Smaller agencies and agencies specialising in particular sectors are in stronger shape to face the economic downturn than the full service agencies. That’s according to the Meetings & Incentive Travel Organisers 16th Annual Financial Benchmarks Survey. The survey compares the results of companies with financial year ends falling in the calendar year 2007 with the results for the comparable period a year earlier.

Overall, gross margins fell by nearly one-half of a percentage point to just 23 per cent, representing the lowest overall level that has been seen for many years. But the margins for full service agencies showed an even more dramatic reduction, falling by nearly one and a half percentage points to 23.47 per cent.

The survey shows that the increase in the level of pre-tax profits stands at over twice the increase in gross margin, indicating that the agencies have kept their overheads under control. The overall 3.76 per cent pre-tax profit achieved is a significant improvement on prior years. Once again the smaller and specialist agencies have performed better than the full service agencies.

Productivity has improved, indicated by an increase in gross margin per person of £404 or nearly three-quarters of a percentage point. It is this, combined with the reduced cost of employment, that has generated the improvement in the key operating efficiency ratio of gross margin per £ of paycost to £1.62. This is at the highest level for many years.

A full report on the survey will be published in the November issue of M&IT.