Ketchum EMEA: Agency Business Report 2015

The Omnicom Group agency falls short of its like-for-like target but the long game could pay off in 2015

David Gallagher: UK chairman and CEO of Europe, Ketchum
David Gallagher: UK chairman and CEO of Europe, Ketchum

Principals: Rob Flaherty, senior partner, CEO and president; David Gallagher, UK chairman and CEO of Europe
Ownership: Omnicom Group
Offices: Global 80; EMEA 19 affiliates and 10 owned
Revenue: Global $500m-$550m (£334m-£367m); UK $25m–$50m (£17m-£33m)
Headcount: Global 2,500; UK 200

It has been a reasonable but hardly vintage year at Ketchum EMEA. The positive news is that profits grew 29 per cent over the past 12 months.

A more negative take is that the figure would and should have been higher if the agency had managed to grow its like-for-like income by more than three per cent. Ketchum’s owner Omnicom rec­orded 4.1 per cent organic growth in its PR income last year, confirming that the region was a slight underachiever when it comes to the top line.

But there are good reasons for this. Much of the region has been flat for several years, especially southern Europe, and revenues declined markedly in 2013. So the fact that most of Ketchum’s offices grew last year and all its top 20 clients spent more last year can be seen as a marked improvement and a turnaround. The star performer by a long chalk was the Belgium office, which installed a new management team and grew revenues by 50 per cent. The UK also performed well with wins from, Tate & Lyle and Hertz.

There were major new region-wide business assignments from MasterCard and car manufacturer Nissan, which hired Ketchum to promote its sponsorship of the UEFA Champions League. The agency will be running an integrated campaign including brand and corporate PR, working with other agencies, including sister Omnicom shops TBWA on advertising and OMD on media buying.

There was also one significant account loss. Last month Ketchum ended its high-profile work for the Russian Federation, although it is keen to point out that this was not some sort of new Cold War manoeuvre on the part of the network. It ret­ained Russian oil giant Gazprom as a client and its office in Moscow is still flourishing.

According to David Gallagher, the Texas-born chairman of Ketchum EMEA, the reg­ion managed to grow profits without expanding the business significantly, for a combination of reasons. Firstly there were some simple housekeeping measures such as managing the real estate costs in European locations, which kept costs down.

In terms of revenue, Ketchum’s acquisition in 2013 of Brandzeichen, the German lifestyle and soc­ial media specialist, started to pay dividends. It contributed half of Ketchum’s non-organic growth. Lastly, and perhaps most significantly, Ketchum is slowly but surely improving its margins by moving its focus on to higher value services like digital strategy and social media community management, and specialist areas like crisis comms, change management and medical education.

The long game
The agency could have pursued revenue more agg­ressively, admits Gallagher, but it took the decision to set its house in order with an eye on the longer term. In January last year he instituted the ‘Rise Up’ programme to differentiate Ketchum EMEA from rival PR agencies and ad agencies and enc­ourage a more entrepreneurial spirit.

The plan has three main facets. First, moving Ketchum from traditional PR agency to what Gallagher describes as the "agency of now", focusing on social media, content and robust planning. Secondly it aims to "take advantage of the geography" to grow international clients from European markets.

Thirdly it wants to make the region more responsive to client needs by making it easier to work with. "In part it’s about working better with other agencies and other Ketchum offices. In part it’s about small cultural changes like picking up the phone versus using email and sending one invoice, not eight separate invoices," says Gallagher.

An important part of investing in client needs was the slightly belated introduction of news rooms to Ketchum offices. "In a content-hungry world, agencies have the chance to provide news as well as entertainment," explains Gallagher.

High spots included success at Cannes when a team from Ketchum Publico (Austria) won a bronze at the Young Lions for its client work.

There were a couple of major people moves during the year related to the agency’s reinvention. Stephen Waddington was promoted to the newly created role of chief engagement officer, to support the agency’s integration of digital and social capabilities. Tara Munday was promoted to the new role of European director of food and beverage practice. Gallagher says the agency has also inc­reased its number of practices from five to 18 bec­ause "the age of the generalist is behind us and clients want deep expertise in their sectors".

His greatest challenges last year were recruiting and retaining talent – and the recent strength of the dollar that reduces the value of foreign earnings. But both of these pale into insignificance compared with next year’s challenge – to achieve organic turnover growth of five per cent.

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