TMG posts improved results
Ad Swartjes, CEO of Telegraaf Media Groep (TMG), noted in his New Year’s speech that TMG’s new direction is beginning to bear fruit. He characterised the currently known financial results for 2006 as ‘gratifying and encouraging’.
It is too early in the year to issue final results, Swartjes only mentioned preliminary figures. ‘With revenues up over 6% for 2006 the operating result before amortisation of intangible assets (publication rights etc.) and excluding exceptional items rose by about € 9 million, or 23%, to an amount of about € 48 million. This improvement is mainly attributable to slightly higher advertising revenues, a different composition of the product portfolio (divesture of Limburg activities and purchase of e.g. the Sky Radio Group and Keesing Media Group) and the effects of cost reduction.’
The operating result excluding exceptional items and after deduction of the € 15 million higher amortisations decreased by about € 6 million.
The final net result will also be influenced by various factors, including (gross) exceptional expenses of about € 45 million (mainly restructuring charges), a positive revaluation of € 10.5 million in respect of the participation in Wegener and a (net) book profit of € 51 million on the sale of the Limburg activities.
Swartjes concluded that ‘despite the gratifying and encouraging increase in the reccuring operating result before amortisations, a 6% margin of revenues is definitely too low. In order to guarantee the long-term continuity and to remain attractive for shareholders and as an employer, that figure must rise.’
The CEO of Telegraaf Media Groep drew a few more conclusions: ‘The reorganisation is vigorously underway; the number of FTEs decreased in 2006 by some 500: half of this is due to the realignment of the product portfolio, the other half to reorganisations within the company.
Major changes are taking place in the portfolio and our print products are still under pressure in terms of circulation and advertising volume. The latter is particularly serious, given that the economy is clearly on the rise but evidently with only limited benefits for our print products.’
Changes in 2006
TMG, as a business, is in the midst of an enormous process of change. Swartjes compared it with a building site, ‘where everything looks cluttered and disorganised, where you can’t see exactly how all the pieces are going to fit together, where there appear to be loose ends everywhere, where lots of people are working very hard but where nobody seems to know whether and how it will all finally come together to form a coherent and unified whole. But I assure you that we are definitely making progress.’
‘TMG has promised to get even deeper into the consumer’s mindset regarding the changing media consumption behaviour. Adjusted and new initiatives have been taken specifically for this purpose. Tangible advances have also been made on the editorial side, both in terms of costs and media consumption. By way of example, go to the TMG sites and look at the internet references from the print products.
TMG has promised to cut costs even further. Different and cheaper, not a luxury but a necessity. Here too, significant progress has been made. Both at the publishers and at the internal facilitating companies, major steps have been and still are being taken in terms of reducing costs, merging activities and/or outsourcing.
In 2006 a number of changes was realised in the product portfolio, including the purchase of Sky Radio Group and Keesing Media Group, Relatieplanet.nl, Yourfuture.tv and the sale of the Limburg activities.
On the organisational side, an international director has been appointed to provide the cross-border ambitions with strategic foundations, a Chief Synergy Officer has been appointed to accelerate and maximise the synergy effects between TMG business units in the Netherlands, and new board appointments were made at BasisMedia and Uitgeversmaatschappij De Telegraaf.’
Swartjes concluded that TMG could not possibly have handled more in the past year, but that the market is continuing to change at a rapid pace. So TMG must change with it. ‘Analysing what was promised and what was delivered, it is clear that changes could and should be anticipated faster. And the deliverables too must be tangible; in other words: SMART and focused.’
Two general points that Swartjes mentioned were: ‘The change in the cross-ownership regulations looks imminent: the Media Concentrations Bill was sent to the Tweede Kamer (Lower Chamber) this week. And the choice made last year to spend part of the income from the sale of the Limburg activities on the purchase of about 2.5 million shares in total, representing about 5% of the outstanding shares.’
At Uitgeversmaatschappij De Telegraaf advertising and circulation volumes of the print products were once again under pressure, while market share also expanded again. The digital turnover increased further, partly organically and partly through acquisitions. The total turnover thus remained at the same level as before. Tangible structural cost savings were realised, which will also have a positive impact on the performance in this and the coming years. Thanks to these cost-cutting measures and the lower start-up losses of new activities, the normal operating result rose significantly relative to 2005.
