Talentum Q2 2005 Interim Report

Page 1

STOCK EXCHANGE RELEASE August 4, 2005 at 8.30 pm

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TALENTUM’S NET SALES AND OPERATING PROFIT IN JANUARY–JUNE 2005 EXCEEDED LAST YEAR’S FIGURES FOR THE SAME PERIOD Talentum’s interim report for January–June 2005 in accordance with IFRS standards -

Net sales: EUR 62.1 million (EUR 60.0 million) Operating profit: EUR 4.6 million (EUR 4.1 million) Cash flow from business operations: EUR 4.9 million (EUR 5.1 million) Earnings per share: EUR 0.06 (EUR 0.08) Equity ratio: 35.6% (42.7%)

April-June -

Net sales: EUR 32.4 million (EUR 30.2 million) Operating profit: EUR 2.7 million (1.7 million)

Talentum’s consolidated net sales increased 3% (5%) on last year during JanuaryJune and stood at EUR 62.1 million (EUR 60.0 million). Operating profit increased to EUR 4.6 million (EUR 4.1 million). Spending to explore possibilities of expanding publishing in Finland and near-by countries weakened the reported operating profit as Group expenses increased on last year. The most significant factor in the Group’s profitability in January-June was publishing’s 10% growth and obvious improvement in profitability. Internet consulting increased during the second quarter by 17% and operating profit turned into clearly positive. Direct marketing’s net sales also started to grow during the second quarter and profitability improved favourably. IAS/IFRS REPORTING In accordance with its previous announcement, Talentum transferred to IFRS (International Financial Reporting Standards) reporting on January 1, 2005. The figures used for comparison purposes are the IFRS-compatible 2004 figures, which were published on April 25, 2005. CEO Harri Roschier: "Of Talentum’s business areas, publishing performed extremely well during the second quarter. Net sales went up by 12% and operating profit improved by 67%." "Direct marketing returned to growth earlier than was anticipated, and net sales for the quarter was up 7% on last year’s level. Operations in the Baltic region are gradually expanding as planned." "Net sales in Talentum’s Premedia and TV content production areas fell by a few per cent, and profitability is only slightly in the black. Improving profitability has taken longer than had been hoped and still requires further measures." "Second quarter net sales for Satama Interactive increased 17% and profits were 10% of net sales." CONSOLIDATED NET SALES Talentum's consolidated net sales growth for the first half of the year was 3.5% (5.4%). Second quarter net sales increased 7.2% (6.8%) and totalled EUR 32.4 million (EUR 30.2 million). There were more working days during the second quarter than in the previous year. Publishing saw the fastest growth during the first half of the year, at 10.2% (3.2%), and the figure for Internet consulting was 5.8% (16.6%). Premedia’s net sales were down -3.0% (+7.1%), and net sales for TV content production and direct marketing were down -2.5% (-0.5%) and -4.5% (-1.2%), respectively.


