Consolidated unaudited interim report for the firts quarter of 2019 30.04

The revenue of AS Ekspress Grupp totalled EUR 17.3 million in the 1st quarter of 2019. The Group's revenue for the 1st quarter increased by 6% as compared to the previous year. Digital revenue increased by 11% and made up 37% of the total revenue.

Digital revenue growth is also one of the key objectives of the media business of Ekspress Group that the management has set for the company.

In the 1st quarter, the Group's EBITDA reached EUR 0.68 million and stayed at the same level as in the same period last year. In the 1st quarter, the Estonian and Lithuanian companies posted strong results both in the sales of subscriptions as well as advertisements. The growth of digital subscriptions was a positive development in Estonia. 

In Estonia, both the sales of articles as well as purchasing of digital subscriptions have exceeded the previously set targets. The beginning of the year with plenty of news helped us achieve good results, creating favourable conditions for production of quality content which the readers are willing to pay for.

The beginning of the year also proved that if there is a lot of news in a certain period, the number of visitors in Delfi environment grows faster than at the competitors. This demonstrates that we have been able to create a news environment which the readers trust and prefer.

The Latvian advertising market which was at a standstill in the 1st quarter had a negative impact on the quarterly results. This trend characterised both the entire Latvian market as well as the results of Delfi Latvia.

As compared to the previous year, the volumes of the Group's printing house increased by approximately 6% whereby all production operated at full capacity in the 1st quarter. However, the volumes of printing batches have decreased which in turn has increased production costs and put pressure on profit margins. While in the media segment the Group posted higher profits in the 1st quarter, then in the printing services segment profits fell by approximately 22%. In a situation where the business volumes are falling in the printing services segment in Estonia, we have managed to grow exports and as of the end of the 1st quarter, exports made up 63% of the total portfolio of the printing services.

In the 1st quarter, the Group acquired an additional 50% ownership interest in Linna Ekraanid OÜ that is engaged in the sale of digital outdoor advertising in Estonia. AS Ekspress Grupp now owns 100% of the entity. The long-term goal of the Group is to continue developing the business line of digital outdoor advertising and assume a leadership position in this market. According to the contract entered into in 2016, Ekspress Group was under the obligation to acquire the remaining 50% of the entity in 2018. Linna Ekraanid has been growing steadily and has helped to increase the digital advertising revenue.

In the 1st quarter, the Group's largest media entity AS Ekspress Meedia organised several events, for example: Game of the Stars in Tartu and the annual e-commerce conference of the Baltic States. Delfi Latvia was the key media partner in such events as: ice skating show "Disney on ice", Tom Odell's concert, Ewert and the 2 dragons's concert, Techchill (Baltic start-up conference), Miit&Links Baltic PR Awards conferences, Jēkabs, Mimmi un runājošie suņi (Latvian animated movie), 1906 (Latvian movie) and fashion week Riga Fashion Week. Delfi Lithuania together with its partners arranged the first ever festival in the winter - Delfi music festival "Snowstorm". In the 4th quarter of 2018, Delfi Lithuania published a book related to "Pravieniskiu Mafija" project that reached the TOP3 bestseller list in Lithuania. In connection with the same project, the team of the Lithuanian DELFI TV made a unique 45-minute documentary "Pravieniskese Mafija" in the 1st quarter of this year. For the second time, Delfi Lithuania organised a major event targeted at schoolchildren where the children are offered the best (outdoor) lessons in the course of a day. This time, 14 000 students from various schools in Lithuania participated in the event "The Day of the Best Lessons". Interactive lessons were given to students in biology, robotics, etc.

Despite bigger business volumes, the profitability of the Group continues to be under pressure, primarily due to the intensifying competition in the printing services segment. In the upcoming periods, the management will pay attention to and will look for additional opportunities to improve profitability and increase efficiency.  

 

SUMMARY OF THE RESULTS FOR THE 1ST QUARTER

In the Group's reporting, the management monitors the performance on the basis of proportional consolidation of joint ventures. The loan contract also determines the calculation of some loan covenants while taking into account proportional consolidation.


