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Group Management Report

 

2. Economic report

2.1 Introduction

GfK has a matrix organization consisting of two globally responsible sectors with product responsibility as well as six regions tasked with managing local business. This structure facilitates the integration of a global product range with excellent services offered to global clients. Beyond this, it also enables both sectors to fully exploit the potential offered by regional markets.

The GfK Group prepares its consolidated financial statements in accordance with the International Financial Reporting Stan­dards (IFRS). The financial data for the sectors and regions originate from our Management Information System.

For internal management of both sectors, GfK applies the financial key performance indicators of sales and adjusted operating income/margin, which is also used as an indicator of income by some of its competitors.

GfK is confident that the explanations regarding business performance using adjusted operating income will facilitate the interpretation of the GfK Group’s business development and enhance the informative value in comparison with other major companies operating in the market research industry. Consequently, where income is mentioned below, this is the adjusted operating income. The margin is the ratio of adjusted operating income to sales. 

The development of the order position in relation to the expected annual sales for the current financial year is another important indicator. This statistic, referred to as the level of sales coverage, is determined on a monthly basis and is closely monitored by GfK’s management. In general, half the planned annual sales are already reported as assured contracts in the first quarter.  

Admittedly, the picture varies between the two sectors. In the panel-based Consumer Choices sector, contracts are largely renewed during the first three months of the fiscal year. However, in some cases, contracts here may provide for surveying on a continuous basis for several years. As a result of the greater weighting of ad hoc studies in the Consumer Experiences sector and the lower proportion of continuous data collection, incoming orders for this sector tend to be more evenly spread over the year as a whole. The adjusted operating income is calculated as follows:

reconciliation of adjusted operating income 1)
in € million 2014 2015 Change in percent
Operating income 68.0 104.2 + 53.2
Goodwill impairment 59.5 39.4 – 33.7
Write-ups/write-downs of additional assets identified on acquisitions
Scheduled amortization/depreciation 7.4 4.9 – 33.9
Impairments 8.4 3.4 – 59.5
Reversal of impairments – 4.4 – 4.0 – 9.1
Income and expenses in connection with share and asset deals 1.0 – 8.7
Income and expenses in connection with reorganization and improvement projects 17.1 22.8 + 33.5
Personnel expenses for share-based incentive payments 1.0 1.9 + 88.7
Currency conversion differences 1.1 2.2 + 96.1
Income and expenses related to one-off effects and other exceptional circumstances 19.7 21.4 + 8.6
Total highlighted items 110.9 83.4 – 24.7
Adjusted operating income 178.8 187.6 + 4.9
1) Rounding differences may occur

Where statements below refer to the number of employees, in principle, this represents the total number of full-time posts. For this purpose, part-time posts have been converted to equate full-time employment.

The figures on the business development of the GfK Group and any percentage changes are based on figures in € thousand. Accordingly, rounding differences may occur.  

As part of its global strategy, GfK has pooled overlapping administrative functional areas of the Other category. 

The companies mentioned in the Group Management Report are referred to by their abbreviated names. The Additional Information section of the Annual Report includes a list of all companies in the GfK Group.

2.2 GfK Group: Back on track

In 2015, the GfK Group achieved sales of € 1,543.4 million, 6.2 percent above the previous year’s figure. With organic growth at 1.1 percent, currency effects contributed 5.0 percent to the increase, while acquisitions resulted in a 0.1 percent growth.

Development of earnings 1)
in € million 2014 2014 excluding goodwill impairment 2015 2015 excluding goodwill impairment Change in percent
Sales 1,452.9 1,452.9 1,543.4 1,543.4 +6.2
Cost of sales -990.6 -990.6 -1,061.9 -1,061.9 +7.2
Gross income from sales 462.3 462.3 481.5 481.5 +4.1
Selling and general administrative expenses -301.0 -301.0 -302.2 -302.2 +0.4
Other operating income 7.8 7.8 19.8 19.8 +153.4
Other operating expenses -101.2 -41.7 -94.9 -55.5 +33.2
EBITDA 202.2 202.2 231.2 231.2 +14.4
as a percentage of sales 13.9 13.9 15.0 15.0 -
Adjusted operating income 178.8 178.8 187.6 187.6 +4.9
as a percentage of sales 12.3 12.3 12.2 12.2 -
Highlighted items -110.9 -51.4 -83.4 -44.0 -14.3
Operating income 68.0 127.5 104.2 143.6 +12.6
as a percentage of sales 4.7 8.8 6.7 9.3 -
Income from participations 4.0 4.0 2.0 2.0 -49.4
EBIT 71.9 131.4 106.2 145.6 +10.7
as a percentage of sales 5.0 9.0 6.9 9.4 -
Other financial income -24.4 -24.4 -18.3 -18.3 -25.0
Income from ongoing business activity 47.6 107.1 87.9 127.3 +18.9
Tax on income from ongoing business activity -28.2 -28.2 -47.2 -47.2 +67.2
Tax ratio in percent 59.3 26.3 53.7 37.0 -
Consolidated total income 19.4 78.9 40.7 80.1 +1.6
Attributable to equity holders of the parent 5.9 65.4 36.8 76.2 +16.6
Attributable to minority interests 13.5 13.5 4.0 4.0 -70.7
Consolidated total income 19.4 78.9 40.7 80.1 +1.6
Earnings per share (undiluted) in € 0.16 1.79 1.01 2.09 +16.8
1) Rounding differences may occur

The percentage rise in cost of sales was similar to that of sales. It amounted to € 1,061.9 million, corresponding a 7.2 percent increase. As a result, the gross income from sales rose by 4.1 percent, reaching € 481.5 million.

The selling and general administrative expenses almost matched the previous year’s. After a rise of just 0.4 percent compared to the previous year, they came to 302.2 million euro in 2015. This meant a total increase in the sum of cost of sales and selling and general administrative expenses of 5.6 percent; a smaller growth than that in sales.

Personnel expenses constitute a major part of the cost of sales as well as selling and general administrative expenses. These grew by 8.6 percent to € 765.9 million. Personnel expenses are also strongly influenced by changes in the exchange rate. In 2015, several of the GfK Group’s major currencies gained in strength against the euro: the U.S. dollar by 20 percent, the Chinese yuan by 17 percent, the Swiss franc by 14 percent and pound sterling by 11 percent. As a result, the costs incurred in those countries and currencies rose by the equivalent amount in euro. The increase in the number of employees was rather moderate, rising by 0.8 percent, or 105 people, to 13,485 employees at the end of 2015. Given that the relative increase in personnel costs was slightly above that of sales, the personnel cost ratio, which represents the relationship of personnel expenses to sales, amounted to 49.6 percent (previous year: 48.5 percent).

GfK increased its adjusted operating income by € 8.7 million to €  187.6 million. This equates to a rise of 4.9 percent. The margin, which expresses the relationship of adjusted operating income to sales, was 12.2 percent (previous year: 12.3 percent).

Other operating income increased by € 12.0 million to € 19.8 million. The reason for this increase is income of €12.0 million in connection with the disposal of minority shareholdings. On Novem­ber 23, 2015, GfK and The NPD Group, Inc., USA, discontinued and unwound their cross-ownership and former joint activities in the Consumer Choices sector and entered into a new strategic contractual partnership. The NPD Group previously held minor direct or indirect shares in a variety of fully consolidated GfK subsidiaries. GfK had shareholdings with significant influence in several of The NPD Group subsidiaries, which were classified as associated companies from GfK’s perspective, as well as a profit-sharing agreement regarding certain business activities. This divestiture ended all mutual stakes.

Other operating income also includes profit made from the sale of real estate owned by GfK Switzerland amounting to € 1.1 million. Currency gains fell from € 3.0 million in the previous year to € 2.3 million.  

After the currency losses in other operating expenses increased by € 0.4 million to € 4.5 million, net foreign exchange losses resulting from operating activity in foreign currency amounted to € 2.2 million (previous year: € 1.1 million).

