GfK Group Press Release 2010 financial figures Date March 31, 2011 Bernhard Wolf Corporate Communications Tel. +49 911 395-2012 Fax +49 911 395-4075 bernhard.wolf@gfk.com Marion Eisenblätter Corporate Communications Tel. +49 911 395-2645 Fax +49 911 395-4041 marion.eisenblaetter@gfk.com Highest income in the history of the GfK Group At EUR 1,294.2 million, GfK Group sales significantly above prior year s level and at a new record high Excellent margin of 14.3% Consolidated income increased by 38.8% to EUR 84.0 million Dividend set to increase significantly by 60% to EUR 0.48 (prior year: EUR 0.30) GfK SE Nordwestring 101 90419 Nuremberg Tel. +49 911 395-0 Fax +49 911 395-2209 public.relations@gfk.com www.gfk.com Management Board: Prof. Dr. Klaus L. Wübbenhorst (CEO) Pamela Knapp (CFO) Dr. Gerhard Hausruckinger Petra Heinlein Debra A. Pruent Wilhelm R. Wessels Supervisory Board Chairman: Dr. Arno Mahlert Commercial register Nuremberg HRB 25014 The outlook for 2011: sales growth of between 5% and 6% and a margin of at least 14.3% Nuremberg, March 31, 2011 In 2010, the GfK Group achieved the highest income in the company s 76-year history. At 14.3%, the margin reached a new peak. Sales increased by 11.1% to a record value of EUR 1,294.2 million. In financial year 2010, all three GfK sectors were able to increase their sales. The Custom Research and Retail and Technology sectors recorded considerable income growth and the Retail and Technology sector again improved its already very high margin. Sales increases were achieved in all regions, and were particularly strong in the growth regions of Latin America, Central and Eastern Europe, and Asia and the Pacific. Professor Dr. Klaus L. Wübbenhorst, CEO of the GfK Group, remarked: 2010 was an excellent year for GfK and we have emerged from the crisis year of 2009 in a stronger position than before. Sales and income have reached new record values and the dividend will also be the highest in our company s history. At the AGM taking place on May 26, 2011, the Supervisory and Management Boards will be proposing a dividend pay-out amounting to EUR 0.48 per no-par share for financial year 2010. This value is in line with the dividend policy of recent years and represents a pay-out ratio of around 20%. Page 1 of 9
Sales and income With sales of EUR 1,294.2 million, GfK significantly surpassed not only the adjusted forecast in its half-year report 2010, but also the previous year s figures. Overall, sales rose by 11.1%. The organic rise in sales amounted to an excellent 7.3%. Currency effects increased sales by 3.6%, while acquisitions added 0.2%. Adjusted operating income climbed from EUR 147.2 million to EUR 185.0 million. At 14.3%, the operating margin reached the highest value in the company s history. The adjusted operating income henceforth referred to as income is the indicator used to measure the success of the GfK Group. Adjusted operating income is reconciled with operating income by taking into account the highlighted items, which are deducted from the adjusted operating income. The highlighted items for the reporting year total EUR 48.3 million, following EUR 58.3 million in the prior year. Highlighted items include costs relating to the BISS fitness and efficiency program amounting to EUR 6.6 million (2009: EUR 16.0 million). The highlighted items also include writeups and amortization on hidden reserves disclosed as part of the purchase price allocation amounting to EUR 16.4 million (2009: EUR 27.5 million), expenses for share-based bonuses of EUR 9.8 million (2009: EUR 3.0 million) and remaining other operating income, of which the greatest share is attributable to exchange rate income totaling EUR 7.3 million (2009: EUR 4.8 million). Page 2 of 9
Investment and finance In 2010, GfK spent EUR 89.6 million on investments (2009: EUR 106.7 million). Of this investment, EUR 48.6 million (2009: EUR 49.0 million) related to the procurement of software, office equipment and other tangible assets and EUR 38.9 million (2009: EUR 55.1 million) to the acquisition of consolidated companies, minority participations and other business units. The rise in cash flow from ongoing operating activity from EUR 134.7 million to EUR 172.0 million is primarily attributable to the improved consolidated total income. Free cash flow after investments and acquisitions totaled EUR 85.8 million (2009: EUR 30.3 million) and, in addition to dividend and interest payments, enabled net indebtedness to be considerably reduced by EUR 52.2 million. Sectors: spotlight on consumers and markets Custom Research: Custom Research is the sector with the highest sales in the GfK Group and substantially increased its sales in 2010 to EUR 785.6 