AS Ekspress Grupp: Consolidated Interim Report for the Fourth Quarter and 12 Months of 2014


Tallinn, Estonia, 2015-02-27 09:31 CET (GLOBE NEWSWIRE) --  

The year 2014 was a successful year for Ekspress Group. In year-on-year comparison, the consolidated EBITDA of the Group increased by 22% to almost EUR 9 million. Consolidated net profit was 30% higher and amounted to EUR 4.6 million. The EBITDA margin was 14.5%. The actual results were also higher compared to our cautiously budgeted EBITDA of EUR 8 million and net profit of EUR 3.8 million.

In the 4th quarter, the EBITDA increased by 37% to EUR 2.8 million, the net profit was 53% higher amounting to EUR 1.6 million. The EBITDA margin of the year’s final quarter amounted to 16.4%.

The above figures include all our joint ventures (AS SL Õhtuleht, AS Ajakirjade Kirjastus and AS Express Post) consolidated 50% line-by-line. Starting from 2014, in consolidated financial reports 50% joint ventures are recognised under the equity method, in compliance with new international financial reporting standards (IFRS). The change in this accounting policy does not affect the net profit, but decreases the fourth-quarter sales revenue by approximately EUR 2.3 million and the EBITDA by approximately EUR 0.35 million (annual sales revenue is approximately EUR 8.6 million lower and EBITDA approximately EUR 1.0 million lower). In its monthly reports, the management has continued to monitor the Group’s performance on a basis of proportional consolidation of joint ventures and the syndicated loan contract also determines the calculation of loan covenants by proportional consolidation. For the purpose of clarity, the management report shows two sets of indicators: one where joint ventures are consolidated line-by-line 50% as previously and the other where joint ventures are recognised under the equity method and their net result is presented as financial income in one line. In  Note 3 of the financial statements, the impact of every joint venture on the respective line of the income statement and balance sheet is described in more detail.

The income statement includes financial income in the amount of EUR 1.9 million resulting from the acquisition of shares of AS Ajakirjade Kirjastus and AS SL Õhtuleht from AS Eesti Meedia, their sale to OÜ Suits Meedia and subsequent restructuring. In essence, joint ventures with AS Eesti Meedia were sold and new joint ventures were acquired together with OÜ Suits Meedia. In addition, as a result of these transactions, trademarks, other intangible assets and goodwill in the acquired joint ventures are now recognised at their fair value in both the balance sheet of the joint ventures themselves and the Group (where joint ventures are 50% consolidated). In the income statement, the depreciation cost of these trademarks and other assets is recognised subsequently thus decreasing the net profit. 

In addition to the above, the net profit was influenced by the impairment of goodwill related to Delfi Latvia in the amount of EUR 1.4 million. It is partly attributable to the decision made in the first half of 2014 to invest in the strengthening of the editorial office of Delfi Latvia which has had an impact on the entity’s financial results and partly to the downturn of the economic climate, caused mainly by the events in Ukraine.

The Group’s financial leverage improved notably during the year. The Group’s total debt to EBITDA ratio (based on 50% proportional consolidation of joint ventures) decreased down to 2.61 by the end of the year and the debt service coverage ratio increased up to 1.90. Today our balance sheet allows us to look very aggressively towards new investment opportunities.

Media segment which includes 50% joint ventures achieved EBITDA growth of 42% compared to last year, totalling EUR 4.0 million. In the 4th quarter, EBITDA was 19% higher, totalling EUR 1.4 million. Starting from the third quarter when the Lithuanian magazine publisher UAB Ekspress Leidyba was merged with Delfi Lithuania, we no longer separate online media from periodicals, and talk about one media segment which represents both online and print media. The online revenue of Delfi Lithuania continues to be reported separately.

In the media segment, the biggest EBITDA growth was achieved by Delfi Estonia, exceeding last year’s result by 95% and amounting to EUR 0.6 million. This included fourth-quarter EBITDA in the amount of EUR 0.2 million which is 36% higher than a year earlier. The strong result of Delfi Estonia is due to excellent work of the editorial office in increasing the readership of the portal that has enabled the advertising sales team to increase the revenue faster than the market in average. The rapid growth of new products, especially online topical portals and video solutions played an important role in increasing the revenue.

Although Delfi Latvia saw the EBITDA decrease 32% compared to year ago, it still earned a profit of EUR 0.1 million. In the 4th quarter, the result remained the level of previous year. In all three Baltic States, the competition in Latvia is the toughest. Acquisitions made by competitors to increase their market share have essentially equalled the readership of the three largest portals in Latvia, although Delfi remains the country’s largest news portal and for a few months in the autumn was also Latvia’s largest internet environment. In such a tough competitive situation we decided not to invest in acquisitions, but in the development of our own product, increasing editorial office and opening new topical portals. For this reason, costs in Delfi Latvia in 2014 were higher than we had planned at the start of the year.

EBITDA of Delfi Lithuania increased 23% in a year to EUR 1.3 million. Fourth-quarter EBITDA remained on the same level as year before. The result of Delfi Lithuania was most affected by the merger with other group company Ekspress Leidyba, the Lithuanian magazine publisher, as a result of which we managed to optimise the organisational structure, while creating better possibilities for selling online and print advertising together.

