Financial results for the second quarter and six months ended 30 June 2002

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METRO INTERNATIONAL S.A. FINANCIAL RESULTS FOR THE SECOND QUARTER AND SIX MONTHS ENDED 30 JUNE 2002 Luxembourg, 6 August 2002 - Metro International S.A. ("Metro") (MTROA, MTROB), today announced its financial results for the six months ended 30 June 2002. SECOND QUARTER HIGHLIGHTS · Net sales up 29% year on year to US$ 36.9 million (US$ 28.6 million) · Net sales outside Sweden up 64% year on year to US$ 24.7 million (US$ 15.1 million) · Group EBITA improves year on year by 41% to US$ -11.0 million (US$ -18.5 million) · The 17 editions launched more than 1 year ago report EBITA profit of US$ 0.5 million (US$ -9.1 million) · Holland reported quarterly operating profit together with 6 other cities · Highest operating profit result in Sweden for two years · 11% year on year reduction in average cost per copy · 48% reduction in Headquarter costs · US$ 64 million of new financing secured · Daily readership up 50% year on year to 10.8 million readers with 2.6 readers per copy FINANCIAL SUMMARY Consolidated income statement Q2 2002 Q2 2001 H1 2002 H1 2001 * (US$ 000's) Net Sales 36,939 28,633 65,361 56,171 Operating income from -7,848 -12,464 -16,948 -26,820 operations Site closure costs - - -4,466 - Headquarter costs -3,130 -5,996 -7,839 -11,407 Goodwill amortization -888 -837 -1,762 -1,716 Operating income -11,866 -19,297 -31,015 -39,943 Net interest -1,402 -1,125 -2,841 2,260 Unrealized exchange rate -5,295 4,639 -6,507 5,125 gains Profit before tax -18,563 -15,783 -39,913 -37,078 Basic earnings per share (US$) -0.11 -0.22 -0.30 -0.51 Basic number of shares 109,383, 76,088, 109,383 76,088, outstanding 131 489 ,131 489 * Metro had 24 operations at 30 June 2002 and 17 operations at 30 June 2001. OPERATING REVIEW Metro is the world's fastest growing and fourth largest newspaper, publishing 4.2 million copies of 24 daily editions in 15 countries around the world. The newspaper attracts 10.8 million daily readers and derives its revenues from advertising sales, which have grown at a compound annual rate of 46% since the launch of the first edition in 1995. The second quarter marked a significant milestone for Metro International. Group net sales were up 29% to US$ 36.9 million (US$ 28.6 million) and international sales (outside Sweden) increased by 64% to US$ 24.7 million (US$ 15.1 million), despite the continued weakness in the newspaper advertising markets around the world. Sales for the international editions outside Sweden now represent 67% of group sales, compared to 53% for the same period last year. Continued and increased cost control yielded a 11% year on year reduction in average cost per copy in the second quarter, which is calculated on the basis of an average 24-page edition and including all Group costs except headquarter expenses and goodwill amortization charges. This result was achieved despite the seven new launches in Madrid, Copenhagen, Aarhus, France and Hong Kong since the end of the second quarter of last year. Furthermore, headquarter costs were nearly halved year on year in the second quarter to US$ 3.1 million (US$ 6.0 million). This combination of this sales growth and cost control resulted in an EBITA improvement of 41% in Group operating income to US$ -10.9 million (US$ -18.5 million). Metro utilizes an EBITA reporting line for the Group due to the low level of depreciation charges arising from the low level of investment in fixed assets. Annual goodwill amortization charges amount to US$ 3.5 million. All Metro's launched more than three years ago were profitable in the second quarter, including Holland. Holland achieved a remarkable year on year turnaround from the second quarter last year when the operation reported a negative EBIT margin of 36%, particularly given the 20% reported decline in the Dutch gross advertising market in the second quarter (source: BBC). Metro reported continued profits in Santiago for the third consecutive quarter and a quarterly profit for the first time in Athens in the second quarter, only one and a half years after the launch. Metro was also profitable on a monthly basis in June in Rome and in Spain (Barcelona and Madrid). This demonstrates the rapid migration towards profitability of the Metro operations. All 17 editions launched before the end of the second quarter last year reported a combined EBITA profit in the second quarter of US$ 0.5 million (US$ -9.1 million). These 17 editions reported a year on year net sales increase of 16%, with the international operations growing by 42%. The 17 editions account for 84% of group net sales or US$ 31.0 million. Costs for these editions were reduced by 15%, resulting in an EBITA improvement of US$ 9.6 million on a sales increase of US$ 4,2 million, equivalent to an incremental margin of 228%. These 17 editions reported an EBITA profit of US$ 0.5 million in the second quarter and a 75% reduction in EBITA losses in the year to date to US$ - 4.0 million (US$ -16.3 million). Metro now has the same circulation as Bild Zeitung, the largest newspaper in the world outside Japan. Metro has a circulation of 4.2 million daily copies and 10.8 million daily readers, according to the latest half-yearly Gallup worldwide readership survey, which was conducted in May 2002. Metro reported a 50% year-on-year growth in the number of daily readers and has increased its level of 2.6 readers per copy from 2.5 for the same period last year. Metro has also maintained its attractive readership profile with 37% of Metro's readers under 30 years of age and an equal proportion of male and female readers. Metro's weekly reach has increased from 21 million to 23 million people and from 25% to 27% of the population in the distribution areas. This extension has been achieved despite the very recent launch of the editions in France and Hong Kong. Gallup Worldwide Readership Readership Circulation* Circulation* Readership Survey May 2002 May 2001 May 2002 May 2001 ('000s) 'Metro' Sweden 917,000 1,003,000 370,000 397,000 'Metro' Prague 322,000 249,000 182,000 180,000 'Metro' Hungary 1,203,000 895,000 331,000 338,000 'Metro' 837,000 951,000 319,000 290,000 Netherlands 'Metro' Helsinki 192,000 160,000 116,000 109,000 'Publimetro' 454,000 437,000 110,000 119,000 Santiago 'Metro' Canada 741,000 777,000 285,000 240,000 'Metro' Italy 1,403,000 1,202,000 410,000 435,000 'Metropol' Warsaw 313,000 260,000 180,000 187,000 'Metrorama' Athens 269,000 162,000 93,000 108,000 'Metro' Spain 1,291,000 397,000 480,000 175,000 'Metro' United 842,000 743,000 336,000 304,000 States 'MetroXpress' 331,000 - 235,000 - Denmark 'Metro' France 1,099,000 - 464,000 - 'Metro Daily News' 627,000 - 305,000 - Hong Kong Total 10,843,000 7,236,000 4,216,000 2,882,000 * picked up copies Metro sold a franchise license during the quarter to a Korean publishing company, which resulted in the launch of an edition of Metro in Seoul at the end of May to coincide with the Football World Cup. Metro is not investing financially in the new newspaper but receives an ongoing franchise fee and retains an option to acquire an interest in the newspaper in the future. The Group is not satisfied with the current performance of the Metro Radio station in Stockholm. The license runs for another quarter and the operation will be kept under close scrutiny and fully evaluated prior to any license renewal discussions. Given that all of the editions launched before the end of the second quarter of 2001 are now EBITA profitable on a combined basis (excluding headquarters), Metro has reclassified its reporting segmentation. All 17 editions launched more than one year ago are now defined as 'established operations' and all seven editions launched within the last year are classified as 'new ventures'. Established Operations Metro Sweden reported continued strong market out-performance in the second quarter. This growth has been achieved despite the weak print advertising market conditions in Sweden, particularly in the most profitable segment of recruitment advertising. Metro Sweden's net revenues were down 10% year on year in the second quarter and by 17% in the year to date. Metro therefore increased its share of the major daily morning newspaper advertising market in Sweden year on year to 19% (source: SIFO RM). Despite the weak Swedish advertising market, Stockholm reported an increased EBITA margin of 38% for the second quarter, following a further 19% year on year reduction in the cost base. The Swedish operations reported a combined EBITA operating margin of 31% in the second quarter, which is both the highest margin and reflected the highest quarterly income since the second quarter of 2000, despite the year on year sales decline. The editions are highly operationally leveraged following the reduction of the cost base and are therefore well-positioned to deliver high levels of incremental profitability when the