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| Wegener: First-half profits grow sharply The results for Royal Wegener, the Dutch media group, improved substantially in the first six months of 2007 compared with performance in the same period of 2006. The group operating result before exceptional items for 2007 first half rose by 47.5% to EUR 35.4 million, up from EUR 24.0 million in the same period of 2006. The improvement was manifest throughout the group, primarily due to widespread cost reductions and to growth in revenues for advertising in Wegener’s free door-to-door newspapers and for recruitment advertising in the group’s regional daily newspapers. The positive result of the AD NieuwsMedia joint venture with PCM Uitgevers, for which the group’s 37% economic interest is consolidated, also contributed to the improvement. Revenues from advertising of national brands and services in the dailies were an exception, and lagged behind those of the previous year. Developments for this segment of the advertising market continue to be unclear. Any assessment of the rise in the result should give consideration to the fact that the course of business in the first half of 2006 was very disappointing. Total group revenues increased by 2.5% to EUR 345.0 million. On an autonomous basis, revenues were up by 3.5%. AD NieuwsMedia still showed a decline in revenues, which is an outcome of the drastic operating changes for this venture in 2005 and 2006. Wegener group net profit was EUR 23.8 million, compared with a net loss of EUR 4.6 million in the 2006 first half. Cash earnings, which consist of the net result before exceptional items and after deduction of the preference dividend to be paid, came to EUR 19.2 million, up from EUR 8.6 million in 2006. In the course of 2006 Wegener made an emphatic commitment to its core activities of newspapers and online. All other activities have been sold and the present figures, as well as comparisons, are thus based on the continuing operations. In May 2007 Wegener and Mecom Group Plc announced that a bid would be made for all of Wegener’s (depository receipts for) shares. This bid is expected to be made no later than August 17. Wegener’s Supervisory Board and its Management Board will support this bid and will recommend it to shareholders. Publishing activities Since January 2006, all of Wegener’s free door-to-door newspapers have been published in tabloid format. The conversion of the daily Eindhovens Dagblad to a compact tabloid format took place in October 2006, followed in early February 2007 by the six other Wegener dailies. AD and its several local editions have been published in tabloid format since start-up in September 2005. All newspapers published by Wegener are therefore now offered to the market in compact tabloid format, to which both readers and advertisers have responded with enthusiasm. This positive impetus is an element in the figures for the first half of 2007. In Wegener’s regional dailies, this was expressed in more than 130,000 trial subscriptions. The conversion of these trial subscriptions into permanent subscriptions is going well and is now at approximately 20%. Along with the format transition, a far-reaching reorganisation and restructuring was started within the Wegener daily newspaper group. This process will be completed in the course of 2007. In addition to achieving a better position in the market, these moves targeted a structural cost reduction in the order of EUR 25 million on an annual basis. This objective had already largely been achieved during the first half, and changes are taking place in accordance with the plan. The revenue from advertising in the Wegener daily newspapers increased by 7.2%, which was due entirely to the increase in recruitment advertising. Advertising revenues for the Wegener free door-to-door newspapers increased by 10.1%, a striking follow-up to the 8% increase recorded in 2006. The group’s newspaper printing organisation gave special focus to preparations for the installation of new printing presses in the printing facility in Best and the announced related closing of the facility in Breda, also in the southern part of the country. This investment project, involving a total of some EUR 80 million, is to be completed in 2009. Revenues from Wegener’s online activities – especially AutoTrack and JobTrack – continue to be limited in absolute terms, but showed a strong rise in the first half compared to the same period of 2006. For the AD NieuwsMedia joint venture, operations improved in accordance with expectations. Although there was still some decline in sale of advertising, particularly to national advertisers, cost control measures meant that a positive result could be booked. In the second quarter, AD NieuwsMedia assumed the sales activities directed to large national advertisers, previously handled by PCM. The overall operations and organisation of AD NieuwsMedia are now stable and the appreciation of the new newspaper has increased considerably, so that it now has a good market position, one that inspires confidence for the future. Divested activities The following activities were sold in 2006 and 2007:
Financial All figures in this half-year report were drawn up on the basis of IFRS and in accordance with IAS 34. The accounting principles applied are the same as those used in the annual accounts for 2006. The results of Wegener Direct Marketing and Wegener Fieldmarketing have been included as discontinued operations. The figures also include book results obtained on their divestment. An auditor’s review report accompanies this half-year report. The profit appropriation proposed in the 2006 Annual Report was approved unchanged by the 2007 General Meeting of Shareholders held on April 25. The dividends on (depository receipts for) both ordinary and preference shares were paid out in May. Net interest-bearing debt rose from EUR 173.6 million at 2006 year-end to EUR 178.3 million as of June 30. The sale of Wegener’s 8.8% interest in press news agency ANP was recently completed. This holding had been carried at actual value, and the book profit was reported under other income. Outlook The trend in the advertising market is expected to continue in the second half of 2007. This implies a rise in revenues from advertising in free door-to-door newspapers and recruitment advertising in the dailies. Advertising of national brands and services, still rather unpredictable, is not expected to increase. There will be a significant focus on the new organisation for the Wegener daily newspaper group and on perfection of the tabloid concept. Progress at AD NieuwsMedia will not be spectacular, but will be positive. In short, the policy launched in the previous years will emphatically be continued, and it thus may be expected that the operating result before exceptional items will show strong growth for the entire 2007 year compared to the level for 2006. Another process of great importance that will require great attention is the bid procedure and takeover by Mecom, due to start in August, the consequences of which will probably be visible in the final quarter of the year. Apeldoorn, The Netherlands, August 9, 2007 Management Board Koninklijke Wegener NV
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