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  • European Directories Group, European Directories Midco S. r.l. and

    European Directories BondCo S.C.A. Interim Report

    January-June 2016 31 August 2016

    http://www.europeandirectories.com/

  • Page | 1

    Interim Report January-June 2016

    (Comparative 2015 numbers in brackets)

    Financial Summary

    April-June 2016

    - Group revenues are MEUR 68 (MEUR 74, -8% below last year) - Revenues for key business drivers profile services and consumer services declined 10% and 12%

    respectively (Q2 2016 vs. Q2 2015) - EBITDA is MEUR 9 (MEUR 10, -16% below last year) - Profit for the period after taxes is MEUR 1 (MEUR -5) - Net cash from operating activities is MEUR 9 (MEUR -1)

    January-June 2016

    - Group revenues are MEUR 133 (MEUR 145, -8% below last year) - Revenues for key business drivers profile services and consumer services declined 9% and 14%

    respectively (Jan-Jun 2016 vs. Jan-Jun 2015) - EBITDA is MEUR 16 (MEUR 18, -11% below last year) - Loss for the period after taxes is MEUR -6 (MEUR -12) - Net cash from operating activities is MEUR 16 (MEUR 5) - Net debt excluding shareholder loans is MEUR 79 (MEUR 78)

    Revenues continued to decrease in the second quarter. Due to intensified cost cutting measures, profitability has remained approximately at prior year levels. The Board of Directors and management expect that certain markets for the Groups products and services will continue to decline. Further, it has been difficult to generate profitable growth in the digital businesses. Board and management are fully aware of these challenges and jointly work towards finding measures to mitigate those risks.

    In light of the continuing decline in revenues and EBITDA, the Board decided to conduct a strategic review of the three businesses at the beginning of the year. The Board has recently completed that review and concluded that the market continues to be very challenging and the transition to online sales for all of the three units is difficult. As part of the strategic review, the Board considered a disposal of the Austrian business but, after testing the market, concluded that there was not sufficient interest at an attractive enough level for the Group to pursue.

    http://www.europeandirectories.com/

  • Page | 2

    Key events during the quarter

    - On 24 June 2016, the Group (through its 61% owned group company Dogado GmbH) acquired 100 % of the shares and votes in Busymouse Business Systems GmbH, a German company providing hosted exchange and cloud services through more than 700 IT channel partners to German SME customers.

    - On 7 June 2016, Thomas Friess, Managing Director of Herold left the company. A management committee made of Martin Kargl and John Goddard has been appointed as Managing Directors of Herold. Martin Kargl will be Speaker of the management committee (CEO).

    - On 2 May 2016, Marcus Englert replaced David Anderson on the board of European Directories Midco S. r.l. As a result, the board of European Directories Midco S. r.l. consists of the following members: Marcus Englert (Chairman), Hannu Syrjnen, Bjrn Osterloff, Peder Prahl, Marco Sodi, Fabrice Rota and Sbastien Rimlinger.

    - As part of an intra-group restructuring in order to reduce administrative costs and bring the Austrian trading companies under the direct ownership of a Dutch holding company, the European Directories Group has finalised merger proceedings in May 2016 of its 100% owned Austrian subsidiary, Herold Holding GmbH, with a newly incorporated 100% owned Dutch subsidiary, European Directories (DH8) B.V. Both companies are 100% direct subsidiaries of European Directories (DH7) B.V. Neither company conducts any trading business, nor has any employees and the operations of the Dutch and Austrian business are completely unaffected by this matter.

    - On 12 April 2016, the Group disposed of its 76.34 % shareholding in Tupalo Internetservices GmbH for a nominal amount. The sale resulted in a minor loss to the Group.

    - In June 2016 the Group (through its group company European Directories DH7 B.V.) purchased TEUR 13,048 nominal value of the bonds issued by European Directories Bondco S.C.A. for a consideration of TEUR 6,434.

