RTL Group Europe’s Annual report Annual report leading television, radio and production company Annual report 2005 2005 RTL Group 45, boulevard Pierre Frieden L-1543 Luxembourg T: (352) 2486 1 F: (352) 2486 2760 www.rtlgroup.com by www.collegedesign.com Designed and produced Press Printed by St Ives Westerham RTL Group’s aim is to offer popular high-quality Five year summary entertainment and information to all our audiences by encouraging and supporting the imagination, talent and professionalism of the 2005 2004 2003 2002 2001 €m €m €m €m €m people who work for us. Revenue 5,115 4,878 4,452 4,362 4,054 of which net advertising sales 3,149 3,016 2,706 2,697 2,574 Other operating income 103 118 76 83 87 Consumption of current programme rights (1,788) (1,607) (1,501) (1,411) (1,453) Depreciation, amortisation and impairment (219) (233) (335) (339) (420) Other operating expense (2,518) (2,495) (2,201) (2,305) (2,005) Amortisation and impairment of goodwill and fair value adjustments on acquisitions of subsidiaries and joint ventures (16) (13) (317) (298) (2,840) Gain/(loss) from sale of subsidiaries, joint Mission ventures and other investments 1 (18) 3 (5) 228 Profit from operating activities 678 630 177 87 (2,349) Share of results of associates 63 42 (4) 34 13 Earnings before interest and taxes (“EBIT”) 741 672 173 121 (2,336) Contents Net interest expense (11) (25) (35) (36) (33) Key values Financial results other than interest 2 (19) (20) (47) (55) Profit before taxes 732 628 118 38 (2,424) 01 Key figures These are the principles and qualities 02 Chairman’s statement 04 Chief executive’s report that guide RTL Group: Income tax expense (116) (196) (95) (85) (67) 08 Operations Profit for the period 616 432 23 (47) (2,491) 10 Highlights 2005 12 How we work 14 Germany television and radio > Quality Attributable to: 20 France television Equity holders of the Company 537 366 14 (56) (2,499) 24 FremantleMedia content We seek excellence in everything we do Minority interest 79 66 9 9 8 30 United Kingdom television 34 Netherlands television and radio Profit for the period 616 432 23 (47) (2,491) 38 France radio 42 Belgium television and radio > Creativity 46 Luxembourg television, radio EBITA 758 709 487 424 276 and technical services 48 Croatia television We provide stimulating workplaces Amortisation and impairment of goodwill and fair value adjustments 50 Spain television and radio on acquisitions of subsidiaries and joint ventures (16) (13) (317) (298) (2,840) 52 Hungary television where creative talent can flourish Impairment of goodwill and amortisation 54 Russia television of fair value adjustments on acquisitions of associates (2) (6) – – – 55 Portugal television and radio Gain/(loss) from sale of subsidiaries, joint 56 Sportfive ventures and other investments 1 (18) 3 (5) 228 57 Corporate governance > Focused management 60 Corporate responsibility Earnings before interest and taxes (“EBIT”) 741 672 173 121 (2,336) 64 The Board We manage our business actively on behalf 66 Executive committee 67 Directors’ report, Auditors’ report of our shareholders, while respecting the Earnings per share (in €) and Consolidated financial – Basic 3.50 2.38 0.09 (0.37) (16.27) statements cultural needs of the communities we serve 133 Five year summary – Diluted 3.50 2.38 0.09 (0.37) (16.27) Dividend per share 1.05 0.95 0.80 0.70 0.50 > Productivity Dividends paid (€ million) 163 146 123 107 77 We seek out ways to work more Average number of full-time equivalent employees 8,771 8,221 7,465 7,414 7,235 Net assets (€ million) 5,348 4,862 4,268 4,425 4,603 efficiently as a Group Net cash/(debt): € million 267 246 (298) (755) (569) 2004 +23.5% €55 Key figures *Adjusted earnings per share represents the net *of which 0.76% are held collectively as profit for the period adjusted for amortisation treasury stock by RTL Group and CLT-UFA of fair value adjustments on acquisitions and impairment of goodwill, gain or loss from sale of subsidiaries, joint ventures and other investments, net of income tax expense and one-off tax effects. RTL Group Annual Report 2005 01 2005 was another successful year for our Group. Our financial result improved once again, supported by strong performances from our profit centres, most of which were confronted with tough market conditions. We also made headway with our ambition to expand into new growth markets, and we readied ourselves for the new opportunities that are emerging across Europe. The continuing improvement in our financial performance does not come by surprise. We have been steadfast in our determination to build healthy families of broadcasting businesses across Europe. In recent years, we have strengthened our TV and radio brands, invested in the creation of high-quality content, and