Quarterly report for the fourth quarter 2008

*Includes restructuring cost of MNOK 25 in Q4 2008

Download Quarterly report for the forth Quarter 2008 key figures

Turnover in Q4 rose by 4 % to MNOK 276.0 compared with the same quarter last year. The pre-tax result for the quarter showed a deficit of MNOK 25.3 as against a deficit of MNOK 22.4 in the same quarter last year.

Turnover rose by 9% for the whole of 2008. The increase is a result of both organic growth and the acquisition of IntraFish and Newsdesk. The full-year result was a loss of MNOK 7.3 as against a surplus of MNOK 54.7 in 2007. The result has been heavily affected by the trend in the economic cycle, particularly in the second half of the year.

The quarter was characterised by the turn of the business cycle globally and in Norway. As the financial crisis hit Norway in full on 28 September, this had an immediate and significant effect on advertising revenue at Dagens Næringsliv. For example, the positions vacant market fell about 50% within a few days. The weak advertising market continued throughout the fourth quarter. There was less impact on other Group publications in the fourth quarter, but all of them face more uncertain economic prospects.

As discussed in the quarterly report for the 3rd quarter, comprehensive measures were taken to improve profitability within the Group to counterbalance the bottom-line effects of the considerable income deterioration. The measures, which have been implemented, amount to a total of MNOK 80 in 2009, and include substantial downsizing of staff and reductions in/phasing out of development schemes. This has led to a restructuring expense fo in Q4 2008 of MNOK 15 for Dagens Næringsliv and of MNOK 10 in other parts of the Group.

At the same time, the 4th quarter evidenced the strong position the Group’s publications holds with its readers. There was a clear increase in readers’ interest in the Group’s publications, reinforced by news where financial news dominated. Overall, competitive strength and the news agenda during the quarter resulted in circulation growth for all the major publications, and in higher market shares. Online traffic to the Group’s news services grew between 20 and 30 percent. Even though advertising revenue was heavily affected by the market decline, market shares improved in the advertising market as well. While there is great uncertainty about how the Group will be affected by economic trends in the short term, the strong market positions – particularly as regards readership and circulation income – provide a sound long-term basis.

Results for the quarter were positively influenced by fluctuations in the currency market where a stronger USD and Euro exercised a positive bottom-line effect on the global publications. (This is not reflected in the operating profit reported for the individual companies below). For the coming year, the foreign exchange exposure is now partly hedged at current levels.

Work on building up an operating organisation for Recharge – the Group’s new global news publication focusing on renewable energy – continued in the 4th quarter, and the newspaper (weekly) and the website (www.rechargenews.com) were launched according to schedule in January 2009. In 2008, the expenses relating to Recharge amounted to MNOK 5.0.

The Group’s plans are now based on the expectation that a high level of macroeconomic uncertainty continues, with falling levels of real economic activity during most of 2009.

Rights issue

As announced on 28 January, the Board of NHST Media Group is proposing to the 2009 Annual General Meeting to raise additional shareholder’s equity through a guaranteed rights issue in the order of NOK 50 million, offered to all the Company’s existing shareholders, with preferential rights for the subscription and allocation of new shares allocated in accordance with shareholdings on the day of the AGM. According to plan, the decision to proceed with the share issue will take place at the AGM on 5 May 2009.

The new share issue will be guaranteed in full through a subscription undertaking by three of the Company’s large share holders; Bonheur ASA, Ganger Rolf ASA and Must Invest AS. Other large shareholders will also be offered to participate in the underwriting consortium. The share issue is proposed in order to solidify the company’s equity capital and operation.

Publication by publication

Dagens Næringsliv’s turnover fell by 9% during the quarter to MNOK 150.0 compared to MNOK 164.3 in the same quarter 2007. The operating profit was MNOK 0.7 against MNOK 8.5 in 2007. The drop in turnover was due to the fall in advertising revenue. Circulation income rose by 7.2%. The circulation increase continued to 82,775 - its highest ever. Consequently, DN was the growth winner amongst Norway’s larger newspapers for a third consecutive year. Readership figures also showed growth and there are now 305,000 people reading DN on weekdays. On Saturdays, there are 330,000 readers. The trend for D2 is positive both for advertising and circulation revenue. The operating profit was considerably affected by the fall in turnover, and by MNOK 15.0 in restructuring costs. At the end of January 2009, it was decided to make a further MNOK 12.0 restructuring provision for Dagens Næringsliv, which will affect Q1 2009 results. For the year as a whole, Dagens Næringsliv showed an increase in turnover of 2% to MNOK 594.2 from MNOK 581.6, while operating profit was MNOK 45.4 against MNOK 82.4 in 2007.