REVENUE

The consolidated revenue for the 1st quarter of 2019 totalled EUR 17.3 million (1st quarter 2018: EUR 16.4 million). Revenue increased by 6% as compared to the previous year. Revenue growth is primarily attributable to the advertising revenue growth both in Estonia and Lithuania.  The share of the Group's digital revenue made up 37% of total revenue. In the 1st quarter 2019, the Group's digital revenue increased by 11% as compared to the same period last year.

PROFITABILITY

In the 1st quarter of 2019, consolidated EBITDA totalled EUR 0.68 million (1st quarter 2018: EUR 0.67 million). EBITDA increased by 1% as compared to the previous year, of which EUR +0,2 million was related to the effect of the new accounting standard IFRS 16 "Leases" on EBITDA that entered into force on 1 January 2019. The EBITDA margin declined to 3.9% (1st quarter 2018: 4.1%). In the 1st quarter of 2019, the consolidated net loss totalled EUR -0.61 million (1st quarter 2018: EUR -0.24 million). The decline in profitability was primarily related to the intensifying competition in the printing services segment and the increase in input prices. In addition, it was related to the decline in the revenue of print media and higher home delivery and labour costs. In the first quarter, the additional loss in amount of EUR 0.1 EUR came from interests in associates and other financial investments.

From 1 January 2019, the Group has applied the new mandatory accounting standard IFRS 16 "Leases". Due to this, the leased assets and lease liabilities are recognised at the present value of lease payments in the balance sheet. Depreciation on leased assets and the estimated interest expense on lease liabilities are recognised in the income statement.

The effect of IFRS 16 on consolidated balance sheet and income statement as at 31.03.2019 is disclosed on page 17 of the financial statements.

CASH POSITION

At the end of the reporting period, the Group had available cash by proportional consolidation in the amount of EUR 1.6 million and equity in the amount of EUR 49.5 million (61% of total assets, without taking into account the effect of IFRS 16 - 63%). The comparative figures as of 31 March 2018 were EUR 2.4 million and EUR 52.3 million (66% of total assets), respectively. As of 31 March 2019, the Group's net debt totalled EUR 18.1 million, without taking into account the effect of IFRS 16, the Group's net debt totalled EUR 13.1 million (31 March 2018: EUR 13.2 million).


BUSINESS OPERATIONS

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 the 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 and the other where joint ventures are recognised under the equity method and their net result is presented as financial income in one line.

The effect of the new standard IFRS 16 "Leases" that entered into force on 1 January 2019 is described on page 17 and in Note 1 of the financial statements.

 

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

Performance indicators – joint ventures consolidated 50% (EUR thousand)

Q1 2019

Q1 2018

Change %

12 months 2018

For the period

 

 

 

 

Sales

17 313

16 351

6%

69 096

EBITDA

677

668

1%

4 206

EBITDA margin (%)

3.9%

4.1%

 

6.1%

Operating profit /(loss)

(405)

(160)

-147%

944

Operating margin (%)

-2.3%

-1.0%

 

1.4%

Interest expenses

(118)

(103)

-15%

(458)

Net profit /(loss) for the period

(615)

(239)

-156%

25

Net margin (%)

-3.5%

-1.5%

 

0.0%

Return on assets (ROA) (%)

-0.8%

-0.3%

 

0.0%

Return on equity (ROE) (%)

-1.2%

-0.5%

 

0.0%

Earnings per share (EPS)

(0.02)

(0.01)

 

0.00

 

Financial indicators and ratios under the equity method are disclosed on pages 16-17 of the financial statements.

 

SEGMENT OVERVIEW

The Group’s activities are divided into two large segments - media segment and printing services segment

The media segment includes the Group's activities in Estonia, Latvia and Lithuania. It comprises the operations of online portal Delfi, several other news portal providing online advertising network and programmatic sales, digital outdoor advertising in Estonia and Latvia, publishing of the Estonian weekly newspapers Maaleht, Eesti Ekspress and LP, the daily newspaper Päevaleht, tabloid Õhtuleht, freesheet Linnaleht, publishing of books and magazines in Estonia and providing home delivery services.

