Quarterly report second quarter 2003

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Overview:

The Group’s profit improvement before taxes is good, and this is the fourth consecutive quarter with a profit improvement. The Group’s operating margin is still too weak, however, and a number of measures have been introduced and are still ongoing for the purpose of improving the operating margin.

The situation in the market is still exacting both as regards income from advertisements and subscriptions, but generally speaking there is a levelling off in the market, globally and in Norway. The Group’s turnover dropped by 9 per cent in the first quarter (Q1) this year as compared to last year whereas the second quarter (Q2) saw a flat turnover. In addition, the effects of last year’s weakened USD exchange rate have considerably reduced the turnover in NOK for several of the publications, which means that had the rates of exchange been stable, there would have been a moderate growth in Q2 turnover for the NHST Group.

The main reason for the improvement in net financial items was a NOK 10.3 million loss on exchange rates in 2002, which means that it is this quarter’s net financial items that represent the normal situation.

Publication by publication:

Dagens Næringsliv enjoyed stable operating income during Q2, whereas Q1 showed a decline of about 11 per cent. Part of the relative improvement is due to the 8-day newspaper strike in Q2 2002. This would indicate that the underlying factor – newspaper day by newspaper day – is still somewhat in decline. There were major variations in income from advertisements from one month to the next during the quarter, with May being very strong, whereas revenues in June were weaker. Income from single copy sales is growing at the rate of 2 per cent from Q1. The cost cuts introduced in 2002 are being continued but greater emphasis is being put on sales activities. There has been an improvement in operating both in Q2 and so far this year and this is expected to continue in the coming quarters. However, there are still uncertainties in the general economic conditions, although a number of macroeconomic indicators are pointing in the right direction.

TradeWinds has a clear drop in turnover which has primarily been caused by USD exchange rates. – The USD is down about 20 per cent quarter on quarter. A number of market activities have been implemented in order to increase revenues and these measures are expected to show results in the second half of this year already. Following cost cuts in the spring of 2002, the organisation is now considered to be cost effective, so further profit improvements are sought by way of growth in turnover. TradeWinds is a definite world leader in shipping, and the decline is considered to be of a temporary nature.

Upstream has a 6 per cent growth in turnover. This is considered to be a strong growth as Upstream has all its turnover in USD. The improvement is particularly in advertisements and comes both from the Americas, Europe and Asia. Upstream’s journalists have received several awards for high-level journalistic performance, and the publication, now in its seventh year, is highly recognised. Like TradeWinds it is expecting further profit improvement as a result of growth in turnover. Growth is expected in the Americas in particular

DN Nye Medier’s revenues have grown by 41 per cent. This is due to a mixture of generally increasing advertising on the internet as a consequence of the clearly increasing use of the internet , and several new advertisement products from dn.no. At the same time, costs have been cut by 12 per cent. Further improvement in operating results is expected in the coming quarters

Nautisk Forlag is making visible progress. This applies both to turnover in the merchant navy, the oil companies and the fisheries, and retail turnover in Oslo. Further progress is expected in the third quarter, partly as a result of a relatively large contract having been won in competition with a number of shipping companies. An agreement has been entered for the purchase of all operational assets and rights in the Navicharts company on 1 October 2003. This will make Nautisk Forlag one of the world’s five – seven largest distributors of charts, and turnover is expected to double in the fourth quarter.

TDN Nyhetsbyrå has quite a stable turnover and result. This proves that TDN is gaining market share in a contracting market. Cooperation between TDN and dn.no is increasing in the sale of common products etc. The coming operating results are expected to be at last year’s level.

Europower has an operating result that has been considerably improved through cost cuts. For the first time in several years, there is also a moderate growth in turnover. The launch of this quarterly newspaper aimed at the power supply market has been a success. The improvement in operating results is expected to continue in the coming quarters.

Intrafish Media has a moderate growth in turnover, but it is weaker than expected. It is particularly the Norwegian advertisement markets that have been reduced, which suggests a connection with the crisis that has prevailed and is still ongoing in the fisheries industry. The global publications are experiencing solid growth and many new readers and advertisers in USA/Canada. The operating result is weaker than expected, primarily because of the advertisements situation. Due to the position in the Norwegian fisheries industry, costs will be cut for the Norwegian-based publications in the coming months, and arrangements are being made for a much lower annual level of costs than today’s level

In conclusion:

The Group is working with determination to continue the improvement in operating results quarter on quarter. Further cost efficiency is of paramount importance, but more emphasis is also being placed on sales activities because the market potential has improved. An improved picture of the economy is important particularly for Dagens Næringsliv. USD trends will have a negative impact on operating income in NOK throughout 2003 and the beginning of 2004, but to a consistently lesser degree. Several of the other companies are clearly improving their results. All in all, the improvement in the Group’s operating results quarter on quarter is therefore expected to continue.

25 August 2003

The Board of Directors of Norges Handels og Sjøfartstidende