Limited margin deterioration despite recession

The recession took a heavy toll on the revenues of TMG. The fact that, ultimately, TMG’s operating result held relatively firm has everything to do with the rigorous focus on implementing the announced cost-cutting programme. 

Revenues declined by €69.1 million, to clearly over €611 million (2008: €681 million). Advertising revenues declined in 2009 by € 54.4 million. Including a decrease of approximately €46.9 million in restructuring expenses, operating expenses declined by €104.5 million. The operating results (EBIT) improved by €34.4 million, from negative €37.3 million to negative € 2.9 million. The recurring EBITA result declined from €62.0 million in 2008 to €49.6 million in 2009. The EBITA margin declined from 9.1% in 2008 to 8.1% in 2009. The net result of €69.3 million includes a €56 million revaluation of the interest in ProSiebenSat.1 Media AG besides the share in the result of this participation of €8.6 million. On 7 January 2010 TMG indicated in a press release for 2009 a recurring EBITA of approximately € 45 million and revenues of over €600 million (EBITA margin 7.5%). Thanks to relatively higher revenues in the second half of December and higher cost reductions than expected at the time, revenues (€611 million) as well as recurring EBITA (€49.6 million) turned out to be higher (EBITA margin 8.1%).

The 2009 and 2008 annual figures have been prepared in accordance with the IFRS guidelines applicable in 2009. The consolidated statement of comprehensive income is presented on the basis of continued operations. In the second half of 2008, TMG decided to sell or cease insufficiently profitable activities and non-core activities. The result from operations already discontinued or held for discontinuation has been presented separately for both 2009 and 2008. The operations concerned are the publishing houses in Sweden and the Ukraine and, in the Netherlands, several magazine titles owned by the Telegraaf Tijdschriften Groep, the narrowcasting activities of Media Librium and Carp's print operations. At the end of 2009, TMG decided to sell Keesing Reference Systems, a provider of solutions for checking ID documents, among other things. This sale was effective at the start of 2010 and, consequently, the result from this activity is also included in the separately-presented results from discontinued operations.


Mid 2008, TMG stated the intention to markedly increase the recurring EBITA margin in the first three years from a level of just over 7% in 2007 to – eventually – a level of 15%. Higher margins had to be realised by cost cutting, disposing of insufficiently performing activities and outsourcing of non core activities. This ambition assumed normal economic conditions, maintaining and expanding market leadership and, at the same time, achieving greater efficiency and synergy in existing activities. Especially the digital activities were expected to grow, both organic and acquisition-driven.

In the meantime, TMG has adjusted the portfolio. Unprofitable or insufficiently profitable activities have been sold or terminated. This has included selling part of the Dutch magazine portfolio and the narrowcasting activities, as well as the activities in Sweden and the Ukraine, and closing a number of distribution centres. TMG has undertaken some radical restructuring, which has entailed altering processes, combining activities and outsourcing a number of non-core activities. These measures have resulted in substantial cost savings and a decrease in the number of full-time jobs from 3,678 on the reference date at the end of June 2008, to 2,808 at the end of December 2009.

All in all, TMG managed to significantly and structurally reduce the costs and is ahead of schedule as regards the cost cutting programme, however, mainly due to the decreases in advertising revenues TMG did not achieve the projected percentage growth in the EBITA margin in 2009. Nonetheless, TMG is steadfast in the goal of achieving a 15% margin. To achieve this, TMG is reliant not only on further growth in digital activities, but also on economic recovery.


The year 2009

In operational terms, advertising revenues suffered the largest decline. This situation was not unique to TMG in 2009, but was typical for all media companies in the Netherlands. An exception has been the advertising market for digital products, which has recorded small gains. The same applies to circulation revenues. 

In terms of market positioning, the market shares of TMG’s three media companies Telegraaf Media Nederland, Sky Radio Group and Keesing Media Group have remained unchanged, by and large, and have in fact grown in a number of cases. A wide range of market shares is meant including advertising volume, single copy sales, listening data, and paid circulation. This illustrates the diversity and, thereby the strength of the portfolio.