Overall, other operating expenses fell by € 6.2 million to € 94.9 million. This decline can be attributed to opposing events: On the one hand, goodwill impairment amounted to € 39.4 million. This represents a year-on-year decline of € 20.1 million. The cause of this impairment was adjusted growth prospects in Central Eastern Europe/META as well as Southern and Western Europe. On the other hand, impairments of tangible and intangible assets rose from € 1.8 million in the previous year to € 24.0 million in 2015. This includes impairments amounting to € 20.0 million, which relate to the termination of the network-based development activities in Mobile Insight/Location Insight as well as two modules of the digital analysis and production platform, CPIMS/NEO.

Personnel costs included in other operating expenses have also risen, increasing from € 10.8 million in the previous year to € 14.5 million in 2015. These were mostly severance payments related to reorganization projects.

Expenses, in particular legal and consulting costs, relating to the irregularities uncovered at a Turkish subsidiary in 2012, account for € 1.3 million of our other operating expenses. In the previous year, such expenses amounted to € 12.1 million, which largely consisted of retrospective tax payments and penalties. For ongoing court proceedings and social security risks, the company incurred costs of € 5.9 million in the previous year. These amounted to just € 0.2 million in 2015.

Highlighted items came to a total of € 83.4 million. Adjusted for goodwill impairments, highlighted items would have amounted to € 44.0 million. This represents a decline of € 7.3 million on the previous year’s similarly adjusted figure of € 51.4 million.

Considering the development of the highlighted items, the report gives a heterogeneous picture as well. While the write-ups and write-downs of additional assets identified on acquisitions as well as income and expenses in connection with share and asset deals fell by € 7.1 and € 9.7 million respectively, the net expenses in connection with reorganization and improvement projects rose by € 5.7 million. The same is true for personnel expenses for share-based incentive payments (increase of € 0.9 million in costs), currency conversion gains and losses (increase of € 1.1 million in costs) and the income and expenses related to one-off effects and other exceptional circumstances, which increased by € 1.7 million to an expense of € 21.4 million.

The latter items include the above-mentioned impairments to the developments in Mobile Insight/Location Insight and parts of the CPIMS/NEO software, amounting to € 20.0 million, as well as the positive influences of the cost reductions of € 10.8 million relating to the incidents in Turkey, and of the € 5.7 million decline in court proceedings and social security risks. This item also includes income from the property sale in Switzerland amounting to € 1.1 million.

The decline in write-ups and write-downs of additional assets identified on acquisitions affects both scheduled amortization, which fell by € 2.5 million to € 4.9 million, and impairments, which amounted to just € 3.4 million after the previous year’s € 8.4 million. Reversals of impairment losses were practically unchanged at € 4.0 million (2014: € 4.4 million).

The income and expenses in connection with share and asset deals are positive due to the above-mentioned income amounting to € 12.0 million from the disposal of minority shareholdings. They amounted to € 8.7 million after expenses of € 1.0 million in the previous year. In addition, this item mainly includes costs related to the sale of our market research business in crop protection and animal health, scheduled for the first half year 2016.

The net expenses in connection with reorganization and improvement projects, which increased by € 5.7 million to € 22.8 million, are dominated by expenses on redundancy settlements, which rose by € 10.8 million to € 13.9 million. Other reorganization costs increased by € 2.3 million to € 2.7 million. These include impairments, consulting fees and other costs from streamlining and optimizing business areas at selected subsidiaries.

Operating income increased by € 36.2 million to € 104.2 million. Adjusted for the expense of the goodwill write-down, the figure would have amounted to € 143.6 million, compared with the respective adjusted figure of € 127.5 million from the previous year. This corresponds to an increase of 12.6 percent.

Amortization and depreciation decreased by € 5.2 million to € 125.1 million. Without the fall in goodwill impairment of € 20.1 million to € 39.4 million, the figure would have increased by € 14.9 million. This increase is attributable to the aforementioned € 20.0 million impairment in Mobile Insight/Location Insight and CPIMS/NEO and an increase in scheduled amortization and depreciation on intangible and tangible fixed assets by € 1.5 million to € 58.4 million as a result of an increase in investments. Conversely, scheduled amortization of additional assets identified on acquisitions fell by € 2.5 million to € 4.9 million. Impairments on these assets amounted to € 3.4 million, down € 5.0 million on the previous year.

Income from participations fell by € 2.0 million to € 2.0 million. This includes income from associated companies, which is mainly responsible for the decline. One-off losses in the amount of € 1.9 million were incurred in relation to the restructuring of an associated subgroup. There was also an impairment of € 2.2 million to a stake in an associated company. These negative effects could not be entirely offset by the € 1.8 million improvement in the income attributed from other associated companies.

EBIT amounted to € 106.2 million in the reporting year. This equates to a year-on-year increase of € 34.2 million. After eliminating the goodwill impairment in both the year under review and the previous year, EBIT would stand at € 145.6 million. This is an increase of 10.7 percent or € 14.1 million.

EBITDA, which is unaffected by the goodwill impairment, rose by 14.4 percent or € 29.0 million to € 231.2 million. The increase in EBITDA is higher than that of the EBIT adjusted for goodwill impairment, as write-downs included in EBIT, which are added for the EBITDA calculation, are € 14.9 million above those of the previous year.

Other financial income improved significantly compared to the previous year. Net expenses amounted to € 18.3 million after € 24.4 million in the previous year. All elements of our financial income have experienced growth: net interest income increased by € 2.8 million to a net expense of € 16.6 million; financial currency expenses fell by € 1.1 million to € 2.4 million; miscella­neous financial income improved by € 2.2 million, resulting in a net income of € 0.7 million.

Income from ongoing business activity rose from € 47.6 million to € 87.9 million. Adjusted for goodwill impairment, this represents an increase of 18.9 percent, rising from from € 107.1 million in the previous year, to € 127.3 million in 2015.

The computed income tax rate is 53.7 percent (previous year: 59.3 percent). Both rates are influenced to a significant extent by the respective goodwill impairment, as the result of this is no tax expense or income in parallel with a reduction in pre-tax profit. The adjusted tax rates would be 26.3 percent for 2014 and 37.0 percent for 2015.

Tax expenses in the previous year were positively impacted by the new assessment of the feasibility of tax loss carry-forwards at a U.S. subsidiary as a result of an increase in planned tax income and the establishment of a tax group in France. In total, this amounts to € 16.2 million, an improvement of 15.1 percentage points on the tax rate last year.

The consolidated total income of the GfK Group was € 40.7 million compared with € 19.4 million in the previous year. Excluding the impact of goodwill impairment in both the year under review and the previous year, the consolidated total income would have risen by 1.6 percent to stand at € 80.1 million. The consolidated total income attributable to minority interests, which is unaffected by the goodwill impairment, fell by 70.7 percent, despite the increase in consolidated total income.

The reason for this lies predominantly with the above-mentioned transaction to dissolve cross-shareholdings with The NPD Group, Inc., USA. With a constant number of shares, this also contributes to an increase in earnings per share which rose from € 0.16 to € 1.01. Adjusted for goodwill write-downs, this amounts to € 2.09, after € 1.79 in the previous year, an increase of 16.8 percent.

