leaving. And, with

its less than impressive worldwide performance, Grey Global Group will

surely want to do something about losses of £21,209 per head at

its London agency.



Of course, it's necessary to acknowledge that published accounts never

tell the whole story, although experience shows that they tell rather

more than company managers would sometimes have us believe. Worldwide

agencies in particular are subject to local accounting distortions,

especially where global clients are a large part of their business.



A worldwide agency inevitably wants its client to remunerate it in the

countries that best suit its internal political agenda or minimise its

tax liabilities. So if the account head is based in New York, he or she

will try to extract as much client remuneration as possible into that

location and cling tightly to it when colleagues around the world plead

for a bigger slice to cover local servicing costs.



Equally, the finance chiefs will be quick to encourage clients to write

out their fattest cheques in currencies that are most favourable and

least vulnerable, as well as most tax efficient.



Having said that, the evidence over many years shows that agencies such

as Saatchi & Saatchi, which have always claimed things were not as bad

as they appeared, have in fact been insufficiently profitable. Publicis

must by now be wondering why it paid so much for so little.



What's clear from the figures is that "standalone" agencies seem to do

better than network shops. Banks Hoggins O'Shea/FCB is the only agency

with any network characteristics that features among the top ten by

operating profit per head and it is at the lower end of that elite

group. By contrast, the bottom ten include Saatchi & Saatchi, Grey, Y&R,

Bates UK and D'Arcy.



Another clear message from the survey is that poor productivity

guarantees poor profits. Hardly surprisingly, those agencies whose staff

handle the lowest amount of client spend per employee escaped from being

among the bottom 40 per cent of agencies reporting the lowest profit per

head and few of them scraped above the average profit of £5,986

per head.



The exception was McCann-Erickson Manchester, which earned a splendid

profit of £16,466 per head on income of £60,984 per head.

Perhaps this is an example of an agency that benefits from highly

favourable allocations of global client income. Or is it just enjoying

lower operating costs in the provinces?



Just as low productivity may guarantee low profits, agencies whose staff

handle large amounts of client spend tend to turn more of it into

profit.



Five of the agencies that handled the highest amount of client spend per

head also featured among the best in profit per head, notably Rainey

Kelly, DLKW, Banks Hoggins and WCRS. But the other five reported mixed

performances.



Circus Communications handled by far the highest level of client income

per employee (at £152,450) but it also paid its personnel a lot

more than the average. The agency's emphasis on high-level consulting

marks it out from most of its competitors. Its profit per head wasn't

bad either - at £15,350 - even if it wasn't among the top ten.



However, Lowe Lintas did less well. As an agency that historically

scored highly by almost every financial measure, this time it could only

generate a profit of £3,278 per head on an impressive gross income

of £102,625 per head.



A major component of any profitability calculation is staff costs. Until

fairly recently it had been hard to hire enough good people to staff up

agencies to the level that managers believed was necessary to satisfy

growing client demand.



Two consequences ensued. First, salary costs went up faster than

inflation.



And second, agencies overestimated the number of staff required with the

result that productivity sometimes fell when, in theory, it should have

increased.



As a result, the average employment cost per staff member increased by 7

per cent and the ratio of staff costs to gross income escalated from

54.1 per cent to an even more excessive 55.8 per cent.



That leaves relatively little income with which to pay the rent and

other overheads if a healthy level of profit is to be retained.

Nevertheless, it's a trend that is not unique to the UK. Figures for

major agency groups in the US and France show a similar pattern.



There may be a crumb of comfort buried beneath this ratio. WPP, among

others, has been eager to increase the proportion of remuneration that

is geared to an agency's financial performance. In this way staff earn

more in good times on the understanding that there may be less to take

home in leaner times.



The effect of such a policy would have been to allow employment costs to

take a bigger slice of income during highly profitable periods, as other

overheads remained fairly static.



In consequence, overall profit margins should have been preserved or

even improved. But will the ratio of staff costs to income fall now that

agency income is on the slide? We shall soon see.



