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Semi Annual Report 2016

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Notes to the consolidated
Semi-Annual Financial Statements


1.Corporate information

Telegraaf Media Groep N.V. (the “Company”) is domiciled in Amsterdam, the Netherlands. Its activities are primarily the publication of print media and the operation of, and participation in, digital media and radio. The Company’s certificates shares are listed on the NYSE EuroNext in Amsterdam.

The Company’s consolidated semi-annual report for the first six months of 2016 comprises the Company, its subsidiaries and entities over which the Company has joint control (together referred to as Telegraaf Media Groep) and its interests in associates.

The consolidated financial statements for the financial year 2015 are available upon request at the Company’s postal address, P.O. Box 376, 1000 EB Amsterdam, or digitally via www.tmg.nl

The interim report, unaudited, was approved by the Executive Board and the Supervisory Board for publication on 28 July 2016.


2.Statement of compliance

The consolidated semi-annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standards Board (IASB) and as adopted by the European Union, and the interpretations of these standards by the IASB.

The consolidated semi-annual financial statements have been prepared in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. The report does not contain all the information required for complete financial statements and should be read in combination with the consolidated financial statements of Telegraaf Media Groep for 2015.


3.Basis for preparation

The principles applied by Telegraaf Media Groep in these consolidated interim financial statements are the same as the accounting policies applied in the consolidated statements for the year 2015 and are in accordance with the International Financial Reporting Standards (IFRS) approved by the European Commission, with the exception of the application of new standards and interpretations effective as of 1 January 2016. As required by IAS 34, the nature and the effect of these changes are disclosed below:

Amendments to IFRS 11 Joint arrangements: Accounting for acquisition of interests

The amendments require that accounting for a joint operation that constitutes a business, entities must apply the relevant IFRS 3 Business Combinations principles.

Amendments to IAS 16 and IAS 38: Clarification of acceptable methods of Depreciation and Amortisation

The amendments clarify that a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets.

Amendments to IAS 1 Disclosure Initiative

The amendments clarify the materiality requirements in IAS 1. They also clarify that entities can be flexible as to the order in which they present the notes to the financial statements.

Annual improvements 2012-2014 cycle

The improvements relate to specific parts of IFRS 5, IFRS 7, IAS 19 and IAS 34.

These changes to IFRS standards have for now no influence on the accounting policies and principles applied, nor retroactively. Where necessary, changes in the presentation and disclosure notes are made in accordance with changes to IFRS.


4.Critical accounting estimates and judgements

In the process of compiling interim reports, management has made judgements, estimates and assumptions that affect the application of the accounting principles, the reported value of assets and liabilities, and the amounts of income and expenses. The resulting accounting estimates will, by definition, seldom equal the related actual results. Interim results are not necessarily indicative for full-year results. Unless stated otherwise, the estimates made by the management in applying the accounting principles of Telegraaf Media Groep and the principal estimate sources used are identical to the judgements and sources that were applied for the consolidated financial statements 2015.


5.Financial risk management

Risk categories and factors affecting the financial position of Telegraaf Media Groep have been reported in the financial statements 2015. In the first six months of 2016, no significant changes with regard to risk occurred, as a result of which this report merely refers to the 2015 financial statements.

Economic developments have a particularly negative effect on net media spending, which is cyclical. Furthermore, media use is changing structurally, as a result of which traditional media is under pressure and new media and new technologies are seeing growing consumer use.

For further information on market conditions, see the notes to the semi-annual results 2016.