    Events after the end of the period

    - There has been no material events after the reporting period.

    http://www.europeandirectories.com/

  • Page | 3

    Report of the Board of Directors*

    Revenues

    Group net revenue by segment, MEUR

    Q2 2016 Q2 2015 Q1-Q2 2016 Q1-Q2 2015 2015 LTM

    Fonecta 34 36 66 72 142 135

    DTG 16 20 33 39 74 68

    Herold 18 18 34 34 79 79

    Other 0 0 0 0 0 0

    Total Group 68 74 133 145 294 282

    Group net revenue by product group, MEUR

    Q2 2016 Q2 2015 Q1-Q2 2016 Q1-Q2 2015 2015 LTM

    Profile services 24 27 47 52 106 101

    Consumer services 16 18 29 34 67 62

    New media 20 17 38 34 76 80

    Print 6 9 13 18 33 27

    Other 3 4 5 6 13 12

    Total Group 68 74 133 145 294 282

    Product groups: Profile services are mainly internet yellow pages (IYP), Consumer services (only in Finland) are directory assistance and sms data information services, New media is mainly consisting of web presence and marketing services, Print is traditional printed directories and Other consists of mixed revenue streams.

    April-June 2016

    Group revenues for the second quarter totalled MEUR 68, an 8% decline compared to the previous year due to the continued structural decline of traditional print revenues and Fonectas consumer business.

    New media revenues, mainly website and marketing services have shown a small improvement, however not overall compensating the decline in traditional business. Profile services revenues totalling MEUR 24 decreased by MEUR 3 mainly due to the terms and conditions change one-off impact in previous period. The total share of online products in the Groups product portfolio totalled 65% in the quarter.

    *) The term Board of Directors is referring to the Board of Managers in European Directories Midco S. r.l

    http://www.europeandirectories.com/

  • Page | 4

    Print revenues totalled MEUR 6, a decline of 32% compared to previous year. Print revenues represented 9% of total revenues, showing a decrease of 5 percentage points. Consumer services consisting of directory assistance and SMS data information services in Finland declined by 12% and totalled MEUR 16, representing 24% of total revenues.

    In addition to the structural decline in traditional print, the transition to online and digital services continues to be challenging in all three markets in which the Group operates due to prevailing economic weakness and strong competition.

    January-June 2016

    Group revenues for January-June totalled MEUR 133, a MEUR 12 or 8% decline compared to previous year.

    New media revenues, mainly website and marketing services have shown an improvement, however not overall compensating the decline in traditional business. Profile services revenues totalling MEUR 47 decreased by MEUR 5 from the previous year due to the divestment of secondary entries business unit and the terms and conditions change one-off impact in previous period. The total share of online products in the Groups product portfolio totalled 64%.

    Print revenues totalled MEUR 13, a decline of 30% compared to previous year. Print revenues represented 10% of total revenues, showing a decrease of 2 percentage points. Consumer services consisting of directory assistance and SMS data information services in Finland declined by 14% and totalled MEUR 29, representing 22% of total revenues.

    In addition to the structural decline in traditional print, the transition to online and digital services continues to be challenging in all three markets in which the Group operates due to prevailing economic weakness.

    http://www.europeandirectories.com/

  • Page | 5

    Result

    Group ebitda by segment, MEUR

    Q2 2016 Q2 2015 Q1-Q2 2016 Q1-Q2 2015 2015 LTM

    Fonecta 6 6 12 14 29 28

    DTG 2 3 5 6 13 12

    Herold 2 2 1 0 10 12

    Other -1 -1 -3 -2 -5 -6

    Total Group 9 10 16 18 48 46

    April-June 2016

    Group EBITDA for the quarter amounted to MEUR 9 (MEUR 10), with EBITDA margin of 13% (14%). EBITDA in Q2 2015 included a c MEUR 1 positive one-time effect from change in contract terms and conditions in the Netherlands. The decline in high margin traditional business (print and consumer business) also has a negative impact on margin and EBITDA in all countries.

    January-June 2016

    Group EBITDA for the first six months amounted to MEUR 16 (MEUR 18), with EBITDA margin of 12% (12%). EBITDA in January-June 2015 included a c MEUR 3 positive one-time effect from change in contract terms and conditions in the Netherlands. The decline in high margin traditional business (print and consumer business) also has a negative impact on margin and EBITDA in all countries. Overall, the consumer business continues to be the main contributor of the Group EBITDA, while new media business continues to be challenging.

    The Groups total operating costs and expenses for January-June decreased by MEUR 10, or 11%, compared to the prior year. Other operating expenses have reduced by 20% mainly due to tighter cost management leading to lower third party service expenses and business support costs. Personnel expenses decreased by MEUR 5, or 7%, due to lower employee numbers, while the cost of consumables has remained at last year level due to higher fulfilment costs of the online products.

    Operating profit amounted to MEUR 3 (MEUR 2) mainly due to lower depreciation and amortisation, representing an operating margin of 2% (1%