Apart from Circus, the highest average staff cost per employee was

£63,937 at TBWA/London. This figure may have been inflated by some

severance costs.



Roose & Partners also paid substantially above the average, although

that may have been prompted by the impending sale of the company to

Chime.



Some of the other highest payers were also among the most profitable -

proving once again that high staff rewards are not incompatible with

high company rewards. Examples include WCRS, DLKW and HHCL. But the

opposite is also true. Leagas Delaney, Abbott Mead Vickers BBDO, Saatchi

& Saatchi and Euro RSCG Wnek Gosper incurred high average staff costs

but were all in the bottom half of the survey when measured by profits

per head.



For AMV to appear among the poorer performers will come as a surprise to

many, as will the relatively low profit per employee achieved by Bartle

Bogle Hegarty. At AMV, gross income slipped by 6.5 per cent while

employment costs rose by 15 per cent, fuelled partly by a small increase

in staff numbers. Maybe the management is less strongly motivated now

that the group belongs completely to Omnicom.



At BBH, the profit per head was well above the average at £10,222

and its gross income grew by more than 10 per cent. But employment costs

grew by 11.6 per cent, dragging down its profit margin. Some of this

decline in performance may be attributable to the initial impact of its

recent overseas expansion into Asia-Pacific and the US.



Before moving on from employment costs, there is always something

interesting to read about directors' rewards. This time we find two of

the top directors of marketing services groups earned more than £2

million.



Needless to say, one of them was WPP's Sir Martin Sorrell, who enjoyed

more than £2.5 million. Only a third of this was "basic" salary. A

further £1.3 million arose from various profit-sharing schemes and

the balance was in the form of company pension contributions.



In the UK industry, Sorrell is the only public company boss with a

package that allows him to enjoy as much as 200 per cent of basic salary

in profit-sharing. Most are capped at either 100 per cent or, in some

cases, 50 per cent of salary. Sorrell also stands to benefit from

phantom share options and other share incentive schemes, provided the

current economic uncertainties don't intervene.



The second beneficiary of a package in excess of £2 million was

probably Robin Wight at WCRS. Much of this was a payout of a long-term

incentive reward made by another company in the Havas group, probably

for tax reasons.



AMV gave £1.3 million to its undisclosed highest paid director. As

Peter Mead was paid $3 million by Omnicom in his capacity as

vice-chairman, it is at least conceivable that much of this was

contributed by AMV.



The £1 million-plus rewards of Cordiant's Michael Bungey and

Aeguis Group's Doug Flynn seem modest by comparison. But then Aegis did

not have a lot to be proud of. Its operating profit per head slipped by

3.5 per cent and gross income per head struggled to show even a 3 per

cent increase.



However, there were many success stories among media buyers. Walker

Media won a place among the top performers by increasing operating

profit per head by 417 per cent to £31,000. PHD's profit per head

jumped by 173 per cent to £31,075 and John Ayling & Associates

recovered from its poor performance in 1999 to record a 354 per cent

improvement. Starcom Motive, Zenith Media and Genus Media all increased

operating profit per head by more than 50 per cent.



Staff costs among media buyers accounted for less than 50 per cent of

gross income - a highly commendable performance. Nevertheless, wage

inflation pushed the ratio up from 48.2 per cent to 49.2 per cent.



Finally, how did the top ten marketing services groups fare? In absolute

terms, operating profits grew dramatically, although foreign-owned

groups such as Omnicom Europe and Interpublic suffered significant falls

in profit margin. Margins at Cordiant, Interpublic, Saatchi & Saatchi

and Omnicom Europe were all at or below 12 per cent - and that was

before any economic downturn.



How the industry will fare in the more hostile climate it now faces is

anybody's guess. Sadly, there is precious little evidence that its

inherent optimism has been tempered by sufficient realism to weather the

economic downturn without some painful consequences.



