GfK Confirms Growth, Ups Dividend

GfK has confirmed a record year of trading in 2007 with organic sales up 5.8% to EUR1,162m. Adjusted operating income rose 4.7% to EUR157.6m and margin crept up to 13.6%. The firm has also announced plans to change its legal form to an SE, or Societas Europaea.

The Boards will recommend the largest of eight successive annual increases in the dividend - up 25.0% from EUR 0.36 to EUR 0.45 per share.

Operating income rose 15.1% to EUR 136.4m while consolidated income was up 28.3% to EUR 91.4m. EPS improved from EUR 1.86 in 2006 to EUR 2.33 in 2007.


Business divisions

Despite what GfK describes as a difficult market environment in the US and the UK, the Custom Research division was able to further expand its sales 4.0% to EUR 538.2m (organic growth 4.5%) - final quarter sales were especially well up on the previous year, the firm says. Income of EUR 42.9 million was just below the 2006 level despite an acquisition-related growth of 1.4 percentage points, due partly to the non-extension of certain automotive contracts in the second quarter.

The Retail and Technology division recorded overall growth of 10.8%, the highest in the Group, to a record EUR 260.8m - organic growth was 11.6 percentage points, underpinned by the implementation of StarTrack, a production and reporting system now in global use. Income was up 13.8% to EUR 67.3m - organic growth 14.5 percentage points. Margin was 25.8%, highest of all the divisions.

The Consumer Tracking division grew sales 3.2% to EUR 102.9m, mostly organic and with particularly good development in many Eastern European countries. Purely organic growth of 10.2% took income to EUR 8.6 million, due in part to an increase in lucrative, panel-based studies and continuous online sampling.

The Media division saw sales rise 6.4% to EUR 124.5m - organic growth of 10.1 percentage points was offset by 3.7 percentage points lost due to the weak dollar. Contract wins/renewals and new ventures in the Netherlands, Romania and the Ukraine contributed to the growth. Income rose 1.3% to EUR 27 million, with 6.9 percentage points of organic growth reduced 5.5 points by currency changes. Margin was 20.6%.

The Healthcare division achieved sales of EUR 131.9, a fall despite acquisitions-related benefits of 1.1 percentage points, due to currency effects (down 5.2 points) and an organic decline of 0.2 points. Growth in the Central and Eastern European region was partly able to offset some of the decline in other regions including the USA, which dominates the firm's coverage of this sector. Income of EUR 14.7m was around 8.4% below the 2006 level (4.6 percentage points due to organic decline). GfK blames a 'generally difficult market environment in the healthcare industry' and says the UK business was most affected, but has seen successful restructuring.

Other areas saw sales of EUR 3.7m, down from 4.6m the previous year.


Regions

GfK's business is divided into six regions:

In Germany, 2007 sales were up 7.7% to EUR 290.3m, around one quarter of the group's sales. All growth was organic.

Western Europe / Middle East / Africa was the firm's 'best-performing region', with sales up 5.0% (4.5% organic) to 480.5m.

Sales in North America fell 6.5 with organic growth of just 1.8% sidelined by a fall of 8.2 points due to the weak dollar - sales were EUR 240.7m.

Central and Eastern Europe has been one of the group's biggest success stories of late and continues strong growth - sales were up 13.4% to EUR 73.1m - organic growth accounted for 12.4 percentage points.

Latin America also shows very strong growth - sales in the region were up 12.9% to EUR 26.7m, with organic growth of 14.4 percentage points.

The Asia and Pacific region led the way with sales up 28.4% to EUR 50.8m, 17.9% coming from organic growrth.


Change of Legal Form

Last week, GfK announced it is proposing to change its legal form from the German Plc-equivalent Aktiengesellschaft into an SE, or Societas Europaea. The company says this form 'supports an open and international corporate culture' and is 'the expression of a corporate European outlook' reflecting where 'its roots lie' and helping to 'intensify the involvement of its European employees'. The change will not alter the legal or commercial identity of the company, shareholder rights or its dual corporate management structure.


Outlook

GfK says the general outlook for the MR industry is good given its 'crisis-resistant' track record, stating: 'It is to be assumed that the robust nature of the market research sector will be maintained in the future, even if macro-economic developments are taken into account... according to expert opinion, the [2008] growth rate is likely to be between four and five percent.'

The Group will continue to pursue the aims and objectives defined in its 5-Star Initiative (see www.mrweb.com/drno/news8023.htm ), and anticipates organic sales growth of more than 5.5% and a margin remaining above 13% despite a decline in the global economy. It points to a good start to 2008 - at the end of February, the order books had already reached 42.2% of the anticipated sales for the year (2007: 41.1%).


As of Dec 31st the Group, which consisted of 115 companies across 100 countries, employed 9,070 people, up from 7,903 a year previously.

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.