AS Ekspress Grupp: Consolidated Interim Report for the First Quarter of 2011

Tallinn, Estonia, 2011-05-06 15:22 CEST (GLOBE NEWSWIRE) --  

The following report presents the consolidated financial information of Ekspress Group, the related market developments and management decision. The financial indicators and ratios show the outcome of the Group’s continuing operations, i.e. they express the consolidated operating results of online media, periodicals and printing services segments.

Key financial indicators

Financial ratios

Formulas used to calculate the financial indicators:

Formulas used to calculate the financial indicators:

In the 1^st quarter of 2011, Ekspress Group significantly improved its operating results for the period. Despite the most modest quarter of the year in terms of advertising revenue, EBITDA increased to EUR 2.93 million and EBITDA growth was 300%. The Group’s net profit totalled EUR 1.38 million and net profit growth was 280%. After normalising the operating results with the impact of business combination with Eesti Päevalehe AS in 2011 (see Note 3 for details), the Group’s EBITDA was EUR 1.39 million and it grew by 90%. Excluding the one-off effects of the aforementioned acquisition of Eesti Päevalehe AS, the net loss was EUR 155 thousand in the 1^st quarter of the year

The key contributors to the significant improvement of EBITDA included AS Printall, whose EBITDA improved by 25% (EUR 303 thousand); the online portal Delfi whose EBITDA improved by 56% (EUR 47 thousand); the publisher of Eesti Ekspress and Maaleht, Eesti Ajalehed AS whose EBITDA improved by 365% (EUR 139 thousand).  

In the periodicals segment, the results of companies improved due to better efficiency and in the online media segment, due to sales growth. In the printing services segment, better results were primarily related to higher sales in export markets. The sales in the periodicals segment have stabilised at the last year’s level, but the recovery from the decline in advertising sales is very uneven. In the middle of the quarter, sales were propelled by elections to the Riigikogu (Parliament), but the last month of the quarter experienced a sales setback. The revenue from subscriptions of periodicals and single copy sales have remained quite stable in terms of the monetary amount. While the revenue from single copy sales declined by 5.6%, then the revenue from subscriptions increased by 5.3% during the same time period. At Ajakirjade Kirjastus, the results of the 1^st quarter were impacted by the additional allowance for the books.  

The key event of the quarter was the acquisition of a controlling interest in Eesti Päevalehe AS. Negotiations with the former co-shareholder Jaan Manitski’s company OÜ Vivarone resulted in OÜ Vivarone acquiring the real estate property which had previously been in the ownership of Eesti Päevalehe AS (former premises of the publisher) and AS Ekspress Grupp acquired the shares of Eesti Päevalehe AS from OÜ Vivarone. The parties did not pay any cash for the transaction. The transaction has created preconditions for better cooperation of Ekspress Group’s media organisations and for increasing the competitiveness of the newspaper Eesti Päevaleht. Although Eesti Päevalehe AS is a loss-making company, the publishing of Eesti Päevaleht is a profitable activity for Ekspress Group as the Group’s joint ventures and subsidiaries earn a profit from providing services to Eesti Päevaleht. With the acquisition of Eesti Päevaleht, Ekspress Group launched development of a new multimedia newsroom using the media brands in its ownership as the basis, which will represent the greatest challenge for the Group this year and an opportunity to save costs as well as increase competitiveness in the field of journalism. 

Another significant event in the periodicals segment was conclusion of a preliminary contract for the sale of the periodical and newspaper home delivery company AS Express Post to AS Eesti Post. The reason for the conclusion of the preliminary sales contract was the vision of the management of Ekspress Group that during the time of media digitalisation, the strategic value of a company engaged in classic home delivery will diminish over time for the Group. The precondition for the conclusion of the transaction is the respective concentration permit to be granted by the Competition Board, the application for which was submitted in the month after the end of the quarter and proceedings of which are expected in being completed in the 3^rd quarter. The transaction amount is EUR 2.6 million. 

Overview of the segments

Key financial data of the segments January – March 2010/2011

Over the last year, the Group’s sales structure has changed, with the segments of printing services and online media increasing from 12.4% to 13.3% and from 44.7% to 46.7% of the total sales of the Group, respectively. The EBITDA margin has improved the most in the periodicals segment, where the last year’s negative margin has been replaced by a positive margin of 2.6%. The margin of the online media segment has improved, increasing from - 5.5 % in the 1^st quarter of the previous year to - 2% in the comparable quarter this year. 

The Group’s management expects online media and printing services segments to continue to grow. The sales growth in periodicals segment is expected to remain uneven. The Group’s management considers creation of a new multimedia newsroom and combination of overlapping activities of various publishing entities to be the largest challenge, expected to create considerable efficiency and support for increasing the competitiveness of its products. The management is also taking next steps towards digitalisation of classic printed media. 

Online media segment

The online media includes Delfi operations in Estonia, Latvia, Lithuania and Ukraine.