In the top 50 table, McCann-Erickson Advertising and McCann-Erickson

Manchester appear as separate entities.



If results from McCann-Erickson UK Group had been used, the combined

entity (which includes other McCann agencies) would be ranked second in

the table.



Bob Willott is the editor of Marketing Services Financial Intelligence

and the founding editor of Willott Kingston Smith's annual survey

Financial Performance of Marketing Services Companies, which is

available at £250 by telephoning 020 7304 4646.



TOP 50 AGENCIES

Rank Rank Agency Year end Gross Prev Chg

latest prev income gross %

pounds income

000

1 1 Young & Rubicam Group 31/12/99 81,914 72,883 12.39

2 2 Ogilvy Group Holdings 31/12/99 52,042 50,385 3.29

3 3 Saatchi & Saatchi Group 31/12/99 49,392 51,438 -3.98

4 6 J. Walter Thompson Group 31/12/99 45,772 42,047 8.86

5 4 BMP DDB 31/12/99 44,421 40,619 9.36

6 5 McCann-Erickson

Advertising 31/12/99 42,484 39,303 8.09

7 7 TMP Worldwide 31/12/99 41,876 41,069 1.96

8 8 D'Arcy 31/12/99 38,967 34,830 11.88

9 9 Abbott Mead Vickers

BDDO 31/12/99 31,667 33,853 -6.46

10 10 Bartle Bogle Hegarty 31/12/00 31,025 28,052 10.60

11 12 Leo Burnett 31/12/99 27,401 24,043 13.97

12 11 Bates UK 31/12/99 25,572 25,734 -0.63

13 13 Publicis 31/12/00 25,555 23,697 7.84

14 22 TBWA/London 31/12/99 23,805 13,321 78.70

15 15 M & C Saatchi 31/12/99 22,462 20,938 7.28

16 14 Lowe Lintas 31/12/99 22,167 21,277 4.18

17 16 Grey Advertising 30/09/99 21,435 20,592 4.09

18 17 EURO RSCG 31/12/98 20,568 17,368 18.42

19 20 WCRS 31/12/99 19,318 16,558 16.67

20 18 Ammirati Puris Lintas 31/12/99 18,079 19,856 -8.95

21 21 Howell Henry Chaldecott

Lury 31/12/99 16,326 14,031 16.36

22 19 McCann-Erickson

Manchester 31/12/99 14,941 18,889 -20.90

23 - Golley Slater Group 30/11/00 14,297 12,205 17.14

24 31 Banks Hoggins

O'Shea/FCB 31/12/99 12,997 4,763 172.86

25 23 Leagas Delaney London 31/12/99 12,542 11,820 6.11

26 24 St Luke's Holdings 31/12/00 10,557 8,710 21.21

27 - Interfocus Network 31/12/00 9,142 8,175 11.83

28 - Citigate Albert Frank 29/02/00 8,848 4,754 86.12

29 28 Delaney Lund Knox

Warren & Partners 31/12/00 8,154 9,008 -9.48

30 37 Cogent Elliott 31/12/99 8,002 6,760 18.37

31 25 Collett Dickenson

Pearce 31/12/00 7,416 7,453 -0.50

32 26 Partners BDDH 31/12/99 7,191 6,627 8.51

33 34 Rainey Kelly Campbell

Roalfe 31/12/99 6,981 5,799 20.38

34 27 BDH TBWA 31/12/99 6,891 6,430 7.17

35 - Bray Leino Group 31/12/00 6,096 4,675 30.39

36 - Senior King

Communications Group 31/12/00 6,075 2,401 153.03

37 30 Masius 31/12/99 5,440 4,867 11.77

38 32 Roose &Partners

