BERTRANGE, Luxembourg, Oct. 24, 2002 (PRIMEZONE) -- Metro International S.A. ("Metro") (Nasadaq:MTROA) (Nasdaq:MTROB) today announced its financial results for the third quarter and nine months ended 30 September 2002.
Third Quarter Highlights
- Net sales up 44% year on year to US$ 31.1 million (US$ 21.5 million)
- Net sales outside Sweden up 65% year on year to US$ 20.7 million (US$ 12.6 million)
- Group operating EBITA improves year on year by 33% to US$ -11.7 million (US$ -17.4 million)
- EBITA for the 19 editions launched more than 1 year ago improves by 61% to US$ -5.3 million (US$ -13.6 million)
- 10 out of 24 editions profitable in September and EBITA profit of US$ 0.5 million in September for the 19 editions launched more than 1 year ago
- 11% year on year reduction in average cost per copy
- Non-recurring increase in head quarter costs to US$ -9.1 million (US$ -5.7 million) due to discontinuation of business development and marketing programmes
- SEK 150 million of additional financing secured
FINANCIAL SUMMARY
Consolidated income Q3 2002 Q3 2001 9m 2002 9m 2001
statement *
(US$ 000's)
Net Sales 31,059 21,506 96,420 77,677
Operating income
from (11,683) (17,431) (28,631) (44,251)
operations
Site closure costs 62 - (4,404) -
Headquarters (9,142) (5,674) (16,981) (17,081)
Goodwill
amortization (932) (877) (2,694) (2,593)
Operating income (21,695) (23,982) (52,710) (63,925)
Financial items, net (2,776) (2,297) (11,674) 568
Profit before tax (24,471) (26,279) (64,384) (63,357)
Basic earnings per
share (0.23) (0.35) (0.53) (0.87)
(US$)
Basic number of shares 109,383,131 76,088,489 109,383,131 76,088,489
outstanding
Metro had 24 operations at 30 September 2002 and 19 operations at
30 September 2001
OPERATING REVIEW
Metro is the world's fastest growing and second largest newspaper outside Japan, publishing over 4 million copies of 24 daily editions in 15 countries around the world, according to the latest worldwide readership survey in May 2002. The newspaper attracts nearly 11 million daily readers and derives its revenues from advertising sales, which have grown at a compound annual rate of 50% since the launch of the first edition in 1995.
The third quarter saw continued strong development in the operations, despite being the seasonally weakest sales quarter of the year. All 19 operations launched more than one year ago reported a combined EBITA profit of US$ 0.5 million in the month of September, which marks the end of the Summer period and therefore typically accounts for approximately half of the quarter's sales. Metro utilizes EBITA as the principal reporting definition for the Group due to the low level of required investment in fixed assets and resulting depreciation charges.
Group net sales were up 44% to US$ 31.1 million (US$ 21.5 million) and international sales (outside Sweden) increased by 65% to US$ 20.7 million (US$ 12.6 million), despite the continued weakness in the newspaper advertising markets around the world. Sales for the international editions outside Sweden represented 67% of group sales, compared to 58% for the same period last year. The third quarter this year was the first time in Metro's history when sales for the third quarter have exceeded those for the first quarter of the same year, reflecting the strong momentum in the international editions.
Continued and increased cost control yielded a 11% year on year reduction in the average cost per copy in the third quarter, which is calculated on the basis of an average 24-page edition and including all Group costs except headquarter expenses and goodwill amortization charges. The total group operating cost base, measured at constant exchange rates, was flat year on year in the third quarter despite the five new launches since the end of the third quarter of last year, and the full quarter of costs from the Madrid and Copenhagen editions, which were launched during the third quarter of last year.
This combination of strong sales growth and strict operational cost control resulted in a 33% improvement in EBITA from operations to US$ - 11.7 million (US$ -17.4 million) in the quarter.
The 19 editions launched before the end of the third quarter last year reported a combined 61% reduction in EBITA losses in the third quarter to US$ -5.3 million (US$ -13.6 million). The same editions reported a year on year net sales increase of 44% in the third quarter.
The Metro edition in Seoul, Korea, which was independently launched during the second quarter under a franchise license from Metro International, continues to progress well. Metro is not investing financially in the new newspaper, but receives an ongoing franchise fee and retains an option to acquire an interest in the newspaper in the future.
Metro's reporting segmentation continues to reflect the classification of all editions launched more than one year ago as 'established operations," and all editions launched within the last year as 'new ventures'.
Established Operations
Despite being the seasonally weakest quarter, over half of the 19 established operations reported monthly operating profits in the month of September - Stockholm, Gothenburg, Prague, Hungary, Holland, Santiago, Toronto, Athens, Barcelona and Madrid. The 19 established operations generated a 44% year on year increase in net sales to US$ 28.4 million and a combined 62% reduction in EBITA losses to US$ -5.1 million in the third quarter.
Metro Sweden reported continued market out-performance in the third quarter. This growth has been achieved despite the weak print advertising market conditions in Sweden, particularly in the most profitable segment of recruitment advertising. Metro Sweden's net sales increased year on year in the quarter in local currency terms for the first time since the first quarter 2001 and were up 16% in U.S. dollars, due to the strengthening Swedish Krona. This increase compared to a reported 8% decline in gross revenues for the other major daily morning newspapers in Sweden (source: SIFO RM). Metro Sweden has therefore further increased its share of the major daily morning newspaper advertising market in Sweden to 19.1% (source: SIFO RM).