Basismedia, Sp!ts, initialy felt the pressurein the advertising market. But thanks to tight cost control and accelerating turnover in the last months, the result will work out at roughly the same level as in 2005.
Both HDC Media and Holland Combinatie had a relatively good year. The results still need to be raised further, but a strong improvement was realised compared to 2005. This was partly thanks to cost measures and partly due to an improving jobs available adverts market. The circulation of the HDC newspapers contracted only marginally.
De Telegraaf Tijdschriften Groephad a difficult year. The magazine JAN is making extraordinarily good progress. TTG, like its competitors, faced strong across-the-board pressure on advertising and circulation revenues. The turnover of TTG stabilised, but higher costs of new projects depressed the result.
Both at Telegraaf Media ICT and at DistriQ and Telegraaf Drukkerij Groep the year 2006 was dominated by measures in the field of costs, portfolio and quality with a view to achieving the objectives of market conformity, transparency and flexibility.
Reorganisations, efficiencies, ongoing automation, but also process simplification were and still are the order of the day.
New additions to TMG are Keesing Media Group and Sky Radio Group. In contributing a healthy result and fulfilling their own specific role, they make TMG less dependent on daily newspapers and better able to follow the trends in media consumption. ‘We are proud to have these businesses in our group. Both are absolute market leaders in their field, have an incredible knowledge base and work with relatively small, enthusiastic teams on the day-to-day results as well as on the – mainly digital – future.’
Less new isAll Connected Media, which originated from Mobillion. All activities not directly related to the TMG titles in the field of the internet and mobile telephony have been brought together within this unit.
Finally, a word about our foreign locations and participating interests. TTG Sweden is continuing down the road that had already proved successful – the commercial exploitation of magazines and related websites – while in the Ukraine growth market a modern multimedia business is being put in place step by step. The Keesing Media Group, which already realises the largest part of its turnover abroad, is developing plans for further international expansion, including in countries where TMG is already active. At TMG’s joint venture in the Dutch exhibitions and trade fairs market the portfolio is under review.Important developments regarding the participation in the international broadcasting company SBS Broadcasting is the recently announced acquisition of the German TV conglomerate ProSiebenSat1 by KKR and Permira and the possible consequences of the intention to merge ProSieben with SBS Broadcasting. TMG has an interest of 20% in SBS and is currently considering its position.
Organisational change for 2007
Analysis of future media consumption patterns and TMG’s portfolio changes, the cost restructuring and the sharpened foreign strategy show that it is imperative to quicken the process of adjusting the company to the accelerating growth in digital multimedia consumption. For this reason the print activities are being separated from the digital activities at the Dutch publishers. Both print and digital will be controlled from a new central unit directly under the Executive Board. This will lead to a better co-ordination of the print side, both geographically and in sales markets as well as in costs and revenues. TMG is one of the largest players in the Netherlands in digital media consumption. With the new organisational form, TMG can also pursue the more pro-active, and hence more effective and efficient, expansion of its share in digital media consumption. More details about the organisational change will be made known in the coming period.
Human Resource Management
Mr Swartjes noted that the people within the business are TMG’s greatest capital asset. The Executive Board is aware that people are constantly at the centre of the cost-cutting measures, the changeover to digital and all the other changes. ‘We are doing all we can, together with the management of the operating companies and with HRM and the P&O departments, to work and continue working on an open and honest, modern and well-balanced human resources policy, including good communication.
We are in the process of transformation from an informal family culture to an innovative business culture. In this process we are not losing sight of the importance of togetherness, independence, reliability and involvement, values that have always been prominent in our culture. TMG is committed to being a social and well-balanced employer. Together with the employees we are constructing a solid and appealing structure, a company with great future.’
Further cost-cutting measures are on the agenda, the organisational change is in progres and TMG will continue to invest in the digital world. The last two months of 2006 were somewhat better from an advertising revenue point of view and the initiated reorganisations are going to bear fruit. But given the forthcoming changes within the business and the uncertain effects of the reviving economy on TMG’s result, it would be premature to make a net profit forecast for 2007 at this stage. However, Swartjes does expect 2007 to bring a further improvement in the operating result excluding exceptional items.