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Strong Profit Performance at TNS
Global agency Taylor Nelson Sofres has just reported its interim results for the first six months of the year with turnover rising by 9.1% to £296 million. The group achieved underlying improvement of 1.4% with acquisitions contributing a further 8.7%.
Operating profit including joint ventures and before goodwill charges was up 6.5% to £24.5 million. Operating margin reduced from 8.5 per cent to 8.3 per cent, after taking into account restructuring costs of £2.6 million. Before these items, the operating margin on continuing activities including acquisitions was 9.2 %, a 70 basis points increase over the corresponding period in the previous year. This improvement reflects a number of factors including the cessation of the loss-making businesses and of some lower margin activities, together with an increase in continuous/syndicated activities to 50 per cent of group turnover. In addition, the group has achieved cost savings, primarily in its customised business.
For the full year, the group maintains its target of improving operating margin by around 50 basis points, after restructuring costs.
Profit before tax and goodwill charges grew by 10.9 per cent to £19.0 million, whilst after goodwill charges of £6.2 million, profit before tax was unchanged at £12.8 million.
Commenting on the six months' results and the future, Chief Executive Mike Kirkham said 'These results again illustrate the resilience of our market information business. Although market conditions have been more challenging than we expected, the results show that with a global presence and clearly directed strategy, it has been possible to deliver both turnover and profit growth. Our performance indicates that market information remains valuable to clients even in a time of economic downturn.'
He added, 'With our presence in all the world's major markets through offices in 53 countries, and the ability to conduct research in over 100 countries, the group has a distinct competitive advantage. Our outstanding performance in the Healthcare sector in the first half of this year, with its underlying growth of 27.8 per cent, is a clear indicator of this benefit; we have gained share through our ability to undertake the multi-national research demanded by major pharmaceutical companies. The network also allows us to take expertise developed in one part of the group to another. Our Healthcare operations in the UK have been particularly successful in developing and selling new syndicated services. We are now poised to extend this expertise into the US, with the introduction of Prime, a consumer panel that monitors individuals for the incidence and treatment of illness. The network was further strengthened in July 2002, when we filled one of the few remaining gaps with the acquisition of Svenska Gallup in Sweden. We were already the leading market information company in Norway, Denmark and Finland and are now ideally positioned to offer pan-Nordic solutions to our clients. This ability to provide regional information is another of the key benefits we derive from having one of the strongest global networks in the industry.'
He continued 'Acquisitions made earlier in the year focused on our US activities, where we already have a proven record of successfully integrating complementary businesses and expertise into the group. TNS Intersearch saw two interesting developments in the first half. In April, we acquired Elrick & Lavidge Marketing Research (E&L), a US customised market information company with a highly-skilled management team. The company has strong client relationships in many of our specialist sectors, particularly FMCG - an area in which previously the group has been underweight in the US. E&L has been performing ahead of expectations in its first few months as part of TNS Intersearch. The use of the internet for data collection in the US is increasing rapidly and this year is expected to account for around 20 per cent of the customised market. In response to this development, the group acquired the custom research division of Greenfield Online, a web-based business conducting hundreds of studies each year for blue chip clients. This brought into the group one of the most experienced teams in the US, in the design and execution of internet research and custom panel building. It also gives us preferential access to the 1.2 million respondents who comprise the Greenfield online research panel. Since the acquisition, we have reinforced the relationship with Greenfield Online's client base by offering them the full range of services we provide in the US, both online and off-line. We are already seeing the benefit of the integration in new business wins, such as a large online panel study we won recently for an international information provider.'
In terms of the future outlook, Mr Kirkham concluded, 'In probably the most difficult trading environment we have encountered for the past ten years, our major regional markets were relatively flat or in slight decline in the first half of 2002. Against that background the group performed well, once again illustrating the benefits we derive from our geographic and sector spread and balanced business mix. Given the established seasonality of the industry, with turnover normally stronger in the second half, we expect to see an improved performance across most markets for the rest of the year. Our order book at the beginning of August accounted for over 80 per cent of anticipated turnover for the year as a whole, which reflects a similar pattern to last year. We therefore anticipate achieving expected levels of turnover growth for the full year. Looking further ahead, we believe that the long-term drivers for growth in the market information industry remain in place, although the rate of advance in the market will depend on the timing and speed of economic recovery. With our strategic focus unchanged, we expect to continue to increase the proportion of our business represented by continuous and syndicated services and to achieve further operational improvements, leading to ongoing margin growth.'
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