Stockholm reported a decreased EBITA margin of 27% for the quarter, compared to 28% for the same period last year. The Swedish operations as a whole, however, reported a combined increase in EBITA operating margin to 18% (16%) in the quarter. This followed a 9% year on year reduction in the operating cost base for the first nine months. The editions are highly operationally leveraged and well positioned to deliver high levels of incremental profitability as the advertising markets recover.
Metro faces competition from rival free titles, as well as its traditional subscription-based peers, in 14 out of its 24 markets, including Holland, Spain and Italy, but has been able to consistently deliver higher audience and advertising market shares than these rivals.
Holland has continued to show the strong momentum towards profitability that was demonstrated in the second quarter. The Dutch operations reported a 31% year on year growth in net sales, and a 43% reduction in operating losses, in a gross advertising market reported to have stabilized in the quarter (source: BBC).
The two editions in Italy reported a combined increase in sales of 61% and a combined reduction in operating losses of 51%. Net sales for the two Spanish editions were up by 186% and operating losses were reduced by 63%. Metro delivered monthly profitability in a new Group record time in June in Spain despite competition and both the Barcelona and Madrid editions repeated this performance in September.
Metro reported its fourth consecutive quarterly operating profit in Santiago, and has therefore now reached annual profitability, ahead of the three-year target schedule for all Metro editions. The joint venture in Toronto reported its first monthly operating profit in September 2002, only two years after launch. Metro's Canadian joint ventures in Toronto and Montreal, in which the Group has a 50% economic interest, are treated as associated companies. Combined net sales for the two editions increased by 63% year on year, whilst operating losses for the two editions were reduced by 75% year on year to US$ 0.2 million (US$ 0.9 million) in the third quarter.
The two US editions, in Philadelphia and Boston, reported sales up 63% and operating losses down 68% year on year in the third quarter.
All cities in Eastern Europe announced increased revenues, with the Prague, Hungarian and Warsaw editions reporting both a combined sales increase of 47%, and a 53% reduction in operating losses in the third quarter.
As previously announced, the more recent editions launched in late 2000 and 2001 are moving towards profitability on an accelerated basis, ahead of the three year timetable. This is a result of the increasing leverage and operational synergies that arise from launching nearly thirty Metro editions around the world. The Malmo and Helsinki editions, which were launched in 1999, have now reached their third year anniversaries but are yet to report annual profitability. The Malmo edition has reduced its operating losses by 28% year on year in the quarter and is close to breakeven despite the weak Swedish newspaper advertising market. Net sales in Helsinki have increased by 43% year on year in the quarter and operating losses have decreased by 21% and 42% in the year to date.
New Ventures Both France and Hong Kong achieved record sales during the third quarter, despite it being the seasonally weakest quarter.
The Hong Kong edition continues to perform well and build on the strong readership numbers reported in the second quarter. Following the Presidential elections in France at the beginning of the summer and the summer break, the French editions built on their similarly strong readership numbers to deliver a significantly improved performance in September, which were up by 125% compared to June.
Hong Kong and France are amongst the largest of Metro's markets, in terms of circulation and annual newspaper advertising market size, and therefore offer considerable potential.
These four new ventures accounted for 7% of Group net sales and 50% of the Group EBITA losses from operations in the third quarter (excluding headquarters). These ventures have in the year to date accounted for 4% of Group net sales and 53% of Group EBITA losses from operations (excluding headquarters and site closure costs).
OTHER INFORMATION
It was with great sadness that Metro International announced that its Founder and Chairman of the Board of Directors, Mr. Jan Hugo Stenbeck, passed away on 19 August 2002. Mr Stenbeck was the Founder and Chairman of Invik & Co. AB, Tele2 AB, Modern Times Group MTG AB, Millicom International Cellular S.A., Transcom WorldWide S.A., and was the Chairman of Industriforvaltnings Kinnevik AB. The Board appointed Uriel Savir as acting Chairman on 30 August 2002 and has simultaneously initiated a search for a Non-Executive candidate to assume the Chairmanship on a long-term basis. Mr Savir has been a Board Director of Metro International since 1999.
Metro's financial results for the fourth quarter and full year ended 31 December 2002 will be released in February 2003.
This interim report has not been subject to review by the Company's auditors.
For further information: please visit www.metro.lu email info@metro.lu Pelle Tornberg, President & CEO tel: +44 (0) 20 7016 1300 Matthew Hooper, Investor & Press Relations tel: +44 (0) 20 7321 5010
Metro is the world's largest free newspaper, publishing and distributing 25 editions in 16 countries in 14 languages: Stockholm, Prague, Gothenburg, Hungary, the Netherlands, Helsinki, Malmo, Santiago, Philadelphia, Toronto, Rome, Milan, Warsaw, Athens, Montreal, Barcelona, Boston, Madrid, Copenhagen, Aarhus, Paris, Marseille, Lyon, Hong Kong and Seoul. Metro International S.A. 'A' and 'B' shares are listed on NASDAQ and the Stockholmsborsen under the symbols MTROA and MTROB.
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