TELEGRAAF MEDIA GROEP (TMG)
Transcription
TELEGRAAF MEDIA GROEP (TMG)
Annual Report 2007 ‘MARGIN IMPROVEMENT ESSENTIAL’ Ad Swartjes - CEO ‘FINANCIAL POLICIES SHARPENED’ Fred Arp - CFO ‘PUBLISHING IS TEAMWORK’ Patrick Morley - COO This annual report is a translation of the original text in Dutch, which is the official version. In case of any discrepancies the Dutch version will prevail. The annual report is available in English at: www.tmg.nl For more information: [email protected] cREDITS a publication of Telegraaf Media Groep N.V., Amsterdam editorial Corporate Communication - Telegraaf Media Groep N.V., Amsterdam editorial financial information Concernfinanciën en Administratie - Telegraaf Media Groep N.V., Amsterdam textual advice Smink, van der Ploeg & Jongsma, Amstelveen english translation Vertaalbureau Bothof, Nijmegen concept, design, illustrations and art-direction Veldsvorm, Amsterdam cover and annual report Veldsvorm, Amsterdam layout of the financial statementsReclameafdeling De Telegraaf, Amsterdam photography Corbis | Stockxpert | Victor Nieuwenhuijs | Own photography printing and binding Gravo Groep B.V., Purmerend paper cover: Arctic, 300 grams | inside: Arctic, 130 grams typefaces Helvetica Neue, Garamond, Syntax Amsterdam, March 2008 TMG Annual Report 2007 Telegraaf Media Groep N.V. Visiting address Basisweg 30, Amsterdam, the Netherlands Mail address P.O. Box 376, 1000 EB Amsterdam, the Netherlands Phone: +31(0)20-585 9111 4 TMG Annual Report 2007 Content Chief Executieve Officer 06 Annual Report 20 Ad Swartjes ‘Farewell to the yes, but… culture’ 06 Profile and Core Values 08 Mission and Vision 09 Strategy motion over the past few years that are designed to produce a 10 Objectives visible improvement in operating results in 2008. Significant strategic 12 Management info 12 Members of the Executive Board 13 Members of the Supervisory Board 14 Report of the Supervisory Board 16 20 Interview Ad Swartjes Interview Fred Arp Consolidated Keyfigures 32 Interview Patrick Morley 36 Corporate Affairs The Netherlands 38 Interview Rob Eijkelenkamp 44 Print 50 Interview Ab Trik 52 Broadcast 53 Narrowcast 53 Internet 54 Cross-media 54 Other Activities 55 Participating Interests 56 International 56 Interview Peter Tordoir 58 Telegraaf Media Sweden 59 Telegraaf Media Ukraine 60 Telegraaf Media Belgium, Denmark en France 62 Participating Interests International 64 Riskmanagement 66 Corporate Governance 71 Financial Statements 125 134 sale of the company’s operations in Limburg, as well as its interests in ANP, SBS and Wegener, and the option… Consolidated Information 28 38 steps were taken by bundling operations in the Netherlands, the Report of the Executive Board 24 28 Telegraaf Media Groep (TMG) put a large number of changes into Other Information Products and activities 138 Keyfigures general manager Telegraaf Media Nederland 38 Rob Eijkelenkamp ‘Creating a unificated culture’ Realising a sizeable increase in revenue and returns in a market with modest growth. That is the challenge facing Telegraaf Media Nederland, which was created in 2007 by clustering operations in the Netherlands. Standardising methods, centralising operational activities and making choices on the basis of the existing portfolio are key policy directions for the coming years. ‘The objectives … TMG Annual Report 2007 5 Content 24 Chief Financial Officer Fred Arp ‘Critical shareholders keep us focused’ After many years of profitability and growth, decreasing profitability forced Telegraaf Media Groep to face up to facts. Change was essential. That process is now in full swing. The emphasis is on cost reduction to an important degree. The objective is to achieve improved margins. Furthermore, increased revenues will have to be realised over the coming years, with or without… Chief Operating Officer 32 Patrick Morley ‘Whenever just a single person drops the…’ Following years of focusing on the returns achieved by separate business units, TMG’s attention is once again focused on the strength of the organisation as a whole. A key factor here is the collaboration between the business units within the chain. The search for the optimal combination of costs, quality and reliability continues unabated. Teamwork, the continuous interplay… CEO Sky Radio Group 50 Ab Trik ‘You’ve got to have radio in your blood’ TMG took advantage of the new rules that apply to media concentrations in taking over the Sky Radio Group, the most successful radio operation in the Netherlands. Sky Radio 101 FM is the radio station that attracts the highest number of listeners on a weekly basis in the Netherlands. The result of staying close to the market and continuous improvement. ‘Producing radio… CEO Keesing Puzzles & Games 56 Peter Tordoir ‘Flexible, enterprising and international’ Keesing’s involvement in the puzzle magazine sector dates back to the thirties. Initially in the Netherlands and eventually followed by Belgium, France and Denmark. Its market leadership positions will be further expanded upon. In print publications, but primarily in the digital market segment as well. With puzzles, but increasingly with games. Based on extensive knowledge of… 6 TMG Annual Report 2007 Profile PROFILE TMG (Telegraaf Media Groep N.V.) is the largest media group in the Netherlands with market leadership positions in relation to daily newspapers, magazines, online and offline media and radio. TMG is the largest newspaper publisher in the Netherlands with the prominent De Telegraaf and Sp!ts daily newspaper titles and has garnered a strong position in the Randstad and surroundings with regional dailies, local newspapers and free local papers. TMG has a strong market position in the Netherlands in the magazine segment on the basis of general interest titles and on the basis of titles aimed at specific target groups. In the Dutch radio market, TMG holds a majority interest in the Sky Radio Group, a market leader among commercial radio stations. TMG is furthermore increasingly active in new, mostly digital, forms of media via the Internet, mobile telephones, narrowcasting and cross-media. On the international scene, TMG has gained a position in the trade fairs and events segment through its participation in the Expomedia Group plc, and in radio and television via an option on 12% of the share capital with voting rights in ProSiebenSat.1 Media AG, the newly formed ProSiebenSat.1 and SBS Broadcasting S.à.r.l combination. Outside the Netherlands, TMG is active in Belgium, France, Sweden, Denmark and Ukraine: partly on the basis of multimedia publishers focused on general or specific interest target groups and partly in specialised niche markets such as puzzle magazines. TMG employs about 3,600 people and achieved € 738.8 million in revenues during 2007. The shares in Telegraaf Media Groep N.V. are traded on the NYSE Euronext Amsterdam stock exchange. TMG Annual Report 2007 Core Values CORE VALUES like to support them by optimising contacts with existing TMG is a self-confident enterprise with a strong identity. and potential clients and creating greater flexibility in this Enterprise is focused on the long term with multimedia respect, through divergent media forms. products for consumer markets. TMG is solid, financially strong and publicly traded. The company’s policy is TMG wants to provide, from large involvement, detached and characterised by its business-like, committed, upright and independent information and entertainment to consumers, change-oriented enterprise. Focused on responding to using various forms of expression, thus ensuring that infor- client desires and needs. Flexible, skilful and sensible. mation is always accessible anywhere. Intentional, focused on the interests of the general public or narrowly defined TMG is a reliable and committed employer with a social groups of readers, informative and entertaining. outlook. Employees are offered extensive development opportunities and good income. In exchange, TMG expects In terms of our shareholders, profitability, predictability and its employees to proactively handle changes, to want to integrity are first and foremost. TMG is solid and, for an further develop themselves and to businesslike contribute important portion of its operating result, dependent on the to the development of the enterprise in a drastically changing Dutch economy. marketplace. TMG wants to provide its shareholders a good return on their investment. TMG adopts a client-oriented, businesslike approach in relation to suppliers of products and services. TMG would 7 8 TMG Annual Report 2007 Mission | Vision VISION In the Dutch domestic market, TMG wants to be the leading provider of information and entertainment, including news, music, puzzles and games for general and/or specific public interest groups and communities. Advertisers will be offered solutions that enable them to communicate with these public interest groups and communities, with or without the integration of multiple media types (cross-media). TMG wants to be a focused media player in Europe, specialised in servicing and reaching specific target groups via relevant media and content. MISSION TMG is actively engaged in finding and creating loyalty among general and/or specific public interest groups and communities and in exploiting their media time. • Finding users, readers, listeners and viewers by providing general and customised media products, by leveraging the reach of strong TMG brands and by crosspromotion in various media platforms. • Creating loyalty by providing attractive content and applications in the area of information and entertainment, including news, music, puzzles and games. Made for and by users. • Exploiting the reach among public interest groups, in which revenues are increasingly expanding in comparison to traditional consumer and advertising revenues. TMG Annual Report 2007 Strategy STRATEGY creates opportunities for synergy, varying from integrated TMG’s enterprise strategy consists of the following product concepts and propositions that combine ‘old’ elements: and ‘new’ media to the cross-promotion of strong 1. TMG is an operator of media platforms involving service to broad public interest groups, whereby advertisers brands. 4. Reducing fixed costs in core operating units is crucial are offered reach on the basis of integrated media for TMG to be able to adapt to the new reality and to concepts centred on information and entertainment, be able to continue to invest in growth in the areas of including music, puzzles and games. 2. To expand reach, TMG is developing a portfolio of print, internet and digital. 5. Limited growth opportunities in the Dutch domestic different types of media companies that complement market and a playing field that is increasingly transcending print media and/or are innovative in relation to the borders are the driving force behind TMG’s expansion publishers of print media (internet, digital). 3. Reaching the same general or specific public interest groups and communities via multiple media platforms beyond Dutch borders. The focus here is on Europe with the emphasis on itself developing media and other markets. 9 10 TMG Annual Report 2007 Objectives OBJECTIVES TMG’s enterprise objective is to achieve an average net return on equity of at least 12% on the basis of developing and offering media products. In terms of the objectives as per the end of 2009, this translates into realising yearly revenues exceeding € 800 million with a normalised EBITA margin (EBITA/revenue of 15% (2007 revenue: € 738.8 million, more than a 7% margin). A significant portion of the improvement in margin is initially derived from cost reductions that also produce the greatest value for the enterprise. The growth in revenue to a significant extent is derived from digital media, including acquisitions and by obtaining a ‘fair share’ of the advertising market. TMG Annual Report 2007 Objectives 11 12 TMG Annual Report 2007 Executive Board MEMBERS OF THE EXECUTIVE BOARD AS AT 31 DECEMBER 2007 A. J. Swartjes (1949), CEO Mr A.J. Swartjes is Chief Executive Officer since 1 January 2005. From 1991 until 2005 he was a member of the holding company board. This form of management ceased in 2005. He joined the Telegraaf Groep in 1978, and has held various positions since that time. From 1974 to 1978 he worked at Reader’s Digest and Colgate/Palmolive. Mr Swartjes studied Economics at Erasmus University Rotterdam. F. Th. J. Arp (1954), CFO Mr F.Th.J. Arp is Chief Financial Officer since 1 January 2005. Mr Arp was holding company director from 1 July 1997 to January 2005. From 1991 until 30 June 1997 he was a partner in the Deloitte & Touche Registered Accountants firm. Before that, he worked in the firm’s accounting practice. Mr Arp studied Business Economics and Accountancy at Erasmus University Rotterdam. P. Morley (1956), COO Mr P. Morley is Chief Operating Officer since 1 December 2007. Before, he was director at Wolters Kluwer Nederland. Before that, mr. Morley was Chief Operating Officer at Telfort and member of the Executive Board at KPN. He studied mathematics and electrical engineering at Trinity College in Dublin. TMG Annual Report 2007 Supervisory Board MEMBERS OF THE SUPERVISORY BOARD AS AT 31 DECEMBER 2007 A.J. van Puijenbroek, chairman Mrs M. Tiemstra Age 60 Age 53 Nationality Dutch Nationality Dutch Profession/Principle position Profession/Principle position Director, N.V. Exploitatiemaatschappij Van Puijenbroek Associate Boer & Croon Executive Management, Former Ancillary positions Chairman, Stichting Beheer van Prioriteits- executive board member of Eureko B.V., Ancillary positions aandelen TMG N.V. (TMG priority share management trust), member of the Executive Board Koninklijke Nederlandse Secretary of Stichting Preferente Aandelen TMG N.V. (TMG Munt preference shares trust), Supervisory Board member of First appointment 05 June 2003 B.V. Textielfabrieken H. van Puijenbroek Current term 2007 – 2011 First appointment 15 May 1975 Current term 2007 – 2011 W. van Voorden, Deputy Chairman L.G. van Aken Age 66 Nationality Dutch Age 65 Ancillary positions Nationality Dutch Executive Board member, Stichting Beheer van Prioriteits Profession/Principle position aandelen TMG N.V. (TMG Priority share management trust) Ex-Chairman of the Supervisory Board for Health Care Executive Board member, Stichting Administratiekantoor Insurance (CTZ), Professor Emeritus, Erasmus University Boekanier (administrative/managerial office), Executive Rotterdam, Professor Emeritus, University of Tilburg Board member, Stichting Administratiekantoor van aandelen Ancillary positions Supervisory board member at Batenburg in H.J. Wols Holding B.V. (share trust office), Chairman of Beheer N.V. and Panteia B.V., Executive Board member, Stichting-Telegraafpensioenfonds (Telegraaf pension fund Stichting Administratiekantoor Ballast Nedam N.V. trust) 1959 First appointment 04 June 1997 First appointment 30 May 2002 Current term 2005 – 2009 Current term 2006 – 2010 H.L. Weenen, secretary J.G. Drechsel Age 63 Age 52 Nationality Dutch Nationality Dutch First appointment 26 June 1980 Profession/Principle position CEO BCD Current term 2004 – 2008 Ancillary positions Supervisory board member at TRX (chairman) and Eneco First appointment 26 September 2007 Current term 2007-2011 13 14 TMG Annual Report 2007 Report of the Supervisory Board REPORT OF THE SUPERVISORY BOARD auditor at the time, Deloitte Accountants B.V., and the 2007 We hereby present the report, the balance sheet as at 31 Management Letter was discussed with the current KPMG December 2007 and the income statement for 2007 with chartered auditor. explanatory notes, as compiled by the Executive Board. During the year under review, we discussed the performance The financial statements have been audited and approved of the Supervisory Board, as well as the performance of by KPMG Accountants N.V. in Amsterdam, as stated in the its members, in accordance with the target board member auditor’s opinion included in this report. competency profiles and the current composition of the Board. We discussed the management model, and the The Supervisory Board discussed the financial statements composition as well as the performance of the members with the auditor during the annual meeting, after which we of the Executive Board, in the absence of Executive Board signed the financial statements. The Supervisory Board met members. with the Executive Board ten times during the past year. Topics such as strategy, internal risk management and control The Central Works Council and the Supervisory Board jointly systems and financial matters were addressed during these decided to appoint a sixth Supervisory Board member with meetings. the assistance of an external agency. During the Special During the year under review, particular attention was J.G. Drechsel was appointed to the Supervisory Board Meeting of Shareholders held on 26 September 2007, Mr. devoted to the following subjects: the divestment of our by the shareholders. In addition, during this meeting we participation in Wegener N.V. and SBS Broadcasting S.à.r.l, announced the arrival of Mr. P. Morley, M.Sc., COO of the the ProSiebenSat.1 option scheme, portfolio adjustments, Executive Board, effective 1 December 2007. including acquisitions and divestments, TMG’s share buy back and the organisational structure of the print and We established the remuneration of the Executive Board on digital operations in the Netherlands. the basis of our remuneration policy. During the meetings held on 19 April 2007 and 26 September 2007, the share- We consulted with the head of Group Internal Audit and the holders approved the individual financial arrangements for external auditor on two occasions. The 19 April 2007 Annual bridging the period between the ages of 62 and 65 for General Meeting of Shareholders approved the appointment current Executive Board members. The payment of individual of KPMG as TMG’s new auditor. The audit report concerning members of the Executive Board is recorded in the 2007 the 2006 financial statements was discussed with the annual report. TMG Annual Report 2007 15 Report of the Supervisory Board One of our members took part in a consultative meeting with the Central Works Council during the year under review. On 13 January 2008, Mr. J. Olde Kalter, former member of the Executive Board and Executive Editor of the De Telegraaf daily newspaper, unexpectedly died at the age of 63. It is with much respect that we look back on a valuable and enjoyable working relationship with Mr. Olde Kalter. We would like to express our gratitude to the Executive Board and all of the Group’s employees for the manner in which they discharged their duties in 2007. We recommend that: 18 January 2007 1. The 2007 financial statements be approved as set out in the documents presented. 2. The Executive Board be granted discharge for the policies TMG and PCM end study into distribution partnership model pursued in 2007. 3. The members of the Supervisory Board be granted discharge for the supervision conducted in 2007. 4. For the 2007 financial year, a cash dividend be adopted In April 2006 Telegraaf Media Groep N.V. (TMG) and PCM Uitgevers B.V. (PCM) started of € 1.00 per share of € 0.25 nominal value (2006: cash up a study to explore the dividend of € 0.50 per share of € 0.25 nominal value). possibilities of a distribution partnership. The findings have meanwhile The dividend will be made payable on 24 April 2008 at the revealed that, whilst economies ABN AMRO Bank N.V. in Amsterdam. of scale are possible through On behalf of the Supervisory Board, capacity utilisation, a merger A.J. van Puijenbroek, Chairman would also be a major operation Amsterdam, 13 March 2008 involving significant risks more efficient and effective regarding the quality of delivery - risks that the publishers certainly cannot afford to take at the present moment. The distribution businesses will therefore remain independent, whilst continuing to pursue cost optimisations by adjusting services and processes. 16 TMG Annual Report 2007 Report of the Executive Board INTRODUCTION revenue is largely derived from acquisitions and price Following years of major reorganisations, optimisation, increases and therefore marginally or not at all due to an portfolio changes and cost control improvements, 2007 increase in volume. The growth in digital reach was only was primarily characterised as a year in which previous transformed to a limited extent into revenue during 2007. acquisitions were streamlined and integrated, the strategic In the past five years, TMG’s revenue dependence of news- directions for internal production units were identified and paper products is decreased about 20 percent points to – in part based on the reorganisation of publishing approximately 60%. operations in the Netherlands – TMG is on it’s way as an organisation to realise the enterprise’s ambitious financial The net profit realised in 2007 was the highest ever earned objectives by the end of 2009. by the company throughout its 115 years of existence. In January 2008, TMG reported that the 2007 normalised Change operating result before amortisation rose in comparison The digital world is changing day by day. Currently there to 2006, but also that this only represents a 7% operating are four free newspapers in the Netherlands and advertisers margin. To guarantee continuity and a meaningful growth have a wide range of options in terms of exposure (ranging in operating result per share, this margin must increase from media to the Internet, from sport sponsorship to significantly. events) and consumers are using increasingly divergent The increase in the aforementioned operating result is for forms of information, free or paid and on the basis of new the most part due to portfolio changes and cost savings, forms of payment or not. Furthermore, the entry of non- and in minor part due to an increase in revenue. The increased traditional publishers into the marketplace, such as cable TMG Annual Report 2007 Report of the Executive Board companies, is a reality. The importance of media and information is undiminished and the need for differentiating content will always remain. 2. Investment in Existing Brands and Products (Print and Digital); 3. Exploitation of Opportunities for Synergy; 4. Investment in New Products (Print and Digital); At the same time, the arrival of the new media world means 5. Exploitation of New Publishing Knowledge Abroad. that cost increases in traditional media can no longer, or only marginally, be passed on, that a head start related to These policy directions are further detailed below: a specific concept can become lost ground within a very 1. Cost Efficiency short period of time and that distribution forms will emerge TMG will produce existing print products at lower cost that lie outside the primary expertise of the traditional and with greater variable costs. The personnel costs in publisher. Thus is why cost savings, realisation of synergy this, forms the largest managable part. Due consideration within the existing portfolio and multimedia use, or reuse, must be given to the provisions of the Collective Labour of content is more important than ever. Agreement (CAO) in this respect, as a result of which the Policy directions company is forced to reduce the number of employees, instead of offering employment to a larger number of In principle, TMG’s business units are in the process of people at a reduced level of compensation. optimising, innovating and internationalising. TMG’s business 2. Investment in Existing Brands and Products units use the following policy directions to address the current TMG will invest in existing print products and create a and future requirements and demands of stakeholders: digital environment for them. This results in different 1. Cost Efficiency; business models related to the news domain, as well as puzzles, games, local information and specific segments. 3. Exploitation of Synergy TMG will put a maximum focus on exploiting opportunities for synergy in relation to revenue generation as well as cost savings. The organisation in the Netherlands was restructured for this reason as well. The divestment of existing products to the extent they lack prospects for achieving sufficient margin over the medium and long term is part of this. In addition, services that are not part of the core business are divested when they do not add sufficient value to the core business and/or when their production costs are higher than the market norm. 4. Investment in New Products (Print and Digital) TMG will add new media or media concepts to the portfolio. These primarily consist of products of the ‘younger media type’ (radio and narrowcasting tv), but also products in the area of puzzles & games or newspapers and magazines. 5. Exploitation of New Publishing Knowledge Abroad Opportunities to create increased scale on the basis of dailies and to do more than is currently the case in the area of radio and/or television are limited in the Netherlands. Given the – by definition international – digital developments, TMG is also exporting its publishing expertise abroad. TMG is operating with multimedia publishing companies in Sweden and Ukraine, and in niche markets in Belgium, France and Denmark. 17 18 TMG Annual Report 2007 Report of the Executive Board Most relevant developments in 2007 as well as building things up and that places heavy demands 1. The sale of the interests in SBS and Wegener contributed on employees. As TMG’s Executive Board we are very to the fact that the company achieved the highest net profit in its existence. appreciative of the enthusiastic contribution made by employees and also of the fact that many of TMG’s products 2. The minority interest in SBS Nederland (acquired in 1996 play a leadership role in the marketplace. Without the and limited due to government restrictions), was swapped contribution of employees this would not be possible. for a position in SBS Broadcasting S.à.r.l (20%) in 2005. TMG products determine the topics for today’s discussion, In 2007 this interest was cashed out for an amount of provide information, entertain and thereby make creative € 433 million, linked to an option on 12% of the share use of all existing and new facilities within TMG. This is what capital with voting rights in ProSiebenSat.1, the newly TMG is good at and this is where our passion lies. formed ProSiebenSat.1 Media AG and SBS Broadcasting TMG is an enterprise that rapidly anticipates the wishes of S.à.r.l combination. This transaction is further explained advertisers and consumers alike. The fact that commitment, further on in this report. solidarity and reliability, TMG’s soul, are still valued as much 3. The creation of Telegraaf Media Nederland, in part for the purpose of achieving cost reductions and strengthening market positions. 4. TMG’s print titles were under volume as well as price as in the past does us proud. The Executive Board would like to thank all employees for this. Outlook pressures. This is structural in nature and is evident on The year 2007 closed with an normalised EBITA margin of the advertising, as well as the consumer side. This is why 7.2% on revenue of € 738.8 million. The target for the end further cost savings and reorganisations are essential. 5. Various initiatives are underway that will lead to the of 2009 is to achieve an normalised EBITA margin of 15% on revenue of at least € 800 million. This margin is after outsourcing of services. Further steps have been imple- deduction of overhead and profit appropriation. In concrete mented in relation to IT and Logistics components. terms this represents an increase of approximately € 53 million To our employees TMG has become a multimedia enterprise in just a few short to approximately € 120 million. Concrete short and medium term period projects have been defined. Approximately two thirds of this major increase will come, years. With this expansion came the need to make a transition according to the expectations, from organic improvements from an informal family-based culture to an innovative in margin and approximately one third will come from business culture. This created a lot of change and will involve acquisitions. The organic growth in margin is derived from still more. TMG is in the process of breaking things down, the divestment of loss-making activities, an increased share TMG Annual Report 2007 19 Report of the Executive Board in advertising revenue (digital) and further cost reduction by merging newspaper and magazine publishing operations, and lowering distribution and printing costs. Last January’s press release following the New Year’s speech announced a significant increase in the operating results for 2008. In concrete terms this represents an expected increase in the normalised EBITA margin from 7% to 9 - 10%, mainly to be achieved on the basis of cost reductions, divestment of lossmaking activities and to a limited degree from acquisitions. Thereby is considered as an assumption a slight increase in advertising and circulation revenue in comparison to 2007. 9 March 2007 The first two months of 2008 show a less favourable development in relation to advertising revenue in print, however, Telegraaf Media Groep to sell namely a limited decreasing level of revenue compared to stake in Wegener the first two months of 2007. The revenues in circulation and in radio were limited higher. If and insofar as this trend is Telegraaf Media Groep (TMG) turning out to be representative for all of 2008, this will of and Mecom Group plc (Mecom) course affect the projections indicated for 2008. At this have reached an agreement on moment there is no reason to adjust the objectives. Mecom’s acquisition of TMG’s interest in Wegener of nearly Actions that further affect the development of the net profit 24% for an amount of € 158.9 per share include decisions related to the disbursement of million. liquid assets, including the effect of the ProSiebenSat.1 option agreement, share buy back and/or an extra dividend. TMG’s interest consists of Executive Board Telegraaf Media Groep for ordinary shares, each with A. J. Swartjes, Chairman a nominal value of € 0.30, Amsterdam, 13 March 2008 representing a stake of 23.9%. 10,594,763 depositary receipts The price agreed between the parties amounts to € 15 per depositary receipt. In addition, Wegener’s dividend distributions for the year 2006 will accrue to TMG, while under certain circumstances TMG may be able to claim a maximum premium of € 1 per depositary receipt. In conformity with the IFRS principles, the interest has been valued on TMG’s part at ‘fair value’ (market value), being € 116.4 million (€ 10.99 each, price as at 31 December 2006). 20 TMG Annual Report 2007 Interview Ad Swartjes | CEO T elegraaf Media Groep (TMG) put a large number of changes into motion over the past few years that are designed to produce a visible improvement in operating results in 2008. Significant strategic steps were taken by bundling operations in the Netherlands, the sale of the company’s operations in Limburg, as well as its interests in ANP, SBS and Wegener, and the option on a participating interest in ProSiebenSat.1. Less visible is the transition to a culture in which people are held accountable for results and are compensated on a variable basis. In spite of the major changes that were initiated in 2007, Chairman Ad Swartjes is not satisfied with the progress made in 2007. As far as he is concerned, things could be moving along more quickly than they are, although he is aware that the translation of policy into actual improvements to the bottom line takes time. ‘We have implemented important changes over the past few years. However, the ‘Increase the flexibility of the organisation’ impact of these changes on the bottom line is not yet acceptable. In 2007, we once again took the necessary measures and many actions were initiated that are not expected to impact operating results until 2008. The integration of acquisitions and the creation of greater of 15% return (normalised EBITA margin) on € 800 million focus for the Sky Radio Group and Keesing Puzzles & Games revenue by the end of 2009. From editors to operational are only expected to be fully reflected in the operating staff, from ICT personnel to printing staff and from those results in 2008. While from an organisational perspective, responsible for distribution to delivery staff, everyone is the bundling of operations in the Netherlands was initiated accountable. On the print as well as on the digital side. in 2007, from an operational perspective this intervention Refusal to accept accountability is no longer an option.’ only came into its own in 2008. Another important factor is that we bade farewell to the ‘yes, but…’ culture in 2007. Media operations form the core For too long the organisation had harboured a culture that Over the past few years, TMG has worked hard to develop time after time accepted that commitments were not a clear overview of the organisation’s core competences respected, budget estimates not achieved and setbacks and a strategy for the future. ‘The media domain is where rationalised. We have now created clarity and made things we excel. This is a highly dynamic market. The media’s explicit. Rules have been defined and it is clear to everyone influence on society is greater than ever. The media is with what is to be accomplished. A financial target has been set people from the moment they get up until the time they go to TMG Annual Report 2007 Interview Ad Swartjes | CEO ‘Farewell to the yes, but… culture’ bed. We maintain strong brands in this Furthermore, the new Interim Act on market and we are in leading market Media Concentrations [Tijdelijke Wet positions. Our strategy is focused on main- Mediaconcentraties] for the first time taining and, where possible, strengthening in decades provides TMG with room to these positions. In the future we want to grow its market share in the Netherlands have a position in a rapidly changing media market and provides opportunities for landscape that is at least as strong as our creating a position in other media types, current position. The implementation of the in addition to daily newspapers. plans to achieve this is in full swing. We ‘In addition to print media, we now also are expanding the portfolio, strengthening have the opportunity to invest in radio and market positions and reducing costs.’ television. We had asked for this in vain for decades. With regard to commercial television the die is cast, but with regard Growth within and outside the Netherlands to radio we have garnered a strong position Telegraaf Media Nederland was created Group.’ through the acquisition of the Sky Radio in 2007 and maintains a focus on strengthening collaboration. Between However, TMG also wants to continue to geographical regions, as well as between grow outside the Netherlands by exporting various media types, such as print and expertise developed in the Dutch market. digital, for example. Furthermore, the In 2007, a fundamental review of the margins on products are subjected to potential markets outside the Netherlands greater scrutiny and the organisation is was undertaken with the assistance of being reviewed, title by title, for its external consultants. contribution to the profitability of the Groep. ‘We also intend to continue operating 21 22 TMG Annual Report 2007 Interview Ad Swartjes | CEO outside the Netherlands. Probably in other instilled in our genes. Professionalism geographical areas and market segments. and change-orientation are values that For example, in Sweden we considerably still require development. For employees strengthened our position in the media it means that they will have to focus market for pleasure boats. The principle of more on dealing with change, be focused contributing to improvements in margins on changes in the marketplace and on the basis of more rapid and improved exploit the opportunities that are inherent performance also applies to operations in such changes. The world is changing in foreign markets. There too, lack of rapidly and we must keep pace.’ accountability is not an option,’ says Ad Swartjes. Increase flexibility Objectives-based compensation All segments of the organisation will be In order to speed up the culture change required to contribute to the realisation process, much effort is being devoted of the objectives formulated for 2009. to this topic in terms of training and a Objectives that the Executive Board has bonus system has been instituted for deliberately formulated strongly in order several hundred managers within the to provide the organisation with a clear organisation. Under this compensation benchmark as a basis for the essential system, salary is partly dependent on change process. ‘To participate in a media personal objectives, business objectives world undergoing drastic changes, we and the performance of TMG as a whole. must increase the flexibility of the ‘This is a way of making people more organisation. In 2007, we formulated four aware of their own role in the realisation core values for the enterprise: profes- of the Groep ’s objectives. We are all in sionalism, change-orientation, integrity this together.’ and reliability. Integrity and reliability are TMG Annual Report 2007 23 Interview Ad Swartjes | CEO 21 June 2007 Sp!ts acquires Carp BasisMedia B.V. (publisher of free daily Sp!ts) and Aromedia (publisher of Carp and Sum) have reached an agreement on the acquisition of Carp by BasisMedia as per July 1st 2007. Through this acquisition, Carp gains a shareholder with a solid position among starters and young professionals. For BasisMedia B.V., the acquisition signifies a key step in the continuing development of its ‘Career’ pillar. In addition to a magazine with a biweekly controlled circulation of 135,000 for well-educated professionals up to the age of 37, the Carp brand consists of a website, newsletter, events and personal e-mail service. Using these channels, Carp informs its target audience about matters regarding labour market communication, career planning and personal development. 