Metro international - results for the nine month period ended 30 september 2000

METRO INTERNATIONAL - RESULTS FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2000 London, 8 November 2000 - Metro International S.A. ("Metro") (MTROA, MTROB), today announced its preliminary results for the first nine months of 2000, ended 30 September 2000. * Net sales up 60.8% to US$ 63.0 million (us$ 39.2 million) rd * New newspaper editions launched in Rome and Stockholm during the 3 quarter, in Buenos Aires and Milan in October 2000, and in Warsaw in November 2000 * Metro is now the fifth biggest newspaper in the world by circulation * Metro is now the most read newspaper in Sweden * Applying for listings on the Luxembourg Stock Exchange and the Stockholm Stock Exchange 'O - List' * Compound annual growth rate in readership of 62% since 1995 FINANCIAL SUMMARY CONSOLIDATED INCOME STATEMENT (US$ 1999 2000 thousand) Jan-Sept Jan-Sept Pro forma Net sales 39190 63032 Gross income 14765 11402 Operating loss - EBIT (7926) (36575) Income after financial items & before (9634) (40599) income tax OPERATING REVIEW Demerger and Listings 34 million 'A' Shares and 32 million 'B' shares in Metro International were issued to shareholders of its former parent company, Modern Times Group MTG AB, on 15 August 2000, following the approval of a meeting of MTG shareholders in May 2000. Metro International subsequently commenced trading as a separate company on the Nasdaq National Market and the Stockholms Börsinformation (SBI) list, under the symbols MTROA and MTROB, from 18 August 2000. Metro is also applying for the listing and admission of its shares to trading on the Luxembourg Stock Exchange and the Stockholm Stock Exchange 'O' List. Profit / Loss account The comparative figures in this report have been adjusted for the deconsolidation of Metro from MTG, which took effect at January 1, 2000. Metro's net sales increased by 60.8% to US$ 63.0 million in the first nine months of 2000, when compared to the same period last year, reflecting the strong top line sales growth in both existing and new businesses. Metro's sales are driven by advertising expenditure, which is cyclical by nature, and the fourth and second quarters are the strongest. Earnings have been impacted by the launch of 10 new editions of the newspaper in 2000. This increase in expenditure is in line with the Company's business development plan. Business Strategy The Metro Concept The Metro concept is based on an editorial principle of delivering objective local, national and international news and useful information in a format that can easily be read in 15 - 20 minutes, the time of a typical commuter journey on local transport. The paper is distributed free of charge in locations where, and at a time of day when, there is a dense traffic of young professionals commuting to and from work. Metro editions are therefore, typically, distributed in Cities, which are major commercial and tourism centers and, consequently, have strong advertising markets. Independent readership surveys confirm that Metro editions have a high proportion of readers under 30 years of age (40%), of which more than half are female. This young professional readership profile is highly attractive to advertisers. The Company has focused mainly on seeking distribution contracts with local transport authorities in each of the locations where new papers are launched. However, Metro has also demonstrated the flexibility to launch new papers where it is not possible or financially attractive to reach such agreements. The editions in Santiago, Buenos Aires, Milan and Warsaw are distributed by hand in City centres at peak traffic times. Metro out-sources the majority of its production costs, which results in a low fixed cost base. Metro is committed to being at the forefront of distribution technology by making Metro editions available on the Internet. As a result, an increasing number of readers are using the 'print on demand' facility to download editions of the newspaper from the Internet, which effectively out-sources the printing and paper costs to readers. Metro therefore benefits from an accelerated speed to market, limited upfront capital expenditure and should be able to operate profitably on a monthly basis at between 12 and 36 months after start-up. The cash flow from the more mature businesses is employed to fund the start-up of the newspaper in new cities or countries. After only 5 years, Metro is now the most read newspaper in Sweden and has rapidly become the number 1 or 2 newspaper by circulation in the other markets that it serves. Where Metro editions are published in a number of cities in the same country or distributed via a national transport network, the Company benefits from local, regional and, in some cases, national and global advertising sales. Global expansion The concept is being implemented in 17 editions in 13 countries around the world and expanding rapidly. The combined circulation of all Metro editions has now established Metro as the fifth biggest paper in the world with a current circulation of 3.176 million, which includes