Quick ratio of the largest Russian advertising agencies

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
INN 7728665444 Moscow
1 371,4 3 671,8 84 1,90 216
INN 7704582421 Moscow
2 315,4 22 747,1 126 0,97 190
The highest
INN 7710668349 Moscow
3 116,3 6 662,4 156 0,77 204
GroupM LLC
INN 7731529770 Moscow
769,2 20 957,8 122 0,38 181
The highest
INN 7710601954 Moscow
785,8 4 061,9 377 0,25 215
INN 7731196087 Moscow region
-744,4 5 436,8 95 0,20 301
INN 7714564333 Moscow
-726,6 4 287,7 79 0,17 309
INN 7709583813 Moscow
400,3 15 818,7 85 0,15 306
INN 7718840440 Moscow
10,5 4 528,5 92 0,01 253
INN 7701320731 Moscow
6,4 11 256,9 290 0,00 219

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
Control and supervision reform: what entrepreneurs should expect?

The way the «Public Government» seeks to relieve the administrative pressure on business, keeping safety in mind.

The necessity of reform on control and supervisory activity was for the first time emphasized as early as in 2009. Why hasn’t it been finished yet? What will the state and business community receive from its implementation?

«Stop nightmarize the business». The question concerning the necessity of control and supervisory activity (CSA) reforming arose in 2009. The famous aphorism concerning redundant number of inspections, by which the authorities «nightmarize» the entrepreneurs appeared during that particular period. However the business community scrutiny, department disputes and some other reasons caused the postponing of problem solution in terms of legislation. Two years ago when the discussion was reestablished the President Vladimir Putin ordered the Government of Dmitry Medvedev to develop the «road map», which offers a possibility to overcome disagreements of different departments, taking part in the reform, to accommodate the interests of business to the full and to prepare a state control bill. The Government affirmed the «road map» on improvement of CSA in Russia as a part of executing of the President’s instruction as of April 1st, 2016. It became the first integrated document which systematized the most important directions of the reform. The main burden during the creation of the new legislative initiatives was laid on the «Public Government» headed by Mikhail Abyzov. He holds as well the position of the head of the government subcommission for improvement of control (supervisory) and permitting functions. The Ministry of Economic Development of the Russian Federation prepares the framework law «On the basics of the state and municipal control (supervision) in the Russian Federation», being the fundamental of control and supervisory reform.

Priority project. The recent up to date results of «Public Government» work concerning CSA reforming were represented within the Sochi International Investment Forum 2016 on September 30th. The project being developed under the leadership of Mikhail Abyzov was included by Vladimir Putin and Dmitry Medvedev to the list of priority ones. Its implementation is divided into three steps up to 2024. 3 main goals of the reform are defined in the project:

  • ensuring safety of human life and health by reducing deaths, as well as diseases, poisonings, victims and injured by 10% in 2018, by 30% in 2021 and by 50% in 2024;
  • reducing the level of threats and material damage by 10% in 2018 г., by 20% in 2021 and by 30% in 2024;
  • increasing the level of maturity and efficiency of CSA by 10% in 2018, by 30% in 2021 and by 50% in 2024.

The reduction of the administrative pressure on business by 20% in 2018, by 30% in 2021 and by 50% in 2024 is designated separately.

It is planned to achieve the defined goals by implementing 8 projects, among the main of them are: change to risk-oriented approach in control and supervision, introduction of the new assessment system of control authorities’ work, preventing of violations in enterprises, reducing the level of corruption and improvement of control and supervisory authorities personnel. Within implementation of the stated projects it is planned to eliminate out-of-date, redundant, controversial and duplicate requirements under carrying out inspections, which relate to 90% of ineffective business expenses from execution of the state requirements.

Risk-oriented approach. Special attention is paid to the implementation of the risk-oriented approach, providing dependence of inspection frequency on the potential risks degree (for example, damage to life and health of citizens, environment, property and safety) on the object. According to this model, the continuous inspections will take place only on the objects of heightened danger. Objects constituting no potential essential threat can be released from them. According to the worldwide experience, using of this approach significantly decreases the total number of inspections. The «Public Government» plans that by 2018 the risk-oriented approach is to be implemented by 90%.

Between business freedom and citizens’ well-being. Annually 44 departments in Russia carry out 130 kinds of the state control; as a result there are more than 2 million inspections. According to Mikhail Abyzov, the expenses from redundant control and supervisory activities amount to from 1,5% to 7,5% of GDP. At the same time during inspections only 60% of real violations are revealed. One of the strategic goals of CSA reform is an annual reduction of inspections by 15%, which will give a possibility to reduce the business expenses by half by 2024 under their carrying out. Except for the quantity parameters, much stress is placed on quality improvement of the system under reform. Significant efforts are directed to increase the inspection efficiency and its results together with the simultaneous reduction of administrative pressure on business. It is important to build a new system which on the one hand could be economically less burdensome for entrepreneurs, and on the other – provide real protection for life and health of citizens, as well as the safety of state.