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Publishing accounted for 41% (41%) of consolidated net sales for the first half of the year. TV content production accounted for 18% (19%) of net sales, Premedia for 18% (17%), direct marketing 6% (6%) and Internet consulting 21% (20%). Inter-group business activities accounted for 4% (3%) of consolidated net sales. Circulation revenue from Talentum’s magazines was up 7% and advertising revenue 10%. The most significant factor for the growth in advertising revenue was the over 30% increase in job advertising. The trend in advertising sales is a key variable for publishing’s financial performance. Magazines and online activities account for about 75% of publishing’s net sales, of which advertising sales accounts for 60%. Books and training bring in the remaining 25% of net sales. Talentum has managed to integrate a number of its separate companies into successfully operating business areas. Investment in these areas will be further increased in the future to raise growth and efficiency. Competitive advantage consistent with the business strategy is being created through cooperation between the Group’s different media on the one hand, and between content production units and the sales organization on the other. Opportunities for exploiting synergy between the business areas have been examined and successfully implemented between magazines, books, online-business and direct marketing. Internal sales accounted for 40% of direct marketing. Development work in the other business areas will be invested in with the aim of improving business operations and creating potential synergies in a way that supports Talentum’s integration. The final result of this development work may result in something other than the complete integration of the business areas. CONSOLIDATED RESULTS Talentum’s consolidated operating profit for the first half of the year totalled EUR 4.6 million (EUR 4.1 million), i.e. 7.4% (6.8%), and the profit was EUR 3.0 million (EUR 3.7 million), i.e. 4.8% (6.1%). Operating profit for the second quarter increased to EUR 2.7 million (EUR 1.7 million), i.e. 8.3% of net sales (5.5%), and the profit was EUR 1.7 million (EUR 1.6 million), i.e. 5.4% (5.2%). Publishing and direct marketing performed very well, and Internet consulting performed satisfactorily, while the performance of Premedia together with TV content production was unsatisfactory. Fluctuations in exchange rates did not have a direct bearing on Talentum’s consolidated net sales or results. The earnings per share amounted to EUR 0.06 (EUR 0.08) for the first half of the year. CASH FLOW, FINANCIAL POSITION AND BALANCE SHEET The cash flow of business operations in January-June totalled EUR 4.9 million (EUR 5.1 million), and in April-June EUR 3.5 million (EUR 3.9 million). Net financial items and taxes in January-June were EUR –0.9 million (EUR –0.5 million), i.e. 1.4% of net sales (0.8%). Investments in other instruments increased significantly, the main reason being the growth of annual pension contributions paid in advance in order to gain rate benefit. The effect on cash flow was EUR -1.9 million (EUR -1.1 million).


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The final balance sheet total at June 30, 2005 was EUR 77.4 million (EUR 82.1 million), of which cash assets totalled EUR 21.0 million (EUR 31.5 million). The Group’s liquid assets are invested primarily in financial instruments and a small amount in shares. The change in cash assets in January-June was EUR –7.4 million (EUR –3.5 million). Talentum Group’s financial standing was good and the equity ratio at the end of the period under review was 35.6% (42.7%).The Group’s equity per share was EUR 0.44 (EUR 0.54) at the end of June. The Group’s interest bearing liabilities at the end of the period under review stood at EUR 25.7 million (EUR 21.8 million). DEPRECIATION, AMORTIZATION AND WRITE-DOWNS Consolidated depreciation, amortization and write-downs amounted to 3.6% of net sales (4.3%), which is EUR 2.2 million (EUR 2.6 million). INVESTMENT Gross investment in fixed assets in January-June totalled EUR 5.7 million (EUR 3.2 million), which is 9.2% (5.3%) of net sales. Of this amount, EUR 4.3 million (EUR 1.7 million) was invested in Group company shares and acquisitions. Gross investment comprised mainly normal replacement and maintenance investment, such as procuring equipment, software and fixtures. PERSONNEL The Group employed an average of 1,242 persons in January-June (1,154 persons). The number of staff increased as a result of company acquisitions. Of the employees, 16.5% (16.3%) work abroad. The average number of staff, broken down by business area, is as follows: Publishing TV content production Premedia Direct marketing Internet consulting Group administration

289 108 215 306 308 16

MANAGEMENT During the second quarter, Jukka Valtanen, Managing Director of Varesvuo Partners Oy, a subsidiary company of Talentum Oyj, resigned. He was a member of the Talentum Group’s Management Group and Executive Management Group. Similarly, Jukka Näntö, Managing Director of Suoramarkkinointi Mega Oy, which is a subsidiary of the Talentum Group, resigned from the company during the second quarter. Jukka Näntö was a member of the Group’s Management Group. His successor Mikko Saarela started in April. BUSINESS AREAS Publishing Publishing performed very well during the first half of the year. The net sales for publishing in January-June were EUR 25.4 million (EUR 23.0 million), and operating profit totalled EUR 4.0 million (EUR 2.6 million), i.e. 15.6% of net sales (11.3%). Publishing was up by 12% during the second quarter and the operating margin was 14.9% (10.0%).


