Amsterdam,
15
August
2013
|
00:00
Europe/Amsterdam

TMG focuses on strong brands

Lower costs the foundation for increased operating result

Key points of first half of 2013 1

Compared to the first half of 2012:

  • The recurring EBITDA result increased by € 8.8 million to € 25.3 million (+54%)
  • The recurring EBITDA margin increased from 5.9% to 9.2% 
  • Revenues declined by 2.5% to € 274.8 million.
  • Operating expenses excluding depreciation and amortisation decreased by 4.4% to € 253.0 million; the 2012-2016 cost reduction programme aimed at saving € 70 million is ahead of schedule
  • Telegraaf Media Groep’s share in the result of ProSiebenSat.1 Media AG increased by 42% to € 11.5 million

Interim dividend

Telegraaf Media Groep will pay out an interim dividend of € 0.50 per depositary receipt for shares, payable on 22 August 2013.

Results

Result and margin

Amounts x €1 million

First Half of 2013

First Half of

2012

Second Quarter

2013

Second Quarter

2012

 

 

 

 

 

Revenues

274.8

282.0

140.6

144.3

Recurring EBITDA

25.3

16.5

16.5

9.0

Recurring EBITDA-margin

9.2%

5.9%

11.7%

6.3%

Net result

14.3

9.1

11.5

7.6

1 The results of Metro Nederland and Zoomin.TV have been consolidated since September and November 2012, respectively, and are not included in the comparative figures for the first half of 2012 therefore. An accounting change was made in the first half of 2013 as a result of IAS 19R; the comparative figures from 2012 have been adjusted accordingly.

Cees Steijn, CEO ad interim van Telegraaf Media Groep
The first half of this year mainly saw the decline in advertising revenues continue. Although we were able to cope with this negative trend thanks to stringent cost cutting, the strategic changes announced are still necessary to be able to structurally stand up to the new media reality and strengthen our position as the leading Dutch media company. The proposed simplification of the corporate structure will enable us to link a higher degree of entrepreneurship to the strength, potential and quality of our strong brands. This will allow us to respond faster and better to opportunities and threats in our markets.
Cees Steijn, CEO ad interim van Telegraaf Media Groep

Strategy and organisation

Telegraaf Media Groep’s ambition is to be the Dutch media company of the future. A company that responds adequately to the rapidly changing market and takes the lead in doing so. An enterprising and dynamic company that plays a key role in the media revolution of today and tomorrow.

Telegraaf Media Groep will mainly focus on strengthening its key brands and its exploitation of these brands. Dutch consumers are reached via print, online, video, mobile and radio. Which channels are used when is not relevant. The manner in which this is done is much more important. The brands and their journalistic relevance are the heart of the company. In the media company of the future, the key will be the combination of brand and content and the added value that this provides to consumers and advertisers.

In order to be able to further strengthen the brands, Telegraaf Media Groep will drastically simplify the current corporate structure so as to give maximum latitude for entrepreneurship. The future organisation will be made up of the following business units managed directly by the Executive Board, acting as the operational management:

  • national brands (among others De Telegraaf, Sp!ts, Metro, DFT.nl and Telegraaf Web Shop),
  • regional and local brands (regional daily newspapers, free local papers and Dichtbij),
  • online activities unrelated to print brands (among others Hyves and Relatieplanet),
  • Sky Radio Group (including Sky Radio 101 FM, Radio Veronica and Classic FM),
  • Keesing Media Group, of which the strategic options are being investigated.

The business units will be supported by the facilities services business units: the printing plants, distribution business and call centre.

Change plans have recently been drawn up for the business units, which have been submitted to the relevant works councils for assessment. It is important in this context that all the business units must be able to work quickly and decisively on the expansion of the already strong brands, the new initiatives focused on growth, the transformation of the company into a strong online organisation and on managing costs. At the national brands there will be more focus on expanding brands such as De Financiële Telegraaf, Vrouw, Entertainment/Prive and Telesport. These brands are closely connected to the De Telegraaf brand and have a strong position in the market, which makes them ideally suited as the bases for new business. At the regional/local brands, titles will be consolidated and optimised, the online ambition will be implemented with the integration of Dichtbij and online news provision will be expanded further.

In addition to the cost reduction programme announced earlier aimed at saving € 70 million in the 2012-2016 period, which includes a reduction of 350 FTEs, an additional cost reduction programme involving € 50 million will be worked out in detail in the second half of 2013, which includes a further reduction of the number of jobs by at least 350 FTEs.

Financial notes to the first half of 2013

For the first six months of 2013 Telegraaf Media Groep realised a recurring EBITDA result of € 25.3 million, an increase of 54% compared to the recurring EBITDA result of € 16.5 million achieved in the same period of 2012. The recurring EBITDA margin in the first half of 2013 was 9.2% (first half of 2012: 5.9%). The improvement in the result was realised despite a decline in revenues of € 7.2 million. The revenues of the Sky Radio Group, the Keesing Media Group and Online Media (internet plus video productions) increased; print revenues declined. The improvement in the result was realised as the result of stringent cost cutting.

