conducted by evo research contact: russell bell 07747 194581 prca benchmarking survey 21 june 2007

Conducted by Evo ResearchContact: Russell Bell 07747 194581

PRCA BENCHMARKING SURVEY

21 June 2007

2

Background

• Annual PR industry benchmarking survey undertaken by Evo Research

• Three elements in the survey:

– 65 HR Director questionnaires (49%)

– 79 MD/CEO questionnaires (60%)

– 58 FD questionnaires (44%)

• Four consultancy size bands defined by income:

– Small: up to £850K

– Medium: £851K - £2.5 million

– Large: £2.51 - £5 million

– Very large: greater than £5 million

Finance Directors

4

Industry growth - Small consultancies

£567£509

£120£97

£0

£250

£500

£750

2005 2006

Income Net pre-tax profit

+24%

+11%

Figs in £000s

Base: Q2 58 FDs

5

Industry growth - Medium consultancies

£1,518

£1,358

£252£206

£0

£250

£500

£750

£1,000

£1,250

£1,500

£1,750

2005 2006

Income Net pre-tax profit

+12%

Figs in £000s

Base: Q2 58 FDs

+22%

6

Industry growth - Large consultancies

£3,590£3,261

£510£405

£0

£500

£1,000

£1,500

£2,000

£2,500

£3,000

£3,500

£4,000

£4,500

2005 2006

Income Net pre-tax profit

+26%

+10%

Figs in £000s

Base: Q2 58 FDs

7

Industry growth – Very large consultancies

£8,402

£7,291

£1,337£1,323

£0

£2,000

£4,000

£6,000

£8,000

£10,000

2005 2006

Income Net pre-tax profit

+15%

Figs in £000s

Base: Q2, 58 FDs

+1%

8

Operating margin

15%15%13%

14%

12%13%

14%14%

0%

5%

10%

15%

20%

1999 2000 2001 2002 2003 2004 2005 2006

Base: Q2, 58 FDs

Sm: 21% Med: 17% Lar: 14% V Lar: 16%

Net pre-tax profit as % of total net income

9

Reported growth over time

Base: Q2, 58 FDs

(NB – basket of consultancies changes each year)

10%

17%

8%

0%-2%-1%

21%

12%

38%

17%

18%

-11%

-21%

25%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Income Profit

05-0604-0503-0402-0301-0200-0199-00

10

Over-servicing rate

24%25%

22%

26%

27%

21%21%22%

0%

10%

20%

30%

40%

2000 2001 2002 2003 2004 2005 2006 2007

Base: Q8, 58 FDs

11

Offer payment by results/performance related pricing

38%

35%36%

27%29%

19%

0%

10%

20%

30%

40%

2002 2003 2004 2005 2006 2007

Base: Q17, 58 FDs

HR Directors

13

Churn by consultancy size

27%

21%

36%

27%

33%

24% 24%22%

24%

14%

Total Very large Large Medium Small

2006 2005

Base: Q2, 65 HRDs

14

Churn by job level

10%

27%24%

33%34%

37%

27%

Board/Partners

Associate/Div'l Directors

AccountDirectors

AccountManagers

AccountExecs

TraineeAccount

Execs

Support/Admin

Base: Q2, 65 HRDs

15

Next career moves

3%7%

27%

22%

14%

5%

15%

16%

28%

42%

Did not return frommat/pat leave

Complete careerchange

Freelance/Consultant

Moved to in houseposition

Moved to newconsultancy

2006 2007

Base: Q3, 65 HRDs

16

Staff retention strategies (past 12 months)