advertising markets recover. Net sales in Holland were up 19% year on year in the second quarter and the operation was profitable on a quarterly basis for the first time. The Dutch operation reported an operating profit margin of 4% in the second quarter, compared to -36% for the same period last year. All cities in Eastern Europe announced increased revenues, with net sales growing by 30% year on year in the second quarter. The Santiago edition, which was launched two and a half years ago at the start of 2000, reported its third consecutive quarterly operating profit, and is well on track to out-perform the Group target of annual profitability within three years, as is Athens. The Athens edition was launched a year and a half ago in November 2000 and also reported a quarterly operating profit in the second quarter, having shown a monthly profit at the end of the first quarter. The two US operations, in Philadelphia and Boston, continue to show strong momentum and combined EBIT losses were down by 36% in the second quarter, compared to the first quarter of the current year. This strong development has been reinforced by monthly operating profitability at the end of the quarter in June for the Barcelona and Rome editions. Metro faces competition from rival free titles, as well as its traditional subscription-based peers, in both Spain and Italy and has been able to consistently deliver higher audience and advertising market shares than these rivals. Metro's joint ventures in Toronto and Montreal, in which the Group has a 50% economic interest, are treated as associated companies. Both operations have performed strongly and the year on year comparison also reflected the fact that Toronto was fully consolidated for the first half of 2001, prior to the merger with the local partner being completed after the end of the second quarter. On a like for like basis, operating losses for the two editions were reduced by 57% year on year to US$ 0.3 million (US$ 0.7 million) for the second quarter. New Ventures The Hong Kong edition is proceeding according to plan and has established a high level of readership, as well as encouraging sales development. France however experienced a well-publicised delay in its development due to legal action with the French unions and the election campaigns during the quarter. All the initial legal disputes encountered with the unions have been resolved and the three editions have established a strong readership. They are now well positioned to catch up with the original plans during the Fall. Hong Kong and France are amongst the largest of Metro's markets, in terms of circulation and annual newspaper advertising market size, and therefore offer significant potential. The Madrid edition reported a monthly operating profit in June, only 10 months after launch in August 2001. Metro's operations in Spain were therefore profitable at the operating income level in June of the current year. The new ventures accounted for 16% of Group net sales and 76% of the Group EBITA losses in the second quarter (including headquarters). Headquarters The Headquarters reporting item relates to revenues arising from the franchising agreement in Korea, the general & administration expenses incurred by the headquarter operations, Metro World News, Clubmetro and Metropoint, as well as investments relating to business development and Group marketing. The Headquarters reporting segment also includes Metro International's investment in the first Glocal Forum, held in Rome in May 2002. The event involved mayors and senior representatives from 20 of the world's leading cities launching a number of independently funded international initiatives to promote the role of the urban community. Also included in headquarters is the Group's sponsorship of the Victory Challenge syndicate's entry in the 2003 America's Cup in Auckland, New Zealand, which provides Metro with unique branding and marketing exposure. Headquarter costs were more than halved to US$ 3.1 million in the second quarter, compared to US$ 6.0 million for the same period last year and US$ 4.7 million in the first quarter of the current year. This reduction is further evidence of the Group's commitment to significantly reduce these costs during 2002 by reducing headcount and restricting expansion. FINANCIAL REVIEW Cash flow used by the operations has almost been halved in the year to date to US$ 26.8 million (US$ 50.8 million). Metro achieved a positive change in working capital