(MEC.L) Mecom Group PLC Buy/Sell

RNS Number : 8959I Mecom Group PLC 19 March 2010 TR-1: NOTIFICATION OF MAJOR INTEREST IN SHARES

1. Identity of the issuer or the underlying issuer Mecom Group plc

of existing shares to which voting rights are attached: 2 Reason for the notification(please tick the appropriate box or boxes): An acquisition or disposal of voting rights An acquisition or disposal of qualifying financial instruments which may result in the acquisition of shares already issued to which voting rights are attached An acquisition or disposal of instruments with similar economic effect to qualifying financial instruments An event changing the breakdown of voting rights
Other (please specify): On market transfer between direct and indirect funds *
3. Full name of person(s) subject to the Aviva plc & its subsidiaries

notification obligation:
4. Full name of shareholder(s) Registered Holder:

(if different from 3.):
BNY Norwich Union Nominees Limited 3,077,532*

Chase(GA Group)Nominees Limited 20,022,637*

Chase Nominees Limited 625,000*

CUIM Nominee Limited 346,315*

Vidacos Nominees Limited 4,574*

*denotes direct interest
BNP Paribas - London 207,068
Chase Nominees Limited 2,232,070
State Street Nominees Limited 2,830,100

Vidacos Nominees Limited 1,515,056

5. Date of the transaction and date on 18 March 2010

which the threshold is crossed or reached:
6. Date on which issuer notified: 19 March 2010
7. Threshold(s) that is/are crossed or 22% to 21% Change at Direct Interest Level

reached:

8. Notified details: A: Voting rights attached to shares
Class/type of Situation previous Resulting situation after the triggering transaction
shares to the triggering
transaction

if possible using the ISIN CODE
Number Number Number Number of voting % of voting rights
of of of shares rights
Shares Voting
Rights
Direct Direct Indirect Direct Indirect
Ordinary Shares GBP0.608589 Ordinary Ordinary Shares 30,860,352 24,076,058 6,784,294 21.88% 6.17%
Shares GBP0.0060858
GBP0.0060858 GB00B06H7T27
GB00B06H7T27 Direct
GB00B3P91873 Direct 2,452,779,107
2,452,779, (22.29%)
107 (22.29%) Indirect
Indirect 627,753,485
627,753,485 (5.71%)
(5.71%)

B: Qualifying Financial Instruments Resulting situation after the triggering transaction
Type of financial Expiration Exercise/ Number of voting % of voting
instrument date Conversion Period rights that may be rights
acquired if the
instrument is
exercised/ converted.

C: Financial Instruments with similar economic effect to Qualifying Financial Instruments Resulting situation after the triggering transaction
Type of financial Exercise price Expiration date Exercise/ Number of voting % of voting rights
instrument Conversion period rights instrument
refers to

Nominal Delta

Total (A+B+C)
Number of voting rights Percentage of voting rights
30,860,352 28.05%

9. Chain of controlled undertakings through which the voting rights and/or the financial instruments are effectively held, if applicable: The voting rights are managed and controlled byAviva Investors Global Services Limited, with the following chain of controlled
undertakings:-

Aviva Investors Global Services Limited:
· Aviva plc (Parent Company)
· Aviva Group Holdings Limited (wholly owned subsidiary of Aviva plc)
· Aviva Investors Holdings Limited (wholly owned subsidiary of Aviva Group Holdings Limited)
· Aviva Investors Global Services Limited (wholly owned subsidiary of Aviva Investors Holdings Limited)

Proxy Voting:
10. Name of the proxy holder: See Section 4

11. Number of voting rights proxy holder will cease to hold: 12. Date on which proxy holder will cease to hold voting rights:

13. Additional information: Figures are based on a total number of voting rights of 110,039,136
14. Contact name: Jaime Tham, Company Secretary
15. Contact telephone number: 0207 925 7200

This information is provided by RNS The company news service from the London Stock Exchange

HOLBLGDXGSBBGGC

RNS Number : 8334I Mecom Group PLC 18 March 2010 Annex DTR3Notification of Transactions of Directors/Persons Discharging Managerial Responsibility and Connected Persons

All relevant boxes should be completed in block capital letters.

1. Name of the issuer 2. State whether the
notification relates
to (i) a transaction
notified in
accordance
withDTR3.1.2 R, (ii)
a disclosure made in
accordance with LR
9.8.6R(1) or (iii) a
disclosure made in
accordance with
section 793 of the
Companies Act
(2006).

MECOM GROUP PLC (i)

3. Name of person 4. State whether
discharging notification relates
managerial to a person
responsibilities/ connected with a
director person discharging
managerial
responsibilities/
director named in 3
and identify the
connected person

5. Indicate whether the 6. Description of
notification is in shares (including
respect of a holding class), debentures
of the person or derivatives or
referred to in 3 or financial
4 above or in instruments relating
respect of a to shares
non-beneficial
interest1

TO THE PERSON NAMED 60.85888 PENCE EACH

7. Name of registered 8 State the nature of
shareholders(s) and, the transaction
if more than one,
the number of shares
held by each of them

COMPANY'S DEFERRED
BONUS PLAN.

9. Number of shares, 10. Percentage of issued
debentures or class acquired
financial (treasury shares of
instruments relating that class should
to shares acquired not be taken into
account when
calculating
percentage)

223,656 (THE NUMBER

11. Number of shares, 12. Percentage of issued
debentures or class disposed
financial (treasury shares of
instruments relating that class should
to shares disposed not be taken into
account when
calculating
percentage)
13. Price per share or 14. Date and place of
value of transaction transaction

BONUS SHARES AWARDED 17 MARCH 2010,

15. Total holding 16. Date issuer informed
following of transaction
notification and
total percentage
holding following
notification (any
treasury shares
should not be taken
into account when
calculating
percentage)

17 Date of grant 18. Period during which
or date on which
exercisable

19. Total amount paid 20. Description of
(if any) for grant shares or debentures
of the option involved (class and
number)

60.85888 PENCE EACH

21. Exercise price (if 22. Total number of
fixed at time of shares or debentures
grant) or indication over which options
that price is to be held following
fixed at the time of notification
exercise

23. Any additional 24. Name of contact and
information telephone number for
queries

JAIME THAM, COMPANY

Name of authorised official of issuer responsible for making notification DATE OF NOTIFICATION: 18 MARCH 2010

Notes: This form is intended for use by anissuer to make a RIS notification required by DTR 3.1.4.

(1) An issuer making a notification in respect of a transaction relating to the shares or debentures of the issuer should complete boxes 1 to 16, 23 and 24.
(2) (2) An issuer making a notification in respect of a derivative relating the shares of the issuer should complete boxes 1 to 4, 6, 8, 13, 14, 16, 23 and 24

(3) (3) An issuer making a notification in respect of options granted to a director/person discharging managerial responsibilities should complete boxes 1 to 3 and 17 to 24.

(4) (4) An issuer making a notification in respect of a financial instrument relating to the shares of the issuer (other than a debenture) should complete boxes 1 to 4, 6, 8, 9, 11, 13, 14, 16, 23 and 24.

This information is provided by RNS The company news service from the London Stock Exchange

RDSUWRWRRAAOAAR

RNS Number : 6993I
  Mecom Group PLC
  17 March 2010
   

17 March 2010

MECOM GROUP PLC

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009

PROFITS IMPROVE IN SECOND HALF: SUCCESSFUL COST-CUTTING SUBSTANTIALLY MITIGATES ADVERTISING DECLINES

Mecom Group plc ("Mecom" or "the Group") announces its results for the year ended 31 December 2009.

HIGHLIGHTS

·      Group adjusted EBITDA of EUR125.5 million, well ahead of previous expectations

·      Net debt of EUR373.4 million (3.1 times ongoing EBITDA) at 31 December 2009 (2008: EUR682.5 million)

·      Advertising revenues down 18 per cent - slowing decline in the second half of 15 per cent with this trend continuing into 2010

·      Circulation revenues resilient, with a slight increase during the year

·      Operating costs reduced by EUR140.0 million, outperforming from original cost cutting targeted reduction of EUR75.0 million

·      Over 75 per cent of lost revenue mitigated through cost reduction

·      Digital revenue growth to compensate in 2010 for moderating declines in print advertising 

·      New financial and operational targets established to measure success of the transformation

                                                 2009       2008       2009
                                                 EURm       EURm   vs. 2008
                                          
                                          
 Advertising revenue                            665.0      813.5      (18)%
 Circulation revenue                            545.5      544.0        - %
 Other revenue                                  199.0      235.2      (15)%
 Total revenue1                               1,409.5    1,592.7      (12)%
 Costs1                                     (1,289.9)  (1,427.8)  10% lower
 Group adjusted EBITDA2                         125.5      174.8      (28)%
 Adjusted earnings per share (euros)             0.07       3.09     (3.02)
 Net debt                                     (373.4)    (682.5)  EUR309.1m

Notes

1  Revenue and costs from ongoing businesses stated at constant currency

2 Total EBITDA from Group operations in 2009, compared with EBITDA from these operations for equivalent period of ownership in 2008, stated at constant currency and before exceptional items and the amortisation of acquired intangibles

Alasdair Locke, Chairman, said:

'Our results for 2009 confirm that, after a successful cost-cutting programme, we have come through an extremely difficult year for consumer advertising in good shape and we look forward to an improvement in profitability this year, even without growth in print advertising markets. Our executive team has led a marked transformation of the business away from the traditional publication of printed products.'

David Montgomery, Chief Executive, said:

'This last year has been an advertising crisis, not a newspaper crisis.  Our assets, both print and online, have been enhanced and have shown great resilience in maintaining readership and increasing audience and that bodes well for the future.  

'In addition to cost reduction, which has been at the top end of performance in the sector, we have continued to invest in digital development with a range of products that will drive revenues in the economic recovery.
      

'We are looking to reap the rewards from greater productivity from a continually reducing cost base as we further centralise within a single management structure.  Today we announce demanding targets for new revenue growth that will flow from our transformed company. 

'This hard won progress is underwritten by the willingness of staff and management to adopt a new model for a wider content business.  The robustness of our proposition is enshrined in the creativity and developing skills of an energetic staff who have embraced a strategy that is leading our industry to a new lease of life.'

Contacts:

Mecom Group plc             +44 (0) 207 925 7200

David Montgomery, Chief Executive 

Henry Davies, Group Finance Director

Jonathan Digges, Group Corporate Finance

M: Communications      +44 (0) 20 7920 2330

Nick Miles 

Eleanor Williamson 

A conference call and webcast briefing for analysts and investors will take place today at 9:30 am (GMT) on the following details:

Telephone conference call: +44 (0) 20 3003 2666 (for registration)

Webcast: a link to the webcast is available on www.mecom.com 

The presentation slides used at this briefing and a recording of the conference call and webcast briefing will be available on the "Investors" section of the Mecom website (www.mecom.com/financial-results.aspx).

CHAIRMAN'S STATEMENT

Overview

In my last annual Chairman's statement I told shareholders that we hoped to finalise a EUR156 million rights issue and re-financing of our bank facilities shortly thereafter.  I am pleased to report that both of these were successfully completed by the summer of 2009.  The Group's balance sheet concerns are now behind it.  Our results for 2009 confirm that, after a successful cost-cutting programme, we have come through an extremely difficult year for consumer advertising in good shape and we look forward to an improvement in profitability this year, even without growth in print advertising markets. Our executive team has led a marked transformation of the business away from the traditional publication of printed products, which is described more fully in the Chief Executive's Review and elsewhere in the Annual report and accounts.  

However, our confidence in the outlook for the Group has not been reflected in the Company's share price and we feel the same considerable frustration about this as our shareholders.  It has been gratifying to see the price moving in recent days and we are working closely with our shareholders and advisers to continue to generate further interest in the Group's shares.

To assist existing and prospective investors in monitoring our progress both this year and beyond, we have announced a number of operational and financial targets.  Operationally, we want to focus attention on our ability to grow revenues and profits in areas away from traditional print media.  We have therefore set targets which relate primarily to digital activities and Enterprise sales.   Financially, our confidence in our ability to de-leverage the Company, to the point where it is in a position to make dividend payments, is reflected in targets relating to cash conversion and leverage multiples.  We will report on progress against these targets, which are set out in the Chief Executive's Review, at the half-year results announcement and each results announcement thereafter. 

An improved outlook for cash flow reflects the final completion of our major investment in printing facilities in the Netherlands and the running down of exceptional costs as restructuring programmes end.  At least as importantly, it reflects the Board's commitment to managing the Group's balance sheet efficiently.  Annual bonuses for our senior executive team are now set substantially by reference to the achievement of cash generation targets.

Board 

I am pleased to report that the repopulation of our Board following last year's departures is complete.  During the course of 2009 we were delighted to welcome Michael Hutchinson and Gerry Aherne, whose enormous experience, respectively, in the commodities and fund management industries gives the Board an ideal balance between media and other disciplines.   I am grateful to the non-executive directors for their support and encouragement and to the executive team and all of our employees for their unfailing commitment during a year from which Mecom has emerged much stronger than when I last wrote to you.

Alasdair Locke

Chairman

CHIEF EXECUTIVE'S REVIEW

Overview

The perception of the newspaper sector is of unrelenting decline of print and advertising associated with it. According to this view the recession and advertising downturn was merely an exacerbation of that trend and the only remedy is continuing cost reduction.

However the reality is quite different. Mecom has withstood the recession in terms of newspaper readership and circulation levels. Readership of newspapers is being maintained partly with continuing expansion of new titles, as in the Netherlands for instance, and re-launch and enhancement of existing ones. The recessionary forces have failed to deliver the anticipated blow to either readership or sales. Our printed products continue to please our customers.

In addition we did not merely provide for the future by cost cutting. It is true that the old economic model for print is unsustainable. But our reforms, in which we continued to invest in 2009, demonstrate that not only do our printed products satisfy the audience but there is also a growing appetite for our content online. It is particularly gratifying that Norwegian market research reveals that an increasing number of 15 to 29 year olds are viewing our local content online and value it highly. This indicates that we have the potential to grow our market overall freed from the physical and geographical restrictions of solely printed content.

Despite the emphasis on achieving our financial restructuring and the effort involved in exceeding expectations in 2009 the modernisation process has moved on decisively. Three years ago there was deep scepticism and some resistance inside the company regarding these operating reforms. In the last year this has transformed. The initiatives to expand into other content products and enhance sales through commercial exploitation of content across all platforms are now coming thick and fast from the local management and staff. 2009 marked this turning point where the pressure for change, originated at the group level, has now been espoused with tremendous enthusiasm by our staff at local level to join what is the most significant revolution in the newspaper industry in its history. 

It is also crucial that we now harness these local initiatives and the talent behind them to roll out the modernisation process more quickly. That is why the group has announced the move to a single management within one company serving a market with a population of 65 million.

Without strenuous efforts the effect of advertising decline, the worst in newspaper history, would have cut deeper in 2009.  Our own advertising revenue fell by 18 per cent during the year, continuing a trend which started in 2008 and which - whilst easing considerably - has dragged on into 2010.  We cannot yet call an upturn but do take some comfort from more positive recent economic indicators in all of the countries in which we operate.  These tend to suggest some improvement in advertising overall.   

Notwithstanding the fall in advertising in 2009, we achieved a satisfactory outcome in the year of Group adjusted EBITDA of EUR126 million (2008: EUR175 million), year-end net debt of EUR373 million (2008: EUR683 million) and a cost programme which resulted in reductions of around EUR140 million, offsetting 75 per cent of our revenue decline and materially higher than anticipated at the beginning of the year.  In the year Group revenues (from ongoing businesses) fell from approximately EUR1.6 billion to EUR1.4 billion, largely as a result of declines in advertising.  Earnings per share from continuing operations in the year were 7 cents per share (2008: 260 cents per share). 

Against this background we have undertaken many initiatives to position Mecom for the future.   We cannot continue to rely solely on sales of - and advertising in - the printed product, although these will of course remain the mainstay of our profitability for many years to come.   We are now well on the way to being a truly multimedia company focused on: 

·      rapidly diversifying our sources of income; 

·      increasing flexibility amongst our journalists who have enthusiastically embraced the need to produce content for multiple outlets; 

·      improving the quality of our paid titles;  and

·      drawing on the benefits of our scale in sharing new product and content ideas and reducing costs; 

These initiatives have been accompanied by continued rigorous focus on cash protection and generation through related financial targets and the development of a number of new operational targets to drive growth in new revenues. 

Crucially, all of this is being led by a single European management group, comprising the three executive directors and five other senior executives.  Although our individual operating divisions continue to report separately and are managed directly by local executives, we increasingly view our business as serving a cohesive market of some 65 million potential customers to whom many of the same products can be sold.  The European management group underpins our belief that Mecom should be run as a wholly unified group, enabling centralised focus on areas such as revenue and product development and cost reduction, for which specific executives have been given responsibility.

Operational and financial targets

Underpinning our new model is a series of simple operational and financial targets, against which we will report our progress every six months. The three operational targets are intended to focus our attentions on the overwhelming requirement to develop new revenues and EBITDA for areas other than traditional print publishing, in which future advertising growth cannot be easily predicted.  They are:

1.     Growth in new revenues (including paid content and online advertising) by EUR100 million from a base of EUR67 million in 2009 or approximately 35 per cent per annum in the next three years;

2.     Growth in unique users of all of our online products from a starting point of 32 million in 2009 to 58 million in the year ending 31 December 2012, a growth of approximately 20 per cent per annum; and

3.     Growth in EBITDA generated by our Enterprises activities (that is, the sale of other goods and services to our readers) from EUR5 million in 2009 to EUR10 million in 2012.

Alongside these operational targets we have three financial targets to assist investors in assessing our progress, all relating to our ability to de-leverage the Group's balance sheet and improving earnings:

1.     A target adjusted EBITDA margin of 12.5 per cent in the year ending 31 December 2012;

2.     Cash conversion (after debt service) of EBITDA of more than 50 per centin the year ending 31 December 2012; and 

3.     Net debt of less than twice EBITDA at the end of 2012.

Divisional Highlights*

Apart from the general restoration of confidence in the Group's financial health that meeting these targets will achieve, our ability to reduce debt to this level will greatly assist us in the refinancing of our facility agreement which ends in 2013 and put us in a position to make dividend payments in respect of 2012 should we agree with our shareholders to do so at the time.

The Netherlands

Our Dutch business comprises both Wegener and Limburg Media Group and is the largest newspaper publisher in the Netherlands. Although currently operated separately, it remains our intention to merge the underlying businesses as soon as various tax issues in Wegener are resolved.   We expect this to happen during the course of 2010.

With overall 2009 revenues of EUR630.9 million (2008: EUR712.5 million), the Netherlands accounted for some 45 per cent of the Group's ongoing revenues. Its contribution to Group EBITDA in 2009 of EUR91.0 million (2008: EUR122.5 million) was relatively higher at 70 per cent of the Group's ongoing EBITDA (before central costs), reflecting the profitability of all of the major city-based newspapers and Wegener's weekly free-sheet business.  This is largely due to the success of a major restructuring programme in Wegener which materially offset advertising declines. 

During 2009, our Dutch business took steps to achieve its strategic aim of national coverage in printed products. The free weekly portfolio, which had been expanded through new free-sheets in the northern regions of the Netherlands in 2008, made in-roads into the Randstad region and in early 2010 we re-established a free weekly in the Limburg region. Autotrack, the number one Dutch car classified site, continued to perform well with revenue growth in a difficult market, highlighting the potential from our market-leading positions such as these. 

In 2009 the division had online revenues of EUR18.3 million (2008: EUR21.2 million). Digital development remains the central priority for the Netherlands which, with the lowest proportion of digital revenues of all of our divisions, needs to capitalise on a franchise which will soon reach almost every household in the Netherlands through one or more of its products.  A programme to redirect resources from the printed newspapers to online activities, to drive digital growth, was initiated in early 2010.  Although Enterprises revenues in the Netherlands fell slightly from EUR5.1 million to EUR4.9 million in the year, EBITDA improved and we are confident that the team and product portfolio we have in place will deliver attractive results in this area in future.

Denmark

Denmark, trading under the name of Berlingske Media, continued to suffer for much of the year from an advertising downturn which started much earlier than in any of our other divisions.   It is pleasing to note that this appeared to flatten at the end of 2009 and into 2010.  In the period under Mecom ownership, Berlingske Media has been dramatically restructured to operate under a single unified management structure, replacing a highly disaggregated structure with many surplus layers of management.  The result is a highly efficient entity which remains a centre of real innovation in driving forward the Group's transformation programme, with a wide range of exciting product launches and digital initiatives, including mobile launches and paid-for-content.  This transformation has occurred against a backdrop of significant cost savings, (down by approaching 20 cent since the beginning of 2007) and a reduction in FTEs (down 18 per cent over the same period).  Cost saving in Denmark was proportionately the best in the group in 2009, at 12 per cent (compared with 10 per cent group-wide), with these cost reductions mitigating 91 per cent of lost revenue.

Digital revenues fell from EUR22.8 million in 2008 to EUR20.7 million in 2009 - at first sight slightly disappointing but a highly creditable achievement in dire economic circumstances. 

In 2009, Berlingske's revenues declined to EUR411.8 million from EUR469.0 million, again largely due to advertising.   Management's success in mitigating this decrease in revenue through cost reduction can be seen in the division's EBITDA which fell only to EUR15.5 million from EUR20.8 million in 2008.    Enterprises revenues, an area on which the division will increase focus in 2010, increased from EUR2.8 million in 2008 to EUR3.7 million in 2009.     

At the forefront of the Group's digital development, Berlingske is very well positioned to take advantage of any improvement in the advertising market in 2010 and beyond, both nationally and in local and hyper-local markets.

Norway

Our Norwegian division, Edda Media, is unique in the Group for its concentration on a large number of small local franchises. This has not insulated it completely from the downturn in the wider Norwegian advertising market, which appears to have begun earlier (and to be ending earlier) than in our other markets.  The first two months trading of 2010 confirm an earlier improvement than in the other divisions, with advertising broadly flat on the prior year. Edda continues to enjoy the highest digital income in the Group, both absolutely and as a proportion of its total revenues, with total digital revenues of EUR23.6 million (2008: EUR28.1 million) representing almost 20 per cent of total advertising revenues.  Revenue from online newspapers increased by 25 per cent in 2009 and online newspaper unique users by 18 per cent, this effect being more than offset by falls in revenue from stand-alone websites, some of whose activities were curtailed during the year.  There is every sign in our local franchises in Norway that we can continue to increase our digital revenues significantly as a proportion of total revenues, and resources continue to be switched from print to online to achieve this.  By contrast, Enterprise revenues were negligible in Norway at EUR0.3 million and, given the quality of our Norwegian readership base, management recognise this is an area of significant opportunity for 2010. 

Total Norwegian revenues in 2009 were EUR240.1 million, a decline from EUR270.9 million in 2008.   As in other divisions, much of this decline was offset through cost reduction, resulting in a decrease in EBITDA to EUR15.4 million in 2009 from EUR22.7 million in 2008.

Poland

The smallest of our divisions, Poland, continues to trade as two separate companies: Presspublica (in which the Polish Treasury has a 49 per cent holding) and Media Regionalne, a wholly-owned subsidiary of Mecom. There are continuing and constructive discussions with the Polish Government regarding the privatisation of their stake in Presspublica, including the potential for an IPO. 

In 2009, Poland experienced the lowest revenue decline of our divisions, with a 10 per cent fall to EUR126.7 million from EUR140.3 million in 2008.  This masked relatively stable advertising revenue in the regionals business and more significant falls in advertising in Presspublica, which is more exposed to the national advertising market.   EBITDA in the Polish division suffered the lowest percentage fall in the Group - by 20 per cent from EUR10.3 million in 2008 to EUR8.2 million in 2009 reflecting FTE reductions and salary cuts to which the workforce have shown great commitment.  This reflects a strong performance from our local management team who have driven through difficult changes in the face of a tough advertising environment. Digital revenues in Poland grew strongly, with a 29 per cent increase from EUR3.4 million in 2008 to EUR4.4 million.  Unique users grew by almost 90% in 2009, including the effect of 15 new community portals in the Moje Miasto ('My City') and other initiatives.

Enterprise revenues in Poland were also impressive - at EUR5.6 million the highest in absolute terms in the Group.  These fell from EUR8.0 million in 2008, although this fall in part reflects the success of the strategy of the division changing its model for the sale of Enterprise products to reduce commercial risk. This is demonstrated in the move from marginally loss making Enterprise activities in 2008 to an EBITDA margin of 25 per cent in 2009. 

Poland remains our biggest market, in terms of demographics and has a growing economy. We are continuing to expand our footprint, operating in a national market online that is beyond our traditional print territories, to take advantage of this potential.  

Digital

Overall digital revenues fell from EUR75.5 million in 2008 to EUR67.0 million in 2009.   In recessionary markets where digital advertising was not immune to general advertising declines (although not as badly affected), we were pleased with this result. The resilience of our online newspaper sites led to revenue growth of 5 per cent in 2009, despite the overall market trends, and intense efforts to grow these revenues are yielding good early results in 2010. The decline felt in the standalone sites, which include recruitment and other classifieds, although significant, was less pronounced that in print. As mentioned above, we intend to report our total unique users, a key indicator of digital health, in future.   In 2009 this figure grew by 31 per cent to around 32 million with impressive growth figures in Poland and the Netherlands.   The latter is especially encouraging as we seek to drive digital growth there.

Outlook

We have no doubt that the steps we have taken to transform Mecom's business will help us through what remains of the recession in Europe.    Our commitment to grow new products and to continue to rationalise our cost base, particularly through the further centralisation of shared services and functions, is expected to increase our profitability in the years ahead.  At the same time, our traditional print circulation volumes continue to experience only modest declines, with our readers' appetite for high quality newspapers not affected by the recession.

As said, we do not know when European print advertising markets will recover but as they do, we will benefit from growth in our traditional advertising as well, the profit impact of which should have a materially positive impact on the Group's earnings over and above our own prognosis.  This was set out in our trading statement on 14 January 2010 and has not changed: we expect continuing but more modest declines, as demonstrated by the 8 per cent decline in February 2010 year to date advertising, in print advertising to be compensated for by increases in our online activities; circulation revenues to remain stable; costs to benefit from previously instigated and new reduction programmes; and EBITDA to rise by around 10 per cent.
        

This hard won progress is underwritten by the willingness of staff and management to adopt a new model for a wider content business. The robustness of our proposition is enshrined in the creativity and developing skills of an energetic staff who have embraced a strategy that will give our industry a new lease of life.

David Montgomery

Chief Executive

* All financial figures in these sections refer to the Group's ongoing businesses, before exceptional items and the amortisation of acquired intangibles, with comparisons at constant currency where applicable for ease of comparison, as set out in Note 6 to the condensed consolidated financial statements.

MANAGEMENT REPORT

FINANCIAL OVERVIEW1

                                      2009       2008  2009 vs. 2008
                                      EURm       EURm              %
                               
 Group Total2                  
 Revenue                           1,494.6    1,701.1          (14)%
 EBITDA                              125.5      174.8          (28)%
 Closing net debt                  (373.4)    (682.5)         309.1m
                               
 Ongoing operations3           
                               
 Revenue                           1,409.5    1,592.7          (12)%
 Total costs                     (1,289.9)  (1,427.8)          (10)%
 EBITDA                              119.6      164.9          (27)%
 EBITDA margin                        8.5%      10.4%      (1.9) pts
                               
 Revenue by country            
 The Netherlands                     630.9      712.5          (11)%
 Denmark                             411.8      469.0          (12)%
 Norway                              240.1      270.9          (11)%
 Poland                              126.7      140.3          (10)%
 Total                             1,409.5    1,592.7          (12)%
                               
 Revenue by category           
 Advertising                         665.0      813.5          (18)%
 Circulation                         545.5      544.0              -
 Printing                             70.9       93.7          (24)%
 Enterprises                          14.5       16.0           (9)%
 Other                               113.6      125.5           (9)%
 Total                             1,409.5    1,592.7          (12)%
 Of which Digital revenue             67.0       75.5          (11)%
                               
 EBITDA by country             
 The Netherlands                      91.0      122.5          (26)%
 Denmark                              15.5       20.8          (25)%
 Norway                               15.4       22.7          (32)%
 Poland                                8.2       10.3          (20)%
 Central                            (10.5)     (11.4)             8%
 Total                               119.6      164.9          (27)%

                                    First half                       Second half
                             2009     2008  2009 vs. 2008     2009     2008  2009 vs. 2008
                             EURm     EURm              %     EURm     EURm              %

Performance half by

half - ongoing
  
             Advertising    336.2    428.9          (22)%    328.8    384.6          (15)%
             Circulation    267.8    270.5           (1)%    277.7    273.5             2%
                   Other     99.2    116.7          (15)%     99.8    118.5          (16)%
           Total revenue    703.2    816.1          (14)%    706.3    776.6           (9)%
             Total costs  (656.7)  (724.9)             9%  (633.2)  (702.9)            10%
  
                  EBITDA     46.5     91.2          (49)%     73.1     73.7           (1)%
           EBITDA margin     6.6%    11.2%      (4.6) pts    10.3%     9.5%        0.8 pts

Notes

1.     All financial information above is presented before exceptional items and the amortisation of acquired intangibles and, for ease of comparison, at constant currency.

2.     'Group Total' represents the results of all businesses operated by the Group during 2009, including therefore Mecom Germany, north-western Norway and AD NieuwsMedia, which were disposed of during the year, compared with the results of these operations for an equivalent period of ownership during 2008.

3.     Ongoing operations represent the businesses owned by the Group at 31 December 2009, that is, excluding therefore from both reporting periods Mecom Germany, north-western Norway and AD NieuwsMedia, which were disposed of during 2009.

(The commentary below is on the results of the Group's ongoing operations included in the table above, as to discuss the underlying financial performance of the Group's businesses in 2009.)

Revenue (from ongoing operations) fell by 12 per cent during 2009, from EUR1,592.7 million to EUR1,409.5 million.  The revenue decline by country was in a relatively narrow range between 10 per cent in Poland and 12 per cent in Denmark: the total country decline being largely a reflection of the advertising experience described below and the relative share of advertising revenue in each country.

The largest single component of this fall by type was advertising revenue, which fell by EUR148.5 million to EUR665.0 million, some 18 per cent.  Advertising fell significantly in all the Group's operations, with the Dutch and Danish businesses, both of which economies experienced GDP shrinkage of over 4 per cent in 2009, experiencing losses of 19 per cent and a fall of 16 per cent in Poland and Norway.  The loss of advertising was most marked in the recruitment category, down 50 per cent, with display advertising (at 13 per cent decline) and other classified categories (at 10 per cent down) showing a more moderate deterioration.  In general, the Group's local markets, where relationships with advertisers are strongest, experienced a better outturn than in national markets.  The decreases slowed after the first half, with second half decline of 15 per cent compared with 22 per cent in the first half.

Circulation revenue across the Group increased by EUR1.5 million, with the recent historical pattern of volume decreases being offset by price increases continuing.  The rate of decline of volumes across the Group, whilst showing local variation, was not materially affected by the economic crisis.  Circulation revenue, of which approximately two-thirds is subscription income collected in advance, represented almost 40 per cent of  revenue (from ongoing operations) in the second half of 2009.  

Third-party printing revenue decreased by 24 per cent: the Group has reduced printing capacity over the past year as it has rationalised its own printing portfolio, and has also lost some third-party printing contracts in remaining facilities.  The EBITDA effect of the decline in printing was limited.  Enterprises revenue fell, by 9 per cent, but the fall was entirely explained by a change in the business model for the sale of books and other products in Poland, where the Group has stopped taking principal publishing risk and now operates largely on a commission basis - underlying revenue grew by 25 per cent.

Total costs from ongoing operations fell by 10 per cent, providing a significant mitigation against the fall in revenue.  The reduction was driven by lower staff costs, down 8 per cent as full-time equivalents ("FTEs") were reduced by over 850 from the start to the end of the year, lower production and distribution costs (down 12  per cent), reflecting fewer pages (from advertising declines and deliberately reduced editorial content), lower volumes of papers sold and decreases in third-party printing and distribution and a decrease in marketing and administrative costs.

EBITDA from ongoing operations fell from EUR164.9 million to EUR119.6 million, with total Group EBITDA (including the results of disposed of businesses for equivalent periods of ownership in both years) falling from EUR174.8 million to EUR125.5 million.  All divisions experienced a fall in EBITDA, ranging from 32 per cent in Norway to 20 per cent in Poland. Resulting EBITDA margin for the Group from ongoing operations was 8.5 per cent, down 1.9 percentage points from 2008.  Margins in the business ranged from 14.4 per cent from ongoing operations in the Netherlands (compared with 17.2 per cent in 2008), through 6.4 per cent and 6.5 per cent respectively in Norway and Poland (down from 8.4 per cent in the case of Norway and 7.3 per cent in the case of Poland), to 3.8 per cent in Denmark, compared with 4.4 per cent in 2008.

There was a marked increase in EBITDA from ongoing operations in the second half of the year, from EUR46.5 million in the first half of the year to EUR73.1 million in the second half.  There has been a continual reduction in the cost base from the first half of 2008, when it was EUR724.9 million, to the second half of 2009, when it was 13 per cent lower at EUR633.2 million.
                                                                                                                                    

DIVISIONAL REVIEWS

The Netherlands

                                                          2009              2008
 Population                                       16.4 million      16.3 million
 GDP (decline)/growth                                   (4.0)%              2.0%
 Newspaper market (circulation and            EUR1,901 million  EUR2,261 million
 advertising)
 Mecom paid-for circulation (dailies)              1.0 million       1.0 million
 Mecom free-sheet circulation (weeklies)          12.0 million       9.3 million
 Internet penetration                                      90%               86%

Market overview

The newspaper (circulation and advertising) market in the Netherlands was estimated to be worth EUR1,901 million in 2009 and has declined 16 per cent since 2008. Newspaper advertising was estimated to be worth EUR1,177 million in 2009 (of which EUR30 million is online advertising) and constituted 36 per cent of the total advertising market. Newspaper advertising declined by 19 per cent in 2009 compared with 2008.

The paid-for newspapers circulation declined by an average of 3.5 per cent over the year, with the national dailies suffering the most and the regional paid-for dailies declining by only 3 per cent in 2009.

