Growth at GfK in Difficult Environment

In the first nine months of 2001, the GfK Group increased its total revenue by 8.3% up from Euro 352.2 million to Euro 381.5 million, whilst earnings before interest and tax rose by Euro 4.9 million to Euro 32.7 million.

Despite the continued downturn in the global economy, GfK's consistent cost management and reviews of ongoing acquisition projects resulted in a further increase in aEBIT in the third quarter. This means that, relative to total performance, the 9.6% margin for the third quarter was significantly higher than that for the first two quarters, 7.6% and 8.8% respectively.

Net interest income was also affected this quarter by additional extraordinary expenses of Euro 5 million relating to write-downs on the participation in US based Jupiter Media Metrix (JMXI). VNU's subsidiary, Netratings, intends to take over JMXI, and GfK has therefore written down its participation in JMXI to the value of the takeover offer. In the first half of 2001, GfK had already carried out a write-down of Euro 2 million, originally included in income from participations.

In the first nine months of the current financial year, total performance in the consumer tracking division remained flat. This was mainly a result of the disposal of the operating business of Infoscan in Sweden in 2000. Excluding this sale, the division would have achieved organic growth of five per cent, which is reflected in the upturn in operating income.

Organic growth in the non food tracking division amounted to ten per cent in the period under review. Negative exchange rate effects depressed growth, which therefore amounted to 7.1%.

Total performance in the Media division continued to rise compared with the same period in the previous year and in comparison with the first half of this year. Operating income was also slightly up, although it was affected by the scheduled start-up loss of the Swiss subsidiary, MMXI Switzerland. Another factor that impacted on results in this division was the fact that smaller contracts in the media industry were postponed as a result of a fall in advertising revenue.

The marked increase in total performance in the ad hoc division is both attributable to the companies acquired this year and to the result of almost 7% organic growth. At EUR 0.7 million, operating income was below the figure for the same period in the previous year. This was mainly a result of the restructuring of activities in the UK as part of the integration of the Martin Hamblin Group, and the market conditions that remained difficult for the companies in the Scandinavian countries.

Despite the weak global economy, GfK achieved good growth rates in almost all regions. In Germany, total performance was up by 9.4%, outstripping even the 6.5% growth rate for the first half of the year. The increase was mainly achieved through organic growth.

The events of 11 September did not have a major impact on GfK's business in the USA in the third quarter. Organic growth of the US subsidiary, GfK Custom Research, amounted to three per cent. The slight decrease in total performance in absolute terms was attributable to the strength of the euro against the US dollar and the same applies to the development in Asia and the Pacific and Northern Europe.

On 25 October, the Dutch media group, VNU, announced that its subsidiary, Netratings, intends to take over US based Jupiter Media Metrix Inc. (JMXI). As mentioned above, GfK has therefore written down its participation in JMXI to the value of the takeover offer.

JMXI is the majority shareholder in Jupiter MMXI-Europe, which measures Internet reach in nine European countries. GfK currently has a 19.9% minority stake in the European company. In the run-up to the negotiations which will centre around the fact that, in future, Internet reach will be measured exclusively by Netratings, GfK has undertaken to sell its shares in Jupiter MMXI Europe to the parent company, JMXI. This disposal will not result in GfK needing to make value adjustments, nor will the change affect GfK's 80.1% stake in MMXI Switzerland.

GfK is forecasting total revenue of Euro 530 million for the current financial year, which represents an increase of a good 10%. Assuming a cautious approach to acquisitions, GfK's organic growth stands at more than 5%, outstripping growth in the sector.

All articles 2006-22 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.