Annual Results 2016 - GfK › fileadmin › user_upload › website...2017/03/14 · 2016 vs. 2015 Changes in m€ Consolidated total income 40.7 -136.5 -177.2 Amortization (incl

1© GfK 2017 | Analyst call | March 14, 2017

Annual Results 2016GfK SE – Analyst Call

March 14, 2017


2016:

Setting the course in a challenging yearGerhard Hausruckinger | Speaker of the Management Board and CCO

GfK SE

March 14, 2017


2016: Setting the course in a challenging year

Good start in Q1

Unsatisfying Q2

- CE: weak order intake

- Start-up difficulties in important projects

(particularly TAM Brazil)

- Decrease in margin despite cost reduction

measures

Preparation and evaluation of alternative

strategic options

Still unsatisfactory sales and margin

development despite some progress in order

intake

Strong focus on

- Clients & growth

- Speed & simplicity

- Commitment & enablement

Support of KKR transaction

1st half of 2016 2nd half of 2016


Netquest (acquisition)

Leading provider of:

Access panels

Behavioral data

High-quality, cross-device digital panel

solutions

Strong presence in Spain, Portugal and

Latin America

Geographic expansion

underway

Digital innovations continue to be major focus

SUPERCRUNCH by GfK (own initiative)

Data scientists, software experts,

consultants and industry specialists

Automated, user-defined analyses

From data science consultancy

to full service software

Expansion beyond existing

GfK product portfolio


Key figures for 2016

Adjusted operating income of 155.3 m€ (2015: 187.6 m€)

Margin of 10.5% (2015: 12.2%)

Consolidated total income -136.5 m€ (2015: 40.7 m€)

Consolidated total income w/o goodwill impairments: 0.5 m€ (2015: 80.1 m€)

Cash flow from operating activity decreased to 146.2 m€ (2015: 170.9 m€)

Investments amounting to 102 m€ (2015: 137 m€)

Sales 1,484 m€ (2015: 1,543 m€)

Organic growth -1.7%

Overall growth due to currency effects -3.9%

Growth

Income

Cash Flow &

Investment


Sales growth in % for FY 2016

1 Data Investment Management segment isolated. Comprises Kantar, TNS, Millward Brown and The Futures Company, among others. Comparison analysis on revenue basis

GfK, IPSOS and Nielsen report final figures, WPP reports on preliminary basis

GfK and Peers

-1.7

-3.9

-2.2

4.1

2.2

n/a

-0.1

3.0

n/a

9.7

-0.9

0.4

Data Investment Management1

Ipsos does not report

growth at constant

FX rates

Nielsen does not report

organic growth

Total Organic At constant currency


2016: Key figures of the financial yearChristian Diedrich | CFO

GfK SE

March 14, 2017


GfK Group – full year results

Y/Y decline in revenue, AOI and margin

• Organic revenue decline of -1.7% driven by sector Consumer Experiences

• Inorganic growth driven by NORM and Netquest, offset by divestiture of ‘Crop Protection and Animal Health Business‘

• Headwind from foreign exchange rate of -1.6%, mainly impacted by GBP

• Adjusted operating income down -32.3m€ Y/Y resulting in a margin deterioration of -1.7pts

• Consumer Choices margin down -4.5pts driven by TAM Brazil and AutoCat

• Consumer Experiences margin at 6.7% – margin decline of -0.1pts Y/Y despite strong performance in Q4

• Improvement in sector Other due to tight management of spending and reduced performance based remuneration

