AS Ekspress Grupp Consolidated Interim Report for the Fourth Quarter and 12 Months of 2103

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| Source: Ekspress Grupp
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Tallinn, Estonia, 2014-02-28 11:34 CET (GLOBE NEWSWIRE) --  

The year 2013 was a year of controversies for the Group, marked by both positive and negative impact. We can be pleased with the financial results for the 4th quarter, leaving aside the one-off costs in the amount of EUR 500 thousand that were related to the share option scheme and the acquisition process of a joint ventures. Normalised EBITDA amounted to EUR 2.5 million and exceeded the result of the same period last year by 12%. The actual result was 10% lower. The consolidated net profit excluding these one-off expenses and also goodwill impairment (in the amount of EUR 2.5 million) amounted to EUR 1.5 million. This result is 22% higher than the result of the same period last year.  

During the financial year, Ekspress Grupp earned normalised net profit in the amount of EUR 3.5 million which is 32% higher than last year. This was mainly attributable to lower interest expenses in connection with the favourable EURIBOR rate and the decrease in outstanding debt. However, we failed to meet the 2012 level for EBITDA and sales revenue. We also did not meet the budget targets. In addition, EBITDA was also impacted by the one-off expenses mentioned above. Without these expenses, EBITDA amounted to EUR 7.8 million, as compared to EUR 7.9 million in 2012.

At the end of the year we recognised impairment losses for goodwill and trademarks related mainly to print media in the total amount of EUR 2.5 million which decreased the full-year net profit down to EUR 1.1 million.    

Impairment losses for goodwill and trademarks in the amount of EUR 1.6 million were recognised for assets related to Eesti Päevaleht. In Ekspress Leidyba, a Lithuanian magazine publisher, impairment losses for goodwill and trademarks totalled EUR 0.4 million, while impairment losses for the trademark related to Delfi Ukraine amounted to EUR 0.5 million, due to the decision to close the company that operates Delfi in Ukraine. Unfortunately, because of the political and economic situation in Ukraine we did not see a prospect for continuing in this country. Since 2008 Ekspress Group has spent approximately EUR 1.8 million in total to operate the online portal in Ukraine.

The final quarter of the year was marked by the dispute with the competing media enterprise Eesti Meedia over the realisation of the purchasing right pertaining to the ownership of joint ventures. The position of Ekspress Group is that AS Eesti Meedia has been obstructing the legal fulfilment of the contract signed between the two parties from the moment when the purchasing right became available. We expect this dispute to get a positive outcome for the company in the arbitration procedure in the second half of 2014.

Summarising the year, we can be proud of the growth in the number of our digital subscriptions that at the end of the year approaching 5,500 subscribers for both Eesti Ekspress and Eesti Päevaleht. The share of digital subscriptions in the total number of subscribers of Eesti Päevaleht and Eesti Ekspress accounts for more than 21%. In the online development of Latvia, an important event was the acquisition of parent-oriented portal Calis.lv in the summer. In addition to launching online verticals, at the end of the year we signed an agreement for the acquisition of advertising network Adnet that operates in all three Baltic countries and that will notably increase the number of online portals that are being sold and mediated by Ekspress Group. We also took aggressive steps in launching video products in all three Baltic countries. Among online portals, Delfi has become the largest enterprise in the Baltics that produces and webcasts online TV. The monetarisation of our video production will be the biggest challenge in all three Baltic countries in 2014.

Of more positive events, one should mention the launch of zave.ee, a new website for discount promotions, in Estonia in December. In Latvia and Lithuania, it will be launched in the first quarter 2014. The objective of the website is to offer users an overview of discounts that are being offered by large retailers. Until now, customers have received such offers in a printed form by direct mail to their mailboxes. In our opinion, another important achievement was that shortly before Christmas, the weekly number of users of Delfi Eesti in terms of Internet browsers exceeded that of our closest competitor by more than 200 thousand, the first time since 2008. In the final quarter of the year, in November and December, Delfi Latvia became Latvia’s second-largest Internet portal, for the first time exceeding the number of users of the local social network Draugiem.

In the online media segment Latvian and Lithuanian companies saw their sales growth slow down considerably in the second half of the year. As a result, sales of Latvian and Lithuanian companies of Delfi increased only by 4% and 9%, respectively, during the year. At the same time, sales of Delfi Estonia increased by 18%. Since Europe’s economic climate has been improving, such a slowdown in sales in the Latvian and Lithuanian market was unexpected and difficult to explain. It affected the profitability of the undertakings, which, as a result, saw their EBITDA to decrease by 27% in Latvia and 11% in Lithuania from the respective levels in 2012. Because competition in Latvia had become stronger, we decided at the end of 2012 to increase the staff of the editorial office which negatively affected the profitability in Latvia. As for 2014, we expect sales growth to recover and organisations to become more efficient. The objective is to increase sales revenue with the same cost basis.