There have been some major changes in the Dutch newspaper market in 2009. In July, Wegener sold its 37 per cent share in AD NieuwsMedia to PCM Uitgevers ("PCM"), thus giving PCM a 100 per cent share in AD NieuwsMedia. As part of this transaction, Wegener sold its printing plant in The Hague to PCM. Wegener also purchased PCM Lokale Media ("PLM"), a publisher of free door-to-door newspapers in Rotterdam. In turn, PCM was sold to the Belgian publishing group, De Persgroep. As a result of this transaction, NRC Handelsblad and nrc.next (together "NRC") had to be disposed for anti-trust reasons. The Dutch private equity company Egeria, together with television broadcaster Het Gesprek, became the new owner of NRC. 

Following these changes, there are three major operators in the Dutch market: Mecom, Telegraaf Media Group ("TMG") and Persgroep Nederland. TMG is the market leader in the daily newspaper market with a 30 per cent share of the total newspaper market. Mecom is second with a market share of 25 per cent of the total daily newspaper market. Persgroep has a 19 per cent market share. Mecom is the leader in the regional newspaper market with a 63 per cent share. The weekly free-sheet market is fragmented, with Mecom as the market leader with a 48 per cent share. 

The Netherlands has the highest internet penetration in Europe, reaching almost 90 per cent of the population. Online advertising sales in the Netherlands were approximately EUR356 million in 2009.  After a long period of rapid growth, online advertising experienced a decline, albeit at a slower rate than the rest of the advertising market. However, its market share increased again, from 10 per cent in 2008 to 11 per cent in 2009. 

Business overview

The Group's Dutch division comprises Wegener and Limburg Media Group ("LMG"). Wegener is the largest publisher of regional daily newspapers and free door-to-door newspapers in the Netherlands. LMG is the leading regional newspaper business in the Dutch province of Limburg.  

With its online portfolio of 54 newspaper websites and stand-alone niche websites, the Dutch division now has 8.5 million unique users per month, up from 6.3 million in 2008. The division owns 270 titles and this complements its newspaper readership of 15.0 million per week (2008: 11.3 million). Following the sale of the print plant in The Hague and closure of the Nijmegen plant, the Dutch division now operates four printing plants that print both Group and third-party publications.

Circulation of regional dailies across the Netherlands fell by 3 per cent. Following a successful subscriber retention strategy, paid-for circulation of the Wegener dailies declined by only 2 per cent in 2009 compared with 2.5 per cent in 2008, lower than the average decline of the overall market. This was despite the global economic crisis. The paid-for daily titles of LMG declined by 5.7 per cent, marginally higher than the national average due to the characteristics of an aging population and higher unemployment in the Limburg region, where LMG operates. However this decline does not reflect a decline in LMG's market share as other publishing companies in Limburg experienced greater losses and were forced either to cease operations or to merge with each other.

Both businesses were affected considerably by the economic crisis, with recruitment, motor vehicles and financial services advertising categories the hardest hit.  The experience in the weekly free papers was less severe than at the daily print papers, but with regional variations.  Wegener and LMG responded in many ways to the decline in the advertising market. Cost reduction measures started at the end of 2008, preventing a greater decline in operating results. Further contingency measures were taken during 2009 to mitigate the effects of the economic downturn.

In Wegener, 2009 was characterised by Wegener's "Delta" reorganisation. The Delta programme involved the merger of the publishing and back-office functions of the daily newspaper group, the free door-to-door newspapers and the holding company into a single publishing unit, named Wegener Media. The Delta programme was almost completed by the end of 2009, a huge accomplishment in a year of extraordinary economic conditions. A total reduction of 400 FTEs (full-time equivalents) was achieved as a result of this reorganisation.

The year also saw further development in print products. New weekly newspapers were developed in the Rotterdam and Limburg areas and urban magazines were introduced in Eindhoven and Nijmegen/Arnhem. Through the purchase of PLM, Wegener strengthened its position in the Randstad, an important market due to its urban regeneration programme. Presence in this same area was also strengthened thanks to the collaborative venture with Dagblad De Pers, the quality free daily newspaper. As a consequence of the acquisition of PLM, the collaboration with various medium-sized publishers in the province of North Holland, the acquisition of a few smaller publishers in the northern part of the country, and the introduction of De Weekkrant in Limburg, Wegener has achieved nationwide coverage of its free door-to-door newspapers. 

Various online initiatives were also introduced including two prize-winning (awards from the marketing organisation INMA) hyper-local websites for new housing estates in Apeldoorn and Zwolle. Among the existing internet activities, AutoTrack.nl managed to increase its revenues in 2009 even though the motor vehicles market was severely hit by the recession. For JobTrack.nl, the recruitment site, the economic crisis meant heavy pressure on revenues. The number of jobs posted declined, but to a significantly lower extent than the number of recruitment ads in the printed newspapers. Although the Dutch division has made significant progress in its online and digital activities, its performance is below the rest of the Group in terms of percentage revenues from digital activities and this represents a significant growth opportunity.

Enterprises activity made good progress in 2009. Its revenue equalled the performance in 2008, while operational profit more than doubled. The web shops of the regional dailies were overhauled completely, whilst web shops specialising in areas such as wine, health, and living were launched. A new web shop for the daily newspaper De Pers was also launched. 

Sources: PricewaterhouseCoopers Entertainment & Media Outlook towards 2013 - Trends in the Netherlands 2009 - 2013, HOI, Media Audit Bureau, Nielsen Media Research, CBS, Statistics Netherlands, CPB, Netherlands Bureau for Economic Policy Analysis, Carat. 

Note: the 2008 unique user figures were adjusted and recalculated from last year following a review of the definitions to ensure like-for-like comparison between the divisions.

Financial overview*

                                         2009     2008      2009
                                         EURm     EURm  vs. 2008
                                                               %
                                    
                                    
 Revenue           Advertising          329.7    406.9     (19)%
                   Circulation          252.3    251.2        0%
                         Other           48.9     54.4     (10)%
 Total revenue                          630.9    712.5     (11)%
 Total costs                          (539.9)  (590.0)        8%
 EBITDA                                  91.0    122.5     (26)%
 Depreciation                          (22.9)   (25.9)       12%
 Operating profit                        68.1     96.6     (30)%
                                    
 EBITDA margin %                        14.4%    17.2%  (2.8)pts
 Digital revenue                         18.3     21.2     (14)%

                  
                          First half                Second half
                     2009   2008      2009   2009   2008  2009 vs. 2008
                     EURm   EURm  vs. 2008   EURm   EURm              %
                                         %
 Advertising        167.6  214.8     (22)%  162.1  192.1          (16)%
 Circulation        124.7  124.6        0%  127.6  126.6             1%
 Other               24.2   27.0     (10)%   24.7   27.4          (10)%
 Total revenue      316.5  366.4     (14)%  314.4  346.1           (9)%
                  
 EBITDA              42.3   64.3     (34)%   48.7   58.2          (16)%
 EBITDA margin %    13.4%  17.6%   4.2 pts  15.5%  16.8%        1.3 pts
                  

* The results in this table exclude the AD NieuwsMedia and The Hague print plant operations disposed of during 2009.

Total revenue fell by 11 per cent, from EUR712.5 million to EUR630.9 million, driven by a fall in advertising revenue of 19 per cent and a fall in other revenue, mainly third-party printing, of 10 per cent.  The decline in advertising was most pronounced in the paid daily newspapers, down 26 per cent, compared with that in the weekly free-sheets of 14 per cent.  The performance of the weekly free-sheets included the benefits of the expansion of the De Weekkrant into the northern regions of the Netherlands.  The rate of decline in advertising decreased in the second half of the year, from 22 per cent in the first half to 16 per cent in the second half.  Display advertising fell by 14 per cent, other classified (including family announcements, which have substantially remained flat) fell by 7 per cent and recruitment advertising fell by 48 per cent.  Online revenues contracted by 14 per cent.  Circulation revenue was up EUR1.1 million, with lower subscription volumes offset by the benefit of price increases.  Declines in printing revenues reflected the closure of printing capacity and the loss of third-party print contracts.

Costs were reduced by 8 per cent, including the benefit of an underlying FTE reduction of 459 from 1 January 2009 to 31 December 2009, resulting in the mitigation of 61 per cent of the decline in revenue.  The cost reduction included the benefit of the Delta reorganisation, which combined many previously decentralised functions within a newly formed single media company within Wegener.

As a result, EBITDA was EUR91.0 million, down EUR31.5 million (or 26 per cent) from 2009, with EUR22.0 million of the decline occurring in the first half of the year and EUR9.5 million in the second.  EBITDA margin at 14.4 per cent was down 2.8 points on 2009; margin in the second half of the year was down only 1.3 points at 15.5 per cent.  Operating profit was EUR68.1 million, down EUR28.5 million from 2008.

Denmark

                                                          2009              2008
 Population                                        5.5 million       5.5 million
 GDP decline                                            (4.5)%            (0.9)%
 Newspaper market (circulation and            EUR1,154 million  EUR1,275 million
 advertising)
 Mecom paid-for circulation (dailies)              0.3 million       0.4 million
 Mecom free-sheet circulation (weeklies)           2.3 million       2.5 million
 Internet penetration                                      86%               85%

Market overview

The newspaper circulation market in Denmark was estimated to be worth EUR563 million in 2009, remaining constant from 2008. Newspaper circulations in the paid-for national daily market in Denmark declined by 6 per cent during 2009, and regional newspaper circulations declined by approximately 8 per cent.

Newspaper advertising was estimated to be worth EUR591 million in 2009 and constituted 35 per cent of the total advertising market against 37 per cent in 2008. Newspaper advertising declined by 17 per cent in 2009 compared with 2008.  Advertising in the paid-for newspapers declined by 23 per cent with nationals down by 22 per cent, regionals down by 25 per cent and locals down by 26 per cent.

There are two major newspaper publishers in the Danish market: Mecom's operations trading as Berlingske Media ("Berlingske") and JP/Politikens Hus, together representing 49 per cent of the total newspaper market.

Berlingske's largest title Berlingske Tidende, a national daily newspaper, has performed better than its main competitors Jyllandsposten and Politiken during 2009. Berlingske Tidende has lost 0.6 per cent of circulation, while Politiken has lost 6 per cent and Jyllandsposten lost 11 per cent. In the tabloid market, both B.T. (Berlingske) and Ekstra Bladet (JP/Politikens Hus) have lost significant circulation during 2009. B.T. has performed marginally better than Ekstra Bladet. The tabloid market circulation declined by almost 20 per cent during 2009. 

After the closure of Nyhedsavisen in 2008, the Danish free-sheet market consists of three national publications: MetroXpress (Metro International), 24Timer (Metro International) and URBAN (Berlingske). MetroXpress has the largest share in the free-sheet market at 40 per cent. Berlingske has an estimated 29 per cent share of the free-sheet market. In 2009, URBAN implemented a new strategy focusing on major Danish cities and reduced the number of copies distributed significantly, however, without compromising its readership. Other free-sheet titles adopted similar strategies, although URBAN had better success and increased the number of readers per copy by 31 per cent, its competitors only managed to increase it by 23 per cent (MetroXpress) and 19 per cent (24 Timer). 

Online advertising is estimated to be worth EUR437 million. Banner advertising continued to grow by 7 per cent year-on-year and search advertising was estimated to have grown by 44 per cent in 2009 whilst online classifieds and recruitment segment declined by 10 per cent. 

Business overview

The activities of Berlingske span across Jutland and Zealand from its headquarters located in the centre of Copenhagen.  It has a portfolio of three national daily paid-for titles, one national daily free-sheet, a weekly national paid-for newspaper, two national business magazines, six local daily newspapers operating under the name of Midtjyske Medier and one partly owned regional newspaper operating under the name of Syddanske Medier.  In addition, Berlingske operates 55 websites, nine mobile sites and 12 online TV channels.  

Its publications have a readership of more than 2.6 million readers per week (2008: 2.5 million) and its online operations attract more than 8.3 million unique users every month (2008: 7.7 million). Berlingske operates five (one of which is jointly owned) printing plants that print both Group and third-party publications.

Even though 2009 was a year overshadowed by the global financial crisis, Berlingske took the opportunity to test new business models and reduced costs in its traditional businesses. 

The high profile Climate Conference ("COP 15"), which took place in Copenhagen at the end of 2009, represented an opportunity for the editorial and marketing departments to collaborate more closely. For the first time journalists and staff from advertising sales, Enterprise and marketing worked together as one team, developing and sharing ideas and initiatives. This horizontal model was a significant success and will be adopted in future co-operation opportunities.

In 2009, Berlingske launched more than 40 new products. One highlight is the launch of the digital paid-for product UGEN (The Week), a lifestyle magazine which draws on new and unique content delivered by Berlingske's well-known titles. The online guide aok.dk (Everything about Copenhagen) developed an application for the iPhone which enhances the experience of the user and provides another channel for its readers to obtain up-to-date information. More applications for iPhone are intended to be launched by Berlingske's recently established mobile development department in the coming years.

Berlingske also decided on a new hyper-local strategy for its 47 local weeklies and its websites. The new strategy included the hyper-local website dinby.dk ('Your City') in both the west and east areas of Denmark. The portal is connected to the free local weekly papers and has expanded with additional websites such as  lokalguiden.dk (a guide to local business life) and navne.dk (a portal enabling individual consumers to make digital advertisement to mark special family events like weddings, birthdays and funerals). In addition, Berlingske introduced two new areas dedicated to business people and wine enthusiasts to its leading web shop lidtmere.dk.

In addition, Berlingske has also been focusing on a further rationalisation of its existing operations. In 2009, the company managed to restructure its historically unprofitable printing operations into a sustainable business. Furthermore, the daily newspaper for Denmark's second biggest city, ?hus Stiftstidende, and the local newspaper business in the Jutland peninsula (Midtjyske Medier) underwent a significant transformation which entailed them being reorganised into smaller, more efficient, units with greater focus on the local communities they serve.

Sources: OECD 19 November 2009, Danske Dagblades Forening, Danmarks Statistik, FDIM, Gallup, Dansk Oplagskontrol, Danish Ministry of Finance, www.internetworldstats.com, www.delokaleugeaviser.dk.

Financial overview

                                                2009     2008  2009 vs. 2008
                                                EURm     EURm              %
                                           
 Revenue                  Advertising          163.3    202.7          (19)%
                          Circulation          166.0    167.0           (1)%
                                Other           82.5     99.3          (17)%
 Total revenue                                 411.8    469.0          (12)%
 Total costs                                 (396.3)  (448.2)            12%
 EBITDA                                         15.5     20.8          (25)%
 Depreciation                                 (20.4)   (18.1)            13%
 Operating (loss)/profit                       (4.9)      2.7         (281)%
                                           
 EBITDA margin %                                3.8%     4.4%       (0.6)pts
 Digital revenue                                20.7     22.8           (9)%

                            First half                   Second half
                     2009   2008  2009 vs. 2008   2009   2008  2009 vs. 2008
                     EURm   EURm              %   EURm   EURm              %
                  
 Advertising         82.5  108.3          (24)%   80.8   94.4          (14)%
 Circulation         81.2   83.9           (3)%   84.8   83.1             2%
 Other               42.6   49.4          (14)%   39.9   49.9          (20)%
 Total revenue      206.3  241.6          (15)%  205.5  227.4          (10)%
                  
 EBITDA               0.9   11.7          (92)%   14.6    9.1            60%
 EBITDA margin %     0.4%   4.8%       (4.4)pts   7.1%   4.0%         3.1pts

Total revenue fell by EUR57.2 million, or 12 per cent, to EUR411.8 million, driven by a decline in advertising revenue of 19 per cent and other revenue reductions of EUR16.8 million.  Advertising in Denmark has experienced a decline since the end of 2006, with the economic crisis in 2009 exacerbating previous competitive pressures fuelled by saturation in the daily national free-sheet market.  Since 2006, Berlingske has cumulatively lost approximately 35 per cent of its advertising revenue.  The second half of 2009 saw a slowing trend in the loss of advertising, with a decline that, at 14 per cent, was 10 percentage points better than in the first half of 2009.  Advertising in the daily Berlingske Tidende, the division's largest paper, was most affected, including a severe decline in recruitment advertising, with more moderate losses in the tabloid and regional daily newspapers and also in URBAN, the division's national free daily paper. 

Circulation revenue was down EUR1.0 million, or 1 per cent, to EUR166.0 million, with increased revenues from Berlingske Tidende offsetting declines in other paid-for titles.  This was particularly pronounced in the second half of the year, where year-on-year increases in Berlingske Tidende circulation (benefiting in part from distribution service improvements) were compounded by price increases.

Online revenue fell by 9 per cent, with the fall in stand-alone websites in the hard-hit advertising sectors of recruitment and motor vehicles contributing significantly to the decrease.  Other revenue declines included the accounting effect of the acquisition of the 50 per cent of a print joint venture not previously owned by Berlingske in the early part of the year, as well as declines in third-party distribution and other non-core revenues.

Total costs fell by 12 per cent, or EUR51.9 million, to EUR396.3 million, after a reduction of costs of 7 per cent in 2007 and 2008.  FTEs were reduced by 221 during the year, following a 10 per cent reduction in 2008, with Berlingske now employing 1,909 FTEs compared with 2,661 at the start of 2007.  

EBITDA was, as a result, EUR15.5 million, with a margin of 3.8 per cent, compared with a result of EUR20.8 million in 2008 and margin of 4.4 per cent.  Substantially all of the EBITDA was earned in the second half of the year: Berlingske has a seasonal balance of advertising revenue in the second half of the year which, when allied with the reduced cost base in 2009, resulted in a margin of 7.1 per cent and EBITDA of EUR14.6 million.  Operating loss was EUR4.9 million, compared with an operating profit of EUR2.7 million in 2008.

Norway

                                                            2009            2008
 Population                                          4.8 million     4.7 million
 GDP (decline)/growth                                     (1.4)%            2.1%
 Total newspaper advertising market (including    EUR694 million  EUR859 million
 inserts and free-sheets)
 Mecom paid-for circulation (dailies)                0.2 million     0.2 million
 Mecom free-sheet circulation (weeklies)             0.4 million     0.4 million
 Internet penetration                                        89%             87%
    
Market overview

The total advertising market declined by 15 per cent in 2009. Newspaper advertising (excluding inserts and free-sheets) accounted for 35 per cent of the total advertising market in 2009 and decreased by 20 per cent compared to 2008. Online advertising declined by 8 per cent in 2009 and now constitutes 11 per cent of the total advertising market, up from 10 per cent in 2008.  The online advertising market was estimated to be worth EUR195 million in 2009.  Norway is one of the leading European internet markets with internet penetration of approximately 90 per cent. 

Total newspaper circulation declined by 3.7 per cent in 2009. There are four major operators in Norway who, between them, account for 68 per cent of the total newspaper circulation. Schibsted has 33 per cent of the market share,   A-Pressen has 17 per cent, with strong positions in the local newspaper segment and Edda Media has 10 per cent, geographically concentrated in local municipalities and Polaris Media has 8.5 per cent market share. The weekly free-sheets market consists of local community-based weeklies, where Edda Media is the leading player with a total of 10 titles and a 56 per cent share of the free-sheet advertising market.

Business overview

Edda Media is the second strongest player in the local media market in Norway, mainly positioned, following the disposal of its north-western assets to Polaris Media ASA in April 2009, in the eastern (and most populated) part of the country.  Edda Media operates through eight regional media houses, reaching out to more than one million Norwegians daily. The product portfolio comprises 31 newspapers (dailies, weeklies and free-sheets), 57 websites, 19 mobile sites, and two local radio stations. Edda Media's publications have a readership of more than one million per week (2008: 1.1 million) and its online operations attract more than 5.3 million unique users per month (2008: 5.1 million). Edda Media operates three printing plants that print both Group and third-party publications.  

In 2009, Edda Media maintained its share of the newspaper market flat at 10 per cent, although the circulation declined by 3.3 per cent from 2008. The overall decline in the paid-for newspaper circulation in Norway was 3.7 per cent. Despite decline in volumes, Edda Media maintained circulation revenues due to cover price increases.

Edda Media increased its share of the newspaper advertising market (excluding inserts and free-sheets) from 13 per cent to 14 per cent for comparable titles.  Within the free door-to-door newspaper segment, Edda Media increased its market share from 53 per cent to 57 per cent.  In addition, within online advertising, Edda Media experienced a strong growth (27 per cent) in an otherwise declining market.

Despite the media industry being hit by the recession heavily in late 2008 and through 2009, Edda Media managed to grow its total audience. By focusing on the core business, which is to deliver local content to the local market both in print and online, the media houses strengthened their positions in their core markets. Although the number of newspaper readers declined (at rates marginally less than the total market), the media houses gained a significant growth in the digital user market, both in the daily and weekly number of unique visitors. Some media houses witnessed a digital user growth of up to 25 per cent. The combined audience of print and online has resulted in a growth in reach of the local user market. The total number of users of Edda Media's brands is increasing and is typically 10 to 15 per cent higher than the number reached and covered by the printed newspaper alone. In some markets the brands have 85 per cent household reach. 

The digital services attracted local consumers outside the typical newspaper reader segment, but the digital growth was to a larger extent driven by the newspaper readers also using online services.

The goal of Edda Media and its local media houses is to build a similar strong digital position in both the local advertising market and the local user market as the newspapers holds in the printed market. The aim is to reach as many daily online users as the number of daily readers of the printed version. By the end of 2009, some of the media houses reported significant growth in daily online users, reaching 50 per cent share of daily print readership. Strong local digital footprints will enable the media houses to attract additional digital revenues and increase their digital revenue share. The target for Edda Media is to double the digital share from 15 to 30 per cent of total revenues within two years. 

The Edda Media strategy of strengthening the media houses' local position requires innovation and commitment focused not only on different products but primarily on the needs of the users and their changed media habits. This transformation has become a way of life for the people working in media houses. Many organisations have been restructured, and products have been renewed to an extent and with a speed no one could imagine just a couple of years ago.

As one of the Group's new strategies is to focus on the local markets, Edda Media restructured its operations and reduced its presence in the national market. Edda Media sold or closed down some of its local radio stations and withdrew from the Sunday newspaper market. A new adjusted organisation was established in late 2008 and early 2009, with a new CEO and senior management team, which has marshalled the implementation of the new strategy. The cost base has been adjusted and is continuously monitored against the current economic environment and market conditions. In 2009, a number of significant cost saving programmes were implemented; whose benefits will be delivered in full in 2010. 

Several bold transformation initiatives have been adopted and are expected to flourish in 2010. The digital resources have been strengthened despite the recession providing Edda Media with a stronger digital footprint. 

Sources: OECD 19 November 2009, TNS-Gallup, Norwegian Circulation Control, IRM, www.internetworldstats.com.  

Note: the 2008 unique user figures were adjusted and recalculated from last year following a review of the definitions to ensure like-for-like comparison between the divisions.

Financial overview*

                                         2009     2008  2009 vs. 2008
                                         EURm     EURm              %
                                    
                                    
 Revenue           Advertising          124.2    147.3          (16)%
                   Circulation           63.1     62.1             2%
                         Other           52.8     61.5          (14)%
 Total revenue                          240.1    270.9          (11)%
 Total costs                          (224.7)  (248.2)             9%
 EBITDA                                  15.4     22.7          (32)%
 Depreciation                          (11.1)   (11.1)              -
 Operating profit                         4.3     11.6          (63)%
                                    
 EBITDA margin %                         6.4%     8.4%       (2.0)pts
 Digital revenues                        23.6     28.1          (16)%

                            First half                   Second half
                     2009   2008  2009 vs. 2008   2009   2008  2009 vs. 2008
                     EURm   EURm              %   EURm   EURm              %
                  
 Advertising         62.8   78.1          (20)%   61.4   69.2          (11)%
 Circulation         30.6   30.3             1%   32.5   31.8             2%
 Other               25.7   30.6          (16)%   27.1   30.9          (12)%
 Total revenue      119.1  139.0          (14)%  121.0  131.9           (8)%
                  
 EBITDA               5.8   16.6          (65)%    9.6    6.1            57%
 EBITDA margin %     4.9%  11.9%       (7.0)pts   7.9%   4.6%         3.3pts

*the results in this table exclude the operations in north-western Norway disposed of in April 2009.

Total revenue in Norway fell by 11 per cent from EUR270.9million, to EUR240.1 million.  The fall in advertising revenue, at 16 per cent to EUR124.2 million, was less marked than in some other countries since Norway had entered the advertising crisis earliest, in the second half of 2008.  Display advertising in the division's local markets was less affected, at 10 per cent deterioration, than either recruitment (down 37 per cent) or other classified (down 15 per cent).  The second half advertising fall of 11 per cent was the lowest of all our divisions, aided by the easing comparatives and relatively improved economic conditions. 

Circulation revenue increased by 2 per cent, with price benefits averaging 6 per cent offsetting volume declines of circa 3 per cent.  Online revenue fell by 16 per cent, including a fall in online advertising of 9 per cent: a decision was made during the year to reduce Edda Media's participation in some national niche markets and to focus online sales activity through the local newspaper operations.  As a result of this and the other local newspaper online initiatives, the stand-alone websites experienced a decline of 27 per cent, whereas the local newspaper websites grew revenue by 24 per cent.   Other revenue declines of 14 per cent were largely the result of lower third-party printing.  

Total costs reduced by 9 per cent during 2009, arresting a previous trend of cost inflation driven by buoyant economic pressure and product expansion.  FTEs were reduced by 130, with a closing FTE count of 1,423, compared with 1,720 at the start of 2007.

Full-year EBITDA was EUR15.4 million, down from EUR22.7 million in 2008.  The second half of 2008 and the first half of 2009 both recorded EBITDA of around EUR6 million, as the sharply reduced advertising revenue had yet to be mitigated by reductions in cost: the second half of 2009 showed some progress, with EBITDA of EUR9.6 million and an EBITDA margin of 7.9 per cent compared with 4.9 per cent in the first half of 2009.  Operating profit for the year was EUR4.3 million, down from EUR11.6 million in 2008.

Poland

                                                           2009            2008
 Population                                        38.1 million    38.0 million
 GDP growth                                                1.4%            5.0%
 Newspaper market (circulation and advertising)  EUR460 million  EUR520 million
 Mecom paid-for circulation (dailies)               2.5 million     2.6 million
 Mecom free-sheet circulation (weeklies)            1.5 million     1.4 million
 Internet penetration                                       52%             40%

Market overview

The newspaper market (circulation and advertising) in Poland was estimated to be worth EUR460 million in 2009. The total advertising market decreased by 13 per cent in 2009 compared to a 10.5 per cent growth in 2008. The newspaper advertising market dropped by 13 per cent in 2009 and represented 13 per cent of the total advertising market. 

The newspaper circulation market is estimated to be worth approximately EUR301 million. Circulation volumes in the paid-for national and daily regional markets declined by 7 per cent and 5 per cent, respectively, in 2009. This downward trend is caused by a combination of readers migrating from print to online and the global economic downturn.

There are four major operators in Poland who, between them, account for 66 per cent of the total paid-for newspaper market. Mecom's operations include Rzeczpospolita, the leading upmarket national daily newspaper, business daily Parkiet and 10 regional newspapers across Poland, giving an 18 per cent share of the total market. Axel Springer, with a 19 per cent share, publishes Fakt, Poland's largest national newspaper. Grupa Wydawnicza Polskapresse is the largest publisher of regional newspapers with a 14 per cent share of the total newspaper market. Agora publishes the daily Gazeta Wyborcza and the national free paper Metro, and has a 15 per cent market share. 

The withdrawal of Dziennik, a key competitor to Rzeczpospolita, was the most important event in the national dailies market in 2009. After three years of strong competition with Rzeczpospolita and Gazeta Wyborcza, Dziennik was merged with Gazeta Prawna and a new title Dziennik Gazeta Prawna was launched, mainly to compete with Rzeczpospolita on the business subscription market. A relatively constant decline in sold circulation and readership indicates that the new title is under pressure and a further decline is expected.

Online advertising grew by 7 per cent in 2009, constituting 13 per cent of the Polish advertising market. There are approximately 15 million internet users in Poland, an 8 per cent increase from 2008. Internet penetration in 2009 was 52 per cent, a 12 percentage points increase from 2008. Presspublica increased its unique users by 33 per cent and Media Regionalne by 121 per cent. 

Business overview

The Group's Polish division comprises Media Regionalne, a regional newspaper and content business, and a 51 per cent share of Presspublica, which is the owner of Rzeczpospolita. Presspublica also operates the business website parkiet.com. The Polish division owns 25 titles, it also operates 51 websites and eight small printing plants which print both Group and third-party publications. The Polish publications have a readership of more than 4.7 million per week (2008: 5.3 million) and its online operations attract more than 8.1 million unique users per month (2008: 5.4 million).

Although the national dailies advertising market decreased by 17 per cent in 2009, Rzeczpospolita fared better than the market average with 9 per cent decline. However, Parkiet, whose advertising revenue is closely linked to the Warsaw stock market performance, noted a 28 per cent decrease and Zycie Warszawy a 37 per cent decrease. Advertising in the dailies of Media Regionalne declined by 11 per cent with a stable first half performance contrasted with a decline in the second half as the economic recession affected the wider Polish economy.

Rzeczpospolitamaintained its market share in terms of number of sold copies and revenue as a result of consistent high pricing and a wide-range of editorial and marketing initiatives. Similarly to circulation, readership of national dailies is decreasing due to the growth of the internet. The circulation of Media Regionalne declined by less than 3 per cent in 2009 and fared better than the market average decline of 7 per cent. Such result was achieved despite challenging market conditions following strong focus on developing new products and successful marketing initiatives.

Although cost savings was a key focus in 2009, maintaining the momentum on online growth by investing in new and existing online and cross-media activities were also important to ensure diversity and top line growth in future years. Illustrations of this are long-term investments in the development of the Moje Miasto ('My City') websites whereby 16 new "lite" versions of the fully-fledged Moje Miasto were launched in conjunction with the introduction of a new web portal targeting local businesses, StrefaBiznesu.pl.

As part of the transformation, Presspublica merged the economic editorial departments of Rzeczpospolita with Parkiet into one newsroom producing business and economic content for both print and online. It is the biggest journalist team in Poland specialising in economic, business and financial news. After a year of consolidating regional publishing houses into one business body, Media Regionalne also embarked on a new approach to newsroom operations by implementing Newsroom 2.0 whereby single newsrooms will be able to produce content for both print and online.

A new model for advertising departments was also launched in Media Regionalne and will be implemented in 2010. It aims to provide customers with a full range of multimedia advertising proposals customised to their needs via the professional advice of trained sales people. This will enable Media Regionalne to provide new and quality advice in the area of customer service for its advertisers. In addition, the media house concept has also been developed, involving print and digital products sharing the same resources and editorial content. 

Several initiatives directed to increase the attractiveness and competitiveness of online products were introduced. Presspublica launched tv.rp.pl in response to the increase in demand of online video content.  In October, tv.rp.pl recorded 44,000 unique users and this number is expected to significantly grow in the future. The improvement of the Zycie Warszawy internet site, zw.com.pl, produced an increase in unique users by more than 50 per cent. In addition, online paid-for content has and will continue to experience considerable growth and is expected to become a strong revenue stream for Presspublica. 

The online revenue of Media Regionalne grew in both display and classified advertising, with revenue in Media Regionalne's Enterprise operation also growing considerably as a result of SMS premium rate campaigns.

Sources: OECD 19 November 2009, GUS, Zenith Optimedia, CR Media Consulting, Expert Monitor, ZKDP, NetTrack, Millward Brown PBC, Gemius Traffic, www.internetworldstats.com. 

Note: the 2008 unique user figures were adjusted and recalculated from last year following a review of the definitions to ensure like-for-like comparison between the divisions.

Financial overview

                                         2009     2008  2009 vs. 2008
                                         EURm     EURm              %
                                    
                                    
 Revenue           Advertising           47.8     56.6          (16)%
                   Circulation           64.1     63.7             1%
                         Other           14.8     20.0          (26)%
 Total revenue                          126.7    140.3          (10)%
 Total costs                          (118.5)  (130.0)             9%
 EBITDA                                   8.2     10.3          (20)%
 Depreciation                           (6.1)    (6.6)             8%
 Operating profit                         2.1      3.7          (43)%
                                    
 EBITDA margin %                         6.5%     7.3%      (0.8) pts
 Digital revenue                          4.4      3.4            29%

                           First half                 Second half
                    2009  2008  2009 vs. 2008  2009  2008  2009 vs. 2008
                    EURm  EURm              %  EURm  EURm              %
                  
 Advertising        23.3  27.7          (16)%  24.5  28.9          (15)%
 Circulation        31.3  31.7           (1)%  32.8  32.0             3%
 Other               6.7   9.7          (31)%   8.1  10.3          (21)%
 Total revenue      61.3  69.1          (11)%  65.4  71.2           (8)%
                  
 EBITDA              2.7   4.8          (44)%   5.5   5.5             0%
 EBITDA margin %    4.4%  6.9%       (2.5)pts  8.4%  7.7%         0.7pts

Total revenue in Poland fell by 10 per cent during 2009, from EUR140.3 million to EUR126.7 million.  Advertising fell by 16 per cent, influenced by a number of factors.  In the first half of the year, the regional business was marginally up, as organic expansion offset what were then only very early effects of the economic crisis, whereas the national business (mainly the Rzeczpospolita title) was affected severely by competition in the national advertising market, being down over 30 per cent.  In the second half of the year, the effect of the economic crisis hardened in the Polish regions, resulting in a decline of almost 10 per cent, whereas the decline in the national business, whilst still severe, reduced to a little over 20 per cent.  Advertising in our national business was also affected by declines in the national business daily which relies in large part on advertising from public offering notices.

Circulation revenue increased by 1 per cent, from EUR63.7 million to EUR64.1 million.  In the national business, Rzeczpospolita, in common with other national opinion-forming papers, suffered more pronounced volume declines than in recent years, at 10 per cent; in the regional business, declines were lower at 4 per cent.   Higher prices, in the case of Rzeczpospolita partly achieved through a restructuring of subscription packages to derive online revenue from the paper's extensive data bank, largely compensated for these volume declines.

Online revenue grew impressively by 29 per cent, driven by a doubling of unique users within the regional business as the Moje Miasto project has been launched across the major Polish cities.  Other revenue fell by 26 per cent, from EUR20.0 million to EUR14.8 million.  This included a reduction of EUR2.4 million in Enterprises revenue as the business model for the sale of book series was changed to a commission-based one, to reduce commercial exposure.  Third-party printing was also lower.

Total costs were reduced by 9 per cent, from EUR130.0 million to EUR118.5 million.  FTE reductions were implemented during the year (50 FTEs, notwithstanding additions in new revenue projects), together with a pay cut in the national business; cost benefits were also evident from the change in Enterprises operations noted above.  EBITDA as a result was EUR8.2 million, compared with EUR10.3 million in 2008.  Operating profit was EUR2.1 million, down from EUR3.7 million in 2008. 

