Consolidated Interim Report for the Third Quarter and Nine Months of 2013 01.11
In the online media segment, the problem in the 3rd quarter was the unexpected revenue weakness in the Latvian and Lithuanian portals and a greater than usual allowance for doubtful receivables which occurred at these companies at the same time. Decelerating economic growth in the Baltic States and Europe coupled with warmer than normal summer significantly curbed the economic activity primarily in Latvia and Lithuania, which directly impacted the advertising revenue of our portals. Although Delfi Lithuania managed to grow it sales by 5% as compared to last year, it fell significantly short of the budget. However, the economic result of Delfi Estonia outpaced the rest of the market, and sales increased by 24% as compared to the same period last year, greatly helped by growth in videostreaming. In the 3rd quarter, the loss of Delfi Estonia decreased by half as compared to last year. In the 3rdquarter, our efforts in all Baltic States have focused on development of the portfolio of online verticals and video production which has, however, hindered the EBITDA margin growth. Sales of videos or banners to our advertising clients in video transmissions are gaining momentum and the profitability of video transmissions is in an upward trend.
Although, the sales in the periodicals segment fell short of the last year’s level, profitability has increased, due to which the profit in the periodicals segment increased by 4% as compared to last year. The main shortfall was attributable to lower sales of the book publisher Hea Lugu which was boosted by the DVD series of Estonian film classics last year. A new children’s DVD series will be launched in October. However, despite a decrease in print advertising, Eesti Ajalehed managed to maintain its sales, attributable to the sale of detective novels available together with Eesti Päevaleht and LP. Our joint ventures SL Õhtuleht, Ajakirjade Kirjastus and Express Post exceeded last year’s result.
In the periodicals segment, we are pleased with the growth in the number of digital subscriptions. Thus from the end of 2nd quarter, the number of paying digital subscribers of both Eesti Päevaleht and Eesti Ekspress has increased by ca 40% and has exceeded the level of 5 000 subscribers for each newspaper.
In the periodicals segment, an important change in also occurred staff, where Kadi Lambot who had been in charge of AS Eesti Ajalehed for 5 years left and Art Lukas assumed her position.
In the printing services segment, sales and profitability remained under pressure due to the slump which hit the market at the beginning of the year, as a result of which the printing works did not operate at full capacity and it took time to find new clients. The decrease in circulations and print volumes of our long-time clients has also had a negative effect. However, we are making investments which help to improve productivity and increase profitability.
In the 3rd quarter, AS Eesti Meedia, the co-shareholder of Ekspress Group in three joint ventures, announced that a change had occurred among its owners, due to which Ekspress Grupp has a purchase right of a co-shareholder arising from the Shareholders’ Agreement. Ekspress Grupp intends to use its purchase right and is performing the necessary activities for this. The possibility of the use of the purchase right as well as the date of its realisation will depend primarily on the willingness of AS Eesti Meedia to cooperate.
In the last quarter of the year we expect revenue to remain at last year’s level and EBITDA of the periodicals and online segments to increase as compared to last year. In respect of the Group’s EBITDA, we expect a slight decrease due to some one-off expenses of the Parent Company. According to the forecast, net profit from ordinary activities is expected to remain at the last year’s level.