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Magazine publishing’s net sales in January-June were EUR 20.0 million (EUR 18.1 million) (Internet services accounted for around EUR 1.8 million (EUR 1.6 million). Net sales for book publishing were EUR 4.5 million (EUR 4.2 million) and net sales for training activities were EUR 0.8 million (EUR 0.7 million). Profitability improved significantly in all the areas. Circulation revenue of Talentum’s magazines was up 7% and advertising revenue 10%. The most significant factor in the growth in advertising sales was again the continued upturn in job advertising that started in the latter half of 2004. TV content production The January-June net sales of Varesvuo Partners Oy, which concentrates in TV content production, fell 2.5% and totalled EUR 11.4 million (EUR 11.7 million). The operating profit was EUR 0.2 million (EUR 0.3 million). TV content production continued to focus on producing TV programmes as the demand for producing commercials has declined. During the first half of the year, the production of commercials contracted 20% and TV programme production rose by 9% compared to the previous year. Net sales for the production of commercials in January-June were EUR 4.2 million (EUR 5.3 million), net sales in TV programme production were EUR 5.5 million (EUR 5.1 million) and other net sales were EUR 1.6 million (EUR 1.3 million). Net sales for the second quarter contracted 7% and the operating margin were 2.0% (1.1%). Premedia January-June net sales for the Premedia business area were EUR 10.9 million (EUR 11.2 million), down 3.0% on the previous year. The operating profit was EUR 0.4 million (EUR 0.6 million). The deal to buy Faktor that was sealed on 1 April, which strengthened the relative market position of Premedia. Talentum Premedia Oy acquired the entire share capital of Faktor Oy and its subsidiary Faktor Tools Oy. Faktor’s net sales in 2004 stood at EUR 3.2 million and the company has 36 employees. Faktor, which was founded in 2003, specializes in improving the performance of prepress production and production processes, and Faktor Tools specializes in data management. The 5.1% growth in net sales of Premedia’s activities during the second quarter fell short of expectations. This was primarily the result of a lower volume of purchases in euros per customer, but also due to an increase in the customer curn rate. The operating margin for the second quarter was 2.4% (1.7%). Direct marketing Direct marketing’s net sales in January-June fell 4.5% and totalled EUR 3.6 million (EUR 3.8 million). The operating profit was EUR 0.6 million (EUR 0.7 million), i.e. 17.3% of net sales (18.5%). Direct marketing’s net sales experienced an upturn during the second quarter of 6.7%, which was reflected in the profitability. The operating margin in the second quarter was 18.0% (15.7%). Internet consulting Net sales for Internet consulting in January-June were EUR 13.1 million (EUR 12.4 million), which is an increase of 5.8% on last year. The operating profit for the first half of the year was EUR 0.5 million (EUR 0.7 million). Internet consulting grew 16.5% during the second quarter and the operating margin was 10.3% (4.6%). Satama Interactive will publish its own separate report on its operations.


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Seasonal variations in the media markets There are seasonal variations in the media and media services markets and business activity is strongest during the last quarter of the year. During the summer holiday season, not all of Talentum’s personnel resources are available and neither are magazines and books published as a rule. Customers usually make the bulk of their purchases in the last quarter of the year. Because of these features that are characteristic of the sector, Talentum’s quarterly net sales and profit in particular can vary considerably; these figures are greater during the last quarter of the year than in other quarters, while the third quarter is generally lower than the first and second quarters. As a result of the considerable seasonal variations in publishing and especially the book business, the major share of their net sales and an even more significant share of profit is accrued during the latter half of the year. It is therefore expected that the financial performance at the end of the year will be better than at the start of the year. SHARES AND SHARE CAPITAL The entire share capital of Talentum Oyj at the end of the period under review comprised 42,551,176 shares and amounted to EUR 17,891,485.15. On June 30, 2005, Talentum Oyj and its subsidiaries held 181,000 company shares, or the equivalent of 0.4% of Talentum’s share capital and votes. Shareholdings of the Board of Directors and Managing Director On June 30, 2005, the number of Talentum Oyj shares and options owned by members of the Board of Directors and the Managing Director personally and through companies in which they have a controlling interest was 120,776, representing 0.3% of the company's total shares and votes. Board of Directors’ authorizations The Annual General Meeting on March 29, 2005 authorized the Board of Directors to decide, within one year of the meeting, on taking out one or several convertible bonds and/or issuing options and/or on increasing the share capital by a rights issue in one or several instalments, provided that the increase is no more than EUR 893,149 and that no more than 2,124,169 new shares are subscribed. The maximum increase in the share capital and the combined number of votes of the shares issued correspond to less than 5% of the company’s registered share capital and of the combined number of votes conferred by the shares. The Board of Directors has the right to decide on the subscription price, the grounds for determining the subscription price, other terms and conditions of the subscription price, and the other terms and factors relating to the rights issue, issuing of options and taking out of a convertible loan. The authorization includes the right to overrule the shareholders' right of pre-emption. The authorization can be exercised only for financing mergers and acquisitions. As of June 30, 2005, the authorization had not been exercised. The Annual General Meeting on March 29, 2005 authorized the Board of Directors to decide, within one year of the meeting, on the acquisition of the company’s own shares using the company’s disposable funds in one or several instalments, but placed a limit of 2,124,169 on the maximum number of shares to be acquired, including the 181,000 shares acquired on the basis of previous acquisition authorizations. The limit is equivalent to less than 5% of the company’s registered share capital and combined votes conferred by the shares. The authorization includes the right to acquire shares in a manner other than in proportion to the shareholders’ holdings. As of June 30, 2005, the authorization had not been exercised. The Annual General decide, within one instalments of the limit of 2,124,169

