Q3 2007
CEO Tomas Franzén’s comments on the Interim report January – September 2007
Our ambition for revenue growth in a mid term perspective is 3-5 percent per year with accelerating growth in online revenues, increased revenues from voice and reduced decline from print.
In order to meet the ambition we started out the year quite aggressively with launches of new versions of our websites in all countries, with an organizational split of our online and print business in Sweden and we expanded our sales forces in most markets. The enlargement of our sales force is a strategic move intended to improve the market penetration, especially within online, and a necessary step towards reaching our overall ambition for revenue growth.
The outcome of these efforts is that all our important websites continue to grow traffic in a healthy way and even if the enlargement of the sales force is putting some pressure on EBITDA during the first nine months it is also resulting in growing order intake, which will increase top line growth going forward.
In the second quarter we acquired Krak, the leading online directory company in Denmark, which gives us the leading online position in Denmark. This acquisition will further strengthen our position as the leading search company in the Nordic countries and gives us very strong online positions in Sweden, Norway, and Denmark and a good position in Finland.
We have in the third quarter completed a fast integration process of Krak resulting in redundancies of approximately 160 employees. The new organization has been in place since September 1. The organization is set up in line with the favored group structure focusing on one business in each unit. We have in the third quarter recorded restructuring effects of approximately SEK 50 M and an additional SEK 10 M will be recorded in the fourth quarter. The restructuring will generate synergies of estimated SEK 60 M annually from 2008.
Looking at the Group revenues development, total revenues increased organically with 3 percent in the third quarter and organically by 1 percent in the first nine months.
We continue to show strong organic growth in online with a 20 percent growth in the third quarter and 18 percent for the first nine months. We expect this strong development to continue also in the fourth quarter due to increased sales force resulting in increased number of customers.
Voice also continued to grow in line with our expectations and showed 4 percent organic growth during the first nine months as a result of the new service concept.
The print revenues declined organically by 7 percent in the third quarter and by 7 percent for the first nine months with print revenues stable in Sweden and the decline attributable to Norway. Our two biggest print markets, Sweden and Norway, are developing in different directions. While Sweden showed organic growth in print of 4 percent in the third quarter, strongly supported by strong growth in local directories, and will show organic flat print revenues for the full year compared with last year, the organic print decline in Norway for the full year will be 15 percent. Print revenues in Norway decreased in line with our expectations by 15 percent in the third quarter. The print development in Norway is of course not satisfactory.
EBITDA for the Group decreased to SEK 398 M (448) for the third quarter. EBITDA for the quarter was negatively impacted by changes in the bundling method and the loss of publication fees. In addition the Krak restructuring impacted negatively with approximately SEK 50 M. Considering the impact of these factors the operational EBITDA is somewhat better then the same quarter last year.
We leave our market outlook for the year unchanged with the exception of additional restructuring effects impacting Denmark with SEK 20M and Sweden with SEK 10 M, which will have an effect on Group EBITDA.
In line with our strategy to focus on the Nordic markets, we have during the third quarter divested our German business Wer liefert was? (WLW) for a consideration of SEK 1,060 M (€ 115 M) resulting in a capital gain of SEK approximately 140 M.
In conjunction with the divestment of WLW a new five-year loan agreement was signed with the existing bank consortium with a credit framework corresponding to SEK 13,000 M, intended to refinance the existing loan agreement, to finance current operations and to enable cash distribution to shareholders. An Extraordinary General Meeting was held on October 9 deciding on a redemption program distributing approximately SEK 2,000 M to the Eniro shareholders.
Tomas Franzén
President and CEO
Last updated: 2008-02-13