 NRJ Group : results for the 3rd quarter of 2006
9-Month Results as at 30 September 2006:
(fiscal year 1 January to 31 December 2006)
Turnover up by 19.6%;
Development of new Television and Telephone businesses in line with Group objectives;
Current operating income excluding Television and Telephone businesses posts 7.0% growth.
NRJ GROUP's Executive Board approved its consolidated accounts as at 30 September 2006, drawn up in line with IFRS standards.
As the first nine month of fiscal year 2006 came to an end, NRJ GROUP'S current operating income stood at 55.5 million, as compared to 75.1 million for the first nine months of 2005. This reflects both the increase in overall income from radio operations, excluding media and broadcasting (+7.0%) and the foreseen cost of developing the new Television and Telephone activities, in line with the overall multi-channel strategy.
Current operating income from Radio in France in the first 9 months of 2006 was down slightly (-1.0%) compared to the first months of 2005, due to a slowdown in advertising during the third quarter and the resulting drop in current operating income over the same period (-17.5% to 14.6 million). In 2006, current operating income from the first 9 months of the year posted a positive contribution on the order of 6 million, for the sale of advertising space to the Group's telephone businesses which, consolidated by contribution, is not included in turnover, but remains in the current operating income. The contribution almost offset the increase in expenses due to the Group's development and the decrease in margin resulting from the commercialisation of a non-Group media, as of 1 January 2006 (MFM Radio).
Current operating income from Radio (international) was nearly stable, despite the decrease in turnover posted in Germany. The sales reorganisation carried out in the country following the signing of the cooperation agreement with ARD-Werbung Sales & Services (AS&S) impacted the business in the third quarter, but, in exchange, made it possible to slightly cut expenses.
Current operating income from the Non-Media businesses amounted to 6.2 million in the first 9 months of 2006, as compared to 0.25 million for the first 9 months of 2005, due in particular to the success of the musical, "The Sun King".
Current operating income from the Group's Broadcasting business continues to improve as its turnover grows (+56.2% in the first 9 months, or 8.9 million), due to the combined effect of the actual roll-out of the digital terrestrial television in France (Télévision Numérique Terrestre or TNT) and Radio France's first broadcasts. The heightened investments and production resources required to develop Towercast, however, had a slight negative impact on this business' operating margin.
The Group's Television businesses continue to develop as TNT spreads in France. According to Mediamétrie data, in October 2006, 19.6 million individuals above age 4 accessed TNT, or 13% more than in June (via an adaptor, cable, satellite or ADSL); moreover, 6.4 million television viewers watched NRJ 12 every week in October, making for an increase of 45% since the beginning of the year. In this environment and with competition becoming tighter, NRJ 12 continues to enhance its semi-generalist programming, all the while controlling its costs. As the first 9 months of the year came to a close, current operating losses were in line with Group targets.
NRJ Mobile, continuing its development on the MVNO (Mobile Virtual Network Operator) market in France, launched its new offer in mid-October and totalled nearly 275 000 clients gained as of end-November 2006.
For the first 9 months of the fiscal year, current operating losses from Mobile and Directory services (Dial 118 333) amounted respectively to 15 million and 7.2 million, the latter consisting mainly of intra-Group advertising expenses (see above). In total, current operating income in the Telephone business amounted to a negative 22.2 million.
Outlook
In the fourth quarter, the Group has continued to post growth in turnover, in line with its overall multi-channel strategy.
At the present time, the combined Radio business in France, for October-November, shows improvement over the previous year.
In line with its strategy to win new audiences, NRJ 12 has been broadcasting the series, "Baywatch", on a daily basis, since 27 November, and will launch a large number of shows in December: "Generation...", a generational information magazine produced by Bernard de la Villardière, "The Winners", the celebrity video game tournament for the global launch of the WII game station, or an all-new football evening (UEFA Cup) hosted by Florian Gazan (host of "6-9" on NRJ), with the participation of French comedians Omar and Fred. On a full-year basis, the Group confirms its current operating loss spread of 10 to 12 million in Television (NRJ 12 and 7L, the upcoming local television channel in Montpellier).
Between now and the end of the year, NRJ Mobile will confirm its position as a major MVNO1. Through its new offer focused on winning over clients who use more services, the Group will come closer to its acquired client target by the end of the year. On a full-year basis, current operating income in the Mobile Telephone business is expected to be less than 25 million. With the Directory business (118 333), which runs mainly on intra-Group advertising, current operating losses for the mobile telephone business as a whole will be slightly more than 30 million.
1 According to the latest ARCEP data, the number of clients gained by MVNOs as at end-September 2006, amounted to nearly 1 million, including almost 250 000 at NRJ Mobile, on that date. Out of the MVNOs, ARCEP did not take into account offers made by historical operators under licensed brands, and based its conclusions on: Coriolis, Debitel, Neuf Cegetel, NRJ Mobile, Omer Telecom, Tele2, Ten and Transatel.
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