Meeting on March 29, 2005 authorized the Board of Directors to year of the meeting, on the relinquishment in one or several company’s own shares acquired for the company, but placed a on the maximum number of shares to be relinquished. The limit


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is equivalent to less than 5% of the company’s registered share capital and combined votes conferred by the shares. The authorization includes the right to relinquish shares in a manner other than in the proportion to the shareholders’ pre-emptive rights to acquire the company’s own shares. As of June 30, 2005, the authorization had not been exercised. Targeted issue for former owners of Suomen Arvopaperimediat Oy Talentum Oyj acquired the entire shareholding of Suomen Arvopaperimediat Oy, the publisher of the magazine Arvopaperi, pursuant to a share exchange agreement signed on July 9, 2004. Under the share exchange agreement, Talentum Oyj agreed to pay the shareholders of Suomen Arvopaperimediat Oy an additional purchase price provided that the conditions for this set out in the agreement are met. On March 17, 2005, Talentum Oyj and the former owners of Suomen Arvopaperimediat Oy agreed that the additional purchase price set in the share exchange agreement will, contrary to the terms of the agreement, be paid in one instalment, after which the purchase price will have been paid in full. In order to pay the additional purchase price the Board of Directors of Talentum Oyj decided, on the basis of the authorization given by the Annual General Meeting of Talentum Oyj on March 24, 2004, to increase the share capital through a targeted rights issue of shares. In the targeted rights issue the share capital of the company may be increased by a maximum of EUR 28,506.17 by offering for subscription a maximum of 67,796 new shares in the company to the former owners of Suomen Arvopaperimediat Oy. The subscription price was EUR 2.95/share. In the issue targeted at the former owners of Suomen Arvopaperimediat Oy, 67,796 Talentum shares were subscribed. The increase of EUR 28,506.17 in the share capital was entered in the Trade Register on March 23, 2005. Notification The Association of Finnish Lawyers notified Talentum Oyj that on January 18, 2005 the Association’s shareholding fell below the five per cent ownership and votingright limit and was 4.938%. The Association of Finnish Engineers notified Talentum Oyj that on January 25, 2005 the shareholding of the Association and of the companies in its control fell below the five per cent ownership and voting-right limit and was 4.71%. OUTLOOK Publishing in particular has traditionally performed well for Talentum at the end of the year. Talentum reaffirms its earlier forecast for the whole of 2005. Its consolidated net sales will increase and operating profit will improve in 2005. GENERAL STATEMENT The forecasts and estimates presented here are based on the management’s current view of economic trends. The actual results may differ considerably from those expected at this time.


