AS Ekspress Grupp: Consolidated unaudited interim report for the fourth quarter and 12 months of 2019

The year 2019 was the most successful one for AS Ekspress Grupp in recent years. The company increased its revenue on account of digital revenue growth, earned a strong profit in the last quarter of the year and was also profitable for the entire financial year.The revenue of Ekspress Grupp totalled EUR 21.7 million in the fourth quarter of last year and EUR 75.3 million in 2019. In the fourth quarter, the Group's revenue increased by 11% as compared to the same period last year...

The year 2019 was the most successful one for AS Ekspress Grupp in recent years. The company increased its revenue on account of digital revenue growth, earned a strong profit in the last quarter of the year and was also profitable for the entire financial year.

The revenue of Ekspress Grupp totalled EUR 21.7 million in the fourth quarter of last year and EUR 75.3 million in 2019. In the fourth quarter, the Group's revenue increased by 11% as compared to the same period last year. Digital revenue increased the most, growing by 22% as compared to last year and making up already 60% of the Group's media segment revenue by the end of December.

The Group's earnings before interest, tax, depreciation and amortisation (EBITDA) totalled EUR 3.28 million in the 4^th quarter and EUR 7.16 million for the 12 months period. The 4^th quarter EBITDA sets a highest level of profits of the Group over the last 5 years.

Due to higher revenue, the Group became profitable, earning net profit of EUR 1.65 in the fourth quarter and EUR 1.41 million in the financial year.

Management proposes not to distribute dividends from the retained profits, in order to continue the investments into the growth of digital business. The Group consistently continues to implement its long-term growth and investment strategy in digital revenues in order to transform from print to digital. As a consequence of the activities implemented over the last five years, the company is less dependent on printing services.

The Baltic's advertising market supported a strong result in the last quarter of all media businesses. The revenue of the Group's media companies increased by 16% in the last quarter and by 13% during the full year. This has also been strongly supported by Group's acquisitions made in 2019.

Ekspress Grupp continues focusing on organic growth to increase our digital footprint and at the same time exploring constantly various options for potential acquisitions in order to increase the share of Group's digital revenues and develop its diversified digital business. The Group's continuing investment strategy is supported by a stronger cash position that has improved from EUR 2.2 million last year to EUR 4.5 million as at 31 December 2019 and also issuing the long-term bonds as private placement with the cooperation of LHV Varahaldus.

In 2019, the number of digital subscriptions of the periodicals of Ekspress Grupp increased strongly. A greater number of readers of periodicals are willing to pay for the digital web content. The digital subscriptions in Estonia and Latvia increased the most. In Lithuania, Ekspress Grupp started to provide paid content in the third quarter, and its results are also encouraging. The company will continue making efforts in the upcoming years to increase digital subscriptions in all Baltic States.

Ekspress Grupp in collaboration with other media organisations and the Association of Media Companies worked hard in 2019 to increase the awareness of the wider public, regulators and legislators regarding the topic of fairer taxation of media companies. The explosive growth of global digital services (e.g. social media networks, sharing platforms, various mobile applications, online advertising, etc.) over the last 15 years has significantly impacted the structure of traditional economy, offering completely new ways to make virtual transactions. This has led to major changes in the economy: reducing the tax base, allowing large information technology groups to transfer their profits to countries with a low tax rate and encouraging unfair competition by reducing the earnings of local periodicals. The Estonian Association of Media Companies has come up with three proposals for more equal treatment of local and international media companies: a digital tax for global platforms operating in the local market, lower value added tax for digital subscriptions (similarly to paper periodicals) and clearer regulations for national broadcasting organisations.

In the 4th quarter we also celebrated Delfi's 20th anniversary in Estonia and Latvia. Our portals in every country are the most preferred news portals with the highest visitors' numbers and also with the biggest time share - already for 20 years.

SUMMARY OF THE RESULTS OF THE FOURTH QUARTER AND 12 MONTHS

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

REVENUE

The consolidated revenue for the 4^th quarter of 2019 totalled EUR 21.7 million (4^th quarter 2018: EUR 19.5 million) and for 12 months of the year, it totalled EUR 75.3 million (12 months 2018: EUR 69.1 million). In the 4^th quarter revenue increased by 11% as compared to the previous year. Revenue growth is primarily attributable to the advertising revenue growth both in Estonia and Lithuania and also to the acquisition of the Latvian ticket sales platform company SIA Biļešu Paradīze in June 2019 which increased the Group's online revenue and its share in total revenue. SIA Biļešu Paradīze manages the electronic ticket sales platform (bilesuparadize.lv) and ticket sales sites, through which tickets to various entertainment events on behalf of event organisers are sold. The share of the Group's digital revenue made up 42% of total revenue and 60% of media segment revenue at the end of the 4^th quarter. The Group's digital revenue for the 12 months of 2019 increased by 22% as compared to the same period last year.