million. Sales were up 10.8% year-on-year, with 6.4 percentage points of this attributable to organic growth. One key factor driving this pleasing growth in sales was the upturn in business with clients from the automotive and financial market sectors. Further growth was generated in financial year 2010 in IT and telecommunications, as well as with new clients and market research instruments such as the GfK Media Efficiency Panel. Development was particularly positive in the region Western Europe/Middle East/Africa, which recorded the strongest sales growth. Substantial increases were also seen in the regions Germany, Central and Eastern Europe, and Latin America. Acquisitions added 0.6 percentage points, while currency effects had a positive impact on sales with growth of 3.7 percentage points. GfK strengthened its network in the USA with the acquisition of consultancy company Interscope, one of the leading specialists in brand positioning in retail. In terms of income, the sector recorded the highest growth rate with a disproportionately strong rise of 59.9% to EUR 63.2 million. The margin improved from 5.6% to 8.0% in financial year 2010. Alongside positive development in the economic framework conditions, which led to higher Page 3 of 9
capacity utilization, the BISS fitness and efficiency program also contributed to the income increase. Of the 59.9% expansion in income, nearly all (54.1%) is based on organic growth. In addition, currency influences added 4.9 percentage points to this positive development, while 0.9 percentage points stemmed from acquisition-related changes. Retail and Technology: In 2010, the sector once again continued the success recorded in previous years, with sales increasing by EUR 45.0 million to EUR 370.8 million. Organic growth accounted for 10.8 percentage points of the overall expansion of 13.8%. Currency influences contributed 3.6 percentage points to growth, while acquisitions accounted for a decline in sales of 0.6%. This effect is due to the transfer of surveys for fast moving consumer goods from GfK Switzerland to The Nielsen Company. The global production and reporting system GfK StarTrack facilitates costeffective production to the same standards worldwide and forms the basis for continuous sales growth. In financial year 2010, the sector, which has the highest income in the GfK Group, significantly increased its income by 18.8% to EUR 113.9 million. At 13.4 percentage points, growth was largely organic. Price effects increased income by 4.2% and acquisitions by 1.1%. The margin rose again from the previous year s already very high level of 29.4% to 30.7%. Media: The ongoing growth trend of the first three quarters of 2010 continued in the fourth quarter. Sales in the sector increased year-on-year by 5.3% to EUR 133.1 million, with organic growth contributing 2.1 percentage points and positive currency effects 3.2 percentage points. Development was especially positive in the regions of Germany, Central and Eastern Europe, and North America. The Media sector achieved increased sales to clients in the TV segment in particular. In Germany, the new, expanded measurement technology TC Score, which was launched in 2009 in the GfK Fernsehforschung TV panel, was the main contributor to higher Page 4 of 9
sales. In addition, the TV audience research contract in the Netherlands was extended again. The North American subsidiary GfK MRI also recorded a rise in incoming orders in the print segment following the market launch of the GfK AdMeasure product. In the multimedia segment, surveys included one for the British Broadcasting Corporation (BBC) covering TV, radio and internet, as well as interactive TV and mobile phone services. At EUR 15.6 million, the level of income in financial year 2010 did not match the figure in the previous year (EUR 16.6 million). This decline in income was primarily due to increased expenses for the roll-out of new metering technology in Germany and the new GfK AdMeasure product from subsidiary GfK MRI, with total expenditure of around EUR 4 million. In financial year 2010, the sector achieved a margin of 11.7% (2009: 13.1%). Other: Sales in this division amounted to EUR 4.7 million in the reporting period (2009: EUR 3.1 million). The income shortfall stood at EUR 7.7 million (2009: EUR 4.8 million). This was due to higher expenses for personnel and consulting services. Regions: growth in all regions The GfK Group s network of subsidiaries covers over 100 countries. In geographic terms, the business is divided into six regions: Germany: In financial year 2010, sales recorded by GfK companies in Germany rose by 13.1% to EUR 340.8 million. This positive development was primarily attributable