Pinch yourself…agencies seem to be making bigger profits

It’s hard to believe that many of the financial results reported in the last week or so have been very positive.   What happened to recession and the financial crisis that we are all supposed to be experiencing?

Marketing software supplier dotDigital reported a 30% rise in operating profit and revenue.  Beattie McGuinness Bungay reported a massive 420% increase in operating profit.   Even poor old Profero managed to turn the previous year’s operating loss of £2 million into a breakeven position.  LBi reinforced the benefit of a Publicis takeover by forecasting a 26% rise in operating profit this year. And digital public relations outfit Hasgrove recovered from a £5 million loss to a profit of £471,000.

Of course there were some poor results as well.   But the fact remains that a number of companies have been able to improve their profits or recover from previous losses.   And that’s worth celebrating.

Equally worthy of comment are the reasons for the improved results which are very varied.    Dot Digital has simply expanded sales of its software products by innovation and good salesmanship.    Beattie McGuinness Bungay closed its New York operation after it had become a drain at a time when the agency needed all the profits it could get to maximise the proceeds of the sale to Cheil.

Profero woke up to reality after discovering that opening offices around the world on a virtually unmanageable joint venture basis looked good in its publicity material but not so good on its balance sheet.    Shedding some of those offices had a healthy impact on the bottom line.

LBi has gained its reward from rationalising a mishmash of under-performing past acquisitions and building a simplified global operation that does what the clients want.    And Hasgrove got rid of a loss-making public affairs subsidiary by selling it (or virtually giving it) to its management.

What emerges from the above is that profits don’t just come automatically.   They require innovation, talent, determination and – quite often – tough decisions.   And these are qualities that still seem to be in short supply.

Bob Willott is editor of “Marketing Services Financial Intelligence”.