An analysis of leading international advertising agencies shows that the Brit pack - WPP and Cordiant - trail their foreign competitors on most financial measures.
Of the two, Cordiant, the holding company for Saatchi & Saatchi and Dorland, has the more dismal record.
In the annual advertising survey, Financial Performance of Marketing Services Companies, 1997, Bob Willott, of accountants Willott, Kingston, Smith, highlights several deficiencies of the two companies against their international brethren.
In terms of revenues, or what the advertising industry refers to as billings, Mr Willott notes that the UK had been closing the gap in recent years between large foreign competitors - notably Omnicon, Interpublic, Grey and True North of the US, and Publicis and Havas of France. But in the annual reports used Cordiant was the only agency to see billings fall, by 1.2 per cent to pounds 4.126bn. Omnicom, by contrast, saw billings increase a healthy 17 per cent to pounds 11bn, partly through acquisition, leaving it the largest agency in the world by a long chalk.
WPP was able to boost sales a decent 8.1 per cent to pounds 7bn.
Operating profit margin on turnover was 2.25 per cent at WPP, leaving it third placed in the universe of companies examined in the survey, up from 1.95 per cent. Cordiant's margins, however, were unchanged at 1.16 per cent, leaving it nearer the bottom of the pecking order.
One of the roots of the problems, especially for Cordiant, seems to stem from costs. As the report spells out, "non-staff costs must be controlled considerably better by the foreign agencies than by UK agencies as a whole ... Control of non-staff costs therefore represents an area where UK agencies need to concentrate further efforts; their counterparts abroad indicate that it is possible to generate greater profits per head".
Cordiant manages a mere pounds 4,702 per head, while WPP manages slightly better, at pounds 7,521 a head. However, that is considerably less for either UK champion, against the pounds 11,461 generated by Interpublic.
Cordiant, however, is embarked on a radical plan to restore margins and profitability. In April it announced it would split into separately listed advertising groups. On Tuesday, it revealed the details, with two new firms, Saatchi & Saatchi Worldwide, and the Bates Worldwide network.
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