to the Custom Research and Retail and Technology sectors. GfK is the clear market leader in Germany. Western Europe/Middle East/Africa: GfK once again generated the highest proportion of sales in this region in financial year 2010. Overall, sales rose here by 5.4% to EUR 483.0 million. Organic growth added 3.3 percentage points to sales, while currency effects accounted for 2.5 percentage points. Central and Eastern Europe: The GfK companies in the region achieved sales totaling EUR 89.7 million in financial year 2010, compared with EUR 71.7 million in the previous year. This corresponds to organic growth of 20.7%. The currency effect amounted to 4.5 percentage points. Overall, sales increased by 25.2%. Page 5 of 9
North America: GfK generated sales of EUR 219.3 million in North America compared with EUR 207.2 million in financial year 2009. For the full year, positive currency effects increased sales by 6.0 percentage points. In organic terms, sales remained almost unchanged during the reporting period, at -0.8 percentage points. Latin America: Compared to the previous year, the GfK Group increased its sales by 39.5% to EUR 54.9 million in the Latin American region during the reporting period. Currency effects added 12.0 percentage points to sales, while acquisitions increased sales by 5.4 percentage points. The region achieved the highest organic sales growth in the GfK Group, at 22.1%. Asia and the Pacific: Sales rose by 22.5% from EUR 86.9 million in 2009 to EUR 106.5 million in 2010. Consequently, the region broke through the EUR 100 million barrier for the first time. Organic growth in sales stood at 9.1 percentage points. Acquisitions increased sales by 0.9 percentage points, while positive currency effects added 12.5 percentage points. Employees: growth in Central and Eastern Europe and Asia As at the end of financial year 2010, the number of employees in the GfK Group amounted to 10,546. This is a rise of 488 employees, or 4.9%, on the previous year. Foreign GfK companies employed 8,715 members of staff, which represents an increase of 447 on 2009. In total, 82.6% of GfK employees worked outside Germany. Major events since the end of financial year 2010 On February 23, 2011, the longstanding CEO of GfK SE, Professor Dr. Klaus L. Wübbenhorst, advised the Supervisory Board that for personal reasons he will not be extending his contract, which runs until the end of July 2012. On January 1, 2011, GfK increased its holdings in SirValUse Consulting, the market leader for user experience consulting, and through an indirect participation, in nurago, one of the world s leading experts in digital brand, media and usability research, by 20% to a total of 60%. The companies are fully consolidated as of January 1, 2011. Customers include numerous international companies in the services sector and trade and industry, including Google, Deutsche Telekom, OTTO, ebay, LG and Samsung. Focus on digital media In terms of research and development, GfK is currently focused on expanding its range of services in the field of digital media measurement. The Custom Research sector, in partnership with experts from SirValUse and nurago, developed a number of innovative instruments in 2010 that enable the influence of the internet on purchase decisions and brand perception to be investigated and optimized. For example, the new tool GfK MarketObsurvey.dx allows GfK to analyze the online behavior of specific target groups using both qualitative and quantitative data derived from monitoring and Page 6 of 9
surveys. Clients can therefore gain a more in-depth insight into the usage patterns of their target groups, their motives and strategies when searching for information, and the latest trends. The new instrument GfK SiteObsurvey.dx combines the monitoring of website surfing behavior with a targeted satisfaction survey in order to analyze the strengths and weaknesses of an online presence and to improve usage and sales success. In the Media sector the Universal Meter System (UMS) was developed, which elevates the standard of media research to an entirely new level. By combining different technologies in a central measuring instrument, the aim is to record all electronic types of media consumption. The central element is the fixed meter device (UMX), which records all household media consumption through the television. By integrating the Mediawatch portable meter, which is worn by the participant and measures individual radio, TV and print consumption, GfK can also measure out-of-home consumption in addition to the media consumption in the home. In the Retail and Technology sector, GfK is concentrating on analyzing internet usage on mobile networks with the new