Businesses

Lagardère Active

• Send

Lagardère Active was established as a new entity in 2006, uniting the Group’s magazine publishing activities and audiovisual and digital divisions.

Lagardère Active aims to become a leader in the production and aggregation of multimedia content in France and internationally. It also aims to capitalize on its expertise acquired in specific sectors, such as women, youth and music, and to extend this know-how across a complete range of media, including radio, television, print, Internet, and telephone.

With its existing talent, resources, content and brands, Lagardère Active already possesses significant assets in France and around the world. They will be boosted by the implementation of an ambitious strategy to combine internal and external growth, if and when opportunities arise.

The merger of Lagardère’s two advertising sales agencies, Interdeco and Lagardère Active Publicité, to become Lagardère Publicité, enabled the Group to create the second largest agency in France in terms of total managed advertising sales. It also supports the growth of advertiser demand by developing a more complete and innovative cross-media offering.

Print media

2006 was a year of transition for the Group’s print media activities, with contrasting developments in its respective countries and markets, and the growing influence of Internet media. The Group has responded to this trend with a strategy of digital development and content synergies, combined with the rationalization of its portfolio of titles and international operations.

• In France
  
  Sales of our upmarket women’s  sales of our upmarket women’s and special interest magazines enjoyed extremely healthy growth: single-copy sales of Elle, Elle Déco and Elle à Table rose in 2006, along with Isa and Parents. The picture market was marked by a drop in sales for Paris Match following an exceptional 2005. However, its circulation reflects a measure of medium-term stability. The weekly TV magazine market enjoyed a healthy start after two unsettled years. Set against this background, Télé 7 Jours recorded one of the best performances in its sector and ended the year in a near-stable position.
  
  
  Public, launched in 2003, reenergized the French generational celebrity market.  For the third consecutive year, the magazine recorded significant growth, both in circulation and readership. Ici Paris and France Dimanche experienced a drop in circulation in 2006 on the conventional, and temporarily saturated, celebrity market. Lastly, the men’s magazine market (Choc, Entrevue) was hit by a steep decline, which impacted on sales in 2006.
  
  The outstanding development of 2006 in the regional dailies sector, was the modernization of Nice-Matin, Var-Matin and La Provence. A proposed merger with the Presse Quotidienne Régionale division of the Le Monde group was also initiated.
  
  Lastly, a drop in kiosk sales and a slow down in advertising revenues  were compensated, in part, by the development of piggy-backing and a higher cover price for La Provence. It was also a year of growth for the supplements Version Femina and TV Hebdo.

• Internationally
  
  Strong economic growth in Russia and China  once again benefited the Group’s subsidiaries, the development of which was reflected, in particular, by the 2006 launch of Psychologies Magazine in both countries and by the strengthening of business structures and support activities.
  
  In the USA, HFM, the leading enthusiast content provider in the U.S., accelerated its transformation into a multimedia company with the long-term objective of providing the consumer with services on all media platforms and of offering a global solution to a complete range of advertisers. In 2006, substantial investments expanded Internet activities, particularly with the ELLE and Car and Driver websites. ELLE magazine experienced vibrant double digit growth in circulation and the largest year ever in terms of advertising sales since its launch over 20 years ago. With the teen girl market showing strong interest in content on digital platforms, HFM closed the print magazine ELLEgirl concentrating its investment on its growing website and mobile phone service. Building on its leadership position in the automotive sector, HFM bought Jumpstart Automotive Media in 2007, making it the fifth largest online automotive advertising network.
  
  In Europe, results improved in Italy, following the restructuring of the activities of Hachette Rusconi. Results also remained healthy in Spain, despite the expense incurred by the launch of Psychologies Magazine and the closure of Xtreme Tuning and Maxim. The goal of setting up operations in other major countries was achieved in July 2006, with the acquisition of the publishing house, Quote Media, making the Group the fourth largest player in the Netherlands. The reorganization of activities in Poland with Burda resulted in the creation of a company in which HFM holds a 49% stake.
  