PROFITABILITY

In the 4^th quarter of 2019, consolidated EBITDA totalled EUR 3.28 million (4^th quarter 2018: EUR 1.22 million) and in the 12 months of 2019, it totalled EUR 7.16 million (12 months 2018: EUR 4.21 million). EBITDA increased by 70% as compared to the previous year, of which EUR +0.84 million was related to the effect of the new accounting standard IFRS 16 Leases entered into force on 1 January 2019 on EBITDA. The EBITDA margin increased to 9.5% (12 months 2018: 6.1%). In the 4^th quarter, the Group earned a profit in the amount of EUR 1.65 million. The consolidated net profit for the 12 months of 2019 was EUR 1.41 million (12 months 2018: EUR 0.03 million). The growth in profitability was primarily related to the good results in media segment. In the printing services segment there was a decline in profitablity due to the intensifying competition and the increase in input prices.

From 1 January 2019, the Group has adopted 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.

CASH POSITION

At the end of the reporting period, the Group had available cash by proportional consolidation in the amount of EUR 4.5 million and equity in the amount of EUR 51.6 million (53% of total assets, without taking into account the effect of IFRS 16 - 55%). The comparative figures as of 31 December 2018 were EUR 2.2 million and EUR 50.4 million (64% of total assets), respectively. As of 31 December 2019, the Group's net debt totalled EUR 20.1 million. Without taking into account the effect of IFRS 16, the Group's net debt totalled EUR 16.8 million (31 December 2018: EUR 13.3 million).

Key financial indicators for segments

(EUR thousand)	Sales
	Q4 2019	Q4 2018	Change %	12 months 2019	12 months 2018	Change %
Media segment (under equity method)	13 441	11 246	20%	44 218	37 248	19%
incl. revenue from all digital and  online channels	9 842	7 093	39%	30 534	24 561	24%
Printing services segment	6 906	7 052	-2%	25 695	25 242	2%
Corporate functions	518	338	53%	2 076	2 341	-11%
Inter-segment eliminations	(1 180)	(1 238)		(4 533)	(4 342)
TOTAL GROUP under equity method	19 685	17 398	13%	67 456	60 489	12%
Media segment (by proportional consolidation)	15 627	13 509	16%	52 711	46 716	13%
incl. revenue from all digital and online channels	10 103	7 482	35%	31 577	25 954	22%
Printing services segment	6 906	7 052	-2%	25 695	25 242	2%
Corporate functions	518	338	53%	2 076	2 341	-11%
Inter-segment eliminations	(1 339)	(1 409)		(5 185)	(5 204)
TOTAL GROUP by proportional consolidation	21 712	19 490	11%	75 297	69 096	9%

(EUR thousand)	EBITDA
	Q4 2019	Q4 2018	Change %	12 months 2019	12 months 2018	Change %
Media segment (under equity method)	2 978	1 333	123%	5 966	3 355	78%
Media segment (by proportional consolidation)	3 083	1 221	152%	6 376	3 329	92%
Printing services segment	567	479	18%	2 032	2 403	-15%
Corporate functions	(296)	(450)	34%	(1 150)	(1 492)	23%
Inter-segment eliminations	(52)	(3)		(75)	(2)
TOTAL GROUP under equity method	3 196	1 359	135%	6 772	4 263	59%
TOTAL GROUP by proportional consolidation	3 284	1 215	170%	7 164	4 206	70%

EBITDA margin	Q4 2019	Q4 2018	12 months 2019	12 months 2018
Media segment (under equity method)	22%	12%	13%	9%
Media segment (by proportional consolidation)	20%	9%	12%	7%
Printing services segment	8%	7%	8%	10%
TOTAL GROUP under equity method	16%	8%	10%	7%
TOTAL GROUP by proportional consolidation	15%	6%	10%	6%

Consolidated balance sheet (unaudited)