24 TMG Annual Report 2007 Interview Fred Arp | CFO A fter many years of profitability and growth, decreasing profitability forced Telegraaf Media Groep to face up to facts. Change was essential. That process is now in full swing. The emphasis is on cost reduction to an important degree. The objective is to achieve improved margins. Furthermore, increased revenues will have to be realised over the coming years, with or without acquisitions. The 7% operating margin achieved in 2007 must be increased to 15% by the end of 2009. There no longer is any room for unaccountability. Shareholders are rightly keeping a critical eye on the process. For years, TMG, in particular the De Telegraaf daily news- Today about 40% of revenues is derived from other sources paper, was able to achieve continuous growth in revenue than newspapers. and operating results. Revenue from subscriptions and advertising balanced each other out reasonably well. A drop From 7% margin to 15% on the one side was offset by improvements on the other. The next step in the process is to increase the operating This pattern came to an end around 1999. margin (normalised EBITA) from the current 7% to 15% on revenues of € 800 million by the end of 2009. In relation to Fred Arp, Chief Financial Officer: ‘Even in case of strong operations in the Netherlands, this measure will in the first economic growth we can no longer automatically assume instance have to be achieved on the basis of cost reduction that there will be an increase in advertising revenues. And (working more efficiently and with standardised processes), in a market under pressure, circulation revenue no longer strengthening of market positions (better marketing and increases either. Given an average yearly cost increase of acquisitions) and bundling of digital operations (share infra- 3% due to wage increases and inflation, combined with a structure and knowledge). Outside the Netherlands the declining trend in print revenues, we will lose ground at a possibility of expanding into other geographical markets and rate of € 10 to € 15 million per year if we do not intervene. In order to bring about a turnaround in this situation, costs will have to decrease and we will need to lessen dependence on markets that are under pressure. We laid the foundation for change in 2005 and 2006. Significant progress in the implementation of that policy has been made in 2007. ‘There no longer is room for unaccountability’ TMG Annual Report 2007 Interview Fred Arp | CFO ‘Critical shareholders keep us focused’ strengthening positions in certain market to the distribution of free local newspapers. segments will be investigated. Initial In 2008 the DistriQ transport function will measures were already taken on this basis also be outsourced. During the second in 2007. ‘We disposed of non-profitable half of 2007 we also invested in a new components such as Sky Radio Hessen Corporate Procurement Department that partly and the Keesing Media Group’s bundles the purchasing activities for the publisher of hobby magazines in France entire Groep,’ according to Fred Arp. completely. We developed projects designed to achieve better margins. The In addition to the profitability of operations Wegener are concerned. The sale of the magazine titles and De Telegraaf will have and the cost structure, elements such as participating interest in Wegener further- to improve their level of collaboration in the strategic value of participating interests, more also contributed to reducing the order to increase the reach among specific the tax structure and the capital structure dependence on newspapers. A greater target groups. This is how we will be able were also carefully reviewed. The criteria international spread is now inherent in that participating interests are expected the fiscal structure. to share knowledge and resources. to meet are that they must serve a strategic Another measure consists of outsourcing purpose and generate an acceptable level Growth through acquisitions operations that we are not capable of of revenue. If that is not the case, the Over the coming years, growth will in part doing better ourselves. This happened participating interests will be disinvested. have to come from acquisitions. Growth in 2006, when a number of ICT functions This has since been the case as far as in print market share and generating were outsourced and in 2007 in relation the participating interests in ANP and greater output from the digital world are 25 26 TMG Annual Report 2007 Interview Fred Arp | CFO ways of increasing revenues to € 800 million in 2006 and another more than 4% up in 2009. ‘We are striving for a number 1 or 2 until March 2008). Furthermore, a cash position in our core segments. Where flow-based dividend policy has been organic growth is not feasible, we intend implemented with the aim of providing to achieve growth through acquisitions. progressively increasing payments, For example, in 2007 we acquired Carp to assuming growing cash flows of course. strengthen our position in the personnel ‘If at any one time our liquid assets are market,’ says Fred Arp. The criterion that not directly appropriated, we will opt for an acquisition must meet is that the net an additional dividend and/or a share buy return on invested capital must be at least back,’ Fred Arp explains. The growing 12%. If borrowed capital is used for focus on shareholders is also related to financing purposes, it must not exceed the changing composition of the share- the maximum of 2.5 times the EBITDA. holder complement. ‘Traditionally our ‘In principle, we are not opposed to using shareholders have been family members borrowed capital for financing purposes, with a long term focus. however, we do not want to become Today, shareholders are apt to assess dependent on financiers. At this time management’s performance and that of the almost nothing has been financed using enterprise with a more critical eye. That external sources. Given the cash position forces us to adopt a tighter management acquired through the sale of the interest approach that, more than previously, is in SBS and Wegener, this is a logical focused on optimising financial policy.’ situation for the time being,’ says Fred Arp. Shareholder interests Achieving our objectives step by step Over the past few years, TMG’s Executive The current year, 2008, will to a large Board has devoted significantly more extent be characterised by the realisation attention to investor relations. Contacts of the 2009 objectives. ‘We specifically have been intensified, more time is spent defined stringent objectives, whereby we on road shows and there clearly is a more took a look at the international ‘peer group’ proactive approach to shareholders. In of media companies and concluded that addition, the company pursued a proactive these objectives keep pace with the policy of purchasing company shares (5% development of these companies. The 15% operating result target will be achieved step by step. In 2008, about 75% of the improvement in margins will come from cost reductions and process optimisation, and 25% will come from growth. In 2009, improvement in operating results must primarily be derived from growth in operations. Organically and through acquisitions. We therefore consider the 15% target associated with € 800 million in revenues a feasible target, provided that economic trends do not let us down.’ TMG Annual Report 2007 27 Interview Fred Arp | CFO 27 June 2007 TMG acquires right to invest in combined ProSiebenSat.1 / SBS Broadcasting Group Telegraaf Media Groep N.V. (‘TMG’) and Lavena Holding 5 GmbH (‘Lavena’), an entity controlled by funds advised by Kohlberg Kravis Roberts & Co. (‘KKR’) and funds advised by Permira (‘Permira’), have reached agreements in which TMG is being granted an option to acquire 12% of the voting shares in ProSiebenSat.1 Media AG (‘ProSiebenSat.1’), subject to the completion of the acquisition of the SBS Group by ProSiebenSat.1 early July 2007. Given the current shareholders structure Lavena would control 76% of the voting shares in ProSiebenSat.1 while Axel Springer AG and TMG would hold 12%, in case TMG exercises the option. 28 TMG Annual Report 2007 Consolidated key figures In th thou ousa sand ndss of euross 2007 20 07 200 0066 Rev even enue uess Ope pera ratiting ng res esul ultt Fin inan anci cial al inc ncom omee and expe pe es penses Res esul ultt beefo fore re tax Inc n om omee ta taxx Gai ainn on sal alee of dis isco contin inue uedd ac actitivi vitities es,, ne nett of tax Result of the yea yearr Minorityy interest st Result attribut utable to sh shar a ehol olders rs off Te T le legr grraa aaff Me Media Groepp N.V. 738 79 738, 7955 -27,760 420,368 68 392, 2,6088 -6,6 -6 ,676 76 3 9,284 39 -813 400,097 67 678,144 -21 21,7 ,785 9,5 ,551 51 -122,2 ,234 34 -7, 7 22 226 54, 4,189 49, 9 181 -418 49,599 Proposed po result appropriati pp pr p tion on (no not st stated ed inn th thee fifina nanc ncial stattement)) Adjusted/released dj from reseerv rves es Dividend pa ppayment paym aym (f (from resultlt)) Pay-out ayy ratio Cash flow from operating op g activi vitities es 350,097 50,000 12.5% 62,130 24,599 25,000 50% 60,195 8.00 1.24 1.00 3,594 0.97 1.18 0.50 3,782 Per share: Result Cash flow from operating op g actitivvities Dividend Fte at year ye end ye TMG Annual Report 2007 Consolidated information Financial Performance The 8.9% increase in revenue to € 738.8 million is primarily due to the fact that the participating interests Sky Radio Results Group and Keesing Media Group acquired in 2006 are The 2007 and 2006 annual figures have been prepared in consolidated in the figures for the full 2007 financial year, accordance with the currently applicable IFRS guidelines. and for 2006 from the moment of acquisition. The changes in TMG’s portfolio during 2006 (the sale of the The consolidated operating result declined by € 6.0 million operations in Limburg and the acquisition of the Sky Radio to negative € 27.8 million. Normalised for exceptional items Group and the Keesing Media Group) make comparison and amortisation, the consolidated operating result rose with the 2007 operating results difficult. To allow for a by € 5.7 million (12%) in relation to 2006, to € 53.3 million. better comparison, the net results from discontinued busi- This increase is due to a clear increase in the normalised ness operations for 2007, as well as the comparative 2006 operating result before amortisation of the enterprises figures, are reported separately in the consolidated income acquired in 2006 (€ 13 million). statement. Furthermore, certain revenue and expense items Organically (excluding the activities of the Sky Radio were reclassified, which also have been changed in the Group, the Keesing Media Group and activities in Limburg), comparative 2006 figures. there is a decrease in the operating result before exceptional items and amortisation from € 29.3 million in 2006 to A net profit of € 400.1 million was achieved during 2007, € 21.4 million in 2007. This result decreased in particular compared to a net profit of € 49.6 million in 2006. The sale during the second half of the year in relation to the first half of the interests in SBS Broadcasting S.à.r.l and Koninklijke of 2007, as well as the second half of 2006. This is due to Wegener N.V. in particular resulted in a gain of over € 411.6 disappointing revenue trends, but in particular incidental million and resulted in the highest net profit ever earned by costs in the amount of € 7.7 million, including € 2 million the company throughout its 115 years of existence. for creating the Telegraaf Media Nederland organisation, € 2 million to establish the procurement organisation which in 2007 is not offset by any savings, € 1.2 million in transition costs for outsourcing the office automation functions and € 1.0 million for hiring temporary agency personnel in (NORMALISED) EBITA In thousands of euros Revenues Other operating income Raw and auxiliary materials Personnel costs Other operating expenses Depreciation EBITA support of the distribution reorganisation. 2007 738,795 2,499 -61,352 -306,779 -326,183 -23,923 23,057 2006 678,144 6,038 -61,478 -302,403 -283,455 -28,343 8,503 Revenues increased by € 60.7 million to € 738.8 million in 2007, due to a € 19.2 million increase in advertising revenue, a € 32.8 million increase in circulation revenue (including the Keesing Media Group) and a slight net increase of € 1.2 million in production and distribution revenue. The significant increase in other revenue in the amount of € 7.5 million includes revenue from Normalisations Restructuring costs 11,970 Employee profit-share 14,487 Pension schemes 1,205 Other 2,565 Total normalisations 30,227 digital activities, such as the Relatieplanet, 41,056 -4,609 2,642 39,089 Habbo.nl and the Pilarczyk Media Group. Total operating expenses increased by € 63.1 million from € 706.0 million to € 769.1 million. This increase includes an increase of € 20.5 million in amortisation (due to acquisitions) Normalised EBITA Amortisation and impairment Operating result 53,284 47,592 50,817 -27,760 30,288 -21,785 and an impairment including € 13.0 million related to the Customer Relationship Normalised EBITA = Earnings before interest, tax and amortisation, excluding restrucuring costs, employee profit sharing related to sale of investments and associates. Management application (CRM application) and the brand name from Sky Radio Hessen, 29 30 TMG Annual Report 2007 Consolidated information as well as an increase of over € 42.6 million in other operating The 2007 cash flow exceeded € 430 million. € 62.1 million expenses. The increase in other operating expenses to € 326.2 was derived from operating activities, fractionally higher million is primarily due to the transfer of the free local paper than in 2006. € 192.7 million of the € 604.1 million in revenue distribution branch to Alfa and the outsourcing of office derived from the sale of participating interests was used to automation. Furthermore, the acquired companies contributed redeem external financing, primarily that of the Sky Radio to the increase as a result of the outsourced work. Group. The wages and salaries and associated social contributions Revenues comprise also expenses for the 2007 profit sharing scheme Revenues rose by 8.9% from € 678.1 million in 2006 to in the amount of € 14.5 million. There was a significant € 738.8 million in 2007. Important factors in this regard increase in the cost of temporary agency personnel due to included the increased revenues from paid subscriptions the implementation of the CRM application and the (€ 32.8 million), increased advertising income (€ 19.2 million) reorganisation of the distribution activities. Restructuring and other revenue (€ 7.5 million). expenses dropped significantly from € 41.1 million in 2006 to € 12.0 million in 2007. The result from associated participations increased by € 364.2 million to € 352.6 million, primarily realised by the REVENUES (€ 738.8 MILLION) sale of the participation in SBS Broadcasting S.à.r.l which resulted in a gain of € 349.5 million and the sale of the interest in ANP which resulted in a gain of € 2.5 million. Financial income increased by € 47.2 million in relation to 2006 to € 76.2 million, including the € 57.0 million Advertisements gain resulting from the sale of the Subscriptions + single-copy sales Wegener participation. The interest on Third-party printing the shareholder loans extended to SBS Distribution Broadcasting S.à.r.l was received up to Other revenue the date of the sale of SBS and amounted to € 6.5 million. The revenue related to the 39.5% sale of SBS has been invested in term deposits 1.1% that produced over € 7.7 million in interest 5.9% revenue. Financial expenses increased slightly to € 8.4 million of which the major portion (approx € 6.5 4.5% million) is directly or indirectly related to the financing of 49.0% the Sky Radio Group and the expansion of the share in this participating interest from 28% to 85% in July 2007. Similar to last year, there was a tax saving, although the amount decreased from € 7.2 million in 2006 to € 6.7 million in 2007. € 54.2 million of the Groep ’s revenue was generated abroad. In 2006, foreign revenue was € 34.2 million (5.0%). The record profits achieved by the enterprise are primarily Revenue per employee (FTE) increased by € 25,000 to due to the capital gain on the sale of participating interests € 202,000, an increase of 14.1%. that are exempt from taxes. The effective tax rate on the The net revenue, average number of person-years and 2007 operating result was negative 1.7%. In 2006, this was revenue per employee trends over the past five years are negative 16.2%. as follows: TMG Annual Report 2007 Consolidated information REVENUE PER EMPLOYEE TMG revenue Average ge amount (x € 1 million) n) fte 200 003* 3* 683.6 2004* 4* 694.3 .3 200 005* 736.7 2006 678.1 2007 738.88 *Includingg Limburgg actiivi vititiees 4,459 4,354 4,3 ,317 17 3,82 3, 8266 3,66 6655 A erage Av agg revenue p emp per mployee ye (x € 1. 1.000) 0)) 153 159 171 177 202 20 Shares In 2007, 2,499,200 ordinary shares were withdrawn. This has resulted in a change in the composition of the number of shares in relation to 2006. The number of shares consists of 50,000,000 ordinary shares (2006: 52,499,200) and 960 priority shares of € 0.25 nominal value. Of the ordinary shares, 259,800 shares were bought back in 2007 but have not yet been withdrawn. Of the ordinary shares, 31,676,029 were converted into depositary receipts as at 31 December 2007, amounting to The revenue generated by the publishing segment rose by 6.5% in 2007 to € 621.0 million. Of this increase, 4.5% is attributable to the full consolidation of the Keesing Media 63.4%, compared to 62.7% at the end of 2006. Investment Group B.V. (acquired in mid-2006) in 2007. Radio-related The total amount invested in 2007 in property, plant and revenue increased by 4 6.1%. This too is attributable to the equipment, and in intangible assets (excluding goodwill) full consolidation of the Sky Radio Group (acquired in April amounts to € 17.7 million. These are investments in soft- 2006) in 2007. ware (€ 7.1 million) as well as other tangible fixed assets (fleet, office fixtures and fittings, and investments in hardware): € 10.6 million. SEGMENT REVENUE x € 1 million Print Daily lyy newspapers spap sp app Regional eg newspapers pape pe Free local papers pape pa pe Magazines ag Puzzle magazines ga ga Other The first six months of 2008, there will be 2007 2006 made no decision about a different size of newspapers, including the concerning 329.4 108.1 55.0 61.7 49.1 17.7 621.00 45% 15% 7% 8% 7% 2% 84% 336.5 105.6 54.0 54.2 23.1 9.8 583.1 50% 16% 8% 8% 3% 1% 86% net profit and depreciation and amortisation, 52.8 7% % 36.1 5% impairment included in the net result for the 44.8 44.8 8.3 11.9 11 .9 65.0 65 .0 6% 1% 2% 9% 43.2 8.3 7.4 58.9 58 .9 7% 1% 1% 9% realised from the sale of the interests in SBS 738. 73 8.88 100% 10 0% investments. Dividend policy The dividend is normally set within a bandwidth of 15% to 30% of the cash flow, with cash flow being defined as the sum of the normalised for the effects of revaluation and Radio Other activities Distribution Print third-party -p ty Other activities year. In part based on the € 405 million gain and Wegener, this would result in a dividend of between € 1.36 and € 2.71 per share. A dividend of € 1 per share is proposed in the interest of reserving the investment resources 678 78.1 .1 100 00% % Shareholders’ equity required for 2008, potentially including the ProSiebenSat.1 call option. In addition, company shares in the amount of over € 51.5 million were Including the result achieved in 2007, the distributed dividend bought back up to the middle of March. Last year’s dividend in 2006 and the share buy back in 2007, shareholders’ was € 0.50 per share. equity increased sharply from € 498.0 million at the end of 2006 to € 866.8 million at the end of 2007. The dividend to be paid for 2007 has not yet been factored into equity. This represents an increase of € 9.96 to € 17.43 per share. 31 32 TMG Annual Report 2007 Interview Patrick Morley | COO ‘Whenever just a single the entire F ollowing years of focusing on the returns achieved by separate business units, TMG’s attention is once again focused on the strength of the organisation as a whole. A key factor here is the collaboration between the business units within the chain. The search for the optimal combination of costs, quality and reliability continues unabated. Teamwork, the continuous interplay between components of the chain, is a central theme. ‘It is a relay race. Whenever just a single person drops the baton, the entire team suffers,’ according to Patrick Morley, Chief Operating Officer. Patrick Morley’s appointment to the Executive Board in 2007 makes him a newcomer to Telegraaf Media Groep. network and highly effective printing operations in Amsterdam Prior to his transfer, he was Netherlands Director for and Alkmaar. However, in all of these areas we must conti- Wolters Kluwer. Before that he worked for KPN. nuously ask ourselves: are we delivering optimal quality His main task within TMG will be to continue to improve the and reliability at the best possible price? We sold the free organisation’s operational processes. ‘TMG is a phenomenal local paper delivery operation to a third party that has enterprise with a good working atmosphere. People are provided us with quality and reliability guaranteed at a committed and motivated. No matter what scenario good price. Based on similar conditions, we are investigating management is focused on, it is important to always keep the possibility of outsourcing the high-level distribution this in mind.’ operations in the Netherlands to a third party that is capable Price, quality and reliability Patrick Morley is impressed by what he has seen within TMG. ‘The national dailies, regional dailies and free local of doing this more efficiently, while maintaining quality and reliability.’ Chain management newspapers, provide TMG with refined coverage of the The key concept that drives how Patrick Morley views the market for print media. We possess an intricate distribution organisation is chain management. ‘The intelligence of this TMG Annual Report 2007 Interview Patrick Morley | COO person drops the baton, team suffers’ ‘Motivating people’ enterprise is related to defining and This involves teamwork that requires ‘This is primarily a way of managing. The reaching target groups. The editors sense continuous interaction. And for each phase, chain is as strong as its weakest link. No this and create content. The printer and the question that needs to be answered matter where you are positioned within production units carry this out, and the is whether optimal price, quality and the chain, you are part of the chain. distribution units deliver it to the client. reliability are being provided Management’s Every phase of the chain must be aware All phases of the chain are characterised task is to ensure this is so.’ In terms of the of the importance of its actions for the by reaching the client. In that chain, the culture of the organisation, this means next link in the chain. This means that newspaper delivery person on a bicycle that every segment of the chain must be you must not only think about how to is just as important as the executive editor. aware of its role as part of the whole. pass your baton to the next link, but it 33 34 TMG Annual Report 2007 Interview Patrick Morley | COO also means staying in touch with the printing operations and by outsourcing the previous phase. We have to perform delivery of free local newspapers. We will better as an overall organisation in order continue this process in 2008.’ to be able to realise the financial objective of achieving a 15% margin on € 800 Motivating people million in revenue by 2009. The operating TMG will continue to develop the chain results must therefore be increased and management and management by improving the management of the entire business unit concepts in 2008. ‘We have chain is of key importance in this regard.’ to improve and become more cost effective Management by component in all segments of the chain. We must improve efficiency in production and In addition to being aware of one’s role distribution in order to save costs. within the chain, it is also important to And increase the effectiveness of our manage the decisions that are taken sales organisation in order to increase within each segment. Patrick Morley: revenue. We will subject the current ‘You have to make choices between portfolio to intense scrutiny and possibly scarce resources in each phase. The undertake some acquisitions in order to editor decides on the news, for example. create a more balanced division between Other units, for example, select projects organic growth and acquisition-based and share resources. The coordination growth. In terms of managing the chain, of such decisions, based on the interests we will not only be reviewing print of the chain as a whole, is something products and digital media, but all media that will be given greater attention. The types across the full breadth of the trends in the market over the past few organisation, as well as potential cross- years are clearly forcing us to make media opportunities. Management based choices. The urgency has increased and on statistical analysis represents one coordination and control is therefore policy aspect in this regard. However, even more important. Not only in relation ultimately it is not only about the figures. to print products, which have been under It is just as important to motivate people. pressure for a longer period of time, but TMG has always been at the head of the elsewhere as well. pack due to the spirit, commitment and Every segment of the chain will have to quality of its people. This employee become more efficient if we are to achieve commitment and competence is the the financial objectives. We took a step in strength of the enterprise,’ concludes that direction in 2007 by reorganising our Patrick Morley. TMG Annual Report 2007 35 Interview Patrick Morley | COO 29 June 2007 Sanoma Uitgevers sells its puzzle magazines to Keesing Dutch-based Sanoma Uitgevers, part of Sanoma Magazines, and Keesing Media Group BV (Keesing), part of Telegraaf Media Groep N.V. announced today that Sanoma Uitgevers has sold its puzzle magazines in the Netherlands to Keesing. The acquisition involves all activities of the puzzle cluster and 23 employees. Sanoma Uitgevers’ puzzle portfolio consists of brands as Puzzelsport, Bingo! and 10 voor Taal. 36 TMG Annual Report 2007 Consolidated figures corporate affairs Four core values were identified in 2007, i.e. change-orientation, Human Resource Management (HRM) These core values have been incorporated into the manage- The year 2007 for the HRM department was primarily ment competency profiles, the performance management characterised by the Focus Project and the creation of cycle and the Management Development Programme. The the Telegraaf Media Nederland organisation that resulted change management project will continue to be pursued in from it. Telegraaf Media Nederland’s new management 2008. team was appointed in the spring and officially started integrity, professionalism and commitment. working on the design of the organisation on 1 September Management development 2007. In part due to the creation of Telegraaf Media Nederland, Employment was clear internal rotation. 31 key positions were filled by Employment in the enterprise increased during 2007 due to internal and 6 by external candidates. the acquisition of a puzzle portfolio by the Keesing Media Furthermore, a new high potential programme was initiated, Group, Pilarczyk and WebRegio (digital), and Carp (personnel as well as a basic training programme for TMG managers. market). This was offset be a reduction in employment due Both training programmes were developed and are being to reorganisations and the disinvestment of the free local delivered in close cooperation with internal and external paper distribution operation (DistriQ), Les Editions de Saxe experts. the mobility of key officers has increased. In 2007, there and Sky Radio Hessen. On balance, the group-wide FTE count decreased from An optimisation project was initiated at the end of 2007 3,782 at the end of 2006 to 3,594 by the end of 2007. in relation to the absenteeism and reintegration policy. Terms and conditions of employment The objective is to enable supervisory personnel to better assume their responsibilities in the area of occupational All Collective Labour Agreements (CAOs) expired in 2007 and health and the employability of their employees with the new agreements were in the process of being negotiated. support of a case manager and absenteeism counsellors. On average, wages are expected to rise by 2.75% per year In addition, to support supervisory personnel, a company during 2007 (as of July) to 2009, inclusive. physiotherapy pilot has been set up in a number of operating companies. The duration of the pilot is one year. The idea A final agreement was reached in July 2007 about a some- is that if complaints are addressed earlier on, the employee what more austere renewed 2006-2007 Social Plan that is better able to make a motivated contribution to TMG. applies to all 100% TMG operating companies. In view of the Social Plan’s current term, initial discussions were held Environment in relation to the 2008 Social Plan. The parties had not yet New Energy Saving Programmes have been set up in reached agreement by the end of 2007. Alkmaar and Amsterdam. Implementation of these Culture Energy acquisition contracts were centrally concluded, TMG is experiencing a rapid transition from a publisher to whereby, in addition to negotiating favourable pricing for a multimedia enterprise. In this context, management and all business units of TMG’s branch offices, ‘green’ power employees need different competencies and must assume will be used. programmes will begin in 2008. a different attitude. In 2007, a culture change from an ‘informal The regular audits conducted by the Environmental Service family’ culture to a ‘business, innovative’ culture was initiated. confirm that all legislative regulations are met. TMG Annual Report 2007 Consolidated figures Corporate procurement The goal of the Corporate Procurement unit is to contribute to TMG’s operating results by reducing costs, exploiting the synergy between the various working companies and by increasing supplier involvement. Corporate Procurement has gone through a professionalisation process that resulted in the consolidation of the decentralised purchasing units under central management. The procurement policy is focused on more intensive collaboration with a selected number of preferred suppliers, so that suppliers are able to proactively contribute their thinking to the quality, flexibility and cost control processes. 2008 will be a year in which the impact of the results achieved will become visible. Employee participation The 15 members of the Central Works Council (COR) have set themselves the target of not only simply promoting the interests of employees, but of acting as chosen representatives who take the mandate specified in the Works Councils Act (Wet op de Ondernemingsraden (WOR)) very seriously indeed. This is an important starting point in view of the change process currently underway within TMG. The effort and professionalism of the COR contributes to the quality of the decision-making process and to the commitment and confidence of employees. The Executive Board appreciates the COR’s judgment and mutual consultations are taking place in a constructive atmosphere. The creation of Telegraaf Media Nederland was an important subject for the COR during 2007. In addition, the COR provided advice on matters such as acquisitions, organisational changes in DistriQ, renewal of the Social Plan, a proposed new group profit sharing scheme and the appointment of a new COO. Based on its strengthened right of recommendation, the COR also participated in the selection of Mr. J.G. Drechsel as a new member of the Supervisory Board. 37 38 TMG Annual Report 2007 Interview Rob Eijkelenkamp ‘Creating a R ealising a sizeable increase in revenue and returns Standardisation and control in a market with modest growth. That is the ‘The market for personnel adverts is levelling off, the challenge facing Telegraaf Media Nederland, emergence of new free daily newspapers has put rates under which was created in 2007 by clustering operations in the pressure, the market leaders in online media offer little room Netherlands. Standardising methods, centralising for price gains and advertisers in the online classified adverts operational activities and making choices on the basis of market segment are increasingly reluctant to pay for adverts.’ the existing portfolio are key policy directions for the coming years. ‘The objectives are clear, everyone is These are but a few of the challenging market trends facing convinced of the necessity; we must now work together Telegraaf Media Nederland. ‘The media expenditures market to produce the required results,’ says General Manager is limitedly increasing every year. The thing that therefore Rob Eijkelenkamp. offers the greatest opportunity for improvement is to expand the portfolio to include new products and to realise Rob Eijkelenkamp was actively involved in key developments improvements on the cost side. Improved chain management within TMG, operationally as well as on a more strategic and tighter control on the basis of standardisation and level, both as Director of the Sp!ts daily newspaper and as optimisation. Standardisation produces uniform processes. Chief Synergy Officer. This experience provided him with This makes it easier to combine activities and to link new the necessary foundation for meeting the challenges that are activities to them,’ according to Rob Eijkelenkamp. now awaiting him. The Dutch print and media operations will have to contribute to Telegraaf Media Groep’s 2009 A different aspect of the process involves the optimisation financial objectives. of the portfolio by subjecting all publications to a critical Across the full breadth of the organisation and in all media review and to judge them on the basis of performance and types included in the Dutch organisation. The quality of our strategic interests. This can result in the rejection of titles brands, products and people provides us with a good starting that are not sufficiently profitable. But it can also result in point for improving profits, albeit at a time when growth strengthened regional market positions by filling in any projections for the Dutch economy are being tempered and white spaces, by centrally controlling the digital publications results will have to be achieved in a highly competitive market. of regional titles or by supplementing digital titles with TMG Annual Report 2007 Interview Rob Eijkelenkamp unificated culture’ Jointly working to develop solutions to a performance-based management The necessity for improvement produced approach. By providing people clarity a clear, concrete financial objective and in terms of their objectives and then has put an awareness-creating process compensating them on the basis of the into motion. ‘The organisation under- realisation of these objectives.’ stands where we want to go. The next hold that decision. We are also migrating step is to continue to implement this Making choices vision on a project basis. We have become The continued implementation of the a single publisher in the Netherlands with structure created in 2007 is a key under- many divergent forms of expression. taking for 2008. This will require choices We must now unify the organisation and to be made in terms of the product portfolio. work on a process of integration. We The current products and media will be centralised editorial content. An important are conscious of the fact that we must reviewed to determine opportunities for step as well, is the bundling of knowledge work better together. We are also aware improvement and organic growth. In in the area of technology and marketing of the fact that the majority of costs is addition, opportunities for growth on the digital media, and more emphatically incurred internally. Solving the problem basis of acquisitions will be investigated, communicating the company’s market therefore is a joint enterprise as well. because experience has shown that leadership in that area to the market. ‘The objective is to ensure that every manifestation, in whatever form of publication, becomes profitable. Control and centralisation are important instruments in this regard, provided that flexibility and entrepreneurship are not sacrificed. ‘Jointly working to develop solutions’ We want to increasingly move towards the centralised control of supporting and operational processes, such as IT, administration, distribution and HR policy. When you discuss these things together, this approach often yields results more Objectification is the starting point for tight it becomes clear pretty quickly that the quickly than in-house development, issues are the same everywhere and that especially with digital media products. you are therefore able to work together to ‘The ultimate goal is to realise the 2009 cost control policy. The financial objective at the TMG Groep develop solutions. By adopting a change- financial objectives on the basis of leading level of 15% return on € 800 million revenue oriented attitude it then becomes a market positions. by 2009 is the big stick and creates a lot question of jointly – in a very business-like Because market leadership provides of clarity.’ manner – making choices, identifying access to optimal returns,’ according to who should make the decision and then Rob Eijkelenkamp. 