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Operating profits slide in the design sector

Operating profits among the Top 30 design consultancies fell marginally throughout 2011, according to a report from accountant Kingston Smith W1.

Cash

Source: Howard Lake

This is a contrast to 2010, when operating costs for the Top 30 soared by 85 per cent.

Kingston Smith says the 0.04 drop in operating profits shown in these most recent results are due to a combination of rising employment costs and general overheads.

While gross income across the board has risen by 13 per cent, employment costs have also risen – by 14 per cent.

Kingston Smith W1 says that 19 of the Top 30 groups reported an operating profit while three – Coutts Retail, The Team and Lambie-Nairn – reported operating losses.

Start, BrandOpus and Black Sun saw the biggest increases in gross income, while The Team, Sun Branding Solutions and Lambie-Nairn saw the biggest decreases.

It says a marked improvement in performance among independent groups has seen their gross income rise by 17 per cent, while that of group-owned consultancies has risen by just 6 per cent.

In its analysis of the results, Kingston Smith W1 says, ‘Overall, results have been mixed in the sector this year. Independent companies have shown tremendous growth in revenue, but are still some way behind the group-owned companies in terms of maintaining profit margins and overall productivity levels.

‘This gap is slowly eroding though, and it will be interesting to see whether this trend will continue in next year’s survey.’

It adds, ‘While there has been growth in this sector, it doesn’t appear to have filtered down to the operating profit figure, which suggests that agencies are working much harder to generate this extra revenue.

‘The current Top 30 is a long way off the heady margins seen at the beginning of this decade!’

The Top 10 consultancies ranked by gross income
Gross income2011 (£’000)Year-on-year change(%)
Imagination46 21224.76
Design Bridge20 12913.12
Radley Yeldar14 28110.67
Sun Branding Solutions14 228-10.09
Interbrand13 52810.49
Publicis Consultants UK12 12714.02
The Brand Union11 76312.76
DCA Design International11 66629.46
Start11 23749.37
Jones Knowles Ritchie10 52410.53

 

The Top 10 consultancies ranked by operating profit
Operating profit2011 (£’000)Year-on-year change (%)
Imagination3 29455.89
DCA Design International2 94246.73
Publicis Consultants UK2 514-3.16
The Brand Union2 1198.61
Venture Three1 91021.19
Jones Knowles Ritchie1 8987.96
Radley Yeldar1 87830.96
The Partners1 60514.07
Wolff Olins1 26718.41
1HQ1 10467.78

 

The Top 10 consultancies ranked by operating profit per head
Operating profit per head2011Year-on-year change
Venture Three46 5856.41
The Partners34 149-0.49
DCA Design International30 02019.78
The Brand Union29 0278.61
Addison25 1950.78
Publicis Consultants UK24 408-13.50
Coley Porter Bell18 410-11.07
Jones Knowles Ritchie17 255-6.76
Wolff Olins15 2659.85
Black Sun14 57323.86

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