  
  In Great Britain, the subsidiary embarked on a major restructuring plan and continued the rationalisation of its portfolio of titles with the closure of the print editions of B and Elle Girl.The Japanese subsidiary Hachette Fujingaho benefited from a similar title rationalization and restructuring process, enabling it to maintain strong results.The advertising market ended 2006 with mixed results. Most major mature world markets remained stable, while China and Russia - emerging countries in the media sector – experienced strong growth. The year was also marked by exceptional growth in the Internet sector, which passed the symbolic 10% mark of total net advertising investment in the US for the first time in 2006.
  This year will see the continued rationalization of the Group’s portfolio of activities in response to a difficult advertising and circulation environment. Magazines reporting a decline in sales, combined with operating losses, will face closure, while excessively small and insufficiently profitable international operations will be wound-up.
  
  Lastly, the relaunch policy  will apply to segments displaying the strongest growth and will support the transition of our activities toward digital media.

Audiovisual

Lagardère Active was able to take advantage of opportunities in each of its markets in 2006, both in France and around the world, based on its diversified and rationalized portfolio. The Audiovisual division achieved a healthy overall performance by building on its capacity for innovation, recognized expertise in its various core activities, marketing power, and management excellence.

• Radio
  
  In 2006, Europe 1 upheld its position as a general-interest radio station with a focus on current events and news accessible to a diverse audience, wherever they happen to be, thanks to downloadable podcasts and blog-based initiatives. Europe 2 launched a new morning programme which recorded the biggest year-to-year rise, both in terms of cumulative audience and audience share. Lastly, RFM became the leading adult-contemporary music station with a 7% audience share in the 35-49 age bracket.It was the only adult music radio station to increase its audience share versus 2005.
  Internationally, Lagardere Active Radio International (LARI) consolidated its audience in the countries where it operates. In early 2006, LARI acquired a 100% stake in four radio stations in which the Warburg Pincus investment fund in Russia held a majority share, and one Polish radio station, in line with its strategy.
  

• Television
  
  In the field of special-interest channels, 2006 was marked by the finalization of a strategy to refocus the company’s activities on youth and music, with the closure of La Chaîne Météo. Our excellent audience figures (*1) underline the healthy performance of the group’s channels, despite an increasingly competitive environment. Canal J is now the fourth largest cable and satellite network, while TiJi rose one place to become the sixth largest cable and satellite network.Lastly, the group joined an initiative to combine the assets of Canal+ and TPS.
  
   

• Entertainment
  
  In 2006 Audiovisual production and distribution activities  strong, with around 880 production hours and 12 of the year’s 100 best prime-time audiences, all programmes combined (*2). For the fifth consecutive year, the group achieved first place in the annual prime-time drama rankings.(*3).
  
  Julie Lescaut and Diane Femme Flic (GMT Productions), Joséphine Ange Gardien (DEMD Productions), Père & Maire (Aubes Productions), Mafiosa (Image & Compagnie), David Nolande (GMT Productions), honoured with an award at the Festival de la Fiction de Saint-Tropez, featured among the most popular series. The most popular live programmes included C’ dans l’air (Maximal Productions), Nous ne sommes pas des anges and Sagas (Angel Productions), La Grande Course (Léo Vision), and Ripostes (Image et Cie). Lastly, Lagardère Images was behind a number of prestigious one-off productions, dramas and mini-series, including De Gaulle (GMT Productions) and Joseph (GMT Productions).
  
  Since February 2008, Lagardère Entertainment has consolidated Lagardère Active’s audiovisual production and distribution activities.
  

New media

As regards new media, 2006 was marked by the grouping of its North American, French and German mobile activities under a single brand - Cellfish Media. The entity is now one of the largest mobile content publishing and distribution companies in the world (ring tones, wallpaper, animations, games, community services, etc.).

Outlook for 2007

Radio activities in France remain heavily dependent on the advertising market which offers limited visibility for 2007, and must take into consideration the opening of television to Distribution advertisers. Broadcast networks remain the division’s main medium-term challenge, entailing the development of a new frequencies plan for FM radio in France, the roll-out of digital radio, and the emergence of new listening media (Internet, etc.). On an international level, LARI will continue with its strategy of rationalizing its international operations.

As regards the television sector, the roll out of Digital Terrestrial Television will provide Lagardère Active channels with an opportunity to strengthen their leadership in the fields of music and youth broadcasting.

Lastly, Lagardère Active is expected to take full advantage of the numerous opportunities offered by the rapid changes taking place in digital media sector..

*1 _ Source: MédiaCabSat survey December 2005 – June 2006.
*2 _ Source: Mediamétrie/Médiamat over 4 years and more.
*3 _ Source: Écran Total No. 576 of 14 September 2005, hourly volume report.