GfK Raises Outlook

In the first nine months of the current financial year, GfK Group sales rose by 9.9 per cent from EUR 368.3 million to EUR404.8 million compared with the same period in the previous year, whilst EBIT including income from participations rose from EUR 24.0 million to 31.1 million and consolidated total income from EUR 8.4 million to 14.6 million. The company confirms earnings forecast and increases target sales figures upwards from EUR 560 million to EUR 568 million.

For the sake of clarity, the comparison of the income statement for the third quarter of 2002 and the income statement for the corresponding period in the previous year has been carried out on a pro forma basis. As a result, it includes the income of four companies which, under US GAAP, would not have been consolidated in 2001. G+E Marketing Research S.A. and Emer-GfK S.L. in Spain and GfK M. S. in Portugal have been taken into account for the year as a whole, while Intomart Benelux in the Netherlands has been included in the first six months of the previous year. These companies now meet US GAAP requirements and have therefore been fully consolidated since 1 January 2002. In the section below, the four companies have been included on a pro forma basis for the first three quarters of 2001 to facilitate a like-for-like comparison with the first nine months of 2002.

In addition, GfK has prepared an income statement under US GAAP for financial year 2001, which is attached to the Notes to the interim report. In order to facilitate a like-for-like comparison with financial year 2002, it contains the relevant adjustment in a pro forma statement. The corresponding adjustments have been made in the comparison of the first nine months of 2001 and 2002.

Despite the difficult economic conditions, the four business divisions enjoyed satisfactory growth.

The Consumer Tracking division has achieved a further increase in operating income, with sales volume remaining more or less unchanged. The continued restructuring measures in the division and the first cost savings resulting from the switch to the standard production system aTRACKtive impacted positively on operating income.

The positive growth trend in the Non-Food Tracking division seen in the first half of 2002 also continued in the third quarter of the year. Organic sales growth amounted to 7.6 per cent, but was reduced by 1.6 per cent due to currency effects, and operating income rose organically by almost 25 per cent. In both cases, the increase was largely achieved through organic growth. The division is benefiting in particular from the fact that new product categories are being measured and from the successful marketing of services in the Middle East, Asia and Africa, all three relatively new markets for the division. The signature of a contract to use Encodex between GfK and the biggest purchasing association in France, Group Référence, marks another milestone in the success story of the Non-Food Tracking division. Encodex is a software and service system for b-to-b trading of consumer durables on the Internet.

The Media division achieves around 70 per cent of its sales on the basis of long-term contracts for measuring TV and radio ratings. In France, GfK was able to extend the existing TV ratings contract until the end of 2005. In the first half of 2002, the division signed a contract with Belgian TV, which runs until 2008. In addition, the contract for measuring digital programme and station frequencies in Germany has also been extended. This means that the company has secured all its TV ratings contracts in the Media segment. Despite the pleasing situation in ratings measurement, the division was not able to repeat the excellent results of the previous year and had to settle for lower sales and operating income figures. This negative trend is attributable to the fact that print media contracts and additional contracts for ad hoc services in the Media division did not materialize.

The Ad Hoc Research division achieved double-digit growth rates, with sales of EUR 177.7 million and an increase in operating income of 83 per cent to EUR 8.7 million. Organic growth of 5.4 per cent highlights the importance of network expansion for carrying out international surveys. GfK Macon, Martin Hamblin GfK, and Intercampus and Metris also contributed to the positive growth trend in the division.

GfK achieved further growth in all the individual regions. However, in Germany, growth was not uniform. The newly consolidated companies resulted in an increase in sales of 8.7 per cent. Organic sales growth by the German companies stood at -1.8 per cent, which is due to the above lack of contracts between GfK Data Services and IRI-GfK. In addition, the crisis in the print media segment and the slight fall in sales in the Consumer Tracking division impacted on total sales in Germany.

In Northern Europe, the first-time consolidation of Martin Hamblin GfK, United Kingdom, since 1 May 2001 accounted for a substantial share of the 19 per cent rise in sales. The Group's restructuring programme relating to the Scandinavian companies made good progress.

In Western and Southern Europe, the increase in sales of 10.8 per cent to EUR 140.1 million is attributable in equal shares to organic growth and the first-time consolidation of the Telecontrol Group, Switzerland (from 1 July 2001), of Metris and of Intercampus, both in Portugal (from 1 January 2002).

In Central and Eastern Europe, GfK recorded significant growth, with operating income doubling and a double-digit increase in sales, both of which were exclusively due to organic growth.

In Asia and the Pacific the equally pleasing rise in sales of 4.6 per cent was dampened by negative currency effects amounting to 6.5 per cent. The high increase in operating income of around 23 per cent would also have been much higher but for negative currency effects.

Developments in North, Central and South America were very similar. Without currency effects, the 8.8 per cent increase in sales to EUR 30.4 million would have been twice as high. Organic growth relating to the subsidiary GfK Custom Research and the first-time consolidation of Martin Hamblin Research Inc., whose activities focus on the pharma segment in the USA, contributed equally growth.

Thanks to the rapid expansion of its international network, GfK has been able to absorb regional fluctuations in business and is therefore expecting to achieve continued success in a difficult environment. GfK's management will continue to focus above all on developing innovative products and services, rigorously monitoring costs as well as making optimum use of available resources. The number of employees has been kept below the target figure and any additions are being considered carefully. The management is also driving forward a programme to combine smaller units with the aim of exploiting further potential cost savings.

GfK has revised its forecast sales figure upwards for 2002 from originally EUR 560 million to EUR 568 million. Based on the pro forma comparison with the previous year, this includes an increase in sales of 12.2 per cent. EBIT including income from participations is likely to amount to around EUR 50 million, and thus meet GfK's own forecast for this year.

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