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North Media

Annual Report Mar 19, 2009

3410_10-k_2009-03-19_bfe8a2cc-8376-487f-823f-7dc86e2f0e49.pdf

Annual Report

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Annual Report 2008

CVR No. 66 59 01 19

PART I --- Consolidated Annual Report
Business concept
Management's review 2
Financial highlights and ratios 2
Annual Report 4
Financial review 7
Corporate governance 10
Incentive schemes 11
Audit committee 11
Risk and risk management 11
Investor relations 13
Company description 17
Newspaper publication and distribution 17
Internet 19
Statement by the Board of Directors and Management 21
Management and Auditors' Report 21
Consolidated financial statements 23
Income statement 23
Balance sheet 24
Consolidated statement of changes in equity 26
Consolidated cash flow statement 27
Notes 29
Board of Directors and Corporate Management 67
Group structure 68
Group addresses
PART II --- Parent financial statements
(enclosed on cd-rom)
70 --- 86

The Annual Report 2008 has been prepared in Danish and English. The Danish text shall be the governing text for all purposes and in case of any discrepancy the Danish wording shall be applicable.

Business concept

To provide consumers with offers and information.

This is achieved:

  • through the publication of free newspapers financed by advertisements and distributed house-to-house and through the distribution of printed matter, newspapers and samples to consumers
  • through the offering of Internet services and advertisements targeted at users of the Internet.

Objective and strategy

Profitability being our primary objective, the Group aims to be one of the leading players within its primary areas of activity. In order to realise this objective, the Group's overall strategy is to be quality-oriented and expansive in the development of the organisation and our products.

Søndagsavisen a-s operates in the financial front line, producing and selling against tough competition, where quality and personal effort make a difference.

For our business areas, the driver of profitability is volume. It is therefore decisive that we achieve a significant share of the markets in which we operate.

Activities

The company's activities are segmented into two business areas: 'Newspaper publication and distribution', and 'Internet services'.

Designations

In the Annual Report the Group is referred to as 'Søndagsavisen' or the Group.

The designations 'Søndagsavisen a-s' and 'the parent company' refer to the parent company.

Management's review

Financial highlights and ratios

2008 2007 2006 2005 2004
1,235.8 1,433.8 1,666.6 1,417.4 1,223.8
295.9 358.1 560.9 467.0 378.4
33.8 114.8 253.3 165.4 85.9
79.0 77.0 73.3 53.2 44.3
-45.2 37.8 180.0 112.2 41.6
-3.1 -2.5 2.1 6.4 4.8
-9.6 -8.3 -7.6 -10.5 -13.0
-92.9 -28.6 0.0 0.0 0.0
-150.8 -1.6 174.5 108.1 33.4
-21.9 -3.3 42.8 30.5 -0.1
-128.9 1.7 131.7 77.6 33.5
299.4 0.0 0.0 0.0 0.0
34.7 22.4 0.0 0.0 0.0
205.2 24.1 131.7 77.6 33.5

Management's review

Financial highlights and ratios (continued)

DKKm

2008 2007 2006 2005 2004
Balance sheet:
Total assets 923.1 979.8 929.2 755.3 737.6
Share capital 111.4 111.4 111.4 111.4 111.4
Shareholders' equity incl. minorities 661.4 490.1 505.4 330.4 225.4
Net interest-bearing debt (1) 85.5 207.8 100.7 144.0 278.0
Non-current liabilities 93.7 119.2 129.5 107.9 188.3
Current liabilities 168.0 370.5 294.3 317.0 323.9
Net working capital (NWC) (1) 96.7 -21.9 -39.2 -68.8 -33.6
Invested capital 746.9 697.9 606.0 474.4 503.5
Investments in property, plant and equipment 36.4 102.4 86.5 34.0 99.6
Free cash flow -93.8 -35.4 140.8 110.3 -32.5
Cash flow statement
Cash flows from operating activities 39.3 94.4 182.4 163.0 39.0
Cash flows from investing activities -70.0 -150.9 -125.7 -64.5 -104.8
Cash flows from financing activities -25.7 -54.5 -20.5 -41.2 44.9
Changes in cash and cash equivalents, continued operations -56.4 -111.0 36.2 57.3 -20.9
Other information:
Average number of employees 927 991 1.191 975 969
Numbers of shares at year-end, in thousand 22,280 22,280 22,280 22,280 22,280
Treasury shares, in thousand 2,225 1,518 1,218 1,218 1,888
Share price at year-end, DKK 19.8 30.4 87.7 78.6 22.6
Ratios:
Gross margin (%) 23.9 25.0 33.7 32.9 30.9
Operating margin (EBIT) (%) -3.7 2.6 10.8 7.9 3.4
Liquidity ratio (%) 161.8 62.0 84.0 64.4 58.5
Equity ratio (%) 71.6 50.0 54.4 43.7 30.6
Return on equity (ROE) (%) (1) 35.6 4.8 31.5 27.9 15.8
Return on capital employed (ROIC) (%) -6.3 5.8 33.3 22.9 9.1
Interest cover Neg. 4.2 18.3 8.5 2.9
Financial gearing 0.1 0.4 0.2 0.4 1.2
Net interest-bearing debt as a ratio of EBITDA 2.5 1.8 0.4 0.9 3.3
Cash conversion (%) 207.5 -93.7 78.2 98.3 -78.1
Earnings per share (EPS) - continued operations -5.2 -0.3 5.7 3.4 1.3
Earnings per share (EPS) - Total (1) 11.0 0.7 5.7 3.4 1.3
Price Earning (P/E) (1) 1.8 43.4 15.5 23.3 17.8
Price/Book Value (P/BV) 0.7 1.4 3.9 5.3 2.2
Cash flow per share (CFPS) 1.9 4.5 8.7 7.9 1.9
Dividend rate (%) 0.0 0.0 20.0 16.0 0.0
Dividend per share 0.0 0.0 1.0 0.8 0.0

Definition of financial ratios, see note 3.

The consolidated highlights are showned for continued operations if nothing else stated. The consolidated highlights are only adjusted for discontinued operations for 2007 and 2008. Note 1: The key figures also includes discontinued operations.

ANNUAL REPORT

Revenue and Operating profit by Country and by Business Area

Revenue Operating profit
DKKm 2008 2007 Change % 2008 2007 Change
By Country
Denmark 1,209.6 1,404.1 -194.5 -14% -44.6 31.4 -76.0
Sweden 268.7 269.1 -0.4 0% 45.5 30.9 14.6
Other countries 48.7 64.5 -15.8 -24% -0.8 6.5 -7.3
Total 1,527.0 1,737.7 -210.7 -12% 0.1 68.8 -68.7
Discontinued operations 291.2 303.9 -12.7 -4% 45.3 31.0 14.3
Continued operations 1,235.8 1,433.8 -198.0 -14% -45.2 37.8 -83.0
By Business Area
Newspaper publ. and distribution 1,433.5 1,646.7 -213.2 -13% 28.9 68.1 -39.2
Internet 93.5 91.0 2.5 3% -28.8 0.7 -29.5
Total 1,527.0 1,737.7 -210.7 -12% 0.1 68.8 -68.7
Discontinued operations 291.2 303.9 -12.7 -4% 45.3 31.0 14.3
Continued operations 1,235.8 1,433.8 -198.0 -14% -45.2 37.8 -83.0

Highlights, Denmark --- Highly adverse performance in the advertisement markets. Product development at Søndagsavisen and the online activities. Cost cuts within all activities.

In 2008, consolidated revenue in Denmark amounted to DKK 1,209.6 million, down DKK 194.5 million, or 14 %, on 2007. The lower revenue was mainly driven by a rapidly falling market for recruitment advertisement and by Helsingør Dagblad A/S's loss of significant printing jobs. Market declines and losses of market share are only to some extent compensated for by price increases for the distribution services.

Søndagsavisen experienced negative performance, particularly in the second half of 2008, on retail, motor and housing advertisements and on recruitment advertisements in particular owing to falling markets.

During the year, Søndagsavisen was restructured and management and expert competencies were added. On 3 October, www.søndagsavisen.dk and www.myLiving.dk were launched, and in the second half of the year the printed newspaper Søndagsavisen underwent ongoing revitalisation.

Helsingør Dagblad A/S lost several printing jobs in 2008, and competition intensified further in the

printing market, competitors having invested in increased capacity despite the fact that the market for printing daily and weekly newspapers is declining.

In 2008, a general price increase was made within distribution activities. However, intensified competition led to a loss of market share, affecting revenue negatively compared with last year. The costs of distribution and packing were cut based on efficiency improvements, compensating for the lower revenue. The distribution quality remains high and satisfactory.

The operating results (EBIT) in Denmark were significantly lower in 2008 than in the previous year. The EBIT of the Danish activities was DKK -44.6 million in 2008. In 2007, EBIT in Denmark was DKK 31.4 million. The lower profit performance in 2008 was mainly the result of a falling job market, Helsingør Dagblad A/S's loss of printing jobs and higher costs of product development at the Internet portal OFiR Job.

The comprehensive product development at Søndagsavisen and in the Internet activities was generally implemented as planned despite the growing negative market trend.

Highlights, Sweden --- Gratistidningar i Sverige AB sold at 30 November 2008

It was announced in Company Announcement No. 14-08 of 25 September 2008, that Søndagsavisen a-s had entered into an agreement with VLT AB regarding the latter's purchase of 66.7 % of the shares in Gratistidningar i Sverige AB (GISAB). The selling price for 66.7 % of the shares has been fixed at SEK 400 million on a debt-free basis. The selling price will be paid in cash.

The shares were acquired on 30 November 2008, and the first payment of SEK 200 million was also made on that date. The second payment of SEK 200 million together with cash balance is to be paid in connection with the adoption of the GISAB financial statements for 2008, however, not later than 1 March 2009.

Søndagsavisen a-s's sales of 66.7 % of the shares in GISAB generated an extraordinary income of DKK 272.1 million in 2008.

In addition, an agreement has been made that Søndagsavisen a-s will sell the remaining 33.3 % of the shares in GISAB at a minimum price of SEK 160 million. The shares will be sold immediately after the financial reporting for 2010. If a number of conditions set for GISAB's future growth and earnings for 2008- 2010 are met, the selling price will be higher. Søndagsavisen a-s will continue to have a seat on the company's Board of Directors until the remaining 33.3 % of the shares have been sold. As from 1 December 2008, GISAB will be recognised as an associate.

Most of the revenue and the operating profit in Sweden is attributable to GISAB in the January 2008 - November 2008 period. Revenue in Sweden amounted to DKK 268.7 million in 2008, which is at the 2007 revenue level. In 2008, the operating profit was DKK 45.5 million, up DKK 14.6 million, or 47 %, on 2007.

Highlights, Other countries --- Norsk Avisdrift AS sold at 23 October 2008

On 28 June 2008, Søndagsavisen a-s entered into an agreement regarding NR1 Adressa-Trykk Oranger AS's purchase of Norsk Avisdrift AS. This was announced on the same day in Company Announcement No. 11-08.

The total price of the acquisition of 100 % of the shares in Norsk Avisdrift AS was NOK 35 million on a debt-free basis. The shares were acquired on 23 October 2008 and Norsk Avisdrift AS is therefore included in consolidated revenue in the 1 January 2008 – 22 October 2008 period.

Søndagsavisen a-s's sale of Norsk Avisdrift AS generated an extraordinary income of DKK 27.3 million in 2008.

In 2008, the revenue of Norsk Avisdrift AS amounted to DKK 28.0 million for the period until the acquisition. Revenue for the full year 2007 was DKK 38.9 million. During the period of ownership in 2008, the operating profit of Norsk Avisdrift AS was DKK 0.9 million, which is at the 2007 profit level.

In the UK, the revenue performance of Match-Work's activities in local currency was flat up to and including August 2008. In the period thereafter the market for recruitment advertisements declined very rapidly in the UK as a result of the financial crisis. MatchWork's primary activity is to service daily newspapers etc. in the recruitment market. The UK is the company's largest single market.

Highlights, The further development of Internet --- OFiR Job continues as planned despite the slowdown in the market for recruitment advertisements. Søndagsavisen.dk and MyLiving.dk launched as planned.

The revenue from the Group's Internet activities was DKK 93.5 million in 2008, up DKK 2.5 million, or 3 %. The operating loss was DKK -28.8 million in 2008, down DKK 29.5 million on 2007.

In the second half of 2008, the Internet based job services, OFiR Job and MatchWork, were both affected by the rapid decline in the recruitment market, which was caused by the accelerating economic crisis and resultant falling employment in Denmark as well as abroad.

However, both OFiR Job and MatchWork are in a development phase and heavily engaged in expanding and refining the enterprises' products. The investment in new forward-oriented user and customer platforms is costly. However, it was decided to continue these development activities unchanged despite the declining job market. The development of the projects is expected to be completed in the first half of 2009.

In the UK, the MatchWork activities were unable to maintain previous years' high growth rates. The UK job market slowed down and the British pound dropped approximately 25 % against the Danish kroner which result of an appreciable reduction in revenue and profit in Danish kroner. The relatively newly established offices in Sweden and Germany show nice growth rates, although the rate of growth was slower owing to market declines also in those countries.

At the end of the year, an international sales manager was recruited to be in charge of the establishment of MatchWork's international distribution network.

On 3 October 2008, www.søndagsavisen.dk was launched, providing a complete platform for the existing FORUM.dk services and a strong coupling to the printed medium Søndagsavisen. In the transitional phase the restructuring process led to lower revenue and large development costs, which overall reduced net profit for the year considerably.

At the end of the year, the organisational structures of OFiR Job, MatchWork as well as www.søndagsavisen.dk were heavily rationalised in response to the falling revenue.

BoligPortal.dk is Denmark's largest portal for housing rentals. The activity is growing. In the second half of 2008, MyLiving.dk was launched as a new site aimed at maintaining contact with users in the BoligPortal's universe, including also the period after the end of a housing search. MyLiving.dk is a site driven partly by its editorial contents with inspiration for the home and partly by user-generated contents. In addition, it is a market place.

Management changes in 2008

As stated in Company Announcement No. 08-08 of 13 May 2008, Christian Lanng Nielsen resigned as manager of the Group's distribution activities and as member of the Executive Board of Søndags avisen a-s. Mads Dahl Andersen has taken over responsibility for the Group's distribution activities in addition to his job as CEO of Søndagsavisen a-s.

Expectations for the year 2009

After the disposal of Gratistidningar i Sverige AB and Norsk Avisdrift AS, the Group's continuing activities are mainly newspaper and distribution business in Denmark handled by Forbruger-Kontakt, Søndagsavisen and the partly owned company Helsingør Dagblad A/S as well as online activities undertaken by www.OFiR.dk, www.søndagsavisen.dk, ww.MatchWork.dk, www.MinReklame.dk and www.BoligPortal.dk, among others

• The revenue from continuing activities in 2009 is expected to be around 10 % lower than the revenue from continuing activities in 2008.

  • In 2009, the operating profit from continuing activities is expected to be at approximately the same level as the operating profit from continuing activities in 2008.
  • The Group's total operating investments are expected to amount to DKK 30 million.

In the advertisement markets, developments in 2009 are subject to considerable uncertainty as a result of the recession and the uncertainty about developments in the economy.

In January 2009, Søndagsavisen's circulation was reduced from 2.1 million to 1.4 million copies. The reduction in circulation and a major reduction in the number of staff within all Group functions result in non-recurring costs in the order of DKK 15 million, which is included in the above expectations.

OFiR Job continues to develop new products which are expected to have a very favourable effect on OFiR Job's position as one of the market leaders within online job advertising.

The Group's total operating investments are expected to be in the order of DKK 30 million. The investments comprise IT solutions and IT hardware as well as plant and machinery at the two packing terminals at Taastrup and at Tilst near Århus.

The liberalisation of the postal markets, which must be implemented by the end of 2010, will provide the distribution business with new expansive opportunities. To exploit these opportunities capital will be required and an owner with more capital will be in a better position to exploit the potential of the new market opportunities. Therefore, the Board of Directors has decided to examine the strategic opportunities for the Group's distribution activities including a potential divestment of the distribution activities. Any potential consequence of this is not included in the above expectations for revenue and results for 2009.

Board resolutions and resolutions to be proposed at the general meeting

The Board of Directors of Søndagsavisen a-s will recommend to the general meeting in 2009 that no dividend be paid, in connection to the Annual meeting, but instead, it is recommended that the Board of Directors will be authorised by an amendment to the Articles of Association to decide on an extraordinary dividend in the period until the next annual general meeting.

The Board of Directors has decided to propose at the annual general meeting on 3 April 2009 that a capital reduction of DKK 11,125,000 nominal value be adopted. If the resolution is carried the total nominal share capital will amount to DKK 100,275,000. The capital reduction will be carried out in accordance with the provisions of Part 7 of the Danish Public Limited Companies Act and will be regarded as having been paid to shareholders, cf. paragraph (2) of section 44a (1) of the Danish Public Limited Companies Act.

Furthermore, the Board of Directors has decided to propose a resolution to the annual general meeting on 3 April 2009 for adoption of an acquisition programme with a view to a subsequent capital reduction.

It is proposed that a special acquisition programme be established, according to which the Board of Directors may let the company acquire up to 2,005,500 treasury shares of DKK 5 nominal value each before the next annual general meeting in 2010, in addition to acquisition of treasury shares within a total nominal value of altogether 10 % of the company's share capital. The special share acquisition programme is based on the assumption that the shares are acquired at market price +/- 5 % always provided that the total market value of treasury shares that may be acquired under the special acquisition programme must not exceed DKK 55 million in total. The Board of Directors is authorised to cancel or reduce the acquisition programme where this is found to be commercially wise or if this is otherwise dictated by the company's capital conditions.

The shares that are comprised by the acquisition programme are to be acquired for the purpose of making a subsequent capital reduction, and payment to the selling shareholders in connection with acquisitions of treasury shares in excess of the 10 % limit is conditional upon the capital reduction being adopted at an annual or extraordinary general meeting.

COMMENTS ON THE FINANCIAL STATEMENTS

INCOME STATEMENT (CONTINUING ACTIVITIES)

Gross profit

The Group's gross profit for 2008 was DKK 295.9 million, representing a gross margin of 23.9 %. The gross profit in 2008 was DKK 62.2 million lower than in 2007 when the gross profit was DKK 358.1

million. The reduction mainly reflects lower revenue at Søndagsavisen and Helsingør Dagblad A/S as well as higher product development costs at OFiR Job, which had a negative effect on the gross profit. The gross profit from the distribution activities improved as a result of higher prices and efficiency improvements in production.

Selling and marketing expenses

Selling and marketing expenses amounted to DKK 142.2 million in 2008, which is 2.3 %, or DKK 3.4 million, less than in the previous year. The decrease is primarily driven by a lover level of costs within newspaper activities.

Administrative expenses

Total administrative expenses amounted to DKK 203.2 million in 2008. The administrative expenses rose by DKK 22.9 million, or 13 %. The increase is mainly due to costs related to restructuring within online activities and the addition of more management and expert competencies. The effect of the reductions in the number of staff which were carried out in December 2008 and in January 2009 will not come through until some time in 2009.

Share of the profits/(losses) of associates

Associates are LokalAvisen Holding ApS, A/S Vestsjællandske Distriktsblade and at 1 December 2008, Gratistidningar i Sverige AB. The share of the profits/(losses) of associates was DKK -3.1 million in 2008, which is DKK 0.6 million lower than in 2007 when the share of the profits/(losses) was DKK -2.5 million.

Financials

The Group's total financials amounted to DKK -9.6 million in 2008 against DKK -8.3 million in 2007. The increase is due to higher average debt over the year combined with higher interest rates.

Special items

The Group's performance in 2008 was affected by a number of special items in a total amount of DKK - 92.9 million. In 2007, special items amounted to DKK -28.6 million.

In 2008, impairments of values of buildings and plant at Helsingør Dagblad A/S accounted for the

greater part of special items. Furthermore, Hillerød Avis had to close down because of increased competition in the mid-week newspaper market. Total non-recurring expenses relating to impairment of assets and the closing of Hillerød Avis amounted to DKK -54.1 million. The impairment loss results from reduced earnings expectations at Helsingør Dagblad A/S on account of increased printing capacity in the market combined with lower demand.

In addition, software was written down by DKK -10.0 million, mainly within online activities, and realised and unrealised foreign exchange losses totalling DKK -28.8 million resulted from the sale of Gratistidningar i Sverige AB and Norsk Avisdrift AS.

In 2007, special items represented impairment of fixed assets in a total amount of DKK 19.4 million, and mainly related to the rebuilding of the distribution terminals at Taastrup and Tilst. Furthermore, software was written down by DKK -4.2 million and investments in associates were written down by DKK -5.0 million.

Profit before tax

The loss before tax from continuing activities in 2008 was DKK -150.8 million. In 2007, the corresponding result was DKK -1.6 million. The decline in results of DKK -149.2 million mainly comprises reduced operating earnings totalling DKK -83.0 million, increased depreciation on assets in a total amount of DKK -35.5 million and foreign exchange losses in a total amount of DKK -28.8 million relating to the sale of Gratistidningar i Sverige AB and Norsk Avisdrift AS.