Sales

D Din m€ 2016 vs 2015 2016 vs 2015

Consumer

Choices680.3 -0.1% 4.1% -3.5% -0.7% 114.6 -30.5 16.8% -4.5pts

Consumer

Experiences803.0 -6.5% -6.4% 2.2% -2.3% 54.0 -4.9 6.7% -0.1pts

Other 0.5 - - - - -13.3 3.1 - -

Group 1,483.8 -3.9% -1.7% -0.5% -1.6% 155.3 -32.3 10.5% -1.7pts

ActualActual Total Organic Inorganic FX effect Actual

FY 2016Growth rate in % AOI Margin in %


Sales 2016 in m€

3 out of 6 regions growing organically

Strong organic growth in Latin America and CEE/META offset by

decline in North America and Europe

62

2

North America 290 m€ Northern Europe 537 m€ CEE/META 128 m€

9M Q4 FY 9M Q4 FY 9M Q4 FY

Total -9.2% -11.0% -9.7% Total -5.4% -9.7% -6.6% Total -1.3% 7.8% 1.1%

Organic -6.8% -7.1% -6.9% Organic -1.8% -2.8% -2.1% Organic 4.1% 7.8% 5.1%

FX -0.2% 0.9% 0.1% FX -2.2% -3.1% -2.4% FX -5.4% 0.0% -4.0%

Latin America 70 m€ Southern and Western Europe 270 m€ Asia and the Pacific 189 m€

9M Q4 FY 9M Q4 FY 9M Q4 FY

Total 8.3% -9.0% 2.6% Total -0.3% 4.8% 1.0% Total 0.3% 7.5% 2.1%

Organic 16.1% -14.9% 5.4% Organic -3.9% 0.6% -2.7% Organic 0.5% 7.4% 2.3%

FX -14.4% -0.5% -9.3% FX 0.0% 0.0% 0.0% FX -0.1% 0.5% 0.1%


1.0

0.5

-1.7

12.2

Acquisitions/

Divestitures2015

-0.3

CE revenue

deterioration

-0.9

POS

business

-0.2

Media

Measurement

-1.8

10.5

Restructuring/

Utilization

Mix/Other 2016

FY 2016 AOI margin compared to FY 2015 (in pts)

GfK Group – AOI Margin Bridge


168

78

-416

YE 2016

13,069

GSC ramp-up

and Other

Acquisition/

Divestment

Sector

CE

-581

Sector

CC

-81

YE 2015

13,485

Productivity and capacity management Scope of consolidation and GSC

GfK Group – Staff Development


GfK Group: Consolidated income statement

In m€ 2015 2016

2016 vs. 2015

Changes in %

Sales 1,543.4 1,483.8 -3.9

Gross income from sales 481.5 424.7 -11.8

SGA expenses -302.2 -296.5 +1.9

Other operating expenses (net) -75.1 -183.5 -144.3

Highlighted items 83.4 210.5 +152.3

Adjusted operating income 187.6 155.3 -17.2

AOI Margin 12.2% 10.5% -1.7pts

Highlighted items -83.4 -210.5 -152.3

Operating income 104.2 -55.2 -

Income from participations 2.0 5.2 +157.2

EBIT 106.2 -50.1 -

EBIT Margin 6.9% -3.4% -10.3pts

EBITDA 231.2 183.1 -20.8

EBITDA Margin 15.0% 12.3% -2.7pts.

Financial result -18.3 -12.7 +30.6

Income before tax 87.9 -62.8 -

Tax on income -47.2 -73.7 -56.3

Tax rate 53.7% -117.5% -

Consolidated total income 40.7 -136.5 -

Earnings per share in € 1.01 -3.85 -

Tax rate distorted by goodwill impairment

which has no tax impact

-1.7% organic “growth”

-1.6% currency effect

-0.5% from acquisitions/divestments

Incl. -136.9m€ goodwill impairment

Interest expenses and FX effect improved


GfK Group: Highlighted items

In m€ 2015 2016

Goodwill impairment -39.4 -136.9*)

Write-ups and write-downs of additional assets

identified on acquisitions-4.3 -16.5

Income and expenses in connection

with share and asset deals+8.7 -4.7

Income and expenses in connection

with reorganization and improvement projects-22.8 -22.1

Personnel expenses for share-based incentive payments -1.9 -7.4

Currency conversion differences -2.2 +0.3

Expenses from litigation, compliance cases and

terminated projects-22.9 -16.9

Remaining highlighted items +1.5 -6.4

Total highlighted items -83.4 -210.5

Sector CE; all regions affected

except for CEE/META

Including impact of provisions for Media

Measurement risks.