DN Nye Medier’s turnover fell by 3% to MNOK 13.9 compared to MNOK 14.3 in the same quarter in 2007. Operating profit was MNOK 0.4 against MNOK 2.3 in the same quarter last year. Although advertising revenue improved during the quarter, there was a fall in other income (books etc.) which pulled overall turnover down. DN.no showed a significant increase in unique users and direct front page viewings measured against the same period in 2007. (TNS Gallup). Full-year revenues rose by 9% to MNOK 50.0 and operating profit was MNOK 0.5 against MNOK 3.0 last year. The decline in profits is due largely to expenses relating to accelerated development and higher editorial investment in the first half-year, and restructuring costs in the Q4. DNtv and DN Søk are being discontinued as separate companies and will be incorporated into DN Nye Medier from Q1 2009.

TradeWinds’ turnover during the quarter increased by 4% to MNOK 20.1 and the result increased to MNOK 0.2 from a deficit of MNOK 2.2. The positive circulation trend continued to the highest level ever at 8,667, while at the same time advertising revenue increased. There was a decline in conference income. Full-year revenues increased by 5% to MNOK 82.0, while operating profit amounted to MNOK 9.9 as against MNOK 5.3 in 2007. This was the best result ever for TradeWinds. There was also good progress online.

Upstream’s turnover fell by 1 % to MNOK 18.0. The operating result showed a loss of MNOK 2.8 against a loss of MNOK 1.3 last year. The business cycle, increased bad debt provisions, and some temporary operational reorganisations affected the result. The number of subscribers reached an average of 7,183 in the quarter – the highest ever. The focus on internet activities is producing results and the trend is positive in terms of both traffic and income. Full-year revenues rose by 8% to MNOK 82.2, while operating profit was MNOK 6.3 against MNOK 7.0 in 2007.

Intrafish Media’s turnover was MNOK 24.2, an increase of 61% compared to the same quarter in 2007. The increase is mainly due to the acquisition of Heighway Publications last year and the merger with Fiskeribladet. The business returned an operating loss for the quarter of MNOK 6.8 while last year there was an operating loss of MNOK 1.9. Full-year revenues rose by 90 % to MNOK 101.1 while there was an operating loss of MNOK 16.0 against a loss of MNOK1.5 last year. The deterioration in results is primarily due to restructuring and integration cost, and partly due to a weak trend in the advertising market. Three titles were discontinued and a reformed Seafood International was launched during the quarter. With the integration projects now regarded as concluded, the situation for Intrafish at the start of 2009 is more of a normal operating modus.

Nautisk Forlag’s turnover increased by 50% to MNOK 22.8. The operating result was a loss of MNOK 5.2 for the quarter compared to a loss of MNOK 4.8 last year. Full-year revenues were almost the same as last year’s at MNOK 100.0 against MNOK 99.8 in 2007, while there was an operating loss of MNOK 0.5 versus MNOK 3.1 last year. The weaker result is due to restructuring and new warehouse control systems, and to problems with the delivery of new charts throughout the year. Nautisk Forlag has launched a new electronic administration system for commercial shipping – Neptune. The response has been good and 160 vessels are already using the system.

TDN’s turnover rose by 10 % in the quarter to MNOK 3.7. The operating profit was MNOK 0.5 against MNOK 0.3 last year. Full-year revenues improved by 10% to MNOK 14.4, while the operating profit was MNOK 3.5 against MNOK 3.0 last year. TDN is gaining market share.

Europower’s turnover increased by 60% to MNOK 7.1. The company had an operating loss of MNOK 0.1 against a loss of MNOK 2.6 last year. The Q4 results shows that measures to improve operating performance have now begun to take effect, even if further adjustments remain. Full-year revenues increased by 30% to MNOK 22.3, with an operating loss of MNOK 3.9 against a loss of MNOK 3.0 last year.

Smartcom’s turnover fell by 3% to MNOK 5.1 against previous year returned an operating loss of MNOK 2.7 against a loss of MNOK 0.8 in 2007. Full-year revenues fell by 4 % to MNOK 20.2, with an operating loss of MNOK 4.2 against MNOK 2.0 last year. A substantial reorganisation was undertaken at Smartcom during the quarter to improve profitability. Simultaneously, a large technical project in corporate video transfer is being closed down.

Other activities This category covers new activities including Recharge, Smartcom International, Web TV, search and database development, as well as non-allocated Group overheads. The operating loss was MNOK 16.1 for the quarter against a loss of MNOK 19.9 in 2007. Because of declining profitability, Smartcom Sverige was closed down during the quarter and Smartcom International is now constituted by Smartcom UK. Full-year result was an operating loss of MNOK 52.2 compared with a loss of MNOK 43.9 in 2007. In the future, only Group overheads will be reported under this heading.

In conclusion

Given the current depressed macroeconomic conditions, the NHST Media Group is prepared for ongoing subdued trading conditions. The economic downturn is expected to continue to affect the advertising markets negatively and consequently, the Group anticipates poor sales trends in the first quarters of 2009. The Group has taken a number of significant actions to adjust operations to a demanding market situation. At the same time, readership continues to expand and there is progress in Asia and in digital activities, that should provide for a solid foundation longer term.