2.3 Asset and Capital Position

In comparison to the previous year, the total assets of the GfK Group rose by € 74.9 million, or 4.2 percent, to € 1,842.3 million. This is primarily a result of the euro’s weakness against other currencies of importance to the GfK Group, such as the U.S. dollar and pound sterling. This is also reflected in goodwill, which increased by € 1.3 million in total to € 774.0 million, although the goodwill decreased on account of a goodwill impairment of € 39.4 million and by a further € 6.9 million following the reclassification to assets held for sale due to the initiated sale of the animal health and crop protection business. This decrease was more than offset by an increase of capital consolidation transactions in the amount of € 3.1 million, in particular through the currency-related increase of € 44.5 million. This currency-related increase is posted in Other reserves.

development of the balance sheet 1)
in € million Dec. 31, 2014 Dec. 31, 2015 Change Share of total assets in percent
Assets
Non-current assets 1,231.4 1,221.7 – 9.7 66.3
Current assets 536.1 620.6 + 84.5 33.7
Liabilities
Equity 705.3 720.5 + 15.2 39.1
Non-current liabilities 523.8 440.7 – 83.1 23.9
Current liabilities 538.3 681.1 + 142.8 37.0
Total assets 1,767.4 1,842.3 + 74.9 100.0
1) Rounding differences may occur

Other intangible assets increased by € 5.1 million to € 271.8 million. The largest share in this increase was attributed to the setup of new panels. This involved capitalized panel setup costs of € 14.4 million above the previous year’s value. Overall, other intangible assets include panels with a carrying value of € 114.6 million. The drop in software of € 6.9 million to € 109.1 million is partly attributable to the impairment already listed on the developments in the Mobile Insight/Location Insight and CPIMS/NEO assets which, together with the regular amortization, exceeded additions in the entire fiscal year. In addition, other intangible assets amounting to € 15.1 million were reclassified to assets held for sale.

Tangible assets decreased by € 10.6 million. The main reason for this is the real estate sale in Switzerland (€ – 6.5 million). Shares in associated companies decreased by € 11.0 million. This was mainly due to the process of unwinding the cross-holdings with The NPD Group and the reclassification of the investment in USEEDS GmbH, Berlin, to assets held for sale.

Non-current assets fell by € 9.7 million to € 1,221.7 million. By contrast, current assets grew by € 84.5 million to € 620.6 million at year-end 2015. This development is mainly due to an increase in trade receivables of € 11.6 million, an increase in cash and cash equivalents of € 36.3 million and the reporting of assets held for sale amounting to € 39.4 million.

Equity rose by € 15.2 million to € 720.5 million. As total assets increased by a higher percentage, the equity ratio fell slightly to 39.1 percent (previous year: 39.9 percent). Within this equity, of particular notice is the sharp increase in other reserves. This figure is up by € 63.0 million on the previous year, mainly as a result of changes in exchange rates of the pound sterling and the U.S. dollar. Although the balance of consolidated total income, attributable to equity holders of the parent company (€ 36.8 million), and the dividend payments (€ – 23.7 million) is positive, the retained earnings decreased by € 10.1 million. Likewise, the minority interest decreased by € 37.7 million. Both are attributable to the unwinding of cross-shareholding with The NPD Group that was partly shown as an equity transaction.

Liabilities increased by € 59.6 million to € 1,121.8 million. This consists of an increase in current liabilities and a decrease in non-current liabilities.

Non-current liabilities fell by € 83.1 million to € 440.7 million. The decline in non-current liabilities by € 102.9 million is offset, among other aspects, by an increase in deferred tax liabilities of € 10.9 million and an increase in non-current other liabilities of € 7.7 million.

Non-current interest-bearing financial liabilities fell by € 102.9 million to € 256.4 million. This is attributable to the increase in current interest-bearing financial liabilities by € 144.4 million to € 208.2 million. In the previous year, non-current financial liabilities included bonds in the amount of € 200 million, of which € 13.9 million were repaid. The remaining amount of €186.1 million was reclassified as a current financial liability, as it falls due for repayment in April 2016. To ensure complete refinancing of this bond, GfK SE has already concluded several bilateral forward bank loans of € 70 million and loan notes in the amount of € 130 million with maturities of between three and twelve years. The payment dates of these financial instruments are in February and March 2016. The long-term loan note increased by € 75 million. In addition, long-term bank loans totaling € 25 million were taken. Short-term bank loans of € 39.6 million were repaid upon maturity.

Current liabilities were up by a total of € 142.7 million to € 681.1 million. This included the already listed increase in current financial liabilities of € 144.4 million. Liabilities from orders in progress rose by € 14.4 million to € 167.0 million. By contrast, short-term provisions fell by € 19.4 million. The majority of this can be attributed to the Turkish subsidiary that had to pay taxes, interest and penalties amounting to € 15.4 million following the judgement of a Turkish tax court in March 2015.

2.4 Investment and finance

For an innovative market research company such as GfK, ongoing investment in the establishment and expansion of panels, new measuring technologies, advanced technology and the necessary new market research methods for these, as well as the expansion of production and analysis systems, is vital. These measures make a decisive contribution to securing the company’s future success, considerably raise the barrier to market entry for potential competitors and substantially strengthen the competitive position of GfK. 

Accordingly, the GfK Group made significant investments in the previous year. They totaled € 108.6 million and were therefore € 8.9 million up on the prior year’s figure. After the investment in tangible assets was exceptionally high due to the setup of the television research panel in Brazil in the previous year, the corresponding value fell by € 10.7 million. The investments in intangible assets, however, increased by € 15.7 million to € 67.8 million. The predominant part thereof relates to the set-up of media measurement panels in Brazil, the Kingdom of Saudi Arabia and Singapore. Investments for acquisitions increased by € 5.8 million to € 12.3 million, compared to the previous year, resulting in part from the acquisition of NORM Group, headquartered in Sweden.

Cash flow from operating activity decreased year on year by € 26.0 million to € 170.9 million. The outflow of funds from working capital was € 21.0 million with a cash inflow of € 6.5 million in the previous year. The payment of taxes and penalties in Turkey, in addition to an ever more marked increase in operating receivables, have influenced this development.

Taking account of investments in tangible and intangible assets of € 94.1 million (2014: € 89.2 million), the free cash flow amounted to € 76.8 million (2014: € 107.7 million). As a result, our acquisitions and other financial investments were fully covered.

Dividends totaling € 31.7 million were paid to the shareholders of GfK SE and to the minority shareholders of its affiliates (previous year: € 29.3 million). Despite a net borrowing in the amount of € 47.7 million (previous year: net loan repayment of € 28.6 million) a total negative cash flow from financing activities of € 59.4 million (previous year: € 75.5 million) was registered. The reason for this is the other equity transactions stemming from the acquisition of minority interests which are also included in the cash flow from financing activities, in particular the transaction in conjunction with the termination of the cross-shareholding with The NPD Group, Inc., USA. Overall, the net change in cash and cash equivalents amounted to € 35.2 million (previous year: € 22.4 million).

development of free cash flow and cash flow from financing activity 1)
in € million 2014 2015 Change
Cash flow from operating activity 196.9 170.9 – 26.0
Investments in tangible and intangible assets –89.2 – 94.1 – 4.9
Free cash flow before acquisitions, other financial investments and asset disposals 107.7 76.8 – 30.9
Acquisitions –8.1 – 12.5 – 4.5
Other financial investments –2.4 – 1.9 + 0.5
Asset disposals 0.8 32.3 + 31.5
Free cash flow after acquisitions, other financial investments and asset disposals 98.0 94.6 – 3.4
Changes in equity –29.7 – 89.2 – 59.5
Net borrowings via loans –28.6 47.7 + 76.3
Interest paid less interest received –17.3 – 17.9 – 0.6
Cash flow from financing activities –75.5 – 59.4 + 16.1
Changes in cash and cash equivalents 22.4 35.2 + 12.8
1) Rounding differences may occur

The net debt, defined as the balance of cash, cash equi­valents and short-term securities less interest-bearing liabilities and pension obligations, rose by € 6.8 million to € 400.0 million. An increase by € 61.8 million in bank liabilities relating to the repayment of the bonds falling due in April 2016 is offset by the increase of € 36.3 million in cash and cash equivalents and the decrease in other interest-bearing liabilities by € 20.1 million, which was above all due to the partial early redemption of the bonds by € 13.9 million. Liabilities for future purchase price payments from acquisitions and earn-outs have decreased by € 7.7 million and amounted, as per balance-sheet date, to € 6.9 million.