The printing services segment includes AS Printall which one of the largest is printing companies in Estonia. We are able to print high-quality magazines, newspapers, advertising materials, product and service catalogues, yearbooks, paperback books and other publications in our printing plant.

Segment EBITDA does not include one-off write-downs for goodwill and trademarks. Volume-based fees and other fees payable to agencies have been deducted from the segment's advertising revenue.

The effect of the new standard IFRS 16 "Leases" that entered into effect on 1 January 2019 is described on page 17 and Note 1 of the financial statements.

Key financial indicators for segments

 (EUR thousand)

Sales

 

Q1 2019

Q1 2018

Change %

12 months 2018

Media segment (under equity method)

9 357

8 095

16%

37 248

      incl. revenue from all digital and online channels

6 054

5 421

12%

24 561

Printing services segment

6 570

6 221

6%

25 242

Corporate functions

539

691

-22%

2 341

Inter-segment eliminations

(1 155)

(990)

 

(4 342)

TOTAL GROUP under equity method

15 310

14 017

9%

60 489

Media segment (by proportional consolidation)

11 523

10 708

8%

46 716

      incl. revenue from all digital and online channels

6 364

5 726

11%

25 954

Printing services segment

6 570

6 221

6%

25 242

Corporate functions

539

691

-22%

2 341

Inter-segment eliminations

(1 319)

(1 269)

 

(5 204)

TOTAL GROUP by proportional consolidation

17 313

16 351

6%

69 096

 

(EUR thousand)

EBITDA

 

Q1 2019

Q1 2018

Change %

12 months 2018

Media segment (under equity method)

436

246

77%

3 355

Media segment (by proportional consolidation)

496

291

71%

3 329

Printing services segment

550

701

-22%

2 403

Corporate functions

(363)

(324)

-12%

(1 492)

Inter-segment eliminations

(7)

0

 

(2)

TOTAL GROUP under equity method

616

623

-1%

4 263

TOTAL GROUP by proportional consolidation

677

668

1%

4 206

 

EBITDA margin

Q1 2019

Q1 2018

12 months 2018

Media segment (under equity method)

5%

3%

9%

Media segment (by proportional consolidation)

4%

3%

7%

Printing services segment

8%

11%

10%

TOTAL GROUP under equity method

4%

4%

7%

TOTAL GROUP by proportional consolidation

4%

4%

6%

 

MEDIA SEGMENT

ONLINE MEDIA

Important progress and significant accomplishments per country are listed below.

Estonia

  • Ekspress Meedia posted all-time highest results in single-article sales.
  • Ekspress Meedia launched refreshed company brand and website.
  • Ekspress Meedia launched Delfi 2019 elections subsite and personal preferences testing wizard "elections engine".
  • For Estonia's Independence Day, a special project “101 dreams” was launched.
  • Novel elections-related TV-show for prime minister candidates "Work interview" was launched.
  • Longread article about special effects in the movie “Truth and Justice” was created.
  • Ekspress Meedia launched special subsite for 2019 European Parliament elections.
  • Õhtuleht Kirjastus launched personal preferences testing wizard "election compass".
  • Õhtuleht Kirjastus refreshed the display logic of domain-specific content and carried out multiple development projects of its digital platform.

 

Latvia

Lithuania

  • Delfi Lithuania's traditional initiative “Heroes among us” was this year dedicated to teachers.
  • Delfi Lithuania journalists won 3 prizes covering EU investments.
  • DELFI TV team prepared unique 45-minute documentary film „Mafia of Pravieniskes“.
  • Delfi Lithuania signed a broadcasting partnership with Lithuanian football A league.
  • Debunk.eu project was covered by Financial Times.
  • Delfi Lithuania together with several partners organized an event “The best day of lessons” in Kaunas with ca 14 thousand school students participating and active coverage, video conferences and streams.
  • Delfi Lithuania launched an overview “DELFI is more than a news portal”, highlighting company’s strong position in variety of its businesses.

