Published: 2017-02-28 08:34:22 CET
Ekspress Grupp
Quarterly report

AS Ekspress Grupp: Consolidated Interim Report for the Fourth Quarter and 12-months of 2016

Tallinn, Estonia, 2017-02-28 08:34 CET --  

The year 2016 was a year of new challenges for the Group, both within and outside the Group. The end of the year was also influenced by the rotation in the management of our parent company, subsidiaries and joint ventures that provided new challenges for several managing directors.

 

Consolidated revenue for the fourth quarter increased 1% amounting to EUR 17.4 million and EBITDA growth amounted to 10% and reached EUR 3 million. Consolidated revenue for the whole year increased 2% as compared to the year before and EBITDA increased 8%, amounting to EUR 62.8 million and EUR 8.5 million, respectively. In revenue terms, it was an especially successful year for the online business of our media segment, with online revenue growing 12% in a year, totalling EUR 18.6 million and reaching almost 30% of the Group’s total revenues. It was also positive that in spite of predictions, the print media in Estonia is showing continued viability and increased revenue from last year. The latter is attributable to new products in our portfolio and additional products targeted at subscribers and retail consumer such as books or special magazine issues. The growth in the print media is mainly being driven by subscription and single-copy sales although average circulations are decreasing. The printing services segment continues to stagnate, with strong price pressure decreasing revenue by 1% and lowering profitability. We were more optimistic when preparing the budget which is why the yearly consolidated revenue and EBITDA of the Group as compared to the budget were 5% below expectations. The above figures include all our joint ventures (AS SL Õhtuleht, AS Ajakirjade Kirjastus, AS Express Post and OÜ Linna Ekraanid) consolidated 50% line-by-line.

 

The revenue of the media segment reached EUR 11.8 million in the fourth quarter having increased 7% and EBITDA increased up to EUR 1.9 million growing 23% compared to the same period in previous year.  Annual sales of media segment reached EUR 42.2 million, having increased 6% in a year, whereas revenue from digital and online channels was up 12%. EBITDA amounted to EUR 4.8 million which was 3% lower than the year before, but exceeded the budget by 7%. The priorities of the media segment continue to be innovation in developing various products and technical platforms. In all three countries, we launched new topical portals, carried out several new multimedia projects, developed e-commerce services and different advertising sales channels and implemented new solutions for target groups. We remain active also in the social media. A major emphasis is on web-based TV production and broadcasting. Since 2016, the apps of our international brand Delfi TV are available for Android TV and Apple TV. In addition, web TV can be watched also traditionally, for instance as a client of Starman or Levira Hybrid TV. One should also mention active development for mobile telephones that have almost become the main channel for consuming news. Delfi and our classical newspaper brands are here clearly market leaders in innovation.

 

A major surprise was the strong performance of Delfi Latvia which started already in the third quarter and continued with the same pace at the end of the year. In the fourth quarter Delfi Latvia increased its revenue by 8% reaching EUR 1 million. Annual revenue increased even more, 10% and totalled EUR 3.4 million. EBITDA grew by 37% to EUR 413 thousand. This was achieved in spite of the exit of a long-term sales manager and part of the sales team in September and tough competition between online portals. In a year, Delfi Latvia has launched and tested several new products and has been kind of a start-up incubator. In July we acquired www.atverskapi.lv, the leading classified portal in its niche in Latvia. The editorial office continues to focus on publishing more long-read analytical articles and carrying out media projects, as reflected in our readership and recognised by press awards.

 

Last quarter was also good for Ekspress Meedia, which managed to grow its revenues by 7% reaching over EUR 5 million. EBITDA growth was more modest, staying on the level of 4%. However taking into consideration personnel changes in top management, it was a great result achieved by the team.  Annual revenues increased 5% and amounted to more than EUR 19.1 million. This includes 13% growth in Delfi online and newspaper digital revenue, totalling EUR 7.3 million. Print advertising grew 3%. This was achieved mainly as a result of focusing on the efficiency of the sales team, the increasingly versatile portfolio and innovative approach. Press subscriptions and single copy sales revenue increased 1% from the previous year, and the number of digital subscriptions is up by about 30% thanks to different cooperation projects. We constantly invest in new products and IT solutions. We also invest in our staff to enable them to increase the quality of journalism. This explains why the company’s EBITDA was 24% lower than a year earlier. The annual result was also affected by the growth in print and delivery costs, resulting from the increase in advertising sales volumes.

 

Delfi Lithuania is growing more modestly, but consistently. The company’s revenue in the fourth quarter increased 6% totalling EUR 2.6 million while annual terms revenue increased 4% up to EUR 8.6 million. The growth of annual online advertising revenue was 9%. Annual EBITDA increased 9% totalling EUR 1.7 million, while the EBITDA in the fourth quarter increased 20% and thus was a great final to the year. This result can be considered positive in all aspects, especially in the light of the very disappointing first quarter. Thanks to persistent work, Lithuania has become a clear market leader in mobile platforms where we were losing out to competition in earlier years. Online continues to grow, but magazine circulations, print advertising and distribution costs decrease at a stable rate.