In the periodicals segment, profitability improved more than in other segments during the year. The financial result of Ajakirjade Kirjastus has improved, as is the case of Express Post. Book publisher Hea Lugu showed marginal growth in EBITDA thanks to publishing more books which included several significant bestsellers. EBITDA of SL Õhtuleht is below last year’ level, while in annual terms, the weakest result was posted by Eesti Ajalehed, mainly due to a decrease in print advertising income.

In the printing services segment, EBITDA fell 3% as compared to last year. This is attributable to the unexpected decrease in sales at the start of the year which affected the profit more than we managed to offset in the second half of the year, mainly because the recovery of falling customer sales has been a slow process. We remain optimistic for 2014 since in the last months of the year we have signed a number of major printing contracts with large Scandinavian publishers.

Looking at the structure of the Group’s sales and profit, the share of sales of the online segment has continued to grow and accounts for 19.1% of all non-Group sales in comparison with 16.9% a year earlier. The periodicals and printing services segments have seen their share fall by a few percentage points. In EBITDA, 2013 was a year when the share of the periodicals segment increased to 12.6%, as compared to 9.8% a year earlier, largely thanks to the improved profitability of the magazine publisher. The printing services segment has seen its share in the Group’s total profit decrease by two percentage points. In terms of EBITDA margins of different segments, printing services remain the most profitable segment, with margin 21.3%. The EBITDA margin of periodicals has increased to 4.6%, but the average margin of the online segment has fallen to 14.9% from 17.1% a year earlier.

In 2014, we expect the Group’s sales to grow by a few percentages, while EBITDA is expected to grow more than 10% from the normalised result in 2013. We expect the profit of the online segment to increase more than 20%, whereas the profit of the periodicals segment is likely to grow less than 20%. The annual target for the printing services segment is re-attain the EBITDA level of 2012, a realistic target at the current equipment park. In addition to ongoing activities, we are actively looking around for suitable acquisitions. For 2014, the biggest challenge will be finding new sources of growth for the Group from new markets or new business sectors. Since the Group’s investment capacity continues to grow due to the decreasing loan burden, we are financially more confident in seeking possible acquisition targets. 

Both our new sources of growth and other developments and innovations must, first and foremost, support the Group’s vision to be the most professional and innovative partner for our demanding readers and customers, and to continue to offer new and interesting experiences both on paper and in digital media.   

KEY FINANCIAL INDICATORS AND RATIOS

Performance indicators
(EUR thousand)
Q4 2013 Q4 2012 Change% Q4 2011 Q4 2010 Q4 2009
For the period            
Sales 16 541 16 447 1% 16 313 14 885 13 514
Gross profit 4 096 3 914 5% 3 660 3 466 2 598
EBITDA 2 015
 
2 246 -10% 1 986 1 854 896
Operating profit* 1 348
 
1 486 -10% 1 037 1 016 37
Interest expenses 185 206 -10% 523 638 667
Net profit/(loss) for the period* 1 057 1 269 -17% 535 210 (780)
EBITDA margin (%) 12.2% 13.7%   12.2% 12.5% 6.6%
Operating margin* (%) 8.1% 9.1%   6.4% 6.8% 0.3%
Net margin* (%) 6.4% 7.7%   3.3% 1.4% -5.8%
Impairment of goodwill and trademarks (2 467) (157)   (750) 0 (5 844)
Net profit / (loss) from continuing operations for the period in the financial statements (1 410) 1 112 -227%  (215) 210 (6 624)
Net profit / (loss) for the period in the financial statements (1 410) 1 112 -227%  (215) 210 (6 986)
Net margin (%) -8.5% 6.8%   -1.3% 1.4% -51.7%
ROA (%) 1.4% 1.6%   0.7% 0.2% -0.8%
ROE (%) 2.5% 3.1%   1.4% 0.6% -2.3%
Earnings per share (EPS) (0.05) 0.04   (0.01) 0.01 (0.34)

*The results exclude impairment of goodwill and trademarks.

 

Performance indicators
(EUR thousand)
12 months 2013 12 months 2012 Change% 12 months 2011 12 months 2010 12 months 2009
For the period            
Sales 58 442 59 706 -2% 57 391 51 814 51 974
Gross profit 13 192 13 187 0% 12 544 11 294 9 292
EBITDA 7 264 7 882 -8% 6 968 6 041 3 014
Operating profit* 4 647 4 596 1% 3 443 2 760 (445)
Interest expenses 763 1 549 -51% 2 212 2 595 2 863
Net profit/(loss) for the period from continuing operations* 3 548 2 682 32% 893  (509) (3 613)
EBITDA margin (%) 12.4% 13.2%   12.1% 11.7% 5.8%
Operating margin* (%) 8.0% 7.7%   6.0% 5.3% -0.9%
Net margin* (%) 6.1% 4.5%   1.6% -1.0% -7.0%
Gain related to acquisition of a 50% ownership interest Eesti Päevalehe AS* 0 0   1 540 0 0
Impairment of goodwill and trademarks (2 467) (157)   (750) 0 (5 844)
Net profit/(loss) from continuing operations for the period in the financial statements 1 081 2 525 -57% 1 683 (509) (9 457)
Net profit/(loss) for the period
in the financial statements
1 081 2 525 -57% 1 683  (146) (12 144)
Net margin (%) 1.8% 4.2%   2.9% -0.3% -23.4%
ROA (%) 1.4% 3.2%   2.0% -0.2% -11.8%
ROE (%) 2.5% 6.4%   4.4% -0.4% -32.2%
Earnings per share (EPS) 0.04 0.08   0.06 (0.01) (0.58)

