Quarterly report third quarter 2004

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The Norges Handels og Sjøfartstidendes (NHST) Group’s turnover increased by 19 per cent in the third quarter this year, to NOK 154.7 m. The growth in turnover is a consequence of the Group’s publications having strengthened their competitive power, thus having taken market share, and the business upturn for the business press. The growth in operating income is advertisements in DN.

The operating result is weak for the ”holiday months” of July and August, as is usually the case. In Q3 2003 NHST had a deficit of NOK 8.2 m, which was reduced by NOK 5.2 m in Q3 this year to a deficit of NOK 2.9 m. The improvement in the operating result this quarter is the tenth in a row since summer 2002.

The accumulated Group turnover was up 16 per cent to NOK 484.8 m and the operating result was up 323 per cent to NOK 32.6 m. This is a trend in line with the Group’s own expectations. Financial and minority items show a clear decline from NOK 8.0 m to NOK 2.8 m, which was mainly due to the constantly declining interest rate levels on NHST’s bank deposits. NHST has not interest-bearing debts.

Publication by publication

Dagens Næringsliv obtained a turnover of NOK 89.6 m this quarter, as against NOK 79.1 m in the equivalent period last year. The growth is primarily due to increased revenues from advertisements and there is a definite improvement in most of the advertisement segments, particularly for traditional business-to-business advertisements. Circulation revenues are also increasing, particularly fromcasual sales.

DN’s own internal circulation follow-up shows that DN’s counted circulation has passed 70,000. Norsk Gallup has carried out its annual readership survey under the auspices of MBL. It shows that DN is read on average by 299,000 readers on weekdays, and 340,000 on Saturdays. The survey shows that DN is the newspaper with the highest number of new readers in Norway. There is a good number of orders for advertisements coming in for the fourth quarter, and it is therefore expected that the improvement in the operating result will continue.

DN Nye Medier has a 45 per cent growth in turnover in the quarter, to NOK 4.9 m. The growth in traffic is also solid, with approximately 50 per cent to around 400,000 unique monthly users. Both are considered to be above market trend. The operating deficit was more than halved during the period, to NOK – 1.3 m. The accounts for September show a small profit. October will be even better, and dn.no is expected to run at a profit in the fourth quarter.

TradeWinds grew in turnover from NOK 13.3 m to NOK 13.9 m, or approximately 4 per cent (in fixed rates of exchange the growth is around 9 per cent). The growth is due to the increase in advertisements. The circulation has grown to more than 7,300 as against approximately 7.000 in the same period last year. The improved circulation does not, however, bring about an increase in turnover because all the advertisement revenues are invoiced in USD, and USD has dropped more than the growth in circulation. Primarily because of TradeWinds having the main part of its cost base in GBP – which has risen in the period – and higher distribution costs (air freight), the costs show an increase of 11 per cent.

The cost growth in the NOK accounts means that TradeWinds has a decline in its operating result of NOK 0.9 m to NOK – 0.5 m for the quarter. Accumulated for the year there is an operating profit of NOK 1.3 m, which is only marginally weaker than last year’s figure. As the leading shipping publication in the world, TradeWinds is in a good position to take part in the growth that international shipping is now experiencing, and further improvement is expected in the coming quarters. Of our own measures, we can mention that as a result of developments in China, TradeWinds is now strengthening its coverage of China with one new journalist who is to work based in Hong Kong and Shanghai. TradeWinds is also planning several major high quality shipping conferences for next year.

Upstream has a growth in turnover of approximately 12 per cent to NOK 12.4 m in the quarter (up about 17 per cent in fixed rates of exchange). The growth is due to a 23 per cent growth so far this year, and new measures that have been well received, e.g. that a daily came out for four days during the ONS petroleum trade fair in Stavanger. The circulation is an all-time high at 5,600 as against approximately 5,300 in the equivalent period last year. As is the case with Tradewinds, USD and GBP have a negative effect. The operating result therefore only shows a marginal improvement to NOK - 0.3 m in the quarter. Upstream has changed over to invoicing in several currencies for subscriptions, and in the coming quarter already the trend in USD will be less sensitive. The high oil prices are starting to create a greater demand for new oilfields and services from sub-contractors to the oil companies. This is expected to have a positive effect for Upstream’s advertisements and circulation. In addition there is the fact that the publication is taking market share. As with TradeWinds, Upstream is increasing its presence in China by one new journalist as from 1 October 2004.

Intrafish Media has a growth in turnover of 14 per cent in the quarter, to NOK 10.9 m. The growth is continuing from the international part. What is new is that the Norwegian part, such as the newspaper Fiskaren and Intrafish.no, is also growing now. The operating result shows a deficit of NOK – 1.2 m as against a deficit of NOK – 1.5 m last year. The Norwegian-language publications are running at ”break-even”, whilst the deficit is in the international publications. As part of improving readers’ options and of rationalising the business, plans are underway to merge Intrafish.com and The Wave as from early in the New Year. Through tight cost management and growth in turnover the deficits are expected to be reduced in the coming quarters.

Nautisk Forlag has a growth of 81 per cent in turnover, to NOK 19.7 m. The g rowth is due both to organic growth and the effect of a corporate acquisition in 2003. The operating result has been improved by 20 per cent to NOK 1.9 m. On average, there are lower margins than one year ago. On the other hand, there are more long-term contracts. In the summer period, there are major sales of leisure articles that have lower margins than does traditional business. Improved results are expected to continue in the coming quarters, but on the whole, at clearly lower levels than has been the case over the last 12 months.

TDN Finans is developing in quite a stable fashion, with some underlying growth, and some improvement is expected in the coming quarters.

Europower has a 2 per cent growth in turnover, to NOK 1.6 m. This growth is a result of increased advertising in the Europower newspaper. The operating result has been marginally changed to a deficit of NOK – 0.6 m. Greater growth in turnover is expected in the coming months as a result of more orders for advertisements coming in. The revenues from internet subscriptions are expect to remain stable.

In conclusion

Developments in the third quarter were satisfactory under the circumstances. The trends in readership and turnover were particularly good. However, there are several companies that still do not produce results in accordance with NHST’s expectations but its is expected that these will “come round” soon. There is a good number of orders coming in for the coming quarters, particularly for advertisements. NHST is following market and competition circumstances closely, and a number of new pro-active marketing measures are being planned in order to capitalise on good market potential. Continued improvements in the operating result is expected, as a result of the company’s own competitiveness and the improved business situation.

Oslo, 19 October 2004

The Board of Directors

AS Norges Handels og Sjøfartstidende