GROUP FINANCE DIRECTOR'S REPORT

The reported results for the Group for the year to 31 December 2009 are summarised below.

                                                                   2009     2008
                                                                   EURm     EURm
 Total statutory
 Revenue                                                        1,494.6  1,923.7
 Adjusted1EBITDA                                                  125.5    205.6
 Adjusted1earnings per share - euros                               0.07     3.09

 Continuing operations
 Revenue                                                        1,461.6  1,773.5
 Adjusted1EBITDA                                                  123.8    186.4
 Adjusted1operating profit                                         61.0    116.9
 Adjusted1profit before tax                                        23.3     66.4
 Exceptional items - restructuring costs                         (38.7)   (93.4)
 Exceptional items - pensions transfer charge                    (26.9)        -
 Exceptional items - impairment charges                           (7.3)  (891.9)
 Amortisation of acquired intangibles                            (61.8)   (76.3)
 Operating loss after exceptional items and amortisation of                     
 acquired intangibles                                            (73.7)  (944.7)
 Loss before tax after exceptional items and amortisation of                    
 acquired intangibles                                           (146.2)  (997.9)
 Adjusted1earnings per share - euros                               0.07     2.60
 Loss per share after exceptional items and amortisation of                     
 acquired intangibles - euros                                    (1.88)   (63.5)

 Discontinued operations
 (Loss)/profit from discontinued operations before exceptional                  
 items and amortisation of acquired intangibles                   (0.1)      7.8
 Loss from discontinued operations after exceptional items and                  
 amortisation of acquired intangibles                             (4.0)  (163.9)

 Continuing and discontinued operations
 Adjusted1earnings per share - euros                               0.07     3.09
 Loss per share after exceptional items and amortisation of                     
             acquired intangibles - euros                        (1.94)   (73.9)
                                                                       

1Adjusted for exceptional items and amortisation of acquired intangibles.

During 2009, the Group took three steps to restructure its balance sheet, through: (i) a series of disposals, (ii) the completion of a rights issue and (iii) the renegotiation of the Group's bank borrowing facilities.  These served to put the Group back on a firm financial footing.  The rights issue and renegotiation of the bank facility also removed the uncertainty that had been apparent in the 2008 Annual report and accounts as to the Group's ability to continue as a going concern.  The financial statements for the year to 31 December 2009 therefore include no reference to such material uncertainties and an unmodified audit report has been issued by the Group's auditors. Further details of the Group's financial position are given below.

The financial statements for the year to 31 December 2009 have been presented with the euro as the Group's presentation currency; previously the Group has presented its financial results in pounds sterling.  Over 70 per cent of the Group's revenue and cost, and over 70 per cent of its assets and liabilities, are denominated in euros (or in the Danish krone, which is effectively pegged to the euro). Presenting the financial statement in euros reduces significantly the effect of movements in foreign exchange rates, increasing the transparency and understandability of the financial statements, and for this reason, as set out in the previous year's financial statements, the directors decided in early 2009 to make this change.  There have been no change to the functional currencies or the underlying measurement of assets, liabilities, revenues and profits in the Company or any of its subsidiaries.  Full details of the effect of the change in presentation currency are given in Note 19 to the condensed consolidated financial statements. The reported results will continue to include the effect of exchange rate movements in the presentation of the results of operations denominated in the Norwegian krone and Polish zloty, as described where relevant below.

The Group made three significant disposals during 2009: of its German operations in their entirety, of its north-western Norway ("NWN") operations and its 37 per cent share of the Dutch AD NieuwsMedia ("AD") national newspaper business (together with an associated print plant). The Group recorded the results of its German operation as a discontinued operation in the 2009 and 2008 consolidated financial statements. The disposals of the NWN operations and the Group's 37 per cent share of AD (together with an associated print plant) did not meet the accounting criteria to be recorded as discontinued operations, but feature as one of the causes of movements in income statement balances within continuing operations from 2008 to 2009. These effects are referred to below where relevant.

The Group's financial key performance indicators continue to include revenue performance and adjusted EBITDA margin, together with cash generation and financial leverage. Note 6 to the condensed consolidated financial statements, Operating segments, sets out information on the first two of these financial key performance indicators, together with an analysis of the Group's result between its ongoing and businesses disposed of during 2009. The Financial Overview section discusses the movement in these financial key performance indicators during 2009. Details of cash generation and financial leverage are given below. The Group continues to present exceptional items and the amortisation of acquired intangibles separately in the income statement, to allow reader of the accounts to understand better the elements of financial performance in the year.

Revenue and earnings before interest and tax from continuing operations

Revenue for the year ended 31 December 2009 was EUR1,461.6 million, down from EUR1,773.5 million in 2008. This decrease included the effects of the disposal of businesses (circa EUR85 million) and differences in currency translation rates of circa EUR50 million. The main feature of underlying revenue performance in 2009 was the dramatic effect of lower advertising revenue, which fell by 18 per cent in the Group's ongoing businesses (as adjusted for foreign currency movements). 

Total Group adjusted EBITDA was EUR125.5m, down from EUR205.6m in 2008.  Adjusted EBITDA from continuing operations for the year ended 31 December 2009 was EUR123.8 million, compared with EUR186.4 million in 2008. This decrease included the effects of the disposal of businesses (EUR14.8 million) and differences in currency translation rates (EUR4.1 million). The underlying decrease in EBITDA of EUR47.8 million reflected the severe fall in advertising revenue, which was mitigated to a large extent (circa 80 per cent) by cost reductions. Costs were reduced by 10 per cent in the Group's ongoing businesses (after adjustment for foreign currency movements).  The Group's closing full-time-equivalents ("FTEs") fell by 863, or 10 per cent, in the continuing businesses, in addition to a reduction of 1,335 FTEs from the disposal of businesses.

Depreciation and amortisation of software reduced from EUR69.5 million to EUR62.8 million, largely as the result of disposals but also including some reductions in the ongoing businesses, resulting in adjusted operating profit from continuing operations of EUR61.0 million, down from EUR116.9 million in 2008. The decrease largely reflects the Group's reduced EBITDA, as described above.  Depreciation in 2010 is expected to be at a similar level to the 2009 ongoing charge.

Restructuring costs for the year ended 31 December 2009 totalled EUR38.7 million, mainly as a result of redundancy programmes of EUR26.5m. These were spread over all the divisions, but included EUR13.3m in the Netherlands, where FTEs reduced by 460 in the year.  Redundancy costs in 2008 of EUR93.4 million included a significant provision for the reorganisation of the back office functions in the Dutch division (largely completed during 2009) and costs associated with print plant closures.  

Other exceptional charges within operating profit for the year ended 31 December 2009 included a charge of EUR26.9 million related to the transfer of a pension arrangement in the Netherlands from a stand-alone trust (solely for the provision of pensions to Wegener current and former employees) to a significantly larger multi-employer pension scheme for the Dutch publishing industry. The Group recorded non-current asset impairment charges of EUR7.3 million related to non-current assets but none of which related to goodwill or acquired intangibles. In 2008, the impairment charge of EUR891.9 million included impairment charges for goodwill and acquired intangibles of EUR885.1million.

Amortisation of acquired intangibles was EUR61.8 million, down from EUR76.3 million in 2008 as a result of the disposal of Group businesses and the impairment charges recorded in the 2008 accounts.

The resulting operating loss after exceptional items and the amortisation of acquired intangibles for the year ended 31 December 2009 was EUR73.7 million, compared with a loss of EUR944.7million in 2008.

Finance items and taxation from continuing operations

Net finance expense before exceptional items for the year ended 31 December 2009 was EUR37.5 million, down from EUR50.0 million in 2008. The reduction arose from the net effect of three different factors. First, the Group's average borrowings decreased by over EUR200 million, reflecting the repayment of borrowings following the disposals described above and the issue of new share capital in June  2009 (as described below). In addition, the underlying inter-bank interest rates which form the basis of the cost for the Group's bank borrowings were lower in 2009, by over 300 basis points. Partially counteracting these effects, however, the margin on the Group's bank borrowings increased from 175 basis points in 2008 to 350 basis points on the term loans for the whole of 2009 and 350 basis points on the revolving credit facility until 22 May 2009, after which date a margin of 300 basis points was charged.  The Group expects its effective interest rate on net debt in 2010, taking into account deferred issue costs, commitment fees and the effect of net cash balances, to be approximately 7 per cent.

Exceptional finance charges totalled EUR34.7 million, most significantly related to the renegotiation of the bank facility agreement. Of this amount, EUR27.3 million comprised non-cash asset write-offs and accounting adjustments, and EUR7.4 million were cash items during the periods. Further details are given in Note 7 to the condensed consolidated financial statements.

The Group's effective tax rate on adjusted profit (excluding the share of results of associates) for the year ended 31 December 2009 was 54.6 per cent (2008: 29.6 per cent), considerably above the weighted blended statutory rates of the countries in which the Group operates. This was largely a result of the non-recognition of tax losses for accounting purposes, an effect which will reverse in future years as the Group's profitability increases.  In 2010, this will only partially be the case, with the Group expecting an effective accounting tax rate of around 35 per cent.  The total income tax credit for the year ended 31 December 2009 was EUR21.3 million, which included exceptional tax credits of EUR17.9 million and an accounting credit on the amortisation of acquired intangibles of EUR15.9 million.

Discontinued operations

The after tax loss of the German division was, in the three months to its disposal, EUR0.1 million before exceptional items and EUR4.0 million after these items, including a loss on disposal of EUR2.1m (2008: profit of EUR7.8 million before exceptional items and the amortisation of acquired intangibles and loss of EUR163.9 million after these items, including an impairment charge of EUR154.4 million). Full details of the results of the discontinued operations are given in Note 10 to the condensed consolidated financial statements.

Earnings per share and dividends

Adjusted earnings per share from continuing operations for the year ended 31 December 2009 were 0.07 euros per share, down from 2.6 euros per share in 2008. Total adjusted earnings per share for the year ended 31 December 2009 were 0.07 euros per share, down from 3.1 euros per share in 2008. The unadjusted loss per share from continuing operations for the year ended 31 December 2009 was 1.88 euros per share (2008: 63.5 euros per share) and the total unadjusted loss per share was 1.94 euros per share in 2009 (2008: 73.9 euros per share).

The average number of shares in issue decreased from 1,572 million shares in 2008 to 65 million in 2009, reflecting the issue of 9,432 million new shares in June 2009 and the 100 for one consolidation of the enlarged share capital in July 2009 (as described below).

Cash flow

The Group's cash flows are summarised in the table below:
                                                          2009    2008      2009
                                                          EURm    EURm  vs. 2008
                                                                            EURm

 EBITDA before exceptional items                         125.5   205.6    (80.1)
 Working capital and other movements                       5.9    35.0    (29.1)
 Exceptional operating cash flows                       (73.3)  (99.9)      26.6
 Net cash from operating activities                       58.1   140.7    (82.6)
 Tax paid                                                (1.7)   (2.1)       0.4
 Net capital expenditure                                (38.9)  (71.6)      32.7
 Purchase of publishing rights and other investments     (7.6)   (0.6)     (7.0)
 Net interest paid, inc. interest rate swaps            (42.8)  (42.0)       0.8
 Finance exceptionals                                   (17.2)   (2.4)    (14.8)
 Net dividends received                                    2.7     2.0       0.7
 Free flow, before acquisitions / divestments and       (47.4)    24.0    (71.4)
 issue of share capital
 Acquisition / divestments                               213.6   (0.6)     214.2
 Issue of share capital                                  155.5       -     155.5
 Net cash flow                                           321.7    23.4     298.3

Cash flow from operating activities (which includes cash flows from discontinued operations) for the year ended 31 December 2009 was EUR58.1 million, down from EUR140.7 million in 2008. The reduction reflects lower EBITDA, the lower cash flows from discontinued operations sold in March 2009 offset by lower cash charges in respect of restructuring activities. The cash effects of previous years' restructuring programmes were experienced in 2009, together with the cash consequences of current year initiatives.  The Group expects cash outflows in 2010 on capital expenditure and exceptional items to be in the order of EUR75 million, split broadly evenly between the two.  The net effect of working capital and movement in provisions and pensions for the year ended 31 December 2009 was an inflow of EUR5.9 million (2008: EUR35.0 million).

Tax paid was EUR1.7 million (2008: EUR2.1 million) as the Group continued to benefit from brought forward tax losses.  Net capital expenditure was EUR38.9 million, down considerably from EUR71.6 million in 2008, with lower spend in particular on the investment in printing presses in the Netherlands, which was largely completed by the end of 2009, and expenditure on publishing rights and other assets was EUR7.6 million (2008: EUR0.6 million). A further EUR9.1 million in respect of the purchase of publishing rights in 2009 was recorded within creditors at 31 December 2009, to be settled as a cash flow in 2010. 

Net interest paid, which included EUR4.1 million in respect of the early settlement of derivative contracts, was EUR42.8 million.  Finance exceptional items were EUR17.2 million, including fees to the Group's lending banks and related professional costs, compared with the EUR2.4 million amendment fee paid to the Group's lending banks at the very end of 2008.  After dividends received of EUR2.7 million (2008: 2.0 million) the cash flow before acquisitions, disposals and the issue of share capital was an outflow of EUR47.4 million (2008: inflow of EUR24.0 million).

The proceeds from disposals were a cash inflow of EUR213.6 million, compared with a net outflow from acquisitions and disposals in 2008 of EUR0.6 million.  Finally, after the proceeds from the issue of share capital of EUR155.5m (after related costs), the Group's net cash inflow for the year was EUR321.7 million, compared with an inflow of EUR23.4 million in 2008.

Issue of share capital

The Group issued 9,432 million new shares in June 2009 for net cash proceeds of EUR155.5 million. This increased the number of shares in issue to 11,004 million. In order to reduce the number of shares to a manageable number and to reduce share price volatility and dealing costs for investors (both of which had been affected by the lower trading range of the shares in early 2009), the Group reorganised its share capital in July 2009 by way of a 100 for one consolidation.  Following the consolidation, the Group had 110 million shares in issue at 31 December 2009.

Financial position

The Group's closing net debt was EUR373.4 million, down by EUR309.1 million from 31 December 2008.  The reduction reflects the Group's disposal programme in early 2009 and the proceeds from the issue of new share capital in June, as described in the cash flow section above. The Group's leverage (measured as the ratio of net debt to adjusted EBITDA according to the definitions of the revised facility agreement, as described in Note 13 to the condensed consolidated financial statements) was 3.1 times for the year to 31 December 2009, compared with 4.14 times at 31 December 2008. The Group's first leverage covenant test under the revised facility agreement is for the twelve month period ended 30 June 2010, at 5.25 times, reducing to 4.5 times for the year to 31 December 2010. Closing net debt at 31 December 2009 comprised bank borrowings (net of capitalised debt issue costs) of EUR429.3 million (2008: EUR730.2 million), other borrowings of EUR10.2 million (2008: EUR39.6 million, including the convertible loan notes and borrowings classified as held for sale), obligations under finance leases of EUR9.0 million (2008: EUR25.1 million) and cash and cash equivalents (net of bank overdrafts) of EUR75.1 million (2008: EUR112.4 million). The year-end cash balance included prepaid subscription receipts collected at the end of December. At 31 December 2008, in the absence of a signed revised facility agreement, the Group classified all bank borrowings as current obligations; at 31 December 2009, all gross bank borrowings are classified as non-current, apart from EUR20 million of term loan due for repayment in December 2010.

The key terms of the revised bank facility agreement are set out in Note 13 to the condensed consolidated financial statements.

The Group's equity increased by EUR52.0 million during 2009, to EUR278.1 million. The increase resulting from the issue of new share capital of EUR155.5 million was offset to an extent by the retained loss for the year of EUR128.9 million. This retained loss includes the accounting amortisation of acquired intangibles of EUR61.8 million. Other net credits to equity in 2009 totalled EUR25.4 million, including entries for actuarial gains (EUR9.6 million), cash flow hedges (EUR.6.8 million) and foreign currency (EUR5.4 million).  Following the change to the euro as the Group's presentation currency, movements in equity resulting from foreign currency translation differences were very much lower than in previous years, when the accounts had been presented in pounds sterling. 

Treasury

The Group manages treasury matters centrally, through the group treasury function.  This function manages the Group's bank borrowing arrangements, the short- and medium- term liquidity position and monitors the Group's treasury risks.  A treasury committee, which includes the Group Finance Director, the Group Treasurer and the  Chief Operating Officer, provides further guidance on treasury matters and overseas risk management.

The Group is exposed to treasury risks arising from exposure to movements in market interest rates, which affect the Group's borrowing costs, and to movements in foreign currency rates, which affect the translation of the Group's non-euro results and asset and liabilities into euro (the Group is exposed to minimal transaction exposure to foreign currency movements in each of its operations, which carry out their business primarily in each local currency).

The Group has a policy of keeping between 40 per cent and 80 per cent of its borrowings at fixed rates, so as to provide some certainty on its interest costs, while leaving open the opportunity to benefit in part from low interest rates.  In economic terms, the Group was approximately 50 per cent hedged on its exposure to interest rates as at 31 December 2009.  (From a financial statement point of view, as explained in detail in Note 27 to the consolidated financial statements, following the renegotiation of the facility agreement, a number of the Group's interest rate swaps have not been accounted for as hedges with the result that some mark-to-market movements on the value of the swaps have been recorded in the consolidated income statement in 2009, as exceptional finance items).

The Group has drawn a portion (16 per cent) of its bank borrowings in Norwegian krone to provide an interest rate and balance sheet hedge of the results and operating assets and liabilities of its Norwegian business.  The Group has reduced the amount of non-euro borrowings during 2009 to benefit from the lower interest rates applicable to euro borrowings.

RELATED PARTY TRANSACTIONS 

Further information is disclosed in Note 17 to the condensed consolidated financial statements below.

PRINCIPAL RISKS AND UNCERTAINTIES 

In recognising that risk is an inherent part of doing business, the Board has adopted a process for identifying, evaluating and managing the risks that the Group faces (as described in the Corporate governance report). The risks to which the Group is potentially exposed at any given time cover a wide range of factors: competition, legislation, fiscal, regulatory, political, financial, terrorism, economic, social and operational. Each could impact on the Group's revenue, operating profit, net assets and liquidity. The principal risks and uncertainties that are specific to the Group at this time, together with the actions that management is taking to mitigate each, are set out below.

During 2008 the Group embarked upon its transformation programme to move from a traditional print to a multimedia content business. The risks and uncertainties associated with this change were exacerbated by the onset of recession and the related advertising crisis later that year. The Board is therefore continuing to pay particular attention to the effectiveness of the Group's mitigation of risk and the progress of management is closely monitored in each area.
 Risk                                                           Description  Management action
 Strategy
  
                                 The Board maintains a well defined and      The Group has
                                 determined strategy to transform the        embarked on a
                                 business from a traditional print company   significant
                                 into a modern multimedia content business.  programme of change
                                                                             to reform previous
                                 The strategy provides for driving           working practices
                                 increasing productivity, primarily through  and to develop the
                                 the development of new digital platforms    operating models and
                                 to exploit content.                         skills needed to
                                                                             perform successfully
                                 The successful implementation of the        in a multimedia
                                 strategy could be impaired because of a     environment. The
                                 lack of the new skills required to          Group has created a
                                 implement this emerging business model and  function that is
                                 of the economic resources needed to invest  dedicated to the
                                 in new products and services.               growth of new
                                                                             revenues and
                                 It is also possible that the rate of        ensuring that
                                 transformation may not be sufficiently      innovation and
                                 quick or profitable to offset a dramatic    emerging models are
                                 decline in the traditional profits of the   developed and shared
                                 business.                                   across the entire
                                                                             Group.
                                                                              
                                                                             Strict controls
                                                                             remain in place over
                                                                             capital expenditure
                                                                             to ensure that new
                                                                             investment is
                                                                             channelled into the
                                                                             most deserving cases
                                                                             in terms of the
                                                                             Group's strategy.
                                                                              
                                                                             Management is
                                                                             satisfied that the
                                                                             new products and
                                                                             services introduced
                                                                             during 2009 are in
                                                                             line with its
                                                                             challenging time
                                                                             schedules. It
                                                                             therefore expects
                                                                             incremental
                                                                             contributions from
                                                                             the new revenue
                                                                             streams to
                                                                             compensate for the
                                                                             traditional revenues
                                                                             that have already
                                                                             been lost, but it is
                                                                             too early to confirm
                                                                             this given the
                                                                             current economic
                                                                             climate.
 Market place                    Short term -           
                                 Advertising revenue    
                                 lost during current   In 2008, the Group started with urgent
                                 economic downturn     steps to mitigate the shortfall in
                                 In common with the    advertising. It did this by setting up a
                                 majority of           programme to reduce the cost base in the
                                 newspaper publishing  traditional print business where the loss
                                 businesses, the       of advertising revenues has been marked.
                                 Group's revenues are   
                                 traditionally         This programme delivered substantial
                                 heavily dependent on  savings in 2009 of around 10 per cent of
                                 advertising which     total costs which mitigated almost 80 per
                                 comprised             cent of lower revenue.
                                 approximately 47 per   
                                 cent of total          
                                 revenue in 2009
                                 (2008:  50 per
                                 cent).
                                  
                                 The Group
                                 experienced a
                                 further reduction of
                                 approximately 18 per
                                 cent in advertising
                                 revenue during 2009.
                                 Although this trend
                                 alleviated somewhat
                                 towards the end of
                                 the year, the
                                 economic crisis has
                                 attacked all
                                 categories of
                                 advertising with
                                 print adverts for
                                 recruitment,
                                 property and motor
                                 vehicles more
                                 affected than other
                                 groups.
                                 Medium term -          
                                 Negative effect of     
                                 internet advertising  The Group has been moving decisively since
                                 on traditional        2008 to accelerate its transformation from
                                 advertising           a pure print company into a multimedia
                                 Across the market,    consumer content business. It has been
                                 the print media's     developing new digital revenue streams and
                                 share of advertising  introducing new media products at great
                                 is declining as       speed to attract a larger share of the
                                 customers exercise    wider advertising market.
                                 their choice to
                                 advertise in other
                                 media, notably the
                                 internet, rather
                                 than in newspapers.
                                 This trend is likely
                                 to continue into the
                                 medium term.
                                 Long term - Erosion    
                                 of demand for          
                                 printed newspapers    Given the strength of the Group's brands
                                 The Group's           and the quality of its products, together
                                 newspapers have       with its in-depth understanding of the
                                 experienced           markets in which it operates, in 2009 it
                                 circulation volume    was again successful in maintaining
                                 declines over recent  circulation revenues despite the severity
                                 years, in common      of the economic recession.
                                 with the newspaper     
                                 industry in general.  It will continue to maintain and improve
                                 Historically the      the quality of its portfolio of strong
                                 Group has been able   premium products in the marketplace and
                                 to offset these       leverage its expert knowledge of local
                                 volume declines by    markets and customers to provide ongoing
                                 cover price and       improvement in the relevance of its papers
                                 subscription rate     to the readers in the individual markets
                                 increases such that   in which it operates. It will also
                                 circulation revenue   implement price increases wherever this is
                                 has remained broadly  possible.
                                 constant.              
                                  
                                 However, in the long
                                 term there is a risk
                                 that the Group will
                                 be less successful
                                 than in the past at
                                 compensating volume
                                 declines with
                                 increases in cover
                                 price and
                                 subscription rates.
 Operational                     The Group's strategy  Throughout 2009 the Group continued to
 performance                     for protecting        seek ways of improving its productivity,
                                 margins includes      to protect its margins and established
                                 identifying           priority programmes in all divisions in
                                 operating synergies   the light of the economic downturn. These
                                 which are often       programmes are driving improvements in our
                                 achieved through      business models by making our businesses
                                 reorganisations, the  more innovative, securing better ways of
                                 introduction of more  working, leveraging cross-Group benefits
                                 efficient work        from scale and removing old "industry
                                 practices and         practices" and have been implemented
                                 realising economies   without disruption to operations.
                                 of scale. However,     
                                 the cost of           To ensure that the Group is able to
                                 structural change in  implement the structural changes needed in
                                 continental European  its business, it is committed to working
                                 economies is          constructively with governments and other
                                 potentially very      regulatory bodies. It is challenging
                                 high.                 previous collective bargaining and
                                                       industry practices to make its cost base
                                 In addition, the      more flexible and continues to engage in
                                 Group operates in     constructive dialogue with unions and
                                 countries with        works councils to develop effective
                                 labour laws and       relationships in each case.
                                 agreements that
                                 differ from the UK
                                 and where employees
                                 generally enjoy
                                 stronger protection.
                                 This sometimes means
                                 that the pace of
                                 change is slower
                                 than changes in
                                 market conditions.
                                  
                                 The Group's ability
                                 to generate cost
                                 savings on a timely
                                 basis may also be
                                 hampered by strikes,
                                 illegal industrial
                                 action or new
                                 regulation from
                                 governments in any
                                 of the jurisdictions
                                 in which we operate.
                                  
 Business                        The Group is highly   All divisions are required to maintain
 continuity                      dependent on the      business continuity plans and to update
                                 continuous operation  these to reflect the reorganisations and
                                 of its print plants,  restructurings taking place within its
                                 distribution          business. Each division is also required
                                 channels and          to develop a programme for the testing of
                                 supporting IT         these plans to ensure their effectiveness
                                 infrastructure to     and relevance.
                                 get its print          
                                 products to its       The Group maintains insurance to protect
                                 customers. It also    against catastrophic risks.
                                 depends on the high
                                 availability of its
                                 many websites which
                                 allow its customers
                                 access to online
                                 products and
                                 services. A
                                 significant and
                                 extended loss of a
                                 major facility,
                                 whether through
                                 natural causes,
                                 deliberate acts or
                                 breakdown, could
                                 result in a loss of
                                 revenue.
 Funding                         The Group is          In the early part of 2009, the Group took
                                 financed by           action to reduce the absolute level of its
                                 significant bank      borrowings through the disposals made in
                                 borrowings, as well   Germany and north-western Norway and the
                                 as shareholders'      issue of new share capital in the form of
                                 equity, and in the    a rights issue which together raised
                                 first half of 2009    approximately EUR349 million.
                                 concluded a            
                                 successful            In parallel cost reduction plans were
                                 renegotiation of its  actioned and the Group continues to
                                 borrowing facilities  operate a policy of strict management of
                                 with its lending      cash expenditure.
                                 banks. As a result,    
                                 the Group now faces   A key indicator for the Group is the
                                 the risk of not       measure of its leverage which is expressed
                                 being able to comply  as the ratio of net debt to EBITDA. At 31
                                 with the covenants    December 2009 this measured  3.1 times on
                                 under its revised     the basis on which it is calculated for
                                 bank facility         these purposes compared with a first
                                 agreement. The key    covenant testing ratio at 30 June 2010 of
                                 covenants will be     5.25 times and at 31 December 2010 of 4.5
                                 tested for the first  times.
                                 time at 30 June 2010   
                                 and then quarterly    A treasury committee, under the
                                 from 31 December      chairmanship of the Group Finance
                                 2010.                 Director, meets monthly to consider,
                                                       amongst others things, the Group's cash
                                                       flow forecasts and projections against the
                                                       various banking covenants. The Group
                                                       Finance Director also makes regular
                                                       reports to the B
 Exchange                        The Group presents    The effect of movements in foreign
 rates                           its financial         currency rates is monitored on a monthly
                                 statements in euro.   basis. A certain portion of the Group's
                                 The reported results  borrowings is denominated in Norwegian
                                 are therefore         krone to provide a partial hedge of the
                                 exposed to movements  balance sheet position.
                                 in exchange rates      
                                 between the euro and
                                 the other currencies
                                 in which the Group
                                 operates,
                                 principally the
                                 Norwegian krone and
                                 Polish zloty.
                                  
                                 Between them, the
                                 Norwegian and Polish
                                 operations account
                                 for less than 30 per
                                 cent of Group
                                 revenue and, in
                                 2009, around 25 per
                                 cent of Group
                                 EBITDA.
 Key                             The Group's success   The Group provides a competitive
 management                      depends on its        remuneration package for its key
                                 ability to attract,   management and employees. Succession
                                 motivate and retain   planning from the level of Country CEOs up
                                 highly qualified      to the Chief Executive is also in place
                                 employees who have    and was reviewed by the Board in 2009.
                                 extensive experience   
                                 and knowledge of the
                                 industry at a
                                 strategic level.
                                  

Certain risks and uncertainties arise through factors that are outside the control of management, for example, inflation or interest rates. Nevertheless in each case management seeks to minimise the impact on the Group from such external events, for example, by hedging through interest rate swaps as set out in the Group Finance Director's report under the heading of "Treasury". In other cases risks may appear that are presently unanticipated as the Group develops its new business models.

GOING CONCERN

After making enquiries, the directors have a reasonable expectation that the Group (and Mecom Group plc as a company) has adequate resources to continue in operational existence for the foreseeable future.  For these reasons, they continue to adopt the going concern basis in preparing the Annual report and accounts.  In arriving at these conclusions, the directors have had regard to the guidance published by the Financial Reporting Council in October 2009.

The Group resolved in 2009 the uncertainties that, in the 2008 accounts, had cast doubt on the Group's ability to continue as a going concern:

·      a revised facility agreement was entered into with the Group's lending banks on 22 May 2009, removing the uncertainty as to the ongoing bank funding of the Group - the terms of the revised facility agreement are set out in Note 26 to the consolidated financial statements; and

·      a rights issue was completed on 26 June 2009, the net proceeds of which were EUR155.5 million.  These proceeds were used to repay the bank borrowings of EUR119.5 million and a convertible loan note of £30.6 million (EUR36.0m on date of repayment).

As a consequence, these uncertainties are no longer relevant and an unmodified auditors' opinion has been issued on the 31 December 2009 financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITIES 

The directors confirm to the best of their knowledge that:

(a) the condensed financial statements for the year ended 31 December 2009, prepared in accordance with the applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and

(b) the Management Report, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that they face.

By order of the Board

David Montgomery                                                              Henry Davies

Chief Executive                                                                     Group Finance Director

Consolidated income statement 

for the year ended 31 December 2009
      
                                                                                                                                                                                                                                                                                            (restated)     
   
                                          Year ended 31 December 2009                                                             Year ended 31 December 2008
                                    Note  Before exceptional    Exceptional items     After exceptional     Before exceptional items and amortisation   Exceptional items     After exceptional
                                          items and             and amortisation of   items and             of acquired intangibles EURm                and amortisation of   items and
                                          amortisation of       acquired intangibles  amortisation of                                                   acquired intangibles  amortisation of
                                          acquired intangibles  (see Note 7) EURm     acquired intangibles                                              (see Note 7) EURm     acquired intangibles
                                          EURm                                        EURm                                                                                    EURm
 Continuing operations                                                                                                                                                                            
 Revenue                               6               1,461.6                     *               1,461.6                                     1,773.5                     *               1,773.5
 Cost of sales                                         (445.9)                     *               (445.9)                                     (544.5)                     *               (544.5)
 Gross profit                                          1,015.7                     *               1,015.7                                     1,229.0                     *               1,229.0
 Operating costs                                       (955.1)               (134.7)             (1,089.8)                                   (1,116.0)             (1,061.6)             (2,177.6)
 Share of results of associates                            0.4                     *                   0.4                                         3.9                     *                   3.9
 Operating profit/(loss)               6                  61.0               (134.7)                (73.7)                                       116.9             (1,061.6)               (944.7)
 Finance income                        8                   5.9                     *                   5.9                                        24.9                     *                  24.9
 Finance expense                       8                (43.4)                (34.7)                (78.1)                                      (74.9)                 (6.8)                (81.7)
 (Loss)/gain on disposal of           16                 (0.2)                 (0.1)                 (0.3)                                       (0.5)                   4.1                   3.6
 businesses and investments
 Profit/(loss) before tax                                 23.3               (169.5)               (146.2)                                        66.4             (1,064.3)               (997.9)
 Income tax (expense)/credit           9                (12.5)                  33.8                  21.3                                      (18.5)                  14.2                 (4.3)
 Profit/(loss) for the year                               10.8               (135.7)               (124.9)                                        47.9             (1,050.1)             (1,002.2)
 from continuing operations
                                                                                                                                                                                                  
 Discontinued operations                                                                                                                                                                          
 (Loss)/profit for the year           10                 (0.1)                 (3.9)                 (4.0)                                         7.8               (171.7)               (163.9)
 from discontinued operations
 Profit/(loss) for the year                               10.7               (139.6)               (128.9)                                        55.7             (1,221,8)             (1,166.1)
                                                                                                                                                                                                  
 Attributable to:                                                                                                                                                                                 
 Mecom Group plc shareholders                              4.1               (129.6)               (125.5)                                        48.6             (1,210.6)             (1,162.0)
 Minority interest                                         6.6                (10.0)                 (3.4)                                         7.1                (11.2)                 (4.1)
                                                                                                                                                                                                  
                                                                                                                                                                                                  
 Loss per share                                                                                                                                                                                   
 From continuing operations                                                                                                                                                                       
 Basic                                11                                                                                                  (1.88) euros                               (63.49) euros
 Diluted                              11                                                                                                  (1.88) euros                               (63.49) euros
 From continuing and                                                                                                                                                                              
 discontinued operations
 Basic                                11                                                                                                  (1.94) euros                               (73.92) euros
 Diluted                              11                                                                                                  (1.94) euros                               (73.92) euros

There are no dividends paid or proposed for either of the years presented. The restatement of the 2008 consolidated income statement (and of the other primary statements and the inclusion of an additional comparative consolidated balance sheet) is because of the change in the Group's presentation currency to euros from pounds sterling, as referred to in Note 4. 