* The results exclude impairment of goodwill and trademarks, and the net extraordinary gain in relation to the acquisition of an additional ownership interest in Eesti Päevalehe AS. In the 1st quarter of 2011, an additional 50% ownership interest was acquired in Eesti Päevalehe AS. The transaction was accounted for in two parts: firstly, as the sale of the current 50% ownership interest on which the net extraordinary gain totalled EUR 1 540 thousand and subsequently as the acquisition of the wholly-owned subsidiary.

 

Balance sheet (EUR thousand) 31.12.2013 31.12.2012 Change% 31.12.2011
As of the end of the period        
Current assets 14 447 13 545 7% 12 523
Non-current assets 63 019 66 754 -6% 68 986
Total assets 77 466 80 299 -4% 81 509
       incl. cash and bank 4 501 3 280 37% 2 827
       incl. goodwill 40 052 41 093 -3% 40 761
Current liabilities 14 470 14 967 -3% 16 547
Non-current liabilities 20 673 24 233 -15% 26 574
Total liabilities 35 143 39 200 -10% 43 121
       incl. borrowings 24 432 28 580 -15% 31 951
Equity 42 323 41 099 3% 38 388

 

  Financial ratios (%) 31.12.2013 31.12.2012 31.12.2011
Equity ratio (%) 55% 51% 47%
Debt to equity ratio (%) 58% 70% 83%
Debt to capital ratio (%) 32% 38% 43%
Total debt/EBITDA ratio 3.3 3.6 4.6
Debt service coverage ratio 1.66 1.52 1.06
Liquidity ratio 1.00 0.90 0.76

 

   Formulas used to calculate the financial ratios
EBITDA margin (%)  EBITDA/sales x 100
Operating margin* (%)  Operating profit* /sales x 100
Net margin* (%)  Net profit* /sales x 100
Net margin (%)  Net profit/sales x 100
Earnings per share  Net profit/average number of shares
Equity ratio (%) Equity /(liabilities+equity) x 100
Debt to equity ratio (%) Interest bearing liabilities /equity x 100
Debt to capital ratio (%) Interest bearing liabilities –cash and cash equivalents (net debt) /(net debt+equity) x 100
Total debt/EBITDA Interest bearing borrowings/EBITDA

 

   Formulas used to calculate the financial ratios above
Debt service coverage ratio (DSCR)      EBITDA/loan and interest payments for the period
Liquidity ratio Current assets/current liabilities
ROA (%) Net profit/average assets  x 100
ROE (%) Net profit/average equity x 100

OVERVIEW OF THE SEGMENTS

The Group operates since 2009 in the following operating segments:

-        online media

-        periodicals (newspapers, magazines and books)

-        printing services.

 

Cyclicality

All operating areas of the Group are characterised by cyclicality and fluctuation, related to the changes in the overall economic conditions and consumer confidence. The Group’s revenue can be adversely affected by an economic slowdown or recession. It can appear in lower advertising costs in retail, preference of other advertising channels (e.g. preference of Internet rather than print media) and changes in consumption habits of retail consumers (following current news in news portals versus reading printed newspapers, preference of the younger generation to use mobile devices and other communication channels, etc.).   

Seasonality

The revenue from the Group’s advertising sales as well as in the printing services segment is impacted by major seasonal fluctuations. The level of both types of revenue is the highest in the 2nd and 4th quarter of each year and the lowest in the 3rd quarter. Revenue is higher in the 4th quarter because of higher consumer spending during the Christmas season, accompanied by the increase in advertising expenditure. Advertising expenditure is usually the lowest during the summer months, as well as during the first months of the year following Christmas and New Year’s celebrations. 