Tax

The Group's total tax on continuing activities was DKK -21.9 million and corresponds to an effective tax rate of 14,5 %. The tax rate is primarily affected by recapture of tax losses and additions from purchases of minorities in group companies.

Gains from sales of companies

Gains from sales of companies totalled DKK 299.4 million, relating to the sale of Gratistidningar i Sverige AB with a gain of DKK 272.1 million and the sale of Norsk Avisdrift AS with a gain of DKK 27.3 million.

Related to the sales are also realised and unrealised exchange rate losses totalling DKK 28.8 million, which amount is recognised under special items. Thus, the net gain on sales of companies was DKK 270.6 million.

Investments

The year's total investments in intangible assets and non-current assets amounted to DKK 70.1 million. Of this amount, DKK 36.3 million was investments in non-current assets, which consisted of plant within distribution activities. The other investments were mainly own developed software related to the product development within the online activities.

Trade receivables

Trade receivables amounted to DKK 82.5 million at year-end 2008. At the end of 2007, receivables amounted to DKK 156.5 million. The reduction was partly due to the sale of Gratistidningar i Sverige AB and Norsk Avisdrift AS, which represented around DKK 30 million. Furthermore, receivables were reduced as a result of lower revenue and fewer credit days.

Other payables

At 31 December 2008, other payables amounted to DKK 97.3 million, which is DKK 44.2 million lower than at 31 December 2007 when other payables amounted to DKK 141.5 million. The decline in other debt was primarily caused by the sale of Gratistidningar i Sverige AB and Norsk Avisdrift AS, representing approx. DKK 30 million. Just over half of other payables are holiday pay obligations, tax-at-source payable and VAT. The balance is other expenses payable.

Cash flows and interest-bearing debt

The year's cash flows in 2008 amounted to DKK 126.2 million.

Cash flows from operating activities relating to continuing activities in 2008 amounted to DKK 39.3 million, which is DKK 55.1 million lower than in 2007. The reason for this was lower operating results while items not affecting liquidity such as impairment losses to some extent reduced the negative impact on liquidity.

Cash flows from investing activities relating to continuing activities in 2008 amounted to DKK -70.0 million compared with DKK -150.9 million in 2007. The reduction was mainly driven by a much lower investment level in intangible and non-current assets.

The cash flows from financing activities relating to continuing activities were DKK -25.7 million in 2008 and mainly consisted of purchases of treasury shares. In 2007, cash flows from financing activities amounted to DKK -54.5 million, reflecting dividend payments and a larger payment for the purchase of treasury shares.

Total cash flows for continuing activities were DKK -56.4 million in 2008, up DKK 54.6 million on 2007 when the corresponding cash flows were DKK -111.0 million.

Total cash flows for discontinuing activities were DKK 182.6 million in 2008 against DKK -1.4 million in 2007. The increase mainly reflects the first payment of SEK 200 million from the buyer of Gratistidningar i Sverige AB and payment of NOK 39.2 million from the buyer of Norsk Avisdrift AS.

Capital structure

The Group's net interest-bearing debt was DKK 85.5 million at 31 December 2008. Most of the debt is composed of long-term mortgage credit financing. At year-end 2007, the Group's net interest-bearing debt was DKK 207.8 million.

EBITDA for continuing activities amounted to DKK 33.8 million in 2008, increasing net interest-bear-

ing debt relative to EBITDA to 2.5 at year-end 2008 against 1.8 at year-end 2007.

The Group's financial gearing was 0.1 at 31 December 2008. At year-end 2007, the Group's financial gearing was 0.4.

Equity and holding of treasury shares

On 31 December 2008, the Group's equity amounted to DKK 661.4 million, up DKK 171.3 million on the previous year. The increase primarily reflects net profit for the year of DKK 205.2 million while purchases of treasury shares have a negative impact of DKK -18.5 million.

In the course of 2008 the Group purchased 707,000 treasury shares in a total amount of DKK 18.5 million equivalent to an average price of DKK 26.2 per share. At year-end 2008, the Group's holding of treasury shares was 2,225,000, or 9.99 % of the share capital.

CORPORATE GOVERNANCE

The Board of Directors and the Management of Søndagsavisen discuss and take a position on the recommendations for good corporate governance prepared by the NASDAQ OMX Copenhagen. Generally, Søndagsavisen believes that the company must be managed in accordance with both the Group's current interests and its forward-oriented strategy. Based on this, and with the objective to safeguard the interests of Søndagsavisen's shareholders and other stakeholders, the individual recommendations have been reviewed and implemented to the extent they are found to contribute to achieving these objectives. Most of the recommendations have been implemented, but any differences are described in the following.

As a modern, responsible undertaking Søndags avi sen adheres to the codes of behaviour and ethics that apply in a modern, Western European culture and which respect Danish values. The Group has not adopted any policy in this area because it is not assessed that this would contribute any changes to the Group's firmly rooted culture based on an open, active dialogue with the company's stakeholders.

Communication and disclosure of information are handled on the basis of the Stock Exchange Code of Ethics. The Board of Directors has not adopted an actual information and communications policy, but administrative procedures and the ongoing dialogue between the Management and the rest of the Group's managerial staff ensure immediate and adequate publication of all significant information that is relevant in the light of the Stock Exchange Code of Ethics.

The Chairman of the Board of Directors of Søndagsavisen is also the majority shareholder and therefore not independent. The other five members of the Board of Directors are independent. The recommendation that at least half the members of the Board of Directors should be independent is therefore met.

The occupations of the directors are not disclosed in the Annual Report because information is stated concerning their competences and professional qualifications when they are recommended for election at the general meeting.

The company has not set any age limit for directors. Therefore, no ages are disclosed in the Annual Report.

The total shareholdings of the company's Board of Directors and the Management are disclosed in the Annual Report, but their individual holdings are not stated as this is not considered to be relevant.

The work of the Board of Directors and the Management is evaluated on a continuous basis and not in accordance with a fixed procedure. Changes are made on the basis of an open dialogue among the Board of Directors and the Management.

The remuneration of the Board of Directors, the Management and managerial staff is disclosed in the Annual Report. The Board of Directors has not prepared a remuneration policy since it is found that it would not change the fact that the Board of Directors and the Management receive a competitive and reasonable level of remuneration based on efforts and performance. In connection with dismissal, if any, of the Management and employees, the maximum term of notice is 12 months, and in the event of takeover of the company the maximum severance pay is further 12 months salary. For competitive reasons, no information is given on the severance schemes or the total remuneration of the individual members of the Board of Directors and the Management.

At the annual general meeting on 4 April 2008, general guidelines relating to incentive pay for the Board of Directors and the Management were adopted. These guidelines reflected the current practice. The Board of Directors receives a fixed annual fee and no share options, nor do they receive any incentive pay.

The Board of Directors may grant an individually variable number of share options to members of the Management and any other managerial staff. Should the Board of Directors choose in any one financial year to grant share options, the calculated theoretical market value of the share options granted at the time of grant cannot exceed 100 % of the annual fixed pay. The value is calculated using the Black & Scholes model.

The members of the Management, and the rest of the company's senior management, receive a fixed basic salary as well as pension contributions paid by the company at a competitive level. In addition, they are subject to a bonus scheme based on growth in net revenue, growth in the profit before tax, and the profit for the year before tax. This bonus scheme gives priority to profitable revenue growth and the bonus is limited to maximum 100 % of the basic salary.

AUDIT COMMITTEE

Søndagsavisen has set up an Audit Committee to supervise the Group's financial reporting procedures. The Audit Committee is only to prepare decisions which are to be made by the entire Board of Directors.

The Committee reports to the Board of Directors, and it is responsible for ensuring that internal controls are appropriate. The Committee must also ensure that current legislation and guidelines, including the NASDAQ OMX Copenhagens disclosure requirements, are complied with. Furthermore, the Committee is responsible for ensuring that the external auditors' recommendations relating to financial as well as IT audits are followed up. Ensuring progress in the implementation of solutions is another responsibility. The Committee reports to the Board of Directors after the end of biannual and annual periods and on any other significant matters.

INCENTIVE SCHEMES

In June 2008, Søndagsavisen established a share option programme for a group of 18 people consisting of the company's Management and selected managerial staff. The number of share options granted is 354,000, each giving the right to acquire one share of DKK 5.00 nominal value in Søndagsavisen. The option programme is described in notes 8 and 25 to the Annual Report. The options are granted to promote the company's growth and earnings.

RISK AND RISK MANAGEMENT

Identification of risks and risk handling

Søndagsavisen is working actively to identify and manage risks that may affect the company's results and activities adversely.

Control structure

To ensure detailed monitoring, the Group's activities are divided into a number of segments which develop their own independent strategies, have their own independent budgets and deliver their own independent operational and financial reports.

Strategy and action plans

Søndagsavisen prepares strategy and action plans designed to ensure, among other things, proactive risk handling. Every year the segments devise a strategy based on a detailed, standardised process, in which business risks are mapped and decisions made on how to handle them.

Detailed one-year action plans based on the strategy plans are prepared by the segments for one year and updated after approximately six months. These action plans are approved by the Board of Directors together with budgets and strategies.

Follow-up and control

Throughout the year the segments are followed up closely and the results achieved are controlled and compared with budgets and action plans.

Every month comprehensive accounting records are prepared, comparing the results of each segment with the budget. This information is sent to both the Board of Directors and the Management, which follows up. In continuation of the monthly financial statements the management of each segment prepares a management report explaining variances, proposing corrective actions and describing the competitive situation and action plan status, etc.

Immediately after the preparation of the monthly reports, a number of business review meetings are held, at which members of the Management meet with the management of the individual segments. At these meetings the management report, the results achieved, and short-term expectations, as well as the possibilities of taking any corrective measures, are explained and discussed.

BUSINESS RISKS

Market risks

In Denmark, ensuring fair terms of competition in the distribution market is key to achieving satisfactory results. The future regulation of the market and the competition authorities' enforcement of this regulation are therefore essential. Søndags avi sen works via the political system to ensure this.

The market for newspaper advertisements is generally characterised by a climate in which competi-

tion is becoming more and more intense. Søndags avisen seeks to handle competition in a number of ways:

  • No other printed media provides access to approx. 1,3 million readers every week.
  • Via the many sub-editions, regional advertisers are offered precisely the coverage they need, in recognised media at competitive prices.

The market for recruitment advertisements is vital to the Group and is a market that is sensitive to economic fluctuations. The distribution market, especially the segment related to the retail sector, is traditionally relatively unaffected by economic fluctuations.

Commodity risks

Newsprint is an essential commodity in the production of newspapers. Søndagsavisen aims to cover this risk by establishing long-term contracts with selected printers so as to align advertisement prices with the current level of costs.

Quality assurance

In the distribution market, high quality is an important competitive parameter. Søndagsavi sen's new distribution terminals in Taastrup and Tilst have been of great importance to continuous quality improvement. Sorting equipment packs the printed matter in household sets with a very small number of errors per thousand, and the distribution quality is ensured through training, control calls and the use of "Track and Trace". Søndagsavisen is cooperating closely with selected customers on an ongoing basis in order to continuously improve the level of quality.

The quality of the Søndagsavisen newspaper is managed via internal control procedures in the editorial and pre-press related processes, while the print quality is described in requirements specifications for internal and external printers.

Insurance

It is Søndagsavisen's policy to transfer risks relating to external matters such as natural catastrophes, fire and other loss events to the Group's insurance companies. The need for insurance is regularly reviewed and the relationship between premium and cover is evaluated in order to minimise the financial impact of any accident.

Emergency power

Søndagsavisen's and OFiR's IT facilities are consolidated at Søndagsavisen's headquarters in Gladsaxe. The buildings have their own emergency power system, which automatically cuts in should the public power supply fail.

An emergency power system has also been established at the two distribution terminals in Taastrup and Tilst, making it possible to perform a controlled power down of the company's IT systems in the event of power failure. However, no emergency power system has been established to continue production because it is believed that even extended power outings can be absorbed in the available time window.

IT security

All vital servers are duplicated and placed in physically separate server rooms, and back-up procedures are run every night on all production servers to obtain two sets of identical data. Inergen, air conditioning and smoke, fire and humidity alarm systems have been installed.

All systems are protected by access controls that limit access to the functions that the individual employee needs. In addition, daily updates are performed of firewall, spam filters, antivirus programs and scanning of mails for high-risk content.

At head office, the connection to both the telephone and the Internet is established via two alternative routes, each terminating at different points.

FINANCIAL RISKS

In addition to business risks, the Group is also exposed to a number of financial risks, including interest rate, currency and liquidity risks. Reference is made to note 40 for a more detailed description of these risks.

INVESTOR RELATIONS

The Group and the NASDAQ OMX Copenhagen

In May 1996 Søndagsavisen a-s was the first media group in Denmark to be listed on NASDAQ OMX Copenhagen.

Company information

Søndagsavisen a-s
Address: Gladsaxe Møllevej 28
DK - 2860 Søborg
Internet: www.son.dk
Telephone: (+45) 39 57 75 00
Fax: (+45) 39 66 14 08
E-mail: [email protected]
CVR no.: 66 59 01 19
Securities ID: DK001027034-7
Auditors: Ernst & Young and
Beierholm
Bankers: Nordea A/S

Financial year

The Group's financial year follows the calendar year, and this Annual Report comprises the year ended 31 December 2008, the company's 28th financial year.

Annual General Meeting

The Annual General Meeting of shareholders will be held on Friday 3 April 2009 at 3.00 p.m. at Ingeniørforeningens Mødecenter A/S, Kalvebod Brygge 31-33, DK-1780 Copenhagen V.

Share capital

The company's share capital is DKK 111.4 million, distributed on 22,280,000 shares of DKK 5.00 nominal value each.

Authorisation

The Board of Directors is authorised to increase the share capital one or several times by up to DKK 25.0 million.

Increases may take place through cash capital injections or otherwise. Increases may take place without any pre-emptive right for the company's existing shareholders if the increase is effected at market price or as consideration for the company's takeover of an existing business or specified property values at a value corresponding to the value of the shares issued. Outside the cases described in the previous sentence, the shareholders have a pre-emptive right to subscribe for new shares. The authorisation is given for a period up to 1 May 2012.

The Board of Directors is authorised to increase the share capital one or more times by up to DKK 1.0 million through the issue of employee shares. The authorisation is given for a period of five years ending on 29 April 2010. The increase may be made on terms and conditions set by the Board of Directors.

Treasury shares

The Board of Directors is authorised to allow Søndagsavisen a-s to acquire treasury shares for up to 10 % of the company's total share capital provided that the acquisition is made at the market price in force at the time of purchase with a variance of plus or minus 5 %. The authorisation applies until the next Annual General Meeting of the company.

The company's holding of treasury shares at 31 December 2008 accounted for 9.99 % of the share capital, corresponding to 2,225,000 shares.

Dividend

The Board of Directors of Søndagsavisen a-s will recommend to the general meeting in 2009 that no dividend be paid, in connection to the Annual meeting, but instead, it is recommended that the Board of Directors be authorised by an amendment to the Articles of Association to decide on an extraordinary dividend in the period until the next annual general meeting

The parent company's income statement shows a profit of DKK 224.3 million. In 2008, the parent company changed from IFRS reporting to reporting under the Danish Financial Statements Act. This change has resulted in a change of the comparative figures. The Board of Directors recommends the following appropriation of the profit:

Appropriation of profit, DKKm

Retained earnings at 1 January 2008 263.7
Other equity items -7.1
Net profit for the year 224.3
Investment in treasury shares -18.5
Available for appropriation 462.4

The Board of Directors submits the following appropriation of the profit for approval by the general meeting:

Retained earnings at 31 December 2008 462.4

Shareholders

The register of shareholders holding at least 5 % of the share capital, which the company keeps in accordance with the Danish Companies Act, comprised the following shareholders at 31 December 2008:

  • Baunegård ApS
  • Fredensborg Kongevej 49, 2980 Kokkedal
  • BNP Paribas Securities Services 66 Rue de la Victoire
  • F-75078 PARISCEDEX 02, France
  • Søndagsavisen a-s Gladsaxe Møllevej 28, 2860 Søborg

The majority shareholder is Richard Bunck, the founder of the company who together with his wife holds 51.29 % of the share capital through a 100 % owned and controlled holding company, Baunegård ApS. Most of the remaining share capital is placed with institutional investors.

Søndagsavisen a-s' shareholders at 31 Decem
ber 2008:
Baunegård ApS 51.29 %
BNP Paribas Securities Services 5.59 %
Søndagsavisen a-s 9.99 %
Other 33.13 %
Total 100.00 %

Management

At year-end 2008, the company's Board of Directors and Management, exclusive of Richard Bunck, controlled 73,788 shares, or 0.33 % of the share capital.

In the financial year under review, the company's Board of Directors and Management, exclusive of Britt and Richard Bunck, purchased 36,698 shares net in the company. In addition, it should be noted that the shareholding controlled by the Board of Directors and the Management was reduced by 437,800 shares net on account of the resignation of two members of the Management.

Share price

The market capitalisation of the company's shares was DKK 441.8 million at the close of the financial year, 31 December 2008.

Contact with investors

Søndagsavisen a-s has an open and uniform dialogue with investors and analysts so as to provide the stock market with optimum and adequate information about the company.

Meetings with shareholders, investors, financial analysts and other stakeholders are held at regular intervals. Each year, the company holds several large presentations in Denmark and conducts meetings with foreign investors.

Banks and stockbrokers monitoring Søndagsavisen a-s:

Stockbroker Name and phone no. Nordea Markets Dan Wejse +45 33 33 24 09 Gudme Raaschou Bank Stig Nymann +45 33 44 90 00

Corporate site

Søndagsavisen a-s' corporate site www.son.dk provides information on the company, the Board of Management and the Board of Directors, shareholder information, etc.

Contact to investors

Mads Dahl Møberg Andersen CEO

Phone: (+45) 39 57 75 00 Fax: (+45) 39 66 14 08 E-mail: [email protected]

Announcements 2008

8 February 2008: Preliminary Announcement of the Annual Report 2007
26 February 2008: Statement of leading management and related parties' trade with Søndagsavisen a-s
shares
18 March 2008: Notice of Annual General Meeting in Søndagsavisen a-s
18 March 2008: Annual Report 2007 for Søndagsavisen a-s
4 April 2008: Minutes of the General Meeting
4 April 2008: Articles of Association
7 May 2008: Interim management statement Q1 2008 for Søndagsavisen a-s
13 May 2008: Christian Lanng Nielsen resigns as director from Søndagsavisen a-s
19 June 2008: Søndagsavisen grants share options to the company's management and selected
executive employees
19 June 2008: Statement of leading management and related parties' trade with Søndagsavisen a-s
shares
28 June 2008: Søndagsavisen a-s enters into an agreement on the sale of Norsk Avisdrift AS
6 August 2008: Interim Report 2008
15 August 2008: Forbruger-Kontakt enters into a two-year distribution agreement with COOP
25 September 2008: Søndagsavisen a-s concludes agreement on sale of Gratistidningar i Sverige AB
(GISAB)
20 October 2008: Søndagsavisen a-s' sale of Norsk Avisdrift has been approved and a partnership has
been established with Travelmarket ApS
31 October 2008: Forbruger-Kontakt concludes distribution agreement with Dansk Supermarked for
2009 and 2010
5 November 2008: Interim management statement Q3 2008 – Søndagsavisen a-s
12 November 2008: Søndagsavisen a-s' sale of Gratistidningar i Sverige AB has been approved
21 November 2008: Financial calendar 2009 for Søndagsavisen a-s

Announcements 2009

15 January 2009: Søndagsavisen a-s downgrades expectations for profit before tax for 2008 20 January 2009: Søndagsavisen closing down four newspaper editions in Jutland

Financial calendar for 2009

5 February 2009: Preliminary Announcement of the Annual Report 2008
3 April 2009: Annual General Meeting
6 May 2009: Interim management statement Q1 2009
5 August 2009: Interim Report 2009
4 November 2009: Interim management statement Q3 2009

The Board of Directors' meeting calendar for 2009

Wednesday 4 February 2009 / Thursday 5 February 2009 Friday 3 April 2009 Tuesday 5 May 2009 / Wednesday 6 May 2009 Thursday 25 June 2009 Tuesday 4 August 2009 / Wednesday 5 August 2009 Monday 7 September 2009 Tuesday 3 November 2009 / Wednesday 4 November 2009 Thursday 3 December 2009

COMPANY DESCRIPTION

The company was founded in 1965, with the distribution of unaddressed printed matter and news papers as its principal activity.

In 1978 the company expanded its activities and began to publish free newspapers, financed by advertisements that were distributed to households during weekends under the name of Søndags avisen. Since then, this has become the name of the entire corporation.

In 1996 the Internet activities commenced, becoming a new main activity.

NEWSPAPER PUBLICATION AND DISTRIBUTION

DENMARK

NEWSPAPER PUBLICATON

Søndagsavisen is now distributed every weekend in approximately 1.4 million copies, corresponding to coverage of approximately 60 % of Denmark's more than 2.6 million households. Søndags avisen is thus clearly the largest newspaper in Denmark, and no other Danish printed media are even close to circulation on this scale or have the same broad readership and unique coverage.