development of net debt 1)
in € million Dec. 31, 2014 Dec. 31, 2015 Change
Cash and cash equivalents 93.2 129.5 + 36.3
Short-term securities and fixed-term deposits 0.9 1.5 + 0.5
Liquid funds and current securities 94.1 130.9 + 36.8
Liabilities to banks 188.3 250.1 + 61.8
Pension obligations 64.3 66.4 + 2.0
Liabilities from finance lease 0.2 0.1 – 0.1
Other interest-bearing liabilities 234.5 214.3 – 20.1
Interest-bearing liabilities 487.3 530.9 + 43.6
Net debt – 393.1 – 400.0 – 6.8
1) Rounding differences may occur

The slight increase in net debt in combination with our improved earnings is reflected in the development of ratios of net debt to key balance sheet and financial ratios.

gearing and ratio of net debt to ebit, ebitda, free cash flow
2014 2015
Gearing (net debt /equity) in percent 55.7 55.5
Net debt / EBIT 5.46 3.77
Net debt  / EBITDA 1.94 1.73
Net debt / free cash flow 3.65 5.21

2.5 Business performance forecast

We set clear priorities for 2015 in the context of “Shape for Growth”. Our aim was to put GfK back on a path to further growth, increase our productivity and invest in the development of the company’s organization, our product portfolio and data integration. The conversion of data into insights should help us to satisfy the growing demands of our customers in ever rapidly changing markets. Our overall aim in 2015 was to achieve moderate organic growth and an AOI margin (adjusted operating income to sales) of between 12.4 percent and 12.8 percent.

Our growth forecast in the Annual Report 2014 was based on two assumptions: The Consumer Choices sector is expected to make use of new potential for growth and margins, grow more strongly than in the previous year and increase its share of the Group’s sales. With regard to the Consumer Experiences business, we did not expect it to make any contribution to growth. Neither was a decline in sales excluded. Of key importance in this regard is the transformation of the scope of the business from purely local and less profitable project-based research into a more profitable scale of business and digital products. We achieved the growth forecast for the Group.

After the first 11 months of the year, however, our adjusted operating income was such that reaching the year’s targeted range for the AOI margin no longer appeared to be as sufficiently secure as before. Therefore, we revised our margin target on December 18, 2015, to “in the range of 12 percent”. This decision was primarily based on our results in October and November, two months in what is traditionally for us the most important quarter, which underperformed our expectations. For example, it was not possible to compensate for the pressures already being exerted by the delays and, as a result, additional ramp-up costs of TV audience measurement contracts in Brazil and the Kingdom of Saudi Arabia. In addition, the Consumer Experiences segment received only a limited amount of orders and, therefore, sales. A decision was also made to discontinue the development of network-centric measurement in the area of Mobile Insight/Location Insight because of technical difficulties preventing a consistent and continuous supply of data from our two main suppliers. This has not affected further developments in the use of mobile data, which GfK is implementing and developing even further on a wider scale. The business performed very positively in December, however, which made up partially for the decline in margin. The difference with the lower end of guidance estimates at year-end was only 0.2 percentage points.

The factors present until the publication of the revisions to the guidance reports and the lower starting basis resulting therefrom also constitute a risk for the 2016 financial year. The outlook for 2016 was also revised for this reason. The forecast for 2016 of organic sales growth outperforming the market remained unchanged. For the AOI margin, we predicted a level of between 14 and 15 percent. From now on, we will be proceeding from the basis of a significant improvement in margin in comparison to 2015, and after the margin risk has been evaluated and the annual financial statements for 2015 have been produced, we will publish a new guidance for 2016.

Forecast and actual business performance
Key performance indicator 2015 Forecast of the Group Management Report 2014 Mid-year change on Dec. 18,2015 As of Dec. 31, 2015
Organic sales growth Moderate organic growth Unchanged 1.1%
Organic sales growth of the sectors Consumer Experiences: Consumer Experiences:
No contribution to growth/sales decline possible Unchanged Sales decline of 1.2 %
Consumer Choices: Consumer Choices:
Faster growth than pre­vious year (2014), increase share of Group sales Unchanged Sales growth of 4.3 %
Margin (adjusted operating income in relation to sales) 12.4 % to 12.8 % In the range of 12 % 12.2%
Key performance indicator 2016
Organic sales growth Outpace the market Unchanged Unchanged
Margin (adjusted operating income in relation to sales) 14 % to 15 % Considerable margin improvement Considerable margin improvement

2.6 Information pursuant to Section 315 (4) of the German Commercial Code (HGB)

The following information reflect circumstances as at the balance sheet date.

Structure of the Share Capital

The share capital of GfK SE (hereinafter also referred to as the company) amounted to €153,316,363.20 in total as at December 31, 2015, divided into 36,503,896 no-par value bearer shares.

Restrictions on Voting Rights or the Transfer of Shares

There are no restrictions in the Articles of Association relating to voting rights or the transfer of shares.

Direct or indirect Shareholdings, exceeding 10 Percent of the Voting Rights 

The GfK-Nürnberg Gesellschaft für Konsum-, Markt- und Absatzforschung e.V., Nuremberg, has a direct holding of 56.46 percent of the voting rights in GfK SE. The company has not received notification of any other shareholders with a stake exceeding 10 percent of the capital.

Shares with Special Control Rights

Shares which confer special control rights have not been issued. All shares carry the same rights.

Control over Voting Rights by Employee Shareholders

The employees with an interest in the capital of the company may exercise their voting rights directly, as other shareholders, in accordance with applicable law and the Articles of Association.

Appointment and Removal of Management and Amendment to the Articles of Association 

Pursuant to Section 84 of the German Stock Corporation Act (AktG) and Article 5 of the Articles of Association of GfK SE, the Supervisory Board is responsible for determining the number of members of the Management Board, which consists of at least two members. The Supervisory Board appoints each member of the Management Board for a maximum term of five years. Appointment for one term or several reappointments each for a maximum of five years are permitted. The Supervisory Board may appoint a member of the Management Board as CEO and one or more deputy CEOs. In addition, the legal regulations on appointing and removing members of the Management Board apply (Sections 84 and 85 of the German Stock Corporation Act (AktG)). 

Pursuant to Article 20 of the Articles of Association of GfK SE, unless otherwise stipulated by mandatory legal regulations, resolutions to amend the Articles of Association require a majority of two thirds of the valid votes cast, or where at least half of the share capital is represented, a simple majority of votes cast. In cases where the law additionally requires the majority of the share capital represented when the resolution is adopted, the simple majority of the share capital represented suffices, unless legal provisions stipulate a different majority as mandatory. The Articles of Association do not contain any regulations that exceed the statutory requirements of Sections 133 and 179 of the German Stock Corporation Act (AktG).

Powers of the Management Board to Issue or Buy Back Shares 

Authorized capital

On the basis of a resolution by the Annual General Assembly on May 28, 2015, the Management Board is authorized, with the approval of the Supervisory Board, to increase the share capital of the company until May 27, 2020, through one or more issuances of no-par shares against contribution in cash or contribution in kind in a total amount up to € 55,000,000.00 (authorized capital). Shareholders generally have subscription rights with respect to the new shares. In accordance with Article 9 (1) c) ii) of the SE Regulation and Section 186 (5) AktG, the new shares may be also be subscribed for by a bank or syndicate of banks with the obligation to offer these shares for subscription to the shareholders (indirect subscription rights). 