 

PRINT MEDIA

Based on Estonian Newspaper Association data, the daily newspaper with the largest circulation in Estonia for last 12 months continues to be Õhtuleht. For January and December, the largest newspaper was Maaleht. During the last 12 months, 5 largest newspapers have declined in circulation in total by ca 8 000 copies.

In the 1st quarter of 2019, the revenue in the media segment totalled EUR 11.5 million (1st quarter 2018: EUR 10.7 million). Sales increased by 8% as compared to the previous year. Sales growth is primarily attributable to the advertising revenue growth in Estonia and Lithuania.

Digital media keeps growing and despite tough competition, the Group has not lost market share and our revenue is increasing. By the end of the 1st quarter, the Group's digital revenue reached 37% of total revenue. The Group's digital revenue in the 1st quarter of 2019 increased by 11% as compared to the same period last year.

The EBITDA of the media segment in the first quarter of 2019 totalled EUR 0.5 million (1st quarter 2018: EUR 0.3 million). As compared to the previous year, EBITDA increased by 71%, of which +0.2 million was the effect of the new accounting standard IFRS 16 "Leases" that entered into force on 1 January 2019 on EBITDA.

 

REAL ESTATE PORTAL

Due to the sales and marketing activities, the real estate portal Kinnisvara24.ee managed to surpass its key competitor city24.ee both in terms of the number of advertisements and visitors by the end of last quarter of 2018. Kinnisvara24.ee ranked second among real estate portals. From the last week of February 2019, city24.ee and kv.ee do not publish their data on the number of people visiting their portals anymore. The Group will continue to actively develop the portal to achieve a higher position in te market.

Kinnisvara24.ee has developed a first-class search engine where one can, for example, look up properties using such criteria as "house with a pool" and "pets allowed" (rental apartments).

At the competition "Real estate deed of the year", the Estonian Real Estate Agents' Association selected the development of the real estate portal Kinnisvara24.ee as the winner.

 

PRINTING SERVICES SEGMENT

In the 1st quarter of 2019, the revenue of AS Printall totalled EUR 6.6 million (1st quarter 2018: EUR 6.2 million). Revenue increased by 6% as compared to the previous year and it was primarily impacted by higher paper prices. The revenue of printing services has declined in Estonia due to the decline of the share of printed media and advertising brochures of large store chains. In the 1st quarter of 2019, EBITDA totalled EUR 0.6 million (1st quarter 2018: EUR 0.7 million). EBITDA decreased by 22% as compared to the previous year. This was primarily impacted by higher input prices (paper, labour, electricity, natural gas, etc.) as well as tighter competition which put negative pressure on sales margins.

For several consecutive years, the printing services segment has been under pressure due to continued digitalisation of regular journalism and increasing popularity of Internet as compared to printed products. Competition concerning sales prices continues to be intense. The sales volumes of print circulations have declined which in turn leads to higher printing costs. In addition, appreciation of input prices (incl. labour, paper and electricity) is another major challenge.

The revenue of AS Printall in the 1st quarter of 2019 outside Estonia is 63% (1st quarter 2018: 62%).

 

FINANCIAL INDICATORS AND RATIOS

Performance indicators - joint ventures under equity method (EUR thousand)

Q1 2019

Q1 2018

Change %

12 months 2018

For the period

 

 

 

 

Sales

15 310

14 017

9%

60 489

EBITDA

616

623

-1%

4 263

EBITDA margin (%)

4.0%

4.4%

 

7.0%

Operating profit /(loss)

(357)

(106)

-225%

1 211

Operating margin (%)

-2.3%

-0.8%

 

2,0%

Interest expenses

(117)

(97)

-21%

(443)

Profit /(loss) of joint ventures under equity method

(51)

(61)

16%

(273)

Net profit /(loss) for the period

(615)

(239)

-157%

25

Net margin (%)

-4.0%

-1.7%

 

0.0%

Return on assets (ROA) (%)

-0.8%

-0.3%

 

0.0%

Return on equity (ROE) (%)

-1.2%

-0.5%

 

0.0%

Earnings per share (EPS)

(0.02)

(0.01)

 

0.00

Financial indicators and profitability ratios by proportional consolidation are disclosed on page 11 of the financial statements.

