Independent marketing companies shine in mixed results
The respected annual Kingston Smith survey of UK marketing services companies has shown mixed results - with independent agencies leading the way in terms of business growth.
The report reviewed the financial performance of UK companies in eight areas - advertising, branding and design, digital, marketing & sales promotion, media planning and buying, public relations, as well as UK-listed groups and independent groups in the marketing services sector. The information was based on accounts filed at Companies House in the UK on, or before, September 30, 2018.
The analysis found that total gross income grew by an average of 7.1 per cent, but the top 50 independent agencies grew by 10.3 per cent. This segment has been growing at a similar rate for the last three years.
In terms of profitability, the design discipline comes nearest to Kingston Smith's recommended operating profit margin of 15 per cent - having achieved 14.9 per cent during the period surveyed.
The report warns that rising costs associated with people have put a lid on profit growth for many companies. In some fields, there has been a greater reliance on freelancers, which have contributed to increased overheads.Other cost pressures were associated with restructuring, overseas investment and rents.
The advertising sector enjoyed a positive year, with improvements in gross income and average profit margin. In the companies surveyed, productivity as measured by average fee income per head, grew by 3.4 per cent to £115,224.
This is enouraging news for the industry as it grapples with ongoing challenges such as pressure from clients to deliver more for lower fees, and uncertainties brought on by Brexit.
The report predicts: "As always, it will be those agencies that can quickly capitalise on the opportunities created by change that will thrive".
Find out more about the full Kingston Smith report.