 

Key financial data of the segments Q4 2010-2013

(EUR thousand) Sales Sales
  Q4  2013 Q4 2012 Change% Q4 2011 Q4 2010
online-media 3 355 2 989 12% 2 586 2 302
periodicals 6 766 6 626 2% 6 544 6 051
printing services 7 566 8 046 -6% 8 143 7 230
corporate functions 393 308 28% 71 31
intersegment eliminations (1 539) (1 522) -1% (1 031) (729)
TOTAL GROUP 16 541 16 447 1% 16 313 14 885

 

(EUR thousand) EBITDA EBITDA
  Q4 2013 Q4  2012 Change% Q4  2011 Q4 2010
online-media 779 586 33% 696 302
periodicals 435 253 72% 62 253
printing services 1 604 1 650 -3% 1 495 1 529
corporate functions (763) (242) -215% (268) (236)
intersegment eliminations (40) (1) -3900% 1 6
TOTAL GROUP 2 015 2 246 -10% 1 986 1 854

 

EBITDA margin Q4 2013 Q4 2012 Q4  2011 Q4 2010
online-media 23% 20% 27% 13%
periodicals 6% 4% 1% 4%
printing services 21% 21% 18% 21%
TOTAL 12% 14% 12% 13%

 

Key financial data of the segments 12 months 2010-2013

(EUR thousand) Sales Sales
  12 months 2013 12 months 2012 Change % 12 months 2011 12 months 2010
online-media 11 455 10 370 10% 8 977 7 884
periodicals 23 798 24 741 -4% 24 069 22 520
printing services 27 462 29 167 -6% 27 736 24 221
corporate functions 1 530 996 54% 209 129
intersegment eliminations (5 803) (5 568) -4% (3 600) (2 940)
TOTAL GROUP 58 442 59 706 -2% 57 391 51 814

 

(EUR thousand) EBITDA EBITDA
  12 months 2013 12 months 2012 Change% 12 months 2011 12 months 2010
online-media 1 703 1 776 -4% 1 425 758
periodicals 1 093 848 29% 552 914
printing services 5 862 6 052 -3% 5 959 5 198
corporate functions (1 356) (795) -71% (980) (833)
intersegment eliminations (38) 1 - 12 4
TOTAL GROUP 7 264 7 882 -7% 6 968 6 041

 

EBITDA margin 12 months 2013 12 months 2012 12 months 2011 12 months 2010
online-media 15% 17% 16% 10%
periodicals 5% 3% 2% 4%
Printing services 21% 21% 21% 21%
TOTAL GROUP 12% 13% 12% 12%

The segments’ EBITDA does not include intragroup management fees, and impairment of goodwill and trademarks. Volume-based and other fees payable to advertising agencies have not been deducted from the advertising sales of segments, because the management monitors gross advertising sales. Discounts and rebates are reduced from the Group’s sales and are included in the combined line of eliminations.

News portals owned by the Group

Owner Portal Owner Portal
Delfi Estonia www.delfi.ee AS Eesti Ajalehed www.ekspress.ee
  rus.delfi.ee   www.maaleht.ee
Delfi Latvia www.delfi.lv   www.epl.ee
  rus.delfi.lv   www.arileht.ee
Delfi Lithuania www.delfi.lt AS SL Õhtuleht www.ohtuleht.ee
  ru.delfi.lt    
Delfi Ukraine www.delfi.ua    

Advertising portals owned by the Group

Owner Portal Owner Portal
Delfi Lithuania www.alio.lt AS Eesti Ajalehed www.ekspressjob.ee
      www.ekspressauto.ee
      www.hyppelaud.ee

 

Online media segment

The online media segment includes Delfi operations in Estonia, Latvia, Lithuania and Ukraine as well as the parent company Delfi Holding.

(EUR thousand) Sales
  Q4
 2013
Q4
2012
Change%
Delfi Estonia 1 217 951 28%
Delfi Latvia 683 653 5%
Delfi Lithuania 1 439 1 369 5%
Delfi Ukraine 16 16 0%
other Delfi companies 0 0 -
intersegment eliminations 0 0 -
TOTAL 3 355 2 989 12%

 

(EUR thousand) EBITDA
  Q4
2013
Q4
2012
Change%
Delfi Estonia 169 118 43%
Delfi Latvia 96 89 8%
Delfi Lithuania 432 332 30%
Delfi Ukraine (40) (59) 32%
other Delfi companies 122 108 13%
intersegment eliminations 0 (2) -
TOTAL 779 586 33%

 

(EUR thousand) Sales
  12 months
2013
12 months
2012
Change %
Delfi Estonia 4 101 3 469 18%
Delfi Latvia 2 378 2 292 4%
Delfi Lithuania 4 924 4 531 9%
Delfi Ukraine 53 73 -27%
other Delfi companies 0 6 -100%
intersegment eliminations (1) (1) 0%
TOTAL 11 455 10 370 10%

 

(EUR thousand) EBITDA
  12 months
2013
12 months
2012
Change%
Delfi Estonia 291 279 4%
Delfi Latvia 133 183 -27%
Delfi Lithuania 1 056 1 182 -11%
Delfi Ukraine (195) (260) 25%
other Delfi companies 421 399 6%
intersegment eliminations (3) (7) -
TOTAL 1 703 1 776 -4%

 

In the first half of the year, sales of the online media segment increased strongly in all markets. In the second half of the year, most of the growth came from Delfi Estonia, while business in Latvia and Lithuania slowed down. This was attributable to the slowdown in the Baltic and European economies and a hotter than normal summer that further reduced economic activity. In Latvia, the transition to euro added insecurity and unawareness, eroding advertising spending. Delfi Estonia buckled this trend and thanks to video streaming managed to significantly increase sales. Higher expenses related to new solutions and services, increase in the workforce of editorial offices aimed at maintaining quality and decrease in the subsidies for cooperation projects, initially affected both EBITDA and margins. The objective of the next year is to increase the efficiency of new solutions and the whole organisation. Strict cost-saving measures implemented in Ukraine succeeded in avoiding a loss.