Distribution areas and days

Søndagsavisen has undertaken comprehensive analyses to map the population's shopping, transport and relocation patterns. These behaviour patterns have formed the basis for Søndagsavisen's regional structure.

Based on these analyses Søndagsavisen is the only example in Denmark of a national newspaper

divided into 15 different regional editions and 27 sub-editions, each with its own characteristic features.

Søndagsavisen's editorial content is basically identical throughout the country and in all editions, which makes the newspaper unique in comparison with local newspapers.

However, the advertisements in Søndagsavisen are matched to regional conditions and the needs of individual readers. This makes the newspaper unique compared to daily newspapers.

By distributing Søndagsavisen at weekends, the newspaper reaches its readers when they have time to spare. The weekend has become a time for families and relaxation – a time for being together, for inspiration and for joint decisions on a new job or a major purchase.

Editorial concept

Søndagsavisen is the most read newspaper in Denmark. As Søndagsavisen is to be the newspaper for the general public, the editorial concept focuses first and foremost on setting the Danes' agenda, mainly with articles about consumption, health, home, personal finance, travel, family and job life.

The newspaper focuses on unique news, consumer guide descriptions and brief consumer guides in these areas. The newspaper must provide relevant, entertaining and pleasant reading. This is ensured by the company's own permanent staff of journalists covering specialised topics, regular information from our segmented websites, and a few freelance suppliers.

Søndagsavisen is an agenda-setting, positive and free weekly newspaper focusing on its readership. With its strong editorial staffing it provides readers

with entertaining and surprising journalism. At the same time, it also attracts readers to the Group's other contents platforms.

Søndagsavisen is the weekend newspaper for every Danish family and is an indispensable source of good advice, opportunities and entertainment for the coming week. The newspaper is an up-to-date, positive and free weekly newspaper distributed to households that, with focus on its readers, provides good national news coverage. It is also a source of inspiration for shopping, working and leisure activities. The target group is the busy modern family in the 25-50 age group.

The reader

Søndagsavisen's strength lies in its large and broad circle of readers, its regionalisation and its household distribution.

Of Søndagsavisen's approximately 1.3 million readers, the following characteristics are particularly noteworthy:

  • Just under half are aged between 25 and 50
  • Approximately one fourth have a long, higher education
  • 80 % have influence on the household's purchases
  • 72 % have an owner-occupied or co-operative housing
  • More than 550,000 do not read other newspapers on weekends than Søndagsavisen

Comparison of Søndagsavisen's readers with the population in general shows, among other things, that:

  • Søndagsavisen has more readers aged between 25 and 50 than in the population in general. Many are families with children.
  • Søndagsavisen has an overrepresentation of female readers, who typically determine most of the family's purchases. This makes Søndags avisen a particularly attractive medium for the retail trade.

Value for advertisers

Søndagsavisen is known by a large proportion of the Danish population and is Denmark's most read newspaper – with many readers among families with children. Consumers benefit from a newspaper delivered directly to their home during the weekend, when they have time to read it – and with content they look forward to reading.

By delivering the newspaper free of charge directly into the letterbox, Søndagsavisen reaches readers in their own homes. Everybody has a letterbox or a letter slit, and everybody sees their mail. Not many media can achieve a level of penetration where potential readers stand holding the newspaper, considering whether to read it.

Søndagsavisen's particular strength lies especially in the fact that the newspaper's readership is both actively and passively looking for information. Most decisions to change job or to make major purchases always take some time to mature. During this maturation period the decision-maker is receptive to influences, but is also passively looking for information. He is inspired by the information at hand without looking for concrete information. Since Søndagsavisen is distributed to households, it is at hand. This is why Søndagsavisen is such a strong medium.

PRINTING

Søndagsavisen a-s owns 57 % of Helsingør Dagblad A/S, whose principal activity is a newspaper printing works that is among the three largest contract printers in Denmark.

The printing works Helsingør Dagblad A/S prints newspapers for the whole country, and are among the best and largest in the market. With 4 colours on all pages no matter the number (from 8 to 128 pages in tabloid format in one impression) and up to 140,000 newspapers per hour, it has sufficient capacity to print virtually all newspapers – from 8 pages in a run of 2,000 to 128 pages in a run of 2 million. Helsingør Dagblad A/S is a supplier to several of the large newspaper houses in Denmark.

The company Helsingør Dagblad A/S publishes the daily newspaper Helsingør Dagblad and free weeklies in the region Nordsjælland.

DISTRIBUTION

Distributing sales messages directly to customers' homes is an extremely effective way of marketing goods or services. This method of advertising is widely used, especially by enterprises or retailers that have comprehensive product catalogues to distribute.

Customers that insert their messages as advertisements in household distributed media such as Søndagsavisen benefit in the same way.

The Søndagsavisen Group is today the largest non state owned Danish operator in the market for household distribution of unaddressed newspapers and printed matter. The distribution system is based on an extensive network of routes that are serviced by the companies' own distributors.

The distribution company is among the most effective of its kind in Europe and it covers a total of more than 2.6 million households.

Products

Companies with a substantial requirement for distribution of information and advertising often choose to have their own printed matter distributed to consumers' homes. This increases flexibility in terms of the shape and size of the material, as well as the geographical distribution area.

Forbruger-Kontakt offers these companies a number of customer-specific distribution methods.

The distribution activities at 31 December 2008 comprised unaddressed printed matter, newspapers, Chess Mail and analyses.

Household distribution of unaddressed printed matter and newspapers

This distribution method is directed at customers requiring distribution of unaddressed printed matter or newspapers to all households within a specific geographical area. The distribution of Søndags avisen is included in this business area.

Chess Mail

Chess Mail is selective unaddressed distribution of advertising to groups of households with a uniform demographic profile. Through selection according to certain criteria, such as gender, age, type of housing, income and profession, interests and purchase behaviour, Forbruger-Kontakt can pick the geographical areas where the concentration of the customer's target group is highest.

Distribution solely in these areas maximises the targeting of the customer's message. At the same time, printing and distribution costs are optimised.

Analyses

As a separate business area, Forbruger-Kontakt also sells analyses of household characteristics in a given area. The analyses are designed to increase benefit from the customer's marketing activities while, at the same time, supporting the distribution-oriented part of the company. Such analyses include:

  • Customer analyses
  • Twin analyses

  • Area analyses

  • Campaign analyses

Forbruger-Kontakt has Denmark's most sophisticated systems and tools for target group and segment analysis. The analyses are performed by pooling data in Forbruger-Kontakt's own database, and via information from Statistics Denmark as well as the customer's own customer database. Forbruger-Kontakt can thus map the profile of a given customer segment or identify a statistically representative test area. This allows the customer to test the impact of a sales brochure before launching a major campaign.

Logistics structure in Denmark

Forbruger-Kontakt's two distribution terminals in Taastrup and Tilst ensure efficient use of resources and have resulted in substantial productivity improvements. Preparation of printed matter for distribution has thus to a great extent been automated, and the quality control of the entire production process has been significantly improved.

INTERNET

The Søndagsavis Group is one of Denmark's oldest providers of Internet-based services. Since the initiation of its activities in 1996, the Group has established a strong position in the market for Internetbased advertising services in Denmark. Since 1998, the Danish portal has been among the most frequently visited websites in Denmark.

Main activities

Søndagsavisen a-s has structured its activities as five main areas, each with particular focus on what the individual customer group may need and expect from a professional supplier:

  • Job & HR services
  • Portal
  • Media Solutions
  • BoligPortal
  • MinReklame

OFiR.DK

Job & HR services in Denmark

OFiR.dk operates a Danish marketplace for job recruitment advertisements and CV services on the Internet. The recruitment service is one of the three largest and most widely used job services in Denmark. With its large number of users, combined with the easy-to-use recruitment tools which intelligently combine jobseekers' wishes with the employers' needs, the Internet service ensures certainty of response for both parties. As a consequence, the Internet service OFiR.dk has become many companies' first choice of recruitment advertiser.

OFiR.dk is cooperating closely with Søndagsavisen and can therefore offer customers a targeted advertsing platform on print as well as online, thus combining the strengths of the two media.

Søndagsavisen.dk

In October 2008, FORUM.dk became part of the new newspaper site Søndagsavisen.dk.

Søndagsavisen.dk is a topical site with focus on that which touches and affects Danes. Søndags avisen.dk brings all news of topical interest, discussing in detail news of greatest interest to Danes. In addition to news, Søndagsavisen.dk provides lifestyle subjects such as health, exercise, food and pets.

Søndagsavisen.dk continues to provide Mail, Chat and Dating services, which together meet the ambition to be the Danes' preferred place to meet online.

Søndagsavisen.dk's primary target group is 18-45 year-olds having a medium-sized or high income and middle-range or further education or training.

In 2008, Søndagsavisen.dk also launched the travel site Ferieliv.dk. Ferieliv.dk's editorial uniqueness is its high proportion of user-generated material and interaction with users through competitions, debate and recommendations. In addition, Ferieliv.dk is intended to be the site on which users can buy their trip as swiftly as possible and at the lowest possible price.

Sonday.dk was launched in November 2008. Sonday.dk is a lifestyle site catering primarily for young urban users interested in fashion and music.

Søndagsavisen.dk's business is based primarily on revenue from banner and permission marketing advertisements (e-mail marketing) and secondarily on revenue from user payment.

Media Solutions

MatchWork Media Solutions provides software solutions for media enterprises that wish to produce classified advertisements online and strengthen their market position and earnings through the Internet.

Media Solutions are provided as a fully integrated solution for newspapers and their advertisement and production systems within:

  • The recruitment market, supplemented with CV databases and unique match technology
  • The property market, which also provides for integration with estate agents
  • The motor market
  • Other classified ad markets

Today the software solutions are sold in the Danish, Swedish, Norwegian, British and German markets. The solutions have significant potential by providing cost-effective hosting and application customisation for media requiring a solution in their own brand on their own site. The customer can also participate in a shared network, creating a higher transaction volume, for the benefit of the customers and users alike.

BoligPortal.dk

BoligPortal.dk ApS was established in 1999 and operates within home sales and rental. The company operates BoligPortal.dk, which is an ad market for landlords, sellers and people seeking housing. BoligPortal.dk is the largest marketplace for rental housing on the Internet with more than 500,000 visitors a month. More than 3,000 rental houses and flats are advertised on BoligPortal.dk every month.

MinReklame.dk

MinReklame ApS, which was acquired by Søn dags avisen a-s on 1 November 2007, is Denmark's leading digital distributor of flyers and catalogues. MinReklame is focused on online marketing and on helping Danish retail chains in attracting customers to the shops.

MinReklame ApS is definitely among the fastest growing companies in Denmark and was awarded the title of Gazelle Company by the daily business newspaper Børsen in 2008.

MinReklame is marketing printed matter for more than 50 of Denmark's largest retail chains on MinReklame.dk and Forbruger-mail.dk. Digital distribution provides retail chains with the opportunity to reach a large proportion of consumers under the Post Danmark 'No advertisements please' scheme.

Statement by the Board of Directors and Management

MANGEMENT REPORT

The Board of Directors and the Management have presented the Annual Report of Søndagsavisen a-s for the year ended 31 December 2008. The Annual Report was considered and adopted as of today's date.

The consolidated financial statement is presented in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements for the presentation of the Annual Reports of listed companies, and the financial statements of the parent company are presented in accordance with the Danish Financial Statements Act. We consider the chosen accounting policies to be appropriate and the internal controls relevant to the preparation of the Annual Report to be adequate so that the Annual Report gives a true and fair view of the assets, equity and liabilities, results and financial position of the Group and the parent company at 31 December 2008, as well as of the results of the company's activities and cash flows for 2008.

In our opinion, the Mangement's Review gives a true and fair view of the development of the activitities and the financial circumstances of the Group and the company, the net profits or losses for the year and financial position as a whole for the companies comprised by the consolidated financial statements as well financial position of the company. In addition, it gives a description of the most significant risks and uncertain factors they are facing.

We recommend that the Annual Report be adopted by the Annual General Meeting.

Søborg, 5 February 2009

Management

Mads Dahl Møberg Andersen Kåre Stausø Wigh Hans Henrik Lund
Board of Directors
Richard Bunck
Chairman
Peter Rasztar
Vice Cairman
Steen Gede
Björn Lindberg Ulrik Holsted-Sandgreen Pål Bruu

Adoption

As adopted at the Annual General Meeting of shareholders on 3 April 2009.

As chairman of the meeting:

THE INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Søndagsavisen a-s

We have audited the Annual Report of Søndagsavisen a-s for the financial year ended 31 December 2008, which comprises the Statement of the Supervisory and Executive Boards on the Annual Report, the Management's Review, a summary of significant accounting policies, the income statement, balance sheet, statement of changes in equity, cash flow statement for the year then ended and notes for the Group as well as for the Parent Company. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU, and the Parent Company financial statements have been prepared in accordance with the Danish Financial Statements Act. Further, the Annual Report has been prepared in accordance with the additional Danish disclosure requirements for Annual Reports of listed companies.

The Supervisory and Executive Boards' Responsibility for the Annual Report

The Supervisory and Executive Boards are responsible for the preparation and fair presentation of this Annual Report in accordance with International Financial Reporting Standards as adopted by the EU (the Group), the Danish Financial Statements Act (the Parent Company), and additional Danish disclosure requirements for Annual Reports of listed companies. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of an Annual Report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility and Basis of Opinion

Our responsibility is to express an opinion on this Annual Report based on our audit. We conducted our audit in accordance with Danish Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the Annual Report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Annual Report. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the Annual Report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the Annual Report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Supervisory and Executive Boards, as well as evaluating the overall presentation of the Annual Report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

The audit did not result in any qualification.

Opinion

In our opinion, the Annual Report gives a true and fair view of the Group's financial position at 31 December 2008 and of the results of its operations and consolidated cash flow for the financial year then ended in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for Annual Reports of listed companies.

Further, in our opinion, the Annual Report gives a true and fair view of the Parent Company's financial position at 31 December 2008 and of the results of its operations and cash flow for the financial year then ended in accordance with the Danish Financial Statements Act and additional Danish disclosure requirements for Annual Reports of listed companies.

Søborg, 5 February 2009

Ernst & Young Beierholm Statsautoriseret Revisionsaktieselskab Statsautoriseret Revisionsaktieselskab

Henrik Kofoed Jan Andersen State Authorised Public Accountant State Authorised Public Accountant

Consolidated income statement

2008 2007
Note DKKm DKKm
Revenue 1,235.8 1,433.8
7,9 Production costs 939.9 1,075.7
Gross profit 295.9 358.1
7,9 Sales and marketing expenses 142.2 145.6
7,9,10 Administrative expenses
Other operating income
203.2
4.3
180.3
5.6
Operating profit -45.2 37.8
11 Share of profit of associates -3.1 -2.5
12 Net financials -9.6 -8.3
Special items -92.9 -28.6
Profit before tax, continued operations -150.8 -1.6
15 Tax, continued operations -21.9 -3.3
Net profit, continued operations -128.9 1.7
Profit of disposal of subsidaries 299.4 0.0
Net profit. discontinued operations 34.7 22.4
Net profit for the period 205.2 24.1
Attributable to:
Shareholders in Søndagsavisen a-s 226.5 15.1
Minority interests -21.3
205.2
9.0
24.1
16 Earnings per share, in DKK
Earnings per share (EPS) - total 11.0 0.7
Diluted earnings per share (EPS-D) – total 11.0 0.7
Earnings per share (EPS) – continued operations -5.2 -0.3
Diluted earnings per share (EPS-D) - continued operations -5.2 -0.3

Consolidated balance sheet at 31 December

Assets

Note 2008
DKKm
2007
DKKm
Goodwill 56.4 67.2
Other intangible assets 26.0 44.7
Completed development projects, software 26.0 26.8
Development projects in progress 11.7 12.7
19 Intangible assets 120.1 151.4
Land and buildings 365.7 379.8
Plant and machinery 111.4 148.7
Operating equipment, fixtures and fittings 34.9 47.5
Property, plant and equipment in course of construction 1.9 7.4
20 Property, plant and equipment 513.9 583.4
22 Investments in associates 11.4 3.5
Other securities and investments 3.7 3.9
24 Deferred tax assets 0.0 5.5
Other receivables 2.1 2.4
Other non-current assets 17.2 15.3
Total non-current assets 651.2 750.1
Inventory 2.5 3.2
23 Trade receivables 82.5 156.5
Receivables from associates 1.1 0.4
28 Receivables from parent company 0.0 5.4
Other receivables 4.8 21.9
Receivable salesprice from disposal of subsidaries 149.7 0.0
Prepayments 18.9 17.1
Cash 12.4 25.2
Total current assets 271.9 229.7
Total assets 923.1 979.8

Consolidated balance sheet at 31 December

Equity and Liabilities

2008
DKKm
2007
DKKm
Share capital 111.4 111.4
Treasury shares -72.7 -54.2
Hedging reserves -5.0 0.0
Revaluation reserves -7.4 -2.2
Note
Retained earnings
Shareholders' equity
Minority interest
25 Total equity
24 Provision for deferred tax
26 Financial institutions
27 Interst rate swap
Total non-current liabilities
26 Financial institutions
Trade payables
28 Income taxes
29 Other payables
Deferred income
Total current liabilities
Total liabilities
579.6 350.0
605.9 405.0
55.5 85.1
661.4 490.1
1.0 30.3
86.0 88.9
6.7 0.0
93.7 119.2
5.2 144.1
32.9 57.5
0.4 7.4
97.3 141.5
32.2 20.0
168.0 370.5
261.7 489.7
Total equity and liabilities 923.1 979.8

Consolidated statement of changes in equity

DKKm

2008 Share
equity
Treasury
shares
Hedging
reserves
Revalua-
tion
reserves
Retained
earnings
Proposed
dividend
Share
holders'
total
share
Minority
interests
Total
Equity at 1 January 2008 111.4 -54.2 0.0 -2.2 350.0 0.0 405.0 85.1 490.1
Changes in equity in 2008
Currency adjustments, foreign
companies 0.0 0.0 0.0 -5.2 0.0 0.0 -5.2 0.0 -5.2
Fair value adjustment of hedging
instruments 0.0 0.0 -5.0 0.0 0.0 0.0 -5.0 0.0 -5.0
Net gains/-losses recognised directly
in equity 0.0 0.0 -5.0 -5.2 0.0 0.0 -10.2 0.0 -10.2
Net profit for the period 0.0 0.0 0.0 0.0 226.5 0.0 226.5 -21.3 205.2
Total income 0.0 0.0 -5.0 -5.2 226.5 0.0 216.3 -21.3 195.0
Addition of minority interests, net 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -5.4 -5.4
Purchase of treasury shares 0.0 -18.5 0.0 0.0 0.0 0.0 -18.5 0.0 -18.5
Dividend distributed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -2.9 -2.9
Share based payments 0.0 0.0 0.0 0.0 3.1 0.0 3.1 0.0 3.1
Total changes in equity in 2008 0.0 -18.5 -5.0 -5.2 229.6 0.0 200.9 -29.6 171.3
Equity at 31 December 2008 111.4 -72.7 -5.0 -7.4 579.6 0.0 605.9 55.5 661.4
2007
Equity at 1 January 2007
111.4 -30.7 -1.7 0.3 323.8 22.3 425.4 80.0 505.4
Changes in equity in 2007
Currency adjustments. foreign
companies 0.0 0.0 0.0 -2.5 0.0 0.0 -2.5 0.0 -2.5
Fair value adjustment of hedging
instruments 0.0 0.0 1.7 0.0 0.0 0.0 1.7 0.0 1.7
Adjustment for fair value allocated
to share of company owned before
acqusition of majority interests 0.0 0.0 0.0 0.0 7.5 0.0 7.5 0.0 7.5
Net gains/-losses recognised directly
in equity 0.0 0.0 1.7 -2.5 7.5 0.0 6.7 0.0 6.7
Net profit for the period 0.0 0.0 0.0 0.0 15.1 0.0 15.1 9.0 24.1
Total income 0.0 0.0 1.7 -2.5 22.6 0.0 21.8 9.0 30.8
Addition of minority interests, net 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.1 4.1
Purchase of treasury shares 0.0 -23.5 0.0 0.0 0.0 0.0 -23.5 0.0 -23.5
Dividend distributed 0.0 0.0 0.0 0.0 0.0 -22.3 -22.3 -8.0 -30.3
Dividend treasury shares 0.0 0.0 0.0 0.0 1.2 0.0 1.2 0.0 1.2
Share based payments 0.0 0.0 0.0 0.0 2.4 0.0 2.4 0.0 2.4
Total changes in equity in 2007 0.0 -23.5 1.7 -2.5 26.2 -22.3 -20.4 5.1 -15.3
Equity at 31 December 2007 111.4 -54.2 0.0 -2.2 350.0 0.0 405.0 85.1 490.1