the Buenos Aires, Milan and Warsaw editions launched after the end of the third quarter. The combined daily circulation has a compound annual growth rate of 73% since 1995 when the first Metro edition was launched and has risen from 1.1 million to 3.2 million in the current year alone. The ability to leverage this international presence is expected to result in economies of scale in purchasing of editorial and paper, as well as in sales to advertisers on an international basis. The international readership also offers opportunities to generate additional revenue streams at low incremental cost. For example, travel promotions can be marketed to the growing number of loyalty club members through tourism supplements published in the printed and online versions of Metro. In Stockholm alone, more than half of Metro's readers are members of Club Metro. In addition, local language editions of Metro are made available to people living overseas through the Internet, and can be tailored to include advertising which is specific to the market in which they are living. Readership The readership of Metro has a compound annual growth rate of 62% since 1995 when the Stockholm edition was launched. In addition to local readership surveys published for the advertising industry, the Company also commissions an independent worldwide readership survey every six months in order to establish trends in the number and profile of Metro readers. The estimated average daily readership of each edition of the newspaper is considerably higher than the daily circulation in each market. Estimated average daily readership is generally between two and three times the average daily circulation in each market and, in some cases, is between three and four times the average daily circulation. The first worldwide survey, which was published in May 2000 by the independent surveyor Gallup, established that Metro had a daily average readership of 3,916,000. At that time, total daily circulation was 1,613,000, which corresponded to an average of 2.43 readers per copy, which is excellent by industry standards. The next survey will be reported in the full year results statement. Segmental breakdown Nordic City Launch date Readership Circulation Stockholm February 1995 573,000 * Gothenburg February 1998 215,000 * Malmö September 1999 149,000 * Stockholm September 2000 251,000 *² 'Everyday' Helsinki September 1999 184,000 * Total 1,372,000 760,000 *³ * Gallup Worldwide Survey - May 2000 *² SIFO Survey - September 2000 *³ As at October 2000 Net sales in Sweden, which comprises the Stockholm, Gothenburg and Malmö operations, increased by 24.6% to US$42.3 million (US$34.0 million), benefiting from a full 3 quarters of sales from the Malmo edition and the national Swedish advertising sales which followed from the launch in Malmö. When excluding the currency effect of the fluctuations in US$ exchange rates, the local revenues in Sweden actually increased by 35%. The EBIT operating margin of the Stockholm operation, which is the most mature business in the Group, was 37.2% compared to 36.7% at the end of the same period in 1999. Metro is now the most read newspaper in Sweden according to SIFO 'Orvesto' for the first half of 2000. SIFO 'Orvesto' is the official independent Swedish readership survey. Operating income after depreciation and amortization for the nine months increased by 20.3% to US$ 7.2 million (US$ 5.9 million). This result was due to a strong performance in Stockholm but also reflected the continuing investment in the Malmö operation and the start-up costs of the new afternoon paper, Everyday, in September 2000. The new afternoon paper, Everyday, has performed well since its launch in August 2000 and has already attracted a readership of over 250,000 readers according to a research report published by SIFO in October 2000, one month after the launch of the new paper. As with other operations at this early stage of development, the business case will not be proven for a number of months yet. The Rest of Nordic comprises the Group's operations in Helsinki, Finland. Sales and readership numbers have grown over the year to date in this operation, which was only launched a year ago. The continuing losses in the Helsinki operation reflect the presence of competition in the market and the continuing investment in the development of the business. Rest of Europe City/Country Launch date Readership Circulation The June 1999 1,059,000 * Netherlands Prague June 1997 320,000 * Budapest September 491,000 * 1998 Newcastle January 41,000 * 2000 Zurich January 215,000 * 2000 Rome July 2000 Not yet available Total 2,126,000 1,271,000 *² Milan October Not yet available 200,000 2000 Warsaw November Not yet available 200,000 2000 * Gallup Worldwide Survey - May 2000 *² As at October 2000 Net sales in Holland increased to US$ 6.9 million (US$ 0.9 million) in the first nine months of 2000, benefiting from the national advertising sales effort and the fact that the 1999 figures only showed results for the three months after the launch in June 1999. Bearing in mind that the Dutch operation was only launched in June 