Annual Report 2005
Transcription
Annual Report 2005
JAARVERSLAG 2005 ILLUSTRATIONS IN THIS ANNUAL REPORT The cover and the illustrated pages of this report reflect the strategy of Telegraaf Media Groep. The basic principle of this strategy is to increase TMG’s share of media consumption. We want to achieve this by penetrating new markets and by optimising and innovating existing products and services. Furthermore, TMG seeks opportunities to export its expertise to new geographical markets, and the group invests strategically in new activities or increases its holdings in existing participating interests. telegraaf media groep n.v. Visitor address Basisweg 30, Amsterdam, the Netherlands +31 (0)20 - 585 9111 Mail address P.O. Box 376, 1000 EB Amsterdam, the Netherlands This annual report is available in English at www.tmg.nl For more information: [email protected] contents 4 annual report 4 5 6 Composition of Managing Board Composition of Supervisory Board Report of the Supervisory Board to shareholders Consolidated key figures Foreword by the Managing Board’s chairman • Prospects Consolidated data Publishing activities • National newspapers • Regional newspapers • Free local papers • Magazines Other activities Facilities services companies Participating interests Corporate Governance code 9 11 15 17 25 25 29 31 33 37 38 40 43 47 47 48 50 51 52 65 103 104 107 financial statements Consolidated income statement Consolidated balance sheet Consolidated cash flow statement Consolidated statement of changes in shareholders’ equity Principles of consolidation, valuation and determination of the result Notes to the consolidated financial statements Separate income statement Separate balance sheet Notes to the separate financial statements 119 119 121 122 123 124 129 130 other information Auditor’s report Provisions in the Articles of Association concerning the appropriation of profit Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V. Stichting Preferente aandelen Telegraaf Media Groep N.V. Publications and activities of Telegraaf Media Group as at 31 December 2005 Directors of subsidiaries as at 31 December 2005 Key figures as at balance sheet date 4 ANNUAL REPORT 2005 members of the executive board (AS AT 31 DECEMBER 2005) A.J. Swartjes (1949) CEO/Chairman J. Olde Kalter (1944) Member of the Executive Board Mr A.J. Swartjes has been a director since 1 January 1991, after having occupied several positions in the company since 1978. During the period from 1974 to 1978, he was attached to Reader’s Digest and to Colgate/Palmolive. Mr Swartjes studied economics at the Erasmus University in Rotterdam. Mr J. Olde Kalter was appointed director on 1 January 1995. He is is editor-in-chief of daily newspaper De Telegraaf as well. He has been with De Telegraaf since 1970 and has held various positions within the company, including being temporarily based in the United States. Mr Olde Kalter is a University of Utrecht law graduate. F.Th.J. Arp RA (1954) CFO Mr F.Th.J. Arp became a director of the company on 1 July 1997. From 1991 to 30 June 1997, he was one of the partners of Deloitte & Touche Accountants. Prior to this, he was already active in the field of accountancy. Mr Arp studied business economics and accountancy at the Erasmus University in Rotterdam. ANNUAL REPORT 2005 5 members of the supervisory board (AS AT 31 DECEMBER 2005) A.J. van Puijenbroek Chairman Age Nationality Profession/main position Other positions First appointment Current term Prof W. van Voorden Vice Chairman Age Nationality Profession/main position 58 Dutch Director of N.V. Exploitatiemaatschappij Van Puijenbroek Chairman of Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V. (TMG Priority share management trust) Secretary of Stichting Preferente Aandelen Telegraaf Media Groep N.V. (TMG preference shares trust). 15 - 05 - 1975 2003 - 2007 First appointment Current term 63 Dutch Chairman CTZ (College Toezicht Zorgverzekeringen = supervisory committee for health insurance) Emeritus professor at Erasmus University Rotterdam Emeritus professor at Tilburg University Supervisory directorships at Batenburg Beheer N.V. and Panteia B.V. 04 - 06 - 1997 2005 - 2009 H.L. Weenen Secretary Age Nationality First appointment Current term 61 Dutch 26 - 06 - 1980 2004 - 2008 Mrs M. Tiemstra Age Nationality Profession/main position First appointment Current term 51 Dutch Executive board member at Eureko B.V. 05 - 06 -2003 2003 - 2007 L.G. van Aken Age Nationality Other positions 64 Dutch Board member of Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V. (TMG Priority share management trust) Board member of Stichting Administratiekantoor Boekanier (administrative / managerial office) Board member of Stichting Administratiekantoor van aandelen in H.J. Wols Holding B.V. (share trust office). Chairman of Stichting-Telegraafpensioenfonds (Telegraaf pension fund trust)1959 30 - 05 - 2002 2002 - 2006 Other positions First appointment Current term 6 ANNUAL REPORT 2005 report of the supervisory board to shareholders We hereby present the report, the balance sheet as at 31 December 2005 and the income statement for 2005 with the notes as compiled by the Managing Board. The financial statements have been audited and approved by Deloitte Accountants B.V. in Amsterdam, as is shown by the certification, which is included in this report. The financial statements were discussed with the auditor during the annual meeting and subsequently adopted by us. In accordance with the reinforced recommendation right (Section 396:1 of Part 9, Book 2 of the Netherlands Civil Code) the central works council has recommended the reappointment of Prof. W. van Voorden as supervisory director of Telegraaf Media Groep N.V. In accordance with this recommendation, the general meeting of shareholders on 20 April 2005 reappointed Mr. Van Voorden. The Supervisory Board has met the Managing Board seven times during the past year and has, among other things, devoted attention to the strategy and the organization, the risks connected with the company (see also page 23 of this annual report), and the financial issues. During the financial year, particular attention has been paid to the elaboration of the components in the strategy of Telegraaf Media Groep N.V, to the composition of the Managing Board, to the exchange of the shares in SBS Broadcasting B.V. for shares in SBS S.à.r.l., to increasing the minority interest in Expomedia Group Plc, to purchase of the remaining shares in Media Groep West B.V. and Mobillion B.V., to the planned participating interest in Sky Radio Ltd, and to the planned sale of Media Groep Limburg B.V. and Grafisch Bedrijf Media Groep Limburg B.V. Much attention has also been paid to the planned cost savings, including those from introduction of a rate card for the facilities services operations within the group and to the reduction of the workforce. We have consulted the external auditor, Deloitte, in two meetings. At a meeting in which the Managing Board did not participate, we have reviewed our own performance and the relationship with the Managing Board and discussed the composition and performance of the Managing Board. ANNUAL REPORT Mr W.O. Kok, member of the Executive Board (COO), resigned from his position with Telegraaf Media Groep N.V. as effectively from 31 August 2005. The reason was a difference in views within the Executive Board concerning the policy to pursue for Telegraaf Media Groep N.V. We are grateful to Mr Kok for his efforts for Telegraaf Media Groep N.V during the many years that he has been associated with the group. The Supervisory Board has used its remuneration policy to establish the remuneration of the Executive Board. The individual remuneration of the members of the Executive Board has been incorporated in the 2005 annual report. During the year under review, one of the members of the Supervisory Board attended a meeting with the Central Works Council. We would like to express our appreciation to the Executive Board and the employees for the way in which they have performed their duties in 2005. 2005 We recommend that: 1. The financial statements for 2005 are approved in accordance with the documents presented. 2. The Executive Board be discharged from responsibility for the policy pursued during 2005. 3. The Supervisory Board be discharged from responsibility for the supervision conducted in 2005. 4. The dividend for the 2005 financial year for each share of € 0.25 par value be fixed at € 0.44 in cash (2004: € 0.30 cash for each share of € 0.25 par value). 5. The dividend be made payable on 27 April 2006 at ABN Amro Bank N.V. in Amsterdam. On behalf of the Supervisory Board A.J. van Puijenbroek, Chairman Amsterdam, 15 March 2006 7 ANNUAL REPORT 2005 9 consolidated key figures telegraaf media groep n.v. 2005 2004 736,686 694,320 Operating result 53,235 26,304 Balance of financial income and expenses 31,730 51,526 Result before tax 84,965 77,830 Corporation tax 19,876 10,049 Net result 65,089 67,781 -339 72 65,428 67,709 To be added to/released from reserves 42,328 51,959 Dividend pay-out (from result) 23,100 15,750 35% 23% 73,600 66,306 Net result 1.25 1.29 Cash flow from operational activities 1.40 1.26 Dividend 0.44 0.30 4,362 4,316 Amounts are given in thousands of euros Net turnover Minority interest share Net result for appropriation by shareholders of Telegraaf Media Groep N.V. Proposed result appropriation (not accounted for in the financial statements) Pay-out ratio Cash flow from operational activities Per share: Number of employees at year-end (FTE) ANNUAL REPORT 2005 11 foreword from the chairman of the executive board investing in change Under continuing difficult economic conditions, Telegraaf Media Groep N.V. (TMG) took significant steps in pursuing an accelerated strategy during the past year. Optimisation, innovation and internationalisation continue to be the main topics for this. Our aim is to increase our share in media consumption. With not only print media continuing as the foundation of TMG as always, but also by means of digital media, radio and television, in the Netherlands and in new markets such as Sweden and the Ukraine. Economic uncertainty From an economic perspective, 2005 was another difficult year. Despite this, turnover rose by 6.1% to € 736.7 million during 2005. The increased turnover mainly originated from newly acquired activities. The operating result increased from € 26.3 million to € 53.2 million. However, when excluding exceptional items in both years, including book profits, reorganisation expenses, and a release of pension and early retirement provisions, the operating result actually decreased by approximately 14% to € 32.6 million. The net profit, accounted on basis of IFRS-principles, amounted to € 65.4 million, a small decline compared to 2004 (€ 67.7 million). The profit per share amounted to € 1. 25, compared with € 1.29 in 2004. A dividend of € 0.44 in cash is proposed (2004: € 0.30). Declining circulation figures and advertising sales at the daily newspapers and periodicals were main causes of the diminished result. The degree to which circulation and sales were under pressure differed per type of medium and per title. Circulation and advertisements under pressure The circulation of the Dutch daily newspapers decreased by 3.7% to a little over 3.9 million between 1 October 2004 and 30 September 2005. For national daily newspapers, the decrease was 3.2%, for the regional papers, 4.1%. The distributed circulation of De Telegraaf daily newspaper fell by 2.7% to 732,073 copies. The regional daily newspapers of HDC Media performed relatively well with a drop in circulation of less than 2%. The advertising volume in all Dutch daily newspapers, excluding the Sunday papers, decreased by 9% in 2005. In this context, the advertising volume in national daily papers fell by 4% and in regional daily newspapers by 11%. The drop in advertising volume in De Telegraaf was 3%, excluding the Sunday paper. The regional daily newspapers of HDC Media did relatively well in this area, with their advertising volume remaining the same as in 2004. The advertising volume at Media Groep Limburg (MGL) dropped by 9%. These figures do not include the developments of the free daily newspapers, of which Sp!ts is one. The average circulation of Sp!ts rose in 2005, with 6.7% to 382.000. The current daily circulation is 430,000 copies, without taking holiday periods into account. Sp!ts was also the only one of the national and free daily papers to show a strong increase in total media spending. Its market share increased from 6.5% in 2004 to 8.5% in 2005, while the advertising volume rose by 24%. At the periodicals, circulations and advertising sales were under pressure in 2005. Partly due to growing competition caused by 12 ANNUAL REPORT 2005 the introduction of many new titles, there was still no improvement in advertising volumes. The circulations of most of the titles of Telegraaf Tijdschriften Group (TTG) stagnated. A significant exception was CosmoGIRL!, which saw the circulation climb by 26% to an average of more than 95,000. There was, however, strong growth in visits and revenues on internet. The average number of page views across the entire Telegraaf network including the classified sites speurders.nl (small ads), autotelegraaf.nl (cars) and vacaturekrant.nl (holidays and travel) more than doubled over the whole of 2005 to 8.9 million per day. The advertising revenues rose by 49% to € 13.1 million. Strategic focus The market developments in 2005 confirm the trend-related development in the media world. Sales and circulations of print media are under pressure. New media, radio, internet and television, continue to gain ground. There are major dynamics in the market, which, apart from threats, also present very many opportunities for media companies such as TMG. The market for media consumption is an enormous market. A market in which TMG, as one of the largest media companies in the Netherlands, also has a very strong position. A position that is based on strong brands, with top positions in the market, and employees with very extensive experience. That market position of TMG is, however, based mainly on print media. The share of this in media consumption and advertising spending has been declining for years. In order to be able to increase its share in media consumption, TMG wants to invest in types of media that do show growth, such as internet, radio and television, and in new products and means of communicating. Therefore, next to cost reductions, TMG invests in existing products benefiting from its publishing expertise in other countries and broadening the portfolio with multimedia products. Significant progress has been made in each of these areas during 2005. Optimising print media Constant control of costs remains essential for the print media. To do things differently and cheaper is the challenge here. TMG has booked great success in the past with a market approach in print products in which the technical quality was foremost. Printing capacity, print quality and distribution were critical success factors. The market conditions accordingly make it essential to achieve lower costs and economies of scale. Lower circulations and advertising revenues add to this pressure. The provision of detailed insight into all cost components of the facilities services (ICT, printing and distribution) must enable publishers to make choices that lead to contemporary, optimal print products with maximum profit. In this context, not only are continuous cost savings being realised, but consideration is also being given to possible cooperation or outsourcing in the field of supporting services. At the same time, investments are being made in the quality of the content in print products. These products must, of course, remain attractive for critical consumers and develop in parallel with readers’ changing requirements. At De Telegraaf daily newspaper this was shown, among other things, by the introduction of the Sunday paper in March 2004, the setting up of regional ANNUAL REPORT sub-editing teams, and the introduction of new columns in the newspaper. The turnover from weekend subscriptions at De Telegraaf increased. The regional daily newspapers of HDC Media have switched from being evening papers to being morning papers. The free local papers have been vigorously reorganised and the digitalisation of the production process has enabled a refinement that makes some 500 local editions possible. At TTG, there have been investments in new titles, such as CosmoGIRL! and JAN. Piece by piece, these measures have had a positive impact on circulation figures and advertising revenues. Where economies of scale cannot be realised, divestment is being considered, such as with the activities in Limburg. In addition, there have also been investments in activities that are parallel to print media or capitalise on developments that threaten the position of these media. An example of this is www.speurders.nl, a website that responds to the strong emergence of internet as competitor for the small ads in daily newspapers. Speurders.nl is one of the leaders among the internet marketplaces, which has won back a significant percentage of the newspapers’ loss in market share of classified adverts in the paper. As with so many initiatives on internet, the ultimate challenge is also to gain the associated financial results from it. Investing in other markets and different types of media TMG has always pursued a policy that was sharply focused at reaching diverse target groups with a combination of information and entertainment. A model that has been successfully applied for many years. In recent years, 2005 13 however, the dynamics of media markets and media consumption have changed drastically. The competition has increased due to new entrants and new types of media, and the rate of information transfer has considerably increased. Moreover, there is a growing group of users who want interactive information facilities. This is also a market in which TMG wants to actively participate and expand. TMG is the largest provider in the Netherlands on internet and in interactive media. Mobillion, for example, is one of the leaders in this field. The company started as a provider of interactive teletext, but now operates interactive TV and internet. An example of this is www.sugababes.nl, an internet community for young people in which television programmes are used to stimulate multimedia applications. www.habbohotel.nl, with 53,000 unique users per day, is also one of the most successful interactive internet sites in the Netherlands. The acquisition of a 70% interest in the dating sites relatieplanet.nl and Iwannadate.nl as at 1 January 2006, and the formation of Telegraaf Classified Media B.V. also fits in with this policy. A new market segment for TMG is also the market for narrowcasting; the development and use of content on digital screens and connecting these screens to back-office systems (such as company networks and inventory systems). TMG entered this market in November 2005 by acquiring a 40% interest in Media Librium, an operator of digital media. Besides investing in internet and interactive media, TMG also wants to reinforce its position in radio and television. The problem with this 14 ANNUAL REPORT 2005 is that the cross-ownership rules in the Dutch Media Act limit the growth opportunities for publishers such as TMG in radio and television on the Dutch media market. Partly because of this the 27% interest in SBS Broadcasting B.V. was converted into a 20% interest in its parent company SBS Broadcasting S.à.r.l. at the end of 2005. This transaction offers TMG the opportunity to participate in the strong international growth of SBS. With the partners in SBS, TMG will look into the possibilities of cooperation both in the Netherlands and abroad, in order to fully utilise the potential of the strategic partnership. urgency is required in this debate, because the dynamics on the media markets are accompanied by rapidly developing changes in market conditions. In February 2006, a consortium under the leadership of Telegraaf Media Groep N.V. (TMG) acquired Sky Radio Limited, with financial support from the investment company ING Corporate Investments Participaties B.V. (ING CI). TMG has a minority interest in the consortium, because the cross-ownership regulation in the Dutch Media Act does not permit TMG to hold an interest larger than 33 1/3% in a national commercial broadcasting body. TMG has an option to acquire the ING CI interest in the consortium if TMG’s share in the total circulation of the Dutch daily newspapers falls to less than 25%, or if the current media regulations are relaxed. With respect to the rules in the Media Act, it seems there is increasing political willingness to ease the existing regulations. After all, the current Media Act no longer seems to be in tune with the current market situation, and there is an urgent need for new basic principles for policy. The Advisory Council on Government Policy has drawn up a report that foresees regulations that leave more room for cross-ownership. Some The Ukraine is a market in which knowledge of print media products still provides abundant opportunities for expansion, but at the same time there is demand for new types of media such as internet, interactive media and narrowcasting. The advertisement market is still growing strongly there, and there is enormous need for new media communication, whereas the capacity of the existing providers is limited. One of TMG’s first initiatives on this market was the introduction of a free daily paper modelled on Sp!ts. For lack of sufficient printing capacity, the newspaper currently only appears three times a week with a limited circulation. Increasing internationalisation Because the growth opportunities in the Dutch media market are currently still limited by the legislation, and because other markets offer room for faster growth, TMG has entered new geographical markets. Following the successful entry on the Swedish market some years ago, a periodical publisher in the Ukraine was acquired in 2005. ANNUAL REPORT prospects For Telegraaf Media Groep N.V., 2005 is a year in which interpretation has been given to the lower case g in our logo, the physical symbol for acceleration. An accelerated interpretation of growth in different types of media other than print media. This is simply because consumers have preceded us in that choice and we as a media group do not want to be left behind. Because our knowledge and passion are invested in media exploitation. We want to become less dependent on print media and claim a larger part of media consumption in other types of media. At the same time, we are adding new values to existing media by use of the same information in different forms (in print, on internet, via the telephone), which is enabled by digitalisation. Entering new growth markets, where there is enormous demand for both new and the more traditional media, offers new opportunities for expansion. Once again, we do not issue a profit forecast for this year. In the first place, there is still not enough insight into the developments in the advertising market. For the first eight weeks of this year we see a slight drop in advertising turnover for the daily De Telegraaf and the regional dailies. Income from single-copy sales is also under pressure. Sp!ts, on the other hand, is successful in maintaining its upward trend in advertising turnover. Secondly, a considerable number of changes will be taking place in the activities portfolio in 2006. These include the proposed sale of Media Groep Limburg, Nieuwsdruk Limburg and possibly Uitgeverij De Trompetter during the course of the year and the purchase of a 33.33% interest 2005 15 in Sky Radio Limited as of 1 April next. There is still uncertainty, in light of media legislation, as to when TMG will be allowed to acquire 100% of Sky Radio. On 31 December 2005 the 27% interest in SBS Broadcasting B.V. was replaced by a 20% interest in SBS S.à.r.l. The impact of these changes on the result for 2006 cannot yet be assessed. Factors that are expected to impact the net result for 2006 in a positive sense include the expected book profit on the sale of the activities in Limburg, the results of the participations acquired, the effects of reorganization measures that have taken place, and the growth in turnover from online activities. Negative factors are the provisions for restructuring that will be required in connection with further cost cutting measures, plus an expected rise in the price of paper. Overall economic developments and the consequences for media spending will be the prime issues impacting this year’s results. The cash flow for 2006 will get a positive impulse from the proposed sale of the activities in Limburg. The purchase of the interest in Sky Radio will require approximately €20 million, with the remaining cash coming from external funding. The resulting cash facilities can be, depending on the size and realisation of acquisitions and the development of the share value, used for the repurchase of own shares. Chairman of the Executive Board Telegraaf Media Groep N.V. A.J. Swartjes Amsterdam, 15 March 2006 ANNUAL REPORT 2005 17 consolidated data financial developments results The annual figures of both 2005 and 2004 have been prepared in accordance with the currently applicable IFRS principles. In note 33, starting on page 95 of this annual report, the annual figures for 2004 adjusted according to the IFRS principles are compared to the figures according to Dutch GAAP principles as published last year, for information purposes. The same section also explains the effect of IFRS on the results separately. A net profit of € 65.4 million was achieved in 2005, compared with a € 67.7 million net profit for 2004. The operating result increased from € 26.3 million in 2004 to € 53.2 million in 2005. The net turnover increased by € 42.4 million, of which € 15 million was advertising turnover that was mainly attributable to the acquisitions of Bongers Beheer B.V., Bohil Media B.V. and several magazine titles in the Ukraine. However, there was hardly any organic growth in turnover. Turnover from subscriptions and single-copy sales declined by € 2.3 million. While it is true that revenue from weekend-subscriptions to the daily newspaper De Telegraaf increased, income from the periodicals and the regional daily papers declined. Turnover from distribution activities for third parties grew by € 6.6 million due to the acquisition of distribution orders from Aldipress and PCM. The other revenues rose by € 23.1 million, as a result of various new activities by Telegraaf Expomedia Events (TE2) and the consolidation of the majority interest in Mobillion acquired in 2005. The total operating costs rose on balance from € 670 million to € 686.3 million, which included, on the one hand, the € 33.4 million costs of the new activities and, on the other, one-off benefits of € 27 million from the revised pension and early retirement schemes. Costs of raw and auxiliary materials increased somewhat as an effect of the new activities, including the acquisition of Bongers Beheer en Bohil Media, as well as an effective 3.4% higher paper price. Against this, there was lower consumption compared to 2004 as a result of the decline in volume. Wages rose by around 2.5%. The number of employees increased due to the acquisition of new activities and there was an average pay rise of some 2%. Much of this was compensated by the reorganisation measures from previous years. Social charges and pension costs declined on balance by approximately € 27 million due to one-off benefits. This is partly due to the new pension arrangements with Stichting Telegraaf Pensioenfonds 1959, which under IFRS meant a transition from a defined benefit scheme to a group defined contribution scheme. In addition, cutbacks on early retirement rights and the health insurance scheme for retired personnel led to a cost reduction. The depreciation of property, plant and equipment decreased by € 3.2 million, and the amortisation of intangible assets increased by € 4.8 million, due to shifts within the IFRS framework. 