Loss-making deal between Wegener & De Pers
UK media investor Mecom just published its expectation for 2010. Apart from the reoccurring cost-cutting (€60m last year) and high debts (€312m) the company expects to lose quite a lot of money on its adventure with free Dutch daily De Pers.
Last year Wegener – one of Mecoms Dutch assets - made a deal with De Pers to organize printing, distribution and advertising sales for the third free Dutch paper. Apparently the deal was better for De Pers than for Wegener, as the projected advertising revenues never materialized, Wegener will therefore make substantial changes at De Pers and expects huge losses for the future.
The complete passage in Mecom press reads as follows:
In 2009 Wegener entered into a long-term contract entitling Wegener to sell advertising in the De Pers daily free newspaper in the Netherlands, supported by the payment by Wegener of an annual fee to the publisher of De Pers. Actual and projected advertising revenues for De Pers have fallen considerably behind the previous expectations of Wegener management, with the result that the Group now expects to incur a loss over the life of the arrangement. The Group intends to mitigate this loss by exercising Wegener’s rights under the contract to change the De Pers publishing model. Notwithstanding this, the Group will record an exceptional charge in the 31 December 2010 accounts of approximately €63 million (approximately €47 million after tax). €48 million of the charge relates to the present value of anticipated future pre-tax cash losses over the remaining 11 years of the contract. The remaining €15 million of the charge relates to the impairment of balance sheet assets.