VNU Slashes Growth Forecast

AMSTERDAM — VNU NV Wednesday lowered its forecast for full-year growth in earnings to 5 percent from a previous projection of low double-digit growth, even as the Dutch magazine publisher posted first-half earnings in line with expectations.

VNU blamed a severe slump in advertising revenue at its business-magazines unit for the revised outlook.

The Dutch company said its first-half net profit before goodwill, amortization and extraordinary items rose 15% to 191 million euros ($176.3 million). Analysts had forecast net profit before items of between 186 million euros and 193.9 million euros.

VNU’s profit downgrade wasn’t unexpected. However, having disposed of its consumer magazines, VNU now is sharply focused on business information and should start to show growth.

Sales at AC Nielsen, acquired by VNU earlier this year for $2.3 billion, rose 7% in the first half. And VNU Chief Financial Officer Frans Cremers said the company expects AC Nielsen to post sales growth of 7% for the full year.

For the marketing-information unit as a whole with its current divisions, VNU expects sales growth to come in at 8% to 8.5%, although it might be as high as 9%, Mr. Cremers said.

To finance the AC Nielsen buy, VNU sold its educational publishing unit Malmberg and its remaining European consumer publications. These included women’s magazines Libelle and Margriet — once core VNU titles.

Meanwhile, the decline in advertising volume at VNU’s trade magazines was the main reason for the company lowering its full-year growth expectations, Mr. Cremers said.

In the first half of the year, advertising sales at VNU’s business information business fell 25% compared to the same period a year ago, he said. In Europe, sales at the unit, which has a leading position in information technology magazines, fell 12%.

And at the AdWeek Group in the U.S., sales fell as much as 60%, Mr. Cremers said, noting that this was an “excessive example,” as the magazine had lost a lot of advertising from the dot-com industry.

“In the U.S. I see the same situation for the second half of the year … and in Europe sales will worsen during the remainder of the year,” he added. He declined to put a figure on the expected fall in Europe, however.

Mr. Cremers said VNU’s 1% sales growth excluding acquisitions and divestitures in the first half doesn’t fully reflect the company’s new portfolio.
“AC Nielsen isn’t in the numbers yet as we only bought it earlier this year. And the consumer magazines we sold, which were hit by the advertising slump, are still in the results,” he said.

He also said that earnings growth in the first half, despite the sharp fall in advertising sales, demonstrated the strength of VNU’s new portfolio.

VNU is now sharply focused on marketing and business information, trade shows and directories.

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