The Management Board may, with the approval of the Supervisory Board, exclude the statutory subscription rights of the shareholders:  

(a) if the share capital is increased against contribution in cash and the issue price of the new shares is not significantly below the price at the stock exchange; the total number of shares issued under exclusion of subscription rights pursuant to this authorization must not exceed 10 percent of the share capital, neither on the date on which this authorization becomes effective nor on the date on which this authorization is exercised. Shares issued or to be issued to satisfy subscription rights resulting from bonds with warrants or convertible bonds count towards such number, provided that such bonds were issued during the term of this authorization under exclusion of subscription rights applying, mutatis mutandis, Article 9 (1) c) ii) of the SE Regulation and Section 186 (3) sentence 4 AktG; in addition, shares sold under exclusion of subscription rights during the term of this authorization pursuant to an authorization to sell own shares in accordance with Article 9 (1) c) ii) of the SE Regulation and Sections 71 (1) no. 8 and 186 (3) sentence 4 AktG shall also count towards such number;  

(b) to acquire contribution in kind in particular in connection with mergers of companies or for the direct or indirect acquisition of companies, participations in companies, parts of companies, claims (e.g., outstanding bonds) or other assets against the issuance of shares of the company;

(c) to issue the new shares as employee shares to employees of the company or affiliated companies within the meaning of Article 9 (1) c) ii) of the SE Regulation and Sections 15 et seq. AktG;  

(d) to grant subscription rights for new shares to the holders of bonds with warrants or convertible bonds of the company or any of its group companies outstanding on the date of the use of the authorized capital to the extent to which such bondholders would have subscription rights as shareholders upon exercise of their conversion and/or option rights or the satisfaction of a conversion or subscription;  

(e) to eliminate fractional amounts in order to facilitate a practically feasible subscription ratio.

The total number of shares to be issued under exclusion of subscription rights against contribution in cash or contribution in kind pursuant to this authorization must not exceed 20 percent of the share capital existing on the date on which this authorization becomes effective or, if such amount is lower, on the date of use of this authorization; this limitation applies to all issuances of new shares under exclusion of subscription rights pursuant to this authorization, no matter under which of the specific exemptions in the preceding paragraphs a) to e) such issuance falls. Shares issued or to be issued to satisfy subscription rights resulting from bonds with warrants or convertible bonds count towards such number, provided that such bonds were issued during the term of this authorization under exclusion of subscription rights. 

The Management Board shall, with the approval of the Supervisory Board, be authorized to determine the further content of the rights represented by the shares and the terms of the issuance of the shares. The Supervisory Board shall be authorized to amend the wording of the Articles of Association in accordance with the use of the authorized capital or upon expiry of the term of the authorization.

The previous authorization of the Management Board pursuant to Article 3 (6) of the Articles of Association to increase, with the approval of the Supervisory Board, the share capital of the company by one or more issuances of no-par value shares against contribution in cash or contribution in kind in a total amount of up to € 55,000,000.00 (authorized capital) was cancelled by resolution of the Annual General Assembly on May 28, 2015.

Contingent capital

Pursuant to Article 3 (9) of the Articles of Association the share capital is contingently increased by up to € 21,000,000.00, divided into up to 5,000,000 new no-par value bearer shares with profit participation from the start of the financial year of their issue (contingent capital). The contingent capital increase serves to grant shares to the holders of stock option and/or convertible loan debentures issued in exchange for cash by the company or a company in which the company holds a direct or indirect majority interest in accordance with the authorization resolved by the Annual General Assembly on May 28, 2015 under agenda item 8 b) (see below). The new shares shall be issued at the option or conversion price determined in accordance with the above authorization. The contingent capital increase shall be implemented only to the extent that stock option and/or conversion rights relating to the debentures are exercised or conversion obligations relating to the debentures are fulfilled without settlement in cash or existing shares in the company or new shares issued from other contingent or authorized capital. The Management Board shall be entitled to define the further details of the contingent capital increase with the approval of the Supervisory Board.

The previous contingent capital III pursuant to Article 3 (6) of the Articles of Association as created by the Annual General Assembly on May 16, 2012 was rescinded by resolution of the Annual General Assembly on May 28, 2015.

Issuance of Bonds with Warrants and/or Convertible Bonds

The Management Board is authorized by resolution of the Annual General Assembly on May 28, 2015 with the approval of the Supervisory Board for the period up to May 27, 2020, on one or more occasions:

› to issue bonds with warrants and/or convertible bonds through the company or domestic or foreign companies in which it holds a direct or indirect majority interest (“subordinate group companies”) in a total nominal amount of up to € 250,000,000.00 for a limited or unlimited period (“debentures”)

› and to grant the holders of debentures option or conversion rights for a total of up to 5,000,000 no-par value bearer shares in the company in accordance with the terms and conditions of the debentures (“terms and conditions”).

The bonds may be denominated in Euro or the legal currency of any OECD country, up to the equivalent amount in such currency. The issue of bonds can also be made against contribution in kind, particularly for the purposes of acquisition of a company, parts of a company or shareholdings in a company, where this is in the interests of the company and the value of the payment in kind is appropriate to the value of the debenture, in respect of which the theoretical market value ascertained according to recognized rules shall apply. 

As a matter of principle, shareholders are entitled to subscribe to the bonds; in accordance with Section 9 (1) c) ii) of the SE Regulation and Section 186 (5) AktG, the bonds may also be underwritten by a bank or banking syndicate with the obligation to offer them to the shareholders for subscription. If bonds are issued by a subordinate group company, the company shall ensure that subscription rights are granted to the shareholders of the company accordingly.  

With the approval of the Supervisory Board, however, the Management Board shall be entitled to exclude shareholders’ subscription rights for the debentures,
› if the bonds are issued for cash and the issue price is not substantially lower than the theoretical market value derived using recognized actuarial methods; however, this shall apply only providing that the shares issued to service the relevant option and/or conversion rights do not exceed 10 percent of the share capital, either at the date on which the authorization comes into force or the date on which this authorization is exercised. This amount shall include the pro rata amount of the share capital attribut­able to shares issued on or after May 28, 2015 from authorized capital as part of a cash capital share increase with shareholders’ subscription rights excluded in accordance with Section 9 (1) c) ii) of the SE Directive and Section 186 (3) sentence 4 AktG. This amount shall also include the pro rata amount of the share capital attributable to the sale of the company’s own shares, provided that this occurs during the term of this authorization with shareholders’ subscription rights excluded in accordance with Section 9 (1) c) ii) of the SE Directive and Section 186 (3) sentence 4 AktG,

› to eliminate any fractions resulting from the subscription ratio from the subscription right of shareholders to subscribe for the bonds,

› where necessary, to grant subscription rights to the holders of option or conversion rights arising from bonds with warrants or convertible bonds which were or will be issued by the company or subordinated group companies in the amount to which they would be entitled on the exercise of their rights or the fulfillment of conversion obligations,

› to the extent that bonds are issued in exchange for contributions in kind, in particular to acquire companies, parts of companies, company shareholdings, receivables (e.g. outstanding bonds) or other assets, provided that this is in the interest of the company and the value of the contributions in kind is adequate in relation to the value of the issued bonds. 

The authorization to exclude shareholders’ subscription rights is limited insofar as, after the stock option or conversion rights have been exercised, the shares to be issued, together with shares issued during the term of this authorization on the basis of the existing authorized capital (Article 3.6 of the Articles of Association) with exclusion of shareholders’ subscription rights, must not exceed 20 percent of the existing share capital at the time the authorization comes into force or – if lower – at the time the authorization is exercised. 

In the event that convertible bonds are issued, the holders shall be granted the right to convert such bond into no-par value bearer shares in the company in accordance with the terms and conditions specified by the Management Board. The conversion ratio shall be calculated by dividing the nominal amount or, if prescribed by the terms and conditions, an issue price for a partial bond that is lower than the nominal amount, by the conversion price established for one share in the company. The resulting amount may be rounded up or down to a whole number; an additional cash payment and the combination of amounts or compensation for unconvertible fractions may also be specified. The terms and conditions may prescribe a variable conversion ratio and require that the conversion price (subject to the minimum price as described below) be set within a predetermined range depending on the development of the stock exchange price of the company’s shares during the term of the debenture. The proportion of the share capital attributable to the shares for each partial bond may not exceed the nominal amount of the partial bonds. Section 9 (1) c) ii) of the SE Regulation and Sections 9 (1) and 199 (2) AktG shall remain unaffected.