2015: Mainly write-down on Mobile Insight /

Location Insight and CPIMS/NEO

*) goodwill impairment reflected in the balance sheet: -137.0m€

(average FX rates vs. spot rates)

Mainly severance payments

Including impact of KKR transaction

Reassessment of growth prospects

in sector CE


Assets in m€ Dec. 31, 2015 Dec. 31, 2016 Change in m€ Share 2016 in %

Goodwill 774.0 642.7 -131.3 37.3

Other non-current assets 447.7 422.8 -24.9 24.6

Non-current assets 1,221.7 1,065.5 -156.2 61.9

Trade receivables 396.3 408.8 +12.6 23.8

Other current assets 184.9 244.3 +59.3 14.2

Assets held for sale 39.4 2.3 -37.1 0.1

Current assets 620.6 655.4 +34.8 38.1

Assets 1,842.3 1,720.9 -121.4 100.0

Equity and liabilities in m€ Dec. 31, 2015 Dec. 31, 2016 Change in m€ Share 2016 in %

Equity 720.5 538.2 -182.3 31.3

Non-current financial liabilities 256.4 451.0 +194.6 26.2

Other non-current liabilities 184.3 214.8 +30.5 12.5

Non-current liabilities 440.7 665.8 +225.1 38.7

Operating liabilities 257.9 251.2 -6.7 14.6

Other current liabilities 415.6 265.6 -150.1 15.4

Liabilities held for sale 7.6 0.1 -7.4 0.0

Current liabilities 681.1 516.9 -164.2 30.0

Equity and liabilities 1,842.3 1,720.9 -121.4 100.0

Change includes goodwill impairment

2015: Mainly 'Crop Protection and Animal

Health Business'

2016: Real estate Switzerland

Increase mainly in bank balances

Change includes goodwill impairment,

dividend payments and currency effects

Change includes repayment and refinancing

of bond

GfK Group: Consolidated balance sheet


GfK Group: Cash flow

In m€ 2015 20162016 vs. 2015Changes in m€

Consolidated total income 40.7 -136.5 -177.2

Amortization (incl. reversal) 128.8 234.7 +106.0

Changes in inventories, receivables, payables -4.3 -10.8 -6.6

Others 32.9 102.0 +69.1

Interest result 15.8 12.4 -3.4

Taxes paid -43.0 -55.6 -12.7

Cash flow from operating activity 170.9 146.2 -24.7

CAPEX -94.1 -71.0 +23.1

Acquisitions, other financial investments

and asset disposals17.8 -0.4 -18.2

Free cash flow after acquisitions,

other investments and asset disposals94.6 74.8 -19.8

Cash flow from financing activity -59.4 -32.1 +27.3

Incl. 136.9m€ goodwill impairment

Improvement in non-operating working

capital (2015: Turkey fraud payments) and

higher deferred tax expense (=non-cash)

Reduced investments in panel set-up and

software

Includes balance of Netquest acquisition and

divestiture of ‘Crop Protection and Animal

Health Business’

Increase in current tax expense has

translated into higher tax payments

year to date


In m€ 2014 2015 2016

< 3Y 62% 52% 25%

3 - 5Y 6% 34% 41%

> 5Y 32% 14% 34%

Total bank debt (gross) -389 -437 -449 Maturing bond fully refunded by

bank term loans and German

Schuldscheine

Revolving Credit Facility

(committed) was extended to

2021, currently not used

Maturities up to 2028 (11 years)

75% funded for more than 3 years

Cash increased to 175m€

Cash 93 130 175

Total bank debt (net) -296 -307 -274

RCF/Credit Lines 279 286 282

Ø YE Total Interest 3.97% 3.23% 1.52%

Funding structurein %

31

1411

43 51

22

27

Bond

Schuldschein fix

Bank loans

Schuldschein floating

Balanced Profile

Maturity profile of financial debt significantly improved vs. prior years


63 6849

28 26

22

9

43

31

0

40

80

120

160

200

2014 2015 2016

100

137*

102

In m€

2016 Business expansion

investment at reduced level

(2015: Largest investments for

Audience Measurement projects)

Ongoing high investment in IT

Infrastructure and Data &

Technology

Business Expansion Financial Investment and NPD deal (2015)Replacement

* Includes effect of unbundling of cross shareholding with The NPD Group.