Advertising 30/09/00 5,060 4,579 10.50

39 29 Duckworth Finn

Grubb Waters 30/09/00 4,786 5,301 -9.72

40 33 Burkitt DDB 31/12/99 4,499 4,323 4.07

41 45 Mustoe Merriman Levy 30/06/00 4,384 2,945 48.86

42 38 Principles

Communications 31/03/01 4,245 3,752 13.14

43 42 Mother 31/12/00 3,955 3,387 16.77

44 - Draft Group 31/12/99 3,846 1,772 117.04

45 39 Faulds Advertising 31/12/99 3,684 3,719 -0.94

46 48 travissully 31/12/00 3,567 3,347 6.57

47 - Miles Calcraft

Briginshaw Duffy 30/06/01 3,369 979 244.13

48 43 Red Cell Advertising 31/12/99 3,345 3,036 10.18

49 44 BCMB 31/12/00 3,270 2,955 10.66

50 47 Circus Communications 31/10/00 3,049 2,736 11.44

Rank Rank Agency Operating Operating Change

latest prev profit profit %

£000 previous

1 1 Young & Rubicam Group -776 212 -466.04

2 2 Ogilvy Group Holdings 5,396 3,216 67.79

3 3 Saatchi & Saatchi Group -15,869 -5,424 -192.57

4 6 J. Walter Thompson Group 5,694 4,644 22.61

5 4 BMP DDB 4,972 5,045 -1.45

6 5 McCann-Erickson

Advertising 7,492 2,854 162.51

7 7 TMP Worldwide 2,587 6,181 -58.15

8 8 D'Arcy 517 1,444 -64.20

9 9 Abbott Mead Vickers

BDDO 3,189 5,239 -39.13

10 10 Bartle Bogle Hegarty 3,291 3,582 -8.11

11 12 Leo Burnett 1,700 1,818 193.51

12 11 Bates UK 210 4,722 -95.55

13 13 Publicis 3,723 4,009 -7.13

14 22 TBWA/London 986 181 444.75

15 15 M & C Saatchi 1,950 2,672 -27.02

16 14 Lowe Lintas 708 2,826 -74.95

17 16 Grey Advertising 4,878 319 -1429.15

18 17 EURO RSCG 660 640 3.13

19 20 WCRS 5,632 3,507 60.59

20 18 Ammirati Puris Lintas 1,550 - 531 391.90

21 21 Howell Henry Chaldecott

Lury 4,264 3,640 17.14

22 19 McCann-Erickson

Manchester 2,953 3,034 -2.67

23 - Golley Slater Group 3,265 2,366 38.00

24 31 Banks Hoggins

O'Shea/FCB 2,346 82 2769.72

25 23 Leagas Delaney London 323 324 -0.31

26 24 St Luke's Holdings 1,982 2,222 -10.8

27 - Interfocus Network 2,165 1,242 74.32

28 - Citigate Albert Frank 2,554 671 280.63

29 28 Delaney Lund Knox

Warren & Partners 1,703 527 223.15

30 37 Cogent Elliott 841 562 49.64

31 25 Collett Dickenson

Pearce 57 47 21.28

32 26 Partners BDDH 1,297 1,456 -10.92

33 34 Rainey Kelly Campbell

Roalfe 1,526 1,229 24.17

34 27 BDH TBWA 627 131 -378.29

35 - Bray Leino Group 1,875 1,211 54.87

36 - Senior King

Communications Group 1,027 520 97.56

37 30 Masius 1,138 663 71.64

38 32 Roose &Partners

Advertising 401 360 11.39

39 29 Duckworth Finn

Grubb Waters 622 713 -12.76

40 33 Burkitt DDB 276 -179 254.19

41 45 Mustoe Merriman Levy 1,048 22 4663.64

42 38 Principles

Communications 234 257 -8.95

43 42 Mother 766 580 32.07

44 - Draft Group 204 376 -45.74