The annual revenue and profit growth of Ajakirjade Kirjastus, respectively 10% and 39% and the growth in the fourth quarter in percentage terms even more is mainly attributable to the expansion in our product portfolio in April when we acquired Estonia’s largest women’s weekly Naisteleht as well as magazines Nipiraamat and Müstiline Ajalugu. As a result of the transaction, we merged the newly acquired weekly Naisteleht with the existing magazine Naised and reached significant synergies, giving a boost to both revenue and profit. In addition, we continue to organise events and courses by using our brands in order to build brands, offer additional value to subscribers and help to increase revenue. The revenue of Ajakirjade Kirjastus for the year totalled EUR 9.5 million and EBITDA was EUR 1.1 million, of which half is recognized in the consolidated figures of the Ekspress Group.

 

This year SL Õhtuleht has been in the winds of change. There have been changes in the team, organizational and management structure. We have invested in increasing the efficiency of advertising sales, modernization of the company and development of new products. All this has helped to make Õhtuleht the newspaper with the largest circulation in weekdays, keep the level of subscribers and single-copy sales high and increase advertising revenue. The number of digital subscribers has more than tripled as compared to the start of the year. The revenue of SL Õhtuleht increased 4% in a year and amounted to EUR 8.7 million. EBITDA amounted to EUR 0.8 million and was 23% lower than in the previous year. The fourth quarter was slightly better for the revenues, which grew 6% up to EUR 2.3 million, while EBITDA at the same time decreased 42% and remained on the level of EUR 130 thousand. Half of this is reflected in the consolidated figures of the Ekspress Group.

It was another difficult quarter and also year in the printing services segment. The revenue of Printall decreased 1% from the year before and amounted to EUR 25.6 million. EBITDA remained 6% below last year’s level and amounted to EUR 4.6 million. Despite of expectations and some positive signs in autumn, the fourth quarter showed even more slowdown and revenues dropped 6% down to EUR 7 million, however EBITDA remained only 2% behind the same period in last year. The number of orders and work volume keeps increasing, but price pressure is dampening revenue growth and increased volume is pushing up labour costs. Despite the tough market situation, persistent and aggressive marketing has helped us to attract new products and customers in Scandinavia, improved our price level in the second half of the year and attracted recognition also in printing sectors outside periodicals. This enables to expand the B2B segment that produces for own use product catalogues and other specific products that are suitable for our sheet-fed printing machines. In the last year, Printall has been transforming from a large and elite plant to wide-based tool for promoting communication. The situation on the printing services market in 2017 is not expected to improve.

In July we signed a contract to acquire a 50% holding in OÜ Linna Ekraanid, which is engaged in the sale of digital outdoor advertising in Estonia. In September we acquired 49% holding in Babahh Media OÜ which is engaged in the video production, media solutions and streaming related infrastructure sales in Estonia. In the second quarter of 2019 we will acquire the remaining 50% of OÜ Linna Ekraanid, and thereby will become the company’s sole shareholder. The purpose of the acquisition is to create preconditions for the Group to set off a new business line and thereby expand the Group’s portfolio of business areas. The objective of AS Ekspress Grupp is to develop the business line of digital outdoor advertising in all three Baltic countries and take the leading role in this business segment. With regard to Babahh Media OÜ, the Group has an option to acquire an additional ownership in Babahh Media OÜ in 2021, thereby AS Ekspress Grupp would increase its ownership in Babahh Media OÜ to 70% in total. The purpose of the acquisition is to expand the business of AS Ekspress Grupp in the fast-growing market of online video production and video streaming. The acquisition of Babahh Media OÜ also helps to supplement the video production portfolio of our Delfis in all our markets through wide-based knowledge.

The financial position of the Group has strengthened notably during the year. As at the end of the year, the ratio of total debt to EBITDA was below 2.0, which according to the syndicate loan contract means a lower interest margin and enables even more aggressively to invest with the help of loan capital. The debt service coverage ratio is almost 2.8.

 

Despite the challenging situation in the media landscape, we are looking forward to the next year with excitement, especially because of several personnel changes in the Group at the start of the year. On January 1, Mari-Liis Rüütsalu who has earlier management experience from Delfi Estonia and Ekspress Meedia took office as the new Group CEO. New managers, all of whom were promoted from within the Group, started also in Ekspress Meedia, Ajakirjade Kirjastus and SL Õhtuleht.

 

In financial terms we expect the revenue of the media segment to increase 4-5% and EBITDA to grow, assisted by acquisitions made in 2016. In the printing services segment we will try to maintain this year’s revenue level in spite of price pressure. In a more optimistic outlook we hope that the profit growth of the media segment will cover the decrease in EBITDA in the printing services segment. This means that the share of media and online activities in the Group revenue and profit will grow. However, a significantly more negative background of the external environment may lower EBITDA of the printing services segment by 10-15%, which in turn would mean that in consolidated terms, the revenue would grow by about 4%, but EBITDA would decrease by about the same percentage.

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.

The Group’s goal is to be a truly modern media group with a strong foothold in all markets where actively present, with a leading position in online media.

