Business update Q1 2013

- Roto Smeets Group has a good first quarter behind it
- Investment in the finishing processes at Senefelder Misset
- Interest-bearing debts further reduced

Market developments
In the first quarter of 2013 the Print Productions companies of Roto Smeets Group (RSG) performed better than the West European market and better than in the first quarter of 2012. In the first quarter the sales of paper in Western Europe fell in the gravure market by approx. 7.0% and in the offset market by 4%. The gravure plants of RSG saw an increase of approx. 6.0% for processed paper, and in the web offset plants the fall was limited to approx. 2.0%.

On the supply side of the graphic industry in Europe the developments followed one another in quick succession: at the end of 2012 the acquisition of the English printer BGP by Polestar was reported. Then in the first quarter of 2013 a large investment programme in web offset was announced by Polestar. Furthermore the planned closure of the Itzehoe location of BE-Printers (Bertelsmann) in 2014 was formally announced, Helio Lys in France applied for a payment moratorium, and CirclePrinters became wholly owned by management and a minority shareholder. On balance, however, there is a still a substantial overcapacity in Europe.

Financial position
In the first quarter of 2013 the turnover of the Print Productions companies fell slightly compared with the first quarter of 2012, despite the increase of the processed paper volume. The added value remained around the same as last year. The EBITDA improved with respect to 2012 due to lower operating costs and further improved performance and efficiency. Due in particular to the lower asset valuation as a result of the impairment applied in 2012, the net result of the first quarter improved with respect to the corresponding period in 2012.

The Marketing Communications companies achieved better turnover and added value in the first quarter of 2013 than in the first quarter of 2012.

The changeover to a flexible roster system was introduced on 1 January 2013. One of the most important objectives, the reduction of the use of temporary workers, was not fully realised in the first quarter due to the recent flu epidemic. It will be attempted to make up for this delay in the course of the year.

The cost-saving actions from the 'faster, better, higher' project, aimed at reducing operating costs, are on schedule.

The financial position of RSG has not changed with respect to the situation described in the annual report on 2012. The repayments made under the credit agreement with ING Bank were €3 million as per 31 March 2013. The interest-bearing debts fell by a good 11% (€ 6 mln) with respect to 31 December 2012.

Notes on important events in the 1st quarter 2013
The market of MediaPartners Group is very much in a state of flux. The dividing line between advertising agencies, online agencies, public relations agencies and customer media agencies is rapidly fading. Advertising agencies focus on branded content, content agencies devise activation campaigns. MediaPartners Group, specialised in content marketing, with its annual turnover of €19 million euros (2012), should be in the top five of advertising agencies in the Netherlands. The group, active on the market with the MediaPartners and vdbj_ brands, was able to realise extra projects with existing customers in the first quarter and was also able to add new customers to its portfolio such as Douwe Egberts, Rabobank Private Banking, FNV, Philips Benelux and T-Mobile.

Due to the cessation of large projects at MediaPartners Belgium, the Brussels agency could no longer meet its set performance criteria. The customers and employees (3) were transferred to a Belgian content marketing agency, after which the office in Belgium was closed.

Roto Smeets worked on fleshing out the new organisational structure and giving shape to the integration of a few decentralised departments into more centralised departments (e.g. planning, order management, administration).

The publisher market is in turmoil. The last quarter of 2012 was the worst quarter ever for publishers. In this segment customers saw their turnover fall by 8.9% on average with respect to the same period one year earlier. They are affected by falling sales and falling advertising income. The expectation is that this trend will continue in 2013 and that it will lead to lower print runs, and in a number of cases even titles being taken off the market. For Roto Smeets too this means the possible loss of a number of titles. In the first quarter various contracts were extended, such as with Sanoma Media Nederland and Sanoma Magazines België, VPRO, Audax and FD Mediagroep.

Within the retail market the proven effectiveness of the printed medium is ensuring a stable order portfolio. A few good new projects were obtained for Hema, IKEA and Blokker, among others.

In the first quarter Roto Smeets became an official 'performance partner' of Deutsche Post. Deutsche Post issues this certificate to partners with whom it works closely in the field of direct marketing in order to increase the quality of the work processes, so that the service to mutual end users is improved.

Roto Smeets was the first in the Netherlands to obtain the new 'EU Ecolabel for printed products' quality mark for its customers. In order to be able to apply the label to printed matter, the printing process, the finishing processes and the materials used must all satisfy the strict environmental criteria set by the EU. These criteria are aimed at stimulating the deinkability and recyclability of printed paper products, the reduction of emissions of volatile organic compounds (VOC), and the reduction or prevention of risks to the environment. The criteria are such that only printed matter with a demonstrably low environmental impact can obtain the label.

Senefelder Misset Doetinchem (SMD) recently held its 15th seminar for customers and potential customers. During this seminar X-Media Solutions launched its Mobile Publishing Platform. Via the Mobile Publishing Platform it created a smartphone app that fits with the content strategy of publishers and the media requirements of the target group. Current newsfeeds, social media, slideshows, audio, and contact and web formulas can be integrated into the app. At SMD printed matter is still the most important source of income, but the X-Media Solutions business unit will play an increasingly important role in the coming years.

For SMD an investment in a Ferag Unidrum with SNT-50 cutting drum was recently approved that will become operational in the third quarter. Compared to the current situation, SMD will then be able to process a higher volume with two machines less. As a result of this investment, the service can be improved and the throughput time substantially reduced.

Roto Smeets GrafiServices Eindhoven and Roto Smeets GrafiServices Utrecht, the two sheet-fed printers of RSG, officially completed the merger of these two companies in the first quarter and will now service the market together under the name Roto Smeets GrafiServices (RSGS). Despite the fact that competition from abroad is increasing within the sheet-fed printing market, RSGS had a good first quarter. Compared to the first quarter of 2012 it is now clear that the investment of last year in the new press is paying off. In this first quarter RSGS produced more volume with one press less compared to 2012. In the first quarter RSGS made a limited investment in an improvement and acceleration of the finishing processes. In the second quarter we expect the RSGS companies to be the first companies in RSG to switch to the new Management Information System (MIS), iTechnique.

Compared to the first quarter of last year Antok improved its sales significantly. The added value also improved with respect to last year.

Outlook
As a result of the new structure of Roto Smeets, in which all Roto Smeets printers now come under one management, and as a result of the legal merger of the RSGS companies, the positioning of the four brands is more visible. An important condition for the growth of the four brands is more entrepreneurship and flexibility in the organisations. As indicated earlier it is currently being examined whether the legal and financial structure, and the management model, must be adapted to this end. It is expected that more information on the progress of this examination will be known at the publication of the half-year figures.

With a lower asset valuation as a result of the impairments and the cost saving measures that are put in motion, Roto Smeets Group has, with the market conditions remaining equal, the prospect of a better result in 2013 compared to 2012.

Important financial dates 2013

Half-year figures 22 August 2013
Business update Q3 7 November 2013


Deventer, 15 May 2013

Roto Smeets Group NV
Board of Directors

For more information contact: Joost de Haas, CEO, +31 570 69 49 01

This is an interim communication within the meaning of article 5:25e of the Financial Supervision Act [Wet op het Financieel Toezicht].





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