To put these figures in context I thought I would delve a little further here and look at relative sizes and then look at the market’s view of PR via their share price performance.

Size

Income

The combined PR income of WPP, Interpublic and Omincom was still approximately £1bn in the first half of 2009 (though this includes Interpublic’s event marketing and branding business) and this in turn represented around 11% of their overall total revenues of around £9.5bn. This compares with approximately £115m of PR based revenue for Chime, Huntsworth and Next Fifteen combined in the same period which represents the majority of their circa £165m of total combined revenue. So the big three’s PR income is around 9 times more.

Market capitalisation

The combined market capitalisation of the three larger groups is approximately £16bn as at 7th September 2009 compared to approximately £300m for the three smaller ones. Over 50 times greater.

So given their relative size the results of the larger groups are a much stronger indicator of the overall global PR market’s current performance. However the higher proportion of PR income in the income of the smaller groups arguably makes them a better indicator of how the market perceives the PR industry’s prospects given that they are all (Chime excepted) suffering a reduction of PR income of broadly similar levels.

Share Price movements in 2009

The graphs below show the movements in share prices of these same companies since the start of this calendar year. (Again you will probably need to view the actual files themselves – graph 1 – showing Chime, Huntsworth and Next Fifteen, graph 2 – showing Omnicom, Interpublic and WPP).

Source FT.com

Source FT.com

The smaller groups that are either predominantly or wholly PR based (Chime, Huntsworth and Next Fifteen) have all outperformed the larger, broader, Marcoms groups during this period. Chime is up to over three times its level at the start of the year and Huntsworth isn’t far behind. Next Fifteen is also up around 60% despite predicting a significant fall in revenues in the first half of 2009. In fact their share prices are back to similar levels to where they were before the recession started.

This compares with increases of around 25-40% for the larger Marcoms groups. They have all therefore outperformed the market generally with the FTSE100 up approximately 10% and the DOW about 5% in the same period.

Of course given the difference in size the increases in the values of the larger groups are much greater in absolute £/$ terms than the smaller ones. However it is still interesting to note that these figures imply that the markets’ perceptions of the PR industry’s prospects has improved considerably over the last six months.

All of which suggests a healthy expectation of the industry’s performance in the coming months. Let’s hope they are right!

Sources/Basis

The analysis is based on publicly quoted figures included in investor presentations, interim and annual reports, SEC filings and in the case of Next Fifteen for 2009, analyst forecasts. Where possible the growth rates represent like for like organic growth excluding the impact of currency movements or acquisitions/disposals. Exceptions to this are Omnicom and Next Fifteen for whom these figures are headline changes as they do not disclose the impact of these items. Also Interpublic’s figures are based on their CMG division which includes their event marketing and branding businesses. If anyone is interested in the chapter and verse just contact me.

1. Ranking who are the largest (by income) PR Agencies in the UK
2. Showing how the PR industry is performing and the strategies that appear to be employed

Given that a substantial number of the largest entrants do not submit audited numbers (we will call these the Sarbanes agencies) I can understand why some have criticised its validity for the first use. Though I would humbly suggest that it is likely that the majority of the agencies that don’t submit figures would still occupy similar places to those estimated. Just not necessarily in the specific order.

But I definitely think the table has value for the second use. Allowing for agencies that have not submitted figures, or only have figures for one of the years, there are still 121 agencies in the list for which full figures have been supplied (we will call these the Audited agencies). These agencies account for approximately 60% of the combined income of the Top 150 and around two thirds of the staff. As a sample of the performance of the industry this is still a significant snap shot.

So I am going to leave the debate around point 1 to others and focus on the areas I discussed on the podcast around point 2.

What do we find?  

Summary table:

Income

Pretty consistent. And don’t think that’s because the Sarbanes estimates are all just the same. In fact the estimates range from a 22% reduction for one agency to a 36% increase for a couple of others.

Staff  

Again fairly consistent and again the estimates for the Sarbanes agencies do vary a lot from a reduction of 29% in one to an increase of 24% in another.

Different strategies  

But it is when you dig deeper, as I stated in the podcast, that you find the really interesting numbers.

Here are tables that stratify each of the groups based on their change in staff numbers year on year.

A “Significant increase” with regards to staff numbers is defined as 5% or more; “Little change” is defined as 0-4.9%.

What you can see from the tables is that they are consistent in showing the following:

– The Reduction group is the largest by value of income in both cases. By value almost half of agencies reduced headcount in 2008 according to these numbers.

– The Reduction group increased income per head by the biggest percentage – 15% in the Audited agencies case 16% in the Sarbanes case.

– The Significant increase group achieved the highest income increase in both cases (19% Audited; 22% Sarbanes) but the smallest increase in income per head – 0% Audited and 8% Sarbanes.

Analysis  

1. The data consistently tells the same story whether audited or estimated. This is despite the significant variability in those estimates.

2. The headline numbers hide a wide variation in strategies that agencies have apparently being employing:

– Staffing up for growth
– Maintaining staff levels and apparently looking for margin improvement
– Reducing headcount to enhance profitability significantly

Implications

The question this poses is which of these groups are best placed for this year?

Have those that have gone for staff growth acquired the cream, and those with the most marketable skills, and so will be best placed to weather the storm? Have those that have gone for maintenance taken the right route as their teams and their client relationships may therefore be the most stable?

Or have those that have gone for an early reduction in headcount made the right call by reducing their cost bases before the recession bit the hardest?

I would be very interested to know the thoughts of those of you who have first hand experience of this discussion.

Podcast can be found here and the Top 150 2009 can be downloaded by subscribers here.

I will be publishing my analysis behind some of my comments in the next couple of days for anyone who is interested in more detail.

Update: Embed code now available so view podcast below.