Accountant Kingston Smith W1’s Financial Performance of Marketing Services Companies Annual Survey is based on the most recent accounts filed at Companies House. In most cases, these cover periods ending in December 2008.
Mandy Merron, a partner at Kingston Smith W1, says, ‘The current set of results does not fully take into account the effects of the downturn. Next year’s survey is likely to show very different results and, historically, the design industry has been one of the first to suffer in a recession.’
The survey shows that gross income across the top 30 consultancies rose by 11 per cent, with 24 of the top 30 consultancies reporting an increase.
Operating profit grew by an average of 55 per cent across the top 30 consultancies, the survey shows. Group-owned consultancies grew by 23 per cent, while independent consultancies saw a 181 per cent rise. Operating profits in the sector rose to 9.9 per cent, from 7 per cent in the previous year.
However, the design sector has the second-lowest gross income per head and operating profit margin of all the marketing services surveyed. The other sectors examined were digital, advertising, media buyers, direct marketing and sales promotion, and public relations.
Merron says, ‘The top 30 designers have increased their net cash by 30 per cent to £79.6m, but net current assets have only shown a slight increase of 6 per cent to £105.4m.’
She adds, ‘Companies should aim to have net current assets equivalent to at least three months of overheads and, in the current climate, closer to six months. Seven of the top 30 design consultancies have long-term debt and, for three of these, this has increased. So the challenge for businesses in the next 12 months will be to maintain their levels of profitability.’