of US$ 0.3 million (US$ -13.9 million) in the year to date. This is due principally to a reduction in the average number of debtor days outstanding and the ongoing implementation of measures to manage supplier relationships and procurement more efficiently. Metro has to date incurred insignificant bad debt charges on its trade receivables, due to the highly diversified nature of its customer base and its strict attention to credit control disciplines. The weakness of the US dollar exchange rate during the first six months of the current year, particularly against the Swedish Krona, gave rise to an unrealized currency translation loss of US$ 5.3 million on the SEK 426 million loan and capitalized interest from Industriförvaltnings AB Kinnevik. Metro reported an unrealized gain of US$ 4.6 million for the same period last year. Interest charges amounted to US$ 1.4 million in the second quarter, compared to US$ 1.1 in the second quarter last year. Consequently, net interest and other financial items for the second quarter totaled $ -6.7 million, compared to US$ 3.5 million in the same period last year. Profit before tax therefore decreased to US$ -18.6 million (US$ -15.8 million) in the second quarter. The Kinnevik loan is no longer secured on the MIC option, which has expired, and alternative security is being negotiated with Kinnevik. Group goodwill amortization amounted to US$ 0.9 million in the second quarter and related to the buy out of minority interests in Metro Sweden, Prague and Hungary. Goodwill is amortized on a straight line basis over a maximum of ten years. Group depreciation charges amounted to US$ 0.5 million in the year to date, reflecting the Group's continuing low level of investment in fixed assets. In recognition of this low level of required investment, the Group has adopted EBITA as its principal reporting classification. Metro booked a deferred tax gain of US$ 7.7 million in the second quarter, based on a prudent valuation of the Group's tax loss carry- forwards to the extent that they can be used in the foreseeable future. Profit after tax improved by 29% year on year to US$ -11.9 million (US$ -16.7 million) in the second quarter. After minority interests in losses, Metro reported a 31% year on year improvement in net losses from US$ -16.7 million in the second quarter of 2001 to US$ -11.5 million in the current year. Metro had liquid funds of US$ 19.7 million as at 30 June 2002, of which US$ 7.3 million was restricted. Long-term debt amounted to US$ 113.0 million, including the US$ 20 million in convertible loan notes issued to Modern Times Group MTG AB during May 2002. Metro also raised new bank debt financing of SEK 400 million (approximately US$ 44 million) in May 2002 by means of a committed Bank credit facility. No money had been drawn down from this facility as at 30 June 2002 and it is therefore not included in the balance sheet for the quarter. As announced on 14 May 2002, Metro will offer the opportunity to its other shareholders to subscribe to an offering of convertible loan notes on the same terms as MTG and in proportion to their shareholdings on 13 May 2002, which may therefore result in a further increase in Metro's capital resources. The Group considers that its accounting policies are conservative and has, for example, always expensed all its pre-launch costs. OTHER INFORMATION Metro's financial results for the third quarter and nine months ended 30 September 2002 will be released on 25 October 2002. This interim report has not been subject to review by the Company's auditors. Luxembourg, 6 August 2002. The Board of Directors of Metro International S.A. For further information, please visit, email or contact: Pelle Törnberg, President & CEO tel: +44 (0) 20 7408 0230 Matthew Hooper, Investor & Press Relations tel: +44 (0) 20 7321 5010 Metro is the world's largest free newspaper, publishing and distributing 24 editions in 15 countries in 13 languages: Stockholm, Prague, Gothenburg, Hungary, the Netherlands, Helsinki, Malmö, Santiago, Philadelphia, Toronto, Rome, Milan, Warsaw, Athens, Montreal, Barcelona, Boston, Madrid, Copenhagen, Aarhus, Paris, Marseille, Lyon and Hong Kong. Metro International S.A. 'A' and 'B' shares are listed on NASDAQ and the Stockholmsbörsen under the symbols MTROA and MTROB. ------------------------------------------------------------ This information was brought to you by Waymaker The following files are available for download: The full report The full report