Synovate business review

£m 2010 2009 Change
%		 Constant
currency
%
Gross revenue‡        
EMEA 239.2 234.4 2.0 0.6
Americas 175.4 151.1 16.1 13.1
Asia Pacific 158.0 135.8 16.3 6.1
Worldwide gross revenue 572.6 521.3 9.8 5.7
Net revenue‡        
EMEA 143.7 138.2 4.0 2.8
Americas 109.9 102.5 7.2 4.7
Asia Pacific 97.1 81.1 19.7 9.8
Worldwide net revenue 350.7 321.8 9.0 5.3
Net revenue conversion 61.2% 61.7% (50) bps (30) bps
Operating costs (305.1) (284.9) (7.1) (3.4)
Operating profit* 45.6 36.9 23.6 19.4
Operating margin on gross revenue* 8.0% 7.1% 90bps 90bps
‡ For the purposes of this report, Synovate gross revenue is the same as revenue in the statutory results. Net revenue is the same as gross profit in the statutory results.
* Throughout this commentary, results are stated on an underlying basis unless otherwise indicated.

Headlines /

  • Sales increased 6.7%, supported by consistent management effort to drive profitable sales
  • Organic gross revenue grew 5.9% during the year, including 6.3% in the fourth quarter
  • Net revenue conversion fell slightly to 61.2%, from 61.7%, due to a change in work mix and continued pricing pressure
  • At constant currency, operating margin increased 90 basis points to 8.0%, with operating profit increasing 19.4% to £45.6m
  • Strong performances from the vast majority of business units across the network
  • Market research industry anticipated to grow by around 4% in 2011, in line with growth in 2010
  • Increasingly optimistic outlook, supported by 8.8% underlying increase in orders on hand at the start of 2011.

2010 results overview /

Synovate delivered a strong performance in 2010, driven by management’s clear focus on driving profitable sales and improving efficiencies, supported by a broad geographic network and a high quality product portfolio. There were good performances from the vast majority of business units across the Synovate network and we started 2011 with a healthy 8.8% underlying increase in orders on hand.

Sales, the leading forward indicator of our performance, increased 6.7% in 2010. As a result, organic gross revenue increased 5.9%, with total revenue growth of 9.8% at reported rates and 5.7% at constant currency to £572.6m. This growth was supported by a particularly strong second half performance, when we delivered 8.4% organic gross revenue growth:

 
Quarter
Half year
 Full Year
Synovate Q110 Q210 Q310 Q410 H110 H210 FY10
Organic gross revenue change % (1.9) 6.5 11.5 6.3 2.8 8.4 5.9

As a result of this strong performance in the second half, Synovate recorded operating profit for the year of £45.6m, 23.6% up on 2009 at reported rates and 19.4% up at constant currency.

Consequently, we achieved an operating margin of 8.0%, up 90 basis points at reported rates and at constant currency. Net revenue was up 9.0% at reported rates, 5.3% at constant currency, to £350.7m. Net revenue conversion decreased slightly to 61.2%, from 61.7% in 2009, as a result of change in work mix and continuing pricing pressure in certain regions.

The improvement in operating margin was achieved despite an anticipated upward pressure on staff costs during the second half of the year. This cost pressure is expected to continue in the coming years, particularly in faster-growing regions, where competition for talent remains intense. However, management will ensure a continued focus on cost control and efficiencies across the business.

At the end of 2010, headcount had increased 3.9%, year on year, with underlying staff costs for the year up 4.0% in constant currency from 2009. Total operating costs increased 7.1% from 2009 at reported rates, and 3.4% at constant currency, to £305.1m.

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