Notes to the consolidated financial statements

1.Accounting policies

General information

Telegraaf Media Groep N.V. (the Company) has its registered office in Amsterdam, the Netherlands. Its primary activities are the publication of printed media and the operation of, and participation in, digital media and radio. The Company’s shares are listed on the NYSE Euronext in Amsterdam.

The Company’s consolidated financial statements for the year ended 31 December 2016 incorporate the Company and its subsidiaries (together referred to as TMG), jointly-controlled entities and TMG’s interests in associates.

The financial statements have been prepared by the Executive Board. They were signed by the Executive Board and the Supervisory Board on 7 March 2017.

Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Commission and interpretations of these standards by the IFRS Interpretations Committee (IFRIC).

Basis of preparation

The financial statements are presented in euros, rounded to the nearest thousand. Following a change in the law, public interest entities are no longer permitted to present an abridged statement of profit or loss in the company financial statements (as previously permitted pursuant to Section 402 of Book 2 of the Netherlands Civil Code). This change has only a small impact given the limited activities within Telegraaf Media Groep N.V.

Changes in accounting policies

The accounting policies presented in these consolidated financial statements have been applied consistently in 2016 and 2015 except as stated below. Various changes in IFRS standards have been in force since January 2016 and their nature and impact are as follows:

• IAS 19 Employee Benefits – Defined benefit plans: employee contributions, effective for financial statements starting on or after 1 January 2016.

• IAS 16 and IAS 38 Property, plant and equipment and intangible assets – Clarification of acceptable methods of depreciation and amortisation (effective for financial statements starting on or after 1 January 2016).

• IFRS annual improvements cycle 2010-2012 (effective for financial statements starting on or after 1 January 2016).

• IFRS annual improvements cycle 2012-2014 (effective for financial statements starting on or after 1 January 2016).
• IAS 1 Presentation of Financial Statements – Disclosure initiative (effective for financial statements starting on or after 1 January 2016).

The changes do not currently impact TMG’s financial position or accounting policies. Where necessary, disclosures and presentation will be amended in accordance with the changes in IFRS.

Changes in presentation

Certain comparative figures have been restated in line with the current presentation. The revenue categories have been changed compared to 2015 to provide a better view of the revenue per business unit; the comparative figures for 2015 have been restated.

Critical accounting estimates and judgements

When preparing the financial statements, management made judgements, estimates and assumptions which affect the application of the accounting policies and amounts recognised in the financial statements. The estimates and the related assumptions are based on historical experience and other factors that are believed to be reasonable in the circumstances. The outcomes of these form the basis for the evaluation of the carrying amount of assets and liabilities where this is not readily apparent from other sources.

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 only that period or in the period of the revision and future periods if the revision affects both current and future periods. The items where estimates may have a material effect on the amounts recognised are:

• intangible assets (useful life, discount rate and impairment: see note 14);
• property, plant and equipment (useful life and impairment: see note 15);
• investment in associates (measurement at fair value as initial measurement at cost: see note 16);
• trade receivables (impairment: see note 19);
• post-employment benefits (discount rate and growth of obligations: see note 27);
• restructuring provision (amount of severance payments and form of redundancy: see note 28);
• provision for legal disputes (probability and amount: see note 28);
• ldeferred tax assets and liabilities (rate and term and utilisation of carry-forward losses: see note 29).

See the note referred to for individual items for the judgements and assumptions made by management when preparing the financial statements.

Basis of consolidation

The consolidated financial statements incorporate the financial information of TMG and its subsidiaries. The consolidation uses the parent company’s accounting policies.

Subsidiaries

Subsidiaries are entities controlled by the Company. Control exists when the Company has power over an entity such that it is exposed, or has rights, to variable returns from its involvement and has the ability to use its power to affect its returns. The financial statements of subsidiaries are incorporated in the consolidated financial statements from the date that control commences until the date that control ceases. Material substantive potential voting rights are taken into account in assessing whether control exists.

Profit and loss and each component of other comprehensive income are attributed to the owners of the subsidiary and its non-controlling interests.

Joint arrangements

A joint operation is an agreement under which the Company exercises joint control and has rights to the assets and obligations for the liabilities. The following are recognised for joint operations where there is joint control:

• rights to the assets and obligations for the liabilities; and
• associated rights to revenue and obligations for the related expenses.

Joint ventures where joint control is exercised are recognised using the equity method and initially measured at cost. Cost includes transaction costs. Subsequently, the consolidated financial statements recognise the Company’s share of the realised and unrealised results using the equity method until there is no further significant influence or joint control. Changes in the value of joint ventures as a result of dilution are recognised through profit or loss as share of result of associates.

Associates

Associates are those entities over which TMG exercises significant influence, but not individual or joint control, over the financial and operating policies. Subsidiaries and joint arrangements are not associates. The consolidated financial statements include TMG’s share of the total result of associates using the equity method from the date that significant influence commences until the date that significant influence ceases. Changes in the value of associates as a result of dilution are recognised through profit or loss as share of result of associates.

Goodwill identified on acquisition is recognised in the carrying amount of the investee net of any accumulated impairment. TMG’s consolidated financial statements include its share of the revenue and expenses and equity movements of investees, after adjustment to align the accounting policies with those of TMG. Impairment is recognised immediately through profit or loss. If TMG’s share of losses exceeds its interest in the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that TMG has incurred legal or constructive obligations or made payments on behalf of an associate.

Transactions eliminated on consolidation

Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated when preparing the consolidated financial statements. Unrealised gains arising from transactions with associates and jointly-controlled entities are eliminated in proportion to TMG’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment. The results of the subsidiaries acquired or disposed of during the financial year are recognised in the consolidated financial statements from or until the share transfer date. If necessary, the figures of subsidiaries are adjusted to align them with the accounting policies with those of TMG.

Foreign currency

Foreign currency transactions

Transactions denominated in foreign currencies are translated into euros at the exchange rate ruling at the date of the transaction.

The statement of financial position consists of monetary and non-monetary items. Monetary assets and liabilities denominated in foreign currencies are translated into euros at the reporting date at the exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of profit or loss. Non-monetary assets and liabilities measured at historical cost in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies measured at fair value are translated into euros at the exchange rate ruling at the date the fair value was determined.

Assets and liabilities of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into euros at the exchange rate ruling at the reporting date. Revenues and expenses of foreign operations are translated into euros at the date of the transaction. Foreign exchange differences arising on translation are recognised directly in a separate component of equity. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised directly in equity in the translation reserve. When a foreign operation is disposed of, the relevant amount in the translation reserve is transferred to the statement of profit or loss.