11%

15%

23%

31%

35%

43%

55%

57%

69%

Encouraged part-time/reduced hours

More sabbaticalopportunities

Larger bonuses

More staff parties

More flexible working

Salaries up by more thancost of living

More focus on definedcareer path planning

Salary increases for allstaff

More training/development

Q28 Base: 65 HRDs

17

Average salary increases over time

9%

10%

7%

6%5%

6%

7%

5.5%

1999 2000 2001 2002 2003 2004 2005 2006

Base: Q6, 65 HRDs

18

Average bonus as % of salary over time

7%

8%

6%

5%

3% 3%

6%

3.5%

1999 2000 2001 2002 2003 2004 2005 2006

Base: Q6, 65 HRDs

19

Benefits introduced in 2006

Base: Q11, 65 HRDs

11%

12%

12%

12%

12%

14%

14%

14%

15%

15%

18%

Low/no interest loans

Further education sponsorship

Happy hour etc

Bonus based on co performance

Personal performance bonus

PMI

Commission for new business

Subscriptions

Special days

Long service awards

Sabbaticals

Career LifestylePerformanceFinancial

20

Flexible working options offered

5%5%

6%

8%

15%23%

20%

23%

37%48%

40%57%

38%

62%

Contracted hours/ accruetime off

Job sharing

Shorter working days

Additional holiday

Core hours with flexistart and finish time

Part-time working

Working from home

Senior staff

Junior staff

Q16 Base: 65 HRDs

MD/CEOs

22

Client relationships: key drivers of success

8%11%

14%22%

17%19%19%

15%23%

30%

29%24%

30%33%

45%39%

49%47%

59%

56%

Honesty / openness

Measurable objectives

Demonstrating success thru' evaluation

Regularity/ level of communication

Trust

Demonstrating ROI

Value for money

Sector knowledge

Creativity

Personal chemistry

2006 2007

% = proportion selecting as one of top three drivers

Q15 Base: 79 MDs

23

Top 6 threats to PR industry success

4.85

5.15

5.35.3

5.45.4

6.5

6

6.9

7.3

Staff poaching bycompetitors

Instability of clientrelationships

Increasing imp. ofprocurementprofessionals

Lack of evaluation

Clients exercisingcommercial

pressure

Shortage of skilledconsultants

2007

2006

10 = very serious threat

1 = not a significant threat

Q1 Base: 79 MDs

24

Income growth forecast 2007 vs 2006

28%

20%

14%11%

22%

18%

26%

19%

42%

27%

Total Very large Large Medium Small

2007 forecast 2006 forecast

Base: Q3, 79 MDs

25

Operating margin growth forecast 2007 vs 2006

22%21% 21%

18% 17%

7%

18%

24%

32%

25%

Total Very large Large Medium Small

2007 forecast 2006 forecast

Base: Q4, 79 MDs

26

Top 6 internal business issues

48%

52%

58%54%

54%58%

65%

59%

64%

63%

66%

67%

Quality of pitching

Staff retention

Staff recruitment

Maintainingprofitability

Client retention

Generating newbusiness

2006 2007

% = proportion selecting as ‘critical internal business issue’

Q2 Base: 79 MDs

27

New business leads and pitches

Types of new business lead (past year)

Other 3%

Re-pitching for retainer

business7%Organic/

new work for existing clients

24%

Proactively sought

30%

Reactive/ response to

brief36%

- 46% reactive leads result in new business pitches- 34% proactive leads result in pitches

- 52% success rate with pitches following reactive leads- 43% success rate for pitches following proactive leads

Qs 6,8,9 Base: 79 MDs

28

Other aspects of leads and pitches

• A majority of consultancies (57%) say that 40% or more of the new business briefs they receive have no stated budget

• 15% of new business briefs don’t result in work for any consultancy (e.g. contract cancelled by client)

• Eight in ten (82%) have experienced delays between winning new business and the work actually commencing

• 26% of these have experienced delays of more than six months

Qs 10,11,13, 14 Base: 79 MDs

29

Industry outlook for next 12 months

35% 14%

3% 64%

2% 52%

5% 40%

11% 37%2007

2006

2005

2004

2003

Get worse Improve

Q16 Base: 79 MDs

30

Income forecasts vs actual income growth

Forecast in 2006 survey - MDs

Actual growth in 2007 survey - FDs

All : +20% All : +17%

Small : +27%

Medium: +19%

Large: +18%

Very Large: +11%

Small: +11%

Medium: +12%

Large: +10%

Very Large: +15%

The end