In 2013, the biggest projects in all Baltic countries were the development of Delfi TV with additional programming and video streaming as well as the launch of various online verticals such as travel, indoor decoration, cooking, family, etc.

 

Delfi Estonia

·       Delfi Eesti continued transmitting live webcasts that were begun last year. During the year, Delfi webcast various sports events (Estonian Championship matches in basketball, SEB Tallink Open 2013 in tennis, various volleyball and football matches, golf, etc.), cultural events such as Black Nights Film Festival (PÖFF), Tallinn Music Week, Jazzkaar, a concert of Smilers held in the Delfi office, etc. The list of major projects included a full-day webcast from the events dedicated to the 95th anniversary of the Republic of Estonia, the election studio dedicated to municipal elections and debates of candidates for the post of the Mayor of Tallinn. The number of both serious and entertaining broadcasts has increased. 

·       In the second quarter, Delfi and Eesti Päevaleht launched a new business news website Ärileht www.arileht.ee that has become very popular.

·       Also a new travel website www.reisijuht.ee and interior decorating website www.moodnekodu.ee were launched

·       In cooperation with Maaleht, the website www.maaleht.ee was re-designed and supplemented with paid content.

·       A new photo gallery and supplement to the comments section was added which now separates posts of registered commentators from posts of anonymous commentators.

·       Cooperation projects with television channels TV3, Sky Media, Fox TV.

·       Cooperation projects with Estonian Athletics Federation, Estonian Ski Federation, basketball club Kalev/Cramo, volleyball club Tallinna Selver.

·       Cooperation projects with Theatre NO99, Tallinn Music Week, etc.

·       Charity project “Astume koos ellu”.

·       In the first quarter, a new mobile application version mDelfi 5.0. was launched that has helped to increase the number of people who read Delfi via their mobile phones 2.5 times.

Estonian online readership 2012-2013

2013 did not bring about major changes in the Internet market. Delfi remains the largest online publication in Estonia. In comparison with its largest competitor, postimees.ee, the number of users of Delfi increased in the fourth quarter and exceeded postimees.ee on average by 150 thousand unique browsers. Over the year, the number of mobile users of Delfi has gone up 2.4 times, reaching 280 thousand unique browsers a week. Because of the proliferation of smartphones, this growth is set to continue also in 2014.

 

Delfi Latvia

·       Delfi TV streamed from various events including Music Festival Positivus, a concert of Marta Ritova, one of the rising stars of Latvian pop music, annual dance competition Baltic Grand Prix, World Snooker Championships, etc.

·       The portals of business news reached the highest number of visitors of all times, helped by strong media coverage of Latvia’s accession to the eurozone both before the year-end and a blog from the first day of euro changeover.

·       In July Delfi Latvia acquired www.calis.lv portal that is targeted at parents. It was successfully integrated into the Delfi portal and became the basis for launching a news channels targeted at parents.

·       During the year, new online verticals were launched in the field of travel, indoor decoration, gardening and cooking.

·       English-language version of Delfi was launched in cooperation with The Baltic Times

·       Video-on-demand project was launched in cooperation with Lattelecom.

·       Russian-language Delfi started cooperation with TV5, station owned by MTG.

·       Cooperation project with the e-school portal e-klase.lv targeted at younger readers.

·       Cooperation project with kasjauns.lv portal targeted at entertainment..

·       Selection of Latvia’s best athlete in cooperation with the Latvian Olympic Committee.

·       Other cooperation projects in different fields:

-        Main media partner of Positivus Festival,

-        Media partner of the Nordea Riga Marathon,

-        Official news website of the Rally of Champions,

-        Official cooperation partner of advertising festival ”Golden Hammer”,

-        Media partner of Latvian Music Awards „The Great Music Award“,

-        Main media partner of European Rally Championships that were held in Latvia.

·       According to data of the advertising agency DDB, Delfi is the most popular and influential brand in the Latvian social media.

