Synovate business review

Re-focused strategic approach /

Following the global economic downturn in 2009, which had a significant impact on the ad hoc custom market research sector, performance recovery at Synovate is now well underway, as highlighted by the operational and financial results delivered in 2010. With a strong foundation in place, supported by our good performance last year, management is now implementing a re-focused strategic approach. This approach, originated and developed last year, aims to improve Synovate’s long term position in the custom market research sector around the world and is based on four key objectives:

  • Increasing traction and building momentum with key global clients by securing long term partnerships in multiple markets and developing more consultative relationships, based on the success already achieved through Synovate’s Global Client Relationship account programme
  • Providing competitive differentiation through operational excellence by delivering its services consistently and efficiently
  • Prioritising gateway geographies which represent key markets for international projects. We aim to add weight to our product and service offerings in major economies, like the US, the UK and Germany. We are also looking to increase market share in faster-growing regions, with further investment in markets such as China and Russia anticipated in the coming years
  • Expanding our existing capabilities in key industrial verticals and research methodologies across all of our network. These industrial verticals, like consumer and healthcare, and research methodologies, including product testing and customer experience, are global in nature and lend themselves to efficient work practices.

Management is currently working on implementing this re-focused strategic approach across the organisation. This will be achieved through on-going communication between the various levels of management, implementation of a number of new systems and processes, recruitment of specialist skill sets and investment in certain capabilities in key markets. The first phase of this process will be completed by the end of 2011.

Synovate Americas /

Sales in the Americas were up 12.7% at constant currency. Gross revenue was up 13.1% on 2009 at constant currency to £175.4m. Net revenue was £109.9m, which was up 4.7% at constant currency.

Our business in North America performed extremely well in 2010, with sales and gross revenue growth in the mid teen range, in spite of an on-going price intensive environment. This performance was driven by particularly strong sales and revenue growth from our consumer, public sector and qualitative teams, which has contributed to a very healthy orders on hand position going into 2011.

In Latin America, we entered the year with a strong order book, which supported a healthy increase in sales and gross revenue during the year.

Synovate EMEA /

For the EMEA region, sales were down 0.9% at constant currency. Gross revenue was up 0.6%, at constant currency, to £239.2m. Net revenue of £143.7m was up 2.8% at constant currency.

Market conditions throughout Europe were less buoyant than other regions. Strong performances in Germany, Italy, the Netherlands, Russia and Turkey were diluted by the on-going economic challenges being experienced by the Greek and Spanish markets. The UK market remained challenging, exacerbated by a sharp decline in public sector activity in the second half of the year. Growth has been slow to materialise in France too. Despite the inconsistent nature of revenue growth in Europe, we have been able to make substantial progress on profitability in these markets as a result of management action on organisational performance.

The Middle Eastern region experienced a progressive economic recovery during 2010 helping our businesses in Saudi Arabia and the United Arab Emirates to deliver good performances.

Africa produced solid sales and gross revenue growth from the prior year, with significant progress made in most of the East African markets, in particular Kenya.

Synovate Asia-Pacific /

Sales in Asia-Pacific were up 10.2% at constant currency, with gross revenue of £158.0m, up 6.1% at constant currency. Net revenue was £97.1m, up 9.8% at constant currency.

Our Asia-Pacific businesses performed very well, with significant growth in sales and gross revenue achieved by all of our major businesses in the region, namely Greater China, Japan, India and Korea.

We outperformed a flat market in Japan, gaining market share in the consumer, healthcare and financial services sectors. Korea also delivered strong results, supported by the winning of a number of global clients in the electronics and automotive sectors.

Our Indian business delivered growth at more than double the market growth rate. Whilst we expect our business in India to continue to grow, inflation remains high and the competitive environment is becoming increasingly intense, in terms of pricing and recruitment of experienced personnel.

Greater China benefited from a revitalised management team and a revised geographic reporting structure to deliver a strong performance in 2010. Our businesses there delivered sales and gross revenue growth at low to mid teen rates, supported by particularly good performances from our automotive and consumer teams. As a result, our orders on hand position going into 2011 was extremely healthy.

Industry verticals /

The strongest performing industry in 2010 in the majority of the markets in which we operate was the consumer sector. FMCG companies started to re-instate significant research projects, deferred from 2009, to support potential expenditure on new product launches and new target customer segments and geographies.

Despite an increase in sales at our Healthcare business in 2010, gross revenue was slightly down on the prior year. Whilst our ad hoc business performed well, our syndicated business was impacted by on-going consolidation in the industry, which reduced subscription opportunities, as well as changing dynamics in certain therapy areas.

Our Healthcare business had a good order book going into 2011 and management is pursuing a range of opportunities to further strengthen our market position going forward. These opportunities include continuing to grow our therapy monitor portfolio, through new monitors and geographic expansion of existing monitors, pitching for significant regional projects, such as sales force effectiveness studies and health economic studies, and investigating new potential client streams.

The automotive sector continued to show signs of recovery during the year, with a number of Asian and European manufacturers increasing their research expenditure across the Asia Pacific region, particularly in China and India.

Summary /

In 2010, Synovate management maintained its focus on driving profitable sales and improving efficiencies, supported by a broad geographic network and an extensive product portfolio. Consequently, Synovate’s 2010 results were good across the vast majority of business units around the network.

Given the re-focused strategic approach being implemented by management in 2011 and our healthy orders on hand position at the start of this year, we are increasingly optimistic about the outlook for Synovate, with the market research industry expected to grow by around 4% in 2011, in line with industry growth in 2010.

Robert Philpott
Chief Executive Officer, Synovate