Intangible assets

Goodwill

Goodwill represents amounts arising on the acquisition of a subsidiary, associate or joint arrangement.

The consideration for a subsidiary, associate or joint arrangement is equal to the amount paid for the acquisition of the interest. If the consideration is higher than the share of the fair value of the identifiable assets, liabilities and contingent liabilities on the acquisition date, the excess is recognised as goodwill. Goodwill is stated at cost less any accumulated impairment. Goodwill is attributed to cash generating units and is not amortised. Instead, it is tested annually for impairment (see impairment accounting policy). The carrying amount of goodwill for associates and joint arrangements is recognised in the carrying amount of the investee. When an interest in a subsidiary, associate or joint arrangement is disposed of, the corresponding goodwill is included in the determination of the result of the transaction. Negative goodwill that arises during an acquisition is recognised directly in the statement of profit or loss. Acquisitions of non-controlling interests are accounted for as transactions between shareholders within equity and therefore no goodwill is recognised as a result of these transactions.

Other intangible assets

Other intangible assets are licences, internally-developed information systems and trademarks and publishing rights with a finite life. The other intangible assets acquired by TMG are measured at cost less accumulated amortisation and impairment (see impairment accounting policy). Expenditure for development activities where the research results are applied to a plan or design for the production of new or substantially improved products and processes are capitalised if the product or process is technically and commercially feasible and can be separately identified, if the expenses can be measured reliably and if TMG has sufficient resources to complete the development.

The capitalised costs comprise the cost of materials, direct labour and the directly-attributable proportion of overheads. A statutory reserve is formed for the amount capitalised. Other development expenditure is recognised in the statement of profit or loss as an expense when incurred. Capitalised development expenditure is measured at cost less accumulated amortisation and impairment.

Subsequent expenditure

Subsequent expenditure on capitalised intangible assets is recognised in the statement of profit or loss unless it increases the future economic benefits embodied in the specific asset to which it relates. In that case, the costs are capitalised insofar as they increase the economic benefits.

Borrowing costs

Borrowing costs relating to acquisitions or specific internally-developed assets, are capitalised.

Amortisation

Amortisation is charged to the statement of profit or loss on a straight-line basis over the estimated useful life of an intangible asset unless such life is indefinite. Other intangible assets are amortised from the date they are available for use.

The estimated useful lives are as follows:

• trademarks and publishing rights 5 - 20 years
• licences 6 years
• software 2 - 5 years

The amortisation method and estimated useful lives are assessed annually.

Leases

Leases under which TMG has substantially all the risks and rewards of ownership are classified as finance leases. The leased asset is initially recognised at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequently, the asset is recognised in accordance with the applicable accounting policy. Other leases are operating leases and the assets are not recognised in TMG’s statement of financial position.

Property, plant and equipment

Owned assets

Property, plant and equipment is stated at cost less accumulated depreciation and impairment (see impairment accounting policy). Property, plant and equipment under construction is stated at the cost of the new building, machinery or equipment.

Subsequent expenditure

TMG recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied in the item will flow to TMG and the cost of the item can be measured reliably. All other costs are recognised in the statement of profit or loss as an expense when incurred.

Borrowing costs

Borrowing costs relating to acquisitions or specific internally-developed assets, are capitalised.

Depreciation

Depreciation is charged to the statement of profit or loss on a straight-line basis over the estimated useful life of each part of an item of property, plant and equipment. Land is not depreciated.

The estimated useful lives are as follows:

• buildings 8 - 25 years
• machinery and equipment 5 - 10 years
• other assets 3 - 5 years

The depreciation method, estimated useful lives and residual values are assessed annually.

Investment in associates

On acquisition, an associate is initially recognised at cost (being the fair value when the shares are acquired plus expenses directly attributable to the transaction). Subsequently, associates are recognised using the equity method, under which the carrying amount of the associate is increased or decreased by the share of the result and movement in equity less dividends received from the associate. Any off-balance sheet liabilities relating to associates for which TMG may be held liable are disclosed in the note on off-balance sheet assets and liabilities (note 32).

Other receivables

Prepaid operating leases comprise the purchased ground rents for the land of the campus in Amsterdam. These are amortised on a straight-line basis over the duration of the leaseholds concerned. Non-current receivables are initially recognised at cost less attributable transaction costs and subsequently measured at amortised cost, with a difference between the cost and the redemption amount using the effective interest method being recognised in the statement of profit or loss over the duration of the receivables.

Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the selling expenses. The cost of the inventories is based on the ‘first in, first out’ (fifo) method and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

Securities

Investments in debt and equity instruments

Financial instruments held for trading are classified as current assets and stated at fair value, with any gain or loss recognised in the statement of profit or loss.

If TMG has the positive intent to hold financial instruments to maturity, they are stated at amortised cost less impairment. Other financial instruments held by TMG are classified as being available for sale and are measured at fair value with any resulting gain or loss being recognised in the equity, except for impairment losses and, in the case of monetary items such as debt securities, foreign exchange gains and losses. When these investments are derecognised, the accumulated gain or loss recognised directly through equity is recognised in the statement of comprehensive income.

Financial instruments

TMG does not use derivative financial instruments to hedge interest rate risk exposures and does not apply hedge accounting.

Trade and other receivables

Trade and other receivables are initially recognised at fair value. Subsequently they are recognised at amortised cost less impairment.

Cash and cash equivalents

Cash comprises cash and bank balances and call deposits.

Impairment

The carrying amount of TMG’s assets is reviewed at each reporting date to determine whether there is an indication of impairment. If such indication exists, the asset’s recoverable amount is estimated (see the policy for the calculation of recoverable amount).

The recoverable amount of goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use is estimated at each reporting date. An impairment loss is recognised whenever the carrying amount of an asset or cash-generating unit it belongs to exceeds the recoverable amount.

Impairment losses are recognised in the statement of profit or loss. Impairment losses recognised for cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (or groups of units) and then to reduce the carrying amount of the other assets in the unit (or groups of units) on a pro rata basis.

When a reduction in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in the statement of profit or loss, even though the financial asset has been derecognised. The accumulated loss that is recognised in the statement of profit or loss is the difference between cost and the current fair value less any impairment loss on that financial asset previously recognised in the statement of profit or loss.

Calculation of the recoverable amount

The recoverable amount of TMG’s investments in securities held to maturity and receivables measured at amortised cost is calculated as the present value of the expected future cash flows, discounted at the original effective interest rate (i.e. the effective interest calculated at the time when the financial assets were initially recognised). Receivables with a short residual term are not discounted to present value. The recoverable amount of other assets and associates is the higher of realisable value and the value in use. When determining the value in use, the present value of the estimated future cash flows is calculated using a pre-tax discount rate that reflects both the current market valuations of the time value of money and the specific risks related to the asset. The realisable value of an asset that generates no cash receipts which are significantly independent of those of other assets is determined for the cash generating unit to which the asset belongs.