The effect of the new standard IFRS 16 "Leases" that entered into effect on 1 January 2019 on the income statement and balance sheet is described on page 17 and Note 1 of the financial statements.

 

Balance sheet

(EUR thousand)

joint ventures 50% consolidated

joint ventures under equity method

31.03.2019

31.12.2018

Change %

31.03.2019

31.12.2018

Change %

As of the end of the period

 

 

 

 

 

 

Current assets

14 950

15 631

-4%

13 606

13 831

-2%

Non-current assets

66 771

63 286

6%

66 084

62 907

5%

Total assets

81 721

78 917

4%

79 690

76 738

4%

      incl. cash and bank

1 566

2 228

-30%

805

1 268

-36%

      incl. goodwill

40 352

39 799

1%

39 308

37 969

4%

Current liabilities

16 772

14 207

18%

14 937

12 186

23%

Non-current liabilities

15 390

14 276

8%

15 153

14 118

7%

Total liabilities

32 163

28 483

13%

30 090

26 304

14%

      incl. borrowings

18 146

15 554

17%

17 842

15 474

15%

Equity

49 558

50 434

-2%

49 600

50 434

-2%

 

Financial ratios (%)

joint ventures 50% consolidated

joint ventures under equity method

31.03.2019

31.03.2019 without the effect of IFRS 16

31.12.2018

31.03.2019

31.03.2019 without the effect of IFRS 16

31.12.2018

Equity ratio (%)

61%

63%

64%

62%

65%

66%

Debt to equity ratio (%)

37%

29%

31%

36%

29%

31%

Debt to capital ratio (%)

25%

21%

21%

26%

22%

22%

Total debt/EBITDA ratio

4.30

3.47

3.70

4.19

3.44

3.63

Liquidity ratio

0.89

0.93

1.10

0.91

0.95

1.13

 

From 1 January 2019, the Group applied the new mandatory accounting standard IFRS 16 "Leases" to recognise rental expenses. Due to this, the leased assets and lease liabilities are recognised at the present value of lease payments and depredation on leased assets and the estimates interest expenses on lease liabilities is recognised in the income statement.

As of 31.03.2019, the effect of IFRS 16 on the consolidated balance sheet and income statement is as follows:

Balance sheet (EUR thousand)

joint ventures 50% consolidated 31.03.2019

joint ventures under equity method 31.03.2019

Right of use of buildings

3 239

2 975

Lease liability (short-term)

616

549

Lease liability (long-term)

2 881

2 644

Retained earnings

(263)

(219)

 

Income statement (EUR thousand)

joint ventures 50% consolidated 31.03.2019

joint ventures under equity method 31.03.2019

Decrease in operating expenses

231

194

Increase in depreciation

195

174

Estimated interest expense on lease liabilities

19

18

 

  Finantssuhtarvude leidmisel kasutatud valemid

EBITDA

Earnings before interest, tax, depreciation and amortisation. EBITDA does not include any impairment losses recognised during the period or result from restructuring.

EBITDA margin (%)

 EBITDA/sales x 100

Operating margin (%)

 Operating profit/sales x100

Net margin (%)

 Net margin in financial statements/sales x100

Earnings per share

 Net profit / average number of shares

Equity ratio (%)

Equity/ (liabilities + equity) x100

Dividend rate (%)

Total amount of dividends paid / Net profit

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

 

Consolidated balance sheet (unaudited)

(EUR thousand)

31.03.2019

31.12.2018

ASSETS

 

 

Current assets

 

 

Cash and cash equivalents

805

1 268

Trade and other receivables

9 106

9 154

Corporate income tax prepayment

96

27

Inventories

3 600

3 382

Total current assets

13 606

13 831

Non-current assets

 

 

