‘Public relations and public affairs have benefited from the web and social networking and are more consistent and less cyclically prone than previously,' he says. In its preliminary results for 2006, WPP reported like-for-like growth globally of almost six per cent in its PR and PA businesses, with operating margins up by 1.1 per cent to more than 15 per cent.
Omnicom's DAS Group European president Anthony Wreford thinks standards across the sector have risen, improving advice and service and thus creating more demand. He notes there is a new type of ‘regular' client - companies that give an agency anywhere between five and 30 projects a year.
Yet although the market is buoyant, agencies are working hard to keep costs down. UK managing director of Omnicom-owned Porter Novelli, Jean Wyllie, adds: ‘Clients are getting more aggressive in procuring services. A lot of our clients are holding their rates below inflation.'
In our report last year, Huntsworth CEO Lord Chadlington said the agency was aiming for 70 per cent of revenue from retained business - a target now met.Chadlington claims the 21 per cent margins achieved by Huntsworth PR shops are ‘the best in the industry' - achieved with incentive schemes tied to a 20 per cent margin.
He points to a larger number of PR contracts ‘deep into six figures' up for grabs than at the same time last year.
‘Integration and collaboration are really starting to happen,' says Tim Sutton, European chairman of Interpublic Group's Constituency Management Group, which includes Weber Shandwick and GolinHarris. ‘Holding companies are coming into their own, although that is really the wrong descriptor. Now clients want combinations of businesses and the dizzying permutations are becoming a reality.'
Sutton cites clients such as Wall's Ice Cream that work with multiple IPG agencies. Last year's World Cup in Germany boosted European marketing and taking Matthew Neale and Jonathan Hughes in 2005 from Weber Shandwick to head the London office of GolinHarris has driven growth and consolidated IPG's second PR brand.
Chime Communications, owner of Bell Pottinger, upped its PR fee income by 13 per cent to almost £47m. When the plc released last month its first results for the year to 31 December 2006, it boasted a six per cent rise in income per employee. The figures also pointed to an uplift in the number of clients using more than one company in the group - from 183 to 215, representing 54 per cent of income compared with 44 per cent last year.
‘There's a lot of demand from companies for CSR, and often it's become about ethical branding' says Bell Pottinger Group chairman Kevin Murray. ‘The user generated content revolution has played into our hands.'
Graham Lancaster, chairman of Havas-owned Euro RSCG Biss Lancaster, says his business income grew around five per cent. He says: ‘Pay growth is outstripping inflation. Not hugely, if you are a well-run business, but it is. In the war for talent you have to pay recruitment fees, for which nobody budgets.'
The group's new PA operation Euro RSCG Apex enjoyed a successful start under Ed Owen and Pete Bowyer.
Nick Band, CEO of Cossette-owned Band and Brown, also sees a rise in client briefs that demand a new approach, with media relations alongside digital and experiential marketing. Competition is fierce and he says on two occasions his business lost out at pitch to smaller competitors offering their first three months' services for no fee.
A drive for greater integration might bring advantages for agencies within large groups, but they still face the same competitive pressure as rivals.
TOP GROUPS BY FEE INCOME
|Rank||Company ||Fee Income (£)|
Fishburn Hedges, Fleishman Hillard, Gavin Anderson, Ketchum, Pleon, Porter Novelli, Staniforth Communications
Citigate Dewe Rogerson, EHPR, Grayling UK Ltd, Trimedia Harrison Cowley, Haslimann Taylor, The Red Consultancy
Bell Pottinger Group (including Good Relations, etc – for full list see note at bottom of page 1 of Top 150 Consultancies Table 2007)
Golin Harris, Weber Shandwick
| 32,063,554* |
Freud Communications, MS&L
Euro RSCG Biss Lancaster, Maitland
Band and Brown
* PRWeek estimates due to Sarbanes-Oxley Act