Consolidated statement of comprehensive income  

for the year ended 31 December 2009

                                           Note  Year ended 31         (restated)
                                                 December 2009          Year ended 31
                                                 EURm                  December 2008
                                                                       EURm
                                         
                                         
                                         
                                         
 Loss for the year                                            (128.9)             (1,166.1)
                                         
 Other comprehensive                     
 income/(loss) for the year:             
 Actuarial gain/(loss) on                                        13.0                (13.0)
 defined benefit pension                 
 schemes                                 
 Tax effect                                                     (3.4)                   3.9
                                                                  9.6                 (9.1)
                                         
 Loss on revaluation of                                             -                 (0.4)
 available-for-sale investments          
 Transfer from revaluation                                          -                 (0.1)
 reserve to the consolidated             
 income statement on impairment          
 of available-for-sale                   
 investments                             
                                         
 Changes in fair value of cash                                  (4.4)                (12.4)
 flow hedges                             
 Tax effect                                                       0.3                   3.9
                                                                (4.1)                 (8.5)
                                         
 Transfer from cash flow hedge           
 reserve to the consolidated             
 income statement of cumulative          
 losses on certain                       
 interest rate swaps on ending                7                  13.2                 (1.9)
 of hedge relationship                   
 Tax effect                                                     (2.3)                     -
                                                                 10.9                 (1.9)
                                         
 Transfer from currency                                                                    
 translation reserve to the                                                                
 consolidated income statement               16                   3.4                 (0.5)
 of cumulative exchange                  
 difference on disposal of               
 foreign operations                      
                                         
 Exchange differences on                                          2.0                (49.4)
 retranslation of foreign                
 operations                              
                                         
 Other comprehensive                                             21.8                (68.8)
 income/(loss) for the year,             
 net of tax                              
                                         
 Total comprehensive loss for                                 (107.1)             (1,234.9)
 the year, net of tax                    
                                         
 Attributable to:                        
 Mecom Group plc shareholders                                 (104.5)             (1,226.9)
 Minority interest                                              (2.6)                 (8.0)

Consolidated balance sheet

at 31 December 2009
                                           Note       2009  (restated)  (restated)
                                                      EURm   2008       2007
                                                            EURm        EURm
                                     
                                     
 Assets                              
 Non-current assets                  
 Goodwill                                            183.1       211.2     1,330.2
 Other intangible assets                             672.5       753.1       948.0
 Property, plant and equipment                       240.4       300.1       371.4
 Employee benefit assets                               4.1         2.3         5.3
 Interests in associates                              39.3        37.9        52.4
 Investments                                           0.7         1.0        12.7
 Other financial assets                               12.0         3.1         2.0
 Deferred tax assets                                  30.6        27.1        74.1
 Total non-current assets                          1,182.7     1,335.8     2,796.1
 Current assets                      
 Inventories                                           9.3        13.5        13.5
 Trade and other receivables                         175.0       173.8       257.5
 Cash and cash equivalents                12,13      104.6       117.4       104.1
 Current tax assets                                    1.5         2.4           -
 Derivative financial                                    -           -         9.1
 instruments                         
 Total current assets                                290.4       307.1       384.2
 Assets held for sale                        16          -       204.7        23.6
 Total assets                                      1,473.1     1,847.6     3,203.9
 Liabilities                         
 Non-current liabilities             
 Borrowings                                  13    (416.0)       (3.9)     (770.2)
 Other payables                                      (5.0)       (4.6)       (7.7)
 Provisions                                         (28.2)      (36.3)      (42.7)
 Employee benefit obligations                       (69.9)      (66.8)      (73.3)
 Deferred tax liabilities                          (166.2)     (189.5)     (258.9)
 Obligations under finance                   13      (4.8)      (18.5)      (19.9)
 leases                              
 Derivative financial                                (4.0)       (1.0)           -
 instruments                         
 Total non-current liabilities                     (694.1)     (320.6)   (1,172.7)
 Current liabilities                 
 Borrowings                                  13     (53.0)     (766.2)      (31.9)
 Trade and other payables                          (398.0)     (407.8)     (483.9)
 Provisions                                         (34.6)      (48.8)      (35.0)
 Current tax liabilities                             (0.7)       (1.6)       (2.9)
 Obligations under finance                   13      (4.2)       (6.6)       (5.3)
 leases                              
 Derivative financial                               (10.4)       (8.7)           -
 instruments                         
 Total current liabilities                         (500.9)   (1,239.7)     (559.0)
 Liabilities directly                        16          *      (61.2)      (11.8)
 associated with assets              
 classified as held for sale         
 Total liabilities                               (1,195.0)   (1,621.5)   (1,743.5)
 Net assets                                          278.1       226.1     1,460.4
 Equity                              
 Issued share capital                                 81.3        13.9        13.9
 Share premium                                     1,526.5     1,438.4     1,438.4
 Retained earnings                               (1,350.6)   (1,239.7)      (68.7)
 Other reserves                                     (13.5)      (23.4)        31.9
 Equity attributable to Mecom                        243.7       189.2     1,415.5
 Group plc shareholders              
 Minority interest                                    34.4        36.9        44.9
 Total equity                                        278.1       226.1     1,460.4

Consolidated statement of changes in equity

for the year ended 31 December 2009

                                                                                                 Other reserves                               Total reserves
                                                                                                                                              attributable to
                                                                                                                                              equity share-
                                                                                                                                              holders
                                                                                                                                              EURm
                                 Share      Share      Retained      Cash flow hedge  Share-based payment  Revaluation  Currency translation                        Minority          Total
                                 capital    premium    earnings      reserve          reserve              reserve      reserve                                     interest         equity
                                 EURm       EURm       EURm          EURm             EURm                 EURm         EURm                                        EURm               EURm

 Balance at 31 December 20071         13.9    1,438.4        (68.7)                -                  7.8          0.1                  24.0               1,415.5          44.9    1,460.4
 Loss for the year                       -          -     (1,162.0)                -                    -            -                     -             (1,162.0)         (4.1)  (1,166.1)
 Other comprehensive
 (loss)/income:
 Actuarial loss on defined
 benefit
 pension schemes                         -          -         (9.0)                -                    -            -                     -                 (9.0)         (0.1)      (9.1)
 Loss on revaluation of
 available-for-
 sale investments                        -          -             -                -                    -        (0.4)                     -                 (0.4)             -      (0.4)
 Transfer from revaluation               -          -             -                -                    -          1.0                     -                   1.0             -        1.0
 reserve to the income
 statement on impairment of
 available-for-sale investments
 Changes in fair value of cash           -          -             -            (8.1)                    -            -                     -                 (8.1)         (0.4)      (8.5)
 flow hedges
 Transfer from cash flow hedge                                                                                                                                                             
 reserve to the income                                                                                                                                                                     
 statement of cumulative losses                                                                                                                                                            
 on certain interest rate swaps          -          -             -            (1.9)                    -            -                     -                 (1.9)             -      (1.9)
 on ending of hedge
 relationship
 Transfer from currency
 translation
 reserve to the income
 statement of
 cumulative exchange difference
 on
 disposal of foreign operations          -          -             -                -                    -            -                 (0.5)                 (0.5)             -      (0.5)
 Exchange differences on                                                                                                                                                                   
 retranslation of foreign                -          -             -                -                    -            -                (46.0)                (46.0)         (3.4)     (49.4)
 operations
 Total comprehensive                     -          -     (1,171.0)           (10.0)                    -          0.6                (46.5)             (1,226.9)         (8.0)  (1,234.9)
 loss/income for the year
 Credit in respect of
 share-based
 payments                                -          -             -                -                  0.6            -                     -                   0.6             -        0.6
 Balance at 31 December 20081         13.9    1,438.4     (1,239.7)           (10.0)                  8.4          0.7                (22.5)                 189.2          36.9      226.1
 Loss for the year                       -          -       (125.5)                -                    -            -                     -               (125.5)         (3.4)    (128.9)
 Other comprehensive
 income/(loss):
 Actuarial gain on defined
 benefit
 pensionscheme plans                     -          -           9.6                -                    -            -                     -                   9.6             -        9.6
 Changes in fair value of cash
 flow hedges                             -          -             -            (4.0)                    -            -                     -                 (4.0)         (0.1)      (4.1)
 Transfer from cash flow hedge
 reserve
 to the income statement of
 cumulative
 losses on certain interest
 rate swaps on
 ending of hedge relationship            -          -             -             10.9                    -            -                     -                  10.9             -       10.9
 Transfer from currency
 translation
 reserve to the income
 statement of
 cumulative exchange
 differences on
 disposal of foreign operations          -          -             -                -                    -            -                   3.4                   3.4             -        3.4
 Exchange differences on
 retranslation foreign                   -          -             -                -                    -            -                   1.1                   1.1           0.9        2.0
 operations
 Total comprehensive loss for            -          -       (115.9)              6.9                    -            -                   4.5               (104.5)         (2.6)    (107.1)
 the year
 Issue of share capital for           67.4       98.7             -                -                    -            -                     -                 166.1             -      166.1
 cash2
 Transaction costs relating to                                                                                                                                                             
 the issue of share capital for          -     (10.6)             -                -                    -            -                     -                (10.6)             -     (10.6)
 cash2
 Transfer of equity component
 of
 convertible loan notes on cash
 settlement of the instrument            -          -           5.0                -                (5.0)            -                     -                     -             -          -
 Credit in respect of
 share-based
 payments                                -          -             -                -                  3.5            -                     -                   3.5             -        3.5
 Minority interest acquired              -          -             -                -                    -            -                     -                     -           0.8        0.8
 Minority interest disposed of           -          -             -                -                    -            -                     -                     -         (0.3)      (0.3)
 Minority interest dividend              -          -             -                -                    -            -                     -                     -         (0.4)      (0.4)
 paid
 Balance at 31 December 2009          81.3    1,526.5     (1,350.6)            (3.1)                  6.9          0.7                (18.0)                 243.7          34.4      278.1

1 Balances at 31 December 2007 and 2008 have been restated due to the change in the Group's presentation currency, as set out in Note 4. 

2 Refer to Note 14 for further details.         

Consolidated cash flow statement 
 for the year ended 31 December            Note       Year ended            (restated)
 2009                                                31 December            Year ended
                                                            2009           31 December
                                                            EURm                  2008
                                                                                  EURm
                                         
                                         
                                         
                                         
                                         
 Operating activities                    
 Cash generated from operations              18             58.1                 140.7
 Income tax paid                                           (1.7)                 (2.1)
 Net cash from operating                                    56.4                 138.6
 activities                              
                                         
 Investing activities                    
 Proceeds from sale of other                                   -                   0.6
 intangible assets                       
 Proceeds from sale of                                       0.9                  12.7
 property, plant and equipment           
 Proceeds from sale of                                         -                   1.8
 interests in associates and             
 investments                             
 Capital expenditure on:                 
 Other intangible assets                                  (11.8)                (15.9)
 Property, plant and equipment                            (28.0)                (70.8)
 Purchase of publishing rights                             (7.2)                     -
 Purchase of interests in                                  (0.4)                 (0.6)
 associates                              
 Acquisition of subsidiaries,                                0.7                (26.1)
 net of cash acquired                    
 Divestment of businesses, net               16            212.9                  25.5
 of cash sold                            
 Interest received                                           5.4                  18.9
 Dividends received                                          3.1                   2.3
 Net cash from/(used in)                                   175.6                (51.6)
 investing activities                    
                                         
 Financing activities                    
 Proceeds from issue of share                14            166.1                     -
 capital                                 
 Transaction costs of issue of               14           (10.6)                     -
 shares                                  
 Proceeds from borrowing                                   144.1                 139.3
 drawdowns                               
 (Payments made)/proceeds                                  (4.1)                   5.7
 received due to settlement of           
 financial instruments                   
 Repayment of borrowings                                 (458.7)               (130.5)
 Repayment of convertible loan               13           (36.0)                     -
 notes                                   
 Repayment of obligations under                            (7.6)                 (7.3)
 finance leases                          
 Interest and other finance                               (44.1)                (66.6)
 expenses paid                           
 Fees paid on renegotiation of               13           (17.2)                 (2.4)
 Group's bank facilities                 
 Dividends paid to minority                                (0.4)                 (0.3)
 interests                               
 Net cash used in financing                              (268.5)                (62.1)
 activities                              
                                         
 Net (decrease)/increase in                               (36.5)                  24.9
 cash and cash equivalents               
 Net foreign exchange                                      (0.8)                (12.1)
 differences                             
 Cash and cash equivalents at                              112.4                  99.6
 beginning of the year                   
 Cash and cash equivalents at                               75.1                 112.4
 end of the year                         

Notes to the CONDENSED consolidated financial statements 

for the year ended 31 December 2009

1. Corporate information

Mecom Group plc (the "Company") is a public limited company incorporated and domiciled in England and Wales. The registered office of the Company is 70 Jermyn Street, London, SW1Y 6NY. Its ordinary shares are traded on the London Stock Exchange (LSE). 

These condensed consolidated financial statements for the year ended 31 December 2009 were approved by the Board of Directors on 16 March 2010. 

The financial information in these condensed consolidated financial statements does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006 but has been extracted from statutory accounts. The statutory accounts for the year ended 31 December 2008 have been filed with the Registrar of Companies and those for the year ended 31 December 2009 will be filed following the Company's Annual General Meeting. The auditors' reports on the statutory accounts for the year ended 31 December 2008 and for the year ended 31 December 2009 were unqualified and do not contain a statement under Sections 498 (2) or (3) of the Companies Act 2006. However, for the year ended 31 December 2008 the auditors' report included reference to matters to which the auditors drew attention by way of emphasis of matter without qualifying the report. 

While the financial information included in these condensed consolidated financial statements has been prepared in accordance with Intentional Financial Reporting Standards ("IFRS"), they do not contain sufficient information to comply with IFRSs. These condensed consolidated financial statements constitute a dissemination announcement in accordance with section 6.3 of the Disclosure and Transparency Rules. The full Annual report and accounts for the year ended 31 December 2009 will be made available on the Company's website at www.mecom.com on or around 13 April 2010.

2. Definitions of terms

The Group uses the following terms, with the definition given, in these condensed consolidated financial statements and in its internal monitoring of financial performance:

Adjusted EBITDA/Adjusted EBITDA margin

The Group monitors the performance of its segments on an earnings before interest, tax, depreciation and amortisation ("EBITDA") basis. This measure includes any profit or loss from associates but excludes any exceptional items. Adjusted EBITDA margin (expressed as a percentage) is defined as adjusted EBITDA for a period divided by external revenue for the same period.

Adjusted operating profit/Adjusted operating profit margin

Adjusted operating profit or loss is stated before exceptional items and amortisation of acquired intangibles. Adjusted operating profit margin (expressed as a percentage) is defined as adjusted operating profit for a period divided by external revenue for the same period. 

Exceptional items

The Group presents as exceptional items on the face of the consolidated income statement those material items of income and expense which, because of their nature and/or expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the period, so as to facilitate comparison with prior periods. 

Net debt

The Group presents as "net debt" the net of cash and cash equivalents, borrowings and obligations under finance leases. The Group also includes in net debt any of the above items that have been classified as held for sale. 

3. New, amended, revised and improved Standards and Interpretations

New, amended, revised and improved Standards and Interpretations adopted in 2009 and which impact the Group

In 2009, the following were adopted by the Group:

IAS 1 Presentation of Financial Statements (Revised), effective for annual periods beginning on or after 1 January 2009, has been adopted during the year, leading to the Group including two new primary financial statements in these condensed consolidated financial statements: the consolidated statement of comprehensive income for the current year and prior year (see page 26) is presented (previously the Group presented the consolidated statement of recognised income and expense); and the consolidated statement of changes in equity (see page 28). Due to the Group changing itspresentationcurrency, which is a change in accounting policy under IAS 1, in 2009 (see Note 4 for further details), the adoption of this Standard also means the Group included to include a consolidated balance sheet at 1 January  2008 (which for convenience is shown as at 31 December 2007). 

IFRS 7 Amendment Improving Disclosures about Financial Instruments, effective for annual periods beginning on or after 1 January 2009, has been adopted during the year, leading to amendments in the way the Group discloses the nature and extent of liquidity risk arising from financial instruments and also how the Group discloses information about fair value measurements of financial instruments.

IFRS 8 Operating Segments, effective for annual periods beginning on or after 1 January 2009, has been adopted during the year, leading to a change in the way the Group discloses information about its segments (see Note 6).

New, amended, revised and improved Standards and Interpretations adopted in 2009 but have no impact on the Group

In 2009, the following were adopted by the Group, all of which are effective for annual periods beginning on or after 1 January 2009 (unless stated) but which have no impact on these condensed consolidated financial statements: 

§ IFRS 1 and IAS 27 Amendment Cost of Investment in Separate Financial Statements;

§  IFRS 2 Share-based Payment Vesting Conditions and Cancellations (Amendment); 

§  IAS 23 Borrowings Costs (Revised); 

§  IAS 32 and IAS 1 Amendment Puttable Financial Instruments and Obligations Arising on Liquidation; 

§  IAS 39 and IFRS 7 Amendments Reclassification of Financial Assets, effective for annual periods beginning on or after 1 July 2008;

§  2008 Improvements to IFRSs, effective for annual periods beginning on or after May 2008;  

§  IFRIC 13 Customer Loyalty Programmes, effective for annual periods beginning on or after 1 July 2008; 

§  IFRIC 15 Agreements for the Construction of Real Estate; and

§  IFRIC 16 Hedges of a Net Investment in a Foreign Operation, effective for annual periods beginning on or after 1 October 2008. 

3. New, amended, revised and improved Standards and Interpretations  (continued) 

New, amended, revised and improved Standards and Interpretations issued but not adopted in 2009

At the date of authorisation of these condensed consolidated financial statements, the following Standards and Interpretations, which have not been applied in these condensed consolidated financial statements, are in issue but are not yet effective for annual periods beginning on 1 January 2009:
    

    
                                                                  Effective date
 Revisions, amendments and improvements to Standards                            
                                                                                
 Amendments to IFRS 1Additional Exemptions                                      
 For First-time Adopters                                          1 January 2010
 Amendments to IFRS 1Limited Exemption from                                     
 Additional IFRS 7 Disclosures                                       1 July 2010
 Amendments to IFRS 2Group Cash-settled                                         
 Share-based Payment Transactions                                 1 January 2010
 IFRS 3Business Combinations (Revised)                               1 July 2009
 IFRS 9Financial Instruments * Classification and Measurement     1 January 2013
 Amendments to IAS 24Disclosure Requirements for                                
 Government-related Entities and Definition of a Related Party    1 January 2011
 IAS 27Consolidated and Separate                                                
 Financial Statements(Revised)                                       1 July 2009
 Amendment to IAS 32Classification of Rights Issues              1 February 2010
 IAS 39 AmendmentEligible Hedged Items                               1 July 2009
 IFRIC 9 and IAS 39 AmendmentEmbedded Derivatives                    1 June 2009
 2009 Improvements to IFRSs                                           April 2009
 New and amended IFRICs                                                         
 IFRIC 17 Distributions of Non-Cash Assets to Owners                 1 July 2009
 IFRIC 18 Transfers of Assets from Customers                         1 July 2009
 IFRIC 19Extinguishing Financial Liabilities with Equity             1 July 2010
 Instruments
 IFRIC 14 AmendmentPrepayments of a Minimum Funding Requirement   1 January 2011
                                                                                

                 

The directors do not currently anticipate that the adoption of these Standards and Interpretations will have a material impact on the Group's consolidated financial statements in the period of initial application. 

4. Statement of compliance and basis of preparation 

Statement of compliance

The Group's condensed consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2009.

Basis of preparation: (i) Preparation of the condensed consolidated financial statements on the going concern basis

The Group's operations, and the factors affecting their current performance and future development, are set out on pages 2 to 6 and 8 to 17. The Group's financial position, cash flows and borrowing facilities are described in the Group Finance Director's review on pages 17 to 21. 

The Group has a series of processes in place designed to ensure that it exercises control over its cash and borrowing position and remains within the covenant limits set out in the revised facility agreement. Covenants are in place for leverage, interest cover, free cash flow before debt service, capital expenditure and exceptional items. Annual cash targets have been set for each division, and progress against these targets is monitored monthly. Capital expenditure and cash restructuring costs are subject to approval under a scheme of delegated authority. Shorter-term (three month) cash flow forecasts are prepared each month and form the basis of the comparison to actual results. In addition, the Group operates an annual budget cycle and quarterly financial reforecasts of the entire consolidated income statement, consolidated balance sheet and consolidated cash flow statement. Furthermore, the Group maintains a programme of dialogue with its lending banks, including the formal presentation of results and budgets to the bank syndicate and individual meetings with lenders.

During 2009, the Group achieved great success in reducing costs to achieve a financial result and year-end borrowing position that were well within the limits of the revised facility agreement. This, the Group's internal forecasts for 2010 and 2011 and the Group's processes for monitoring compliance with the bank facility agreement (as described above), give the directors confidence that the financial covenants under the revised facility agreement will be met.  

After making enquiries, the directors have a reasonable expectation that the Group (and Mecom Group plc as a company) has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the Annual report and accounts.

Basis of preparation: (ii) Change in the Group's presentation currency

The Group has previously presented its condensed consolidated financial statements in pounds sterling. However, since a significant portion of the Group's operations are carried out in the Netherlands and Denmark (whose currency is effectively pegged to the euro) and a significant amount of the Group's net debt is denominated in euros, the directors have decided it is appropriate to change the Group's presentation currency to the euro. This change in accounting policy is expected to eliminate many of the foreign exchange differences in reported numbers from period to period. 

There have been no changes to the functional currencies or the underlying measurement of assets, liabilities, revenues and profits of the Company or any of its subsidiaries in the year. The Company's functional currency continues to be pounds sterling and so is different to the presentation currency of the Group. 

Since the change in presentation currency has been applied retrospectively, all comparative numbers in these condensed consolidated financial statements are described as "restated". Note 19 to these condensed consolidated financial statements sets out in detail how the consolidated income statement for the year ended 2008, the consolidated balance sheets at 31 December 2008 and 2007 and the consolidated cash flow statement for the year ended 31 December 2008, which were included in the 2008 Annual report and accounts and presented in pounds sterling, have been converted into euros. 

As required by IAS 1 Presentation of Financial Statements (Revised), the Group presents in these condensed consolidated financial statements a consolidated balance sheet at 1 January 2008 (which, for convenience, is shown as at 31 December 2007) which has been translated into euros.

Basis of preparation: (iii) Change to the Group's primary financial statements

As noted above, the Group adopted IAS 1 Presentation of Financial Statements (Revised) during the year, leading to the Group including two new primary financial statements in these condensed consolidated financial statements: the consolidated statement of comprehensive income for the current year and prior year (see page 26) is presented (previously the Group presented the consolidated statement of recognised income and expense); and the consolidated statement of changes in equity (see page 28).

Basis of preparation: (iv) Other

The condensed consolidated financial statements have been prepared on a historical cost basis, except for available-for-sale financial assets, derivative financial instruments, employee benefit assets and obligations and share-based payments that have been measured at fair value.

4. Statement of compliance and basis of preparation (continued)

As noted above, these condensed consolidated financial statements are presented in euros and, except when otherwise stated, all values are shown in millions, rounded to the nearest one hundred thousand euros. The significant exchange rates for the Group (against the euro), applied during the current year and prior year (and also spot rates at 31 December 2007 due to the inclusion of the consolidated balance sheet at that date), are as follows:

      Average rate for year ended 31 December    Spot rate at 31 December
                    2009                 2008      2009     2008     2007
 NOK                8.78                 8.23      8.29     9.75     7.94
 DKK                7.45                 7.46      7.44     7.44     7.46
 PLN                4.33                 3.51      4.11     4.12     3.60
 GBP                0.89                 0.79      0.89     0.97     0.73

Differences in spot rates from 31 December 2008 to 31 December 2009 have caused the Group's non-euro denominated assets and liabilities (primarily comprising amounts denominated in NOK and PLN) to increase (on a net basis) in value when retranslated into euros, resulting in foreign exchange differences of EUR2.0m being credited to reserves in the year ended 31 December 2009 (year ended 31 December 2008: debit of EUR49.4m; year ended 31 December 2007: credit of EUR18.5m).

Judgements made by management in the application of IFRS that have a significant effect on these condensed consolidated financial statements and estimates with a significant risk of material adjustment in the next year are discussed in Note 5 below.

5. Significant accounting judgements and key sources of estimation uncertainty 

In the application of the Group's accounting policies, the directors are required to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual outcomes could differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects that period only, or in the period of the revision and future periods if the revision affects both current and future periods. 

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, the directors have made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in these condensed consolidated financial statements:

(a) Taxation 

The Company and its subsidiaries are subject to routine tax audits and also a process whereby tax computations are discussed and agreed with the appropriate authorities. Whilst the ultimate outcome of such tax audits and discussions cannot be determined with certainty, management estimates the level of provisions required for both current and deferred tax on the basis of professional advice and the nature of current discussions with the tax authority concerned. 

(b) Recoverability of deferred tax assets

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that a taxable profit or loss will be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits. 

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Impairment of goodwill and acquired intangibles

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value-in-use of the cash-generating units to which the goodwill is allocated. Estimating a value-in-use amount requires the directors to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. At 31 December 2009, the carrying amount of goodwill was EUR183.1m (2008: EUR211.2m; 2007: EUR1,330.2m). 

The Group assesses at least annually whether there is any indication of any of its acquired intangibles (comprising customer relationships, brands and publishing rights) being impaired. If there is such an indication, the individual asset's recoverable amount is measured and, if necessary, an impairment charge is recorded. At 31 December 2009, the carrying amount of the Group's acquired intangibles was EUR623.1m (2008: EUR698.5m; 2007: EUR911.8m). 

If a cash-generating unit's goodwill was to be fully impaired following the annual assessment of the carrying amount of goodwill, any remaining excess of book value over recoverable amount would be allocated to other asset classes of the CGU, including its acquired intangibles.  

(b) Valuation of assets and liabilities in a business combination

The acquisition of subsidiaries is accounted for using the purchase method and the purchase consideration is allocated over the net fair value of identifiable assets, liabilities and contingent liabilities acquired with any excess consideration representing goodwill. In determining the fair value of assets, liabilities and contingent liabilities acquired, the directors may make significant estimates and assumptions, including those with respect to cash flows and unprovided liabilities and commitments.

(c) Useful lives of acquired intangibles

On acquisition of subsidiaries the Group will consider the useful lives of any intangible assets acquired. The length of useful lives of customer relationships is assessed based on the average lives of historic customer relationships for all main titles. The length of useful lives of brands and publishing rights is assessed based on the directors' view of the market, the length of the time that the main titles have been established and, in the case of publishing rights, the term of any contract. 

The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. 

(d) Provisions 

The amounts provided for restructuring and redundancy provisions, onerous lease provisions and other provisions are based on the directors' best estimates of costs likely to be incurred to the extent that they are recognisable under relevant reporting standards. To the extent that events or costs differ in future, the carrying amount of provisions may change. At 31 December 2009, the carrying amount of provisions was EUR62.8m (2008: EUR85.1m; 2007: EUR77.7m).  

(e) Employee benefit obligations

The cost of defined benefit pension plans and other retirement benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. At 31 December 2009, the carrying amount of employee benefit obligations was EUR69.9m (2008: EUR66.8m; 2007: EUR73.3m). 

6. Operating segments

For management and therefore internal reporting purposes, the directors have organised the Group into divisions based on geographical location. For internal reporting purposes, all significant operations that have been disposed of during the year are separated from the results of the "ongoing" businesses (regardless of whether they are accounted for as "discontinued operations" under IFRS in these accounts) and are shown separately, in aggregation, as "Mecom disposed". This allows the Board to focus on the financial performance of the continuing businesses, the total of which is shown in the Group's internal financial reports as "Mecom ongoing".   

The Group's reportable operating segments included within "Mecom ongoing" are:

·   The Netherlands (excluding the results of the disposed AD NieuwsMedia business - see Note 16);

·   Denmark;

·   Norway (excluding the results of the disposed north-western Norway business - see Note 16); and

·   Poland.  

"Central and other" is also part of "Mecom ongoing" and comprises the Group's head-office activities, which are primarily located in the UK, together with the costs of certain Group-wide functions including IT strategy, revenue development and Group internal audit. No operating segments have been aggregated to form the above reportable operating segments. 

The Group's directors (being the chief operating decision maker) monitor the operating results of its divisions separately for the purpose of making decisions about resource allocation and performance assessment. The Group's financial performance is based on an assessment of the results, which are measured consistently with operating profit or loss in the condensed consolidated income statement, of the above segments. Such monitoring and assessment of an individual division's financial performance is done primarily at the adjusted EBITDA level. 

All of the Group's reportable operating segments derive their revenue from the following revenue streams: advertising, circulation and other (comprising principally third-party printing and enterprises). Revenue from external customers is attributed to individual operating segments on an origin basis. Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties. Transactions between operating segments represented less than 1% of total Group revenue and operating costs.   

Exceptional items (comprising amounts recorded in operating costs, finance exceptional items and gains/losses on disposal of businesses and investments) are also monitored and assessed, in aggregate, by the directors at the operating segment level. Amortisation of acquired intangibles is also monitored and assessed by the directors at the operating segment level. 

Regular, non-exceptional finance income and expense and income taxes are managed on a Group basis and are not provided to the chief operating decision-maker at the operating segment level. These items are therefore not allocated to operating segments. 

Operating assets and liabilities comprise all classes of assets and liabilities, respectively. 

Digital revenue comprises revenue earned from either newspaper websites or standalone websites and is recorded against the relevant revenue category. Capital expenditure excludes any items purchased via a business combination or the separate purchase of publishing rights and, for the purposes of this Note, includes both property, plant and equipment additions and software additions. Additions to non-current assets comprises additions to goodwill, other intangibles assets, property, plant and equipment, interests in associates, investments and other financial assets arising from capital expenditure and business combinations but excludes such additions to employee benefit assets and deferred tax assets.  

The following tables present (i) financial information as internally reported to the directors for the years ending 31 December 2009 and 2008 in respect of the Group's reportable operating segments and (ii) reconciliations of financial information as internally reported to financial information as reported under IFRS.  

6. Operating segments (continued)

Financial information as internally reported to Board for year ended 31 December 2009

                                         The  Denmark   Norway   Poland      Central  Eliminations      Mecom       Mecom        Mecom
                                 Netherlands     EURm     EURm     EURm    and other          EURm    ongoing   disposed1  Group total
                                        EURm                                    EURm                     EURm        EURm         EURm

 Revenue:                                                                                                                                
 External sales:                                                                                                                         
   Advertising                         329.7    163.3    124.2     47.8            -             -      665.0        33.4        698.4   
   Circulation                         252.3    166.0     63.1     64.1            -             -      545.5        40.8        586.3   
   Other                                48.9     82.5     52.8     14.8            -             -      199.0        10.9        209.9   
 Total external revenue                630.9    411.8    240.1    126.7            -             -    1,409.5        85.1      1,494.6   
 Inter-segment sales                       -        -      1.1        -            -         (1.1)          -           -            -   
 Total revenue as internally           630.9    411.8    241.2    126.7            -         (1.1)    1,409.5        85.1      1,494.6   
 reported
 Total costs (including share                                                                                                            
 of results
 of associates, excluding            (539.9)  (396.3)  (225.8)  (118.5)       (10.5)           1.1  (1,289.9)      (79.2)    (1,369.1)   
 depreciation)
 Adjusted EBITDA as internally          91.0     15.5     15.4      8.2       (10.5)             -      119.6         5.9        125.5   
 reported
 Depreciation (including              (22.9)   (20.4)   (11.1)    (6.1)        (0.2)             -     (60.7)       (2.1)       (62.8)   
 amortisation of software)
 Adjusted operating                     68.1    (4.9)      4.3      2.1       (10.7)             -       58.9         3.8         62.7   
 profit/(loss) as internally
 reported
 Total exceptional items2             (48.7)   (12.7)    (6.5)    (5.6)       (34.2)             -    (107.7)       (3.9)      (111.6)   
 Segment result as internally           19.4   (17.6)    (2.2)    (3.5)       (44.9)             -     (48.8)       (0.1)       (48.9)   
 reported
                                                                                                                                         
 Assets and liabilities                                                                                                                  
 Operating assets                      812.0    248.0    281.6    108.6         24.6         (1.7)    1,473.1           -       1473.1   
 Operating liabilities               (616.9)  (162.5)  (111.3)   (23.3)      (281.0)             -  (1,195.0)           -    (1,195.0)   
 Other information                                                                                                                       
 Digital revenue                        18.3     20.7     23.6      4.4            -             -       67.0           -         67.0   
 Amortisation of acquired             (42.2)    (8.9)    (9.2)    (1.5)            -             -     (61.8)           -       (61.8)   
 intangibles
 Impairment charges in respect                                                                                                           
 of:
 property, plant and equipment,                                                                                                          
 software, associates and
 investments                           (0.6)        -    (2.7)    (4.0)            -             -      (7.3)           -        (7.3)   
 Adjusted EBITDA margin                14.4%     3.8%     6.4%     6.5%          n/a           n/a       8.5%        6.9%         8.4%   
 Adjusted operating profit             10.8%   (1.2)%     1.8%     1.7%          n/a           n/a       4.2%        4.5%         4.2%   
 margin
 Interests in associates                 6.9      3.1     29.3        -            -             -       39.3           -         39.3   
 Capital expenditure on                 12.3      4.7      3.9      0.2            -          36.8        0.2        37.0                
 property, plant and equipment
 and software3
 Additions to non-current               32.9     20.0      5.1      4.0          0.2             -       62.2         0.2         62.4   
 assets

1 For the year ending 31 December 2009, "Mecom disposed" comprised Mecom Germany, north-western Norway and AD NieuwsMedia. Further details of these disposals are contained in Note 16.  

2 For internal reporting purposes, total exceptional items include both operating and finance exceptional items together with all gains/losses on disposal of businesses and investments. 