39 40 TMG Annual Report 2007 The Netherlands The advertising market The free local newspaper, Sp!ts, is aiming for maximal reach The overall net advertising expenditures in the Netherlands in the national niche markets of students and young in 2006 rose by 4% to € 4.5 billion (2005: € 4.3 billion). professionals by focusing on news and entertainment. HDC A further increase of over 2% to € 4.6 billion is projected Media is focused on strong and profitable regional titles. for 2007. Holland Combinatie is striving for local market leadership in the Telegraaf Media Nederland is to strengthen markets and products in support of Telegraaf A programme of organisational change for a substantial Media Nederland. ‘Greater Randstad’ region. Telegraaf Tijdschriften Groep’s task part of the publishing activities in the Netherlands was introduced in early 2007 under the project name ‘Focus’. The internal focus will be on achieving a competitive cost level, by means of maximising collaboration and synergy in The objective of the programme is to achieve higher returns the various sub-sectors. Together with the production units, on the basis of creating more synergy and efficiency and a further work is underway to develop market-based pricing better internal revenue target setting process for print, as and quality standards for the production units and a further well as for digital products. refinement of the rate structure. Aside from product renewal, the emphasis is also on cost reduction in relation to print media in this context, while Digital media in the case of digital products, there is a push to increase Telegraaf Digitale Media Nederland consolidates the revenue. The latter is realised on the basis of acquisitions organisation’s digital activities. Existing activities have been on the one hand and better exploitation of the current extricated from the publishing houses and distributed across market position on the other. five business units. Online Marketing & Sales, Media- The project phase was finalised in the second half of 2007, Mobile Publishing. technologie, Database Publishing, Beeld & Geluid, Web & and resulted in the emergence of a new organisation named The set up and design of this new organisation was not yet Telegraaf Media Nederland on 1 September 2007. fully completed by the end of 2007. The activities of Uitgeversmaatschappij De Telegraaf, BasisMedia, HDC Media, Holland Combinatie, De Telegraaf Digitale Media is required to contribute to achieving a Tijdschriften Groep and All Connected Media will be joined maximum share in media consumption. Growth in digital in the new organisation, while retaining existing consumer media is to be achieved by means of independent brands. This involves some hundred print titles, one hundred development and acquisitions. A revenue of € 38.5 million Internet sites, video production houses and ‘Out-of-Home (2006: € 34.3 million) was realised in 2007 TV’ networks. Print media The scope consists of the overall addressable digital market, which is projected to reach € 3.1 billion in 2009 Telegraaf Media Nederland intends to realise a vital market and which includes the following: leadership position in the Dutch print media market on the • Internet (models: advertising and user paid) basis of national, regional and local brands in relevant • Lead generation, database marketing and the facilitation of e-commerce markets or target groups such as personnel, cars, finance, women, travel, entertainment, retail and telecom. Telegraaf Media Nederland intends to meet its objectives by • Digital tv and Web tv • TV production and digital content • Narrowcasting and Broadcasting means of a maximal share of consumer media consumption. Based on optimal collaboration and synergy, the business TMG enjoys a strong position in digital media in the units are anticipating the key advertising and consumer Netherlands. Its more than 100 Internet sites reach half of trends. The largest business unit and market leader, the Dutch population who are 13 years and older, every De Telegraaf, is striving to stabilise its circulation and reach month. across a broad, national target group with its daily newspaper and associated component brands. TMG Annual Report 2007 41 The Netherlands 2 July 2007 Joint Venture TE2 terminated The Boards of both Expomedia Group PLC (Expomedia) and Telegraaf Media Groep (TMG) jointly announce the termination of Telegraaf Expomedia Events (TE2), a Joint Venture established by both companies in 2004. This being due to the fact that the combination of activities of the Joint Venture turned out to be financially non-viable. Also this decision follows Expomedia ‘s previously announced policy of focussing on its core markets of Russia, India, Poland, UK and Germany. In The Netherlands TMG will via it’s subsidiary Telegraaf Events B.V. further develop the successful and profitable portfolio of exhibitions and events in the areas of automotive (402EVENTS.COM B.V., 100%), fashion (Modefabriek B.V., 50%) and home and decorations (Ludique Events B.V., 50%). 42 TMG Annual Report 2007 The Netherlands Highlights by business unit Online Marketing & Sales One of Digitale Media’s spearheads is to increase the return on its existing Internet sites. The over 100 Internet sites must improve their collaboration and knowledge sharing, link their reach, jointly build up and enrich client knowledge and operate as a single powerful entity in the national advertising market. Enhanced synergy here leads to increased returns. Database Publishing As of September 2007, Telegraaf Classified Media’s operations continued under the name Database Publishing. This reflects the goal of broadening the field of operations, but also indicates that the market is undergoing significant change. New business models are emerging in a number of markets, whereby revenue is generated from other than customary sources. The paid listings model is consequently under pressure in the housing market as well as at Speurders.nl. Beeld en Geluid This unit, which incorporates Librium TV (84%), Telegraaf Productiehuis and Pilarczyk Media Group (75%), is responsible for implementing the convergence strategy, in which TMG Annual Report 2007 43 The Netherlands the transition from ‘text and still images’ to ‘moving images and sound’ is a central theme. The unit is actively involved in the exploitation of various channels (Out-of-Home TV and WebTV) and in the creation, purchase, editing and exploitation of ‘moving content’. Web & Mobile Publishing This unit incorporates Internet activities related to news, entertainment and communities. Among others this includes: Sugababes/Superdudes, WUZ (Wat U Zegt [What You’re Saying]), linked to the well-known page in the De Telegraaf, GSMedia (40%), which includes labels such as GeenStijl and Dumpert. Mediatechnology The Mediatechnology unit carries ultimate responsibility for all digital publication platforms, provides direction for internal media technology policy and is the technical execution producer. This unit is required to make an important contribution to 6 July 2007 the synergy objectives of Telegraaf Media Nederland. The exploitation of economies of scale and the bundling of know- TMG increases interest in Sky ledge are designed to produce cost savings for Digitale Radio to 85% Media’s 100 Internet sites. The unit was still developing at the end of 2007. By acquiring the interest of the non-strategic financial shareholders in the Sky Radio Group, the Telegraaf Media Groep (TMG) has increased its interest in the Netherlands’ most successful group of commercial radio stations from roughly 28% to 85%. Veronica Holding and management hold the remaining 15%. 44 TMG Annual Report 2007 Print NEWSPAPERS PAID DAILIES adverts by 12% and family notices by In the consumer market, the Dutch daily The overall circulation of paid Dutch 2%. The last few months of the year newspapers are represented by products daily newspapers in 2007 (1 October showed some improvement. that are different in nature, scope and 2006 to 30 September 2007, inclusive) The national dailies performed worse in publication frequency and are decreased by 2.9% to 3.7 million copies the advertising market than the regional segmented by region and by free or paid per day (2006: 2.1% decrease to 3.8 dailies. While the regional dailies lost 3% subscription. The overall daily newspaper million copies). of their volume, the national dailies lost 8%. The foreign portion of the circulation Uitgeversmaatschappij De Telegraaf market, after the introduction of two free newspapers in the first half of 2007, accounted for 5.4 million copies in the third quarter of 2007 (2006: 4.7 million). The performance of the Dutch daily newspapers in the consumer market nowadays is not only assessed on the basis of movements in the circulation of paper products, but on the trend in digital forms of publication as well. decreased by 2.2% to almost 39,000 copies per day. Last year the decrease was 1.9%, falling to almost 40,000 The normalised operating result of copies. Uitgeversmaatschappij De Telegraaf decreased slightly in 2007. Advertising The composition of the circulation is as revenue also exhibited a slight decline. follows: subscriptions: 90.5% (2006: While the subscription revenue rose by Figures recently released show that the 90.1%); single copy sales: 7.7% (2006: 2%, and the single copy revenue declined Dutch newspaper sites collectively are 8.1%) and other distributions: 1.8% by 1%. Digital revenues increased accessed 14 times per month and reach (2006: 1.8%). significantly. during the same period. The cumulative The national dailies decreased by 4.1% Circulation reach of all daily newspaper sites incre- (2006: -/- 1%) and the regional dailies As it did in 2006, the Dutch economy ased from 35% in January to 64% for the decreased by 1.4% (2006: -/- 3.3%). grew by 3% in 2007. The continuing high year as a whole. The total advertising volume, expressed level of economic activity ultimately had Within the global Dutch advertising market, in millimetres of paid dailies, decreased a positive impact on the De Telegraaf the portion related to daily newspapers by 4% in 2006. This excludes the Sunday daily newspaper circulation figures. 35% of all Dutchmen 13 years and older amounted to € 859 million in 2006 (2005: editions. Only the personnel adverts rose It’s true that circulation during the 2007 € 844 million). An increase of 3.5% to by 23%. In the other categories, brands circulation year (4th quarter of 2006 to € 889 million is projected for 2007. and services decreased by 6%, classified the 3rd quarter of 2007, inclusive) still TMG Annual Report 2007 45 Print declined by 2.8%, however the long- due to the start-up of a new Customer term trend reversed by mid-2007 and Relationship Management system. The the circulation once again exhibited a number of delivery complaints started fractional increase. The share of the De to decline in the fall, but the internal Telegraaf daily newspaper in the paid standard was not met in 2007. Additional dailies subscription market rose slightly actions will be taken in 2008 to bring the in the third quarter of 2007 (source: HOI, quality of newspaper delivery back to the excluding Sunday edition). desired level. The number of permanent De Telegraaf De Telegraaf is increasingly involved in daily newspaper subscriptions, including the sale of books, DVDs, tickets and, weekend subscriptions, reached a record since the end of 2007, wine as well. More high of over 610,000 during the last than a quarter of a million books were quarter of 2007. The number of weekend sold in 2007. With 23,000 copies sold, subscriptions rose to over 60,000. the book about Maxima has become a Single copy sales were affected by the bestseller in its own right. free newspapers in 2007. National single copy sales from Monday to Saturday, 16 July 2007 TMG increases its share in Media Librium The circulation forecasts for 2008 are inclusive, declined by 8.1%, while the a stretch. The European Football TMG (Telegraaf Media Group) number of copies sold abroad stayed Championships and the Olympic Games, has expanded its existing virtually at the same level. depending on the results achieved by the interest in Media Librium from As of 1 April 2007, the single copy price Dutch teams, are expected to significantly 40% to 84% by acquiring the of the Saturday and Sunday editions boost circulation. Furthermore, quality shares of non-strategic parties. increased by 10%. The cost of a improvements are designed to minimise The remaining shares belong subscription was increased by 4.5% the loss of subscriptions. to Media Librium management. effective 1 October. Advertising This transaction is in keeping with TMG’s digital strategy and In order to remain competitive in the the ambitious objectives that advertising market, a policy of restraint were recently announced. In the was adopted in relation to pricing trends. coming period, maintaining and Based on equal volume, advertising further expanding its leading revenue declined. position in the market will be the focus of Media Librium’s The fact that De Telegraaf is operating in activities, as well as higher a competitive market became abundantly turnover and results. clear this year. Newspapers and newcomers to the market are all competing for the same advertising revenues. Particularly advertisers in the Top 50 expect a special approach in the form of customised concepts or cross-media propositions. Revenue in this category consequently clearly increased. Market growth in the personnel adverts category The quality of newspaper delivery outpaced that of the De Telegraaf. The operations was under pressure in 2007, number of classified adverts once again primarily due to the growing shortage of declined. newspaper delivery personnel, but also 46 TMG Annual Report 2007 Print Editorial board Under the title ‘Laat Nederland Rijden’, distributed within the same distribution De Telegraaf has been able to maintain attention was focused on the problems window as Sp!ts and partially via the its market leadership position in 2007 that characterise driving in the Netherlands. same channel. In spite of this, adverti- without challenge. This caused the social debate surrounding sing revenue and the operating result The magazine VROUW was launched at this theme to intensify. In addition, the both clearly increased. the start of 2007. Due to the fact that this intensive focus prior to the Christmas magazine is distributed as part of the season on the work performed by the Saturday edition, the magazine became Dutch Military in the Afghan Province of the largest women’s magazine in the Uruzgan, created a sense of appreciation Netherlands at its initial introduction. for the mission among supporters and Advertisers quickly caught on to this fact opponents alike. as well, and the advertising revenues generated by this publication are Internet consequently exceeding expectations. The number of visitors to the De Telegraaf An Internet extension was added to the Internet sites continues to rise. magazine during the course of the year. De Telegraaf appears to be an obvious brand that is consulted daily. Advertising The Wat U Zegt [What You’re Saying] revenue is rising in tandem. The news- page has been renovated and the website paper/website combination appears to www.wuz.nl has been linked to this page continue to be highly complementary in due to the need for readers to contribute terms of readers and visitors. news themselves or to react to the news. The average daily number of unique The addition of the Carrière page in the visitors to telegraaf.nl website in 2007 Sp!ts was able to successfully differentiate Saturday edition provides readers with was over 550,000; in January 2008 the itself from the competition in terms of its news and information about work and number of unique visitors to the site rose editorial formula, as well as its income. The expectation that this group to almost 700,000 per day. Weekdays communication approach to consumers of readers would also attract specific enjoy greater popularity than weekends and advertisers. Restyling of the product, advertisers appears to have been borne in this respect. a new and multimedial proposition: News & Entertainment and Careers, and a new out. The revenue generated on the basis of campaign with a new slogan contributed The editorial board highlighted an important cross-media propositions is also to these results. theme several times during the past year. increasing. This is due to the increased effectiveness of the concepts developed Sp!ts’ circulation rose somewhat in 2007 by the department specifically created to an average of 421,700 copies per day for this purpose. FREE NEWSPAPERS of issue. Improvement of the quality of distribution was one of the key spearheads in 2007. The total daily circulation of free newspapers, after the introduction of two free In the advertising market, Sp!ts garnered newspapers, consisted of over 1.7 million market share in the all important national copies in the third quarter of 2007 (2006: advertisers and personnel categories. 4th quarter 2005 to the 3rd quarter 2006, The growth in the personnel advertising inclusive, over 865,000 copies). market also had a positive impact on the BasisMedia The competition experienced by Sp!ts results achieved by the InfoPinnacle and SmartEvents participating interests. The second edition of the Sp!ts CareerEvent sharply increased over the past year. held in November was completely Two new free newspapers are being sold out. With the acquisition of Carp, TMG Annual Report 2007 47 Print BasisMedia strengthened its position in HDC Media’s publications compared parties within Telegraaf Media Nederland. the ‘Young Professionals’ market. The favourably with other daily newspaper In this respect attention will be focused magazine has since undergone a restyling. publishers. More effective canvassing on new developments and initiatives. In In 2007, Sp!ts expanded its narrowcasting and strengthening of newspaper loyalty addition, inadequately performing titles kept the decline in subscriptions to will be subjected to a critical review. The recently announced participation activities in collaboration with Media below 1% and some publications even Librium and is negotiating with major experienced an increase. This result was in WebRegio is expected to assist HDC suppliers concerning the delivery of achieved in spite of the unacceptable Media in strengthening its regional posi- narrowcasting services. distribution quality. There was, however, tion and responding to the requirements a drop in single copy sales. The increase and demands of a changing market. REGIONAL DAILIES in revenue was due to a price increase. The regional dailies have also had to deal with the increased competition generated There was a slight decline in the revenue by the unabated surge in the availability generated in the advertising market from of free information, including the Internet, local and national adverts. Personnel as well as regional and national radio, adverts, however, produced significantly television and free local papers. more revenue than in 2006. The prospects for a further increase in personnel volume The regional dailies circulation market deteriorated during the latter part of 2007. declined by 1.6% during the third quarter of 2007 in relation to the third quarter Since 2003, HDC Media has implemented of 2006, to a circulation of 1.6 million various reorganisations. copies per day. HDC Media 8 August 2007 As a consequence, the number of jobs Univocal identity for all TMG decreased by over one third and personnel companies costs significantly decreased over the In comparison with other regional and past few years. There was a further Aiming to clearly and transpa- national newspapers, developments at decrease in 2007 as well. In addition, a rently put TMG (Telegraaf HDC Media were favourable. cost savings programme led to a slight Media Groep) on the map The operating result doubled in comparison decrease in other indirect costs. as the largest Dutch media to 2006, with fractionally higher advertising company, both nationally and and circulation revenue. The intent is to reduce the editorial The circulation trends registered by department’s personnel complement by logo will be rolled out in all TMG 30 FTE. The outcome of an editorial companies. review completed in 2007 is expected By implementing the logo internationally, the TMG group to contribute to the optimisation of the company wide, combined with titles’ content. This is expected to result the relevant company name or in an even better alignment with regional activity, a univocal identity for needs and readers’ wishes. all TMG companies is created. The brand TMG forms a crucial, The profitability of the Almere Vandaag leading and binding factor for, publication improved as a result of actions among other things, the finan- such as a reduction in the number of cial, labour and international publication days by one (Tuesdays). market and also the b-to-b Various books were successfully published market of underlying and a number of less profitable supplements brands. However, consumer have been removed from the market. brands remain unaltered but will The future will more than ever before be get a TMG endorsement. characterised by collaboration with other 48 TMG Annual Report 2007 Print FREE LOCAL PAPERS interest magazines, valued at € 347 The Dutch free local papers advertising million in 2006, remained virtually the market was valued at € 614 million in same as in 2005 (€ 349 million). The size 2006, representing an increase of over of the market is expected to be the same 4% in relation to the previous year (2005: as in 2006. € 588 million). An increase of 4% to € 639 million is projected for 2007. Holland Combinatie Telegraaf Tijdschriften Groep TTG revenue clearly increased in 2007. New projects, organic growth, improved The Holland Combinatie’s operating result distribution margins and the discontinuation clearly improved, with a fractional rise in of the loss-making Starstyle magazine advertising revenue and direct cost resulted in a significantly improved result. savings. Unfortunately, the margin is still below the The rise in advertising revenue is the result margin of the average magazine publisher. of an increase in the volume of mid-week In the circulation market, the revenue publications during the first half of the derived from subscriptions levelled off, year and an increase in the average price while the revenue generated by single of advertising space during the second copy sales increased somewhat. The half of 2007. The weekend publications have gone through a difficult year: volume as well as the price of advertising space dropped. In general, advertising rates are under a great deal of pressure in local markets. Based on reader surveys, the design and formula of weekend publications will be fundamentally changed. As an extension to and to strengthen mid-week and other publications, and due to direct, local competition, a number of websites with local information will soon be introduced. To achieve further growth, Holland Combinatie will focus on acquisitions or the in-house publication of new titles recovery of the advertising market within and outside the distribution region. continued during the year. Publications MAGAZINES showed significant improvements, while publications. In addition, the introduction The total circulation of general interest Privé is altogether successful. of the glossy magazine, Stijl ontmoet Stijl such as CosmoGIRL!, Residence and JAN Wonen, is an example of such collaboration. magazines in the Netherlands (excluding sponsored and daily magazines) in Two new publications were successfully the third quarter 2007 was 27.1 million launched in 2007. The more important This magazine appeared twice in 2007. copies. In the third quarter 2006 this was of the two was VROUW, a Saturday AM van Gaal Media (20%) 26.1 million copies. The market is divided supplement to the De Telegraaf. VROUW TMG holds a 20% interest in AM van Gaal into multiple segments that almost all demonstrates that good collaboration Media, a publisher of general interest experienced growth. between the newspaper and the magazine magazines primarily aimed at women. The Dutch advertising market for general groups can lead to new and successful AM van Gaal publishes the AM Magazine, TMG Annual Report 2007 Print Keesing Puzzles & Games potential for further internationalisation. In At the beginning of 2007, it looked like July 2007, Keesing acquired the puzzle 2007 would turn out to be a difficult year activities of Sanoma in the Netherlands. for Keesing’s puzzle activities due to the The emergence of the titles Puzzelsport, overabundant supply of popular Sudoku Bingo!, Tien voor Taal and Jan publications. As indicated earlier, this Meulendijks resulted in a strengthened relatively new and successful segment position in the Dutch market. attracted many non-traditional competitors. Les Editions de Saxe (EDS) was divested at the end of 2007. This company did not fit into the strategy and was not profitable. Not only the Sudoku publications, but also the traditional puzzle publications suffered as a consequence, particularly in France. In the meantime, quiet is returning to the market, also in France. Keesing’s strategy is focused on puzzle activities. In addition to the annual print circulation of 65 million puzzle magazines, Keesing puzzles now also appear in many daily, weekly and monthly magazines throughout Europe. Furthermore, Keesing has been active over the past few years as well as, since March 2007, the Catherine magazine. in the area of digital puzzles and games for the Internet and the mobile telephone. The digital games market is a growing PUZZLE MAGAZINES segment and Keesing intends to increasingly focus on that segment. The traditional puzzle market, originally a very stable one, has expanded The positions in the countries in which substantially as a result of the introduction Keesing’s products are distributed are of logic puzzles such as Sudoku, but has being further strengthened, while policy also become less stable as a result. is also being reviewed in terms of the 49 50 TMG Annual Report 2007 Interview Ab Trik T MG took advantage of the new rules that apply to media concentrations in taking over the Sky Radio Group, the most successful radio operation in the Netherlands. Sky Radio 101 FM is the radio station that attracts the highest number of listeners on a weekly basis in the Netherlands. The result of staying close to the market and continuous improvement. ‘Producing radio runs in our blood,’ according to director Ab Trik. Sky Radio was created in 1988 as part of Rupert Murdoch’s FM on the 50+ age group and more affluent individuals. Sky Television UK. The station originally broadcast only This makes us the most successful radio group in the over cable, but still managed to reach a large public Netherlands with a combined market share of 18.8%,’ audience. Sky Radio is the creator of Radio 538, which according to Ab Trik, a radio enthusiast in heart and soul. later, when broadcasting frequencies were reallocated, was ‘Radio is always accessible and can be plucked out of the forced to be sold to the then minority shareholders in air anywhere for free. Radio is image and sometimes simply Radio 538. Furthermore, Sky Radio Group owns New Radio habit. You need to ensure that your station is the first station Veronica, created in 2003 with Veronica Holding as a joint people turn to. This means that you must have a profile. In shareholder. The Sky Radio Group was acquired in 2006 by a segmented and free market it is after all very easy to a consortium led by TMG and was subsequently integrated switch to something else. You therefore have to be in tune into TMG on a phased basis. 85% of the shares are now with people’s tastes and the music that they would like to held by TMG, 10% by Veronica Holding and 5% by hear. We work on this on a continuous basis.’ management. Big target group Over the past few years, Sky Radio Group has grown into a Close to the product Ab Trik describes the Sky Radio Group as an enterprise with young creative people with a heart for radio. ‘You commercial radio enterprise with the largest weekly reach can’t sell radio advertising time unless it runs in your in the Netherlands. With 3.5 million Sky Radio, 1.8 million blood. We have a relaxed, flat and mostly informal orga- Radio Veronica, 800,000 Classic FM and roughly 350,000 nisational structure, however, people must deliver perfor- TMF Radio listeners, the overall weekly reach is almost 5.5 mance. Everyone is on top of this. There is a tremendous million listeners. ‘We get a terrific kick out of this,’ says degree of social control and we draw each other’s attention Ab Trik. ‘Like TMG, we are focused on a big target group. to our responsibilities. We listen to We have a well-distributed portfolio of radio stations. each other and to the programmes. TMF radio is focused on the 15-25 age group, Sky Radio Everyone keeps his/her hands in and Radio Veronica on the 20-49 age group and Classic things and we are very close to the Constant TMG Annual Report 2007 Interview Ab Trik ‘You’ve got to have radio in your blood’ product. And this works. The advertising sector selected frequencies. The current terms run until 2011. According to us as number 1 in the world of radio, with the best sales Ab Trik, FM will by far remain the most important distribution operation according to advertisers and media planners. system for radio over the next 15 years. Radio is like a football club. You are continuously judged on your performance. Radio listening data is published 12 Focus on digital times a year and you are sure to notice if the data is not The Sky Radio Group succeeded in strengthening market good. Revenues are directly related to radio listening data. share for all stations in 2007 and also made a good start This definitely keeps you on your toes.’ in this respect in 2008. Minor programming changes have The radio market was highly dynamic in 2007. Multiple for Sky Radio 101 FM: ‘Music that makes you feel good’. been implemented and a new slogan has been introduced stations changed hands and TMG increased its interest in New measures were also implemented in collaboration with the Sky Radio Group to 85%. What remained is the scarcity TMG. The financial editorial staff of the De Telegraaf daily in FM frequencies. Not much change is expected in that newspaper, for example, prepares the financial news for situation due to the related technical constraints. The Classic FM broadcasts, a station that with cable frequencies implementation of Digital Audio Broadcasting (DAB) is a new alone reaches considerably more listeners than Radio 4, development. The government wants to divide the DAB which can be reached anywhere via the FM band. In terms frequencies on the basis of an auction, possibly as early as of digital media, the Sky Radio Group also runs on TMG’s this year. The question, however, is to what extent market digital platform and selling advertising is a joint effort. players will express interest. Even in the British market, ‘Digital media is a trend that we will be looking at very closely. where DAB enjoys relatively large success, market players This will take the full attention of the digital director that are highly critical. One of the major impediments is the lack of DAB receivers. Another development in the Dutch radio market is the Constant fine-tuning. That is the core of our profession,’ announcement of the method that will says Ab Trik. be used to redivide the current FM fine-tuning we just appointed. Just like radio broadcast via the ether, digital media will be primarily brand and content-driven. 51 52 TMG Annual Report 2007 Broadcast, Radio, Television TELEVISION The Dutch market for television expenditures was valued at € 810 million in 2006 (2005: € 779 million). Expenditures in 2007 are projected to go up by 2.0% to € 826 million. SBS Nederland ProSiebenSat.1 is represented in the Dutch market by three commercial television channels. SBS 6, Net 5 and Veronica. On the viewer market, the market share of the above mentioned commercial television channels rose from 24.5% in 2006, to 26.3% in 2007. The market share for the RADIO individual stations was: SBS 6 12.5% Group’s radio stations was good. With a (2006:12.2%), Net 5 7.2% (2006: 6.5%), The Dutch radio advertising market was joint 18% to 20% market share in the total Veronica 6.6% (2006: 5.8%). valued at € 262 million in 2006 and rose radio listeners market, Sky Radio Group 3.5% in relation to 2005 (€ 253 million). accounted for approximately 25% of In the advertising market SBS Nederland No growth is projected for 2007 in national radio expenditures. achieved a larger market share than the total viewer market share was. comparison to 2006. An important challenge is to realise maximum collaboration between the NARROWCAST Subject to the constraints imposed by Sky Radio Group, with its own creative Narrowcasting is a digital data distri- Dutch cross-ownership rules, in 2006 culture, and other TMG units. Sky Radio Group bution technology that is characterised by its ability to transmit different data TMG acquired an interest in the Sky Radio Group of over 28%. Following a In Germany, 49% of the interest in Sky streams from a single location (the change to this law in June 2007, TMG Radio Hessen was sold. studio) to different external points exercised its option to expand its interest to 85%. simultaneously. This is in contrast to broadcasting. The distinct advantage of narrowcasting lies in the fact that it The acquisition of the largest radio station affords the possibility of programming in the Netherlands means that TMG will and advertising that is geared to visitors control three popular radio channels, each at specific locations at specific points with its own target group, Sky Radio in time. 101 FM, Radio Veronica, Classic FM and TMF Radio. Jointly, these channels reach The market is still young, small in size, almost 5.5 million Dutch listeners per week. but highly promising. The total advertising As a result of increased and aggressive includes narrowcasting, as well as bus competition, the price of radio advertising shelters and billboards was valued at € 164 in the Dutch market came under pressure million in 2006. A market-size increase market for ‘Out-of-Home’ media, which in 2007. of 1.7% to € 167 million is projected for 2007. Despite this development, Sky Radio Group’s results for 2007 were satisfactory. The radio listening data for the Sky Radio TMG Annual Report 2007 Narrowcast | Internet Librium TV for synergy and expect this to have a Habbo.nl once again showed conside- In 2007, TMG expanded its interest in positive impact on the operating result. rable growth in the number of unique, Media Librium from 40% to 83% by buying out two non-strategic shareholders. INTERNET The Dutch market for online display and especially, paying visitors during 2007. During the year, Habbo.nl was confronted with the theft of virtual In 2004, Media Librium was one of the advertising (excluding search engines, property. The first arrest for virtual theft first professional organisations to initiate email and affiliated marketing) in 2007 became world news. development of digital ‘Out-of-Home’ was valued at € 137 million compared to media (= narrowcasting) networks. The € 97 million in 2005. In 2007, this market first such network is the Librium.TV is expected to grow by 10% to € 151 network in McDonald’s restaurants. This million. Due to a shift to and an increase network remains the reference case study in other online resources, the growth in for many new initiatives. Communication online display adverts clearly levelled off via digital screens is becoming an in 2007. accepted phenomenon. Media Librium in this respect is focused on networks with Internet and TMG TMG’s total Internet revenue in 2007 amounted to over € 30 million (2006: over € 27 million). Revenue in the business-to-business market grew from over € 18 million in 2006 to almost € 19 million in 2007, while the business-to-consumer market grew from € 9.6 million to € 11.7 million. The successful and controversial site The Relatieplanet.nl and Iwannadate.nl Geenstijl.nl also once again experienced (70%) dating sites also experienced sharp considerable growth in 2007. Dumpert.nl growth in 2007. The same applies to the was introduced in 2007 and with a reach sites Botentekoop.nl, Nieuweboten.nl of over 10% of the 13-34 age group was and CampersenCaravans.nl, which are an instant success in Dutch WebTV. published by Bohil B.V. During the year under review, TMG converted its majority interest in viewers that are spending some time at a Sugababes.nl B.V. publisher of the specific location. Examples include the popular Dutch websites for young people networks at McDonald’s restaurants (170), in the 13-20 age bracket – sugababes.nl hairdressing salons (250), bus stations and superdudes.nl – into full ownership. (250), metro stations (3), shopping centres (30), gas stations and in media and advertising offices. Many advertisers have found their way to various DOOHM (digital Out-of-Home media) networks. Nielsen Media identified Librium.TV as a market leader in 2007. Librium.TV and Telegraaf Media Nederland are exploiting all possible opportunities 53 54 TMG Annual Report 2007 Crossmedia | Other activities CROSS-MEDIA The term multimedia is understood OTHER ACTIVITIES During the first half of 2007, in addition to providing its regular services, TMI was to apply to content presented as any All Connected Media (ACM) combination of audio, moving/still In the process of bundling TMG’s digital of existing generic ICT (hardware and images and text. activities in the Netherlands into Telegraaf database) and office automation services. The term cross-media applies when the Media Nederland, most of the business The initial phase and the transfer were presentation of content for a certain units of ACM, a fully owned TMG subsi- completed by mid-2007. The follow-up subject is strengthened through the diary, were incorporated into that phase, consisting of changes that are application of different media types organisation as well. designed to lead to improved and flexible (newspaper, radio, Internet, etc.) to Only Mobillion, a market leader in the service delivery combined with a reduction those aspects in which each of the Netherlands in the area of value-added in costs, is scheduled to run until the end media types excels. mobile services, survived as an of 2008. independent entity in order to continue to also involved in guiding the outsourcing Telegraaf Productiehuis was established be able to offer its services internally as Printing facilities to leverage the unique knowledge, well as to third parties. During the past year, Telegraaf Drukkerij contacts and icons of the De Telegraaf’s editorial staff for the production of MediaPact television programmes. Good examples In 2006, DataWire consolidated its include the Voetballer van het Jaar syndication activities (editing, storing, [Footballer of the Year] Gala and the distributing and selling existing editorial Schaatser van het Jaar [Skater of the content and content from other sources) Year] Gala. Both events are broadcast and archival operations in support of TMG’s live by TROS, as well as Bureau Van den publishers into the company MediaPact. Heuvel, a programme on crime produced In 2007, MediaPact’s operations were by crime reporter John van den Heuvel. sold to the Algemeen Nederlands Wilma Nanninga’s real life soap was Persbureau (ANP) [Netherlands Press broadcast via RTL. In addition, a number Agency]. of WebTV productions were produced that were journalistic as well as commercial DataWire Sport B.V. in nature. An internal professional IPTV DataWire Sport B.V., a joint venture studio was set up for this purpose. between DataWire B.V. (70%) and ANP In October, TMG acquired a 75% interest and other sports information. DataWire in Pilarczyk Media Groep, a producer of Sport B.V. is in a unique position in multiple TV programmes on cars, films, the Netherlands in the area of amateur dealer presentations, commercials and sports results. At the balance sheet date, websites for clients in the automobile DataWire was recorded as an ‘asset industry. classified as held for sale’. Groep felt the impact of the reorganisation implemented at the end of 2006. (30%), is a supplier of sports results This acquisition is consistent with the Employees had to adjust to new working objective of acquiring a position in audiovisual content and the goal of acquiring a strong position on this basis in the advertising market in a number of markets, including the automobile market. INTERNAL PRODUCTION UNITS ICT schedules and to different, multifunctional work tasks. A training programme was started to support employees in their new tasks. The goal of Telegraaf Media ICT (TMI) is to deliver flexible, high-quality ICT A great deal of emphasis was put on management and development services cost control and, in consultation with at market-compatible price levels. clients, on the search for more efficient TMG Annual Report 2007 Participations production methods. The sale of residual operations to a third party and the since 2006. Given the shortage of news- printing press capacity was successfully completion of preparations to dispose of paper delivery personnel, the services of pursued, particularly by the printing the Transport unit. temporary Polish workers and TNT postal workers were used in problem areas as an operation in Alkmaar. In December, the employees of the new interim measure. In addition, arrangements In association with TMG publishers, a newspaper delivery organisation, as well were made with the The Hague City number of short and long-term scenarios as the newly created Support Unit, were Council concerning the use of welfare were developed based on ideas and hired. The latter concerns the implemen- recipients as newspaper delivery personnel. requirements concerning the newspaper’s tation of a portion of the coordination The negative trends related to news- format. Decisions concerning the deve- function in the context of the chain paper deliveries persisted until October loped options will be made in the not too management approach. 