Latvian online readership 2012-2013

In the 4th quarter of 2013, the readership of Latvian online portals was at peak levels, in connection with the tragic accident in Riga. In November, the number of Delfi readers went up 16.4% as compared to the previous month which is the highest all-time increase of readers within a month. With this result, Delfi was only 2% behind Inbox.lv, Latvia’s largest online portal and e-mail service provider, while increasing its leadership position in the news portal segment. Although there was a slight correction in December, Delfi recorded the smallest decline in the percentage among news portals and the gap with tvnet.lv increased to more than 100 thousand unique users. Already in October, Delfi passed social network Draugiem.lv in terms of readers, making Delfi second-largest Latvian online portals by the number of users in the 4th quarter.

 

Delfi Lithuania

·       In November, a 51% holding was acquired in UAB Sport Media that has secured basketball broadcasting rights in Lithuania for nine years. Participation and partnership with the Lithuanian Basketball Federation creates an opportunity to significantly increase video streaming of the most popular sport in Lithuania.  

·       In cooperation with the Group’s magazine publisher Ekspress Leidyba, verticals were developed on the basis of magazines. Together  www.cosmopolitan.lt, www.moteris.lt, www.panele.lt, www.manonamai.lt and www.tavovaikas.lt are strong standalone websites with a focus on lifestyle and entertainment.

·       Other specialised portals on travel, cooking, home and interior decoration and website targeted at parents were launched.

·       The cooperation project with Nubo TV that allows computer users to watch various TV channels is successful.

·       A new e-bookstore was launched.

·       The development of Alio, a portal of classified ads acquired at the end of 2012, has been disappointing because its online potential is not being fully used and its print version is decreasing faster than initially expected.

·       In the first quarter, Delfi Lithuania launched Russian, Polish and English language versions.

Lithuanian online readership 2012-2013

Among Lithuanian Internet users, Delfi Lithuania remains an uncontested market leader, with more than one million unique users a month. In December, Delfi.lt attained its all-time best result with 1.127 million users a month, increasing the gap with the news portal 15min.lt to 270 thousand users a month. The readership of the Lietuvos Rytas portal has also increased and is already close to that of 15min.lt.

 

Delfi Ukraine

·       In 2013, the previous strategy was continued, offering easier and more tabloid-like news and mainly increasing production of content targeted at women.

·       This strategy has helped to increase the number of users that is getting close to that of Delfi Lithuania and reaches almost one million. However, it has not generated enough advertising revenue to have confidence in the future of the project. Therefore, a decision has been made to terminate the Group’s activity in Ukraine. The local undertaking will be liquidated, while the management and the editorial office are allowed to use the Delfi trademark and portal for some time, but without the Group’s support.

 

Periodicals segment

The periodicals segment includes AS Eesti Ajalehed, the publisher of Maaleht, Eesti Ekspress and Eesti Päevaleht, AS SL Õhtuleht, the publisher of Õhtuleht and Linnaleht, book publisher OÜ Hea Lugu, magazine publishers AS Ajakirjade Kirjastus in Estonia and UAB Ekspress in Lithuania. This segment also includes AS Express Post, engaged in home delivery of periodicals.

 

(EUR thousand) Sales
  Q4 2013 Q4 2012 Change%
AS Eesti Ajalehed 3 288 2 975 11%
OÜ Hea Lugu 431 554 -22%
AS SL Õhtuleht* 964 950 1%
AS Ajakirjade Kirjastus* 1 136 1 186 -4%
UAB Ekspress Leidyba 646 641 1%
AS Express Post* 605 601 1%
intersegment eliminations (304) (281) -8%
TOTAL 6 766 6 626 2%

 

(EUR thousand) EBITDA
  Q4 2013 Q4 2012 Change%
AS Eesti Ajalehed 183 172 6%
OÜ Hea Lugu 20 (67) 130%
AS SL Õhtuleht* 53 51 4%
AS Ajakirjade Kirjastus* 75 93 -19%
UAB Ekspress Leidyba 32 (80) 140%
AS Express Post* 72 85 -15%
intersegment eliminations 0 (1) -
TOTAL 435 253 72%

 

(EUR thousand) Sales
  12 months 2013 12 months 2012 Change%
AS Eesti Ajalehed 11 235 11 300 -1%
OÜ Hea Lugu 987 1 699 -42%
AS SL Õhtuleht* 3 734 3 705 1%
AS Ajakirjade Kirjastus* 4 036 4 196 -4%
UAB Ekspress Leidyba 2 515 2 629 -4%
AS Express Post* 2 351 2 313 2%
intersegment eliminations (1 060) (1 101) 4%
TOTAL 23 798 24 741 -4%

 

(EUR thousand) EBITDA
  12 months 2013 12 months 2012 Change %
AS Eesti Ajalehed 368 454 -19%
OÜ Hea Lugu 55 48 15%
AS SL Õhtuleht* 221 244 -9%
AS Ajakirjade Kirjastus* 172 35 391%
UAB Ekspress Leidyba 0 (190) 100%
AS Express Post* 279 258 8%
intersegment eliminations (2) (1) -
TOTAL 1 093 848 29%

