The big agency chiefs may not be confidently talking about the return to good times just yet, but the belt tightening and retrenchment of several years ago has been replaced by growth strategies – with many companies now confident that they can increase their fee income and boost their market share.
The full complement of group-owned agencies is now included in this year's Top 150, so the fee income for UK groups such as Huntsworth and Chime Communications, can now be compared with PRWeek's estimates for groups whose obligations under Sarbanes Oxley mean they have been unable to submit their financial figures.
WPP leads the fee income chart by a mile, but Huntsworth, Chime and IPG are all comparatively close in the £40m+ bracket.
At its preliminary results for the year ending 31 December 2005, WPP reported that its PR and public affairs growth was almost 19 per cent while margins were pushed up by one percentage point to 14 per cent. These are global figures, but in the UK WPP has singled out financial specialist Buchanan as being 'particularly strong'.
'My impression is we did OK in the UK last year,' says WPP Group CEO Sir Martin Sorrell, guardedly. 'But I do think the UK is a tough market. With brands such as Burson-Marsteller, Hill and Knowlton and Buchanan I think we have the best portfolio of businesses. I would also say the corporate and financial sectors are growing faster than say the marketing disciplines. Specialist areas such as tech, pharma, financial services and media and entertainment are steady performers.'
Chime chairman Lord Bell is optimistic about the year ahead. 'Our market share will increase,' he predicts. 'This is largely down to the efforts of Kevin Murray (Bell Pottinger Group chairman), who has restructured our PR division with great skill.'
Huntsworth CEO Lord Chadlington believes his group has already improved its market share, with most of its brands enjoying good fortunes in 2006. He says the market is particularly difficult for medium-sized agencies – which he defines as having PR income of between £3.5 and £6m. Such businesses, he argues, find themselves squeezed between the large groups that enjoy strong infrastructure and international clout and the smaller, more nimble boutiques, which have now hit a ceiling.
A medium-sized agency 'has either got to join forces with a major agency or integrate with one of the networks of international businesses. The trouble is, there aren't that many good networks around,' he asserts.
This year Chadlington is aiming to secure 70 per cent of total revenue to come from client retainers. So far he is only one per cent off. 'Overall, I think that the industry is two-thirds of the way through an upturn cycle which everyone is experiencing. But, I also think it is gathering pace. From now, and up to 2008, I believe we will see continued growth.'
The arrival of client procurement officers has been a major worry during 2005. But while the big groups, with their larger overheads, feared the worst, there are signs that procurement professionals favour guarantees of professionalism and financial stability. Agencies in large groups retain their appeal – especially to clients with cross-border needs.
'It would be foolish for anyone to rely on parents and brothers and sisters for income, but in a global market there are big advantages to being part of an owned group,' says Band & Brown chairman Nick Band.
Last year B&B's Canadian parent group Cossette Communication bought top 25 UK ad agency Miles Calcraft Briginshaw Duffy. Band, whose own agency was acquired by Cossette in 2004, expects the MCBD acquisition to generate some referral benefits. He describes 2005 as a 'good' year for Band & Brown and feels it was similarly strong for other well-established agencies, noting that 'familiar names' such as The Red Consultancy and Cohn & Wolfe often featured against his agency on pitch lists.
We are a long way short of a boom – perhaps thankfully, as the risk of a sharp correction is lower – but the market is enjoying growth and the PR groups appear for the most part to be reaping the benefits.