18 ANNUAL REPORT 2005 Other operating costs grew by over € 34 million. The increase includes the € 23.3 million costs of new activities in particular, higher promotional expenses for new activities, and higher automation costs. Offsetting these was a more than € 4 million drop in printing expenses due to revised print contracts for the periodicals and TV Weekeinde. The result from associated participating interests rose on balance by € 2.6 million to € 9.8 million, mainly due to a € 1.7 million higher result in SBS Broadcasting B.V. The net financing activities result increased by the balance of € 1.4 million extra dividend received from Koninklijke Wegener N.V. and € 0.1 million lower interest income. The other financial income and expenses concern the one-off proceeds from the sale of the interest in SBS SA accrued in 2005, and the sale of the 50% interest in the teletext activities of Media Groep West B.V. In contrast, in 2004 there was a one-off book profit of € 13.2 million from the sale of holdings in ANP Holding B.V. and Brouwer Groep B.V. Revaluation of financial fixed assets, in line with IFRS requirements, includes the increase in value over both 2005 and 2004 to fair value of the holding in Wegener. The cash flow from operational activities increased from € 66.3 million in 2004 to € 73.6 million in 2005. net turnover Turnover increased by 6.1% from € 694.3 million in 2004 to € 736.7 million in 2005. Important factors for this were higher advertising revenues (€ 15 million), distribution revenues (€ 6.6 million) and other turnover (€ 23.1 million), and a drop of € 2.3 million in revenues from single-copy sales. 4.7% 4% 2.3% TURNOVER (€ 736.686 MILLION) 49.8% Advertisements Subscriptions + single-copy sales Third-party printing Distribution Other turnover 39.2% GOODS, SERVICES AND VALUE ADDED 8.9% 2.7% 0.9% 56.7% Goods and services VALUE ADDED Personnel costs Depreciation + miscellaneous Company tax Net profit 30.8% At De Telegraaf daily paper, advertising volume declined by 3% compared to 2004, mainly in the classified ads sector, whereas Sp!ts achieved a 27% increase in volume. At the regional daily papers, there was a rise in volume by 1%, especially in the personnel category. The free local (door-to-door) newspapers increased in volume as a result of the acquisition of Bongers Beheer. The periodicals lost advertising revenue, partly because of the ANNUAL REPORT divestment of the titles MAN in the Netherlands and Hemmet’s Bazaar in Sweden. In contrast to this, the new title JAN was introduced in the Netherlands. In total, the group’s turnover in 2005 consisted of € 366.6 million in advertising revenues (49.8%) and € 288.6 million (39.2%) from circulation income. The turnover from printing orders for third parties amounted to € 16.7 million (2.3%), the distribution income amounted to € 35.4 million (4,8%) and the miscellaneous turnover amounted to € 29.3 million (4%). This was € 351.6 million, € 291 million, € 15.8 million, € 28.8 million and € 7.2 million respectively in 2004, or 50.6%, 41.9%, 2.3%, 4.2% and 1%. Turnover can be broken down as follows: 2005 x € 1 million 19 Group turnover (x € 1 million) Average number man-years Average turnover per employee (x € 1,000) 2001* 822.2 5,425 152 2002* 704.5 4,690 150 2003* 683.6 4,459 153 2004 694.3 4,354 159 2005 736.7 4,317 171 *(Dutch GAAP) added value The group’s total added value and the average added value per employee, have developed as follows in the past five years: 2004 Added value (x € 1 million) Per employee (x € 1,000) 2001* 372 69 (11%) 2002* 339 73 (8%) 2003* 333 75 (4%) 2004 387 89 (2%) 2005 396 91 (1%) *(Dutch GAAP) National newspapers 346.4 (47%) 330.9 (48%) Regional newspapers 179.8 (24%) 180.6 (26%) Free local papers 80.6 (11%) 72.9 Magazines 51.9 (7%) 53.7 Distribution activities 34.6 (5%) 28.6 Printing orders 16.7 (2%) 15.7 Other activities 26.7 (4%) 8.1 736.7 (100%) 2005 690.5 (100%) The consolidated sales in 2005 include 0.8 million (1.1%) achieved in the other EU countries, compared to 0.2 million in 2004. The turnover per employee (FTE) increased by 7% from € 159,463 in 2004 (on IFRS basis) to € 170,632 in 2005. During the past five years, turnover, average number of man-years, and turnover per employee, developed as follows: shareholders’ equity Including the result achieved over 2005, shareholders’ equity increased from € 480.6 million at year-end 2004 to € 530.5 million at year-end 2005. In the equity, no account has yet been taken of the dividend to be paid over 2005. 20 ANNUAL REPORT 2005 This represents an increase from € 9.15 to € 10.10 per share. The number of shares is unchanged and consists of 52,499,200 ordinary shares and 960 priority shares of € 0.25 nominal value. Of the ordinary shares, 32,910,938 were converted into depositary receipts as at 31 December 2005, amounting to 62.7%, compared with 62.1% at year-end 2004. 2004 62,1%. the vehicle fleet (€ 5.7 million), as well as other equipment and intangibles (office furniture and equipment, and hardware and software investments: € 24.6 million). MOVEMENTS IN CAPITAL EXPENDITURE OF TANGIBLE FIXED ASSETS IN RELATION TO OPERATIONAL CASH FLOW in millions of euros ADVERTISING TURNOVER in millions of euros 61 38 25 19 25 405 19 370 77 344 352 75 366 74 21 80 41 38 265 2002 -5 2001 Newspapers 2002 2003 2004 Door-to-door papers 2005 Magazines + others Cijfers 2000 t/m 2003 zijn niet aangepast voor IFRS grondslagen. investments The total amount invested in 2005, in both property, plant and equipment, and intangible assets (excluding goodwill), amounts to € 44.2 million. This concerns investments in new projects, including the advertising department and the customer contact centre (€ 9.6 million), replacement investments in company premises and machinery (€ 4.3 million), investments in Cash flow 35 38 2003 -30 2001 65 49 33 309 68 66 62 2004 2005 -26 Depreciation Net profit Capital expenditure dividend Dividend policy The dividend is set within a bandwidth of 15% to 30% of the cash flow, in which cash flow is defined as the sum of the net profit and depreciation and amortisation, adjusted for the effects of revaluation and impairment included in the net result. The proposal is to fix the dividend for 2005 at € 0.44 per share. In doing so, € 23.1 million, or more than 26% of the net profit, will be paid out. Last year € 0.30 per share was paid out. ANNUAL REPORT group matters human resource management For the HRM organisation, 2005 was characterized by the numerous amendments in legislation and regulations with effect from 1 January 2006. In particular, the tax rules in the area of early retirement, pre-pension, pension and career-break savings, led to laborious collective labour agreement (CAO) consultations and the lack of agreements concerning redundancy schemes for older employees. The continuing negative economic climate made further cost reductions necessary. In June of the financial year, a selective recruitment freeze was announced. When filling job vacancies, the emphasis lay on as much internal promotion as possible. A group-wide reorganisation was announced at the end of the financial year, involving a reduction of more than 200 full-time equivalents (ftes). The various operating companies will carry out these staff reductions during 2006. Employment In 2005, there was an average of 4,317 employees in the group’s service, compared to 4,354 in 2004. The reduction of the number of ftes can be explained by staff reductions part of large-scale reorganisations at the operating companies HDC Media, Holland Combinatie, Media Groep Limburg and DistriQ. This against an increased number of ftes as a specific result of acquiring for 100% new activities, such as Bohil, Mobillion and Bongers. 2005 21 Terms and conditions of employment Five CAOs were agreed during the financial year, but no agreement has been reached yet for the road transfer and haulage CAO. The final Grafimedia CAO was agreed in October 2005, with a pay rise of 1% on 1 June 2005 and another 1.5% on 1 June 2006. A new CAO for newspaper journalists was agreed for the period of 2005 to 2006, an important component of this being a new job demarcation instrument with a corresponding new wage structure. Moreover, the agreement contains an amended early retirement/pre-pension scheme. The newspaper journalists’ CAO contains a collective pay rise of 1% on 1 July 2005 and another 1.5% on 1 January 2006. Health policy In 2005, a group-wide health management process was started. To achieve this, on the one hand, the health policy has been optimised across the group. On the other, preventive attention is actively paid to the health of the employees. Besides preventive activities, there is tighter management aimed at decreasing the rate of absenteeism. environment The environmental policy of Telegraaf Media Groep is characterised by compliance with the regulations and by taking personal responsibility in this area. An additional point of attention is the environmental awareness of employees. The activities during the past year have been particularly focused on an integrated group-wide approach and on the reduction of waste. New cleaning techniques in printing lead to 22 ANNUAL REPORT 2005 a reduction in the use of chemicals, which could harm the environment. In 2006, an energy-saving investigation will be commenced. health and safety at work (arbo) An ongoing point of attention continues to be enforcing and further optimising good working conditions to promote the productivity of the employees. During the past year, a scan has been carried out on the completeness and quality of the health and safety policy at the operating companies. In accordance with the Dutch Health and Safety at Work Act, preventionstaff members have been appointed and trained at the operating companies. They will ensure up-to-date and complete implementation of the policy in the future. corporate purchasing During 2005, a plan has been developed for a group-wide purchasing improvement project. This plan provides economies of scale, while the specific individual needs of the operating companies remain guaranteed. The centralised purchasing of personnel, services and resources will increasingly lead to savings on immediate and indirect purchasing costs. central works council (cor) During the past three years, the Central Works Council (COR) has developed itself into a professional employee participation body. In 2005, there was a follow-up to the revised operating procedure, which was introduced in 2004. The members have all attended a course, in which strengths and areas for improvement have been identified, which the COR wants to continue developing in 2006. The group is continually developing and changing, which demands a lot of effort and professionalism from the COR. The consultations with the Executive Board were held in a stimulating atmosphere. The main issues involving the COR in 2005 were: acquisition of Bongers Beheer, job performance and appraisal system of non-CAO positions, 2004 COR annual report, introduction of a whistle-blower scheme, the participating interest in Expomedia, the participating interest in Media Librium (M-Media), and the interest in SBS Broadcasting S.à.r.l. All advisory and approval requests to the COR were not only checked against the corporate strategy, but also against its own mission. ANNUAL REPORT specific risks associated with the company The Executive Board of Telegraaf Media Group is accountable for the internal risk management and control systems, and, insofar this is possible, for the active management of strategic, financial and operational risks that confront TMG. In this context, the following risks have been identified, which, if they arise and are not sufficiently controlled, could have a substantial impact on the realisation of the operational goals. • TMG operates in an industry that is sensitive to economic cycles. • TMG is one of the largest media players in the market for media consumption in the Netherlands, with a strong position in print media, in which the share in printed media has visibly decreased. • TMG is still strongly dependent of one product, the daily newspaper De Telegraaf. • Because of the restricted growth opportunities in the Netherlands, TMG has currently entered new geographical markets, which can equally constitute a risk. • TMG is experiencing increased competition from new entrants and new types of media, and the increased rate of information transfer in the media consumption market. • The cross-ownership rules in the Dutch Media Act limit TMG in its growth opportunities in radio and television in the Netherlands. 2005 23 • Large parts of the business processes of TMG rely ever increasingly on computerised systems and networks. Malfunctions on these can cause a large disruption to the business processes. • Another risk is the fluctuation in the level of the price for paper, particularly of rotation-offset paper for the printing of newspapers. TMG concludes annual contracts with the paper suppliers. There is a risk of not or not entirely being able to pass on paper price rises. Although adequate and effective risk management and control systems are applicable, these, however, can never provide an absolute guarantee for the realisation of the corporate objectives, nor can they completely prevent substantial errors, losses, fraud or the violation of legislation and regulations. (see page 46). ANNUAL REPORT 2005 25 publishing activities market developments for newspapers showed an increase of 6%. National dailies, excluding the Sunday papers, performed better than regional dailies in the area of advertising volume. The advertising volume in the national papers fell by 4%, while the fall for the regional dailies was 11%. The total distributed circulation of Dutch newspapers decreased during the period from 1 October 2004 up to and including 30 September 2005 by 3.7% down to 3,912,382 copies. The fall in circulation of the national daily papers amounted to 3.2%, and that of the regional dailies was 4.1%. Note: All the reported advertising volumes have come from Nielsen Media Research. The free daily papers Sp!ts and Metro have been disregarded in all figures. The domestic distribution of newspapers consisted of 90.2% from subscriptions and 8% from single copy sales. Foreign sales amounted to an average of 40,452 copies a day. The other forms of distribution (special subscriptions, Telegraaf-i) amounted to 1.8% of the circulation. The breakdown of the distributed circulation into circulation components provides the following picture for the total Dutch market: National Subscriptions Single-copy sales Abroad Total % 3,514,989 13,255 284,867 27,073 3,528,244 90.2 311,940 8.0 72,074 124 72,198 1.8 3,871,930 40,452 3,912,382 100 Other distribution Total distributed circulation The advertising volume in all Dutch daily newspapers, excluding the Sunday papers, decreased by a total of 9% in 2005. The categories of national and local brands and services decreased by 10%. The classified advertisements decreased by 21% and the family notices by 6%. On the other hand, the personnel advertisements national daily newspapers uitgeversmaatschappij de telegraaf b.v. (de telegraaf publishing company) The still ongoing bad economic cycle retained its negative impact on the revenues of De Telegraaf publishing company. Its main victim was the advertising sales, but this situation also had a negative side effect on the readers’ market. Cost-saving measures only partially offset the disappointing turnover. Incidental savings have already been achieved during the financial year, and preparations were made that will lead to structural cost reductions. The quality of products and service will remain unchanged despite this. Circulation The distributed circulation of daily newspaper De Telegraaf in the Netherlands during the period from the fourth quarter of 2004 to the end of the third quarter of 2005 fell by 2.7% compared to the same period of the previous 26 ANNUAL REPORT 2005 year. The circulation amounted to 732,073 copies because of this. This percentage is some 1% less than the average fall in circulation for all daily newspapers in 2005. The market share of De Telegraaf newspaper in the market’s circulation, excluding the Sunday edition, rose slightly to 18.7% as a result of this. During the financial year, substantially more subscriptions were acquired than the previous year. However, partly because of the economic situation, which obliges consumers to make spending cuts, the number of cancellations was also higher. On balance, the number of subscriptions in the Netherlands decreased from 598,189 copies to 589,810 copies, a fall of 1.4%. The number of weekend subscriptions (a combination of Saturday and Sunday papers) increased steadily and grew from 26,559 in 2004 to an average of 48,084 in 2005. This is an increase of 81%. By the end of 2005 the status was 63,500 copies. The average single copy sales in the Netherlands from Monday to Saturday decreased from 116,357 copies in 2004, to 97,181 copies in 2005, a fall of 16.5%. The Sunday paper appeared to really meet a consumer need in 2005 and gained an average circulation of 688,353 over the period from quarter four of 2004 to the end of quarter three of 2005. The single copy sales abroad remained at a good level. Partly thanks to the efforts of the five foreign printers during the summer period (in the Canary islands, Valencia, Marseille, Istanbul and Verona), with an increase in those countries where tourism also grew. In the countries that had to contend with a decline in numbers of tourist visits, De Telegraaf was able to reinforce its market share. The foreign circulation averaged 26,755 copies over the financial year, an increase of 3.8% compared to last year. In September 2005, a special Caribbean edition was introduced on Curacao, Aruba, Bonaire, Saint Martin, Saba and Saint Eustace. On Curacao, besides single copy sales, the newspaper is also available on subscription. Editorial A number of revitalizations were carried out in the newspaper during the course of 2005. The ‘What You Say’ feature, which promotes the interaction with the readers, was expanded with a strong link to internet. The Telesport section was enlarged, and there was an expansion of the ‘Lifestyle’ segment by adding features such as ‘Eating and Enjoying’, ‘Health’ and ‘Healthy and Fit’. The editorial staff of the Greater Amsterdam edition was reinforced and The Hague edition had a regional page added, similar to the existing page for Rotterdam. In Twente, the addition in 2005 of the ‘Twente Today’ regional section to De Telegraaf daily newspaper also ensured a better circulation position in this region compared to the national average. Advertisements The total advertising volume in De Telegraaf was subject to pressure and decreased by 4%. ANNUAL REPORT The advertising volume, excluding the Sunday paper, decreased in 2005 by 3%. The national brands and services category increased by 5%. The personnel advertisements soared by 28%. On the other hand, the classified ads category plummeted by 21%, a trend that has been continuing for years due to the fierce competition. The family notices category declined by 2%. The total advertising volume in the Sunday paper decreased in 2005 by 16% compared to 2004. In contrast to the readers’ market, the familiarisation with the Sunday paper as advertising medium is taking longer than expected. The advertising turnover of the Sunday paper is not yet fully comparable on an annual basis, because this edition was introduced on 21 March 2004. Additionally, the comparability is distorted by the unrepresentative high level of advertising during the introduction period. Internet The most important internet activities experienced substantial growth in the areas of both number of unique visitors and in page views. The advertising revenues increased strongly. The average number of page views across the entire Telegraaf network including the classified sites speurders.nl, autotelegraaf.nl (cars) and vacaturekrant.nl (situations vacant) more than doubled to 8.9 million per day compared to December 2004. Measured across the entire Telegraaf network, online advertisement revenue rose by 49% to an amount of 13.1 million euros. 2005 27 The telegraaf.nl news portal saw its daily visits increase during the financial year to an average of more than two million page views per day, 25% more compared to December 2004. In 2005, besides the restyling of a number of sites, new sites were added, such as Fitclub, Glamour, Crime, Eating and Enjoying, Televideo, Newzy, Telepuzzel, GameToday and What You Say. Moreover, the interaction of the sites with the consumer was extensively expanded. With many topics, the consumers can make their opinions known on-line, which provides a picture of the broad opinion on each topic. Classified Because the Noordelijke Dagblad Combinatie B.V. has a 10% interest in both speurders.nl and vacaturekrant.nl, a new B.V. (private limited company) was set up within De Telegraaf publishing company: Classified Media B.V., into which all classified advertising activities within the publisher have been bundled. Speurders.nl This digital marketplace for second-hand goods experienced a major expansion throughout the financial year. The number of page views grew from a 2 million average per day in December 2004 to an average of 5.8 million page views per day in December 2005. The number of advertisements in the database grew from 750,000 at the end of December 2004 to 1,300,000 by the end of December 2005. Speurders.nl has meanwhile become one of the best visited Dutch sites. 28 ANNUAL REPORT 2005 Acquisitions basismedia b.v. Bohil Media B.V. De Telegraaf publishing company acquired the remaining 80% of Bohil Media B.V. in 2005. In 2003, a 20% participating interest had already been taken in this company, a publisher of classified magazines about boats and caravans & campers, with important internet sites linked to these magazines for both used and new boats, caravans, and campers. The results of this publisher were even better in the 2005 financial year than in 2004. From an increase in turnover, on one hand, and optimising of costs on the other, the result of BasisMedia has increased exceptionally. The objective in 2005, that BasisMedia would provide an important contribution to the consolidated results, has been realised. Against the market trend, the total turnover increased by 24.6% in 2005. Relatieplanet.nl Nederland B.V. including iWannadate Nederland B.V. In the last month of 2005, 70% was acquired in this market leader in on-line dating. The activities have been placed under Classified Media BV. Forecast On 1 October 2005, an average price increase of 2.7% was implemented on the readers’ market. As a result of the fall in circulation, as at 1 January 2006 no appreciable increase in rates has been realised on the advertisement market. It remains to be seen how the market situation is going to develop in 2006. Naturally, everything very much depends on the economy and consumers’ media behaviour. During the financial year, preparations were made for structural and also substantial savings to be introduced in the overhead costs of the production and staff components in particular during the first half of 2006. Circulation The average circulation of the free daily newspaper Sp!ts in 2005 is 382,000 compared to 358,000 in 2004: a 6.7% increase. The current daily circulation is 430,000 copies, without taking holiday periods into account. Advertisements Sp!ts was the only one of the national and free daily newspapers to see a strong increase of the total media spending in 2005 compared to 2004. The market share of Sp!ts has increased from 6.5% in 2004, to 8.5% in 2005. The advertising volume rose by 24% in 2005. On the advertisement market, the customers increasingly expect a tailor-made multimedial media package. A shift is taking place from product thinking to concept thinking. It is also essential to launch new joint ventures with other parties or other media. 