It was also a good year for publishers. Although advertising income was largely in a downward trend, subscription income increased. AS Eesti Ajalehed that publishes newspapers Eesti Ekspress, Eesti Päevaleht and Maaleht improved its result by 46% and earned EUR 0.5 million in EBITDA. At the same time the fourth-quarter result was 19% weaker than a year earlier and the profit was only EUR 0.15 million. Additional contribution to the result during the year came from the series of Estonian children’s films that were produced in cooperation with a group’s book publisher Hea Lugu, and a series of detective novels, a cooperation project with third party book publisher Varrak. Our book publishing company Hea Lugu provided a positive surprise by earning an annual profit of EUR 0.1 million which is an increase of 71% from a year earlier. The strong annual result was attributable to the series of children’s films in the first half of the year and to several bestsellers published.

AS SL Õhtuleht increased its EBITDA result by 61% in a year to EUR 0.7 million. Fourth-quarter profit, at the same time, was 142% higher. The EBITDA result of AS Ajakirjade Kirjastus also improved this year, increasing by 49% and totalling EUR 0.5 million by the end of the year. In the 4th quarter, the result was 39% better. The result of both AS SL Õhtuleht and AS Ajakirjade Kirjastus was influenced positively by smaller printing costs resulting from entering into new printing contracts with AS Kroonpress and AS Printall. Express Post, a home delivery service provider, grew its EBITDA by 33% in a year, earning EUR 0.7 million. Fourth-quarter result improved 57% year-on-year.

Since only the net profit of our joint ventures is recognised in the Group’s consolidated income statement prepared in accordance with new IFRS, the direct positive impact on consolidated results will be smaller due to amortisation of the trademarks and customer relations which now appear at their fair value in the balance sheet of the joint ventures of AS SL Õhtuleht and AS Ajakirjade Kirjastus as a result of ownership restructuring. However the positive impact is reflected in the EBITDA of the joint ventures themselves.

One of the most significant events in 2014 was the ending of the court dispute over the ownership of AS SL Õhtuleht and AS Ajakirjade Kirjastus. As a result of the dispute, OÜ Suits Meedia replaced AS Eesti Meedia as a shareholder in those two joint ventures. The immediate positive impact of the change in ownership was a significant decrease in the cost of printing services. In addition to a direct economic effect, this decision also has a long-term positive impact on the companies which have now more possibilities to compete in the market.

Very important event for the media segment was the growth in the number of paid digital subscriptions which exceeded 10,000 subscribers at the end of the year both for newspaper Eesti Ekspress and Eesti Päevaleht. It is also worth mentioning that weekly newspaper Eesti Ekspress celebrated its 25th birthday in autumn and at the same time Delfi celebrated its 15th birthday.

For online media companies, one of the most significant projects in 2014 was the development of the discount price portal Zave. By the end of the year, approximately 150 different merchants in the three Baltic States participated in this project.

The printing services segment increased its revenues by 5% and EBITDA by 1% last year and earned approximately EUR 6 million EBITDA. In 2014, the key event in the printing services segment was the decision to acquire a new printing machine and its arrival in the last month of the year. The new sheet fed machine starts production at the beginning of 2015.

At the end of the year we decided to launch a new business line – arrangement of entertainment events. The first project will be an exhibition in Riga about M/S Titanic that sank on her maiden voyage. The exhibition will open in the first half of 2015. After the Titanic exhibitions we will decide our further steps in terms of developing the business line of entertainment events.

In 2015 we expect the Group’s business to gather pace and increase of our financial capability. We expect to increase the consolidated revenue by 5% and the EBITDA by 7% at least. This includes 50% of the results of our joint ventures.

At the start of January we announced a merger between AS Eesti Ajalehed and AS Delfi into one entity. The objective of this step is to cut administrative bureaucracy in joint transactions between the two closely linked companies, to increase journalistic quality through further cooperation of editorial offices of both media entities and to provide paper and digital newspapers direct access to the marketing capacity of Estonian largest portal. For our advertising customers we wish to provide access to all our platforms from a single sales organisation.

We continue to develop the discount price portal Zave, a new innovative customer communication tool for retail merchants. We have also set a goal to increase the number of paid digital subscriptions up to 20 thousand by the end of the year.

We have also started the project in investing into Baltic startup companies with the objective of supporting young businesses that could develop their business with the help of the Group’s marketing power in Baltic states and prepare expanding to larger international markets.

Our mission remains to offer new and interesting experiences both on paper and in digital media, without ever compromising on news quality, choice of topics and journalistic objectivity.

 

FINANCIAL INDICATORS AND RATIOS – joint ventures consolidated 50%                 

line-by-line

Starting from 2014, in consolidated financial reports 50% joint ventures are recognised under the equity method, in compliance with new international financial reporting standards (IFRS). In its monthly reports, the management has continued to monitor the Group’s performance on a basis of proportional consolidation of joint ventures and the syndicated loan contract also determines the calculation of loan covenants by proportional consolidation. For the purpose of clarity, the management report shows two sets of indicators: one where joint ventures are consolidated line-by-line 50% as previously and the other where joint ventures are recognised under the equity method and their net result is presented as financial income in one line.

