FAILURE TO keep a tight reign on employment costs has caused a reduction in gross income per head within direct marketing agencies, reports Marketing Monitor
, the quarterly review of fiscal performance by beancounters Willott Kingston Smith.
, Although overall costs, excluding staff, have fallen by 4% since the last quarter, employment costs rose by 2.3%, negating a modest 1.7% increase in agency incomes. This has resulted in an average operating profit per head (OPH) index of 15.1 compared with the retail price index which stands at 16.8. Opines WKS partner Cliff Ireton: 'A well run company in the marketing services industry should be able to generate operating profit margins of around 15%. If the [dm] sector was achieving this, it would be reporting an OPH index of 17.6 - higher than any time since we started publishing.'