2005 approach During the past year, Sp!ts has made the strategic decision to position its brand more clearly and even more distinctively as the medium in reaching the new generation: teenagers and young adults in the age category from 18 to 34, within which ANNUAL REPORT 2005 29 there are many students, business starters and young professionals. During the coming years, print, online, mobile, events, radio and television will be extended within several pillars of content. from personnel advertisements was considerably improved, the advertising revenues from national and regional advertisers lagged behind, however. On balance the adverting revenues in 2005 were 1% down on the preceding year. regional daily newspapers In the context of product developments in 2005, for the first time HDC Media organised a number of regional trade fairs that provided additional revenue flows. By linking print products to these trade fairs, new advertising revenue was also generated. In 2005, both circulation and advertising revenues came under pressure again at the regional daily newspapers. Thanks to various actions in the area of acquiring subscriptions and conversion of titles, HDC Media’s result was better than average in comparison to other regional dailies. Media Groep Limburg B.V. (MGL), like the other regional papers, showed a decrease in the advertisement revenues. hdc media b.v. In some parts on the edge of the distribution area, the coverage of HDC Media left something to be desired. Therefore, a new experimental publishing concept was started in Alphen aan de Rijn: alphen.cc. Three times a week for the time being, a newspaper that is free during the introduction period is distributed as an editorial format of a regional daily and with multimedial possibilities. The first results are encouraging. Circulation and advertising In comparison to other regional dailies, and certainly also against the national daily press, the developments at HDC Media were relatively favourable. The circulations decreased less than 2%, which is partly attributable to the switch in 2004 to morning papers for titles that then still appeared as afternoon papers (in 2005 there were more than 40% fewer cancellations in this area). Revised policy concerning acquiring and particularly retaining subscribers also led to successes in this area. With the move into the vast and largely renovated head office in Alkmaar, an important step forward was taken in the reorganisation of HDC Media, which commenced in 2002. The central editorial staff as well as a large number of supporting departments have now been combined here. The total advertising volume compared to last year remained virtually the same. The revenue The majority of the reorganisations were rounded off in 2005. In a relatively short time, The total turnover of HDC Media remained virtually unchanged. The cost reduction as result of the reorganisations resulted in more than 6% lower indirect costs. ANNUAL REPORT the workforce has been reduced by 30%. Nevertheless, the coming years will continue to be characterised by improvement of the market share in the readers’ and advertisers’ markets, further cost reduction, and still more efficient arrangement of the various working processes, including the use of outsourcing. media groep limburg b.v. (mgl) In 2005, the revenues were under pressure, both on the advertising side (-9%) and the circulation (subscriptions). Nevertheless, the financial result improved compared to 2005. The result improvement is thanks to the strategic course for MGL that was chosen and implemented three years ago, with the main focus on structural cost reductions. In this way, the operating result has been improved and the vulnerability of the company reduced at a time of pressure on circulation and the advertising market. In 2005, the Netherlands Competition Authority (NMa) removed the restrictive conditions for the publishers De Limburger and Uitgeversmaatschappij Limburgs Dagblad BV. This means that further cost efficiencies are possible through collaboration. In 2006, the focus will again be on reduction of the production costs on existing operations, because revenues associated with these activities from subscriptions and advertisers will continue to decrease. This does not prevent MGL having to achieve a good balance between revenues and production costs, to guarantee 2005 31 the continuity of the publisher. TMG announced in 2005 that it was considering selling MGL, since, in the longer term, MGL needs both synergy in the back-office and a level of scale that cannot be realised within TMG. What determines this development is not the current quality of paid newspapers, but rather more the behaviour of consumers who increasingly obtain up-to-date information by means of cheap, cheaper, or free alternatives, such as radio, TV, internet, mobile telephony, teletext, etc. free local papers The advertising volume of HC’s free local papers was under pressure and there were higher costs. Publishing company De Trompetter has realised an increase in advertising volume opposite to the market trends. The integration of the publisher Bongers, acquired in 2005, was completed successfully. Both organisations expect to realise synergy benefits from efficiency and increase in scale in 2006. holland combinatie b.v. (hc) General The year 2005 was a transitional year. The four different legal organisations have merged into a single publisher for which all group tasks are performed in Amsterdam. The editorial staff and local sales will remain in the branch offices, a new structure and working methods must make contributions to a more efficient 32 ANNUAL REPORT 2005 and more effective organisation. The objectives of the restructuring will only be completely realised during 2006. The organisation has undergone a major change in structure, locations, jobs, working method and automation. The name has also been changed of Hollandse Huis-aan-huisbladen Combinatie B.V. to Holland Combinatie B.V. The annual result of the Holland Combinatie was considerably lower in 2005 than the aggregate result of the group from last year. This was caused by the lagging behind of the advertising revenues at the regular weekly and weekend papers, the printing costs, staff and ICT expenses, provisions, and lower interest income. In 2005, the advertising revenue was 4% lower compared to 2004. The turnover was generally under pressure due to disappointing volumes (-6% compared to 2004), rates under pressure, and competition. In particular, the weekend editions suffered a loss in turnover. There were large differences per region. Wherever possible, solutions have been found in revenue-boosting and cost-saving measures. The title ’De Echo’ (11 editions) has been entirely renewed and now appears in tabloid format. The Amsterdam market, however, is experiencing a downward trend and is dragging several neighbouring midweek titles with it, because the onward placements decrease. At the ’Woonbode’ in ‘t Gooi (a property weekly, for the area around Hilversum), the price is under some pressure and the number of advertisements lagged seriously behind. New agreements have been made with the estate agents this year, as a result of which they are more committed to this title. In Almere, the turnover is also lagging behind. Half of the operating costs of the Holland Combinatie consist of direct intercompany production costs for the newspapers. Because of the smaller scale, there was less efficient allocation of the production capacity, as a result of which the direct production costs increase and the added value decreases. Personnel costs are an important expense item for the Holland Combinatie. In order to improve the result and prevent redundancy as much as possible, restraint has been observed in filling staff vacancies. Reorganisation resulted in more than 23 employees being declared redundant. This enabled savings on the payroll costs and the number of employees has decreased. The reorganisation and the redundancy measures will be completed in 2006. uitgeversmaatschappij de trompetter b.v. (de trompetter publishing company) In a difficult advertisement market, the turnover of De Trompetter has increased by organic growth and acquisitions. The number of advertising pages increased during the financial year. The operating result improved considerably due to the increase of the turnover and tight cost control. Uitgeversmaatschappij De Trompetter B.V. acquired Bongers Beheer B.V. in Kelpen-Oler as at 1 January 2005. Bongers Beheer B.V. is a holding company with three operating companies: ANNUAL REPORT 2005 33 Bongers Media Productie, Bongers Drukkerij and Bongers Productie. Bongers is the publisher of free special-interest papers distributed in Limburg. magazines De Trompetter also acquired the free local paper ‘De Schakel’ in Stein, with a circulation of 12,000 copies. In the Brabant municipality of Haaren and Udenhout, Kempen Pers started up the free local paper ‘De Leije’ with a circulation of 9,000 copies. TTG the Netherlands The result of De Telegraaf Tijdschriften Group (TTG) in 2005 is lower than for 2004. This was caused by decreasing revenues on both the advertisement market and the readers’ market. Moreover, there was heavy investment in the portfolio (new title ’JAN’ plus the restyling of ‘Elegance’) and in the organisation (restructuring the Sales department). Concluding new printing and pre-printing contracts led to considerable savings in the production costs. The strong increase of the turnover at Kempen Pers is almost entirely attributable to organic growth through higher revenue from advertisements. The increase in turnover was realised with the same advertising volume, as a result of which the operating result increased substantially. Bongers realised an operating result that, despite higher depreciation charges due to the transition to the new owner, is nearly equal to its operating result for 2004. The turnover increased strongly, partly due to expansion in 2004 with the special-interest papers ’Autoinformatief’ and ’Werken’. The number of advertising pages has strongly increased due to this expansion in the number of publications. The income from external printing orders in 2005 was also much higher than in the 2004 calendar year. The year 2006 will be marked by further optimisation. The synergy benefits from the acquisition of Bongers Beheer must become clearly visible in the new calendar year. de telegraaf tijdschriften groep b.v. (ttg) There was still no recovery visible on the advertisement market in 2005. At the same time, the number of periodical titles grew considerably. The price level was under further pressure as a result of an aggressive pricing policy within the total sector. The competition from other types of media, including television, was also very noticeable. The circulation market has been characterised for a number of years already by further segmentation and new title introductions, with resulting pressure on the number of copies sold. Moreover, consumers are still cautious in their spending. Compared to 2004 (HOI 3rd quarter) the sales figures of ’CosmoGIRL!’ were 26% higher, with an average of 95,020 copies. With the exception of ’Elegance’, the circulations of the other titles were under pressure. TTG’s largest title, ’Privé’, decreased by 4%, but was still able to increase its market share in the gossip segment. 34 ANNUAL REPORT 2005 The ’Idols Magazine’ was published in cooperation with RTL Nederland. Although TTG strives mainly for further growth, it continues to critically examine the profitability of its existing portfolio. The results and the prospects for the titles ’MAN’ and ’Modern Country’ were negative, so it was decided to stop publishing both titles. The Habbo Hotel (virtual meeting place for young people), introduced in 2004, developed further into a success in 2005. At present, the website has approximately 53,000 unique visitors per day. TTG expects a slightly cyclic recovery on the advertisement market in 2006. Moreover, the marketing will improve as result of the internal restructuring. TTG does not expect any recovery on the readers’ market yet. Although consumer confidence is increasing, TTG does not expect any increase in spending for the time being. TTG Sweden The Swedish economy developed successfully and at TTG Sweden the turnover and result improved. The special interest and interior design periodicals show a strong increase in advertisement revenues. In the boat segment, the revenue from advertisements continued growing by 17%. The single copy sales in Sweden stood under pressure from the increase in new titles and one-off publications, with unchanged consumer spending. Despite this, the sales of ’Cosmopolitan’ continued growing in 2005, and the magazine is now the best-selling title for young women. The publication frequency of ’Residence’ in 2005 was increased to 8 numbers a year. The circulation is stable, advertisement income has increased and the result has improved. ’Golf Digest’ showed a particularly positive development on the subscription market. In 2005, the focus was on brand and line extensions, and during the year various one-off publications and events were organised around the titles. TTG Sweden has also entered the market of sponsored magazines with the start of a joint venture with SAS Media. A magazine is being jointly published for the members of the SAS Frequent Flyer programme. The marketing and sales departments have been merged and an efficient digital work flow has been organised within the company. All pre-printing activities are performed in-house. The prospects appear favourable for the Swedish market in 2006. The most important priority remains a continuing expansion of the portfolio, through organic growth and/or acquisitions. telegraaf media international b.v. Telegraaf Media Ukraïne LLC (TMU) In 2005, TMG started publishing activities in the Ukraine, commencing with periodicals. A local publisher was acquired, which publishes five existing and profitable titles in the segments interior/design (Domus Design), do-it-yourself (Maister), free time (What’s On), eating out (Gourmet Guide) and the in-flight magazine of ANNUAL REPORT Ukrainian Airlines (Panorama). In October 2005, Kiev City was added to these. Except for What’s On (in English), all the periodicals are published in Russian. Because of the poor quality of the distribution network, the Ukrainian market is still mainly aimed at advertising revenues. A part of the distribution of the majority of periodicals is free therefore, in order to nevertheless be able to guarantee advertisers penetration. The advertising spending shows very positive developments year after year. The increase in 2005 is valued at 30% and the same increase is expected for 2006. Due to the low rates of the mainly state-managed TV stations, however, the share of periodicals is much lower than in other European countries. With the move towards a more market-oriented economy, a positive development for the periodicals market can be expected, both for growth of the total advertising spending and a shift from TV to print. At the same time, with the strong increase in advertising spending, the number of periodical titles grows. However, there are currently many segments not yet covered, with local periodicals of very poor quality, and the competition within segments being limited. Further professionalisation of the existing titles in the portfolio is on the agenda for 2006, as well as launching new titles. Much attention will also be paid to the professionalisation of distribution, market research and printers. These activities are mostly set up from within an umbrella organisation for publishers in the Ukraine, in which TMU actively participates. 2005 35 On 1 January, a start was made with a free newspaper ’Obzor’, which appears three times a week. ’Obzor’ aims at a younger and wealthier target group (18 to 35) than regular newspapers in the Ukraine. ’Obzor’ offers an alternative with a colourful exterior, free distribution during the rush hour, and objective reporting. ’Obzor’ guarantees advertisers high penetration due to the free distribution. ANNUAL REPORT 2005 37 other activities datawire b.v. A number of multimedial activities of TMG have been placed under DataWire. DataWire has developed a digital distribution platform, with which the contents of printed media can be utilised via internet. DataWire aims at syndication, including: the processing, distributing and selling of existing content originating from editorial departments and other sources. PayperNews B.V. PayperNews expects further growth of turnover by increasing its market share in the Netherlands and abroad, and further exploitation of the DIGI products. To be able to achieve this, the organisation will be further “scaled up”, in which extra attention will be paid to the sales organisation and the order procedure. DataWireSport B.V. DataWireSport B.V., a joint venture of DataWire ( 70%) and ANP (30%), is a supplier of sports results and other sporting information. In 2005, DataWireSport concluded a cooperation agreement for seven years with KNVB, the Dutch Football Association, for a common utilisation of the KNVB website. mobillion b.v. Via TMG’s 100% interest in Media Groep West B.V., Mobillion B.V. became a wholly-owned subsidiary of Telegraaf Media Group during the course of 2005. Whereas Mobillion, due to the management buyout as at 30 December, was set up initially as an enterprise which specialised in the production and use of new communication and entertainment services for users of mobile telecommunications networks, during recent years the business has developed into a much more broadly-oriented online entertainment company. In the Netherlands, Mobillion has for some years already been one of the largest providers of SMS (text) chat services as well as ringtones that are downloaded to mobile telephones, especially by young people. Apart from in-house developed consumer services, Mobillion also provides SMS gateway services (business to business) to a large number of SMS service providers. The turnover of Mobillion has strongly increased this year, among other things because of the successful market launch of a self-developed mass calling voice response platform, which is mainly used for the various call-in-and-win game programmes that are broadcast via the television stations of SBS Broadcasting. Mobillion has this year acquired a 70% interest in Sugababes.nl B.V., publisher of the websites www.sugababes.nl and www.superdudes.nl that are extremely popular with young people in the age bracket of 13 to 19 years old. Both so-called profile sites are visited by some 100,000 young people daily, and are operated profitably. During coming years, the management of Media Group West will be concentrating on establishing a new online communications and entertainment group of which Mobillion B.V., Sugababes.nl B.V. and the new WEB TV production company Bibop TV will become full subsidiaries. 38 ANNUAL REPORT 2005 facilities services companies The activities in the areas of information and communication technology, printing and distribution have been placed in separate subsidiary operating companies each having its own result responsibility. This structure promotes the optimisation of processes and technologies, and improves the transparency of the cost structure within the entire organisation. telegraaf media ict b.v. (tmi) Telegraaf Media ICT had a successful year in 2005. Although the original budget was not achieved in all areas, an important step has again been made in far-reaching cost reductions and improved services. Compared to 2004, ICT costs decreased by 6%, whereas the efficiency improved by more than 12%. This efficiency results from: the farreaching arrangement of central ICT procurement, centralising the ICT infrastructure, standardising applications, better coverage of effort due to accurate time recording, and structurally reducing the personnel expenses. Because the internal charging-on has been fully implemented, all customers have insight into their actual ICT costs and these can be better managed by the customer. TMI played an important part in a number of large internal ICT projects during 2005. The year 2006 will be a dynamic one for TMI, because of the focus on more drastic cost reduction and improved quality within TMG. Objectives for 2006 are: market conformity in the area of costs, investigation into possibilities for outsourcing, the portfolio and quality of the services, increasing internal promotion, increasing the customer’s options and improving measurability and manageability. telegraaf drukkerij groep b.v. (tdg = telegraaf printing group) The newspaper printers in Alkmaar, Amsterdam and Heerlen have focused on cost reduction because of decreasing circulation and diminishing advertising revenues at the publishers. This has led to investigation and proposals concerning capacity utilisation, optimum production methods and as much as possible market-level rates. Moreover, the Telegraaf Printing Group have continued with the external marketing of residual capacity. An inventory has been made of the wishes and requirements of the clients, and the corresponding utilisation and cost structure will be rolled out in 2006. Grafisch Bedrijf Media Groep Limburg will be included as part of the sale of MGL. The joint procurement of consumer non-durables at the various printers is in its completion stage. distriq b.v. DistriQ is a distribution organisation for print media that operates nationally, which uses a tightly-knit network of about 35,000 transporters, depot holders and deliverers. DistriQ distributes, among other things, the daily newspapers of TMG and Het Financieele ANNUAL REPORT Dagblad (the financial daily). In addition, it manages the transport for PcM (newspaper publisher), and the distribution of periodicals for Aldipress, several free local newspapers, advertising folders, and post. Compared to 2004, DistriQ has succeeded in maintaining or improving the quality of the distribution in almost all product-market combinations. Tighter legislation and regulations and in particular, control of this by the health and safety inspectorate, among other things, have led to an increase of the complexity and an increase of the distribution costs. Moreover, initiatives have been developed by several publishers that have a major influence on the distribution efforts. For example, this includes line extensions, supplements, additional doorto-door distribution and new publications. In the North-Holland region, the previously separate distribution of daily papers has been integrated successfully, which has led to tangible synergy benefits. For further optimisation of processes and organisation, a start has been made with replacement of the existing delivery and transport systems. The total turnover has increased compared to last year, particularly from effects of full-year orders that were rolled out during the course of 2004 (distribution of the Sunday paper for De Telegraaf, periodical distribution for Aldipress and transport for PcM). The revenue from retailers’ folders was somewhat lower. In 2006, DistriQ will continue with optimising the logistics processes, including the implementation of new ICT systems, as well as projects for 2005 39 joint delivery of daily papers in South Holland and ’t Gooi area around Hilversum. DistriQ expects a lower result for 2006, because the rates will be under pressure from seeking to achieve more market conformity. 40 ANNUAL REPORT 2005 participating interests telegraaf expomedia events vof (te2) Telegraaf Expomedia Events VOF is a joint venture of Telegraaf Media Groep N.V. and the British Expomedia Group Plc. The joint venture has the goal of operating special-interest trade fairs and events. The 2005 financial year was an investment year for TE2. Besides continuation of existing titles, such as ’Eten & Genieten’ (Eating and Enjoying), ’POP’ and ’Crime in Retail’, in 2005, the portfolio of professional and consumer trade fairs was strongly expanded in the segments of fashion (’Modefabriek’, ’Kleine Fabriek’) and automotive (’Race & Rally’), and participating interests in titles such as Fleurig. Moreover, new concepts such as New Technology Events and Fashion Items were introduced. The EXPO XXI congress and event facilities were also opened in 2005. Besides a number of events for TE2, EXPO XXI has meanwhile also already hosted a number of successful events for third parties. In 2006, TE2 will further extend the position it has built up. expomedia group plc Following the existing Telegraaf Expomedia Events VOF joint venture, TMG accrued a 20% interest in joint venture partner Expomedia Group Plc in 2005. This company has the objective of setting up and operating an international chain of state-of-the-art exhibition, event and conference centres. These centres will then be used by Expomedia to stage both its own events and those of third parties. Meanwhile, existing locations include places such as Cologne, Moscow, Belgrade, Warsaw, Budapest and New Delhi. The rationale behind this transaction is reinforcing the cooperation already existing in the Netherlands, being able to grow in parallel with the trade fair medium type, and to access new, attractive growth markets. sbs broadcasting b.v./ sbs broadcasting s.à.r.l. TMG’s share in SBS Broadcasting B.V. amounted to 27% up to and including 20 December 2005. On 21 December 2005, TMG exchanged its shareholding of 27% in SBS Nederland, plus a non-recurring cash injection of approximately € 18 million, for a 21.39% interest (diluted to 20% early 2006) in SBS Broadcasting S.à.r.l., the former PKS Media S.à.r.l. This exchange fits entirely within the international ambitions of TMG. The enterprise thus acquires a share in the international growth of SBS and obtains access to a broader international media platform. Permira and Kohlberg Kravis Roberts & Co. L.P. (KKR) retain the operational control of SBS. TMG will appoint members to the Supervisory Board in proportion to the shareholding in SBS. TMG also has certain rights in the event of a possible future sale of SBS S.à.r.l. or SBS Nederland. Earlier in 2005, TMG had accrued an interest of 2.4% in SBS Broadcasting S.A. (later known as TVSL S.A. and now liquidated) worth € 29 million. For this interest, TMG received approximately € 35 million from the liquidation of TVSL on 8 November 2005. ANNUAL REPORT koninklijk wegener n.v. As at 31 December 2005, the share in Wegener consisted of 10,594,763 depository receipts of ordinary shares of € 0.30 nominal value (an interest of 23.9%) and 2,593,030 depository receipts of 6.84% cumulative preference shares of € 0.30 nominal value (an interest of 61.7%). The price as at 31 December 2005 was € 10 against a price of € 9.45 as at 31 December 20034. The average purchase price was € 5.74. In accordance with the IFRS principles, the interest in the depository receipts of ordinary shares has been measured at fair value (stock exchange value) of € 105.9 million at year-end 2005 compared to € 100.1 million at year-end 2004. At year-end 2003, the stock exchange value amounted to € 73.1 million. The capital gains over 2005 and 2004 of respectively € 5.8 million and € 27 million have been incorporated in the income statement under revaluation of financial fixed assets. The financing preference shares carry a net reimbursement of 6.84% per annum up until year-end 2005. Commencing on 1 January 2006, the reimbursement amounts to 5.33% per annum. The result from participating interests includes both the ordinary dividend, and the preference dividend for 2005, received in 2005. The ordinary and financing preference shares represent a vote of 26,24% as of 2006. am van gaal media b.v. Telegraaf Media Groep N.V. has had a 20% interest in AM van Gaal Media (AM Media) for 2005 41 two years now. The goal of the publisher is to develop into a medium-sized publisher of public magazines specially aimed at women. The publisher issues the titles AM magazine and Tweed. m-media / media librium b.v. Since November 2005, TMG has had a 40% interest in Media Librium, an operator of digital media. Media Librium has specialised in the development and use of content on digital screens and in connecting these screens to back-office systems (such as company networks and inventory systems). This uses the newest methods, including narrowcasting (reaching specific target groups by means of digital screens providing information specially designed for them). M-Media, a subsidiary of Media Librium, has provided a narrowcasting network for the McDonald’s branches in the Netherlands since September 2004, including the Channel-M television channel and digital bill boards. Additionally, M-Media uses a similar concept to operate digital screens in several shopping centres. For 2006, the company foresees expansion of its networks to public transport, retail sector organisations and public spaces. Meanwhile, M-Media has also concluded a strategic cooperation agreement with KPN that, on the one hand, enables the company to structurally reduce its costs for ICT and network management considerably and, on the other, creates the opportunities to benefit from KPN’s strength in rolling out new networks. ANNUAL REPORT 2005 43 corporate governance code At the general meeting of 20 April 2005, the shareholders approved the compliance of TMG on the corporate governance code. The Executive Board and the Supervisory Board share the basic assumption of the Corporate governance code that the company represents a long-term collaboration of all parties involved with the company. The interested parties are the groups and individuals which directly and indirectly influence the achievement of the company’s objectives, or are being influenced by it, such as employees, shareholders and other investors, suppliers and customers, but also the government and social institutions. The Executive Board and the Supervisory Board have an integral responsibility for the evaluation of these interests, which is generally aimed at the continuity of the company. The Code is effective from the financial year which began on or after 1 January 2004. In this section, Telegraaf Media Groep N.V. (TMG) states the way in which it interprets compliance with the Code. As a publisher of, among other products, daily newspapers, TMG is of the opinion that it also serves a social interest besides the interest of the shareholders. As a result of this, the continuity and independence of the group is considered to be of the greatest importance. In some details, this leads to choices which differ from those within the code, which places shareholders’ value first and foremost. best practice provision ii. 1.1. Period of appointment for a maximum of four years. The company’s policy is that a director is employed by the company and is appointed for an unlimited period. A periodical appointment results in the risk of a conflict of interest between the long term for the company and the short term because of reappointment of the director. The shareholders can annually exert their influence during their meeting when discharging the Executive Board from responsibility for the policy pursued. The Supervisory Board evaluates the Executive Board’s performance annually. principle ii.2. remuneration/ii.2.7 Maximum compensation for dismissal of directors. This principle is only partly shared. Every member of the Executive Board is in the service of the company. Compensation for dismissal, if applicable, and sometimes determined by the competent court, also stems from this employment relationship. The new remuneration policy for the Executive Board was approved by the shareholders in the general meeting on 20 April 2005. The remuneration policy has a fixed part and a variable part. The variable part involves an individual bonus and the group’s profit-sharing scheme, which applies to each employee. TMG does not have option schemes or remuneration in the form of shares. 