2009 second quarter result for TMG (Telegraaf Media Groep N.V.)
- EBITA result € 13.2 million (Q2 2008: € 14.4 million)
- Recurring EBITA margin 8.5% (Q2 2008: 10.6%)
- Revenues declined 12.8% to € 154.6 million
- Operating expenses declined € 20.6 million
- Cash position reduced by € 32.0 million mainly due to distribution of dividend and severance arrangements
- Sale of magazine titles and the passenger car fleet completed
TMG’s activities are subject to seasonal fluctuations under ‘normal economic circumstances’. During the second and fourth quarter of the year, advertising revenues are higher than during the remainder of the year. The single-copy sales of De Telegraaf and Keesing Media Group’s publications are significantly higher in the third quarter. The fourth quarter is an important quarter for advertising revenues.
The recession is negatively affecting advertisers’ media expenditures across all media types in the second quarter of 2009. The same also applies to TMG’s activities. Despite an increase in the market share, the drop in advertising revenues in the second quarter (20%) is higher than it was in the first quarter (18%). There is no sign of recovery of the market as of yet. TMG’s revenues are furthermore influenced by the termination of a distribution contract. Circulation revenues in contrast appear to be less sensitive to economic trends and rose marginally.
A year ago, TMG announced a structural cost reduction programme amounting to € 40 to € 50 million per year, to be implemented in the period from 2008 to 2010. This programme is on track. A planned reduction of almost 500 fulltime jobs was announced as part of the cost reduction programme, of which the major portion (425 fulltime jobs) is to be completed by the end of 2009. The reduction in the number of fulltime jobs at the end of June in this context was 334.
In addition, in November 2008, TMG announced its intent to dispose of inadequately performing business units (activities in Sweden and Ukraine, a number of Dutch magazines and its interest in Media Librium BV). This divestment programme has since been completed (Media Librium in July 2009). This resulted in a reduction in the number of fulltime jobs by 289. Including the reorganisations of TMG’s transportation operations, the number of fulltime jobs at TMG declined from 3,678 to 3,040 in comparison to the 30 June 2008 reference date.
Due to the measures taken, the decline in the recurring (normalised) EBITA margin was limited to 2.1 percentage points (from 10.6% in Q2 2008 to 8.5% in Q2 2009).
The consolidated statement of comprehensive income is reported on the basis of continued operations. The results from discontinued operations are presented separately for Q2 2009, as well as for Q2 2008.
The operating result (EBIT) was € 2.2 million in Q2 2009 and as such is € 2.4 million lower than it was in the comparable period in 2008. The operating result before amortisation (EBITA) decreased by € 1.1 million to € 13.2 million. Normalised for one-time results (book profits and restructuring costs), the recurring EBITA result declined by € 5.6 million compared to Q2 2008, primarily due to the strong decrease in advertising revenues (20%).
Amounts x € 1,000
Revenues decreased by € 22.8 million to € 154.6 million in Q2 2009, which was primarily due to a significantly lower advertising income and the termination of a distribution contract.
Lower paper use resulted in a reduction of € 1.3 million in the cost of raw and auxiliary materials.
A significant decrease of €13.2 million in personnel costs was achieved through a reduction in the number of fulltime jobs and despite the impact of Collective Labour Agreement (CAO) increases. The costs of hiring temporary personnel decreased by € 2.9 million. No restructuring charges were taken in Q2 2009, compared to € 5.9 million in Q2 2008.
Other operating expenses decreased by approximately € 6 million due to cost savings.
The result of associates includes the TMG share in the results of ProSiebenSat.1 Media AG (ProSiebenSat.1) for Q2 2009 in the amount of € 2.7 million. This participation had not yet been acquired by TMG in the comparable period in 2008.
Other financial income and expenses amounted to negative € 0.4 million in Q2 2009 compared to negative € 181.3 million during the same period in 2008. In Q2 of 2008, an impairment of the then existing option arrangement for acquiring 12% of the voting shares (economic interest 6%) of ProSiebenSat.1 in the amount of € 185 million was recognised. Revenues from the sale of the interest in SBS Broadcasting S.a.r.l. were in Q2 2008 still invested in term deposits that at the time produced interest income of approximately € 4 million.
The result from discontinued activities increased by € 3 million to € 2.7 million in Q2 2009 due to the termination and sale of operations in Sweden and Ukraine and the sale of a number of Dutch magazines. The sale of the magazines resulted in a book profit of € 6.7 million. The magazine JAN was already sold in Q1 2009.
The cash position decreased by € 32 million mainly due to a € 20 million negative cash flow from financing activities. A € 0.35 dividend per share was distributed resulting in a € 16.7 million outgoing cash flow. Furthermore, there was a negative cash flow from operating activities due to a normal decrease in accounts payable in the second quarter, employee benefits and redundancy payments. The cash position was positively affected (€ 9.5 million) in Q2 2009 through the sale of the passenger car fleet to Terberg Leasing B.V. and the sale of real estate.
The impact of the recession was more severe in the second quarter than in the first quarter. At this point in time the markets relevant to TMG are not showing any signs of recovery.
TMG has strong, mostly leading positions, in various media markets. However, the result declined in spite of increased market shares and effectively implemented measures. TMG is developing plans on the basis of several scenarios which will lead to further adjustments in response to the situation arisen.
The message previously communicated that it is irresponsible under the current circumstances to make predictions concerning the 2009 full year results, remains in effect. As a result it is also impossible to make projections about the pace at which earlier communicated margin targets will be achieved.
It is, however, possible to identify a number of factors that will affect the 2009 full year operating results:
- Circulation revenues are expected to remain more or less stable.
- Advertising revenues from print and radio activities are on balance expected to be significantly lower in comparison to 2008. Revenue derived from digital activities is expected to show an increase this year.
- In terms of costs the restructuring measures taken, the outsourcing of a number of non-core activities and portfolio changes will result in a cost reduction in line with projected € 31 million in comparison to 2008. The 2008 and 2009 Collective Labour Agreement (CAO) salary increases have a mitigating effect.