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January – December 2006

Observer AB

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Highlights January - December 2006

Revenue up 8 % and EBIT* up 16 %

Strong growth in integrated services driven by evaluation services

Growth in international client segment

Restructurings in the Nordic & Baltic region proceed according to plan

Further restructurings in the UK initiated

Positive development in the US, Canada, Germany and Portugal

A company for mediating digital information established in January

* Excluding write-down goodwill and restructuring expenses

January - December

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Market

Expected global market growth: 5-7%

Generally good market conditions

New media and channels create opportunities for service development

– Crises management through blog monitoring

– New channels, primarily within broadcast monitoring

Growing importance of reputation and brands drive demand

Rising demand for integrated services with value-added analyzed information

Growing demand within international client segment

Copy right issues change market prerequisites

Tough competition in all service areas

Consolidation will continue and increase, mainly driven by technological shift (digitalization), internationalization of industry and lack of critical mass amongst regional competitors.

January - December

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January – December 2006

Amounts in SEK million January – December

Revenue 1 915 (1 776)

Organic growth 4 % (2)

EBIT - 612 (175)

EBIT excl. write-down goodwill and restructuring expenses 204 (175)

Operating margin excl. write-down goodwill and restructuring expenses 11 % (10)

Operating cash flow 178 (163)

January - December

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October – December 2006

Amounts in SEK million October - December

Revenue 487 (489)

Organic growth 4 % (2)

EBIT - 281 (44)

EBIT excl. write-down goodwill and restructuring expenses 32 (44)

Operating margin excl. write-down goodwill and restructuring expenses 7 % (9)

Operating cash flow 22 (73)

January - December

• Nonrecurring expenses of SEK 21 million in the UK during Q4

• Restructuring expenses of SEK 23 million during Q4

• Weak development in Anglo Europe

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Organic Growth & Operating Margin* (rolling 12 months)

-2%

0%

2%

4%

6%

8%

2004 Q

3

2004 Q

4

2005 Q

1

2005 Q

2

2005 Q

3

2005 Q

4

2006 Q

1

2006 Q

2

2006 Q

3

2006 Q

4

Gro

wth

5%

7%

9%

11%

13%

15%

Marg

in

Organic growth Operating margin

* Excluding write-down goodwill and restructuring expenses

January - December

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Operating Cash Flow and EBIT * (rolling 12 months)

0

50

100

150

200

250

2004 Q

3

2004 Q

4

2005 Q

1

2005 Q

2

2005 Q

3

2005 Q

4

2006 Q

1

2006 Q

2

2006 Q

3

2006 Q

4

OC

F

0

50

100

150

200

250

EB

IT

Operating Cash Flow EBIT *

* EBIT before write down of goodwill and restructuring costs Amounts in SEK million

January - December

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Balance Sheet December 31, 2006

Working capital: -81 Equity / Assets ratio: 45 % Debt / Equity ratio: 61 % Net debt: 764

Financial liabilities 904

Operating liabilities 454

Equity 1 249

Financial Assets, 140

Current receivables, 373

Other fixed assets, 274

Goodwill 1 922

Amounts in SEK million

January - September

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The Regions

North America Improved earnings Organic growth amounted to 7 % (Q4: 7 %) Healthy demand for integrated services Strong market for broadcast monitoring

Nordic & Baltic Improved but still weak earnings Digitalization will reduce costs Organic growth amounted to 5 % (Q4: 6 %) Strong double digit growth in evaluation services Positive development in the international client segment

Rest of Europe Lower earnings Organic growth amounted to -1 % (Q4: -2 %) Positive development in Germany and Portugal Weak development in UK and Ireland

January - December

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Changes and development

Revised strategy and new financial targets

Digitalization of client offering and production processes

Strategic approach through establishment of new company

Strategic repositioning for increased efficiency and profitability:

Uniform profile and service offering

Common solutions and tools for the European market

International client offering and processes Strategic sourcing

Expansion in geographic markets with high shareholder ROI

Restructuring - estimated savings: SEK 130 + 70 million, costs: SEK 120 + 50 million

January - December

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Savings measures 2006

Reduction of the Head Office organization

A common functional Nordic organization implemented

– New Regional Director appointed February 8 2007

Centralization of Nordic digital production

One of two production sites in Norway shut down

The Estonian operations sold; operations in Latvia discontinued

– Operations in the Baltic countries concentrated in Lithuania.

New management in the UK

Irish operations shut down

One of three production sites in the UK shut down

January - December

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Further savings measures

Estimated savings: SEK 70 million; costs: SEK 50 million

Coordination of business processes

Changeover to a digital client offering based on a digital production process

Uniform profile and offering in Europe

The previous and current action programs are expected to lead to yearly savings of SEK 200 million

with a full effect by 2009. Restructuring expenses are expected to total SEK 170 million. The impact

on earnings based on the 2006 expense level and exchange rates is estimated as follows:

Estimates of aggregate effects are preliminary and could be affected by outside circumstances, which could result in eventual changes in the time schedule.

January - December

Mkr 2006 2007 2008 2009

Savings impact 10 75 165 200

Restructuring expenses 57 63 50 –

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Observer today

Strengths

Global market leader

Unparalleled offering – breadth and depth

Large client base

Prime position in North America – the leading media market in the world

Strong cash flow

Opportunities

Strong growth in international client segment

Strong position within our client segment

Effects from initiated cost reduction program

Increased synergies within and between regions

Expansions to new markets

Observer is well positioned to capitalize on a growing market.

January - December

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