Lagardère : Strong growth in net earnings

At its March 10, 1999 meeting, the Supervisory Board examined the accounts for fiscal year 1998, as presented by Mr. Jean-Luc LAGARDERE, general manager, and Mr. Philippe CAMUS and Mr. Arnaud LAGARDERE, co-general managers.

The consolidated revenue of the Group was 70.1 billion FF (10.7 billion Euros) compared to 65.9 billion FF (10.04 billion Euros) in 1997 – representing an increase of 6.4%.

Excluding changes in Group structure and exchange rates, the revenues for the High Technology, Automobile and Media-Communications sectors rose respectively by 1.2%, 4.9% and 4.9%, thus contributing to an overall increase of 3.7%.

For fiscal year 1998, Lagardère’s operations average exchange rate after currency risk management was 5.90 FF per U.S dollar.

GROWTH IN OPERATING INCOME

Operating income rose by 5.9% to reach 4,223 million FF (644 million Euros).

This 5.9% gain, following a 51% increase in 1997 operating income, can be divided as follows:

• 6.4% increase in the High Technology sector, as a result of growth in the Defense and Space divisions, and a slowdown in the Telecommunications division because it moved away from its profitable public switching activities and incurred charges related to discontinuing its “mobile” business in July 1998.
• 22.5% increase in the Automobile sector (+30.5 % if one takes into account its exit from Transit system activities) – mainly due to the huge commercial success of the third generation of the Renault Espace minivan.
• 2.3% increase in the Media-Communications sector, as a result of an improvement in all its divisions (Book Publishing, Print Media, Media Distribution Services, Broadcasting & Outdoor Advertising) with the exception of Multimedia/Grolier, due to investments made to expand “Club Internet”, which is showing strong subscriber growth.

STRONG NET EARNINGS (+ 33%)

Interest expense, net for fiscal year 1998 was 6 million FF (0.9 million Euros) compared to 121 million FF (18.5 million Euros) in 1997.

Non-operating expense totaled 169 million FF (25.8 million Euros) compared to 462 million FF (70.4 million Euros) in 1997. This includes the net surpluses of asset transfers of 1,128 million FF (172 million Euros) – mainly MET, Matra Transport International and Selsius; restructuring provisions mainly related to the Telecommunications division; provisions related to intangible assets in the Media/Communications division; and some other extraordinary items.

Income taxes for the year were 1,563 million FF (238 million Euros) compared to 1,266 million FF (193 million Euros) for fiscal year 1997.

After minority interests, the net income rose to 1,837 million FF (280 million Euros) – an increase of 33% from 1997.

The following table presents the highlights of the consolidated income statement:

CREATING VALUE FOR SHAREHOLDERS

The economic value created by the company can be measured by comparing EBIT after notional taxes and the cost of capital. Our calculations indicate a created value of 1,222 million FF (186.3 million Euros).

OUTLOOK

We anticipate that operating income for fiscal year 1999 will lag behind that of 1998. Fiscal year 1998 benefited from the final delivery of certain long term export contracts. However, our strong orderbook in Defense and Space (49.8 billion FF i.e 7.6 billion Euros at the end of 1998) allows us to anticipate a substantial increase in operating income for the year 2000.

INCREASED DIVIDENDS

The general managers plan to recommend, at the Annual Shareholders Meeting, the distribution of a dividend of 0.78 Euros (5.12 FF) per share (to be matched with a tax credit of 0.39 Euros, or 2.56 FF), an increase of 16.3% with respect to 1997.

Please note that the Public and Shareholder Information Center is open to visitors at 121 avenue Malakoff, PARIS, 16th (Tel. 01.40.69.20.73) and that any information regarding the group can also be obtained via MINITEL 3615, Code LAGARDERE or on ECOFIL: 3615 COB or on the Internet at: //www.lagardere.fr