Consolidated cash flow statement

Note 2008
DKKm
2007
DKKm
Net profit, continued operations -128.9 1.7
30 Adjustments for non-cash operating items 133.8 113.1
31 Changes in working capital 40.6 -17.6
Cash flow from operating activities before net financials 45.5 97.2
Interest received 0.9 1.7
Interest paid -12.2 -3.8
Cash flows from ordinary activities 34.2 95.1
24 Income tax paid 5.1 -0.7
Cash flows from operating activities, continued operations 39.3 94.4
Cash flows from operating activities, discontinued operation 40.8 14.3
Cash flows from operating activites total 80.1 108.7
32 Additions of intangible assets and property, plant and equipm. -70.1 -125.5
Disposals of intangible assets and property, plant and equipm. 4.1 2.2
Dividend from associates 1.2 4.3
Dividend to minorities -2.9 -8.0
Investment in other non-current assets 0.4 1.1
Investment in subsidiaries 0.0 -20.2
Investment in associates -2.7 -4.8
Cash flows from investing activities, continued operations -70.0 -150.9
Cash flows from investing activities, discontinued operations 144.1 -14.2
Cash flows from investing activities total 74.1 -165.1
Repayment and non-current liabilities -2.8 -10.9
Currency adjustments, etc. -4.4 1.0
Investment in treasury shares -18.5 -23.5
Dividend, treasury shares 0.0 1.2
Dividend to shareholders 0.0 -22.3
Cash flows from financing activities, continued operations -25.7 -54.5
Cash flows from financing acitivties, discontinued operations -2.3 -1.5
Cash flows from financing activities total -28.0 -56.0
Changes in cash and cash equivalents 126.2 -112.4
Cash and cash equivalents at 1 January -115.9 -3.5
34 Cash and cash equivalents at 31 December 10.3 -115.9
Notes – Accounting policies Page
1 Accounting policies in general 30
2 Accounting policies 30
3 Ratio definitions 38
4 Significant accounting estimates and judgements 39
Notes – Consolidated income statements
5 Primary segment information 40
6 Secondary segment information 42
7 Employee and staff costs 42
8 Share based payment 44
9 Amortisation, depreciation and impairment 45
10 Fee to auditors 46
11 Share of profit of associates 46
12 Net financials 46
13 Income statement, discontinued activities 47
14 Special items 47
15 Income taxes 48
16 Earnings per share 49
17 Dividend per share 49
Notes – Consolidated balance sheet
18 Acquired activities 50
19 Intangible assets 51
20 Property, plant and equipment 53
21 Investments in Joint Ventures 54
22 Investments in associates 54
23 Trade receivables 55
24 Deferred tax 55
25 Equity 57
26 Debt to financial institutions 58
27 Interest rate swap 58
28 Income tax payable 58
29 Other payables 59
Notes – Consolidated cash flow statements
30 Adjustments for non-cash operating items 59
31 Changes in working capital 59
32 Additions of intangible assets and property, plant and equipment 59
33 Net cash flow from investing activities in discontinued activities 59
34 Cash and cash equivalents 60
Notes – Supplementary information
35 Operating leases and rent obligation 60
36 Contingent assets and liabilities and guarantee obligations 60
37 Security for loans 60
38 Related parties 61
39 Subsequent events 61
40 Financial risks 62
41 Financial assets and liabilities 66

1 Accounting policies in general

The Consolidated Financial Statement has been prepared in accordance with the international financial reporting standards (IFRS) as well as additional Danish disclosure requirements for the presentation of financial statements of listed companies cf. Copenhagen Stock Exchange's financial reporting requirements for listed companies and the IFRS Executive Order issued in pursuance of Danish Financial Statements Act.

New and amended standards and interpretations

New and amended standards and interpretations adopted by the IASB and the EU with effect from the 2008 financial year are not relevant to the company. Consequently, they have not affected the Annual Report.

New and amended standards and interpretations, which have not yet become effective

The IASB has adopted a number of new standards and amendments to existing standards and interpretations, which have not yet become effective but which will become effective in the 2009 and 2010 financial years. The following standards, amendments and interpretations are expected to affect the Annual Report:

  • Amendment to IAS 1 Presentation of Financial Statements, which will lead to a change in the presentation of the company's total income (effective date 1 January 2009, adopted by the EU)
  • IFRS 8 Segment Reporting, which will affect the company's segment information (effective date 1 January 2009, adopted by the EU)
  • New IFRS 3 Business Combinations, which may affect future business combinations (effective date 1 July 2009, not yet adopted by the EU)
  • Amendment to IAS 27 concerning purchases and sales of ownership interests in subsidiaries which may affect future purchases and sales of ownership interests (effective date 1 July 2009, not yet adopted by the EU)

New and amended standards are expected to be implemented on the effective date.

The IASB has also adopted a number of new and amended standards as well as interpretations which are not relevant to the company and which are therefore not expected to affect future annual reports.

The Annual Report is presented in Danish kroner.

2 Accounting policies

Consolidated financial statements

The consolidated financial statements comprise the parent company Søndagsavisen a-s and the subsidiaries in which Søndagsavisen a-s has a controlling interest. Control exists where Søndagsavisen a-s owns or holds, directly or indirectly, more than 50 % of the voting rights or otherwise exercises control over the enterprise concerned. Enterprises, in which the Group holds between 20 % and 50 % of the voting rights and exercises a significant, albeit not controlling, influence, are considered associates. In assessing whether Søndagsavisen a-s has control or significant influence, potential voting rights are taken into account.

The consolidated financial statements are prepared by consolidating the audited financial statements of the parent company and the relevant Group enterprises, all of which are presented in accordance with uniform accounting policies. All intra-group items, including revenue, expenses, interest, unrealised gains and losses on intra-group transactions, as well as balances and investments, are eliminated for the purpose of consolidation.

Investments in subsidiaries are offset against the proportionate share of the fair value of the subsidiary's identifiable net assets and recognised contingent liabilities at the time of acquisition.

Business combinations

Newly acquired or newly established enterprises are recognised in the consolidated financial statements from the date of acquisition. Enterprises sold or discontinued are recognised in the consolidated income statement up to the time of sale or discontinuance. Comparatives are not restated for enterprises newly acquired, sold or discontinued.

Purchases of new enterprises which give the parent company control over the enterprise acquired, are accounted for by applying the purchase method, according to which the identifiable assets, liabilities and contingent liabilities of the acquired enterprises are measured at fair value at the time of acquisition. Identifiable intangible assets are recognised if they can be separated from or arise from a contractual right and the fair value can be measured reliably. Deferred tax is recognised on the revaluations.

In respect of business combinations that have arisen since 1 January 2004, positive differences (goodwill) between the cost of the acquisition and the fair value of the identifiable assets, liabilities and contingent liabilities acquired are recognised as goodwill under intangible assets. Goodwill is not amortised but is tested for impairment on a yearly basis. The first impairment test is carried out before the end of the year of acquisition. On acquisition goodwill is allocated to the cash-generating units which subsequently provide the basis for the impairment test. Goodwill and fair value adjustments in connection with the acquisition of a foreign entity with a functional currency different from the Group's presentation currency are treated as assets and liabilities of the foreign entity and are translated to the foreign entity's functional currency at the exchange rate ruling on the transaction date. Negative differences (negative goodwill) are recognised in the income statement at the time of acquisition.

Gains or losses on the disposal of Group enterprises and associates are made up as the difference between the sel ling price and the carrying amount of net assets at the time of sale and expected selling expenses.

Joint Ventures

Enterprises where joint management has been agreed with one or more other enterprises are regarded as Joint Ventures and are included in pro rata consolidation. This means that the proportionate share of the enterprise's income statement and balance sheet items is included in the corresponding items in the consolidated financial statements and that proportionate elimination of intra-Group items is carried out.

Currency retranslation

Danish kroner is used as the functional currency. All other currencies are regarded as foreign currencies.

Transactions in foreign currencies are translated on initial recognition at the exchange rate at the date of the transaction. Any exchange differences between the exchange rate at the date of the transaction and the exchange rate at the date of payment are recognised in the income statement under financial income and expenses.

Receivables, payables and other monetary items in foreign currency which have not been settled at the balance sheet date are translated at the closing rate. Differences between the closing rate and the exchange rate at the time when the receivable or payable has occurred or is recognised in the latest financial statements are recognised in the income statement under 'Net financials'.

On recognition in the consolidated financial statements of foreign subsidiaries and associates with a functional currency different from the presentation currency of the Group, the income statement is translated at the exchange rates at the transaction date, and the balance sheet items are translated at the exchange rates at the balance sheet date. The average exchange rate for the individual months is used as the rate at the transaction date to the extent that this does not give a materially different picture. Exchange differences arising from the translation of the opening equity of foreign group enterprises at closing rates and exchange differences from the retranslation of income statements from average rates to closing rates are taken directly to equity.

Exchange adjustments of accounts with foreign enterprises which are regarded as part of the total net investment in the enterprise concerned are taken directly to equity in the consolidated financial statements if the account is denominated in the functional currency of the parent company or the foreign enterprise.

Derivative financial instruments

Derivative financial instruments are initially recognised at cost and subsequently measured at fair value. Positive and negative fair values are recognised as other receivables and other payables, respectively.

Fair value adjustments of derivative financial instruments classified as hedges of expected future cash flows are recognised in equity until the hedge transaction is carried through.

INCOME STATEMENT

Revenue

Revenue comprises Internet income as well as newspaper and distribution income from services rendered less VAT, cash and quantity discounts. On recognition and measurement, gains, losses and risks that arise before the time of presentation of the Annual Report and which prove or disprove matters existing on the balance sheet date are taken into consideration.

Internet income comprises job and banner ads as well as sales of software for classified advertisement databases, including in particular Job & CV databases. Sales of job and banner ads are recognised when the ad is published on the Internet site. Software sales are recognised when delivery and risk have passed to the purchaser. Internet income imposing future liabilities on the Group are recognised over the life of the liability.

Newspaper and distribution income comprises newspaper ads and household distributed newspapers and printed matter. Sales are recognised on the day of publication/distribution. Sales imposing future liabilities on the Group are recognised when the liability falls due.

Production costs

Production costs include expenses incurred to generate the net revenue for the year. The amount includes printing expenses, external distribution, and distribution services including distribution payroll, etc. as well as hosting service. In addition, it includes production overheads as well as maintenance and depreciation on manufacturing facilities.

Development costs not qualifying for capitalisation and amortisation of capitalised development costs are also recognised under production costs.

Selling and marketing expenses

Expenses incurred in the year in relation to sales campaigns, etc. are recognised under selling and marketing expenses. Such expenses include expenses related to sales personnel, advertising and amortisation/depreciation.

Administrative expenses

Administrative expenses include expenses related to management and administration, including expenses related to administrative staff, the Management, all expenses related to premises, stationery and amortisation/depre ciation.

Share based payment

The value of services received in consideration of options granted is measured at the fair value of the options.

For equity-settled share options the fair value is measured at the time of allocation and is recognised in the income statement under staff costs over the period in which the final right to the options is vested (the vesting period). The counter-item is carried directly to equity.

On initial recognition of the share options, an estimate is made of the number of options to which the employees are expected to acquire a right, cf. the allocation conditions described in notes 8 and 25. Subsequently, adjustments are made for changes in the estimate of the number of vested options so that the total recognition is based on the actual number of vested options.

The fair value of the options granted is estimated by using an option pricing model. In this estimate, account is taken of the terms and conditions that apply to the share options granted.

Special items

Special items include significant income and expenses which are not directly attributable to the Group's normal operating activities but are related to single events. Special items also include significant amounts of a non-recurring nature such as amortisation of goodwill or other assets which are written down as a result of special conditions.

Other operating income and expenses

Other operating income and expenses include items of a secondary nature relative to the activities of the enterprises, including profit loss from the sale of intangible assets and property, plant and equipment. Profit from the sale of intangible assets is calculated as the selling price less selling expenses and the carrying amount at the time of sale.

Profits or losses from investment in associates

The proportionate shares of the net profits or losses of associates are included in the consolidated income statement after elimination of the proportionate shares of intra-group gains/losses.

Financial income and expenses

Financial income and expenses include interest income and expenses, capital and exchange gains and losses, as well as impairment losses relating to securities, debt and transactions in foreign currency, amortisation of financial assets and liabilities and surcharges and allowances under the provisional tax scheme, etc. All financial borrowing costs are recognized in the income statement as incurred.

Discontinuing activities

Discontinued activities are presented separately if they represent a separate major line of business or geographical area, whose activities and cash flows can be distinguished operationally and for financial reporting purposes from the rest of the company, and the line of business has either been disposed of or classified as held for sale and the sale is highly probable and expected to be completed within one year in accordance with a single coordinated plan.

Profit/(loss) after tax from discontinued activities is presented in a separate line in the income statement with restated comparative figures. Revenue, expenses and taxes relating to discontinued activities are disclosed in the notes.

Cash flows from operating, investing and financing activities relating to discontinued activities are presented in separate lines in the cash flow statement with restated comparative figures.

Tax on profit/loss for the year

Søndagsavisen a-s is jointly taxed with all its Danish subsidiaries. The current Danish income tax is allocated among the jointly taxed Danish companies in proportion to their taxable income (full allocation with refunds for losses). The jointly taxed companies are covered by the provisional tax scheme.

Tax for the year, which consists of current tax and changes in the calculated deferred tax, is recognised in the income statement to the extent that it relates to the net profit/loss for the year, and directly in equity to the extent that it relates to items recognised directly in equity.

BALANCE SHEET

Intangible assets

Goodwill

Goodwill is initially recognised in the balance sheet at cost as described under 'Business combinations'. Subsequent measurements are at cost less accumulated impairment losses. Goodwill is not amortised.

The carrying amount of goodwill is allocated to the Group's cash-generating units at the time of acquisition. The definition of cash-generating units follows the management structure and the internal financial management policy. As a result of the integration of acquired enterprises in the existing Group, management believes that the lowest level of cash-generating units to which the carrying amount of goodwill can be allocated is the Group's primary segments.

The carrying amount of goodwill is tested for impairment if there are any indications of impairment, but at least on a half-yearly basis. The impairment test is carried out for all operating assets taken together in the cash-generating unit to which goodwill is allocated. Goodwill is written down to the lower of the carrying amount and the recoverable value of the cash-generating unit to which goodwill relates. Goodwill impairment is recognised as a separate item in the income statement.

Development projects, Software

Development costs include expenses and salaries that are directly or indirectly attributable to the Company's development activities.

Development projects that are clearly defined and identifiable and in respect of which the technological feasibility, sufficient resources and a potential future market or development potential in the enterprise can be demonstrated and where the intention is to produce, market or use the project, are recognised as intangible assets provided that it is sufficiently certain that future earnings will be adequate to cover the production, sales and administrative expenses and the total development costs. Other development costs are expensed in the income statement as incurred.

Capitalised development projects are measured at the lower of cost less accumulated amortisation and the recoverable value.

After completion of the development work, a development project is amortised on a straight-line basis over its estimated useful economic life. The period of amortisation is usually 3-5 years. The basis of amortisation is reduced by any impairment losses.

Acquired intangible fixed assets and completed development projects are tested for impairment if there are indications of impairment. The test is carried out on at least a yearly basis.

Other intangible assets

Other intangible assets, including intangible assets acquired in connection with business combinations, are amortised over the expected useful lives. However, intangible assets with an indefinite useful life are not amortised, but tested for impairment if there are indications of impairment. The test is carried out on at least a yearly basis.

Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation. Cost includes cost and expenses directly related to the acquisition until the asset is ready for use. Where parts of an item of property, plant and equipment have different useful lives, they are depreciated as separate items of property, plant and equipment.

The cost of properties includes the cash cost of acquisition for land and buildings and the aggregate building and/or refurbishment expenses.

The assets are depreciated on a straight-line basis over the expected useful lives, based on the following assessment of the expected useful lives of the assets:

Leasehold improvements 5 years
Domicile land and buildings 50 years
Mixed land and buildings 35 years
Plant and machinery 5-10 years
Other fixtures and fittings, tools and equipment 3-5 years

Land is not depreciated.

Depreciation is recognised in the income statement under production costs, sales and marketing expenses and administrative expenses, respectively.

The basis of depreciation is calculated with due regard for the asset's scrap value and is reduced by any impairment losses. The scrap value is fixed at the time of acquisition and is revaluated every year. If the scrap value exceeds the asset's carrying amount, no further depreciation will be made.

If the period of depreciation or the scrap value is changed, the impact on depreciation will be recognised prospectively as a change of accounting estimates.

An impairment test is made for property, plant and equipment if there are indications of decreases in value. The impairment test is made for each individual asset or group of assets, respectively. The assets are written down to the higher of the value in use and the net selling price of the asset or group of assets (recoverable amount) if it is lower than the carrying amount.

Investments in associates

Investments in associates are measured according to the equity method.

Investments in associates and other securities and investments are measured in the balance sheet at the proportionate share of the net asset value of the associates less or plus a proportionate share of unrealised intra-Group profits and losses plus the carrying amount of goodwill.

Associates with a negative net asset value are measured at DKK 0. If the Group has a legal or constructive obligation to cover the associate's negative balance, it is included under liabilities.

Any receivables from associates are written down to the extent the receivable is found to be irrecoverable. When investments are made in associates, the purchasing method of accounting is used, cf. the description of business combinations.

Receivables

Receivables are measured at amortised cost. Provisions are made for expected bad debts.

Inventory

Inventory is measured at the lower of cost or net realisable value using FIFO.

Prepayments (assets)

Prepayments recognised under assets include expenses related to subsequent reporting periods.

Impairment of assets

Søndagsavisen tests goodwill for impairment if there are indications of impairment, but at least on a yearly basis. Any impairment loss is recognised in the income statement.

Intangible assets with an indefinite useful life are tested for impairment if there are indications of impairment. The test is carried out on at least a yearly basis, the first time before the end of the year of acquisition. Development projects in progress are similarly tested for impairment on at least a yearly basis.

The carrying amount of intangible assets and property, plant and equipment with definite useful lives is reviewed on an annual basis to determine whether there is any indication of impairment. If such an indication exists, the recoverable amount of the asset is estimated. The recoverable amount is the higher of the asset's fair value less expected selling costs and its value in use.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds the recoverable amount of the asset or the cash-generating unit. Impairment losses are recognised in the income statement under respectively production, sales, marketing and administrative expenses. However, goodwill impairment is presented as a separate item in the income statement.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the assumptions and estimates that led to recognition of the impairment loss. An impairment loss is reversed only to the extent that the asset's new 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

Dividend

Proposed dividends are recognised as a liability when a resolution approving the dividends has been adopted by the Annual General Meeting of shareholders (the time of declaration). Dividends expected to be paid for the year are presented as a separate item under equity.

Treasury shares

Cost and selling prices and dividends related to treasury shares are recognized in a separate account under equity. A capital reduction through cancellation of treasury shares reduces the share capital by an amount equal to the nominal value of the investment.

Income taxes and deferred taxes

Current tax liabilities and current tax receivable are recognised in the balance sheet as tax calculated on the taxable income for the year, adjusted for tax on previous years' taxable income and for provisional tax paid on account.

Deferred tax is measured according to the balance sheet-oriented liability method on all temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, no deferred tax is recognised on temporary differences relating to goodwill not deductible for tax purposes, office properties, or other items where temporary differences – except in the case of acquisitions of companies – have arisen at the time of acquisition and affect neither the net profit for the year nor the taxable income. In those cases where the calculation of the tax base can be made under alternative taxation rules, deferred tax is measured on the basis of the planned use of the asset and settlement of the liability, respectively.

Deferred tax assets, including the tax base of loss carry forwards available for tax purposes are recognised under other non-current assets at the values at which they are expected to be realised, either by elimination in tax on future earnings or by set-off against deferred tax liabilities within the same legal tax entity and jurisdiction.

Adjustment is made of deferred tax relating to eliminations of unrealised intra-group gains and losses.

Deferred tax is measured on the basis of the tax rules and tax rates that under the legislation in force at the balance sheet date will be applicable in the respective countries when the deferred tax liability is expected to crystallise as current tax. Changes in deferred tax as a result of changed tax rates are recognised in the income statement.

Financial liabilities

Debt to credit institutions, etc. is recognised on the raising of the loan at the proceeds received after deduction of transaction costs incurred. In subsequent periods the financial liabilities are measured at amortised cost using 'the effective interest method' so that the difference between the proceeds and the nominal value is recognised in the income statement under financial expenses over the loan term.

Other liabilities are measured at net realisable value.

Deferred income (liabilities)

Deferred income recognised as a liability comprises payments received concerning income in subsequent reporting periods.

CASH FLOW STATEMENT

The cash flow statement shows the consolidated cash flows for the year, broken down by cash flows from operating, investing and financing activities, respectively, the year's changes in cash and cash equivalents and the cash and cash equivalents at the beginning and end of the year.

Funds generated from corporate acquisitions and disposals are shown separately under 'Cash flows from investing activities'. Cash flows concerning acquired enterprises are recognised in the cash flow statement from the time of acquisition, and cash flows concerning disposals are recognised until the time of sale.

Cash flows from operating activities

Cash flows from operating activities are calculated as the profit or loss before tax, adjusted for non-cash operating items, working capital changes, interest received and paid and income taxes paid.