GfK Group – Investments


OT CECC

20 21 20

29 30

48

10 7

9

0

20

40

60

80

100

2014 2015 2016

59 58

78

In m€

In 2016 increasing

amortization/depreciation in

Consumer Choices due to

• Audience Measurement projects

• StarTrack/Neo

investment of the past

• AutoCat ramp-down

GfK Group – Amortization/Depreciation


Reduction of complexity continued

2016: Number of legal entities reduced to 172

ReductionExpansion Entities as at Dec 31st

• Total number of entities has been reduced

from 182 to 172 by end of 2016

• Acquisition of Netquest (8 entities)

• 19 entities were merged, sold or liquidated

• On January 1, 2017, three more entities

were merged into other existing entities

• Streamlining efforts will continue

Number of legal entities

224

209203 201

189184 182

172

6

810 11

49 9

21

1412

23

9 11

19

150

170

190

210

230

2009 2010 2011 2012 2013 2014 2015 2016

-23%


2017: New momentum for a successful

future of GfKGerhard Hausruckinger | Speaker of the Management Board and CCO

GfK SE

March 14, 2017


Guidance 2017

Sales coverage at the end of January 2017 was 43.2% of predicted annual sales (2016: 43.8%),

which is in line with the historic range of 37% to 44% over the last 5 years.

Sales Coverage

GfK expects a continued challenging competitive environment. The risks especially with respect

to the TV Audience Measurement contracts in Brazil and the Kingdom of Saudi Arabia will

continue into the current fiscal year. For 2017 the group expects, depending on the mentioned

challenges, a sales development slightly above 2016 and an AOI margin (adjusted operating

income against sales) in the same range as 2016.

Guidance


Voluntary takeover offer by KKR

Offer price of

€43.50 per share;

GfK Verein supports

offer (Dec. 21, 2016)

Additional 10.06% of the

share capital to be

attributed to Acceleratio

(March 2, 2017)

New momentum

for a successful

future of GfK

GfK‘s Management and

Supervisory Boards

support offer

(Dec. 30, 2016) All completion conditions

satisfied (March 2, 2017)

Future shareholder structure :

85.85% GfK Verein and Acceleratio

14.15% FreefloatKKR announces

voluntary takeover

offer (Dec. 8, 2016)

Shareholding quota of

tender amounts to

19.33% at expiry of

acceptance period

(March 1, 2017)

Market research

industry know how

International

network

Track record of

successful investments

KKR‘s engagement is promising due to


New CEO as of March 15: Peter Feld

Peter Feld

Most recently: CEO of WMF Group

Before: Member of Management Board of

Beiersdorf

Previous companies: Johnson & Johnson,

Procter & Gamble


Q&A


Appendix


GfK Group – single Q4 2016

Y/Y decline in revenue, AOI and margin

• Organic revenue decline of -1.8% driven by sector Consumer Experiences

• Inorganic growth driven by Netquest, overcompensated by divestiture of ‘Crop Protection and Animal Health Business‘

• Headwind from foreign exchange rate of -1.0%

• Adjusted operating income down -14.5m€ Y/Y resulting in a margin deterioration of -2.9pts

• Consumer Choices margin down -5.9pts driven by TAM Brazil and AutoCat

• Consumer Experiences strong performance, margin improvement of 1.4pts due to efficiency efforts and cost management

• Sector Other Y/Y deterioration due to timing effects

Sales

D D

in m€Q4 2016 vs

Q4 2015

Q4 2016 vs

Q4 2015

Consumer

Choices178.4 -5.1% 0.7% -5.7% -0.2% 33.9 -12.9 19.0% -5.9pts

Consumer

Experiences228.4 -3.2% -3.7% 2.2% -1.6% 26.1 2.5 11.4% 1.4pts

Other 0.0 - - - - -5.8 -4.2 - -

Group 406.8 -4.2% -1.8% -1.5% -1.0% 54.2 -14.5 13.3% -2.9pts

Actual Actual

Single Q4

2016

Growth rate in % AOI Margin in %

Actual Total Organic Inorganic FX effect


GfK Group – full year results per quarter per sector

Organic sales development

D D D D D

2016 vs 2015 2016 vs 2015 2016 vs 2015 2016 vs 2015 2016 vs 2015

Sales 169.9 9.8% 165.9 3.7% 166.1 3.0% 178.4 0.7% 680.3 4.1%

AOI 27.5 0.3 21.2 -11.1 32.0 -6.8 33.9 -12.9 114.6 -30.5

Margin in % 16.2% -1.1pts 12.8% -6.5pts 19.3% -3.7pts 19.0% -5.9pts 16.8% -4.5pts