 

Performance indicators – joint ventures consolidated  50% (EUR thousand) Q4 2014 Q4 2013 Change % Q4 2012 Q4 2011
For the period          
Sales 16 778 16 526 2% 16 447 16 313
EBITDA 2 757 2 015 37% 2 246 1 986
EBITDA margin (%) 16.4% 12.2%   13.7% 12.2%
Operating profit* 1 894 1 348 41% 1 496 1 037
Operating margin* (%) 11.3% 8.2%   9.1% 6.4%
Interest expenses (186) (185) -1% (206) (523)
Profit /(loss) for the period* 1 614 1 057 53% 1 269 535
Net margin* (%) 9.6% 6.4%   7.7% 3.3%
Net profit /(loss) for the period in the financial statements
(incl. impairments and gain on change of ownership interest)
1 149 (1 410) 181% 1 112 (215)
Net margin (%) 6.8% -8.5%   6.8% -1.3%
Return on assets ROA (%) 1.4% -1.8%   1.4% -0.3%
Return on equity ROE (%) 2.4% -3.2%   2.7% -0.6%
Earnings per share (EPS) 0.04 (0.05)   (0.04) (0.01)

* The results exclude allowances on impairments and one-off gains in relation to the acquisition in Eesti Päevalehe AS in 2011 and the change in ownership structure in joint ventures AS Ajakirjade Kirjastus and AS SL Õhtuleht in 2014. More information is disclosed in the Note 5 to the financial statements.

 

Performance indicators – joint ventures consolidated 50% (EUR thousand) 12 months 2014 12 months 2013 Change % 12 months 2012 12 months 2011
For the period          
Sales 61 384 58 427 5% 59 706 57 391
EBITDA 8 878 7 264 22% 7 882 6 968
EBITDA margin (%) 14.5% 12.4%   13.2% 12.1%
Operating profit* 5 638 4 647 21% 4 596 3 443
Operating margin* (%) 9.2% 8.0%   7.7% 6.0%
Interest expenses (732) (763) 4% (1 549) (2 212)
Profit /(loss) for the period* 4 620 3 548 30% 2 682 893
Net margin* (%) 7.5% 6.1%   4.5% 1.6%
Net profit for the period in the financial statements
(incl. impairments and gain on change of ownership interest)
5 110 1 081 373% 2 525 1 683
Net margin (%) 8.3% 1.9%   4.2% 2.9%
Return on assets ROA (%) 6.6% 1.4%   3.2% 2.0%
Return on equity ROE (%) 11.4% 2.5%   6.4% 4.4%
Earnings per share (EPS) 0.17 0.04   0.08 0.06

* The results exclude allowances on impairments and one-off gains in relation to the acquisition in Eesti Päevalehe AS in 2011 and the change in ownership structure in joint ventures AS Ajakirjade Kirjastus and AS SL Õhtuleht in 2014. More information is disclosed in the Note 5 to the financial statements.

 

Balance sheet – joint ventures consolidated 50% (EUR thousand) 31.12.2014 31.12.2013 Change %
As of the end of the period      
Current assets 15 189 14 447 6%
Non-current assets 65 665 63 019 4%
Total assets 80 854 77 466 5%
       incl. cash and bank 6 788 4 501 51%
       incl. goodwill 39 432 40 052 -2%
Current liabilities 14 110 14 468 -2%
Non-current liabilities 19 569 20 673 -5%
Total liabilities 33 679 35 141 -4%
       incl. borrowings 24 592 24 432 1%
Equity 47 175 42 325 12%

 

Financial ratios (%) – joint ventures consolidated 50% 31.12.2014 31.12.2013
Equity ratio (%) 58% 55%
Debt to equity ratio (%) 52% 58%
Debt to capital ratio (%) 27% 32%
Total debt/EBITDA ratio (adjusted as per syndicate agreement) 2.61 3.36
Debt service coverage ratio 1.90 1.66
Liquidity ratio 1.08 1.00

 

FINANCIAL INDICATORS AND RATIOS – joint ventures recognized                       

under the equity method

 

Performance indicators – joint ventures under the equity method (EUR thousand) Q4 2014 Q4 2013 Change % Q4 2012 Q4 2011
For the period          
Sales (only subsidiaries) 14 454 14 291 1% 14 165 13 995
EBITDA (only subsidiaries) 2 413 1 815 33% 2 017 1 740
EBITDA margin (%) 16.7% 12.7%   14.2% 12.4%
Operating profit* (only subsidiaries) 1 661 1 175 41% 1 293 822
Operating margin* (%) 11.5% 8.2%   9.1% 5.9%
Interest expenses (only subsidiaries) (158) (185) 14% (206) (524)
Profit of joint ventures by equity method 182 174 4% 202 208
Profit for the period* 1 601 1 057 52% 1 269 535
Net margin* (%) 11.1% 7.4%   9.0% 3.8%
Net profit/(loss) for the period in the financial statements
(incl. impairments and gain on change of ownership interest)
1 136 (1 410) 181% 1 112 (215)
Net margin (%) 7.9% -9.9%   7.8% -1.5%
Return on assets ROA (%) 1.5% -1.8%   1.4% -0.3%
Return on equity ROE (%) 2.4% -3.2%   2.7% -0.6%
Earnings per share (EPS) 0.04 (0.05)   (0.04) (0.01)

* The results exclude allowances on impairments and one-off gains in relation to the acquisition in Eesti Päevalehe AS in 2011 and the change in ownership structure in joint ventures AS Ajakirjade Kirjastus and AS SL Õhtuleht in 2014. More information is disclosed in the Note 5 to the financial statements.