Cash flows from investing activities

Cash flows from investing activities include payments in connection with purchases and sales of enterprises and activities, purchases and sales of intangible, tangible and other long-term activities, and purchases and sales of securities not recognised as cash and cash equivalents.

Cash flows from financing activities

Cash flows from financing activities comprise changes in the size or composition of the share capital and costs connected therewith, as well as the raising of loans, repayments on interest-bearing debt, purchases and sales of treasury shares, and payment of dividend to shareholders.

Cash and cash equivalents

Cash and cash equivalents include cash balances as well as short-term bank debt which is an integral part of the company's capital reserves.

SEGMENT INFORMATION

The Group's geographical areas are regarded as the primary segment. The primary segment is divided into Denmark, Sweden, Norway and other countries. The Group's business activities are regarded as the secondary segment and are divided into 'Newspaper publication and distribution' and 'Internet services'. The segment information is presented in conformity with the Group's risks and its management and internal financial management procedures.

Revenue in the primary segments comprises newspaper publishing, distribution and Internet services and in Denmark, also printing works and publication of dailies. Segment income and expenses as well as segment assets and liabilities comprise the items that are directly attributable to the individual segment and the items that can be allocated to the individual segment on a reliable basis. Unallocated items mainly comprise assets and liabilities as well as income and expenses relating to the Group's administrative functions, investment activity, income taxes, etc.

Non-current assets in the segment include non-current assets used directly in the segment's operations, including intangible assets and property, plant and equipment, and investments in associates.

Current assets in the segment comprise current assets used directly in the segment's operations, including inventories, trade receivables, other receivables, prepayments and cash and cash equivalents.

Segment liabilities comprise liabilities derived from the segment's operations, including trade payables as well as other payables.

3 Ratio Definitions

Gross margin = Gross profit x 100
Revenue
Operating profit before depreciation and
amortisation
= EBITDA
Operating profit = EBIT
Operating margin = EBIT x 100
Revenue
Return on assets = EBIT x 100
Total assets
Liquidity ratio = Current assets x 100
Current liabilities
Equity ratio = Equity at the end of the period x 100
Total assets
Return non equity (ROE) = Net profit x 100
Average equity
Net interest-bearing debt = Interest-bearing debt less interest-bearing cash and receivables
Net working capital (NWC) = Receivables less current liabilities excl. interest-bearing debt
Capital employed = Equity and minority interests plus net interest-bearing debt
Return on capital employed (ROIC) = EBIT x 100
Average capital employed
Interest cover = EBIT + financial income
Financial expenses
Financial gearing = Net interest-bearing debt
Equity
Net interest-bearing debt as a ratio of
EBITDA
= Net interest-bearing debt
EBITDA
Free cash flow = EBITDA minus investments adjusted for changes in operational
balance sheet items excl. tax
Cash conversion (%) = Free cash flow
EBIT
Earnings per share (EPS) = Parent company's share of net profit for the year
Average number of shares in circulation
Earnings per share (EPS) continuing activities = Profit/(loss) from continuing activities
Average number of shares in circulation
Diluted earnings per share
(EPS-D)
= Parent company's share of net profit for the year
Average number of diluted shares in circulation
Price Earning (P/E) = Share price
EPS
Cash flow per share (CFPS) = Cash flow from operating activities
Average number of shares
Dividend rate = Distributed dividend x 100
Average share capital

Earnings per share (EPS) and diluted earnings per share (EPS-D) are calculated in accordance with IAS 33.

Other ratios have been prepared in accordance with the Danish Society of Financial Analysts' "Recommendations & Ratios 2005", where these are defined.

4 Significant accounting estimates

The calculation of carrying amount of certain assets and liabilities requires an estimate of how future events affect the value of these assets and liabilities on the balance sheet day. Estimates, which are significant to the presentation of financial statements are, for example, made when calculating amortisation and impairment losses, provisions as well as contingent liabilities and assets.

The estimates are based on assumptions that management believes to be reasonable but which, in the nature of the case, are uncertain an unpredictable. The assumptions can be incomplete or inaccurate, and unexpected events or circumstances may occur. Furthermore, the enterprise is subject to risks and uncertainties that may lead to actual results that differ from these estimates. Special risks that Søndagsavisen is exposed to are mentioned in the Management's Review on pages 12-13.

Assumptions about the future and about other uncertain estimates on the balance sheet day are disclosed in the notes if they involve a material risk of changes that may lead to significant adjustment of the carrying amount of assets or liabilities within the next financial year.

For Søndagsavisen the measurement of intangible assets, including goodwill, can be significantly affected by material changes in estimates and assumptions underlying the calculations of the values. For a description of the impairment test of intangible assets, see note 19.

Deferred tax assets are recognised to the extent it is probable that they can be utilised in connection with future profits in the company or elsewhere in the Group. Capitalisation of tax assets is thus based on estimates of earnings expectations.

The most significant estimates made in the presentation of the financial statements are:

  • The useful life of plant and machinery.
  • Goodwill, including the possible necessity of writing down goodwill from subsidiaries as well as goodwill arising from acquisitions of associates.
  • The future cash flow from Helsingør Dagblad A/S.
  • Purchase price broken down into identifiable assets in connection with business combinations.

5 Primary segment information – Geographic DKKm

Discontinued Continued
2008 Denmark Sweden Other Total operations operations
Revenue 1,209.7 268.6 48.7 1,527.0 291.2 1,235.8
Gross Profit 269.3 132.3 37.8 439.4 143.5 295.9
Opertaing profit before depreciation and
amortisation (EBITDA) 34.2 48.4 -0.2 82.4 48.6 33.8
Depreciation and amortisation 78.8 2.9 0.6 82.3 3.3 79.0
Operating profit (EBIT) -44.6 45.5 -0.8 0.1 45.3 -45.2
Profit of associates -3.1 0.0 0.0 -3.1 0.0 -3.1
Special items -92.9 0.0 0.0 -92.9 0.0 -92.9
Profit before tax, continued operations -150.6 1.2 -1.4 -150.8 0.0 -150.8
Disposal of subsidaries 299.4 0.0 0.0 299.4 299.4 0.0
Net profit of the year. discontinued operations 0.0 33.5 1.2 34.7 34.7 0.0
Net profit for the year 171.2 34.7 -0.7 205.2 334.1 -128.9
Minority interests -21.3 0.0 0.0 -21.3 0.0 -21.3
Shareholders' share 192.5 34.7 -0.7 226.5 334.1 -107.6
Non-current assets 650.7 0.0 0.5 651.2 - 651.2
Current assets 266.2 2.1 3.6 271.9 - 271.9
Segment assets 916.9 2.1 4.1 923.1 - 923.1
Goodwill 56.4 0.0 0.0 56.4 56.4
Non-current liabilities 93.7 0.0 0.0 93.7 - 93.7
Current liabilities 166.8 0.3 0.9 168.0 - 168.0
Segment liabilities 260.5 0.3 0.9 261.7 - 261.7
Investments in associates 11.4 0.0 0.0 11.4 - 11.4
Investments 70.1 4.5 0.0 74.6 4.5 70.1
Cash flow from operating activities 42.6 37.3 0.2 80.1 40.8 39.3
Cash flow from investing activities 77.5 -3.4 0.0 74.1 144.1 -70.0
Cash flow from financing activities -25.7 -2.3 0.0 -28.0 -2.3 -25.7
Average number of employees 913 243 31 1,187 260 927
Operating margin (EBIT) -4% 17% -2% 0% 16% -4%
EBITDA margin 3% 18% 0% 5% 17% 3%
Return on net assets -5% - - 0% - -5%
Gross margin 22% 49% 78% 29% 49% 24%

Primary segments are affected by the sale of GISAB and Norsk Avisdrift AS.

5 Primary segment information – Geographic DKKm

Discontinued Continued
2007 Denmark Sweden Other Total operations operations
Revenue 1,404.1 269.1 64.5 1,737.7 303.9 1,433.8
Gross Profit 327.9 120.1 51.2 499.2 141.1 358.1
Opretaing profit before depreciation and
amortisation (EBITDA) 108.2 33.4 7.3 148.9 34.1 114.8
Depreciation and amortisation 76.8 2.5 0.8 80.1 3.1 77.0
Operating profit (EBIT) 31.4 30.9 6.5 68.8 31.0 37.8
Profit of associates -2.5 0.0 0.0 -2.5 0.0 -2.5
Special items -28.6 0.0 0.0 -28.6 0.0 -28.6
Profit before tax, continued operations -7.9 0.6 5.7 -1.6 0.0 -1.6
Disposal of subsidaries 0.0 0.0 0.0 0.0 0.0 0.0
Net profit of the year, discontinued operations 0.0 21.5 0.9 22.4 22.4 0.0
Net profit for the year -3.6 22.1 5.6 24.1 22.4 1.7
Minority interests 9.0 0.0 0.0 9.0 0.0 9.0
Shareholders' share -12.6 22.1 5.6 15.1 22.4 -7.3
Non-current assets 722.8 23.9 3.4 750.1 26.2 723.9
Current assets 161.4 53.0 15.3 229.7 61.1 168.6
Segment assets 884.2 76.9 18.7 979.8 87.3 892.5
Goodwill 53.0 13.4 0.8 67.2 14.1 53.1
Non-current liabilities 118.2 1.0 0.0 119.2 0.9 118.3
Current liabilities 314.5 47.8 8.2 370.5 54.7 315.8
Segment liabilities 432.7 48.8 8.2 489.7 55.6 434.1
Investments in associates 3.5 0.0 0.0 3.5 0.0 3.5
Investments 124.5 3.6 1.6 129.7 4.2 125.5
Cash flow from operating activities 82.2 18.9 7.5 108.6 14.3 94.3
Cash flow from investing activities -160.0 -3.5 -1.6 -165.1 -14.2 -150.9
Cash flow from financing activities -53.5 -1.1 -1.4 -56.0 -1.5 -54.5
Average number of employees 981 231 30 1,242 251 991
Operating margin (EBIT) 2% 11% 10% 4% 10% 3%
EBITDA margin 8% 12% 11% 9% 11% 8%
Return on net assets 4% 40% 35% 7% 36% 4%
Gross margin 23% 45% 79% 29% 46% 25%

6 Secondary segment information – business activities DKKm

Newspaper
publication & Discontinued Continued
2008 distribution Internet Total operations operations
Revenue 1,433.5 93.5 1,527.0 291.2 1,235.8
Operating profit 28.9 -28.8 0.1 45.3 -45.2
Non-current assets 575.9 75.3 651.2 0.0 651.2
Liabilities 215.8 45.9 261.7 0.0 261.7
Investments 46.2 28.4 74.6 4.5 70.1
Newspaper
publication & Discontinued Continued
2007 distribution Internet Total operations operations
Revenue 1,646.7 91.0 1,737.7 303.9 1,433.8
Operating profit 68.0 0.8 68.8 31.0 37.8
Non-current assets 675.1 75.0 750.1 26.2 723.9
Liabilities 414.0 75.7 489.7 0.9 488.8
Investments 81.6 48.1 129.7 4.2 125.5
2008
DKKm
2007
DKKm
Employees and staff costs
Average number of employees 927 991
In addition a large number of part-time employees are working within distribution.
The numbers only consists of continued operations. Average number of employees
are 1,187 in 2008 and 1,242 in 2007 if inclusive discontinued operations
Analysis of total salaries and remuneration for the year:
Wages and salaries, incl. compensated absence 674.4 739.6
Defined contribution pensions 19.3 18.5
Other social security costs 3.0 3.8
Remuneration of the Parent Company's Board of Directors 1.3 1.3
Share based payment 3.1 2.4
Other staff costs 20.7 17.6
Employee and staff costs 721.8 783.2
The total staff costs are included under the following
items in the income statement:
Production costs 497.1 581.2
Sales and marketing expenses 106.8 100.6
Administrative expenses 117.9 101.4
Employee and staff costs 721.8 783.2

7 Employee and staff costs, continued

Remuneration of the Board of Directors, Management and managerial staff

DKKm Board of Board of Other
Directors mngmnt mana
of Parent of Parent gerial
2008 Company Company staff Total
Wages and salaries 1.3 11.0 6.1 18.4
Pension (contribution) 0.0 0.4 0.3 0.7
Share based payment 0.0 2.3 0.6 2.9
Severance pay 0.0 1.0 1.4 2.4
Remuneration of the Board of Dir., Management and man. Staff 1.3 14.7 8.4 24.4
Board of
Directors
Board of
mngmnt
Other
mana
of parent of parent gerial
2007 Company Company staff Total
Wages and salaries 1.3 7.9 6.8 16.0
Pension (contribution) 0.0 0.4 0.3 0.7
Share based payment 0.0 1.6 0.5 2.1
Severance pay 0.0 2.3 3.0 5.3
Remuneration of the Board of Dir., Management and man. Staff 1.3 12.2 10.6 24.1

The Board of Directors of the Parent Company has in 2008 consisted of 6 members. No changes have taken place since 2007.

The Board of Management of the Parent Company has decreased from 4 to 3 members at 13 May 2008.

8 Share based payment

In June 2008, Søndagsavisen a-s established a share option programme for a group of 18 persons composed of the company's Management and selected managerial staff. The share option programme comprises a total of 354,000 share options, including 100,000 granted to the Management. Each share option gives the option holder the right to buy one existing share of DKK 5.00 in Søndagsavisen a-s. The options granted correspond to 1.59 % of the share capital. The theoretical market value (calculated using Black & Scholes model) of share options granted is approx. DKK 3.5 million.

Share options were granted in accordance with the general rules for incentive programmes approved by Søndagsavisen a-s' Annual General Meeting on 4 April 2008.

The share option programme runs until 6 weeks after publication of the interim report for 2012.

The options were issued at an exercise price corresponding to the average closing price of the company's shares in the period from 11 June - 17 June 2008, i.e. DKK 27.92. With a few exceptions, exercise of the share options is conditional on the option holder being employed by the Group at the time of exercise.

The options can be exercised in the period from one week after publication of the company's preliminary announcement of the Annual Report for 2010 until 6 weeks after publication of the interim report for 2012. In the exercise period the options can only be exercised within the window periods which at the time of exercise are stipulated in the company's internal rules, in accordance with the insider trading rules of the Danish Securities Trading act.

The value of the options (calculated using the Black & Scholes formula) at the time of allocation was lees than one year's salary.

The calculation of the fair value of the options is based on the following assumptions:

  • The interest rate applied is the interest rate on Danish government securities with a maturity of three years.
  • The expected dividend payment is equivalent to the 2006 dividend.
  • The share's volatility is calculated as a monthly average (beginning to end of period) over five years.
  • The options are exercised the first time they are exercisable

The options can only be settled in shares. A portion of the company's holding og treasury shares has been reserved for settlement of the options granted.

At the balance-sheet date, outstanding share options total 514,000 shares, equivalent to 2.31% of the share capital.

During the year DKK 3.1 million (2007: 2.3 million) was debited under staff costs relating to the option scheme.

For further information on the option programme, see note 23.

2008
DKKm
2007
DKKm
Amortisation, depreciation and impairment
Intangible assets 19.3 21.8
Property, plant and equipment 59.7 55.2
Total amortisation and depreciation 79.0 77.0
Impairment intangible assets 26.8 4.2
Impairment property, plant and equipment 37.3 19.4
Impairment associates 0.0 5.0
Total amortisation, depreciation and impairment 143.1 105.6
Total amortisation, depreciation and impairment of intangible assets, plant and
equipment is included under the following items in the income statement:
Production costs 55.1 54,9
Sales and marketing expenses 4.1 2.6
Administrative expenses 19.8 19.5
Special items 64.1 23.6
Share of profit of associates 0.0 5.0
Total amortisation, depreciation and impairment 143.1 105.6

For 2008, impairments of values of buildings and plant at Helsingør Dagblad A/S accounted for the greater part of special items. In addition, goodwill amortisation relating to Hillerød Avis was DKK 4.3 million. The impairment loss was due to reduced earnings expectations at Helsingør Dagblad A/S on account of increased printing capacity in the market combined with lower demand. The value of Helsingør Dagblad A/S has been calculated at the expected value on a going concern basis. The Group's discount factor was used to make the calculation. The impairment of intangible assets mainly represents the writedown of software in connection with the accelerated development of a new and improved IT platform for online activities. Reference is also made to the description in the Annual Report.

For 2007 intangible assets written down for impairment are mainly sotware which is no longer used whilst property, plant and equipment written down are mainly packing machines to be converted. The impairment loss on packing machines is part of the production costs whilst the impairment loss on software breaks down into two equal amounts: production costs and administrative expenses. The impairment on associates is a partial impairment on investment in LokalAvisen Holding ApS. The value has been written down in accordance with the guidelines stated in note 17. For details see the Annual Report.

2008 2007
10 Fee to the auditors appointed by the company in general meeting DKKm DKKm
Audit
Ernst & Young 2.5 2.4
Beierholm 0.2 0.2
Total audit 2.7 2.6
Advisory services:
Ernst & Young 1.1 1.4
Beierholm 0.0 0.0
Total advisory services 1.1 1.4
Total audit and advisory services 3.8 4.0
Fees include costs to audit and advisory services for discontinued activities.
11 Share of profit of associates after tax
Share of profit before tax -2.8 -2.2
Share of tax
Total share of profit of associates after tax
-0.3
-3.1
-0.3
-2.5
12 Net financials
Income from other sercurities and investments 0.0 1.4
Exchange differences, other 0.7 0.0
Interest income, etc. 2.4 2.1
Total financial income 3.1 3.5
Currency adjustments 0.2 0.0
Exchange differences, other 0.0 1.0
Interest expenses, etc. 12.5 10.8
Total financial expenses 12.7 11.8
Total net financials -9.6 -8.3

Interest income relates to lending and receivables, cf. note 41. Financial expenses relate to financial liabilities at amortised cost price, cf. note 41.

13 Income statement, discontinued operations

2008
DKKm
2007
DKKm
Revenue 291.2 303.9
Production costs 147.7 162.8
Gross profit 143.5 141.1
Sales and marketing expenses 53.6 59.4
Administrative expenses 44.6 50.7
Operating profit 45.3 31.0
Net financials 1.0 0.9
Profit before tax 46.3 31.9
Tax for the period 11.6 9.5
Net profit for the year 34.7 22.4
Earnings per share, in DKK
Earnings per share (EPS) - discontinued operations
Diluted earnings per share (EPS-D) - discontinued operations
14 Special items
1.7
1.7
1.1
1.1
Impairment of buildings and machines relating to Helsingør Dagblad A/S
Impairment of goodwill relating to Hillerød Avis as well as other
37.3 0.0
intangible assets relating to Helsingør Dagblad A/S 16.8 0.0
Software impairment in connection with accelerated
development of new improved IT platform
10.0 0.0
Exchange loss in connection with the sales of GISAB and Norsk Avisdrift AS 28.8 0.0
Impairment of software 0.0 4.2
Partial impairment of packing machines in connection with conversion 0.0 19.4
Impairment of investments in associates 0.0 5.0
Total special items 92.9 28.6

Special items have been reclassified to present more fairly the Group's operating results. The comparatives are restated, which means that items of a special nature for 2007 have been correspondingly restated.

2008
DKKm
2007
DKKm
15 Income tax
In the period under review income tax was paid in the amount of 5.1 -0.7
Income taxes in the income statement, continued operations:
Current tax charges, incl. surcharges/allowances 0.2 0.1
Change in the deferred tax charge -24.9 -5.9
Adjustment relating to prior years 0.2 0.0
Change in tax rate 0.0 2.5
Addition business combinations 2.6 0.0
Total income tax, continued operations -21.9 -3.3
Analysis of tax for the year, continued operations
Calculated 25% tax on the profit before tax -37.7 -0.5
Tax rate differences foreign subsidiaries 0.0 -0.1
-37.7 -0.6
Tax effect of:
Capitalisation of tax assets, not previously included -0.2 -1.9
Reversal of former tax asset 0.6 0.0
Addition 2.6 0.0
Recapture of tax losses 7.9 0.0
Use of loss ved sambeskatning med moder 0.5 0.0
Change in tax rate 0.0 -2.5
Other non-deductible expenses 2.5 -0.2
Share of profit after tax of associates 1.1 1.9
Adjustment relating to prior years 0.8 0.0
Total income tax, continued operations -21.9 -3.3
Effective tax rate 14.5% 206.3%

In connection with the transfer of the majority shareholder's 51.29 % shares to a wholly-owned and controlled holding company, Baunegård ApS, Søndagsavisen a-s' Danish activities are included in the joint taxation with Baunegård ApS, with the latter company as administration company. As a result, the company's corporation tax receivable is shown as receivables from subsidiaries.

