TNS chief makes last-ditch case for independence

UK-- TNS chief executive David Lowden made a last-ditch attempt to secure the company's continued independence today, delivering a set of results with which he hoped to convince investors to turn their backs on WPP's £1bn takeover bid.

With hopes of a rival offer from GfK evaporating this morning, it seems unlikely that another, higher bid will be forthcoming - and with the first deadline for acceptance of WPP's offer expiring Friday, shareholders now appear to have little incentive to not cash in their chips.

Lowden sought to convince them otherwise, however, reporting first-half underlying revenue growth of 5% to £580m, a 19.6% increase in adjusted operating profit to £54.3m, steady margin improvement and a 25% increase in the interim dividend.

“I hope you will agree that these results do show that we are delivering significant value in what is a very dynamic sector with strong growth prospects,” he said.

Knowing investors would be weighing jam today versus jam tomorrow, Lowden presented an overview of the company's 6th Gear initiative that aims to strip out some £14m in costs through a mix of increased offshoring and by upping the amount of data collection carried out online for custom projects, from 25% to 40% in the next three years.

TNS also wants to reduce the number of client delivery systems from over 80 locally supported platforms to six centrally managed systems, and grow the percentage of revenue from multi-country projects from 25% to 30%.

With at least £8m more in savings expected from country-specific change initiatives - creating common service structures and automating particular research tasks, for example - the company aims to see an improvement in its adjusted operating margin from the current 9.4% to 12.5% in the medium term.

“We have a very good business executing well against a successful strategy and delivering increased shareholder value,” said Lowden. “What is more, we have a business that is very capable of delivering value to shareholders into the future.”

Yet TNS's future as a standalone business looks increasingly likely to be short-lived. Lowden asserted his belief that WPP's bid was “opportunistic”, coming at a time when the market is low. “They are trying to secure what they see as a strategically attractive asset at a price that is below what shareholders should insist upon,” he said.

But whether Lowden's words will be enough to sway investors remains to be seen.

To read TNS's complete interim results release, including geographic and sector breakdowns, click here.

Author: Brian Tarran