In the event that bonds with warrants are issued, one or more warrants will be attached to each partial bond entitling the holder to subscribe to no-par value bearer shares in the company in accordance with the terms and conditions specified by the Management Board. Such terms and conditions may include the possibility of paying the option price through the transfer of partial bonds and, if applicable, an additional cash payment. The subscription ratio shall be calculated by dividing the nominal amount or, if prescribed by the terms and conditions, an issue price for a partial bond that is lower than the nominal amount by the option price established for one share in the company. The proportion of the share capital attributable to the shares for each partial bond may not exceed the nominal amount of such partial bonds. In the event of share fractions, the terms and conditions relating to the convertible bonds and/or bonds with warrants may specify that such fractions can be added together for the purposes of acquiring complete shares. Section 9 (1) c) ii) of the SE Regulation and Sections 9 (1) and 199 (2) AktG shall remain unaffected.

The terms and conditions may provide for the company not to issue new shares in the event of conversion or exercise of warrants, but to pay the equivalent value in money, such payment to equate to the unweighted average closing price of the company’s shares in Xetra trading on the Frankfurt Stock Exchange (or a comparable successor system) in the ten trading days prior to or following the declaration of conversion or exercise. At the company’s choice, the terms and conditions may also provide that new shares from authorized capital or existing shares in the company instead of new shares from contingent capital will be granted upon conversion or exercise of warrants.  

The terms and conditions may also provide for a conversion obligation at the end of the term (or at another specified date) or grant the company the right to provide creditors with shares in the company in respect of all or part of the amount due on maturity of the convertible bonds; this also includes maturity due to termination (right to deliver shares).  

The option or conversion price for a no-par value bearer share in the company must amount to at least 80 percent of the average volume-weighted stock exchange price of the same class of shares in the company in Xetra trading on the Frankfurt Stock Exchange (or a comparable successor system) during the last ten trading days prior to the date on which the Management Board resolves the issue of the bonds or, if shareholders are entitled to subscribe for the bonds, at least 80 percent of the average volume-weighted stock exchange price of the same class of shares in the company in Xetra trading on the Frankfurt Stock Exchange (or a comparable successor system) in the period from the start of the subscription period until the third day prior to the announcement of the final terms and conditions in accordance with Section 9 (1) c) ii) of the SE Regulation and Section 186 (2) sentence 2 AktG (inclusive).  

In the case of a stock option or conversion obligation or a right to deliver shares, the specific terms and conditions state that the option or conversion price may also be lower than the aforementioned minimum price (80 percent), but must at least correspond tothe average volume-weighted stock exchange price of the same class of shares in the company in Xetra trading on the Frankfurt Stock Exchange (or a comparable successor system) during a period of 15 trading days prior to final maturity or the other predetermined date.  

The proportion of the share capital attributable to the shares in the company to be issued may not exceed the nominal amount of the debentures. Section 9 (1) c) ii) of the SE Regulation and Sections 9 (1) and 199 (2) AktG shall remain unaffected.  

The option or conversion price may, without prejudice to Section 9 (1) c) ii) of the SE Regulation and Sections 9 (1) and 199  (2) AktG, on the basis of an anti-dilution clause as provided for in more detail in the terms and conditions of the bonds, be adjusted if the Company increases the share capital at any time before expiration of the option or conversion period while granting a pre-emptive right to the shareholders or issues or guarantees additional bonds without granting a pre-emptive right to the holders of existing option rights or convertible bonds. The terms and conditions of the bonds may also provide for a value-stabilizing adjustment of the option and/or conversion price with respect to any other measures of the Company which may lead to an economic dilution of the value of the option and/or conversion rights. The option or conversion price may also be reduced by way of a cash payment on exercise of the option or conversion right or the fulfillment of an option or conversion obligation. In all cases, the proportion of the share capital attributable to the shares to be acquired for each debenture shall not exceed the nominal value of the debenture.  

The Management Board is authorized, with the approval of the Supervisory Board, or in consultation with the bodies of the subordinated group companies issuing the bonds, to determine in compliance with the above provisions the further details of the issuance of the bonds and their terms and conditions, including but not limited to, interest rate, type of interest, issue price, term and composition of the bonds, provisions on dilution protection, option or conversion period and option or conversion price.

The Management Board will, in any event, carefully check whether it should make use of the authorization to issue debentures with exclusion of any subscription rights of shareholders, and will then only proceed to do this if, having considered all relevant aspects, it is in the interest of the company and its shareholders.

The previous authorization of the Management Board based on the resolution of the Annual General Assembly on May 16, 2012 to issue, with the approval of the Supervisory Board, bonds with warrants and/or convertible bonds with a total nominal amount of up to € 250,000,000.00 for the period up to May 15, 2016 was rescinded.

Acquisition of own shares

By resolution of the Annual General Assembly on 27 May 2014 the company is authorized, pursuant to section 71 para. 1 (8) Stock Corporate Act (AktG) to acquire own shares up to a maximum of 10 % of the current share capital (i) at the time the resolution is passed, or (ii) at the time when the authorization is exercised, whichever is the less. At no time may the shares acquired and those already in the possession of the company or attributable to the company in accordance with Sections 71a et seq. AktG cumulatively represent more than 10 % of the share capital. This authorization shall not be used by the company for the purposes of trading in its own shares. This authorization shall be valid until May 26, 2019.

The authorization may be exercised in one or more installments, on one or several occasions, in the pursuit of one or more purposes by the company, by third parties controlled by the company or in which the company holds a majority interest or are acting for the account of such company or the company.

The acquisition of own shares shall be at the discretion of the Management Board either (i) via the stock exchange or (ii) through a public offer to all shareholders or a public invitation for such an offer to be made.  

(i)   If the shares are acquired on the stock exchange, the consideration paid by the company for each share (excluding ancillary purchase costs) must not be 10 percent higher or lower than the share price in the closing auction in Xetra trading (or a comparable successor system) on the day prior to the reference day. The reference day shall be the day on which the Management Board decides on the formal offer. In case of an adjustment of the offer, the date on which the Management Board finally decides on the adjustment shall be the reference date.  

(ii) If the acquisition is made by way of a public offer to purchase and/or public invitation to make a purchase offer, the purchase price offered or the thresholds of the price range per share (excluding ancillary acquisition costs) may not be more than 10 percent above or below the closing price trading on Xetra (or a comparable successor system) on the trading day prior to the reference day. If there are significant variations in the relevant price after the publication of a purchase offer or a public invitation to make a purchase offer, the offer or the invitation to make a purchase offer may be adjusted. In this case, the price is based on the closing price in Xetra trading (or a comparable successor system) on the trading day prior to the date of publication of any adjustment. The purchase offer or the invitation to make such an offer may stipulate further conditions. If the purchase offer is oversubscribed or, in the case of an invitation to make the offer, not all of several equal offers can be accepted, offers may be accepted on a quota basis. Provision may be made for the preferential acceptance of small lots of up to 100 shares offered for acquisition per shareholder providing a partial exclusion of shareholders’ tender rights Provision may also be made to round off in accordance with commercial principles to avoid theoretical fractions of shares. The details of the offer or invitation to the shareholders to submit offers to sell will be determined by the Management Board.

The Management Board is hereby authorized to dispose of own shares acquired under this or a previous authorization via the stock market or by an offer to all shareholders. The Management Board is also authorized to use shares acquired under this or a previous authorization or otherwise under Sections 71 et seq. AktG for any and all legally permissible purposes, and, in particular, for the following purposes:  

(1) The shares may also be sold by means other than on the stock exchange or by way of an offer to all shareholders if they are sold for cash at a price that is not substantially lower than the market price of shares of the company with the same terms at the disposal date. The relevant market price shall be the average closing price of shares of the company in Xetra trading (or a comparable successor system) during the last five trading days prior to the sale of the shares. In this case, the number of shares authorized for sale may not exceed 10 percent of the share capital at the date on which the resolution is adopted by the present Annual General Assembly or, if lower, 10 percent of the registered share capital of the company at the date on which the shares are sold. This limit of 10 percent of the share capital shall include any shares issued during the period of validity of this authorization in direct application of Section 186 (3) sentence 4 AktG or if applied mutatis mutandis with simplified exclusion of shareholder subscription rights. This limit of 10 percent of the share capital shall also include such shares as are issued to service convertible bonds and/or bonds with warrants, providing that the bonds have been issued during the period of validity of this authorization in applying Section 186 (3) sentence 4 AktG mutatis mutandis with exclusion of shareholder subscription rights.  