3 Capital expenditure in this instance relates to book amounts. 

6. Operating segments (continued)

Reconciliations of financial information as internally reported to financial information as reported under IFRS for the year ended 31 December 2009

i Reconciliation of "Mecom ongoing" as internally reported to loss for the year from continuing operations as reported under IFRS
                                         Total      Add back results             Reverse            Amortisation            Amounts as
                                            of         of operations             finance                      of              reported
                                        "Mecom           disposed of         exceptional                acquired           for contin-
                                      ongoing"       but not classi-               items             intangibles          uing operat-
                                          EURm               fied as                EURm                    EURm            ions under
                                                        discontinued                                                              IFRS
                                                         under IFRS1                                                              EURm
                                                                EURm                      
 Revenue:                                                                                 
 External sales:                                                                          
   Advertising                           665.0                  16.8                   -                       -                 681.8
   Circulation                           545.5                  27.3                   -                       -                 572.8
   Other                                 199.0                   8.0                   -                       -                 207.0
 Inter-segment sales                         -                     -                   -                       -                     -
 Total revenue                         1,409.5                  52.1                   -                       -               1,461.6
 Total costs (including share                                                             
 of results                                                                               
 of associates, excluding            (1,289.9)                (47.9)                   -                       -             (1,337.8)
 depreciation)                                                                            
 Adjusted EBITDA                         119.6                   4.2                   -                       -                 123.8
 Depreciation (including                (60.7)                 (2.1)                   -                       -
 amortisation of software)                                                                
 Adjusted operating profit                58.9                   2.1                   -                       -                  61.0
 Exceptional items                     (107.7)                   0.1                34.7                       -                (72.9)
 Amortisation of acquired                    -                     -                   -                  (61.8)                (61.8)
 intangibles                                                                              
 Operating (loss)/profit                (48.8)                   2.2                34.7                  (61.8)                (73.7)
 Net finance expense before                                                                                                     (37.5)
 exceptional items
 Exceptional finance expense                                                                                                    (34.7)
 Loss on disposal of businesses                                                                                                  (0.3)
 and investments
 Loss before tax                                                                                                               (146.2)
 Income tax credit                                                                                                                21.3
 Loss for the year ended 31                                                                                                    (124.9)
 December 2009 from continuing
 operations

1 These items related to the Group's NWN and AD operations which were disposed of during 2009 (see Note 16). 

ii Reconciliation of "Mecom disposed" as internally reported to loss for the year from discontinued operations as reported under IFRS

                                                                     Note  EURm
 Segment result as internally reported for "Mecom disposed"                (0.1)
 Reverse operating profit of operations not classified as                  (2.1)
 discontinued operations under IFRS
 Net finance expense before exceptional items                              (1.8)
 Loss for the year ended 31 December 2009 from discontinued          10    (4.0)
 operations

                            

6. Operating segments (continued)

Financial information as internally reported to Board for year ended 31 December 2008
                                         The  Denmark   Norway   Poland      Central  Eliminations      Mecom       Mecom        Mecom
                                 Netherlands     EURm     EURm     EURm    and other          EURm    ongoing  disposed1,  Group total
                                        EURm                                    EURm                     EURm           4         EURm
                                                                                                                     EURm

 Revenue:                                                                                                                                
 External sales:                                                                                                                         
   Advertising                         406.9    202.7    147.3     56.6            -             -      813.5       137.5        951.0   
   Circulation                         251.2    167.0     62.1     63.7            -             -      544.0       110.8        654.8   
   Other                                54.4     99.3     61.5     20.0            -             -      235.2        32.7        267.9   
 Total external revenue                712.5    469.0    270.9    140.3            -             -    1,592.7       281.0      1,873.7   
 Inter-segment sales                       -        -      0.3        -            -         (0.3)          -           -            -   
 Total revenue as internally           712.5    469.0    271.2    140.3            -         (0.3)    1,592.7       281.0      1,873.7   
 reported
 Total costs (including share                                                                                                            
 of results
 of associates, excluding            (590.0)  (448.2)  (248.5)  (130.0)       (11.4)           0.3  (1,427.8)     (242.8)    (1,670.6)   
 depreciation)
 Adjusted EBITDA as internally         122.5     20.8     22.7     10.3       (11.4)             -      164.9        38.2        203.1   
 reported
 Depreciation (including              (25.9)   (18.1)   (11.1)    (6.6)        (0.4)             -     (62.1)       (9.3)       (71.4)   
 amortisation of software)
 Adjusted operating                     96.6      2.7     11.6      3.7       (11.8)             -      102.8        28.9        131.7   
 profit/(loss) as internally
 reported
 Total exceptional items2            (622.4)  (176.5)  (150.9)   (31.0)        (7.2)             -    (988.0)     (160.1)    (1,148.1)   
 Segment result as internally        (525.8)  (173.8)  (139.3)   (27.3)       (19.0)

RNS Number : 6993I
  Mecom Group PLC
  17 March 2010
   

17 March 2010

MECOM GROUP PLC

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009

PROFITS IMPROVE IN SECOND HALF: SUCCESSFUL COST-CUTTING SUBSTANTIALLY MITIGATES ADVERTISING DECLINES

Mecom Group plc ("Mecom" or "the Group") announces its results for the year ended 31 December 2009.

HIGHLIGHTS

·      Group adjusted EBITDA of EUR125.5 million, well ahead of previous expectations

·      Net debt of EUR373.4 million (3.1 times ongoing EBITDA) at 31 December 2009 (2008: EUR682.5 million)

·      Advertising revenues down 18 per cent - slowing decline in the second half of 15 per cent with this trend continuing into 2010

·      Circulation revenues resilient, with a slight increase during the year

·      Operating costs reduced by EUR140.0 million, outperforming from original cost cutting targeted reduction of EUR75.0 million

·      Over 75 per cent of lost revenue mitigated through cost reduction

·      Digital revenue growth to compensate in 2010 for moderating declines in print advertising 

·      New financial and operational targets established to measure success of the transformation

                                                 2009       2008       2009
                                                 EURm       EURm   vs. 2008
                                          
                                          
 Advertising revenue                            665.0      813.5      (18)%
 Circulation revenue                            545.5      544.0        - %
 Other revenue                                  199.0      235.2      (15)%
 Total revenue1                               1,409.5    1,592.7      (12)%
 Costs1                                     (1,289.9)  (1,427.8)  10% lower
 Group adjusted EBITDA2                         125.5      174.8      (28)%
 Adjusted earnings per share (euros)             0.07       3.09     (3.02)
 Net debt                                     (373.4)    (682.5)  EUR309.1m

Notes

1  Revenue and costs from ongoing businesses stated at constant currency

2 Total EBITDA from Group operations in 2009, compared with EBITDA from these operations for equivalent period of ownership in 2008, stated at constant currency and before exceptional items and the amortisation of acquired intangibles

Alasdair Locke, Chairman, said:

'Our results for 2009 confirm that, after a successful cost-cutting programme, we have come through an extremely difficult year for consumer advertising in good shape and we look forward to an improvement in profitability this year, even without growth in print advertising markets. Our executive team has led a marked transformation of the business away from the traditional publication of printed products.'

David Montgomery, Chief Executive, said:

'This last year has been an advertising crisis, not a newspaper crisis.  Our assets, both print and online, have been enhanced and have shown great resilience in maintaining readership and increasing audience and that bodes well for the future.  

'In addition to cost reduction, which has been at the top end of performance in the sector, we have continued to invest in digital development with a range of products that will drive revenues in the economic recovery.
      

'We are looking to reap the rewards from greater productivity from a continually reducing cost base as we further centralise within a single management structure.  Today we announce demanding targets for new revenue growth that will flow from our transformed company. 

'This hard won progress is underwritten by the willingness of staff and management to adopt a new model for a wider content business.  The robustness of our proposition is enshrined in the creativity and developing skills of an energetic staff who have embraced a strategy that is leading our industry to a new lease of life.'

Contacts:

Mecom Group plc             +44 (0) 207 925 7200

David Montgomery, Chief Executive 

Henry Davies, Group Finance Director

Jonathan Digges, Group Corporate Finance

M: Communications      +44 (0) 20 7920 2330

Nick Miles 

Eleanor Williamson 

A conference call and webcast briefing for analysts and investors will take place today at 9:30 am (GMT) on the following details:

Telephone conference call: +44 (0) 20 3003 2666 (for registration)

Webcast: a link to the webcast is available on www.mecom.com 

The presentation slides used at this briefing and a recording of the conference call and webcast briefing will be available on the "Investors" section of the Mecom website (www.mecom.com/financial-results.aspx).

CHAIRMAN'S STATEMENT

Overview

In my last annual Chairman's statement I told shareholders that we hoped to finalise a EUR156 million rights issue and re-financing of our bank facilities shortly thereafter.  I am pleased to report that both of these were successfully completed by the summer of 2009.  The Group's balance sheet concerns are now behind it.  Our results for 2009 confirm that, after a successful cost-cutting programme, we have come through an extremely difficult year for consumer advertising in good shape and we look forward to an improvement in profitability this year, even without growth in print advertising markets. Our executive team has led a marked transformation of the business away from the traditional publication of printed products, which is described more fully in the Chief Executive's Review and elsewhere in the Annual report and accounts.  

However, our confidence in the outlook for the Group has not been reflected in the Company's share price and we feel the same considerable frustration about this as our shareholders.  It has been gratifying to see the price moving in recent days and we are working closely with our shareholders and advisers to continue to generate further interest in the Group's shares.

To assist existing and prospective investors in monitoring our progress both this year and beyond, we have announced a number of operational and financial targets.  Operationally, we want to focus attention on our ability to grow revenues and profits in areas away from traditional print media.  We have therefore set targets which relate primarily to digital activities and Enterprise sales.   Financially, our confidence in our ability to de-leverage the Company, to the point where it is in a position to make dividend payments, is reflected in targets relating to cash conversion and leverage multiples.  We will report on progress against these targets, which are set out in the Chief Executive's Review, at the half-year results announcement and each results announcement thereafter. 

An improved outlook for cash flow reflects the final completion of our major investment in printing facilities in the Netherlands and the running down of exceptional costs as restructuring programmes end.  At least as importantly, it reflects the Board's commitment to managing the Group's balance sheet efficiently.  Annual bonuses for our senior executive team are now set substantially by reference to the achievement of cash generation targets.

Board 

I am pleased to report that the repopulation of our Board following last year's departures is complete.  During the course of 2009 we were delighted to welcome Michael Hutchinson and Gerry Aherne, whose enormous experience, respectively, in the commodities and fund management industries gives the Board an ideal balance between media and other disciplines.   I am grateful to the non-executive directors for their support and encouragement and to the executive team and all of our employees for their unfailing commitment during a year from which Mecom has emerged much stronger than when I last wrote to you.

Alasdair Locke

Chairman

CHIEF EXECUTIVE'S REVIEW

Overview

The perception of the newspaper sector is of unrelenting decline of print and advertising associated with it. According to this view the recession and advertising downturn was merely an exacerbation of that trend and the only remedy is continuing cost reduction.

However the reality is quite different. Mecom has withstood the recession in terms of newspaper readership and circulation levels. Readership of newspapers is being maintained partly with continuing expansion of new titles, as in the Netherlands for instance, and re-launch and enhancement of existing ones. The recessionary forces have failed to deliver the anticipated blow to either readership or sales. Our printed products continue to please our customers.

In addition we did not merely provide for the future by cost cutting. It is true that the old economic model for print is unsustainable. But our reforms, in which we continued to invest in 2009, demonstrate that not only do our printed products satisfy the audience but there is also a growing appetite for our content online. It is particularly gratifying that Norwegian market research reveals that an increasing number of 15 to 29 year olds are viewing our local content online and value it highly. This indicates that we have the potential to grow our market overall freed from the physical and geographical restrictions of solely printed content.

Despite the emphasis on achieving our financial restructuring and the effort involved in exceeding expectations in 2009 the modernisation process has moved on decisively. Three years ago there was deep scepticism and some resistance inside the company regarding these operating reforms. In the last year this has transformed. The initiatives to expand into other content products and enhance sales through commercial exploitation of content across all platforms are now coming thick and fast from the local management and staff. 2009 marked this turning point where the pressure for change, originated at the group level, has now been espoused with tremendous enthusiasm by our staff at local level to join what is the most significant revolution in the newspaper industry in its history. 

It is also crucial that we now harness these local initiatives and the talent behind them to roll out the modernisation process more quickly. That is why the group has announced the move to a single management within one company serving a market with a population of 65 million.

Without strenuous efforts the effect of advertising decline, the worst in newspaper history, would have cut deeper in 2009.  Our own advertising revenue fell by 18 per cent during the year, continuing a trend which started in 2008 and which - whilst easing considerably - has dragged on into 2010.  We cannot yet call an upturn but do take some comfort from more positive recent economic indicators in all of the countries in which we operate.  These tend to suggest some improvement in advertising overall.   

Notwithstanding the fall in advertising in 2009, we achieved a satisfactory outcome in the year of Group adjusted EBITDA of EUR126 million (2008: EUR175 million), year-end net debt of EUR373 million (2008: EUR683 million) and a cost programme which resulted in reductions of around EUR140 million, offsetting 75 per cent of our revenue decline and materially higher than anticipated at the beginning of the year.  In the year Group revenues (from ongoing businesses) fell from approximately EUR1.6 billion to EUR1.4 billion, largely as a result of declines in advertising.  Earnings per share from continuing operations in the year were 7 cents per share (2008: 260 cents per share). 

Against this background we have undertaken many initiatives to position Mecom for the future.   We cannot continue to rely solely on sales of - and advertising in - the printed product, although these will of course remain the mainstay of our profitability for many years to come.   We are now well on the way to being a truly multimedia company focused on: 

·      rapidly diversifying our sources of income; 

·      increasing flexibility amongst our journalists who have enthusiastically embraced the need to produce content for multiple outlets; 

·      improving the quality of our paid titles;  and

·      drawing on the benefits of our scale in sharing new product and content ideas and reducing costs; 

These initiatives have been accompanied by continued rigorous focus on cash protection and generation through related financial targets and the development of a number of new operational targets to drive growth in new revenues. 

Crucially, all of this is being led by a single European management group, comprising the three executive directors and five other senior executives.  Although our individual operating divisions continue to report separately and are managed directly by local executives, we increasingly view our business as serving a cohesive market of some 65 million potential customers to whom many of the same products can be sold.  The European management group underpins our belief that Mecom should be run as a wholly unified group, enabling centralised focus on areas such as revenue and product development and cost reduction, for which specific executives have been given responsibility.

Operational and financial targets

Underpinning our new model is a series of simple operational and financial targets, against which we will report our progress every six months. The three operational targets are intended to focus our attentions on the overwhelming requirement to develop new revenues and EBITDA for areas other than traditional print publishing, in which future advertising growth cannot be easily predicted.  They are:

1.     Growth in new revenues (including paid content and online advertising) by EUR100 million from a base of EUR67 million in 2009 or approximately 35 per cent per annum in the next three years;

2.     Growth in unique users of all of our online products from a starting point of 32 million in 2009 to 58 million in the year ending 31 December 2012, a growth of approximately 20 per cent per annum; and

3.     Growth in EBITDA generated by our Enterprises activities (that is, the sale of other goods and services to our readers) from EUR5 million in 2009 to EUR10 million in 2012.

Alongside these operational targets we have three financial targets to assist investors in assessing our progress, all relating to our ability to de-leverage the Group's balance sheet and improving earnings:

1.     A target adjusted EBITDA margin of 12.5 per cent in the year ending 31 December 2012;

2.     Cash conversion (after debt service) of EBITDA of more than 50 per centin the year ending 31 December 2012; and 

3.     Net debt of less than twice EBITDA at the end of 2012.

Divisional Highlights*

Apart from the general restoration of confidence in the Group's financial health that meeting these targets will achieve, our ability to reduce debt to this level will greatly assist us in the refinancing of our facility agreement which ends in 2013 and put us in a position to make dividend payments in respect of 2012 should we agree with our shareholders to do so at the time.

The Netherlands

Our Dutch business comprises both Wegener and Limburg Media Group and is the largest newspaper publisher in the Netherlands. Although currently operated separately, it remains our intention to merge the underlying businesses as soon as various tax issues in Wegener are resolved.   We expect this to happen during the course of 2010.

With overall 2009 revenues of EUR630.9 million (2008: EUR712.5 million), the Netherlands accounted for some 45 per cent of the Group's ongoing revenues. Its contribution to Group EBITDA in 2009 of EUR91.0 million (2008: EUR122.5 million) was relatively higher at 70 per cent of the Group's ongoing EBITDA (before central costs), reflecting the profitability of all of the major city-based newspapers and Wegener's weekly free-sheet business.  This is largely due to the success of a major restructuring programme in Wegener which materially offset advertising declines. 

During 2009, our Dutch business took steps to achieve its strategic aim of national coverage in printed products. The free weekly portfolio, which had been expanded through new free-sheets in the northern regions of the Netherlands in 2008, made in-roads into the Randstad region and in early 2010 we re-established a free weekly in the Limburg region. Autotrack, the number one Dutch car classified site, continued to perform well with revenue growth in a difficult market, highlighting the potential from our market-leading positions such as these. 

In 2009 the division had online revenues of EUR18.3 million (2008: EUR21.2 million). Digital development remains the central priority for the Netherlands which, with the lowest proportion of digital revenues of all of our divisions, needs to capitalise on a franchise which will soon reach almost every household in the Netherlands through one or more of its products.  A programme to redirect resources from the printed newspapers to online activities, to drive digital growth, was initiated in early 2010.  Although Enterprises revenues in the Netherlands fell slightly from EUR5.1 million to EUR4.9 million in the year, EBITDA improved and we are confident that the team and product portfolio we have in place will deliver attractive results in this area in future.

Denmark

Denmark, trading under the name of Berlingske Media, continued to suffer for much of the year from an advertising downturn which started much earlier than in any of our other divisions.   It is pleasing to note that this appeared to flatten at the end of 2009 and into 2010.  In the period under Mecom ownership, Berlingske Media has been dramatically restructured to operate under a single unified management structure, replacing a highly disaggregated structure with many surplus layers of management.  The result is a highly efficient entity which remains a centre of real innovation in driving forward the Group's transformation programme, with a wide range of exciting product launches and digital initiatives, including mobile launches and paid-for-content.  This transformation has occurred against a backdrop of significant cost savings, (down by approaching 20 cent since the beginning of 2007) and a reduction in FTEs (down 18 per cent over the same period).  Cost saving in Denmark was proportionately the best in the group in 2009, at 12 per cent (compared with 10 per cent group-wide), with these cost reductions mitigating 91 per cent of lost revenue.

Digital revenues fell from EUR22.8 million in 2008 to EUR20.7 million in 2009 - at first sight slightly disappointing but a highly creditable achievement in dire economic circumstances. 

In 2009, Berlingske's revenues declined to EUR411.8 million from EUR469.0 million, again largely due to advertising.   Management's success in mitigating this decrease in revenue through cost reduction can be seen in the division's EBITDA which fell only to EUR15.5 million from EUR20.8 million in 2008.    Enterprises revenues, an area on which the division will increase focus in 2010, increased from EUR2.8 million in 2008 to EUR3.7 million in 2009.     

At the forefront of the Group's digital development, Berlingske is very well positioned to take advantage of any improvement in the advertising market in 2010 and beyond, both nationally and in local and hyper-local markets.

Norway

Our Norwegian division, Edda Media, is unique in the Group for its concentration on a large number of small local franchises. This has not insulated it completely from the downturn in the wider Norwegian advertising market, which appears to have begun earlier (and to be ending earlier) than in our other markets.  The first two months trading of 2010 confirm an earlier improvement than in the other divisions, with advertising broadly flat on the prior year. Edda continues to enjoy the highest digital income in the Group, both absolutely and as a proportion of its total revenues, with total digital revenues of EUR23.6 million (2008: EUR28.1 million) representing almost 20 per cent of total advertising revenues.  Revenue from online newspapers increased by 25 per cent in 2009 and online newspaper unique users by 18 per cent, this effect being more than offset by falls in revenue from stand-alone websites, some of whose activities were curtailed during the year.  There is every sign in our local franchises in Norway that we can continue to increase our digital revenues significantly as a proportion of total revenues, and resources continue to be switched from print to online to achieve this.  By contrast, Enterprise revenues were negligible in Norway at EUR0.3 million and, given the quality of our Norwegian readership base, management recognise this is an area of significant opportunity for 2010. 

Total Norwegian revenues in 2009 were EUR240.1 million, a decline from EUR270.9 million in 2008.   As in other divisions, much of this decline was offset through cost reduction, resulting in a decrease in EBITDA to EUR15.4 million in 2009 from EUR22.7 million in 2008.

Poland

The smallest of our divisions, Poland, continues to trade as two separate companies: Presspublica (in which the Polish Treasury has a 49 per cent holding) and Media Regionalne, a wholly-owned subsidiary of Mecom. There are continuing and constructive discussions with the Polish Government regarding the privatisation of their stake in Presspublica, including the potential for an IPO. 

In 2009, Poland experienced the lowest revenue decline of our divisions, with a 10 per cent fall to EUR126.7 million from EUR140.3 million in 2008.  This masked relatively stable advertising revenue in the regionals business and more significant falls in advertising in Presspublica, which is more exposed to the national advertising market.   EBITDA in the Polish division suffered the lowest percentage fall in the Group - by 20 per cent from EUR10.3 million in 2008 to EUR8.2 million in 2009 reflecting FTE reductions and salary cuts to which the workforce have shown great commitment.  This reflects a strong performance from our local management team who have driven through difficult changes in the face of a tough advertising environment. Digital revenues in Poland grew strongly, with a 29 per cent increase from EUR3.4 million in 2008 to EUR4.4 million.  Unique users grew by almost 90% in 2009, including the effect of 15 new community portals in the Moje Miasto ('My City') and other initiatives.

Enterprise revenues in Poland were also impressive - at EUR5.6 million the highest in absolute terms in the Group.  These fell from EUR8.0 million in 2008, although this fall in part reflects the success of the strategy of the division changing its model for the sale of Enterprise products to reduce commercial risk. This is demonstrated in the move from marginally loss making Enterprise activities in 2008 to an EBITDA margin of 25 per cent in 2009. 

Poland remains our biggest market, in terms of demographics and has a growing economy. We are continuing to expand our footprint, operating in a national market online that is beyond our traditional print territories, to take advantage of this potential.  

Digital

Overall digital revenues fell from EUR75.5 million in 2008 to EUR67.0 million in 2009.   In recessionary markets where digital advertising was not immune to general advertising declines (although not as badly affected), we were pleased with this result. The resilience of our online newspaper sites led to revenue growth of 5 per cent in 2009, despite the overall market trends, and intense efforts to grow these revenues are yielding good early results in 2010. The decline felt in the standalone sites, which include recruitment and other classifieds, although significant, was less pronounced that in print. As mentioned above, we intend to report our total unique users, a key indicator of digital health, in future.   In 2009 this figure grew by 31 per cent to around 32 million with impressive growth figures in Poland and the Netherlands.   The latter is especially encouraging as we seek to drive digital growth there.

Outlook

We have no doubt that the steps we have taken to transform Mecom's business will help us through what remains of the recession in Europe.    Our commitment to grow new products and to continue to rationalise our cost base, particularly through the further centralisation of shared services and functions, is expected to increase our profitability in the years ahead.  At the same time, our traditional print circulation volumes continue to experience only modest declines, with our readers' appetite for high quality newspapers not affected by the recession.

As said, we do not know when European print advertising markets will recover but as they do, we will benefit from growth in our traditional advertising as well, the profit impact of which should have a materially positive impact on the Group's earnings over and above our own prognosis.  This was set out in our trading statement on 14 January 2010 and has not changed: we expect continuing but more modest declines, as demonstrated by the 8 per cent decline in February 2010 year to date advertising, in print advertising to be compensated for by increases in our online activities; circulation revenues to remain stable; costs to benefit from previously instigated and new reduction programmes; and EBITDA to rise by around 10 per cent.
        

This hard won progress is underwritten by the willingness of staff and management to adopt a new model for a wider content business. The robustness of our proposition is enshrined in the creativity and developing skills of an energetic staff who have embraced a strategy that will give our industry a new lease of life.

David Montgomery

Chief Executive

* All financial figures in these sections refer to the Group's ongoing businesses, before exceptional items and the amortisation of acquired intangibles, with comparisons at constant currency where applicable for ease of comparison, as set out in Note 6 to the condensed consolidated financial statements.

MANAGEMENT REPORT

FINANCIAL OVERVIEW1

                                      2009       2008  2009 vs. 2008
                                      EURm       EURm              %
                               
 Group Total2                  
 Revenue                           1,494.6    1,701.1          (14)%
 EBITDA                              125.5      174.8          (28)%
 Closing net debt                  (373.4)    (682.5)         309.1m
                               
 Ongoing operations3           
                               
 Revenue                           1,409.5    1,592.7          (12)%
 Total costs                     (1,289.9)  (1,427.8)          (10)%
 EBITDA                              119.6      164.9          (27)%
 EBITDA margin                        8.5%      10.4%      (1.9) pts
                               
 Revenue by country            
 The Netherlands                     630.9      712.5          (11)%
 Denmark                             411.8      469.0          (12)%
 Norway                              240.1      270.9          (11)%
 Poland                              126.7      140.3          (10)%
 Total                             1,409.5    1,592.7          (12)%
                               
 Revenue by category           
 Advertising                         665.0      813.5          (18)%
 Circulation                         545.5      544.0              -
 Printing                             70.9       93.7          (24)%
 Enterprises                          14.5       16.0           (9)%
 Other                               113.6      125.5           (9)%
 Total                             1,409.5    1,592.7          (12)%
 Of which Digital revenue             67.0       75.5          (11)%
                               
 EBITDA by country             
 The Netherlands                      91.0      122.5          (26)%
 Denmark                              15.5       20.8          (25)%
 Norway                               15.4       22.7          (32)%
 Poland                                8.2       10.3          (20)%
 Central                            (10.5)     (11.4)             8%
 Total                               119.6      164.9          (27)%

                                    First half                       Second half
                             2009     2008  2009 vs. 2008     2009     2008  2009 vs. 2008
                             EURm     EURm              %     EURm     EURm              %

Performance half by

half - ongoing
  
             Advertising    336.2    428.9          (22)%    328.8    384.6          (15)%
             Circulation    267.8    270.5           (1)%    277.7    273.5             2%
                   Other     99.2    116.7          (15)%     99.8    118.5          (16)%
           Total revenue    703.2    816.1          (14)%    706.3    776.6           (9)%
             Total costs  (656.7)  (724.9)             9%  (633.2)  (702.9)            10%
  
                  EBITDA     46.5     91.2          (49)%     73.1     73.7           (1)%
           EBITDA margin     6.6%    11.2%      (4.6) pts    10.3%     9.5%        0.8 pts

Notes

1.     All financial information above is presented before exceptional items and the amortisation of acquired intangibles and, for ease of comparison, at constant currency.

2.     'Group Total' represents the results of all businesses operated by the Group during 2009, including therefore Mecom Germany, north-western Norway and AD NieuwsMedia, which were disposed of during the year, compared with the results of these operations for an equivalent period of ownership during 2008.

3.     Ongoing operations represent the businesses owned by the Group at 31 December 2009, that is, excluding therefore from both reporting periods Mecom Germany, north-western Norway and AD NieuwsMedia, which were disposed of during 2009.

(The commentary below is on the results of the Group's ongoing operations included in the table above, as to discuss the underlying financial performance of the Group's businesses in 2009.)

Revenue (from ongoing operations) fell by 12 per cent during 2009, from EUR1,592.7 million to EUR1,409.5 million.  The revenue decline by country was in a relatively narrow range between 10 per cent in Poland and 12 per cent in Denmark: the total country decline being largely a reflection of the advertising experience described below and the relative share of advertising revenue in each country.

The largest single component of this fall by type was advertising revenue, which fell by EUR148.5 million to EUR665.0 million, some 18 per cent.  Advertising fell significantly in all the Group's operations, with the Dutch and Danish businesses, both of which economies experienced GDP shrinkage of over 4 per cent in 2009, experiencing losses of 19 per cent and a fall of 16 per cent in Poland and Norway.  The loss of advertising was most marked in the recruitment category, down 50 per cent, with display advertising (at 13 per cent decline) and other classified categories (at 10 per cent down) showing a more moderate deterioration.  In general, the Group's local markets, where relationships with advertisers are strongest, experienced a better outturn than in national markets.  The decreases slowed after the first half, with second half decline of 15 per cent compared with 22 per cent in the first half.

Circulation revenue across the Group increased by EUR1.5 million, with the recent historical pattern of volume decreases being offset by price increases continuing.  The rate of decline of volumes across the Group, whilst showing local variation, was not materially affected by the economic crisis.  Circulation revenue, of which approximately two-thirds is subscription income collected in advance, represented almost 40 per cent of  revenue (from ongoing operations) in the second half of 2009.  

Third-party printing revenue decreased by 24 per cent: the Group has reduced printing capacity over the past year as it has rationalised its own printing portfolio, and has also lost some third-party printing contracts in remaining facilities.  The EBITDA effect of the decline in printing was limited.  Enterprises revenue fell, by 9 per cent, but the fall was entirely explained by a change in the business model for the sale of books and other products in Poland, where the Group has stopped taking principal publishing risk and now operates largely on a commission basis - underlying revenue grew by 25 per cent.

Total costs from ongoing operations fell by 10 per cent, providing a significant mitigation against the fall in revenue.  The reduction was driven by lower staff costs, down 8 per cent as full-time equivalents ("FTEs") were reduced by over 850 from the start to the end of the year, lower production and distribution costs (down 12  per cent), reflecting fewer pages (from advertising declines and deliberately reduced editorial content), lower volumes of papers sold and decreases in third-party printing and distribution and a decrease in marketing and administrative costs.

EBITDA from ongoing operations fell from EUR164.9 million to EUR119.6 million, with total Group EBITDA (including the results of disposed of businesses for equivalent periods of ownership in both years) falling from EUR174.8 million to EUR125.5 million.  All divisions experienced a fall in EBITDA, ranging from 32 per cent in Norway to 20 per cent in Poland. Resulting EBITDA margin for the Group from ongoing operations was 8.5 per cent, down 1.9 percentage points from 2008.  Margins in the business ranged from 14.4 per cent from ongoing operations in the Netherlands (compared with 17.2 per cent in 2008), through 6.4 per cent and 6.5 per cent respectively in Norway and Poland (down from 8.4 per cent in the case of Norway and 7.3 per cent in the case of Poland), to 3.8 per cent in Denmark, compared with 4.4 per cent in 2008.

There was a marked increase in EBITDA from ongoing operations in the second half of the year, from EUR46.5 million in the first half of the year to EUR73.1 million in the second half.  There has been a continual reduction in the cost base from the first half of 2008, when it was EUR724.9 million, to the second half of 2009, when it was 13 per cent lower at EUR633.2 million.
                                                                                                                                    

DIVISIONAL REVIEWS

The Netherlands

                                                          2009              2008
 Population                                       16.4 million      16.3 million
 GDP (decline)/growth                                   (4.0)%              2.0%
 Newspaper market (circulation and            EUR1,901 million  EUR2,261 million
 advertising)
 Mecom paid-for circulation (dailies)              1.0 million       1.0 million
 Mecom free-sheet circulation (weeklies)          12.0 million       9.3 million
 Internet penetration                                      90%               86%

Market overview

The newspaper (circulation and advertising) market in the Netherlands was estimated to be worth EUR1,901 million in 2009 and has declined 16 per cent since 2008. Newspaper advertising was estimated to be worth EUR1,177 million in 2009 (of which EUR30 million is online advertising) and constituted 36 per cent of the total advertising market. Newspaper advertising declined by 19 per cent in 2009 compared with 2008.

The paid-for newspapers circulation declined by an average of 3.5 per cent over the year, with the national dailies suffering the most and the regional paid-for dailies declining by only 3 per cent in 2009.

There have been some major changes in the Dutch newspaper market in 2009. In July, Wegener sold its 37 per cent share in AD NieuwsMedia to PCM Uitgevers ("PCM"), thus giving PCM a 100 per cent share in AD NieuwsMedia. As part of this transaction, Wegener sold its printing plant in The Hague to PCM. Wegener also purchased PCM Lokale Media ("PLM"), a publisher of free door-to-door newspapers in Rotterdam. In turn, PCM was sold to the Belgian publishing group, De Persgroep. As a result of this transaction, NRC Handelsblad and nrc.next (together "NRC") had to be disposed for anti-trust reasons. The Dutch private equity company Egeria, together with television broadcaster Het Gesprek, became the new owner of NRC. 

Following these changes, there are three major operators in the Dutch market: Mecom, Telegraaf Media Group ("TMG") and Persgroep Nederland. TMG is the market leader in the daily newspaper market with a 30 per cent share of the total newspaper market. Mecom is second with a market share of 25 per cent of the total daily newspaper market. Persgroep has a 19 per cent market share. Mecom is the leader in the regional newspaper market with a 63 per cent share. The weekly free-sheet market is fragmented, with Mecom as the market leader with a 48 per cent share. 

The Netherlands has the highest internet penetration in Europe, reaching almost 90 per cent of the population. Online advertising sales in the Netherlands were approximately EUR356 million in 2009.  After a long period of rapid growth, online advertising experienced a decline, albeit at a slower rate than the rest of the advertising market. However, its market share increased again, from 10 per cent in 2008 to 11 per cent in 2009. 

Business overview

The Group's Dutch division comprises Wegener and Limburg Media Group ("LMG"). Wegener is the largest publisher of regional daily newspapers and free door-to-door newspapers in the Netherlands. LMG is the leading regional newspaper business in the Dutch province of Limburg.  

With its online portfolio of 54 newspaper websites and stand-alone niche websites, the Dutch division now has 8.5 million unique users per month, up from 6.3 million in 2008. The division owns 270 titles and this complements its newspaper readership of 15.0 million per week (2008: 11.3 million). Following the sale of the print plant in The Hague and closure of the Nijmegen plant, the Dutch division now operates four printing plants that print both Group and third-party publications.

Circulation of regional dailies across the Netherlands fell by 3 per cent. Following a successful subscriber retention strategy, paid-for circulation of the Wegener dailies declined by only 2 per cent in 2009 compared with 2.5 per cent in 2008, lower than the average decline of the overall market. This was despite the global economic crisis. The paid-for daily titles of LMG declined by 5.7 per cent, marginally higher than the national average due to the characteristics of an aging population and higher unemployment in the Limburg region, where LMG operates. However this decline does not reflect a decline in LMG's market share as other publishing companies in Limburg experienced greater losses and were forced either to cease operations or to merge with each other.

Both businesses were affected considerably by the economic crisis, with recruitment, motor vehicles and financial services advertising categories the hardest hit.  The experience in the weekly free papers was less severe than at the daily print papers, but with regional variations.  Wegener and LMG responded in many ways to the decline in the advertising market. Cost reduction measures started at the end of 2008, preventing a greater decline in operating results. Further contingency measures were taken during 2009 to mitigate the effects of the economic downturn.

In Wegener, 2009 was characterised by Wegener's "Delta" reorganisation. The Delta programme involved the merger of the publishing and back-office functions of the daily newspaper group, the free door-to-door newspapers and the holding company into a single publishing unit, named Wegener Media. The Delta programme was almost completed by the end of 2009, a huge accomplishment in a year of extraordinary economic conditions. A total reduction of 400 FTEs (full-time equivalents) was achieved as a result of this reorganisation.