Due to the rigorous focus on cost savings, maintaining and expanding market shares of existing products and measures to boost cooperation and achieve synergies, there were no notable acquisitions in the digital market in 2009. Organic growth was achieved in various areas, including digital activities such as internet, mobile internet and gaming. 

TMG also made progress towards a segment strategy for the markets for cars, women, travel, finance and recruiting.

As the decline in revenues exceeded the reduction in costs, additional measures were taken at the end of 2009, which included the discontinuation of the Sunday paper of De Telegraaf and tackling excessive salaries.

The plans to distribute newspapers jointly with fellow publishers in the Netherlands will yield significant benefits. This project is receiving the attention commensurate with the importance of home delivery in the Netherlands, but is complex in its consequences.


TMG’s Media companies
Some major changes have taken place at Telegraaf Media Nederland in terms of processes and activities, which have resulted in more cooperation and greater unity and synergy. Synergies are also being realised in regard to revenues and the various publishers are working on cross-media propositions and multimedia reach packages.  Keesing Media Group’s results proved remarkably resilient in 2009 which proves that advertising markets were worse-hit than the consumer markets. Sky Radio Group had to contend with falls in advertising income in line with the overall market. The decision by the Dutch government to renew the FM licences for six years subject to certain conditions is very significant for the radio group's position in the longer term, ensuring as it does that plans for the future of radio, and digital radio in particular, can proceed with confidence.

The reach and position of the internet sites increased at a steady pace. The advertising income increased limitedly despite the economic situation.

The internal operating companies realised cost savings while quality of the services was maintained.



As previously mentioned, the cost savings were not enough to offset the decline in revenues. The operating result was negative €2.9 million in 2009, but improved by €34.4 million compared with 2008 thanks to lower restructuring expenses (2008: €37.3 million negative).

Net profit of €69.3 million was realised in 2009, compared with a net loss of €360.8 million in 2008. The net profit for 2009 includes a €56 million revaluation of the interest in ProSiebenSat.1 Media AG. The loss for 2008 includes impairments on the participating interests in ProSiebenSat.1Media AG and Expomedia totalling €324 million. In addition, a provision of more than €52 million was made for restructuring.

Revenues declined by €69.1 million, to €611.8 million (2008: €680.9 million). All sources of income were under severe pressure, except for circulation revenues, which rose by €4.8 million primarily due to higher revenues at Keesing Media Group and higher prices for subscriptions and single copy sales of daily newspapers. Circulation was slightly lower than in 2008 for most print titles. Advertising income in the national brands and services and personnel segments and from classified ads was under severe pressure due to the economic conditions and price pressure in an intensely competitive media market. The income decreased by 54.4 million (16.4%). Revenues from print and distribution activities for third parties declined by €17.9 million in 2009, as a result of the cessation of insufficiently profitable contracts. As regards the trend in revenues at the media companies, revenues at Telegraaf Media Nederland and Sky Radio Group declined by 8.0% and 18.2% respectively, due primarily to lower advertising revenues. In contrast, Keesing Media Group’s revenues rose by €2.2 million, thanks primarily to more effective distribution of the puzzle activities in France. Income from digital activities rose by 0.6% to €36.3 million,

A tough cost-cutting programme was launched in 2008, as a result of which operating expenses were reduced by €104.5 million in 2009. The costs of raw and auxiliary materials declined by €4.3 million, due to reduced paper consumption.

Personnel costs fell by €76.5 million compared with 2008. Reported restructuring expenses were €46.9 million lower in 2009 compared with 2008. The FTE reduction programme already had some impact in 2009, resulting in a decrease of €29.6 million in expenditure on own and temporary personnel. The decrease in personnel costs as a result of personnel reductions was partially negated by increases under the collective labour agreement (CAO) (an average of 2.75% as at 1 July 2009). Consultation with the trade unions regarding the postponement or abandonment of this increase due to the economic malaise proved fruitless.