(2) Shares may be offered and transferred against payment in kind, particularly in connection with corporate mergers or acquisitions of companies or parts of companies or participations in companies, or in connection with acquiring other assets. 

(3) Shares may be used to meet conversion and/or option obligations under or in connection with convertible bonds and/or bonds with warrants issued by the company or its group companies. Shares may also be transferred for securities lending purposes.

(4) The shares may be redeemed without the redemption or its execution requiring a further resolution by the Annual General Assembly. The redemption may be limited to parts of the acquired shares. The redemption will lead to a reduction in the company’s share capital. Alternatively, the Management Board may determine that the share capital shall remain unchanged following the redemption and that the interest of the other shares in the share capital shall instead increase in accordance with article 8 (3) AktG. In this case, the Management Board shall be authorized to adjust the number of shares stated in the Articles of Association.

The authorizations above may be exercised on one or more occasions, individually or jointly, comprehensively or for partial quantities of the acquired shares. The authorizations specified under (1), (2) and (3) above may also be used by entities controlled by the company, companies in which the company holds a majority interest or by third parties acting on their account or for account of the company.

The shareholder´s subscription right for these shares is excluded to the extent that those shares are used in accordance with the authorization specified under (1) to (3) above

Significant agreements which take effect upon a change of control of the company following a takeover bid

In the event of a change in the controlling interest as part of a takeover bid, the corporate bonds issued in 2011, the revolving credit facility renegotiated in 2014 (amend to extend), the loan notes from 2013 and 2015 as well as various bilateral bank loans may fall due. A change of controlling interest is defined as a party other than the GfK-Nürnberg, Gesellschaft für Konsum-, Markt- und Absatzforschung e.V., alone or together with others acquiring the right to exercise more than 50 percent of the voting rights, either directly or indirectly, or to hold more than 50 percent of the company’s capital. With regard to a public offering for acquiring shares in the company, the law and Articles of Association including the provisions of the German Securities Acquisition and Takeover Act (WpÜG) apply exclusively. 

Compensation agreements in case of a  takeover bid 

No compensation agreements are in place between members of the Management Board or employees of GfK SE for the event of a takeover bid.

2.7 Sectors: A focus on consumers and markets

With our two complementary sectors, Consumer Experiences and Consumer Choices, we offer our clients worldwide a comprehensive range of information and advisory services.

The Consumer Experiences (CE) sector deals with consumer behavior, perceptions and attitudes. Here, we offer our clients well-founded answers concerning the who, why and how of consumption. In order to develop a profound understanding of how consumers experience brands and services, we continuously develop pioneering new procedures, some of which are highly complex. These are complemented by proven, robust and flexible market analysis methods.

The Consumer Choices (CC) sector investigates what is bought by consumers, when and where. The main focus here is on the continuous measurement of market volumes and trends, and we include all the significant media, sales and information channels in our analysis.

In this way, we combine substantial insights into consumer decisions and market trends with profound knowledge concerning the drivers of these developments all over the world. The combination of these two sectors offers great added value for our clients, many of whom operate in a large number of different markets.

For the internal management of both sectors, GfK uses two key financial performance indicators: margin and sales.  

Complementary to these two sectors is the Other category. This unites the central services that GfK provides for its subsidiaries and other less important services unrelated to market research.

Economic development of the sectors

Consumer Experiences: In the past financial year, the Consumer Experiences sector achieved sales of € 859.1 million (+ 4.0 percent compared with the previous year). Organic sales declined by 1.2 percentage points, but this still constitutes a significant improvement compared with the previous year. Currency effects contributed 5.0 percentage points to the increase in sales, while the figure for growth from acquisitions in the reporting period was 0.2 percentage points.

In 2015, the sector’s strategic alignment was successfully promoted further, and the share of standardized global products was increased from around 38 percent in the previous year to around 44 percent in the current financial year. 

At the same time, the continued streamlining of the product portfolio resulted in a slight drop in sales, which was recorded primarily in Northern Europe and could not be completely offset by good sales performance in the growth markets of Asia and the Pacific, Latin America and Central Eastern Europe/META. A fall in orders from existing clients and the relocation of orders initiaded by clients within the Group to other regions had a negative impact on sales development in Northern Europe. Although the overall economic environment in the region remained difficult, sales development was stabilized and achieved a slight increase in Southern and Western Europe, while organic sales growth in North America was slightly negative.  

Growth from acquisitions was attributable to the acquisition of NORM in Sweden and the Netherlands, through which we consolidated our digital competence and supported our digitalization and global product strategy.  

At € 58.9 million, adjusted operating income was up by € 1.4 million compared with the previous year, representing an increase of 2.4 percent.  

At 6.9 percent, the operating income margin in the 2015 financial year remained almost stable compared with the previous year, while further optimization of processes and cost structures had a positive impact. However, limited order intake and special effects in Asia and the Pacific had the opposite effect. In some Asian countries, it was necessary to revise sales recognition, which also negatively affected the income margin.  

Efficiency gains in the Consumer Experiences sector and the reorganization of the Data & Technology organization resulted in a staffing adjustment whereby the number of staff was reduced to 5,892 (previous year: 6,229).

Consumer experiences: key indicators 1)
in € million 2014 2015 Change in percent
Sales 826.0 859.1 4.0
Growth from acquistions 0.2
Organic growth – 1.2
Currency effects 5.0
Adjusted operating income 57.6 58.9 2.4
Growth from acquistions – 0.6
Organic growth – 1.5
Currency effects 4.6
Margin in percent 7.0 6.9 – 0.1 2)
Employees 6,229 5,892 – 5.4
1) Rounding differences may occur
2) Percentage points

Consumer Choices: In 2015, the sector once again increased its sales significantly by € 57.5 million (growth of + 9.2 percent), with organic growth of 4.3 percentage points. Currency effects contributed a share of 5.0 percentage points to the increase in sales.  

With the exception of Southern and Western Europe, sales developed positively in all regions. In particular, Latin America achieved a significant increase in sales through the first sales generated by TV audience measurement with leading TV broadcasters in Brazil. In the region of Central Eastern Europe/META, Russia and Turkey were the main contributors to our sales growth.  

In addition to the above-mentioned contract in Brazil, the Media Measurement business also benefits from additional TV research contracts in Singapore, Morocco and the Kingdom of Saudi Arabia, which will generate additional sales in 2016. The sector also secured further major new business with a radio audience measurement contract in Malaysia. Furthermore, the first successes of the GfK Crossmedia Link Panel are particularly notable. We have already achieved our first sales in Indonesia and Brazil in the past year, while sales will be generated in Russia from 2016 onwards. This panel enables holistic measurement of the use of TV, print and online media, including mobile Internet use, through in-depth analyses of the individual media and their relationships with each other.

In Point of Sales Measurement, we achieved single-digit growth, although the picture varied according to product groups: Telecommunications, information technology, automotive and small domestic appliances contributed positively to growth, whereas consumer electronics and major domestic appliances finished below the previous year’s level because of a drop in incoming orders from Asian clients. It is particularly notable that geomarketing solutions in Germany and trends and forecasting solutions with clients from the financial sector in the USA achieved above-average, double-digit growth. The GfK Hospital Panel was also launched, winning its first contract in Germany.

The adjusted operating income of the Consumer Choices sector was at € 145.0 million, which was € 7.3 million higher than in the previous year (2014: € 137.7 million). As a result of our investment in the latest technology for our production systems as well as expenses for the international expansion of our TV Audience Measurement business, the margin was 21.3 percent, which was 0.8 percentage points lower than in the previous year.  

