OREANDA-NEWS. In the second quarter of 2016, the revenue of the AS Ekspress Grupp increased 3% as compared to the year before amounting to EUR 16.5 million. Considering only the Group’s core business and excluding the revenue earned from the Titanic exhibition, the revenue increased even more impressively by 6%. Revenue grew  both in the media and printing services segments. In comparison with the forecast, the actual result was 2% lower, mainly in the printing services segment that continues to be influenced by strong price competition in Scandinavia caused by sanctions imposed against Russia. In the second quarter, the Group’s EBITDA increased 57% year on year, totalling EUR 2.3 million. Including elimination of the loss of EUR 1.1 million in connection with the Titanic exhibition, our profit in the core business was 11% lower than a year earlier and 12% lower than our forecast. The decrease in core business’ EBITDA and net profit by EUR 0.3 million in a year are mainly attributable to the decision to deliberately increase the cost basis in the highly competitive media segment, lower page prices in advertising and strong price pressure in the printing services segment. The above figures include all our joint ventures (AS SL ?htuleht, AS Ajakirjade Kirjastus and AS Express Post) consolidated 50% line-by-line.

In the second quarter revenue in the media segment amounted to EUR 11.2 million and increased 7% year on year, whereas revenue from digital and online channels increased 15%. EBITDA totalled EUR 1.4 million, decreasing 12% or by approximately EUR 0.2 million compared to the second quarter of 2015. In the second quarter, Delfi Lithuania increased advertising revenue by 8% and EBITDA by 15% as compared to the year earlier, but the shortfall of the first quarter was not yet offset fully. In the second quarter, online advertising revenue grew strongly by 15%, but the Lithuanian magazine market continues to shrink. During the quarter, Ekspress Meedia posted strong growth in advertising sales in both online (16%) and in print (3%). The latter figure is significant, especially when taking into consideration the overall negative trend in the print market. This was achieved as a result of strong and efficient sales team, the increasingly versatile portfolio and innovative approach to advertising products and activities in the sales department. Subscription and retail sales revenue were both up by 3%, despite decreasing circulations. The decrease of EBITDA by EUR 0.3 million was attributable mainly to additional marketing costs of the new LP book series (last year’s advertising costs related to Maaleht book series were recognised in the first quarter), increased personnel and growth in printing and delivery costs resulting from growth in advertising volumes. Of various projects, one should mention the arrangement of the historic basketball game Kalev25 that was sold out and that was viewed by a record number of people via Delfi TV. Ekspress Meedia also signed a new contract with the Estonian Basketball Federation, under which Delfi was granted three-year exclusive rights for web broadcasts. The Latvian Internet market has also shown good growth this year and in the second quarter Delfi Latvia increased its revenue by 14%. The competition situation between Internet portals remains tough which forces to continue investments in strong editorial offices. Despite that, Delfi Latvia managed to increase EBITDA 40% up to EUR 0.1 million in the second quarter.

The priority in the media segment continues to be innovation in developing different products and technical platforms. In all three countries, several new topical portals were launched, various new multimedia projects carried out, e-commerce services developed, and various advertising sales channels and solutions specific to target groups developed. Activities in social media also continue.

The revenue and profit growth of Ajakirjade Kirjastus 12% and 23%, respectively, were mainly attributable to the increase of our product portfolio. At the beginning of April, the company acquired from O? Presshouse Estonian largest women’s weekly magazine Naisteleht, as well as the rights and obligations related to the publication of magazines Nipiraamat and M?stiline Ajalugu. As a result of the transaction, existing magazine Naised and new acquired Naisteleht were merged and reached significant synergy that has enabled to increase both revenue and profit.

In the second quarter, SL ?htuleht increased its revenue 6%. The growth was attributable to advertising revenue, circulation sales revenue and new projects. The book about Estonian football player Raio Piiroja and the magazine dedicated to the UEFA European Championships were published. Structural changes in the advertising department have had a particularly good impact on the print advertising sale. In May and June, advertising sales of ?htuleht increased 5% and in May Linnaleht posted the best revenue of recent six years. Web advertising sales are growing at similar pace as print advertising. May was record month in web advertising sales of ?htuleht. The number of digital subscribers has doubled since beginning of the year.

The printing segment has managed to halt the decrease of revenue and profit from last year. While in the first quarter the result was similar to the period a year earlier, the second-quarter revenue already increased 4%. While growth in the amount of orders and work volume was positive, continued price pressure does not allow revenue to increase at the same rate. In addition to competition in the export markets, Printall’s print prices outside of euro-zone are negatively affected also by the strengthening of the euro. For us, the positive news has been the closure of printing houses in the first half of 2016 and the decrease in capacities on the Scandinavian print market as this is already having an impact in the more stable and improved price levels. Thanks to consistent sales work, we have attained new products and customers in Scandinavia. Awareness about Printall is also growing in other printing sectors than newspapers and magazines. The objective is to further expand from periodicals to the B2B segment that produces for own use product catalogues and other specific products that are suitable for our sheet-fed machines. The 10% decrease in EBITDA is attributable to the growth in labour costs resulting from increased volumes and, in particular, growth in salaries of lower-level positions.

In July, we signed a contract to acquire 50% holding in O? Linna Ekraanid, which is engaged in the sale of digital outdoor advertising in Estonia. In the second quarter of 2019, AS Ekspress Grupp will acquire the remaining 50% of the shares of O? 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.

The financial position of the Group remains strong, the ratio of total debt and EBITDA is already approaching 2.0 and the debt service coverage ratio is almost 2.4.

Our outlook for the next quarter and the whole year remains modest. However, we expect the online media and print media to continue stable growth and the printing services segment to recover. We believe that the second half will be more positive than the start of the year. In the third quarter we expect the revenue of our core business to grow approximately 8% and EBITDA to remain on last year’s level.

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.