GfK Reports 'Dynamic Growth' in Q2

Following yesterday's news that it had shelved plans to acquire UK rival TNS, GfK has bounced back by announcing its highest rate of sales growth since the firm's IPO in 1999. Organic sales were up 11.4% for the quarter, and 8.4% for the first six months of the year.

Adjusted operating income rose by 13.4% to EUR 43.8m compared with the second quarter of 2007. With a figure of 13.6%, margin was up from 13.2% a year previously.

Acquisitions contributed a total of 2.6% to sales growth, while currency effects arising mainly from the revaluation of the Euro against the US dollar, reduced sales by 4.5%. Compared with the same period in the prior year, GfK increased sales by a total of 6.5% to EUR 589.7m (prior year: EUR 553.7m).

By Sector

All three sectors contributed to these figures. Custom Research doubled its organic sales growth from 2.6% to 5.2% in the first six months; achieving EUR 380.5m, with acquisitions boosting growth by an additional 3.0%. Income for the division totalled EUR 21.4m (prior year: EUR 24.1m), a dip which the firm attributes to time delays in the receipt of income and says 'does not represent lost income'.

Developments in Healthcare varied at a regional level. Results were good in Germany and Western Europe/Middle East/Africa, while in Central and Eastern Europe, new markets have been developed which resulted in high growth rates. However, the trend towards shrinking market research budgets within the pharma industry resulted in 'restrained sales' and income at the US business units - a similar story to that reported by Harris last week.

GfK's Retail & Technology sector saw sales rise by 16.8% to EUR 142.8m in the first half of 2008, with organic growth of 15.7%. Acquisitions, including Shopping Brazil in Latin America, contributed an increase in sales of 2.9%. The sector achieved the highest margin, 24.6%.

The Media division experienced organic sales growth of 13.4%. Despite negative currency effects of 7.8%, the sector achieved an increase in income of 3.7% to EUR 12.7m, with margin rising to 19.8%.

By Region

In the first half of 2008, the company generated sales of EUR 156.5m in Germany: organic sales growth of 15.4% versus 5.3% the previous year.

With sales totaling EUR 239.0m, Western Europe/Middle East/Africa made the highest sales contribution, with sales rising by a total of 3.1%, and organic sales growth of 5.2%.

Central and Eastern Europe contributed EUR 42.5m to consolidated total sales (prior year: EUR 32.8m). Overall, sales growth resulted in a 29.4% rise with organic growth of 23.6%.

North America generated sales of EUR 102.7m in the first half of the year (prior year: EUR 119.1m). The firm says marked organic growth in the second quarter of 2008 reduced the decline in sales of the first quarter from 2.3% to just 0.7% by the end of the half-year period. This improvement was largely attributable to good results in the Media sector.

In Latin America, GfK achieved sales of EUR 14.7m, which corresponds to an increase of 29.4% on the first half of 2007. Organic sales growth amounted to 23.1%.

Sales in Asia and the Pacific rose by a total of 48.2% to EUR 34.2m, with organic sales growth accounting for 17.0%.

At the end of July 2008, the order books had already covered 80.3% of expected annual sales (2007: 79.4%), and consequently the firm has revised its forecast for organic sales growth from 5.5% to more than 6.0% across the group. For 2008 as a whole, GfK says it remains confident of a positive performance.

While GfK is no longer pursuing its original intention to submit a bid to buy TNS, it states that it does not rule out the possibility of an offer at a later date if the UK firm has a 'material change of circumstances'.

Web site: 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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