FINANCIAL INDICATORS AND RATIOS – joint ventures consolidated 50% line-by-line

 

In the consolidated financial reports 50% joint ventures are recognised under the equity method, in compliance with international financial reporting standards (IFRS). In its monthly reports, the management monitors the Group’s performance on a basis of proportional consolidation of joint ventures and the syndicated loan contract also determines the calculation of some 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% 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 50%
consolidated (EUR thousand)
Q4
2016
Q4 2015 Change % Q4
2014
Q4
2013
Q4
2012
For the period            
Sales 17 409 17 181 1% 16 778 16 526 16 447
EBITDA 2 981 2 720 10% 2 757 2 015 2 246
EBITDA margin (%) 17.1% 15.8%   16.4% 12.2% 13.7%
Operating profit* 2 113 1 936 9% 1 895 1 348 1 496
Operating margin* (%) 12.1% 11.3%   11.3% 8.2% 9.1%
Interest expenses (123) (141) 13% (186) (185) (206)
Net profit /(loss) for the period* 1 868 1 660 13% 1 614 1 057 1 268
Net margin (%)* 10.7% 9.7%   9.6% 6.4% 7.7%
Net profit for the period in the financial statements (incl. impairments and gain on change of ownership interest) 1 868 460 306% 1 149 (1 410) 1 112
Net margin (%) 10.7% 2.7%   6.8% -8.5% 6.8%
Return on assets ROA (%) 2.4% 0.6%   1.4% -1.8% 1.4%
Return on equity ROE (%) 3.7% 0.9%   2.4% -3.2% 2.7%
Earnings per share (EPS) 0.06 0.02   0.04 (0.05) 0.04

 

 

 

Performance indicators – joint ventures
consolidated 50% (EUR thousand)
12 months 2016 12 months 2015 Change % 12 months 2014 12 months
2013
12 months
2012
For the period            
Sales 62 793 61 528 2% 61 384 58 427 59 706
EBITDA 8 487 7 869 8% 8 878 7 264 7 882
EBITDA margin (%) 13.5% 12.8%   14.5% 12.4% 13.2%
Operating profit* 5 221 4 866 7% 5 638 4 647 4 596
Operating margin* (%) 8.3% 7.9%   9.2% 8.0% 7.7%
Interest expenses (518) (618) 16% (732) (763) (1 549)
Net profit/(loss) for the period* 4 406 3 907 13% 4 620 3 548 2 682
Net margin (%)* 7.0% 6.4%   7.5% 6.1% 4.5%
Net profit for the period in the financial statements (incl. impairments and gain on change of ownership interest) 4 406 2 707 63% 5 110 1 081 2 525
Net margin(%) 7.0% 4.4%   8.3% 1.9% 4.2%
Return on assets ROA (%) 5.8% 3.5%   6.6% 1.4% 3.2%
Return on equity ROE (%) 8.9% 5.6%   11.4% 2.5% 6.4%
Earnings per share (EPS) 0.15 0.09   0.17 0.04 0.08

 

* The results reflect the outcome of regular business activities and do not include impairment losses on goodwill, profit arised from the changes in ownership interests in our joint ventures etc.

 

Balance sheet – joint ventures 50% consolidated (EUR thousand) 31.12.2016 31.12.2015 Change %
As of the end of the period      
Current assets 16 251 15 553 4%
Non-current assets 61 506 61 588 0%
Total assets 77 757 77 141 1%
       incl. cash and bank 4 572 4 666 -2%
       incl. goodwill 38 904 38 232 2%
Current liabilities 12 222 12 539 -3%
Non-current liabilities 14 462 15 928 -9%
Total liabilities 26 684 28 467 -6%
       incl. borrowing 16 603 18 787 -12%
  Equity 51 073 48 674 5%
         

 

 

 

  Financial ratios (%) – joint ventures consolidated 50% 31.12.2016 31.12.2015
Equity ratio (%) 66% 63%
Debt to equity ratio (%) 33% 39%
Debt to capital ratio (%) 19% 22%
Total debt/EBITDA ratio 1.96 2.39
Debt service coverage ratio 2.75 1.79
Liquidity ratio 1.33 1.24

 

 

FINANCIAL INDICATORS AND RATIOS – joint ventures recognised under the equity method

Performance indicators – joint ventures under equity method (EUR thousand) Q4
2016
Q4
2015
Change % Q4
2014
Q4
2013
Q4
2012
For the period            
Sales (only subsidiaries) 14 743 14 811 0% 14 454 14 291 14 165
EBITDA (only subsidiaries) 2 660 2 440 9% 2 413 1 815 2 017
EBITDA margin (%) 18.0% 16.5%   16.7% 12.7% 14.2%
Operating profit* (only subsidiaries) 1 889 1 718 10% 1 661 1 175 1 293
Operating margin* (%) 12.8% 11.6%   11.5% 8.2% 9.1%
Interest expenses (only subsidiaries) (114) (125) 9% (158) (185) (206)
Profit of joint ventures by equity method 210 196 7% 182 174 202
Net profit for the period* 1 868 1 660 13% 1 601 1 057 1 269
Net margin (%)* 12.7% 11.2%   11.1% 7.4% 9.0%
Net profit for the period in the financial statements (incl. impairments and gain on change of ownership interest) 1 868 460 306% 1 136 (1 410) 1 112
Net margin (%) 12.7% 3.1%   7.9% -9.9% 7.8%
Return on assets ROA (%) 2.5% 0.6%   1.5% -1.8% 1.4%
Return on equity ROE (%) 3.7% 0.9%   2.4% -3.2% 2.7%
Earnings per share (EPS) 0.06 0.02   0.04 (0.05) 0.04