* Proportionate share of joint ventures

2013 will be remembered by the continued recession in the advertising market of print media. Advertising income of almost all newspapers decreased. At the same time advertising volumes of magazines in Estonia are growing that creates some confidence about the future and hope that the exodus of advertising from print media is slowing down. Circulations of newspapers and magazines have been in a slight downward trend and income is generated mainly through price increases. A positive factor is the ongoing growth of digital subscriptions that went up sharply especially in summer months. Throughout the year, the number of digital subscribers of Eesti Ekspress is up 60% and the number of subscribers of Eesti Päevaleht has almost doubled, reaching five and a half thousand for both publications. From now on, digital subscribers can read both digital newspapers and paid online content. In addition, in cooperation with Eesti Digiraamatute Keskus (Estonian Centre of e-books), a digital subscription entitles the subscriber to one free e-book a month. Our newspapers can be read in full also via mobile phones. In the autumn, the digital package of Maaleht was launched.  

At the beginning of the year the joint project of OÜ Hea Lugu and Eesti Päevaleht was continued that includes 15 films dedicated to the 100th anniversary of Estonian film. At the start of October, Eesti Ekspress co-launched a similar series of DVDs with Estonian children’s films. In August, LP and Eesti Päevaleht launched a new series of criminal novels.

The website and mobile application of SL Õhtuleht has been renewed. Ajakirjade Kirjastus and SL Õhtuleht started cooperation in co-selling web advertising space. From July, “Kalale”, a new fishing magazine targeted at men, is being published.

Estonian newspaper circulation  2012-2013

Circulations of Estonian newspapers have remained stable or are falling moderately. The circulation of daily newspapers is falling faster than that of weeklies. At year-end, the highest decline in the circulation was recorded for Postimees, a publication of Eesti Meedia: more than 10% in comparison with December 2012. As an annual average, the circulation of larger daily newspapers has fallen by 4%.  Weekly newspapers have done relatively well, with Eesti Ekspress and Maaleht, two publications of Ekspress Grupp, managing to maintain average circulation. As for the publications of Ekspress Grupp, one needs to add also subscribers of digital newspapers numbering ca 5 500 for both Eesti Ekspress and for Eesti Päevaleht at the end of the year. In comparison with the end of 2012, the number of subscribers of the digital package of Eesti Ekspress has increased by 60% and the number of subscribers of the digital package of Eesti Päevaleht has grown even by as much as 90%.

Estonian newspaper readership 2012-2013

In 2013, there were no major changes in the readership of Estonian newspapers. According to the readership survey of Turu-uuringute AS, the number of newspaper readers fell by 2% on average in 2013. Monthly fluctuations have been bigger, but it is attributed mainly to the survey methods. It should be mentioned that the number of digital newspapers of Ekspress Grupp is not included in the above figures and the number of readers of all publications of Ekspress Grupp is higher than shown in the graph.

 

Printing services segment

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

 

(EUR thousand) Sales
  Q4 2013 Q4 2012 Change%
AS Printall 7 566 8 046 -6%

 

(EUR thousand) EBITDA
  Q4 2013 Q4 2012 Change%
AS Printall 1 604 1 650 -3%

 

(EUR thousand) Sales
  12 months 2013 12 months 2012 Change%
AS Printall 27 462 29 167 -6%

 

(EUR thousand) EBITDA
  12 months 2013 12 months 2012 Change%
AS Printall 5 862 6 052 -3%

 

After a number of years, total sales of AS Printall comprising paper and printing services decreased. Negative impact is attributable to falling circulations, and it takes a long time to offset and replace them with new customers due to the specific nature of the printing industry. Also, since in the peak season the production capacity of heatset machines has been at a maximum level, sales can be increased only by individual orders in less active months.The company’s revenue purely from printing services fell slightly less, 2.3% in 2013. Work in making processes more efficient is continuing, as a result of which the EBITDA margin has even been increased. 85% of revenue comes from heatset printing.

Printing services and the environment

In addition to its very strong financial position, Printall also focuses on environmentally conscious production. In 2012, Printall was granted ISO 9001 management and ISO 14001 environmental certificates.

The Minister of the Environment of the Republic of Estonia and the waste managing company AS Ragn-Sells awarded Printall with the title of the Top Recycler of the Year, because the company recycles 95% of its waste.

The Nordic Council of Ministers has awarded Printall with the environmental label “The Nordic Ecolabel”, used to acknowledge the companies in the Nordic countries that use environmentally efficient production. Printall also has FSC and PEFC Chain of Custody (COC) certificates, which the company uses to promote a green way of thinking in the printing industry. Both of those certificates indicate compliance with monitoring and product production process requirements which are issued to businesses that comply with the requirements established by the FSC (Forest Stewardship Council) and the PEFC (Programme for the Endorsement of Forest Certification). A business that is issued these certificates helps to support the environmentally friendly, socially fair and economically viable management of the world’s forests.

