2006 Annual Results up 7.0%
Corporate & other activities, Finance
Paris, March 12, 2007
Media Division target recurring EBIT before associates up 4.8% (excluding impacts of Dalloz and TWBG, investment in DTT, and at €/$: 1.25)
LAGARDERE SCA recurring EBIT before associates down 35.4% at €578m (including €39m from EADS)
Highlights for the year ended December 31, 2006:
LAGARDERE SCA consolidated net sales were up 7.6% at €13,999m, against €13,013m in 2005.
Media division net sales were €8,092m, up 0.9% on a like-for-like basis.
The Books segment enjoyed a year of solid growth, with like-for-like sales up 1.8% despite being eroded by refocusing of editorial programs at Larousse in France and at Octopus in the United Kingdom. In addition, Hachette Livre benefited in 2006 from the consolidation of Time Warner Book Group over nine months (adding €336m). Press sales were down 1.2% on a like-for-like basis, due to the combined effect of title closures and weakness in some market segments (lads mags, cars). Distribution sales rose by 1.9% like-for-like, with a decline in low-margin activities (tobacco sales in Spain, press distribution in Belgium) more than offset by strong growth in higher-margin activities (at airports and in Eastern Europe and Asia). Finally, Lagardere Active had a better year than expected, with the fall in like-for-like sales limited to 0.9% despite a very high comparative in 2005.
With net sales up 14% at €25.2bn, Airbus made a record number of deliveries: 434 aircraft were delivered in 2006, against 378 in 2005, thanks mainly to A320 family single-aisle jets.
RECURRING EBIT BEFORE ASSOCIATES BY DIVISION/SEGMENT
The Media division made a contribution of €539m (up 7.0%). Excluding the impacts of the sale of Dalloz and the acquisition of TWBG, investment in DTT, and at a €/$ exchange rate of 1.25, year-on-year growth would have been 4.8%.
Media division operating margin (recurring EBIT before associates as a percentage of net sales) rose from 6.4% in 2005 to 6.7% in 2006 on a like-for-like basis, despite a poor performance by the Press segment and increased investment in DTT.
Books turned in a fine performance, with recurring EBIT before associates 16.6% higher at €220m. The segment benefited from the contribution of Time Warner Book Group over nine months, adding €33m (net of €3m of corporate costs) to 2006 consolidated recurring EBIT before associates. On the other hand, the segment no longer includes the contribution from Dalloz (€10m in 2005), which was sold at the start of the year. Part-works had another year of significant growth, driven mainly by Spain and Italy. Educational books were one of the highest performing segments in France and Spain (Anaya). Distribution in France and Hodder Headline played a significant role in the increase in recurring EBIT before associates. Conversely, Larousse in France and internationally, Octopus and Orion (United Kingdom) contributed less than in 2005. Overall, operating margin was 11.1%, compared with 11.5% in 2005. The fall was due to the integration of Time Warner Book Group and the impact of the sale of Dalloz. Excluding these two factors, underlying operating margin rose by 0.2%.
In 2006, Lagardere Active again posted record recurring EBIT before associates of €71m, against €47m in 2005 (up 53%), despite investing €19m in DTT (versus €7m in 2005). Operating margin rose sharply, from 7.5% in 2005 to 12.1% in 2006. In radio, the international network -mainly Russia- and Europe 1 underpinned the rise in recurring EBIT before associates to €66m, versus €46m in 2005. RFM saw Rec EBIT ease, despite having a good year-end, as did Europe 2. As expected, TV Program Production and Distribution results were lower, against an exceptional 2005 comparative. However the fall was less than anticipated, due to solid growth in Drama Production. The contribution from theme channels was roughly similar: fine results from the music channels in particular, and the elimination of losses at Match TV (closed in summer 2005), offset additional investment in DTT. Overall, recurring EBIT before associates from TV was only €2m lower than in 2005 at €8m.
HDS reported recurring EBIT before associates of €116m, up 8.4%. The French performance was again excellent, buoyed by Aelia. America and Asia also had a very good year. Belgium slipped back again, but growth in Eastern Europe was strong and trading remained buoyant in the Asia-Pacific region.
The Press segment achieved recurring EBIT before associates of €132m, which as forecast was down on 2005 (by 18.5%).
On the plus side, there was further progress for the titles Public and Psychologies.
The United States also saw a sharp drop in recurring EBIT before associates, at a higher rate than for the Press segment as a whole, due to lads mags (failed launch of Shock), Woman’s Day, home and interiors magazines, and car magazines.
In other countries, excluding emerging markets (Russia) which are still growing, contributions were flat overall. The United Kingdom is recording healthy growth due to the success of Psychologies and the first effects of restructuring.
The contribution made by EADS at operating level slumped from €392m in 2005 to €39m in 2006.
Overall, LAGARDERE SCA consolidated recurring EBIT before associates was €578m, compared with €896m in 2005.
INCOME FROM ASSOCIATES
For LAGARDERE (excluding EADS), income from associates was €68m, compared with €63m in 2005.
LAGARDERE (excluding EADS) showed net non-recurring losses of €40m in 2006, comprising a loss of €54m on the Media division and a gain of €14m on Other Activities.
The €54m loss for Lagardère Media breaks down as follows:
The €14m gain on Other Activities mainly related to the disposal of a building near Paris.
NET INTEREST EXPENSE
LAGARDERE SCA reported net interest expense of €192m, against €76m in 2005.
The increase in net interest expense was due to:
For the Group as a whole, income tax expense totaled €85m, including a net tax gain of €12m attributable to EADS.
MINORITY INTERESTS in net income were €30m, of which €2m was attributable to EADS.
Taking all these factors into account, consolidated net income was €291m, against €670m in 2005.
LAGARDERE net income (excluding EADS) was €268m, compared with €404m in 2005.
Calculation of adjusted net income
NET CASH FLOW FROM OPERATING AND INVESTING ACTIVITIES
LAGARDERE (excluding EADS) recorded a net cash outflow of €465m on operating and investing activities in 2006, compared with a net cash inflow of €857m in 2005, reflecting the active acquisitions policy pursued during the year.
The components of the year-on-year movement were as follows:
NET DEBT: HIGHER GEARING
At December 31, 2006, net bank debt was €1,532m, versus the end December 2005 figure of €863m.
The Managing Partners will ask the General Meeting of the Shareholders to approve a dividend of €1.20 per share, compared with the €1.10 dividend paid out of 2005 income. This proposal reflects our sound financial health and our confidence in our future performances.
The Lagardère Group is a market leader in the media sector (books, distribution of cultural products, press and audiovisual). The Group also has interests in the high technology sector via a 14.98% stake in EADS.
Lagardère shares are listed in Paris on Eurolist by Euronext – Compartment A.
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