 

 

 

Performance indicators – joint ventures under equity method (EUR thousand) 12 months 2016 12 months
2015
Change % 12 months
2014
12 months
2013
12 months
2012
For the period            
Sales (only subsidiaries) 53 324 52 773 1% 52 793 50 086 51 290
EBITDA (only subsidiaries) 7 280 6 680 9% 7 894 6 591 7 345
EBITDA margin (%) 13.7% 12.7%   15.0% 13.2% 14.3%
Operating profit* (only subsidiaries) 4 328 3 920 10% 4 973 4 071 4 173
Operating margin* (%) 8.1% 7.4%   9.4% 8.1% 8.1%
Interest expenses (only subsidiaries) (471) (550) 14% (689) (763) (1 550)
Profit of joint ventures by equity method 772 785 -2% 557 494 339
Net profit for the period* 4 406 3 907 13% 4 621 3 548 2 682
Net margin (%)* 8.3% 7.4%   8.8% 7.1% 5.2%
Net profit for the period in the financial statements (incl. impairments and gain on change of ownership interest) 4 406 2 707 63% 5 110 1 081 2 525
Net margin (%) 8.3% 5.1%   9.7% 2.2% 4.9%
Return on assets ROA (%) 6.1% 3.7%   6.8% 1.4% 3.2%
Return on equity ROE (%) 8.9% 5.6%   11.4% 2.5% 6.4%
Earnings per share (EPS) 0.15 0.09   0.17 0.04 0.08

 

* The results reflect the outcome of regular business activities and do not include impairment losses on goodwill, profit arised from the changes in ownership interests in our joint ventures etc.

 

 

Balance sheet – joint ventures under equity method
(EUR thousand)
31.12.2016 31.12.2015 Change %
As of the end of the period      
Current assets 13 094 12 386 6%
Non-current assets 61 074 60 794 0%
Total assets 74 168 73 180 1%
       incl. cash and bank 2 856 2 927 -2%
       incl. goodwill 36 953 36 953 0%
Current liabilities 9 591 9 033 6%
Non-current liabilities 13 504 15 473 -13%
Total liabilities 23 095 24 506 -6%
       incl. borrowing 15 784 17 687 -11%
Equity 51 073 48 674 5%

 

 

 

  Financial ratios (%) – joint ventures under equity method 31.12.2016 31.12.2015
Equity ratio (%) 69% 67%
Debt to equity ratio (%) 31% 36%
Debt to capital ratio (%) 20% 23%
Total debt/EBITDA ratio 2.17 2.65
Debt service coverage ratio 2.67 1.67
Liquidity ratio 1.37 1.37

 

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 in home and export markets. It can appear in lower advertising costs in retail, preference of other advertising channels like preference of internet rather than print media and changes in consumption habits of retail consumers e.g. 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 an increase in subscriptions and retail sale which usually continues until next summer holiday period.

 

Formulas used to calculate the financial ratios
EBITDA Earnings before interest, tax, depreciation and amortization. EBITDA does not include any impairment losses recognized during the period or result from restructuring.
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

SEGMENT OVERVIEW

The Group’s activities are divided into two large segments - media segment and printing services segment. Last year, there was also an entertainment segment.

The segments’ EBITDA does not include intragroup management fees, 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 2012-2016

 

(EUR thousand) Sales Sales
  Q4
 2016
Q4
2015
Change % Q4
 2014
Q4
 2013
Q4
 2012
media segment (by equity method) 8 861 8 399 6% 7 535 7 617 7 049
       incl. revenue from all digital and online channels 4 974 4 544 9% 4 015 3 389 3 029
printing services segment 6 952 7 386 -6% 8 083 7 566 8 046
entertainment segment 0 0 - 0 0 0
corporate functions 566 543 4% 459 393 308
intersegment eliminations (1 636) (1 517) -8% (1 624) (1 286) (1 238)
TOTAL GROUP by equity method 14 743 14 811 0% 14 454 14 291 14 165
media segment (by proportional consolidation) 11 836 11 041 7% 10 141 10 043 9 532
       incl. revenue from all digital and online channels 5 381 4 841 11% 4 257 3 584 3 184
printing services segment 6 952 7 386 -6% 8 083 7 566 8 046
entertainment segment 0 0 - 0 0 0
corporate functions 566 543 4% 459 393 308
intersegment eliminations (1 945) (1 789)   (1 905) (1 476) (1 439)
TOTAL GROUP by proportional consolidation 17 409 17 181 1% 16 778 16 526 16 447

 

 

 

(EUR thousand) EBITDA EBITDA
  Q4
 2016
Q4
2015
Change % Q4
 2014
Q4
 2013
Q4
 2012
media segment by equity method 1 618 1 299 25% 1 103 1 014 611
media segment by proportional consolidation 1 938 1 579 23% 1 448 1 214 839
printing services segment 1 329 1 355 -2% 1 623 1 604 1 650
entertainment segment (0) (4) 94% 0 0 0
corporate functions (287) (210) -36% (313) (763) (242)
intersegment eliminations 0 (0) 189% 0 (40) (1)
TOTAL GROUP by equity method 2 660 2 440 9% 2 413 1 815 2 017
TOTAL GROUP by proportional consolidation 2 981 2 720 10% 2 757 2 015 2 246

