GfK Results Impress

GfK has announced 'a year of extraordinary success' with sales up 12.8% to EUR 671.7m and a margin of 13.6%, putting the Group 'top of the market research sector in terms of profitability'. EBIT including income from participations increased by 31.2% to EUR 91.1m and the dividend by around 43% to EUR 0.30.

The Group significantly exceeded even its upwardly revised sales forecast, and achieved an increase in EBIT including income from participations of 31.2% to EUR 91.1m. The Group says all business divisions and regions contributed to the growth.

Consolidated total income is set to rise to over EUR 52.6 million compared with EUR 33.3 million in 2003. The dividend will increase to EUR 0.30 per share, a rise of approx. 43 per cent on the previous year. This is the fifth successive increase in dividend.

Organic growth of 6.6% outpaced an industry average of around 3.5%,while another 7.2% sales growth resulted from the first-time consolidation of subsidiaries including GfK Arbor in the USA, and two companies which were consolidated for only six months in 2003, V2 GfK, USA and Media Control GfK International, Germany.

Operating costs grew only 10.9% compared to the 12.8% for sales, leading to a 27.9% increase in operating profit.

Key growth indicators for the Group are shown below:

In EUR million	2003	2004	Change in %
Sales	595.3	671.7	+12.8
EBITDA	91.2	108.9	+19.5
EBIT before income from participations	66.4	86.9	+30.9
Net income from participations	3.1	4.3	+37.5
EBIT after income from participations	69.5	91.1	+31.2
EBIT margin1)	11.7	13.6	--
Consolidated total income	33.3	52.6	+57.8
Earnings per share in EUR	1.06	1.68	+57.8
Dividend in EUR2)	0.21	0.303)	+42.9
1) after income from participations in % 2) Adjusted dividend resulting from the capital increase from company 3) Proposal for 2004

Total assets increased by EUR 58.3m to EUR 560.3m, mainly attributable to growth of EUR 49.2m in fixed assets. Shareholders' equity increased by EUR 44.3m to EUR 248.4m and the equity ratio rose once again from 40.7% at the end of 2003 to a healthy 44.3% as at 31 December 2004. GfK financed all its acquisitions and other financial investments out of cash flow.

Business divisions

The Custom Research division, which is GfK's largest business division in terms of sales and the number of employees, performed strongly with sales up 14.2% to EUR 252.1m from 220.8m in 2003 - a third of this was attributable to organic growth. Operating profit was up 37.7% to EUR 21.2m from 15.4m and the margin from 7.0 to 8.4%.

The Retail and Technology division continued the successful trend of previous years with sales up 12.2% from EUR 166.7m to EUR 187.0m. Organic growth was once again the highest of all business divisions at 11.2%, and operating profit rose30.0% to EUR 46.9m. Margin rose from 21.6% to 25.1%. The Group puts this success down to its growth strategy of expansion into new countries and addition of new information services, along with dynamic growth in Asian markets and rapid growth in Latin America.

The Consumer Tracking division saw sales up 5.2% to EUR 94.4m, all down to organic growth and helped by all regions in which it operates ConsumerScan and ConsumerScope panels. Operating profit rose by 68.1% from EUR 3.5m to EUR 5.9m, and margin from 3.9% in 2003 to 6.2%. Particular factors in success were efficient cost management via the aTRACKtive production platform in Europe, and the expansion of the ConsumerScan panel in Germany to 17,000 and in Italy from 6,000 to 7,000 households.

The Media division saw a slight recovery in 2004 following two weak years, generating sales of EUR 62.2m (2003: EUR 58.3m), with organic growth entirely responsible. Operating profit increased by 4.0% to EUR 7.8m and margin fell slightly from 12.8% to 12.5%.

The Healthcare division achieved the highest sales growth within the Group in 2004 - up 38.2% to EUR 68.1m. 33.7% related to acquisition-driven growth, essentially from V2 GfK, USA and m2A, France. Organic growth accounted for 7.8 percentage points, while currency effects reduced sales by 3.2%. Operating profit rose by 23.8% to EUR 7.7m but the margin was down from 12.7% in 2003 to 11.4%.

Regions

All Group regions increased their sales from the previous year and all except Northern Europe improved their operating profit.

Germany, where it has a market share well in excess of 25%, is still the Group's most important market in sales terms. 2004 sales here were EUR 236.3m in Germany, up 6.6% from EUR 221.7m in 2003, and represent 35.2% of the Group's total sales. Growth was held back by a decline in business at GfK Business Solutions & Processing for Information Resources, Germany.

In EUR million 2003-04 Change in %	2003	2004	Change in %	Organic growth in %
GERMANY
Sales	221.7	236.3	+6.6	+5.5
Operating profit	22.9	27.5	+20.2	+16.2
NORTHERN EUROPE
Sales	54.1	55.6	+2.7	+1.6
Operating profit	3.2	2.9	-9.0	-11.2
WESTERN & SOUTHERN EUROPE
Sales	204.7	215.7	+5.4	+4.9
Operating profit	27.5	32.0	+16.4	+15.2
CENTRAL & EASTERN EUROPE
Sales	31.8	40.1	+26.0	+26.9
Operating profit	3.7	4.5	+21.7	+22.3
AMERICA
Sales	48.6	84.8	+74.5	+3.4
Operating profit	4.4	12.3	+176.1	-7.6
ASIA AND THE PACIFIC
Sales	34.3	39.3	+14.3	+17.3
Operating profit	5.6	6.9	+24.0	+27.9
Operating profit in Germany rose 20.2% to EUR 27.5m, most of which was organic.

Sales in the American region expanded very strongly from EUR 48.6m to EUR 84.8m, making it the GfK Group's third largest region. Despite the weak dollar, which reduced growth by 8.5 percentage points, the region achieved sales growth of 74.5%. Only 3.4% came from organic growth.

In Asia and the Pacific, there was a considerable sales increase of 14.3% to EUR 39.3m, with organic growth very strong at 17.3% - the Chinese market saw particularly dynamic growth. Operating profit in the region increased by 24.0% to EUR 6.9m.

Trends and Outlook

GfK's workforce grew 9.3% to 5,539 individuals at the end of 2004, with a rise both in Germany (2.9%, purely organic) and abroad (11.9%, of which two fifths came from the acquisition of GfK Arbor, m2A and GfK Indicator). 73% of the GfK workforce is now based outside Germany.

Major events since the 2004 financial statements include a restructuring of the management board, following the loss in the Asian tsunami of Heinrich A. Litzenroth; the acquisition of Beyen Marktforschung on
1 January 2005, the sale of a 50% stake in IHA-IMS Health in Switzerland and an increase in shareholding in the German company, GPI Kommunikationsforschung the same month; and the acquisition of a majority stake in the American company, Caribou Lake Software, in February.

The group expects to significantly increase sales and income again in 2005, sales by around 5.8% at constant scope of consolidation. Plans for the divisions include the harmonization of Custom Research's services and its expansion in regions outside Europe; strong growth in Retail and Technology through innovation and the dynamic growth of consumer technology markets; and strengthening of the Healthcare division's presence in the USA and Europe and the launch of activities in Asia. Generally, the company will look to strengthen and expand its US presence and continue to establish its retail and technology division in South America with the growth of retail panels.

GfK says its 'globally orientated business divisions of Custom Research, Retail and Technology and HealthCare will use any acquisition potential available to continue the expansion into all economically relevant regions of the world. The Media division will focus its acquisition and new business activities on Europe'.

The Group's home page is at www.gfk.com

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

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