2008
DKKm
2007
DKKm
16 Earnings per share
Net profit for the year – total 205.2 24.1
Minority interests' share of the consolidated profit 21.3 -9.0
The Søndagsavisen a-s Group's share of the net profit for the year 226.5 15.1
Net profit for the year – continued operations -128.9 1.7
Minority interests' share of the consolidated profit – continued operations 21.3 -9.0
The Søndagsavisen a-s Group's share of the net profit for the year – continued operations -107.6 -7.3
Average number of shares 22.3 22.3
Average number of treasury shares 1.8 1.4
Average number of shares in circulation 20.5 20.9
Average dilution effect of outstanding share options 0.0 0.0
Average number of diluted shares in circulation 20.5 20.9
Earnings per share (EPS) of DKK 5 – total 11.0 0.7
Diluted earnings per share (EPS-D) of DKK 5 – total 11.0 0.7
Earnings per share (EPS) of DKK 5 – continued operations -5.2 -0.3
Diluted earnings per share (EPS-D) of DKK 5 – continued operations -5.2 -0.3

17 Dividend per share

The Board of Directors of Søndagsavisen a-s will recommend to the general meeting in 2009 that no dividend be paid, in connection to the Annual meeting, but instead, it is recommended that the Board of Directors be authorised by an amendment to the Articles of Association to decide on an extraordinary dividend in the period until the next annual general meeting.

18 Acquired activities

2007 – DKKm

The Søndagsavisen Group has acquired the share majority in the following companies, after which they are recognised as subsidiaries:

Profit or losses and equity are recognised from the date of acquisition.

Acquired at Ownership interest
MDA Holding ApS 01.01.2007 77.5%
Södertalje Posten AB 01.09.2007 100.0%
MinReklame ApS 01.11.2007 100.0%
Slotsbyerne 01.11.2007 100.0%

MDA Holding ApS was previously recognised pro rata with an ownership interest of 50 %.

Slotsbyerne was previously recognised through the profit/(losses) of associates with an ownership interest of 50 %. Slotsbyerne has been sold to Helsingør Dagblad, after which it is recognised as a subsidiary through the Group's 57 % ownership interest in Helsingør Dagblad.

In connection with the purchase of the mentioned companies, Søndagsavisen a-s has measured identifiable intangible assets and property, plant and equipment at fair value.

Fair value Carrying
at time amount before
At 100% acquisition: of acquisition acquisition
Intangible assets 30.3 7.2
Property. plant and equipment 0.9 0.9
Other long-term assets 0.1 0.1
Receivables 1.1 1.1
Cash 6.4 6.4
Deferred tax -6.4 -0.1
Trade payables -5.8 -5.8
Other payables -2.7 -2.2
Net assets acquired 23.9 7.6
At actual acquisition:
Net assets acquired 10.5 5.0
Goodwill 24.1
Cost 34.6
Of which cash -4.4
Cash costs 30.2

As a result of the insignificant size of the indvidual companies, a total statement is shown. No purchase costs were incurred in connection with the acquisition.

After recognition of identifiable assets, liabilities and contingent liabilities at fair value, goodwill in connection with the acquisitions has been calculated at DKK 24.1 million. Goodwill represents the value of existing staff, knowhow as well as synergies from the increased/full ownership interest.

The result is fully consolidated into the consolidated profit for 2007 in line with the acquisitions made. Profit for the year before tax on the acquires activities amounts to DKK 0.2 million. If the companies had been consolidated into Søndagsavisen's profit for the full 2007 with the acquired ownership interest, consolidated revenue and profit would have changed as follows:

Effect in case of consolidation throughout the financial year

2007 as 2007 - full year
announced consolidation Difference
Revenue 1,737.7 1,760.4 22.7
Net profit for the year 30.3 29.9 -0.4

19 Intangible assets

DKKm

Completed Develop
Other development ment
intangible projects projects in
2008 Goodwill assets software progress Total
Costs at 1 January 67.2 60.0 113.6 12.7 253.5
Currency adjustments -2.0 -1.0 -0.8 -0.1 -3.9
Additions, business combinations 8.3 0.0 0.0 0.0 8.3
Additions in the year 0.0 0.0 29.5 22.6 52.1
Disposal, business combinations 12.7 6.1 5.9 0.2 24.9
Disposals in the year 4.4 0.0 17.7 23.3 45.4
Costs at 31 December 56.4 52.9 118.7 11.7 239.7
Amortisation and impairment at 1 january 0.0 15.3 86.8 0.0 102.1
Currency adjustments 0.0 -0.5 -0.6 0.0 -1.1
Amortisation and impairment ind the year 4.4 15.6 27.7 0.0 47.7
Disposals in the year 4.4 0.0 17.7 0.0 22.1
Disposal, business combinations 0.0 3.5 3.5 0.0 7.0
Amortisation and impairment at 31 December 0.0 26.9 92.7 0.0 119.6
Carrying amount at 31 December 56.4 26.0 26.0 11.7 120.1
Amortised over (years) - 5-20 3-5 -
Completed Develop
Other development ment
intangible projects projects in
2007 Goodwill assets software progress Total
Costs at 1 January 43.1 31.2 118.9 7.5 200.7
Currency adjustments 0.0 -0.2 -0.1 0.0 -0.3
Additions, business combinations 24.1 29.0 1.5 0.0 54.6
Additions in the year 0.0 0.0 19.7 22.1 41.8
Disposals in the year 0.0 0.0 26.4 16.9 43.3
Costs at 31 December 67.2 60.0 113.6 12.7 253.5
Amortisation and impairment at 1 january 0.0 13.4 88.4 0.0 101.8
Currency adjustments 0.0 -0.2 0.1 0.0 -0.1
Amortisation and impairment ind the year 0.0 2.1 20.5 0.0 22.6
Disposals in the year 0.0 0.0 22.2 0.0 22.2
Amortisation and impairment at 31 December 0.0 15.3 86.8 0.0 102.1
Carrying amount at 31 December 67.2 44.7 26.8 12.7 151.4
Amortised over (years) - 5-20 3-5 -

19 Intangible assets – continued

Assets with an indefinite life

Assets with an indefinite life are not amortised but are instead subject to an impairment test.

Goodwill is by definition an asset with an indefinite life.

Other intangible assets in the Group comprise distribution rights acquired in connection with acquisitions. The Group cannot foresee a limit to the period over which the assets may be expected to generate future economic benefits for the Group. The distribution rights are therefore believed to have an indefinite life.

Impairment test

Goodwill and intangible assets were tested for impairment in connection with the preparation of the financial statements. Based on this test, both intangible and non-current assets have been written down. Reference is made to note 9 and note 41 for a more detailed description.

The impairment test was carried out by comparing the carrying amounts with the discounted values of future cash flows for each cash generating unit (CGU). For all CGUs the discount rate is based on uniform assumptions.

The discount rate is composed of an equity share and a debt share. The equity share has been calculated on the basis of a risk-free interest rate plus a market risk premium weighted by an expected equity share. Similarly, the debt share is based on the interest rate on loan capital weighted by an expected debt share.

The discount model is based on budget 2009, which is projected up to five years ahead based on conservative estimates, after which the terminal value is fixed as the value of an infinite series with EBIT growing by 1 % every year (2007: 1 %). Discounting is carried out at a WACC of 9.4 % (2007: 9,1 %), equivalent to a discount interest rate before tax at 12,4 % (2007: 12,1 %).

A change in the discount rate will not affect the value of the activities significantly and the need for further impairment.

A significant assumption underlying the projections is the EBIT growth rate, which is estimated for individual CGUs. Depreciation, amortisation and investments have been projected to increase at the same growth rate as EBIT. The tax rate of the model has been fixed at 25% (2007: 25%).

Of the Group's total goodwill of DKK 56.4 million, DKK 21.8 million is attributable to newspaper and distribution activities while DKK 34.6 million is attributable to Internet activities.

20 Property, plant and equipment

Land and Operating Property,
equipment,
plant and
equipment
Plant and
buildings machinery Total
1,005.2
-3.0
0.0 0.0 0.2 0.0 0.2
1.4 24.6 16.8 14.3 57.1
0.8 0.0 14.5 0.0 15.3
0.4 0.4 11.1 19.8 31.7
437.5 370.2 202.9 1.9 1,012.5
57.6 197.3 166.9 0.0 421.8
-0.1 0.0 -2.3 0.0 -2.4
14.8 61.7 22.0 0.0 98.5
0.2 0.2 6.5 0.0 6.9
0.3 0.0 12.1 0.0 12.4
71.8 258.8 168.0 0.0 498.6
365.7 111.4 34.9 1.9 513.9
35-50 5-10 3-5 -
437.4
-0.1
346.0
0.0
214.4
-2.9
fixtures in course of
and fittings construction
7.4
0.0

The public property evaluation of land and buildings totalled DKK 321.5 million at 1 January 2008, compared to DKK 242.2 million at 1 January 2007.

Property,
Property, plant and
Operating equipment, equipment
Land and Plant and fixtures in course of
2007 buildings machinery and fittings construction Total
Costs at 1 January 406.7 319.1 199.5 14.5 939.8
Currency adjustments 0.0 0.0 -0.7 0.0 -0.7
Additions, business combinations 0.0 0.0 1.0 0.0 1.0
Additions in the year 30.7 58.5 22.2 65.6 177.0
Disposals in the year 0.0 31.6 7.6 72.7 111.9
Costs at 31 December 437.4 346.0 214.4 7.4 1,005.2
Depreciation and impairment at 1 January 49.1 183.2 150.2 0.0 382.5
Currency adjustments 0.0 0.0 -0.5 0.0 -0.5
Impairment and depreciation in the year 8.5 26.3 22.7 0.0 57.5
Disposals in the year 0.0 12.2 5.5 0.0 17.7
Depreciation and impairment at 31 December 57.6 197.3 166.9 0.0 421.8
Carrying amount at 31 December 379.8 148.7 47.5 7.4 583.4
Depreciated over (years) 35-50 5-10 3-5 -

21 Investments in Joint Ventures

Joint Venture companies are recognised on a pro rata consolidated basis in the income statement.

Joint Ventures: Registered office Ownership
2008 2007
Dansk Distributions Center P/S Taastrup 50% 50%
Dansk Distributions Center Komplementar ApS Søborg 50% 50%
Tryksagsomdelingen Fyn P/S Svendborg 57% 57%
Tryksagsomdelingen Fyn Komplementar ApS Søborg 60% 60%
Reference is made to the Group structure on page 68.
Summary of the Group's share of the profits etc. of Joint Ventures: 2008
DKKm
2007
DKKm
Revenue 152.3 179.3
Expenses 145.0 166.5
Other operating income 0.4 0.5
Net financials -0.1 0.4
Profit before tax 7.6 13.7
Non-current assets 2.3 3.0
Current assets 19.7 30.6
Total assets 22.0 33.6
Current liabilities 10.1 15.7
Total liabilities 10.1 15.7
22 Investments in associates
Net assets value at 1 January 3.5 10.5
Addition, GISAB recognised as associated 10.4 0.0
Addition in the year 2.7 4.8
Share of profit before tax -2.9 -2.2
Share of tax -0.3 -0.3
Currency adjustment -0.8 0.0
Revaluation 0.0 -5.0
Dividend -1.2 -4.3
Net assets value at 31 December 11.4 3.5

Additions in 2008 mainly represent the residual value of the investment after the sale of 66.7 % of GISAB. The value has been calculated at net asset value.

The carrying amount of the investment in GISAB was DKK 9.5 million net at year-end 2008. An agreement on the sale of the remaining 33.3 % of the shares at a minimum price of SEK 160 million immediately after the presentation of the financial statements for 2010 was made.

Revaluation of 2007 is impairment on investments in LokalAvisen Holding ApS.

22 Investments in associates, continued

Associates:
Registered office
Ownership
2008 2007
A/S Vestsjællandske Distriktsblade Slagelse 50% 50%
LokalAvisen Holding ApS Frederikssund 50% 50%
Gratistidningar i Sverige AB (GISAB), subsidiary until 30 November 2008 Stockholm 33% -
Reference is made to the Group structure on page 68.
Summary of the Group's share of profits etc. of associates 2008
DKKm
2007
DKKm
Revenue 44.9 31.5
Profit before tax -4.5 1.2
Total assets 11.4 8.1
Total liabilities 7.4 4.0
23 Trade receivables
Trade receivables 89.0 162.8
Write-downs -6.5 -6.3
Net trade receivables 82.5 156.5
Write-downs included in the above receivables have developed as follows:
Write-downs at 1 January 6.3 5.6
Additions in the year 1.5 0.8
Disposals, business combinations -1.3 0.0
Used in the year:
- Used 2.2 2.1
- Reversal -2.2 -2.2
Write-downs at 31 December 6.5 6.3
No security has been received for trade receivables.
24 Deferred tax
Deferred tax 1 January
24.8 21.7
Currency adjustments 0.0 0.1
Disposal, business combinations 0.5 0.0
Deferred tax included in the net profit for the year -25.2 -5.9
Deferred tax included in the equity -1.7 0.0
Addition, business combinations 2.6 6.4
Change in tax rate 0.0 2.5
Deferred tax at 31 December, net 1.0 24.8

24 Deferred tax, continued

Specification of deferred tax:

DKKm 2008
Liabili-
2007
Liabili
Assets ties Total Assets ties Total
Intangible assets 5.1 16.2 -11.1 5.1 18.2 -13.1
Property, plant and equipment 11.0 7.1 3.9 2.6 17.9 -15.3
Current assets 1.6 0.0 1.6 2.1 0.1 2.0
Non-current liabilities 0.0 1.7 -1.7 0.8 0.0 0.8
Tax losses available for carry-forward 6.3 0.0 6.3 0.8 0.0 0.8
Total 24.0 25.0 -1.0 11.4 36.2 -24.8
Set-off deferred tax assets and deferred tax
liabilities within the same legal tax entities and
jurisdictions 24.0 24.0 0.0 5.9 5.9 0.0
Deferred tax assets/deferred tax at 31 December 0.0 1.0 -1.0 5.5 30.3 -24.8

Deferred tax assets and tax liabilities not recognised in the balance sheet:

Previous years' balances of tax losses for recapture no longer exist as a result of the sale and closure of the companies concerned. The balance of tax losses for recapture relating to the Norwegian company resulted in a tax expense of DKK 7.9 million in total.

Deferred tax has been reduced as a result of the Group's loss. A total tax liability remains outstanding at the end of December 2008.

25 Equity

Share capital: Number in thousand Nominal value DKK'000
2008 2007 2008 2007
At 1 January 22,280 22,280 111,400 111,400
At 31 December 22,280 22,280 111,400 111,400

The share capital consist of 22,280,000 shares of DKK 5.00 nominal value each. No shares carry special rights.

Treasury shares:
Number in thousand
Nominal value DKK'000 % of share capital
2008 2007 2008 2007 2008 2007
At 1 January 1,518 1,218 7,590 6,090 6.81% 5.47%
Addition in the year 707 300 3,535 1,500 3.17% 1.35%
Disposals in the year 0 0 0 0 0.00% 0.00%
At 31 December 2,225 1,518 11,125 7,590 9.99% 6.81%

Søndagsavisen a-s is authorised to acquire a maximum nominal amount of DKK 11,140,000 of share capital in the period until the next Annual General Meeting, however before 1 June 2009 at least,

In 2008, Søndagsavisen a-s acquired a total of 707,000 Treasury shares to cover newly issued options and to place excess liquidity from the sale of foreign activities.

The holding of Treasury shares was acquired as part of the capital reserve for any future acquisitions and to hedge outstanding share options.

Management's and other staff's share of issued options

Earliest
exercise
Number of
optioner
granted
Number of
employees who
have been
granted options
Number
lapsed
Number
exercised
Number
unexercised
at
31.12.2008
Exercise Liability
an accruals
Total
liability
DKKm
2009 100,000 1 0 0 100,000 77.28 3.4 3.7
2010 100,000 3 30,000 0 70,000 77.90 1.2 2.1
2011 100,000 3 0 0 100,000 27.92 0.2 1.0
2010 102,000 5 50,000 0 52,000 77.90 0.9 1.6
2011 150,000 7 30,000 0 120,000 27.92 0.2 1.2
2010 48,000 4 24,000 0 24,000 77.90 0.4 0.7
2011 104,000 8 56,000 0 48,000 27.92 0.1 0.5
recognised on
price basis DKKm

The options are granted to promote the company's long-term growth and earnings.

The fair value of the option programme for 2006-2008 is DKK 0 million at 31 December 2008.

The options can only be settled in shares. Søndagsavisen a-s has a holding of Treasury shares, reserved to cover the option programm, which provides full cover for the exercise of the option programme so that the exercise will not affect the Group's liquidity through acquisitions of shares in the market.

The exercise of the options is conditional in the option holder being employed by the Group at the time of exercise.

2008
DKKm
2007
DKKm
26 Debt to financial institutions
Mortgage debt 89.1 91.9
Loan, Overdraft facility 2.1 141.1
Carrying amount 91.2 233.0
Of which fixed-interest 89.1 91.9
Debt to financial insitutions are included under the following items in the balance sheet:
Non-current liabilities 86.0 88.9
Current liabilitites 5.2 144.1
Carrying amount 91.2 233.0
Nominal value 91.2 233.0
For details of interest sensitivity, see note 40.
27 Interest rate swap
Due after 5 years 6.7 0.0
Non-current 6.7 0.0
Total other accrued expenses, interest rate swap 6.7 0.0

The Group's mortgage credit loan is a variable-rate CIBOR 6 loan to be repaid as a 20-year annuity loan. To reduce the interest uncertainty, the interest rate remains locked in throughout the loan term through an interest rate swap entered into with Nordea, which has effectively locked in the interest rate at 5.28 % during the loan term. The interest on both the CIBOR 6 loans as well as the interest differential amount from the interest rate swap is presented as financial expenses.

The interest rate swap was measured at fair value at 31 December 2008. The value of the new interest rate swap (debt) is in DKK 6.7 million (0 million in 2007), and revaluations are recognised on the equity.

The interest sensitivity of the interest rate swap is described in further detail in note 40 under the section Interest rate risks.

In connection with the refinancing of loans at 31 December 2007, as described in further detail in note 40, this interest rate swap was repurchased and replaced by a new interest rate swap on the entire new loan with a total principal of DKK 91.0 million. The write-down of the interest rate swap previously made via equity has been reversed, and the difference in relation to the redemption price has been recognised in the income statement.

2008
DKKm
2007
DKKm
28 Income tax payable
Income tax payable at 1 January 2.0 -3.1
Current tax for the year, continued operations 0.6 0.2
Current tax for the year, discontinued operations 0.0 9.3
Income taxes paid in the year, discontinued operations 0,0 -2.0
Tax relating to discontinued operations -7.3 0.0
Income taxes paid in the year 5,.1 -2.4
Income tax payable at 31 December 0.4 2.0
Appropiated as follows
Receivables from parent company 0.0 5.4
Income tax payable 0.4 7.4
Income tax payable at 31 December 0.4 2.0
2008 2007
DKKm DKKm
29 Other payables
A-tax (PAYE), etc. Payable to public authorities 17.7 26.0
VAT liability 5.5 16.5
Other debt 74.1 99.0
Total other liabilities 97.3 141.5
30 Adjustments for non-cash operating items
Share of profits in associates 3.1 2.5
Tax for the year -21.9 -3.3
Amortisation of non-current assets 79.0 77.0
Special items, non-cash effect 64.1 28.6
Loss by disposals in the year -0.1 0.0
Net financials 9.6 8.3
Total adjustments 133.8 113.1
31 Changes in working capital
Changes in receivables 101.8 -7.2
Changes in current liabilities excl. short-term bank debt -60.0 -4.8
Changes in receivables and payables 41.8 -12.0
Changes in income taxes payable
Changes in interest receivable
-2.9
1.7
0.6
-6.2
Total change in working capital 40.6 -17.6
32 Addition of intangible assets and property, plant and equipment
Investment in goodwill
-7.7 -0.1
Investment in other intangible assets 0.0 -0.1
Investment in software -26.0 -22.9
Investment in land and buildings -1.0 -30.7
Investment in property, plant and equipment in progress 5.4 7.0
Investment in plant and machinery -24.6 -58.5
Investment in operating equipment, fixtures and fittings -16.2 -20.2
Total investments -70.1 -125.5
33 Net cashflow from investing activities in discontinued activities
Carrying amount in discontinued activities
before disposal:
Intangible assets 19.6 0.0
Property, plant and equipment 3.1 0.0
Other non-current assets 0.5 0.0
Current assets 38.3 0.0
Cash 27.2 0.0
Deferred tax -2.6 0.0
Income taxes, due -2.8 0.0
Other current liabilities -40.9 0.0
Net assets 42.4 0.0
Residual value - investment in associates -10.3 0.0
Profit of disposal of subsidaries 299.4 0.0
Not received sales value / not paid cost -156.8 0.0
Cash in discontinued operations
Net cashflow from divestment
-27.2
147.5
0.0
0.0
Cash flows from investting activities in discontinued operations excl. sale value -3.4 0.0
Net cashflow from investing activities in discontinued activities 144.1 0.0
2008 2007
DKKm DKKm
34 Cash and cash equivalents
Cash and cash equivalents at 31 December comprise
Cash 12.4 25.2
Short-term bank debt
Cash and cash equivalents at 31 December
-2.1
10.3
-141.1
-115.9
35 Operating leases and rent obligations
Operating leases
Future total expenses related to operating leases:
Due within 1 year 0.3 2.5
Due within 1 and 5 years 0.6 2.5
Due after 5 years 0.0 0.0
Total 0.9 5.0
The Group has entered into operating leases relating to operating assets. The lease term is typi
cally a period of between 2 and 8 years, with extension as may be arranges after the end of the
term. No lease contains conditional rent payments.
For operating leases the following amounts have been recognised in the income statement: 3.0 2.9
Rent obligations:
Future total expenses related to rent obligations:
Due within 1 year 5.5 12.6
Due within 1 and 5 years 3.6 8.5
Due after 5 years 0.0 0.0
Total 9.1 21.1
For rent obligations the following amounts have been recognised in the income statement: 15.0 14.2
36 Contingent assets and liabilities, and guarantee obligations
Guarantees and commitments:
Søndagsavisen a-s' bank has provided a payment guarantee towards the 'Turnkey contractors' 2.6 2.6
Other guarantees 0.1 0.2
Other contingent liabilities
The company has entered into a contract for the supply of fixed assets for a value
of approx. DKK 1 million, which had not been delivered at the balance-sheet date.
37 Security for loan
A mortgage deed registred to the mortgagor has been pledged as security for the loan 50.0 50.0
Carrying amount of mortgaged properties 365.7 379.8

38 Related parties

As majority shareholders in Søndagsavisen a-s' parent company Baunegård ApS, Britt and Richard Bunck are affected by the disclosure requirements for related parties. During the financial year 2007, there were no transactions wih Britt and Richard Bunck except for the payment of remuneration to the Board of Directors.