 

 

 

EBITDA margin Q4
 2016
Q4
 2015
Q4
 2014
Q4
 2013
Q4
 2012
media segment by equity method 18% 15% 15% 13% 9%
media segment by proportional consolidation 16% 14% 14% 12% 9%
printing services segment 19% 18% 20% 21% 21%
TOTAL GROUP by equity method 18% 16% 17% 13% 14%
TOTAL GROUP by proportional consolidation 17% 16% 16% 12% 14%

 

 

Key financial data of the segments in 12 months 2012-2016

 

(EUR thousand) Sales Sales
  12 months
 2016
12 months
2015
Change % 12 months
 2014
12 months
 2013
12 months
 2012
media segment (by equity method) 31 579 30 063 5% 27 459 25 842 25 562
       incl. revenue from all digital and online channels 17 269 15 555 11% 13 449 11 595 10 561
printing services segment 25 585 25 842 -1% 28 951 27 462 29 167
entertainment segment 517 -100% 0 0 0
corporate functions 2 233 1 937 15% 1 731 1 530 996
intersegment eliminations (6 073) (5 586) -9% (5 347) (4 748) (4 435)
TOTAL GROUP by equity method 53 324 52 773 1% 52 793 50 086 51 290
media segment (by proportional consolidation) 42 229 39 943 6% 36 930 34 955 34 773
       incl. revenue from all digital and online channels 18 574 16 619 12% 14 306 12 226 11 147
printing services segment 25 585 25 842 -1% 28 951 27 462 29 167
entertainment segment 517 -100% 0 0 0
corporate functions 2 233 1 937 15% 1 731 1 530 996
intersegment eliminations (7 254) (6 711)   (6 228) (5 520) (5 230)
TOTAL GROUP by proportional consolidation 62 793 61 528 2% 61 384 58 427 59 706

 

 

 

(EUR thousand) EBITDA EBITDA
  12 months
 2016
12 months
2015
Change % 12 months
 2014
12 months
 2013
12 months
 2012
media segment by equity method 3 572 3 724 -4% 3 025 2 123 2 089
media segment by proportional consolidation 4 779 4 913 -3% 4 013 2 792 2 624
printing services segment 4 645 4 966 -6% 5 944 5 862 6 052
entertainment segment (2) (1 110) 100% 0 0 0
corporate functions (936) (899) -4% (1 076) (1 356) (797)
intersegment eliminations 0 0 -65% 0 (38) 1
TOTAL GROUP by equity method 7 280 6 680 9% 7 894 6 591 7 345
TOTAL GROUP by proportional consolidation 8 487 7 869 8% 8 878 7 264 7 882

 

 

 

EBITDA margin 12 months
 2016
12 months
 2015
12 months
 2014
12 months
 2013
12 months
 2012
media segment by equity method 11% 12% 11% 8% 8%
media segment by proportional consolidation 11% 12% 11% 8% 8%
printing services segment 18% 19% 21% 21% 21%
TOTAL GROUP by equity method 14% 13% 15% 13% 14%
TOTAL GROUP by proportional consolidation 14% 13% 14% 12% 13%

 

 

MEDIA SEGMENT

The media segment includes Delfi operations in wholly-owned subsidiaries in Estonia, Latvia and Lithuania, publishing of Estonian newspapers Maaleht, Eesti Ekspress and Eesti Päevaleht, book publishing in Estonia, magazine publishing in Lithuania, activities of the retail offer portal Zave and holding company Delfi Holding. This segment also includes 50% joint ventures AS SL Õhtuleht (publisher of Õhtuleht and Linnaleht), magazine publisher AS Ajakirjade Kirjastus, home delivery company AS Express Post and, since the summer 2016, OÜ Linna Ekraanid, engaged in sale of digital outdoor advertising.

In July 2015 AS Delfi and newspaper publisher AS Eesti Ajalehed were merged in Estonia. New company continued to operate under name of AS Ekspress Meedia. A year earlier Delfi UAB and magazine publisher Ekspress Leidyba UAB were merged in Lithuania. In Lithuania mergered entity continued under name of Delfi.

News portals owned by the Group

 

Owner Portal Owner Portal
Ekspress Meedia www.delfi.ee Ekspress Meedia 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 SL Õhtuleht www.ohtuleht.ee
  ru.delfi.lt   www.vecherka.ee

 

 

 

(EUR thousand) Sales
  Q4
 2016
Q4
2015
Change 
%
Ekspress Meedia AS (Delfi Estonia + Eesti Ajalehed) 5 085 4 756 7%
        incl. Delfi Estonia online revenue 1 772 1 592 11%
Delfi Latvia 997 927 8%
Delfi Lithuania (incl. Ekspress Leidyba) 2 558 2 414 6%
        incl Delfi Lithuania online revenue 2 043 1 887 8%
OÜ Hea Lugu 230 304 -24%
OÜ Zave Media 0 2 -100%
Other companies (Delfi Holding) - -
Intersegment eliminations (9) (4) -128%
TOTAL subsidiaries 8 861 8 399 5%
AS SL Õhtuleht* 1 134 1 066 6%
AS Ajakirjade Kirjastus* 1 368 1 218 12%
AS Express Post* 677 648 4%
Linna Ekraanid OÜ* 115 - -
Intersegment eliminations (318) (289) -10%
TOTAL joint ventures 2 975 2 643 13%
TOTAL segment by proportional consolidation 11 836 11 041 7%