44 ANNUAL REPORT 2005 best practice provision iii.2.1. Independence of Supervisory Board members with the exception of no more than 1 person. If a majority of the Supervisory Board members is independent, as intended in III.2.2. (dependence criteria), a sufficient guarantee for independent supervision is provided. Because of the social importance of our daily newspapers and thus the long-term vision of the company, much importance is attached to having more than one Supervisory Board member who has a high degree of involvement in the company through experience or ownership of shares. best practice provision iii.3.5 Maximum term of Supervisory Board members Referring to that which is mentioned in III.2.1, this provision is not shared and it is noted that there are many functions in society which are filled for a longer period. Experience and expertise are of great importance. Commitment to, and knowledge of the company prevails. best practice provision iii.5. Composition and role of the key committees of the Supervisory Board. The Code states that in the case of a Supervisory Board of more than four members, an auditing committee, remuneration committee, and appointment and selection committee should be established. The present Supervisory Board has five members. Because of the involvement of the Supervisory Board members, their different areas of expertise and the nature and size of our company, one sees no reason to establish these committees. best practice provision iii.7.2. Possible ownership of shares by a Supervisory Board member in the company of which one is a Supervisory Board member, for long-term investment. The law provides sufficient guarantees for preventing the improper use of knowledge or prior knowledge. best practice provision iii.7.3. Regulations and statement of ownership of shares of Supervisory Board members in securities other than those issued by one’s ‘own’ company. This provision is not supported: it is considered to represent too great an infringement on the privacy of Supervisory Board members. best practice provision iv.2.2. Members of the trust office’s board are appointed by the management of the trust office. The present composition of the board complies with Appendix X of the Fund’s Regulations. This provides a good balance between guaranteeing the interests of the certificate holders on the one hand, and the company on the other hand. In this context, reference is made to the previous remark about the specific character of the company and the social importance ANNUAL REPORT that daily newspapers represent. The Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V. (the TMG priority share management trust) is entitled to make non-binding recommendations for two of the five board members. These members are of particular importance to ensure that the affinity for and solidarity with the company of so large a shareholder as the trust office, is guaranteed. best practice provision iv.2.8. Proxy votes Holders of depositary receipts for shares can unrestrictedly convert their depositary receipts into shares in order to obtain the right to vote. The board’s granting of a proxy vote to holders of depositary receipts without cancellation is not a problem. The binding voting instructions from a depositary receipt holder to the board are not supported, because the company is of the view that those persons who wish to vote should also be present at the shareholders’ meeting. 2005 45 best practice provision iv.3.1. Webcasting or suchlike of analysts’ meetings, analysts’ presentations, presentations for institutional and other investors and press conferences. This provision is not shared insofar as it concerns the ‘one on ones’. However, group presentations can be followed via webcasting. After they finish, presentations will be placed on the group’s website. 46 ANNUAL REPORT 2005 report on internal risk management and control systems During the financial year, the control environment has been analysed and evaluated, as have the risks to which TMG is exposed. The most important components of internal risk management and control systems in the financial year were: • A standard cycle for the annual planning and reporting cycle; • Standard financial and non-financial procedures and guidelines for the operating companies; • Since 2004, TMG has had an Internal Audit department to ensure compliance with the policy and the procedures as well as tracing and tackling problems concerning the internal control. The Internal Audit department reports to both the Executive Board and to the Supervisory Board. • Implementation of a formalised risk management policy within TMG. For that purpose, an extensive Risk Assessment Project was started in 2005 in order to further improve the internal risk management and control system. The risk management project that was implemented during the financial year has provided a clear contribution to the further improvement of the effectiveness of the internal risk management and control systems. In 2006, follow-up steps will be undertaken to provide additional content and shape for the risk management process. Besides holding more workshops at strategic level, a project will be started in 2006 that will focus on the operational processes and their associated financial processes. In this way, TMG will try to obtain insight into where the necessary steps must still be taken in order to improve the risk management and internal control areas at operational level. The Executive Board of TMG is responsible for the internal risk management and control systems. ANNUAL ACCOUNTS 2005 47 consolidated income statement Note* 2005 2004 Net turnover 1 736,686 694,320 Other operating revenues 3 2,806 1,949 739,492 696,269 Amounts in thousands of euros. Total revenues Raw materials and consumables 4 Wages and salaries Social security and pension charges 5 76,699 74,117 212,293 207,153 14,668 41,749 10,11 41,509 39,877 6 341,088 307,069 686,257 669,965 53,235 26,304 Share in the results of associates 9,761 7,197 Net financing result 5,610 4,400 Revaluation of non-current financial assets 5,777 26,712 Depreciation and amortisation Other operating costs Total operating costs Operating profit 1 Other financial income and expenses Balance of financial income and expenses 7 Pre-tax profit Corporation tax 8 Net result 10,582 13,217 31,730 51,526 84,965 77,830 19,876 10,049 65,089 67,781 65,428 67,709 Allocated to: Shareholders of Telegraaf Media Groep Minority interest share Net result -339 72 65,089 67,781 65,428 67,709 52,499,200 52,499,200 € 1.25 € 1.29 Result per share Net result allocated to the holders of ordinary shares in Telegraaf Media Groep N.V. Average number of ordinary shares issued Ordinary and diluted profit per share (EUR) * Inhoudsopgave toelichtingen geconsolideerde jaarrekening zie pag 65. 20 48 ANNUAL ACCOUNTS 2005 consolidated balance sheet Notes 31-12-2005 31-12-2004 Property, plant and equipment 10 167,163 181,876 Non-current intangible assets 11 178,531 148,852 Interests in associates 12 99,069 43,981 Deferred tax credits 14 - 4,965 Other non-current financial assets 13 Amounts in thousands of euro’s. assets Non-current assets Total non-current assets 132,382 132,998 577,145 512,672 Current assets Inventories 16 8,498 14,372 Other investments 13 2,361 6,475 9 29,995 27,812 17 103,128 84,474 Tax credits Trade receivables and other receivables 1843,334 Cash and cash equivalents Assets held for sale 15 Total current assets Total assets 1 91,268 6,906 - 194,222 224,401 771,367 737,073 ANNUAL ACCOUNTS Amounts in thousands of euro’s. 2005 49 Notes 31-12-2005 31-12-2004 19,33 530,468 480,595 equity and liabilities Shareholders’ equity Allocated to Telegraaf Media Groep N.V. Minority interest share 688 473 531,156 481,068 Liabilities Interest-bearing loans and other non-current financing liabilities 21 3,078 1,175 Provision for employee benefits 22 18,029 53,102 Restructuring provision 23 27,699 35,917 Deferred tax liability 14 11,213 - 60,019 90,194 Total non-current liabilities Interest-bearing loans and other current financing liabilities Trade and other payables 24 Total current liabilities Total commitments Total equity and liabilities 1 432 - 179,760 165,811 180,192 165,811 240,211 256,005 771,367 737,073 50 ANNUAL ACCOUNTS 2005 consolidated cash flow statement 2005 2004 Total revenues 739,492 696,269 Total operating costs 686,257 669,965 53,235 26,304 - depreciation and amortisation 41,509 39,877 - changes in current receivables -9,401 2,588 6,228 6,715 Amounts in thousands of euro’s. Cash flow from operating activities: Operating profit Restatements for: - changes in inventories - changes in trade payables and 6,185 6,511 -43,316 -9,605 Cash flow from operations 54,440 72,390 Dividends received from associates 18,143 1,424 5,610 4,400 Tax paid on the profit -4,593 -11,908 Cash flow from operating activities 73,600 66,306 other current liabilities - changes in provisions Other financial income and expenses ANNUAL ACCOUNTS Amounts in thousands of euro’s. Cash flow from operating activities 2005 51 2005 2004 73,600 66,306 -35,601 -18,181 Cash flow from investing activities Investments in non-current intangible assets Acquisition or divestment of group entities and other financial assets -51,310 8,909 Investments in property, plant and equipment -25,007 -18,707 -755 -8,240 Changes in investment creditors Divestments of property plant and equipment 3,724 7,010 Changes in securities 4,114 -2,904 -104,835 -32,113 -15,750 -5,775 Cash flow from investing activities Cash flow from investing activities Dividend paid out Changes in non-current liabilities Cash flow from financing activities Exchange differences Changes in cash and cash equivalents -1,144 579 -16,894 -5,196 195 -40 -47,934 28,957 52 ANNUAL ACCOUNTS 2005 consolidated statement of changes in equity Reserve for Total exchange rate Retained shareholders’ Share capital differences earnings equity Balance as at 1 January 2004 13,125 114 405,463 418,702 Result for the financial year - - 67,709 67,709 Foreign currency differences - -41 - -41 Dividend to shareholders - - -5,775 -5,775 13,125 73 467,397 480,595 Amounts in thousands of euro’s. Balance as at 31 December for allocation to Telegraaf Media Groep N.V. Minority interest share 473 481,068 Balance as at 1 January 2005 13,125 73 467,397 480,595 65,428 Result for the financial year - - 65,428 Foreign currency differences - 195 - 195 Dividend to shareholders - - -15,750 -15,750 13,125 268 517,075 530,468 Balance as at 31 December to allocate to Telegraaf Media Groep N.V. Minority interest share 688 531,156 ANNUAL ACCOUNTS 2005 53 accounting and consolidation policies important principles for financial reporting Telegraaf Media Groep N.V. (‘the Company') has its registered office in Amsterdam, the Netherlands, and is primarily involved in publishing print media and operating and participating in digital media, radio and TV. The Company’s shares are listed on EuroNext Amsterdam. The consolidated financial statements of the Company for the 2005 financial year cover the Company and its subsidiaries (together called ‘the Group’) and the holdings of the Group in associates and entities that are jointly controlled with others. The executive board prepared the financial statements on 15 March 2006. declaration of conformity The consolidated financial statements have been drawn up in accordance with International Financial Reporting Standards (IFRS) drawn up by the Inter-national Accounting Standards Board (IASB) and approved by the European Commission and the interpretations of these standards by the IASB. This is the first time that the Group’s consolidated financial statements have been compiled in accordance with IFRS. In drawing up these financial statements, IFRS 1 has been applied, with a transition date of 1 January 2004. An explanation of the effects of the transition to IFRS on the reported financial position, financial results and cash flows of the Group is included in section 33 of the notes. accounting policies applied in drawing up the financial statements The financial statements are presented in euros, rounded to the nearest thousand. The financial statements are based on historical costs, except that financial instruments held for sale or classified as available for sale are valued at fair value. Non-current assets held for sale and divested group assets are valued at the lower of the book value and the fair value less selling costs. The compiling of the financial statements in conformity with IFRS requires that the management makes estimates and evaluations and should specify the assumptions that influence the application of the accounting policies and the reported value of assets and liabilities, and of income and expenditure. The estimates and the associated assumptions are based on past experience and various other factors that are regarded as reasonable in view of the circumstances. The outcomes of these constitute the basis for an evaluation of the book value of assets and liabilities where this is not easily apparent from other sources. The actual results may deviate from these estimates. The estimates and underlying assumptions are critically reviewed from time to time. Revisions of the estimates are recognised in the period in which the estimate is revised, if the revision has consequences only for that period. If the 54 ANNUAL ACCOUNTS 2005 revision has consequences for both the revision period and future periods, the revision is revised in both the period of revision and future periods. Evaluations made by the management, in relation to the application of the IFRS, which have important consequences for the financial statements, and any estimates that entail a considerable risk of a material restatement in the following year are reported in section 32 of the notes. The financial reporting policies set out below have been consistently applied for the periods of 2005 and 2004 presented in these consolidated financial statements, and also in drawing up the IFRS opening balance on 1 January 2004, as required for the transition to IFRS. consolidation policies The financial figures for the parent company Telegraaf Media Groep N.V., its subsidiary companies and joint ventures are incorporated in the consolidation. The consolidation has been based on the valuation and accounting policies of the parent company. Subsidiary companies Subsidiary companies are entities over which the company exercises control. There is a relationship of control if the Company is able to directly or indirectly determine the financial and operational policy of an entity in order to benefit from the activities of the entity. In determining whether there is a relationship of control, potential voting rights that cannot be exercised at that time or that are convertible are taken into account. The financial statements of subsidiary companies are recognised in the consolidated financial statements from the date on which a relationship of control first arises, until the moment at which this ends. Associates Associates are entities in which the Group has a significant influence on financial and operational policies, but does not have control. The consolidated financial statements include the Group’s share of the total results of associates in accordance with the 'equity' method, from the date at which the Group first acquires a significant influence, to the date at which it last has a significant influence. If the Group’s share of the losses is larger than the value of the holding in an associated company, the book value of the entity on the Group’s balance sheet is written off to zero, and no further losses are taken into account except in so far as the Group has entered into a legally enforceable or actual commitment, or has made payments on behalf of the associated company. Joint ventures Joint ventures are those entities over which the Group exercises a joint control with others, and where this control is contractually specified. The consolidated financial statements include the Group’s proportional share in the assets, commitments, revenues and costs of the entity, with each individual accounting item being combined with items of a similar nature, from the date at which the joint control was first exercised, up to the date on which it ends. ANNUAL ACCOUNTS Elimination of transactions in the consolidation Intra-group balances and any unrealised profits and losses on transactions within the Group, or income and expenditure from such transactions, have been eliminated when drawing up the consolidated financial statements. Unrealised profits derived from transactions with associates and entities over which the Group exercises joint control have been eliminated in proportion to the Group’s holding in the entity. Unrealised losses are eliminated in the same way as unrealised profits, providing there is no indication of an impairment. foreign currencies Transactions in foreign currencies Transactions denominated in foreign currencies are translated into euros at the exchange rate applicable on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into euros on the balance date at the exchange rate applicable on that date. Exchange rate differences arising from the translation are recognised in the income statement. Non-monetary assets and commitments that are denominated in foreign currencies and valued on the basis of historical costs, are translated at the exchange rate applying on the date of the transaction. Non-monetary assets and liabilities in foreign currencies that are recognised at fair value are translated into euros at the 2005 55 exchange rates that applied on the dates on which the real values were determined. Financial statements of foreign activities The assets and liabilities of foreign activities, including goodwill and fair value corrections arising during consolidation, are translated into euros at the exchange rate applicable on the balance sheet date. The revenues and costs of these foreign activities have been translated into euros at a rate that approximates the exchange rate on the date of the transaction. Differences arising from currency translations are recognised immediately, in a separate section of the equity. Net investments in foreign activities Currency exchange differences resulting from the translation of net investments in foreign activities are incorporated in the reserve for currency translation differences. In the event of a sale, they are transferred to the income statement. property, plant and equipment Assets owned Property, plant and equipment are valued at cost less cumulative depreciation (see below) and impairment (see the principle for impairment revaluations on page 58). Non-current assets under construction are valued at the amount spent for new construction, machines and installed equipment. Expenditure after initial recognition The Group recognises the cost of replacing part of a property, plant and equipment asset in the 56 ANNUAL ACCOUNTS 2005 book value of that asset, when the cost is incurred, if it is probable that the future economic advantages in relation to the asset will accrue to the Group, and if the cost of the asset can be reliably determined. All other costs are recognised as expenditure in the income statement when they are incurred. Depreciation Depreciation is charged to the income statement using the linear method on the basis of the estimated useful life of each part of a property, plant and equipment asset. Land is not depreciated. The estimated useful life is as follows: 20 to 25 years • business premises 5 to 10 years • plant and machinery 5 years • other operating assets The residual value is critically evaluated each year, except where it is not significant. intangible assets Goodwill Acquisitions are incorporated into the accounts using the acquisitions method. Goodwill concerns an amount resulting from the acquisition of subsidiary companies, associates and joint ventures. For company acquisitions that occurred after 1 January 2004, goodwill is the same as the difference between the purchase price of the acquisition and the net fair value of the identifiable assets, liabilities and contingent liabilities. In the case of acquisitions before this date, goodwill is based on the supposed purchase price, which is equal to the value that was recognised under the previously applied GAAP. The classification and incorporation of business combinations that occurred before 1 January 2004 has not been modified in drawing up the IFRS opening balance as at 1 January 2004 (see section 33 of the notes). Goodwill is valued at cost less cumulative impairment. Goodwill is attributed to cash generating units and is not amortised. Instead, there is an annual evaluation to see whether there has been an impairment (see the principle for impairment on page 58). For associates, the book value of the goodwill is recognised in the book value of the investment in the associated company. Where a holding in a subsidiary company, associated company or joint venture is sold, the corresponding goodwill is included in determining the profit or loss on the book value. Negative goodwill that arises in an acquisition is taken directly to the income statement. Other intangible assets Other non-current intangible assets concern licensing rights for information systems (developed in-house) for own use, and temporary publishing rights. These intangible assets acquired by the Group are valued at cost, less cumulative amortisation (see below) and impairment (see the principle for impairment on page 58). Expenditure on research activities is recognised as an expense in the income statement when it is incurred. ANNUAL ACCOUNTS 2005 57 Expenditure for development activities, where the research results are used for a plan or design for the production of new or substantially improved products and processes, are capitalised if the product or process is technically and commercially feasible, is separately identifiable, the costs can be reliably determined and the Group has sufficient resources to complete the development. The amortisation of other intangible assets starts as soon as the assets are ready for use. The capitalised costs comprise the material costs, direct labour costs and the directly attributable part of the indirect costs. For the part that is capitalised and concerns internal hours, a legal reserve will be formed. The other development costs are recognised as expenses in the income statement when they are incurred. investments The capitalised development costs are valued at cost less cumulative amortisation (see below) and impairment (see the principle for impairment on page 58). When the Group has the express intention of holding government bonds to maturity, and is able to do so, these are valued at amortised purchase cost less impairment (see the principle for impairment on page 58). Expenditure after initial recognition Expenditure for capitalised intangible assets after their initial recognition is treated as expenditure in the income statement, unless the expenditure increases the future economic advantages incorporated in the specific asset to which it relates. In that case, the costs are capitalised in so far as the economic advantages are increased. Amortisation Amortisation is linear and is booked to the income statement. It is based on the estimated useful life of the intangible asset, unless this useful life is indeterminate. The estimated useful life of intangibles is as follows: • publishing rights • software 8 to 20 years 3 to 5 years Investments in debt instruments and shares Financial instruments held for trading purposes are classified as current liquid assets and valued at fair value, and the profit or loss when they are sold is recognised in the income statement. Other financial instruments held by the Group are classified as held available for sale, and are valued at fair value. The resulting profits or losses from their sale are booked directly to the shareholders’ equity, subject to impairments and (in the case of monetary items such as debt instruments) exchange rate differences. When these investments are no longer recognised on the balance sheet, the cumulative profit or cumulative loss that has been booked directly to the equity is recognised in the income statement. Where the instruments are interest-bearing investments, the interest is recognised in the income statement using the effective rate of interest method. 58 ANNUAL ACCOUNTS 2005 The fair value of the financial instruments that are classified as held for sale and available for sale is the bid price on the financial market, on the balance sheet date. Financial instruments classified as held for sale or available for sale are recognised on the balance sheet of the Group at the moment that the commitment to purchase the investment is entered into, and are excluded from the balance when a commitment to sell them is established. Investments held to maturity are recognised on the balance sheet at the moment that they are transferred to the Group, and are removed from the balance sheet when they are transferred from the Group. other financial assets Other financial assets consist of participating interests, prepaid operational leases and non-current receivables. These participating interests, in which the Group does not exercise significant influence, are recognised at fair value. Prepaid operational leases comprise the purchased leaseholds of the grounds on the campus in Amsterdam. These are amortised using the straight-line method over the duration of the leaseholds concerned. Non-current receivables are recognised at cost less attributable transaction costs. They are subsequently valued at the amortised purchase cost, with any difference between the purchase cost and the amount to be repaid being recognises in the income statement using the effective interest rate method over the term of the loan. inventories Inventories are recognised at cost, or net realisable value if this is lower. The net realisable value is the estimated selling price as part of normal operations, less the estimated costs of completion and the sales cost. The cost price of the inventories is based on the 'first in, first out' (FIFO) principle and includes the expenditure involved in acquiring the inventories and moving them to their current location and placing them in their present position. trade receivables and other receivables Trade receivables and other receivables are valued at cost, less impairment (see the principle for impairment on page 58). cash and cash equivalents Cash and cash equivalents consist of cash and bank balances and other demand deposits. impairments The book value of the assets of the Group, with the exception of inventories (see above) and deferred tax assets (see page 63), is reviewed on each balance sheet date to determine whether there are reasons for an impairment. If there are such reasons, the realisable value of the asset is estimated (see the basis for calculating the realisable value on page 59). ANNUAL ACCOUNTS For goodwill, assets with an indefinite useful life and intangible assets that are not yet ready for use, the realisable value is estimated on each balance sheet date. An impairment loss is recognised when the book value of an asset or the cash-generating unit to which the asset belongs is higher than the realisable value. Impairments are recognised in the income statement. Impairments recognised in relation to cash generating units are first subtracted from the book value of any goodwill allocated to cash generating units (or groups of units), and then proportionally subtracted from the book value of the other assets of the unit (or group of units). Goodwill and intangible assets with an indefinite useful life were tested for impairment on 1 January 2004, the date of transition to the IFRS, even if there was no reason to suspect that there had been an impairment. If a drop in the fair value of a financial asset that is available for sale has been recognised directly in the shareholders’ equity, and there are objective indications that the asset has suffered an impairment, the cumulative loss that has been directly booked to equity is recognised in the income statement, even though the financial asset has not been removed from the balance sheet. The cumulative loss that is recognised in the income statement is the difference between the acquisition price and the current fair value, less any impairment on that financial asset, which has previously been recognised in the income statement. 