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Wegener in 1st half of 2010:
Significantly improved operating profit
Continuing advertising weakness
The operating profit (before exceptional items) of Royal Wegener, the Dutch multi-media group, was EUR 30.3m in the first half of 2010. This figure was up by EUR 4.2m, a rise of 16.0% compared to the first half of 2009. The most important reason for this increase was a lower cost level.
Revenues were lower due to the mixed effects of a number of factors:
Revenue declined due to the sale of AD NieuwsMedia and the printing plant in The Hague.
Revenue from subscriptions, sale of products and services to readers, internet activities, and advertisements in the free door-to-door newspapers were up. The latter segment rose following the acquisition of PLM as of mid-July 2009 and the development of new activities in Limburg and the Amsterdam region.
Advertising sales in the daily newspapers and revenues from external printing orders were below those for the 2009 period.
Thanks to the higher operating profit and lower financing costs and higher taxes, the net profit before exceptional items for the first half year of 2010 came, on balance, to EUR 18.7m (2009 EUR 13.6m), an increase of 37.4%. The lower financing costs result from a lower average bank debt and a lower interest mark-up.
Primarily because of the reservation made for a disputed fine imposed by NMa, the Dutch competition authority, relating to the newspapers in the southwest region, Zeeuws-Vlaanderen, the first half of 2010 showed a net loss (after exceptional items) of EUR 4.5m compared with 2009’s net profit of EUR 13.2m. The fine imposed on Wegener of EUR 19.1m is reported under “Other operating expense”.
Market conditions remained unfavourable during the first half of 2010 despite reports of a modest economic upturn. This cautious economic recovery is primarily related to exports. Domestic consumption remained very low, so that advertisers kept their purse strings tightly drawn. Advertising of national brands and services exhibited a clear decrease compared with the same period in 2009. This also applied to the market of recruitment advertisements, where revenues slackened for both printed products and internet products, as employment opportunity fell.
The pace of the ongoing decline in advertising revenue has lessened considerably. The decrease in advertising sales in the first half of 2010 compared to the same 2009 period was 3.3%, considerably less steep than the 22.9% decline in 2009 compared to the same period in 2008.
Because of the sale of the 37% share in AD NieuwsMedia and the printing plant in The Hague to “de Persgroep Nederland” as of mid-2009, the figures for the first half year of 2010 and those for 2009 are difficult to compare. If these effects are eliminated, total revenue in the first half of 2010 was down by 1.0% compared to the previous year.
Since 1 January 2010, all of Wegener’s publishing activities have been accommodated in a single publisher under the name of Wegener Media. All supporting and staff services were merged per discipline in the back office departments of Wegener Media.
Activities
Wegener Media daily newspapers
Advertising revenue in Wegener’s daily newspapers was EUR 60.3m in the first half of 2010, down EUR 5.9m (8.9%) compared to the same period in 2009. The decline was primarily due to lower revenues from national advertisers and recruitment advertisements. Recruitment ads are exhibiting a further decline in volume, causing revenues to fall proportionately. Regional advertisers showed slight growth and family announcement ads were at the same level as in the first half year of 2009.
Subscription revenues increased by 2.3% thanks to price rises. The number of paid subscriptions decreased by 1.9%, compared with 2.4% in 2009. The sale of products and services to readers showed an increase of 7.6%. Thanks to the increased focus on online activities, the news sites of the dailies could be developed further, and the interaction between the printed product and the online news site was intensified. As a result, in June 2010 both the number of page views and the number of unique visitors were up from the levels in June 2009 by 11% and 27% respectively. Revenue from internet activities of the dailies showed significant growth in the first half year of 2010.
The reorganisation of the back office departments in 2009 meant that daily newspapers could benefit from a lower cost level in 2010. In addition, the daily newspaper publishers also implemented decentralised cost-cutting measures to mitigate effects of the decline in sales.
On 16 June 2010, Wegener, Telegraaf Media Groep and NDC Mediagroep signed a letter of intent in which they had reached broad agreement on the joint distribution of their respective dailies. Under the new model, TMG’s distribution activities for De Telegraaf in the regions where Wegener and NDC distribute their regional morning newspapers will be integrated with the distribution activities of Wegener and NDC respectively. This will yield benefits of synergy and ensure the quality of distribution. The new organisation will be operational in mid-2011.
