TNS Reports Solid First Half, Rapid Progress with NFO Integration
September 10 2003
Taylor Nelson Sofres plc (TNS) have announced positive interim results for the six months ended 30 June 2003, with steady growth in the market for syndicated and continuous tracking services, but continued pressure in media intelligence and ad hoc customised research.
Turnover including joint ventures was up 2.9% and operating profit was 5.1%. The acquisition of NFO WorldGroup Inc. (NFO) was completed on 10 July 2003 - it has no impact on first half operating results but will contribute to the second half.
Highlights for the six months ended 30 June 2003
| Business performance | 2003 | 2002 | % Change |
| Turnover including joint ventures | £304.7m | £296.0m | 2.9 |
| Operating profit* | £25.8m | £24.5m | 5.1 |
| Operating margin* | 8.4% | 8.3% | |
| Profit before tax** | £20.7m | £19.0m | 8.9 |
| Adjusted earnings per share** | 3.43p | 3.38p | 1.7 |
| Total dividend per share | 0.95p | 0.90p | 5.6 |
* including joint ventures and before goodwill charges
** including joint ventures and before goodwill charges and finance charges related to the acquisition of NFO
| Statutory results | 2003 | 2002 | Change |
| Turnover excluding joint ventures | £296.9 | £288.2m | 3.0 |
| Operating profit before joint ventures and associates | £18.7m | £17.8m | 4.6 |
| Profit before tax | £13.8m | £12.8m | 7.4 |
| Basic earnings per share | 1.70p | 1.76p | (3.4) |
The record date for the dividend is 8 November 2003 and the payment date is 9 December 2003.
The first half margin was impacted by a charge of £1.3m made during the period relating to property litigation in France, where a judgement in favour of TNS was overturned on appeal. TNS is currently appealing against this decision and no further payments are anticipated.
Net debt at 30 June 2003 was £154.4m compared with £204.8m at 31 December 2002. This was after receiving £50.9m of cash, net of expenses, in respect of the placing of 39.1m shares on 14 May 2003. The previous day, TNS signed new banking facilities of £490m in anticipation of the acquisition of NFO.
£2.6m was spent on acquisitions in the period. This includes purchase of the remaining 25% minority interests in TNS subsidiaries, Piar and Siar, which operate in Turkey and Central and Eastern Europe respectively, and of the remaining minority interests in its Portuguese subsidiary, Euroteste, and its Spanish subsidiary, Demoscopia.
Chief Executive Mike Kirkham says the results 'reflect the group's ability to maintain underlying levels of turnover and to increase operating profit, despite the ongoing effects of a difficult economic environment on some of our markets.
'In the acquisition of NFO ... we have acquired a high quality company that fits well with our existing business. We have put significant management resource into the integration process, to ensure that we make rapid progress. This process is going well. We expect to see an improvement in market growth over the medium term, as the world economy strengthens. The enlarged group has the geographic spread and operational scale to take an increasing share of that growing market. By effectively managing the integration, we are establishing a platform from which to secure this longer-term goal'. He adds that 'the revenue synergies arising ... should begin to show through progressively during 2004 and we remain on track to realise the significant benefits provided by the merger.
'For the full year 2003, we anticipate that the enlarged group will achieve turnover growth in line with our expectations'. Management reports for NFO as a whole, under US GAAP, showed a small underlying turnover growth in the first half.
The integration of TNS and NFO in North America and Asia has made good progress, and integration in Europe will be brought forward from the projected start time of early 2004. In key areas this is already underway - for example, an integrated and global healthcare operation under a new CEO (see
DRNO 23rd August) will target perceived opportunities for longer-term growth in the recently troubled sector.
TNS' syndicated services, such as consumer panels and TV and radio audience measurement, have maintained steady growth, as has continuous tracking of markets for individual clients, but media intelligence was 'again impacted by the weak advertising environment and by the focus of news coverage on the war in Iraq'.
'Performance within the ad hoc customised market was mixed', says Kirkham. 'The recent signs of an improvement in the US economy have led to an increase in enquiries in that market but it is premature to talk of a sustained recovery. Northern Europe continues to be soft but there are signs of a pick-up in parts of Southern, Central and Eastern Europe. Asia Pacific is still a growing area. Overall, we believe that the market will show low single digit growth for the year as a whole'.
Regional Differences
Underlying change in turnover (taking account of currencies rather than looking at reported figures) is +0.2%, covering substantial regional variations. Turnover in Asia Pacific is up 10.4%, in the Americas up 0.9% and in Europe down 1.1%. Europe represents 68% of turnover, the Americas 23% and Asia Pacific 9%.
In the UK, there was growth in Consumer Panels and especially in Telecoms, but an underlying decline in Healthcare and Media Intelligence - improvement is expected in the second half.
France performed well, with a strong performance from panels and a pick-up in customised work countering difficult conditions for Media Intelligence. Southern Europe and Russia saw good results while operations in Germany and Northern Europe suffered due to regional economic problems. With this pattern expected to continue into the second half, underlying performance by the Rest of Europe (ie excluding UK and France) is anticipated to be flat for the full year.
Custom business in the US showed underlying growth of almost 4 per cent in a generally flat market, largely due to strong growth in Consumer, IT and Telecoms. The Americas region is expected to show stronger growth in the second half.
Asia Pacific continued to perform strongly, delivering underlying growth of 10.4 per cent despite the group's activities in Singapore, China and Hong Kong being affected by SARS. Growth is strong in IT, Polling and Consumer Panels, the last particularly in Vietnam (recently launched), the Philippines and China. The TV audience measurement joint venture in China, now the clear leader in the Chinese market, grew strongly again. Good second half results are anticipated for Asia Pacific.
Performance by Sector
Looking at specific sectors across the group as a whole, underlying turnover growth in the biggest sectors, consumer and media, of 5.4% and 0.7% respectively, added to strong growth (8.8%) in Telecoms to compensate for falls in revenue in Business Services (-7.4%), Healthcare (-12.5%) and Other Activities (-4.3%).
A number of business wins in the UK and France for Consumer Panels, along with panel growth in Spain and Asia Pacific have helped this sector, now branded as TNS Worldpanel. Consumer customised showed good growth in the US and Asia Pacific, as well as France, although the market for customised research in some other areas of Europe remains soft.
Media markets remain soft, with early indications of an upturn in the US not expected to affect performance this year. News and cinema monitoring services have been expanded in Spain, Italy, France, the UK and Australia.
Business Services turnover is not expected to improve until economic conditions become generally more buoyant.
IT and Telecoms was boosted by strong US performance - this is attributed to effective key account management, an ability to meet the growing demand from clients for internet research and for added value consulting.
In Healthcare, the customised market in the UK has been relatively flat but syndicated healthcare services, such as Transact, have done well, with significant new business wins.
The group's Automotive sector was down year on year.
Full details and other financial information are available on the company's web site, at
www.tns-global.com
All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.