6.Segment reporting

In thousands of euros

TMG Landelijke Media

TMG Digital

Holland Media Combinatie

Keesing Media Group

Facilitating services

Headoffice & Other

Total

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

Continued operations

Revenues from third-party transactions

97,397

109,474

17,961

16,408

47,336

52,548

35,044

33,054

8,883

10,831

331

421

206,952

222,736

Intercompany transactions

-

-

-

-

-

-

102

30

35,422

38,787

-35,524

-38,817

-

-

Total income

97,397

109,474

17,961

16,408

47,336

52,548

35,146

33,084

44,305

49,618

-35,193

-38,396

206,952

222,736

Segment result before depreciation, amortisation and impairment losses

26,272

33,911

1,854

1,322

12,132

14,772

10,076

8,718

-16,600

-18,275

-25,663

-24,279

8,071

16,169

Total depreciation, amortisation and impairment losses

166

901

481

2,030

321

715

2,340

2,104

2,731

10,495

1,441

220

7,480

16,465

Operating result

26,106

33,010

1,373

-708

11,811

14,057

7,736

6,614

-19,331

-28,770

-27,104

-24,499

591

-296

Result from associates

-

-3

55

42

-

-

-

-

-

-

-

-

55

39

Financial income

6

-

10

3

-

-

7

146

-

-

-

13

23

162

Financial expenses

-

-

-

-

-

-

-52

-44

-

-

-550

-393

-602

-436

Income tax

-6,542

-8,371

-361

280

-2,963

-3,525

-2,357

-1,920

4,833

5,460

6,788

8,510

-602

434

Net result for the period

19,570

24,636

1,077

-383

8,848

10,533

5,334

4,796

-14,498

-23,310

-20,866

-16,369

-535

-97

Segment assets

26,796

31,722

13,992

13,352

20,643

21,582

153,493

153,112

54,476

56,745

133,302

169,402

402,702

445,915

Investments in associates

-

24

374

-

-

-

-

-

-

-

-

-

374

24

Total assets as at 30 June 2016 / 31 December 2015

26,796

31,746

14,366

13,352

20,643

21,582

153,493

153,112

54,476

56,745

133,302

169,402

403,076

445,939

Segment liabilities

44,095

57,972

4,623

5,367

21,699

25,783

33,136

33,921

4,757

25,030

65,573

70,660

173,883

218,733

Total liabilities as at 30 June 2016 / 31 December 2015

44,095

57,972

4,623

5,367

21,699

25,783

33,136

33,921

4,757

25,030

65,573

70,660

173,883

218,733

Segment investments

294

1,176

24

271

13

95

486

460

1,891

2,948

2,854

364

5,562

5,314

Total investments

294

1,176

24

271

13

95

486

460

1,891

2,948

2,854

364

5,562

5,314

Restructuring costs

303

-

-

-

27

-

10

-288

-574

-

537

-

303

-288

Impairment losses on property, plant and equipment

-

-

-

-

-

-

-

-

-

6,900

-

-

-

6,900

Other material non-cash items

303

-

-

-

27

-

10

-288

-574

6,900

537

-

303

6,612

Average number of FTE

507

605

122

113

437

510

274

266

304

443

159

131

1,803

2,068

Operating segments

Telegraaf Media Groep N.V. comprises the following main operating segments:

  • TMG Landelijke Media: The publishing of national newspapers, magazines, print-related internet activities and video productions.
  • TMG Digital: The digital activities include, among others, Geenstijl, Groupdeal, Dumpert, Gaspedaal and Relatieplanet.
  • Holland Media Combinatie: The publishing of regional newspapers, free door-to-door papers and print-related internet activities.
  • Keesing Media Group: The publishing of puzzle booklets within Europe.
  • Facilitating Services: Other activities include, among others, the printing and distribution of newspapers, the provision of office space and related facilities, primarily for the segments TMG Landelijke Media, TMG Digital and Holland Media Combinatie.
  • Head Office and Other/Eliminations: Head Office includes the corporate departments and the continued Classic FM and MyRadio activities, previously part of the now discontinued segment Sky Radio Group.

As of January 2016, non-title-related digital activities have been part of the new business unit TMG Digital. The comparative figures have been adjusted for this change accordingly. Additionally, for centralisation purposes, some internal departments have been moved to Facilitating Services and Head Office (IT). The comparative figures 2015 have been adjusted to reflect these changes to the various segments.



7.Seasonality of business activities

A part of the business operations of Telegraaf Media Groep is subject to seasonal influences. During the first and third quarters of the year, advertising revenues are normally lower than during the remainder of the year. The single-copy sales of De Telegraaf and the Keesing Media Group’s publications are significantly higher in the third quarter. The fourth quarter is normally the most important quarter for advertising revenues.

Cash flow is the strongest in the fourth quarter because, in addition to quarterly subscriptions, annual subscriptions are also received in advance.


8.Business Combinations

On 28 April 2016, TMG Landelijke Media B.V. acquired 100% of the shares in International Fashion Week B.V. (organiser of Amsterdam Fashion Week among other things) and its subsidiaries. TMG has recognised 907 as goodwill. This is mainly attributable to synergies expected to arise from the integration of the companies with existing operations of TMG. Other than goodwill, no intangible assets were identified in this transaction.


9.Discontinued operations

In the first half of 2016, TMG entered into a strategic partnership with Talpa, as a result of which the radio stations Sky Radio and Radio Veronica, among other things, will be transferred to a newly established radio company. TMG will acquire a minority interest in this new company. In anticipation of the final agreement, these activities are considered to be discontinued. The Sky Radio Group segment has therefore lapsed.