The year also saw further development in print products. New weekly newspapers were developed in the Rotterdam and Limburg areas and urban magazines were introduced in Eindhoven and Nijmegen/Arnhem. Through the purchase of PLM, Wegener strengthened its position in the Randstad, an important market due to its urban regeneration programme. Presence in this same area was also strengthened thanks to the collaborative venture with Dagblad De Pers, the quality free daily newspaper. As a consequence of the acquisition of PLM, the collaboration with various medium-sized publishers in the province of North Holland, the acquisition of a few smaller publishers in the northern part of the country, and the introduction of De Weekkrant in Limburg, Wegener has achieved nationwide coverage of its free door-to-door newspapers. 

Various online initiatives were also introduced including two prize-winning (awards from the marketing organisation INMA) hyper-local websites for new housing estates in Apeldoorn and Zwolle. Among the existing internet activities, AutoTrack.nl managed to increase its revenues in 2009 even though the motor vehicles market was severely hit by the recession. For JobTrack.nl, the recruitment site, the economic crisis meant heavy pressure on revenues. The number of jobs posted declined, but to a significantly lower extent than the number of recruitment ads in the printed newspapers. Although the Dutch division has made significant progress in its online and digital activities, its performance is below the rest of the Group in terms of percentage revenues from digital activities and this represents a significant growth opportunity.

Enterprises activity made good progress in 2009. Its revenue equalled the performance in 2008, while operational profit more than doubled. The web shops of the regional dailies were overhauled completely, whilst web shops specialising in areas such as wine, health, and living were launched. A new web shop for the daily newspaper De Pers was also launched. 

Sources: PricewaterhouseCoopers Entertainment & Media Outlook towards 2013 - Trends in the Netherlands 2009 - 2013, HOI, Media Audit Bureau, Nielsen Media Research, CBS, Statistics Netherlands, CPB, Netherlands Bureau for Economic Policy Analysis, Carat. 

Note: the 2008 unique user figures were adjusted and recalculated from last year following a review of the definitions to ensure like-for-like comparison between the divisions.

Financial overview*

                                         2009     2008      2009
                                         EURm     EURm  vs. 2008
                                                               %
                                    
                                    
 Revenue           Advertising          329.7    406.9     (19)%
                   Circulation          252.3    251.2        0%
                         Other           48.9     54.4     (10)%
 Total revenue                          630.9    712.5     (11)%
 Total costs                          (539.9)  (590.0)        8%
 EBITDA                                  91.0    122.5     (26)%
 Depreciation                          (22.9)   (25.9)       12%
 Operating profit                        68.1     96.6     (30)%
                                    
 EBITDA margin %                        14.4%    17.2%  (2.8)pts
 Digital revenue                         18.3     21.2     (14)%

                  
                          First half                Second half
                     2009   2008      2009   2009   2008  2009 vs. 2008
                     EURm   EURm  vs. 2008   EURm   EURm              %
                                         %
 Advertising        167.6  214.8     (22)%  162.1  192.1          (16)%
 Circulation        124.7  124.6        0%  127.6  126.6             1%
 Other               24.2   27.0     (10)%   24.7   27.4          (10)%
 Total revenue      316.5  366.4     (14)%  314.4  346.1           (9)%
                  
 EBITDA              42.3   64.3     (34)%   48.7   58.2          (16)%
 EBITDA margin %    13.4%  17.6%   4.2 pts  15.5%  16.8%        1.3 pts
                  

* The results in this table exclude the AD NieuwsMedia and The Hague print plant operations disposed of during 2009.

Total revenue fell by 11 per cent, from EUR712.5 million to EUR630.9 million, driven by a fall in advertising revenue of 19 per cent and a fall in other revenue, mainly third-party printing, of 10 per cent.  The decline in advertising was most pronounced in the paid daily newspapers, down 26 per cent, compared with that in the weekly free-sheets of 14 per cent.  The performance of the weekly free-sheets included the benefits of the expansion of the De Weekkrant into the northern regions of the Netherlands.  The rate of decline in advertising decreased in the second half of the year, from 22 per cent in the first half to 16 per cent in the second half.  Display advertising fell by 14 per cent, other classified (including family announcements, which have substantially remained flat) fell by 7 per cent and recruitment advertising fell by 48 per cent.  Online revenues contracted by 14 per cent.  Circulation revenue was up EUR1.1 million, with lower subscription volumes offset by the benefit of price increases.  Declines in printing revenues reflected the closure of printing capacity and the loss of third-party print contracts.

Costs were reduced by 8 per cent, including the benefit of an underlying FTE reduction of 459 from 1 January 2009 to 31 December 2009, resulting in the mitigation of 61 per cent of the decline in revenue.  The cost reduction included the benefit of the Delta reorganisation, which combined many previously decentralised functions within a newly formed single media company within Wegener.

As a result, EBITDA was EUR91.0 million, down EUR31.5 million (or 26 per cent) from 2009, with EUR22.0 million of the decline occurring in the first half of the year and EUR9.5 million in the second.  EBITDA margin at 14.4 per cent was down 2.8 points on 2009; margin in the second half of the year was down only 1.3 points at 15.5 per cent.  Operating profit was EUR68.1 million, down EUR28.5 million from 2008.

Denmark

                                                          2009              2008
 Population                                        5.5 million       5.5 million
 GDP decline                                            (4.5)%            (0.9)%
 Newspaper market (circulation and            EUR1,154 million  EUR1,275 million
 advertising)
 Mecom paid-for circulation (dailies)              0.3 million       0.4 million
 Mecom free-sheet circulation (weeklies)           2.3 million       2.5 million
 Internet penetration                                      86%               85%

Market overview

The newspaper circulation market in Denmark was estimated to be worth EUR563 million in 2009, remaining constant from 2008. Newspaper circulations in the paid-for national daily market in Denmark declined by 6 per cent during 2009, and regional newspaper circulations declined by approximately 8 per cent.

Newspaper advertising was estimated to be worth EUR591 million in 2009 and constituted 35 per cent of the total advertising market against 37 per cent in 2008. Newspaper advertising declined by 17 per cent in 2009 compared with 2008.  Advertising in the paid-for newspapers declined by 23 per cent with nationals down by 22 per cent, regionals down by 25 per cent and locals down by 26 per cent.

There are two major newspaper publishers in the Danish market: Mecom's operations trading as Berlingske Media ("Berlingske") and JP/Politikens Hus, together representing 49 per cent of the total newspaper market.

Berlingske's largest title Berlingske Tidende, a national daily newspaper, has performed better than its main competitors Jyllandsposten and Politiken during 2009. Berlingske Tidende has lost 0.6 per cent of circulation, while Politiken has lost 6 per cent and Jyllandsposten lost 11 per cent. In the tabloid market, both B.T. (Berlingske) and Ekstra Bladet (JP/Politikens Hus) have lost significant circulation during 2009. B.T. has performed marginally better than Ekstra Bladet. The tabloid market circulation declined by almost 20 per cent during 2009. 

After the closure of Nyhedsavisen in 2008, the Danish free-sheet market consists of three national publications: MetroXpress (Metro International), 24Timer (Metro International) and URBAN (Berlingske). MetroXpress has the largest share in the free-sheet market at 40 per cent. Berlingske has an estimated 29 per cent share of the free-sheet market. In 2009, URBAN implemented a new strategy focusing on major Danish cities and reduced the number of copies distributed significantly, however, without compromising its readership. Other free-sheet titles adopted similar strategies, although URBAN had better success and increased the number of readers per copy by 31 per cent, its competitors only managed to increase it by 23 per cent (MetroXpress) and 19 per cent (24 Timer). 

Online advertising is estimated to be worth EUR437 million. Banner advertising continued to grow by 7 per cent year-on-year and search advertising was estimated to have grown by 44 per cent in 2009 whilst online classifieds and recruitment segment declined by 10 per cent. 

Business overview

The activities of Berlingske span across Jutland and Zealand from its headquarters located in the centre of Copenhagen.  It has a portfolio of three national daily paid-for titles, one national daily free-sheet, a weekly national paid-for newspaper, two national business magazines, six local daily newspapers operating under the name of Midtjyske Medier and one partly owned regional newspaper operating under the name of Syddanske Medier.  In addition, Berlingske operates 55 websites, nine mobile sites and 12 online TV channels.  

Its publications have a readership of more than 2.6 million readers per week (2008: 2.5 million) and its online operations attract more than 8.3 million unique users every month (2008: 7.7 million). Berlingske operates five (one of which is jointly owned) printing plants that print both Group and third-party publications.

Even though 2009 was a year overshadowed by the global financial crisis, Berlingske took the opportunity to test new business models and reduced costs in its traditional businesses. 

The high profile Climate Conference ("COP 15"), which took place in Copenhagen at the end of 2009, represented an opportunity for the editorial and marketing departments to collaborate more closely. For the first time journalists and staff from advertising sales, Enterprise and marketing worked together as one team, developing and sharing ideas and initiatives. This horizontal model was a significant success and will be adopted in future co-operation opportunities.

In 2009, Berlingske launched more than 40 new products. One highlight is the launch of the digital paid-for product UGEN (The Week), a lifestyle magazine which draws on new and unique content delivered by Berlingske's well-known titles. The online guide aok.dk (Everything about Copenhagen) developed an application for the iPhone which enhances the experience of the user and provides another channel for its readers to obtain up-to-date information. More applications for iPhone are intended to be launched by Berlingske's recently established mobile development department in the coming years.

Berlingske also decided on a new hyper-local strategy for its 47 local weeklies and its websites. The new strategy included the hyper-local website dinby.dk ('Your City') in both the west and east areas of Denmark. The portal is connected to the free local weekly papers and has expanded with additional websites such as  lokalguiden.dk (a guide to local business life) and navne.dk (a portal enabling individual consumers to make digital advertisement to mark special family events like weddings, birthdays and funerals). In addition, Berlingske introduced two new areas dedicated to business people and wine enthusiasts to its leading web shop lidtmere.dk.

In addition, Berlingske has also been focusing on a further rationalisation of its existing operations. In 2009, the company managed to restructure its historically unprofitable printing operations into a sustainable business. Furthermore, the daily newspaper for Denmark's second biggest city, ?hus Stiftstidende, and the local newspaper business in the Jutland peninsula (Midtjyske Medier) underwent a significant transformation which entailed them being reorganised into smaller, more efficient, units with greater focus on the local communities they serve.

Sources: OECD 19 November 2009, Danske Dagblades Forening, Danmarks Statistik, FDIM, Gallup, Dansk Oplagskontrol, Danish Ministry of Finance, www.internetworldstats.com, www.delokaleugeaviser.dk.

Financial overview

                                                2009     2008  2009 vs. 2008
                                                EURm     EURm              %
                                           
 Revenue                  Advertising          163.3    202.7          (19)%
                          Circulation          166.0    167.0           (1)%
                                Other           82.5     99.3          (17)%
 Total revenue                                 411.8    469.0          (12)%
 Total costs                                 (396.3)  (448.2)            12%
 EBITDA                                         15.5     20.8          (25)%
 Depreciation                                 (20.4)   (18.1)            13%
 Operating (loss)/profit                       (4.9)      2.7         (281)%
                                           
 EBITDA margin %                                3.8%     4.4%       (0.6)pts
 Digital revenue                                20.7     22.8           (9)%

                            First half                   Second half
                     2009   2008  2009 vs. 2008   2009   2008  2009 vs. 2008
                     EURm   EURm              %   EURm   EURm              %
                  
 Advertising         82.5  108.3          (24)%   80.8   94.4          (14)%
 Circulation         81.2   83.9           (3)%   84.8   83.1             2%
 Other               42.6   49.4          (14)%   39.9   49.9          (20)%
 Total revenue      206.3  241.6          (15)%  205.5  227.4          (10)%
                  
 EBITDA               0.9   11.7          (92)%   14.6    9.1            60%
 EBITDA margin %     0.4%   4.8%       (4.4)pts   7.1%   4.0%         3.1pts

Total revenue fell by EUR57.2 million, or 12 per cent, to EUR411.8 million, driven by a decline in advertising revenue of 19 per cent and other revenue reductions of EUR16.8 million.  Advertising in Denmark has experienced a decline since the end of 2006, with the economic crisis in 2009 exacerbating previous competitive pressures fuelled by saturation in the daily national free-sheet market.  Since 2006, Berlingske has cumulatively lost approximately 35 per cent of its advertising revenue.  The second half of 2009 saw a slowing trend in the loss of advertising, with a decline that, at 14 per cent, was 10 percentage points better than in the first half of 2009.  Advertising in the daily Berlingske Tidende, the division's largest paper, was most affected, including a severe decline in recruitment advertising, with more moderate losses in the tabloid and regional daily newspapers and also in URBAN, the division's national free daily paper. 

Circulation revenue was down EUR1.0 million, or 1 per cent, to EUR166.0 million, with increased revenues from Berlingske Tidende offsetting declines in other paid-for titles.  This was particularly pronounced in the second half of the year, where year-on-year increases in Berlingske Tidende circulation (benefiting in part from distribution service improvements) were compounded by price increases.

Online revenue fell by 9 per cent, with the fall in stand-alone websites in the hard-hit advertising sectors of recruitment and motor vehicles contributing significantly to the decrease.  Other revenue declines included the accounting effect of the acquisition of the 50 per cent of a print joint venture not previously owned by Berlingske in the early part of the year, as well as declines in third-party distribution and other non-core revenues.

Total costs fell by 12 per cent, or EUR51.9 million, to EUR396.3 million, after a reduction of costs of 7 per cent in 2007 and 2008.  FTEs were reduced by 221 during the year, following a 10 per cent reduction in 2008, with Berlingske now employing 1,909 FTEs compared with 2,661 at the start of 2007.  

EBITDA was, as a result, EUR15.5 million, with a margin of 3.8 per cent, compared with a result of EUR20.8 million in 2008 and margin of 4.4 per cent.  Substantially all of the EBITDA was earned in the second half of the year: Berlingske has a seasonal balance of advertising revenue in the second half of the year which, when allied with the reduced cost base in 2009, resulted in a margin of 7.1 per cent and EBITDA of EUR14.6 million.  Operating loss was EUR4.9 million, compared with an operating profit of EUR2.7 million in 2008.

Norway

                                                            2009            2008
 Population                                          4.8 million     4.7 million
 GDP (decline)/growth                                     (1.4)%            2.1%
 Total newspaper advertising market (including    EUR694 million  EUR859 million
 inserts and free-sheets)
 Mecom paid-for circulation (dailies)                0.2 million     0.2 million
 Mecom free-sheet circulation (weeklies)             0.4 million     0.4 million
 Internet penetration                                        89%             87%
    
Market overview

The total advertising market declined by 15 per cent in 2009. Newspaper advertising (excluding inserts and free-sheets) accounted for 35 per cent of the total advertising market in 2009 and decreased by 20 per cent compared to 2008. Online advertising declined by 8 per cent in 2009 and now constitutes 11 per cent of the total advertising market, up from 10 per cent in 2008.  The online advertising market was estimated to be worth EUR195 million in 2009.  Norway is one of the leading European internet markets with internet penetration of approximately 90 per cent. 

Total newspaper circulation declined by 3.7 per cent in 2009. There are four major operators in Norway who, between them, account for 68 per cent of the total newspaper circulation. Schibsted has 33 per cent of the market share,   A-Pressen has 17 per cent, with strong positions in the local newspaper segment and Edda Media has 10 per cent, geographically concentrated in local municipalities and Polaris Media has 8.5 per cent market share. The weekly free-sheets market consists of local community-based weeklies, where Edda Media is the leading player with a total of 10 titles and a 56 per cent share of the free-sheet advertising market.

Business overview

Edda Media is the second strongest player in the local media market in Norway, mainly positioned, following the disposal of its north-western assets to Polaris Media ASA in April 2009, in the eastern (and most populated) part of the country.  Edda Media operates through eight regional media houses, reaching out to more than one million Norwegians daily. The product portfolio comprises 31 newspapers (dailies, weeklies and free-sheets), 57 websites, 19 mobile sites, and two local radio stations. Edda Media's publications have a readership of more than one million per week (2008: 1.1 million) and its online operations attract more than 5.3 million unique users per month (2008: 5.1 million). Edda Media operates three printing plants that print both Group and third-party publications.  

In 2009, Edda Media maintained its share of the newspaper market flat at 10 per cent, although the circulation declined by 3.3 per cent from 2008. The overall decline in the paid-for newspaper circulation in Norway was 3.7 per cent. Despite decline in volumes, Edda Media maintained circulation revenues due to cover price increases.

Edda Media increased its share of the newspaper advertising market (excluding inserts and free-sheets) from 13 per cent to 14 per cent for comparable titles.  Within the free door-to-door newspaper segment, Edda Media increased its market share from 53 per cent to 57 per cent.  In addition, within online advertising, Edda Media experienced a strong growth (27 per cent) in an otherwise declining market.

Despite the media industry being hit by the recession heavily in late 2008 and through 2009, Edda Media managed to grow its total audience. By focusing on the core business, which is to deliver local content to the local market both in print and online, the media houses strengthened their positions in their core markets. Although the number of newspaper readers declined (at rates marginally less than the total market), the media houses gained a significant growth in the digital user market, both in the daily and weekly number of unique visitors. Some media houses witnessed a digital user growth of up to 25 per cent. The combined audience of print and online has resulted in a growth in reach of the local user market. The total number of users of Edda Media's brands is increasing and is typically 10 to 15 per cent higher than the number reached and covered by the printed newspaper alone. In some markets the brands have 85 per cent household reach. 

The digital services attracted local consumers outside the typical newspaper reader segment, but the digital growth was to a larger extent driven by the newspaper readers also using online services.

The goal of Edda Media and its local media houses is to build a similar strong digital position in both the local advertising market and the local user market as the newspapers holds in the printed market. The aim is to reach as many daily online users as the number of daily readers of the printed version. By the end of 2009, some of the media houses reported significant growth in daily online users, reaching 50 per cent share of daily print readership. Strong local digital footprints will enable the media houses to attract additional digital revenues and increase their digital revenue share. The target for Edda Media is to double the digital share from 15 to 30 per cent of total revenues within two years. 

The Edda Media strategy of strengthening the media houses' local position requires innovation and commitment focused not only on different products but primarily on the needs of the users and their changed media habits. This transformation has become a way of life for the people working in media houses. Many organisations have been restructured, and products have been renewed to an extent and with a speed no one could imagine just a couple of years ago.

As one of the Group's new strategies is to focus on the local markets, Edda Media restructured its operations and reduced its presence in the national market. Edda Media sold or closed down some of its local radio stations and withdrew from the Sunday newspaper market. A new adjusted organisation was established in late 2008 and early 2009, with a new CEO and senior management team, which has marshalled the implementation of the new strategy. The cost base has been adjusted and is continuously monitored against the current economic environment and market conditions. In 2009, a number of significant cost saving programmes were implemented; whose benefits will be delivered in full in 2010. 

Several bold transformation initiatives have been adopted and are expected to flourish in 2010. The digital resources have been strengthened despite the recession providing Edda Media with a stronger digital footprint. 

Sources: OECD 19 November 2009, TNS-Gallup, Norwegian Circulation Control, IRM, www.internetworldstats.com.  

Note: the 2008 unique user figures were adjusted and recalculated from last year following a review of the definitions to ensure like-for-like comparison between the divisions.

Financial overview*

                                         2009     2008  2009 vs. 2008
                                         EURm     EURm              %
                                    
                                    
 Revenue           Advertising          124.2    147.3          (16)%
                   Circulation           63.1     62.1             2%
                         Other           52.8     61.5          (14)%
 Total revenue                          240.1    270.9          (11)%
 Total costs                          (224.7)  (248.2)             9%
 EBITDA                                  15.4     22.7          (32)%
 Depreciation                          (11.1)   (11.1)              -
 Operating profit                         4.3     11.6          (63)%
                                    
 EBITDA margin %                         6.4%     8.4%       (2.0)pts
 Digital revenues                        23.6     28.1          (16)%

                            First half                   Second half
                     2009   2008  2009 vs. 2008   2009   2008  2009 vs. 2008
                     EURm   EURm              %   EURm   EURm              %
                  
 Advertising         62.8   78.1          (20)%   61.4   69.2          (11)%
 Circulation         30.6   30.3             1%   32.5   31.8             2%
 Other               25.7   30.6          (16)%   27.1   30.9          (12)%
 Total revenue      119.1  139.0          (14)%  121.0  131.9           (8)%
                  
 EBITDA               5.8   16.6          (65)%    9.6    6.1            57%
 EBITDA margin %     4.9%  11.9%       (7.0)pts   7.9%   4.6%         3.3pts

*the results in this table exclude the operations in north-western Norway disposed of in April 2009.

Total revenue in Norway fell by 11 per cent from EUR270.9million, to EUR240.1 million.  The fall in advertising revenue, at 16 per cent to EUR124.2 million, was less marked than in some other countries since Norway had entered the advertising crisis earliest, in the second half of 2008.  Display advertising in the division's local markets was less affected, at 10 per cent deterioration, than either recruitment (down 37 per cent) or other classified (down 15 per cent).  The second half advertising fall of 11 per cent was the lowest of all our divisions, aided by the easing comparatives and relatively improved economic conditions. 

Circulation revenue increased by 2 per cent, with price benefits averaging 6 per cent offsetting volume declines of circa 3 per cent.  Online revenue fell by 16 per cent, including a fall in online advertising of 9 per cent: a decision was made during the year to reduce Edda Media's participation in some national niche markets and to focus online sales activity through the local newspaper operations.  As a result of this and the other local newspaper online initiatives, the stand-alone websites experienced a decline of 27 per cent, whereas the local newspaper websites grew revenue by 24 per cent.   Other revenue declines of 14 per cent were largely the result of lower third-party printing.  

Total costs reduced by 9 per cent during 2009, arresting a previous trend of cost inflation driven by buoyant economic pressure and product expansion.  FTEs were reduced by 130, with a closing FTE count of 1,423, compared with 1,720 at the start of 2007.

Full-year EBITDA was EUR15.4 million, down from EUR22.7 million in 2008.  The second half of 2008 and the first half of 2009 both recorded EBITDA of around EUR6 million, as the sharply reduced advertising revenue had yet to be mitigated by reductions in cost: the second half of 2009 showed some progress, with EBITDA of EUR9.6 million and an EBITDA margin of 7.9 per cent compared with 4.9 per cent in the first half of 2009.  Operating profit for the year was EUR4.3 million, down from EUR11.6 million in 2008.

Poland

                                                           2009            2008
 Population                                        38.1 million    38.0 million
 GDP growth                                                1.4%            5.0%
 Newspaper market (circulation and advertising)  EUR460 million  EUR520 million
 Mecom paid-for circulation (dailies)               2.5 million     2.6 million
 Mecom free-sheet circulation (weeklies)            1.5 million     1.4 million
 Internet penetration                                       52%             40%

Market overview

The newspaper market (circulation and advertising) in Poland was estimated to be worth EUR460 million in 2009. The total advertising market decreased by 13 per cent in 2009 compared to a 10.5 per cent growth in 2008. The newspaper advertising market dropped by 13 per cent in 2009 and represented 13 per cent of the total advertising market. 

The newspaper circulation market is estimated to be worth approximately EUR301 million. Circulation volumes in the paid-for national and daily regional markets declined by 7 per cent and 5 per cent, respectively, in 2009. This downward trend is caused by a combination of readers migrating from print to online and the global economic downturn.

There are four major operators in Poland who, between them, account for 66 per cent of the total paid-for newspaper market. Mecom's operations include Rzeczpospolita, the leading upmarket national daily newspaper, business daily Parkiet and 10 regional newspapers across Poland, giving an 18 per cent share of the total market. Axel Springer, with a 19 per cent share, publishes Fakt, Poland's largest national newspaper. Grupa Wydawnicza Polskapresse is the largest publisher of regional newspapers with a 14 per cent share of the total newspaper market. Agora publishes the daily Gazeta Wyborcza and the national free paper Metro, and has a 15 per cent market share. 

The withdrawal of Dziennik, a key competitor to Rzeczpospolita, was the most important event in the national dailies market in 2009. After three years of strong competition with Rzeczpospolita and Gazeta Wyborcza, Dziennik was merged with Gazeta Prawna and a new title Dziennik Gazeta Prawna was launched, mainly to compete with Rzeczpospolita on the business subscription market. A relatively constant decline in sold circulation and readership indicates that the new title is under pressure and a further decline is expected.

Online advertising grew by 7 per cent in 2009, constituting 13 per cent of the Polish advertising market. There are approximately 15 million internet users in Poland, an 8 per cent increase from 2008. Internet penetration in 2009 was 52 per cent, a 12 percentage points increase from 2008. Presspublica increased its unique users by 33 per cent and Media Regionalne by 121 per cent. 

Business overview

The Group's Polish division comprises Media Regionalne, a regional newspaper and content business, and a 51 per cent share of Presspublica, which is the owner of Rzeczpospolita. Presspublica also operates the business website parkiet.com. The Polish division owns 25 titles, it also operates 51 websites and eight small printing plants which print both Group and third-party publications. The Polish publications have a readership of more than 4.7 million per week (2008: 5.3 million) and its online operations attract more than 8.1 million unique users per month (2008: 5.4 million).

Although the national dailies advertising market decreased by 17 per cent in 2009, Rzeczpospolita fared better than the market average with 9 per cent decline. However, Parkiet, whose advertising revenue is closely linked to the Warsaw stock market performance, noted a 28 per cent decrease and Zycie Warszawy a 37 per cent decrease. Advertising in the dailies of Media Regionalne declined by 11 per cent with a stable first half performance contrasted with a decline in the second half as the economic recession affected the wider Polish economy.

Rzeczpospolitamaintained its market share in terms of number of sold copies and revenue as a result of consistent high pricing and a wide-range of editorial and marketing initiatives. Similarly to circulation, readership of national dailies is decreasing due to the growth of the internet. The circulation of Media Regionalne declined by less than 3 per cent in 2009 and fared better than the market average decline of 7 per cent. Such result was achieved despite challenging market conditions following strong focus on developing new products and successful marketing initiatives.

Although cost savings was a key focus in 2009, maintaining the momentum on online growth by investing in new and existing online and cross-media activities were also important to ensure diversity and top line growth in future years. Illustrations of this are long-term investments in the development of the Moje Miasto ('My City') websites whereby 16 new "lite" versions of the fully-fledged Moje Miasto were launched in conjunction with the introduction of a new web portal targeting local businesses, StrefaBiznesu.pl.

As part of the transformation, Presspublica merged the economic editorial departments of Rzeczpospolita with Parkiet into one newsroom producing business and economic content for both print and online. It is the biggest journalist team in Poland specialising in economic, business and financial news. After a year of consolidating regional publishing houses into one business body, Media Regionalne also embarked on a new approach to newsroom operations by implementing Newsroom 2.0 whereby single newsrooms will be able to produce content for both print and online.

A new model for advertising departments was also launched in Media Regionalne and will be implemented in 2010. It aims to provide customers with a full range of multimedia advertising proposals customised to their needs via the professional advice of trained sales people. This will enable Media Regionalne to provide new and quality advice in the area of customer service for its advertisers. In addition, the media house concept has also been developed, involving print and digital products sharing the same resources and editorial content. 

Several initiatives directed to increase the attractiveness and competitiveness of online products were introduced. Presspublica launched tv.rp.pl in response to the increase in demand of online video content.  In October, tv.rp.pl recorded 44,000 unique users and this number is expected to significantly grow in the future. The improvement of the Zycie Warszawy internet site, zw.com.pl, produced an increase in unique users by more than 50 per cent. In addition, online paid-for content has and will continue to experience considerable growth and is expected to become a strong revenue stream for Presspublica. 

The online revenue of Media Regionalne grew in both display and classified advertising, with revenue in Media Regionalne's Enterprise operation also growing considerably as a result of SMS premium rate campaigns.

Sources: OECD 19 November 2009, GUS, Zenith Optimedia, CR Media Consulting, Expert Monitor, ZKDP, NetTrack, Millward Brown PBC, Gemius Traffic, www.internetworldstats.com. 

Note: the 2008 unique user figures were adjusted and recalculated from last year following a review of the definitions to ensure like-for-like comparison between the divisions.

Financial overview

                                         2009     2008  2009 vs. 2008
                                         EURm     EURm              %
                                    
                                    
 Revenue           Advertising           47.8     56.6          (16)%
                   Circulation           64.1     63.7             1%
                         Other           14.8     20.0          (26)%
 Total revenue                          126.7    140.3          (10)%
 Total costs                          (118.5)  (130.0)             9%
 EBITDA                                   8.2     10.3          (20)%
 Depreciation                           (6.1)    (6.6)             8%
 Operating profit                         2.1      3.7          (43)%
                                    
 EBITDA margin %                         6.5%     7.3%      (0.8) pts
 Digital revenue                          4.4      3.4            29%

                           First half                 Second half
                    2009  2008  2009 vs. 2008  2009  2008  2009 vs. 2008
                    EURm  EURm              %  EURm  EURm              %
                  
 Advertising        23.3  27.7          (16)%  24.5  28.9          (15)%
 Circulation        31.3  31.7           (1)%  32.8  32.0             3%
 Other               6.7   9.7          (31)%   8.1  10.3          (21)%
 Total revenue      61.3  69.1          (11)%  65.4  71.2           (8)%
                  
 EBITDA              2.7   4.8          (44)%   5.5   5.5             0%
 EBITDA margin %    4.4%  6.9%       (2.5)pts  8.4%  7.7%         0.7pts

Total revenue in Poland fell by 10 per cent during 2009, from EUR140.3 million to EUR126.7 million.  Advertising fell by 16 per cent, influenced by a number of factors.  In the first half of the year, the regional business was marginally up, as organic expansion offset what were then only very early effects of the economic crisis, whereas the national business (mainly the Rzeczpospolita title) was affected severely by competition in the national advertising market, being down over 30 per cent.  In the second half of the year, the effect of the economic crisis hardened in the Polish regions, resulting in a decline of almost 10 per cent, whereas the decline in the national business, whilst still severe, reduced to a little over 20 per cent.  Advertising in our national business was also affected by declines in the national business daily which relies in large part on advertising from public offering notices.

Circulation revenue increased by 1 per cent, from EUR63.7 million to EUR64.1 million.  In the national business, Rzeczpospolita, in common with other national opinion-forming papers, suffered more pronounced volume declines than in recent years, at 10 per cent; in the regional business, declines were lower at 4 per cent.   Higher prices, in the case of Rzeczpospolita partly achieved through a restructuring of subscription packages to derive online revenue from the paper's extensive data bank, largely compensated for these volume declines.

Online revenue grew impressively by 29 per cent, driven by a doubling of unique users within the regional business as the Moje Miasto project has been launched across the major Polish cities.  Other revenue fell by 26 per cent, from EUR20.0 million to EUR14.8 million.  This included a reduction of EUR2.4 million in Enterprises revenue as the business model for the sale of book series was changed to a commission-based one, to reduce commercial exposure.  Third-party printing was also lower.

Total costs were reduced by 9 per cent, from EUR130.0 million to EUR118.5 million.  FTE reductions were implemented during the year (50 FTEs, notwithstanding additions in new revenue projects), together with a pay cut in the national business; cost benefits were also evident from the change in Enterprises operations noted above.  EBITDA as a result was EUR8.2 million, compared with EUR10.3 million in 2008.  Operating profit was EUR2.1 million, down from EUR3.7 million in 2008. 

GROUP FINANCE DIRECTOR'S REPORT

The reported results for the Group for the year to 31 December 2009 are summarised below.

                                                                   2009     2008
                                                                   EURm     EURm
 Total statutory
 Revenue                                                        1,494.6  1,923.7
 Adjusted1EBITDA                                                  125.5    205.6
 Adjusted1earnings per share - euros                               0.07     3.09

 Continuing operations
 Revenue                                                        1,461.6  1,773.5
 Adjusted1EBITDA                                                  123.8    186.4
 Adjusted1operating profit                                         61.0    116.9
 Adjusted1profit before tax                                        23.3     66.4
 Exceptional items - restructuring costs                         (38.7)   (93.4)
 Exceptional items - pensions transfer charge                    (26.9)        -
 Exceptional items - impairment charges                           (7.3)  (891.9)
 Amortisation of acquired intangibles                            (61.8)   (76.3)
 Operating loss after exceptional items and amortisation of                     
 acquired intangibles                                            (73.7)  (944.7)
 Loss before tax after exceptional items and amortisation of                    
 acquired intangibles                                           (146.2)  (997.9)
 Adjusted1earnings per share - euros                               0.07     2.60
 Loss per share after exceptional items and amortisation of                     
 acquired intangibles - euros                                    (1.88)   (63.5)

 Discontinued operations
 (Loss)/profit from discontinued operations before exceptional                  
 items and amortisation of acquired intangibles                   (0.1)      7.8
 Loss from discontinued operations after exceptional items and                  
 amortisation of acquired intangibles                             (4.0)  (163.9)

 Continuing and discontinued operations
 Adjusted1earnings per share - euros                               0.07     3.09
 Loss per share after exceptional items and amortisation of                     
             acquired intangibles - euros                        (1.94)   (73.9)
                                                                       

1Adjusted for exceptional items and amortisation of acquired intangibles.

During 2009, the Group took three steps to restructure its balance sheet, through: (i) a series of disposals, (ii) the completion of a rights issue and (iii) the renegotiation of the Group's bank borrowing facilities.  These served to put the Group back on a firm financial footing.  The rights issue and renegotiation of the bank facility also removed the uncertainty that had been apparent in the 2008 Annual report and accounts as to the Group's ability to continue as a going concern.  The financial statements for the year to 31 December 2009 therefore include no reference to such material uncertainties and an unmodified audit report has been issued by the Group's auditors. Further details of the Group's financial position are given below.

The financial statements for the year to 31 December 2009 have been presented with the euro as the Group's presentation currency; previously the Group has presented its financial results in pounds sterling.  Over 70 per cent of the Group's revenue and cost, and over 70 per cent of its assets and liabilities, are denominated in euros (or in the Danish krone, which is effectively pegged to the euro). Presenting the financial statement in euros reduces significantly the effect of movements in foreign exchange rates, increasing the transparency and understandability of the financial statements, and for this reason, as set out in the previous year's financial statements, the directors decided in early 2009 to make this change.  There have been no change to the functional currencies or the underlying measurement of assets, liabilities, revenues and profits in the Company or any of its subsidiaries.  Full details of the effect of the change in presentation currency are given in Note 19 to the condensed consolidated financial statements. The reported results will continue to include the effect of exchange rate movements in the presentation of the results of operations denominated in the Norwegian krone and Polish zloty, as described where relevant below.

