Print Published 18th Nov 2016, 16:43

The7Stars UK media agency dazzles again

purple hanging plumsThe media agency The7Stars UK and TRBR (owner of The Red Brick Road advertising agency) have shared this year’s top award for their financial credentials in our annual review designed to promote good financial husbandry among privately-owned UK marketing agencies.

The “Private Plums” award scheme was launched by Marketing Services Financial Intelligence in 2002 to recognise good financial management among privately owned UK marketing agencies irrespective of size. For this year’s survey seventy-four privately owned companies were scrutinised, each having annual gross income in excess of £2.5 million.  The full analysis and report is available free to subscribers – see below.

Juciest plums 2016There are eight criteria that have to be satisfied to get top marks and agencies are awarded a “plum” for each of those criteria. Thus the maximum crop of plums that can be earned is eight.

Neither The7Stars UK nor TRBR is new to scoring well in the “Private Plums” awards. The7Stars UK won last year with a full crop of eight plums (see The7Stars media agency tops awards for financial credentials) .  TRBR’s predecessor company The Red Brick Road was in fifth place with seven plums in 2013 and was in eighth place in 2009.

“Winners of a high number of plums are likely to become some of the juiciest targets for potential acquirers (assuming the owners want to sell)”, commented Bob Willott, the compiler of the awards, “as is demonstrated by the companies featured in last year’s awards that are no longer privately owned – companies like Stickyeyes and Langland Advertising, Design and Marketing both of which had achieved a full crop of plums in earlier years.”

This year’s awards coincided with news that a second publicly listed marketing company has opted to become a private company again:  Creston is on the receiving end of an offer from investment fund manager DBA Advisors (see Isle of Man fund manager bids £75m for Creston), following the sale of Chime Communications to private equity investor Providence Equity Partners last year (see Chime offered £370m by private equity group supported by WPP).  Thus the monitoring of privately owned marketing groups is becoming even more important.

“Many of the smaller publicly listed marketing groups have come and gone over the last 15 years and, of those that remain, shares in only seven (or 37% of the survivors) have improved in value over that period or since coming to the market, if later”, commented the award’s compiler Bob Willott (see Sector share prices: 12 November 2016). “Small wonder that few successful marketing groups contemplate seeking a public listing for their shares.”

The report accompanying the awards noted that:

  • An increasing number of privately owned agencies had boosted their gross incomes over a two year period by at least 15% pa compound;
  • Operating profits – both in absolute terms and per employee – were also improving, despite a growing slice of income being spent on staff costs.
  • Borrowings and finance costs were on the increase although two-thirds of the privately owned agencies had no net borrowings at their year end at all.

Among those companies sporting substantial cash balances, the report noted that Freud (Holdings) had invested £4 million in artwork but still had £10 million of cash left in its latest balance sheet.

And the report discovered that, at the capital market communications consultancy Milton House Investments, the sole shareholder and director Andrew Grant found an even simpler way of using the spare cash: he paid himself £1 million salary and there was still £1.4 million left in the bank at the end of the year.