 

Performance indicators – joint ventures under the equity method (EUR thousand) 12 months 2014 12 months 2013 Change % 12 months 2012 12 months 2011
For the period          
Sales (only subsidiaries) 52 793 50 086 5% 51 290 49 027
EBITDA (only subsidiaries) 7 894 6 591 20% 7 345 6 311
EBITDA margin (%) 15.0% 13.2%   14.3% 12.9%
Operating profit* (only subsidiaries) 4 973 4 071 22% 4 173 2 930
Operating margin* (%) 9.4% 8.1%   8.1% 6.0%
Interest expenses (only subsidiaries) (689) (763) 10% (1 550) (2 219)
Profit of joint ventures by equity method 557 494 13% 339 421
Profit for the period* 4 621 3 548 30% 2 682 893
Net margin* (%) 8.8% 7.1%   5.2% 1.8%
Net profit / (loss) for the period in the financial statements
(incl. impairments and gain on change of ownership interest)
5 110 1 081 373% 2 525 1 683
Net margin (%) 9.7% 2.2%   4.9% 3.4%
Return on assets ROA (%) 6.8% 1.4%   3.2% 2.0%
Return on equity ROE (%) 11.4% 2.5%   6.4% 4.4%
Earnings per share (EPS) 0.17 0.04   0.08 0.06

* The results exclude allowances on impairments and one-off gains in relation to the acquisition in Eesti Päevalehe AS in 2011 and the change in ownership structure in joint ventures AS Ajakirjade Kirjastus and AS SL Õhtuleht in 2014. More information is disclosed in the Note 5 to the financial statements.

 

Balance sheet– joint ventures under equity method (EUR thousand) 31.12.2014 31.12.2013 Change %
As at the end of the period      
Current assets 12 303 11 357 8%
Non-current assets 64 292 63 899 1%
Total assets 76 595 75 256 2%
       incl. cash and bank 5 275 2 209 139%
       incl. goodwill 38 153 39 596 -4%
Current liabilities 11 481 12 259 -6%
Non-current liabilities 17 939 20 672 -13%
Total liabilities 29 420 32 931 -11%
       incl. borrowings 23 152 24 432 -5%
Equity 47 175 42 325 11%

 

Financial ratios (%) – joint ventures under the equity method 31.12.2014 31.12.2013
Equity ratio (%) 62% 56%
Debt to equity ratio (%) 49% 58%
Debt to capital ratio (%) 27% 34%
Total debt /EBITDA ratio 2.93 3.71
Debt service coverage ratio 1.77 1.50
Liquidity ratio 1.07 0.93

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. Book sales are the strongest in the last quarter of the year. Subscriptions and retail sales of periodicals do not fluctuate as much as advertising revenue. However the summer period is always more quiet and at the beginning of the school year in September there is increase in subscriptions and retail sale which usually continues until next summer holiday period.    

 

  Formulas used to calculate the financial ratios
EBITDA margin (%)  EBITDA/sales x 100
Operating margin* (%)  Operating profit*/sales x100
Net margin* (%)  Net profit*/sales x100
Net margin (%)  Net profit /sales x100
Earnings per share  Net profit / average number of shares
Equity ratio (%) Equity / (liabilities + equity) x100
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 ratio Interest bearing borrowings /EBITDA
Debt service coverage ratio EBITDA/loan and interest payments for the period
Liquidity ratio Current assets / current liabilities
Return on assets ROA (%) Net profit /average assets x 100
Return on equity ROE (%) Net profit /average equity x 100

* The results exclude allowances on impairments and one-off gains in relation to the acquisition in Eesti Päevalehe AS in 2011 and the change in ownership structure in joint ventures AS Ajakirjade Kirjastus and AS SL Õhtuleht in 2014. More information is disclosed in the Note 5 to the financial statements.

SEGMENT OVERVIEW

From the 3rd quarter of the current year when the Group’s Lithuanian subsidiaries were merged, the Group’s activities are divided into the media segment and the printing services segment. Previously, the entities of the media segment were divided into online media and periodicals segments.

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.

 

Key financial data of the segments Q4 2011-2014

(EUR thousand) Sales Sales
  Q4 2014 Q4 2013 Change % Q4 2012 Q4 2011
media segment (by equity method) 7 535 7 617 -1% 7 049 6 550
       incl. revenue from all digital and online channels 4 015 3 389 18% 3 029 2 618
printing services segment 8 083 7 566 7% 8 046 8 143
corporate functions 459 393 17% 308 71
intersegment eliminations (1 624) (1 286) -26% (1 238) (769)
TOTAL GROUP by equity method 14 454 14 291 1% 14 165 13 995
media segment by proportional consolidation 10 141 10 043 1% 9 532 9 030
       incl. revenue from all digital and online channels 4 257 3 584 19% 3 184 2 773
printing services segment 8 083 7 566 7% 8 046 8 143
corporate functions 459 393 17% 308 71
intersegment eliminations (1 905) (1 476) 29% (1 439) (931)
TOTAL GROUP by proportional consolidation 16 778 16 526 2% 16 447 16 313

 

