Focus on revenue growth
CEO´s comments in Annual Report 2006:
During 2006, Eniro’s strong growth in Internet continued, with increases in both Internet revenues and usage figures in all markets. Although the revenues for printed directories remains under pressure, we made considerable progress towards stabilization of the revenues in
most markets.
The Norwegian directory market remains a challenge. For 118 services, we succeeded in maintaining and strengthening our positions. Through continued tight cost controls and leveraging of synergies, margins were strengthened during the year. Strong market positions and favorable cash flows also mean that we will be able to continue to provide high returns for our shareholders.
Eniro’s business developed well during 2006. Despite tough competition in all markets, Internet revenues continued to show strong growth. All Nordic markets reported doubledigit growth figures, and the share of Internet revenues, as a proportion of total revenues were 29 percent. Traffic to Eniro sites in the various countries also continued to increase, in total by more than 20 percent.
At the same time as the revenue shares from Internet advertising and 118 services are increasing, the revenue share for Eniro’s printed directories is declining. In five years, our dependency on print revenues has declined from 80 percent to 57 percent. However, we believe that printed directories will continue to fill a great need for both users and advertisers for a long time. Our challenge lies in increasing usability as far as possible while enhancing the offer to advertisers and stimulating demand for printed directories.
With the increased use of mobile phones and demand for a higher level of service, we anticipate stable development of 118 services. The introduction of new concepts and services contribute to increasing revenues from this type of services.
Eniro’s position as the leading search company in the Nordic region was strengthened. In 2006, 1.4 billion searches were performed in Eniro’s Internet networks. During the year, we worked with integrating the during 2005 acquired company Findexa with our previous Norwegian operations. The two units Findexa AS and Eniro AS are now completely integrated, and employees have moved to joint offi ces. Findexa’s name has been changed to Eniro AS. The promised cost synergies of SEK 50 M during 2006 were realized, and we intend to achieve an additional SEK 50 M in 2007.
The work to increase cost awareness within the Group has continued to produce results. Operating income before depreciation (EBITDA) for the year increased by 9 percent to SEK 2,290 M (2,093), including a capital gain of SEK 43 M. Our market outlook was an improvement by 5–7 percent. Excluding the capital gain the outcome was in the higher end of the range and the EBITDA-margin was 34 percent. Net income per share amounted to SEK 5.82, and the dividend proposal to the Annual General Meeting means that 76 percent of net income will be returned to the shareholders.
Our ambition
Eniro’s ambition is to achieve revenue growth of 3–5 percent per year with a sustained EBITDA margin exceeding 30 percent over the medium-long term. The balance sheet will be continuously optimized with consideration taken to fi nancial flexibility and stability. The goal is a an efficient capital structure with a net debt in relation to EBITDA of up to 5 times. Eniro’s business generates high cash flows, while investment requirements are limited, thus permitting a high return to shareholders.
Eniro’s dividend policy is a dividend corresponding to 75 percent of net income. Our challenge going forward is primarily growth. During 2006, revenues increased organically by 1 percent. To achieve the goal of 3–5 percent growth, we must accelerate the growth rate in Internet revenues, increase revenues from 118 services and reduce revenue losses for printed directories. We must retain cost controls, but also become better at realizing Group synergies. Above all, we must better leverage the benefits of our Nordic Internet position.
Accelerated Internet revenue growth
Norway, Finland, Denmark and Poland are experiencing high growth in Internet revenues. The challenge lies in increasing growth in Germany and Sweden. To meet user requirements and to increase Internet traffic, new versions of eniro.se, eniro.fi , eniro.dk, gulesider.no and kvasir.no were launched with a new design and improved functionality. In addition to development of new functions and improved functionality for our Internet services, significant effort is being devoted to new customer offerings based on transaction-based payment. These solutions enable Eniro to be an active participant in thefastest growing market segment, which is the market for sponsored links. As of 2006, Eniro also has specialized Internet sales representatives in all markets.
Stable or somewhat higher revenues from 118 services
The ambition is that revenues from 118 services will be retained or increase somewhat in Sweden and Norway and grow in Finland. Eniro will continue to develop its service concept and offer a broader service than previously that includes driving directions and web searches.
Reduced revenue decline from directories
Revenues from printed directories declined by 5 percent during 2006. The ambition is to reduce and preferably stabilize the revenue decline. Denmark and Poland already report stable print revenues. Sweden and Finland are making satisfactory progress, while Norway is the market in which Eniro currently faces the greatest challenge. The keys to success are continuous product development that stimulates usage while increasing the effect of advertising, our ability to lead and develop the sales force based on Eniro’s sales concept, and our ability to demonstrate the value of advertising for our advertisers.
Realizing Group synergies
Synergies within the Eniro Group are currently created primarily within purchasing, product development and IT through common platforms that can be used by several of the Nordic countries. We believe that there are opportunities for realizing further synergies in these areas.
Future
Over the past two years, we have succeeded in accelerating Internet revenue growth, decreasing the decline in print revenues and stabilize revenues from 118 services in most markets while improving our profi tability. This gives us strength and a strong belief in our ability to succeed in achieving even higher improvements. We have an organization of skilled and loyal employees to whom I wish to extend my warmest thanks. I am convinced that we can continue to increase shareholder value over the coming years through continued focus on organic growth with high profitability.
Tomas Franzén
President and CEO
Last updated: 2007-03-20