(EUR thousand)	31.12.2019	31.12.2018
ASSETS
Current assets
Cash and cash equivalents	3 647	1 268
Trade and other receivables	12 705	9 154
Corporate income tax prepayment	0	27
Inventories	3 120	3 382
Total current assets	19 472	13 831
Non-current assets
Trade and other receivables	975	1 588
Deferred tax asset	38	44
Investments in joint ventures	1 254	2 345
Investments in associates	2 356	319
Property, plant and equipment	14 943	11 921
Intangible assets	56 369	46 691
Total non-current assets	75 935	62 907
TOTAL ASSETS	95 407	76 738
LIABILITIES
Current liabilities
Borrowings	5 100	1 356
Trade and other payables	16 483	10 801
Corporate income tax payable	65	29
Total current liabilities	21 647	12 186
Non-current liabilities
Long-term borrowings	19 242	14 118
Other long-term liabilities	2 895	0
Total non-current liabilities	22 137	14 118
TOTAL LIABILITIES	43 784	26 304
EQUITY
Minority shareholding	100	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	17 701	16 526
Total capital and reserves attributable to equity holders of parent company	51 522	50 347
TOTAL EQUITY	51 622	50 434
TOTAL LIABILITIES AND EQUITY	95 407	76 738

 

Consolidated statement of comprehensive income (unaudited)

(EUR thousand)	Q4 2019	Q4 2018	12 months 2019	12 months 2018
Sales	19 685	17 398	67 456	60 489
Cost of sales	(14 660)	(13 884)	(54 044)	(48 874)
Gross profit	5 025	3 513	13 412	11 615
Other income	157	173	607	394
Marketing expenses	(814)	(930)	(3 124)	(3 108)
Administrative expenses	(2 156)	(2 211)	(8 024)	(7 609)
Other expenses	(94)	(33)	(148)	(82)
Operating profit /(loss)	2 119	511	2 722	1 211
Interest income	4	25	22	143
Interest expenses	(229)	(138)	(784)	(443)
Other finance income and costs	(24)	(52)	(61)	(103)
Net finance cost	(249)	(165)	(823)	(403)
Profit (loss) on shares of joint ventures	(22)	(261)	(38)	(273)
Profit (loss) on shares of associates	(17)	(243)	(114)	(234)
Profit /(loss) before income tax	1 831	(158)	1 746	302
Income tax expense	(186)	(83)	(339)	(276)
Net profit /(loss) for the reporting period	1 645	(240)	1 407	25
Net profit /(loss) for the reporting period attributable to
Equity holders of the parent company	1 637	(262)	1 394	6
Minority shareholders	8	21	13	19
Total comprehensive income	1 645	(240)	1 407	25
Comprehensive income for the reporting period attributable to
Equity holders of the parent company	1 637	(262)	1 394	6
Minority shareholders	8	21	13	19
Basic and diluted earnings per share	0.05	(0.01)	0.05	0.00

Consolidated cash flow statement (unaudited)

(EUR thousand)	2019	2018
Cash flows from operating activities
Operating profit for the reporting year	2 722	1 211
Adjustments for:
Depreciation, amortisation and impairment	4 070	3 052
Gain from change in ownership interest in subsidiary	(31)	0
(Gain)/loss on sale and write-down of property, plant and equipment	(4)	(5)
Cash flows from operating activities:
Trade and other receivables	(2 929)	(397)
Inventories	262	(550)
Trade and other payables	3 594	2 449
Cash generated from operations	7 684	5 760
Income tax paid	(270)	(379)
Interest paid	(740)	(462)
Net cash generated from operating activities	6 675	4 920
Cash flows from investing activities
Acquisition of subsidiaries/ associates (less cash acquired)	(6 648)	0
Purchase and receipts of other investments	9	(995)
Cash paid-in/ received from equity-accounted investees	(63)	0
Interest received	14	127
Purchase of property, plant and equipment and intangible assets	(2 775)	(3 082)
Proceeds from sale of property, plant and equipment and intangible assets	19	29
Loans granted	(118)	(700)
Loan repayments received	303	1 763
Net cash used in investing activities	(9 259)	(2 858)
Cash flows from financing activities
Dividends paid	0	(2 085)
Payment of lease liabilities (2018: payment of finance lease liabilities)	(978)	(74)
Change in overdraft	(265)	1 191
Notes issued	5 000	0
Loans received / Repayments of bank loans	1 207	(900)
Net cash used in financing activities	4 964	(1 868)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS	2 379	194
Cash and cash equivalents at the beginning of the year	1 268	1 073
Cash and cash equivalents at the end of the year	3 647	1 268

Signe Kukin
Group CFO
AS Ekspress Grupp 
+372 669 8381
[email protected]

AS Ekspress Grupp is the leading media group in the Baltic States whose key activities include web media content production, publishing of newspapers and magazines and provision of printing services in Estonia, Latvia and Lithuania. Ekspress Grupp that launched its operations in 1989 employs 1700 people, owns leading web media portals in the Baltic States and publishes the most popular daily and weekly newspapers as well as the majority of the most popular magazines in Estonia.

Attachment

• EG_IV_kvartal_2019_ENG