Comment

ACE Benchmarking: What's the earning's story?

In the last year has revenue increased for consultants? And if so was it more profitable? ACE senior economist Graham Pontin reviews the findings of the latest ACE Benchmarking Report.

Graham Pontin

Has industry performance picked up over the past 12 months? How do SMEs compare to large companies? How does the UK compare to Europe?

Of the companies which took part in the 2014 ACE business benchmarkeing exercise, some 20 of the 25 large firms reported an increase in their revenue in the latest year while and 17 of the 20 SMEs also saw their revenue increase.

Given that the industry is emerging from particularly challenging economic times,  such news will be seen as a positive step forward for the industry and perhaps might even be seen as representing the long-awaited return to the more confortable levels of output seen in the past.

"Larger UK profit margin improved from 4.1% to 4.9%. In 2013, UK firms were originally forecasting a bigger improvement in average profit margin, but although revenue targets were generally achieved, costs rose faster than anticipated."

The 2014 benchmarking report reveals that, whilst in the previous year mega firms with higher revenue growth and turnover enjoyed faster growth, the opposite is true in 2014. This suggests the firms above SME level but below the mega consultants have started playing catch-up.  

On an annual 12 month rolling average basis, large UK firms on average achieved an 11% increase in revenue in Q2 2014, which was significantly above the 2.3% being achieved by European equivalents.  SMEs performed even better than their large UK counterparts achieving growth of 17.2%. 

Revenue alone, however, is not the only issue industry faces. Tight profit margins have also been identified as an issue.

This year’s findings reveal that the average larger UK firms reported profit margin improvement from 4.1% to 4.9%. In 2013, UK firms were originally forecasting a bigger improvement in average profit margin, but although revenue targets were generally achieved, costs rose faster than anticipated.

The European firms average profit margin fell from 6.8% to 6.3% in the latest report, compared to last year’s forecast of a 0.8% point rise in profit margin. Unlike the UK where cost rises were the significant factor in undershooting profit margin, for EU firms forecasts were more typically missed due to overestimating revenue growth.

However, for SMEs the average profit margin for the companies fell slightly from 14.7% to 14.4% in the 2014 report.

The ACE Benchmarking Report is prepared by the Centre for Interfirm Comparison in collaboration with ACE

For more see

ACE Benchmarking: Late payments are adding to costs

Payroll costs on the rise

or go to www.acenet.co.uk/benchmarkingreport