2007 and have since started to improve The new structure was effective 1 January due to the measures implemented. distant future. Distribution 2008 and the newspaper distribution activities will be continued under the In addition to the abovementioned A management change took place at name TMG Distributie. trends, a cost savings project was DistriQ in 2007 and its tasks were The adjustment to DistriQ’s core tasks initiated in 2006. This project was reajusted. A reorganisation has been had a far-reaching impact on the unit’s completed in 2007 and resulted in targeted savings of over € 10 million. PARTICIPATING INTERESTS Koninklijke Wegener N.V. TMG’s interest in Wegener was sold during the course of 2007. The interest consisted of 10,594,763 depositary receipts for ordinary shares with a nominal value of € 0.30 (a 23.8% interest) and 2,593,030 depositary receipts for cumulative financing preference shares with a nominal value of € 0.30. The equity interest including these preference shares was 25.0%. The sold ordinary shares, including the agreed upon premium of a maximum of € 1 per depositary receipt and dividend over 2006, amounted to € 171.5 million. The preference shares were sold for € 20.1 million. underway since April as a consequence. personnel. Whereas more than 550 FTE The objective is to create a more efficient were employed by DistriQ in 2006, that ANP distribution organisational structure number declined to just over 400 in The 8.84% interest in ANP Holding B.V. focused on the core activity: high-quality 2007. Over time the newspaper distri- was sold in 2007. newspaper delivery at low cost. With bution business, including the Support respect to existing activities, a strategy Unit, is expected to employ an estimated has been developed for each activity. 135 FTE. This produced several results, including A negative trend in the number of delivery- the disposal of door-to-door delivery related complaints has been developing 55 56 TMG Annual Report 2007 Interview Peter Tordoir ‘We are flexible, enterprising and K eesing’s involvement in the puzzle magazine sector dates back to the thirties. Initially in the Netherlands and eventually followed by Belgium, France and Denmark. Its market leadership positions will be further expanded upon. In print publications, but primarily in the digital market segment as well. With puzzles, but increasingly with games. Based on extensive knowledge of target groups and distribution channels. ‘We are flexible, enterprising and maintain an international perspective,’ says General Manager Peter Tordoir. In 1911, Isaac Keesing, inventor and a former financial journalist, started his first business in Amsterdam. He dealt in stock exchange information. In the thirties he came across puzzle magazines in Germany and subsequently we want to increasingly move to digital in tandem with our introduced the Denksport [Thinking Sport] magazine in the target groups. All of our supporting databases are already Netherlands. Keesing entered the French market during digital. By adding an additional layer we can make them the fifties, via Flanders and Brussels. Denmark came later. interactive.’ By entering the much broader online games Keesing remained a family business until NPM Capital segment, Keesing wants to reach much broader target acquired a portion of the company’s shares in the nine- groups. ‘The population is ageing, people have more time, ties. The company was acquired by TMG in 2006. Tordoir including media time. Even older persons are no longer characterises the former company as a ‘small media digitally challenged. We will be participating in this shift,’ conglomerate with puzzle magazines as its core business’. says Peter Tordoir. Greater focus has been created in the past few years. The core remained: an innovative and international publisher of Keesing wants to maintain its market positions in puzzle puzzle magazines, with market leadership positions in the magazines and where feasible strengthen its positions on Netherlands, Belgium, France and Denmark. the basis of acquisitions. ‘95% of puzzle magazine sales consists of single copy sales. Keesing possesses extensive An eye for target groups knowledge about distribution channels and the retail trade. According to Tordoir, Keesing’s strategy is now focused on The market will be forced to consolidate, because there are strengthening its market positions, further internationalisa- too many titles at present. Just like any other brand-name tion and the digitisation of its activities, particularly online item, magazines are also focused on gaining a prominent games. ‘Keesing’s target groups are looking for relaxation. They are not readers, rather they are puzzlers. They want to escape from the daily routine for a short while or engage in some mental exercise. We want to consolidate our market positions in paper-based publications. In addition, ‘Our target groups are looking for relaxation’ TMG Annual Report 2007 57 Interview Peter Tordoir international’ place on store shelves. In the Netherlands alone, Keesing lot of activity on the Internet in the area of games,’ Tordoir already publishes 1,200 issues per year. That requires a says with conviction. significant proportion of the space available in stores. The Furthermore, Keesing wants to acquire a position in market wants to see fewer titles. This means that portfolio markets outside the Netherlands, where the company is management and the position in the retail network are key. not yet active. A trial is currently underway in Poland and This does not need to adversely affect our profitability. Keesing wants to explore opportunities in other European More digital products of small-scale local distribution networks and by using Based on its knowledge of the puzzles market, Keesing editorial content in France and the Netherlands. But also also wants to expand its market positions in the digital on the basis of games, which are much easier to sell in games segment. ‘We have knowledge about target groups international markets. and user markets that few developers of games possess. markets, together with TMG. With puzzles, on the basis We are much closer to the consumer than the developers Improving profitability in 2008 of games. We intend to enter that market with caution and 2007 for Keesing was characterised by changes within its perhaps make an acquisition in order to create a position own organisation. In France, less profitable operations were for ourselves. That will likely not be without a struggle,’ sold. The organisation was adjusted in the Netherlands and Tordoir expects. He sees opportunities for synergy within Keesing’s market position was strengthened through the TMG, especially in relation to digital products. By leveraging acquisition of Sanoma’s puzzle magazines. Achieving visitor traffic on Internet sites and TMG’s sales organisation. improved operating results, in part on the basis of the ‘We have much to learn from TMG in the area of digital actions implemented in 2007, is key for 2008. In addition, development, but above all there is a lot that we can do the magazines acquired in 2007 will be included in the together.’ Provided that the sites are properly linked, TMG operating result for the full year and a careful step will be has tremendous reach via the Internet. And there will be a made into the digital games segment. 58 TMG Annual Report 2007 International INTERNATIONAL Sweden TMG’s objective is to realise a larger share of the Groep ’s The Swedish economy once again exhibited clear growth in total revenues abroad. 2007, resulting in a renewed increase in media expenditures. The Internet experienced the most rapid growth, Following a thorough assessment and analysis, a decision was while magazines – the segment in which TMG operates in taken to further refine the international strategy pursued up Sweden – lagged behind at the market average. until now. The current range of international activities is broad and The Swedish TMG titles – in segments such as women, offers limited opportunities for differentiation. Its focus is interior design and boating performed better than the predominantly on a number of target groups, includes market. The existing portfolio once again garnered market broad content and involves the use of multiple media types. share with clear organic growth in advertising income. Focus, coherence and synergy are therefore not as easily Including acquisitions and new introductions, advertising attained, while these aspects are conditions for a successful income grew sharply. international expansion that meets TMG’s ambitions and goals. The new Segling sailing magazine was added to the boating portfolio at the beginning of 2007. In mid-2007, TMG also Following an extensive analysis of elements such as environ- acquired a leading boating Internet site, Marineguiden.se mental trends, competition, business models and core which gave the Swedish subsidiary a clear market leader- competencies, clear options for the target groups, related ship position in this market segment, in print as well as content and the most suitable media types to which TMG online. wants to limit itself were identified as a means for expanding and accelerating growth in the international domain on the The Cosmopolitan and Residence titles once again basis of a focused strategy. managed to realise significant growth in the advertising This strategy will be further developed in 2008. market in the women and lifestyle segment. The magazine TMG Annual Report 2007 International Plus was launched in this segment as a joint venture with revenue generated by the titles acquired by TMG in 2005, Bayard/Roularta. During the first quarter of 2008, Plus was grew at an above-average market rate. retired from the market due to disappointing advertising income. The start-up costs of new activities resulted in a slight loss during 2007. Ukraine At the beginning of 2006, TMGua took over the free newspaper Obzor and after a restyling in 2007, the paper was re-launched, together with an increased publication frequency (from 3 to 5 times a week). Since then, advertising Following 35% growth in 2006, the advertising market sales have grown exponentially. An Internet site associated exhibited a more modest growth of 25% in 2007. Now that with this newspaper was launched in 2007. the political situation has stabilised, a new cabinet was In September 2007, TMGua launched the Emarket.ua buy formed in December, the projected growth for 2008 is of and sell site. This website managed to garner the ‘number the same magnitude as that of 2006. At the end of 2007, 2’ position in the marketplace within two months. The site TMG Ukraine (TMGua) was involved in three activities: provides a solid foundation for the continued development magazines, a free newspaper with an associated news site of digital activities. and a Ukrainian version of Speurders.nl.: Emarket.ua Finally, TMGua is a 24% participant in Gala Media, one of Quite a few new magazines were launched in the Ukrainian the largest radio stations in the Ukraine. Gala is developing market in 2007. International publishers are concentrating on in line with the vigorously growing radio market and the creating market share in this market, which is still relatively collaboration among the various TMGua and Gala media small and therefore has exceptional growth potential. units is intensive and fruitful, particularly in the area of cross promotion. TMGua’s magazine portfolio was expanded in 2007 with the launch of Glance, a title in the so-called ‘celebrity’ The start-up costs of new activities resulted in a loss segment. Glance was well-received by the market. The during 2007. 59 60 TMG Annual Report 2007 International Belgium, Denmark and France In 2007, Keesing disposed of Les Editions de Saxe, Outside the Netherlands, TMG’s subsidiary Keesing Puzzles publisher of hobby magazines. The disappointing trends & Games is active in France, Belgium and Denmark. The of this business unit identified earlier persisted with even Polish market was also broached in 2007 and the results of greater intensity during the first half of 2007. A decision this incursion are expected to manifest themselves in 2008. was consequently taken to sell Les Editions de Saxe. This transaction was completed during the month of November The traditionally stable puzzle market was thrown into of the year under review. turmoil by the rapid emergence of logic puzzles such as Sudoku. Keesing has developed a strong position in this One important development within the Keesing Media Group new logic puzzles segment in all markets in which the is the implementation of the so-called SPS system. This company operates. system permits Keesing to generate puzzles in a rapid and The entry of many non-traditional competitors in 2006 and flexible manner, and at low cost, for the various international for part of 2007 put the profitability of the company under markets in which the company currently operates or pressure. However, the prediction made in last year’s intends to operate over the coming years. annual report that competition would return to pre-Sudoku levels manifested itself in the second half of the year under Keesing focused on possible takeover candidates in the review. The margins of the various Keesing companies online games segment during the year under review. This exhibit a clear positive trend. focus is expected to lead to actual acquisitions in 2008. TMG Annual Report 2007 61 International 31 August 2007 Alfa Groep acquires door-todoor distribution activities of DistriQ Alfa Groep and DistriQ reached an agreement on the acquisition of the door-to-door distribution activities of DistriQ by Alfa Groep as per 1 October 2007. DistriQ is the distribution company of TMG (Telegraaf Media Groep). The activities of DistriQ consist among others of the distribution and delivery of the free regional and local doorto-door papers of TMG and unaddressed mail from external customers. Therefore DistriQ possesses a delivery organisation within the distribution area of the local and regional media of TMG. 62 TMG Annual Report 2007 Participating interests SBS BROADCASTING S.À.R.L (20%), PROSIEBENSAT.1 MEDIA AG (12% SHARE OPTION WITH VOTING RIGHTS) ProSiebenSat.1 from KKR/Permira. The option price amounts € 34.71 per share minus dividends payable in the period between 6 March 2007 and the exercise date of the option. Over fiscal year 2006 a dividend of € 0,87 has been paid, over fiscal year 2007 a dividend of € 1,25 has been Introduction proposed. The call option can be exercised from 1 June In May 1996, when SBS 6 was introduced to the through 15 June 2008 Netherlands, TMG acquired a 30% interest in this commercial television station. Due to cross-ownership Directly linked to this option is the right of Lavena Holding restrictions, TMG was not permitted to acquire a larger 4 GmbH – the company via which the investment funds interest. This initiative was and still is consistent with advised by KKR and Permira control their majority interest TMG’s strategy to proactively track the changing media in ProSiebenSat.1 – to in case TMG does not exercise its behaviour of consumers and advertisers and in addition, call option, possibly sell 12% of the voting shares to TMG to become less dependent on print products. at a put price of € 28.71 per share, minus any distribution beyond the average dividends received during the period In 2005, SBS Broadcasting S.A., the international parent between 2 March 2007 and the date on which the put company of SBS with commercial radio and television option is exercised. The option can be exercised during the stations in multiple European countries, was taken over period of 1 to 15 August 2008, inclusive. by investment funds advised by Kohlberg Kravis Roberts & Co (KKR) and Permira Advisers LLP (Permira), herein- In addition to the option on 12% of the voting shares, TMG after KKR/Permira. In the meantime, the SBS 6, Net 5 acquired two seats on ProSiebenSat.1’s Aufsichtsrat and Veronica (channel and magazine) television (Supervisory Board). stations had become part of SBS. Since July 2007, two TMG representatives have participated Activities in the Netherlands at that point were owned by in the deliberations of the Aufsichtsrat. SBS Broadcasting S.A. (63%), TMG (27%) and Veronica Holding B.V. (10%). The Dutch regulations concerning cross-ownership were only changed and liberalised effective mid-June 2007, At the end of 2005, TMG swapped its 27% share in SBS in other words after the decisions concerning the above Nederland, increased by a one-time cash investment mentioned transaction had been taken, with the coming of approximately € 18 million, for a 20% interest in the into effect of the Interim Act on Media Concentrations international parent company SBS Broadcasting S.à.r.l [Tijdelijke Wet Mediaconcentraties]. (SBS). The other 80% of the shares was held by KKR/ Permira. TMG declared the transaction to be consistent Strategic considerations with its international ambitions and TMG at the same The exercise of its option right provides TMG with an time acquired a share in SBS’ international growth, and opportunity to participate in an international media furthermore gained access to a broader international combination with a strong market position and strong media platform. financial results. In that case TMG also participates in the 2007 Events opportunities for synergy that are created on the basis expected international growth and the exploitation of the KKR/Permira acquired a majority interest in the leading of the formation of the new ProSiebenSat.1 television German media group ProSiebenSat.1 Media AG combination. A move like this is also consistent with TMG’s (ProSiebenSat.1) at the end of 2006. This group consequently international and multimedia strategy. made a bid on all SBS shares in the spring of 2007. After investigating various options, TMG decided to sell its 20% According to the 2007 interim figures published on 4 March interest in SBS to ProSiebenSat.1. This transaction 2008 by ProSiebenSat.1, revenues grew by 29.0% to € 2.7 involved an amount of € 433 million. billion (2006: € 2.1 billion). These results reflect the initial Together with the sale of the interest in SBS, TMG acquired consolidation of SBS Broadcasting, acquired by a call option on 12% (13,127,832) of the voting shares in ProSiebenSat.1 in July, as well as the strong growth of the TMG Annual Report 2007 63 Participating interests company’s international business and the organic growth in part due to the decreased price of the preference shares of the German-language segment. and in part due to an adjustment made to the multiples used in the valuation of television companies. EBITDA after deducting non-recurring items (recurring EBITDA) rose by 36.3% and amounted to € 661.9 million The positive results achieved during 2007 and the expected (2006: € 485.6 million). However, a fine imposed by the further improvements in ProSiebenSat.1’s operating results, German Federal Cartel Authority partially negated the as well as a recent valuation completed for TMG by an positive effects of the SBS consolidation. independent third party, confirm TMG’s earlier expectations After the deduction of this non-recurring € 120 million item concerning ProSiebenSat.1. and other non-recurring items, the EBITDA rose by 8% to € 521.3 million (2006: € 482.9 million). TMG is currently considering various options with regard to the acquired ProSiebenSat.1 position. The January to December pro forma figures for the new combination indicate that the 2007 consolidated revenues A more specific decision will be taken during the second rose by 4.2% to € 3.2 billion (2006 pro forma: € 3.1 billion). quarter of 2008. The recurring EBITDA rose by 13.2% to € 783.2 million (2006 pro forma: € 691.8 million). Expomedia Group PLC (20%) TMG acquired its interest in Expomedia in 2005. The aim Renewed growth in revenues and profitability is expected of the transaction was to acquire the opportunity to profit for the current year. These projections are based on the from the growth in the trade fairs, consolidation of SBS over the entire year and leverage of events and conferences segment and the synergy potential. Although economic prospects are to obtain access to new markets. 9 October 2007 In addition to developed media Telegraaf Media Nederland uncertain, ProSiebenSat.1 has not observed any signs of a decline. markets (United Kingdom and acquires majority interest in ProSiebenSat.1 anticipates deriving synergy benefits in the Germany), Expomedia is also active TV-producer € 80 to € 90 million range from the integration of SBS into in attractive growing media markets, ProSiebenSat.1, starting in 2010. Two thirds of this amount such as Poland, Russia and India. will be derived from cost savings and one third from Telegraaf Media Nederland has signed a letter of intent to revenue increases. The Group expects to be able to realise In 2007 the company once again synergy benefits amounting to € 40 million in 2008. realised a considerable increase in Pilarczyk Mediagroep (PMG) revenue in its core markets. The policy and Carmichael & Pilarczyk B.V. The price of listed preference shares (without voting rights) initiated in 2006 to increase the focus (C&P), respectively a producer recently declined sharply. It is clear from the above figures on larger product market concepts of television programmes such obtain a controlling interest in that there is a discrepancy between the enterprise value that offer greater opportunities as RTL Autowereld, Gek op calculated by means of the stock price of the preference clearly produced results in 2007. Wielen, RTL Transportwereld shares and the actual underlying value. TMG has an option Following the start-up losses incurred and a producer of films, dealer on shares with voting rights. during past years, Expomedia presentations, commercials and achieved a positive result in 2007. websites for customers in the Funds of KKR and Permira have adjusted the value of the investments in ProSiebenSat.1 effective at the end of 2007, car-industry. 64 TMG Annual Report 2007 Riskmanagement SPECIFIC RISK’S CONNECTED TO TMG possible to achieve synergy among various printing units TMG conducts risk management workshops at the Groep coordinated market approach in the Netherlands. level and for all operating companies as a structured method TMG has appointed specific project groups focused on for gaining and maintaining insight into current and future realising these opportunities for cooperation across the and between printing units and digital units, by adopting a risks. TMG makes a distinction between strategic and organisational boundaries of business units. Furthermore, operational risks in this respect. Based on the outcome of the structure within Telegraaf Media Nederland has been these workshops, actions are formulated to mitigate the designed in order to promote cooperation between business identified risks. units. Strategic risk management 3. Inadequately developed ‘SMART’ culture Strategic risk management is integrated into TMG’s planning TMG is in the middle of a transition from a family culture to and control cycle. Risk management is part of the annual an innovative business culture. Work continued in 2007 to plan of the Groep, as well as the operating companies build on the start made in 2006 to identify four core values belonging to the Groep. The Executive Board, together with (professionalism, commitment, change-orientation and Groep staff members, prepares a Groep level risk report. integrity) and the refinement of a number of instruments The management boards of the operating companies prepare designed to promote professionalism and change-orientation, a similar report for their own business units. including a performance management evaluation process The actions formulated on the basis of these reports are in which managers are compensated on the basis of results subject to periodic reporting. Risk management is part of achieved. The recruitment of senior management and the performance evaluation of management board members. managers from outside the enterprise is designed to further At the end of 2007, the following five risks were identified programme has been set up to further promote the change as the most important future risks for TMG: in culture. promote the desired culture. An internal communications 1. Insufficient ability to rapidly anticipate shifts in the consumer and advertising markets caused by the impact 4. The inadequate or lagging realisation of the identified of digital media. cost saving opportunities in the traditional publishing The largest portion of TMG’s revenues and operating result is houses. dependent on traditional businesses that are still immersed The creation of Telegraaf Media Nederland, which clusters in the transition process to the Internet/digital media. TMG all printing activities, and the focus on EBITDA targets on has implemented a number of actions designed to accelerate the basis of highly detailed margin improvement projects, matters in this area, including: including a refined price list, are designed to make a significant • Formulation of specific Internet revenue targets; contribution to the mitigation of this risk and to reducing fixed • • Creation of business development positions in all business costs. Furthermore, starting in 2008, the EBITA margin will units focused on the development and/or acquisition of be managed more tightly and on a monthly basis as part of Internet concepts/products; the performance management process and, where necessary, Consolidation of the advertising sales for TMG’s total business units are required to formulate additional actions online reach into a centralised sales unit. in order to ensure estimated margins are safeguarded. 2. Insufficient ability to effect the envisioned synergy 5. Insufficient coherence in providing direction to the between various business units. various business units by TMG Corporate. TMG has acquired a number of business units on the basis Due to the transition of TMG from a company that is highly of the view that synergy exists and is created by servicing dependent on a single product to a cross-media enterprise, target groups using various forms of information and enter- the recent additions of substantive business units and the tainment including news, music, puzzles and games. From focus on clear management through objectives, there is a the chain management perspective, supplementary positive need to refine TMG’s role and the direction it provides to cooperative synergies among newspaper publishers, printers business units and to align this with the Groep’s new identity and distributors can also be achieved, and it is furthermore and areas of particular interest. The initiatives started up in TMG Annual Report 2007 Riskmanagement 2007 include, but are not limited to an ‘internal governance volume and on in-house execution in relation to its printing project’, the formulation of refined procedures, and the operations, distribution and facilities services units. At the intensification of the performance management process. present time, activities are in all cases assessed to determine Operational risk management At the end of 2006, TMG initiated an Internal Control Project whether they can be outsourced, which improves the flexibility of costs. The divestment of the free local newspaper delivery operations in 2007 is an example of this. at the Groep level, with the objective of highlighting the operational risks for each process in a structured way. The right people in the right position This means the retention of the right people, because in a Risk analyses were carried out. A best practice was created rapidly changing media market having the proper for each process, for primary as well as supporting processes. combination of competences is more important than ever. Based on the process-related activities, the key risks and The appointment process was refined for all key positions the expected control measures are identified as part of the in 2008. The standard that applies to management appoint- best practice. ments is that they take the assessment results and the scores of the Management Drives Profile into account. A In 2007, risk analyses, including the identification of the management competence profile was developed in 2007. degree to which risks are controlled, were carried out for the This profile is used as a basis for classifying positions, advertising, financial management, personnel & organisation recruitment and selection, professionalisation and the and procurement processes. Implemented actions resulted evaluation of managers in relation to key positions. in further improvement in the management and optimisation A TMG-wide analysis was carried out to determine how of primary and supporting processes. The risk analyses operating companies conduct the performance management concerning the circulation and editorial processes will be process. A TMG-wide performance management policy was completed in 2008. developed and approved on the basis of this analysis. The Due to the fact that TMG is operating in a dynamic environ- as clear criteria and guidelines for various performance basic premise underlying this policy includes elements such ment and the organisation is in full motion, its processes evaluation meetings and an unambiguous process with are subject to continuous change. The optimisation of the concrete deadlines. This policy will be implemented in 2008. internal control system therefore continues to be an important point of attention. Although proper and effective risk management and control The further development and implementation of the provide an absolute guarantee for achieving the enterprise’s systems are in place, it is not possible for these systems to operational risk management process is assigned to the objectives, nor can they completely prevent substantive business units. errors, losses, fraud or a violation of laws and regulations. Progress related to specific risks identified in the 2006 Annual Report Flexibility, time to market and shorter product lifecycles Telegraaf Media Nederland’s coordinated approach to its development activities is designed to make an important contribution to the mitigation of this risk. The Sky Radio Group, Keesing Puzzles & Games and TMG International are also specifically focusing on business development activities and shorter cycles for new, innovative concepts that fit into the Internet/digital market. High fixed costs combined with stagnating circulation and advertising markets Until recently, TMG was primarily focused on growth in 65 66 TMG Annual Report 2007 Corporate Governance CORPORATE GOVERNANCE The Executive Board and the Supervisory Board support the basic principle of the Corporate Governance Code, namely that the company is a long-term cooperative relationship among all parties involved. Interested parties are the groups and individuals who either directly or indirectly influence or are influenced by the achievement of the company’s objectives, such as employees, shareholders and other providers of capital, suppliers and customers as well as the government and civil society organisations. The Executive Board and the Supervisory Board bear complete responsibility for balancing these interests, with a view to the continuity of the company. The Code came into force effective from the financial year that started on or after 1 January 2004. This chapter will describe the approach that Telegraaf Media Groep N.V. has taken in order to comply with the code. The shareholders approved any deviations from the code during the General Meeting of Shareholders. BEST PRACTICE PROVISION II.1.1 Maximum appointment term of 4 years. According to company policy, a Board member is an employee of the company with a permanent appointment. Periodic appointments create the risk of conflicts of interest, between the long-term interests of the company and short-term interests because of the reappointment of the Board member. Shareholders can exert their influence annually during the General Meeting as regards granting of discharge to the Executive Board under the Corporate Governance code. The Supervisory Board annually evaluates the Executive Board’s performance. PRINCIPLE II.2. REMUNERATION II.2.7 The remuneration policy contains a fixed component and a variable component. The variable component pertains to an individual bonus and to the Groep profit share scheme that applies to all employees. TMG does not have any option schemes or remuneration in the form of shares. In the General Meeting, the shareholders agreed to the Executive Board’s remuneration policy. Maximum remuneration in the event of dismissal of directors. This principle is only applied in part. Each member of the Executive Board is an employee of the company. It is this working relationship that determines the remuneration in the event of dismissal, as the situation dictates, which remuneration may be determined by the competent court. TMG Annual Report 2007 67 Corporate Governance BEST PRACTICE PROVISION III.2.1 The current composition of the management satisfies this Independence of Supervisory Board members with the best practice provision. It should be noted that Stichting exception of not more than one person. Beheer van prioriteitsaandelen TMG is entitled to recom- Independent supervision will be adequately safeguarded if the mend two of the five Board members for appointment to majority of the Supervisory Board members can be deemed the position of Board member, in consultation with the to be independent according to III.2.2 (criteria for indepen- Executive Board and the Supervisory Board. However, dence). Because of its long-term vision, the company regards such a recommendation is not binding. it as very important to have more than one Supervisory Board member with a high level of commitment to the company due to experience or share ownership. BEST PRACTICE PROVISION IV.2.8 Proxies It is possible for the management of the trust office to BEST PRACTICE PROVISION III.3.5 issue proxies to depositary receipt holders, even during Maximum period of appointment for Supervisory Board times of war. The practice of binding voting instructions members. from a depositary receipt holder to the management is not This provision is not applied (see also the comments under supported, as the Board is of the opinion that that those iii.2.1). There are many positions within the company that wishing to vote ought to be present at the general meeting are occupied for longer periods. Experience and expertise of shareholders. Holders of depositary receipts can freely are extremely important. The connection with and know- convert their depositary receipts into shares in order to ledge of the company take precedence. obtain voting rights. BEST PRACTICE PROVISION III.5 BEST PRACTICE PROVISION IV.3.1 Composition and role of the key committees of the Supervisory Board. Webcasting, etc., of meetings with 25 October 2007 The Code states that if the Supervisory Board consists of analysts, presentations to analysts, more than four members, it shall appoint an audit committee, presentations to investors and Keesing sells French publisher of leisure magazines a remuneration committee and a selection and appointment institutional investors and press committee. The current Supervisory Board has six members. conferences. In view of the commitment and wide-ranging expertise of This provision will not apply as Keesing Media Group, a subsi- the members and the nature and scope of the company, regards the so-called ’one-on-one’ diary of TMG (Telegraaf Media meetings. However, group presen- Groep), has sold Editions de tations can be viewed via webcasts Saxe S.A.S., located in Lyon. (www.tmg.nl). After they are given, The sale is effective as of Any shares held by a Supervisory Board member in the presentations will be posted on the October 1, 2007. company on whose Supervisory Board he/she sits are Groep’s website. The sale of this publishing these committees will not be appointed. BEST PRACTICE PROVISION III.7.2 long-term investments. company for leisure magazines The law provides adequate safeguards to prevent improper is a logical consequence of use of information or inside knowledge. Keesing’s policy to concentrate BEST PRACTICE PROVISION III.7.3 and digital games in Europe. Rules governing ownership of and disclosure of transactions in securities by Supervisory Board members, other than securities issued by their ’own’ company. This provision is not observed: it represents too great an invasion of Supervisory Board members’ privacy. BEST PRACTICE PROVISION IV.2.2 Management of the trust office shall appoint the managers of the trust office. on publishing puzzle magazines 68 TMG Annual Report 2007 Corporate Governance INFORMATION ON THE DIRECTIVE ON TAKEOVER BIDS IN THE CONTEXT OF ARTICLE 1 OF THE DECREE TO IMPLEMENT ARTICLE 10 DIRECTIVE ON TAKEOVER BIDS • The authorised capital of Telegraaf Media Groep N.V. • N.V. Exploitatiemaatschappij van Puijenbroek; (‘TMG’) is € 50,000,000 consisting of: • Tweedy Browne Company LLC; • 99,999,040 ordinary shares; • Navitas B.V.; • 960 priority shares; • Cyrte Investments B.V.; • 100,000,000 preference shares. • Aviva plc. • Stichting Administratiekantoor van aandelen Telegraaf Media Groep N.V.; Stichting Preferente aandelen Telegraaf Media Groep N.V.; • Stichting Beheer van prioriteitsaandelen Telegraaf Media Groep N.V.; Each share carries a nominal value of € 0.25. Each share is entitled to one vote. Other than described in relation to priority shares above, TMG’s issued capital is € 12,500,240 consisting of the shares do not convey any special rights. 