Consolidated Interim Report for the First Quarter of 2018 27.04

This is a centennial year from the birth of all three Baltic countries. In the first quarter, the editorial departments focused on covering the events dedicated to 100th anniversaries of the Republic of Estonia and the Republic of Lithuania. Many different projects were implemented and the events held in the three countries were extensively covered.

In Lithuania, the celebrations were rounded up with a major conference organised by Delfi Lithuania in February, which concluded the social project "Idea for Lithuania", selecting three ground-breaking ideas that will be implemented for the benefit of the Lithuanian state. In Estonia, several Arvo Pärt music concerts were organised, and in addition in Lithuania "The Day of Best Lessons" targeted at schoolchildren was held that was attended by several tens of thousands of students. Organising events and activities under our various brands is becoming an increasingly important activity across the entire Group. This new revenue type is a good complement to our media companies, which have traditionally "lived on" advertising and distribution revenue.

Besides all of the above, we have not forgotten our role as a watchdog for the society, and we continue to provide our readers with the best and most reliable content. This is proven by the record number of prizes awarded to our journalists this year by the Estonian Newspaper Association. Our journalistic activities in Latvia also received several awards.

In March, the Competition Authority issued a license to restructure Ajakirjade Kirjastus, the Estonian largest magazine publisher. One part of Ajakirjade Kirjastus will be merged with the Group's subsidiary Ekspress Media and the other part with the joint venture SLÕhtuleht. The merger process has started and should be completed by midsummer. The main purpose of the change is to provide a better online output for the content of paper publications of Ajakirjade Kirjastus and to support the collaboration of publications with existing strong online platforms. In 2018, it is not reasonable to start building a new large web centre, but to provide readers with high-quality content in collaboration with existing platforms, i.e. Delfi and Õhtuleht. No currently published magazines are planned to be closed during the merger.

The expansion of the Group has also taken place in the direction of digital outdoor advertising. In January, we acquired a company in Tartu, and, in addition, have grown organically by installing new screens in Estonia and Latvia. Compared to the year before, the network of our digital outdoor screens has grown exponentially both in Latvia and in Estonia.

The acquisition of a majority holding in Adnet, an advertising network and provider of target group-based advertising sales solutions, last November has together with Delfis increased the Group’s online revenues and its share among total revenue. The share of the Group's digital revenues has increased to 35% of total revenue. Delfi Lithuania in particular increased revenue in the first quarter (25%). In Latvia, due to the local banking crisis and change in the pricing policy of a major media monopoly, the advertising market is temporarily stagnating, resulting in somewhat lower revenue than in the previous year.

We continue to invest in people and software solutions to enable new products to enter the market and to further develop and enhance our digital platforms and online products. We are looking for synergies between paper products and online output.

The situation is complicated for the Group's printing house, which is under strong price pressures due to falling circulations. Our strength remains very good service and the quality of work which has made it possible to expand our service to the rest of Europe, but which will take longer than expected to grow. The decline in circulations and the increase in labour costs have also affected the results of our home delivery company.

The Group's revenues for the first quarter increased by 11% to EUR 16.4 million, but EBITDA decreased and amounted to EUR 0.7 million. More detailed financial information about each group company is provided on interim report pages 14-15.

The main reason for the decrease in EBITDA is the lower-than-expected result of printing services and the difficult situation of the home delivery company.

For the rest of the year, we are looking forward to a stabilisation of the printing services segment as well as to the smooth integration of Ajakirjade Kirjastus with Ekspress Meedia and Õhtuleht. In the business line of digital outdoor screens, the plan is to expand and take stronger position in the market.
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