One-time charges heavily influence results
Highlights of the 2011 results (in comparison with 2010):
- Recurring EBITDA decreased by € 15.8 million to € 62.5 million.
- Recurring EBITDA-margin decreased from 13.2% to 10.8%.
- Internet revenues increased by 36.1% to almost € 70 million.
- Print advertising revenues decreased by 13%; radio decreased by 8.3%.
- The share in the result of ProSiebenSat.1 Media AG including the book profit related to the disposal of the Belgian and Dutch activities amounts to € 38.3 million.
- Results negatively influenced by one-time charges: impairment of goodwill and reorganisation charges.
- Dividend proposal per share € 0.47 (2010: € 0.45).
The 2011 and 2010 annual figures have been prepared in accordance with the IFRS guidelines applicable in 2011.
The year 2011 was an eventful one for TMG. The expected economic recovery did not materialise and instead turned into a recession at the end of 2011. Furthermore, the media landscape changed further and the pace of migration from print to digital quickened. Both of these trends adversely affected the advertising, as well as the circulation revenues of our daily newspapers and free local papers (distributed door-to-door). The growth in digital activities plus the cost reductions achieved through means of reorganisation measures and due to the partnering with Wegener and NDC in the distribution of dailies were insufficient in terms of offsetting the decline in print revenues.
Revenues from radio were also affected by the recession and from the (temporarily) declining listener share of our stations. A positive development was the more than 20% reduction in the FM frequency charges incurred by Sky Radio and Veronica effective September 2011.
The revenues and the results produced by the Keesing Media Group’s traditional puzzle activities were stable. An important step was made in further expanding the revenues and results through the acquisition of MegaStar in France in December 2011. This significantly increases market share in the French language area. Aside from synergy benefits, Keesing expects to acquire a good starting position in the Spanish, and to a lesser extent in the German, language areas with this acquisition. The investments Keesing made in the digital domain can also be applied within Megastar.
Further good news was the rate at which digital revenues grew in 2011: a growth of 36% in comparison to 2010, due to organic growth and the acquisition of Hyves in November 2010. Surveys of internet behaviour conducted by STIR show that TMG has now become one of the players with the highest internet reach in the Netherlands. Internet revenues amounted to 12.1% of TMG’s revenues in 2011 compared to 8.7% in 2010.
On balance, the above trends resulted in a decline of € 15.1 million in revenues and a decline of € 15.8 million in the recurring EBITDA in comparison to 2010. This resulted in a recurring EBITDA margin of 10.8% of revenues in 2011. The EBIT result declined from positive € 22.4 million in 2010 to negative € 82.5 million in 2011.
The revenues from our participating interest in ProSiebenSat.1 Media AG doubled in 2011 due to an increase in the ordinary net result and the share in the gain on the sale of the SBS operations.
Due to the declining results of the Sky Radio Group, the termination of a number of relatively minor operations and lower valuation of a building that is classified as held for sale, a total of € 52.1 million in impairments is recognised in the 2011 result. The € 44.0 million write down against the Sky Radio Group is the result of declining results due to stiff competition in the radio market.
Because of the impairments and restructuring provisions the net result realised in 2011 was minus € 32.6 million.
TMG presented the strategic direction for the coming years in December 2011. The strategic initiatives also include a cost reduction programme in the amount of € 70 million, including an fte reduction of approximately 350 employees. A restructuring provision of almost € 44 million was made at year-end of 2011 in support of this reorganisation.
The decline in revenues by 2.5% to €577.2 million (2010: € 592.3 million) was primarily due to declining advertising revenues. Advertising revenues from print declined by 13% and from radio by 8.3%. By contrast, online advertising rose by 35.8%; however in absolute figures this was not sufficient to compensate for the decline experienced by print and radio. It should be noted however, that the comparable 2010 figures include the positive effect on revenues caused by the FIFA World Cup in South Africa and the Olympic Winter Games in Vancouver. Circulation revenues declined by € 3.8 million (1.4%) in comparison to 2010. The decline is due to a decrease of daily newspaper subscriptions, a decrease of trial subscriptions (Winter Olympics and FIFA World Cup in 2010) and a reduction in promotion-based singly copy sales.
Total internet revenues (including Hyves and e-commerce), reported under the header advertising revenues and other revenues, rose by 36.1% to almost € 70 million. TMG sites reach over 9 million persons per month, making TMG a market leader in terms of internet reach in the Netherlands. Increasing numbers of Dutch citizens have a smartphone and/or a tablet. TMG is anticipating this trend by making apps available. Video and video production is also becoming increasingly important in the digital domain.
Distribution revenues declined by € 3.4 million in comparison to 2010 due to the termination of transportation activities for third parties as of December 2010. This resulted in the termination of less profitable transportation activities.
One of the buildings classified as held for sale was sold in 2011. The sale resulted in a book profit of €1.3 million.