Reversal of impairment

An impairment loss on a security held to maturity or a receivable carried at amortised cost is reversed if the subsequent increase, after recognising that loss, in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

Impairment losses on goodwill are not reversed. Impairment losses on other assets are reversed if there has been a change in the estimates used to determine the recoverable amount. Impairment is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Equity

Issued capital

The issued capital is the nominal amount of shares in issue.

Other reserves

Other reserves are the accumulated amount of annual comprehensive income attributable to the shareholders and changes in non-controlling interests less dividends distributed.

Non-controlling interests

Non-controlling interests are the portion of the profit or loss and net assets of a subsidiary attributable to equity interests of third parties. In the event of both a written put and a call option on shares, those shares will be included in TMG’s economic interest and not classified as a minority interest. The remaining interest is classified as a liability, based on the most realistic estimate.

Changes in non-controlling interests

Changes in TMG’s ownership interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. Any difference between the carrying amount of the non-controlling interest and the transaction price is recognised directly in equity as a transaction between shareholders.

Repurchase of shares

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs and net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and presented as a separate deduction from equity. The amount received for repurchased shares classified as treasury shares that are sold or reissued subsequently is recognised as an increase in equity and the resulting surplus or deficit on the transaction is transferred to/from retained earnings. Repurchased shares are deducted from issued capital at nominal value and the resulting surplus or deficit on the transaction is transferred to/from retained earnings.

Interest-bearing loans and borrowings

Interest-bearing loans and borrowings are recognised initially at fair value less costs relating to the loan or borrowings. Subsequently, interest-bearing loans and borrowings are measured at amortised cost with any difference between cost and redemption value being recognised in the statement of profit or loss over the period of the loans and borrowings on an effective interest basis.

Employee benefits

Pension plans

TMG has established various pension plans, some administered under its own management through Stichting-Telegraafpensioenfonds 1959 and some placed with external parties such as industry-wide pension funds and insurance companies.

TMG’s net obligation in respect of defined-benefit plans is calculated separately for each plan by estimating the amount of future entitlements that employees have accrued in return for their service in the current and prior reporting periods. Those entitlements are discounted to determine their present value. Any unrecognised past-service costs and the fair value of plan assets are deducted. The discount rate is the yield at the reporting date on corporate bonds with at least an AA credit rating and maturities approximating to the terms of TMG’s obligations. The calculation is performed by a certified actuary using the ‘projected unit credit’ method.

Actuarial gains and losses that arise when calculating TMG’s obligation in respect of a plan, the effect of the changes in the asset ceiling and the return on plan assets (excluding interest) are recognised immediately in the statement of financial position over the expected average remaining service period of the employees who are members of the plan.

Where the calculation results in a gain for TMG, the asset recognised is limited to the net total of any unrecognised actuarial losses and past-service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. If the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the statement of financial position on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the statement of profit or loss. The result ensuing from the curtailment or termination of a defined-benefit plan is recognised in the statement of profit or loss immediately the curtailment or termination exists. The result consists of service costs and net interest expense and/or income. Other movements are recognised in the financial position.

Obligations for contributions to defined-contribution plans are recognised as an expense in the statement of profit or loss as incurred. Industry-wide pension funds for which no reliable information is available are treated as defined-contribution plans.

c. Long-service schemes

TMG’s employment conditions include a long-service scheme under which employees who reach a certain length of service receive a gross payment. Under IAS 19 ‘Employee Benefits’, a provision has been formed for the liability arising from the long-service scheme. This provision is calculated in the same way as the provision for the defined-benefit pension schemes. Actuarial gains and losses are recognised immediately in the statement of profit or loss. Benefits paid under the long-service scheme during the financial year are charged against the provision. The movement in the provision for the long-service scheme is recognised in the statement of profit or loss.

Share-based payments

Cash-settled share-based payments are a conditional element of remuneration which when granted are subject to the recipient meeting set performance criteria after a period of four years (the performance period). Payment is only made if the recipient is still in employment after the four-year period. A pro-rata grant may be made in certain circumstances if the contract of employment is terminated in the intervening period. The amount payable at the end of the four-year period is estimated at the end of each year and a proportionate amount is charged to profit or loss during the performance period.

Provisions

A provision is recognised in the statement of financial position when TMG has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic assets will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the specific risks related to the liability.

Restructuring provision

A provision for restructuring is recognised when TMG and the works council have agreed a detailed and formalised restructuring plan and the restructuring has either commenced or has been announced publicly and TMG has no possibility of withdrawing the plan. Termination benefits are recognised as an expense when TMG is demonstrably committed to either terminating the employment of current employees and/or job grades. To the extent they can be reliably estimated, benefits falling due more than 12 months after the reporting date are discounted to their present value.

Onerous contracts

TMG recognises a provision for an onerous contract when total contract costs exceed the economic benefits expected to be received from the contract.

Trade and other payables

Trade and other payables are stated at fair value. Subsequent recognition is at amortised cost.

Determination of fair value

A number of TMG’s accounting policies and disclosures require the determination of fair value of financial and non-financial assets and liabilities. The following methods are used to determine fair value for measurement and/or disclosure purposes.

Intangible assets

The fair value of publishing rights and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

Property, plant and equipment

The fair value of property, plant and equipment recognised as a result of a business combination is based on market value. The market value of property is the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction in which the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of other plant, equipment, fixtures and fittings is based on the market prices for similar assets.

Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows discounted at the market rate of interest at the reporting date.

Derivatives

The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for similar instruments at the measurement date.

Assets and liabilities classified as held for sale

The fair value of assets and liabilities held for sale is based on discounted expected future cash flows or market observations and/or appraisals by a broker used to determine the expected net realisable value.

Further information on the assumptions made when determining fair values is disclosed in the notes to a specific asset or liability.

Revenue

Revenue excludes value added tax and is after discounts. Revenue from the sale of goods is recognised in the statement of profit or loss when the significant risks and rewards of ownership have been transferred to the buyer. Revenue relating to services provided is recognised in the statement of profit or loss in proportion to performance in the financial year. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible returns of goods, or when there is continuing management involvement with the goods.

