Semi-annual report 2006
AMSTERDAM- Telegraaf Media Groep N.V. (TMG) realised a net profit of € 52.9 million over the period from 1 January 2006 up to and including 16 July 2006, compared to € 23.8 million over the similar period of 2005. The turnover achieved amounted to € 418.2 million, compared to € 385.3 million in the similar period of 2005. Per share, the net profit increased to € 1.03 (2005: € 0.45). Excluding exceptional items, the net profit fell from € 19.5 million to € 17.4 million, mainly due to a lower result from participating interests.
Market and policy
TMG focuses on exploitation of media consumption, particularly in the consumer market. The core of the business knowledge and the passion of the people concerned consist of the creation and exploitation of media products. In the past this only involved print media in the Netherlands. However, numerous new formats for information have emerged. TMG´s policy anticipates this development, which means that TMG is no longer exclusively a newspaper company.
The following summarised points form the core of the policy:
- improving the results by strengthening of and shifts within the product portfolio,
- investing in existing brands/products,
- continuing to make cost savings,
- maximising synergy,
- utilising existing publishing expertise in countries outside the Netherlands.
All this is naturally aimed at longer-term profitability and thus promoting the interests of all stakeholders.
With the decreasing relevance of traditional and other print products in the Netherlands, the following investments and disposals are being anticipated.
The acquisition of Sky Radio Group is completed. This concerns an investment in the most successful group of commercial radio stations in the Netherlands, comprising the broadcasters
Sky Radio 101FM, Radio Veronica and Classic FM. In Germany the group owns Sky Radio Hessen. TMG has provisionally acquired a stake of 28% in the group. Veronica Holding company owns 10%. The majority of the shares are held by financial parties against a fixed rate of interest. TMG will acquire the stake from the financial parties as soon as that is possible within the restrictions of the Dutch media legislation. Sky Radio Group has provided a positive contribution to the EBITA since the middle of April 2006.
At the end of the first half-year, the acquisition was completed of Keesing Group B.V., a multinational publisher mainly in the field of puzzle magazines. Keesing has business locations in four countries in Europe and publishes approximately 300 printed and digital publications.
This acquisition will also provide a positive contribution to the EBITA with effect from the second half-year of 2006.
Around the middle of June, the disposal was completed of Media Groep Limburg, including the printing company (Grafisch Bedrijf Media Groep Limburg B.V.), and Uitgeversmaatschappij De Trompetter for an enterprise value of € 200 million. The Limburg activities offered insufficient prospects within TMG of realising the necessary scale and synergy with other businesses within the Group.
At the start of 2006, via the business unit Telegraaf Classified Media B.V., TMG acquired a 70% interest in the Internet dating websites Relatieplanet.nl and Iwannadate.nl. These activities also ensure an increase in the EBITA.
Investing in existing brands/products
Print media form an indispensable part of the market for consumer information and with that also for TMG. The group is market leader with renowned and profitable brands such as De Telegraaf, Sp!ts and Privé. Investments are being made in both digital and print products to reinforce this position.
Introduction of the Sunday edition of daily newspaper De Telegraaf and investments in accentuating the positioning of Sp!ts reinforce the position of the daily papers. By adaptations in and introduction of local newspapers, TMG is investing in broadening its offering in the regions.
Investment is also being made in digital media, including in market places such as Speurders.nl and Telegraaftickets.nl as well as in local Internet activities and SMS services.
Across the entire group, the publishing process is being performed more austerely, more efficiently and therefore at lower costs. An important component of this is cost transparency in all levels of the organisation and the requirement for each unit to operate at market-level costs. This leads to adjustments and cost reductions across the full breadth of the organisation, both at publishers and at facilities services companies.
Efficiencies realised in and adjustments to the staffing level, to meet the changed market demand, are leading to a considerable lowering of the staffing level in 2006, for both the printers in Amsterdam and the distribution organisation.
Moreover, in the area of distribution, research is currently underway into the opportunities for cooperation with PCM publishers (PCM Uitgevers). The targeted increase in scale to be achieved must lead to significant savings. The results of this research are expected soon.
