Eniro AB - Interim Report January-September 2000

Eniro AB - Interim Report January-September 2000 Continued strong revenue and profit growth * Eniro was listed on OMSE on October 10, 2000, at which time Telia divested a majority of its holding * Revenues rose by 17% to SEK 1,612 million (1,377) * Continued strong On-line development in terms of both revenues and use. Revenues from On-line operations amounted to SEK 279 million (118), up 136% * Operating income (EBITA) increased by 30% to SEK 326 million (250) * The CONTAKT directory has been launched in Copenhagen Market The markets in which Eniro operates continue to show solid economic growth. Favorable market conditions and strong demand led to growth for Eniro's traditional Off-line directory business and for its On-line operations. GDP growth for 2000 is expected to be between 4 and 5% in Sweden and Finland. A somewhat lower growth rate is expected in Denmark. All of the markets in Eastern Europe experienced weaker economic growth during the past few years, largely related to the downturn in the Russian economy. Recently, economic conditions have stabilized in Eastern Europe, where the Baltic States have recovered quickly, with a growth rate of 3-5% expected this year. A favorable trend has also been noted in Russia, where growth of approximately 6-7% is estimated for 2000. The economic trend in the Nordic region is having a positive effect on the advertising market, both in the traditional media market for printed directories and in the Internet advertising market. In Eastern Europe, however, the economic upswing during the period had no impact on earnings for the first nine months, due to a time lag between order and publication. Competition continues to be intense in the markets for both Off-line and On-line products. Operations Eniro continues to develop well and its revenues grew by 17% during the period, compared with the corresponding period of the preceding year. Operations in Sweden accounted for 71% of total revenues during the period. Denmark accounted for 13%, Finland for 7% and the Baltic States & Eastern Europe for 5%, while other markets accounted for the remaining 4%. Eniro launched CONTAKT, the new universal Yellow Pages directory, in Copenhagen during the period. Strategic initiatives in the form of market investments in Copenhagen, Helsinki and Moscow had a negative impact on operating income compared with the year-earlier period. These initiatives will primarily start to generate revenues as of 2001. As of June 30, Eniro AB acquired virtually all of Telia's directory business. In connection with this and as part of preparations for the IPO, a new legal structure was created. As a consequence of Eniro's demerger from Telia, a review of the Company's brands was initiated during the period. Sales and earnings Revenues increased by 17% to SEK 1,612 million (1,377) during the period. This increase was attributable to a rise in advertising sales, primarily in Sweden where revenues from On-line operations grew by 178% to SEK 222 million (80), while revenues from Swedish Off-line operations rose by 8% to SEK 929 million (863). Due to seasonal variations affecting Eniro's operations, the third quarter of a year is traditionally weaker than the second and fourth quarters, a factor that had an adverse impact on both revenues and earnings during the third quarter. Compared with third quarter of 1999A has a shift in publication dates for some directories, primarily in Swedish had a negative impact on revenue of approximately SEK 25 million on third quarter this year. Operating income before goodwill amortization (EBITA) increased by 30% to SEK 326 million (250) and the Operating margin (EBITA margin) rose by 2% units to 20% (18). A comparison of operating income during the third quarter of 2000 with the year-earlier period shows that income rose sharply in Sweden, while Danish and Finnish operations reported declines during the quarter. In total, the third quarter of 2000 was charged with additional costs amounting to slightly more than SEK 60 million. The earnings dip in Denmark during the period was due to considerable market investments, attached to the launch of directory in the Copenhagen area. During the quarter, Finnish operations were charged with costs for marketing activities that were mainly related to new products, including On-line operations. Operating income includes SEK 18 million pertaining to a refund of pension contributions from the SPP Pension Company (Sweden), an amount that was booked among other revenues during the period. Operating cash flow Operating cash flow before financial items and taxes for the 9-month period amounted to SEK 657 million (451). The main reasons for the strong cash flow were the favorable operating income before goodwill amortization (EBITA), which amounted to SEK 326 million (250), and a reduction in the Group's working capital by SEK 364 million (-183). Financial position As of September 30 the equity/asset ratio was 40%. Return on equity for the twelve-month period ended September 30, 2000 was 33%. The Group's net financial debt amounted to SEK 430 million on September 30, 2000. Net investments during the period amounted to SEK 53 million, including SEK 20 million for a number of minor acquisitions in Denmark. Personnel The number of employees at the end of the period was 2,041, an increase of 144 compared with September 30,1999. Of the total, 559 (613) were employed in Swedish operations. Outlook for the full year We expect a continued strong advertising market in the market in which we operate. Eniro holds a strong position in these markets and the outlook is good for ongoing healthy growth in line with the directory advertising market. Pro forma information In this report, the financial information for the Eniro Group is presented pro forma and is mainly based on the Group structure that is scheduled to be fully implemented during the first quarter of 2001. Detailed information about the basis for the pro forma adjustments is available in the prospectus prepared in conjunction with Eniro's IPO on the OM Stockholm Exchange. The prospectus can be ordered from Eniro and is also available on www.eniro.com. The Eniro Group's financial position and third-quarter results based on its legal structure are shown separately at the end of this report. Significant events after the end of the report period Eniro was listed on the OMSE on October 10, 2000, at an initial price of SEK 84 per share. An Extraordinary General Meeting will be held on November 21 to address an employee warrant program and the authorization of the Board of Directors to make decisions regarding the issue of new shares in a maximum amount of 10% of the share capital to be used in connection with future acquisitions. Stockholm November 9, 2000 Lars Guldstrand President and CEO Auditor's Review Report We have reviewed this interim report in accordance with recommendations issued by the Swedish Institute of Authorized Public Accountants. A review is substantially limited in scope in comparison to an audit. Nothing has come to our attention that indicates that this interim report fails to comply with the requirements of the Swedish Securities Exchange Act or the Swedish Annual Accounts Act. Stockholm November 9, 2000 Ernst & Young AB ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/11/09/20001109BIT00240/bit0001.doc The full report http://www.bit.se/bitonline/2000/11/09/20001109BIT00240/bit0002.pdf The full report