Year-end report 2007
CEO Tomas Franzen’s comments on the Year – end report 2007
During 2007, Eniro’s position as the Nordic leading online search company was strengthened. Eniro’s strong online growth continued with record high numbers of searches performed in Eniro’s Internet network. In 2007, the Group managed to generate above SEK 2 bn of online revenues.
New technology is continuously changing the dynamics in the search industry, offering the users more and more advanced search possibilities whenever and wherever. However, new technology also means new possibilities for the search industry. With the ease of use and the never ending accessibility online search channels increase the overall number of searches every year and provide a fast growing market for search companies.
As the Nordic market leader in search, Eniro is and has to be in the forefront of this development. Our overall challenge is to master a fast growing business within online and at the same time master a declining business within print.
Eniro is very well positioned to handle this challenge. During the last years we have organically and by acquisitions created excellent local search positions and we have the leading local search site in all Nordic countries. Our dependency on the print business has declined from 64 percent of total revenues in 2005 to 54 percent for 2007, and during the same time our online business has grown from SEK 1,346 M in 2005 to SEK 2,004 M in 2007.
During the same time we have been able to grow our EBITDA-margins from 32 percent to 34 percent. Our ability to keep and improve our margins in the changing revenue mix from print to online is based on the rational that a leading online position with a critical mass large enough has every possibility to deliver margins in line with the margins on the print side. Within Eniro today we have two markets close to that critical mass, Norway and Sweden. Runner up is Denmark after our acquisition of Krak, which gave us the number one local search position in the Danish market. Our positions in Finland and Poland need to be developed further in order to reach the right fundamentals for print alike margins also on the online side.
Going forward we believe that the development we have seen during the last years will continue and Eniro will be an online company with a print heritage, but with continued high margins.
Looking at 2007 in some more detail this has been an eventful year when we continued to strengthen our position as the leading search company in the Nordic market. During the year our focus has been on accelerating growth in online revenues, increase revenues from voice and reduce the decline from print in order to achieve our ambition for revenue growth in a mid term perspective of 3-5 percent per year.
Group revenues for the full year increased organically with 2 percent to SEK 6,443 M, an improvement from the 1 percent organic growth in 2006, but still short of our mid term target.
In 2007 we launched new versions of our websites in all countries with new design and improved functionalities such as aerial photographs and video search. We expanded our sales forces in most markets to increase our market penetration and to grow our customer base, especially within online. We now have online business units as well as focused online sales forces in all our markets.
In the second quarter 2007, we acquired Krak, the leading online directory company in Denmark. This was an important acquisition, which gave us a leading online position in Denmark and strengthened our position as the leading search company in the Nordic region. The integration of Krak during the second half-year has been in accordance with our plan, and the Danish EBITDA-result in the fourth quarter clearly shows that the expected cost synergies are now turning into reality.
Regarding our ambition to accelerate online growth we recorded an organic growth of 16 percent compared with 14 percent in 2006. The organic growth in the fourth quarter was 21 percent compared with 15 percent in the same quarter in 2006. Our overall share of Internet revenues, as a proportion of total revenues increased to 31 percent compared to 25 percent in 2006. I am especially pleased with the 20 percent growth in the Swedish online business in the fourth quarter, an improvement from 17 percent in the same period in 2006. Our 2007 market outlook for online growth in Norway and Sweden was reached.
Regarding our aim to grow the directory assistance we recorded an organic increase in voice revenues of 3 percent. The growth was a consequence of our new service concept and increased market share in Finland.
Regarding our objective to reduce decline in print we were successful in Sweden, which recorded organically flat print revenues but print revenues in Norway continue to be challenging and an organic decline of 15 percent in Norway is a disappointment.
EBITDA for the Group improved by 2 percent to SEK 2,266 M. Our guidance was an underlying EBITDA for the Group, excluding capital gains and restructuring effects, to be in line with 2006. Excluding capital gains of SEK 140 M and restructuring effect of SEK 70 M, we exceeded last years EBITDA with SEK 19 M. The operational EBITDA-margin excluding capital gains was 34 percent.
In our market outlook for 2008 we expect Group revenues to grow organically with a strong growth in online revenues more than offsetting the decline in print revenues. Our operational EBITDA is expected to be in line with 2007 due to increased investments in the online business.
A refinancing of the Eniro Group was carried out during the fourth quarter and enabled the cash distribution of approximately SEK 2,000 M to our shareholders. In the end of 2007 Eniro had a net debt in relation to EBITDA of 4.8 excluding capital gains.
For 2007, the Board will propose to the AGM a dividend of SEK 5.20 per share, 75 percent of net income from continuing operations, which is in line with our dividend policy.
Tomas Franzén
President and CEO
Last updated: 2008-04-10