50,000,000 ordinary shares and 960 priority shares. The TMG depositary receipts for ordinary shares are listed TMG does not assign any rights to its employees to take on the NYSE Euronext in Amsterdam, can be traded freely out or acquire shares in the company’s capital or one of its and converted without limitation. subsidiaries, when control is not directly exercised by the The Stichting Beheer van Prioriteitsaandelen Telegraaf employees. Media Groep N.V. (TMG Priority Share Management Trust) owns the 960 TMG priority shares. Pursuant to TMG N.V.’s As described above depositary receipts have been issued articles of association, the Priority Share Management in collaboration with the company. Trust has a number of rights, including the right to issue shares, grant rights to acquire shares, restrict or rule out As far as TMG is aware, TMG’s shareholders are not party the preferential right of subscription to ordinary shares, to an agreement that could result in limiting the transfer to determine the number of members on the Executive of shares or the issue of depositary receipts for shares in Board, to grant prior approval for certain decisions of the collaboration with the company or in a restriction of voting Executive Board, to reserve profit, to distribute dividend rights. in the form of shares and to propose mergers, spin-offs, amendments to the articles of association or dissolution. The two-tier board structure applies to TMG. TMG’s Executive Board is appointed by the Supervisory Board. The Stichting Preferente Aandelen Telegraaf Media Groep The general meeting of shareholders is informed of any N.V. has the right to acquire a number of preference shares planned appointments. The Supervisory Board cannot in TMG’s capital that corresponds to 50% of the total number dismiss a member of the Executive Board before the of ordinary shares issued, for the exercise of these rights. general meeting of shareholders has been consulted about The company does not impose any limitation on the transfer Board has been given the opportunity to answer to the of ordinary shares or on the issue of depositary receipts for general meeting of shareholders. the planned dismissal and the member of the Executive shares in collaboration with the company. Priority shares and preference shares (if issued) can only be transferred Members of the Supervisory Board are appointed by the with the approval of the Supervisory Board. general meeting of shareholders on the recommendation of the Supervisory Board. The general meeting of share- Pursuant to the Wet op het financieel toezicht [Financial holders and the Works Council can recommend persons for Oversight Act] and the Besluit melding zeggenschap kapitaal- nomination to the Supervisory Board. The Works Council belang in uitgevende instellingen [Disclosure of Major Holdings has a so-called strengthened right of recommendation for a in Listed Companies Act] the following significant partici- third of the members on the Supervisory Board. If a request pations in TMG were reported to the Authority for Financial is made to that effect, the Works Council can dismiss a Markets (AFM) (source: www.afm.nl at 4 January 2008): Supervisory Board member due to dereliction of duties, TMG Annual Report 2007 Corporate Governance due to other important reasons or due to drastic changes or depositary receipts for shares that may be acquired, how in circumstances as a result of which the company cannot they may be acquired and the applicable price range, in be reasonably expected to maintain the Supervisory Board granting the authorisation (Article 13 of TMG’s articles of member. The general meeting of shareholders can, on the association at www.tmg.nl ). During the general meeting of basis of an absolute majority of votes cast, representing at shareholders on 19 April 2007, the shareholders authorised least one third of the issued capital, rescind its confidence TMG’s Executive Board up to October 2008, to buy back, on in the entire Supervisory Board. the stock exchange or otherwise, TMG’s shares or depositary (See TMG’s articles of association at www.tmg.nl ). receipts for shares up to no more than one tenth of the issued capital at a price not lower than the nominal value and not The general meeting of shareholders can only take a decision higher than 10% above the average closing prices of the to amend the articles of association on the basis of a proposal depositary receipts for ordinary shares published in the Daily submitted by the Priority Share Management Trust. Official List during the five consecutive days prior to the date of buy back. Shares are issued on the basis of a decision taken by the Priority Share Management Trust’s management board. On 13 May 2007, TMG entered into an agreement with The general meeting of shareholders can be requested to Lavena Holding 4 GmbH that grants TMG the right (the extend the Priority Share Management Trust’s appointment Call Option) to acquire 12% of the share capital with voting as the body authorised to issue shares, for a maximum rights of ProSiebenSat.1 Media AG. The Call option can period of five years each time (see Article 5 of TMG’s articles be exercised as of 1 June 2008. The agreement contains of association at www.tmg.nl ). During the meeting of 19 April a provision on the basis of which the Call option expires 2006, the shareholders appointed the Priority Share if a party (i) makes a public bid for TMG’s shares that is Management Trust as the authorised body until 1 July 2008. rejected by TMG; (ii) the public bid is accepted; and (iii) the party as a result of the public bid acquires 50% plus 1 share TMG is entitled to acquire paid up company shares or in the issued capital of TMG. depositary receipts for shares with due consideration to the applicable legal provisions. Shares, other than for no value, TMG has not negotiated any agreements with members of the can only be acquired if the general meeting of shareholders Executive Board or with any other employees that would grant has so authorised the Executive Board. The authorisation them the right to compensation in case their employment is is valid for a period of at most 18 months. The general terminated following the settlement of a public bid on TMG’s meeting of shareholders must specify the number of shares shares. 69 Financial Statements 2007 TMG Financial Statements 2007 73 consolidated income statement In thousands of euros Note 2007 2006 4 738,795 2,499 741,294 678,144 6,038 684,182 61,352 306,779 74,740 326,183 769,054 61,478 302,403 58,631 283,455 705,967 -27,760 -21,785 352,561 76,177 -8,370 420,368 -11,561 29,070 -7,958 9,551 392,608 -12,234 11 -6,676 399,284 -7,226 -5,008 13 – 399,284 54,189 49,181 400,097 -813 399,284 49,599 -418 49,181 Continued operations Revenues Other operating income Total income Raw and auxiliary materials Personnel costs Depreciation, amortisation and impairment Other operating expenses Total operating expenses 6 7 8 9 Operating result Result from associates Financial income Financial expenses Financial income and expenses 10 10 10 Result of continued operations, before tax Income tax Result after tax before gain on discontinued operations Result of discontinued activities Gain on sale of discontinued operation, net of tax Result for the year Attributable to: Shareholders of Telegraaf Media Groep N.V. Minority interest Result for the year Jaarrekening_2007_Engels.indd 73 Earnings per share Result attributable to shareholders of ordinary shares Telegraaf Media Groep N.V. 24 400,097 49,599 Weighted average number of ordinary shares 24 49,992,892 51,010,958 Basic and diluted earnings per share (EUR) 8.00 0.97 Basic and diluted earnings discontinued operations per share (EUR) 0.00 1.06 3-4-2008 15:46:04 74 TMG Financial Statements 2007 consolidated balance sheet as at 31 December In thousands of euros Note 2007 2006 14 15 16 17 429,603 112,155 22,626 7,293 571,677 423,095 126,937 89,078 154,691 793,801 18 16,401 54 17,576 119,486 496,025 11,992 661,534 11,069 2,326 19,950 130,786 67,347 17,294 248,772 1,233,211 1,042,573 12,500 854,315 866,815 13,125 484,916 498,041 4,021 870,836 6,487 504,528 25 27 28 29 38,074 29,684 10,201 33,892 111,851 208,484 24,980 21,595 42,831 297,890 25 30 21 21,760 226,630 2,134 250,524 23,759 213,110 3,286 240,155 362,375 538,045 1,233,211 1,042,573 assets Non-current assets Intangible assets Property, plant and equipment Investments in associates Other investments Total non-current assets Current assets Inventories Other investments Tax receivables Trade and other receivabels Cash Assets classified as held for sale Total current assets 12 19 20 21 Total assets equity and liabilities Shareholders' equity Issued capital Other reserves Attributable to equityholders Telegraaf Media Groep N.V. 22 Minority interest Total shareholders' equity Liabilities Interest-bearing loans and borrowings Post-employment benefit liabilities Provisions Deferred tax liabilities Non-current liabilities Interest-bearing loans and borrowings Accounts payable and other current liabilities Liabilities classified as held for sale Current liabilities Total liabilities Total equity and liabilities TMG Financial Statements 2007 75 consolidated statement of cash flows In thousands of euros Note 2007 2006 399,284 49,181 23,923 37,866 – 12,951 -10,788 1,981 -703 -411,561 – -6,676 46,277 30,761 29,728 -10,489 1,806 -9,910 11,396 -4,976 – -50,937 -6,065 40,495 -6,438 14,922 -3,114 24,392 -11,054 64,985 -1,369 -4,109 2,932 1,326 23,368 62,643 -2,452 -403 62,130 -2,596 148 60,195 21,016 913 -7,159 -10,504 -34,106 -2,936 413,035 191,047 2,618 15,400 2,272 591,596 1,254 2,451 -15,166 -14,290 -286,690 -4,105 – – 169,904 6,735 35 -139,872 -25,000 -6,164 383 -192,746 – -223,527 -23,100 -54,415 190,332 -7,809 24 105,032 Net increase (decrease) in cash 430,199 25,355 Cash at 1 January Effect of exchange rate fluctuations on cash held Change in cash classified as held for sale Cash at 31 December 67,347 -83 -1,438 496,025 43,334 -232 -1,110 67,347 Cash flow from operating activities Result for the year Adjustments for: Depreciation of property, plant and equipment Amortisation of intangible assets Revaluation of non-current financial assets Impairment loss of intangible assets Net financing costs Share in result investments incorporated according to the ‘equity’ method Gain on sale of property, plant and equipment Gain on sale of non-current financial assets Gain on sale of discontinued operations, net of tax Income tax 15 14 14 10 10 5 10 11 Change in inventories Change in trade and other receivables Change in prepayments Change in accounts payable and other current liabilities Change in provisions and post-employment benefit liabilities Paid interest Income taxes paid Net cash from operating activities Cash flows from investing activities Received for interest Dividends received Investments in intangible assets Investments in property, plant and equipment Acquisition of subsidiaries, net of cash acquired Acquisition of minority interest Divestment of minority interest Divestment of other investments Disposal of operation, net of cash disposed of Divestments in property, plant and equipment Change in other investments Net cash from investing activities Cash flows from financing activities Dividends paid Repurchase of own shares Withdrawal of borrowings Redemption of borrowings Change in minority interest Net cash from financing activities 14 13 76 TMG Financial Statements 2007 consolidated statement of changes in equity Attributable to equity holders of Telegraaf Media Groep N.V. In thousands of euros Note Balance, 1 January 2006 Result for the year IFRS adjustment opening balance sheet Foreign currency translation Total income and expense for the year Capitalised development costs Dividends paid to shareholders Repurchase of own shares Minority interest arising on business combinations Balance, 31 December 2006 Result for the year Foreign currency translation Total income and expense for the year Capitalised development costs Dividends paid to shareholders Repurchase of own shares Withdraw of own shares Minority interest arising on business combinations Balance, 31 December 2007 27 22 23 22 22 23 22 22 Issued Translation Other legal capital reserve reserves Treasury shares Retained earnings Total Minority interests Total shareholders’ equity 13,125 268 1,625 – 515,450 530,468 688 531,156 – – – – 49,599 49,599 -418 49,181 – – – -232 – – – – -4,279 – -4,279 -232 – – -4,279 -232 – -232 – – 45,320 45,088 -418 44,670 – – – – – – -191 – – – – -54,415 191 -23,100 – – -23,100 -54,415 – – – – -23,100 -54,415 – 13,125 – 36 – 1,434 – -54,415 – 537,861 – 498,041 6,217 6,487 6,217 504,528 – – – -159 – – – – 400,097 – 400,097 -159 -813 – 399,284 -159 – -159 – – 400,097 399,938 -813 399,125 – – – -625 – – – – -1,434 – – – – – -6,164 54,415 1,434 -25,000 – -53,790 – -25,000 -6,164 – – – – – – -25,000 -6,164 – – 12,500 – -123 – – – -6,164 – 860,602 – 866,815 -1,653 4,021 -1,653 870,836 TMG Financial Statements 2007 notes to the consolidated financial statements contents page 78 86 88 90 90 90 90 90 91 91 92 93 93 94 96 97 99 99 Note 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. Significant accounting policies Segment reporting Business combinations Revenue Other operating income Raw and auxiliary materials Personnel costs Depreciation, amortisation and impairment Other operating expenses Financial income and expense Income tax Current tax assets and liabilities Discontinued operations Intangible assets Property, plant and equipment Investments in associated companies Other investments Inventories page 99 100 100 101 102 102 103 105 105 107 108 109 110 112 112 112 113 114 Note 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. Trade and other receivables Cash Assets held for sale Shareholders’ equity Dividend Earnings per share Interest-bearing loans and borrowings Share-based remunerations Post-employment benefit liabilities Restructuring provision Deferred tax assets and liabilities Accounts payable and other current liabilities Financial risk management Off balance sheet liabilities Investment commitments Contingent liabilities Related parties Interests in joint ventures 77 78 TMG Financial Statements 2007 1. significant accounting policies Corporate information the financial position of TMG. The comparative financial figures 2006 have been reclassified to conform with the current period presentation. Telegraaf Media Groep N.V. (the ‘company’) domiciled in Amsterdam, the Netherlands is a media company with a leading market position and recognized brands in the Netherlands. The activities primarily are the publication of printed media and the operation of, and participation in, digital media, radio and television. The company’s shares are listed on the EuroNext stock exchange in Amsterdam The presentation of, and certain terms used in, the balance sheet, income statement, statement of changes in equity and certain notes has been changed in 2007 to provide additional and more relevant information. Certain comparative amounts have been reclassified to conform with the current period presentation. None of the changes are significant. The consolidated financial statements of the Company for the year ended 31 December 2007 comprise the company and its subsidiaries (together referred to as TMG) and jointly controlled entities and TMG’s interest in associates. Changes in accounting policy The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standards Board (IASB) and as authorized by the European Commission, and the interpretations of these standards by the IASB. Following a broadening of TMG’s activities, changes have been made with effect from 1 January 2006 in the presentation and definition of the following accounting policies: • Barter transactions were considered similar where advertisements were exchanged within the same mediatype. As of 2007 the barter transactions are similar where advertisements for the same target group are exchanged, which reduced the other operating expenses and revenue in 2006 by 11,123. In 2007, the change has an effect of 12,557 on the other operating expenses and revenue; • Mobillion’s revenue of SMS activities is recognised as a net amount, whereas in 2006 this revenue was recognised as a gross amount under revenue and other operating expenses. The adjustment to the revenue and other operating expenses in 2006 amounts to 33,345. In 2007, the change has an effect of 26,942 on the revenue and other operating expenses. Basis for preparation Critical accounting estimates and judgements The financial statements are presented in euros, rounded to the nearest thousand. They are prepared on the historical cost basis, except that the following assets and liabilities are stated at their fair value: financial instruments available for sale. In the process of applying TMG’s accounting policies, management has made judgements, estimates and assumptions, which affect the application of the accounting principles and on the amounts recognised in the financial statements. The estimates and the related assumptions are based on historical experience and other factors, that are believed to be reasonable under the circumstances. The outcomes of these form the basis for the evaluation of the carrying value of assets and liabilities where this is not easily apparent from other sources. The resulting accounting estimates will, by definition, seldom equal the related actual results. The financial statements have been compiled by the Executive Board and together with the Supervisory Board signed on 13 March 2008. Statement of Compliance Non-current assets and disposal groups held for sale are stated at the lower of the carrying amount and the fair value less costs to sell. The principles for the valuation of assets and liabilities and the determination of the result of the company financial statements of Telegraaf Media Groep N.V., are in conformity with article 402, Book 2 of The Netherlands Civil Code. The accounting policies have been applied consistently for the periods of 2006 and 2007 as presented in these consolidated financial statements, with the exception of the following changes in presentation and accounting policies. Changes in presentation The presentation of the income statement in 2007 is on continued operations. The discontinued activities has a fractional effect on These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions of the estimates are applied in the period during which the estimate is revised, if the revision only has consequences for the period in question. If the revision has consequences for both the period under review and future periods, the estimate is revised in both the period of revision and future periods. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated statements are: • intangible assets (useful life and impairment – see note 14); • property, plant and equipment (useful life – see note 15); TMG Financial Statements 2007 • trade receivables (impairment – see note 19); • post employment benefit liabilities (actuarial assumptions – see note 27); • income tax (rate and duration deferred tax – see note 11). Transactions eliminated on consolidation Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Judgements made by management in the application of IFRS that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in the accompanying notes. Unrealised gains arising from transactions with associates and jointly controlled entities are eliminated to the extent of the TMG’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Basis of consolidation The result of the subsidiaries acquired or disposed of during the financial year are included in the consolidated financial statements as of the effective transaction date. If necessary, changes have been made to the figures of subsidiaries to align the accounting principles with those of TMG. The consolidated financial statements of Telegraaf Media Groep N.V. and all its subsidiaries and joint ventures are incorporated in the consolidation. The consolidation is based on the valuation and the accounting principles of the parent company. Subsidiaries Subsidiaries are entities controlled by the company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Joint ventures Joint ventures are those entities established by contractual agreement over whose activities TMG has joint control and in which strategic decisions are taken by unanimous consent. The consolidated financial statements include TMG’s proportionate share of the entities assets, liabilities, revenues and expenses with items of a similar nature on a line-by-line basis, from the date that joint control commences until the date that joint control ceases. Associates Associates are those entities in which TMG has a significant influence, but no control, over the financial and operating policies. Subsidiaries and joint ventures are no associated companies. The consolidated financial statements include the TMG’s share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. The difference between the purchase price of TMG’s share and the fair value of the identified assets, liabilities and contingent liabilities of the associated company is goodwill. The goodwill is included in the carrying amount of the investment and is tested for impairment as part of the investment. An impairment is accounted for immediately in the income statement. When the TMG’s share of losses exceeds its interest in the associate, the TMG’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that TMG has incurred legal or constructive obligations or made payments on behalf of an associate. Foreign currency Foreign currency transactions Transactions in foreign currencies are translated into euros at the foreign exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to euros at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currency are translated at the exchange rate applying on the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to euros at foreign exchange rates ruling at the dates the fair value was determined. Financial statements of foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to euros at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to euros at the date of the transaction. Foreign exchange differences arising on translation are recognised directly in a separate component of equity. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeble future, are considered to form part of a net investment in a foreign operation and are recognised directly in equity in the translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the translation reserve is transferred to the income statement. 79 80 TMG Financial Statements 2007 Intangible assets Goodwill Goodwill represents amounts arising on acquisitions of subsidiaries, joint ventures and associates. In respect of acquisitions, goodwill represents the difference between the cost of the acquisition and the fair value of the identifiable assets liabilities and contingent liabilities acquired. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is attributed to cash generating units and is not amortised. Instead, it is tested annually for impairment (see accounting policy on page 81). In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate. Whenever an interest in a subsidiary, associate or joint venture is sold, the corresponding goodwill is included in the determination of the result of the transaction. Negative goodwill that arises during an acquisition is included directly in the income statement. The estimated useful lives are as follows: 8 - 50 years •trademarks and publishing rights 5 years •licences 3 - 5 years •software The amortisation method and estimated useful lives are assessed annually. Lease Leases agreements, where TMG has substantially all the risks and rewards of ownership are classified as financial leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases, which assets are not recognised in TMG’s balance sheet. Property, plant and equipment Other intangible assets Other intangible assets concern licences, (internally developed) software, trademarks and publishing rights. The other intangible assets acquired by the TMG are stated at cost less accumulated amortisation (see below) and impairment losses (see accounting policy 81). Owned assets Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see accounting policy on page 81). Property that is being constructed or developed for future use is stated at cost until construction or development is complete. Expenditure for development activities, whereby the research results are applied to 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 the expenses are estimated reliable, and TMG has sufficient resources to complete the development. The capitalised costs comprise the cost of material, investments, direct labour and an appropriate proportion of overheads. With regard to the capitalised internal hours, a legal reserve is stated. Other development expenditure is recognised in the income statement as an expense as incurred. Subsequent expenditure TMG recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the TMG and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation (see below) and impairment losses. Subsequent expenditure Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. In that case, the costs are capitalised in so far as this increases the economic benefits. Amortisation Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangibles assets unless such lives are indefinite. Other intangible assets are amortised from the date they are available for use. Jaarrekening_2007_Engels.indd 80 Depreciation Depreciation is charged to the income statement on a straight-line basis over the estimated useful life of each part of a property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows: 20 - 25 years •buildings 5 - 10 years •machines and installations 5 years •other tangible fixed assets The depreciation method, estimated useful life and residual value are assessed annually. Other investments Other investments are participations, prepaid operational leases and long-term receivables. The participations, in which the TMG does not have power of control, are valued at fair value. 3-4-2008 15:46:04 TMG Financial Statements 2007 81 Prepaid operational leases comprise the purchased leaseholds of the grounds on the campus in Amsterdam. These are amortised on a straight-line basis over the duration of the leaseholds concerned. Non-current receivables are initially recorded at cost price less attributable transaction costs. They are then capitalised at amortised cost, whereby a difference between the cost and the redemption amount on the basis of the effective interest method is included in the income statement over the duration of the receivables. Financial instruments Inventories Derivatives are recognised initially at cost; attributable transaction costs are recognised in income statement when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for in income statement. If the range of various estimates in fair value of financial instruments is substantial, the probabilities of the various estimates can not be reasonably assessed, is the financial instrument stated at cost instead of fair value.TMG applies no hedge accounting. Inventories are stated at the lower of cost or net realisable value. The net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the selling expenses. The cost price of the inventories is based on the ‘first in, first out’ principle (FIFO) and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. TMG finite holds derivative financial instruments to hedge interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit and loss. Trade and other receivables Securities Trade and other receivables are stated at cost less impairment losses. Investments in debt instruments and shares Financial instruments held for trading are classified as current assets and are stated at the fair value, with any gain and loss recognised in the income statement. If the range of various estimates in fair value of financial instruments is substantial, the probabilities of the various estimates can not be reasonably assessed, is the financial instrument stated at cost instead of fair value. Cash Cash comprises cash balances and call deposits. Impairments When TMG has the positive intent and ability to hold financial instruments to maturity, they are stated at amortised cost less impairment losses. Other financial instruments held by TMG are classified as being available for sale and are stated at fair value, with any resultant gain or loss being recognised directly to the shareholders’ equity, except for impairment losses and, in the case of monetary items such as debt securities, foreign exchange gains and losses. When these investments are derecognised, the cumulative gain or loss recognised directly to the shareholders’ equity is recognised in Income statement. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in income statement. The fair value of the financial instruments classified as held for trading and available for sale is their quoted bid price at the balance sheet date. Financial instruments classified as held for trading or available for sale investments are recognised respectively derecognised by TMG on the date it commits to purchase respectively to sell the financial instruments. Investments held to maturity are recognised on the day they are transferred to TMG and are removed from the balance sheet on the day they are disposed of. Jaarrekening_2007_Engels.indd 81 The carrying amount of TMG’s assets other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is an indication of impairment. If such indication exists, the asset’s recoverable amount is estimated (see enclosed the policy for calculation of recoverable amount). For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date to determine whether there is an indication for impairment. An impairment loss is recognised whenever the carrying amount of an asset, or the cash-generating unit exceeds its recoverable amount Impairment losses are recognised in the income statement. Impairment losses recognised of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis. 3-4-2008 15:46:04 82 TMG Financial Statements 2007 When a decline in the fair value of an available financial asset has been recognised directly in the shareholders’ equity, and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity is entered in the income statement, even though the financial asset has been derecognised. The amount of cumulative loss that is recognised in income statement is the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement. Calculation of recoverable amount The realisable value of TMG’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 at which these financial assets are initially entered). Receivables with a short residual term are not discounted to the present value. For the other assets, the realisable value is the revenue value, or the operational value if this is higher. When determining the operational value the present value of the estimated future 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 which are significantly independent of those of other assets, the realisable value is determined for the cashgenerating unit to which the asset belongs. Reversal of impairment An impairment loss for a security held to maturity or a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Issued capital TMG’s ordinary shares are designated as the Company’s equity. Minority interests Minority interests are the portion of the profit and loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by TMG. In the event of both a written put and a call option on the shares, these shares will be included in TMG’s economic interest, and not classified as a minority interest. Jaarrekening_2007_Engels.indd 82 Treasury shares When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effects, and is recognised as a deduction from equity. Repurchased shares classified as treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus of deficit on the transaction is transferred to/from retained earnings. Withdrawn shares are deducted from issued capital for nominal value, and the resulting surplus of deficit on the transaction is transferred to/from retained earnings. Interest-bearing loans and borrowings Interest-bearing loans and borrowings are recognised initially at cost less attributable transaction costs. Subsequent to initial recognition, interest-bearing loans are stated at amortised cost, with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. Share-based remunerations Share-based remunerations are discounted at the (expected) present value of the shares owned by the management at settlement date. The grant date fair value of shares granted to management is recognised over the period that the management is unconditionally entitled to sell the shares to TMG. Expenses are recognised when payment of shares is unconditional or realized. In the event of both a written put and a call option on the shares, these shares will be included in TMG’s economic interest. At the same time, a management obligation is included. The valuation is the discounted fair value of the shares at settlement date. Post-employment benefit liabilities The group has established various pension schemes, some under its own management, with Stichting Telegraaf Pensioenfonds 1959 and some placed with external parties such as industry wide pension funds and insurance companies. a. Defined benefit plan TMG’s net obligation in respect of defined benefit plans is calculated separately for each scheme by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Any unrecognised past servicecosts and the fair value of plan assets are deducted hereon. The discount rate is the yield as at the balance sheet date on AAA credit rated bonds that have maturity dates approximating to the terms of TMG’s obligations. The calculation is performed by a certified actuary using the ‘projected unit credit’ method. 3-4-2008 15:46:04 TMG Financial Statements 2007 In respect of actuarial gains and losses that arise while calculating TMG’s obligation in respect of a plan, to the extent that any cumulative unrecognised actuarial gain and loss exceeds 10 per cent of the greater of the present value of the defined benefit obligation and the fair value of plan assets, that portion is recognised in the income statement over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain and loss is not recognised. Where the calculation results in a benefit to TMG, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement on a straightline basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement. The result ensuing from the curtailment or termination of a defined benefit plan is incorporated in income statement immediately when the curtailment or termination exists. The result consists of the change in the present value of the defined benefit obligation and the fair value of plan assets and previous actuarial results and past service costs which have not accounted for. A curtailment exists if there is a material reduction in the number of employees covered by the pension plan or if the plan changes substantially. Determination of fair values A number of TMG’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. Property, plant and equipment The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items. Intangible assets The fair value of publishing rights and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets. b. Defined contribution plan Obligations for contributions to defined contribution plans are recognised as an expense in the income statement as incurred. Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. Provisions Derivatives The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on terms and maturity of each contract and using market interest rates for similar instrument at the measurement date. A provision is recognised in the balance sheet when TMG has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation and can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the specific risks related to the liability. Restructuring provision A provision for restructuring is recognised when TMG and the employees council has approved a detailed and formalised restructuring plan and the restructuring has either commenced or has been announced. Future operating costs are not provided for. Accounts payable and other current liabilities Accounts payable and other current liabilities are stated at cost. Jaarrekening_2007_Engels.indd 83 83 Share based payment transactions The fair value of share-based payment transactions is based on the expected cash value of the cash flow from the subsidiary. Factors affecting valuation include strike price of the instrument, the expected cash flow from the entity and the discount rate. Revenue The revenues exclude value added tax and any discounts. Revenues from the sale of goods are recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Revenues relating to services provided are included in the income statement in proportion to performance in the same financial year. 3-4-2008 15:46:05 84 TMG Financial Statements 2007 No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods continuing management involvement with the goods. Interest income is recognised in the income statement as it accrues using the effective interest calculation method. Dividend income is recognised in the income statement on the date the entity’s right to receive payments. Barter transactions If advertisement space or time are exchanged or swapped for advertisement space or time which are similar as regards the nature, fair value and same target population, such an exchange is not recognised as a revenue-generating transaction. If this condition is not applicable, the exchange will be regarded as a transaction which generates revenue. The amount of the revenue is determined on the basis of the fair value of the goods or services received, plus or minus any cash or assets which have been received or paid for which can be transferred in cash. If the fair value of the received goods or services cannot be reliably determined, the revenue is determined on fair value of the exchanged goods or services plus or minus cash or assets which can be transferred. Foreign currency gains and losses are reported on a net basis. Government grants Government grants are recognised in the balance sheet initially as income when there is reasonable assurance that it will be received and that TMG will comply with the conditions attaching to it. Grants that compensate TMG for the expenses are recognised in the income statements on a systematic basis in the same period the expenses are made. Expenditure Lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. Minimum lease payments from financial lease are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic interest rate on the remaining balance of the liability. Conditional lease payments are incorporated by revising the minimal lease payments during the remaining lease term as soon as the adaptation of a lease is confirmed. Financial income and expenses Result from associates concerns TMG’s share in the total result of the associate, when TMG has significant influence. Result on the sale of the associate is stated on the date the transaction is effected. The financial income and expenses comprise interest payable on borrowings calculated using the effective interest method, interest income on funds invested, dividend income and foreign exchange gains and losses. Jaarrekening_2007_Engels.indd 84 Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in shareholders’ equity, in which case it is recognised in shareholders’ equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: non tax-deductible goodwill, the initial recording of assets or liabilities which affect neither the commercial nor the fiscal profit, and differences related to investments in subsidiaries in so far as these are probably not going to be settled in the foreseeable future. The amount of the provision for deferred tax liabilities is based on the way in which the carrying amount of the assets and liabilities is expected to be realised or settled, with the tax rates being used as determined on the balance sheet date, or to which a material decision has already been taken on the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The deferred tax liabilities and debts are balanced if there is a legal entitlement to settle current and deferred tax. The income tax is charged by the same Tax Authorities and TMG intends to balance the amounts. Segment reporting A segment is a distinguishable component of TMG that is engaged either in providing products and services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. 3-4-2008 15:46:05 TMG Financial Statements 2007 Assets classified as held for sale and discontinued operations Then, on initial classification as held for sale, non-current assets and disposal groups are recognised at the lower of carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale are included in profit and loss, even when there is a revaluation. The same applies to gains and losses on subsequent re-measurement. A discontinued operation is a component finished of TMG’s business that represents a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view of resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. A disposal group that is to be abandoned may also qualify. Cash flow statement The consolidated cash flow statement is stated in accordance with the indirect method. A distinction is made between the operating, investment and financing activities. The pre-tax profit is adjusted in the cash flow from operating activities for income statement and changes in balance sheet which have no effect on the cash flow for the year. Effect of new accounting standards and interpretations not yet adopted Certain new standards, amendments to standards and interpretations are mandatory for TMG’s accounting periods on or after January 1, 2008 or later periods. The following standards are not early adopted by TMG: • IAS 1 revised – Presentation of Financial statements • IAS 23 revised – Borrowing Costs • IFRS 3 revised – Business Combinations • IFRS 8 – Operating segments • IFRIC 11 – Group and Treasury share transactions • IFRIC 12 – Service Concession Arrangements • IFRIC 13 – Customer Loyalty Programmes • IFRIC 14 – The limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction • IFRIC D 12 – Real estate Sales • IFRIC D 22 – Hedges of a Net Investment in a Foreign Operation TMG expects that the adoption of these new standards, amendments to standards and IFRIC interpretations in the future will have no material impact on TMG’s financial statements. 85 86 TMG Financial Statements 2007 2. segment reporting Business segments The group comprises the following main business segments: -- Publishing: The publishing of national and regional newspapers, magazines, puzzle booklets and free door-to-door papers. -- Radio: The operating of several radio stations in the Netherlands and Germany (until December 2007). -- Other: Other activities include, among other things, the printing and distribution of newspapers, providing of office space and related facilities, providing (internal) ICT services, organising exhibitions and trade fairs and the operating of mobile telephone services. The activities sold in June 2006 include: -- in the Publishing segment the activities of Media Groep Limburg, De Trompetter; -- in the ‘other’ segment: the activities of Nieuwsdruk Limburg. 2007 In thousands of euros Revenue from third-party transactions Revenue from transactions with other segments Total revenue Segment result for amortisation Amortisation and impairment Segment result Publishing Radio Other activities Eliminations Total 621,010 1,731 622,741 52,798 273 53,071 64,987 230,412 295,399 – -232,416 -232,416 738,795 – 738,795 59,328 20,675 38,653 25,010 27,348 -2,338 -18,645 2,663 -21,308 – – – 65,693 50,686 15,007 Unallocated revenue and costs Operating result -42,767 -27,760 Result from associates Financial income and expenses Income tax Result of continued operations 352,561 67,807 6,676 399,284 Gain on sale of discontinued operations Result for the year – 399,284 Segment assets Investments in associates Unallocated assets Total assets 310,077 251,661 192,889 – 754,627 22,626 455,958 1,233,211 Segment liabilities Unallocated liabilities Total liabilities 166,851 80,867 50,557 – 298,275 64,100 362,375 Segment investments Unallocated investments Total investments 48,532 907 15,005 – 64,444 14,588 79,032 Depreciation, amortisation and impairment Unallocated depreciation and amortisation Total depreciation, amortisation and impairment 24,021 27,990 22,554 – 74,565 175 74,740 2,478 134 965 – 3,577 88 3,665 Average number of FTEs Unallocated FTEs Total FTEs Jaarrekening_2007_Engels.indd 86 3-4-2008 15:46:05 TMG Financial Statements 2007 2006 1) In thousands of euros Revenue from third-party transactions Revenue from transactions with other segments Total revenue Segment result for amortisation Amortisation and impairment Segment result 87 Publishing Radio 2) Other activities Eliminations Total 583,070 3,241 586,311 36,141 910 37,051 58,933 251,193 310,126 – -255,344 -255,344 678,144 – 678,144 41,116 9,827 31,289 16,677 18,365 -1,688 -22,973 2,096 -25,069 – – – 34,820 30,288 4,532 Unallocated revenue and costs Operating result -26,317 -21,785 Result from associates Financial income and expenses Income tax Result of continued operations -11,561 21,112 7,226 -5,008 Gain on sale of discontinued operations 3) Result for the year 54,189 49,181 Segment assets Investments in associates Unallocated assets Total assets 294,190 275,263 190,803 – 760,256 89,078 193,239 1,042,573 Segment liabilities Unallocated liabilities Total liabilities 163,341 134,414 62,508 – 360,263 177,782 538,045 Segment investments Unallocated investments Total investments 108,885 278,867 16,547 – 404,299 8,942 413,241 13,776 18,960 25,854 – 58,590 41 58,631 2,425 76 1,222 – 3,723 103 3,826 Depreciation and amortisation Unallocated depreciation and amortisation Total depreciation and amortisation Average number of FTEs Unallocated FTEs Total FTEs Presentation of financial figures 2007 is on continued operations, comparative figures 2006 are reclassified. As of 12 April 2006, Sky Radio Group was acquired. 3) Primarily concerns the activities in Limburg which were disposed of on 13 June 2006. 1) 2) Segment information is presented in respect of TMG’s business and geographical segments. The primary segmentation basis, business segments, is based on TMG’s management and internal reporting structure. Distinction is made between publishing, radio and other activities because of differences in risks and rewards. The intercompany financing is unallocated. The inter-segment pricing, principally the printing and distributing of newspapers and the support of ICT projects and - infrastructure, are determined on at arm’s length basis. Segment results, assets and liabilities include items directly attributable to the segment as well as, those that can be allocated on reasonable basis. Unallocated items comprise primarily items allocated at group level. The increase in unallocated revenue and costs in 2007 is caused by the employee profit share, Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be in use for more than one reporting period. 88 TMG Financial Statements 2007 Geographical segments The presentation of information based on geographical segments, the geographical location of the clients is used for the segment’s yields. The segments’ assets are determined on the basis of the geographical location of those assets. The Publishing segment is mainly operating in the Netherlands. TMG publishes newspapers in the Netherlands, Sweden and the Ukraine. Puzzle magazines are published in Belgium, France, Denmark and Poland. In view of their size, these are not designated as a separate segment. As a result, the assets related to these activities are not presented separately. Revenues, assets and investments are divided in geographical segments as follows: 2007 In thousands of euros The Netherlands Other countries Total 2006 In thousands of euros The Netherlands Other countries 1) Total 1) Revenues Assets Investments 684,576 54,219 738,795 1,142,637 90,574 1,233,211 73,605 5,427 79,032 Revenues Assets Investments 643,954 34,190 678,144 994,881 47,692 1,042,573 394,895 18,346 413,241 As of 30 June 2006, Keesing Media Group was acquired. 3. business combinations On 29 June 2007, TMG took over the puzzle magazines of Sanoma Uitgevers for 22,800. Various other smaller acquisitions also occurred in 2007: Segling Magazine from Nakterhuset Forlag AB, Aromedia B.V. (Carp), Media librium B.V., Pilarczyk Mediagroep B.V. (PMG), Carmichael & Pilarczyk B.V. (C&P) RTL FM and Onehello. Given the size of these acquisitions, no separate explanations for them are included in the financial statements. If the acquisition of Sanoma Uitgevers’ Puzzle portfolio and the other acquisitions had happened on 1 January 2007, the revenue and net result would have been 7,970 and 140 more respectively. In thousands of euros Sanoma Uitgevers’ Puzzelportfolio Other acquisitions Total 2007 Total 2006 Acquisition date 29 juni 2007 Result as of Purchase price acquisition date Balance Other acquired assets intangible assets Goodwill 22,800 12,883 35,683 1,043 -1,648 -605 -368 -650 -1,018 8,982 3,681 12,663 14,186 9,852 24,038 292,861 584 -81,145 206,669 167,641 In 2006 TMG acquired Relatieplanet B.V. and IWD Nederland B.V. (1 January 2006, purchase price 20,526), Sky radio group (12 April 2006, purchase price 189,100) and Keesing Media Group (30 June 2006, purchase price 83,235). The total cash flow for acquisitions of subsidiaries, net of cash acquired, amounted 286,690. TMG Financial Statements 2007 89 Puzzle portfolio Other acquisitions Total 2007 Total 2006 8,982 – – – 10 – 1,272 – – – -1,650 8,614 3,681 2,942 – – 11 410 305 -871 -190 – -3,257 3,031 12,663 2,942 – – 21 410 1,577 -871 -190 – -4,907 11,645 206,669 3,763 8 9,072 1,809 26,286 6,475 -43,260 -1,032 -59,595 -24,872 125,524 Acquisition goodwill Consideration paid in cash 14,186 22,800 9,852 12,883 24,038 35,683 167,641 293,165 Cash acquired Net cash outflow -1,272 21,528 -305 12,578 -1,577 34,106 -6,475 286,690 In thousands of euros Intangible assets Property, plant and equipment Financial fixed assets Assets held for sale Inventories Trade and other receivables Cash Deferred tax Post-employment benefit liabilities FM license liablities Current liabilities Net identifiable assets and liabilities Sanoma Uitgevers’ Puzzle portfolio On 29 June 2007, Keesing Media Group B.V. took over the activities involving the puzzle magazines of Sanoma Uitgevers by means of an asset/ liability transaction. Sanoma Uitgevers’ Puzzle portfolio comprises Puzzelsport, Bingo! and 10 voor Taal. The effect of the takeover of Sanoma Uitgevers’ Puzzle portfolio on the consolidated assets and liabilities was as follows: In thousands of euros Intangible assets Inventories Cash Accounts payable and other current liabilities Net identifiable assets and liabilities Acquisition goodwill Total Before After acquisition date acquisition date – – 1,272 -1,272 – 8,982 10 1,272 -1,650 8,614 – – 14,186 22,800 The identified intangible assets with total value of 8,982 primarily involve brand names and publishing rights in the puzzle portfolio (5,865) and subscription data (2,067). The amortisation period for the brand names and publishing rights is 10 years, and subscription data is fully written down in 5 years. If the acquisition of Sanoma Uitgevers’ Puzzle portfolio had happened on 1 January, the revenue and net result would have been 3,340 more and 1,360 more respectively. The goodwill acquired as a result of the takeovers is primarily attributable to the expertise and technical qualities of the employees from the acquired companies and the synergy advantages that are expected to arise from integration of the companies with existing publishing activities of TMG. 90 TMG Financial Statements 2007 4. revenue In thousands of euros Advertisements Circulation Print third parties Distribution Other activities Total 2007 2006 362,072 291,666 8,451 43,708 32,898 738,795 342,888 258,822 8,279 42,710 25,445 678,144 The revenue of 738,795 (2006: 678,144) includes barter transactions of 2,412 (2006: 2,290). The acquisition of Sky Radio Group, Keesing Media Group, Relatieplanet/Iwannadate, based on the acquisition dates, have affected in 2006 the revenue of advertisement, circulation and other. The other activities consist of SMS- and internetactivities. 5. other operating income In thousands of euros 2007 2006 703 1,000 796 2,499 4,976 1,062 – 6,038 2007 2006 57,738 3,614 61,352 57,802 3,676 61,478 2007 2006 196,930 28,893 21,939 47,047 11,970 306,779 183,884 25,453 16,692 35,318 41,056 302,403 Note 2007 2006 14 14 15 37,866 12,951 23,923 74,740 28,882 1,406 28,343 58,631 Net gain on disposal of property, plant and equipment Grants Receipt of NDP contribution Total 6. raw and auxiliary materials In thousands of euros Paper and Ink Auxiliary materials Total 7. personnel costs In thousands of euros Wages and salaries Compulsory social security contributions Contributions to pension schemes Other personnel costs Restructuring costs Total Note 27 28 The average amount of employees (FTE) is 3.665 (2006: 3.826). 8. depreciation, amortisation and impairment In thousands of euros Amortisation Intangible assets impairment Depreciation Total TMG Financial Statements 2007 91 9. other operating expenses In thousands of euros Transport and distribution costs Subcontracted work and technical production costs Sales costs Editorial costs Research and development costs Impairment of trade receivables Other Total 2007 2006 124,939 56,499 37,831 25,890 – 1,650 79,374 326,183 118,783 44,077 33,706 26,168 981 1,181 58,559 283,455 The other operating expenses of 79,374 (2006: 58,559) consist of IT expenses 21,557 (2006: 5,138), housing expenses 17,055 (2006: 16,454) and other general expenses 40,762 (2006: 36,967). The increase of the IT expenses is arised by partially outsourcing of the IT activities at the end of 2006. 10. financial income and expense In thousands of euros 2007 2006 354,542 -1,981 352,561 – -11,561 -11,561 Interest income Dividend income from other investments Gain on sale other investments (2006: revaluation) Other financial income Financial income 19,027 125 57,019 6 76,177 16,036 2,451 10,489 94 29,070 Financial expenses -8,370 -7,958 Gain on sale of the associates Share of result associates Result from associates In July 2007, TMG sold its interest in SBS Broadcasting S.à.r.l. The associate was valued in accordance with the ‘equity’ method. The gain on the sale of the interest amounted 349,544 and was recognised under ‘Result from associates’. For more information, see note 16. In addition, TMG sold its interest in ANP holding. The investment was valued in accordance with the ‘equity’ method. The result from the sale of the interest amounted to 2,500 and was recognised under ‘Result from associates’. On 13 April 2007, TMG sold its interest in Wegener N.V. The gain on sale of this investment (including cumulative financing preference shares), 57,019, is recorded as financial income from gain on sale of other investments. 92 TMG Financial Statements 2007 11. income tax In thousands of euros 2007 2006 Current tax Current year Adjustment from prior years -270 381 8,208 – Deferred tax Origination and reversal of temporary differences Change in tax rate Total income tax continued operations -6,787 – -6,676 -9,624 -5,810 -7,226 Tax on continued operations Tax on discontinued operations Income tax in consolidated income statement -6,676 – -6,676 -7,226 1,161 -6,065 Tax on gain on sale discontinued operations Total income tax – -6,676 -762 -6,827 2007 2006 392,608 – – 392,608 -12,234 4,413 50,175 42,354 25.5% 29.6% 100,115 -533 1,919 -108,456 -252 2,647 – -2,116 -6,676 12,536 -732 1,552 -16,116 -505 2,248 -5,810 – -6,827 In thousands of euros Result continued operations before tax Result discontinued operations before tax Gain on sale of discontinued operations, before tax Result before tax Tax rate in the Netherlands Income tax in the Netherlands Effect of tax rate in foreign jurisdictions Non-deductible expenses Tax exempt revenues Rate difference Non-settled losses Change in tax rate Tax facilities Total The tax exempt revenues includes the gain on sale of SBS Broadcasting S.à.r.l. and Wegener and in 2006 the gain on sale of Media Groep Limburg. Reconciliation of the effective tax rate The effective tax rate on the result from all activities was negative 1.7% in 2007 (2006: negative 16.2%). The relationship between the tax rate in the Netherlands and the effective tax rate on consolidated income is as follows: In percentages 2007 2006 Domestic income tax rate 25.5 29.6 Tax effects of: - Deviating rates - Tax-exempt income and non-deductible costs - Other effects Effective tax rate -0.1 -27.1 0.0 -1.7 -15.7 -30.3 0.2 -16.2 TMG Financial Statements 2007 93 12. current tax assets and liabilities The current tax asset of 17,576 (2006: 19,950) represents the amount of taxes recoverable in respect of current and prior periods that exceeds payments. The current tax liability of 7,247 (2006: 6,839) represents the income tax to be paid over current and prior years after deduction of payments. 13. discontinued operations TMG discontinued or sold various activities during the financial year, including’ Editions de Saxe SAS from Keesing Media Group, 49% of the interest in Sky Radio Hessen, the joint venture Telegraaf Expomedia Events and the distribution of free local newspapers. The discontinued activities had a limited effect on TMG’s financial position, on account of which there is no separate explanation of them. In 2006, TMG sold Media Groep Limburg B.V. (De Limburger newspaper and Limburgs Dagblad), Grafisch Bedrijf Media Groep Limburg B.V. (newspaper printer Nieuwsdruk Limburg) and Uitgeversmaatschappij De Trompetter B.V. (publisher of free local newspapers) to the Mecom Group PLC (Mecom). The transaction was concluded on 13 June 2006 with a sales value for the three entities of € 200 million. The discontinued business activities involve publishing and other (Newspaper printing) segments. In thousands of euros Result of discontinued operation Revenue Expenses Result from operating activities Financial income and expense Income tax Income tax results from operating activities, net of income tax Gain on sale of discontinued operation, net of income tax Profit for the period Basic and diluted earnings per share (EUR) Cash flow of discontinued activities Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net cash from discontinued activities In thousands of euros Intangible assets Property, plant and equipment Financial fixed assets Inventories Trade and other receivables Cash Accounts payable and other current liabilities Deferred tax liabilities Restructuring provision Interest-bearing loans and other borrowings Net identifiable assets and liabilities Cash received Discontinued cash Net cash 2006 61,848 56,887 4,961 -548 -1,161 3,252 50,937 54,189 1.06 4,665 169,753 -149 174,269 2006 -23,328 -117,313 -4,035 -674 -10,572 -10,033 25,586 1,307 10,918 2,378 -125,766 179,937 -10,033 169,904 94 TMG Financial Statements 2007 14. intangible assets Trade- and publishing rights Licences Goodwill Software Assets under construction Total Cost Amortisation Impairment Carrying amount at 1 January 2006 15,824 1,531 – 14,293 – – – – 249,700 107,577 – 142,123 21,743 9,205 – 12,538 9,577 – – 9,577 296,844 118,313 – 178,531 Movement carrying amount Investments Acquisitions through business combinations Divestments Discontinued operations Amortisation Impairment Assets under construction in use Effect of change in foreign exchange Transfer of assets held for sale Total movement 2,295 77,993 -637 -3,036 -5,628 -896 – -312 -374 69,405 – 123,667 – – -16,464 – – – – 107,203 – 173,588 – -114,277 – -510 – 34 -850 57,985 5,468 4,944 -1 – -6,790 – 188 -3 -1,050 2,756 7,403 – – – – – -188 – – 7,215 15,166 380,192 -638 -117,313 -28,882 -1,406 – -281 -2,274 244,564 Cost Amortisation Impairment Carrying amount at 1 January 2007 90,702 6,108 896 83,698 123,667 16,464 – 107,203 278,139 77,521 510 200,108 32,814 17,520 – 15,294 16,792 – – 16,792 542,114 117,613 1,406 423,095 Movement carrying amount Investments Acquisitions through business combinations Divestments Amortisation Impairment Assets under construction in use Effect of change in foreign exchange Transfer of assets held for sale Total movement – 11,093 – -5,340 -3,299 – – -1 2,453 – 464 – -22,972 – – – – -22,508 – 37,165 -34 – – – -67 -20 37,044 6,299 1,106 – -9,554 -9,652 17,255 -5 465 5,914 860 – – – – -17,255 – – -16,395 7,159 49,828 -34 -37,866 -12,951 – -72 444 6,508 Cost Amortisation Impairment Carrying amount at 31 December 2007 98,002 7,656 4,195 86,151 124,131 39,436 – 84,695 315,139 77,477 510 237,152 57,099 26,239 9,652 21,208 397 – – 397 594,768 150,808 14,357 429,603 In thousands of euros Through business combinations 49,828 was acquired, which consist in addition to note 3, of goodwill relating to the acquired minority interest Media Librium in 2006 (in 2007 consolidated by increase of the interest) of 7,338 and goodwill of share based compensation of 5,789. Tradenames and publishing rights concerns acquired tradenames and publishing rights of Sky Radio Group and Keesing Media Group. Given the strong alliance between brand names and publishing rights, these items are not listed separately. The amortisation of the brand names (38,800) of Sky Radio Group is 50 years. The amortisation period of the other brand names and publishing rights ranges from 5 to 20 years. The licences relate to the broadcasting rights of Sky Radio Group and are acquired under contract to 2011. The amortisation period amounts to 5 years. Licences include also the annual contributions of Sky Radio Group to the Telecom agency. The annual payments to the Telecom agency until 1 September 2011 are recognised as 36,144 (2006: 46,001). The related non-current liability is accounted for in note 25. TMG Financial Statements 2007 95 Goodwill through business combinations major consist of Sky Radio Group (97,427) and Keesing Media Group (53,912). In addition, 12,000 (2006: 12,000) related to synergy effects in the Telegraaf Drukkerij Groep B.V. resulting from acquisitions. In 2006, goodwill was divested as a consequence of the sale of the business activities relating to De Limburger newspaper (2006: 111,697). Goodwill is believed to be indefinite and therefore not amortised. All intangible assets at the end of 2007 have been acquired externally. Intangible assets under construction Information systems (partly self-developed) at Uitgeversmaatschappij De Telegraaf B.V. and Telegraaf Tijdschriften Groep. In 2007 the information systems are used. Impairment test for cash-generating units The impairment test for intangible assets being allocated to cash-generating units, the lowest level within TMG for which there are separately identifiable cash flows. The carrying value of intangible assets attributed to the cash-generating units as at 31 December 2007 and 2006 is as follows: Publishing Radio Other Unallocated Total 2007 2006 164,471 224,779 27,740 12,613 429,603 138,382 251,784 23,312 9,617 423,095 The recoverable amount of the cash-generating units is based on the value in use calculations. Those cash-flow projections based on actual operating results and cash flow forecasts, the budget 2008 and the long-term plans up to and including 2010. The cash flows after 2010, which are extrapolated on the basis of 0% growth, are also taken into account. The economic useful life is an estimate by the management relating to the expected cash-generating period of the investment. The forecast cash flows are calculated based on a pre-tax discount rate of 8.0% (2006: 8.0%). The discount rate and growth factors were determined on the basis of the risk profile for TMG as a whole. These assumptions have been applied to all cash-generating units in TMG. The realisable value is equal to or higher than the carrying value, including goodwill, of the above reported entity. In 2007 is an impairment of 9,652 for a CRM application and 3,299 for a trade name (radio) was stated as impairment loss. In 2006 an impairment of 896 was adjusted on magazine titles (Publishing segment), primarily Ukrainian. During the course of the year, 734 was debited from goodwill from acquisitions in 2003 by Paypernews (Datawire) and Esquire (magazine) in connection with the revaluation or termination of these activities. 96 TMG Financial Statements 2007 15. property, plant and equipment In thousands of euros Land and buildings Machines and installations Other tangible fixed assets Assets under construction Total Cost Depreciation Carrying amount at 1 January 2006 209,800 127,658 82,142 267,954 210,278 57,676 141,569 117,232 24,337 3,008 – 3,008 622,331 455,168 167,163 Movement carrying amount Investments Acquisitions through business combinations Divestments Discontinued operations Depreciation Assets under construction in use Effect of change in foreign exchange Transfer of assets held for sale Total movement 474 1,530 -131 -10,027 -8,230 24 -4 849 -15,515 460 25 -312 -11,960 -8,600 5,214 – -1,599 -16,772 9,960 2,069 -1,272 -1,630 -11,513 122 16 -3,524 -5,772 3,364 – -44 -41 – -5,360 – -86 -2,167 14,258 3,624 -1,759 -23,658 -28,343 – 12 -4,360 -40,226 Cost Depreciation Carrying amount at 1 January 2007 193,802 127,175 66,627 237,102 196,198 40,904 102,022 83,457 18,565 841 – 841 533,767 406,830 126,937 2,066 19 -1,051 – -7,789 – -12 -603 -7,370 558 – -347 – -8,756 710 -1 -11 -7,847 7,477 2,923 -1,556 -792 -7,378 – -36 59 697 453 – – – – -710 -5 – -262 10,554 2,942 -2,954 -792 -23,923 – -54 -555 -14,782 190,762 131,505 59,257 238,233 205,176 33,057 98,052 78,788 19,262 579 – 579 527,626 415,469 112,155 Movement carrying amount Investments Acquisitions through business combinations Divestments Discontinued operations Depreciation Assets under construction in use Effect of change in foreign exchange Transfer of assets held for sale Total movement Cost Depreciation Carrying amount at 31 December 2007 Property, plant and equipment consist of land and buildings, machines and installations of the printing facility and other equipment. The value in case of the Real Estate Appraisal Act amounted approximately 107,500. Assets under construction The ‘assets under construction’ item concerns machines and/or installations at: Telegraaf Drukkerij Groep B.V., HDC Media B.V., DistriQ B.V., Telegraaf Media Ukraïne LLC. TMG Financial Statements 2007 97 16. investments in associated companies TMG has the following investments in associates: Equity interest SBS Broadcasting S.à.r.l. De Nationale Regiopers B.V. Expomedia Plc Media Librium B.V,1) AM van Gaal Media B.V. RKK B.V./C.V. ANP Holding B.V. 1) Location 2007 2006 Luxemburg Almere London Amsterdam Amsterdam Vriezenveen The Hague 0.0% 14.0% 20.0% 0.0% 20.0% 24.0% 0.0% 20.4% 14.0% 20.0% 40.0% 20.0% 24.0% 8.8% 2007 2006 – 18,688 – 3,938 22,626 61,432 18,412 6,180 3,054 89,078 100% consolidated as of 1 September 2007. Carrying value SBS Broadcasting S.à.r.l. Expomedia plc. Media Librium B.V. Other Total TMG’s share in the total profit or loss from the above-mentioned associated companies over 2007 amounts to 1,982 negative (2006: 11,561 negative). For associated companies which have been written to nil, a provision of nil was made for the participation in the additional losses. (2006: nil). The 14.0% interest (2006: 14.0%) in the Nationale Regiopers is a partnership with other regional newspaper publishers in the Netherlands for advertising sales. As a consequence of the economic interest in Nationale Regiopers TMG has significant influence. The 8.84% shareholding in ANP Holding B.V. is included under associates because TMG and other publishers jointly own 30% of this company. The ANP share is sold in July 2007. Summary financial information on associates – figures are based on 100% participation: In thousands of euros 2007 Expomedia Plc Assets Liabilities Shareholders equity Revenues Profit/loss 80,450 52,572 27,878 34,981 804 -33,674 1,527 26,225 1,002,956 3,288 30,801 -37,338 -2,204 -15,068 Listed value Expomedia as at 31 December is 63,334 (2006: 77,715) 2006 SBS Broadcasting S.à.r.l. Media Librium B.V. Expomedia Plc Jaarrekening_2007_Engels.indd 97 2,715,393 5,990 71,899 2,749,067 4,463 45,674 3-4-2008 15:46:05 98 TMG Financial Statements 2007 SBS Broadcasting S.à.r.l. The 20.44% interest in SBS Broadcasting S.à.r.l., a holding company domiciled in Luxembourg, was sold by TMG in July 2007 for 433,444 (including shareholders’ loans and accumulated interest). The holding in SBS Broadcasting S.à.r.l. was acquired in December 2005 in exchange for a 27% interest that TMG held in SBS Broadcasting B.V. (the Netherlands). At the exchange transaction shareholders’ loans are obtained which were not valued. The gain on sale of the 20.44% interest in SBS Broadcasting S.à.r.l. can be specified as follows: In thousands of euros Valuation interest in SBS Broadcasting S.à.r.l. in 2005 at acquisition Share in result 2005 Carrying amount 31 December 2005 67,790 -917 66,873 Acquisition costs Share in result 2006 Carrying amount 31 December 2006 1,894 -7,335 61,432 Share in result 2007 until sale Carrying amount at sale -2,040 59,392 Gain on sale of interest Transaction costs Gain on sale 2007, stated as result from associates 415,898 -6,962 349,544 The accumulated interest (17,546) on shareholders loans is received. The interest on these shareholders loans relating to 2007 (6,003) is stated as financial income. In 2007 the gain 349,544 on sale of SBS Broadcasting S.à.r.l. is realised and recognised. At the exchange transaction of SBS Broadcasting B.V. to SBS Broadcasting S.à.r.l. in 2005 no gains are stated as a consequence of uncertainty of realising future economic benefits and the lack of cashflows. The difference between the obtained shareholders’ loans and interest in SBS Broadcasting S.à.r.l. against ‘equity’ value and the carrying value for exchange of interest in SBS Broadcasting B.V. amounted to approximately 124,000 positive. If a gain was recognised, the valuation of shareholders’ equity and the valuation of the associated company SBS Broadcasting S.à.r.l. amounted 124,000 higher after the exchange transaction. This would not have an effect on the result 2006, but the result 2007 would amount to 124,000 lower. In exchange for selling its interest in SBS, TMG also received a call option for 12% of the ordinary voting shares in the ProSiebenSat.1-SBS Broadcasting combination. TMG has the right to exercise this call option on 1 June 2008 for a price of € 34.71 per share minus the dividend paid out during the period between 6 March 2007 and the option strike date, resulting in a estimated purchase price of approximately 456,000 (before dividend). In the case TMG is not exercising its call option, Lavena Holding, (majority shareholder in the ProSiebenSat.1-SBS Broadcasting combination) has a put option for the same 12% of the ordinary voting shares. These must be exercised in the period 1 – 15 August 2008 at a fixed price of € 28.71 per share minus the dividend payments. Resulting in an estimated purchase price of approximately 377,000 (before dividend). The initial valuation of the call option is at fair value nil, because the exercise price of the option equals the fair value of the shares at moment of obtaining the shares. The call option is not negotiable. The initial valuation of the written put-option is nil. The exercise price is below fair value of the shares at the moment of writing the put option. After initial valuation the option has to be valued at fair value. The underlying shares are not listed. The fair value has to be measured reliable with reasonable assurance. While the range of various estimates in fair value is substantial, is no reasonable assurance obtained. The valuation is continued on initial valuation nil. TMG has no indication, based on a 5 years result forecast of ProSiebenSat.1-SBS Broadcasting combination, that the fair value has changed. The voting shares of ProSiebenSat.1-SBS Broadcasting differ from the non-voting shares in ProSiebenSat.1-SBS Broadcasting that are listed on the stock exchange. For this reason, a comparison between the specified shares is not possible. Jaarrekening_2007_Engels.indd 98 3-4-2008 15:46:05 TMG Financial Statements 2007 99 17. other investments In thousands of euros Non current investments Interest in Wegener: -(Depositary receipts for) ordinary shares -Preference shares Prepaid operational lease Non-current receivables Total 2007 2006 – – 4,650 2,643 7,293 116,437 18,151 4,887 15,216 154,691 Besides the investments in associated participations indicated in note 16, TMG had an interest (2006: 23.8%) in Wegener N.V. The interest was sold on 13 April 2007 for 171,530 including dividend 2006 and an € 1.00 maximum premium per receipt (fair value at the end of 2006: 116,437). TMG also had cumulative financing preference shares, which were sold in 2007 for 20,100 (2006: 18,151). This interest in Wegener (shares only) is not designated as an associate because TMG has no significant influence on the company’s policy. TMG has designated the participation to be a financial asset valued at fair value with the changes of value directly in income statement. The fair value is based on the listed market price as at the balance sheet date without deduction of transaction costs. The ground lease included under ‘prepaid operational lease’ is amortised using the straight-line method for the term of the underlying ground lease contracts. The final instalment expires in 2039. In 2006 an non-current receivable of 11,260 of accumulated interest of shareholders’loans SBS Broadcasting S.à.r.l. stated. The interest of shareholders’loans fall due to the sale of the interest in SBS Broadcasting S.