Letter from the Management Board

Letter from
the Management Board

Dear shareholders, dear colleagues, dear friends of the SYZYGY GROUP, 

A positive digital experience has a crucial impact on the quality of the customer relationship, making it vital for brand and corporate success. Positive digital experiences exceed expectations: they focus on user needs while delivering a seamless and compelling experience. They create added value, convenience and satisfaction – and strengthen a company’s market position. As one of the leading consultancy and implementation partners for digital experiences, we have been supporting and assisting our clients in meeting these challenges for more than 28 years. 

Business performance

 

2023 was marked by a generally weak economic environment, culminating in a recession. This led to many of our clients becoming reluctant to invest and applying budget cuts, resulting in a significant decline in sales, particularly at strategy consultancy diffferent and our UK company. We did, however, continue to see momentum and significant growth in the development and operation of digital platforms and in our technology services.

This meant that despite all the challenges, we posted a new all-time sales high of EUR 71.7 million in 2023, representing a year-on-year rise of 2 per cent. The company generated operating income of EUR 5.2 3 million before goodwill write-downs and restructuring costs, corresponding to an operating EBIT margin of around 7 per cent. 

Although we are again able to report record sales, in mid-year we had to adjust our forecast for the full year to reflect the latest business performance. 

71,7
Mio. EUR
Sales revenue
2
%
Increase in sales compared to the previous year
7
%
operating EBIT margin

A major reason for this was that our strategy consultancy did not perform as planned, due to the recessionary market environment and a change in client demand. As a result, we introduced restructuring measures following a thorough review and planning process, which led to additional costs totalling EUR 1.2 million. Positioning was tightened and the service portfolio realigned. The cost structure was also adapted in line with the latest performance figures, while efficiency was boosted through organisational changes. A goodwill write-down of EUR 4.7 million was required as part of this programme. The SYZYGY GROUP’s operational viability and cash flow are unaffected by this write-down. The restructuring measures were completed in 2023 and we believe that diffferent is now well positioned for the future. 

Our core SYZYGY brand and technology specialist SYZYGY Techsolutions again performed very strongly, achieving high growth rates. Our performance marketing specialist SYZYGY Performance also held its own in a challenging market environment. We were able to partly compensate for the situation at diffferent, with the result that the Germany region generated overall sales growth of 4 per cent to reach EUR 57.4 million, with operating profitability coming in at 10 per cent. The core German market thus proved to be stable overall and now accounts for 81 per cent of total sales.

57,4
Mio. Euro
Sales
in the German core market
4
%
Sales growth
in the German core market
10
%
operating EBIT margin

The quality of the customer relationship and therefore brand and corporate success are hugely influenced by a positive digital experience.

In the UK and US, we posted a 16 per cent drop in sales to EUR 8.4 million, due to a reluctance on the part of some existing clients to invest. We took early action to cut costs in response, focusing on rental space and overheads. This enabled an EBIT margin of 10 per cent to be achieved. 

Looking ahead to 2024, we have introduced additional cost-cutting measures due to a further budget cut by a major client. The size of the team has been aligned with future requirements and the staff moved into much cheaper office premises. These measures were also completed in 2023, so in this respect we believe we are likewise well positioned for the future.

The performance of our Polish specialist for creative production, Ars Thanea, and SYZYGY Poland remained stable overall. Sales were up 3 per cent to EUR 6.1 million year-on-year, with an EBIT margin of 16 per cent. 

We are committed to sharing business performance appropriately with you, dear shareholders, and at the same time maintaining the continuity of dividends. As a result, it was not easy for us to make the decision to suspend the dividend for one year. The Management Board and Supervisory Board have decided to recommend suspending the dividend payment for the 2023 financial year as a one-off measure at the Annual General Meeting, due to negative total net income and in order to strengthen the capital base and liquidity reserves. This move underlines our commitment to creating a solid financial basis for sustainable growth.

Strategic decisions

We have taken a number of key strategic decisions with the aim of becoming more efficient and more focused. By doing so, we are creating a solid foundation for sustainable growth and the long-term success of the SYZYGY GROUP.  

Developments in generative artificial intelligence in particular are having a major impact on our business. Generative AI, as a subset of AI, can produce new content. Instead of just analysing or classifying information, generative AI actually creates new content. Generative AI will change the SYZYGY GROUP’s services and the way we provide those services. 