45 39 Faulds Advertising 35 284 -87.68

46 48 travissully 435 233 86.70

47 - Miles Calcraft

Briginshaw Duffy 318 54 488.89

48 43 Red Cell Advertising 345 -29 1289.66

49 44 BCMB 531 373 42.36

50 47 Circus Communications 307 469 -34.54

Rank Rank Agency Operating Employment Change

latest prev profit costs %

margin (%) £000

1 1 Young & Rubicam Group -0.95 40,177 9.03

2 2 Ogilvy Group Holdings 10.37 19,936 -10.87

3 3 Saatchi & Saatchi Group -32.13 34,923 19.60

4 6 J. Walter Thompson Group 12.44 25,418 -2.48

5 4 BMP DDB 11.19 24,484 7.97

6 5 McCann-Erickson

Advertising 17.63 23,984 20.98

7 7 TMP Worldwide 6.18 24,896 11.78

8 8 D'Arcy 1.33 24,595 18.19

9 9 Abbott Mead Vickers

BDDO 10.07 19,635 15.01

10 10 Bartle Bogle Hegarty 10.61 16,772 11.65

11 12 Leo Burnett 6.20 16,098 16.55

12 11 Bates UK 0.82 13,827 -4.2

13 13 Publicis 14.57 14,158 21.38

14 22 TBWA/London 4.14 16,112 42.11

15 15 M & C Saatchi 8.68 12,048 8.93

16 14 Lowe Lintas 3.19 11,517 7.27

17 16 Grey Advertising -22.76 11,600 27.29

18 17 EURO RSCG 3.21 12,751 28.69

19 20 WCRS 29.15 11,112 25.02

20 18 Ammirati Puris Lintas 8.57 8,813 0.11

21 21 Howell Henry Chaldecott

Lury 26.12 8,397 18.35

22 19 McCann-Erickson

Manchester 19.76 7,811 -23.75

23 - Golley Slater Group 22.84 8,148 14.76

24 31 Banks Hoggins

O'Shea/FCB 18.05 6,634 140.89

25 23 Leagas Delaney London 2.58 7,673 16.88

26 24 St Luke's Holdings 18.77 5,851 33.68

27 - Interfocus Network 23.68 4,150 -2.76

28 - Citigate Albert Frank 28.87 4,518 63.52

29 28 Delaney Lund Knox

Warren & Partners 20.89 4,094 2.81

30 37 Cogent Elliott 10.51 4,663 21.53

31 25 Collett Dickenson

Pearce 0.77 4,744 -9.14

32 26 Partners BDDH 18.04 3,811 14.65

33 34 Rainey Kelly Campbell

Roalfe 21.86 2,940 22.19

34 27 BDH TBWA -9.10 4,793 21.33

35 - Bray Leino Group 30.76 5,472 10.79

36 - Senior King

Communications Group 16.91 3,667 157.9

37 30 Masius 20.92 2,609 10.22

38 32 Roose &Partners

Advertising 7.92 2,932 13.73

39 29 Duckworth Finn

Grubb Waters 13.00 2,516 -14.22

40 33 Burkitt DDB 6.13 2,696 8.89

41 45 Mustoe Merriman Levy 23.91 2,237 4.48

42 38 Principles

Communications 5.51 2,587 37.9

43 42 Mother 19.37 2,115 19.83

44 - Draft Group 5.30 2,131 171.46

45 39 Faulds Advertising 0.95 3,685 0.93

46 48 travissully 12.20 1,849 -0.11

47 - Miles Calcraft

Briginshaw Duffy 9.44 1,769 331.46

48 43 Red Cell Advertising 10.31 1,395 -6.75

49 44 BCMB 16.24 1,121 -1.67

50 47 Circus Communications 10.07 1,406 9.08

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

Companies House, covering periods ending in 1998, 1999, 2000, 2001.