 

 

 

(EUR thousand) EBITDA
  Q4
2016
Q4
2015
Change
 %
Ekspress Meedia AS (Delfi Estonia + Eesti Ajalehed) 443 425 4%
Delfi Latvia 262 157 67%
Delfi Lithuania (incl. Ekspress Leidyba) 865 723 20%
OÜ Hea Lugu 50 85 -41%
OÜ Zave Media (0) (87) 99%
Other companies (Delfi Holding) (2) (4) 50%
Intersegment eliminations (0) (1) -
TOTAL subsidiaries 1 618 1 299 25%
AS SL Õhtuleht* 65 113 -42%
AS Ajakirjade Kirjastus* 160 86 87%
AS Express Post* 75 82 -9%
Linna Ekraanid OÜ* 20 - -
Intersegment eliminations 0 (0) 217%
TOTAL joint ventures 321 281 14%
TOTAL segment by proportional consolidation 1 938 1 579 23%

 

* Proportional share of joint ventures

 

 

(EUR thousand) Sales
  12 months 2016 12 months 2015 Change  %
Ekspress Meedia AS (Delfi Estonia + Eesti Ajalehed) 19 116 18 248 5%
        incl. Delfi Estonia online revenue 6 728 5 931 13%
Delfi Latvia 3 375 3 066 10%
Delfi Lithuania (incl. Ekspress Leidyba) 8 563 8 230 4%
        incl Delfi Lithuania online revenue 6 602 6 051 9%
OÜ Hea Lugu 538 651 -17%
OÜ Zave Media 1 5 -77%
Other companies (Delfi Holding) - -
Intersegment eliminations (14) (136) 89%
TOTAL subsidiaries 31 579 30 063 5%
AS SL Õhtuleht* 4 329 4 154 4%
AS Ajakirjade Kirjastus* 4 765 4 347 10%
AS Express Post* 2 609 2 477 5%
Linna Ekraanid OÜ* 166 - -
Intersegment eliminations (1 219) (1 099) -11%
TOTAL joint ventures 10 651 9 879 8%
TOTAL segment by proportional consolidation 42 229 39 943 6%

 

 

 

(EUR thousand) EBITDA
  12 months 2016 12 months 2015 Change %
Ekspress Meedia AS (Delfi Estonia + Eesti Ajalehed) 1 448 1 899 -24%
Delfi Latvia 413 301 37%
Delfi Lithuania (incl. Ekspress Leidyba) 1 741 1 590 9%
OÜ Hea Lugu 33 91 -64%
OÜ Zave Media (61) (147) 59%
Other companies (Delfi Holding) (2) (9) 78%
Intersegment eliminations (0) (1) -
TOTAL subsidiaries 3 572 3 724 -4%
AS SL Õhtuleht* 394 508 -23%
AS Ajakirjade Kirjastus* 544 392 39%
AS Express Post* 247 289 -14%
Linna Ekraanid OÜ* 22 - -
Intersegment eliminations 0 (0) 118%
TOTAL joint ventures 1 207 1 189 2%
TOTAL segment by proportional consolidation 4 779 4 913 -3%

 

* Proportional share of joint ventures

 

ONLINE MEDIA and DELFI

As a market leader Delfi continues to invest into new technologies and IT solutions to improve user experience of its readers and advertisers. This year Delfi mobile application for IOS and Android devices and m.delfi environment were renewed together with more functionality. New feature zlick was introduced enabling to purchase paid content with 0-click. Ad-free Delfi solution for mobile phones where users can remove all ads from the Delfi environment for a monthly fee was introduced. Since 2016 Delfi app is available for Apple TV and Sony Android TV users. The clients of Levira and Starman in Estonia are able to watch Delfi TV broadcasts and programmes traditionally on trtelevision screens.

In Lithuania, Delfi was the first publisher that introduced Facebook messenger bots. Delfi was also the first in Lithuania to use Facebook Live streaming. Of pan-Baltic developments, the solution to use Facebook Instant Article was completed.  

Starting from 2016, our advertising sales departments offer in addition to online advertising in our own portals also the possibility to buy advertising in other local or international channels. We also offer to our customers a full advertising service from the idea to execution including booking media space and provide programmatic advertising solutions.

 

The range of vertical products continues to expand. This year, Delfi Estonia launched www.kinoveeb.ee dedicated to the film art and www.homme.ee that is targeted at men and refers to a supplement of newspaper Eesti Ekpress. Delfi Latvia launched an esoterics portal www.orakuls.lv and two video sub-verticals www.retvplay.lv and www.360play.lv. In Lithuania, in cooperation with the Lithuanian Marketing Association (LiMA), a new unique website for marketing professionals was launched that aims to promote communication between them. Delfi FIT, a Delfi subsite that is promoting healthy lifestyle, was launched  in cooperation with the Lithuanian Basketball Federation. Also portal www.busiumama.lt, a portal targeted at expecting mothers, and a new Delfi subsite Delfi Style, were launched. The National Basketball Association (NBA) and DELFI Lithuania announced a new multiyear partnership that includes plans to launch www.nba.com/Lithuania, the NBA’s new official online destination in Lithuania. 