In thousands of euros

Period

Period

1/1 - 30/6 2016

1/1 - 30/6 2015

Result from discontinued operations

Revenues

13,922

14,206

Wages and salaries

2,383

2,385

Social charges and pension charges

618

581

Other personnel costs

139

268

Restructuring costs

-

432

Amortisation

-

5,263

Depreciation

-

225

Other operational costs

5,955

7,678

Total operating expenses

9,095

16,832

Operating result from discontinued operations

4,827

-2,626

Financial income and expenses

-138

-499

Income tax

1,020

-765

Result from discontinued operations, net of tax

3,669

-2,360

Average number of employees (FTE)

88

94

Earnings and diluted earnings on discontinued operations per share (EUR)

0.08

-0.05

Cash flows from discontinued operations

Net cash from operating activities

4,772

3,097

Net cash used in investing activities

-39

-198

Net cash used in financing activities

-

-

Total net cash flow from discontinued operations

4,733

2,899


10.Financial income and expenses

In thousands of euros

Period

Period

1/1 - 30/6 2016

1/1 - 30/6 2015

Result from associates

55

39

Result from associates

55

39

Financial income

23

162

Financial expenses

-602

-436

Total

-524

-235


11.Income tax

The income tax is based on the best estimate for the expected 2016 average tax rate attributable to result before tax for the first six months of 2016. Due to higher statutory tax rates abroad and non-deductible costs, the effective tax rate in the first half year of 2016 was above the nominal tax rate in the Netherlands.


12.Property, plant and equipment

In 2015, an impairment loss of 6,900 was recognised in Property, plant and equipment.


13.Assets held for sale

Assets held for sale involve the business premises of Holland Media Combinatie and the discontinued activities of Sky Radio Group, which will become part of the new radio company. See note on Discontinued operations.


14.Shareholders' equity

During the first half year of 2016, TMG paid out a dividend of € 0.16 (2015: nil) per share (or depositary receipt of a share), charged to retained earnings, for a total amount of 7,416 (2015: nil).

The movements in non-controlling interests in 2016 concern the acquisition of the remaining shares in Sienna Holding B.V., resulting in an increase of the share in Sienna Holding B.V. from 90% to 100%. In 2015, the movement was due to the dilution of non-controlling interests in Classic FM v.o.f.


15.Provisions

Restructuring provision

In the first half of 2016, severance costs were paid to the amount of 27,905 (2015: 13,281).


16.Interest-bearing loans and borrowings

The decline in interest-bearing loans and borrowings is due to the acquisition of the 10% minority interest of V-Ventures B.V. in Sienna Holding B.V. and the related shareholder loan. In addition, the liability licences of Sky Radio Group have been reclassified to liabilities held for sale.

In the first half of 2016, TMG used 5,000 of the existing credit facilities to deal with seasonality effects in the cash flow. The interest payable for the facility is the 3-month Euribor rate, with a premium of 1.50%.


In the first six months of 2016, Telegraaf Media Groep paid a premium of 4,829 (first six months 2015: 4,939) to Stichting-Telegraafpensioenfonds 1959. Including employees' contributions, the premium amounted to 7,244 (first six months 2015: 7,404).


18.Subsequent events

On 22 July 2016, TMG published further information regarding the intended strategic partnership with Talpa that was announced on 15 January 2016. Both parties set out the following agreements in a contract:

  • TMG and Talpa will be merging their radio activities (Radio 538, Sky Radio, Radio Veronica and Radio 101), as well as Talpa’s controlling interest in One Media Sales, into a joint radio company.
  • The radio spot sales of Sky Radio and Radio Veronica will be transferred to One Media Sales as of 1 January 2017.
  • TMG will have the option of taking a 15% interest in Talpa Broadcasting, which would also lead to an indirect interest in SBS.
  • As a result of the negotiations for the total agreement, TMG's previously announced one-off cash investment (27,000) has lapsed.
  • Talpa and TMG expect to complete all transactions by late August; the transaction is still subject to the approval of the authorised Supervisors and the advice of TMG’s works councils.

On 29 July 2016, TMG announced several organisational changes in order to continue its focus strategy at the same pace and to anticipate further shrinking revenues from print ads. The main changes are:

  • The centralisation of essential TMG activities in Amsterdam will be maximised in order to reduce the number of locations;
  • The activities of Holland Media Combinatie (HMC) and Telegraaf Landelijke Media (TLM) will be combined in Amsterdam: the HMC head office will move from Alkmaar to Amsterdam, and the office in Alkmaar will be closed;
  • The weekly portfolio will be reconsidered;
  • Sourcing and outsourcing of non-core actitivities (including support activities) will be researched and options considered;
  • New competencies will be acquired and developed to speed up the transition to new business models. 

In addition, TMG will align the sales organisation with the needs of the market, and the fixed costs within this department will be lowered and brought in line with advertising revenues. The reorganisation of the sales organisation is expected to result in the loss of approximately 75 jobs.  

With the organisational changes now announced, TMG is taking a first step, with the ultimate aim of reducing the cost base by at least 20% in 2018 (compared to 2015). On 29 July, the works councils involved will be asked to prepare their advice on the proposed restructuring and its consequences for employees. In the coming weeks, the measures announced will be worked out in more detail. During the next Investor Relations Day at the end of September, among other things, these proposed organisational changes will be elaborated on further.

  1. On 3 May 2016, Talpa announced that it will offer SLAM! for sale and add Radio 10 to its portfolio.