Wegener Media free door-to-door newspapers
In the first quarter of 2010 Wegener achieved its goal of nationwide coverage, with the introduction of free door-to-door newspapers in Limburg and the Amsterdam region. These new products and the collaboration started in 2009 with a number of external publishers of free door-to-door newspapers had a positive effect on revenues. Furthermore, the acquisition of PLM in July 2009 increased revenues for the first half of 2010 compared to the first half of 2009. Revenues from advertising showed an overall increase of 1.8% to EUR 76.2m.
Thanks to the reorganisation of the back office departments in 2009, the free door-to-door newspapers could benefit from a lower cost level. In the first half of the current financial year, cost-reducing measures taken in 2009 were further intensified.
Wegener Media digital
After Wegener had adjusted its organisation to the new market circumstances in 2009 and the objective of nationwide coverage had been achieved in early 2010, in the first half of this year the next step could be taken toward becoming a cross-media content publisher. Attention was focused on expanding and enhancing the reach of the total portfolio, among other things by improving and developing new digital products and services at both local and national levels. AutoTrack maintained its number one position in the market for automotive sites. Its newly launched platform will contribute to maintaining this market position. Revenues of JobTrack were under pressure due to the poor labour market situation, while site visitors were up compared to the same period in 2009. Overall, revenues from internet products increased by 14.7% in the first half year of 2010 compared to the same period in 2009.
Wegener NieuwsDruk
Revenues of the printing plants declined in the first half of 2010 from the level for the same period in 2009, due to a loss of printing orders and shrinking print runs and volumes of orders from external clients. In addition, some activities were lost -- in particular, the printing order for the AD daily -- because of the sale of the printing plant in The Hague in August 2009 to “de Persgroep Nederland”. External revenues showed an autonomous decrease of EUR 2.7m. By adjusting the available printing capacity to the lower demand -- among other things, by closing the printing plant in Nijmegen at the end of June 2009 -- and further cost-reducing measures, the operating profit of the printing plants was about the same for the first half of 2010 as in the first half of 2009.
In June 2010 it was announced that two printing plants, Wegener NieuwsDruk Twente and Wegener NieuwsDruk Gelderland, were recipients of the Quality Award of the IFRA, which is part of the World Association of Newspapers and News Publishers. These two printers are among the newest members of the select company of the International Newspaper Color Quality Club.
Investments/divestments
Investments in the first half of 2010 totalled EUR 4.3m in contrast to the EUR 9.8m for the comparable 2009 period. Of this total EUR 3.3m, compared to EUR 8.4m in 2009, was directed to tangible fixed assets. The lower 2010 figure is largely due to the fact that investment for the new printing plant in Best have now been completed.
Investments in intangible fixed assets (EUR 1.0m) primarily related to publishing rights of free door-to-door newspapers. Parts of a number of investments from 2009 were paid in 2010, including the publishing rights for De Pers.
Financing
Wegener’s net interest-bearing debt at the end of June 2010 was EUR 111.0m, down by 5.1% from EUR 117.0m at year-end 2009. This decrease is partly the result of the receipt of the repayment of the Wegener loan to AD NieuwsMedia of EUR 15.4m.
Outlook
Compared to the previous year, the results obtained for the first half of 2010 cannot simply be projected to the second half. This is primarily because:
The sale of AD NieuwsMedia and of the printing plant in The Hague and the acquisition of PLM took place in mid-2009; and,
Recent reorganisations were completed in the course of 2009. This means that comparable cost savings have been relatively higher in the first half of 2010.
Completed reorganisations, lower prices for newsprint, and additional measures in 2010 will have a positive effect on the efficiency of the organisation as well as on the cost level. However, developments in the advertising market remain uncertain for the time being. This means the operating profit for the full year is also uncertain at this point.
Apeldoorn, The Netherlands, 28 July 2010
Management Board
Koninklijke Wegener NV
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Wegener producten
Dagbladen
7 regional newspapers and free daily De Pers. Daily reach of over 3 million people.
Huis-aan-huiskranten
Over 225 local door-to-door papers. Weekly reach of 6.8 million people.
Online
National network of news and special interest sites, monthly reach of 3,4 million people.
Speciaal Media
Concept and realization of print and new media products.
The job site for MBO and HBO, 800,000 monthly visitors and thousands of new jobs each week.
Site for new and used cars,
2.8 million monthly.
Website with daily local discount offers of at least 50%.
Producer of newspapers and newspaper-style magazines.
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