As a result of taxation of Søndagsavisen a-s' Danish activities with Baunegård ApS, a company wholly-owned and controlled by Britt and Richard Bunck, Baunegård ApS is a related party. This company is an administration company and guarantees the payment/receipt of Danish corporation tax on behalf of the Søndagsavisen Group.

The group company OFiR Services a-s has entered into cooperation on Internet sales of package holidays with the company Travelmarket controlled by Richard Bunck. In the year under review the trade between OFiR Services a-s and Travelmarket was insignificant due to initiation of the internetsite.

Søndagsavisen has transactions with a number of associates. All transactions are based on fair market value.

2008
DKKm
2007
DKKm
Transactions with associates:
Acquisition of Slotsbyerne (investment in activity) 0.0 4.6
LokalAvisen Holding ApS, sale 6.2 5.2
A/S Vestsjællandske Distriktsblade, sale 6.0 7.0
Total transactions 12.2 16.8
LokalAvisen Holding ApS 0.5 0.0
A/S Vestsjællandske Distriktsblade 0.6 0.4
Receivables from associates 1.1 0.4

In the year under review no transactions were made with the Board of Directors, Management, managerial staff, significant shareholders or other related parties, except for salaries and remuneration set out in note 7.

39 Subsequent events

No events other than those mentioned in the Annual Report have occurred since the presentation of the Annual Report on 5 February 2009 which would influence the reader's perception of the Annual Report.

40 Financial risks

In addition to business risks, the Group is also exposed to a number of financial risks, including interest rate, currency and liquidity risks. The Board of Directors of Søndagsavisen has drawn up guidelines on how to handle these risks.

Liquidity risks

The Group undertakes liquidity management to ensure the availability of sufficient and flexible financial resources at any time. The risk of the liquidity situation suddenly and unexpectedly developing adversely and affecting the Group's investment and operational liquidity requirements is handled through a number of management tools. Planning of the anticipated liquidity requirements and the associated credit facilities is carried out in connection with the preparation of budgets and action plans. These liquidity requirements are monitored on both a monthly and a daily basis.

The bank accounts of the parent company and the Danish subsidiaries are included in the Group's cash pool, which is monitored daily in order to optimise interest received and paid on the Group's total cash flows.

The Group's borrowing policy is to ensure maximum flexibility by spreading loans over the due dates/renegotiation dates having regard to their pricing. The Group's liquidity reserve consists of liquid funds (primarily in foreign subsidiaries) and unutilised credit facilities. The Group's objective is to have a sufficient capital reserve so that it can continue to take appropriate steps in case of unforeseen fluctuations in liquidity.

The Group's cash pool agreement including unutilised credit facilities may be terminated at short notice. At 31 December 2008, the amount drawn was DKK 2.2 million.

A combination of short- and long-term financing is arranged having regard to the anticipated liquidity needs both in the short term and in the long term. The Group regularly assesses the right composition having regard to the future financing needs. Efforts are made to obtain large-scale financing of the Group's properties through a long-term fixed-rate loan. As a result of the Group's low indebtedness and its bank account deposits at 31 December 2008, the fixed-rate portion of total net interest-bearing debt was more than 100% (2007: 44 %).

The Group financial liabilities is due as follow:

DKKm Carrying Contrac
tual cash
Within Within After
2008 amount flow 3 months 1 year 1-5 years 5 years
Financial instruments:
Financial institutions including banks 1) 91.2 154.9 2.2 8.6 33.9 110.2
Interest rate swap 6.7 -1.0 0.0 -0.1 -0.3 -0.6
Trade payables 32.9 32.9 32.9 0.0 0.0 0.0
Income taxes 0.4 0.4 0.0 0.4 0.0 0.0
Other payables 23.2 23.2 23.2 0.0 0.0 0.0
31 December liabilities 154.4 210.4 58.3 8.9 33.6 109.6

1) The Group cashpool debt can be terminated with short notice, and are therefore placed "within 3 months". The interest rate on the CIBOR 6 loan is higher than the interest rate on the fixed-rate loan. Therefore, the contractual cash flows are negative.

2007
Financial instruments:
Financial institutions including banks 233.0 301.4 141.1 8.6 33.8 117.9
Interest rate swap 0.0 0.0 0.0 0.0 0.0 0.0
Trade payables 57.5 57.5 57.5 0.0 0.0 0.0
Income taxes 7.4 7.4 0.0 7.4 0.0 0.0
Other payables 42.5 42.5 42.5 0.0 0.0 0.0
31 December liabilities 340.4 408.8 241.1 16.0 33.8 117.9

Interest rate risks

The Group's policy is to hedge interest rate risks on the Group's long-term loans if it is found to be possible to secure the interest payments at a satisfactory level. Hedging is normally done by entering into interest rate swaps, under which floating-rate loans are converted into fixed-rate loans.

In connection with the debt refinancing at 31 December 2007, interest on Søndagsavisen's mortgage credit debt, which is being repaid as a 20-year annuity loan, was frozen at a rate of 5.28 %. The market value of the interest rate swap (debt) at 31 December 2008 was DKK 6.7 million (2007: DKK 0.0 million).

The remaining term of the mortgage credit loans is 19 years.

The total value of mortgage credit loans and the associated interest rate swap was DKK 95.8 million (2007: DKK 91.0 million).

In connection with the refinancing of the loans in 2007, the interest rate was reduced on average by 0.34 % points to a total of 5.28 %, which, however, is partially offset by an exchange gain of DKK 1.5 million net. The amount is recognised in the income statement in 2007.

An increase in the interest rate level of 1 % per annum will have no significant effect on the market values of the mortgage credit loans because their interest rates are determined every six months. However, the market value of the interest rate swap will be increased by DKK 7.2 million on an increase in the interest rate level of 1 % per annum. A fall in the interest rate level will have a similar negative impact on the market value of the interest rate swap. Duration has been measured at 8.2. For 2007 the interest sensitivity of the interest rate swap was approx. DKK 7.7 million on an increase in the interest rate level of 1 % per annum, corresponding to a duration of 8.5.

An increase in the interest rate level of 1 % per annum compared with the existing level for 2008 would have increased the interest expense on the floating-rate loan by DKK 1.1 million (2007: DKK 0.7 million). A fall in the interest rate level would have had a corresponding positive impact.

The calculation of the Group's interest sensitivity is based on the following assumptions:

  • The sensitivity rates specified for the fixed-rate debt have been calculated on the basis of recognised financial assets and liabilities at 31 December 2008. No adjustments of the mortgage credit debt were made in 2008 in respect of repayments, borrowings and the like.
  • For the cash pool debt or deposit, the interest sensitivity has been calculated based on the actual loan amounts / deposits on a daily basis.
  • It is assumed that the mortgage credit loans are repaid in accordance with the ordinary repayment method used for a 20-year annuity loan.
  • All security aspects of floating-rate loans are found to be 100 % effective.

The Group's liquid funds are placed as demand or fixed-term deposits with a term of up to one month.

Currency risks

After the sale of GISAB and Norsk Avisdrift, more than 95 % of the Group's activities are in Denmark. There are minor activities in England, Sweden and Germany, mainly related to the Group's MatchWork activities.

A substantial amount in Swedish kroner is outstanding in connection with the sale of GISAB. The amount receivable at 31 December 2008 (2007: DKK 0 million) is SEK 220 million and has not been hedged. The amount is recognised at the exchange rate at 31 December 2008, equivalent to 68.04. In addition, the Group has agreed to sell the remaining 33,3 % of the shares in GISAB in 2011 at a minimum price of SEK 160 million. This amount has not been hedged either.

There is no significant trading between business units in different countries, but Søndagsavisen is exposed to currency risks in connection with cash flows relating to financial transactions and dividend flows. There is also a translation risk in connection with the consolidation and translation of the financial statements of foreign subsidiaries into Danish kro-

ner and in connection with the Group's net investment in the companies, including acquisition and disposal of companies

The Group's total currency risks are subject to ongoing assessments, and it is the Group's policy to reduce the impact of exchange-rate fluctuations on results and the Group's financial position. However, the exchange rate risk of the operating results is not hedged because of the limited foreign activity.

Special currency exposures, including in connection with acquisitions and sales of companies, are always assessed individually by the Board of Directors.

It is believed that hedging of the Group's foreign investments and related items and the exposure from the translation of foreign financial statements into Danish kroner is not commensurate with the associated cost. Therefore, no hedging is performed.

The effects on profits and equity of a change in the company's primary foreign currencies relative to the average/closing exchange rate is shown below for profits and equity respectively. The stated changes of the foreign exchange rates have been chosen based on the actual exchange rate fluctuations for the year:

Exchange- Profit Profit
DKKm rate before tax Equity before tax Equity
change 2008 31.12.2008 2007 31.12.2007
Exchange rate used av. rate closing rate av. rate closing rate
SEK +/-10 % +/-4.2 +/-3.8 +/-3.4 +/-2.8
GBP +/-10 % +/-1.3 +/-1.0 +/-1.8 +/-1.4

In addition to the operational foreign currency risks, the Group has, as mentioned above, a significant outstanding account in Swedish kroner of SEK 220 million at 31 December 2008. A fluctuation of +/- 10 % relative to the recognised exchange rate will affect consolidated results in 2009 by DKK +/-15 million.

The Group had no other significant exchange rate risks relating to receivables and payables denominated in foreign exchange at 31 December 2008.

The calculation of the Group's currency sensitivity is based on the following assumptions:

  • The sensitivity rates specified for operating activities have been calculated based on continuing activities.
  • It is assumed that sales and price and interest rate levels will remain unchanged.
  • The currency sensitivity of the amount receivable from the sale of GISAB has been calculated on the basis of the expected proceeds.
  • The sensitivity rates related to financial instruments have been calculated on the basis of the financial instruments recognised at 31 December.
  • The calculated expected fluctuations are based on the average annual volatility rates for the underlying risks.

Credit risks

The Group is exposed to credit risks relating to receivables and deposits with banks. The maximum credit risk corresponds to the carrying amount. There is not believed to be any significant credit risks in connection with liquid funds, the other parties being banks with a high credit rating. The Group performs continuous follow-up on outstanding receivables in accordance with the Group's receivables policy. Where uncertainty arises about a customer's ability or willingness to pay a receivable and the claim is believed to entail a risk, a write-down is made to cover this risk.

The Group has no significant risks relating to a single customer or business partner. In accordance with the Group's credit risk assumption, all major customers and other business partners are subject to continuous credit assessment.

In the past three years the Group's bad debts have been at the level of 1.5 ‰ – 3.5 ‰ of revenue.

The balance due on trade receivables is composed as follows:

DKKm
2008 0-30 days 31-60 days 61-90 days >90 days Total
Overdue trade receivables, but not decreased in value 14.0 1.8 0.5 0,0 16.3
Overdue trade receivables, that are decreased in value 0.0 0.5 0.5 7.2 8.2
24.6
Write down -6.5
Trade receivables, net value at 31 December 2008 18.1
2007 0-30 days 31-60 days 61-90 days >90 days Total
Overdue trade receivables, but not decreased in value 57.4 4,3 0.5 0.0 62.2
Overdue trade receivables, that are decreased in value 0.0 1.3 0.4 0.2 7.9
70.1
Write down -6.3
Trade receivables, net value at 31 December 2007 63.8

Capital management

The Group evaluates continuously the need to adapt the capital structure, weighing the pros and cons of the higher return requirements relating to equity against the increased uncertainty associated with loan capital. The equity's share of total equity and liabilities amounted to 71.6 % at year-end 2008 against 50.0 % in 2007.

The Group's long-term aim is to achieve an EBITDA margin of 15 % and net interest-bearing debt which is not more than four times EBITDA. For 2008, net interest-bearing debt was approx. 2.4 times EBITDA whilst the EBITDA margin was 2.8 %. For 2007, the EBITDA margin was 8.2 % while net interest-bearing debt was approx. 1.8 times EBITDA.

It is the Group's policy to pay dividend to the extent it is found to be appropriate within the frameworks of the overall capital structure and to the extent net profit for the year is satisfactory.

41 Financial assets and liabilities

2008
DKKm
2007
DKKm
Carrying Carrying
amount Fair value amount Fair value
Receivable salesprice from disposal of subsidaries 149.7 149.7 0.0 0.0
Trade receivables 82.5 82.5 156.5 156.5
Receivables from associates 1.1 1.1 0.4 0.4
Receivables from parent company 0.0 0.0 5.4 5.4
Other receivables 6.9 6.9 24.3 24.3
Cash 12.4 12.4 25.2 25.2
Total lending and receivables 252.6 252.6 211.8 211.8
Receivable salesprice from disposal of subsidaries
is due for payment latest 1. March 2009.
Financial institutions 91.2 91.2 233.0 233.0
Trade payables 32.9 32.9 57.5 57.5
Income taxes 0.4 0.4 7.4 7.4
Other payables 97.3 97.3 141.5 141.5
Financial liabilities at amortized
costprice 221.8 221.8 439.4 439.4
Interest rate swap
Financial liabilities at fair value
6.7
6.7
6.7
6.7
0.0
0.0
0.0
0.0

Corporate Management

Mads Dahl Møberg Andersen CEO, Søndagsavisen a-s

Kåre Stausø Wigh CFO, Søndagsavisen a-s

Hans Henrik Lund Director, Media-Online

Board of Directors

Publisher Richard Bunck, Chairman Vice Chairman of the Board of Directors of: OFiR a-s

Member of the Board of Directors of: OFiR Danmark a-s OFiR Services A/S MatchWork World Wide A/S

Peter Rasztar, Vice Chairman Member of the Board of Directors of: Royal Greenland A/S, Nuuk

Steen Gede

Chairman of the Board of Directors of: Carl F. International A/S Elsparefonden Unicare Nordic A/S Forenede Service A/S

Vice Chairman of the Board of Directors of: Sanistål A/S DSB

Member of the Board of Directors of: Brandhouse A/S Gumlink A/S Thiele A/S

Ulrik Holsted-Sandgreen Member of the Board of Directors of: Bech-Bruun I/S

Pål Bruu No other directorships or executive functions

Björn Lindberg Chairman of the Board of Directors of: Ariterm AB

Member of the Board of Directors of: Gratistidningar i Stockholm AB

Board of Directors and Corporate Management from left to right: Hans Henrik Lund, Mads Dahl Andersen, Steen Gede, Ulrik Holsted-Sandgreen, Kåre Stausø Wigh, Pål Bruu, Björn Lindberg, Richard Bunck and Peter Rasztar.

Group Structure

At 31 December 2008

Søndagsavisen a-s
Associates
Subsidiaries and Joint Ventures
including continuing companies
A/S Vestsjællandske Distriktsblade 50.00% 57.00% Helsingør Dagblad A/S
LokalAvisen Holding ApS 50.00% 100.00% Nordsjælland Avis A/S
Gratistidningar i Sverige AB 33.33% 100.00% Distribution Danmark a-s
50.00% Dansk Distributions Center P/S
60.00% HA Grafisk Reklame A/S
60.00% Tryksagsomdelingen Fyn P/S
60.00% UA/FK Distribution A/S
70.00% Distribution Syd A/S
100.00% Aps SA Komp. 3106
100.00% Aps SA Komp. 3107
100.00% Min Reklame ApS
100.00% OFiR a-s
100.00% OFiR Danmark a-s
100.00% OFiR Services A/S
100.00% MatchWork World Wide A/S
100.00% MatchWork Danmark A/S
100.00% MatchWork Sverige AB
100.00% MatchWork UK Ltd.
100.00% MatchWork Deutschland GmbH
100.00% BoligPortal Holding ApS
100.00% BoligPortal.dk ApS

Group addresses

Parent company: Søndagsavisen a-s
----------------------------------- --
Søndagsavisen Forbruger-Kontakt
Gladsaxe Møllevej 28 Bredebjergvej 6
DK-2860 Søborg DK-2630 Taastrup
Phone: +45 39 57 75 00 Phone: +45 43 43 99 00
Fax: +45 39 57 75 80 Fax: +45 43 43 90 22
www.sondagsavisen.dk www.fk.dk
Subsidiaries
Distribution Danmark a-s
Gladsaxe Møllevej 28
DK-2860 Søborg
Dansk Distributions Center P/S
Bredebjergvej 6
DK-2630 Taastrup
Phone: +45 36 48 80 00
Fax: +45 36 48 88 00
www.d-d-c.dk
H.A. Grafisk Reklame A/S
Bødkervej 11-13
DK-7100 Vejle
Phone: +45 75 85 84 11
Fax: +45 75 85 96 26
www.ha-grafisk.dk
Tryksagsomdelingen Fyn P/S
Ryttermarken 17 B
DK-5700 Svendborg
Phone: +45 62 22 22 22
Fax: +45 62 20 10 78
www.tof.dk
UA/FK Distribution A/S
Bødkervej 11-13
DK-7100 Vejle
Phone: +45 75 85 84 11
Fax: +45 75 85 96 26
www.uadistribution.dk
Distribution Syd A/S
Energivej 8
DK- 6700 Esbjerg
Phone: +45 75 13 34 33
Fax: +45 75 13 34 66
www.distribution-syd.dk
Helsingør Dagblad A/S
Klostermosevej 101
DK-3000 Helsingør
Phone: +45 49 22 21 10
Fax: +45 49 26 65 05
www.helsingordagblad.dk
Nordsjællands Avis A/S
Klostermosevej 101
DK-3000 Helsingør
Phone: +45 49 22 21 10
Fax: +45 49 26 65 05
www.nsnet.dk
OFiR a-s
Gladsaxe Møllevej 26
DK-2860 Søborg
Phone: +45 39 57 77 00
Fax: +45 39 66 46 67
www.ofir.com
OFiR Danmark a-s
Gladsaxe Møllevej 26
DK-2860 Søborg
Phone: +45 39 57 78 00
Fax: +45 39 57 78 01
www.ofir.dk
OFiR Services A/S
Gladsaxe Møllevej 26
DK-2860 Søborg
Phone: +45 88 20 98 00
Fax: +45 88 20 98 01
www.forum.dk
MatchWork World Wide A/S
Gladsaxe Møllevej 26
DK-2860 Søborg
Phone: +45 36 95 95 95
Fax: +45 36 95 95 37
www.matchwork.com
OFiR Holding ApS
Gladsaxe Møllevej 26
DK-2860 Søborg
Boligportal.dk ApS
Helsingforsgade 27
DK-8200 Århus N
Min Reklame ApS
Dronning Olgas Vej 39B
DK-2000 Frederiksberg
Associated companies
A/S Vestsjællandske Distriktsblade
Klingeberg 14
Lokalavisen Holding ApS
Akselundsvej 2, 1.
Gratistidningar i Sverige AB
Årstaängsvägan 11, 6 tr.
DK-4200 Slagelse DK-3600 Frederikssund S-100 74 Stockholm
Phone: +45 58 53 32 22 Phone: +46 8 550 550 00
Fax: +45 58 52 90 88 Fax: +46 8 550 554 77

Søndagsavisen a-s

FINANCIAL STATEMENTS OF THE PARENT COMPANY

2008

Financial statement for the year ended 31 December 2008
Income statement 71
Balance sheet 72
Statement of changes in equity 74
Notes 75

The Financial Statement of the parent year is an integral part of the full Annual Report. The full Annual Report will be sent to the Danish Commerce and Company Agency, from which a copy can be obtained.

The Financial Statement 2008 has been prepares in Danish an English. The Danish text shall be the governing text for all purposes and in case of any discrepancy the Danish wording shall be applicable.