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 Turnover Turnover

Latest Previous Change (%)

1 Omnicom Group 25,655,446 21,387,959 20.0

2 Interpublic 23,452,741 20,751,300 13.0

3 Dentsu 8,888,078 8,516,183 4.4

4 Publicis 7,870,667 4,500,069 74.9

5 True North Communications 6,490,089 6,000,557 8.2

6 Grey Global Group 5,200,299 4,448,940 16.9

7 Hakuhodo 4,080,033 3,723,394 9.6

8 Havas Advertising 3,780,221 2,897,150 30.5

Average for above

Multi-Nationals: 10,667,197 9,028,194 15.8

WPP Group 13,949,400 9,345,900 49.3

Aegis Group 5,712,500 4,791,800 19.2

Cordiant Communications 2,341,500 1,677,900 39.5

Average for all UK

quoted groups: 2,944,012 2,160,919 36.2

Rank Group Gross income Gross income Gross

Latest Previous income

Change (%)

1 Omnicom Group 3,846,394 3,206,591 20.0

2 Interpublic 3,516,153 3,111,139 13.0

3 Dentsu 1,443,244 1,282,928 12.5

4 Publicis 1,197,034 805,390 48.6

5 True North Communications 1,180,000 683,719 72.6

6 Grey Global Group 973,027 889,634 8.2

7 Hakuhodo 779,665 667,008 16.9

8 Havas Advertising 524,728 478,089 9.8

Average for above

Multi-Nationals: 1,682,529 1,391,812 20.9

WPP Group 2,736,100 1,855,300 47.5

Aegis Group 513,000 335,800 52.8

Cordiant Communications 382,800 281,700 35.9

Average for all UK

quoted groups: 495,548 346,625 43.4



The spread of the US advertising downturn across the Atlantic threatens

to create a difficult year ahead for both the foreign multinationals and

the largest UK quoted groups.



Its impact has been sudden and startling with little sign last year of

what was to come. Indeed, the improvement in the results of Japan's two

advertising giants, Dentsu and Hakuhodo, were reflecting a slow return

to confidence.



Recent events, though, have snuffed that out with frightening speed.



Just look at what's happened to Cordiant. Last year the group seemed

well on course with its plan to insulate itself from any slump in its

advertising income by building its related marketing services business.

Indeed, it reported the strongest percentage growth of the UK quoted

groups to £513 million. In June this year, Michael Bungey,

Cordiant's chief executive, issued a profits warning.



Average turnover growth for the UK groups was well ahead of their

foreign counterparts, thanks mostly to the takeover of Young & Rubicam

by Sir Martin Sorrell's WPP.



Nevertheless, Omnicom retained its top slot, the group's acquisition

policy adding a further £4 million to its billings. Interpublic,

its closest competitor, also extended its empire by taking over 77

companies during the year. True North was the most spectacular of them

after the Chicago company concluded it could not carry on alone after

the loss of its Daimler-Chrysler business. But with $160 million

worth of internet investments having to be written off and income from

the Lowe Lintas network having declined, a full-year loss for

Interpublic would be no surprise.



Elsewhere, Publicis' acquisition of Saatchi & Saatchi propelled it into

fourth spot while its great French rival, Havas, recorded a record

growth rate on the back of more than 20 acquisitions.