The Group made three significant disposals during 2009: of its German operations in their entirety, of its north-western Norway ("NWN") operations and its 37 per cent share of the Dutch AD NieuwsMedia ("AD") national newspaper business (together with an associated print plant). The Group recorded the results of its German operation as a discontinued operation in the 2009 and 2008 consolidated financial statements. The disposals of the NWN operations and the Group's 37 per cent share of AD (together with an associated print plant) did not meet the accounting criteria to be recorded as discontinued operations, but feature as one of the causes of movements in income statement balances within continuing operations from 2008 to 2009. These effects are referred to below where relevant.

The Group's financial key performance indicators continue to include revenue performance and adjusted EBITDA margin, together with cash generation and financial leverage. Note 6 to the condensed consolidated financial statements, Operating segments, sets out information on the first two of these financial key performance indicators, together with an analysis of the Group's result between its ongoing and businesses disposed of during 2009. The Financial Overview section discusses the movement in these financial key performance indicators during 2009. Details of cash generation and financial leverage are given below. The Group continues to present exceptional items and the amortisation of acquired intangibles separately in the income statement, to allow reader of the accounts to understand better the elements of financial performance in the year.

Revenue and earnings before interest and tax from continuing operations

Revenue for the year ended 31 December 2009 was EUR1,461.6 million, down from EUR1,773.5 million in 2008. This decrease included the effects of the disposal of businesses (circa EUR85 million) and differences in currency translation rates of circa EUR50 million. The main feature of underlying revenue performance in 2009 was the dramatic effect of lower advertising revenue, which fell by 18 per cent in the Group's ongoing businesses (as adjusted for foreign currency movements). 

Total Group adjusted EBITDA was EUR125.5m, down from EUR205.6m in 2008.  Adjusted EBITDA from continuing operations for the year ended 31 December 2009 was EUR123.8 million, compared with EUR186.4 million in 2008. This decrease included the effects of the disposal of businesses (EUR14.8 million) and differences in currency translation rates (EUR4.1 million). The underlying decrease in EBITDA of EUR47.8 million reflected the severe fall in advertising revenue, which was mitigated to a large extent (circa 80 per cent) by cost reductions. Costs were reduced by 10 per cent in the Group's ongoing businesses (after adjustment for foreign currency movements).  The Group's closing full-time-equivalents ("FTEs") fell by 863, or 10 per cent, in the continuing businesses, in addition to a reduction of 1,335 FTEs from the disposal of businesses.

Depreciation and amortisation of software reduced from EUR69.5 million to EUR62.8 million, largely as the result of disposals but also including some reductions in the ongoing businesses, resulting in adjusted operating profit from continuing operations of EUR61.0 million, down from EUR116.9 million in 2008. The decrease largely reflects the Group's reduced EBITDA, as described above.  Depreciation in 2010 is expected to be at a similar level to the 2009 ongoing charge.

Restructuring costs for the year ended 31 December 2009 totalled EUR38.7 million, mainly as a result of redundancy programmes of EUR26.5m. These were spread over all the divisions, but included EUR13.3m in the Netherlands, where FTEs reduced by 460 in the year.  Redundancy costs in 2008 of EUR93.4 million included a significant provision for the reorganisation of the back office functions in the Dutch division (largely completed during 2009) and costs associated with print plant closures.  

Other exceptional charges within operating profit for the year ended 31 December 2009 included a charge of EUR26.9 million related to the transfer of a pension arrangement in the Netherlands from a stand-alone trust (solely for the provision of pensions to Wegener current and former employees) to a significantly larger multi-employer pension scheme for the Dutch publishing industry. The Group recorded non-current asset impairment charges of EUR7.3 million related to non-current assets but none of which related to goodwill or acquired intangibles. In 2008, the impairment charge of EUR891.9 million included impairment charges for goodwill and acquired intangibles of EUR885.1million.

Amortisation of acquired intangibles was EUR61.8 million, down from EUR76.3 million in 2008 as a result of the disposal of Group businesses and the impairment charges recorded in the 2008 accounts.

The resulting operating loss after exceptional items and the amortisation of acquired intangibles for the year ended 31 December 2009 was EUR73.7 million, compared with a loss of EUR944.7million in 2008.

Finance items and taxation from continuing operations

Net finance expense before exceptional items for the year ended 31 December 2009 was EUR37.5 million, down from EUR50.0 million in 2008. The reduction arose from the net effect of three different factors. First, the Group's average borrowings decreased by over EUR200 million, reflecting the repayment of borrowings following the disposals described above and the issue of new share capital in June  2009 (as described below). In addition, the underlying inter-bank interest rates which form the basis of the cost for the Group's bank borrowings were lower in 2009, by over 300 basis points. Partially counteracting these effects, however, the margin on the Group's bank borrowings increased from 175 basis points in 2008 to 350 basis points on the term loans for the whole of 2009 and 350 basis points on the revolving credit facility until 22 May 2009, after which date a margin of 300 basis points was charged.  The Group expects its effective interest rate on net debt in 2010, taking into account deferred issue costs, commitment fees and the effect of net cash balances, to be approximately 7 per cent.

Exceptional finance charges totalled EUR34.7 million, most significantly related to the renegotiation of the bank facility agreement. Of this amount, EUR27.3 million comprised non-cash asset write-offs and accounting adjustments, and EUR7.4 million were cash items during the periods. Further details are given in Note 7 to the condensed consolidated financial statements.

The Group's effective tax rate on adjusted profit (excluding the share of results of associates) for the year ended 31 December 2009 was 54.6 per cent (2008: 29.6 per cent), considerably above the weighted blended statutory rates of the countries in which the Group operates. This was largely a result of the non-recognition of tax losses for accounting purposes, an effect which will reverse in future years as the Group's profitability increases.  In 2010, this will only partially be the case, with the Group expecting an effective accounting tax rate of around 35 per cent.  The total income tax credit for the year ended 31 December 2009 was EUR21.3 million, which included exceptional tax credits of EUR17.9 million and an accounting credit on the amortisation of acquired intangibles of EUR15.9 million.

Discontinued operations

The after tax loss of the German division was, in the three months to its disposal, EUR0.1 million before exceptional items and EUR4.0 million after these items, including a loss on disposal of EUR2.1m (2008: profit of EUR7.8 million before exceptional items and the amortisation of acquired intangibles and loss of EUR163.9 million after these items, including an impairment charge of EUR154.4 million). Full details of the results of the discontinued operations are given in Note 10 to the condensed consolidated financial statements.

Earnings per share and dividends

Adjusted earnings per share from continuing operations for the year ended 31 December 2009 were 0.07 euros per share, down from 2.6 euros per share in 2008. Total adjusted earnings per share for the year ended 31 December 2009 were 0.07 euros per share, down from 3.1 euros per share in 2008. The unadjusted loss per share from continuing operations for the year ended 31 December 2009 was 1.88 euros per share (2008: 63.5 euros per share) and the total unadjusted loss per share was 1.94 euros per share in 2009 (2008: 73.9 euros per share).

The average number of shares in issue decreased from 1,572 million shares in 2008 to 65 million in 2009, reflecting the issue of 9,432 million new shares in June 2009 and the 100 for one consolidation of the enlarged share capital in July 2009 (as described below).

Cash flow

The Group's cash flows are summarised in the table below:
                                                          2009    2008      2009
                                                          EURm    EURm  vs. 2008
                                                                            EURm

 EBITDA before exceptional items                         125.5   205.6    (80.1)
 Working capital and other movements                       5.9    35.0    (29.1)
 Exceptional operating cash flows                       (73.3)  (99.9)      26.6
 Net cash from operating activities                       58.1   140.7    (82.6)
 Tax paid                                                (1.7)   (2.1)       0.4
 Net capital expenditure                                (38.9)  (71.6)      32.7
 Purchase of publishing rights and other investments     (7.6)   (0.6)     (7.0)
 Net interest paid, inc. interest rate swaps            (42.8)  (42.0)       0.8
 Finance exceptionals                                   (17.2)   (2.4)    (14.8)
 Net dividends received                                    2.7     2.0       0.7
 Free flow, before acquisitions / divestments and       (47.4)    24.0    (71.4)
 issue of share capital
 Acquisition / divestments                               213.6   (0.6)     214.2
 Issue of share capital                                  155.5       -     155.5
 Net cash flow                                           321.7    23.4     298.3

Cash flow from operating activities (which includes cash flows from discontinued operations) for the year ended 31 December 2009 was EUR58.1 million, down from EUR140.7 million in 2008. The reduction reflects lower EBITDA, the lower cash flows from discontinued operations sold in March 2009 offset by lower cash charges in respect of restructuring activities. The cash effects of previous years' restructuring programmes were experienced in 2009, together with the cash consequences of current year initiatives.  The Group expects cash outflows in 2010 on capital expenditure and exceptional items to be in the order of EUR75 million, split broadly evenly between the two.  The net effect of working capital and movement in provisions and pensions for the year ended 31 December 2009 was an inflow of EUR5.9 million (2008: EUR35.0 million).

Tax paid was EUR1.7 million (2008: EUR2.1 million) as the Group continued to benefit from brought forward tax losses.  Net capital expenditure was EUR38.9 million, down considerably from EUR71.6 million in 2008, with lower spend in particular on the investment in printing presses in the Netherlands, which was largely completed by the end of 2009, and expenditure on publishing rights and other assets was EUR7.6 million (2008: EUR0.6 million). A further EUR9.1 million in respect of the purchase of publishing rights in 2009 was recorded within creditors at 31 December 2009, to be settled as a cash flow in 2010. 

Net interest paid, which included EUR4.1 million in respect of the early settlement of derivative contracts, was EUR42.8 million.  Finance exceptional items were EUR17.2 million, including fees to the Group's lending banks and related professional costs, compared with the EUR2.4 million amendment fee paid to the Group's lending banks at the very end of 2008.  After dividends received of EUR2.7 million (2008: 2.0 million) the cash flow before acquisitions, disposals and the issue of share capital was an outflow of EUR47.4 million (2008: inflow of EUR24.0 million).

The proceeds from disposals were a cash inflow of EUR213.6 million, compared with a net outflow from acquisitions and disposals in 2008 of EUR0.6 million.  Finally, after the proceeds from the issue of share capital of EUR155.5m (after related costs), the Group's net cash inflow for the year was EUR321.7 million, compared with an inflow of EUR23.4 million in 2008.

Issue of share capital

The Group issued 9,432 million new shares in June 2009 for net cash proceeds of EUR155.5 million. This increased the number of shares in issue to 11,004 million. In order to reduce the number of shares to a manageable number and to reduce share price volatility and dealing costs for investors (both of which had been affected by the lower trading range of the shares in early 2009), the Group reorganised its share capital in July 2009 by way of a 100 for one consolidation.  Following the consolidation, the Group had 110 million shares in issue at 31 December 2009.

Financial position

The Group's closing net debt was EUR373.4 million, down by EUR309.1 million from 31 December 2008.  The reduction reflects the Group's disposal programme in early 2009 and the proceeds from the issue of new share capital in June, as described in the cash flow section above. The Group's leverage (measured as the ratio of net debt to adjusted EBITDA according to the definitions of the revised facility agreement, as described in Note 13 to the condensed consolidated financial statements) was 3.1 times for the year to 31 December 2009, compared with 4.14 times at 31 December 2008. The Group's first leverage covenant test under the revised facility agreement is for the twelve month period ended 30 June 2010, at 5.25 times, reducing to 4.5 times for the year to 31 December 2010. Closing net debt at 31 December 2009 comprised bank borrowings (net of capitalised debt issue costs) of EUR429.3 million (2008: EUR730.2 million), other borrowings of EUR10.2 million (2008: EUR39.6 million, including the convertible loan notes and borrowings classified as held for sale), obligations under finance leases of EUR9.0 million (2008: EUR25.1 million) and cash and cash equivalents (net of bank overdrafts) of EUR75.1 million (2008: EUR112.4 million). The year-end cash balance included prepaid subscription receipts collected at the end of December. At 31 December 2008, in the absence of a signed revised facility agreement, the Group classified all bank borrowings as current obligations; at 31 December 2009, all gross bank borrowings are classified as non-current, apart from EUR20 million of term loan due for repayment in December 2010.

The key terms of the revised bank facility agreement are set out in Note 13 to the condensed consolidated financial statements.

The Group's equity increased by EUR52.0 million during 2009, to EUR278.1 million. The increase resulting from the issue of new share capital of EUR155.5 million was offset to an extent by the retained loss for the year of EUR128.9 million. This retained loss includes the accounting amortisation of acquired intangibles of EUR61.8 million. Other net credits to equity in 2009 totalled EUR25.4 million, including entries for actuarial gains (EUR9.6 million), cash flow hedges (EUR.6.8 million) and foreign currency (EUR5.4 million).  Following the change to the euro as the Group's presentation currency, movements in equity resulting from foreign currency translation differences were very much lower than in previous years, when the accounts had been presented in pounds sterling. 

Treasury

The Group manages treasury matters centrally, through the group treasury function.  This function manages the Group's bank borrowing arrangements, the short- and medium- term liquidity position and monitors the Group's treasury risks.  A treasury committee, which includes the Group Finance Director, the Group Treasurer and the  Chief Operating Officer, provides further guidance on treasury matters and overseas risk management.

The Group is exposed to treasury risks arising from exposure to movements in market interest rates, which affect the Group's borrowing costs, and to movements in foreign currency rates, which affect the translation of the Group's non-euro results and asset and liabilities into euro (the Group is exposed to minimal transaction exposure to foreign currency movements in each of its operations, which carry out their business primarily in each local currency).

The Group has a policy of keeping between 40 per cent and 80 per cent of its borrowings at fixed rates, so as to provide some certainty on its interest costs, while leaving open the opportunity to benefit in part from low interest rates.  In economic terms, the Group was approximately 50 per cent hedged on its exposure to interest rates as at 31 December 2009.  (From a financial statement point of view, as explained in detail in Note 27 to the consolidated financial statements, following the renegotiation of the facility agreement, a number of the Group's interest rate swaps have not been accounted for as hedges with the result that some mark-to-market movements on the value of the swaps have been recorded in the consolidated income statement in 2009, as exceptional finance items).

The Group has drawn a portion (16 per cent) of its bank borrowings in Norwegian krone to provide an interest rate and balance sheet hedge of the results and operating assets and liabilities of its Norwegian business.  The Group has reduced the amount of non-euro borrowings during 2009 to benefit from the lower interest rates applicable to euro borrowings.

RELATED PARTY TRANSACTIONS 

Further information is disclosed in Note 17 to the condensed consolidated financial statements below.

PRINCIPAL RISKS AND UNCERTAINTIES 

In recognising that risk is an inherent part of doing business, the Board has adopted a process for identifying, evaluating and managing the risks that the Group faces (as described in the Corporate governance report). The risks to which the Group is potentially exposed at any given time cover a wide range of factors: competition, legislation, fiscal, regulatory, political, financial, terrorism, economic, social and operational. Each could impact on the Group's revenue, operating profit, net assets and liquidity. The principal risks and uncertainties that are specific to the Group at this time, together with the actions that management is taking to mitigate each, are set out below.

During 2008 the Group embarked upon its transformation programme to move from a traditional print to a multimedia content business. The risks and uncertainties associated with this change were exacerbated by the onset of recession and the related advertising crisis later that year. The Board is therefore continuing to pay particular attention to the effectiveness of the Group's mitigation of risk and the progress of management is closely monitored in each area.
 Risk                                                           Description  Management action
 Strategy
  
                                 The Board maintains a well defined and      The Group has
                                 determined strategy to transform the        embarked on a
                                 business from a traditional print company   significant
                                 into a modern multimedia content business.  programme of change
                                                                             to reform previous
                                 The strategy provides for driving           working practices
                                 increasing productivity, primarily through  and to develop the
                                 the development of new digital platforms    operating models and
                                 to exploit content.                         skills needed to
                                                                             perform successfully
                                 The successful implementation of the        in a multimedia
                                 strategy could be impaired because of a     environment. The
                                 lack of the new skills required to          Group has created a
                                 implement this emerging business model and  function that is
                                 of the economic resources needed to invest  dedicated to the
                                 in new products and services.               growth of new
                                                                             revenues and
                                 It is also possible that the rate of        ensuring that
                                 transformation may not be sufficiently      innovation and
                                 quick or profitable to offset a dramatic    emerging models are
                                 decline in the traditional profits of the   developed and shared
                                 business.                                   across the entire
                                                                             Group.
                                                                              
                                                                             Strict controls
                                                                             remain in place over
                                                                             capital expenditure
                                                                             to ensure that new
                                                                             investment is
                                                                             channelled into the
                                                                             most deserving cases
                                                                             in terms of the
                                                                             Group's strategy.
                                                                              
                                                                             Management is
                                                                             satisfied that the
                                                                             new products and
                                                                             services introduced
                                                                             during 2009 are in
                                                                             line with its
                                                                             challenging time
                                                                             schedules. It
                                                                             therefore expects
                                                                             incremental
                                                                             contributions from
                                                                             the new revenue
                                                                             streams to
                                                                             compensate for the
                                                                             traditional revenues
                                                                             that have already
                                                                             been lost, but it is
                                                                             too early to confirm
                                                                             this given the
                                                                             current economic
                                                                             climate.
 Market place                    Short term -           
                                 Advertising revenue    
                                 lost during current   In 2008, the Group started with urgent
                                 economic downturn     steps to mitigate the shortfall in
                                 In common with the    advertising. It did this by setting up a
                                 majority of           programme to reduce the cost base in the
                                 newspaper publishing  traditional print business where the loss
                                 businesses, the       of advertising revenues has been marked.
                                 Group's revenues are   
                                 traditionally         This programme delivered substantial
                                 heavily dependent on  savings in 2009 of around 10 per cent of
                                 advertising which     total costs which mitigated almost 80 per
                                 comprised             cent of lower revenue.
                                 approximately 47 per   
                                 cent of total          
                                 revenue in 2009
                                 (2008:  50 per
                                 cent).
                                  
                                 The Group
                                 experienced a
                                 further reduction of
                                 approximately 18 per
                                 cent in advertising
                                 revenue during 2009.
                                 Although this trend
                                 alleviated somewhat
                                 towards the end of
                                 the year, the
                                 economic crisis has
                                 attacked all
                                 categories of
                                 advertising with
                                 print adverts for
                                 recruitment,
                                 property and motor
                                 vehicles more
                                 affected than other
                                 groups.
                                 Medium term -          
                                 Negative effect of     
                                 internet advertising  The Group has been moving decisively since
                                 on traditional        2008 to accelerate its transformation from
                                 advertising           a pure print company into a multimedia
                                 Across the market,    consumer content business. It has been
                                 the print media's     developing new digital revenue streams and
                                 share of advertising  introducing new media products at great
                                 is declining as       speed to attract a larger share of the
                                 customers exercise    wider advertising market.
                                 their choice to
                                 advertise in other
                                 media, notably the
                                 internet, rather
                                 than in newspapers.
                                 This trend is likely
                                 to continue into the
                                 medium term.
                                 Long term - Erosion    
                                 of demand for          
                                 printed newspapers    Given the strength of the Group's brands
                                 The Group's           and the quality of its products, together
                                 newspapers have       with its in-depth understanding of the
                                 experienced           markets in which it operates, in 2009 it
                                 circulation volume    was again successful in maintaining
                                 declines over recent  circulation revenues despite the severity
                                 years, in common      of the economic recession.
                                 with the newspaper     
                                 industry in general.  It will continue to maintain and improve
                                 Historically the      the quality of its portfolio of strong
                                 Group has been able   premium products in the marketplace and
                                 to offset these       leverage its expert knowledge of local
                                 volume declines by    markets and customers to provide ongoing
                                 cover price and       improvement in the relevance of its papers
                                 subscription rate     to the readers in the individual markets
                                 increases such that   in which it operates. It will also
                                 circulation revenue   implement price increases wherever this is
                                 has remained broadly  possible.
                                 constant.              
                                  
                                 However, in the long
                                 term there is a risk
                                 that the Group will
                                 be less successful
                                 than in the past at
                                 compensating volume
                                 declines with
                                 increases in cover
                                 price and
                                 subscription rates.
 Operational                     The Group's strategy  Throughout 2009 the Group continued to
 performance                     for protecting        seek ways of improving its productivity,
                                 margins includes      to protect its margins and established
                                 identifying           priority programmes in all divisions in
                                 operating synergies   the light of the economic downturn. These
                                 which are often       programmes are driving improvements in our
                                 achieved through      business models by making our businesses
                                 reorganisations, the  more innovative, securing better ways of
                                 introduction of more  working, leveraging cross-Group benefits
                                 efficient work        from scale and removing old "industry
                                 practices and         practices" and have been implemented
                                 realising economies   without disruption to operations.
                                 of scale. However,     
                                 the cost of           To ensure that the Group is able to
                                 structural change in  implement the structural changes needed in
                                 continental European  its business, it is committed to working
                                 economies is          constructively with governments and other
                                 potentially very      regulatory bodies. It is challenging
                                 high.                 previous collective bargaining and
                                                       industry practices to make its cost base
                                 In addition, the      more flexible and continues to engage in
                                 Group operates in     constructive dialogue with unions and
                                 countries with        works councils to develop effective
                                 labour laws and       relationships in each case.
                                 agreements that
                                 differ from the UK
                                 and where employees
                                 generally enjoy
                                 stronger protection.
                                 This sometimes means
                                 that the pace of
                                 change is slower
                                 than changes in
                                 market conditions.
                                  
                                 The Group's ability
                                 to generate cost
                                 savings on a timely
                                 basis may also be
                                 hampered by strikes,
                                 illegal industrial
                                 action or new
                                 regulation from
                                 governments in any
                                 of the jurisdictions
                                 in which we operate.
                                  
 Business                        The Group is highly   All divisions are required to maintain
 continuity                      dependent on the      business continuity plans and to update
                                 continuous operation  these to reflect the reorganisations and
                                 of its print plants,  restructurings taking place within its
                                 distribution          business. Each division is also required
                                 channels and          to develop a programme for the testing of
                                 supporting IT         these plans to ensure their effectiveness
                                 infrastructure to     and relevance.
                                 get its print          
                                 products to its       The Group maintains insurance to protect
                                 customers. It also    against catastrophic risks.
                                 depends on the high
                                 availability of its
                                 many websites which
                                 allow its customers
                                 access to online
                                 products and
                                 services. A
                                 significant and
                                 extended loss of a
                                 major facility,
                                 whether through
                                 natural causes,
                                 deliberate acts or
                                 breakdown, could
                                 result in a loss of
                                 revenue.
 Funding                         The Group is          In the early part of 2009, the Group took
                                 financed by           action to reduce the absolute level of its
                                 significant bank      borrowings through the disposals made in
                                 borrowings, as well   Germany and north-western Norway and the
                                 as shareholders'      issue of new share capital in the form of
                                 equity, and in the    a rights issue which together raised
                                 first half of 2009    approximately EUR349 million.
                                 concluded a            
                                 successful            In parallel cost reduction plans were
                                 renegotiation of its  actioned and the Group continues to
                                 borrowing facilities  operate a policy of strict management of
                                 with its lending      cash expenditure.
                                 banks. As a result,    
                                 the Group now faces   A key indicator for the Group is the
                                 the risk of not       measure of its leverage which is expressed
                                 being able to comply  as the ratio of net debt to EBITDA. At 31
                                 with the covenants    December 2009 this measured  3.1 times on
                                 under its revised     the basis on which it is calculated for
                                 bank facility         these purposes compared with a first
                                 agreement. The key    covenant testing ratio at 30 June 2010 of
                                 covenants will be     5.25 times and at 31 December 2010 of 4.5
                                 tested for the first  times.
                                 time at 30 June 2010   
                                 and then quarterly    A treasury committee, under the
                                 from 31 December      chairmanship of the Group Finance
                                 2010.                 Director, meets monthly to consider,
                                                       amongst others things, the Group's cash
                                                       flow forecasts and projections against the
                                                       various banking covenants. The Group
                                                       Finance Director also makes regular
                                                       reports to the Board on these matters.
 Exchange                        The Group presents    The effect of movements in foreign
 rates                           its financial         currency rates is monitored on a monthly
                                 statements in euro.   basis. A certain portion of the Group's
                                 The reported results  borrowings is denominated in Norwegian
                                 are therefore         krone to provide a partial hedge of the
                                 exposed to movements  balance sheet position.
                                 in exchange rates      
                                 between the euro and
                                 the other currencies
                                 in which the Group
                                 operates,
                                 principally the
                                 Norwegian krone and
                                 Polish zloty.
                                  
                                 Between them, the
                                 Norwegian and Polish
                                 operations account
                                 for less than 30 per
                                 cent of Group
                                 revenue and, in
                                 2009, around 25 per
                                 cent of Group
                                 EBITDA.
 Key                             The Group's success   The Group provides a competitive
 management                      depends on its        remuneration package for its key
                                 ability to attract,   management and employees. Succession
                                 motivate and retain   planning from the level of Country CEOs up
                                 highly qualified      to the Chief Executive is also in place
                                 employees who have    and was reviewed by the Board in 2009.
                                 extensive experience   
                                 and knowledge of the
                                 industry at a
                                 strategic level.
                                  

Certain risks and uncertainties arise through factors that are outside the control of management, for example, inflation or interest rates. Nevertheless in each case management seeks to minimise the impact on the Group from such external events, for example, by hedging through interest rate swaps as set out in the Group Finance Director's report under the heading of "Treasury". In other cases risks may appear that are presently unanticipated as the Group develops its new business models.

GOING CONCERN

After making enquiries, the directors have a reasonable expectation that the Group (and Mecom Group plc as a company) has adequate resources to continue in operational existence for the foreseeable future.  For these reasons, they continue to adopt the going concern basis in preparing the Annual report and accounts.  In arriving at these conclusions, the directors have had regard to the guidance published by the Financial Reporting Council in October 2009.

The Group resolved in 2009 the uncertainties that, in the 2008 accounts, had cast doubt on the Group's ability to continue as a going concern:

·      a revised facility agreement was entered into with the Group's lending banks on 22 May 2009, removing the uncertainty as to the ongoing bank funding of the Group - the terms of the revised facility agreement are set out in Note 26 to the consolidated financial statements; and

·      a rights issue was completed on 26 June 2009, the net proceeds of which were EUR155.5 million.  These proceeds were used to repay the bank borrowings of EUR119.5 million and a convertible loan note of £30.6 million (EUR36.0m on date of repayment).

As a consequence, these uncertainties are no longer relevant and an unmodified auditors' opinion has been issued on the 31 December 2009 financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITIES 

The directors confirm to the best of their knowledge that:

(a) the condensed financial statements for the year ended 31 December 2009, prepared in accordance with the applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and

(b) the Management Report, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that they face.

By order of the Board

David Montgomery                                                              Henry Davies

Chief Executive                                                                     Group Finance Director

Consolidated income statement 

for the year ended 31 December 2009
      
                                                                                                                                                                                                                                                                                            (restated)     
   
                                          Year ended 31 December 2009                                                             Year ended 31 December 2008
                                    Note  Before exceptional    Exceptional items     After exceptional     Before exceptional items and amortisation   Exceptional items     After exceptional
                                          items and             and amortisation of   items and             of acquired intangibles EURm                and amortisation of   items and
                                          amortisation of       acquired intangibles  amortisation of                                                   acquired intangibles  amortisation of
                                          acquired intangibles  (see Note 7) EURm     acquired intangibles                                              (see Note 7) EURm     acquired intangibles
                                          EURm                                        EURm                                                                                    EURm
 Continuing operations                                                                                                                                                                            
 Revenue                               6               1,461.6                     *               1,461.6                                     1,773.5                     *               1,773.5
 Cost of sales                                         (445.9)                     *               (445.9)                                     (544.5)                     *               (544.5)
 Gross profit                                          1,015.7                     *               1,015.7                                     1,229.0                     *               1,229.0
 Operating costs                                       (955.1)               (134.7)             (1,089.8)                                   (1,116.0)             (1,061.6)             (2,177.6)
 Share of results of associates                            0.4                     *                   0.4                                         3.9                     *                   3.9
 Operating profit/(loss)               6                  61.0               (134.7)                (73.7)                                       116.9             (1,061.6)               (944.7)
 Finance income                        8                   5.9                     *                   5.9                                        24.9                     *                  24.9
 Finance expense                       8                (43.4)                (34.7)                (78.1)                                      (74.9)                 (6.8)                (81.7)
 (Loss)/gain on disposal of           16                 (0.2)                 (0.1)                 (0.3)                                       (0.5)                   4.1                   3.6
 businesses and investments
 Profit/(loss) before tax                                 23.3               (169.5)               (146.2)                                        66.4             (1,064.3)               (997.9)
 Income tax (expense)/credit           9                (12.5)                  33.8                  21.3                                      (18.5)                  14.2                 (4.3)
 Profit/(loss) for the year                               10.8               (135.7)               (124.9)                                        47.9             (1,050.1)             (1,002.2)
 from continuing operations
                                                                                                                                                                                                  
 Discontinued operations                                                                                                                                                                          
 (Loss)/profit for the year           10                 (0.1)                 (3.9)                 (4.0)                                         7.8               (171.7)               (163.9)
 from discontinued operations
 Profit/(loss) for the year                               10.7               (139.6)               (128.9)                                        55.7             (1,221,8)             (1,166.1)
                                                                                                                                                                                                  
 Attributable to:                                                                                                                                                                                 
 Mecom Group plc shareholders                              4.1               (129.6)               (125.5)                                        48.6             (1,210.6)             (1,162.0)
 Minority interest                                         6.6                (10.0)                 (3.4)                                         7.1                (11.2)                 (4.1)
                                                                                                                                                                                                  
                                                                                                                                                                                                  
 Loss per share                                                                                                                                                                                   
 From continuing operations                                                                                                                                                                       
 Basic                                11                                                                                                  (1.88) euros                               (63.49) euros
 Diluted                              11                                                                                                  (1.88) euros                               (63.49) euros
 From continuing and                                                                                                                                                                              
 discontinued operations
 Basic                                11                                                                                                  (1.94) euros                               (73.92) euros
 Diluted                              11                                                                                                  (1.94) euros                               (73.92) euros

There are no dividends paid or proposed for either of the years presented. The restatement of the 2008 consolidated income statement (and of the other primary statements and the inclusion of an additional comparative consolidated balance sheet) is because of the change in the Group's presentation currency to euros from pounds sterling, as referred to in Note 4. 