2005 59 Calculation of the realisable value The realisable value of the Group’s investments in securities held to maturity and receivables valued at the amortised cost of acquisition is calculated as the present value of the expected future cash flows, discounted at the original effective interest rate (i.e., the effective interest calculated at the time of the initial recognition of these financial assets). Receivables with a short residual term are not discounted to present value. For the other assets, the realisable value is the realisable value, or the operational value if this is higher. In determining the operational value, the present value of the estimated future cash flows is calculated using a pre-tax discount rate that reflects both the current market valuations of the time value of money and the specific risks related to the asset. For an asset that generates no cash receipts that are significantly independent of those of other assets, the realisable value is determined for the cash-generating unit to which the asset belongs. Reversal of impairments An impairment loss for a security held to maturity or a receivable valued at the amortised cost of acquisition is reversed if an increase in the realisable value occurring after this loss was booked can be objectively related to an event that has occurred after this impairment loss was recognised. An impairment loss on an investment in an equity instrument classified as available for sale is not reversed in the income statement . If the fair value of a debt instrument available for sale is rising, and the increase can be objectively related to an event that occurred after the impairment loss was recorded in the income statement, the impairment must be 60 ANNUAL ACCOUNTS 2005 reversed, with the amount of the reversal being recognised in the income statement. No impairments are reversed for goodwill. For other assets, an impairment loss is reversed if the estimates on which the realisable value was based are changed. An impairment is only reversed in so far as the book value of the asset is not higher than the book value, after deducting depreciation or amortisation that would have been applied if no impairment loss had been recognised. recognised interest-bearing loans Interest-bearing loans are recognised at cost less attributable transaction costs. After the initial recognition, interest-bearing loans are valued at the amortised cost price, with any difference between the cost price and the amount to be repaid being recognised in the income statement using the effective interest rate method over the term of the loan. provisions A provision is recognised on the balance sheet if the Group has a legally enforceable or actual commitment as a result of an event in the past, and it is probable that an outflow of funds will be required to meet that commitment. If the effect of this is material, the provisions are determined by discounting the expected future cash flows to present value using a pre-tax discount rate that reflects the current market valuation of the time value of money and, where necessary, the specific risks related to the commitment. Restructuring provision A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and a start has been made with the restructuring or it has been publicly announced. No provision is made for future operating costs. Provision for employee benefits The Group has established various pension schemes, some under its own management and some placed with external parties, such as industrial pension funds and insurance companies. On the basis of IAS 19, a number of these schemes have been classified as defined benefit schemes. The net commitment of the Group under defined benefit schemes is calculated separately for each scheme, by estimating the pension rights that employees have accumulated in exchange for their services during the accounting period and previous periods. These pension rights are discounted to determine their present value, and the fair value of the fund’s investments are subtracted from this. The discount rate is the return, on the balance sheet date, on company bonds with a creditworthiness rating of AAA and a term approximately equal to the term of the Group’s commitments. The calculation is carried out by a recognised actuary using the 'projected unit credit' method. All actuarial profits and losses are recognised as at 1 January 2004, the date of the transition to IFRS. In relation to actuarial profits and losses arising after 1 January 2004 in the course of ANNUAL ACCOUNTS calculating the Group’s commitments under a pension scheme, in so far as the unrecognised cumulative actuarial profits or losses amount to more than 10% of the present value of the gross commitment under the defined-benefit pension scheme, or 10% of the fair value of the fund’s investments if this is higher, that part is recognised in the income statement over the expected average remaining period of employment of the employees who participate in the scheme. Apart from this, actuarial profits or losses are not recognised. If the calculation results in a positive outcome for the Group, the recognition of the asset is limited to no more than the balance of any unrecognised actuarial losses and pension costs for completed years of service and the present value of possible future refunds by the fund, or of lower future pension premiums. When the pension rights under a pension scheme are changed, the part of the improved pension rights that relate to employees’ years of service (past service cost) is recognised as an expenditure in the income statement, spread linearly over the average period until the pension rights become unconditional. In so far as the claims are immediately unconditional, the expenditure is immediately recognised in the income statement. The result ensuing from the curtailment or termination of a defined benefit scheme is incorporated in the accounts as soon as the curtailment or termination takes place. The result consists of the change in the present value of the defined benefit commitments and the fair value of the funds’ investments and any 2005 61 previous actuarial results and past service costs that have not yet been accounted for. There is a curtailment if there is a material reduction in the number of workers who fall under the pension scheme, or if the scheme itself changes so that substantially lower rights will be granted for future years of service. Commitments relating to contributions to pension schemes on the basis of defined contributions are recognised as expenditure in the income statement when the contributions are due and payable. trade debts and other payables Trade debts and other payables are valued at cost. revenues Net turnover The net turnover is the sum of the revenues after deducting turnover tax and any applicable discounts. Revenues from the sale of goods are taken to the income statement when the important risks and benefits of ownership are transferred to the buyer. Revenues relating to services provided are recognised in the income statement in proportion to the performance provided in that financial year. No revenues are recognised if there are significant uncertainties concerning the collection of the agreed fees, the associated costs for possibly returned goods, or if the management has a continuing involvement with the goods. 62 ANNUAL ACCOUNTS 2005 If goods or services are exchanged for goods or services of a similar nature and fair value, this barter is not treated as a transaction that generates revenue. If a barter exchange does not meet this criterion, it is regarded as a transaction that generates revenue. The amount of this revenue is based on the fair value of the received goods or services, plus or minus any cash or cash equivalents received or paid (or any assets that can be converted into cash in the very short term). If the fair value of the goods or services received cannot be reliably determined, the revenue is determined on the basis of the fair value of the goods or services bartered in exchange plus or minus any cash or cash equivalents received or paid (or any assets that can be converted into cash in the very short term). Government subsidies Government subsidies are initially recognised on the balance sheet as prepayments received, and are entered as revenue as soon as there is reasonable certainty that they will be received and that the Group will comply with the conditions involved. Subsidies that compensate for costs incurred by the Group are systematically recognised as revenues in the income statement, in the same period in which these costs are incurred. received as incentives for entering into lease agreements are recognised in the income statement as an integral part of the total lease costs. Net financing result The net financing result comprises the interest expenses on funds withdrawn calculated using the effective interest rate method, interest income from investments, dividends received and currency exchange gains and losses. Interest income is recognised in the income statement using the effective interest rate method. Dividend income is recognised in the income statement at the moment the dividend is announced. tax on profits Taxes on profits or losses over the financial year comprise the current corporation tax liability and deferred taxes for the reporting period. The corporation tax is recognised in the income statement in so far as it relates to items that are entered directly to the equity, in which case the tax is debited to the equity. expenses The current tax liability for the financial year is the expected tax payable on the taxable profits over the financial year, calculated on the basis of tax rates that have been determined on the balance sheet date, and corrections to the tax liabilities for previous years. Lease payments for operational leasing Lease payments for operational leases are recognised in the income statement , spread linearly over the period of the lease. Payments that are The provision for deferred tax liabilities is formed on the basis of the balance sheet method, under which a provision is made for temporary differences between the book value of assets ANNUAL ACCOUNTS and liabilities for financial reporting purposes and the book value of these items for tax purposes. No provision is made for the following temporary differences: goodwill that is not tax deductible, the initial recognition of assets or liabilities that do not affect either the commercial or the fiscal profit, and differences that relate to investments in subsidiary companies in so far as they are unlikely to be disposed of in the foreseeable future. The amount of the provision for deferred tax liabilities is based on the way the book value of the assets and liabilities are expected to be realised or disposed of, using the tax rates that have been determined on the balance sheet date, or that have been materially decided by the balance sheet date. A deferred tax credit is only recognised in so far as it is probable that there will in the future be taxable profits available to realise the asset item. The amount of the deferred tax credit is reduced in so far as it is no longer probable that the corresponding tax benefit will be realised. segmented information A segment is a clearly distinguishable section of the Group that provides goods or services (known as a business segment), or that provides those goods or services to a particular economic region (a geographical segment), and that has a risk and return profile that differs from other segments. 2005 63 non-current assets held for sale Immediately prior to reclassification as ‘held for sale,’ the valuation of the assets (and all assets and liabilities of group assets to be divested) is brought up to date in accordance with the applicable IFRS. Non-current assets and group assets to be divested, at the time of their initial recognition as ‘held for sale,’ are then valued at the lowest of the book value and the fair value less selling costs. Impairments at the first classification as ‘held for sale’ are recognised in the income statement, even if there is a revaluation. The same is true for gains and losses arising from later revaluations. A discontinued business activity is a part of the Group’s activities that represents a separate and significant business activity or a separate and important geographical business area, or a subsidiary company that has been taken over exclusively with the intention of reselling it. A business activity is classified as discontinued when it is divested, or when it complies with the criteria for classification as ‘held for sale,’ whichever occurs first. A group of assets to be divested, that has been discontinued, can also meet this criterion. ANNUAL ACCOUNTS 2005 65 toelichting op de geconsolideerde jaarrekening inhoud pag. 66 70 72 72 72 73 73 74 74 75 76 78 80 81 82 83 83 83 84 84 Toelichting 1. Gesegmenteerde informatie 2. Overname van dochterondernemingen 3. Overige bedrijfsopbrengsten 4. Grond- en hulpstoffen 5. Sociale- en pensioenlasten 6. Overige bedrijfskosten 7. Nettofinancieringslasten 8. Vennootschapsbelasting 9. Belastingvorderingen en -verplichtingen 10. Materiële vaste activa 11. Immateriële activa 12. Investeringen in geassocieerde deelnemingen 13. Overige financiële vaste activa 14. Latente belastingvorderingen en verplichtingen 15. Vaste activa aangehouden voor verkoop en beëindigde bedrijfsactiviteiten 16. Voorraden 17. Handels- en overige vorderingen 18. Geldmiddelen en kasequivalenten 19. Eigen vermogen 20. Dividend pag. 85 86 88 89 89 90 90 90 91 92 93 94 95 Toelichting 21. Rentedragende leningen en overige financieringsverplichtingen 22. Personeelsbeloningen 23. Voorzieningen 24. Handelsschulden en overige te betalen posten 25. Financiële instrumenten 26. Operationele leaseovereenkomsten 27. Investeringsverplichtingen 28. Voorwaardelijke gebeurtenissen 29. Verbonden partijen 30. Belangen in joint ventures 31. Gebeurtenissen na de balansdatum 32. Schattingen en oordeelsvorming door de leiding 33. Verklaring van de overgang naar IFRS 66 ANNUAL ACCOUNTS 2005 1. segmented information Segmented information is provided concerning the Group’s business segments and geographical segments. The primary basis of segmentation, that of the business segments, is based on the management and internal reporting structure of the Group. The prices for transactions between segments, principally printing and distributing newspapers and providing ICT projects and infrastructure, are mainly determined on the basis of business and objective principles. The results, assets and liabilities of a segment include items that can be attributed to the segment directly, or based on reasonableness. Unattributed items consist mainly of items which must be allocated at group level. The capital expenditure of a segment concerns the total of the expenses incurred in the reporting period for the purchase of assets for the segment that are expected to be used for longer than one reporting period. Business segments The Group identifies the following main business segments: - Publishing: The publishing of national and regional newspapers, periodicals and free local (door-to-door) papers. - Other: Other activities include, among other things, printing and distributing newspapers, providing office space and associated facilities, providing (internal) ICT services, organising exhibitions and trade fairs, and the operation of mobile-telephone services. ANNUAL ACCOUNTS 2005 67 Other* Amounts in thousands of euro’s. Publishing* activities Eliminations Consolidated 2005 664,936 71,750 - 4,142 291,878 -296,020 - Net turnover 669,078 363,628 -296,020 736,686 Segment result 39,569 5,332 - 44,901 Revenues from transactions with third parties Revenues from transactions with other segments 736,686 8,334 Unattributed revenues and expenses Operating profit 53,235 Share in results of associates 9,761 Net financing result 5,610 5,777 Revaluation of non-current financial assets 10,582 Other financial income and expenses -19,876 Corporation tax Profit for the financial year Segment assets 65,089 344,741 360,539 -511,953 193,327 99,069 Investments in associates Unattributed assets 478,971 Total assets 771,367 Equity of the segment 54,366 -27,032 -27,208 Segment liabilities 290,375 387,571 -484,744 Total equity and liabilities 771,367 85 Unattributed depreciation and amortisation 11,367 30,057 - Total depreciation and amortisation Total number of FTEs Unattributed FTEs Total number of FTEs 193,202 47,697 Unattributed liabilities Depreciation and amortisation 126 530,342 Unattributed equity 41,424 41,509 2,829 1,463 - 4,292 70 4,362 * All segments concern continuing business activities. For post-balance sheet events with an impact on these activities, please refer to note 31. Post-balance sheet events. 68 ANNUAL ACCOUNTS 2005 Other* Amounts in thousands of euro’s. Publishing* activities Eliminations Consolidated 2004 Revenues from transactions with third parties 643,654 50,666 - 1,223 289,282 -290,505 - Net turnover 644,877 339,948 -290,505 694,320 Segment result 40,815 -2,144 - 38,671 Revenues from transactions with other segments Unattributed revenues and expenses 694,320 -12,367 Operating profit 26,304 Share in results of associates 7,197 Net financing result 4,400 Revaluation of non-current financial assets 26,712 Other financial income and expenses 13,217 Corporation tax -10,049 Profit for the financial year Segment assets 67,781 365,866 402,733 -601,498 Investments in associates 167,101 43,981 Unattributed assets 525,991 Total assets 737,073 Equity of the segment 58,707 -22,419 -35,941 Unattributed equity Segment liabilities 307,160 425,152 -565,557 Unattributed liabilities 737,073 Unattributed depreciation and amortisation 130 8,925 30,822 - Total depreciation and amortisation Total number of FTEs Unattributed FTEs Total number of FTEs 166,755 89,723 Total equity and liabilities Depreciation and amortisation 347 480,248 39,747 39,877 2,851 1,427 - 4,278 38 4,316 * All segments concern continuing business activities. For post-balance sheet events with an impact on these activities, please refer to note 31. Post-balance sheet events. ANNUAL ACCOUNTS 2005 69 The net turnover includes an amount of 9,376 (2004: 3,775) for turnover from barter transactions. Geographical segments With the presentation of information on the basis of geographical segments, the geographical location of the customers is the basis for the revenue of the segment. For the assets of the segments, the geographical location of the assets is the basis. The Publishing segment is mainly active in the Netherlands. The Group also publishes periodicals in Sweden and the Ukraine. In view of their size, these are not shown as a separate segment. For these reasons, the assets associated with these activities are not presented separately. The division of the net turnover into geographical areas is as follows: 2005 2004 the Netherlands 715,128 673,844 Other countries 21,558 20,476 736,686 694,320 Amounts in thousands of euro’s. Total 70 ANNUAL ACCOUNTS 2005 2. acquisition of subsidiary companies In 2005, the Group acquired whole-ownership of Bongers Beheer B.V., Bohil Media B.V. and Mobillion B.V.: Balance Other Purchase acquired intangible Amounts in thousands of euro’s. price1 ) assets assets Goodwill Total 25,610 4,787 11,165 9,658 ) Consisting of purchase price plus costs of financial and legal advice for the acquisition. 1 The balance of assets and commitments of the companies that have been taken over, before and after the date of acquisition, valued under the IFRS system, can be summarised as follows: Before After Amounts in thousands of euro’s. acquisition date acquisition date Property, plant and equipment 6,032 6,032 - 11,165 Goodwill before acquisition date 692 692 Non current financial assets 265 265 Inventories 178 178 Trade and other receivables 5,578 5,578 Cash and cash equivalents 2,437 2,437 -275 -275 financing liabilities -2,571 -2,571 Trade debts and other payables -7,549 -7,549 4,787 15,952 Intangible assets Provisions Interest-bearing loans and other Balance of identifiable assets and liabilities Goodwill at acquisition Total 9,658 25,610 ANNUAL ACCOUNTS 2005 71 From the acquisitions described below, commencing from the date of acquisition, the contribution to the consolidated net profit in 2005 amounts to 1,228. If the acquisitions had already taken place on 1 January, the revenues and net profit would have increased by 17,151 and 546 respectively. Bongers Beheer B.V. In January 2005, the Group, acting through its subsidiary De Trompetter B.V., acquired all the shares in Bongers Beheer B.V. The business engages in publishing and distributing thematic free suburban newspapers in the Province of Limburg, such as the magazines ‘Wonen’ and ‘Auto’s’ (living and cars). In addition, Bongers Beheer B.V. performs printing orders for third parties. The identified intangible assets with a total value of 2.954 relate to relationships with advertisers such as estate agents, relationships with customers for its printing business, databases, titles and brand names. The intangible assets will be amortised using the straight-line method over 8 years. Bohil Media B.V. After the acquisition of a 20% holding in Bohil Media in 2003, the Group purchased the remaining holding of 80% in July 2005, with the result that the Group is now the whole owner. Bohil Media B.V. publishes diverse magazines with advertisements for boats and caravans. The company also has various internet sites accessible in this field. The identified intangible assets are primarily publication rights, titles, brand names and internet domain names with a total value of 4,023, which will be amortised using the straight-line method over 8 years. In addition, 294 has been capitalised for software licences, to be amortised in 3 years. Mobillion B.V. In July 2005 the Group expanded its 35% holding in Mobillion B.V. to 70%. In December 2005, the Group acquired the remaining 30% interest. This acquisition strengthens the Group’s position in the market for added value services in the field of 0900 numbers, SMS, MMS and Internet. Mobillion B.V.'s subsidiary company Sugababes is active in the internet services market. The identified intangible assets relate primarily to relationships with customers and brand names, with a total value of 3,288, which will be amortised using the straight-line method over 8 years. In addition, 628 has been capitalised for software licences, to be amortised in 3 years. In October 2005 Mobillion B.V. expanded its 51% holding in its subsidiary Sugababes B.V. by purchasing an additional 19% interest. 72 ANNUAL ACCOUNTS 2005 3. other operating revenues Amounts in thousands of euro’s. Book profit on property, plant and equipment 2005 2004 251 1,949 Receipt of NDP contribution returned because of BBC sale 2,555 - Total 2,806 1,949 2005 2004 71,385 70,042 4. raw materials and consumables Amounts in thousands of euro’s. Paper and ink 5,314 Other consumables Total 4,075 76,699 74,117 Notes 2005 2004 26,151 25,868 Release of provisions due to scheme reduction 22 -32,339 - Contributions to defined contribution schemes 22 13,705 8,529 5. social security and pension charges Amounts in thousands of euro’s. Compulsory social security contributions Increased commitments for defined benefit schemes Total 7,151 7,352 14,668 41,749 ANNUAL ACCOUNTS 2005 73 6. other operating costs Amounts in thousands of euro’s. Notes 2005 1,780 650 23 9,202 15,798 2004 Research and development costs, charged to the result in the period in which they are incurred Restructuring costs Impairment of trade receivables Outsourced work and technical production costs Selling costs Transport and distribution costs 2,617 572 40,788 25,503 37,841 29,654 125,407 116,495 28,699 Editorial costs 30,381 Other 93,072 89,698 Total 341,088 307,069 2005 2004 Share in the results of associates 9,761 7,197 Interest income 3,523 2,904 Dividends from non-associates 2,670 1,374 7. financial income and expenses Amounts in thousands of euro’s. 157 235 -740 -113 Total net financial result 5,610 4,400 Revaluation of non-current financial assets 5,777 26,712 Other financial income and expenses 10,582 13,217 Total financial income and expenses 31,730 51,526 Result from securities Interest expenses The revaluations of non-current financial assets, in both 2005 and 2004, were primarily increases in the value of the holding in Wegener N.V. to fair value. The other financial income and expenses in 2005 relate to the sale of interests in the teletext activities of Media Groep West B.V. and the sale of the interest in SBS SA. In 2004, the non-recurring book profit was attributable to the sale of the interests in ANP and Brouwer Group. 