Revenues

Revenues

Amounts x € 1 million

Period

1/1 - 30/6/2013

Period

1/1 - 30/6/2012

 

 

 

Circulation

138.6

142.4

Advertising

104.4

111.2

Printing for third parties

1.5

1.7

Distribution for third parties

7.4

5.1

Other Revenues

22.9

21.6

Total

274.8

282.0

Circulation revenues for the first half of the year declined by € 3.8 million to € 138.6 million. The daily newspaper De Telegraaf saw fewer trial subscriptions and lower single copy sales compared to the previous year, mainly because of the European Football Championships in 2012. The special editions marking the abdication of Queen Beatrix (in January) and the succession to the throne (in May) became collector's items. The circulation revenues of the Keesing Media Group increased marginally in France, Germany and Spain.

The advertising revenues declined by € 6.8 million (6.1%) in the first half of the year, mainly as the result of fewer advertisements from larger companies (in the category National Brands and Services) in the national dailies. This was partly compensated by the extra advertising revenues after the acquisition of Metro. The Sky Radio Group managed to cash in on its growing listener figures.

Revenues increased by € 1.5 million (8.8%) in a declining radio market.

Revenues from distribution activities for third parties increased by € 2.3 million thanks to the cooperation with the Persgroep Distributie in the provinces of Zuid-Holland, Noord-Holland and Limburg.

Other revenues increased by € 1.3 million due to higher revenues from e-commerce activities, including the sale of tablets, travel packages and jewellery. The revenue of GroupDeal increased by more than 60%.

Expenses

The cost reduction programme aimed at saving € 70 million, which is to be realised in the period 2012-2016, is ahead of schedule and, on balance, more than compensated for the decline in revenues. In the first six months cost savings were primarily achieved in printing, distribution and personnel, and totalled € 26.8 million. On balance cost reductions of € 40 million have been realised since the start of the programme.

Despite the acquisition of Metro, which has been printed by Telegraaf Media Groep since February 2013, the cost of raw and auxiliary materials declined by € 1.8 million (7.4%) in the first half of 2013. This was partly due to a decrease in the price of newspaper paper, which yielded a cost advantage of € 1.2 million.

The personnel costs declined in the first half of 2013 by € 3.2 million (2.9%) to € 106.5 million, despite an allocation of € 2.9 million to the restructuring provision because of the planned closing of the Keesing Media Group’s Rotomega printing plant in France. Personnel costs include wages and salaries, social security contributions, pension premiums and the costs of temporary personnel. Telegraaf Media Group’s staff complement has decreased over the past years as a result of staff reductions and increased as the result of the acquisition of Hyves (4th quarter of 2010), Megastar (end of 2011), GroupDeal (beginning of 2012) and Metro and Zoomin.TV (2nd half of 2012). As at 30 June 2013, the number of FTEs was 2,734. Including the expansion of personnel because of the acquisition of Metro and Zoomin.TV, there was a reduction of 191 FTEs on balance compared to the end of June 2012. Autonomously the reduction was 251 FTEs. The decrease in the number of FTEs mainly took place at regional dailies, free local papers (distributed door-to-door), online (Hyves) and the head office. FTE reductions were also realised by integrating the so-called back-office and the editorial departments of Sp!ts (Spits) and Metro.

Other operating expenses decreased by € 6.9 million (5.2%) in the first half of 2013. Last year, sales costs were higher because of marketing campaigns and increased circulation activities in relation to the European Football Championships and the personalised online radio station ‘My Radio’ was developed and introduced by the Sky Radio Group. Further savings were achieved this year on distribution costs, editorial costs and automation costs; savings were also realised at the free local papers as the result of changes to the product portfolio (fewer titles).This decrease was accompanied, however, by higher expenditure on account of the related purchase value of the e-commerce revenues, which increased by € 3.5 million (mainly at GroupDeal and De Telegraaf Web Shop). The consolidation of Metro and Zoomin.TV also entailed other operating expenses of approximately € 2.2 million.

The depreciation and amortisation costs increased to a limited extent in the first half of 2013 because of the acquisition of the servers of Hyves and a faster amortisation of the Sky Radio Group’s brand names.

Financial income and expenses

The result of associates includes the result of Telegraaf Media Groep's 6% share in ProSiebenSat.1 Media AG (ProSiebenSat.1), which was € 11.5 million for the first half of 2013 (first half of 2012: € 8.1 million). As at 30 June, the carrying value of the interest (before payment of the 2012 dividend) amounted to € 242.3 million or approximately € 18.46 per share of ProSiebenSat.1.

Taxes

The variance between the effective tax burden (-9.3%) and the nominal tax burden (25%) is mainly due to the exempted results of the associate ProSiebenSat.1.

Cash Position

Due to a higher operating result, the net cash flow from operational activities in the first half of 2013 was € 5.4 million higher than in the same period in 2012.