research method GfK Network Intelligence Solution (GfK NIS). This innovative technology makes it possible to monitor mobile internet behavior and exposure to advertising campaigns in real time. Analysis is then carried out via the GfK StarTrack online portal. Trends in market research Digital media will play a decisive role in shaping the process of change in the market research industry. For example, the internet will soon be the most important platform for market research and is also becoming increasingly important as an object of research itself. Digitization and the ensuing flood of data is one of the challenges facing the market research industry. To date, the industry s main task has been to gather representative data. In future, however, the service provided by market research will not be limited to optimum data procurement; it will have to condense and analyze the data flows gained through new technologies and the online buzz and translate these into precise recommendations for action. GfK does not just present the data freely obtainable from the internet, but acts as an information specialist and expert in consumer insights. Strategic client consulting is firmly embedded in GfK s own corporate strategy as fact-based consultancy. Outlook Assuming a sustained economic upturn, GfK expects organic growth in sales of around 5% to 6% for financial year 2011, based on the companies included in the scope of consolidation at the start of the year. All three sectors will contribute to this with positive organic growth in sales. Despite planned investments, especially in the digital segment and in growth regions, GfK is setting itself a challenging target for its margin, that is the ratio of adjusted operating income to sales, of at least 14.3%. Page 7 of 9
2011 is already off to a promising start. As at the end of February 2011, the order book covers a total of 43.2% of expected annual sales (previous year: 41.1%). In future, the focus will continue to be on GfK s consistent international orientation and its expansion in growth markets. The standardization of methods, software and survey content, and synergies across the sectors, will also be further advanced. The Management Board believes that as a broad-based enterprise specializing in market research, the GfK Group is superbly positioned to balance out economic fluctuations. GfK will therefore be in a position to secure sustainable growth in sales and income in the medium term. The GfK Group The GfK Group offers the fundamental knowledge that industry, retailers, services companies and the media need to make market decisions. It delivers a comprehensive range of information and consultancy services in the three business sectors Custom Research, Retail and Technology and Media. The No. 4 market research organization worldwide operates in more than 100 countries and employs over 10,000 staff. In 2010, the GfK Group s sales amounted to EUR 1.29 billion. For further information, visit our website: www.gfk.com. Follow us on Twitter: www.twitter.com/gfk_group. Provisional key dates in the financial calendar May 16, 2011 Quarterly report as at March 31* May 26, 2011 Annual General Meeting, Fürth, Germany August 15, 2011 Interim half-year report as at June 30* November 14, 2011 Interim nine-month report as at September 30* * Publication is scheduled for before the start of the trading season. Responsible under press legislation GfK SE Corporate Communications Bernhard Wolf Nordwestring 101 90419 Nuremberg Tel. +49 911 395-2012 Fax +49 911 395-4075 bernhard.wolf@gfk.com Page 8 of 9
Disclaimer This information is not intended for publication or distribution in the United States of America. This publication does not constitute an invitation to buy securities in the United States of America. GfK SE securities may not be offered or sold in the United States of America without registration or the relevant exemption from the duty of registration pursuant to the Securities Act of 1933 in its valid version. This press release contains forward-looking statements. Forward-looking statements are statements that do not describe events of the past. They also comprise statements regarding our assumptions and expectations. Each statement in this press release that reflects any intentions, assumptions, expectations or forecasts by us (and any underlying assumptions) is a forwardlooking statement. These statements are based on forecasts, estimates and predictions currently available to the management of the GfK Group. Forward-looking statements relate therefore only to the date on which such statements are made. We assume no liability to update such statements on the basis of new information or future events. Page 9 of 9