à.r.l. 18. inventories In thousands of euros Raw materials Auxiliary materials Total 2007 2006 14,376 2,025 16,401 7,982 3,087 11,069 2007 2006 86,710 12,946 19,830 119,486 88,629 24,096 18,061 130,786 19. trade and other receivables In thousands of euros Trade receivables Other receivables Prepayments and accrued income Total Trade receivables are shown net of impairment losses. During the current year, such losses amounted to 5,410 for bad debts (2006: 9,396). For more information see note 31, Financial risk management. Fair value For current receivables, the nominal value is considered to reflect the fair value. 100 TMG Financial Statements 2007 20. cash In thousands of euros Bank Call deposits Total 2007 2006 44,855 451,170 496,025 67,329 18 67,347 Of the above-mentioned cash, an amount of 451,170 is placed in deposits that are not freely available. If necessary, the deposits can be immediately accessed under the terms of the penalty clause. The weighted average remaining term of the deposits is 2 months. The fair value is deemed equal to the nominal value. 21. assets and liabilities held for sale In thousands of euros Assets Property, plant and equipment Associates’ assets held for sale Total In thousands of euros Liabilities Associates’ liabilities held for sale Total 2007 2006 809 11,183 11,992 6,605 10,689 17,294 2007 2006 2,134 2,134 3,286 3,286 The property, plant and equipment concern company premises and hardware. The associates held for sale concern Datawire B.V. and Keesing Reference Systems B.V. (2006: Datawire B.V. and Keesing Reference Systems B.V.). The intention is that the sales transactions are completed in 2008. The expected fair value of these assets is on or higher than the carrying value. TMG Financial Statements 2007 101 22. shareholders’ equity Issued capital At 31 December 2007 the authorised share capital comprised 200,000,000 ordinary shares, preference and priority shares (2006: 200,000,000), which were issued and paid up as follows: Number of shares Ordinary shares On issue as at 1 January Shares withdrawn in 2007 On issue at 31 December – fully paid 52,499,200 2,499,200 50,000,000 Number of repurchased shares as at 31 December Number of outstanding shares as at 31 December 259,800 49,740,200 2007 Priority shares Ordinary shares 2006 Priority shares 960 52,499,200 960 960 52,499,200 960 960 2,499,200 50,000,000 960 All shares have been paid up and have a nominal value of € 0.25. No preference shares have been issued. In 2007, ordinary shares were repurchased for an amount of 6,164 (2006: 54,415). These shares are stated as treasury shares. The holders of ordinary shares and priority shares receive a maximum primary dividend of five percent of the nominal amount of the shares, if the profit is sufficient. If the profit does not allow this, any deficit is charged to the payable amount of the shareholders’ equity. The remaining profit is at the disposal of the meeting of shareholders. The holders of ordinary shares and priority shares are entitled to cast one vote per share during the meeting. Each TMG shareholder has access to the meeting of shareholders and the right to cast a vote. A summary of the legal and statutory provisions relating to the appropriation of the profit and the other statutory rights associated with the ordinary shares, priority shares and preference shares is included under ‘Other Information’ on page 125. The right to issue TMG preferential shares is granted by Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V. to Stichting Preferente aandelen Telegraaf Media Groep N.V. TMG has an option to issue preferential shares, which will then be managed by Stichting Preferente aandelen Telegraaf Media Groep. At present, no preferential shares have been issued. The provisions in the articles of association governing remuneration of preferential shares are in line with the market. The option to issue preferential shares is valued at nil. Translation reserve The translation reserve comprises all the foreign exchange differences arising from the translation of the financial statements of foreign operations in Sweden and the Ukraine. Other legal reserves The reserve capitalised development costs concerns capitalised software which has been developed internally. An impairment was applied to the relevant software in 2007, as result of which the legal reserve was eliminated. Repurchased shares On the balance sheet date, the Company had disposal of 259,800 (2006: 2,499,200) repurchased ordinary shares (nominal value € 0.25, 0.5% (2006: 4.8%) of the issued capital). The cost of the repurchased ordinary shares was 6,164 (2006: 54,415). The repurchased own shares 2006 are withdrawn in 2007. Jaarrekening_2007_Engels.indd 101 3-4-2008 15:46:05 102 TMG Financial Statements 2007 23. dividend In the year under review TMG paid out the dividend determined by the meeting of shareholders: In thousands of euros € 0.50 per (depositary receipt for an) ordinary share (2006: € 0.44) 2007 2006 25,000 23,100 As regards the 960 priority shares, 5% of the nominal amount was paid out in dividend. After 31 December 2007, the Executive Board made the following dividend proposal for 2007: In thousands of euros € 1.00 per (depositary receipt for an) ordinary share (2006: € 0.50) 2007 50,000 The dividends have not been provided for and there are no income tax consequences. 24. earnings per share Basic earnings per share The calculation of the basic earnings per share as at 31 December 2007 is based on profit attributable to ordinary shareholders of 400,097 (2006: 49,599) and a weighted average number of ordinary shares which has been outstanding during 2007 of 49,992,892 (2006: 51,010,958), as shown below: In thousands of euros Earnings per share Result attributable to equity holders of ordinary shares in Telegraaf Media Groep N.V. Weighted average number of ordinary shares Basic earnings per share (EUR) 2007 2006 400,097 49,992,892 8.00 49,599 51,010,958 0.97 Diluted earnings per share The calculation of the diluted earnings per share at 31 December 2007 is based on profit attributable to ordinary shareholders of 400,097 (2006: 49,599) and a weighted average number of ordinary shares, after adjustment in line with all potential diluted effects on the ordinary shares, has been outstanding during 2007, of 49,992,892 (2006: 51,010,958). No shares were diluted in 2007. TMG Financial Statements 2007 103 25. interest-bearing loans and borrowings This note provides information on the contractual terms of TMG’s interest-bearing loans and borrowings. For more information about TMG’s exposure to interest rate and foreign currency risk, see note 31. 2007 In thousands of euros Interest bearing loans Acquisition payables Other financing Total 2006 In thousands of euros Interest bearing loans Acquisition payables Other Financing Total Total Current Non-current 12,689 15,189 31,956 59,834 1,743 8,814 11,203 21,760 10,946 6,375 20,753 38,074 Total Current Non-current 150,705 3,482 78,056 232,243 12,556 – 11,203 23,759 138,149 3,482 66,853 208,484 Non-current liabilities, all denominated in euros, were incurred by a combination led by TMG to facilitate acquisition of the Keesing Media Group and the Sky Radio Group. As a result of the Netherlands Temporary Media Concentrations Act of 13 June 2007 (Tijdelijke Wet Mediaconcentraties), TMG repaid the bank loan from Sienna Holding B.V. raised for the acquisition of Sky Radio Group in July 2007. Non-current interest bearing loans and borrowings (2007: 21,760; 2006: 23,759) are classified as current liabilities. In thousands of euros Interest-bearing loans Syndicated bank loan Syndicated bank loan Sienna Holding B.V. Shareholders loan Veronica Holding B.V. to Sienna Holding B.V. Keesing bank loan Other loans Total Acquisition payables Shares Sienna Holding B.V. Shares Keesing Media Group B.V. Shares Relatieplanet Nederland B.V. and IWD Nederland B.V. Pilarczyk Media Groep B.V. Total Other financing Non-current liabilities: Sky Radio Group licences Shares in Sienna Holding B.V. (Banks) Other non-current liabilities Total 1) Currency Nominal interest rate Nominal value Year of maturity Carrying amount 2007 Carrying amount 2006 EUR EUR Euribor Euribor 92,981 50,000 – – – – 92,981 43,386 EUR EUR EUR 5.50% 3-mnd Euribor Euribor 8,400 10,000 – 2010 2008 - 2012 – 9,227 2,543 919 12,689 8,740 4,829 769 150,705 EUR EUR – – – – 2010 - 2011 2010 4,662 1,713 1,352 2,130 EUR EUR – – – – 2008 2008 7,800 1,014 15,189 1) – 3,482 EUR EUR EUR Euribor Euribor Euribor – – – 2008 - 2011 – – 31,390 – 566 31,956 40,873 37,037 146 78,056 In 2006 the acquisition payable of Relatieplanet and Iwannadate (7,464) was stated as accounts payable and other current liabilities. 104 TMG Financial Statements 2007 Terms and debt repayment schedule For the terms and repayment schedule of long-term loans involved in the takeover of Sky Radio Group (Sienna Holding), please refer to the 2006 TMG Financial statements. The loans were repaid in June and July 2007. The Keesing Media Group bank loan, totalling 800, has a linear repayment requirement and must ultimately be fully repaid in 2012. The interest rate is linked to the 3-month Euribor. The short-term portion amounts to 2,286 and is recognised under current liabilities. The interest rate is linked to the Euribor and is set on the balance sheet date. TMG is jointly and severally liable for Keesing Media Group. In the case of all loans, the effective interest is equal to the nominal interest. Acquisition payables The management is entitled to offer shares to TMG as of the date of maturity. TMG has the obligation to buy these shares from that date. For an explanation of the valuation of Sky radio management shares, please refer to note 26. The management shares of Keesing Media Group do not involve any share-based remunerations given that the purchase price is the same as the strike price. In 2007 TMG bought the management shares of a manager of Keesing Media Group with bad leaver conditions. Telegraaf Classified Media B.V. has a purchase option on the remaining 30% interest in Relatieplanet Nederland B.V. and IWD Nederland B.V. The option has to be exercised before September 2008. The shares are in possession of the management. The purchase price on the date of exercising is fixed. The obligation to purchase the remaining 30% is included in the other debts. Taking the management share purchase option into account, TMG bears the entire 100% of the economic risk and control of Relatieplanet Nederland B.V. and IWD Nederland B.V. The companies are included as a group subsidiary in the consolidated financial statements of TMG. Other financing Non-current liabilities relating to the licences of Sky Radio Group involve annual payments to the Telecom agency until 1 September 2011. Besides the payment of a one-time fee to acquire the licensing rights, Sky Radio Group also has an obligation to make annual payments to the Telecom agency. The annual payments to Telecom are listed under intangible assets as 36,144 (2006: 46,001). The intangible assets are amortised over the contractual period. The interest payments associated with financial liabilities are recorded as financial charges, while the annual payment is deducted from the non-current liability. The shares in Sienna Holding held by banks were purchased for 37,037. In this way, TMG obtained 85% of the shares in Sky Radio Group. The remaining 15% is in the possession of management at Sky Radio Group and Veronica Holding. TMG Financial Statements 2007 105 26. share-based remunerations The management of Sky Radio Group has share-based remunerations: Bid price Fair value per per share on share on balance Number acquisition date sheet date In euros Sienna Holding B.V. Sienna Holding B.V. 211 1,474 490 490 2,475 2,475 Due date 1-3-2010 1-3-2011 The fair value share price has been determined in accordance with a pre-determined formula. The fair value per share on the balance sheet date is estimated and is based on future cash flows from the associates. The expense in income statement of these share based remunerations amounted 329 (2006: 320). Good leaver, bad leaver conditions have been agreed with the management relating to the period up until the date of maturity. 27. post-employment benefit liabilities In thousands of euros 2007 2006 2005 2004 2003 Present value of unfunded obligations Present value of funded obligations Present value of obligations 9,814 38,481 48,295 23,055 23,975 47,030 18,892 167,420 186,312 36,643 682,601 719,244 37,371 602,573 639,944 Fair value of plan assets Present value of net obligations -17,337 30,958 -20,498 26,532 -148,226 38,086 -628,647 90,597 -576,413 63,531 Unrecognised actuarial gains and losses Recognised liability for defined benefit obligations -1,274 29,684 -1,552 24,980 -20,057 18,029 -37,495 53,102 – 63,531 Experience adjustments Experience adjustments arising on plan liabilities Experience adjustments arising on plan assets Adjusted assumptions plan liabilities 3,600 -3,500 1,600 Gross commitment for defined benefit pension rights TMG contributes to three defined benefit pension schemes on the basis of which employees of TMG in the Netherlands are paid pension benefits after retirement. This concerns pension schemes of Sky Radio Group and Keesing Media Group and a part of the Amsterdam and Alkmaar companies of TMG. In determining the provision, account is taken of other employee schemes including allowances for the healthcare costs of retired employees, early retirement and anniversary schemes. In 2005, the Stichting Telegraafpensioenfonds 1959 plan was changed from a defined benefit scheme to a defined contribution scheme, giving rise to a release in the employee benefits category. 106 TMG Financial Statements 2007 The principle actuarial assumptions at the balance sheet date In weighted averages 2007 2006 2005 Discount rate at 31 December Expected return on plan assets at 31 December Future salary increases Adjustment for inflation Increase in social security benefits 5.1% 6.1% 2.5% 2.0% 2.0% 4.5% 6.1% 2.5% 2.0% 2.0% 4.0% 6.1% 2.5% 2.0% 2.0% The forecast yield is the weighted average expected return, based on the expected investment mix of shares (40%), fixed-interest securities (60%). The forecast returns on these investments of 8.5% and 4.5% respectively correspond to the points of departure prescribed to date by De Nederlandsche Bank N.V. Movements in commitment for defined benefit pension schemes 2007 2006 As at 1 January 47,030 186,312 Business Combinations Service costs Past service costs Interest expenses IFRS adjustment to opening balance sheet (anniversary payments) From restructuring provision Employee contribution Actuarial losses (gains) Release of provisions due to scheme reduction Release of provisions due to discontinued activities Payments As at 31 December – 1,692 1,205 2,198 – 6,516 – -3,914 – – -6,432 48,295 13,462 3,477 – 4,839 6,331 – 359 -6,751 -14,421 -139,357 -7,221 47,030 2007 2006 As at 1 January 20,498 148,226 Business Combinations Contributions Expected yield Employee contribution Actuarial gains (losses) Release of investments due to scheme reduction Release of investments due to discontinued activities Payments As at 31 December – 6,824 1,000 – -4,553 – – -6,432 17,337 11,084 1,475 5,282 359 12,800 -6,582 -150,097 -2,049 20,498 In thousands of euros Movement of fair value of plan assets In thousands of euros The release of provisions (or investments) through the termination of activities in 2006 came about due to the sale of the Limburg activities. In 2006, the scheme restriction concerned HDC Media. The costs of defined contribution schemes also include the costs related to the early retirement scheme for the printed industry sector. Jaarrekening_2007_Engels.indd 106 3-4-2008 15:46:05 TMG Financial Statements 2007 107 The following funds, which also qualify as defined benefit schemes, have informed TMG that they are not able to provide us with any details for the calculation of (our share in) surpluses or deficits: •Pensioenfonds Grafische Bedrijven (pension scheme for employees in the printing and allied trades). •Stichting bedrijfstakpensioenfonds voor het beroepsvervoer over de weg (pension scheme for the goods haulage sector). •Stichting vrijwillig vervroegde uittreding voor het beroepsgoederenvervoer over de weg en de verhuur van mobiele kranen (early retirement scheme for employees in the goods haulage sector and the rental of mobile cranes). •Stichting Prepensioenfonds voor het beroepsgoederenvervoer over de weg en de verhuur van mobiele kranen (pre-pension scheme for employees in the goods haulage sector and the rental of mobile cranes). These plans qualify as a defined pension scheme and are processed as a defined contribution plan. TMG is not responsible for any shortfall in an early retirement / pension plan, nor is it required to make up any shortfall. The same applies to the departmental plan concerning the pre-pension of newspaper journalists. TMG estimates the contributions to be paid to the defined benefit schemes during 2008 1,087 (2007: 1,018). In income statement stated expenses: 2007 2006 Pension costs allocated to the year of service Past service cost Interest over the liability Expected return on plan assets Depreciation of non-recognised gains/ (losses) Total contribution to defined benefit schemes 1,692 1,205 2,198 -1,000 – 4,095 3,477 – 4,839 -5,282 128 3,162 Result on account of curtailment/termination Contribution to defined contribution schemes Total – 17,844 21,939 -4,609 18,139 16,692 2007 2006 21,595 15,272 – 11,970 -6,516 -16,848 10,201 3,590 44,370 – -41,637 21,595 In thousands of euros Note 7 28. restructuring provision In thousands of euros Balance as at 1 January Discontinued activities Provisions made during the financial year To post-employment benefit liabilities Provisions used during the financial year Balance as at 31 December The restructuring provision concerns the obligations relating to finding alternative employment, redundancy, relocation and retraining and additional training at Telegraaf Tijdschriften Groep B.V., Holland Combinatie B.V., Uitgeversmaatschappij de Telegraaf B.V., HDC Media B.V., Telegraaf Drukkerij Groep B.V., DistriQ B.V. and at holding level. Of these, 13,205 (2006: 17,623) is stated as current obligation. The non-current part is expected to be spent in 2014 at the latest. Jaarrekening_2007_Engels.indd 107 3-4-2008 15:46:05 108 TMG Financial Statements 2007 29. deferred tax assets and liabilities The tax assets and liabilities recognised can be allocated as follows at the end of the financial year: 2007 In thousands of euros Assets Liabilities Balance – 419 958 – 206 29 1,612 -33,539 – – -1,965 – – -35,504 -33,539 419 958 -1,965 206 29 -33,892 2006 In thousands of euros Assets Liabilities Balance Intangible assets Property, plant and equipment Post-employment liabilities schemes Provisions Carry-forward loss compensation Deferred tax liability abroad Other items Net tax credit/liability (-) – – 1,264 – 180 – – 1,444 -38,716 -417 – -2,477 – -2,559 -106 -44,275 -38,716 -417 1,264 -2,477 180 -2,559 -106 -42,831 Intangible assets Property, plant and equipment Post-employment liabilities schemes Provisions Carry-forward loss compensation Other items Net tax credit/liability (-) In some countries in which TMG operates, local tax laws provide that the gains are taxed at the moment it is paid out. As of the balance sheet date, the total gain was nil (2006: 11,516) which results in a tax liability of nil (2006: 2,559). Unrecognised deferred tax assets With regard to start-up losses at a few subsidiaries, no deferred tax assets were recognised on the balance sheet. At the end of 2007, unrecognised deferred tax assets amounted to 7,744 (2006: 8,140). Of this amount, 4,668 (2006: 5,567) concerns foreign losses that can be carried forward indefinitely. The unused losses in the Netherlands remain within the limit of 9 years. Movement in temporary differences during the year In thousands of euros Balance 1-1-2007 Recognised in income (De-) Consolidated Balance 31-12-2007 Intangible assets Property, plant and equipment Post-employment liabilities schemes Provisions Carry-forward loss compensation Deferred tax liability abroad Other items Net tax credit/liability (-) -38,716 -417 1,264 -2,477 180 -2,559 -106 -42,831 5,702 836 -306 512 26 – 17 6,787 -525 – – – – 2,559 118 2,152 -33,539 419 958 -1,965 206 – 29 -33,892 In thousands of euros Balance 1-1-2006 Recognised in income (De-) Consolidated Balance 31-12-2006 – -1,811 -2,514 -6,888 – – – -11,213 9,592 256 3,003 5,218 -26 -2,559 -50 15,434 -48,308 1,138 775 -807 206 – -56 -47,052 -38,716 -417 1,264 -2,477 180 -2,559 -106 -42,831 Intangible assets Property, plant and equipment Post-employment liabilities schemes Provisions Carry-forward loss compensation Deferred tax liability abroad Other items Net tax credit/liability (-) Jaarrekening_2007_Engels.indd 108 3-4-2008 15:46:05 TMG Financial Statements 2007 109 30. accounts payable and other current liabilities In thousands of euros Subscriptions paid in advance Amounts paid in advance Trade payables to suppliers Employee benefits payable (holidays/-allowance and profit share) Current tax expense Other taxes and social security premiums Restructuring provision (short-term) Other debts and accruals and deferred income Total Note 2007 2006 12 52,717 10,211 38,121 44,556 7,247 12,627 13,205 47,946 226,630 49,373 25,443 32,401 31,626 6,839 13,365 17,623 36,440 213,110 Other debts and accruals consist of (estimate for) editorial and distribution, other general expenses, provisions, returned products and commissions to be paid. The fair value of the liabilities does not differ from the nominal value recognised here. 110 TMG Financial Statements 2007 31. financial risk management TMG recognises the market, credit, currency-rate and interest risk involved in regular business operations. The trends in the price of paper can also have a substantial effect on the business result. The Executive Board has overall responsibility for the establishment and oversight of TMG’s Risk control framework. The Executive Board makes an annual assessment of the strategic risks at both the central and decentralised level and evaluates the developments and monitoring of the strategic risks quarterly. TMG’s risk management policies are established to identify and analyse the risks faced by TMG, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and TMG’s activities. TMG, through its training and management standards and procedures, aims to developed a disciplined and constructive control environment in which all employees understand their roles and obligations. Group Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Executive Board and Supervisory Board. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect TMG’s income or the value of its holdings of financial instruments in a negative way. The objective of market risk management is to manage and control market risk exposures with acceptable parameters, while optimising the return. TMG has a policy of not using any forward, swap and/or future contracts. Only in the case of interest-rate risk has TMG made use of interest-rate swaps in 2006 when contracting long-term loans. No use is made of hedge accounting. At the end of 2007 no interest-rate swap contracts were arranged. TMG also has the policy of restricted use of external financing, with the exception of Sky Radio Group and Keesing Media Group where external financing is temporary used. Major criteria is that TMG is not dependent on external finance companies. External borrowings will not exceed 2.5 times EBITDA. For further information, see the note on interest-rate risk. Credit risks Credit risk arises principally from TMG’s receivables if a customer to a financial instrument fails to meet its contractual obligation. The (industry-wide) terms of payment applied, the relatively limited dependency on individual customers and the historical payment behaviour of our customers make it unnecessary to use financial instruments to limit this risk. The credit risk is principally concentrated in The Netherlands. Impairment losses Customers are required to pay within pre-set time limits. Exceeding the deadline results in service deliveries being halted. Customers are primarily media outlets, companies and subscribers. The aging of trade receivables at balance sheet date was: In thousands of euros Balance, 31 December 2007 Balance, 31 December 2006 Total Not past due Past due 30 - 60 days Past due 60 - 90 days 92,120 98,025 63,216 67,963 18,043 16,344 5,885 3,712 Past due Past due 90 - 180 days 180 - 360 days 3,932 1,543 -1,121 1,376 More than 360 days 2,165 7,087 TMG has established an impairment risk provision for estimated losses on trade receivables. The loss provision is based on payment arrears and the stipulated deadlines. Changes in the impairment provision for trade receivables during the year were as follows: In thousands of euros 2007 2006 Balance, 1 January 9,396 11,554 Added Impairment losses recognised Balance, 31 December 1,189 -5,175 5,410 1,650 -3,808 9,396 TMG Financial Statements 2007 Currency risk TMG incurs currency risks to a very limited extent due to activities outside the euro zone, specifically in Sweden, Denmark and the Ukraine. The net cash in and outflows of entities and their timing is such that no significant currency positions are created as a result. Sensitivity of TMG to foreign exchange rates is therefore extremely small. At the end of 2007 TMG had no forward contracts. TMG has the policy of responding to significant currency exposures by concluding forward contracts to cover the risks over a period of one year. For an individual entity within TMG, a currency exposure is deemed to be significant if the size of the exposure as a percentage of revenue in any calendar month exceeds the limit of 500, and the cash flow has a probability of more than 50%. Interest-rate risk The most relevant interest-rate risk for TMG involves a mismatch between interest payments and the cash flows from financed assets. However, TMG is on balance a recipient of interest since the net debt position (recognised loans minus cash resources) is more than compensated by the interest-bearing cash resources and immediately accessible deposits. Given the limited size of the debt position, TMG is hardly affected by interest-rate fluctuations, nor do they have any significant influence on TMG’s financial position and result. For this reason, TMG does not use any interest-rate hedging. Other market-price risk Of the commodities traded on the global market, TMG only purchases paper, but to the extent that fluctuations in its price can have a substantial impact on the business result. TMG has decided not to hedge the risk of increasing paper prices because (a) TMG already has long-term contracts with paper suppliers and (b) large manufacturers of paper have taken up positions on the futures market making it insufficiently liquid to hedge significant volumes in a manner that would be attractive to TMG. Liquidity risk TMG has hardly any liquidity risk given the limited financial liabilities and the large liquidity position. Liquidity risk is the risk that TMG will not be able to meet its financial obligations as they fall due. The aim of liquidity risk management is to maintain sufficient liquidity in order, as far as possible, to cover existing and future financial liabilities under normal and difficult circumstances and without incurring unacceptable losses or damaging the reputation of TMG. The following lines of credit are available at balance sheet date: • € 45 million overdraft facility that is unsecured, unrestricted and without expiry date. Interest would be payable at the EURIBOR one-month rate plus 50 basis points, 1,877 of this credit line was being used on the balance-sheet date. • 5 million overdraft facility that is unsecured, unrestricted and without expiry date. Interest would be payable at the EURIBOR one-months rate plus 50 basis points. No use was being made of this available credit on the balance sheet date. The fair value of the financial instruments equals the carrying value in 2007 and 2006. Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of business. The Executive Board monitors the return of capital, which TMG defines as the net operating income divided by total shareholders’ equity, excluding minority interests. The Executive Board also monitors the level of dividends to ordinary shareholders. From time to time TMG purchases its own shares on the market. Buy and sell decisions are made on a specific transaction basis by the Executive Board within limits set by the Supervisory Board and the annual meeting of shareholders; TMG does not have a defined share-buy-back plan. There have been no changes in TMG’s approach to capital management during the year. Neither TMG nor any of its subsidiaries are subject to externally imposed capital requirements. 111 112 TMG Financial Statements 2007 32. off balance sheet liabilities Non-cancellable off balance sheet operational leases expire as follows: In thousands of euros < 1 year 1-5 years > 5 years Total 2007 2006 4,065 11,320 881 16,266 3,623 15,428 8,638 27,689 The liabilities have terms up to 2020 and consist primarily of rental and lease liabilities. In the financial year 2007, an expense of 6,944 (2006: 5,286) was included in the income statement of operational leasing. Within the framework of the termination of non-core activities, Telegraaf Media Groep B.V. entered into an agreement with Atos Origin concerning the subcontracting of the generic ICT services of Telegraaf Media ICT B.V. as of 1 January 2007. The total value of the contract is expected to be 43,300 for a period of 5 years. Litigation At the Nederlands Drukkerij Bedrijf (NDB), a subsidiary of the Biegelaar Groep, a litigation is started in which former employees of the Biegelaar Groep sue TMG for supplementary payment. TMG disputes the supplementary payment. At this moment no opinion could be given in case of the result of the litigation. A number of TMG group companies face legal proceedings. These cases primarily concern employment relations, disputes and rectifications of publications. We have every faith in a positive outcome in the case of all these proceedings and do not expect them to have a significant effect on TMG’s consolidated financial position. 33. investment commitments In the financial year 2007, TMG entered into agreements for development of software for 4,132 (2006: nil). These investments concern development of IT systems of DistriQ B.V. and Keesing Media Group. 34. contingent liabilities As regards partnerships entered into with third parties in the form of general partnerships, the participating group company is jointly and severally liable for all the partnership’s debts. For associated companies TMG is jointly and severally liable its share in participation. The Company also provided security for the continuity of Telegraaf Media Ukraïne (Ukraine), TTG Sverige A.B., Telegraaf Media Cyprus Ltd (Cyprus) and Barragold Ltd (Cyprus). At the end of 2007 bank guarantees of 2,149 (2006: 1,645) were issued to cover rental agreements. TMG Financial Statements 2007 113 35. related parties Identity of related parties TMG has a related party relationship with its subsidiaries, associates (see section 16 of the notes), joint ventures (see section 36 of the notes), Stichting Telegraafpensioenfonds 1959 their management and key management of TMG. A list of Telegraaf Media Groep N.V. participations has been published at the Chamber of Commerce in Amsterdam. The following shareholders have an interest more than 20% in TMG’s capital. Stichting Administratiekantoor Telegraaf Media Groep N.V. N.V. Exploitatiemaatschappij Van Puijenbroek 2007 2006 63.4% 32.5% 62.7% 31.0% Transactions with key management personnel For a specification of the remunerations per director please refer to the company Income statement (Note 9). The note on related parties generally refers to TMG senior management, namely the Executive and Supervisory Boards. The total remuneration is included in Personnel costs (see section 27 of the Notes to the consolidated financial statements). Other related party transactions Transactions with related parties relate to associated companies (revenue 3,084; revenue 2006: 17,402) and joint ventures (revenue 834; revenue 2006: 611). Receivables with related parties were 1,772 as at December 31, for which an provision is made of 1,697. This provision has not effected the result 2007. All outstanding balances with these related parties are priced on an arm’s length basis and are settled in cash within six months of the reporting date. None of the balances is secured. 114 TMG Financial Statements 2007 36. interests in joint ventures The group has an interest in the following joint ventures: Fitclub B.V. Telegraaf Expomedia Events vof TTG Hearst AB TTG Hearst B.V. TTG Sulake B.V. TTG Volgas v.o.f. Plus Magazine AB Info Pinnacle B.V. Ludique Events B.V. R & R Expo vof SmartEvents B.V. Adventure Holding B.V. Location Interest 2007 Interest 2006 Groningen Amsterdam Stockholm Amsterdam Amsterdam Amsterdam Stockholm Amsterdam Liempde Amsterdam Rotterdam Zeist 75.0% 0.0% 50.0% 75.0% 49.0% 50.0% 50.0% 50.0% 50.0% 0.0% 50.0% 33.3% 75.0% 50.0% 50.0% 75.0% 50.0% 50.0% 0.0% 50.0% 25.0% 32.5% 50.0% 33.3% The consolidated financial statements include the following items which correspond to TMG’s interest in the joint venture’s assets and liabilities, revenues and costs: In thousands of euros Non-current assets Current assets Non-current liabilities Current liabilities Balance of assets and liabilities In thousands of euros Total revenues Total expenses Financial income and expense Income tax expense Result 2007 2006 282 3,704 -2,773 -3,370 -2,157 2,122 3,049 -5,341 -3,688 -3,858 2007 2006 9,456 -11,473 911 -474 -1,580 9,211 -10,656 -78 -307 -1,830 TMG Financial Statements 2007 115 income statement of telegraaf media groep n.v. In thousands of euros 2007 2006 Share in result of subsidiaries, joint ventures and associates 405,544 33,062 Other income and expense after tax Result for the year -5,447 400,097 16,537 49,599 116 TMG Financial Statements 2007 balance sheet of telegraaf media groep n.v. as at December 31, before approportionment of result In thousands of euros Note 2007 2006 2 17,445 3,891 3 603,769 23,107 18,804 – 140 645,820 180,554 67,791 25,486 314 390 274,535 663,265 278,426 15,457 437,552 317 18,662 398,791 4,575 – 453,326 – 422,028 1,116,591 700,454 12,500 -123 454,341 400,097 866,815 13,125 1,470 433,847 49,599 498,041 5 26,399 2,904 177 29,480 21,459 4,772 118 26,349 6 6,375 133,500 Subsidiaries Borrowings and other financing Accounts payable and other current liabilities Total current liabilities 192,638 1,483 19,800 213,921 23,365 16,705 2,494 42,564 Total liabilities 220,296 202,413 1,116,591 700,454 non-current assets Intangible assets Goodwill Financial assets Subsidiaries Receivables from subsidiaries Other associated companies Receivables from associated companies Other receivables Total non-current financial assets Total non-current assets current assets Receivables Taxes and social security premiums Subsidiaries Other receivables and accrued income Cash Total current assets 4 Total assets shareholders’ equity Issued capital Statutory reserves Other reserves Retained earnings Total shareholders’ equity provisions Pension provision Restructuring provision Deferred tax liabilities Total provisions non current liabilities Interest bearing loans current liabilities Total shareholders’ equity and liabilities TMG Financial Statements 2007 notes to the financial statements telegraaf media groep n.v. contents page Note 118 118 119 119 120 120 120 121 1. 2. 3. 4. 5. 6. 7. 8. Significant accounting policies Intangible assets Financial assets Receivables Provisions Non-current liabilities Off- balance sheet liabilities Remuneration of Executive Board and Supervisory Board members 117 118 TMG Financial Statements 2007 notes to the company financial statements 1. significant accounting policies General The company financial statements have been prepared in accordance with the provisions in Part 9, Book 2 of the Netherlands Civil Code. As regards determining the principles for the valuation of assets and liabilities and the result of its company financial statements, Telegraaf Media Groep N.V. uses the option provided for in Article 2:362, paragraph 8 of the Netherlands Civil Code. This means that the principles for the valuation of assets and liabilities and the determination of the result (hereinafter to be referred to as the ‘accounting principles’) of the company financial statements of Telegraaf Media Groep N.V. are the same as those used for the consolidated IFRS financial statements. Investments in subsidiaries, in which TMG has significant influence, are accounted for in accordance with the equity method. These consolidated IFRS financial statements have been prepared in accordance with the standards of the International Accounting Standards Board and approved by the European Union. Please refer to pages 78 to 85 for a description of these principles. Share in result of subsidiaries, joint ventures and associates includes the share of Telegraaf Media Groep N.V. in the results of these participations. Results on transactions which have involved the transfer of assets and liabilities between Telegraaf Media Groep N.V. and its participations and between participations themselves have not been processed in so far as these cannot be regarded as having been realised. A reference is made to the Notes to the consolidated financial statements, unless otherwise stated. In conformity with article 402, Book 2 of the Netherlands Civil Code, a condensed Income statement is included in the separate financial statements of Telegraaf Media Groep N.V. 2. intangible assets The Company’s intangible assets of 17,445 (2006: 3,891) consist of the goodwill and acquisition costs paid during the purchase of the Gooi- en Eemlander and Media Librium. TMG Financial Statements 2007 119 3. financial assets In thousands of euros Group Companies Equity Receivables Other participations Media Menu Holding Media Menu CV Expomedia Plc Media Librium B.V. ANP Holding B.V. Receivables from associates Other receivables Total non-current financial assets 2007 2006 603,769 23,107 626,876 180,554 67,791 248,345 4 112 18,688 – – 18,804 4 112 18,412 6,180 778 25,486 – 140 140 314 390 704 645,820 274,535 Movements in non-current financial assets can be shown as follows: In thousands of euros Carrying amount at 1 January 2007 Movements in carrying amount Investments Divestments during current financial year Share in result of investments Dividend received Foreign exchange rate differences (De)consolidation Loans provided Withdrawal of loans Carrying amount at 31 December 2007 Subsidiaries Receivables from subsidiaries Other associates Receivables from minority Other receivables Total 180,554 67,791 25,486 314 390 274,535 33,447 – – 799 29 34,275 – 405,544 -15,617 -159 – – – – – – – 1,885 21,222 -67,791 -778 -514 – – -5,390 – – – – – – -1,113 – – -279 – – – – – – -1,057 405,030 -15,617 -159 -4,618 21,222 -67,791 603,769 23,107 18,804 – 140 645,820 2007 2006 15,457 437,552 – 317 453,326 18,662 398,791 238 4,337 422,028 4. receivables In thousands of euros Income tax Subsidiaries Trade receivables Other receivables and accrued income Total 120 TMG Financial Statements 2007 5. provisions In thousands of euros Provisions for post-employment liabilities Restructuring provision Deferred tax expense Total provisions 2007 2006 26,399 2,904 177 29,480 21,459 4,772 118 26,349 6. non-current liabilities The non-current debts related to the loan taken out in relation to the purchase of Sky Radio Group and non-current liabilities relating to the purchase of the shares in Sienna Holding (Sky Radio Group) and Keesing Media Groep from banks. The loans are redeemed in 2007. The loans amounting to 6,375 at the end of 2007 involves management shares with regard to Sky Radio Group and Keesing Media Group. Further details are included in the notes to the consolidated balance sheet (Note 25). 