PARENT INCOME STATEMENT

Note 2008 2007
DKKm DKKm
Revenue 932.3 1,096.2
45,46 Production costs 752.6 905.0
Gross profit 179.7 191.2
45,46 Sales and marketing expenses 83.2 102.0
45,46,47 Administrative expenses 146.5 133.2
Other operating income 34.4 21.3
Operating profit/loss -15.6 -22.7
Net financials -40.5 -11.3
Gain/loss from divestments 305.4 -4.1
51 Share of profit/loss in subsidiaries -24.3 38.6
52 Share of profit/loss in associates -2.8 -2.5
Profit/loss before tax 222.2 -2.0
48 Tax for the year -2.1 -8.9
Net profit/loss for the year 224.3 6.9
Appropriation of profit
Retained earnings at 1 January 263.7
Other equity adjustments -7.1

Net profit of the year 224.3 Purchase of treasury shares -18.5 Available for appropriation before dividend 462.4

Dividend to the shareholders 0 Retained earnings at 31 December 462.4 Total appropriation 462.4

The Board of Directors submits the following appropriation

of the profit for approval by the general meeting:

PARENT BALANCE SHEET

Assets

Note 2008 2007
DKKm DKKm
Goodwill 15.0 18.1
Completed development projects, software 16.7 9.4
Development project in progress 0.2 10.5
49 Intangible assets 31.9 38.0
Land and buildings 321.6 328.9
Plant and machinery 0.6 7.4
Property, plant and equipment in course of construction 76.2 64.8
Operating equipment, fixtures and fittings 25.2 29.6
50 Property, plant and equipment 423.6 430.7
51 Investment in subsidiaries 123.2 171.3
52 Investment in associates 9.8 3.5
Deferred tax 0.6 0.0
Other receivables 1.2 1.2
Other non-current assets 134.8 176.0
Total non-current assets 590.3 644.7
Trade receivables 55.0 73.5
Receivables from the subsidiaries 26.8 35.6
Receivables from associates 1.0 0.4
56 Receivables from parent company 0.0 5.4
Other receivables 151.1 3.1
Prepayments 14.2 8.7
Receivables 248.1 126.7
Cash 0.1 0.1
Total current assets 248.2 126.8
Total assets 838.5 771.5

Equity and Liabilities

Note 2008 2007
DKKm DKKm
Share capital 111.4 111.4
Retained earnings 462.4 263.7
Shareholders' equity 573.8 375.1
53 Provisions for deferred tax 0.0 3.4
Total provisions 0.0 3.4
54 Financial institutions 85.4 88.1
55 Interest-rate swap 6.7 0.0
Total non-current liabilities 92.1 88.1
54 Financial institutions 52.3 172.1
Trade payables 20.8 27.7
Payables to subsidiaries 23.9 32.1
Payables to the parent company 0.4 0.0
Other payables 61.3 68.9
Deferred income 13.9 4.1
Total current liabilities 172.6 304.9
Total liabilities 264.7 396.4
Total equity and liabilities 838.5 771.5

Contingent liabilities Security for loans Related parties Subsequent events

DKKm
2008
Share
capital
Retained
earnings
Proposed
dividend
Total
Equity at 1 Januar 2008 111.4 263.7 0.0 375.1
Changes in equity in 2008
Currency adjustments, foreign subsidi
aries and associates 0.0 -5.6 0.0 -5.6
Adjustments of investments in subsidi
aries and associates 0.0 0.3 0.0 0.3
Fair value adjustments of hedging in
struments 0.0 -6.7 0.0 -6.7
Tax of adjustments in equity 0.0 1.7 0.0 1.7
Net profit/loss for the year 0.0 224.3 0.0 224.3
Purchase of treasury shares 0.0 -18.4 0.0 -18.4
Share based payment 0.0 3.1 0.0 3.1
Total changes in equity in 2008 0.0 198.7 0.0 198.7
Equity at 31 December 2008 111.4 462.4 0.0 573.8
DKKm
2007 Share
capital
Retained
earnings
Proposed
dividend
Total
Equity at 1 Januar 2007 111.4 277.3 22.3 411.0
Changes in equity in 2007
Currency adjustments, foreign subsidi
aries and associates 0.0 -2.4 0.0 -2.4
Adjustments of investments in subsidi
aries and associates 0.0 0.1 0.0 0.1
Fair value adjustments of hedging in
struments 0.0 1.7 0.0 1.7
Net profit/loss for the year 0.0 6.9 0.0 6.9
Purchase of treasury shares 0.0 -23.5 0.0 -23.5
Distributed dividend 0.0 0.0 -22.3 -22.3
Dividend, own shares 0.0 1.2 0.0 1.2
Share based payment 0.0 2.4 0.0 2.4
Total changes in equity in 2007 0.0 -13.6 -22.3 -35.9
Equity at 31 December 2007 111.4 263.7 0.0 375.1
Notes – Accounting policies Side
42 Accounting policies in general 76
43 Changes in accounting policies 76
44 Accounting policies 77
Notes – Parent income statement
45 Employee and staff costs 78
46 Amortisation, depreciation and impairment 79
47 Fee to the auditors 79
48 Income taxes 80
Notes – Parent balance sheet
49 Intangible assets 81
50 Property, plant and equipment 82
51 Investments in subsidiaries 83
52 Investments in associates 83
53 Deferred tax 83
54 Financial institutions 84
55 Other accrued expenses, interest-rate swap 84
56 Income tax payables 84
57 Other payables 85
Notes – Supplementary information
58 Operating leases and rent obligations 85
59 Contingent assets and liabilities, and guarantee obligations 86
60 Securities for loans 86
61 Related parties 86

42 Accounting policies in general

The parent company's financial statements have been prepared in accordance with the provisions of the Danish Financial Statements Act for reporting class D companies and the financial reporting requirements of NASDAQ OMX Copenhagen for listed companies.

The Annual Report is presented in Danish kroner.

43 Changes in accounting policies

In 2008, the company migrated from the IFRS to the Danish Financial Statements Act, and the accounting policies of the parent company have been changed in a number of areas.

The opening balance sheet at 1 January 2007 and comparatives for 2007 were prepared in accordance with the Danish Financial Statements Act. The opening balance sheet at 1 January 2007 was prepared as if the Danish Financial Statements Act had always been used.

Except in the areas mentioned in note 2, the accounting policies are unchanged compared with last year.

Net profit and equity at 31 December 2007 were calculated in accordance with the existing and the changed accounting policies respectively, see below.

Explanation of accounting policy changes on transition to the Danish Financial Statements Act:

As a result of the transition to presentation in accordance with the Danish Financial Statements Act, the accounting policies have been changed in the following areas:

  • A. Goodwill has so far not been amortised. On transition to the Danish Financial Statements Act, Søndagsavisen applies section 43 retrospectively from 1 January 2005. In future, Søndagsavisen will amortise goodwill over ten years.
  • B. In addition to the above accounting policy changes, the note disclosures have been restated to reflect the provisions of the Danish Financial Statements Act.
  • C. Investments in subsidiaries and associates were previously recognised at cost. On transition to the Danish Financial Statements Act from 1 January 2008, investments in subsidiaries and associates are measured at net asset value.

The parent company's net profit for 2008 was DKK 224.3 million (2007: DKK 6.9 million), presented in accordance with the Danish Financial Statements Act. This was DKK 128.6 million (2007: DKK 6.2 million) higher than if the Annual Report had been presented in accordance with the current IFRS practice. Also equity has changed after the transition to the Danish Financial Statements Act. According to the Danish Financial Statements Act, the parent company's equity was DKK 573.8 million (2007: DKK 411.0 million) compared with DKK 788.6 million if the Annual Report had been presented in accordance with the IFRS (2007: DKK 713.2 million)

Reclassifications:

In addition to the accounting policy changes, the following reclassifications and format changes have been made with restatement of the comparatives for 2007:

  • The designation of the main group long-term assets has been changed to non-current assets
  • The subgroup other long-term assets has been changed to investments
  • The designation of the main group short-term assets has been changed to current assets
  • Provisions are no longer included under non-current liabilities but are presented as a separate main group.
  • Minority interests' share of the profit or loss is no longer shown as a component of net profit for the year but is presented as an income or expense in the income statement.
  • Minority interests' share of equity is no longer presented as a separate item under equity but is presented separately from equity.

The reclassifications have not affected net profit for the year or equity.

44 Accounting policies

The parent company's accounting policies are identical to the Group's accounting policies except in the following areas:

INCOME STATEMENT

Profits or losses from investments in subsidiaries

The parent company's profit includes the proportionate share of the gains or losses of the individual group companies before tax after full elimination of intra-group gains or losses. The share of the companies' tax is included under tax on profit for the year.

BALANCE SHEET

Goodwill

Goodwill is measured at cost less accumulated amortisation and impairment losses.

Amortisation is provided on a straight-line basis over the expected lives of the assets, which are not more than: · Goodwill 10 years

Goodwill is amortised over the estimated economic life which is determined based on the Management's experience of the individual business areas. Goodwill is amortised on a straight-line basis over the amortisation period which is not more than 10 years and longest for strategically acquired companies with a strong market position and a long-term earnings profile.

Goodwill is tested for impairment if there are any indications of impairment. The impairment test is carried out for the activity or the business area to which goodwill relates. Goodwill is written down to the higher of the value in use and net selling price for the activity or the business area to which goodwill relates (recoverable amount) if such amount is lower than the carrying amount.

Only goodwill acquired after 1 January 2002 has been capitalised.

Investments

Investments in group companies are measured according to the equity method. Investments are measured in the balance sheet at the proportionate share of net asset value.

Investments in companies with a negative equity are recognised at DKK 0 while any additional write-down on negative equity is included under other provisions.

Other investments acquired for permanent ownership are measured at cost. If the carrying amount is found to be permanently impaired, a write-down is made which will be reflected in the income statement.

2008
DKKm
2007
DKKm
45 Employee and staff costs
Average number og employee 589 633
In addition, a large number of part-time employees are working
within distribution.
Analysis of total salaries and remuneration for the year:
Wages and salaries, incl. compensated absence 411.8 477.9
Defined contribution pensions 10.5 10.3
Other social security costs 0.8 1.1
Remuneration of the Parent Company's Board of Directors 1.3 1.3
Other staff costs 16.5 19.0
Employee and staff costs 440.9 509.6
The total staff costs are included under the following items in the
income statements:
Production costs 298.1 381.3
Sales and marketing expenses 52.0 56.8
Administrative expenses 90.8 71.5
Employee and staff costs 440.9 509.6

Remuneration of the Board of Directors, Management and managerial staff: DKKm

Board of
Directors
of Parent
Company
Board of
Manage
ment of
Parent
Company
Other
managerial
staff
Total
2008
Wages and salaries 1.3 11.0 4.0 16.3
Pension 0.0 0.4 0.2 0.6
Severance pay 0.0 1.0 1.5 2.5
Share based payment 0.0 2.3 0.3 2.6
1.3 14.7 6.0 22.0
Board of
Directors
of Parent
Company
Board of
Manage
ment of
Parent
Company
Other
managerial
staff
Total
2007
Wages and salaries 1.3 7.9 4.3 13.5
Pension 0.0 0.4 0.3 0.7
Severance pay 0.0 2.3 1.5 3.8
Share based payment 0.0 1.6 0.3 1.9
1.3 12.2 6.4 19.9

Reference is made to notes 8 and 25 to the consolidated Annual Report concerning share based payments.

2008 2007
DKKm DKKm
Amortisation, depreciation and impairment
Intangible assets, amortization 11.5 15.7
Property, plant and equipment, depreciation 34.0 30.6
Total amortization and depreciation 45.5 46.3
Intangible assets, impairment 0.0 2.4
Property, plant and equipment, impairment 0.0 18.5
Impairment associates 0.0 5.0
Total amortization, depreciation and impairment 45.5 72.2
Total amortisation, depreciation and impairment of intangible
assets, property, plant and equipment is included under the fol
lowing items in the income statements:
Production costs
25.8 47.5
Sales and marketing expenses 1.3 1.7
Administrative expenses 18.4 18.0
Gain/loss from divestments 0.0 5.0
Audit:
Ernst & Young 1.0 0.9
Beierholm 0.2 0.2
Total audit 1.2 1.1
Advisory services:
Ernst & Young 0.5 0.8
Total advisory 0.5 0.8
Total audit and advisory services 1.7 1.9
2008 2007
DKKm DKKm
48 Income taxes
In the period under review income tax was paid in the amount of -5.6 -17.0
Income tax in the income statement:
Current tax charge, incl. Surcharges/allowances 0.2 -4.7
Change in the deferred tax charge -2.3 -5.0
Change of tax rate 0.0 0.8
Total income tax -2.1 -8.9
Analysis of tax for the year:
Calculated 25% tax on the profit before tax 55.5 -0.5
Tax effect of:
Change of tax rate 0.0 -0.8
Share of profit/loss in subsidiaries 6.1 -9.6
Share of profit/loss in associates 1.1 0.9
Other non-deductible expenses 2.3 0.1
Recapture of tax losses 7.9 0.0
Utilisation of los son joint taxation with parent company 0.5 0.0
Gain/loss from divestments -76.3 1.0
Adjustment relating to prior years 0.8 0.0
Total income tax -2.1 -8.9

49 Intangible assets

DKKm

Goodwill Ac
quired
rights
Com
pleted
devel
opment
projects,
software
Devel
opment
projects
in pro
gress
Total
116.6
0.0 22.9
0.0 0.0 0.0 -17.5 -17.5
35.0 8.0 78.8 0.2 122.0
8.0 53.7 0.0 78.6
3.1 0.0 8.4 0.0 11.5
0.0 0.0 0.0 0.0
90.1
20.0
15.0 0.0 16.7 0.2 31.9
35.0
16.9
0.0
8.0
0.0
8.0
63.1
15.7
62.1
10.5
7.2
0.0
Goodwill Ac
quired
rights
Com
pleted
devel
opment
projects,
software
Devel
opment
projects
in pro
gress
Total
2007
Cost at 1 January 32.0 8.0 65.2 5.3 110.5
Additions in the year 7.5 0.0 4.0 8.2 19.7
Disposals in the year -4.5 0.0 -6.1 -3.0 -13.6
At 31 December 35.0 8.0 63.1 10.5 116.6
Amortisation and impairment at 1 January 14.9 8.0 44.7 0.0 67.6
Amortisation and impairment in the year 2.9 0.0 12.8 0.0 15.7
Disposals in the year -0.9 0.0 -3.8 0.0 -4.7
Amortisation and impairment at 31 8.0 53.7 0.0 78.6
December 16.9
Carrying amount at 31 December 0.0 9.4 10.5 38.0
Amortised over (year) - - 3-5 -

Reference is made to note 19 to the consolidated Annual Report for a description of assets with an indefinite life and the impairment test.

50 Property, plant and equipment

DKKm

Land
and
buildings
Plant
and ma
chinery
Land
and
buildings
in pro
gress
Plant,
machin
ery and
equip
ments
Total
2008
Cost at 1 January 369.3 89.9 7.4 145.5 612.1
Additions in the year 0.6 23.5 12.9 12.7 49.7
Disposals in the year 0.0 -0.4 -19.7 -4.9 -25.0
At 31 December 369.9 113.0 0.6 153.3 636.8
Depreciation and impairment at 1 Janu 25.1 0.0 115.9 181.4
ary 40.4
Depreciation and impairment in the
year
7.9 11.9 0.0 14.1 33.9
Disposals in the year 0.0 -0.2 0.0 -1.9 -2.1
Depreciation and impairment at 31 36.8 0.0 128.1 213.2
December 48.3
Carrying amount at 31 December 321.6 76.2 0.6 25.2 423.6
Land
and
buildings
Plant
and ma
chinery
Land
and
buildings
in pro
gress
Plant,
machin
ery and
equip
ments
Total
2007
Cost at 1 January 340.5 78.2 8.7 136.0 563.4
Additions in the year 28.8 43.3 57.2 12.7 142.0
Disposals in the year 0.0 -31.6 -58.5 -3.2 -93.3
At 31 December 369.3 89.9 7.4 145.5 612.1
Depreciation and impairment at 1 Janu 28.0 0.0 103.7 164.9
ary 33.2
Depreciation and impairment in the
year
7.2 9.3 0.0 14.1 30.6
Disposals in the year 0.0 -12.2 0.0 -1.9 -14.1
Depreciation and impairment at 31 25.1 0.0 115.9 181.4
December 40.4
Carrying amount at 31 December 64.8 7.4 29.6 430.7
Depreciated over (year) 5 20-50 - 3-5

The real-estate value of land and buildings totalled DKK 264.0 million at 1 January 2008, compared to DKK 184.7 million at 1 January 2007.

2008
DKKm
2007
DKKm
51 Investments in subsidiaries
Net asset value at 1 January 171.3 217.2
Currency adjustments -10.8 -3.9
Additions in the year 60.1 3.2
Disposals in the year -29.1 1.3
Dividend -44.1 -85.0
Share of loss before tax -26.9 52.2
Share of tax 2.7 -13.7
Net assets value at 31 December 123.2 171.3
52 Investments in associates
Net asset value at 1 January 3.5 5.9
Currency adjustments -0.8 0.0
Additions in the year 11.2 4.8
Revaluation 0.0 -0.4
Dividend -1.3 -4.3

53 Deferred tax

Deferred tax at 1 January 3.4 7.6
Deferred tax for the year included in the net profit/losses for the year -2.3 -5.0
Deferred tax for the year included in the equity -1.7 0.0
Change in tax rate 0.0 0.8
Deferred tax at 31 December, net -0.6 3.4

A/S Vestsjællandske Distriktsblade 50% 50% Slagelse Lokalavisen Holding ApS 50% 50% Frederikssund

Share of loss before tax -2.5 -2.2 Share of tax -0.3 -0.3 Net assets value at 31 December 9.8 3.5

Associates: Ownership

Registered office

2008 2007

53 Deferred tax, continued

Specification of deferred tax: DKKm

2008 Assets Liabilities Total
Intangible assets 0.0 7.2 7.2
Property, plant and equipment 8.3 0.0 -8.3
Current assets 1.2 0.0 -1.2
Non-current liabilities 0.0 1.7 1.7
Total 9.5 8.9 -0.6
Set-off deferred tax assets and deferred tax liabilities within
the same legal tax entities and jurisdictions 8.9 8.9 0.0
Deferred tax assets/deferred tax at 31 December 0.6 0.0 -0.6
2007 Assets Liabilities Total
Intangible assets 0.0 7.4 7.4
Property, plant and equipment 1.5 0.0 -1.5
Current assets 1.7 0.0 -1.7
Non-current liabilities 0.8 0.0 -0.8
Total 4.0 7.4 3.4
Set-off deferred tax assets and deferred tax liabilities within
the same legal tax entities and jurisdictions 4.0 4.0 0.0
Deferred tax assets/deferred tax at 31 December 0.0 3.4 3.4

54 Financial institutions

Due within 1 year
Current
52.3
52.3
172.1
172.1
Due within 1 and 5 year 13.0 12.8
Due after 5 year 72.4 75.3
Non-current 85.4 88.1
Total debt to financials institutions 137.7 260.2

55 Interest-rate swap

See description of 'Interest-rate swap' under note 27 to the consolidated Annual Report.

56 Income taxes payable

Income taxes receivables at 1 January -5.4 -17.7
Current tax for the year 0.2 -4.6
Income taxes received / paid in the year 5.6 16.9
Income taxes receivables at 31 December 0.4 -5.4

2008 2007

DKKm DKKm
57 Other payables
A-tax (PAYE), etc. payable to public authorities 10.4 12.2
VAT liability 3.2 4.6
Other debt 47.7 52.1
Other payables 61.3 68.9
58 Operating leases and rent obligations
Operating leases:
Future total expenses related to operating leases:
Due within 1 year 0.2 0.0
Due within 1 and 5 year 0.3 0.0
Total 0.5 0.0
For operating leases the following amounts have been recognised in the
income statement: 0.2 0.1
Rent obligations
Future total expenses related to rent obligations:
Due within 1 year 2.4 2.8
Due within 1 and 5 year 3.3 0.7
Total 5.7 3.5
For the rent obligations the following amounts have been recognised in
the income statement: 4.2 3.0
2008
DKKm
2007
DKKm
59 Eventualaktiver, -forpligtelse samt garantiforpligtelser
Søndagsavisen a-s has submitted a letter of comfort to its subsidiary, OFiR a-s. The total
liabilities in OFiR a-s amounts to DKK 16.7 million of which DKK 0.0 million is to
other group companies.
Reference is made to note 36 to the consolidated Annual Report concerning other guaran
tee obligations and contingent liabilities.
60 Security for loan
Søndagsavisen a-s has furnished security to the Group enterprise OFiR
a-s for a maximum of
20.0 20.0
Reference is made to note 37 to the consolidated Annual Report con
cerning other securities.
61 Related parties
Transactions with associates:
Lokalavisen Holding ApS 6.2 5.2
A/S Vestsjællandske Distriktsblade, salg 6.0 7.0
Total transactions 12.2 12.2
Lokalavisen Holding ApS 0.5 0.0
A/S Vestsjællandske Distriktsblade 0.5 0.4
Receivables/payables from associates 1.0 0.4

Reference is made to note 38 to the consolidated Annual Report for a description of related party transactions.

Photographer: Carsten Lundager

Gladsaxe Møllevej 28 • DK - 2860 Søborg Phone: +45 39 57 75 00 • Fax: +45 39 66 14 08 Internet: www.son.dk E-mail: [email protected]

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