Direct and sales promotion agencies suffer in 2008

Direct marketing and sales promotion agencies (DMSP) saw their financial performance suffer in 2008, according to a report.

According to accountants Kingston Smith W1, growth in fee income slowed to 3.7% across the top 40 DMSP agencies, from 9% in the previous two years, with 18 of the Top 40 agencies reporting a fall in gross income.

The annual survey also found almost half of DMSP agencies reported a drop in operating profit, while operating profit margins fell to a 16-year low of 7.7%.

In terms of fee income, independent agencies seemed to outperform their group counterparts, the survey found. Income at independents was 11.8% compared to a decline of 1.3% for group-owned companies.

Tullo Marshall Warren (TMW) was crowned the most profitable agency replacing Proximity London in the top spot. TMW saw its operating profit increase 41% in the year, while Proximity recorded a 46% fall.

Despite the drop in performance at many agencies, total directors' remuneration increased within half of the Top 40 agencies, the survey found, including nine companies that saw a fall in gross income and four companies where other staff costs were cut.

Ten companies reported an increase in total directors' remuneration while also reporting a cut in overall headcount, the survey claims.