MEDIA BUYING AGENCIES

Rank Agency Year end Gross Gross

income income

Latest Previous Change

pounds pounds %

000 000

1 Aegis Group 31/12/00 382,800 281,700 35.89

2 Tempus Group 31/12/00 151,284 92,200 64.08

3 Zenith Media Holdings 31/12/99 57,016 49,165 15.97

4 PHD Media 31/12/99 15,483 10,208 51.68

5 Mindshare Media UK 31/12/99 15,357 15,457 -0.65

6 MediaCom UK 30/9/00 15,008 8,742 71.68

7 Starcom Motive 31/12/00 12,145 4,797 153.17

8 Initiative Media London 31/12/99 10,165 8,347 21.78

9 Optimedia International 31/12/99 8,163 7,067 15.51

10 Media Planning 31/12/99 7,216 - n/a

Rank Agency Operating Operating

profit profit

Latest Previous Change

£000 £000 %

1 Aegis Group 84,500 66,400 27.26

2 Tempus Group 19,912 12,293 61.98

3 Zenith Media Holdings 8,397 4,991 68.24

4 PHD Media 4,941 1,367 261.45

5 Mindshare Media UK -414 -1,292 67.96

6 MediaCom UK 1,203 1,229 -2.11

7 Starcom Motive 3,127 1,139 174.65

8 Initiative Media London 829 545 52.11

9 Optimedia International 1,175 678 73.30

10 Media Planning 1,857 - n/a

Rank Agency Operating profit margin

on gross income

Latest Previous Change

% % %

1 Aegis Group 22.07 23.57 -6.35

2 Tempus Group 13.16 13.33 -1.28

3 Zenith Media Holdings 14.73 10.15 45.08

4 PHD Media 31.91 13.39 138.3

5 Mindshare Media UK -2.7 -8.36 67.75

6 MediaCom UK 8.02 14.06 -42.98

7 Starcom Motive 25.75 23.74 8.48

8 Initiative Media London 8.16 6.53 24.91

9 Optimedia International 14.39 9.59 50.04

10 Media Planning 25.73 - n/a



This table reviews the top ten media buying specialists in the UK as

measured by gross income. This represents a change from previous years,

in which WKS focused solely on media independents. With an increasing

number of media dependants now trading through separate standalone

companies, it seems most useful to review the sector as a whole,

irrespective of ownership.



Aegis Group remains unassailable at the head of the table with £383 million gross income and £84.5 million operating profit,

accounting for 63 per cent of the profits of the top 30. However, this

is a decrease on last year when Aegis comprised 72 per cent of the

profits. The next most significant player is Tempus, which is currently

the subject of a bid from WPP after its preferred suitor, Havas, pulled

out. Tempus' gross income of £151 million comprises 15 per cent of

the profits of the top 30. The highest growth was reported by Starcom

Motive, which jumped from ninth to seventh place as measured by gross

income from comparative years' results.



It is worth pointing out how well the media specialist sector has

performed in comparison with the top 50 creative agencies in this year's

survey.



In almost all respects, the media sector outperforms the creative agency

sector, with higher profit margins on gross income, higher operating

profit per head and lower employment costs per head.



Of course, creative agencies are often burdened with higher client

servicing costs then their media counterparts and traditionally operate

from more expensive offices. However, one could argue from these figures

that media buyers are better fee negotiators than their ad agency peers

and that creative agencies are less ably managed than media buying

agencies.



TOP TEN BY OPERATING PROFIT PER HEAD

Rank Agency Operating profit per head pounds Change

Latest Previous %

1 WCRS 29,957 20,272 47.78

2 Citigate Albert Frank 28,378 10,167 179.13

3 Howell Henry Chaldecott Lury 28,053 26,000 7.89

4 Rainey Kelly Campbell Roalfe 27,745 28,581 -2.92

5 Delaney Lund Knox Warren 23,014 6,934 231.88

6 Mustoe Merriman Levy Holdings 21,833 524 4068.18

7 Interfocus Network 20,234 12,804 58.02

8 Mother 19,641 17,059 15.14

9 Masius 19,621 11,839 65.73

10 Banks Hoggins O'Shea/FCB 18,919 1,486 1172.86

This table covers possibly the most important measure of financial

performance and shows the amount of operating profit generated per

employee. This combines the average output per head, the employment

costs and the overheads allocated per head.

BOTTOM TEN BY OPERATING PROFIT PER HEAD

Rank Agency Operating profit per head pounds Change

Latest Previous %

1 Leagas Delaney London 2,626 2,945 -10.85

2 Principles Communications 2,543 3,836 -33.69

3 D'Arcy 1,141 3,703 -69.18

4 Bates UK 727 16,986 -95.72

5 Collett Dickenson Pearce 553 412 34.23

6 Faulds Advertising 357 2,812 -87.30

7 Young & Rubicam Group -770 227 - 438.80

8 BDH TBWA -6,029 -1,192 -405.88

9 Grey Advertising -21,209 -1,526 -1289.54

10 Saatchi & Saatchi Group -25,269 -7,941 -218.19

The poorest performers in terms of operating profit per head included a

number of privately owned companies such as Leagas Delaney. It is

possible that these companies distributed most of their profits to their

owners in bonuses and other remuneration.

