Synovate Revenue Drops in 'Year of Two Halves'

Synovate has reported a 13.7% fall in net revenue on an organic basis during 2009, while describing the research sector as 'much weaker than expected from historical precedent'.

At the half year, Synovate's performance was below expectation, but the division picked up in the second half, when improved performance resulted in operating profit of £36.9m, down somewhat from £42.2m in 2008.

During the year, Synovate's gross revenue increased by 0.6% to £521.3m, equivalent to an 8.7% decline on a constant currency basis, and a 9.6% decline on a fully organic basis.

Net revenue (after direct costs) was down 2.2% to £321.8m, or down 12.6% on a constant currency basis. The firm says this reflects several factors including some increased pricing pressure and work mix - for example a reduction in higher margin qualitative studies.

Regionally, on a constant currency basis Synovate EMEA reported a 5.6% decline in gross revenue to £234.4m, while net revenue fell 6.4% to £138.2m. Strong performances were seen in the UK, Netherlands and parts of Scandinavia, which were counterbalanced by weaker results elsewhere - notably France, Germany and Spain.

Africa, where Synovate now has 'extensive coverage' through its acquisition of Steadman Group, produced what the firm described as an 'excellent performance'.

In the Americas, gross revenue was up 4.1% to £151.1m, and net revenue up 2.0% to £102.5m.

Gross revenue in the Asia-Pacific region was £135.8m, up 9.0% year-on-year, while net revenue was flat at £81.1m.

Synovate's total operating costs were 0.7% better than 2008 at £284.9m; an improvement of 10.7% at constant currency.

Under the leadership of CEO Robert Philpott, Synovate implemented a wide range of measures to reduce overheads in 2009, including a redundancy programme, which has led to an 8.2% reduction in staff costs.

John Napier, Chairman of Synovate's parent Aegis said that the research division had delivered a 'satisfactory outcome in 2009 in difficult market circumstances'.

'An improved second half performance, with a particularly strong final quarter, against a background of a slightly more optimistic view of the world outlook for 2010 has led us to budget for modest growth,' Napier added. 'However global economic circumstances remain uncertain, there are specific country challenges, and we still have work to do to continue to transform and improve our business.'

Separately, Aegis has appointed Philpott to its Board, and is moving Jerry Buhlmann, the CEO of Aegis Media, to the position of Group CEO in May.

Shares in Aegis fell 6p, or 4.7%, to 121.6p in early trading.

Web sites: www.synovate.com and www.aegisplc.com .