Ipsos Splutters as Smoke of Integration Clears

Ipsos has reported 2012 revenues of EUR 1.8bn, up from EUR 1.4bn in 2011, but disappointing given the addition of Synovate. Accustomed to rapid growth, the group blamed the stall on politicians, the integration process and competitor poaching of senior staff. Profits however remained solid.

Results during 2012 proved hard to interpret given the ongoing integration process, but Ipsos had already warned that the process had slowed its advance, and in October expressed its satisfaction that the combination was complete and it could 'resume its focus on growth'.

Results for the fourth quarter of 2011 were the first to include Synovate, so Q4 2012 provides the first directly comparable set of figures - in organic terms overall revenues declined by 1%. Ipsos says clients cancelled rather than spent their remaining budgets in the last quarter, except in emerging countries where organic growth was 5.9%. Globally, business volume was lower than expected as a result of a 'deteriorating macroeconomic environment, uncertainty in the US and several wrong turns in Europe', which the firm says strained economic growth prospects and hence the business climate.

These complaints come from a company used to success - Ipsos' growth beat the market throughout the first years of the century, and after a poor year in 2009 it had bounced back quickly in 2010. Ipsos had made the most of relatively good conditions in 2011 - in the first nine months of that year, it reported organic growth of 6.0% - and had said that it expected 2012 to be tough.

Nevertheless, some of the 2012 results are encouraging: for the full year, the group reported adjusted net profit of EUR 118.5m, up 2.7% on the 2011 figure, and operating margin of 10%.

(in millions of euros)	2012	2011 (Statutory)	Change 2012 / 2011	2011 Pro Forma
Revenue	1,789.5	1,362.9	+31.3%	1,789.9
Gross profit	1,147.2	872.3	+31.5%	1,125.3
Gross margin	64.1%	64.0%		62.9%
Operating profit	178.5	160.2	+11.4%	157.2
Operating margin	10%	11.8%		8.8%
Net profit (attributable to the Group)	74.1	84.1	-11.9%
Adjusted net profit * (attributable to the Group)	118.5	115.3	+2.7%
* Adjusted net profit is calculated before non-cash items linked to share-based payments, amortisation of acquisition-related intangible assets, deferred tax liabilities related to goodwill on which amortisation is tax-deductible in certain countries, and the impact net of tax of other non-recurring income and expenses.

Looking at organic comparisons by region, a poor performance in the Americas (dominated by the US which accounts for 60% of turnover here) cancelled out growth in Asia Pacific, with a flat showing in EMEA completing the picture. In absolute terms, Synovate's strong presence in Asia Pacific means revenue here grew a massive 56.3%.

Consolidated revenues by region (in millions of euros)	2012	2011	Change 2012 / 2011	Organic Growth Q4 Only
EMEA	768.3	587.5	+30.8%	-0.5%
Americas	709.1	575.7	+23.2%	-4.5%
Asia-Pacific	312.1	199.7	+56.3%	+4 .5%
Full year revenues	1,789.5	1,362.9	+31.3%	-1%

The Synovate merger has added substantially to Ipsos' revenue in what it defines as marketing research (up 40.1% to EUR 947.9m from EUR 676.5m); media research (rising 29.2% to EUR 168.5m) and customer relationship management research (up 37.6% to EUR 231.5m) - however, these three areas did not show significant organic growth, with media research in particular declining 12% in organic terms. Opinion and social research; and advertising research both put in good organic growth.

Consolidated revenues by business line (In million euros)	2012	2011	Change 2012 / 2011	Organic Growth Q4 Only
Advertising Research	283.9	258.3	+9.9%	+8%
Marketing Research	947.9	676.5	+40.1%	-3.5%
Media Research	168.5	130.4	+29.2%	-12%
Opinion & Social Research	157.8	129.4	+21.9%	+6%
Customer Relationship Management Research	231.5	168.3	+37.6%	+1%
Full year revenues	1,789.5	1,362.9	+31.3%	-1%

In a statement, Ipsos said that 2012 had not been an easy year, with some losses in market share having resulted from activities or contracts that Ipsos deemed it was unable to continue with, or because of decisions made by clients relating to conflicts of interest, a lack of proximity to Ipsos, or 'fear of assigning certain projects to a company occupied with its own restructuring'.

'Finally, staff departures were seen in Asia and the US in particular' the firm concluded, 'sometimes as a result of targeted approaches by direct rivals, making it impossible to hold on to all of the contracts for which these staff were responsible'.

Preliminary results from rival GfK, a month ago, suggest that the German firm - free of major merger considerations - enjoyed a better year in 2012, with organic growth of 3.1%.

Web site: www.ipsos.com .