Consolidated statement of comprehensive income  

for the year ended 31 December 2009

                                           Note  Year ended 31         (restated)
                                                 December 2009          Year ended 31
                                                 EURm                  December 2008
                                                                       EURm
                                         
                                         
                                         
                                         
 Loss for the year                                            (128.9)             (1,166.1)
                                         
 Other comprehensive                     
 income/(loss) for the year:             
 Actuarial gain/(loss) on                                        13.0                (13.0)
 defined benefit pension                 
 schemes                                 
 Tax effect                                                     (3.4)                   3.9
                                                                  9.6                 (9.1)
                                         
 Loss on revaluation of                                             -                 (0.4)
 available-for-sale investments          
 Transfer from revaluation                                          -                 (0.1)
 reserve to the consolidated             
 income statement on impairment          
 of available-for-sale                   
 investments                             
                                         
 Changes in fair value of cash                                  (4.4)                (12.4)
 flow hedges                             
 Tax effect                                                       0.3                   3.9
                                                                (4.1)                 (8.5)
                                         
 Transfer from cash flow hedge           
 reserve to the consolidated             
 income statement of cumulative          
 losses on certain                       
 interest rate swaps on ending                7                  13.2                 (1.9)
 of hedge relationship                   
 Tax effect                                                     (2.3)                     -
                                                                 10.9                 (1.9)
                                         
 Transfer from currency                                                                    
 translation reserve to the                                                                
 consolidated income statement               16                   3.4                 (0.5)
 of cumulative exchange                  
 difference on disposal of               
 foreign operations                      
                                         
 Exchange differences on                                          2.0                (49.4)
 retranslation of foreign                
 operations                              
                                         
 Other comprehensive                                             21.8                (68.8)
 income/(loss) for the year,             
 net of tax                              
                                         
 Total comprehensive loss for                                 (107.1)             (1,234.9)
 the year, net of tax                    
                                         
 Attributable to:                        
 Mecom Group plc shareholders                                 (104.5)             (1,226.9)
 Minority interest                                              (2.6)                 (8.0)

Consolidated balance sheet

at 31 December 2009
                                           Note       2009  (restated)  (restated)
                                                      EURm   2008       2007
                                                            EURm        EURm
                                     
                                     
 Assets                              
 Non-current assets                  
 Goodwill                                            183.1       211.2     1,330.2
 Other intangible assets                             672.5       753.1       948.0
 Property, plant and equipment                       240.4       300.1       371.4
 Employee benefit assets                               4.1         2.3         5.3
 Interests in associates                              39.3        37.9        52.4
 Investments                                           0.7         1.0        12.7
 Other financial assets                               12.0         3.1         2.0
 Deferred tax assets                                  30.6        27.1        74.1
 Total non-current assets                          1,182.7     1,335.8     2,796.1
 Current assets                      
 Inventories                                           9.3        13.5        13.5
 Trade and other receivables                         175.0       173.8       257.5
 Cash and cash equivalents                12,13      104.6       117.4       104.1
 Current tax assets                                    1.5         2.4           -
 Derivative financial                                    -           -         9.1
 instruments                         
 Total current assets                                290.4       307.1       384.2
 Assets held for sale                        16          -       204.7        23.6
 Total assets                                      1,473.1     1,847.6     3,203.9
 Liabilities                         
 Non-current liabilities             
 Borrowings                                  13    (416.0)       (3.9)     (770.2)
 Other payables                                      (5.0)       (4.6)       (7.7)
 Provisions                                         (28.2)      (36.3)      (42.7)
 Employee benefit obligations                       (69.9)      (66.8)      (73.3)
 Deferred tax liabilities                          (166.2)     (189.5)     (258.9)
 Obligations under finance                   13      (4.8)      (18.5)      (19.9)
 leases                              
 Derivative financial                                (4.0)       (1.0)           -
 instruments                         
 Total non-current liabilities                     (694.1)     (320.6)   (1,172.7)
 Current liabilities                 
 Borrowings                                  13     (53.0)     (766.2)      (31.9)
 Trade and other payables                          (398.0)     (407.8)     (483.9)
 Provisions                                         (34.6)      (48.8)      (35.0)
 Current tax liabilities                             (0.7)       (1.6)       (2.9)
 Obligations under finance                   13      (4.2)       (6.6)       (5.3)
 leases                              
 Derivative financial                               (10.4)       (8.7)           -
 instruments                         
 Total current liabilities                         (500.9)   (1,239.7)     (559.0)
 Liabilities directly                        16          *      (61.2)      (11.8)
 associated with assets              
 classified as held for sale         
 Total liabilities                               (1,195.0)   (1,621.5)   (1,743.5)
 Net assets                                          278.1       226.1     1,460.4
 Equity                              
 Issued share capital                                 81.3        13.9        13.9
 Share premium                                     1,526.5     1,438.4     1,438.4
 Retained earnings                               (1,350.6)   (1,239.7)      (68.7)
 Other reserves                                     (13.5)      (23.4)        31.9
 Equity attributable to Mecom                        243.7       189.2     1,415.5
 Group plc shareholders              
 Minority interest                                    34.4        36.9        44.9
 Total equity                                        278.1       226.1     1,460.4

Consolidated statement of changes in equity

for the year ended 31 December 2009

                                                                                                 Other reserves                               Total reserves
                                                                                                                                              attributable to
                                                                                                                                              equity share-
                                                                                                                                              holders
                                                                                                                                              EURm
                                 Share      Share      Retained      Cash flow hedge  Share-based payment  Revaluation  Currency translation                        Minority          Total
                                 capital    premium    earnings      reserve          reserve              reserve      reserve                                     interest         equity
                                 EURm       EURm       EURm          EURm             EURm                 EURm         EURm                                        EURm               EURm

 Balance at 31 December 20071         13.9    1,438.4        (68.7)                -                  7.8          0.1                  24.0               1,415.5          44.9    1,460.4
 Loss for the year                       -          -     (1,162.0)                -                    -            -                     -             (1,162.0)         (4.1)  (1,166.1)
 Other comprehensive
 (loss)/income:
 Actuarial loss on defined
 benefit
 pension schemes                         -          -         (9.0)                -                    -            -                     -                 (9.0)         (0.1)      (9.1)
 Loss on revaluation of
 available-for-
 sale investments                        -          -             -                -                    -        (0.4)                     -                 (0.4)             -      (0.4)
 Transfer from revaluation               -          -             -                -                    -          1.0                     -                   1.0             -        1.0
 reserve to the income
 statement on impairment of
 available-for-sale investments
 Changes in fair value of cash           -          -             -            (8.1)                    -            -                     -                 (8.1)         (0.4)      (8.5)
 flow hedges
 Transfer from cash flow hedge                                                                                                                                                             
 reserve to the income                                                                                                                                                                     
 statement of cumulative losses                                                                                                                                                            
 on certain interest rate swaps          -          -             -            (1.9)                    -            -                     -                 (1.9)             -      (1.9)
 on ending of hedge
 relationship
 Transfer from currency
 translation
 reserve to the income
 statement of
 cumulative exchange difference
 on
 disposal of foreign operations          -          -             -                -                    -            -                 (0.5)                 (0.5)             -      (0.5)
 Exchange differences on                                                                                                                                                                   
 retranslation of foreign                -          -             -                -                    -            -                (46.0)                (46.0)         (3.4)     (49.4)
 operations
 Total comprehensive                     -          -     (1,171.0)           (10.0)                    -          0.6                (46.5)             (1,226.9)         (8.0)  (1,234.9)
 loss/income for the year
 Credit in respect of
 share-based
 payments                                -          -             -                -                  0.6            -                     -                   0.6             -        0.6
 Balance at 31 December 20081         13.9    1,438.4     (1,239.7)           (10.0)                  8.4          0.7                (22.5)                 189.2          36.9      226.1
 Loss for the year                       -          -       (125.5)                -                    -            -                     -               (125.5)         (3.4)    (128.9)
 Other comprehensive
 income/(loss):
 Actuarial gain on defined
 benefit
 pensionscheme plans                     -          -           9.6                -                    -            -                     -                   9.6             -        9.6
 Changes in fair value of cash
 flow hedges                             -          -             -            (4.0)                    -            -                     -                 (4.0)         (0.1)      (4.1)
 Transfer from cash flow hedge
 reserve
 to the income statement of
 cumulative
 losses on certain interest
 rate swaps on
 ending of hedge relationship            -          -             -             10.9                    -            -                     -                  10.9             -       10.9
 Transfer from currency
 translation
 reserve to the income
 statement of
 cumulative exchange
 differences on
 disposal of foreign operations          -          -             -                -                    -            -                   3.4                   3.4             -        3.4
 Exchange differences on
 retranslation foreign                   -          -             -                -                    -            -                   1.1                   1.1           0.9        2.0
 operations
 Total comprehensive loss for            -          -       (115.9)              6.9                    -            -                   4.5               (104.5)         (2.6)    (107.1)
 the year
 Issue of share capital for           67.4       98.7             -                -                    -            -                     -                 166.1             -      166.1
 cash2
 Transaction costs relating to                                                                                                                                                             
 the issue of share capital for          -     (10.6)             -                -                    -            -                     -                (10.6)             -     (10.6)
 cash2
 Transfer of equity component
 of
 convertible loan notes on cash
 settlement of the instrument            -          -           5.0                -                (5.0)            -                     -                     -             -          -
 Credit in respect of
 share-based
 payments                                -          -             -                -                  3.5            -                     -                   3.5             -        3.5
 Minority interest acquired              -          -             -                -                    -            -                     -                     -           0.8        0.8
 Minority interest disposed of           -          -             -                -                    -            -                     -                     -         (0.3)      (0.3)
 Minority interest dividend              -          -             -                -                    -            -                     -                     -         (0.4)      (0.4)
 paid
 Balance at 31 December 2009          81.3    1,526.5     (1,350.6)            (3.1)                  6.9          0.7                (18.0)                 243.7          34.4      278.1

1 Balances at 31 December 2007 and 2008 have been restated due to the change in the Group's presentation currency, as set out in Note 4. 

2 Refer to Note 14 for further details.         

Consolidated cash flow statement 
 for the year ended 31 December            Note       Year ended            (restated)
 2009                                                31 December            Year ended
                                                            2009           31 December
                                                            EURm                  2008
                                                                                  EURm
                                         
                                         
                                         
                                         
                                         
 Operating activities                    
 Cash generated from operations              18             58.1                 140.7
 Income tax paid                                           (1.7)                 (2.1)
 Net cash from operating                                    56.4                 138.6
 activities                              
                                         
 Investing activities                    
 Proceeds from sale of other                                   -                   0.6
 intangible assets                       
 Proceeds from sale of                                       0.9                  12.7
 property, plant and equipment           
 Proceeds from sale of                                         -                   1.8
 interests in associates and             
 investments                             
 Capital expenditure on:                 
 Other intangible assets                                  (11.8)                (15.9)
 Property, plant and equipment                            (28.0)                (70.8)
 Purchase of publishing rights                             (7.2)                     -
 Purchase of interests in                                  (0.4)                 (0.6)
 associates                              
 Acquisition of subsidiaries,                                0.7                (26.1)
 net of cash acquired                    
 Divestment of businesses, net               16            212.9                  25.5
 of cash sold                            
 Interest received                                           5.4                  18.9
 Dividends received                                          3.1                   2.3
 Net cash from/(used in)                                   175.6                (51.6)
 investing activities                    
                                         
 Financing activities                    
 Proceeds from issue of share                14            166.1                     -
 capital                                 
 Transaction costs of issue of               14           (10.6)                     -
 shares                                  
 Proceeds from borrowing                                   144.1                 139.3
 drawdowns                               
 (Payments made)/proceeds                                  (4.1)                   5.7
 received due to settlement of           
 financial instruments                   
 Repayment of borrowings                                 (458.7)               (130.5)
 Repayment of convertible loan               13           (36.0)                     -
 notes                                   
 Repayment of obligations under                            (7.6)                 (7.3)
 finance leases                          
 Interest and other finance                               (44.1)                (66.6)
 expenses paid                           
 Fees paid on renegotiation of               13           (17.2)                 (2.4)
 Group's bank facilities                 
 Dividends paid to minority                                (0.4)                 (0.3)
 interests                               
 Net cash used in financing                              (268.5)                (62.1)
 activities                              
                                         
 Net (decrease)/increase in                               (36.5)                  24.9
 cash and cash equivalents               
 Net foreign exchange                                      (0.8)                (12.1)
 differences                             
 Cash and cash equivalents at                              112.4                  99.6
 beginning of the year                   
 Cash and cash equivalents at                               75.1                 112.4
 end of the year                         

Notes to the CONDENSED consolidated financial statements 

for the year ended 31 December 2009

1. Corporate information

Mecom Group plc (the "Company") is a public limited company incorporated and domiciled in England and Wales. The registered office of the Company is 70 Jermyn Street, London, SW1Y 6NY. Its ordinary shares are traded on the London Stock Exchange (LSE). 

These condensed consolidated financial statements for the year ended 31 December 2009 were approved by the Board of Directors on 16 March 2010. 

The financial information in these condensed consolidated financial statements does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006 but has been extracted from statutory accounts. The statutory accounts for the year ended 31 December 2008 have been filed with the Registrar of Companies and those for the year ended 31 December 2009 will be filed following the Company's Annual General Meeting. The auditors' reports on the statutory accounts for the year ended 31 December 2008 and for the year ended 31 December 2009 were unqualified and do not contain a statement under Sections 498 (2) or (3) of the Companies Act 2006. However, for the year ended 31 December 2008 the auditors' report included reference to matters to which the auditors drew attention by way of emphasis of matter without qualifying the report. 

While the financial information included in these condensed consolidated financial statements has been prepared in accordance with Intentional Financial Reporting Standards ("IFRS"), they do not contain sufficient information to comply with IFRSs. These condensed consolidated financial statements constitute a dissemination announcement in accordance with section 6.3 of the Disclosure and Transparency Rules. The full Annual report and accounts for the year ended 31 December 2009 will be made available on the Company's website at www.mecom.com on or around 13 April 2010.

2. Definitions of terms

The Group uses the following terms, with the definition given, in these condensed consolidated financial statements and in its internal monitoring of financial performance:

Adjusted EBITDA/Adjusted EBITDA margin

The Group monitors the performance of its segments on an earnings before interest, tax, depreciation and amortisation ("EBITDA") basis. This measure includes any profit or loss from associates but excludes any exceptional items. Adjusted EBITDA margin (expressed as a percentage) is defined as adjusted EBITDA for a period divided by external revenue for the same period.

Adjusted operating profit/Adjusted operating profit margin

Adjusted operating profit or loss is stated before exceptional items and amortisation of acquired intangibles. Adjusted operating profit margin (expressed as a percentage) is defined as adjusted operating profit for a period divided by external revenue for the same period. 

Exceptional items

The Group presents as exceptional items on the face of the consolidated income statement those material items of income and expense which, because of their nature and/or expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the period, so as to facilitate comparison with prior periods. 

Net debt

The Group presents as "net debt" the net of cash and cash equivalents, borrowings and obligations under finance leases. The Group also includes in net debt any of the above items that have been classified as held for sale. 

3. New, amended, revised and improved Standards and Interpretations

New, amended, revised and improved Standards and Interpretations adopted in 2009 and which impact the Group

In 2009, the following were adopted by the Group:

IAS 1 Presentation of Financial Statements (Revised), effective for annual periods beginning on or after 1 January 2009, has been adopted during the year, leading to the Group including two new primary financial statements in these condensed consolidated financial statements: the consolidated statement of comprehensive income for the current year and prior year (see page 26) is presented (previously the Group presented the consolidated statement of recognised income and expense); and the consolidated statement of changes in equity (see page 28). Due to the Group changing itspresentationcurrency, which is a change in accounting policy under IAS 1, in 2009 (see Note 4 for further details), the adoption of this Standard also means the Group included to include a consolidated balance sheet at 1 January  2008 (which for convenience is shown as at 31 December 2007). 

IFRS 7 Amendment Improving Disclosures about Financial Instruments, effective for annual periods beginning on or after 1 January 2009, has been adopted during the year, leading to amendments in the way the Group discloses the nature and extent of liquidity risk arising from financial instruments and also how the Group discloses information about fair value measurements of financial instruments.

IFRS 8 Operating Segments, effective for annual periods beginning on or after 1 January 2009, has been adopted during the year, leading to a change in the way the Group discloses information about its segments (see Note 6).

New, amended, revised and improved Standards and Interpretations adopted in 2009 but have no impact on the Group

In 2009, the following were adopted by the Group, all of which are effective for annual periods beginning on or after 1 January 2009 (unless stated) but which have no impact on these condensed consolidated financial statements: 

§ IFRS 1 and IAS 27 Amendment Cost of Investment in Separate Financial Statements;

§  IFRS 2 Share-based Payment Vesting Conditions and Cancellations (Amendment); 

§  IAS 23 Borrowings Costs (Revised); 

§  IAS 32 and IAS 1 Amendment Puttable Financial Instruments and Obligations Arising on Liquidation; 

§  IAS 39 and IFRS 7 Amendments Reclassification of Financial Assets, effective for annual periods beginning on or after 1 July 2008;

§  2008 Improvements to IFRSs, effective for annual periods beginning on or after May 2008;  

§  IFRIC 13 Customer Loyalty Programmes, effective for annual periods beginning on or after 1 July 2008; 

§  IFRIC 15 Agreements for the Construction of Real Estate; and

§  IFRIC 16 Hedges of a Net Investment in a Foreign Operation, effective for annual periods beginning on or after 1 October 2008. 

3. New, amended, revised and improved Standards and Interpretations  (continued) 

New, amended, revised and improved Standards and Interpretations issued but not adopted in 2009

At the date of authorisation of these condensed consolidated financial statements, the following Standards and Interpretations, which have not been applied in these condensed consolidated financial statements, are in issue but are not yet effective for annual periods beginning on 1 January 2009:
    

    
                                                                  Effective date
 Revisions, amendments and improvements to Standards                            
                                                                                
 Amendments to IFRS 1Additional Exemptions                                      
 For First-time Adopters                                          1 January 2010
 Amendments to IFRS 1Limited Exemption from                                     
 Additional IFRS 7 Disclosures                                       1 July 2010
 Amendments to IFRS 2Group Cash-settled                                         
 Share-based Payment Transactions                                 1 January 2010
 IFRS 3Business Combinations (Revised)                               1 July 2009
 IFRS 9Financial Instruments * Classification and Measurement     1 January 2013
 Amendments to IAS 24Disclosure Requirements for                                
 Government-related Entities and Definition of a Related Party    1 January 2011
 IAS 27Consolidated and Separate                                                
 Financial Statements(Revised)                                       1 July 2009
 Amendment to IAS 32Classification of Rights Issues              1 February 2010
 IAS 39 AmendmentEligible Hedged Items                               1 July 2009
 IFRIC 9 and IAS 39 AmendmentEmbedded Derivatives                    1 June 2009
 2009 Improvements to IFRSs                                           April 2009
 New and amended IFRICs                                                         
 IFRIC 17 Distributions of Non-Cash Assets to Owners                 1 July 2009
 IFRIC 18 Transfers of Assets from Customers                         1 July 2009
 IFRIC 19Extinguishing Financial Liabilities with Equity             1 July 2010
 Instruments
 IFRIC 14 AmendmentPrepayments of a Minimum Funding Requirement   1 January 2011
                                                                                

                 

The directors do not currently anticipate that the adoption of these Standards and Interpretations will have a material impact on the Group's consolidated financial statements in the period of initial application. 

4. Statement of compliance and basis of preparation 

Statement of compliance

The Group's condensed consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2009.

Basis of preparation: (i) Preparation of the condensed consolidated financial statements on the going concern basis

The Group's operations, and the factors affecting their current performance and future development, are set out on pages 2 to 6 and 8 to 17. The Group's financial position, cash flows and borrowing facilities are described in the Group Finance Director's review on pages 17 to 21. 

The Group has a series of processes in place designed to ensure that it exercises control over its cash and borrowing position and remains within the covenant limits set out in the revised facility agreement. Covenants are in place for leverage, interest cover, free cash flow before debt service, capital expenditure and exceptional items. Annual cash targets have been set for each division, and progress against these targets is monitored monthly. Capital expenditure and cash restructuring costs are subject to approval under a scheme of delegated authority. Shorter-term (three month) cash flow forecasts are prepared each month and form the basis of the comparison to actual results. In addition, the Group operates an annual budget cycle and quarterly financial reforecasts of the entire consolidated income statement, consolidated balance sheet and consolidated cash flow statement. Furthermore, the Group maintains a programme of dialogue with its lending banks, including the formal presentation of results and budgets to the bank syndicate and individual meetings with lenders.

During 2009, the Group achieved great success in reducing costs to achieve a financial result and year-end borrowing position that were well within the limits of the revised facility agreement. This, the Group's internal forecasts for 2010 and 2011 and the Group's processes for monitoring compliance with the bank facility agreement (as described above), give the directors confidence that the financial covenants under the revised facility agreement will be met.  

After making enquiries, the directors have a reasonable expectation that the Group (and Mecom Group plc as a company) has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the Annual report and accounts.

Basis of preparation: (ii) Change in the Group's presentation currency

The Group has previously presented its condensed consolidated financial statements in pounds sterling. However, since a significant portion of the Group's operations are carried out in the Netherlands and Denmark (whose currency is effectively pegged to the euro) and a significant amount of the Group's net debt is denominated in euros, the directors have decided it is appropriate to change the Group's presentation currency to the euro. This change in accounting policy is expected to eliminate many of the foreign exchange differences in reported numbers from period to period. 

There have been no changes to the functional currencies or the underlying measurement of assets, liabilities, revenues and profits of the Company or any of its subsidiaries in the year. The Company's functional currency continues to be pounds sterling and so is different to the presentation currency of the Group. 

Since the change in presentation currency has been applied retrospectively, all comparative numbers in these condensed consolidated financial statements are described as "restated". Note 19 to these condensed consolidated financial statements sets out in detail how the consolidated income statement for the year ended 2008, the consolidated balance sheets at 31 December 2008 and 2007 and the consolidated cash flow statement for the year ended 31 December 2008, which were included in the 2008 Annual report and accounts and presented in pounds sterling, have been converted into euros. 

As required by IAS 1 Presentation of Financial Statements (Revised), the Group presents in these condensed consolidated financial statements a consolidated balance sheet at 1 January 2008 (which, for convenience, is shown as at 31 December 2007) which has been translated into euros.

Basis of preparation: (iii) Change to the Group's primary financial statements

As noted above, the Group adopted IAS 1 Presentation of Financial Statements (Revised) during the year, leading to the Group including two new primary financial statements in these condensed consolidated financial statements: the consolidated statement of comprehensive income for the current year and prior year (see page 26) is presented (previously the Group presented the consolidated statement of recognised income and expense); and the consolidated statement of changes in equity (see page 28).

Basis of preparation: (iv) Other

The condensed consolidated financial statements have been prepared on a historical cost basis, except for available-for-sale financial assets, derivative financial instruments, employee benefit assets and obligations and share-based payments that have been measured at fair value.

4. Statement of compliance and basis of preparation (continued)

As noted above, these condensed consolidated financial statements are presented in euros and, except when otherwise stated, all values are shown in millions, rounded to the nearest one hundred thousand euros. The significant exchange rates for the Group (against the euro), applied during the current year and prior year (and also spot rates at 31 December 2007 due to the inclusion of the consolidated balance sheet at that date), are as follows:

      Average rate for year ended 31 December    Spot rate at 31 December
                    2009                 2008      2009     2008     2007
 NOK                8.78                 8.23      8.29     9.75     7.94
 DKK                7.45                 7.46      7.44     7.44     7.46
 PLN                4.33                 3.51      4.11     4.12     3.60
 GBP                0.89                 0.79      0.89     0.97     0.73

Differences in spot rates from 31 December 2008 to 31 December 2009 have caused the Group's non-euro denominated assets and liabilities (primarily comprising amounts denominated in NOK and PLN) to increase (on a net basis) in value when retranslated into euros, resulting in foreign exchange differences of EUR2.0m being credited to reserves in the year ended 31 December 2009 (year ended 31 December 2008: debit of EUR49.4m; year ended 31 December 2007: credit of EUR18.5m).

Judgements made by management in the application of IFRS that have a significant effect on these condensed consolidated financial statements and estimates with a significant risk of material adjustment in the next year are discussed in Note 5 below.

5. Significant accounting judgements and key sources of estimation uncertainty 

In the application of the Group's accounting policies, the directors are required to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual outcomes could differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects that period only, or in the period of the revision and future periods if the revision affects both current and future periods. 

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, the directors have made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in these condensed consolidated financial statements:

(a) Taxation 

The Company and its subsidiaries are subject to routine tax audits and also a process whereby tax computations are discussed and agreed with the appropriate authorities. Whilst the ultimate outcome of such tax audits and discussions cannot be determined with certainty, management estimates the level of provisions required for both current and deferred tax on the basis of professional advice and the nature of current discussions with the tax authority concerned. 

(b) Recoverability of deferred tax assets

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that a taxable profit or loss will be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits. 

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Impairment of goodwill and acquired intangibles

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value-in-use of the cash-generating units to which the goodwill is allocated. Estimating a value-in-use amount requires the directors to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. At 31 December 2009, the carrying amount of goodwill was EUR183.1m (2008: EUR211.2m; 2007: EUR1,330.2m). 

The Group assesses at least annually whether there is any indication of any of its acquired intangibles (comprising customer relationships, brands and publishing rights) being impaired. If there is such an indication, the individual asset's recoverable amount is measured and, if necessary, an impairment charge is recorded. At 31 December 2009, the carrying amount of the Group's acquired intangibles was EUR623.1m (2008: EUR698.5m; 2007: EUR911.8m). 

If a cash-generating unit's goodwill was to be fully impaired following the annual assessment of the carrying amount of goodwill, any remaining excess of book value over recoverable amount would be allocated to other asset classes of the CGU, including its acquired intangibles.  

(b) Valuation of assets and liabilities in a business combination

The acquisition of subsidiaries is accounted for using the purchase method and the purchase consideration is allocated over the net fair value of identifiable assets, liabilities and contingent liabilities acquired with any excess consideration representing goodwill. In determining the fair value of assets, liabilities and contingent liabilities acquired, the directors may make significant estimates and assumptions, including those with respect to cash flows and unprovided liabilities and commitments.

(c) Useful lives of acquired intangibles

On acquisition of subsidiaries the Group will consider the useful lives of any intangible assets acquired. The length of useful lives of customer relationships is assessed based on the average lives of historic customer relationships for all main titles. The length of useful lives of brands and publishing rights is assessed based on the directors' view of the market, the length of the time that the main titles have been established and, in the case of publishing rights, the term of any contract. 

The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. 

(d) Provisions 

The amounts provided for restructuring and redundancy provisions, onerous lease provisions and other provisions are based on the directors' best estimates of costs likely to be incurred to the extent that they are recognisable under relevant reporting standards. To the extent that events or costs differ in future, the carrying amount of provisions may change. At 31 December 2009, the carrying amount of provisions was EUR62.8m (2008: EUR85.1m; 2007: EUR77.7m).  

(e) Employee benefit obligations

The cost of defined benefit pension plans and other retirement benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. At 31 December 2009, the carrying amount of employee benefit obligations was EUR69.9m (2008: EUR66.8m; 2007: EUR73.3m). 

6. Operating segments

For management and therefore internal reporting purposes, the directors have organised the Group into divisions based on geographical location. For internal reporting purposes, all significant operations that have been disposed of during the year are separated from the results of the "ongoing" businesses (regardless of whether they are accounted for as "discontinued operations" under IFRS in these accounts) and are shown separately, in aggregation, as "Mecom disposed". This allows the Board to focus on the financial performance of the continuing businesses, the total of which is shown in the Group's internal financial reports as "Mecom ongoing".   

The Group's reportable operating segments included within "Mecom ongoing" are:

·   The Netherlands (excluding the results of the disposed AD NieuwsMedia business - see Note 16);

·   Denmark;

·   Norway (excluding the results of the disposed north-western Norway business - see Note 16); and

·   Poland.  

"Central and other" is also part of "Mecom ongoing" and comprises the Group's head-office activities, which are primarily located in the UK, together with the costs of certain Group-wide functions including IT strategy, revenue development and Group internal audit. No operating segments have been aggregated to form the above reportable operating segments. 

The Group's directors (being the chief operating decision maker) monitor the operating results of its divisions separately for the purpose of making decisions about resource allocation and performance assessment. The Group's financial performance is based on an assessment of the results, which are measured consistently with operating profit or loss in the condensed consolidated income statement, of the above segments. Such monitoring and assessment of an individual division's financial performance is done primarily at the adjusted EBITDA level. 

All of the Group's reportable operating segments derive their revenue from the following revenue streams: advertising, circulation and other (comprising principally third-party printing and enterprises). Revenue from external customers is attributed to individual operating segments on an origin basis. Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties. Transactions between operating segments represented less than 1% of total Group revenue and operating costs.   

Exceptional items (comprising amounts recorded in operating costs, finance exceptional items and gains/losses on disposal of businesses and investments) are also monitored and assessed, in aggregate, by the directors at the operating segment level. Amortisation of acquired intangibles is also monitored and assessed by the directors at the operating segment level. 

Regular, non-exceptional finance income and expense and income taxes are managed on a Group basis and are not provided to the chief operating decision-maker at the operating segment level. These items are therefore not allocated to operating segments. 

Operating assets and liabilities comprise all classes of assets and liabilities, respectively. 

Digital revenue comprises revenue earned from either newspaper websites or standalone websites and is recorded against the relevant revenue category. Capital expenditure excludes any items purchased via a business combination or the separate purchase of publishing rights and, for the purposes of this Note, includes both property, plant and equipment additions and software additions. Additions to non-current assets comprises additions to goodwill, other intangibles assets, property, plant and equipment, interests in associates, investments and other financial assets arising from capital expenditure and business combinations but excludes such additions to employee benefit assets and deferred tax assets.  

The following tables present (i) financial information as internally reported to the directors for the years ending 31 December 2009 and 2008 in respect of the Group's reportable operating segments and (ii) reconciliations of financial information as internally reported to financial information as reported under IFRS.  

6. Operating segments (continued)

Financial information as internally reported to Board for year ended 31 December 2009

                                         The  Denmark   Norway   Poland      Central  Eliminations      Mecom       Mecom        Mecom
                                 Netherlands     EURm     EURm     EURm    and other          EURm    ongoing   disposed1  Group total
                                        EURm                                    EURm                     EURm        EURm         EURm

 Revenue:                                                                                                                                
 External sales:                                                                                                                         
   Advertising                         329.7    163.3    124.2     47.8            -             -      665.0        33.4        698.4   
   Circulation                         252.3    166.0     63.1     64.1            -             -      545.5        40.8        586.3   
   Other                                48.9     82.5     52.8     14.8            -             -      199.0        10.9        209.9   
 Total external revenue                630.9    411.8    240.1    126.7            -             -    1,409.5        85.1      1,494.6   
 Inter-segment sales                       -        -      1.1        -            -         (1.1)          -           -            -   
 Total revenue as internally           630.9    411.8    241.2    126.7            -         (1.1)    1,409.5        85.1      1,494.6   
 reported
 Total costs (including share                                                                                                            
 of results
 of associates, excluding            (539.9)  (396.3)  (225.8)  (118.5)       (10.5)           1.1  (1,289.9)      (79.2)    (1,369.1)   
 depreciation)
 Adjusted EBITDA as internally          91.0     15.5     15.4      8.2       (10.5)             -      119.6         5.9        125.5   
 reported
 Depreciation (including              (22.9)   (20.4)   (11.1)    (6.1)        (0.2)             -     (60.7)       (2.1)       (62.8)   
 amortisation of software)
 Adjusted operating                     68.1    (4.9)      4.3      2.1       (10.7)             -       58.9         3.8         62.7   
 profit/(loss) as internally
 reported
 Total exceptional items2             (48.7)   (12.7)    (6.5)    (5.6)       (34.2)             -    (107.7)       (3.9)      (111.6)   
 Segment result as internally           19.4   (17.6)    (2.2)    (3.5)       (44.9)             -     (48.8)       (0.1)       (48.9)   
 reported
                                                                                                                                         
 Assets and liabilities                                                                                                                  
 Operating assets                      812.0    248.0    281.6    108.6         24.6         (1.7)    1,473.1           -       1473.1   
 Operating liabilities               (616.9)  (162.5)  (111.3)   (23.3)      (281.0)             -  (1,195.0)           -    (1,195.0)   
 Other information                                                                                                                       
 Digital revenue                        18.3     20.7     23.6      4.4            -             -       67.0           -         67.0   
 Amortisation of acquired             (42.2)    (8.9)    (9.2)    (1.5)            -             -     (61.8)           -       (61.8)   
 intangibles
 Impairment charges in respect                                                                                                           
 of:
 property, plant and equipment,                                                                                                          
 software, associates and
 investments                           (0.6)        -    (2.7)    (4.0)            -             -      (7.3)           -        (7.3)   
 Adjusted EBITDA margin                14.4%     3.8%     6.4%     6.5%          n/a           n/a       8.5%        6.9%         8.4%   
 Adjusted operating profit             10.8%   (1.2)%     1.8%     1.7%          n/a           n/a       4.2%        4.5%         4.2%   
 margin
 Interests in associates                 6.9      3.1     29.3        -            -             -       39.3           -         39.3   
 Capital expenditure on                 12.3      4.7      3.9      0.2            -          36.8        0.2        37.0                
 property, plant and equipment
 and software3
 Additions to non-current               32.9     20.0      5.1      4.0          0.2             -       62.2         0.2         62.4   
 assets

1 For the year ending 31 December 2009, "Mecom disposed" comprised Mecom Germany, north-western Norway and AD NieuwsMedia. Further details of these disposals are contained in Note 16.  

2 For internal reporting purposes, total exceptional items include both operating and finance exceptional items together with all gains/losses on disposal of businesses and investments. 

3 Capital expenditure in this instance relates to book amounts. 

6. Operating segments (continued)

Reconciliations of financial information as internally reported to financial information as reported under IFRS for the year ended 31 December 2009

i Reconciliation of "Mecom ongoing" as internally reported to loss for the year from continuing operations as reported under IFRS
                                         Total      Add back results             Reverse            Amortisation            Amounts as
                                            of         of operations             finance                      of              reported
                                        "Mecom           disposed of         exceptional                acquired           for contin-
                                      ongoing"       but not classi-               items             intangibles          uing operat-
                                          EURm               fied as                EURm                    EURm            ions under
                                                        discontinued                                                              IFRS
                                                         under IFRS1                                                              EURm
                                                                EURm                      
 Revenue:                                                                                 
 External sales:                                                                          
   Advertising                           665.0                  16.8                   -                       -                 681.8
   Circulation                           545.5                  27.3                   -                       -                 572.8
   Other                                 199.0                   8.0                   -                       -                 207.0
 Inter-segment sales                         -                     -                   -                       -                     -
 Total revenue                         1,409.5                  52.1                   -                       -               1,461.6
 Total costs (including share                                                             
 of results                                                                               
 of associates, excluding            (1,289.9)                (47.9)                   -                       -             (1,337.8)
 depreciation)                                                                            
 Adjusted EBITDA                         119.6                   4.2                   -                       -                 123.8
 Depreciation (including                (60.7)                 (2.1)                   -                       -
 amortisation of software)                                                                
 Adjusted operating profit                58.9                   2.1                   -                       -                  61.0
 Exceptional items                     (107.7)                   0.1                34.7                       -                (72.9)
 Amortisation of acquired                    -                     -                   -                  (61.8)                (61.8)
 intangibles                                                                              
 Operating (loss)/profit                (48.8)                   2.2                34.7                  (61.8)                (73.7)
 Net finance expense before                                                                                                     (37.5)
 exceptional items
 Exceptional finance expense                                                                                                    (34.7)
 Loss on disposal of businesses                                                                                                  (0.3)
 and investments
 Loss before tax                                                                                                               (146.2)
 Income tax credit                                                                                                                21.3
 Loss for the year ended 31                                                                                                    (124.9)
 December 2009 from continuing
 operations

1 These items related to the Group's NWN and AD operations which were disposed of during 2009 (see Note 16). 

ii Reconciliation of "Mecom disposed" as internally reported to loss for the year from discontinued operations as reported under IFRS

                                                                     Note  EURm
 Segment result as internally reported for "Mecom disposed"                (0.1)
 Reverse operating profit of operations not classified as                  (2.1)
 discontinued operations under IFRS
 Net finance expense before exceptional items                              (1.8)
 Loss for the year ended 31 December 2009 from discontinued          10    (4.0)
 operations

                            

6. Operating segments (continued)

Financial information as internally reported to Board for year ended 31 December 2008
                                         The  Denmark   Norway   Poland      Central  Eliminations      Mecom       Mecom        Mecom
                                 Netherlands     EURm     EURm     EURm    and other          EURm    ongoing  disposed1,  Group total
                                        EURm                                    EURm                     EURm           4         EURm
                                                                                                                     EURm

 Revenue:                                                                                                                                
 External sales:                                                                                                                         
   Advertising                         406.9    202.7    147.3     56.6            -             -      813.5       137.5        951.0   
   Circulation                         251.2    167.0     62.1     63.7            -             -      544.0       110.8        654.8   
   Other                                54.4     99.3     61.5     20.0            -             -      235.2        32.7        267.9   
 Total external revenue                712.5    469.0    270.9    140.3            -             -    1,592.7       281.0      1,873.7   
 Inter-segment sales                       -        -      0.3        -            -         (0.3)          -           -            -   
 Total revenue as internally           712.5    469.0    271.2    140.3            -         (0.3)    1,592.7       281.0      1,873.7   
 reported
 Total costs (including share                                                                                                            
 of results
 of associates, excluding            (590.0)  (448.2)  (248.5)  (130.0)       (11.4)           0.3  (1,427.8)     (242.8)    (1,670.6)   
 depreciation)
 Adjusted EBITDA as internally         122.5     20.8     22.7     10.3       (11.4)             -      164.9        38.2        203.1   
 reported
 Depreciation (including              (25.9)   (18.1)   (11.1)    (6.6)        (0.4)             -     (62.1)       (9.3)       (71.4)   
 amortisation of software)
 Adjusted operating                     96.6      2.7     11.6      3.7       (11.8)             -      102.8        28.9        131.7   
 profit/(loss) as internally
 reported
 Total exceptional items2            (622.4)  (176.5)  (150.9)   (31.0)        (7.2)             -    (988.0)     (160.1)    (1,148.1)   
 Segment result as internally        (525.8)  (173.8)  (139.3)   (27.3)