(EUR thousand) EBITDA EBITDA
  Q4 2014 Q4 2013 Change % Q4 2012 Q4 2011
media segment by equity method 1 103 1 014 9% 611 511
media segment by proportional consolidation 1 448 1 214 19% 839 758
printing services segment 1 623 1 604 1% 1 650 1 495
corporate functions (313) (763) 59% (242) (267)
intersegment eliminations 0 (40) 100% (1) 1
TOTAL GROUP by equity method 2 413 1 815 33% 2 017 1 740
TOTAL GROUP by proportional consolidation 2 757 2 015 37% 2 246 1 986

 

EBITDA margin Q4 2014 Q4 2013 Q4 2012 Q4 2011
media segment by equity method 15% 13% 9% 8%
media segment by proportional consolidation 14% 12% 9% 8%
printing services segment 20% 21% 21% 18%
TOTAL GROUP by equity method 17% 13% 14% 12%
TOTAL GROUP by proportional consolidation 16% 12% 14% 12%

 

Key financial data of the segments 12 months 2011-2014

(EUR thousand) Sales Sales
  12 months 2014 12 months 2013 Change % 12 months 2012 12 months 2011
media segment (by equity method) 27 459 25 842 6% 25 562 23 789
       incl. revenue from all digital and online channels 13 449 11 595 16% 10 561 9 111
printing services segment 28 951 27 462 5% 29 167 27 736
corporate functions 1 731 1 530 13% 996 209
intersegment eliminations (5 347) (4 748) 13% (4 435) (2 707)
TOTAL GROUP by equity method 52 793 50 086 5% 51 290 49 027
media segment by proportional consolidation 36 930 34 955 6% 34 773 32 771
       incl. revenue from all digital and online channels 14 306 12 226 17% 11 147 9 673
printing services segment 28 951 27 462 5% 29 167 27 736
corporate functions 1 731 1 530 13% 996 209
intersegment eliminations (6 228) (5 520) 13% (5 230) (3 325)
TOTAL GROUP by proportional consolidation 61 384 58 427 5% 59 706 57 391

 

(EUR thousand) EBITDA EBITDA
  12 months
2014
12 months 2013 Change % 12 months 2012 12 months 2011
media segment by equity method 3 025 2 123 42% 2 089 1 325
media segment by proportional consolidation 4 013 2 792 44% 2 624 1 977
printing services segment 5 944 5 862 1% 6 052 5 959
corporate functions (1 076) (1 356) 21% (797) (980)
intersegment eliminations 0 (38) 101% 1 7
TOTAL GROUP by equity method 7 894 6 591 20% 7 345 6 311
TOTAL GROUP by proportional consolidation 8 878 7 264 22% 7 882 6 968

 

EBITDA margin 2014 2013 2012 2011
media segment by equity method 11% 8% 8% 6%
media segment by proportional consolidation 11% 8% 8% 6%
printing services segment 21% 21% 21% 21%
TOTAL GROUP by equity method 15% 13% 14% 13%
TOTAL GROUP by proportional consolidation 15% 12% 13% 12%

 

MEDIA SEGMENT

The media segment includes Delfi operations in Estonia, Latvia and Lithuania as well as the parent company Delfi Holding. Starting from 1 March 2014, the operations of Delfi in Ukraine have been terminated. The nine-month EBITDA of Delfi Ukraine also includes expenses related to the termination of operations. The media segment also includes AS Eesti Ajalehed (publisher of Maaleht, Eesti Ekspress and Eesti Päevaleht), book publisher OÜ Hea Lugu as well as magazine publisher UAB Ekspress Leidyba in Lithuania, the latter having been merged into Delfi Lithuania on 1 July 2014.

This segment also includes joint ventures AS SL Õhtuleht (publisher of Õhtuleht and Linnaleht), magazine publisher AS Ajakirjade Kirjastus and home delivery company AS Express Post.

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    
Delfi Lithuania www.delfi.lt AS SL Õhtuleht www.ohtuleht.ee
  ru.delfi.lt    

 

Classified portals owned by the Group

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

 

(EUR thousand) Sales
  Q4 2014 Q4 2013 Change %
Delfi Estonia 1 460 1 217 20%
Delfi Latvia 786 683 15%
Delfi Lithuania (incl. Ekspress Leidyba) 2 250 2 085 8%
        incl. online revenue of Delfi Lithuania 1 679 1 416 19%
Delfi Ukraine 0 17 -100%
AS Eesti Ajalehed 2 905 3 288 -12%
OÜ Hea Lugu 202 431 -53%
Other companies (Delfi Holding) 0 -
Intersegment eliminations (68) (104) 34%
TOTAL (subsidiaries) 7 535 7 617 -1%
AS SL Õhtuleht* 1 022 964 6%
AS Ajakirjade Kirjastus* 1 205 1 136 6%
AS Express Post* 654 605 8%
Intersegment eliminations (275) (279) 1%
TOTAL (joint ventures) 2 606 2 426 7%
TOTAL segment by proportional consolidation 10 141 10 043 1%

 

