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Home arrow Marketing Research News arrow Company News and Announcements July-December 2007 arrow Moderate Growth In The Second Quarter - Sales Target For 2007 Confirmed
Moderate Growth In The Second Quarter - Sales Target For 2007 Confirmed PDF Print E-mail
Written by GfK Group   
13 Aug 2007

August 14th 2007 – Nuremberg

Sales increase of 3.6% to EUR 553.7 million

Organic sales growth of 4.9% achieved; dynamic growth in emerging markets and the high-margin divisions, Retail and

Technology as well as Media  

Adjusted operating income of EUR 63.5 million at previous year’s level

Order books as of the end of July total 81.5% of expected annual sales, clearly outstripping the figure for the previous year

Cash flow up by almost 60% to EUR 56.6 million

2007 sales forecast confirmed: organic growth of at least 5%


The trend in the first half year has been moderate for the GfK Group compared with the highly successful prior year. Sales rose by 3.6% to EUR 553.7 million, with the company recording organic growth of 4.9%. Adjusted operating income of EUR 63.5 million was achieved. The margin which represents the ratio of adjusted operating income to sales amounted to 11.5% (prior year: 11.9%) and was the second best figure achieved in the company’s history to date. By comparison, the cash flow from operating activity developed very positively, rising by almost 60% to EUR 56.6 million.

The more restrained growth in sales and income at the GfK Group results mainly from two factors, negative currency effects and the fact that business in two divisions, Custom Research and HealthCare, fell short of expectations. At regional level, GfK recorded a very high level of organic growth in the emerging markets of Central and Eastern Europe, Asia/Pacific and Latin America. At divisional level, the high-margin Retail and Technology, and Media divisions recorded particularly dynamic growth.

Overall, the order situation at GfK is very good. By the end of July, 81.5% of the expected GfK Group sales for 2007 were already posted or included under existing orders. This represents another considerable increase of 79.4% in comparison to the previous year.

The GfK Group achieved an increase in SALES of 3.6% to EUR 553.7 million in the first six months of the year, compared with the same period in the prior year. Organic growth at the company rose by 4.9%. Overall, 0.5% of growth was attributable to acquisitions. Negative currency effects reduced growth by 1.8%.

ADJUSTED OPERATING INCOME (in the following: income) totaled EUR 63.5 million and was therefore approximately at the high level for the same period in the prior year (EUR 63.8 million). The margin amounted to 11.5% (prior year: 11.9%). This margin is the second best half-year figure ever recorded in the GfK Group’s history.

Divisional trends
All GfK divisions, with the exception of HealthCare, achieved an organic sales increase. Growth in the Retail and Technology division and the Media division was particularly dynamic.

CUSTOM RESEARCH:

In its Custom Research division, GfK provides information services for operational and strategic marketing decisions via some 50 subsidiaries in over 30 countries and cooperations in more than 60 countries. These include tests and surveys on product and pricing policy, brand positioning and brand management, traditional and modern means of communication with consumers and users, optimizing distribution and customer loyalty issues.

In the first six months of this year, sales in the Custom Research division were up 3.5% on the prior year at EUR 258.3 million. Organic growth amounted to 4.2%, with currency effects reducing sales by 1.6%. Income totaled EUR 15.0 million. This figure was 25% lower than the figure for the same period in the prior year. The restrained sales trend and the income figure which fell short of expectations resulted essentially from the non-extension of contracts in the automotive research segment. This affects syndicated business in the regions North America and Western Europe/Middle East/Africa, where continuous data is collected. Continuous data is collected here. The cost structure can only be adjusted to a limited extent in the short term, as the data is also required for other contracts. The fact that these contracts have not materialized also impacts on income. Other segments within the Custom Research division are performing very well.

RETAIL AND TECHNOLOGY:

GfK’s Retail and Technology division provides clients with information services based on continuous surveys and analyses of sales of technical consumer goods in the retail sector, in particular, in more than 70 countries worldwide. Among the market segments in which GfK surveys and analyzes data are office communication, photographic technology and optics, electrical household appliances, information technology, telecommunications, sports equipment, tourism, consumer electronics and entertainment media.

Sales in Retail and Technology of EUR 122.3 million in the first half of 2007 were 8.6% up on the prior year’s level. Organic growth totaled 9.9%, exceeding the figure for the first half of the prior year as well as that for the first quarter of 2007. Currency effects reduced organic growth by 1.3%. Income rose by 15.2% to EUR 28.2 million. At 23.1%, the Retail and Technology division achieved the highest margin of all of GfK’s divisions. Like sales, it was higher than in the same half-year in 2006 (22.9%) and outstripped the margin for the first quarter of this year (19.7%).

CONSUMER TRACKING:

GfK’s Consumer Tracking division provides its clients with information services based on continuous surveys and analyses of the purchasing decisions and behavior patterns of consumers in 26 European countries. The information and consulting services cover nearly all fast moving consumer goods as well as numerous other consumer goods and services.

In the period under review, the Consumer Tracking division recorded an increase in sales of 1.6% to EUR 49.7 million. This sales growth was almost exclusively of an organic nature. At EUR 3.1 million, income was just below the figure for the same period in the prior year but in line with GfK’s expectations.