Barter transactions

If advertising space or time is exchanged or swapped for advertising space or time of a similar nature, fair value and target audience, such an exchange is not recognised as a revenue-generating transaction. If this condition is not applicable, the exchange will be regarded as a transaction that generates revenue. The amount of the revenue is determined on the basis of the fair value of the goods or services received plus or minus any cash or assets which have been received or paid and that can be converted into cash in the short term.

If the fair value of goods or services received cannot be measured reliably, revenue is determined on the basis of the fair value of the exchanged goods or services plus or minus cash or assets which have been received or paid and that can be converted into cash in the short term

Government grants

Government grants are initially recognised in the statement of financial position if received in advance and recognised as income when there is reasonable assurance that they will be received and that TMG will comply with the conditions attached to them. Grants that compensate TMG for expenses are recognised systematically in the statement of profit or loss in the same period the expenses are incurred.

Expenditure

Lease payments

Payments made under operating leases are recognised in the statement of profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in the statement of profit or loss as an integral part of the total lease expense.

The minimum lease payments for finance leases are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic interest rate on the remaining balance of the liability. Conditional lease payments are incorporated by revising the minimum lease payments over the remaining lease term as soon as the amendment of the lease is confirmed.

Financial income and expense

The share of result of associates is TMG’s share of the total result of an associate for the period in which TMG has significant influence. When determining the share of result of associates, where necessary the associates’ accounting policies are brought into line with those of TMG.

A change in the value of a financial instrument through profit or loss is recognised as financial income and expense.

Financial income and expense includes interest payable on borrowings calculated using the effective interest method, interest income on funds invested, dividend income and foreign exchange gains and losses.

Interest income and expense is recognised in the statement of profit or loss using the effective interest method. Dividend income is recognised in the statement of profit or loss when the dividend is declared. Foreign currency gains and losses are reported net. Borrowing costs that are not directly attributable to an acquisition are recognised in the statement of profit or loss using the effective interest method.

Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the statement of profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or to be settled on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustments to tax payable in respect of previous years.

Deferred tax is provided for using the balance sheet liability method, forming a provision for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

The following temporary differences are not provided for: non-deductible goodwill and the initial recognition of assets or liabilities which affect neither the commercial nor the fiscal profit and differences related to investments in subsidiaries insofar as these are probably not going to be settled in the foreseeable future.

The amount of the provision for deferred tax liabilities is based on the way in which the carrying amount of the assets and liabilities is expected to be realised or settled, using tax rates in force or which had been enacted on the reporting date. A deferred tax liability is measured at nominal value. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets for losses carried forward are recognised only to the extent that it is probable that they can be utilised against future taxable profits.

Deferred tax liabilities and assets are netted if there is a legal entitlement to settle current and deferred tax, the income tax is charged by the same tax authorities and TMG intends to net the amounts.

Segment reporting

An operating segment is a clearly distinguishable unit of TMG that delivers goods or services or that delivers goods or services with other TMG units. All operating segments’ operating results are reviewed regularly by the Executive Board for decision-making on allocating resources. The segment reporting is in line with the internal management reporting.

Assets classified as held for sale and discontinued operations

Assets classified as held for sale are those relating to an operation to be disposed of if that operation is available for immediate sale and a sale is highly probable. Liabilities related to these assets are classified as liabilities held for sale. Assets are not depreciated from the time they are classified as held for sale. Assets and liabilities held for sale are measured at the lower of the carrying amount and fair value less costs to sell. Where necessary, external appraisals are used for the valuation. Impairment losses on assets held for sale are recognised in the statement of profit or loss.

A discontinued operation is a component of TMG’s business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view of resale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. A disposal group that is to be abandoned may also qualify.

Statement of cash flows

The consolidated statement of cash flows is prepared using the indirect method, distinguishing between operating, investment and financing activities. The cash flow from operating activities is adjusted for items in the statement of profit or loss and movements in items in the statement of financial position that have no effect on the cash flow for the year.

New accounting standards and interpretations not yet applied

Certain amendments to standards and interpretations are not yet in force and have not been applied in these financial statements. TMG has decided not to apply the following new standards early: IFRS 9 ‘Financial instruments’, IFRS 15 ‘Revenue from contracts with customers’ and IFRS 16 ‘Leases’. The impact of these new standards on the TMG’s financial statements is set out below:

IFRS 9 ‘Financial Instruments’

The impact of IFRS 9 on TMG’s financial statements is expected to be very limited mainly because TMG has almost only current receivables and liabilities, does not have complex financial instruments and does not apply hedge accounting.

IFRS 15 ‘Revenue from contracts with customers’

TMG started a project with external reporting specialists in 2016 to determine the impact of IFRS 15. The current status is that the revenue categories that will be affected by the implementation of IFRS 15 have been identified. The financial impact and impact on systems will be addressed further during 2017. The greatest impact of IFRS 15 is expected to be on the following revenue categories:

Subscription income:

• TMG uses third-parties to acquire subscribers and pays them a fee for this. Under IFRS 15, the cost of acquiring subscriptions of longer than one year will be capitalised and amortised over the term of the subscription. This will result in phased recognition of the acquisition costs over the term of the subscription and the presentation of these costs as an amortisation charge instead of selling expenses.

Single-copy sales:

• TMG uses various distribution channels, distributors and sales outlets for its print and other products. The arrangements with the distributors and sales outlets may differ in respect of returns, pricing, TMG’s influence over the outlets, etc. The changes in assessing the agent/principal classification under IFRS 15 mean that in some cases the distributor or sales outlet will be seen as an agent while under IAS 18 they were treated as principals. This will lead to an increase in revenue from single-copy sales and in selling expenses. There is no effect on the result.

Print and digital advertising revenue:

• Barter transactions: TMG regularly enters into similar barter transactions (advertising space and time for advertising space and time) with third parties. Under current revenue recognition standards, no revenue or expenses are recognised. Under IFRS 15, there will be higher advertising revenue and higher expenses. There is no effect on the result.
• Umbrella contracts: TMG enters into umbrella contracts with large advertisers under which they place advertisements with different brands and across different channels (print, online display, online video, etc.). TMG will have to allocate the contract revenue to the different performance obligations, with performance possibly being delivered at different times. These contracts were still small in volume in 2016 but this type of contract is expected to increase in the coming year. 

E-commcerce revenue:

• TMG generates revenue through online sales of third-party products (‘e-commerce revenue’). The changes in the assessment of the agent/principal classification under IFRS 15 mean that in some transactions TMG will be acting as agent while under IAS 18 it was regarded as the principal. This will lead to a reduction in e-commerce revenue and cost of sales. There is no effect on the result.