Printall cares about the environment and uses green energy. The POWERED BY GREEN certificate is a proof that the company buys electricity, 70% of which has been generated by renewable sources of energy.

 

Consolidated balance sheet (unaudited)

(EUR thousand) 31.12.2013 31.12.2012
ASSETS    
Current assets    
Cash and cash equivalents 4 403 3 182
Term deposit 98 0
Trade and other receivables 7 229 7 344
Inventories 2 717 2 922
Total 14 447 13 448
Non-current assets held for sale 0 97
Total current assets 14 447 13 545
Non-current assets    
Term deposit 0 98
Trade and other receivables 399 365
Property, plant and equipment 13 665 14 841
Intangible assets 48 955 51 450
Total non-current assets 63 019 66 754
TOTAL ASSETS 77 466 80 299
LIABILITIES    
Current liabilities    
Borrowings 3 760 4 347
Trade and other payables 10 708 10 620
Total current liabilities 14 468 14 967
Long term liabilities    
Long-term borrowings 20 672 24 233
Other long-term payables 1 0
Total non-current liabilities 20 673 24 233
Total liabilities 35 141 39 200
EQUITY    
Share capital 17 878 17 878
Share premium 14 277 14 277
Reserves 1 250 740
Retained earnings 8 848 8 190
Currency translation reserve 72 14
TOTAL EQUITY 42 325 41 099
TOTAL LIABILITIES AND EQUITY 77 466 80 299
       

 

Consolidated statement of comprehensive income (unaudited)

 
(EUR thousand)
 
Q4 2013 Q4  2012 12 months 2013 12 months 2012
Sales revenue 16 541 16 447 58 442 59 706
Cost of sales (12 445) (12 533) (45 250) (46 519)
Gross profit 4 096 3 914 13 192 13 187
Other income 196 245 556 650
Marketing expenses (791) (768) (2 442) (2 378)
Administrative expenses (2 106) (1 805) (6 527) (6 643)
Other expenses (47) (90) (132) (220)
Gain on sale of ownership interest in a joint venture 0 0 0 0
Impairment of trademarks and goodwill  (2 467)  (157) (2 467) (157)
Operating profit  (1 119) 1 339 2 180 4 439
Interest income 2 0 6 5
Interest expense (185) (206) (763) (1 549)
Foreign exchange gains/losses  (46)  (13)  (71)  (15)
Other finance income/costs (16) (14) (58) (117)
Total finance income/costs  (245)  (233)  (886)  (1 676)
Profit (loss) on shares of associates 20  (8) 20  (41)
Profit (loss) before income tax  (1 344) 1 098 1 314 2 722
Income tax expense (66)  14 (233) (197)
Net profit (loss) for the reporting period  (1 410) 1 112 1 081 2 525
Net profit (loss) for the reporting period attributable to:        
Equity holders of the parent company  (1 410) 1 112 1 081 2 525
Other comprehensive income (expense) that can be later reclassified to profit or loss         
Currency translation differences 45 8 58 10
Profit on change in value of a hedging instrument 0 0 0 176
Total other comprehensive income for the period 45 8 58 186
Comprehensive income (expense) for the reporting period  (1 365) 1 120 1 139 2 711
Attributable to equity holders of the parent company  (1 365) 1 120 1 139 2 711
Basic and diluted earnings per share  (0.05) 0.04 0.04 0.08

Consolidated cash flow statement (unaudited)

(EUR thousand) 2013 2012
Cash flows from operating activities    
Operating profit for the reporting period 2 180 4 439
Adjustments for:    
Depreciation, amortisation and impairment 2 618 3 285
Loss on sale of trademarks, trademark and goodwill impairment 2 467 157
Gain / loss on sale and write-down of property, plant and equipment (29) 63
Change in value of share option 384 0
Cash flows from operating activities:    
Trade and other receivables 24 (715)
Inventories 342 (146)
Trade and other payables 144 (433)
Cash generated from operations 8 130 6 650
Income tax paid (305) (188)
Interest paid (794) (1 591)
Net cash generated from operating activities 7 031 4 871
Cash flows from investing activities    
Acquisitions through business combinations (327) (434)
Purchase of other financial investments (15) (15)
Interest received 34 5
Purchase of  property, plant and equipment (888) (785)
Proceeds from sale of property, plant and equipment 51 42
Loans granted (3) (10)
Loan repayments received 6 182
Net cash generated from investing activities (1 142) (1 015)
Cash flows from financing activities    
Dividends paid (298) 0
Finance lease repayments made (25) (390)
Change in use of overdraft (745) 731
Change in used of factoring 0 (270)
Repayments of borrowings (3 600) (3 474)
Net cash used in financing activities (4 668) (3 403)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS 1 221 453
Cash and cash equivalents at the beginning of the period 3 182 2 729
Cash and cash equivalents at the end of the period 4 403 3 182

 

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