It's been a strong year for margin growth and profitability for the top 40 PR consultancies.
Testament to the strong results is that 10 PR consultancies reported operating profits of more than £5m compared to only six in last year’s report.
For only the second time in the past 11 years, the top 40 have posted a double-digit percentage increase in fee income.
While the operating profits of the top 40 increased by 21.6 per cent to £128m, this was largely due to improved control of non-staff costs.
This helped push margins up from 13.4 per cent in last year’s survey to 14.5 per cent this year – by some distance the highest operating profit margin achieved across all the marketing services sectors surveyed.
Out of the 18 consultancies that improved their operating profit margin, Syneos Health Communications Europe and Tulchan Communications topped the margin chart with 47.7 per cent and 38.1 per cent respectively.
Five companies experienced growth of more than 40 per cent this year.
The most significant of these was Four Communications, which rose 20 places in the Top 40 to number 19 thanks to a 78 per cent increase in fee income, partly due to the hive up of the trade of subsidiary Consolidated PR.
Teneo Strategy's 2017 acquisition of Credo Business Consulting Group – a management consultancy – contributed to another year of impressive growth of 50 per cent, while Syneos Health Communications Europe (rebranded from inVentiv Health) also recorded a 50 per cent increase in its fee income.
Overall, it has been another successful year for the top 40 PR consultancies as they have continued to move in the right direction in almost all KPIs. Fee income and operating profit margin have particularly highlighted this, with the latter getting closer to the pre-recessionary average of 16 per cent.
We have always said that public relations is well placed to deliver good margins, given the strength of the senior relationships it tends to hold with clients and the level of strategic input that it gives. This continues to be the case and, once again, profit margins are the highest of all the marketing services sectors.
Esther Carder is the head of media at Moore Kingston Smith.