Quarterly report fourth quarter 2004
The Norges Handels og Sjøfartstidende (NHST) Group’s pre-tax profit for the fourth quarter 2004 amounted to MNOK 8.5 as against MNOK 4.9 in 2003 . The operating profit for the quarter was MNOK 8.8 as against MNOK 3.6 last year. This improvement in the profit is the eleventh in an unbroken row of quarters since the summer of 2002.
Turnover increased by 22 % during the quarter, to MNOK 186. This is the highest increase in turnover in one quarter in NHST’s 115-year history, and ends a year of increased growth in turnover quarter on quarter. The improvement is primarily due to increased advertisement sales and increased sales of maritime charts. Dagens Næringsliv in particular saw a very good turnover in advertisements during the period in question, and all the market segments experienced growth, from corporate profile advertisements to more consumer-oriented advertisements. The other companies also experienced good growth, but some of the companies’ growth was weakened by sharp drops in the USD rate of exchange. Parts of NHST’s turnover growth can be put down to good business cycles and general growth in the market, but most of the growth is due to the publications having captured market share.
The operating profit improved 257% to MNOK 40 in 2004 as against MNOK 11 in 2003. The improvement in the operating result was due to the upswing both at Dagens Næringsliv and the other publications. All the publications have taken up a leading position or a markedly leading position in their respective segments.
The pre-tax profit for 2004 is expected to be MNOK 43 as against MNOK 20.6 in 2003. For Finance and minority net there was a decline in the profit from MNOK 9.3 in 2003 to MNOK 2.5 for 2004. The decline was primarily due to lower interest rates on bank deposits. NHST’s liquid assets are all invested in banks or interest-bearing instruments. The result, coupled with NHST’s financial position, gives grounds for dividends to be paid.
As a result of the weakened USD, Trade Winds, Upstream and Intrafish Media have started invoicing both subscriptions and advertisements in several currencies (Euro, GBP, NOK). These changes are understood by the market. In addition, hedgings have been introduced for one year ahead for 70% of the net amount of USD expected to come in at a true rate of exchange of 6.12. All in all, it is expected that these measures will reduce theoretical rate of exchange risks by up to 50%, and ensure greater operational predictability. However, the effects of the current lower USD will be felt almost throughout 2005, particularly during the first quarters.
Publication by publication
Dagens Næringsliv (DN) had a growth in revenue of 22 % for the quarter, from MNOK 95.4 to MNOK 116.2. There was a 55% growth in advertisement turnover to MNOK 61.7 in the quarter. Consumer-oriented advertisements and advertisements announcing vacancies experienced the greatest growth, and there was growth in all defined advertisement segments. The monitoring of market share by the major Norwegian newspapers shows that DN had by far the greatest growth in advertisements in the quarter, and that DN captured significant market share in the Oslo market. This growth may be ascribed to better selling and a number of new initiatives that have been well received in the market. The relevant market growth for DN in the quarter is assessed at slightly less than 20%. These considerable improvements must be seen in connection with the fact that the fourth quarter 2003 was surprisingly weak and consequently does not represent a sustainable trend.
The circulation trend is also positive and shows a tentative circulation for 2004 of 70,647 as opposed to a circulation of 69,292 in 2003. The improvement must also be seen in light of most major Norwegian newspapers reporting a moderate decline in circulation. The greatest improvement in circulation is in subscriptions and casual sales, whereas there is a marked decline in fixed sales to aircraft because of SAS having stopped its distribution of all newspapers on domestic flights as a result of SAS’ change of concept. On SAS flights to and from abroad DN is still being distributed.
For the period ahead DN is expected to develop more in line with market trends. The domestic market for advertisements still looks strong, but as yet uncertainty prevails among international brand name advertisers, and the order situation for 2005 is so far in line with the 2004 level.
