Decline in revenues offset by further cost reductions
One-time book profit produces exceptionally high net result in difficult market.
- The recurring EBITDA result increased from € 49.3 million to € 60.1 million due to cost reduction interventions. Operating margin increased from 8.9% to 11.1%.
- Additional restructuring costs in the amount of € 37 million depress the operating result (EBIT): decline from positive € 16.2 million over 2012 to negative € 10.3 million over 2013.
- Lower revenues: from € 555.8 million to € 542.2 million due to decline in revenues from advertising and circulation. Revenues from digital and radio activities and revenues from distribution for third parties grew significantly, primarily due to ecommerce and Dichtbij.nl.
- Various business activities were discontinued, or are classified as held for sale, during 2013. Revenue and recurring EBITDA amounted to € 12 million (2012: € 21.3 million) and negative € 4 million (2012: negative € 8.8 million), respectively.
- The 2012-2016 cost reduction programme was increased by € 50 million to a total of € 120 million. The programme generated € 68 million in annual savings by year-end 2013.
- The € 218.3 million book profit on the sale of the interest in ProSiebenSat.1 Media AG has produced an exceptionally high net result of € 177.9 million.
- Following the payment of an interim dividend in August (€ 0.50 per share) and in November (€ 6.00 per share), it is proposed that final dividend payment be passed. A new dividend policy will be proposed to the General Meeting of Shareholders which will link the dividend to the operating cash flow.
- New composition of the Supervisory Board.
The annual figures have been prepared in accordance with the IFRS-EU guidelines. The consolidated income statement is reported on the basis of continued operations. The result of discontinued activities or those held for sale has been presented separately in 2013. This concerns the activities of Keesing Games, Mobillion, Relatieplanet, Hyves Social Network, Moviebites and Nobiles (online, non-print related, segment). The comparative 2012 figures have been adjusted accordingly. The comparative figures have also been adjusted for the IAS 19R; see the Consolidated Financial Statements for further clarification.
Cees van Steijn, CEO ad interim of Telegraaf Media Groep: “The media landscape has structurally changed. That why we have to re-invent ourselves. During last year we took important steps in that matter. Our costs are structurally lowered and the corporate structure has drastically been simplified. Regarding the portfolio we have made some clear choices and our strong brands and journalistic relevance are at the heart of the company. Revenues of digital activities and radio show a positive trend. Although reorganisations will take place in the phase to come, we will be heading distinctively for renewed growth as well. We will further invest in digital activities and additional budget will be freed up for a circulation drive for national and regional daily newspapers. This way we keep our position as a leading media company.”
The Telegraaf Media Groep improved its result over 2013. Although revenue declined by € 13.6 million to € 542.2 million over the course of the year due to the negative impact of the economic conditions on advertising and circulation income, the cost reduction programmes in particular enabled TMG to realise a substantial increase in the recurring EBITDA from € 49.3 million in 2012 to € 60.1 million in 2013. Due to the € 218.3 million book profit earned on the sale of the interest in ProSiebenSat.1 Media AG (ProSiebenSat.1), the net result was exceptionally high and amounted to € 177.9 million.
The Telegraaf Media Groep took important steps during the year to prepare for the future. The organisation operated in a market with unrelenting challenges, while the economy has continued to shrink and changes in the media world were occurring in rapid succession. As advertising and circulation income came under increased pressure, a great deal of effort was invested in simplifying the organisation structure. This contributes to the company’s versatility and flexibility, needed to provide maximum room for entrepreneurship. The future will be built around the strength of the company’s brands, which, without exception, occupy a prominent position in the Dutch media landscape.
The 2012-2016 cost reduction programme was initiated in 2012 and ultimately is to generate nearly € 70 million in annual savings. An additional programme was initiated in August 2013 amounting to approximately € 50 million. While the first programme is clearly running ahead of schedule and has since resulted in a € 68 million cost reduction, it is expected that the effects of the new programme for a large part will be evident in the 2014 results. In total, the personnel complement will be reduced by 700 FTEs due to these cost reductions, a large part of which has since been realised (410 FTEs). The current reorganisations are expected to be completed by the end of 2014 and their effects should be fully evident in the 2015 results.
At the beginning of 2013 it was decided to concentrate on the core business. Market conditions had fundamentally changed and it was clear that something needed to happen to prepare the organisation for the future. By the beginning of 2014, the simplification of the organisation structure has been completed in main lines. The brands were made the centre of focus so as to offer maximum room for entrepreneurship. Where possible, the organisation has been simplified and downsized. No concessions were made to journalistic quality in this respect. The reduction primarily took place in other areas of the organisation. Within the new structure, work is now underway on the further expansion of the company’s brands, on the transformation to online operations and on initiatives focused on growth.
