ROTO SMEETS : Business update Q3 2013

Business update Q3 2013

- Market developments demand structural changes
- Restructuring will improve entrepreneurial spirit
- Reducing debt remains priority

Market developments demand structural changes
Those segments of the market in which the Roto Smeets Group (RSG) printing plants are active are declining more rapidly than last year, and faster than was foreseen at the start of 2013. The economy remains weak, the print runs of magazines and catalogues are in accelerated decline, even as excessive printing capacity persists, all of which has led to lower volumes for existing customers and even more price competition. In the Netherlands, the first three quarters saw more than twice as many magazines vanish from the market as in the comparable period in 2012; magazine advertising expenditures have dropped by more than 6%, and a number of publishers have announced reorganisations, which may mean that a number of smaller, less profitable titles will be dropped. More specifically, we see our customers reducing print runs, cutting page numbers, and publishing less frequently. Up to now, RSG has been relatively successful in maintaining production volumes: the market as a whole has already shrunk by approximately 4% this year, but RSG is producing at roughly the same level as in the same period last year. On average, however, sales prices have declined. The measures set in train last year in the 'Faster, Better, Higher' programme are on schedule and are bearing fruit. Sadly, however, they have not been able to compensate for market shrinkage, meaning that further measures will have to be taken to improve our results.
These measures will allow RSG once again to adapt to changes in the market.

Restructuring will improve entrepreneurial spirit
In order to make the various RSG business units more competitive, the Board has today submitted a number of proposals to the Central Works Council for its advice. The proposals are concerned to improve the cost structure and to increase the entrepreneurial spirit of the businesses units.
The following measures are proposed:

1. Reduce personnel by 170 fte (full time equivalents). Indirect efficiency improvements, coupled with changed work structures in a number of plants will lead to the disappearance of 170 jobs in total in Deventer, Etten-Leur, Weert and Doetinchem. In the course of 2014, the activities of De Wit Binders in Eindhoven will be integrated with the plants in Roto Smeets Deventer and Roto Smeets Weert.
2. Rearranging divisions. In order to improve customer service and focus, the Roto Smeets and Senefelder Group divisions are to be rearranged according to the market segments served. This will result in a Publishing division, located in Doetinchem and Weert, and a Commercial Print division, located in Deventer and Etten-Leur. The Publishing division will serve publishers and non-profit organisations at home and abroad. Besides the Netherlands, in future they will focus more intensely on Belgium, (Western) Germany and (Northern) France. The Commercial Print division will serve retail and other customers publishing catalogues in Western Europe. The MediaPartners Group and Roto Smeets GrafiServices divisions are unaffected by these changes.
3. Restructuring. The four divisions will be set up to give them greater legal and financial autonomy, which will improve their entrepreneurial spirit. Moreover, this move will prepare them, as divisions, to enter into collaboration with other parties.

Major events, Q3 2013
Despite the weak market, the Marketing Communications businesses have once again achieved positive results. New clients have been welcomed, including Aegon International, Kips and FNV.

It was also announced in Q3 that Alec Bergsma, MediaPartners Group's managing director, had stated his wish to resign his present position. After more than 15 years' service in a number of positions within Roto Smeets Group, of which MediaPartners Group is a part, he wishes to expand his horizons outside the Group. The Supervisory Board and the Management Board regret Alec's choice, but understand his wish to seek new challenges after his fascinating career within the Group.

A second-hand Ferag Unidrum drum stitcher, including rotating cutter, was installed at Roto Smeets Weert in Q3. The equipment is linked to a new palletising system, which can complement the Unidrum's high operating speed. This has replaced two obsolete machines at Roto Smeets Weert and has reduced the wages bill.

Extreme storms in July led to an incident at Roto Smeets Weert, where part of the roof collapsed, flooding the finishing department hall. Work on hand was nevertheless delivered after only a slight delay. Customers including Sanoma Belgium and Reed (Elsevier) expressed their appreciation for the way Roto Smeets Weert coped with this emergency.

As of 1 July 2013, the threshold for announcing a capital interest and/or control rights in publicly quoted companies was lowered to 3%. Such announcements are governed by the Financial Disclosure Act, which has been part of the Financial Supervision Act since 1 January 2007. Shareholders with an interest greater than 3% must report any changes in their holding to the Financial Markets Authority. It is in this context that the Group has received notice from the Financial Markets Authority that Mr J.G.H.M. Niessen has announced a first holding of 3.85% in Roto Smeets Group N.V., with corresponding voting rights, dated 1 July 2013.

Financial position
RSG's financial position remains unchanged compared to the situation described in the H1 report of 22 August 2013. The 2013 investments, including two Unidrum drum stitchers, were funded entirely out of free cash flow. Interest bearing debts have been reduced by € 12.0 mln.  to € 57.7 compared to the position at year end 2012. 
From mid-September, Roto Smeets Group is once again in a position to benefit fully from payment discounts by reducing payment delays.

Prospects
The financial consequences of the restructuring announced above, coupled with developments in the economic climate, which remain difficult to predict, mean we can make no statement on the course of the Group's results for the remainder of 2013. 

Roto Smeets Group NV
Management Board

Deventer, 30 October 2013 

For further information please contact:
Drs J.A. de Haas MBA, CEO
Tel. [phone]

This is an interim announcement within the meaning of article 5:25e of the van Financial Supervision Act.
In connection with a situation that has arisen within the purview of article 5:25i, para 2 of the Financial Supervision Act [Wet op het Financieel Toezicht ,Wft] and articles 4 and 5 of the Transparency Directive for Issuers in the Wft [Besluit uitvoeringsrichtlijn transparantie uitgevende instellingen Wft (BT)], this announcement has been published on 30 October 2013 rather than 7 November 2013, the date given in the Financial Diary. 

Financial calendar 2014:
Publication annual figures 2013	18 March 2014
Annual Report 2013	2 April 2014
Shareholders' Annual General Meeting	14 May 2014
Business update Q1 2014	14 May 2014
Publication figures H1 2014	21 August 2014
Business update Q3 2014	6 November 2014

Profile
Roto Smeets Group NV is listed on NYSE Euronext, Amsterdam and is one of the leading graphics companies in Western Europe. Roto Smeets Group comprises two business lines: Print Productions, for the efficient supply of full-service graphics and related services; and  Marketing Communications, for the production of content-rich media and media platforms based on a solid communications strategy.

Hunneperkade 4, 7418 BT Deventer, The Netherlands. [phone], [e-mail], www.rotosmeetsgroup.com