In the 1^st quarter, the sales in the online media segment grew by 20%, whereby the growth by countries was quite similar. The advertising sales in the online media segment were supported by elections in Lithuania and Estonia in early spring. The position of Delfi Latvia has strengthened due to product design upgrades and this, combined with the content quality, has helped Latvia to reach the highest number of pageviews. A product upgrading process is also underway at Delfi Lithuania. In the 1^st quarter, Delfi Lithuania launched the new women’s portal www.5braskes.lt with the goal of primarily increasing the market share in the advertising segment targeted at women. At the end of the 1^st quarter, Delfi Latvia launched the portal Morning.lv with an EU grant, the goal of which is to transmit information related to the European Parliament. In the 1^st quarter, Delfi Estonia incorporated the portal Eesti Elu, to be used as the basis for developing a portal of hyperlocal news, and launched a new advertising and content section "Reisileidja", which has received positive feedback from tourist companies and created a new advertising sales flow for Delfi. Surveys of the focus groups of Delfi readers were conducted in all Baltic States in the 1^st quarter, which help the editorial offices to better manage the quality of products. In the 1^st quarter, a significant conceptual change was implemented at Delfi Ukraine, and a product and organisation reform was launched with the goal of finding a more competitive segment for the product in the extremely oversaturated Ukrainian online media landscape. At the suggestion of the management, a decision was adopted to make the product more tabloid-like than it is customary in the Baltic States. The change and focus of the concept have enabled to lower costs by downsizing the organisation. The first results show that the market has received the new product well, and the number of unique users and downloadable pages has increased. In the online media segment, the Group has started to sell mobile portal advertisements both on the iPhone and Android platforms as well as to the web-based application. The sales of video advertisements have been launched, which provides even better opportunities to participate in the TV advertising market. As the volume of TV advertisements exceeds the sales of online advertisements several times, the Management Board sees the best future growth opportunities primarily in the sale of video advertisements, enabling to participate in the budgets of TV advertisements. The growth in mobile advertisements will be aggressive, but modest in absolute numbers. 

News portals owned by Ekspress Group     

In the 1^st quarter of 2011, there were no major changes in terms of the profile and number of readers of online publications. Delfi Group continues to be the only new media publication operating in all Baltic States as well as in Ukraine.

Estonian online readership 2009-2011

The number of the users of Delfi Estonia increased by ca. 11% in the 1^st quarter as compared to the 1^st quarter of 2010.

Latvian online readership 2009-2011

Delfi Latvia continues to be the most visited news portal. Of the competitors, tvnet.lv and apollo.lv have almost a third fewer visitors than Delfi.lt and this difference has prevailed also in the 1^st quarter of 2011.

Lithuanian online readership 2009-2011

In the 1^st quarter of 2011, Delfi Lithuania continued to be the most popular Internet environment in Lithuania, increasing by 15% year-over-year.   

Ukrainian online readership 2009-2011

In the first months of the year, the number of users of Ukraine Delfi has declined slightly; however, the number of users in March is the highest it has ever been. The decline in the first months of the year is attributable to the rearrangement of Delfi editorial team, which has been completed by now, and rearrangement of some parts of the portal.

Periodicals segment

The periodicals segment includes publishers of newspapers and magazines, the operations of which also include publishing of books. This segment also includes AS Express Post, engaged in home delivery of periodicals.

*Proportionate share of joint ventures

** Until February 2011, a 50% joint venture and consolidated on a proportionate basis. From March 2011, consolidated 100%.

Estonian newspaper circulation 2009-2010

The circulation numbers of Estonian daily newspapers show slight signs of stabilisation and despite no investments in major marketing campaigns at the end of 2010 and beginning of 2011, the circulation numbers have been maintained in the 1^st quarter of 2011.

Estonian newspaper readership 2009-2010

In the 1^st quarter of 2011, Maaleht has significantly increased its readership, and to a lesser extent, Õhtuleht.

In a year-over-year comparison, Eesti Ekspress has preserved its reader base. The daily newspapers – Postimees and Eesti Päevaleht have lost their readers the most.

Ekspress Group Lithuanian magazine readership 2010-2011

With regard to the Lithuanian magazines of Ekspress Group, the readership has declined in the 1^st quarter of 2011 for all periodicals, except for Panele and Mano Namai.

Printing services segment

All printing services of Ekspress Group are provided by AS Printall which is the largest printing company in Estonia. Printall is able to print both newspapers (coldest) and magazines (heatset).

In the printing segment, aggressive development continued in export markets. The share of exports in total sales has increased from 64% to 67% in a year. Exports to Scandinavia have increased the most, and new markets have been added in Western Europe. The company has reached its production capacity and the company’s Management Board is preparing an investment plan for adding new production capacity. 

Geographical break-down of printing services

Consolidated statement of financial position (unaudited)

Consolidated statement of comprehensive income (unaudited)

Consolidated cash flow statement (unaudited)

         Additional information:
         Gunnar Kobin
         Chairman of the Management Board
         GSM: +372 5188111
         E-mail: gunnar@egrupp.ee