Financial Notes per Business Unit
TMG’s various business units produced varying results in 2013. Especially the daily newspapers and the free local papers (distributed door-to-door) experienced a decline in circulation and advertising revenues, although the free local papers showed a fragile recovery in advertising income during the last months of 2013. The decline in revenues experienced by the daily newspapers was partially offset by an increase of € 7 million in revenues from digital activities and a € 4.5 million increase in revenues from the radio market. The latter was due to the Sky Radio Group’s success in transforming its increased listening figures into higher revenues.
In terms of the Keesing Media Group (Keesing), an analysis was performed of the strategic options for this activity, after which it was decided to keep Keesing within TMG. Keesing fits into the Telegraaf Media Groep’s brand portfolio with strong brands such as Denksport in the Netherlands, and Sport Cérébral/Megastar in Belgium and France, and it is a healthy and very profitable business unit.
Unlocking Shareholder Value
While a great deal of effort was devoted to the internal organisation, a substantial portion of the shareholder value present within the Telegraaf Media Groep was unlocked in 2013. In August an interim dividend of € 0.50 per share was distributed to shareholders and following the sale of the 6% interest in the share capital of ProSiebenSat.1 Media AG, which produced net proceeds of over € 390 million, an additional interim dividend of € 6.00 per share was distributed in November. In addition to these dividend payments, the proceeds from the sale of the interest in ProSiebenSat.1 were also used to settle bank debts, thus strengthening the balance sheet. In addition, current reorganisations are also funded.
Composition of the Supervisory Board
Ms M. Tiemstra and Mr J.G. Drechsel have decided to step down as Supervisory Board members in the 2014 General Meeting. In addition, Mr D.H.H.D. Ropers is stepping down in accordance with the schedule of rotation. Mr Ropers has indicated that he will not make himself available for reappointment. The Board would like to express its sincere appreciation to Ms M. Tiemstra, Mr J.G. Drechsel and Mr D.H.H.D. Ropers for their contribution and tremendous effort during the time they served as Supervisory Board members for TMG. TMG announces today the appointment of Ms S.G. Brummelhuis and Ms A. van den Belt as a member of the Supervisory Board of Telegraaf Media Groep, subject to shareholder appointment at the Annual General Meeting of 24 April 2014. Ms Brummelhuis' appointment is recommended for her management skills, knowledge of and experience in digital media and mergers and acquisitions. Ms Van den Belt's appointment is recommended for her management skills, knowledge of and experience in digital media, and thepublishing sector.
Dividend Policy and Proposal
In recent years the operating result has been under pressure due to lower advertising and circulation revenues and high restructuring costs. The pay out of the dividend was primarily determined by the relatively stable income from puzzle activities and the receipt of the ProSiebenSat.1 Media AG (ProSiebenSat.1) net dividend. The interest in ProSiebenSat.1 was sold in September 2013, as a result of which the current dividend policy is no longer tenable. Accordingly, a proposal will be submitted to the General Meeting of Shareholders to be held on 24 April requesting the Meeting to set the dividend effective from the 2014 financial year dependent on the recurring operating cash flow, i.e. the recurring EBITDA of the total operations (continued operations and operations terminated that year) subject to the deduction of the license fees owed by the Sky Radio Group (cash out), taxes, interest and replacement investments.
The basic principle will be to pay out 30% - 40% of this net operating cash flow. If this dividend policy had been applied this past year, the normal dividend payment over 2013 would have been approximately € 0.30 (excluding the ProSiebenSat.1 result). In view of the fact that in 2013 an interim dividend amounting to € 6.50 was already paid pursuant to the sale of the participation in ProSiebenSat.1 effective from September 2013 and the dividend received from this participation, and furthermore, given the high redundancy payments expected for the coming financial year, it is proposed that there be no final dividend payment for 2013.
A further decline in advertising and circulation revenues is expected for 2014 relative to 2013. This applies to the national as well as regional daily newspapers due to the structurally changed market in which media companies operate. Revenues from radio-related activities are expected to remain stable. Revenues from digital activities are expected to continue to grow. Puzzle activities are expected to experience a slight decline in revenues. To tap new growth opportunities, approximately € 5 million will be invested in digital initiatives in 2014 and an additional budget will be freed up for a circulation drive for national and regional daily newspapers. The projected lower revenues are offset by major cost reductions resulting from the € 120 million cost reduction programme, of which € 52 million will be realised in 2014/2015.
1. Consolidated statement of profit and loss 2013.
2. Consolidated statement of comprehensive income 20113
3. Consolidated statement of financial position 2013
4. Consolidated statement of cash flows 2013.
5. Recurring EBITDA 2013.