TALENTUM OYJ Malminkatu 30 FIN-00100 Helsinki Tel.+358(0) 20 442 40 Fax +358(0)20 4424 130 www.talentum.com 7(12)

STOCK EXCHANGE RELEASE August 4, 2005 at 8.30 pm

INCOME STATEMENT (1000 EUR) Net sales Other operating income Operating expenses Depreciation, amortization and impairment Operating profit Financial income and expenses Share of profit of associates Profit before taxes Income tax expense Profit for the period Attributable to: Equity holders of the parent Minority interest Earnings per share (EUR)

4-6/ 2005 32403 184 -28774

4-6/ 2004 30226 240 -27527

1-6/ 2005 62133 304 -55628

1-6/ 2004 60039 482 -53843

1-12/ 2004 119923 667 -106239

-1118 2695 -310 111 2497 -755 1742

-1275 1664 167 106 1938 -355 1583

-2219 4590 -443 120 4267 -1279 2988

-2578 4100 213 200 4513 -844 3669

-5054 9298 -72 308 9534 -2564 6969

1436 306 0.03

1436 147 0.03

2711 277 0.06

3234 435 0.08

6280 690 0.15

BALANCE SHEET (1000 EUR) ASSETS Non-current assets Intangible assets Goodwill Tangible assets Investments in associates Deferred income taxes Other long term receivables and investments Total non-current assets Current assets Inventories Trade receivables and other receivables Cash and cash equivalents Total current assets TOTAL ASSETS SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity Share capital Share premium reserve Fair value reserve and other reserves Exchange differencies Retained earnings Net income Total Minority interest Total equity Long term debt Short term debt

30.06.2005

30.06.2004

31.12.2004

2589 16888 8847 1270 5392

2797 8139 10318 1380 5897

2569 12748 9460 1234 5754

694 35679

956 29487

1091 32855

2748

1699

1878

18032 20987 41768 77447

19477 31486 52661 82149

15314 28418 45610 78464

17891 167

8760 394

17863 -4

15 85 -2242 2711 18627 8390 27017

7116 86 2662 3234 22252 12709 34961

7 84 -1252 6280 22977 9875 32852

6767 43663

21791 25397

10552 35060


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77447 25683

82149 21768

78464 21177

1-6/2005

1-6/2004

1-12/2004

2988 3237

3669 2829

6969 7522

Change in working capital Net financial items and taxes Net cash from operating activities

-387 -888 4949

-879 -472 5147

-1194 -1045 12253

Acquisitions of subsidiaries and associates Purchase of other non-current assets Other investments Sales of other non-current assets Net cash used in investing activities

-5161

-19

-1069

-1422 -1876 287

-2731 -1441 519

-8172

-3672

Issue of share capital Change in short term loans Change in long term loans Payment of finance lease liabilities Dividends paid and equivalents Other financing items Share repurchases Net cash used in financing activities

0 8000 -3675 -76

3 10000 -8342 -82

3 10000 -8772 -196

-6597 -135 -1724

-6539 -32

-13869 -829

-4207

-4992

-13663

-7430

-3517

28418

35003

20987

31486

1-6/2005 5720 9.2

1-6/2004 3159 5.3

1-12/2004 9029 7.5

981 261 1242

897 257 1154

940 263 1203

30.6.2005 17220

30.6.2004 17220

31.12.2004 17220

4365 21501 3579

4667 20263 3404

4308 22924 3361

42354126

41480762

41793256

SHAREHOLDERS' EQUITY AND LIABILITIES

Interest bearing debt Cash flow statement (1000 EUR) Profit for the period Adjustments

Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Investments (1000 EUR) Investments in non-current assets % of net sales Average number of employees Talentum Group Part-time telemarketing staff Total Contingent liabilities (1000 EUR) Given as security loans with securities as collateral Rental and other commitments Leasing commitments Number of shares Adjusted average number

-4359 -411 664 -5175

-6585 35003 28418


STOCK EXCHANGE RELEASE August 4, 2005 at 8.30 pm

Number at the end of period

42370176

41481830

TALENTUM OYJ Malminkatu 30 FIN-00100 Helsinki Tel.+358(0) 20 442 40 Fax +358(0)20 4424 130 www.talentum.com 9(12)

42298780


STOCK EXCHANGE RELEASE August 4, 2005 at 8.30 pm

Key figures Earnings per share, adjusted (EUR) Equity per share (EUR) Equity ratio, %

