Lagardère SCA 2009 first-half consolidated revenues: down 2.2% on a reported basis and 3.5% on a like-for-like basis(*)

Lagardère SCA consolidated revenues for the six months ended June 30, 2009 totaled €3,720.0m, representing a fall of 2.2% on a reported basis and of 3.5% on a like-for-like basis.

– Lagardère Publishing – Continuing strong sales growth driven mainly, as in the first quarter, by the success of Stephenie Meyer books. Slowdown in growth in the month of June due to robust sales in June 2008 when two novels by James Patterson were published.
– Lagardère Active – Pace of contraction in revenues similar to the first quarter despite a deterioration in Broadcast revenues, which were particularly strong in the second quarter of 2008. Advertising revenues continued to fall by over 20%. In France, the fall was just over 15%. Digital revenues rose to 7.7% of total revenues in the second quarter of 2009.
– Lagardère Services – Stabilization, with trends similar to those at end March 2009. Sharp drop in press distribution revenues and slowdown in retail, due to the contraction in single-copy newspaper sales markets and the reduction in air travel. The retail business has been buoyed by the opening of new sales outlets.
– Lagardère Sports – Second quarter in line with forecasts. Lower revenues due to a less favorable sporting calendar than last year, which included billings for the Euro 2008 football tournament.

I – Revenues

Lagardère Publishing

2009 first-half revenues were €1,009m, up 11.1% on a reported basis and 11.5% on a like-for-like basis. The slowdown in growth relative to the first quarter of 2009, when revenues increased by 14.1% on a like-for-like basis, was due to a less favorable comparative (revenues rose by 2.4% in the 2008 first quarter and by 6.3% in the 2008 second quarter). Unlike 2008, there was only a marginal negative forex effect of €8m.

The success of the Stephenie Meyer saga (Breaking Dawn, New Moon, Twilight and Eclipse) was unabated, either in the United States or in the UK and France. The success of David Baldacci’s First Family and William P. Young’s The Shack boosted revenues in the United States. In the United Kingdom, Victoria Hislop’s The Return made a positive contribution, as did the successes of Orion and Little, Brown UK.

In France, revenues were propelled by strong sales for Illustrated Books, while General Literature recovered ground relative to the first quarter with successes like Anthony Beevor’s D-Day, Pierre Péan’s Le Monde selon K and Stefan Zweig’s Lettre d’une inconnue.

Trends in Education sales were better than in the first quarter of 2009, both in France and in Spain.

Partworks, which are more sensitive to economic conditions, again saw a downturn, except in Germany and Italy, though the fall was less marked than at end March.

The Retail business made progress despite the recession, adding 8.0% to revenues in France and 6.5% in the United Kingdom.

Lagardère Active

Lagardère Active first-half revenues fell by 17.7% on a like-for-like basis and by 18.3% on a reported basis to €831m, in line with the first-quarter performance (down 17.5% on a like-for-like basis).

Though the trend in advertising revenues is generally similar to the first quarter of 2009, there was a stabilization at International level and a slight deterioration in France, mainly for Radio. Advertising revenue trends are showing strong volatility month-on-month, reducing the group’s visibility. However, the slowdown in magazine circulation has eased.

Digital activities accounted for 7.4% of Lagardère Active first-half revenues (against 6.4% at June 30, 2008), in line with the objective of 5%-10% of revenues in 2009.

Press

First-half revenues of the Magazines business were down 18.7% on a reported basis and 18.5% on a like-for-like basis, at €633m.

The main trends in advertising revenues in the second quarter were:

• Magazine Publishing France contracted by just over 15%, though the decline was less marked than for Magazine Publishing International.
• The fall in revenues for Magazine Publishing International stabilized, though it remained above 25% in the second quarter. It was a very mixed picture for different geographical regions: the United States and China saw better trading in the second quarter than the first, unlike the United Kingdom and to a lesser extent Italy.

Press circulation revenues improved slightly over the first quarter, with same-title sales dipping by around 2% in the second quarter, versus nearly 8% to end March. Again the picture was mixed geographically though there was a noticeable improvement, especially in France.

Broadcast

The acceleration in the downturn in Broadcast revenues relative to end March 2009 was largely due to an unfavorable comparative provided by Q2 2008 revenues, which rose by 12.9% on a like-for-like basis. Revenues from Broadcast activities were €198m, a drop of 17.1% on a reported basis to end June 2009 and 15.0% on a like-for-like basis.

