Quick ratio of the largest Russian advertising agencies

ranking 26/10/2016

Information agency Credinform prepared a ranking of the largest Russian advertising agencies on the quick ratio.

The advertising agencies with the highest volume of revenue were selected for the ranking, according to the data from the Statistical Register for the latest available period - for 2015 (TOP-10). Then, the enterprises were ranked by decrease in quick ratio (Table 1).

Quick ratio characterizes company’s solvency in the short and medium term. The indicator is illustrative of the possibility of an enterprise to repay its short-term liabilities on account of the most liquid assets: cash, short-term receivables and short-term financial investment. Recommended value of the ratio is from 0,5 up to 0,8.

Too high ratio value may indicate irrational capital structure. It may be connected with a slow turnover of funds invested in stocks and an increase in accounts receivable. The low level of the indicator means that the funds and the upcoming income from current operations do not cover company’s current liabilities.

For getting of the most comprehensive and fair picture of the financial standing of an enterprise it is necessary to pay attention to all available combination of ratios, financial and other indicators.

Table 1. Net profit, revenue, quick ratio and solvency index Globas-i of the largest Russian advertising agencies (TOP-10)
Name, INN, RegionNet profit 2015, mln RUBRevenue for 2015, in mln RUBRevenue for 2015 by 2014, %Quick ratio, (х)Solvency index Globas-i
LLC GAZPROM-MEDIA
INN 7728665444 Moscow
1 371,4 3 671,8 84 1,90 216
High
GOOGLE LLC
INN 7704582421 Moscow
2 315,4 22 747,1 126 0,97 190
The highest
KEH ECOMMERCE LLC
INN 7710668349 Moscow
3 116,3 6 662,4 156 0,77 204
High
GroupM LLC
INN 7731529770 Moscow
769,2 20 957,8 122 0,38 181
The highest
CODE OF TRADE JSC
INN 7710601954 Moscow
785,8 4 061,9 377 0,25 215
High
RUSS OUTDOOR LLC
INN 7731196087 Moscow region
-744,4 5 436,8 95 0,20 301
Satisfactory
LLC GALLERY SERVICE
INN 7714564333 Moscow
-726,6 4 287,7 79 0,17 309
Satisfactory
AEGIS MEDIA CS LLC
INN 7709583813 Moscow
400,3 15 818,7 85 0,15 306
Satisfactory
KOMPANIYA MEDIA-STATUS LLC
INN 7718840440 Moscow
10,5 4 528,5 92 0,01 253
High
PRO MEDIA ADVERTISING AGENCY LLC
INN 7701320731 Moscow
6,4 11 256,9 290 0,00 219
High

The average value of the quick ratio in the group of TOP-10 companies amounted to 0,48 in 2015. The same indicator in the group of TOP-100 companies averaged 0,41, by the industry average of 0,26.

The only company in the TOP-10, showing the recommended value of the ratio, is KEH ECOMMERCE LLC, which received also the highest net profit at the end of 2015.

There are 12 enterprises in the group of TOP-100 companies with the recommended value of the quick ratio. 15 organizations have the indicator above the recommended one in this group and 73 organizations have the indicator below the standard.

Seven companies from TOP-10 got the highest and high solvency index Globas-i, that indicates their ability to repay their debts in time and fully.

RUSS OUTDOOR LLC and GALLERY SERVICE LLC got satisfactory solvency index Globas-i, due to available information on their participation as defendants in arbitration court proceedings in terms of debt collection and due to losses in the balance sheet structure.

AEGIS MEDIA CS LLC got also satisfactory solvency index Globas-i, due to available information on cases of company’s late performance of its obligations and active enforcement orders.

Picture 1. Quick ratio and revenue of the largest advertising agencies (TOP-10)
Quick ratio and revenue of the largest advertising agencies (TOP-10)

The total revenue of the TOP-10 enterprises was 99,4 billion rubles in 2015, that is by 19% more than in 2014. At the same time the total net profit increased by 14%. Five companies of this group made in this period a decline in revenue and net profit, or loss. In the group of TOP-100 companies the increase in total revenue for the same period reached 22%, during the decrease in total net income by 7%.

According to the Federal State Statistics Service (Rosstat), the amount of money spent by Russian organizations for the services of advertising agencies and audit companies is constantly increasing since 2010 (Picture 2).

Picture 2. The amount of money spent by Russian organizations for the services of advertising agencies and audit companies (indicator value for the year, ths rubles)
The amount of money spent by Russian organizations for the services of advertising agencies and audit companies (indicator value for the year, ths rubles)

Such growth affects directly also the indicator of sales proceeds from the sale of advertising services, that is also confirmed by the data from Rosstat (Picture 3).

Picture 3. Sales proceeds (nett) from the sale of advertising services (net of value added tax, excise duties and other similar obligatory payments, ths rubles)
Sales proceeds (nett) from the sale of advertising services (net of value added tax, excise duties and other similar obligatory payments, ths rubles)

At the same time the revenue growth rate are instable from year to year (Picture 4).

Picture 4. The rate of growth (drawdown) of sales proceeds from advertising services from year to year (%)
The rate of growth (drawdown) of sales proceeds from advertising services from year to year (%)

*) - Data for 6 months 2016 are presented by the corresponding period of 2015

Thus, against the background of a growing volume of advertising services market, taken into account the significant number of companies with the quick ratio below standard, that is reflected in the industry average value of the ratio, the industry players in whole do not cover their current liabilities on account of own funds and income from current operations. This indicates an insufficiently high level of solvency of companies in the industry.

At the same time there is a significant concentration of advertising business observed in Moscow - the largest financial center in the country. This is testified by the data of the Information and analytical system Globas-i, according to which 100 the largest advertising agencies in terms of revenue for 2015 are focused only in five regions of Russia:

RegionAmount of registered companies
Moscow 85
Moscow region 7
Saint-Petersburg 5
Nizhny Novgorod region 2
Krasnoyarsk territory 1