Depreciation declined by €5.4 million, primarily due to a sale and lease back transaction in respect of the car fleet and the cessation of depreciation on several business premises that are classified as “held for sale”.

Amortisation totalled €37.6 million in 2009 (2008: €38.5 million). Whilst there were no acquisitions in 2009, additional payments were made in respect of acquisitions from prior years. In addition, as a result of the economic situation, impairments totalling €8.6 million were recognised with regard to the goodwill on the operations of Weekbladen Groep Midden Nederland B.V., Nobiles B.V., 402EVENTS.COM B.V. and Bohil Media B.V. (2008: €10.3 million).

Other operating expenses are down €15.7 million compared with 2008, specifically due to lower distribution costs in connection with the cessation of transport operations in Heerlen and Horst and the further centralisation of the other transport operations.

The result from associates totalled €63.8 million in 2009, and primarily comprises the revaluation of the interest in ProSiebenSat.1 of €56 million due to structural improvements in anticipated future cash flows and the result for 2009 of €8.7 million (2008: €10.2 million negative) on the 6% economic interest in ProSiebenSat.1. In 2008, there was an impairment on the interest in ProSiebenSat.1 Media AG of €99.8 million and the investment in Expomedia Group Plc. was written off in the amount of €18.7 million.

Financial income declined from €15.6 million in 2008 to €0.7 million in 2009. Until the purchase of the interest in ProSiebenSat.1 Media AG in September 2008, the proceeds from the sale of SBS in 2007 were invested in a term deposit and yielded more than €13.3 million.

In 2008, financial expenses also included an impairment on the ProSiebenSat.1 Media AG put option of €195.0 million, until 25 September 2008.

TMG’s most important participating interest by far is the 6% interest in ProSiebenSat.1 Media AG (12% of the ordinary voting shares). In 2009, ProSiebenSat.1 Media AG (ProSiebenSat.1) held its position exceptionally well on the international viewers’ and advertisers’ market. Thanks in part to structural substantial cost cuts, the operating result (recurring EBITDA) increased. As a consequence of this, TMG’s expectation regarding ProSiebenSat.1s’ future cash flows has been positively adjusted. As a consequence at year-end 2009 TMG revalued this interest upwards to over €10 per ordinary voting share. In March 2009, the market price of the preference share in ProSiebenSat.1 dipped to less than €1, but has now climbed back up to over €10.

Corporate Income Tax on continued operations amounted to €0.9 million in 2009, whereas in 2008 there was a tax gain on continued operations of €10.3 million. The effective tax rate in 2009 was 1.5% compared to 2.9% in 2008.


The net cash flow for 2009 was €22.2 million positive. The net cash flow from operational activities came to €49.3 million positive. The positive result before depreciation, amortisation, impairments and impairment reversals was countered by expenditure of €25.8 million on redundancy payments due to the FTE reduction programme and other non-regular employee benefits. The negative cash flow from financing activities totalled €29.7 million due to dividend payments of €16.7 million and the repayment of long-term liabilities, including the annual FM licence payments by Sky Radio Group. In 2008, the net cash flow was negatively impacted by the investment of €377.1 million in the associated company ProSiebenSat.1 Media AG.

Shareholders’ equity

At year-end 2009, shareholders’ equity attributable to TMG’s shareholders had risen to €466.0 million compared with €411.6 million at year-end 2008. Total comprehensive income attributable to shareholders of TMG for 2009 totalled €71.1 million, whilst dividends totalling €16.7 million were paid for 2008. Equity per share totalled €9.76 at year-end 2009, compared with €8.62 at year-end 2008. The dividend to be paid for 2009 is not yet reflected in the shareholders’ equity as at 31 December 2009.


During 2007 and 2008, TMG purchased 2,250,000 shares and depositary receipts for shares, for a total amount of €53.2 million. In 2009, these shares were withdrawn. The nominal portion of €0.6 million has been deducted from the share capital and the remainder of €52.6 million has been charged to retained earnings.

