On the face of it, the profitability of this year's sample suggests things are relatively static. But a dig into the figures reveals a much more mixed picture.
All 22 agencies that improved their profit margin in 2013 also saw an increase in the total amount of profit. Collectively, this increase in profits amounts to an impressive 65 per cent. In contrast, 14 of the 17 agencies whose profit margins declined also saw their profit decrease.
Underlying this performance appears to be the ability of the first group to significantly increase their teams’ productivity, as demonstrated by their average increase in revenue per employee of more than 11 per cent.
This increase may reflect a number of different changes within these agencies: more investment in training, more efficient working practices, improved communication of the value of their work, or a shift away from low-value-add activities or markets.
Whatever the reasons, the significantly differing fortunes of the two groups is evidence that some agencies are potentially finding it harder to adapt to the changing nature of the PR
market than others.
- The 39 agencies that entered profit figures in the Top 150 achieved a weighted average profit margin of 17.1 per cent in 2013. This is an improvement of 0.9 per cent over their 2012 performance of 16.2 per cent.
- These agencies (the Top 150 profit sample) grew their PR income by 15.5 per cent on average.
- In contrast, the quoted PR divisions/companies sample experienced a fall in margins of 0.7 per cent to 13.9 per cent (in 2012 this was 14.6 per cent). All three companies experienced a reduction. Since 2012, the combined margin for these three companies has fallen by 1.4 per cent from 15.3 per cent.
- The quoted marcoms groups sample fared better, with a slight increase in margins of 0.2 per cent to 14.7 per cent (in 2012 it was 14.5 per cent). Since 2012, the combined margin for these companies has improved 0.7 per cent from 14 per cent.
- There was a large variation in the profit margins of the 2013 Top 150 sample from +46.4 per cent to -1.2 per cent. In 2012, this was even wider: +69.2 per cent to -0.1 per cent.
- The 2013 Top 150 sample agencies’ PR income growth varied from +252.1 per cent to -17.2 per cent (2012 variation of sample, +146.5 per cent to -7.5 per cent).
The table below compares the performance of agencies that increased their profit margin in 2013 with those whose profit margin fell. This excludes one agency with an exceptional level of headcount growth.
|Increased profit margin||Decreased profit margin|
|Number of agencies||22||16|
|Revenue per employee||+11.6%||-0.6%|
|Cost per employee||+4.3%||+4.4%|
Top 150 sample analysis
Top 150 sample figures have been based on 39 agencies that provided profit and PR income figures for 2013 and their comparator figures for 2012, and where their PR income represented at least 80 per cent of their gross turnover. This restriction is applied to make it less likely that profit was materially attributable to sources other than PR. Margin was then calculated based on net profit as a proportion of PR income, not gross turnover. The sample made combined profits of £17.4m on income of £102m in 2013. A weighted profit margin of 17.1 per cent. Their 2012 comparator figures are £14.3m profit on income of £88.3m. A weighted profit margin of 16.2 per cent.