Sales 190.5 -6.0% 195.2 -9.5% 189.0 -6.7% 228.4 -3.7% 803.0 -6.4%

AOI 7.7 1.6 8.4 -7.1 11.8 -2.0 26.1 2.5 54.0 -4.9

Margin in % 4.0% 1.1pts 4.3% -2.8pts 6.2% -0.6pts 11.4% +1.4pts 6.7% -0.1pts

Sales 0.1 - 0.1 - 0.2 - 0.0 - 0.5 -

AOI -3.0 2.9 -2.8 1.1 -1.6 3.3 -5.8 -4.2 -13.3 3.1

Sales 360.5 0.9% 361.2 -3.7% 355.3 -2.3% 406.8 -1.8% 1,483.8 -1.7%

AOI 32.1 4.8 26.8 -17.1 42.2 -5.5 54.2 -14.5 155.3 -32.3

Margin in % 8.9% 1.4pts 7.4% -4.0pts 11.9% -1.0pts 13.3% -2.9pts 10.5% -1.7pts

Q3 2016 2016

Actual Actual Actual

Q4 2016Q1 2016 Q2 2016

Consumer

Choices

Consumer

Experiences

Other

Group

FY 2016

quarter viewin m€ Actual Actual


71

346 334 360 372 374

119

573

445 413 402

269

2004 2012 2013 2014 2015 2016

CC

CE

Goodwill

in m€

774

643

GfK´s strategy, the changing market environment

and the effect on goodwill

• Focus on acquisitions to achieve a global footprint

• Strong growth of market research industry

• Competitive M&A environment drove high multiples

• Strong increase of goodwill

• GfK managed as “Holding” company with independent local entities

"Internationalization“ of GfK – pre 2012

• New strategy focusing on organic growth. Selective, technology driven

acquisitions

• Decelerated growth, price pressure and commoditization in Custom

Research market

• Impairment test based on current market conditions and the new

GfK business model

• Goodwill impairment is cash neutral and therefore has no effect on

investments and future business success

• The impairment 2016 resulted essentially from adjusted growth

prospects in nearly all regions in sector CE (except for CEE/META)

"Globalization and Integration" of GfK – since 2012

Pre new

strategy

Post new strategy

919

779 773

190

CE

goodwill

impairment

-113

Group:

FX effect

-29

Goodwill impairment in Balance sheet Dec. 31, 2016: 137.0 m€, FX rate as of December 31, 2016;

Goodwill impairment in Income Statement 2016: 136.9 m€, average FX rate (12 months 2016)

CE

goodwill

impairment

-63

Group:

FX effect

+53

CE

goodwill

impairment

-40

Group:

FX effect

+45

CE

goodwill

impairment

-137

Group:

FX effect

-23

45.6 41.3 39.1 39.9 39.1 31.3

Equity

ratio

in %


Net Debt in 2016 below 2015

Net debt to EBITDA (IFRS) at 2.08 – stable investment grade

2013 2014 2015 2016

CAPEX in m€ -80 -89 -94 -71

Net M&A in m€

(after divesture of assets)-38 -10 -43 -4

Net Debt IFRS in m€ -428 -393 -400 -382

Net Debt/EBITDA IFRS 1.90 1.94 1.73 2.08

IFRS Net Debt

EBITDA

428393 400 382

225202

231183

Documents

Annual Results 2016 - GfK › fileadmin › user_upload › website...2017/03/14 · 2016 vs. 2015 Changes in m€ Consolidated total income 40.7 -136.5 -177.2 Amortization (incl