Of the total revenues in 2011, €37.5 million was realised abroad (2010: € 36.5 million). Revenues outside the Netherlands are expected to continue to rise in 2012 as a result of the acquisition of Megastar in France.
Revenues per segment
Revenues per segment
x € 1 million
Telegraaf Media Nederland
Keesing Media Group
Sky Radio Group
Third party printing
The revenues of Telegraaf Media Nederland and the Sky Radio Group declined by € 22.6 million and € 2.6 million, respectively, due to the decline in advertising revenues.
The Keesing Media Group experienced an increase in revenues, primarily in France.
Internet revenues rose by € 18.5 million to almost € 70 million. The increase resulted from the acquisition of Hyves in the fourth quarter of 2010, the expansion of e-commerce activities via the De Telegraaf web shop and higher display ad volumes.
Operating expenses rose by € 90.8 million due to a € 43.9 million increase in restructuring expenses caused by a reduction in personnel starting in 2012 and impairments on intangible assets in the amount of € 52.1 million. As a result of these exceptional items EBIT realised in 2011 was minus € 82.5 million (2010: positive € 22.4 million).
Due to a reduction in the use of paper combined with lower paper prices in the first half of the year, the cost of raw and auxiliary materials declined by €1.5 million in 2011 compared to 2010. The cost of raw materials rose in the second half of 2011, due to an increase in the price of paper. At year-end 2011, a paper inventory valued at approximately € 13.7 million was held in reserve (2010: € 4.4 million).
A cost reduction programme in the amount of € 70 million during the period leading up to 2016 forms part of TMG’s planned transformation into a leading cross-media company. The cost reduction programme includes an fte reduction of approximately 350 employees working in various business units within the company. This has resulted in an allocation of € 43.9 million to the restructuring provision. Aside from this exceptional item (2010: € 3.5 million), personnel costs rose by € 3.7 million in 2011 due to a marginally higher average number of fte due to the acquisition of Hyves and the rollout at Dichtbij.nl. Furthermore, pension premiums rose by € 0.7 million due to a new five-year financing agreement with the Telegraaf Pension Fund Trust and one-time charges for persons unfit for work. In addition, the costs of hiring temporary agency personnel rose by € 1.3 million due to the creation of subscription acquisition and retention programmes and IT projects.
The average number of fte in 2011 was 2,822, an increase of 16 fte in comparison to the previous year. This increase is primarily due to an increase in the number of fte required for the launch of Dichtbij.nl in May 2011 and the acquisition of Hyves in November 2010 (two months in 2010 and the full year in 2011).
The other operating costs were € 0.7 million higher than in 2010. Automation costs increased due to the acquisition of Hyves and new online initiatives. Purchasing costs also increased due to the increase in the volume of e-commerce sales. Distribution costs clearly declined due to the partnership with NDC and Wegener in the distribution of dailies and lower circulation volumes.
Depreciation charges declined by € 2.2 million since a number of printing presses has been fully written off.
Impairments totalling € 52.1 million were recognised for intangible assets at the end of 2011. Due to the projected structurally lower future results of the Sky Radio Group, goodwill was reduced by € 44 million. Also the termination of a number of activities related to free local papers (distributed door-to-door) and the job market cluster resulted in write downs. A structural lower market value of buildings classified as held for sale resulted in an impairment loss of € 0.9 million.
Amortisation charges declined by € 2.5 million primarily due to the fully written down valuation of the Sky Radio Group’s FM license permits in September 2011. Furthermore, the extended six-year licensing period went into effect on 1 September at a lower fee than that was paid to the Dutch government up until that point in time. The fee paid to the government constitutes out-of-pocket costs, but is recognised as amortisation under the IFRS rules.
The result of associates includes TMG’s 6% share in the result of ProSiebenSat.1 Media AG (ProSiebenSat.1) for 2011 in the amount of € 38.3 million, of which € 22.5 million is related to the disposal of the Belgian and Dutch activities of ProSiebenSat.1. This consists of a book profit of € 20.2 million derived from the sale that was effected in June and July 2011 and € 2.3 million share in the results until the date of disposal. The TMG interest in the 2010 result of ProSiebenSat.1 was € 62.6 million, including a € 43.8 million revaluation due to a projected structural improvement in future cash flows.
During the Annual General Meeting of ProSiebenSat.1 Media AG of 1 July 2011, a dividend of € 1.12 per share was adopted for the shares with voting rights for 2010. TMG owns 13,127,832 such shares. The dividend paid has been accounted for by TMG after tax payments. The € 10.8 million net amount received was deducted from the value of TMG’s interest in ProSiebenSat.1.
As at 31 December 2011, the carrying value of TMG’s equity interest (prior to the payment of the dividend over the 2011 financial year) amounted to € 226.7 million or approximately € 17 per share with voting rights.