IFRS 16 ‘Leases’

The impact of IFRS 16 has been examined and will lead to recognition of certain leases on the balance sheet. This applies mainly to a limited number of leased buildings (TMG owns the majority of its buildings), cars and printers.

During its Investor Relations day on 29 September 2016, TMG announced that it was examining the sale and leaseback of the land and buildings on Basisweg. The implementation of IFRS 16 will mean that the lease obligations of the leaseback will be recognised on the statement of financial position under IFRS 16.

2.Segment reporting

Operating segments

The segment structure was revised with effect from 2016. TMG Digital, which was part of TMG Landelijke Media until 2016, is now managed as a separate segment. In addition, the ICT departments and activities of the various segments have been centralised in the Head Office segment. Sky Radio Group has been held for sale since January 2016 and is no longer presented as a segment. The comparative figures for 2015 have been restated.

TMG comprises the following main operating segments:

TMG Landelijke Media: publishing national newspapers, magazines, print-related internet activities and video productions.

TMG Digital: business unit combining all primary online platforms and e-commerce activities since 1 January 2016.

Holland Media Combinatie: publishing regional newspapers, free door-to-door papers and print-related internet activities.

Keesing Media Group: publishing puzzle booklets in Europe

Facilitating Services: activities including the printing and distribution of newspapers and providing office space and related facilities mainly for the TMG Landelijke Media and Holland Media Combinatie segments.

Head Office and other: in addition to Classic FM and eliminations, includes the Executive Board, Corporate Communication, Corporate Development, Internal Audit & Risk Management, HRM, ICT and Legal corporate departments.

Segment information is presented for TMG’s business and geographical segments. The segment results are based on the organisational management structure used within TMG and the nature of the activities. Results are reported to the Executive Board monthly for decision-making on performance and allocation of resources within the segments. Support activities such as printing and distribution are reviewed at group level and not allocated to operating segments. The internal allocation of costs was changed in 2015 and the recharging of fixed costs to segments was ended.

Prices for transactions between segments, mainly newspaper printing and distribution costs are set on a commercial and objective basis. A segment’s results, assets and liabilities comprise items that can either directly or reasonably be attributed to it. A segment’s capital expenditure includes the total cost incurred during the reporting period for the acquisition of assets which are expected to be in use for more than one reporting period.

The decline in revenue and operating profit at TMG Landelijke Media and Holland Media Combinatie was caused mainly by lower print advertising revenue. The increase in revenue at TMG Digital came from growth in e-commerce (GroupDeal.nl). The increase in revenue and operating profit at Keesing Media Group was due to price increases and growth in the number of editions per year. The decline in revenue at Facilitating Services came partly from ending printing for third parties. The fall in operating profit at the Head Office was mainly a result of higher consultancy fees and cost of temporary staff, in part in connection with various cost reduction programmes and investment in new products by the ICT department.

Geographical segments

The presentation of information based on geographical segments uses the geographical location of the customer for a segment’s revenue. A segment’s non-current assets are determined from their geographical location.

Revenue and non-current assets by geographical area:

1. Excluding deferred tax assets.

1. Excluding deferred tax assets.

Revenue and non-current assets in other countries include 44,385 (2015: 44,211) and 39,106 (2015: 39,924) respectively for puzzle activities in France.

3.Business combinations

TMG Landelijke Media B.V. acquired a 100% holding in the activities of International Fashion Week B.V. (IFW) on 28 April 2016. IFW has been consolidated in Telegraaf Media Groep N.V. (TMG) since 1 May 2016 and its operations have also been included in the TMG fiscal unity since that date. The results between 1 January and 1 May have been incorporated in the opening statement of financial position. The acquisition of IFW fits TMG’s strategy of providing 24/7 online and offline content to its subscribers, directed by the strong brands in TMG’s portfolio.

The initial purchase price of IFW was 500 and goodwill was established at 910. The purchase price will be paid in instalments. Management agreements that have been entered into with two former shareholders include retention bonuses. These bonuses are being recognised in the statement of profit or loss over the period in which they work for IFW and consequently do not form part of the initial purchase price.

4.Revenue

The revenue of 420,370 (2015: 451,409) included barter transactions of 2,657 (2015: 3,260). Revenue declined in part due to lower subscription income and advertising revenue.

Subscription income (B2C subscriptions) consists of print-only subscriptions, combined print and digital access subscriptions (and digital-only subscriptions. Many print-only subscriptions for De Telegraaf were converted into combined subscriptions on 1 July 2016. This explains the sharp fall in revenue from print-only subscriptions and the sharp increase in revenue from combined subscriptions.

B2C transactions comprise single-copy sales and other transactions, mainly e-commerce transactions, with consumers. E-commerce revenue is from buying and selling products and services by internet, mainly through GroupDeal.

B2B advertisements are the revenue from print and digital advertising.

The decline in revenue from distribution and printing is mainly attributable to ending commercial printing for third parties following the decision to reduce the number of printing presses from 10 to 4.

Other revenue includes revenue from video-productions, events (including Amsterdam FashionWeek) and the iPad campaign by De Telegraaf.

5.Other operating income

The gain on sale of property, plant and equipment related to the sale of buildings by TMG Landelijke Media (Haarlem and Utrecht) in 2016 and to the sale of buildings by the Facilitating Services segment in 2015.

6.Raw materials and consumables

The decrease in the cost of paper and ink was mainly a result of lower volumes because of the decline in circulation and the ending of commercial printing for third parties.

7.Employee benefits

The average number of employees (FTE) was 1,790 (2015: 2,023), of whom 184 (2015: 193) are abroad. Wages and salaries declined mainly due to the outflow of employees as a result of the cost reduction programme. This also reduced the social security contributions.

A one-time release of 2,400 was included in pension costs in 2015 due to the reduction in the reimbursement of medical expenses for pensioners. Ignoring this, there was a reduction in pension costs.

Other employee benefits increased due to higher costs of temporary staff, in part in connection with various cost reduction programmes and the development of new products.

Other employee benefits included 508 for the phantom share plan. See the note Remuneration of the members of the Executive and Supervisory Boards for more information on this plan. A number of managers joined the plan in 2016 in addition to the Executive Board. 546,679 phantom shares were outstanding at 31 December 2016 (31 December 2015: 135,691) and the liability was 584 (31 December 2015: 76).

Restructuring costs cover both large-scale and individual redundancy plans.

8.Depreciation, amortisation and impairment losses

The impairment losses on financial assets of 827 in 2015 related to prepaid ground rent for a building no longer in use as a result of the restructuring of the printing activities. In 2015, a building that had been out of use since 2012 was returned to service, resulting in a reversal of previously recognised impairment losses of 693 on property, plant and equipment and 136 on financial assets.