TALENTUM OYJ Malminkatu 30 FIN-00100 Helsinki Tel.+358(0) 20 442 40 Fax +358(0)20 4424 130 www.talentum.com 10(12)

30.6.2005 0.06 0.44 35.62

30.6.2004 0.08 0.54 42.69

31.12.2004 0.15 0.54 42.34

4-6/2004

1-6/2004

1-12/2004

626

2108

4460

Income taxes Leases Employee benefits Share-based payments Impairment of assets

12 -4 32 -114 1031

-61 -10 64 -172 1740

-228 -12 132 -653 3270

Profit for the period according to IFRS

1583

3669

6969

Attributable to: Equity holders of the parent Minority interest

1436 147

3234 435

6280 690

1.1.2004

30.6.2004

31.12.2004

46519

42242

38925

4322 85 -721 -1118 -11187

3954 75 -657 -1206 -11187 1740

3640 71 -588 -1312 -11187 3303

37901

34961

32852

Reconciliation of net profit for comparison periods 2004 Profit for the period before minority interest according to FAS

Reconciliation of equity for comparison periods 2004 Total equity incl. minority interest according to FAS Effects of adopting IFRS: Income taxes Leases Employee benefits Financial instruments Impairment of assets Reversal of goodwill amortization Total equity according to IFRS


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Statement of changes in equity Share premium reserve (1000 EUR) Equity 1.1.2004

Equity

8759

391

Share-based payments Net income recognized directly in equity Profit for the period Dividends paid Issue of share capital

Exchange Fair value reserve differencies and other reserves

7204

86

-88

Retained earnings

Minority interest

Total equity

8899

12561

37901

104

69

173

-119

-39

-246

3234

435

3669

-6222

-317

-6539

1

3

8760

394

7116

86

5896

12709

34961

17863

-4

7

84

5028

9875

32852

54

36

90

63

2

73

Profit for the period

2711

277

2988

Share repurchases

-1031

-693

-1724

-6356

-241

-6597

Equity 30.6.2004 Equity 31.12.2004

4

Share-based payments Net income recognized directly in equity

Dividends paid Issue of share capital Other changes Equity 30.6.2005

8

28

17891

171

167

199

15

1

0

-866

-865

85

470

8390

27017


STOCK EXCHANGE RELEASE August 4, 2005 at 8.30 pm

Talentum Group/Sub-segments (1000 EUR) Net sales Publishing TV content production Premedia Direct marketing Internet consulting Sales within group Total Operating profit Publishing TV content production Premedia Direct marketing Internet consulting Parent company and group items Total

TALENTUM OYJ Malminkatu 30 FIN-00100 Helsinki Tel.+358(0) 20 442 40 Fax +358(0)20 4424 130 www.talentum.com 12(12)

4-6/ 2005

4-6/ 2004

1-6/ 2005

1-6/ 2004

1-12/ 2004

13135 5545 5715 1944 7317 -1253 32403

11721 5964 5439 1822 6280 -1000 30226

25359 11382 10905 3616 13126 -2255 62133

23010 11677 11246 3785 12404 -2083 60039

48895 23168 21210 6885 23602 -3837 119923

1956 113 138 349 752 -612 2695

1168 63 93 286 287 -232 1664

3962 217 398 627 472 -1086 4590

2594 282 583 702 692 -753 4100

7947 180 1204 1117 651 -1801 9298

289 108 215 306 308 16 1242

245 120 200 304 268 17 1154

268 124 203 310 281 17 1203

Average number of employees Publishing TV content production Premedia Direct marketing Internet consulting Group administration Total The interim report is not audited.

Talentum Oyj will publish third quarter results on October 26, 2005.

FURTHER INFORMATION CEO Harri Roschier, tel +358 (0)20 442 4220 CFO Kai J채rvikare, tel +358 (0)40 342 4210 www.talentum.com Press conference A press conference will be held today on Thursday August 4, 2005 for members of the press and analysts at 10.30 am at the hotel Radisson SAS Royal. The address is Runeberginkatu 2, Helsinki. The conference will be held in Finnish. COPIES TO Helsinki Stock Exchange Key media


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