Many reasons to be cheerful

The design industry can feel cheered by a second year of strong profits, with Willott Kingston Smith’s latest annual survey recording nearly doubled pre-tax profits for the 20 top design groups.

The accountant’s review, Financial Performance of Marketing Services Companies, shows that the tough decisions of the past few years on issues such as staffing are paying off.

Employment costs per employee, including directors, have increased in all but seven consultancies, with Siegel & Gale showing the biggest increase of 21 per cent to an average of 46 000. Average pay per employee fell at Design House, The Imagination Group, Lewis Moberly, Wickens Tutt Southgate, Coley Porter Bell, Pentagram Design, and The Tayburn Group.

Design groups’ average staff spend is about five per cent less than at the top 50 marketing services groups – defined by WKS as companies with a marketing mix, like WPP, rather than pure design consultancies like Fitch.

But while “designers generate lower average income per head than the marketing services top 50”, the report states “this is more than compensated by the efficiency with which they translate income into profits”. Designers generate an average profit per head of 7070 compared with 6312 for marketing services groups.

Staff numbers at design groups saw a slight increase, even though eight consultancies lost more staff than they took on. Design In Action suffered the biggest drop in numbers from 67 to 49. Conversely, Addison saw the highest increase, from 41 to 52 staff. Addison also managed to achieve the best operating profit per employee of 23 865, a hike of 63 per cent on the previous year.

Fewer consultancies overall reported an increased operating profit in 1995 – 16 compared with 19 in the previous year. Pentagram suffered the worst decline, from 138 000 in the black in 1994 to a loss of 170 000 in 1995.

Despite Pentagram and a few other groups recording losses, the general forecast appears bright. “The average operating profit per head is better than it has been for a number of years but again this may be influenced by increased use of freelance staff,” states the report.

WKS manager Steve Waring is hopeful that such strong recovery will continue to be apparent in the industry.

A glimpse of the figures for the top 20 design groups in the last fiscal year:

Highest pre-tax profits: Fitch 1.53m, Sampson Tyrrell 1.43m, Addison 1.26m, Coley Porter Bell 1.21m.

Highest and lowest turnovers of the 18 companies which logged turnover results: Imagination 39m and Lewis Moberly 2.27m.

Average turnover for the 18 companies: 7.77m.

Highest paid directors: Fitch 298 000, The Imagination Group 232 000, Siegel & Gale 184 000, Design House 175 000.

The highest paid director at Siegel & Gale received at pay rise of 43.75 per cent.

Highest employment costs per employee including directors: Siegel & Gale 46 292, Fitch 41 768, Design Bridge 40 000.

Lowest employment costs per employee including directors: The Tayburn Group 21 571, Pentagram Design 26 959, Holmes & Marchant Communications 28 050, BDG/McColl 28 137.