TMG adjusts 2008 forecast and acquires interest in ProSiebenSat.1
Early 2008, TMG (Telegraaf Media Groep) indicated a significant increase in recurring operating results assuming a limited increase in advertising and circulation revenue in 2008. This implied an increase in the recurring EBITA margin from 7.2% for 2007, to 9 to 10% for 2008.
In the first half year of 2008, TMG’s circulation revenues rose according to expectations and TMG’s market share of paid circulation in newspapers also increased.Advertising revenues decreased marginally in comparison to the same period last year, despite increasing market share and additional revenues generated by the European Football Championship. Given the economic outlook, further pressure on advertising revenues cannot be precluded.Therefore TMG lowers its expected recurring EBITA margin for 2008 to at least 8%. Nevertheless this is a marked increase compared to 2007 as a result of earlier announced cost reduction measures and synergy benefits from the creation of Telegraaf Media Nederland. The final EBITA result for 2008 is of course partly dependent on actual economic trends during the second half of 2008.
Given the further projected discrepancy between future revenue and expense trends, more drastic cost reduction measures will be required than announced to date, in addition to achieving further synergy benefits. Plans are currently being drafted and will include further personnel reductions whereby lay offs cannot be precluded.
More detailed information will be provided at the time of publication of the semi-annual results on 15 August 2008.
TMG also announces the acquisition of a 12% interest (13,127,832 shares) in the ordinary shares with voting rights of ProSiebenSat.1 Media AG (ProSiebenSat.1).
In an earlier stage TMG has indicated the strategic interest of a participation in television. In June 2007, at the time of the sale of the TMG participation in SBS for an amount of € 433 million, TMG and Lavena Holding 4 GmbH (Lavena), a company indirectly controlled by funds advised by Kohlberg Kravis Roberts & Co. (KKR) and funds advised by Permira (Permira), agreed upon an option arrangement concerning the acquisition of an interest in ProSiebenSat.1 by TMG. Under this option arrangement TMG acquired a call option and Lavena a put option, both of which would be exercisable in 2008. In addition, TMG acquired two seats on the Supervisory Board of ProSiebenSat.1 as of July 2007.
In May 2008, TMG announced that it would not exercise its call option (call price per share: € 32.61). Lavena exercised its put option today (put price: € 28.71 per share). The immediate impact of this is that TMG is able to acquire the 12% interest at a cost which is € 51 million below the cost of the call option. TMG will finance the € 377 million transaction from existing cash assets. Partly due to the gloomy macro-economic climate as well as the continuing impact of the credit crisis, a devaluation of € 150 to € 200 million should be taken into consideration following IFRS principles. The exact amount will be disclosed together with the semi annual results.
Ad Swartjes, TMG’s CEO: “Economic trends of course do not only affect media expenditures in the Netherlands alone. However, TMG has every confidence in the long term growth and synergy potential of the newly formed ProSiebenSat.1 and SBS combination (for reference: pro forma combined recurring EBITDA for 2007: € 783 million). We therefore view our participation in ProSiebenSat.1 as an important step that fits into our strategy of becoming less dependent on print media.”