Good Overall Growth for TNS Despite UK and US Results

TNS has announced results for the year ended 31 December 2005. Revenue is up 5.7% (adjusted 4.1%) to £999.0m and adjusted operating profit up 9.5% to £112.6m. Strong growth across syndicated services and in custom business in continental Europe and emerging markets contrasted with 'challenging conditions' in the US and UK.

New CEO David Lowden says 2005 saw 'strong underlying revenue growth across its syndicated services and in the custom businesses of Continental Europe, Asia Pacific, Latin America and Middle East & Africa. While the performance of our US custom business was disappointing' says Lowden, 'we saw a return to growth in our UK custom business during the second half of the year.' More generally, for the second half of the year, the group reports a stronger performance with strong cash generation reducing net debt to £295.4m.

[main results table]

NB These are the first full year results reported by TNS under International Financial Reporting Standards (IFRS), as endorsed by the European Union. 'Adjusted' results are before goodwill impairment, share based payments, amortisation of acquired intangible assets, exceptional pension curtailment credit and integration costs. Earnings per share are shown before deferred tax on goodwill.

General Outlook

Lowden says growth in custom research is being driven by demand from the emerging economies, 'with China, India and Brazil leading the increase in business in their regions.' He expects demand for market information to continue to grow, steadily in the major consumer and media syndicated markets. 'The emerging markets will continue to see the fastest growth, the US market should remain fairly strong but growth in Western European markets will be at a slower pace.'

For 2006, Lowden says the company 'may not be able to maintain the significant market outperformance achieved in continental Europe in 2005' but good growth should continue and there should be an improvement year-on-year in the UK and a stabilisation in the US custom business after a difficult year. However he says it is 'too early in the year to predict exactly when that business will return to growth'. The consumer market 'remains challenging' but 'Media, Business Services and Healthcare should grow well. We expect good demand in Technology but the sector will be impacted by the continued cut-backs in business from one of our major US clients.'

By Region

[regional table]

Underlying revenue growth in Europe was strong at 6.3% but with wide variation - in the UK, it grew by just 1.2%, recovering well from a poor first half and with strong performances in financial services and healthcare, while in France, underlying revenue growth was 8.6%, and in the rest of Europe 7.7%.

In the Americas, underlying revenue declined by 3.7%, with a disappointing performance in custom business and further reductions in marketing expenditure by a key technology client, plus a weak performance in the Consumer and Business Services sectors.

Growth in Latin America continued strong, and demand in Asia Pacific buoyant with underlying growth in the latter 10.0%.

By Sector

[sector table]

The Consumer sector was flat overall, held back by weaker demand in the custom business and conditions in the UK and US. Worldpanel continued to show steady growth in 2005, with successful implementation of panel expansion programmes in the UK and Spain contributing.

Media Intelligence and TRAM saw good underlying growth of 6.6%, with good progress for the former in Europe. TRAM had 'an excellent year', including contract wins in Hong Kong and Singapore and expansion of services in China and Russia.

Business Services had a 'challenging' year, affected by the loss of third party business on the US access panel. Second half recovery gave overall modest growth in underlying revenue of 1.4% for the year.

Technology saw some good contract wins and strong growth in Asia Pacific and Latin America. Overall growth of 2% only is put down largely to 'one key US client, [whose] change in direction has led to a substantial reduction in studies conducted by TNS'.

Underlying growth in the Healthcare sector was high at 6.0%, with strong growth in Europe, especially in the UK and Germany; and success in Asia and Latin America. The US market 'continues to be more challenging due to concerns on drug safety and regulatory changes'.

The company also announced good performances in Automotive research, especially in the US and Asia Pacific, and in Polling & Social, the latter helped by the first full year of the contract with the EU for the Standard Eurobarometer among other factors.

The company is online at www.tns-global.com

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.