Q1 2008
CEO Tomas Franzén's comments on the Interim report January - March 2008
As the Nordic market leader in online search Eniro continued to strengthen its online position during the first quarter of 2008 with regard to both traffic and revenues. The traffic within the Eniro Internet network continued to grow in the first quarter 2008 and several of our websites had all time high traffic numbers during the period. Online revenues grew organically by 13 percent to SEK 567 M compared with SEK 424 M in the first quarter of 2007.
During the first quarter 2008, most of our efforts have been put on measures to accelerate the Group’s online growth. Strong online growth is needed to expand the overall company top line and to outpace the decline in the print business. Our mid-term target is to turn Eniro into an online company with a strong print business aiming at 3 to 5 percent overall revenue growth.
The measures taken during the first quarter to support continued high online growth were enlargement of our online sales force in most of our markets, to find new ways to broaden our online product portfolio versus our small and medium size enterprise (SME) customers, continued focus on development of our core search sites and efforts to build value creating partnerships with other important Nordic media players.
The ongoing enlargement of the sales force is necessary in order to increase customer penetration in the existing online directories. This will be the major online growth driver in the short-term perspective. Further customer penetration calls for the introduction of low-end online products in all our markets, an initiative that has proven to be very successful in Sweden with a rapidly growing customer base.
The SME-customers are the foundation of our business today. In order to strengthen the relationship with the SME-customers and at the same time leverage on one of our core assets the sales force, we will introduce new products during 2008 targeting the SME-market, making it possible to extend our online growth beyond an increased customer penetration in our existing online directories.
New functionality is constantly being introduced in our core search sites resulting in continued traffic growth measured in numbers of unique browsers. Several of our websites had all time high traffic numbers during the period proving our ability to develop services in line with user needs and expectations.
On the topic of creating partnerships with other leading media players we have taken some important steps and our aim is to announce some important partnerships later this year.
Looking at our first quarter online results in some more detail, I am pleased with the continued strong online growth of 34 percent to SEK 567 M compared with SEK 424 M in the first quarter of last year. The organic growth was 13 percent, which was in line with last year. In our two most important markets, Sweden and Norway, online revenues continued to grow in a healthy way. The organic online growth in Sweden was 14 percent and the corresponding growth rate in Norway was 15 percent. Our organic online growth of 9 percent in Denmark was weaker than expected. The integration of KRAK is delayed due to IT issues preventing the sales force from operating as planned, resulting in lower sales efficiency. However, we expect the Danish organic growth rate to improve considerably during the remainder of the year. The first quarter is also a seasonally weaker online quarter than the others, and we expect the organic online growth for the Group to be considerably higher for the full-year 2008 than the 13 percent reported in the first quarter.
Revenues from our Directory Assistance (DA) business were organically unchanged and totaled SEK 222 M for the first quarter. The voice business was negatively affected by the fact that the Easter holidays took place in the first quarter this year compared to last year. On the Group level we expect the DA-business to increase somewhat for the full year. In order to improve the efficiency in the Swedish DA-business, we have decided to close one call center resulting in annual savings of SEK 10 M.
Our print business reported revenues of SEK 587 M in the first quarter, an organic decline of 14 percent, which is a number heavily impacted by the fact that the Norwegian print business, especially the Oslo directory, is a large part of the print revenues in the quarter. Going forward, we expect the organic full-year print decline to be considerably lower, as the print revenue mix will have a larger portion of print revenues from other markets than Norway. In order to improve the situation for the print yellow pages in the 2009 editions in both Norway and Sweden, a new smaller and much more attractive format will be introduced.
Our total revenues for the quarter declined organically by 2 percent due to the exceptionally high print decline. However, for the full year we expect total revenues to grow organically and online growth to more than offset the decline in print.
EBITDA for the Group totaled SEK 301 M. Last year EBITDA included capital gains of SEK 140 M. The quarter has been burdened by changes in publication dates and higher sales costs than in the same quarter last year as well as some additional integration costs for the KRAK acquisition.
We have decided to revise our market outlook. A Swedish court decision, relating to advertising taxes in Sweden, is expected to affect the EBITDA comparison with last year negatively with approximately SEK 55 M in the second quarter 2008. Also the delay of the KRAK integration will negatively impact the EBITDA for the full year compared to our plan.
In our new full year guidance for 2008, we expect Group revenues to grow organically, with a strong growth in online revenues more than offsetting the decline in print revenues. Operational EBITDA, excluding capital gains and restructuring effects, is expected to be in the range of SEK 2,050 – 2,100 M.
We will in the second quarter record restructuring charges of approximately SEK 28 M due to the closure of one DA call center in Sweden and the integration of our Norwegian price comparison site Din Pris into Eniro Norway.
After almost four years as the President and CEO of Eniro, I have decided to take on a new assignment as the CEO for ComHem. I would like to take the opportunity to thank you all, staff, customers and investors for four rewarding years.
Tomas Franzén
President and CEO
Last updated: 2008-07-17