Europe and Africa

Europe and Africa represented 15% of Group revenue this year. Reported revenue declined by 3%, but based at constant exchange rates the decline was 13%. The region was affected in a similar way to the United Kingdom in terms of client budget cuts, although the cycle was a little behind but has been more prolonged and very difficult to forecast. One reason for this lack of visibility is the high degree of project revenue in this region rather than monthly retainers. The proportion is 34% in Europe and Africa compared to 15% in US. This is also an increasing trend and it therefore makes it more difficult to predict when the recovery will begin. Headcount reductions to match the more volatile revenue took longer to implement and are more costly than in the UK and US. These factors contributed to adjusted profit margins falling to 8.9%, from 11.6% last year.

Looking back on the last year reveals a higher than usual amount of client churn. The client base was under pressure to make significant cost reductions and this pressure resulted in a rise in re-pitching, where it is always more difficult for the incumbent to win. The two largest and most disappointing losses were ARM and Novell. These losses detract from a successful new-business campaign.

The most notable successes were the SanDisk and Skype wins, where London acts as the hub for work performed in France, Germany, Spain and Italy. In the case of SanDisk this also extends to cover Netherlands, Denmark, Sweden and Norway. From a Next Fifteen perspective the best new client win in the region was the AMD account where Bite benefited from its relationship in the US to win the EMEA lead agency role and then brought in Text 100 to carry out local market implementation in the UK, Germany and France.

The management priority in 2009 was to protect the future health of the region. Headcount reductions were made to match the projected revenue, salary reviews were postponed and all non-essential overhead expenditure was cut back. Another action taken to reduce cost was the closure of the small office in Dublin.

It is a little early to be calling an end to the downturn in Europe but markets like Germany and Spain are performing better than expected in the first quarter of the current year. Bite, which only has one office in the region is still looking to have a bigger presence in the core European markets of Germany and France and this is something that they will explore in 2010.