74 ANNUAL ACCOUNTS 2005 8. corporation tax Recognised in the income statement Amounts in thousands of euro’s. 2005 2004 3,368 6,833 625 68 16,440 3,223 Corporation tax liability Financial year Adjustments for previous years Deferred taxes Emergence and settlement of temporary differences -557 -75 19,876 10,049 2005 2004 Profit before tax 84,965 77,830 Corporation tax on the basis of the Dutch tax rate 26,764 26,851 Reduced tax rates Total corporation tax in the income statement Reconciliation with the effective tax rate Amounts in thousands of euro’s. Effect of foreign tax rates Non-deductible costs Revenues exempt from corporation tax 6 - 734 272 -7,692 -17,051 -4 -16 Reduction of tax rate -557 -75 Too little or too much (–) set aside in provisions in previous financial years 625 68 19,876 10,049 Tax credits not recognised in the income statement 9. tax credits and liabilities The tax credit of 29,995 (2004: 27,812) relates to corporation tax that will be reimbursed for the period under review and preceding periods. The tax liability of 1,820 relates to corporation tax over the reporting period and previous years that is still to be paid, after deducting provisional payments. ANNUAL ACCOUNTS 2005 75 10. property, plant and equipment Amounts in thousands of euro’s. Land and Plant and buildings machinery Other Assets operating under assets construction Total Book value as at 1 January 2004 Purchase price 217,653 247,775 154,573 10,312 630,313 Cumulative depreciation 122,376 179,073 120,586 - 422,035 95,277 68,702 33,987 10,312 208,278 Investments 1,060 720 8,784 8,134 18,698 Divestments -1,015 -97 -1,606 -4,292 -7,010 Depreciation -8,983 -11,298 -17,817 - -38,098 669 3,670 1,992 -6,331 - Book value Changes in the book value Put into operation Exchange differences - - 8 - 8 Total of the changes -8,269 -7,005 -8,639 -2,489 -26,402 Book value as at 1 January 2005 Purchase price 216,071 252,260 143,940 7,823 620,094 Cumulative depreciation 129,063 190,563 118,592 - 438,218 87,008 61,697 25,348 7,823 181,876 Book value Changes in the book value Reclassification Investments Acquired via business combinations - 3,111 -3,111 - - 870 3,429 15,044 5,450 24,793 1,816 3,481 735 - 6,032 Divestments -66 -2,289 -1,304 -66 -3,724 Depreciation -9,234 -12,094 -13,600 - -34,928 8,654 341 1,204 -10,199 - - - 20 - 20 Reclassification as available for sale -6,906 - - - -6,906 Total of the changes -4,866 -4,021 -1,011 -4,815 -14,713 Put into operation Exchange differences Book value as at 31 December 2005 Purchase price 209,800 267,954 141,569 3,008 622,331 Cumulative depreciation and impairments 127,658 210,278 117,232 - 455,168 82,142 57,676 24,337 3,008 167,163 Book value 76 ANNUAL ACCOUNTS 2005 Company premises are insured on the basis of reconstruction value, and the other assets on the basis of their new value. The insured amount is 731,870 (2004: 714.000). Property, plant and equipment under construction The item ‘assets under construction’ refers to buildings and/or plant and machinery at: Telegraaf Drukkerij Groep B.V., Hollandse Dagbladcombinatie B.V., DistriQ B.V., Uitgeversmaatschappij De Telegraaf B.V., De Telegraaf Tijdschriften Groep B.V. and Media Groep Limburg B.V. 11. intangible assets Publication Amounts in thousands of euro’s. Book value as at 1 January 2004 Assets under rights Goodwill Software construction Total 235 132,211 - - 132,446 Changes in the book value Investments - 400 12,134 5,646 18,180 -21 -117 -1,641 - 1,779 Exchange differences - 5 - - 5 Total of the changes -21 288 10,493 5,646 16,406 Book value as at 1 January 2005 214 132,499 10,493 5,646 148,852 4,925 - 7,534 6,959 19,418 10,265 9,658 924 - 20,847 Amortisation Changes in the book value Investments Purchased via business combinations Divestments - - -943 -3,028 -3,971 Amortisation -1,111 - -5,470 - -6,581 Exchange differences - -34 - - -34 Total of the changes 14,079 9,624 2,045 3,931 29,679 Book value as at 31 December 2005 14,293 142,123 12,538 9,577 178,531 Goodwill includes an amount of 111,697 (2004: 111,697) related to the purchase of ‘Dagblad De Limburger’ newspaper in 2000. In addition, 12,000 (2004: 12,000) concerns synergy effects at Telegraaf Drukkerij Groep B.V. that ensue from the transaction above. ANNUAL ACCOUNTS 2005 77 Non-current intangible assets under construction This item refers to IT systems (some developed in-house) used at Uitgeversmaatschappij De Telegraaf B.V. and DistriQ B.V. Impairment testing The Telegraaf Media Groep N.V. has subjected all its cash generating entities that contain goodwill to an impairment test. The realisable value of the cash generating units is based on calculations of the value in use. These calculations are based on cash flow forecasts based on actual trading results, the budget for 2006 and long-term plans to 2008. In addition, an allowance is made for the cash flows after 2008, which are extrapolated on the basis of growth of 0%. The forecast cash flows are discounted to present value using a pre-tax discount rate of 7.7% (2004: 8.2%). These calculations show that there have been no impairments during the period under review. 78 ANNUAL ACCOUNTS 2005 12. investments in associates The Group has the following interests in associates: Head office in 2005 2004 27.0% Capital holding SBS Broadcasting B.V. SBS Broadcasting S.à.r.l. Mobillion B.V. Amsterdam - Luxembourg 21.4% - Ede -* 31.5% Amsterdam -* 20.0% Televisiebedrijf Limburg B.V. Maastricht 45.0% 45.0% Omroepbedrijf Limburg B.V. Maastricht 40.0% 41.0% De Nationale Regiopers B.V. Almere 25.8% 25.8% Expomedia Plc London 20.0% - Amsterdam 40.0% - Bohil Media B.V. Media Librium B.V. Amsterdam 20.0% 20.0% RKK B.V./C.V. Vriezenveen 24.0% 24.0% De Informatiefabriek vof Kelpen-Oler 30.0% - The Hague 8.8% 8.8% 2005 2004 AM van Gaal Media B.V. ANP Holding B.V. Book value SBS Broadcasting S.à.r.l. SBS Broadcasting B.V. Expomedia Plc Media Librium B.V. 66,873 - - 39,965 21,426 - 7,059 - Other 3,711 4,016 Total 99,069 43,981 The Group’s share in the total achieved profit or loss after acquisition of the associates mentioned above over the 2005 financial year was 9,761 (2004: 7.197). For associates that have been written-down to zero, a provision of 88 has been formed for the share in further losses (2004: 1,700). This provision is included under the current liabilities. The 25.8% interest (2004: 25.8%) in the Nationale Regiopers is a cooperative enterprise in advertising sales, together with other publishers of regional newspapers in the Netherlands. The 8.84% shareholding in ANP Holding B.V. is included under associates because TMG and other publishers jointly own 30% of this enterprise. * Fully consolidated in 2005. ANNUAL ACCOUNTS 2005 79 Summary of the financial data for the most important associates: Shareholders’ Amounts in thousands of euro’s. Assets Liabilities equity Revenues Profit/loss 3,538,921 3,549,627 -10,706 221,994 -28,888 8,454 4,723 3,731 1,989 -2,072 58,646 14,390 44,256 10,991 -1,215 325,393 177,340 148,053 269,045 26,867 2005 SBS Broadcasting S.à.r.l. Media Librium B.V. The 2005 figures for Expomedia Plc are not yet available. The figures for the first half-year of 2005 are as follows: Expomedia Plc 2004 SBS Broadcasting B.V. SBS Broadcasting S.à.r.l. At the end of December 2005, TMG completed the purchase of a 21.39% interest in SBS Broadcasting S.à.r.l. (20% after dilution at start of 2006), a holding company in Luxembourg for all the activities of SBS. This interest was obtained by exchanging the 27% interest that TMG had in SBS Broadcasting B.V. (the Netherlands), with an additional contribution of 17,818, determined as follows: - Purchase of 21.39% of Shares and Shareholder loans in SBS Broadcasting S.à.r.l. for 192,159; - Reinvestment of a one-off dividend payment of 18,142 by SBS Broadcasting B.V.; - Reinvestment of 156,199 obtained from selling the 27% interest in SBS Broadcasting B.V. The 21.39% interest in SBS Broadcasting S.à.r.l. can be broken down as follows: Amounts in thousands of euro’s. Shares Interest-bearing Shareholders’ loans Shareholders’ loans, interest-free Total interest Interest rate Term in years Purchase price - - 1,928 6.3375 49 171,222 - 49 19,009 192,159 80 ANNUAL ACCOUNTS 2005 The valuation of SBS Broadcasting S.à.r.l. consists of the valuation of SBS Broadcasting B.V. as at 1 January 2005, the share in the results of 2005, the reinvestment of the dividend amount of 18,142, the payment of 17,818 plus the costs directly attributable to the transaction. Shareholders’ loans The interest is calculated on a daily basis and can be paid in cash, in shares, or in new shareholders’ loans. The payment of interest and the principal are subordinated to all payments from SBS Broadcasting S.à.r.l., with the exception of share-related payments, such as dividends and repurchasing of shares. These conditions also apply to the interest-free shareholders’ loans, with the exception of the interest calculations and payments stated above. 13. other non-current financial assets Amounts in thousands of euro’s. 31-12-2005 31-12-2004 105,948 100,121 18,151 18,151 5,097 5,307 Non-current investments in assets Interest in Wegener: - (Depository receipts for) ordinary shares - Preference shares Operational lease paid in advance Non-current receivables Total 3,186 9,419 132,382 132,998 The ground lease included under Prepaid operational lease is amortised using the straight-line method for the duration of the underlying ground lease contracts. The final instalment expires in 2039. In addition to the investments in associates stated in note 12, the Group has a 23.9% holding (2004: 23.9%) in Wegener N.V., with a book value of 124,099 (2004: 118.272). Including cumulative funding preference shares, the capital interest is 27.14%. The total controlling interest is 26.24%. This holding is not regarded as a holding in an associate because it is only a share position, without significant influence on the policy of the company. The share position has been treated by the group as a financial asset valued at fair value, with changes of value being taken directly to the result. The fair value is based on the listed market price on the balance sheet date, without deducting transaction costs. ANNUAL ACCOUNTS 2005 81 14. latent tax credits and liabilities The deferred tax credits and liabilities included on the balance sheet at the year-end can be attributed as follows: 2005 Assets Liabilities Balance Property, plant and equipment - -1,811 -1,811 Provisions - -9,402 -9,402 Net tax credit/liability (–) - -11,213 -11,213 Assets Liabilities Balance Property, plant and equipment 120 -1,800 -1,680 Intangible assets 858 - 858 - -596 -596 Provisions 6,383 - 6,383 Net tax credit/liability (–) 7,361 -2,396 4,965 Amounts in thousands of euros 2004 Amounts in thousands of euros Inventories In some countries where the Group is active, the local legislation stipulates that profits are taxed at the moment the profit is paid out. As at the balance sheet date, the total of such profit amounted to 391, which would result in a tax liability of 90 if the subsidiaries were to pay out a dividend. Deferred tax credits not recognised on the balance sheet No latent tax claims have been recognised on the balance sheet concerning the losses or start-up losses of a number of subsidiaries. The latent tax credit that has not been recognised amounted to 2,723 at the end of 2005 (2004: 2.512) Almost all losses are off-settable without limitations. 82 ANNUAL ACCOUNTS 2005 Changes in temporary differences during the financial year Situation Recognised (De-) Situation Amounts in thousands of euros. 1-1-2005 in result Consolidation 31-12-2005 Property, plant and equipment -1,680 164 -295 -1,811 858 -858 - - -596 596 - - 6,838 -9,352 - -2,514 Non-current intangible assets Inventories Employee benefits Provisions -455 -6,433 - -6,888 4,965 -15,883 -295 -11,213 Situation Recognised (De-) Situation Amounts in thousands of euros. 1-1-2004 in result Consolidation 31-12-2004 Property, plant and equipment -1,826 128 18 -1,680 1,879 -1,021 - 858 Inventories -1,072 476 - -596 Employee benefits 10,040 -3,202 - 6,838 -926 471 - -455 8,095 -3,148 18 4,965 Non-current intangible assets Provisions 15. assets held for sale In 2005, several business premises in the publishing segment were treated as held for sale; the business entities concerned will move to another location during the course of 2006. The sales transactions are expected to be completed in 2006. Please refer to note ‘31. Post-balance sheet events’ in which the proposed divestment of our activities in Limburg is described. Assets classified as held for sale: Amounts in thousands of euros. Notes 2005 Property, plant and equipment 10 6,906 ANNUAL ACCOUNTS 2005 83 16. inventories Amounts in thousands of euros. 2005 2004 13,223 Raw materials 6,361 Consumables 2,137 1,149 Total 8,498 14,372 2005 2004 Trade receivables 76,879 68,512 Other receivables 10,008 2,194 16,241 13,768 103,128 84,474 17. trade receivables and other receivables Amounts in thousands of euros. Prepayments and accrued income Total Trade receivables are presented after deduction of impairment. In the financial year, such losses have amounted to 11,555 for bad debts (2004: 12.704) Fair value For receivables that fall due within one year, the nominal value is considered to reflect the fair value. 18. cash and cash equivalents 2005 2004 Bank balances 24,858 65,313 Demand deposits 18,476 25,955 Cash and cash equivalents 43,334 91,268 Amounts in thousands of euros. The cash, cash equivalents and securities are freely available. The fair value is deemed to be equal to the nominal value. 84 ANNUAL ACCOUNTS 2005 19. shareholders’ equity Share capital and share premium As at 31 December 2005, the authorised share capital consisted of 200,000,000 ordinary shares and priority shares (2004: 200,000,000), which were issued and paid up as follows: 2005 Thousands of shares. Issued as at 1 January Priority Ordinary Priority shares shares shares shares 52,499,200 960 52,499,200 960 - - - - 52,499,200 960 52,499,200 960 Issued and paid up in cash Issued as at 31 December (paid up) 2004 Ordinary All shares have a nominal value of € 0.25. As at 31 December 2005, no preference shares have been issued. An overview of the legal and articles of association provisions concerning the distribution of profits and the other rights under the articles of association connected with the ordinary shares, priority shares and preference shares is included under Other Information on pages 121 to 123. Reserve for currency translation differences The reserve for currency translation differences comprises all exchange differences for foreign currencies that arise as the result of currency translations from the financial statements of foreign activities in Sweden and the Ukraine. 20. dividend After the balance sheet date, the Executive Board proposed the dividend set out below. The dividend proposal has not been incorporated in the balance sheet and has no consequences for the tax on profits. Amounts in thousands of euros. 2005 2004 23,100 15,750 € 0.44 per (depositary receipt for) ordinary share (2004: € 0.30) ANNUAL ACCOUNTS 2005 85 21. interest-bearing loans and other financing liabilities This note contains information about the contractual provisions for the interest-bearing loans and other financing liabilities of the Group. For more information about the interest rate risks and exchange rate risks facing the Group, see section 25 of the notes. 31-12-2005 31-12-2004 217 0 Non-current loans 2,861 1,175 Total 3,078 1,175 Amounts in thousands of euros. Investment liabilities Conditions and repayment schedule The non-current liabilities, all in euros, are mainly loans from the Rabobank amounting to 724 and from Graphic Lease amounting to 1,803, made to Bongers Beheer B.V. The loan from the Rabobank is repaid in equal amounts and must be redeemed by 2016 at the latest. The interest is linked to the base rate of the Rabobank and was 3.8% at year-end 2005. The loan from Graphic Lease bears interest of 5.25% and is repaid in equal amounts, in 2011 at the latest. Both loans are secured by pledges against movable property and a registration of mortgage on immovable property. The effective interest rate on these loans is the same as the nominal rate. Fair value The fair value is calculated on the basis of the discounted future principal repayments and interest rate payments. In discounting financial instruments, the entity has used the yield on government bonds as at 31 December 2005 as a discount rate. The interest rate used is 4% (2004: 4.5%) The fair value is equal to the amortised acquisition cost stated above. 86 ANNUAL ACCOUNTS 2005 22. provision for employee benefits Amounts in thousands of euros. 31-12-2005 31-12-2004 31-12-2003 18,892 36,643 37,371 Cash value of financed liabilities 167,420 682,601 602,537 Cash value of liabilities 186,312 719,244 639,944 -148,226 -628,647 -576,413 38,086 90,597 63,531 -20,057 -37,495 - 18,029 53,102 63,531 Cash value of unfinanced liabilities Fair value of fund investments Cash value of net liabilities Actuarial gains and losses not included Commitment included for defined benefit pension rights Gross commitment for defined benefit pension rights The Group contributes to three defined benefit pension schemes on the basis of which employees of the Group in the Netherlands are paid pension benefits after they retire. In the calculation of the provision, account is also taken of an allowance for the medical expenses of pensioners. At year-end 2005, almost all of the most important pension scheme, Stichting Telegraafpensioenfonds 1959 (Telegraaf pension fund trust), was transferred to a group defined contribution scheme. Moreover, the allowance for health insurance for pensioners has been amended in line with the new national healthcare scheme. In addition, this allowance is being phased out for (former) members that retire after 2005. Furthermore, the early retirement top-up scheme has been revised because of the extensive cutbacks in the early retirement scheme for the printing and allied trades. Due to these constraints on the pension schemes and the related release from the previously incorporated pension commitment, a credit is accounted for in the result for 2005. The most prominent actuarial assumptions as at the balance sheet date In weighted averages. 2005 2004 Discount rate as at 31 December 4.0% 4.5% Expected yield from fund investments as at 31 December 6.1% 6.1% Future pay rises 2.5% 2.5% Adjustment for inflation 2.0% 2.0% Increase in social security benefit payments 2.0% 2.0% ANNUAL ACCOUNTS 2005 87 Information concerning the actual yield on fund investments in 2005 are not yet available (2004: 8%). The forecast yield is the weighted average expected return, based on the expected investment mix. Movements in commitment for defined benefit pension schemes Amounts in thousands of euros. 2005 2004 719,244 639,944 Service costs 19,739 13,989 Interest expenses 32,450 32,539 as at 1 January Employee’s contribution Actuarial losses 7,536 7,536 81,409 42,565 -656,737 - -17,329 -17,329 186,312 719,244 2005 2004 628,647 576,413 Contributions 17,670 17,670 Expected yield 38,588 37,999 Release of provisions due to scheme reduction Benefit payments Movements in fair value of fund investments Amounts in thousands of euros. as at 1 January Employee’s contribution Actuarial gains Release of provisions due to scheme reduction Benefit payments 7,536 7,536 - 6,358 -526,886 - -17,329 -17,329 148,226 628,647 The costs of defined contribution schemes also include the costs related to the early retirement scheme for the printing and allied trades. This scheme qualifies for treatment as a defined benefit scheme. It is treated as a defined contribution scheme because its share in the shortfall cannot be sufficiently reliably calculated. The same applies for the industrial scheme for the prepension of newspaper journalists. 88 ANNUAL ACCOUNTS 2005 Furthermore, the following funds, for which the schemes also qualify for treatment as defined benefit schemes, have informed us that they will not supply us with data for the calculation of (our share in) surpluses or shortfalls: - Pensioenfonds Grafische Bedrijven (pensioenregeling grafici – graphic designers’ pension scheme) - Stichting bedrijfstakpensioenfonds voor het beroepsvervoer over de weg (pensioenregeling goederenvervoer – goods transporters’ pension scheme) - Stichting vrijwillig vervroegde uittreding voor het beroepsgoederenvervoer over de weg en de verhuur van mobiele kranen (vut regeling goederenvervoer – goods transporters’ early retirement scheme) - Stichting Prepensioenfonds voor het beroepsgoederenvervoer over de weg en de verhuur van mobiele kranen (prepensioenregeling goederenvervoer – goods transporters’ prepension scheme) Incidentally, in none of the cases is there any obligation to remedy any shortfalls in the funds, nor are there any entitlements concerning possible surpluses. Expense included in the income statement 2005 2004 Pension costs attributed to year of service 19,843 13,989 Interest on the commitment 32,450 32,539 -38,588 -37,999 13,705 8,529 Amounts in thousands of euros. Expected yield from fund investments Total contribution to defined benefit schemes Result from the restriction of the schemes Contribution to defined contribution schemes Total -32,339 - 7,151 7,352 -11,483 15,881 2005 2004 23. restructuring provision Amounts in thousands of euros. Situation as at 1 January Provisions formed during the financial year Provisions used during the financial year Situation as at 31 December 35,918 35,094 9,202 15,798 -17,421 -14,975 27,699 35,917 The restructuring provision concerns the liabilities involved in finding alternative employment, redundancy compensation, relocation as well as retraining and additional training at Telegraaf Tijdschriften Groep B.V., Holland Combinatie B.V., ANNUAL ACCOUNTS 2005 89 Media Groep Limburg B.V., Hollandse Dagbladcombinatie B.V., Telegraaf Drukkerij Groep B.V., DistriQ B.V. and at group level. Of this, 12.427 is a current liability. It is anticipated that the non-current portion will be finally spent in 2014 at the latest. 24. trade debts and other payables 31-12-2005 31-12-2004 Subscriptions paid in advance 54,503 54,786 Trade payables to suppliers 25,945 23,798 96 851 Amounts in thousands of euros. Investment creditors Trade payables to associated companies 2,352 - Tax liabilities 1,820 - Other liabilities, accruals and deferred income Total 95,044 86,376 179,760 165,811 The fair value of the liabilities does not differ from the nominal value recognised here. 25. financial instruments As part of its normal operations, the Group faces credit risks, interest rate risks and exchange rate risks. In addition, the development of the price of paper can also affect the operating result. TMG faces credit risks if major customers do not make their due payments, or do not make them on time. In the view of TMG, the conditions of payment (which are general in the industry) and the relatively very limited reliance on individual customers make it unnecessary to use financial instruments to limit this risk. Where there are significant exposures to exchange rate fluctuations, forward contracts are concluded to hedge the risks within a period of one year. An exchange rate exposure is regarded as significant for an individual entity within the Group if it exceeds a threshold value as a percentage of the turnover per calendar month, and the revenues have a probability exceeding 50%. The most relevant interest rate risk for TMG is the risk of a mismatch between the term of the financing that has been obtained and the life expectancy of the assets that are financed with these moneys. In 2005, TMG did not use hedging to mitigate the interest rate risks and exchange rate risks of the Group or individual companies in the Group, and has also not used hedge accounting. In the absence of capital market financing, TMG does not face specific interest rate risks. TMG faces very limited exchange rate risks because of its activities outside the euro-zone, that is, in Sweden and the Ukraine. The net cash flows to and from those entities, and the timing of those flows, are such that no significant currency positions arise. 90 ANNUAL ACCOUNTS 2005 Of all the raw materials that are traded on the world market, TMG buys only paper in volumes so great that price fluctuations could impact the operating result materially. TMG chooses not to hedge the risk of rising paper prices, because (a) TMG already has long-term contracts with paper suppliers, and (b) the major paper manufacturers take up such a position on the futures market, that this is insufficiently liquid to make hedging attractive for volumes significant for TMG. 26. operational lease agreements The amounts due under non-cancellable operational lease agreements become payable as follows: Amounts in thousands of euros. < 1 year 1 - 5 years 2005 2004 7,842 9,300 21,987 19,840 > 5 years 26,401 24,174 Total 56,230 53,314 Of the commitments with a term longer than 1 year, 32,007 relates to costs for the premises of Media Groep Limburg. The commitments extend to October 2022. In addition, Telegraaf Media Events has entered into rental agreements amounting to 5,273 and extending to 2020. At the end of 2005, the liabilities under ground leases amounted to 5,097 (2004: 5.307). In the 2005 financial year, an expense of 7,407 was recognised in the income statement for operational leasing (2004: 5.894). 27. investment liabilities In the 2005 financial year, the Group entered into agreements for the purchase of property, plant and equipment, for a sum of 4,792 (2004: 6.768). These investments relate mainly to premises for the Telegraaf Drukkerij Groep (TMG’s printing group). 28. contingent liabilities A number of TMG’s group entities face legal proceedings. These cases relate mainly to labour relations, rectifications in publications and disputes with suppliers. Although the final outcome of the cases cannot be predicted with certainty, the management of TMG does not expect that the outcome will have a material effect on the consolidated financial position of the Group. ANNUAL ACCOUNTS 2005 91 In the case of partnerships with third parties, established in the legal form of a commercial partnership (vennootschap onder firma), the Group’s companies that participate in the partnership are jointly and severally liable for all debts of the partnership. At the end of 2005, bank guarantees to the value of 9,293 had been issued to cover the rental agreements that have been entered into. 29. related parties Identity of related parties A ‘relationship between related parties’ exists between TMG and its subsidiary companies (see section 31 of the notes), associates (see section 12 of the notes), joint ventures (see section 30 of the notes) and their Directors and management functionaries. The following shareholders have a holding of more than 20% in the capital of the Group. 31-12-2005 31-12-2004 Stichting Administratiekantoor Telegraaf Media Groep N.V. 62.7% 62.1% N.V. Exploitatiemaatschappij Van Puijenbroek 29.6% 29.6% Transactions with managers in key positions The remuneration of managers is specified in the separate income statement (note 7). The total wages are included under personnel costs (see section 6 of the notes to the consolidated financial statements). Other transactions with related parties Nature of Outstanding transaction Size balance Associates Turnover 17,847 - Associates Creditors - 2,352 cr. Joint Ventures Turnover 385 - Joint Ventures Debtors - 344 dt. Thousands of shares. All transactions with related parties concern transactions related to associates and joint ventures. 92 ANNUAL ACCOUNTS 2005 30. interests in joint ventures The Group has holdings in the following joint ventures: SBS Text V.o.F./V8 Fox Kids text. vof Fitclub B.V. Registered Capital holding Capital holding office in 31-12-005 31-12-004 Amsterdam - 45.0% Groningen 75.0% - Amsterdam 50.0% - TTG Hearst AB Stockholm 50.0% 50.0% Telegraaf Expomedia Events vof TTG Hearst B.V. Amsterdam 75.0% 75.0% TTG Sulake B.V. Amsterdam 50.0% - De Modefabriek B.V. Amsterdam 25.0% - Ludique Events B.V.* Liempde 25.0% - R & R Expo vof * Amsterdam 32.5% - SmartEvents B.V. Rotterdam 50.0% 50.0% Zeist 14.3% 14.3% Adventure Holding B.V. The following items in the consolidated financial statements correspond to the Group’s holdings in the assets and liabilities, income and expenses of the joint venture: Amounts in thousands of euros. 