As of December 31, 2015, the number of staff was 5,828 (pre­vious year’s figure: 5,327). This increase of 501 is due to the consolidation of the newly established Data & Technology organization (product-oriented software development) under the roof of the Consumer Choices sector, the setting up of TV audience measurement business in Brazil and the Kingdom of Saudi Arabia (as already mentioned) and the expansion of capacity in our Global Service Centers.

Consumer Choices: key indicators 1)
in € million 2014 2015 Change in percent
Sales 623.6 681.1 9.2
Growth from acquistions 0.0
Organic growth 4.3
Currency effects 5.0
Adjusted operating income 137.7 145.0 5.3
Growth from acquistions 0.0
Organic growth – 2.1
Currency effects 7.4
Margin in percent 22.1 21.3 – 0.8 2)
Employees 5,327 5,828 9.4
1) Rounding differences may occur
2) Percentage points

Other: Sales in the Other category were at € 3.2 million in the reporting period, which is approximately on a par with the previous year (2014: € 3.3 million). The loss for 2015 in this category was €16.4 million, which was comparable with the previous year (2014: € – 16.4 million). As part of its global strategy, GfK is increasingly centralizing the expenses for general administrative functions (corporate functions) in the Other category. Investments have been made in particular in IT hardware and software as well as process optimization to be able to manage business more effectively and efficiently.

In view of the stewardship expenses in this context, it is likely that the Other category will continue to report a loss in future.

In 2015, the number of employees in the Other category fell by 60 to 1,765 (2014: 1,825). This fall is predominantly due to the reclassification in product-oriented software development (Data & Technology) from the Other category to the Consumer Choices sector.

Other: key indicators 1)
in € million 2014 2015 Change in percent
Sales 3.3 3.2 – 4.0
Growth from acquistions 0.0
Organic growth – 14.7
Currency effects 10.7
Adjusted operating income – 16.4 – 16.4 0.1
Growth from acquistions 0.0
Organic growth 0.5
Currency effects – 0.4
Employees 1,825 1,765 – 3.3
1) Rounding differences may occur
2) Percentage points

2.8 regions: Proximity to our clients worldwide

The GfK Group with its subsidiaries operates in more than 100 countries. We have organized our business geographically into six regions: Northern Europe, Southern and Western Europe, Central Eastern Europe/META (Middle East, Turkey, Africa), North America, Latin America as well as Asia and the Pacific. The growth regions of Latin America, Central Eastern Europe/META and Asia and the Pacific remained highly significant in the past fiscal year: At 25 percent of total sales, their share of sales increased slightly compared with the previous year. All three of these regions recorded encouraging organic growth, although currency effects in Central Eastern Europe/META and Latin America had a negative impact on total growth.

Northern Europe: This region still accounted for the largest share of sales at 37 percent of total sales. At € 575.6 million, total sales remained virtually stable in 2015, increasing slightly by 0.1 percent. The 3.1 percent decline in organic growth was primarily attributable to a drop in sales in the United Kingdom, and it was offset by acquisitions (0.2 percent by NORM) and positive currency effects of 3.0 percent.

Northern Europe: Key Indicators 1)
in € million 2014 2015 Change in percent
Sales 574.9 575.6 0.1
Growth from acquistions 0.2
Organic growth – 3.1
Currency effects 3.0
Employees 3,511 3,570 1.7
1) Rounding differences may occur

Southern and Western Europe: Having recorded declining sales in previous years, we achieved a slight increase in sales of 0.6 percent in Southern and Western Europe, attaining a figure of € 267.0 million, while our organic growth of 0.4 percent is primarily attributable to good development in Belgium and Spain. We achieved additional sales growth of 0.2 percent through the acquisition of NORM.

southern and western europe: key indicators 1)
in € million 2014 2015 Change in percent
Sales 265.4 267.0 0.6
Growth from acquistions 0.2
Organic growth 0.4
Currency effects 0.0
Employees 1,946 1,893 – 2.7
1) Rounding differences may occur

Central Eastern Europe/META: Organic growth was once again strong in the 2015 financial year, attaining a figure of 6.6 percent. However, unfavorable currency effects more than counterbalanced this trend, and sales of € 126.5 million were slightly lower than the previous year.

central eastern europe/meta: key indicators 1)
in € million 2014 2015 Change in percent
Sales 127.5 126.5 –0.8
Growth from acquistions 0.0
Organic growth 6.6
Currency effects –7.3
Employees 3,474 3,490 0.4
1) Rounding differences may occur

North America: At € 321.0 million, our sales in North America achieved a considerable increase of 22.1 percent. The region’s organic growth of 2.4 percent in 2015 was significantly higher than the previous year (2014: – 1.6 percent), which is also attri­butable to an improvement in our sales processes, while positive currency effects of 19.6 percent were recorded.

north america: key indicators 1)
in € million 2014 2015 Change in percent
Sales 263.0 321.0 22.1
Growth from acquistions 0.0
Organic growth 2.4
Currency effects 19.6
Employees 1,071 1,041 -2.8
1) Rounding differences may occur

Latin America: In the 2015 financial year, we began delivering data for the TV panel in Brazil. This new business was a key factor in our organic growth of 18.7 percent. Although currency effects, especially those in Brazil, had a negative impact amounting to – 7.7 percentage points, we achieved sales of € 67.9 million overall, which corresponds to total growth of 11.0 percent.

latin america: key indicators 1)
in € million 2014 2015 Change in percent
Sales 61.2 67.9 11.0
Growth from acquistions 0.0
Organic growth 18.7
Currency effects – 7.7
Employees 1,079 1,202 11.4
1) Rounding differences may occur

Asia and the Pacific: In 2015, GfK’s sales in the Asia and the Pacific region accounted for € 185.4 million with the organic growth of 4.4 percent as compared with the previous year. The significant sales growth in Japan, Australia and China are particularly notable. Overall growth of 15.2 percent was influenced by positive currency effects of 10.8 percentage points.

asia and the pacific: key indicators 1)
in € million 2014 2015 Change in percent
Sales 161.0 185.4 15.2
Growth from acquistions 0.0
Organic growth 4.4
Currency effects 10.8
Employees 2,300 2,289 – 0.5
1) Rounding differences may occur

major changes in the gfk group
Company Investment activity Stake change in percent Sector Region
NORM Research & Consulting AB Acquisition From 0 to 100 Consumer Experiences Northern Europe
Norm Research & Consulting B.V. Acquisition From 0 to 100 Consumer Experiences Southern and Western Europe
YouEye Inc. Increase in stake From 0 to 22.22 Consumer Experiences Northern America
GfK Retail and Technology GmbH Increase in stake From 95 to 100 Consumer Choices Northern Europe
GFK LATINOAMERICA HOLDING, S.L. Increase in stake From 67.6 to 100 Consumer Choices Southern and Western Europe
GfK Retail and Technology Asia Holding B.V. Increase in stake From 89.48 to 100 Consumer Choices Southern and Western Europe
GfK Marketing Services K.K. Increase in stake From 84.21 to 95 Consumer Choices Asia and the Pacific
GfK Retail and Technology Argentina S.A. Increase in stake From 95.1 to 98.3 Consumer Choices Latin America
ENCODEX Inter­national GmbH Increase in stake From 95 to 100 Consumer Choices Northern Europe
NPD Intelect, L.L.C. Divestment From 25 to 0 Consumer Choices Northern America
Oz Toys Marketing Services Pty. Ltd. Divestment From 25 to 0 Consumer Choices Asia and the Pacific
Sports Tracking Europe B.V. Divestment From 25 to 0 Consumer Choices Southern and Western Europe
Incoma GfK Increase in stake From 85 to 100 Consumer Experiences Central Eastern Europe/META
GfK CR Japan Increase in stake From 86 to 100 Consumer Experiences Asia and the Pacific
General