GROUPS' HIGHEST PAID DIRECTORS

Rank Agency Latest Previous Change

pounds pounds %

'000 '000

1 WPP Group Sir Martin Sorrell 2,520 1,648 52.91

2 WCRS Robin Wight? 2,118 676 213.31

3 Abbott Mead Vickers Grp Peter Mead? 1,316 628 109.55

4 Saatchi & Saatchi Kevin Roberts 1,306 1,017 28.42

5 Aegis Group Doug Flynn 1,034 719 43.81

6 Chime Communications Lord Bell 798 756 5.56

7 The College Group Alex Sandberg 711 692 2.75

8 Firefly Communications Mrs CA Mellor? 686 1,041 -34.10

9 Tempus Group Chris Ingram 658 553 18.99

10 Euro RSCG RG Offen 651 981 -33.64

Companies must disclose the pay of the highest-paid director and the

chairman, so unless the chairman is disclosed in the accounts and

happens to be the highest paid director, you cannot name names. Here,

however, are some educated guesses.

TOP TEN BY GROSS INCOME PER HEAD

Rank Agency Gross income per head pounds Change

Latest Previous %

1 Circus Communications 152,450 152,000 0.30

2 Ogilvy Group Holdings 127,554 111,471 14.43

3 Rainey Kelly Campbell Roalfe 126,927 134,860 -5.88

4 Delaney Lund Knox Warren

& Partners 110,189 118,526 -7.03

5 Roose & Partners Advertising 110,000 101,756 8.10

6 Ammirati Puris Lintas 107,613 97,813 10.02

7 Howell Henry Chaldecott Lury 107,408 100,221 7.17

8 Banks Hoggins O'Shea/FCB 104,815 86,605 21.03

9 WCRS 102,755 95,711 7.36

10 Lowe Lintas 102,625 95,413 7.56

Over a number of years, the productivity of marketing services companies

has declined, or, at best, stagnated. Perhaps agencies have been too

quick to hire staff as client spending has increased, or it may reflect

an increase in lower charged below-the-line services.

BOTTOM TEN BY GROSS INCOME PER HEAD

Rank Agency Gross income per head pounds Change

Latest Previous %

1 Collett Dickenson Pearce 72,000 65,377 10.13

2 Draft Group Holdings 66,310 73,833 -10.19

3 BDH TBWA 66,260 58,455 13.35

4 Cogent Elliott 65,590 62,593 4.79

5 McCann-Erickson Manchester 60,984 61,328 -0.56

6 TMP Worldwide 58,000 54,759 5.92

7 Principles Communications 46,141 56,000 -17.60

8 Faulds Advertising 37,592 36,822 2.09

9 Senior King Communications Group 36,598 43,655 -16.16

10 Bray Leino Group 20,185 16,290 23.92

Not a good table to be seen on, this, and Faulds is a persistent

offender appearing on the same table for the past three years.

Overworked agency staffers may disagree, but these figures are arguably

a sign of too many people working on too few accounts.

TOP TEN GROUPS BY CASHFLOW

Rank Agency Cash inflow

pounds '000

1 WPP Group 311,300

2 Tempus Group 28,727

3 BBH Holdings 12,411

4 Saatchi & Saatchi 6,400

5 Leagas Delaney Group 6,173

6 Incepta Group 5,087

7 Golley Slater Group 3,994

8 The Triangle Group 3,096

9 M&C Saatchi Worldwide 1,759

10 St Luke's Holdings Limited 902

The size of a company's bank balance, while intriguing, is not a

particularly good indication of its financial success. Cordiant, which

does not appear, is an example of a company that has allowed its

acquisition programme to burn up cash at an alarming rate.



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