7. off-balance sheet liabilities Joint and several liability and guarantees On the basis of Article 403, paragraph 1, under f of Book 2 of the Netherlands Civil Code, the company is liable for the debts resulting from legal acts of the consolidated subsidiaries as published at the Chamber of Commerce in Amsterdam and is available from TMG upon request. As regards partnerships entered into with third parties in the form of general partnerships, the participating group company is jointly and severally liable for all the partnership’s debts. For associated companies TMG is jointly and severally liable for its share in participation. Fiscal unity Telegraaf Media Groep, along with almost all of its wholly-owned subsidiaries in the Netherlands, is a single fiscal entity for both income tax and VAT. Within the fiscal entity, TMG companies are jointly and severally liable for tax liabilities to the Tax Authorities. TMG Financial Statements 2007 121 8. remuneration of Executive Board and Supervisory Board members The Supervisory Board, in consultation with Stichting Beheer van prioriteitsaandelen TMG N.V., decided on the following remuneration of the Executive Board based on the remuneration policy established by the General Meeting of Shareholders on 20 April 2005. The fixed annual salaries of A. J. Swartjes and F. Th. J. Arp will be increased by 2.25% as of 1 January 2007 and Messieurs Swartjes and Arp will each receive a bonus for 2006 amounting to 1.3 months’ salary. At the General Meeting of Shareholders of 19 April 2007, the remuneration policy proposed by the Executive Board was ratified for implementation as of 1 January 2007. The remuneration structure comprises fixed and variable elements. The fixed element is the yearly salary and vacation pay. The variable element is comprised of (a) the existing profit-share scheme for all employees of Telegraaf Media Groep N.V. and (b) an individual bonus. The latter varies between 0 and 2 months’ salary, 60% of which is determined by the degree to which the collective Executive Board targets are accomplished and 40% by the degree to which the individual targets of Executive Board members are accomplished. In addition, the Supervisory Board can decide to award an extra bonus, for which it will be held accountable at the General Meeting of Shareholders. In such case, the extra bonus concerns a one-time payment, taking the pension rights of Executive Board members into account. At this General Meeting, the shareholders agreed to an individual scheme as a facility to bridge the period between 62 and 65 years old for sitting Executive Board members, this amounting to 70% of the last salary earned, along with maintenance of pension contributions until the age of 65. At the Extraordinary General Meeting of Shareholders of 26 September 2007, the shareholders agreed to a similar scheme for Mr P Morley MSc, COO to commence 1 December 2007. Remuneration of present and former directors of the Executive Board In euros Members of the Executive Board A.J. Swartjes F. Th. J. Arp P. Morley MSc. (as of 1 December 2007) Former member of the Executive Board J. Olde Kalter (till 30 April 2006) Periodical remuneration 2007 Deferred remuneration Periodical remuneration 2006 Deferred remuneration 559,755 533,995 36,755 857,993 461,714 11,784 528,794 498,312 – 64,000 59,000 – – – 238,121 19,000 Included in the periodical remuneration is a variable component amounted for Mr. Swartjes 48,928 (2006: 35,554) and Mr. Arp 44,703 (2006: 33,554). The remuneration of the Supervisory Board is based on indexation of retail price all families (2000 = 100) within January 1, 2007. Remuneration of present and former members of the Supervisory Board In euros Members of the Supervisory Board A.J. van Puijenbroek Dr. W. van Voorden H.L. Weenen M. Tiemstra L.G. van Aken J.G. Drechsel (as of 1 October 2007) Periodical remuneration 2007 Deferred remuneration Periodical remuneration 2006 Deferred remuneration 30,000 24,945 24,945 24,945 24,945 6,236 – – – – – – 28,103 23,502 23,502 23,502 23,502 – – – – – – – 122 TMG Financial Statements 2007 Share ownership at 31 December 2007: Members of the Executive Board A.J. Swartjes F. Th. J. Arp P. Morley MSc. Members of the Supervisory Board A.J. van Puijenbroek Dr. W. van Voorden H.L. Weenen M. Tiemstra L.G. van Aken J.G. Drechsel Shares Depositary receipts for shares – – – – 597 – 64 – – – 11 – – – 5,200 – – – Amsterdam, 13 March 2008 Executive Board A.J. Swartjes, chairman F. Th. J. Arp P. Morley MSc. Supervisory Board A.J. van Puijenbroek, chairman Dr. W. van Voorden H.L. Weenen M. Tiemstra L.G. van Aken Drs. J.G. Drechsel Other information 126 TMG Annual Report 2007 Other information SUBSEQUENT EVENTS 100% of Nobiles Media B.V. was acquired on 16 February 2008. At the same time, the 50% holding in Smart Event B.V. and Info pinnacle B.V. was expanded to 100%. The acquisitions in question strengthened the position of TMG in the employment communications market aimed at starters and young professionals. January 2008 a 70% holding was taken in WebRegio. After the balance sheet date, TMG acquired the free local newspapers from Argo Press, including the Amsterdams Stadsblad. The acquisitions have a fractional effect on TMG’s financial position. From January 1, 2006 till March 13, 2008 TMG repurchase 1,903,753 (depositary receipt of) ordinary shares for € 45,263,000 TMG Annual Report 2007 Other information Auditor’s Report whether due to fraud or error. In making those risk assess- To: the Annual General Meeting of Shareholders of ments, the auditor considers internal control relevant Telegraaf Media Groep N.V. to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures Report on the financial statements that are appropriate in the circumstances, but not for the We have audited the accompanying financial statements purpose of expressing an opinion on the effectiveness of of Telegraaf Media Groep N.V. from page 73 to page 123, the entity’s internal control. An audit also includes evalu- Amsterdam. The financial statements consist of the ating the appropriateness of accounting policies used consolidated financial statements and the company and the reasonableness of accounting estimates made by financial statements. The consolidated financial statements the company’s Executive Board, as well as evaluating the comprise the consolidated balance sheet as at December overall presentation of the financial statements. 31, 2007, income statement, statement of changes in equity, and cash flow statement for the year then ended, We believe that the audit evidence we have obtained is and a summary of significant accounting policies and other sufficient and appropriate to provide a basis for our audit explanatory notes. The company financial statements opinion. comprise the company balance sheet as at December 31, 2007, the company income statement for the year then Opinion with respect to the consolidated ended and the notes. financial statements In our opinion, the consolidated financial statements give Responsibility of the Executive Board a true and fair view of the financial position of Telegraaf The company’s Executive Board is responsible for the Media Groep N.V. as at December 31, 2007, and of preparation and fair presentation of the financial statements its result and its cash flow for the year then ended in in accordance with International Financial Reporting accordance with International Financial Reporting Standards as adopted by the European Union and with Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code, and for the Part 9 of Book 2 of the Netherlands Civil Code. preparation of the Report of the Executive Board in accordance with Part 9 of Book 2 of the Netherlands Civil Code. This responsibility includes: designing, implementing, and Opinion with respect to the company maintaining internal control relevant to the preparation and financial statements fair presentation of the financial statements that are free In our opinion, the company financial statements give a from material misstatement, whether due to fraud or error; true and fair view of the financial position of Telegraaf selecting and applying appropriate accounting policies; Media Groep N.V. as at December 31, 2007, and of its and making accounting estimates that are reasonable in result for the year then ended in accordance with Part 9 the circumstances. of Book 2 of the Netherlands Civil Code. Auditor’s responsibility Report on other legal and regulatory requirements Our responsibility is to express an opinion on the financial Pursuant to the legal requirement under 2:393 sub 5 part e statements based on our audit. We conducted our audit of the Netherlands Civil Code, we report, to the extent of in accordance with Dutch law. This law requires that we our competence, that the Report of the Executive Board comply with ethical requirements and plan and perform the is consistent with the financial statements as required by audit to obtain reasonable assurance whether the financial 2:391 sub 4 of the Netherlands Civil Code. statements are free from material misstatement. An audit involves performing procedures to obtain audit Amsterdam, March 13, 2008 evidence about the amounts and disclosures in the finan- KPMG Accountants N.V. cial statements. The procedures selected depend on the L.N.J. Epskamp auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, 127 128 TMG Annual Report 2007 Other information provisions in the articles of association concerning the appropriation of profit • If a loss is incurred in any one year, no dividend is then paid in that year. In addition, in subsequent years a dividend may only be paid after sufficient profit has been made to In relation to the appropriation of profit, Article 33 of the cover the loss. Based on a proposal submitted by the priority articles of association of Telegraaf Media Groep N.V. shareholders, the general meeting of shareholders may stipulates that: however decide to extinguish such a loss against the • attributable portion of equity or also make a dividend payable Each year the Executive Board, subject to the approval of the Supervisory Board and the Stichting Beheer van from the distributable portion of equity. Prioriteitsaandelen Telegraaf Media Groep N.V. [TMG • Preference Shares Trust], determines the portion of the profit that the distribution is permissible, have been adopted. – the positive balance on the income statement – that will • be transferred to the reserves. not count in determining the distribution of profit. • A dividend is made payable on the paid-up preference Profit is distributed after the financial statements, showing The shares held by the company in its own capital do of ordinary shares and priority shares in the amount of five stichting preferente aandelen telegraaf Media groep n.v. (tMg preference shares trust) and stichting Beheer van prioriteitsaandelen telegraaf Media groep n.v. (tMg priority share ManageMent trust) percent of the nominal value of their shares or – if profit is In accordance with Best Practice Provision IV 3.9 of the shares from the profit remaining after the transfer to reserves in accordance with the previous paragraph, at a percentage equal to the average yield on Dutch government mediumterm borrowings at the start of the financial year to which the dividend pertains, plus one percent. This average yield is determined by the Executive Board subject to the approval of the Supervisory Board. • A statutory dividend is subsequently paid to the holders insufficient for this purpose – at a percentage that is as high Corporate Governance Code, the following is an overview as possible. In relation to priority shares, the percentage of of all outstanding and potentially available defensive the dividend as provided for in the previous paragraph may measures to guard against a possible takeover of control of not be higher than the statutory interest rate on the last TMG N.V. This summary identifies the circumstances under day of the relevant financial year. which these defensive measures would likely be invoked. • If in any financial year the dividend on preference shares as provided for in paragraph 2 above, cannot or can only 1. Stichting Preferente Aandelen Telegraaf Media Groep partially be paid, due to a lack of sufficient income, the N.V. (TMG Preference Shares Trust) shortfall is paid from the distributable portion of equity. The purpose of the Stichting Preferente Aandelen TMG N.V. The dividend is calculated on the paid-up portion of the (TMG Preference Shares Trust) is as follows: nominal amount. • • hereinafter referred to as the company, with its affiliated The profit then remaining is at the disposal of the general To protect the interests of TMG, vested in Amsterdam, meeting of shareholders. No additional dividend may however companies and all involved parties, whereby such measures be paid from this amount on the priority shares or the are taken as required to protect to the maximum possible preference shares. extent against influences that could threaten continuity, • independence or identity, in conflict with these interests. Distribution of profit is limited to the distributable portion of equity. • To protect against the influence of third parties that could TMG Annual Report 2007 Other information affect the editorial independence, as well as the principles that define by Article 5:71 paragraph 1 sub c of the Wft [Financial serve as the basis on which the opinion-forming publications Oversight Act]. of the companies within the Groep are formulated. The trust The management board consists of one chairman and four attempts to achieve this goal by 1) acquiring preference members. At 31 December 2007, the composition of the shares in the company and by exercising the rights board was as follows: Dr. S.E. de Jong (Chairman), A. den associated with these shares and 2) by exercising other Bandt, A.H.M. van Roosmalen, E.F.M. Kok and A.J. van rights that are assigned to the Trust pursuant to laws, the Puijenbroek. No preference shares were outstanding on the articles of association or on the basis of an agreement. balance sheet date. The Trust thereby takes the purpose, as identified under 1) above, for which the preference shares may be issued into 2. Stichting Beheer van Prioriteitsaandelen Telegraaf consideration, in accordance with the notes to the proposed Media Groep N.V. (TMG Priority Share Management Trust) amendment to the articles of association adopted by the The objective of the management trust is to acquire and Annual General Meeting of Shareholders of the company manage the priority shares of the company and, on this basis, on December twenty third, nineteen hundred eighty-three. to ensure the continuity of the company’s management, ward The disposal, encumbrance or in any other way disposing off any influences on the company’s management that could of shares falls outside such purpose, except: affect the independence of the company in conflict with its • interests and to promote sound policy in the interests of the Disposal to the company itself or to an affiliated group company to be designated by the company. • Collaboration in the repayment and withdrawal of shares. company. The authorities associated with the priority shares include the decision to issue shares, set the number of directors and the The right to issue preference shares in Telegraaf Media right to propose an amendment to the articles of association Groep N.V. is granted by the Stichting Beheer van Prioriteits- or dissolution of the company before the General Meeting of aandelen TMG N.V. (TMG Priority Share Management Trust). Shareholders can decide on such matters. The Stichting Preferente aandelen Telegraaf Media Groep N.V. has the right to acquire preference shares in TMG’s The priority shares are held by the Stichting Beheer van capital that correspond to 50% of the total number of ordinary Prioriteitsaandelen Telegraaf Media Groep N.V., whose shares issued, for the exercise of these rights. management board at 31 December 2007 consisted of Messrs. A.J. van Puijenbroek, Chairman, L.G. van Aken, The Stichting Preferente Aandelen Telegraaf Media Groep N.V. (TMG Preference Shares Trust) is an independent trust as E.F.M. Kok, and E.H. van Puijenbroek. 129 130 TMG Annual Report 2007 Other Information 2007 ANNUAL REPORT OF THE STICHTING ADMINISTRATIEKANTOOR VAN AANDELEN TELEGRAAF MEDIA GROEP N.V. (TMG SHARE ADMINISTRATION TRUST) Telegraaf Media Groep N.V. is a listed company. The receipts for depositary shares in Telegraaf Media Groep N.V. (TMG) are traded on the NYSE Euronext in Amsterdam. The issue of depositary receipts for shares is a measure designed to prevent the absence of shareholders at the general meeting of shareholders from resulting in a minority of shareholders, by happenstance or otherwise, that is subsequently able to take over control of the meeting. As already mentioned in the introduction, the issue of depositary receipts for shares is not used as an anti-takeover measure in case of TMG: TMG’s depositary receipts for shares can be converted without limitation. Shareholders are entitled to attend the general meeting of shareholders, and to speak and vote at this meeting. The meeting of holders of TMG depositary receipts for shares Holders of depositary receipts are entitled to attend and took place on 8 February 2007 in Amsterdam. Agenda items speak at this meeting. Holders of depositary receipts may included a discussion of the minutes of the meeting of obtain a proxy for the duration of the meeting from the holders of depositary receipts for shares held on 2 February management board of the Stichting Administratiekantoor van 2006, a review of the TMG N.V. general meeting of share- aandelen Telegraaf Media Groep N.V. [TMG Share holders held on 19 April 2006, the activities of the manage- Administration Trust] that entitles them to vote. TMG’s ment board during the year and consultation of the meeting depositary receipts for shares can be converted without in relation to a vacancy on the management board. Only two limitation. The issue of depositary receipts for shares there- holders of depositary receipts for shares were present at fore does not constitute an anti-takeover measure for TMG this meeting (0.01%). At that point the Trust was in the possession of 63% of the outstanding shares. The minutes One of the purposes of the Stichting Administratiekantoor of this meeting are available on the Trust’s website (http:// van aandelen Telegraaf Media Groep N.V. [TMG Share administratiekantoor.tmg.nl). Administration Trust] is to issue convertible bearer depositary receipts for shares in exchange for which the trust acquires The items discussed during the management board’s meeting and holds ordinary shares in its own name, for administration. of 10 April 2007 (minutes available on the Trust’s website The trust administers the acquired ordinary shares and http://administratiekantoor.tmg.nl) include the financial exercises the rights associated with these shares, including statements and report for the 2006 financial year, and the the voting rights. In exercising the rights associated with Trust’s finances. the shares, the trust will primarily focus on the interests of the holders of depositary receipts with due consideration of the interests of TMG and its affiliated companies. TMG’s financial statements and the proposed dividend for 2006 were extensively discussed with Mr. F.Th.J. Arp, CFO of TMG In addition, the management board reviewed the The notes explaining the variance from Principle IV.2 Issue of meeting of holders of depositary receipts for shares held Depositary Receipts for Shares of the Corporate Governance on 8 February 2007 and Mr. Moleveld was reappointed as Code may be found on page 67 of this annual report. member A of the management board. In preparation for TMG’s general meeting of shareholders, the management During 2007, the number of convertible depositary receipts board discussed a number of subjects that the manage- for shares in TMG issued by the Stichting Administratiekantoor ment board intends to submit for inclusion on the agenda. van aandelen Telegraaf Media Groep N.V. [TMG Share Administration Trust] (hereinafter: the Trust) declined by TMG’s annual general meeting of shareholders was held on 1,265,155 depositary receipts and amounted to 31,676,029 19 April 2007 in Amsterdam (www.TMG.nl). The management (at a nominal value of € 0.25) at 31 December 2007, corres- board issued proxies with full voting rights for the duration of ponding to a nominal amount of € 7,919,007. An equal number the meeting to the holders of depositary receipts for shares of shares were administered by the Trust against these present during the meeting. The management board repre- depositary receipts. The decline is due to the share buy sented 57.8% of the votes present during this meeting, while back and subsequent withdrawal of the company’s own the holders of depositary receipts for shares represented shares by TMG 4.4%. The chairman of the Trust’s management board TMG Annual Report 2007 131 Other Information 26 October 2007 NMa stops investigation about possible price-fixing in Dutch as the Groep ’s auditor. The proposal advertising market of the Priority Share Management Trust to withdraw the bought back Today the Nederlandse shares, the authority to buy back Mededingingsautoriteit (NMa shares and the extension of the - Netherlands Competition authority of the Stichting Beheer Authority) announced to end the van Prioriteitsaandelen Telegraaf investigation which was aimed at Media Groep N.V. [Priority Share ascertaining whether price-fixing Management Trust] to issue ordinary or discounting agreements have shares and the granting of rights to been made in the Dutch print issued a number of comments further to the 2006 Annual acquire ordinary shares and the media advertising market. Report, such as: a word of thanks for including the Trust’s extension of the authority of this trust The investigation started in annual report in TMG’s Annual Report, the structure of the to restrict or rule out preferential right September 2006 at the Raad Annual Report and questioned the Executive Board as to of subscription to ordinary shares van Orde en Toezicht voor het how it intended to achieve its ambitious goals. (including the granting of rights to Advertentiewezen (Board acquire ordinary shares), was also for the Advertising market), supported by the Trust. at the Nederlands Uitgevers- In addition, the chairman clearly articulated and explained verbond (Dutch Publishers the stance of the Trust related to the proposed remuneration On 6 September 2007, the manage- Association) and at a number ment board held its regular autumn of publishers under which The management board voted for the adoption of the 2006 meeting at which it discussed a Uitgeversmaatschappij De financial statements, the proposed profit appropriation, and number of items, including TMG’s Telegraaf B.V. company (UMT), the discharge of the Executive Board of responsibility for semi-annual figures, the Trust’s whose publications include ‘De the policies pursued and the discharge of the Supervisory finances, the preparations for the TMG Telegraaf’ newspaper. UMT is Board of responsibility for the supervision exercised during special meeting of shareholders held a part of TMG (Telegraaf Media the year under review. The Trust voted for the appointment on 26 September 2007, the draft profile Groep). of Ms. M. Tiemstra and Mr. A.J. van Puijenbroek as members of the management board and the of TMG’s Supervisory Board and the appointment of KPMG 2008 board member vacancies A and B. policy for the Executive Board during the meeting. 132 TMG Annual Report 2007 Other information During the special meeting of shareholders held on 26 Article 2:113 paragraph 3 of the Dutch Civil Code and is September 2007, the management board voted for the comprised of the following members, including mention of appointment of Mr. J.G. Drechsel as a member of TMG’s the former and/or current functions occupied: Supervisory Board. The Central Works Council’s strengthened right of recommendation applied to this vacancy. W.M. Lammerts van Bueren During this meeting, the Supervisory Board announced the Chairman: Emeritus Professor in International University intended appointment of Mr. P. Morley as a member of the Collaboration/Economics EUR. Executive Board, in the capacity of COO. The management board agreed to the proposal that the individual financial Mrs. J.A. Brewer-de Koster arrangements for bridging the period between the ages of Secretary: former member of Telegraaf Media Groep N.V.’s 62 and 65 shall also apply to Mr. Morley in accordance with Supervisory Board and former member of the Stichting the arrangements approved for Mr. F.Th.J. Arp, member of Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V. the Executive Board in the capacity of CFO. J.S. Dienske The remuneration of the board members of the Trust consists Former Secretary of the Koninklijk Verbond van Grafische of € 8,000/year for the Chairman and € 6,000/year for the Ondernemingen. other board members, paid on an after-the-fact basis and per calendar year. The annual costs of the activities of the W.P. Moleveld Trust primarily consist of expenses related to stock exchange Professor of accountancy at the Nyenrode Business University. listings and processing costs, for a total of € 21,052; costs for the meeting of holders of depositary receipts for shares, E.H. van Puijenbroek including advertising expenses, for a total of € 3,646; and Former director of B.V. Textielfabrieken H. van Puiijenbroek, costs for maintaining the Trust’s website, for a total of € 7,884 board member of Stichting Beheer van Prioriteitsaandelen and administration costs in the amount of € 4,908. Telegraaf Media Groep N.V. The total costs incurred by the Trust during 2007 amounted to € 69,490 (2006: € 73,833). Amsterdam, March 2008 The management board of the Stichting Administratiekantoor Stichting Administratiekantoor van Aandelen van aandelen Telegraaf Media Groep N.V. (TMG Share Telegraaf Media Groep N.V. Administration Trust) is independent as provided for in c/o Basisweg 30 1043 AP AMSTERDAM TMG Annual Report 2007 133 Other information 23 November 2007 Patrick Morley appointed COO of TMG effective 1 December 2007 As a follow up to its 29 August 2007 announcement, TMG (Telegraaf Media Groep) is pleased to announce that Patrick Morley has been appointed COO and will become a member of the Executive Board as per 1 December 2007. Effective on that date the members of TMG’s Executive Board will consist of A.J. Swartjes (CEO), F. Th. J. Arp (CFO) and P. Morley, MSc (COO). Mr Morley will initially be closely involved in the continued development of Telegraaf Media Nederland which incorporates TMG’s printing and digital activities in the Netherlands. 134 TMG Annual Report 2007 Other information products and activities of telegraaf Media groep The Netherlands Free local publications and news Nieuwsblad IJmuiden journals www.nieuwsbladijmuiden.nl De Echo (11 edities) www.echo.nl Nieuwsblad Santpoort & Velserbroek www.nieuwsbladsantpoort.nl Zondagochtendblad (10 edities) Newspapers www.zondagochtendblad.nl Dagblad De Telegraaf) www.telegraaf.nl Witte Weekblad (22 edities) www.dft.nl www.witteweekblad.nl www.telesport.nl Zondag IJmuiden www.zondagijmuiden.nl www.overgeld.nl Amstelveens Nieuwsblad www.teleweer.nl www.amstelveensnieuwsblad.nl www.vaarkrant.nl www.autotelegraaf.nl Zondag Haarlem www.zondaghaarlem.nl Nieuwsblad De Kennemer www.nieuwsbladdekennemer.nl Het weekend (2 edities) www.woonkrant.nl Nieuwsblad voor Castricum www.reiskrant.nl Zondag Haarlemmermeer www.wuz.nl www.zondaghaarlemmermeer.nl Sp!ts De Gooi- en Eembode (2 edities) www.spitsnet.nl www.gooieneembode.nl Noordhollands Dagblad Laarder Courant De Bel/ waarin begrepen: Nieuwsblad voor Huizen De Zaankanter - Alkmaarsche Courant www.laardercourant.nl www.zaankanter.nl - Enkhuizer Courant Vecht-Journaal De Krommenieër - Dagblad voor West-Friesland www.vechtjournaal.nl Het op Zondag www.hetopzondag.nl Alphen.cc www.alphen.cc - Schager Courant - Helderse Courant Het Gezinsblad - Dagblad Kennemerland Baarns Weekblad - Dagblad Zaanstreek www.baarnsweekblad.nl - Dagblad Waterland www.nhd.nl www.gezinsblad.nl Westfries Weekblad (2 edities) De Almare (3 edities) www.westfriesweekblad.nl www.dealmare.nl Haarlems Dagblad www.haarlemsdagblad.nl Alkmaars Weekblad De Woonbode www.alkmaarsweekblad.nl www.woonbode.nl IJmuider Courant www.ijmuidercourant.nl De Koerier Haarlems Weekblad www.haarlemsweekblad.nl Leidsch Dagblad www.leidschdagblad.nl www.deduinstreek.nl De Digitale Wijkkrant www.wijkkrant-haarlem-oost.nl De Gooi- en Eemlander www.gooieneemlander.nl www.almerevandaag.nl Helders Weekblad www.heldersweek.nl Heemsteedse Courant www.heemsteedsecourant.nl Almere Vandaag De Duinstreek Schager Weekblad www.schagerweekblad.nl TMG Annual Report 2007 135 Other information CTR/De Polderbode Wieringer Courant/ Wieringermeerbode www.wieringercourant Magazines Privé www.prive.nl CosmoGIRL! www.cosmogirl.nl FHM (For Him Magazine) www.fhm.nl Elegance www.elegance.nl Residence 28 November 2007 www.residence.nl Share buy-back programme Hitkrant TMG www.hitkrant.nl TMG (Telegraaf Media Groep Autovisie N.V.) announces today the start www.autovisie.nl of a share buy-back programme -among others- because of the JAN recent development of the stock www.jan-magazine.nl price of TMG. TMG’s Executive Board was authorized to take MotoPlus such steps during TMG’s www.motoplus.nl Annual General Meeting of Shareholders on 19 April 2007. Boten www.botentekoop.nl www.nieuwebotentekoop.nl Campers en Caravans www.camperscaravans.nl www.nieuwecampers.nl Automaxx www.automaxx.nl VROUW vrouw.telegraaf.nl 136 TMG Annual Report 2007 Other information Stijl ontmoet Stijl www.stijlontmoetstijl.nl Carp www.carp.nl www.careerscope.nl Trips en Travels Puzzle magazines Denksport www.denksport.nl Puzzelsport www.puzzelsport.nl Tazuku www.tazuku.nl 10 voor Taal www.10voortaal.com Jan Meulendijks Bingo! www.bingo.nl Digital activities (not print related) Internet www.autocircuit.nl www.woneninholland.nl www.fitclub.nl www.iwannadate.nl www.mijnvoordeelpagina.nl www.news.nl www.yourfuture.tv (50%) www.scholieren.tv (50%) www.bestetraineeships.nl (50%) www.vakantierecreatie.nl www.marinestore.nl www.cruijff.com www.mobisphere.nl www.mobillion.nl www.mobelle.nl www.speurders.nl www.vacaturekrant.nl www.onderweg.nl www.relatieplanet.nl www.habbo.nl www.sugababes.nl www.superdudes.nl TMG Annual Report 2007 Other information www.geenstijl.nl (40%) Radio Veronica (85%) France www.geenredactie.nl (40%) www.radioveronica.nl Sport Cérébral Tazuku www.dumpert.nl (40%) www.gamert.nl (40%) Classic FM (60%) www.sudokujeux.fr www.nieuwnieuws.nl (40%) www.classicfm.nl www.sportcerebral.fr TMF Radio (42,5%) Poland www.tmfradio.nl Tazuku www.dumpert.nl (40%) www.telegraaftickets.nl Sport Umyslowy Video Productionhouses 6Pack TV Events Librium Productions AutoMaxx Summer Editions Ukraine Infopinnacle Viva Italia What’s On Telegraaf Produktiehuis Mega Trucks Festival www.whatson-kiev.com Carmichael & Pilarczyk Fleet Management Expo 2007 Obzor Pilarczyk Media Groep Taxi Management Expo 2007 www.obzor-online.com Modefabriek (50%) Panorama Out of Home TV Fleurig (50%) Domus Design Librium TV Sp!tsCareerevent(50%) Maister Agency TV Sp!tsMasterbeurs (50%) Gourmet Guide Crossmedia-formats Production companies www.kyivcity.com Voetballer van het Jaar Telefonische informatiediensten Glance Bureau van den Heuvel Digitaal distributieplatform www.Emarket.ua Schaatser van het Jaar SMS/MMS gateway services Wilma Nanninga Privé 0900 call TV services Sweden RTL Autowereld Web TV productieactiviteiten Vi Båtägare RTL Transportwereld Drukwerk www.vibatagare.se Gek op Wielen Distributie/transport Båtnytt Lubimaya Tarzan Red Carpet www.batnytt.se Duels & Cijfers International GeenStijl TV op het Web Belgium www.golfdigest.se 6 Pack Denksport Residence Sport Report www.denksport.com Cosmopolitan Het Zwarte Gat Sport Cérébral www.cosmopolitan.se Rage Garage Puzzelsport Allt om Kök och Bad De Proefprofs Tazuku Segling Zienema www.tazuku.be www.segling.biz Fashion www.habbo.be Plus Sverige Golf Digest www.plussverige.se Kidz in Biz Super Cars Denmark www.marinan.com Stapel op Auto’s SoPus www.maringuiden.se Jolink goes Mexico Tazuku www.batvarlden.se RTL Wintersport Tankesport Seasons Broadcast Germany Sky Radio 101 FM (85%) Sky Radio Hessen (43,4%) www.skyradio.nl www.skyradio.de 137 138 TMG Annual Report 2007 Key Figures KEY FIGURES1) 20072) 20062) 20052) 20042) 2003 2002 2001 2000 1999 1998 866,815 498,041 530,468 480,595 428,333 454,079 464,761 500,057 471,529 430,079 70.3% 2.64:1 2.37:1 738,795 62,130 400,097 47.8% 1.04:1 0.91:1 678,144 60,195 49,599 68.8% 1.01:1 2.20:1 736,686 46,833 65,428 65.2% 1.35:1 1.87:1 694,320 66,306 67,709 64.5% 1.06:1 1.81:1 683,556 62,172 -25,765 62.5% 0.98:1 1.67:1 704,462 33,059 -4,913 60.6% 0.72:1 1.54:1 822,220 74,992 -29,510 61.6% 0.70:1 1.60:1 811,147 141,486 48,452 63.2% 1.44:1 1.72:1 721,335 102,357 64,794 65.3% 1.55:1 1.88:1 689,916 119,618 65,877 54.2% 7.3% 8.8% 9.8% -3.8% -0.7% -3.6% 6.0% 9.0% 9.5% -3.8% 201,590 3,594 46.2% p.m. -3.2% 177,246 3,782 9.9% 50.0% 7.2% 170,632 4,362 12.3% 35.3% 3.8% 159,463 4,316 14.1% 23.6% 3.5% 153,298 4,357 -6.0% p.m. 3.1% 150,205 4,553 -1.1% p.m 1.2% 151,561 5,393 -6.4% p.m. 9.9% 156,690 5,457 9.7% 41.3% 12.3% 153,922 4,756 13.7% 36.0% 12.8% 151,018 4,619 15.3% 35.4% Per TMG share with a nominal value of € 0.25 (rounded off to whole euro cents) Shareholders’ equity 17.43 9.96 10.10 Cash flow from operating activities 1.24 1.18 0.89 Result 8.00 0.97 1.25 Dividend 1.00 0.50 0.44 Lowest rate 19.69 19.00 17.06 Highest rate 26.87 23.00 20.64 Closing rate as at 31 December 25.00 19.85 18.25 9.15 1.26 1.29 0.30 16.05 18.90 18.25 8.16 1.18 -0.49 0.11 13.00 19.00 17.99 8.65 0.63 -0.09 0.11 13.00 24.47 15.44 8.85 1.43 -0.56 0.11 14.00 22.90 17.09 9.52 2.70 0.92 0.38 20.80 37.00 21.60 8.98 1.95 1.23 0.44 16.88 24.69 22.00 8.19 2.28 1.26 0.44 17.47 23.82 22.91 Shareholders’ equity x € 1,000 TMG equity in percentages of the total equity and liabilities Current ratio Current gearing Revenue TMG x € 1,000 Cash flow from operating activities x € 1,000 Result x € 1,000 Result TMG in percentages of the total revenue Operating result in percentages of the total revenue Average total revenue per employee (fte) Personnel end of year (fte) Equity profitability Payments percentage 1) 2) Attributable to Telegraaf Media Groep N.V. Based on IFRS principles. 140 Telegraaf Media Nederland BasisMedia drs. J.H.R. Eijkelenkamp M.C.A. Roos F. Volmer B. Brouwers M. Zwagerman Telegraaf Media Ukraine LLG J. Zijlstra International M.M.P. van Lent Executive Board Keesing Media Group CEO | drs. A.J. Swartjes P.P. Tordoir TTG Sverige AB K.Neld CFO | drs. F.Th.J. Arp RA COO | P. Morley MSc Sky Radio Group A. Trik T. Lathouwers Corporate Staff Departments Finance & Control: W. R. de la Motte Tax Planning: mr. H. de Groot Human Resources Management: mr. G.E.M. Hermens Procurement: J. Forrester Legal Affairs: Production Units DistriQ: H. de Wit mr. H.M.A. van Meurs-Bergsma Development & Communication: drs. B.J. Hilberts Telegraaf Media ICT: D. H. Pouw MBA Investor Relations: J. Elekan Telegraaf Drukkerij Groep: H.J.M.M. Eijkenboom Group Internal Audit: drs. P. de Bie J. Talsma 141 Holland Combinatie R.D. Keller G. Brouwer E.W.C. Wilmink Video Production M. Albert S.A. Kroon E. Bos K. de Vroede J.J.M. Paradijs Telegraaf Tijdschriften Groep C.B.M.J. d’Haans HDC Media mr. T.E. Klein drs. M. Moos H.G.M. ten Dam J.G.C. Majoor Digital A BASIC STRUCTURE TELEGRAAf MEDIA GRoEP, 31 DECEMBER 2007 Uitgeversmaatschappij De Telegraaf drs. Th.J.C. Trimbach CREDITS a publication of Telegraaf Media Groep N.V., Amsterdam editorial Corporate Communication - Telegraaf Media Groep N.V., Amsterdam editorial financial information Concernfinanciën en Administratie - Telegraaf Media Groep N.V., Amsterdam textual advice Smink, van der Ploeg & Jongsma, Amstelveen english translation Vertaalbureau Bothof, Nijmegen concept, design, illustrations and art-direction Veldsvorm, Amsterdam cover and annual report Veldsvorm, Amsterdam layout of the financial statements Reclameafdeling De Telegraaf, Amsterdam photography Corbis | Stockxpert | Victor Nieuwenhuijs | Own photography printing and binding Gravo Groep B.V., Purmerend paper cover: Arctic, 300 grams | inside: Arctic, 130 grams typefaces Helvetica Neue, Garamond, Syntax Amsterdam, March 2008 000-047 annual report
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