DN Nye Medier (dn.no) had a growth in turnover of 32% in the quarter, to a turnover of MNOK 7.7. This reflects the strong growth in traffic on dn.no throughout the autumn, and November saw an all time high with 436.000 unique users. Dn.no has grown more than the average for the market for several quarters and has obtained a very strong position. It obtained a profit of MNOK 0.9 as opposed to a loss of MNOK 0.3 in 2003. For the period ahead the strong growth is expected to continue in the turnover on dn.no, and it is also expected that dn.no is now established as a profit-making enterprise. A series of new initiatives are planned in collaboration with DN.
TradeWinds had a turnover of MNOK 15.5 in the quarter. This was a growth of 1% (10% in comparable rates of exchange). The greatest growth was in advertisements but the effect of the increasing circulation was also a contributing factor. The circulation reached an all time high for Trade Winds at more than 7,400 at the turn of the year. The growth in circulation can be put down to several reasons, such as the improved situation in shipping and that TradeWinds has gained market share. The growth in turnover is highest in the USA, Denmark and China. The operating result was MNOK 0, a decline of MNOK 1 on 2003. Out of all the NHST companies, the weaker USD will have the greatest impact on TradeWinds throughout 2005. In order to ensure further improvement in its results, a number of new market initiatives have been prepared, and they are expected to produce a higher circulation and a higher number of advertisement sales. The conference part will also be strengthened, and three major shipping conferences are planned to take place in 2005, in Shanghai, Oslo and Mumbai respectively.
Upstream had a turnover of MNOK 12.6 in the quarter. This is a growth of 20% (25% in comparable rates of exchange). The advertisement side had the strongest growth: 21.6%, and the circulation has risen to the highest level ever by more than 5,700 issues. Unfortunately, Upstream lost a contract in the quarter, and this produced a one-off effect of MNOK 0.6 compared with 2003. The operating loss was reduced by MNOK 1 to MNOK 0.7 as against a loss of MNOK 1.7 in 2003. Upstream is well positioned to obtain a marked growth in 2005, both in circulation and advertisements.
Intrafish Media had a turnover of MNOK 11.7 for the quarter, which is a growth of 9%. This is the fourth quarter in a row with a growth in turnover and reflects that the industry, which was into a crisis in 2002-2003, is experiencing somewhat better times. The internationally-oriented publications have seen the greatest growth in turnover. There was an operating loss of MNOK 0.6 as opposed to a loss of MNOK 2 in 2003. In the time ahead the growth in turnover is expected to continue, and this in turn is expected to improve the operating results.
Nautisk Forlag had a 70% growth in turnover, to MNOK 19.8. This was due both to organic growth and the effect of a company acquisition in 2003. The operating result in the quarter improved by 35% to MNOK-0.5. On the whole there are lower margins than one year ago. On the other hand, there are more long-term contracts. 2004 was also marked by a fierce battle for the market, and Nautisk Forlag has gained market share both in Norway and internationally. Even though the shipping industry, particularly certain segments, has seen its best year for many years, the players are still reticent when it comes to buying.
TDN Finans’ development is fairly stable, with some growth underlying, and some improvement is expected in the coming quarters.
Europower had a growth in turnover of 12 %, to MNOK 1.6. The growth is a result of increased advertising in the Europower newspaper. The operating loss was reduced from MNOK 0.4 to MNOK 1.4. The cost increase is mainly due to the newspaper being published more frequently, and one-off costs linked to changes in the company. Greater growth in turnover is expected in the coming months as a result of an increase in orders coming in for advertisements. Revenues from internet subscriptions are expected to remain stable.
In conclusion: 2004 became a successful year. The turnover and the market position were particularly good. However, there is still room for improvements in the results, and continued improvements are expected in 2005. The reason for this is that macrowise, moderately improved markets are expected. Also that several companies will improve their results as a consequence of their market positions constantly improvement, and that several new activities planned will produce results.
10th February 2005
The Board of Directors of AS Norges Handels og Sjøfartstidende