The most obvious impact will be productivity improvements. With the help of generative AI, it will be possible to automate work processes, e.g. in areas such as text creation, image processing and software development, where this has previously not been possible. In the medium and long term, generative AI will also change the digital experience itself, creating a wide range of opportunities for consulting, conceptualisation, implementation and operation of new and different digital experiences. 

Our goal is to make the SYZYGY GROUP an industry pioneer in adopting these new technologies. To do this, we have already introduced appropriate tools throughout the Group and developed our own solutions. We have also drawn up corresponding guidelines and policies to ensure that this is done within a safe framework. 

In addition, we have tightened and simplified the SYZYGY GROUP’s positioning. We have brought together our extensive range of services for the design, development and operation of digital experiences in the central Digital Experience Services business area. This area offers a comprehensive portfolio for developing and implementing customer-centric end-to-end strategies, and represents the main focus of our proposition. 

The Transformational Consulting Services offered by our strategy consultancy, diffferent, serve as a strategic extension. The aim here is to identify and unlock additional growth levers for clients around brand, sustainability, organisational design and innovation. 

Lastly, we have discontinued the SYZYGY Extended Realities brand. Our virtual, mixed and augmented reality services will now be handled by our creative production specialist, Ars Thanea. 

This new structure simplifies our offering, provides greater clarity and enhances the profile of each of the SYZYGY GROUP brands. It will facilitate the marketing of our services and access to our clients. We are also acknowledging the fact that the two business areas target different audiences, thus requiring different routes to market. This reality can now be addressed more clearly and effectively, particularly through diffferent, our strategy consultancy. 

For us, sustainable corporate development is the basis for long-term success.

Going forward, we will continue to extend our partnerships within the WPP network. British advertising holding company WPP is the main shareholder of the SYZYGY GROUP with a 50.3 per cent stake at present. As part of a modified strategy, WPP is currently creating structures to improve collaboration between the WPP companies in Germany. One of the steps taken is to appoint a Country Manager for the first time. The SYZYGY GROUP’s integration into these structures could lead to potential sales opportunities. 

For us, sustainable corporate development is the foundation for long-term success. That makes it essential to integrate corporate social responsibility into the company’s overall strategy. Sustainable and partnership-based client relationships in particular and the retention of talented people within the company are key success factors that are embedded in our sustainability strategy. The SYZYGY GROUP attaches great importance to an attractive working environment in which our employees can learn new technologies and other skills, and apply them every day. Another factor in our employees’ job satisfaction is the high degree of flexibility in organising their work. 

Former CEO Franziska von Lewinski opted not to renew her contract, which expired at the end of 2023. We, Frank Ladner and Erwin Greiner, are continuing our management board work and have accepted the offer to extend our contracts until the end of 2026. The Supervisory Board has already started the process of selecting a new CEO. There have been no other changes to the senior management team, thus ensuring continuity and stability in the running of the company. This gives us the ability to act effectively and drive forward the operational and strategic development of the SYZYGY GROUP.

Outlook

Having taken these strategic decisions and following completion of the restructuring programme, the SYZYGY GROUP is very well positioned for the current financial year. 

Due to ongoing strong demand for our services in the digital experiences space, we expect to maintain our previous level of sales, despite the recession in Germany, while also achieving significantly improved profitability. 

Based on the information available to date, we expect sales to be maintained at the prior-year level in the 2024 financial year, with an EBIT margin of around 10 per cent before goodwill write-downs.

Based on the information available to date, we expect sales to be maintained at the prior-year level in the 2024 financial year, with an EBIT margin of around 10 per cent before goodwill write-downs. 

10
%
Outlook for 2024: Sales at the prior-year level with an EBIT margin of around 10%

Erwin Greiner (CFO), Frank Ladner (CTO)

Acknowledgements

We would like to thank all SYZYGY GROUP clients for the trust they have placed in us and you, dear shareholders, for your loyalty. Special thanks go to our around 600 employees, who show huge commitment every day and are actively involved in shaping the future of the SYZYGY GROUP, and to their families. 

We would also like to thank the Supervisory Board for its effective, supportive and farsighted work. We want to express our special gratitude here to Andrew Payne for his many years of constructive involvement. Mr Payne began his well-deserved retirement in July 2023, for which we wish him all the best. At the same time, we welcome Shahid Sadiq as a new member of the Supervisory Board and look forward to working with him. 

We wish you and all of us at the SYZYGY GROUP a successful 2024 and look forward to continuing our collaboration, partnership and shared journey. 

On behalf of the entire Management Board of the SYZYGY GROUP

Interested?
Let’s talk!
Investor Relations & New Business Susan Wallenborn
On this page