MEDIA:

GfK’s Media division provides information services on the intensity and nature of media usage and acceptance. The services are directed at clients from media companies, agencies and the branded goods industry in more than 20 European countries and in the USA. These services relate to information about traditional media such as television, radio, print, film and outdoor advertising as well as the Internet.

The Media division achieved an increase in sales of 4.6% to EUR 59.6 million in the first six months of this year. In organic terms, growth totaled 7.9% and considerably exceeded the prior year’s level (4.8%). This positive performance is attributable to good business levels in the segment of media usage measurement on the strength of new contracts and contract extensions. Currency effects reduced sales by 3.3%. Income in the first six months of 2007 amounted to EUR 12.3 million and is approximately at the prior year’s level. This corresponds to a margin of 20.6% (prior year: 22.0%). The deviation on the prior year is largely attributable to the higher impact of currency effects.

HEALTHCARE:

GfK’s HealthCare division provides its clients with information and consulting services for health markets. Services include analyses of product development and market communication, image development and price control of medicines, market positioning, customer satisfaction and information on the sales volumes of products used in the dental and veterinary sectors and in laboratories.

In the first half of 2007, sales in the HealthCare division were just below the prior year’s level at EUR 61.6 million. This figure was affected by the fact that budgets in the pharmaceutical industry in North America and the UK were not increased. Currency effects reduced sales by 4.2%. In the same period, growth in income rose by a healthy 5.3% to EUR 5.9 million. Organic growth of 7.6% was positive, with currency developments reducing income.

Regional trends
GfK has organised its business into six regions: Germany, Western Europe/Middle East/Africa, Central and Eastern Europe, North America, Latin America and Asia/Pacific.

GfK’s increased focus on business development in the emerging markets is paying dividends. In the growth regions of Central and Eastern Europe, Asia/Pacific and Latin America, the company’s performance is highly dynamic.

From the point of view of the Group, the strong euro generated negative currency effects in terms of activities in North America and the Asia/Pacific region. Although these currency effects reduced consolidated sales reported in euros, their impact on income at the company is limited. Production costs in the GfK Group are mostly in the relevant local currency in which the company invoices its sales. The company uses income in US dollars primarily to repay loans that were raised in this currency.

GERMANY

Where GfK is headquartered is the Group’s second strongest region by sales. GfK generated sales amounting to EUR 135.6 million here in the first six months of 2007. This was attributable to sound organic growth of 5.3%.  

With EUR 231.7 million, the region of WESTERN EUROPE , MIDDLE EAST and AFRICA is the strongest in terms of sales. In the first six months of 2007, a sales increase of 4.3% was recorded, of which 3.7% was of an organic nature.

The region CENTRAL AND EASTERN EUROPE contributed EUR 32.8 million to consolidated total income in the first six months of this year. This growth of 11.7% was exclusively organic. Currency effects increased growth by 0.8%.

In NORTH AMERICA, sales in the first half of 2007 were up 2.4% to EUR 119.1 million compared with the same period in the prior year. The high euro exchange rate reduced sales by 7.3%.

In LATIN AMERICA, GfK achieved sales of EUR 11.4 million. This represents an increase of 21.8% on the first half of 2006. The up-and-coming region, where young GfK companies operate, generated the highest organic growth worldwide with 24.9%.

Sales in the region ASIA/PACIFIC increased by 17.0% to EUR 23.1 million. More than half of this growth was organic. Currency effects reduced sales by 5.7%.

Outlook
GfK expects to increase sales organically by more than 5% in 2007. This does not take into account exchange rate changes. GfK anticipates that with this increase, the company will once again outperform average sector growth which experts currently estimate will be around 5% in 2007.

The GfK Group sales target is confirmed by the good order book situation at the company. As of the end of July, the order book (total of orders already invoiced and existing orders relating to the remaining months of 2007) already covered 81.5% of target sales for 2007, compared with 79.4% in the prior year. The GfK Group margin is set to be up to 13.5% (previously over 13.5%).

The sales forecast for the Custom Research division remains unchanged. The margin will be slightly lower than in the prior year. In the Retail and Technology division, the company expects stronger sales growth and a better margin than previously forecast. With the sales volume slightly lower than expected, GfK expects the margin in the Consumer Tracking division to be unchanged on the prior year. The Media division is set to achieve a stronger expansion in sales than previously expected and will achieve the same margin as in the prior year. Sales and income growth in the HealthCare division is estimated to be more restrained than in the prior year.

The GfK Group
With activities in the five business divisions of Custom Research, Retail and Technology, Consumer Tracking, Media and HealthCare, the GfK Group is ranked No. 4 worldwide among market research companies. In financial year 2006, the GfK Group achieved sales totaling EUR 1,112.2 million. The GfK Group comprises more than 115 companies operating in over 90 countries. The GfK Group currently employs of more than 8,400 staff, of whom around 80% are based outside Germany. For more info rmation, go to www.gfk.com.

Responsible under press legislation:
GfK AG, Corporate Communications
Marion Eisenblätter
Nordwestring 101
90319 Nuremberg
Germany
Tel. +49 911 395-2645
Fax +49 911 395-4041
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Last Updated ( 01 Jan 2009 )
 
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