• Radio
  In France, revenues were down more than 15% due to a fall in music channel audience figures, and despite an increase in Europe 1 audiences. The deterioration in the second quarter was caused by a sharp dip in revenues for RFM and Virgin Radio. To end June, International Radio showed a similar trend to the first quarter of 2009, continuing to contract by over 20%.
• Television
  Lagardère Entertainment revenues to end June were hit by the program delivery cycle, especially in certain TV series. The trend in DTT advertising revenues deteriorated markedly relative to the first quarter of 2009.

Lagardère Services

Lagardère Services 2009 first-half revenues were down 2.6% on a like-for-like basis and 3.7% on a reported basis, at €1,619m. The fall was less marked than at end March 2009 despite an unfavorable comparative due to strong Q2 2008 revenues (6.4% like-for-like, vs. 5.2% in Q1 2008). The negative forex effect of €40m was largely due to rises in the average rate of the euro against the Polish zloty (28%) and the Hungarian forint (15%).

Retail (two-thirds of Lagardère Services revenues) held steady, while press distribution revenues continued to fall by about 10%.

• Despite the extension of the store network, Aélia still saw a slight fall in revenues over the first six months of the year, hit by the drop in air travel. Relay France sales were flat after a slight upturn in the second quarter. Though the print media market remained in decline, it seemed less depressed at the mid-point of the year.
• Retail operations in Romania recorded double-digit growth driven by the expansion of store networks, while sales fell in Hungary. In Spain, though the market continued to contract, the trend was more favorable in the 2009 second quarter than the first. Sales in Belgium and Germany were slightly up in the first half.
• Distribution activities showed a further fall. In the United States, Curtis was hit throughout the second quarter by the bankruptcy of wholesaler Anderson. In Spain and Belgium, the fall was slightly less marked.

Lagardère Sports

Lagardère Sports posted 2009 first-half revenues of €261m, up 31.9% on a reported basis and down 7.6% on a like-for-like basis. More than €80m of the difference between reported-basis and like-for-like growth was due to the full consolidation of WSG from January 1, 2009.

As expected, like-for-like revenues were down in the second quarter. Given the structure of the division’s contracts (rights acquisition or agent’s commission) and the timing of sporting events, the revenue streams of Lagardère Sports are highly volatile from one quarter to the next. At end June 2009, the non-recurrence of the revenues generated by the African Cup of Nations and Euro 2008 was only partially offset by the positive impact of the Handball World Cup and qualifiers for the 2010 football World Cup.

Excluding Lagardère Active, for which we have not issued guidance, consolidated revenues to end June 2009 were €2,889m, up 3.7% on a reported basis and 1.7% on a like-for-like basis. This performance illustrates the group’s resilience in a tough environment for media companies, and enables us to reiterate the guidance issued in March this year.

II – Outlook

For Lagardère Active, the lack of visibility on the advertising side was confirmed in the second quarter. Consequently, we are still not in a position to issue guidance for the full year.

For Lagardère Publishing, 2009 second-half revenues will likely be hit by a tough comparative: the success of the Stephenie Meyer saga was particularly marked from July 2008, accelerating in the fourth quarter.
For Lagardère Services, trends will likely be in line with the start of the year, though with a more favorable comparative base in the fourth quarter.
The irregular profile of Lagardère Sports revenues is expected to continue depending on the quarter, but with full-year like-for-like revenues virtually unchanged.

We are reiterating our guidance for Media recurring EBIT before associates given in March 2009:

For Lagardère Active, we would point out that:

• Each 1% loss of revenue has a negative impact of between €8m and €10m on recurring EBIT before associates over a full year before any cost savings, on top of which comes the unavoidable knock-on effect of rises in some operating costs (approximately €35m) and the cost of continuing with our initiatives to prepare for the future (approximately €10m).
• Cost savings arising from measures already taken and from the additional measures announced in March 2009 (One Step Further plan) are expected to have a positive impact of €90m in 2009. The One Step Further cost-cutting plan was absolutely on target at end June 2009.

For other activities, despite the deeper than expected recession, we are reiterating our guidance of a fall in recurring EBIT before associates of between zero and no more than 10%, assuming constant exchange rates.