(EUR thousand) EBITDA
  Q4 2014 Q4 2013 Change %
Delfi Estonia 230 169 36%
Delfi Latvia 95 96 -1%
Delfi Lithuania (incl. Ekspress Leidyba) 461 464 -1%
     incl. online revenue of Delfi Lithuania      
Delfi Ukraine 0 (40) 100%
AS Eesti Ajalehed 149 184 -19%
OÜ Hea Lugu 23 20 15%
Other companies (Delfi Holding) 145 122 19%
Intersegment eliminations (0) (0) -
TOTAL (subsidiaries) 1 103 1 014 9%
AS SL Õhtuleht* 127 53 142%
AS Ajakirjade Kirjastus* 104 75 39%
AS Express Post* 114 73 57%
Intersegment eliminations (0) (0) -38%
TOTAL (joint ventures) 344 200 72%
TOTAL segment by proportional consolidation 1 448 1 214 19%

*Proportional share of joint ventures

 

(EUR thousand) Sales
  12 months 2014 12 months 2013 Change %
Delfi Estonia 5 020 4 101 22%
Delfi Latvia 2 562 2 378 8%
Delfi Lithuania (incl. Ekspress Leidyba) 8 047 7 439 8%
        incl. online revenues of Delfi Lithuania 5 557 4 806 16%
Delfi Ukraine 2 53 -96%
AS Eesti Ajalehed 11 330 11 235 1%
OÜ Hea Lugu 792 987 -20%
Other companies 0 -
Intersegment eliminations (294) (351) 16%
TOTAL (subsidiaries) 27 459 25 842 6%
AS SL Õhtuleht* 3 909 3 734 5%
AS Ajakirjade Kirjastus* 4 224 4 036 5%
AS Express Post* 2 415 2 351 3%
Additional eliminations (1 077) (1 008) -7%
TOTAL (joint ventures) 9 471 9 112 4%
TOTAL segment by proportional consolidation 36 930 34 955 6%

 

(EUR thousand) EBITDA
  12 months 2014 12 months 2013 Change %
Delfi Estonia 575 291 98%
Delfi Latvia 90 133 -32%
Delfi Lithuania (incl. Ekspress Leidyba) 1 295 1 056 23%
        incl. online revenues of Delfi Lithuania      
Delfi Ukraine (51) (195) 74%
AS Eesti Ajalehed 539 369 46%
OÜ Hea Lugu 94 55 71%
Other companies 479 421 14%
Intersegment eliminations 3 (7) -
TOTAL (subsidiaries) 3 025 2 123 42%
AS SL Õhtuleht* 356 221 61%
AS Ajakirjade Kirjastus* 257 172 49%
AS Express Post* 372 279 33%
Additional eliminations 2 (3) 168%
TOTAL (joint ventures) 987 670 47%
TOTAL segment by proportional consolidation 4 013 2 792 44%

*Proportional share of joint ventures

 

Delfi Estonia

  • Further development of Delfi TV on a standalone new platform and the increasing number of live webcasts under the Delfi TV brand. Major projects included, already for the second year events dedicated to the anniversary of the Republic of Estonia, reports from Olympic Games, FIBA World Cup, Song and Dance Festival, visit of US President Barack Obama in Estonia, streams from basketball matches abroad and webcasts from games of 5 different Estonian leagues etc.
  • Websites for weather and jokes were renewed. The latter was re-named www.igav.ee.
  • A new verticals were launched: www.kasulik.ee aimed at regular consumers, www.elutark.ee directed to elderly people, www.catwalk.ee intended for people with interest on fashion.
  • Cooperation with the New Age portal www.alkeemia.ee.
  • Cross Baltic development of portal www.zave.ee, intented for information about discount offers in the city.
  • Launching of a new comments’ section which has increased the number of comments posted by registered users.
  • Delfi’s mobile application was renewed.
  • Delfi celebrated it’s 15th birthday in November. “A day with Delfi” was presented for showing to the users how Delfi everyday work is being done and news produced.

 

Estonian online readership 2013-2014

In the third quarter 2014, TNS Emor changed the methodology of its TNS Metric survey, which explains the sharp increase in the number of users. The main essence of the change is more accurate measurement and separate reporting of the number of mobile users. As a result of this change, Delfi remains the largest news portal in Estonia. This applies both to the number of PC and mobile users who visit the news portals.

The increase of the usres in Estonian internet market can be also explained by the increasing number of mobile users using smartphones. This will remain the key priority for news organisations to serve mobile users.

 

Delfi Latvia

  • In July and August, Delfi was the largest online portal in Latvia succeding also the local e-mail provider inbox.lv.
  • Delfi TV streams based on a new platform from such events as matches of the Latvian basketball league and ice hockey league, an exclusive cabaret show from Concert Hall Palladium, opening of the National Library, etc.
  • During the year many new verticals have been launched: travel site www.turismagids.lv both in Latvian and Russian, humour website www.loli.lv, new weather portal www.laika-zinas.lv, home and garden portal www.majadarzs.lv, new portal for women www.vina.lv, Russian portals covering politics www.spektr.lv, easy reading portals aimed at younger generation in Latvian www.skats.lv and Russian www.tchk.lv, health portal www.rutks.lv.
  • Cross Baltic development of portal www.zave.lv, intented for getting overview about discount offers in the city.
  • Media partner for several cooperation projects and teams: 

-        Latvian Music Awards „The Great Music Award“

-        Positivus Festival and several Latvian music bands

-        Baltic Pearl Film and International Film Festival

-        Marketing Festival „Password“ and international advertising festival “Golden Hammer 2014”

-        Riga Fashion Week

-        Riga Marathon

-        Latvian national ice-hockey team

-        Award of the year in Sports etc.

