GfK – marked rise in Q3 income and cash flow

gfkNuremberg, 14 November 2013 – In the third quarter of 2013, the GfK Group’s income and the cash flow rose significantly: Adjusted operating income climbed 12.5 percent to €49.9 million, the cash flow from operating activities increased from €48.1 million to €92.8 million. In the first nine months of 2013, sales were slightly up by 0.9 percent in organic terms, with currency effects leading to a figure of -0.6 percent for the nine-month period. At €126.3 million, adjusted operating income for the first nine months was 0.6 percent higher than the prior year’s level. Accordingly, the margin rose from 11.4 percent to 11.6 percent.

Matthias Hartmann, CEO of GfK SE, explained: “With regard to our income, we built on the strong trend of the previous quarter in Q3 of this year. We are pleased with the margin and cash flow achieved. In parallel, we are continuing the transformation of our group. And we have seen that our strategy of introducing global, digital products based on innovative platforms into the market is making good progress.”

On the day of publication of the quarterly results, GfK signed a memorandum of understanding with four of the leading TV channels in Brazil for the introduction of a new TV audience measurement system and audience research. The agreement worth above USD 100 million is scheduled to be signed in the coming weeks and shall cover a term of five years. [Further details will be published in a separate press release on Friday.]

Trends in the sectors

The organic sales growth results from the development in the two sectors, Consumer Choices which recorded 3.8 percent growth, and Consumer Experiences where sales were down 1.1 percent. Currency effects of 2.5 percentage points impacted negatively on both sectors. Sales in the Consumer Experiences sector including an increase through acquisitions were down by 2.0 percent overall in the nine-month period. The trend in Consumer Choices was generally positive, with the sector achieving growth of 1.4 percent.

Despite further expenses for systems and the launch of new products, Consumer Choices achieved a margin of 23.9 percent in the first nine months, higher than in the previous year. Conversely, at 4.2 percent, the Consumer Experiences margin was lower than the figure for the prior year of 5.0 percent, and thus below expectations.

Regional trends

In NORTHERN EUROPE, the region with the highest sales, the moderate organic growth in sales for the first nine months of the year was reduced to -0.9 percent by currency effects. In SOUTHERN and WESTERN EUROPE, the decline in sales was halted somewhat compared with the previous quarter, despite the prevailing difficult business climate.

In the CENTRAL EASTERN EUROPE, MIDDLE EAST, TURKEY and AFRICA region, sales growth of almost 7 percent was achieved for the first nine months of 2013, despite considerable negative currency effects. This growth was supported by the positive development of the business in Russia.

The LATIN AMERICA region also achieved significant growth. Based on substantial double-digit organic growth in the third quarter of 2013, overall growth totaled 5.4 percent for the first nine months of the year even with significant currency effects.

In NORTH AMERICA, the business trend was weaker, with sales down by 2 percentage points. The most substantial sales losses were recorded in ad hoc business. In contrast, the business trend was pleasing in the Media and Forecasting segments, both of which are based in the Consumer Choices sector.
At 10.0 percent, ASIA and the PACIFIC once again recorded a very pleasing growth rate in organic terms, although considerable negative currency effects depressed overall growth to 1.4 percent.

Key indicators

SALES were considerably impacted by currency effects in the third quarter of 2013 and amounted to €361.4 million (previous year: €376.7 million). In the first nine months of the year, total sales stood at €1,090.0 million, which represents a year-on-year decrease of 0.6 percent. In organic terms, sales were up by 0.9 percent.

ADJUSTED OPERATING INCOME (AOI) increased significantly by 12.5 percent in the third quarter of 2013 from €44.3 million in the same quarter of the previous year to €49.9 million. As a result, the figure for the first nine months of the year also rose by 0.6 percent to €126.3 million. At the end of the first six months, AOI was 5.9 percent below the figure for the same period in the previous year. Currency effects of -4.1 percent had a marked negative impact.

On the back of the strong third quarter, the GfK Group MARGIN for the first nine months of 2013 was up on the prior year’s figure. After 11.4 percent in the first nine months of 2012, the like-for-like figure was 11.6 percent this year. In the third quarter of this year, a margin of 13.8 percent was achieved (last year’s quarter: 11.8).

The CASH FLOW FROM OPERATING ACTIVITIES was considerably up in the first nine months of 2013. This increase is attributable to the measures taken since the beginning of the year to improve the working capital situation. Compared with 2012, the figure for the third quarter rose by almost 93 percent, so that the cash flow for the first nine months of this year amounted to €123.5 million (compared with €73.4 million in the same period of the previous year), representing a rise of 68.3 percent.

Outlook

Provided that the economic situation does not worsen, GfK still anticipates organic growth of up to 3 percent in 2013. Despite the scheduled expenses for developing new business, GfK aims to achieve an AOI margin (adjusted operating income, AOI, in relation to sales) of between 12.4 percent and 13 percent in the current financial year.

In the fourth quarter of 2013, GfK will continue to make every effort in driving forward the optimization of the Group’s structure and implementation of its strategy. This will impact favorably on the business trend in the medium term.

GfK expects global economic growth to remain sluggish in the course of this year, especially in the industrialized nations. Although there are increasingly signs of an easing in the eurozone, the recession is expected to continue in Southern and Western Europe. Any impetus is likely to be provided by the emerging markets, where GfK also remains on course for growth.

The level of incoming orders in the GfK Group is satisfactory. As the key performance indicator for the order book was changed from an invoicing based approach to a sales based approach, an exact comparison with the previous year’s figure is not possible. At the end of September, a total of 96.0 percent of the annual sales required to achieve the forecast had already been posted or were in the order book.

About GfK

GfK is one of the world’s largest research companies, with almost 13,000 experts working to discover new insights into the way people live, think and shop, in over 100 markets, every day. GfK is constantly innovating and using the latest technologies and the smartest methodologies to give its clients the clearest understanding of the most important people in the world: their customers. In 2012, GfK’s sales amounted to €1.51 billion.
To find out more, visit www.gfk.com