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A distinction is made between “continuing” and “discontinued” operations in the 2006 annual accounts, in accordance with an IFRS (International Financial Reporting Standards) guideline. All publishing activities have been classified under continuing operations, while the direct marketing operations are classified as discontinued. The 2005 figures used for comparison in the income statement have been adjusted accordingly. Consolidated revenues from continuing operations in 2006 came to EUR 668.1 million, which is 1.9% above the level for 2005. The operating result before exceptional items of all continuing and discontinued operations amounted to EUR 52.0 million, up from EUR 50.5 million in 2005. Newspaper activities A striking difference can be observed between the first half and the second half of 2006 for the group’s newspaper activities. The course of business, particularly for advertising, in the first half lagged behind that period for 2005, while the second half showed clear improvement. Despite the change, growth in advertising volume – in light of the general economic situation in the Netherlands – fell short of expectations. Total revenues from the group’s newspaper activities were EUR 663.5 million, up 2.8% from EUR 645.4 million for 2005. The group’s free door-to-door newspapers division, Wegener Huisaanhuiskranten, had a very good year. Following conversion of nearly all titles to the tabloid format in early 2006, advertising sales increased substantially, with growth as high as 12% in the second half, and revenues were up by 8% for the year as a whole. Thanks to simultaneous cost reductions, results also developed very well. Advertising revenues for the group’s regional dailies, Wegener Dagbladen, rose marginally, but this was entirely due to recruitment advertising, for which revenues rose by 30%. Revenues from brands & services advertising, both national and regional, declined. Revenues for the group’s online activities rose by 28%, with special strength from developments for the AutoTrack and JobTrack websites. After a disappointing first half of the year, there was improvement in the position of Restructuring and reorganization at group level was a dominant feature of the year for the Wegener dailies. This far-reaching transition process, by which the dailies have moved to a group structure, with central services, and adopted a standardised tabloid format formula for all titles, will be completed in the first half of 2007. The actions will yield a structural cost reduction of EUR 25 million on an annual basis. Along with improved efficiency, the changes are fostering a significant gain in professionalism. The group’s newspaper printing operations, Wegener Grafische Groep, completed plans for renewal of the facility in Best and the associated streamlining of the organization, as well as for closure of the operation in Breda, also in the south of the country, in 2009. Financial The consolidated annual accounts for 2006 have been drawn up on the basis of IFRS guidelines and in accordance with Dutch legislation and regulations, making use of the legal possibility to work with the same accounting principles for the company annual accounts as for the consolidated annual accounts. The annual accounts have received an unqualified auditor’s opinion. The sale of Wegener DM resulted in a tax credit of EUR 34.3 million, which was recorded as an exceptional item for 2006. Completing the liquidation of a number of foreign companies in 2007 will lead to lower tax payments in 2007 and 2008. The sale generated a book loss of EUR 32.8 million. In early 2006, EUR 27.2 million of outstanding cumulative financing preference shares were redeemed. Despite this expense, net interest-bearing debt decreased during the year, from EUR 210.4 million at 2005 year-end to EUR 173.7 million at the end of 2006. Proceeds from divestments of group companies and real estate contributed to this reduction. Investments in tangible and intangible fixed assets totalled EUR 17.6 million, compared with EUR 17.1 million in 2005. A provision of EUR 32 million was made as a one-time cost item for 2006, to cover the entire reorganization processes for both the dailies and the graphic group. Outlook The market for advertising of brands & services appears especially uncertain. While the positive economic developments well visible in the 2006 rise in recruitment advertisements would make one expect otherwise, there was no improvement in volume or revenues for other categories of advertising. At this point, the enduring effect of the recent switch to the smaller tabloid format for the dailies is not yet clear. The free door-to-door newspapers are expected to show a further improvement of revenues and results. Expansion in this market will be continued. The daily newspaper operations are counting on improved results stemming from their recent reorganizations and cost-reduction efforts. It is also expected that AD NieuwsMedia will make a positive contribution to the operating result in 2007. The multimedia/online products and services will be energetically further developed this year, and thus are expected to require investments as well as show further growth in revenues. Although the advertising market in particular still represents an uncertain factor, the group’s cost basis will decline further, thanks to the projects started in 2006 and to be completed in 2007. The operating result before exceptional items will increase again in 2007. Dividend The 2007 General Meeting of Shareholders will be held on April 25 in Apeldoorn. The shareholders will act on the proposal to distribute a dividend on ordinary shares totalling EUR 8.5 million and representing 35% of the cash earnings for 2006. This means Apeldoorn, The Netherlands, March 6, 2007 Management Board Note
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