Latvian online readership 2013-2014

In July and August 2014, Delfi.lv became Latvia’s largest online portal for the first time, exceeding the readership of inbox.lv. In September, however, Inbox.lv had again more users than Delfi.lv. In spite of the merger of tvnet.lv and apollo.lv in the 2nd quarter, their readership has not exceeded that of Delfi. In addition, the first available data on the number of users of mobile equipment are very favourable for Delfi.lv. Delfi is exceeding Latvian competitors in terms of mobile equipment by more than 20%.

During the 4th quarter competitive situation remained stable with inbox.lv holding the first position in readership numbers. Delfi has been holding the second position and has been the most read newsportal in Latvia.

Starting from January 2014, the method of the Gemius online survey has changed. The readership in 2014 includes only results for computer users (PC) and excludes all mobile equipment. Separate statistics on mobile equipment will be created in the beginning of 2015.

 

Delfi Lithuania

  • In November and December DELFI news portal achieved its all time high readership records.
  • Delfi TV was launched on a new platform and has produced live webcast and streams from such events as Login, the largest tech conference in the Baltic states, ideas conference Tedx Vilnius, Davis Cup tennis match between Lithuania and Norway, various fashion and theatre events, Geneva Automotive Show, etc.  DELFI signed long lasting contracts with National Basketball League and Lithuanian Basketball Federation and got an exclusive internet streaming rights to broadcast more than 700 sport streams in 2015.
  • Delfi TV launched a daily TV programme with news in brief that in 2 minutes wraps up the most important and interesting news and produced several documentary series.
  • New TV channels „Moteris TV“ (“Lithuanian Woman”)  and „Mano namai TV“ (“My Home”) were launched.
  • Several new verticals were launched and existing sub-sites were renewed. New jokes site www.galjuokauji.lt, a special co-site kablys.delfi.lt dedicated to fisherman audience, a new Delfi English Channel.
  • Co-operation projects such as: special co-site dedicated to auto fans in a partnership with Top Gear magazine, two major on-line automotive projects with the partners "Top Gear Awards" and "Car of the Year" to attract more male audience, special project with www.Kur.lt Lithuanian entertainment guide aimed at young city audience, a food order platform  lekste.lt  was integrated into Delfi recipes vertical www.1000receptu.lt.
  • The layout of the mobile application was renewed and information was added, making Delfi the most popular newsportal in mobile phones and tablet PCs.
  • DELFI changed social media strategy and dedicated additional resources within organization. Due to those activities significatly increased effectiviness in working with social media.
  • Delfi and the Lithuanian magazine publisher Ekspress Leidyba were merged into one media house enabling further synergies between those two companies.

 

Lithuanian online readership 2013-2014

Delfi continues to be the largest online portal in Lithuania. In the 4th quarter, there were no major changes in preferences of Internet users in Lithuania. The initial data about the users of mobile equipment shows that the competition in this segment in Lithuania is very tough and other portals are closer to Delfi in readership than in computer users (PC). Delfi ended year  with a new record of monthly real users – 1.198.737 and reached the highest gap between Delfi and 15min.lt – 19,45%. Starting from January 2014, the method of the Gemius online survey has changed. The readership in 2014 includes only results for computer users (PC) and excludes all mobile equipment. Separate statistics on mobile equipment will be created in the beginning of 2015.

 

Print-media in Estonia

Estonian newspaper circulation 2013-2014

Circulations of Estonian newspapers have remained stable or are falling moderately. The circulation of daily newspapers is falling faster than that of weekly newspapers. As of the 4th quarter 2014, there has also been a significant development in the market – Õhtuleht has been the newspaper with the largest circulation in Estonia for three consecutive months. Other Group publications also performed well during the second half of the year, with all Eesti Päevaleht,  Maaleht and Eesti Ekspress increasing circulation. One also needs to add to these figures the number of subscribers of digital newspapers which totalled more than 10 thousand for both Eesti Ekspress and Eesti Päevaleht, as of the end of the 2014.

Estonian newspaper readership 2013-2014

Over the recent two years, newspaper readership has been fairly stable. Õhtuleht has been one of the most successful newspaper brand, that has been growing it’s readership. Other two daily newspapers, Postimees and Eesti Päevaleht, has been losing readers. Weekly newpapers are also in a stable readership trend. The number of readers of digital newspapers of the Group is not included in the above figures and the number of readers of all publications of the Group is higher than shown in the graph above.

 

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 2014 Q4 2013 Change %
AS Printall 8 083 7 566 7%

 

(EUR thousand) EBITDA
  Q4 2014 Q4 2013 Change %
AS Printall 1 623 1 604 1%

 

(EUR thousand) Sales
  12 months 2014 12 months 2013 Change %
AS Printall 28 951 27 462 5%

 

(EUR thousand) EBITDA
  12 months 2014 12 months 2013 Change %
AS Printall 5 944 5 862 1%

 

In 2014 AS Printall managed to increase its revenues 5%, out of which 5.7% is allocated to increase of services provided and 5.2% sales of paper. Due to changes in political landscape there have been changes in the structure of export markets where the share of Russia continues to decrease.

In June, AS Printall signed a contract for the acquisition of a new sheetfed printing machine. The machine will be used for printing magazine covers, small-circulation magazines and advertising products. The production will start at the beginning of 2015. Approximately 2/3 of the acquisition cost is financed with a long-term loan.