31-12-2005 31-12-2004 Non-current assets 1,913 309 Current assets 2,603 1,468 Non-current liabilities -2,700 -1,958 Current liabilities -4,788 -864 Balance of assets and liabilities -2,972 -1,045 2005 2004 Amounts in thousands of euros. Total revenues 5,826 3,755 Total expenses -6,529 -3,680 Financial result -43 -47 Corporation tax -118 18 Net profit -864 46 * Via joint venture Telegraaf Expomedia Events vof. ANNUAL ACCOUNTS 2005 93 31. post balance sheet events Acquisition of subsidiary companies after 2005 Sky Radio Limited In February 2006, a consortium of the Group and ING Corporate Investment Participaties B.V. reached an agreement concerning the acquisition of Sky Radio Limited from News International Limited for a total enterprise of 190,000. Because the cross-ownership regulation in the Dutch Media Act does not permit the Group to hold an interest larger than 33.33% in a national commercial broadcasting body, the Group has acquired a minority interest in Sky Radio Limited. The Group has an option to acquire the 67.67% interest of ING Corporate Investment Participaties B.V. if the Group’s share in the total circulation of the Dutch daily newspapers falls to less than 25%, or if the current media regulations are relaxed. The acquisition will be funded as follows: Share from Amounts in thousands of euros. Share from borrowed equity capital Total Telegraaf Media Groep N.V. 17,371 75,610 92,981 ING Corporate Investment Participaties B.V. 41,462 58,401 99,863 Management Total 1,032 - 1,032 59,865 134,011 193,876 The acquisition price is 190,000; the costs of the acquisition to be capitalised amount to 3,876. The loan capital acquired by the Group consists of a loan of 75,600 which will be contracted in the Group’s name. The loan capital to be acquired by ING Corporate Investment Participaties B.V. will consist of a loan to be contracted in the name of Sky Radio Limited. The financing structure outlined above will result in the Group acquiring a 49% commercial interest in Sky Radio Limited. It is anticipated that the acquisition will be completed in April 2006, after which the Group will commence the incorporation of the acquisition in the Groups financial figures. Other acquisitions On 1 January 2006, via the recently established business unit Telegraaf Classified Media B.V., the Group acquired a 70% interest in the internet dating websites Relatieplanet.nl and Iwannadate.nl. The acquisition of the 70% interest means the Group has control of Relatieplanet and Iwannadate. Currently, the Group still has insufficient information to recognise the fair value of the assets and liabilities. 94 ANNUAL ACCOUNTS 2005 In 2006, via a 50% interest in TTG Volgas VoF, Telegraaf Tijdschriften Groep B.V. will publish the Motoplus magazine. Telegraaf Media Ukraine LLC acquired an 80% interest in LLC Telegraaf News Media in January 2006. This subsidiary is going to publish the paper “Obzor”, which is based on the Sp!ts concept, 3 times a week in the Ukraine. Uitgeversmaatschappij De Telegraaf B.V. has expanded its interest in Adventure Holding B.V. by 441. In addition, it has taken a 40% holding in GS Media B.V. The acquisitions outlined above involved a total purchase price of some 14,000. Other events Due to the impossibility of achieving economies of scale, consideration is being given to divesting the activities in Limburg. These activities comprise: - Media Groep Limburg, publisher of newspapers including the dailies De Limburger and Limburgs Dagblad. - Nieuwsdruk Limburg, printer for Media Groep Limburg, among others. - De Trompetter, Kempen Pers and Bongers, publishers of free local (door-to-door) papers. These enterprises will be offered for sale via a public tendering procedure. Telegraaf Media Group expects that the sale will take place at a price above the book value during the second quarter of 2006. These activities fall under the segments publishing (Media Groep Limburg) and other (Nieuwsdruk Limburg). 32. estimates and evaluations by the management The Executive Board has discussed the development and choice of the significant accounting policies applied in the financial reporting and estimates, the provision of information about these policies, and the application of the policies and estimates, with the Supervisory Board. The most important sources of uncertainty in the estimates Note 11 contains information about the assumptions and the corresponding risk factors in relation to impairment of, among other items, goodwill. During the financial year, goodwill of 142,123 (2004: 132,499) has been established with no impairment required. Assumptions with regard to pensions The Group bases its expected long-term yield on assets on that used by De Nederlandsche Bank (the Dutch central bank), taking into account the asset mix of the pension funds. If the expected return were to decline, the unrecognised actuarial results of TMG would be negatively affected. The pension charges for 2007 would also be affected. If there was a decline in the long-term market interest rate, and thus also the discount rate, the commitments would increase, and the unrecognised actuarial results would also increase. Both causes produce a risk that the unrecognised actuarial results in 2006 might fall outside the bandwidth. In that case, the part outside the bandwidth would be included in the pension charges commencing in 2007. ANNUAL ACCOUNTS 2005 95 33. analysis of the transition to ifrs As reported in the accounting policies section, these are the first consolidated financial statements prepared in accordance with IFRS. The principles for financial reporting presented there have been applied in the preparation of the 2005 financial statements, the comparative information on 2004 presented in these financial statements and for the preparation of the IFRS opening balance sheet as at 1 January 2004 (TMG’s transition date). In the preparation of the IFRS opening balance sheet, TMG adjusted the prior year’s amounts reported in the financial statements, which were drawn up using the previously applied accounting standards (previous GAAP). A statement of the effect of the transition from the previous GAAP to IFRS on the TMG financial position, financial results and cash flows is explained in the following summaries and the notes to the summaries. Reconciliation of the equity as at 1 January 2004 Effect of Amounts in thousands of euros. Notes* Dutch GAAP transition to IFRS IFRS 1-1-2004 213,677 -5,400 208,277 132,446 - 132,446 41,015 Assets Property, plant and equipment a,b Intangible assets Investments in associates Deferred tax credits Other non-current financial assets 41,471 -456 i - 8,095 8,095 b,g 85,267 15,011 100,278 472,861 17,250 490,111 b,e 20,598 489 21,087 3,570 - 3,570 a,b 107,605 2,269 109,874 Total non-current assets Inventories Other investments Trade receivables and other receivables Cash and cash equivalents 61,674 637 62,311 Total current assets 193,447 3,395 196,842 Total assets 666,308 20,645 686,953 * For the notes, please see page 98. b 96 ANNUAL ACCOUNTS 2005 Effect of Amounts in thousands of euros. Notes Dutch GAAP transition to IFRS IFRS 1-1-2004 13,125 - 13,125 114 - 114 415,094 -9,631 405,463 428,333 -9,631 418,702 Shareholders’ equity Issued capital Reserves Retained earnings j Total equity to allocate to Telegraaf Media Groep N.V. Minority interest share b Total shareholders’ equity 885 302 1,187 429,218 -9,329 419,889 Liabilities Interest-bearing loans and other financing liabilities b - 596 596 Employee benefits f 28,428 35,103 63,531 Provisions f 25,965 9,129 35,094 Deferred tax liabilities i 202 -202 - 54,595 44,626 99,221 Total non-current liabilities Trade debts and other payables b 25,225 480 25,705 Subscriptions paid in advance b 34,869 - 34,869 Taxes and social security contributions b 9,356 54 9,410 Accrued liabilities and deferred income b 96,946 913 97,859 Provisions f 16,100 -16,100 - Total current liabilities 182,495 -14,652 167,843 Total liabilities 237,090 29,974 267,064 Total liabilities 666,308 20,645 686,953 ANNUAL ACCOUNTS 2005 97 Reconciliation of the equity as at 31 December 2004 Effect of Amounts in thousands of euros. Notes Dutch GAAP transition to IFRS IFRS 31-12-2004 Assets Property, plant and equipment a,b Intangible assets Investments in associates Deferred tax credits 188,181 -6,305 181,876 138,838 10,014 148,852 43,645 336 43,981 i - 4,965 4,965 b,g 88,710 44,288 132,998 459,374 53,298 512,672 13,784 588 14,372 6,475 - 6,475 a,b 111,487 799 112,286 b 90,902 366 91,268 Total current assets 222,648 1,753 224,401 Total assets 682,022 55,051 737,073 13,125 - 13,125 73 - 73 431,445 35,952 467,397 444,643 35,952 480,595 Other non-current financial assets Total non-current assets Inventories b,e Other investments Trade receivables and other receivables Cash and cash equivalents Shareholders’ equity Issued capital Reserves Retained earnings j Total equity to allocate to Telegraaf Media Groep N.V. Minority interest share b Total shareholders’ equity - 473 473 444,643 36,425 481,068 Liabilities Interest-bearing loans and other financing liabilities b 575 600 1,175 Employee benefits f 27,082 26,020 53,102 Provisions f 27,495 8,422 35,917 Deferred tax liabilities i 793 Total non-current liabilities 55,945 -793 34,249 90,194 98 ANNUAL ACCOUNTS 2005 Effect of Notes Dutch GAAP transition to IFRS IFRS 31-12-2004 Trade debts and other payables b 23,781 17 23,798 Subscriptions paid in advance b 54,770 16 54,786 Taxes and social security contributions b 9,162 22 9,184 Accrued liabilities and deferred income b 93,721 -15,678 78,043 Total current liabilities 181,434 -15,623 165,811 Total liabilities 237,379 18,626 256,005 Total liabilities 682,022 55,051 737,073 Amounts in thousands of euros. Notes to the reconciliation of the equity The effects of the following restatements on the deferred taxes are explained under (f). (a) On the basis of the previous GAAP, the purchased leasehold on the grounds of the premises in Amsterdam is presented under land and buildings as part of the property, plant and equipment. On the basis of IFRS, the purchased leasehold is considered to be a prepaid operational lease, and as such is presented under non-current assets as ‘other non-current financial assets’. (b) Both under the previous GAAP and under IFRS, there is the option of incorporating joint ventures in the consolidated financial statements by means of proportional consolidation, or not to consolidate and value the interest as an associate. Under the previous GAAP, the Group did not consolidate joint ventures. In IFRS, proportional consolidation is stated as an acceptable method. The Group uses this method. The effects of this adjusted working method are limited to a reclassification of 1,529 as at 1 January 2004 from Investments in associates and a reclassification of € 2,494 as at 31 December 2004. This restatement has no effect on equity or result. (c) The Group has applied IFRS 3 to all business combinations that have occurred since 1 January 2004 (the transition to IFRS). The Group has chosen not to apply IFRS retroactively on business combinations that occurred before the transition date to IFRS. (d) On the basis of IFRS, goodwill will no longer be amortised, but it is annually reviewed for impairment commencing from 1 January 2004. As result of this restatement, the amortisation of goodwill concerning the 2005 financial year has been reversed for an amount of 8,709 (presented as a component of Depreciation of property, plant and equipment and amortisation of intangible assets). ANNUAL ACCOUNTS 2005 99 (e) Both under the previous GAAP and under IFRS, the Group’s share in the overall result of associates is presented according to the equity method, under application of the parent company’s principles for measurement an determination of the result. With respect to the participating interest SBS Broadcasting B.V. a restatement has been made, with which the amortisation of goodwill in 2004 is reversed for an amount of 3,198, in accordance with the restatement which has been introduced under (c) for the Group’s amortisation of goodwill. Moreover, by virtue of the application of IAS 8, an adjustment of -2,555 was made in the balance sheet as at 1 January 2004, that relates to the treatment of tax deferrals by SBS Broadcasting B.V. Under the previous GAAP, this adjustment was charged to the result for 2004. (f) On the basis of the previous GAAP, the cost of inventories was measured using the `last in, last out’ method (LIFO). As a result of the transition to IFRS, the Group now uses the principle by which the cost is determined using the ‘first in, first out’ method (FIFO). The effects are an increase by 477 for inventories as at 1 January 2004 and by 573 as at 31 December 2004, and a decrease of 96 in the costs of Raw materials and consumables for the 2004 financial year. (g) There are a number of employee benefits with a long-term effect, which qualify as defined benefit pension schemes under IFRS and so have an effect on the consolidated shareholders’ equity and result. The most important are three pension schemes, the WAO (state old age pension scheme) and early retirement top-up schemes, and restructuring provisions. In accordance with IFRS 1, the cumulative actuarial gains and losses that existed on 1 January for all defined benefit pension schemes are incorporated. This results in an increase of the provisions by 28,132 (including the reclassified current portion) as at 1 January 2004 and of 19,706 as at 31 December 2004. For the determination of the impact of these valuations on the income statement, the so-called corridor approach is applied. Through this, only changes in the capital deficit that are more than 10% of the largest of the items for assets and pension commitments, will be taken into consideration. In addition, and in accordance with the guideline, these will be amortised over the average remaining period of employment, in this case 11.25 years. (h) According to the previous GAAP, the Group recognised shares available for sale and similar instruments at cost. In accordance with IFRS, such financial instruments should be recognised at fair value, in which changes of the fair value are accounted for in the Fair value reserve of the shareholders’ equity. In addition, by designation, there can be measurement at fair value, in which the changes in the fair value are recognised in the result. The effect is an increase of other investments by 12,282 as at 1 January 2004, and 39,994 as at 31 December 2004, which produces a positive effect of 27,712 to the benefit of the result for 2004. (i) Non-current receivables and liabilities are recognised at amortised cost price. The effect of this was zero. (j) The changes above have led to the following increase respectively decrease (-) of the deferred tax credit, calculated at a tax rate of 30%. 100 ANNUAL ACCOUNTS 2005 Taxes Amounts in thousands of euros. 31-12-2004 01-01-2004 18 - Inventories -172 -143 Provisions 5,912 8,440 Increase in deferred tax credits 5,758 8,297 Other (=balance) The effect on the income statement for 2004 was an increase of 2,557 on the previously reported tax liability. (k) The effect of the changes above on the retained earnings is as follows: Shareholders’ equity Amounts in thousands of euros. 31-12-2004 01-01-2004 Non-current intangible assets 8,709 - Investments in associates 3,893 -2,555 27,017 12,282 Other investments Inventories Provisions 96 477 8,426 -28,132 Deferred taxes -2,557 8,297 Total restatement of retained earnings 45,584 -9,631 On balance, the effect on the shareholders’ equity in 2004 is 35,952. ANNUAL ACCOUNTS 2005 101 Reconciliation of the profit for 2004 Effect of Amounts in thousands of euros. Notes Dutch GAAP transition to IFRS IFRS Net turnover b 686,853 7,467 Other operating revenue b - 1,949 1,949 686,853 9,416 696,269 Total operating revenues Raw materials and consumables 694,320 e 74,213 -96 74,117 b, f 206,306 847 207,153 51,028 -9,279 41,749 b, c, d 46,491 -6,614 39,877 b, f 301,490 5,579 307,069 679,528 -9,563 669,965 7,325 18,979 26,304 19,917 -12,720 7,197 3,034 1,366 4,400 -1,000 27,712 26,712 - 13,217 13,217 Balance of financial income and expenses 21,951 29,575 51,526 Pre-tax profit 29,276 48,554 77,830 Wages, salaries and social security charges Social insurance and pension charges Depreciation of property, plant and equipment and amortisation of intangible assets Other operating costs Total operating costs Operating result Share in results of associates b, g Net financing result Revaluation of non-current financial assets Other financial income and expenses Corporation tax Net result i -7,510 -2,539 -10,049 21,766 46,015 67,781 22,125 45,584 67,709 Allocated to: Shareholders of Telegraaf Media Groep N.V. Minority interest share -359 431 72 Net result 21,766 46,015 67,781 Ordinary and diluted profit per share (EUR) € 0.42 € 0.87 € 1.29 102 ANNUAL ACCOUNTS 2005 Explanation of changes in the cash flow statement for 2004 The changes in the cash flow statement for 2004 are not material and relate to proportional consolidation applied under IFRS. ANNUAL ACCOUNTS 2005 103 separate income statement Amounts in thousands of euros. Notes Net result from subsidiaries Other net income and expenditure Result after taxes 2 2005 2004 32,425 47,796 33,003 19,913 65,428 67,709 104 ANNUAL ACCOUNTS 2005 separate balance sheet Amounts in thousands of euros. Notes 31-12-2005 31-12-2004 2,689 37 499,740 459,112 non-current assets Non-current intangible assets Goodwill Non-current financial assets Holdings in Group entities 3 29,263 40,743 Deferred tax credits - 7,271 Other receivables - 4,850 Total non-current financial assets 529,003 511,976 Total non-current assets 531,692 512,013 29,590 25,633 Other holdings current assets Receivables Taxes and social security contributions Other receivables 4,889 135 Prepayments and accrued income 1,270 1,060 Cash and cash equivalents Total current assets Total assets - 9,655 35,749 36,483 567,441 548,496 ANNUAL ACCOUNTS 2005 105 31-12-2005 31-12-2004 Issued capital 13,125 13,125 Legal reserves 1,893 1,732 450,022 398,029 Amounts in thousands of euros. Notes shareholders’ equity Other reserves 65,428 67,709 1,4 530,468 480,595 Pension provision 5 16,912 52,000 Restructuring provision 5 4,562 8,958 Deferred tax liabilities 5 9,308 - 30,782 60,958 Retained earnings Total shareholders’ equity provisions Total provisions current liabilities Credit institutions 4,372 - Trade debts and other payables 1,819 6,943 Total current liabilities 6,191 6,943 36,973 67,901 567,441 548,496 Total liabilities Total equity and liabilities ANNUAL ACCOUNTS 2005 107 notes to the separate financial statements contents page 109 112 113 115 116 116 117 Notes 1. Summary of effect of accounting policies’ change on balance sheet 2. Summary of effect of accounting policies’ change on income statement 3. Financial fixed assets 4. Shareholders’ equity 5. Provisions 6. Off-balance sheet commitments 7. Remuneration of Managing Board and Supervisory Board members 108 ANNUAL ACCOUNTS 2005 significant accounting policies General The company financial statements have been drawn up in accordance with legal provisions concerning financial statements as included in Part 9 Book 2 of the Netherlands Civil Code. The policies used for valuation and determining the result are the same as those used in the consolidated accounts. With regard to the separate income statement of Telegraaf Media Groep N.V., use had been made of the exemption under section 402 in Book 2 of the Netherlands Civil Code. For the general accounting policies as well as for the policies for valuation and result determination, see the notes to the consolidated financial statements. Group companies are valued at their net asset value. Change in accounting policies As a result of applying the valuation policies used in the consolidated financial statements in its separate financial statements, Telegraaf Media Groep N.V. has changed its accounting policies. This change in the accounting policies results from making use of the option under Section 2: 362 (8) of the Netherlands Civil Code. The use of this option means that it is still possible to reconcile the consolidated equity and the company’s separate equity. The separate financial statements for the company were previously drawn up using the accounting policies for the valuation of assets and liabilities and for determining the result stipulated in Part 9, Book 2 of the Netherlands Civil Code. The change in the policies of valuation, which have been made retrospective, has influenced the equity and the result. The impact on the equity as at 1 January 2004 and 31 December 2004 is 9,631. The impact on the result for 2004 is 45,584. For purposes of comparability, the comparative figures have been restated using the newly adopted valuation policies. For further information see section 35 of the notes, which explains the transition to IFRS 1. The reconciliation tables for the separate company balance sheet and income statement, in which the effects of the change in the accounting system are set out for each item of the financial statements, are included under sections 36 and 37. In addition, the principle of economic reality has been applied in classifying financial instruments for the determination of the company equity because this principle has been applied in the consolidated financial statements compiled in accordance with International Financial Reporting Standards (IFRS) drawn up by the International Accounting Standards Board (IASB) and approved by the European Commission, and the interpretations of these standards by the IASB. Previously, the classification of components of the equity was based on the legal form of the financial instrument. The corresponding change in the presentation of accounts has been carried through in the equity and is also presented separately in the reconciliation table. ANNUAL ACCOUNTS 2005 109 1. summary of effect of accounting policies’ change on balance sheet Balance sheet as at 1-1-2005 Effect of Amounts in thousands of euros. Notes Dutch GAAP transition to IFRS IFRS 1-1-2005 Non-current assets a - 37 37 b,c,d,g 450,904 61,072 511,976 450,904 61,109 512,013 24,837 1,991 26,828 9,655 - 9,655 34,492 1,991 36,483 485,396 63,100 548,496 Issued capital 13,125 - 13,125 Legal reserves 1,732 - 1,732 407,660 -9,631 398,029 22,125 45,584 67,709 444,643 35,953 480,595 32,031 28,927 60,958 Intangible assets Non-current financial assets Total non-current assets Current assets Receivables g Cash and cash equivalents Total current assets Total assets Shareholders’ equity Other reserves f Retained earnings Total shareholders’ equity Liabilities Provisions e,g Short-term liabilities e,g Total liabilities Total equity and liabilities 8,722 -1,780 6,942 40,753 27,147 67,900 485,396 63,100 548,496 110 ANNUAL ACCOUNTS 2005 Balance sheet as at 1-1-2004 Effect of Amounts in thousands of euros. Notes Dutch GAAP transition to IFRS IFRS 1-1-2004 Non-current assets Intangible assets a 37 - 37 b,c 483,343 21,031 504,374 483,380 21,031 504,411 32,001 - 32,001 103 - 103 32,104 - 32,104 515,484 21,031 536,515 Issued capital 13,125 - 13,125 Legal reserves 115 - 115 440,858 -9,631 431,227 Retained earnings -25,765 - -25,765 Total shareholders’ equity 428,333 -9,631 418,702 Non-current financial assets Non-current financial assets Current assets Receivables Cash and cash equivalents Total current assets Total assets Shareholders’ equity Other reserves e Liabilities Provisions d 35,241 42,078 77,319 Current liabilities d 51,909 -11,415 40,494 87,150 30,663 117,813 515,484 21,032 536,515 Total liabilities Total equity and liabilities ANNUAL ACCOUNTS 2005 111 Shareholders’ equity Amounts in thousands of euros. 31-12-2004 37 - 59,531 21,032 -23,615 -30,663 35,953 -9,631 Non-current intangible assets Non-current financial assets Provisions Total restatement of shareholders’ equity 1-1-2004 Notes to the changes of accounting policies on the balance sheet The reconciliation with the equity as at 1 January 2005 (1 January 2004) can be specified as follows: (a) The amortisation of goodwill of 37 in 2004 is reversed. (b) The valuation of group companies increases by 50,922 (15,492) because of IFRS effects at subsidiaries: - the restatement of the valuation of the share in Wegener by 27,017 (12,282). - reversing the amortisation of goodwill of 8,672. - amortisation of restructuring provisions at subsidiaries of -355 (2,733). - upwards revaluation of the paper inventories by 573 (477). (c) The valuation of minority holding increases by 1,338 (- 2,555) due to: - 643 (-2,555) the restatement of the value of the interest in SBS Broadcasting B.V., in connection with the recognition of tax deferrals and the reversal of the amortisation of goodwill (2004 financial year). Under the previous GAAP, this adjustment for the tax deferrals was charged to the result for 2004. - 695 upward revaluation of the interest in ANP Holding B.V. to fair value. (d) The deferred tax asset increases by 7,270 (8,095) as a result of the restatement in the equity. his also has an effect of 1,531 on the provisions (deferred tax liabilities). (e) The value of provisions increases on balance by 22,084 (30,663) due to the application of IAS 19 for the measurement of employee benefits. (f) As at 1 January 2005, the adjustment as at 1 January 2004 carries forward to the opening equity. (g) With respect to the figures as at 31 December 2004, the 2004 financial statements contain reclassifications of current liabilities to non-current financial assets of 3,072, from non-current financial assets to other receivables and liabilities of 1,992 and to provisions (deferred tax liabilities) of 1,531. 112 ANNUAL ACCOUNTS 2005 2. summary of effect of accounting policies’ change on income statement The summary below shows the effect of the changed accounting policies on the separate income statement for the 2004 financial year: Income statement Effect of Amounts in thousands of euros. Notes Dutch GAAP transition to IFRS IFRS 2005 47,796 Net result of holdings a 9,168 38,628 Other net income and expenditure b 12,957 6,956 19,913 22,125 45,584 67,709 Net result Notes to the effect of the change of accounting policies on the income statement. The reconciliation of the net result for the financial year can be specified as follows: (a) The net result of subsidiaries increases by 38,628 due to IFRS effects at subsidiaries: - the restatement of the valuation of the share in Wegener by 27,017 - reversing the amortisation of goodwill of 8,672 - amortisation of restructuring provisions at subsidiaries by -355 - reduction of the paper costs by 96 - reversal of the goodwill with SBS Broadcasting B.V. of 3,198 (b) Other net income and expenses increase by 6,956 due to: - decrease in pension costs by 9,396 due to IAS 19 valuation of employee benefits - -615 result of amortisation of restructuring provisions - upward revaluation of ANP by 695 - increasing tax burden by 2,556 - reversal of amortisation of goodwill by 36 ANNUAL ACCOUNTS 2005 113 3. non-current financial assets 2005 Amounts in thousands of euros. 