An impairment loss on property, plant and equipment was recognised in 2016 to reduce properties held for sale to their lower realisable value less costs to sell. The lower realisable value was based on bids received in 2016. In 2015, the impairment loss related to machinery, printing presses and buildings of Facilitating Services as a result of the restructuring of the printing activities.

The impairment losses on intangible assets related mainly to a write down of the Dichtbij.nl brand as a result of the cessation of operations.

9.Other operating expenses

Transport and distribution costs fell in 2016 as a result of lower average circulation of De Telegraaf and the regional newspapers, partly because of changes to the portfolio (closing the Sunday newspaper in 2015 and ending publication in Rotterdam).

Subcontracted work and technical production costs rose in 2016 as a result of subcontracting printing to third parties. TMG reduced the number of printing presses from 10 to 4 in 2016 and subcontracted some printing. Other operating expenses fell mainly due to movements in the provision for legal disputes.

10.Financial income and expense

The share of the result of associates related mainly to TMG’s share of the result of Radio Newco B.V. in the fourth quarter of 2016.

11.Income tax

Prior-year adjustments in 2016 were differences between the returns to 2015 and the tax computed in the relevant financial statements. The adjustment recognised in 2016 mainly concerned liquidation losses on the participating interests in Cyprus not recognised in the 2015 financial statements.

Prior-year adjustments in 2015 related mainly to the participation exemption for a non-resident participating interest. The tax on its result amounted to 2,198 in 2015. In addition, recoverable pre-consolidation losses relating to Dichtbij.nl were impaired in 2015. It is no longer thought that these losses can be utilised within the period available for set off as a result of the restructuring of Dichtbij.nl in 2015.

Reconciliation of the effective tax rate

The effective tax rate on the result on all activities was 31.0% in 2016 (2015: -9.1%). The relationship between the tax rate in the Netherlands and the effective tax rate on income from total operations is as follows:

12.Current tax assets and liabilities

At year-end 2016, income tax of 46 was recoverable for the current and previous reporting periods (2015: 623). The current tax liability of 841 (2015: 1,141) related to the income tax payable for the current and previous years after deduction of prepayments. Both sums related at year-end 2016 to non-resident associates.

13.Discontinued operations

On 15 January 2016, TMG and Talpa agreed a comprehensive alliance which included combining radio activities. Under this, TMG sold Sky Radio Group (SRG) to Radio Newco B.V. and received a 22.85% holding in Radio Newco B.V. in exchange. See the note on investments in associates for further information.

From the time the decision was taken to sell the Sky Radio Group, its assets and liabilities were classified as assets and liabilities held for sale (see note 21) and amortisation and depreciation ceased. The book profit on the sale of Sky Radio Group comprised the transaction costs and the fair value of the rights and obligations (318) remaining with TMG, as agreed on the sale, including settlement of the dispute on the value of the Radio Veronica FM licence. The income tax of 1,699 on the book profit was a tax charge for the adjustment of the value of the Radio Veronica licence.

The net cash flow from financing activities related mainly to the payment for the Sky Radio licence.

14.Intangible assets

The segment structure was revised with effect from 2016. TMG Digital, which was part of TMG Landelijke Media until 2016, is now managed as a separate segment. The goodwill relating to these digital activities was allocated to the new segment in 2016. The comparative figures for 2015 have been restated.

Trademarks and publishing rights include acquired trademarks and publishing rights of Keesing Media Group. Given the strong relationship between trademarks and publishing rights, these items are not presented separately. The amortisation period of trademarks and publishing rights ranges from 5 to 20 years.

Goodwill arose mainly on acquisitions, in particular of Keesing Media Group (91,160). In addition, 12,000 relates to synergy effects resulting from acquisitions at De Telegraaf Drukkerij Groep. Goodwill is assumed to have indefinite life and is therefore not amortised.

The cost and accumulated amortisation of intangible assets fell in 2016 as a result of the reclassification of Sky Radio Group’s operations as held for sale in January 2016. The carrying amount of the intangible assets at that time was 55,890. This asset has not been amortised since reclassification.

182 was written down during 2016, mainly on the Dichtbij.nl brand which ceased operations in 2016.

Additions include information systems at TMG Landelijke Media and Head Office of which 1,001 were developed in-house. Sub-projects were still under construction on the reporting date. The information systems will be taken in use in 2017.

Impairment test

For the impairment test, intangible assets are allocated to segments, being the lowest level within TMG at which goodwill is monitored by the internal organisation, or a lower level within a segment at which goodwill is monitored.

The total carrying amount of intangible assets attributed to the groups of cash-generating units at 31 December 2016 and 2015 was as follows:

Intangible assets

Goodwill

The recoverable amount of the cash-generating units is based on the value in use calculation. The cash-generating units are based on operating segments within TMG. Cash flow projections used in the calculation are based on actual operating results and cash flow forecasts, the 2017 budget and the long-term plans up to and including 2019. This is consistent with previous years. The cash flows are based on EBITDA, expected capital expenditure and movements in net working capital. Cash flows after 2019, which are extrapolated on the basis of 0% growth (2015: 0%), are based on economic life. Since Facilitating Services and the Head Office support the other segments, their assets and future cash flows are allocated to the other segments.

The forecast cash flows are discounted using a pre-tax discount rate (WACC) of 9.5% (2015: 8.6%). The discount rate and growth factors are determined on the basis of the interest rate and risk profile for TMG as a whole. These assumptions have been applied to all cash-generating units at TMG. The values assigned to the key assumptions represent management’s assessment of future trends in the media industry and are based on both internal and external sources (historical data). A modification in assumptions and estimates could have consequences for the recoverable amount and expected economic life of an asset and affect the statement of profit or loss.

A 1% increase in WACC has no effect on impairment of any segment. The recoverable amount of a segment is equal to the carrying amount at the following WACC: TMG Landelijke Media 31% (2015: 63%), Holland Media Combinatie >100% (2015: 54%), TMG Digital 56% (2015: n/a) and Keesing Media Group 18% (2015: 12%). Furthermore, the recoverable amount is equal to the carrying amount at the following negative growth rates for cash flows after 2018: TMG Landelijke Media -32% (2015: > -100%) and Keesing Media Group -11% (2015: -5.2%). The recoverable amount for the TMG Digital and Holland Media Combinatie segments is equal to the carrying amount at negative growth rates exceeding 100%.

15.Property, plant and equipment

Property, plant and equipment consists of land and buildings, machinery and equipment of the printing facility and other equipment. The carrying amount is the fair value.

