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 income 2011 (£’000) Year-on-year change(%)
Imagination 46 212 24.76
Design Bridge 20 129 13.12
Radley Yeldar 14 281 10.67
Sun Branding Solutions 14 228 -10.09
Interbrand 13 528 10.49
Publicis Consultants UK 12 127 14.02
The Brand Union 11 763 12.76
DCA Design International 11 666 29.46
Start 11 237 49.37
Jones Knowles Ritchie 10 524 10.53
The Top 10 consultancies ranked by operating profit
Operating profit 2011 (£’000) Year-on-year change (%)
Imagination 3 294 55.89
DCA Design International 2 942 46.73
Publicis Consultants UK 2 514 -3.16
The Brand Union 2 119 8.61
Venture Three 1 910 21.19
Jones Knowles Ritchie 1 898 7.96
Radley Yeldar 1 878 30.96
The Partners 1 605 14.07
Wolff Olins 1 267 18.41
1HQ 1 104 67.78
The Top 10 consultancies ranked by operating profit per head
Operating profit per head 2011 Year-on-year change
Venture Three 46 585 6.41
The Partners 34 149 -0.49
DCA Design International 30 020 19.78
The Brand Union 29 027 8.61
Addison 25 195 0.78
Publicis Consultants UK 24 408 -13.50
Coley Porter Bell 18 410 -11.07
Jones Knowles Ritchie 17 255 -6.76
Wolff Olins 15 265 9.85
Black Sun 14 573 23.86

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