Trade and other receivables

1 010

1 588

Deferred tax asset

44

44

Investments in joint ventures

1 491

2 345

Investments in associates

319

319

Property, plant and equipment

15 133

11 921

Intangible assets

48 087

46 691

Total non-current assets

66 084

62 907

TOTAL ASSETS

79 690

76 738

LIABILITIES

 

 

Current liabilities

 

 

Borrowings

3 754

1 356

Trade and other payables

11 157

10 801

Corporate income tax payable

25

29

Total current liabilities

14 937

12 186

Non-current liabilities

 

 

Long-term borrowings

14 088

14 118

Other long-term liabilities

1 065

0

Total non-current liabilities

15 153

14 118

TOTAL LIABILITIES

30 090

26 304

EQUITY

 

 

Minority shareholding

90

87

Capital and reserves attributable to equity holders of parent company:

 

 

Share capital

17 878

17 878

Share premium

14 277

14 277

Treasury shares

(22)

(22)

Reserves

1 688

1 688

Retained earnings

15 689

16 526

Total capital and reserves attributable to equity holders of parent company

49 510

50 347

TOTAL EQUITY

49 600

50 434

TOTAL LIABILITIES AND EQUITY

79 690

76 738

 

Consolidated statement of comprehensive income (unaudited)

(EUR thousand)

Q1 2019

Q1 2018

12 months 2018

Sales

15 310

14 017

60 489

Cost of sales

(13 097)

(11 564)

(48 874)

Gross profit

2 214

2 453

11 615

Other income

119

39

394

Marketing expenses

(731)

(767)

(3 108)

Administrative expenses

(1 938)

(1 816)

(7 609)

Other expenses

(21)

(16)

(82)

Operating profit /(loss)

(357)

(106)

1 211

Interest income

6

44

143

Interest expenses

(117)

(97)

(443)

Other finance income and costs

(36)

(19)

(103)

Net finance cost

(147)

(72)

(403)

Profit (loss) on shares of joint ventures

(51)

(61)

(273)

Profit (loss) on shares of associates

(59)

0

(234)

Profit /(loss) before income tax

(614)

(239)

302

Income tax expense

(1)

0

(276)

Net profit /(loss) for the reporting period

(615)

(239)

25

Net profit /(loss) for the reporting period attributable to

 

 

 

Equity holders of the parent company

(618)

(239)

6

Minority shareholders

3

0

19

Total comprehensive income

(615)

(239)

25

Comprehensive income for the reporting period attributable to

 

 

 

Equity holders of the parent company

(618)

(239)

6

Minority shareholders

3

0

19

Basic and diluted earnings per share

(0.02)

(0.01)

0.00

 

Consolidated cash flow statement (unaudited)

(EUR thousand)

Q1 2019

Q1 2018

Cash flows from operating activities

 

 

Operating profit /(loss) for the reporting year

(357)

(106)

Adjustments for:

 

 

Depreciation, amortisation and impairment

962

729

(Gain)/loss on sale and write-down of property, plant and equipment

(1)

(3)

Cash flows from operating activities:

 

 

Trade and other receivables

(16)

330

Inventories

(217)

(454)

Trade and other payables

993

656

Cash generated from operations

 

 

Income tax paid

(73)

(11)

Interest paid

(134)

(97)

Net cash generated from operating activities

1 158

1 044

Cash flows from investing activities

 

 

Purchase of subsidiaries (less acquired cash)

(459)

0

Interest received

6

25

Purchase of property, plant and equipment

(597)

(580)

Proceeds from sale of property, plant and equipment

3

12

Loans granted

(49)

(422)

Loan repayments received

199

0

Net cash used in investing activities

(897)

(966)

Cash flows from financing activities

 

 

Finance lease payments made

(196)

(18)

Change in overdraft

(665)

(92)

Loans received / Repayments of bank loans

138

0

Net cash used in financing activities

(723)

(111)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS

(462)

(32)

Cash and cash equivalents at the beginning of the year

1 268

1 073

Cash and cash equivalents at the end of the year

805

1 041


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