Reclassification as held for sale and impairment losses

At the end of 2016 it was decided to hold the office buildings and car park in Amsterdam for sale along with certain regional properties of Holland Media Combinatie (in total 15,510). At that time, there was an appraisal of the expected proceeds less costs to sell. This led to impairment of certain properties (2,073).

The carrying amount of Sky Radio Group’s property, plant and equipment was 1,957 at the time of the decision to sell in January 2016. Since then these assets have not been depreciated.

Impairment losses in 2015 related mainly to the production capacity of printing facilities. The impairment was a result of the decision to reduce the number of printing presses in the printing plant in Amsterdam from seven to four. The presses were impaired to net realisable value less costs to sell. The net realisable value was based on an appraisal by an independent expert based in particular on the values of similar assets.

The reversal of impairment losses in 2015 related to a building that was out of use and brought back into operation in 2015.

Assets under construction

Assets under construction mainly concern the renovation of the main hall of the office building in Amsterdam. This project will be completed in 2017.

16.Investments in associates

The main addition in 2016 was the acquisition of a 22.85% holding in Radio Newco B.V. at 30 September 2016 in exchange for a contribution in the form of the shares in Sky Radio Group. The initial valuation of 45,509 was the fair value of the holding in Radio Newco B.V. (including purchase costs to the amount of 1,066) determined using a present value calculation of its future cash flows, applying a WACC of 10.2%. The valuation was supported by valuation specialists. Following the acquisition, there was a dilution of 0.85% in TMG’s holding as a result of Radio Newco B.V. partly funding an acquisition with shares. The share of the result of this associate was 642 for the period from 30 September to the end of the financial year. After receipt of a dividend of 1,100, a carrying amount of 45,051 remained at year-end 2016.

Specific arrangements on an earn-out for TMG were agreed when the shares in Sky Radio Group were contributed to Radio Newco B.V. These resulted in an additional holding of 1% for TMG, representing a value of 1,946. Consequently, TMG’s holding in Radio Newco B.V. was increased to 23% at the start of 2017.

In 2016, Keesing Media Group acquired a 39.3% holding in Eye to Eye Puzzles Ltd, a company that publishes puzzle booklets in the United Kingdom. The investment was 756; the share of the result for 2016 was 16.

Loss-making associates are measured at nil. All results of associates are recognised in the consolidated statement of profit or loss.

17.Other receivables

Prepaid operating leases related to prepaid ground rent on the buildings in Amsterdam. This item decreased in 2016 mainly due to reclassification as held for sale.

18.Inventories

The further decline in the stock of raw materials was due to the stricter stock control involving smaller quantities being ordered more frequently.

19.Trade and other receivables

The reduction in trade receivables was directly related to the fall in revenue in the year. Trade receivables are shown net of impairment losses. During the current year, these losses amounted to 588 (2015: 1,071) and related to doubtful receivables. For more information see the note Financial risk management.

Other receivables at 31 December 2015 included a receivable of 4,450 relating to the sale of a building.

Fair value

The nominal value is considered to reflect the fair value of current receivables which fall due within one year.

20.Cash and cash equivalents

With the exception of issued bank guarantees as disclosed in note 34, bank balances are freely available. The fair value is regarded as being equal to the nominal value.

21.Assets and liabilities held for sale

Assets held for sale were 15,848 (2015: 62) in 2016 and related to printing presses, several regional business premises of Holland Media Combinatie (mainly Alkmaar) and the office building in Amsterdam. At year-end 2016, a sales plan was drawn up for the premises and an agent was engaged. The intention is to lease the office building in Amsterdam back after the sale.

Certain buildings of Facilitating Services were sold at the end of 2015.

Relatieplanet.nl had been classified as held for sale from 2013 but was reclassified to continuing operations in 2015 following the decision not to sell it but to include its operations in TMG Digital.

22.Equity

Issued capital

At 31 December 2016, the authorised share capital comprised 99,999,040 ordinary shares, 100,000,000 preference shares and 960 priority shares, which were issued and paid up as follows:

All shares have been paid up and have a nominal value of €0.25 each. No preference shares have been issued.

The holders of priority shares receive a dividend of 5% of the nominal amount of the shares. The remaining profit is at the disposal of the meeting of shareholders.

The holders of ordinary shares and priority shares are entitled to cast one vote per share during the meeting. Each TMG shareholder may attend and vote at meetings of shareholders. A summary of the statutory and articles of association provisions relating to the appropriation of profit and other rights under the articles of association attaching to the ordinary shares, priority shares and preference shares is included under Other information.

Stichting Beheer van Prioriteitsaandelen Telegraaf Media Groep N.V. has granted the right to issue TMG preference shares to Stichting Preferente Aandelen Telegraaf Media Groep N.V. Stichting Preferente Aandelen Telegraaf Media Groep N.V. manages the call option granted on the preference shares. At present, no preference shares have been issued. The provisions in the articles of association governing the income on the preference shares are in line with the market. The option to issue preference shares is valued at nil.

Treasury shares

TMG owned no repurchased ordinary shares at year-end 2016 and 2015.

23.Dividend

During the year, TMG paid a dividend of €0.16 per share or depositary receipt from other reserves (2015: nil). A total of 7,416 was distributed.

The profit of 1,558 for the financial year 2016 is at the disposal of the General Meeting of Shareholders. It is not proposed that a dividend should be distributed given the reduction in the cash position in 2016 and in order to have cash and cash equivalents available to invest in new initiatives, such as Online Video, and to finance the restructuring.

24.Earnings per share

Basic earnings per share

The calculation of the basic earnings per share at 31 December 2016 is based on the result attributable to ordinary shareholders of 1,558 (2015: -22,760) and the weighted average of 46,350,000 ordinary shares outstanding during 2016 (2015: 46,350,000), as shown below:

Diluted earnings per share

There was no dilution of shares in 2016 and 2015.

25.Non-controlling interests

The movements in non-controlling interests were as follows:

In early 2016, TMG purchased V-Ventures B.V.’s 10% holding in Sienna Holding B.V. The transaction related to the purchase of ordinary and cumulative preference shares in Sienna Holding B.V. Under IFRS, the cumulative preference shares are classified as long-term debt. The purchase price was 5,700.

26.Interest-bearing loans and borrowings

This note provides information on the contractual terms of TMG’s interest-bearing loans and borrowings. See note 31 for more information on TMG’s exposure to interest rate and foreign currency risk.

Terms and debt repayment schedule

The effective interest rate for all loans is equal to the nominal interest rate.