The tax burden item in 2011 showed a credit balance of € 9.4 million (2010: a debit balance of € 6.2 million) The effective tax burden was 19.9% in 2011 compared to 7.1% in 2010.
The net cash flow from operating activities declined by € 42.1 million to € 17.5 million. Of this decline € 20.3 million is due to the higher paper inventory as a result of the projected further increase in the price of paper, and due to a lower result and redundancy payments.
The cash flow from financing activities was negative due to the buy-back of company shares (€ 11.2 million) and the dividend paid (€ 21.5 million). In addition, an amount of € 7.7 million was paid in September 2011 in the context of the renewed FM licensing permit for the Sky Radio Group. A credit facility in the amount of € 38.1 million has been arranged for the acquisition of MegaStar at the end of 2011.
At year-end 2011, shareholders’ equity attributable to TMG’s shareholders had declined by € 65.2 million to € 465.8 million. The net result attributable to shareholders of ordinary shares TMG for 2011 amount to minus € 32.6 million. Dividends totalling € 21.5 million were paid for 2010. Shareholders’ equity per share totalled € 9.99 at year-end 2011, compared to € 11.12 at year-end 2010. The dividend to be paid for fiscal year 2011 is not yet reflected in the shareholders’ equity as at 31 December 2011.
TMG bought back 1,121,532 (depositary receipts for) shares for a total amount of € 11.2 million during the second half of 2011. These shares have not been withdrawn, as a result of which the composition of the number of shares in comparison to 2010 remains unchanged. As at 31 December 2011, there are 47,750,000 ordinary shares and 960 priority shares of € 0.25 nominal value. Of the ordinary shares, 29,190,077 were converted into depositary receipts as at 31 December 2011, amounting to 61.1% (year-end 2010: 61.1%).
The total net amount invested in 2011 was € 39.8 million (2010: € 49.2 million). This includes the phased investments in printing presses and colour printing units for the printing plant in Amsterdam, the acquisition of the MegaStar in France by the Keesing Media Group and a number of smaller acquisitions including Huizenzoeker.nl and Gaspedaal.nl. In 2010, the investment cash flow was primarily affected by the acquisition of Hyves.
2011 was an important year for TMG due to the impact that the trends described above had on the management of the business and the results achieved, but especially also due to our decision to reject the possibility of acquiring SBS Nederland and the plans we developed in relation to the strategic direction of the company.
The second half of the year in particular was characterised by a redevelopment of the company strategy. The results of this process followed by the Executive Board were presented to the market in December. During the period 2012 - 2016, TMG wants to transform into a leading cross-media company by accelerating online growth. In this respect TMG is putting the focus on the print, online and radio platforms. Strengths will be bundled and investments will be made in growth. The organisation structure, of course, follows the strategy. A change to the company’s organisation structure is planned for the second quarter of 2012.
Keesing Media Group, the market leader in puzzle magazines in France, the Netherlands, Belgium and Denmark, has its own strategy line and will focus on further growth on the basis of its current core activities through means of expansion into new countries and into digital platforms.
Outlook for 2012
TMG is convinced that the planned strategic direction will set the company on the path towards renewed growth in terms of revenues, as well as operating result. Because the employee participation bodies will be issuing advice concerning the detailed plans and the organisational changes in the near future and since the strategy implementation phase will only commence after that, 2012 will primarily be a transition year. A year in which TMG prepares itself to realise the formulated objectives.
The current economic conditions are not contributing to positive expectations in terms of consumer and producer confidence. By contrast, 2012 is a year with major sports events, such as the European Football Championship and the Olympic Games. The results of the Dutch sportsmen in particular are a determining factor in terms of the scope of the revenue-producing opportunities presented by a sports year like this. TMG is well positioned to benefit from these opportunities. In 2012, Megastar’s acquisition will also make a positive contribution to revenues, as well as to the EBITDA result.
Projections indicate that a limited rise in the cost of paper, the effect of increases pursuant to the collective labour agreement (CLA) and the start-up costs of growth initiatives will negatively impact operating costs.
As we indicated earlier, the recurring EBITDA result in 2012 is projected to be 20% lower than the € 62.5 million recurring EBITDA result in 2011.
The 2012 net result is expected to be positively affected by lower amortisation due to the reduced FM licensing costs incurred by the Sky Radio Group.
The proposal is to pay out a cash dividend of € 0.47 per share. On outstanding shares, this equates to a dividend to be paid of € 21.9 million. The dividend for 2010 was € 0.45 per share.
1. Consolidated Statement of Comprehensive Income 2011.
2. Consolidated Statement of Financial Position as at 31 December 2011.
3. Consolidated Cash Flow Statement for 2011.
4. Recurring EBITDA 2011.
5. Consolidated Statement of Comprehensive Income for the fourth quarter of 2011.
6. Recurring EBITDA fourth quarter 2011.