“Danger Looms” For Ad Agencies

A third of all advertising agencies must undergo some form of change or financial restructuring if they are to avoid worsening financial difficulties and potential liquidation, according a report from Plimsoll Publishing. The survey, which examined the financial performance of some 1,910 agencies, found that 34% were suffering financial difficulties of some nature. This is a deterioration from last year when 30% of the industry was found to struggling.

Poor performance however was not limited to small companies, since of those companies with a turnover above £12m, 22% were found to be in a financially weak position. The good news in the report was that on average agencies were able to increase sales by 10.8%.

Those agencies with a turnover of between £1m and £3m “seemed to be setting the pace” by showing an average increase in sales of 13.3% whilst the smallest companies, with sales of less than £1m, only managed an average increase of 1.3%. The largest companies, those with sales in excess of £12m, reported an average 11.4% rise in sales.

In terms of profit margins the largest companies managed an average 1.7% pre-tax profit margin whilst the smallest companies had an average 1.8%. Those agencies in the £3-12m sales bracket did best, reporting a 3.5% profit compared to the industry average pre-tax profit as a percentage of sales of 2.5%.

Plimsoll Publishing: 01642 230977