There are 47,750,000 ordinary shares and 960 priority shares of €0.25 nominal value. Of the ordinary shares, 29,056,337 had been converted into depositary receipts as at 31 December 2009, amounting to 60.9% (year-end 2008: 63.4%).


The total net amount invested in 2008 was €417.8 million, whereas in 2009, on balance, the sum of €2.6 million was disposed of. This relates both to investments in property, plant and equipment, and intangible assets, including additional payments of €3.1 million on acquisitions from previous financial years. A total of €2.0 million was received in respect of divested business operations. Disposals, including the sale of the car fleet, yielded proceeds of €14.8 million. In 2008, the investment total primarily consisted of €377.1 million for the purchase of the interest in the associated company ProSiebenSat.1 Media AG. In addition, €39 million was invested in acquiring new business operations in 2008.

With the aim of consolidating its leadership in a changing market, TMG investigates increasing the full color printing capacity of its Amsterdam facilities to add more flexibility to its printing capabilities. Such investment is expected to commence in 2010 at a cost of approximately €15 million.           


As announced in the press release issued further to the New Year’s speech, a further decline in advertising revenues of print and radio is expected. The first two months of 2010 have exhibited a more than 8% decline in advertising revenues across TMG compared with the same period in 2009, despite a boost from the Winter Olympics. Thanks to the cost cutting measures taken in 2009, the EBITA result improved.

No predictions will be made regarding the result for 2010. The main reason for this is the ongoing uncertainty with regard to economic developments – a situation compounded by the collapse of the cabinet.


The following factors will affect the EBITA result in 2010:

  • Positive influence:
    • continued effect of the cost measures implemented in 2009;
    • outsourcing of activities;
    • discontinuation of De Telegraaf on Sunday;
    • expected growth in revenues from circulation and digital activities;
    • expected decline in the price of newsprint, influenced by developments on the paper market.
  • Negative influence:
    • expected further decline in revenues from advertisements, despite the positive effect of the Winter Olympics and the FIFA World Cup;
    • effect of increases pursuant to the collective labour agreement;
    • effect of inflation.

The share in the result of ProSiebenSat.1 Media AG in particular will also impact on the net result in 2010 and a tax gain regarding the expected liquidation of Expomedia Group Plc.


In conclusion

TMG is almost debt-free and occupies leading positions with big brands in a number of relevant markets. Over the coming months, TMG will continue to focus on achieving synergy, economies of scale, digitalisation and the strengthening of market shares for existing products, while of course remaining alert to potential acquisitions which would further consolidate the position.

TMG is occupied with the changing media landscape and the future in many different ways, ranging from the exploitation of content on e-readers to the opportunities for new advertising billing models in the print and digital area.  Print products remain very important for the profitability, and the attention TMG pays to them reflects this. TMG is investing in these products too, and is updating, improving as well as optimising them. The print products will deliver outstanding returns for many years to come. And especially in a declining market a major publisher of print products such as TMG is able to win market share and to realise proper financial margins.

All of which means TMG must invest in tandem with unpopular internal measures. In the proper balance, this is the best guarantee for all stakeholders of a successful future for TMG. The biggest challenge facing TMG is to migrate to more digital revenues and profits, without losing sight of the profitability of print products.

In the long run economies of scale are important in a consolidating print industry and so is migration to higher revenues and results from digital activities. This is restricted by still existing crossownership constraints and also by competition in the digital area of public broadcasters, which are funded by the government. 

Dividend policy

The dividend is normally set within a range of 15% to 30% of the cash flow, with cash flow being defined as the sum of net result and depreciation, adjusted for the effects of revaluations and impairments included in the net result for the year.

Despite the limited negative operating result (EBIT), but in view of the positive operational cash flow and TMG's debt-free position, a cash dividend of €0.35 per share is proposed, like in 2008. On a total of 47,750,000 outstanding shares and depositary receipts for shares, this equates to a payout of €16.7 million.