Interest-bearing loans

On 21 January 2016, TMG acquired the shareholder loan to Sienna Holding B.V from V-Ventures B.V. along with its 10% non-controlling interest in Sienna Holding B.V. (see also note 25). As a result, TMG became sole shareholder of Sky Radio Group. On 30 September 2016, the shares in Sienna Holding B.V. were sold to Radio Newco B.V. in exchange for a 22.85% holding in this new radio company. 

A three-year financing facility was agreed with a consortium of two banks on 10 July 2015. The facility consists of a revolving credit facility and a current account overdraft facility (ancillary credit facility). The financing is on market terms and is limited to 2.5 times NEBITDA (operating result excluding depreciation, amortisation and impairment losses and excluding exceptional items such as restructuring costs and results on sales of assets). In addition, interest expense may not exceed 1/5th of NEBITDA in the relevant period. Both conditions were met in 2016. No collateral has been provided for this loan.

At year-end 2016, 5,000 of this facility had been used.

Other financing

The Sky Radio Group license liabilities related to the annual prepayment to the Radiocommunications Agency to 1 September 2017. The final payment for the Sky Radio licence was paid in 2016. See note 30 Trade and other payables for information on the Radio Veronica licence.

The acquisition payables included liabilities for the acquisition of Metro and Fashion Week.

27.Post-employment benefits

Defined-contribution plans

The pension plans for most of the employees of TMG companies are administered by Stichting-Telegraafpensioenfonds 1959. The pension plans are conditionally indexed average salary plans. The only obligation of the employer is the payment of contributions. A new plan came into force in January 2017 under a new five-year administration agreement with Stichting-Telegraafpensioenfonds 1959.

Gross commitment for defined-benefit pension plans

TMG has a number of defined-benefit plans under which certain current and former employees in the Netherlands and France are entitled to additional benefit. These are:

Defined-benefit pension plans

Additions to pensions (guarantee arrangements)

Until January 2016, a specific group of workers was guaranteed a pension of a minimum percentage of their final pay. This final pay plan ended on 31 December 2015. The final-pay entitlements, funded entirely by the employer, were allocated to the participants at that date. TMG paid 350 to the pension fund in 2016 to fund the plan.

Keesing Media Group has a guaranteed indexation scheme for certain staff. The indexation scheme is for an annual increase in accrued entitlements of 50% of price inflation and is funded by the employer. The scheme is administered by an insurance company. Furthermore, there are schemes for Keesing Media Group employees in France that provide for a payment when the retirement age is reached. The amount depends on the number of years of service.

Contribution to the healthcare costs of pensioners

In 2016, a limited group of pensioners were receiving a contribution to their health insurance premiums. This group was notified on 1 July 2015 that the arrangement, which closed to new participants on 1 January 2006, would shortly end. In 2016, the compensation was 50% of that of 2015. The plan was terminated on 31 December 2016

Other employee benefit schemes

This relates to supplementary disability and long-service schemes. The restructuring of TMG business units announced at the end of 2016 was taken into account when determining the provision for long-service benefits and a gain of 226 (past-service costs) was recognised in employee benefits. Restructurings announced in 2015 led to a release of 503.

TMG’s pension plan for its graphical employees (mostly working in the printing facilities) is administered by the industry-wide Pensioenfonds Grafische Bedrijven (PGB) pension fund. This is a collective average pay plan for staff of several employers which is accounted for as a defined-contribution plan. Under the regulations, the employers are not required to make up any shortfall nor are they entitled to any buffers. The plan is therefore treated as a defined-contribution plan in the financial statements. The PGB had a coverage ratio of 100.7% at the end of 2016, which is below the legal minimum (about 121%). PGB has a recovery plan which has applied since 1 January 2015 and is updated annually, most recently on 1 January 2016. It includes various measures to improve the fund’s financial position, one of which is not to index pension benefits in full. The possibility that pension benefits and/or accrued entitlements will be reduced in future cannot be precluded. This final measure can only be used as a last resort.

Risks

The provisions are determined actuarially. An increase in discount rates will lead to an increase in liabilities, which, in case of defined-benefit plans, is partly offset by an increase in the return on investments. An increase in life expectancy and salary increases will lead to an increase in liabilities. The benefits under the indexation arrangements and termination of employment benefits at Keesing Group are insured externally. Given the extent and size of the obligations, the exposure for TMG is assessed as very small.

Principal actuarial valuation assumptions at reporting date

The expected return on plan assets is the weighted average expected return. The expected return, depending on the term of the plan, is between 0.65% and 1.85% (2015: 1.25% and 2.20%) on investments at external insurance companies.

Net provision for defined-benefit obligations

Liability for defined-benefit obligations

Present value of the liability for defined-benefit obligations

Movements in fair value of plan assets

Plan assets

Recognised in the statement of profit or loss

1. 11,179 (2015: 10,090) recognised in pension costs and 216 (2015: -222) in other employee benefits.

TMG estimates that the total contributions to be paid under the personnel benefit plans during 2017 will be 9,631 (2016: 11,582), as far as can be reasonably measured.

There are no specific exposures related to the pension fund. The exposures arising from the defined-benefit employee benefit plans relate to market developments in interest rates, inflation, life expectancy and investments.

Actuarial results recognised in other comprehensive income

Sensitivity analyses

The sensitivity analyses below are based on various assumptions. An interval of 0.25% is used. The interdependence of the assumptions is ignored.

28.Provisions

Restructuring provision

1. Provision made by Sky Radio

Most of the 2015 restructuring provision was used in 2016. During 2016, a restructuring provision was formed for the cessation of operations at Dichtbij.nl and a restructuring announced in the newspaper marketing and sales departments, Facilitating Services and the regional editorial staff. The restructuring includes a reduction of approximately 200 employees (FTE).

Restructuring plans are communicated to TMG employees in several ways, creating a valid expectation amongst those affected that the restructuring will take place. At some units, restructuring is set in motion after agreement of the Works Council. The restructuring provision covers commitments related to job placement services and redundancies. A change in assumptions and estimates, including filling positions, redundancy options (buyout or job placement services), the social plan, timing and the period during which unemployment benefit or a lower salary at another employer will be supplemented, may affect the actual cost of the restructuring. The current part amounted to 13,607 (2015: 30,479), of which 2,655 related to agreements signed at 31 December 2016. The amount may depend on future estimates, such as the period during which unemployment benefit or a lower salary will be supplemented.

Onerous contracts

The provision for onerous contracts related to ICT and distribution contracts. These contracts expire in 2017.

Legal disputes

The provision for legal disputes concerns claims made by third parties against TMG. The disputes have arisen from TMG’s regular business operations. No further details are given because of the potential adverse effects for the Company.