Printing services and the environment

In addition to its very strong financial position, Printall also focuses on environmentally conscious production.  Printall has been  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) 31.12.2014 31.12.2013
ASSETS    
Current assets    
Cash and cash equivalents 3 656 2 111
Term deposit 19 98
Trade and other receivables 6 519 6 774
Corporate income tax prepayment 37 45
Inventories 2 072 2 329
Total current assets 12 303 11 357
Non-current assets    
Term deposit 1 600 0
Trade and other receivables 1 170 269
Deferred tax asset 65 130
Investments in joint ventures 500 1 543
Investments in associates 164 0
Property, plant and equipment 14 506 13 595
Intangible assets 46 287 48 362
Total non-current assets 64 292 63 899
TOTAL ASSETS 76 595 75 256
LIABILITIES    
Current liabilities    
Borrowings 5 213 3 760
Trade and other payables 6 249 8 436
Corporate income tax payable 19 63
Total current liabilities 11 481 12 259
Non-current liabilities    
Long-term borrowings  17 939 20 672
Total non-current liabilities 17 939 20 672
TOTAL LIABILITIES 29 420 32 931
EQUITY    
Share capital 17 878 17 878
Share premium 14 277 14 277
Treasury shares (64) 0
Reserves 1 440 1 250
Retained earnings 13 644 8 848
Currency translation reserve 0 72
TOTAL EQUITY 47 175 42 325
TOTAL LIABILITIES AND EQUITY 76 595 75 256

Consolidated statement of comprehensive income (unaudited)

(EUR thousand) Q4 2014 Q4 2013 12 months 2014 12 months 2013
Sales revenue 14 454 14 291 52 793 50 086
Cost of sales (10 781) (10 852) (40 688) (39 195)
Gross profit 3 673 3 439 12 105 10 891
Other income 132 201 470 542
Marketing expenses (600) (622) (2 011) (1 864)
Administrative expenses (1 495) (1 813) (5 438) (5 396)
Other expenses (49) (30) (153) (102)
Gain from change in ownership interest in joint ventures 978 0 1 933 0
Impairment of goodwill and trademarks (1 443) (2 467) (1 443) (2 467)
Operating profit/(loss) 1 196  (1 292) 5 463 1 604
Interest income 22 1 27 5
Interest expense (158) (185) (689) (763)
Foreign exchange gains/(losses)  (3)  (46) 33  (71)
Other finance costs 42 16 (90) (58)
Total finance income/costs  (181)  (246)  (719)  (887)
Profit on shares of joint ventures 182 174 557 494
Profit (loss) on shares of associates  39 20  23 20
Profit before income tax 1 236  (1 344) 5 324 1 231
Income tax expense (100) (66) (214) (150)
Net profit /(loss) for the reporting period 1 136  (1 410) 5 110 1 081
Net profit/(loss) for the reporting period attributable to:        
Equity holders of the parent company 1 136  (1 410) 5 110 1 081
Other comprehensive income (expense) that may be subsequently reclassified to profit or loss         
Currency translation differences 0 45 (34) 58
Total other comprehensive income (expense) 1 136  (1 365) 5 076 1 139
Comprehensive income (expense) for the reporting period        
Attributable to equity holders of the parent company 1 136  (1 365) 5 076 1 139
Basic and diluted earnings per share 0.04 (0.05) 0.17 0.04

Consolidated cash flow statement (unaudited)

(EUR thousand) 12 months 2014 12 months 2013
Cash flows from operating activities    
Operating profit for the reporting year 5 463 1 604
Adjustments for:    
Depreciation, amortisation and impairment 2 921 2 521
Loss on trademark and goodwill impairment 1 443 2 467
Gain from change in ownership interest in joint ventures (1 933) 0
(Gain)/loss on sale and write-down of property, plant and equipment 6 (30)
Change in value of share option 136 384
Cash flows from operating activities:    
Trade and other receivables 334 72
Inventories 251 242
Trade and other payables (2 250) 16
Cash generated from operations 6 371  
Income tax paid (185) (240)
Interest paid (692) (794)
Net cash generated from operating activities 5 494  
Cash flows from investing activities    
Term deposit (placement)/release (1 600) 0
Received on restructuring of joint ventures 2 354 0
Investments in joint ventures (3) 0
Acquisition of associate (135) 0
Acquisition of subsidiary 0 (327)
Purchase of other investments 0 (15)
Interest received 6 34
Purchase of  property, plant and equipment (3 101) (769)
Proceeds from sale of property, plant and equipment 13 107
Loans granted (24) (3)
Loan repayments received 7 6
Net cash used in investing activities (2 483) (967)
Cash flows from financing activities    
Dividends paid (298) (298)
Dividend received from joint ventures 203 312
Finance lease repayments (75) (25)
Change in use of overdraft 1 117 (745)
Loan received 1 346 0
Repayments of bank loans (3 695) (3 600)
Purchase of treasury shares (64) 0
Net cash used in financing activities (1 466) (4 357)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS 1 545 918
Cash and cash equivalents at the beginning of the year 2 111 1 193
Cash and cash equivalents at the end of the year 3 656 2 111

 

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


Attachments

EG_IV_kvartal_2014_ENG.pdf