Delfi Lithuania continues developing the classified portal www.alio.lt. In July, Delfi Latvia acquired a specialized classified portal www.atverskapi.lv. As a new e-commerce service, www.tobook.lv  was launched in Latvia that gathers different beauty saloons and possibility of making reservations on-line.

In all three Baltic countries the focus is on writing more long-read analytical articles in order to increase the value of Delfi to users. In Estonia this is being provided in co-operation with editorial teams of our daily and weekly newspapers Eesti Päevaleht, Eesti Ekspress and Maaleht.

A lot of attention is being paid on socially responsible behaviour and to supporting various charity projects, cultural, sport, social and business events in all Baltic countries.

Estonian online readership 2015-2016

In the first quarter of 2016, Postimees merged two classified portals www.kv.ee and www.osta.ee owned by Eesti Meedia into its postimees.ee domain. This increased the number of users of Postimees.ee by 17%.

 

In the third quarter of 2016, Gemius changed the methodology of the online readership survey in Estonia, Latvia and Lithuania, as a result of which the readership of mobile devices and tablet PCs was added to the above readership of computer users. As a result of the change of methodology that was made in September, the total number of computer users in Estonia fell by 11%. The number of computer users of Postimees.ee decreased less than that of computers users of Delfi. Competition between Delfi and Postimees remains active. In spite of changes in methodology, the readership of Õhtuleht has been very stable. Starting from the summer of 2016, the Gemius survey also shows separate readership in mobile devices and tablet PCs.

 

Latvian online readership 2015-2016

At the beginning of 2016, the research company Gemius changed its method of online surveys, and, as a result, the online readership figure decreased in February. This figure shows only the online readership of PC users. Inbox.lv remains Latvia’s largest portal among PC users. Contrary to expectations, Inbox increased its readership at the end of the year, especially in mobile devices. The readership of Delfi.lv as compared to tvnet.lv is practically unchanged. The number of mobile users continues to grow. The local social network draugiem.lv steadily continues to lose users to Facebook. As in other Baltic countries, the main competition in Latvia is for attracting new mobile users.

Lithuanian online readership 2015-2016

Delfi.lt remains Lithuania’s largest online portal. In the third quarter 2016, 15min.lt added several portals that do not belong to this media group, which is why the readership of the 15min.lt domain increased in the fourth quarter of 2016. This growth does not mean growth in readership of media services and therefore does not mean that the market situation of 15min.lt has improved. TV3 and Lrytas.lt are competing for the third place. As in other markets, development and marketing activities in Lithuania are focused on increasing the number of mobile users. In this segment, Delfi has notably increased its readership.

 

PRINT MEDIA IN ESTONIA

 

Estonian newspaper circulation 2015-2016

Circulations of newspapers in Estonia have been falling moderately in the long run. In the fourth quarter 2016 there was a significant change in the circulations of paper versions of newspapers in Estonia. For three months, Õhtuleht has been the newspaper with the largest circulation in Estonia and Postimees has fallen to the second place. In December, Postimees fell to the third place because, traditionally, Maaleht gained considerably in December. The circulation of Päevaleht has somewhat decreased in 2016, but the growth in the number of digital subscribers of Päevaleht has been much quicker than the decrease in the circulation of the paper version of the newspaper.

 

Estonian newspaper readership 2015-2016

Similarly to the circulation of newspapers, the readership of publications also remained relatively stable in 2016. As compared to the fourth quarter 2015, the readership of Eesti Ekspress and Eesti Päevaleht increased, while that of Postimees and Õhtuleht decreased. As this survey does not cover the readership of digital newspapers, it does not represent the total readership. The number of digital subscriptions of periodicals of Ekspress Group amounts to ca 50 thousand. Increasing the readership of digital newspapers remains the main task for the Group’s publications.

PRINTING SERVICES SEGMENT

All printing services of the Group are provided by AS Printall which is one of the largest printing companies in Estonia. We are able to print high-quality magazines, newspapers, advertising materials, product and service catalogues, paperback books and other publications in our printing plant. The new printing machine installed in 2015 has enabled us to further expand the range of printed products.   

 

 

(thousand EUR) Sales
  Q4
2016
Q4
2015
Change
%
AS Printall 6 952 7 386 -6%

 

 

 

(thousand EUR) EBITDA
  Q4
2016
Q4
2015
Change %
AS Printall 1 329 1 355 -2%

 

 

 

(thousand EUR) Sales
  12 months
2016
12 months
2015
Change
%
AS Printall 25 585 25 842 -1%

 

 

 

(thousand EUR) EBITDA
  12 months
2016
12 months
2015
Change %
AS Printall 4 645 4 966 -6%

 

 

 

The printing services segment continues to be impacted by the economic sanctions imposed towards Russia, the negative impact of which on the Scandinavian printing industry also impacts us. The production volume of Printall continues to increase, but the price pressure is still strong due to the production capacity which has become available in Scandinavia. The sales keep increasing, however the profit margin continues to fall due to lower prices. 