improved our portfolio of holdings. We have sought out opportunities to enter new arenas, diversifying into media-related activities and extending our presence into Southern, Central and Eastern Europe. We have always said that this approach would create value for our shareholders – and so it has. Ours is a record of steady share price improvement that outperforms the DJ STOXX index of European statement media shares. Chairman’s Chairman’s None of this would have been possible without the wholehearted commitment of the people at our profit centres. It is their passion and belief that drives our success. We are fortunate to have so many talented and hard-working people, and on behalf of the RTL Board I would like to put on record my thanks to every one of the 8,700 people who work for companies that are part of our Group. Siegfried Luther Chairman 02 RTL Group Annual Report 2005 RTL Group Annual Report 2005 03 report Chief executive’s 04 RTL Group Annual Report 2005 I’m delighted to report on an excellent set of results. 2005 was a year of solid and substantial achievement, during which we built on the successes of the previous year and made significant strategic progress. We enhanced our position in the UK, where we now own 100% of Five. We entered one new growth market – Russia – and we increased our investment in another – Portugal. Group revenue has grown every year since 2001, and it rose by another 4.9% to €5,115 million in 2005. The increase in EBITA has been even more marked, and it testifies to the quality of our profit centre management teams. Group EBITA was €758 million in 2005, a year-on-year rise of 6.9% and an increase of no less than 78.8% on the figure for 2002. We take pride in this performance, as it has been accomplished during a testing period for the European media industry. Despite the investments made in developing our portfolio in 2005 we remained cash positive, reflecting the excellent cash generation of our business. The dividend we are proposing for payment in 2006 is €1.05 per share, an uplift of 10.5% on the 2004 dividend. We continue to see opportunities for creating value for our shareholders by investing in new businesses, whether through development of our existing portfolio or by further external growth. RTL Group Annual Report 2005 05 A resilient portfolio Netherlands continued, with further Chief executive’s Our 2005 results demonstrate the value of a strengthening of our business and diversified and balanced portfolio. The broad continued growth in EBITA contribution. report pan-European spread of our holdings and continued their quality helped to ensure a strong result Our content business FremantleMedia in generally unfavourable market conditions. also performed well. It took full advantage 2005 was a year of little or no growth in most of the continuing popularity of international of our advertising markets, and in some hit formats such as Idols and The X-Factor, countries there was intensified competition for while successfully introducing new audiences as new channels and distribution concepts to TV audiences in Europe, platforms came on stream. Our TV and radio such as the telenovela format of serialised operations had to be at their best just to hold love stories. on to their market positions. Strategic progress Conditions were toughest in Germany, our We continued to implement our three central largest market. Advertising remained weak strategic objectives – to develop our families in the first half of the year, but there was a of channels, to build diversified businesses pick-up during the second half, which we that reduce our dependence on advertising hope continues into 2006. Our flagship revenue, and to expand into new markets that channel RTL Television lost some audience offer potential for rapid growth. We made share to smaller channels, but it remained the positive progress in all three. market leader in its target group. A powerful performance from VOX and strong support Developing our families from Super RTL meant that our TV family The strengthening of our radio and TV families remained the German number one, well continued, notably in the Netherlands where ahead of its rivals. our three TV channels were successfully regrouped and relaunched in August 2005. Although Germany is our most important This has reinforced their position in a market market, it now occupies a less dominant made more competitive by the launch of the position in our portfolio as a result of new new channel, Talpa. RTL 4, the Dutch market investments and development of our leader, is now supported by a refreshed RTL 5. holdings in other countries. In 2003, Germany We launched a new channel, RTL 7, to accounted for more than half of Group EBITA replace Yorin, which we closed.