Where the money is

The traditional moan of the design consultancy employee – of being undervalued when compared to contemporaries in other marketing disciplines – could now be invalid.

According to the latest Financial Performance of Marketing Companies Survey by accountant Willott Kingston Smith, designers working for consultancies in its Top 30 Design Houses List are paid, on average, 11 per cent more than employees of companies in its Top 50 Marketing Services Groups list.

Lower non-staff overheads are to thank for the happy situation, says the report. Design groups tend to achieve higher operating profit margins than ad agencies and direct marketing groups – on average 15.6 per cent against 10.7 per cent.

The impressive performance of some of the design groups listed in the survey explains another prominent feature of the research. A number of the top-listed groups have changed ownership since last year’s survey, making them attractive acquisition targets.

More ownership changes could be set to follow. One of the best performers in the WKS survey is The Brand Union, which reported an 87 per cent rise in gross income to enter the Top 20 for the first time. Composed of Tutssels and Lambie Nairn, The Brand Union is currently engaged in takeover talks with the giant WPP Group (DW 24 September).

The Top 30 design groups report an aggregate pre-tax profit of £21.5m, a 10 per cent increase on last year’s figure of £19.6m. (Design Week Top 100 followers will note the differences in this survey’s accounting periods.) The combined figure was, however, eroded by heavy exceptional costs incurred by some of the design groups in the list: The Imagination Group incurred costs of £836 000 because of an unassigned lease on former premises, while Shelfco (No 1327), the parent company of Wolff Olins since its management buyout, spent £343 000 on restructuring.

Overall Top 30 operating profits increased by 15.3 per cent, while gross income grew by 16.9 per cent. The difference is in a large part due to increases in staff costs of 22 per cent.

But an increase in business levels in successful groups has seen negative performance creep into certain administrative tasks. On average, design groups are taking 15 per cent longer to chase debts because they are too busy. Some have managed to keep up with the bill-chasing, however. The most efficient debt collector in the survey is Basten Greenhill Andrews, paid on average in 36 days.

There is not good news for all the groups in the survey. The largest decline in gross income among the top 30 is reported at Coley Porter Bell, falling by 45 per cent, while 17 companies saw operating profits reduced.

Only three companies – Interbrand Newell and Sorrell, IDH Group and Siegal & Gale – saw operating losses. Last year’s survey saw design groups benefiting from interest paid to them. All three groups operating at a loss have this year seen themselves paying out interest charges.