Printing services and the environment

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 consumes green energy. GREEN CHOICE certificate confirms that 100% of energy consumed by printing plant has been produced from renewable energy sources. 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.

 

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 received these certificates helps to support the environmentally friendly, socially fair and economically viable management of the world’s forests.

 

Consolidated balance sheet (unaudited)

(thousand EUR) 31.12.2016 31.12.2015
ASSETS    
Current assets    
Cash and cash equivalents 2 805 2 927
Term deposits 51 0
Trade and other receivables 7 468 6 741
Inventories 2 770 2 718
Total current assets 13 094 12 386
Non-current assets    
Trade and other receivables 982 1 149
Deferred tax asset 34 42
Investments in joint ventures 2 435 1 007
Investments in associates 591 215
Property, plant and equipment 12 722 13 791
Intangible assets 44 310 44 590
Total non-current assets 61 074 60 794
TOTAL ASSETS 74 168 73 180
LIABILITIES    
Current liabilities    
Borrowings 2 313 2 240
Trade and other payables 7 170 6 679
Corporate income tax payable 108 114
Total current liabilities 9 591 9 033
Non-current liabilities    
Long-term borrowings 13 471 15 447
Deferred tax liability 33 26
Total non-current liabilities 13 504 15 473
TOTAL LIABILITIES 23 095 24 506
EQUITY    
Share capital 17 878 17 878
Share premium 14 277 14 277
Treasury shares (863) (176)
Reserves 2 058 1 787
Retained earnings 17 723 14 908
TOTAL EQUITY 51 073 48 674
TOTAL LIABILITIES AND EQUITY 74 168 73 180

Consolidated statement of comprehensive income (unaudited)

(thousand EUR) Q4 2016 Q4 2015 12 months 2016 12 months 2015
Sales revenue 14 743 14 811 53 324 52 773
Cost of sales (11 163) (11 121) (42 122) (41 781)
Gross profit 3 580 3 690 11 202 10 992
Other income 579 281 1 085 659
Marketing expenses (770) (743) (2 488) (2 377)
Administrative expenses (1 446) (1 472) (5 357) (5 236)
Other expenses (54) (38) (114) (118)
Impairment of goodwill 0 (1 200) 0 (1 200)
Operating profit 1 889 518 4 328 2 720
Interest income 7 10 32 42
Interest expense (114) (125) (471) (550)
Foreign exchange gains (losses)  (6)  (1) (10) (6)
Other finance costs (10) (15) (56) (71)
Net finance cost  (123)  (131) (505) (585)
Profit on shares of joint ventures 210 196 772 785
Profit from shares of associates 72 72 113 86
Profit before income tax 2 048 655 4 708 3 006
Income tax expense (180) (195) (302) (299)
Net profit  for the reporting period 1 868 460 4 406 2 707
Net profit for the reporting period attributable to:        
Equity holders of the parent company 1 868 460 4 406 2 707
Other comprehensive income 0 0 0 0
Total comprehensive income 1 868 460 4 406 2 707
Attributable to equity holders of the parent company 1 868 460 4 406 2 707
Basic and diluted earnings per share 0.06 0.02 0.15 0.09

Consolidated cash flow statement (unaudited)

(EUR thousand) 12 months 2016 12 months 2015
Cash flows from operating activities    
Operating profit for the reporting year 4 328 2 720
Adjustments for:    
Depreciation, amortisation and impairment 2 953 2 760
Loss on trademark and goodwill impairment 0 1 200
(Gain)/loss on sale and write-down of property, plant and equipment 37 (4)
Change in value of share option 136 91
Cash flows from operating activities:    
Trade and other receivables (709) (191)
Inventories (53) (645)
Trade and other payables 484 361
Cash generated from operations 7 175 6 292
Income tax paid (293) (118)
Interest paid (519) (525)
Net cash generated from operating activities 6 363 5 649
Cash flows from investing activities    
Term deposit (placement)/release 0 1 600
Acquisition of joint ventures (868) 0
Acquisition of associate (311) 0
Purchase and receipts of other investments 5 (50)
Interest received 32 33
Purchase of  property, plant and equipment (1 335) (1 575)
Proceeds from sale of property, plant and equipment 39 33
Loans granted (25) 0
Loan repayments received 175 74
Net cash used in investing activities (2 289) 115
Cash flows from financing activities    
Dividends paid (1 456) (1 187)
Dividend received from joint ventures 246 278
Finance lease repayments (72) (89)
Change in use of overdraft 0 (1 117)
Loan received 11 687
Repayments of bank loans (2 186) (4 952)
Purchase of treasury shares (687) (112)
Net cash used in financing activities (4 144) (6 492)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (71) (729)
Cash and cash equivalents at the beginning of the year 2 927 3 656
Cash and cash equivalents at the end of the year 2 856 2 927

 

         Additional information:
         Mari-Liis Rüütsalu
         Chairman of the Management Board
         GSM: +372 512 2591
         e-mail: mariliis.ryytsalu@egrupp.ee


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