1999 and had competition from day one, in the form of a rival product published by the leading Dutch national daily newspaper, the losses have decreased year on year to US$ 4.1 million (US$ 5.0 million). The first independent survey of newspaper readership was published in Holland in 2000 and contributed to increased sales in the operation, which showed a monthly profit for the first time in May 2000. The Rest of Europe segment includes the operations in Prague, Budapest, Newcastle, Zurich and Rome The more mature businesses in Budapest and Prague showed rapid sales growth in the period. Prague showed profits in the second quarter and September 2000 whilst Budapest, which was launched in September 1998, was profitable on a monthly basis in June 2000. The total EBIT line continued to reflect the investment in the businesses. Metro has two competitors in Switzerland who are publishing national daily free newspapers. New editions of Metro were launched in Milan in October 2000, and in Warsaw in November 2000. Metro immediately became the second biggest newspaper in Milan with a target circulation of 200,000. When combined with the circulation of the Rome edition of Metro, the newspaper is now the third biggest in Italy and has already attracted a number of national advertisers including Fiat. The Warsaw edition is the biggest paper by circulation in the City with a daily circulation of 200,000. Rest of the World City Launch date Readership Circulation Philadelphia January 2000 268,000 * Santiago January 2000 401,000 * Toronto June 2000 Not yet available Total 669,000 445,000 *² Buenos Aires October 2000 300,000 * Gallup Worldwide Survey - May 2000 *² As at October 2000 Net sales were US$ 4.3 million for the nine month period, with the start- up of the operations in Santiago and Philadelphia in the first quarter and Toronto at the end of the second quarter. The operating income line showed an increased loss of US$ 11.6 million, reflecting the early stage of the development of these businesses. As the result of a lawsuit, which was brought against the public transport authority in Philadelphia by a group of US media publishers, full distribution was delayed in Philadelphia until April 2000. Initial sales were delayed but have grown rapidly since the launch of full distribution. Sales levels in Santiago continue to expand and the edition is now the second most read newspaper in Chile. A new edition of Metro was launched in October 2000 in Buenos Aires, the largest city in Argentina with 12 million inhabitants. Metro immediately became the second biggest newspaper in Argentina with a circulation of 300,000 copies. Headquarters Operating costs increased to US$ 9.6 million (US$ 4.8 million) for the nine month period, reflecting the accelerated investment in license hunting around the world. Once the Metro operations are fully established, head office costs will fall significantly, in line with reduced business development expenditure. The Company is based in Luxembourg. Employees Metro has added 230 new employees to its operating businesses around the world since the end of 1999, bringing the total number of full time employees to 551. Capital Position The Group's equity to assets ratio (consolidated shareholders' equity and minority interests including the convertible debenture loan, divided by total assets) was negative. This does not reflect the underlying value of Metro's option to acquire 1,363,480 shares in Millicom International S.A. at an exercise price of SEK 88 million, which is capitalised at the original acquisition cost in the balance sheet. At the mid-market closing price of Millicom shares on Nasdaq on 7 November 2000, the option was deep in the money with a market value of US$ 42.5 million, compared to an acquisition price of US$ 8.8 million. Taking into account the goodwill and deferred tax in publicly traded shares, the ratio of equity to assets was 5 %. OTHER INFORMATION 2000 Year end results announcement Metro's results for the fourth quarter and year ended 31 December 2000 will preliminarily be released in February 2001. Luxembourg, November 7, 2000 Pelle Törnberg President and Chief Executive Officer, Metro International S.A. Metro International S.A. publishes and distributes free daily newspapers, comprising 17 editions in 13 countries: Stockholm ('Metro' & 'Everyday'), Gothenburg ('Metro'), Malmö ('Metro'), Helsinki ('Metro'), Prague ('Metro'), Budapest ('Metro'), Holland ('Metro'), Newcastle ('Morning News'), Zurich ('Metropol'), Santiago ('MTG'), Rome ('Metro'), Philadelphia ('Metro'), Toronto ('Metro'), Buenos Aires ('PubliMetro'), Milan ('Metro') and Warsaw ('Metropol'). Metro International S.A. 'A' and 'B' shares are listed on the Stockholms Börsinformation (SBI) and on the Nasdaq National Market under the symbols MTROA and MTROB. For further detail, please visit, email or contact: Pelle Törnberg - President & CEO, Metro International +44 (0) 20 7408 0230 ------------------------------------------------------------ This information was brought to you by BIT The following files are available for download: The full report The full report