In the ICT area, outsourcing of so-called infrastructure services is being examined.
Digital techniques are being more used, which have resulted in spending cuts, for example in the area of page layout and in the processing of classified advertisements.
With the appointment of a Chief Synergy Officer, who reports directly to the executive board, attention is systematically being paid to improvement in the use of synergy benefits throughout the organisation from a high level within it. Synergy between the various means of communication (print, mobile phones and on-line), between products and markets (brands policy), between supporting activities (sales) and also synergy between the different products by region, in order to maximise the return within geographical areas. The bundling of back-office activities also falls within the scope of the Chief Synergy Officer.
The internationalisation received a boost in January of this year from the appointment of an International President, who will manage the expansion on the markets outside the Netherlands.
Telegraaf Media Ukraine LLC acquired an 80% interest in LLC Telegraaf News Media in January 2006. This participating interest issues the paper `Obzor’ three times per week, a Ukrainian alternative of the Dutch Sp!ts.
TMG is now active as an independent media company in the Netherlands, Belgium, France, Denmark, Sweden and the Ukraine, and by means of participating interests in a number of other - mainly European – countries.
The semi-annual figures of both 2006 and 2005 have been drawn up in accordance with the currently applicable IFRS principles.
The disposal of the Limburg activities (as at 13 June 2006), the acquisition of Sky Radio Group (as at 13 April 2006) and of Keesing Group as at 30 June 2006, have brought about a further change in the portfolio composition. The effects of this on the operating result will be mainly apparent with effect from the second half of 2006. The acquisition of Relatieplanet/Iwannadate as at the start of January 2006, as well as the swap of the 27% interest in SBS Broadcasting B.V. for a 20%-interest in SBS S.à.r.l. have been fully incorporated in the figures for the first half-year of 2006.
In the reported net profit of € 52.9 million over the first seven periods of 2006, € 20.8 million on balance is included for non-recurring income (book profits less restructuring expenses, and so on) as well as a positive revaluation of € 14.7 million for the interest in Wegener. In accordance with IFRS principles, this interest is valued at the price applicable as at the balance sheet date (€ 11.39 per share). Excluding these exceptional items, the ‘normal’ net profit fell from € 19.5 million in the first half-year of 2005 to € 17.4 million in 2006, mainly due to a lower result from participating interests (mainly IFRS effects).
The operating result decreased by € 44.3 million from € 20.5 million for the first 28 weeks of 2005 to minus € 23.8 million over virtually the same period of 2006. Excluding the effect of € 44.5 million higher non-recurring expenses, including € 32.3 million higher restructuring expenses, approximately € 4 million higher profit sharing and approximately € 1.2 million lower other operating revenues, the 'ordinary' operating result rose fractionally by € 0.2 million from € 18.8 million to € 19.0 million.
In the newspaper sector, the HDC Media, Holland Combinatie and BasisMedia (Sp!ts) performances improved compared to the previous year, partly because of higher advertising revenue, and partly because of further cost reductions. At the publishing company Uitgeversmaatschappij De Telegraaf and the Telegraaf Tijdschriften Groep (TTG – the magazines group) the results also came under more pressure because of decreasing advertising revenue (with an increased market share) and at TTG also because of lower circulation revenue.
The composition of the result for the first half-year can be broken down as follows.
Net turnover increased from € 385.3 million to € 418.2 million, consisting of:
Amounts in € millions
Advertisements 215.4 198.1
Subscriptions and single-copy sales 149.3 153.6
Production activities 8.1 8.9
Distribution activities 20.3 18.2
Other revenues 25.1 6.5
Total 418.2 385.3
- the acquisition of Sky Radio Group and Keesing Group,
- the growth from Internet activities (Relatieplanet, Speurders.nl and so on),
- cost savings from restructuring,
- higher financial income,
- a higher result form the participating interest in SBS S.à.r.l.
- the disposal of the Limburg activities,
- the filtering through of the paper price-rise,
- possible expenses in the context of restructuring,
- amortisation on licences, et cetera as a result of the PPAs for Sky Radio Group, Keesing Group and Relatieplanet.