Payment instalments were made in the first half of 2013 for the investments to create greater flexibility in printing options at the printing plants in Amsterdam and Alkmaar. The Hyves servers were also purchased (previously under operational lease) for a sum of € 4.3 million and severance payments of € 10.1 million were paid out as part of the FTE reduction programme.

In the first half of 2012 a dividend of € 1.15 per share with voting rights was received from ProSiebenSat.1 for the 2011 financial year. The dividend for the fiscal year 2012 was received in the second half of 2013.

The decline in the cash flow from operational activities and investment activities, at € 29.9 million, was financed with existing credit facilities. The net bank debt at 30 June 2013 was € 93 million, which is € 22 million more than it was at 31 December 2012.

Financial notes to second quarter of 2013

For the second quarter of 2013 Telegraaf Media Groep realised a recurring EBITDA result of € 16.5 million, an increase of over 80% compared to the recurring EBITDA result of € 9.0 million achieved in the same period of 2012. The recurring EBITDA margin in the first half of 2013 was 11.7% (first half of 2012: 6.3%).

Revenues

Amounts x €1 million

Period

1/4 - 30/6/2013

Period

1/4 - 30/6/2012

 

 

 

Circulation

69.8

71.8

Advertising

55.0

58.9

Printing for third parties

0.7

0.9

Distribution for third parties

4.1

2.4

Other revenues

11.0

10.3

Total

140.6

144.3

Revenues declined in the second quarter by € 3.7 million, mainly as a result of lower advertising revenues. Increases in the revenues from radio, internet and puzzles were countered by decreases in revenues from printed publications. The distribution revenues increased as the result of partial implementation of the joint daily newspaper distribution by Telegraaf Media Groep and De Persgroep.

The sharp improvement in the recurring EBITDA result in the second quarter was mainly achieved by reducing the operating expenses by € 11.2 million. The costs of raw and auxiliary materials, distribution and sales primarily decreased compared to the second quarter of 2012. The total personnel costs were virtually the same as last year because of a provision of € 2.9 million in connection with the impending closure of the Rotomega printing plant in France. The depreciation and amortisation costs increased to a limited extent because of faster depreciation of the Sky Radio Group’s brand names. The result from the interest in ProSiebenSat.1 was € 8.2 million, € 3.2 million higher than last year therefore. Telegraaf Media Groep’s net result increased by € 3.9 million compared to the same period in 2012, to € 11.5 million.

Changes to management and supervision

As of 5 April 2013, Mr H.M.P. van Campenhout has resigned as CEO of Telegraaf Media Groep and Mr C.J.J. van Steijn has taken over his responsibilities, as CEO ad interim. The Supervisory Board has also named its chairman, Mr M.A.M. Boersma, as delegated supervisory board member until a permanent successor is appointed.

Issued share capital

In accordance with the resolution of the shareholders’ meeting of 23 April 2013, the 1.4 million shares purchased in the Telegraaf Media Groep were cancelled. The issued share capital now consists of 46,350,000 ordinary shares and 960 priority shares.

Outlook

No improvement in the market is expected for the second half of this year: both advertising and circulation revenues will remain under pressure. Because of uncertainty about the level of pressure no concrete pronouncement on projected profits is being issued for 2013. In the second half of the year extra efforts are put in to keep the position in the circulation market.

The appreciation on Telegraaf Media Groep’s interest in ProSiebenSat.1 will have an impact on the net result in the second half of the year because of the impending change to the valuation method, from equity method to market value. The change is being made on account of the upcoming market listing of shares with voting rights, as held by Telegraaf Media Groep, whereby the preference shares will also acquire voting rights. After the market listing, Telegraaf Media Groep’s voting rights will be reduced by half; consequently it will no longer exercise significant influence. Based on the share price of the preference shares as at 30 June 2013, and compared to the carrying value, the value of the stake gained € 191.2 million. The final gain depends of course on the price at the moment of conversion.

On the other hand, account will also be taken of possible impairments of intangible assets as the result of the sale or termination of activities that have to be valued at market value at that point. The size of the impairments is estimated at € 40 million to € 50 million. Finally allocations to restructuring provisions will be required because of cost reduction measures which are additional to those of the 2012-2016 programme of € 70 million. The additional cost reduction programme of approximately € 50 million will be concluded next year and includes a further reduction of the number of jobs by at least 350 FTEs. This involves an allocation to the restructuring provision in the order of € 35 million.

The cash flow will be positively impacted in the second half of the year by the dividend received from ProSiebenSat.1 in July in the amount of over € 62 million, and negatively impacted by the expected payments from the restructuring provisions in the amount of € 15 million, as well as by the payment of an interim dividend to holders of (depositary receipts for) shares of Telegraaf Media Groep.

Interim dividend Telegraaf Media Groep

Based on the dividend received from ProSiebenSat.1 after the balance sheet date, it was decided that an interim dividend of € 0.50 will be paid out per (depositary receipt for) a share of Telegraaf Media Groep. The interim dividend will become payable on 22 August 2013. The ex-dividend date of the Telegraaf Media Groep share is 19 August 2013.

Annex: Semi-Annual Report 2013