2004 Holdings in group companies Visible assets Balance of receivables and liabilities 73,728 69,950 426,012 389,162 499,740 459,112 21,426 - Other holdings Expomedia Plc. Media Librium B.V. ANP Holding B.V. SBS Broadcasting B.V. 7,059 - 778 778 - 39,965 29,263 40,743 Deferred tax credits - 7,271 Other receivables - 4,850 529,003 511,976 Total non-current financial assets Movements in non-current financial assets can be shown as follows: Amounts in thousands of euros. Book value as at 31-12-2004 Group Other Deferred Other companies holdings vordering receivables Total 459,112 40,743 7,271 4,850 511,976 Changes in the book value Investments - 44,600 - 207 44,807 Divestments during current financial year - -65,911 - -205 -66,116 38,899 - -7,271 -4,852 26,776 - -50 - - -50 22,544 9,881 - - 32,425 -21,010 - - - -21,010 195 - - - 195 499,740 29,263 - - 529,003 Other changes Write-downs Share in the results of participating interests Dividends received from participating interests Exchange rate differences Book value as at 31-12-2005 114 ANNUAL ACCOUNTS 2005 Holdings in group companies Telegraaf Media Management B.V. Amsterdam Uitgeversmaatschappij De Limburger B.V. Telegraaf Finance B.V. Amsterdam Regionale Televisie Limburg B.V. Maastricht Telegraaf Media International B.V. Amsterdam Limburgse Dagbladen Combinatie B.V. Maastricht Telegraaf Media Cyprus Ltd. Cyprus B.V. Het land van Weert Vitalhold Ltd. Cyprus Drukkerij uitgeverij het land Baragold Ltd. Cyprus van Valkenburg B.V. Telegraaf Media Ukraine LLC Kiev Maas en Geleenbode B.V. Publishing House Telegraaf Mag.Ukraine Kiev Maas en Mijn B.V. Telegraaf Media Estonia Ö.U. (i.o.) Tallinn Maastricht Weert Valkenburg-Houthem Geleen Sittard Eolus B.V. Heerlen Haarlem Uitgeversmaatschappij De Telegraaf B.V. Amsterdam Hollandse Dagbladcombinatie B.V. Twickel B.V. Amsterdam HDC Media B.V. Classified Media B.V. Amsterdam Drukkerij Stuurman B.V. Speurders.nl B.V. Amsterdam Offsetrotatie Schagen B.V. Vacaturekrant.nl B.V. Amsterdam Uitgeversmaatschappij Midden Bohil Media B.V. Amsterdam Noordholland B.V. De Telegraaf Tijdschriften Groep B.V. Amsterdam Grafische Bedrijven Damiate B.V. Haarlem Zaandam Schagen Zaandam Haarlem TTG Sverige AB Stockholm Goois Weekblad B.V. Hilversum Telegraaf Media Sverige AB Stockholm Holland Combinatie B.V. Amsterdam TTG Participaties B.V. Amsterdam DistriQ B.V. Amsterdam Telegraaf Drukkerij Groep B.V. Amsterdam Telegraaf Distri B.V. Amsterdam B.V. Rotatiedrukkerij Voorburgwal Amsterdam Regio Distri B.V. Amsterdam Datawire B.V. Amsterdam B.V. Drukkerij Noordholland Grafisch Bedrijf Media Groep Limburg B.V. Hoorn Heerlen DWC B.V. Roermond Telegraaf Media ICT B.V. Amsterdam Paypernews Beheer B.V. Amsterdam Telegraaf Media Vastgoed B.V. Amsterdam Telegraaf Events B.V. Amsterdam B.V. Beleggingsmaatschappij Voorburgwal Amsterdam Media Groep West B.V. Amsterdam B.V. Agentenadministratiekantoor ’t Gooi Hilversum Mobillion B.V. Amsterdam Basismedia B.V. Uitgeversmaatschappij De Trompetter B.V. Amsterdam Roermond Sugababes.nl B.V. Bibop TV International S.à.r.l. Ede Luxembourg De Kempen Pers B.V. Hapert Mobillion GmbH Bongers Beheer B.V. Kelpen Media Groep West International B.V. Bongers Drukkerij B.V. Kelpen Franken Beleggingsmaatschappij B.V. Bongers Media Productie B.V. Kelpen Adwire B.V. Amsterdam Kelpen Telegraaf Telemol B.V. Amsterdam De Informatiefabriek B.V. Media Groep Limburg B.V. Heerlen Exploitatiemaatschappij G en E Uitgeversmij Limburgs Dagblad B.V. Heerlen Vastgoed B.V. Munich Amsterdam Deventer Hilversum ANNUAL ACCOUNTS 2005 115 4. shareholders’ equity Amounts in thousands of euros. 31-12-2005 31-12-2004 13,125 13,125 Issued capital The authorised capital amounts to € 50,000,000 and is divided into shares of € 0.25 nominal value. Issued: Ordinary shares (including € 240 in priority shares) Legal reserves Position as at start of financial year Plus/minus: - Re. capitalised (amortised) development costs Plus/minus: - Exchange differences Position as at end of financial year 1,732 114 -34 1,658 195 -40 1,893 1,732 465,738 405,462 34 -1,658 Overige reserves Position at start of financial year Plus/minus: - To legal reserve - Dividend 2004 Position as at end of financial year -15,750 -5,775 450,022 398,029 65,428 67,709 530,468 480,595 Retained earnings Result of the financial year Total shareholders’ equity at year-end Share capital and share premium As at 31 December 2005, the authorised share capital consisted of 200,000,000 ordinary shares and priority shares (2004: 200,000,000), which were issued and paid up as follows: 2005 In thousands of shares. Issued as at 1 January Issued and paid up in cash Issued as at 31 December (paid up) 2004 Ordinary Priority Ordinary Priority shares shares shares shares 52,499,200 960 52,499,200 960 - - - - 52,499,200 960 52,499,200 960 116 ANNUAL ACCOUNTS 2005 All shares have a nominal value of € 0.25. As at 31 December 2005, no preference shares had been issued. An overview of the legal and articles of association provisions concerning the distribution of profits and the other rights under the articles of association connected with the ordinary shares, priority shares and preference shares is included under Other Information on pages 121 to 123. Reserve for currency translation differences The reserve for currency conversion differences comprises all exchange differences for foreign currencies that arise as the result of currency translations in the financial statements of company activities in Sweden and the Ukraine which are no longer an integral part of the Company’s activities. Reserve for holdings The reserve for holdings comprises the reserve for capitalised development costs relating to capitalised software that has been developed in-house (see also note 11 in the notes to the consolidated financial statements). Effect of the change in the accounting policies An overview of the effects of the change in the accounting policies is included in note 1 to the separate financial statements above, ‘Summary of effect of accounting policies’ change on balance sheet’. 5. provisions For notes to the provisions please refer to the notes to the consolidated balance sheet. 6. off-balance sheet commitments Joint and several liability and guarantees The company has accepted liability on the basis of section 403:1 (f) of Book 2 of the Netherlands Civil Code, for liabilities resulting from legal transaction of consolidated subsidiary companies mentioned in note 3 (Non-current financial assets), with the exceptions of Telegraaf Media Cyprus Ltd, Vitalhold Ltd, Telegraaf Media Ukraine LLC, Publishing House Telegraaf Magazines Ukraine, TTG Sverig A.B., TTG Participaties B.V., De Informatiefabric B.V., Telegraaf Events B.V. and Mobillion GmbH. In the case of partnerships with third parties, established in the legal form of a commercial partnership (vennootschap onder firma), the Group’s companies that participate in the partnership are jointly and severally liable for all debts of the partnership. ANNUAL ACCOUNTS 2005 117 Tax entity Telegraaf Media Groep, along with nearly all of its wholly-owned subsidiaries in the Netherlands, is a single tax entity for both corporation tax and turnover tax. Within the tax entity, the companies in the Group are mutually jointly and severally liable for tax liabilities to the tax authorities. 7. remuneration of executive board and supervisory board members Remuneration of present and former members of the Executive Board 2005 Amounts in euros. 2004 Regular Deferred Regular Deferred remuneration remuneration remuneration remuneration A.J. Swartjes 495,397 46,000 469,568 33,000 F.Th.J. Arp RA 485,713 19,000 469,568 13,000 Olde Kalter 471,214 84,000 469,568 59,000 441,317 1,512,000 469,568 13,000 Members of the Board Former Board members W.O. Kok* Remuneration of present and former members of the Supervisory Board 2005 Amounts in euros. 2004 Regular Deferred Regular Deferred remuneration remuneration remuneration remuneration A.J. van Puijenbroek 23,370 - 23,370 - Mrs M. Tiemstra 19,966 - 19,966 - Prof W. van Voorden 19,966 - 19,966 - - 70,000 - 49,000 19,966 - 19,966 - 6,655 - 19,966 - - - 4,992 - Supervisory Directors L.G. van Aken H.L. Weenen Former Supervisory Directors W.H. Charles** W. Overmars * Left company with effect from 31 August 2005. ** Resigned supervisory directorship with effect from 20 April 2005. 118 ANNUAL ACCOUNTS 2005 The general meeting of shareholders on 20 April 2005 approved the proposed remuneration policy for the Executive Board. The remuneration structure consists of fixed and variable elements. The fixed element is the annual salary and holiday pay. The variable element consists of a) the existing profit-sharing scheme for all employees of Telegraaf Media Groep N.V. and b) an individual bonus. The individual bonus varies between 0 and 2 month’s salary and is allocated on the basis of previously determined criteria and objectives. Shares owned as at 31 December 2005: Depository Shares receipts for shares Members of the Executive Board A.J. Swartjes - - F.Th.J. Arp RA - 583 11 - J. Olde Kalter Members of the Supervisory Board 51 - H.L. Weenen A.J. van Puijenbroek - 5,200 Prof. W. van Voorden - - Mrs M. Tiemstra - - 11 - L.G. van Aken Executive Board Supervisory Board A.J. Swartjes, chairman A.J. van Puijenbroek, chairman F.Th.J. Arp RA Prof W. van Voorden J. Olde Kalter H.L. Weenen Mrs. M. Tiemstra L.G. van Aken Amsterdam, 15 March 2006 OTHER DATA 2005 119 auditors’ report introduction We have audited the financial statements of Telegraaf Media Groep N.V., Amsterdam, for the year 2005 as set out on pages 47 to 118. These financial statements consist of the consolidated financial statements and the company financial statements. These financial statements are the responsibility of the management of Telegraaf Media Groep N.V. Our responsibility is to express an opinion on these financial statements based on our audit. scope We conducted our audit in accordance with auditing standards generally accepted in the Netherlands. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. opinion with respect to the consolidated financial statements In our opinion, the consolidated financial statements give a true and fair view of the financial position of the company as at December 31, 2005 and of the result and the cash flows for the year then ended in accordance with the International Financial Reporting Standards as adopted by the EU and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Netherlands Civil Code as far as applicable. Furthermore, we have established to the extent of our competence that the annual report is consistent with the consolidated financial statements. opinion with respect to the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of the company as at 31 December 2005 and of the result for the year then ended in accordance with accounting principles as generally accepted in the Netherlands and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Netherlands Civil Code. Furthermore, we have established to the extent of our competence that the annual report is consistent with the company financial statements. Amsterdam, 15 March 2006 Deloitte Accountants B.V. Drs P. Kuijpers RA OTHER DATA 2005 121 provisions in the articles of association concerning the appropriation of profit Pursuant to article 33 of the articles of association of Telegraaf Media Groep N.V., the following rules apply to the appropriation of profit: distributable portion of shareholders’ equity. The dividend is calculated on the paid-up portion of the nominal amount. • Subject to the approval of the Supervisory Board and Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V., the Executive Board shall decide every year what percentage of the profit - the positive balance of the profit and loss account - is to be added to the reserves. • The remaining profit shall be at the disposal of the General Meeting provided that no further dividend is to be distributed on priority shares and preference shares. • Out of the profits, after addition to the reserves in accordance with the preceding paragraph, a dividend shall be paid on the amount paid in on the preference shares, the percentage of which shall be equal to the average yield of Dutch medium-term government bonds as at the beginning of the financial year to which the payment relates, increased by one per cent. The average yield is determined by the Executive Board subject to approval by the Supervisory Board. • A primary dividend amounting to five per cent of the nominal amount of their shares or - if the profit is not sufficient for this - as high a percentage as possible, is then paid out to the holders of ordinary shares and priority shares. Where it concerns priority shares, the percentage of the above-mentioned dividend may not exceed the percentage of the legal interest rate prevailing on the last day of the financial year in question. • If the distribution of dividend on preference shares, as referred to in paragraph 2, cannot be effected or not in full because the profit is not sufficient, the deficit shall be paid out of the • Profit distributions may not exceed the amount of the distributable portion of shareholders’ equity. • If there is a loss incurred for any year, no dividend will be distributed for that year. No dividend may be paid in subsequent years until the loss has been fully compensated for by the profit. However, at the proposal of the priority shareholders, the general meeting may resolve to recover such loss by a charge to the distributable portion of shareholders’ equity or also to distribute a dividend that is charged to the distributable portion of shareholders’ equity. • Distribution of profit is effected following adoption of the annual accounts showing that such distribution is permitted. • In determining the profit distribution, the shares the company holds in its capital are not included in the calculation. 122 OTHER DATA 2005 stichting beheer van prioriteitsaandelen telegraaf media groep n.v. The priority shares are held by the Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V. (TMG priority share management trust), the Board of which as at 31 December 2005 consisted of Messrs A.J. van Puijenbroek, chairman, L.G. van Aken, E.F.M. Kok, and E.H. van Puijenbroek. The goal of the trust is to acquire and manage the priority shares in the company and, among other things, to ensure continuity in the management of the company, to defend against influences on the management that could prejudice the company’s independence and would be contrary to the company’s interests, and to further a good policy in the company’s interests. The powers attached to the priority shares include the right to decide to issue shares, of fixing the number of Executive Board members, and the right to propose an amendment to the articles of association or dissolution of the company prior to the General Meeting of Shareholders being able to decide these issues. statement of independence The Executive Board of Telegraaf Media Groep N.V. and the Board of the Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V. hereby declare that, in their joint opinion, the requirements concerning the independence of the Board of the Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V., set out in Appendix X to the Listing and Issuing Rules of Amsterdam Exchanges N.V., Amsterdam, have been fully met. Executive Board, Telegraaf Media Groep N.V. Board of the Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V. Amsterdam, March 2006. OTHER DATA 2005 123 stichting preferente aandelen telegraaf media groep n.v. The goal of Stichting Preferente Aandelen Telegraaf Media Groep N.V. (TMG preference share trust) is: • To look after the interests of the Telegraaf Media Groep N.V. company, established in Amsterdam, hereinafter called: ’the company’, the companies associated with it and all those involved, including by defending the company as much as possible against influences that could threaten its continuity, independence or identity and would be contrary to these interests. • Defending the company against influences of third parties that could impair editorial independence, as well as the principles underlying editorial policy concerning opinion-forming publications of enterprises within the group. The trust seeks to achieve this goal by acquiring preference shares in the company and by exercising the rights attached to these shares. In doing so, the trust takes into account the purpose for which preference shares may be issued. This goal does not include the sale, encumbrance or any other manner of having control of shares except in case of: • Sale to the company itself or to a company associated with it within the group and designated by the company. • Collaboration in the repayment on and the withdrawal of shares. The right to issue preference shares of Telegraaf Media Groep N.V. has been granted by the Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V. The Board consists of one chairman and four members. The composition of the Board as at 31 December 2005 was: G.G. Witsen Elias (Chairman), S.E. de Jong, A. den Bandt, E.F.M. Kok, and A.J. van Puijenbroek. On the balance sheet date, no preference shares had been issued. statement of independence The Executive Board of Telegraaf Media Groep N.V. and the Board of Stichting Preferente Aandelen Telegraaf Media Groep N.V. hereby declare that, in their joint opinion, the requirements concerning the independence of the Board of the Stichting Preferente Aandelen Telegraaf Media Groep N.V. set out in Appendix X to the Listing and Issuing Rules of Amsterdam Exchanges N.V., Amsterdam, have been fully met. Executive Board, Telegraaf Media Groep N.V. Board of the Stichting Preferente Aandelen Telegraaf Media Groep N.V. Amsterdam, March 2006. 124 OTHER DATA 2005 publications and activities of telegraaf media groep (AS AT 31 DECEMBER 2005) newspapers CosmoGIRL! www.elegance.nl www.Fitclub.nl FHM (For Him Magazine) www. Jan-magazine.nl www.Gametoday.nl De Telegraaf Elegance www.habbohotel.nl www.relatieplanet.nl Sp!ts Residence www.chapeaumagazine.com www.iwannadate.nl Limburgs Dagblad Hitkrant Dagblad De Limburger Autovisie SWEDEN Haarlems Dagblad Starstyle www.cosmopolitan.se IJmuider Courant Chapeau! (issued by MGL) www.batnytt.se Leidsch Dagblad Nummer 1 (issued by MGL) www.vibatagare.se De Gooi- en Eemlander AutoTelegraaf Occasion Mag. www.golfdigest.se Almere Vandaag JAN www.marinan.com www.speurders.nl www.vacaturekrant.nl door-to-door publications and news journals www.residenceonline.se Noordhollands Dagblad which includes: SWEDEN - Alkmaarsche Courant Vi Båtägare www.ttg.se Regionally distributed with - Schager Courant Båtnytt UKRAINE !N - Enkhuizer Courant Golf Digest www.whatson-kiev.com - Dagblad voor West-Friesland Residence www.kyivcity.com Greater Amsterdam - Helderse Courant Cosmopolitan www.obzor-online.com De Echo (11 editions) - Dagblad Kennemerland Allt om Kök och Bad - Dagblad Zaanstreek Cosmopolitan Style De Telegraaf Het Weekblad op Zondag De Woongids other internet activities Amstelveens Nieuwsblad Panorama www.DFT.nl Amstelland/ Domus Design www.autotelegraaf.nl Haarlemmermeer Maister www.elcheapo.nl Witte Weekblad Gourmet Guide www.teleweer.nl Zondag Haarlemmermeer Kiev City www.woonkrant.nl Obzor www.reiskrant.nl ’t Gooi and surrounding www.Limburgpersoneel.nl area www.Limburgopwielen.nl De Gooi- en Eembode www.spits.vacaturekrant.nl Laarder Courant De Bel THE NETHERLANDS www.zorg.vacaturekrant.nl Nieuwsblad voor Huizen www.ttg.nl www.limburgwonen.nl Vecht-Journaal www.autovisie.nl www.autocircuit.nl Baarns Weekblad www.hitkrant.nl www.woneninholland.nl Woonbode www.prive.nl www.groeneweekblad.nl Wijdemeren Journaal magazines www.fhm.nl www.botentekoop.nl HEBBUS www.starstyle-magazine.nl www.nieuwebotentekoop.nl THE NETHERLANDS Privé Esquire www.esquire.nl www.campersencaravans.nl Flevoland www.cosmogirl.nl www.nieuwecampers.nl De Almare (3 editions) www.residence.nl www.nieuwecaravans.nl Zondagochtendblad - Dagblad Waterland UKRAINE internet www.telegraaf.nl www.spitsnet.nl www.haarlemsdagblad.nl www.ijmuidercourant.nl www.leidschdagblad.nl www.nhd.nl www.gooieneemlander.nl www.almerevandaag.nl www.mgl.nl www.limburgsdagblad.nl www.limburger.nl www.hdcmedia.nl Het Weekend What’s On internet OTHER DATA Haarlem and surrounding Alkmaar and area surrounding area Nieuwsblad De Kennemer internet www.hollandcombinatie.nl Haarlems Weekblad Alkmaars Weekblad www.trompetter.nl Heemsteedse Courant De Koerier www.bongersmedia.nl Nieuwsblad IJmuiden De Duinstreek www.alphen.cc Nieuwsblad Santpoort Nieuwsblad voor Castricum www.woneninlimburg.nl & Velserbroek Zondagochtendblad www.autoinformatief.nl Zondag Haarlem www.werken.inlimburg.nl Noord-Holland-North www.ondernemen. Helders Weekblad inlimburg.nl Leiden and surrounding Schager Weekblad www.deregionaleuitwijzer.nl area CTR/De Polderbode Zondag IJmuiden HET op Zondag Deze Maand Witte Weekblad Wieringer Courant Het Magazine Wieringermeerbode Zondagochtendblad - Telephone information Noord-Brabant-East - Participating interests in The bulb-growing area Witte Weekblad other activities services De Trompetter (5 editions) international commercial TV Alphen a/d Rijn and De Schakel - Participations in exhibitions surrounding area Veldhovens Weekblad - Teletext activities Witte Weekblad Oirschots Weekjournaal - Participating interests in Het Weekend Kempener Koerier Makelaars Vizier De Kempenaer - Digital distribution platform Alphen.cc De Hilverbode - Printing Nieuwsklok - Logistics narrowcasting Zaanstreek/Purmerend De Leije De Zaankanter Parel van Brabant internet Het Gezinsblad Limburg www.mediagroepwest.nl Zondagochtendblad De Trompetter (13 editions) www.datawire.nl Witte Weekblad voor De Schakel www.mobillion.nl Edam/Volendam/ Wonen in Limburg www.mobelle.nl Waterland Auto-informatief www.sugababes.nl Werken in Limburg www.superdudes.nl De Krommenieër West-Friesland Ondernemen in Limburg Westfries Weekblad De Regionale Uitwijzer Enkhuizer Weekblad Zondagochtendblad 2005 125 126 OTHER DATA 2005 participating interests BasisMedia B.V. Smart Events B.V. (50%) Telegraaf Media Ukraine Telegraaf News Media LLC (80%) Telegraaf Events B.V. Telegraaf Expomedia Events V.O.F. (50%) Mobillion Sugababes.nl B.V. (70%) Bongers Media Productie - Bibop TV International S.à.r.l. (50%) De Informatiefabriek B.V. De Informatiefabriek V.O.F. Telegraaf Media Groep N.V. Expomedia Group Plc SBS Broadcasting S.à.r.l. (20%) (20%) Koninklijke Wegener N.V. (26,24%) ANP Holding B.V. (8,84%) Media Librium B.V. (40%) AM van Gaal Media B.V. (20%) Uitgeversmaatschappij De Telegraaf B.V. RKK C.V./RKK Beheer B.V. (25%) Fitclub B.V. (50%) Adventure Holding B.V. (14,3%) Media Groep Limburg B.V. Televisiebedrijf Limburg B.V./L1 (45%) Omroepbedrijf Limburg B.V./L1 (40%) De Nationale Regiopers C.V./NRp Beheer B.V. Media Menu C.V./Media Menu Beheer B.V. (11,8%) (25%) Hollandse Dagblad Combinatie De Nationale Regiopers C.V./NRp Beheer B.V. (14%) Media Menu C.V./Media Menu Beheer B.V. (25%) De Telegraaf Tijdschriften Groep B.V. TTG Hearst AB (50%) TTG Hearst B.V. (75%) TTG Sulake B.V. (50%) TTG Bloom V.O.F. (80%) DataWire B.V. DataWireSport B.V. (70%) (30%) OTHER DATA statement of independence The Managing Board of Telegraaf Media Groep N.V. and the Board of the Stichting Administratiekantoor van aandelen Telegraaf Media Groep N.V. (trust office for TMG shares) hereby declare that, in their joint opinion, the requirements concerning the independence of the Board of the Stichting Administratiekantoor van aandelen Telegraaf Media Groep N.V. set out in Appendix X to the Listing and Issuing Rules of Amsterdam Exchanges N.V., Amsterdam, have been fully met. Managing Board, Telegraaf Media Groep N.V. Board of the Stichting Telegraaf Media Groep N.V. Amsterdam, March 2006 2005 127 OTHER DATA 2005 129 management of subsidiaries (AS AT 31 DECEMBER 2005 ) uitgeversmaatschappij de telegraaf b.v. Uitgeversmaatschappij TTG Sverige AB telegraaf events b.v. Limburgs Dagblad B.V. Mrs K. Neld F. Th. J. Arp RA A.J.M. Boerma Uitgeversmaatschappij TTG Participaties B.V. Th.J.C. Trimbach De Limburger B.V. E.T. van den Brakel telegraaf media ict b.v. P.C.J. Tuijnman B. Brouwers R. Mackloet J. J. W. Janssen Regionale televisie Limburg B.V. telegraaf media international b.v. telegraaf drukkerij groep b.v. J.H. Boermann F.Th.J. Arp RA R. van der Plasse F. Blok F. Volmer Classified Media B.V. Speurders.nl B.V. H.J.J.M. Eijkenboom A.J.M. Boerma uitgeversmaatschappij de trompetter b.v. ESB, A.V. Husiak (a.i.) Vacaturekrant.nl B.V. A.C.P. Peters Telegraaf Media Cyprus Ltd P.C.J. Tuijnman P.C.J. Tuijnman A.J.M. Boerma De Kempen Pers B.V. A.C.P. Peters Bohil Media B.V. B.R.C. Hilberdink (via Bohil Beheer B.V.) basismedia b.v. J.H.R. Eijkelenkamp hollandse dagbladcombinatie b.v. T.E. Klein H. de Wit Bongers Beheer B.V. A.C.P. Peters E.W.P.A. Bongers V.G.M. Nijpels-Bongers Bongers Drukkerij B.V. Bongers Beheer B.V. Bongers Beheer B.V. T.E. Klein De Informatiefabriek B.V. Bongers Beheer B.V. H. de Wit B.V. Drukkerij Noordholland J.R.Talsma W.R. de la Motte B.V. Rotatiedrukkerij C. Michaelides Voorburgwal P. Papademetriou F.C. van der Kooij Vitalhold Ltd Grafisch Bedrijf C. Michaelides Media Groep Limburg B.V. P. Papademetriou (Nieuwsdruk Limburg) H.J.M.M. Eijkenboom datawire b.v. W. Kwak F.T.M. Philippo telegraaf finance b.v. F.Th.J. Arp RA Bongers Media Productie B.V. Bongers Media Productie HDC Media B.V. Telegraaf Media Ukraine LLC PayperNews Beheer B.V. J. Olde Kalter W. Kwak A.J. Swartjes F.T.M. Philippo media groep west b.v. distriq b.v. W.P. Delput J.J.M. van der Veen Telegraaf Media Groep N.V. Exploitatiemaatschappij holland combinatie b.v. G+E Vastgoed B.V. R.D. Keller Mobillion B.V. F.Th.J. Arp RA J. Looijenga W.P. Delput de telegraaf tijdschriften groep b.v. Th.E.R.A. Kampschreur J.J.M. van der Veen Mobillion GmbH Regio Distri B.V. E.T. van den Brakel R. van der Meijs F.Th.J. Arp RA HDC B.V. media groep limburg b.v. J.H. Boermann R. Mackloet Telegraaf Distri B.V. W.P. Delput J.J.M. van der Veen key figures as of balance sheet date 2005 * 2004 * 2003 2002 2001 2000 530,468 480,595 428,333 454,079 464,761 500,057 Shareholders' equity TMG as a percentage of total assets 68.8% 65.2% 64.5% 62.5% 60.6% 61.6% Current assets TMG: short term liabilities 1.08:1 1.35 : 1 1.06 : 1 0.98 : 1 0.72 : 1 0.70 : 1 Shareholders' equity TMG: borrowed capital 2.20:1 1.87 : 1 1.81 : 1 1.67 : 1 1.54 : 1 1.60 : 1 Net-turnover TMG x € 1,000 736,686 694,320 683,556 704,462 822,220 811,147 Cash flow from operational activities x € 1,000 Net profit x € 1,000 73,600 65,428 66,306 67,709 62,172 -25,765 33,059 -4,913 74,992 -29,510 141,486 48,452 Net profit TMG as a percentage of net turnover 8.9% 9.8% -3.8% –0.7% –3.6% 6.0% Operating profit as a percentage of net turnover 7.2% 3.8% 3.5% 3.1% 1.2% 9.9% 170,632 4,362 159,463 4,316 153,298 4,357 150,205 4,553 151,561 5,393 156,690 5,457 12.3% p.m. 14.1% 23.6% -6.0% p.m. –1.1% p.m. –6.4% p.m. 9.7% 41.3% Shareholders' equity Cash flow from operating activities Net result Dividend 10.10 1.40 1.25 p.m. 9.15 1.26 1.29 0.30 8.16 1.18 –0.49 0.11 8.65 0.63 –0.09 0.11 8.85 1.43 –0.56 0.11 9.52 2.70 0.92 0.38 Price: low Price: high Closing rate of exchange as per 31 -12 17.06 20.64 18.25 16.05 18.90 18.25 13.00 19.00 17.99 13.00 24.47 15.44 14.00 22.90 17.09 20.80 37.00 21.60 Shareholders' equity x € 1,000** Average net turnover per employee (fte) Work force at year-end (fte) Renturn on shareholders' equity Pay-out ratio Per share TMG van € 0.25 par value (rounded off to full eurocents) * Op basis van IFRS ** Toe te rekenen aan Telegraaf Media Groep N.V. 1999 1998 1997 1996 471,529 430,079 386,903 348,299 63.2% 65.3% 65.7% 65.9% 1.44 : 1 1.55 : 1 1.48 : 1 1.58 : 1 MOVEMENTS EBIT IN RELATION TO TURNOVER in millions of euros 1.72 : 1 1.88 : 1 1.92 : 1 1.93 : 1 721,335 689,916 616,122 582,303 822 737 704 102,357 64,794 119,618 65,877 124,093 56,573 99,129 38,391 9.0% 9.5% 9.2% 6.6% 12.8% 12.8% 11.2% 2001 25 22 5 12.3% 694 684 2002 2003 2004 Turnover 53 26 2005 Ebit Cijfers 2000 t/m 2003 zijn niet aangepast voor IFRS grondslagen. 153,922 4,756 151,018 4,619 141,625 4,384 141,035 4,125 13.7% 36.0% 15.3% 35.4% 14.6% 35.4% 11.0% 42.2% 8.98 1.95 1.23 0.44 8.19 2.28 1.26 0.44 7.37 2.36 1.08 0.38 6.63 1.89 0.73 0.31 16.88 24.69 22.00 17.47 23.82 22.91 16.34 22.01 17.33 12.84 19.24 16.51 INDEXED NUMBER OF EMPLOYEES IN RELATION TO TURNOVER 100 100 100 86 86 2001* Turnover 2002* 105 101 99 83 82 2003* Average number of employees 84 113 90 80 80 2004 2005 Turnover per employee Cijfers 2000 t/m 2003 zijn niet aangepast voor IFRS grondslagen.
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