Ekspress grupp | Annual report 2020

Statement of the chairman of the management board

The year 2020 was a breakthrough year for the Group’s media publications in terms of the growth of digital subscriptions. The key reason for the growth in digital subscriptions was the change in the attitudes and habits of people: they are more willing to pay for high-quality digital content in their own language. The change was supported by the general background – objective journalism is more and more appreciated in a society dominated by global fragmented information. A major setback hit the Group in mid-March when the Baltic States imposed a state of emergency to curb the spread of the coronavirus. This in turn led to sudden changes in the economic environment. The most susceptible companies to the effects of the restrictions were the Group’s media companies, especially outdoor media and the ticket sales platform in Latvia. As we look back on the past year we can state that owing to our quick reaction, clear and open communication, keeping of promises, correct management decisions, and the loyalty and contribution of all Group employees, Ekspress Grupp was able to cope with the corona crisis and continue to provide our readers with what they needed the most - fast, relevant and reliable information in the most appropriate channels.

– Mari-Liis Rüütsalu, Chairman of the Management Board

Media Segment

The year 2020 was a year of fast growth in terms of digital media consumption. The year was characterised by the following trends:
• a surge of interest in paid digital content in all of our key markets, i.e. Estonia, Latvia and Lithuania,
• rapid adjustment of the digital advertising market to the COVID-19 pandemic and a recovery from the peak of the virus outbreak in spring,
• more acute awareness of the need to safeguard fair competition in the global as well as local media market: increasing interest in market distortions of digital media created by major Internet platforms across in the world and raising of fundamental questions in respect of the role of the state in the Baltic media market.

One year ago we were expecting continued growth in digital subscriptions, i.e. increasing interest of consumers in high-quality journalism and increasing interest in buying digital products. The market was indeed moving in this direction and even more rapidly than we had expected. The total number of digital subscriptions of Ekspress Grupp, the largest provider of digital subscriptions for the written press in our target markets increased by 73% in the Baltic States. Paid digital subscriptions launched by Delfi Latvia and Delfi Lithuania a year earlier continued their rapid growth, increasing by 250% and 700%, respectively, in a year. Considering the outlook of how many total consumers of digital content and how many consumers of paid digital content there are in our target markets, it can be said with certainty that in the digital world, the business model of paid subscriptions in our markets is still in the early growth phase.

For the Baltic media houses, the biggest competitors in terms of financial resources in the digital advertising market are still international Internet platforms. In 2020, the activities of large technology companies fell under the scrutiny of legislators and competition regulators all around the world, incl. in the USA that is home to the Internet platforms predominantly consumed here. Although the investigations and court cases may still take years, on the basis of preliminary data it can already be said that the market power of these giants has made the society reflect and ask critical questions about the market power regulation, social and economic effects as well as future fair taxation. We are witnessing that consumers will clearly benefit from the ongoing processes, both in terms of privacy protection as well as improvement of freedom of choice when it comes to consumption of media. The activities of regulators will probably also have a balancing effect on the competitive positions over the long term, for example, the dominant platforms will become more open when it comes to their cooperation with media organisations, new business models will appear, etc.

During the year, the activities of publicly funded broadcasting companies came also under more scrutiny in our target markets. As there is sufficiently strong competition and a variety of opinions in terms of the production of online news among private media houses, according to the media companies state intervention in these markets is by no means justified or necessary. In respect of the digital news media in Estonia, Latvia and Lithuania, there are no market distortions that the states should resolve through publicly owned media houses with growing budgets. The media companies that have been active in the local market for years find it difficult to understand why taxpayers’ money should be used to build online entertainment portals or streaming platforms, or to produce content for them in the areas where the private sector is already active. To obtain fair assessment in the crucial issue related to the future of private media and if needed, more precise regulations, the Estonian and Lithuanian media companies turned to the European Commission in the year ended.

This year, we expect the continuation of current trends, strong growth of high-quality digital content, more and better choices for readers and certain reorganisation of digital markets, and clearer definition of competition that is related to the activities of Internet giants and national partners. Our expectations of the Baltic digital market in 2021 are as follows:
- greater popularity of the subscription-based business model in all markets, continued growth of costs made by consumers in digital content, growth in the number of those consumers who have multiple active subscriptions from different content providers in the same market
- fast development of smaller market sectors in the digital landscape, incl. accelerating growth of the subscriptions of business customers, widespread adoption of the subscription business model by periodicals with narrower customer groups
- certain stabilisation of the competitive situation in the local advertising market with international platforms.
In 2020, media segment revenue totalled EUR 43.7 million (2019: EUR 44.2 million). In the 4th quarter, advertising revenue demonstrated decent recovery. After the 2nd quarter, it is evident that advertising customers prefer the Internet and this has put paper In 2020, media segment revenue totalled EUR 43.7 million (2019: EUR 44.2 million). In the 4th quarter, advertising revenue demonstrated decent recovery. After the 2nd quarter, it is evident that advertising customers prefer the Internet. Print advertising revenue decreased as the COVID-19 pandemic further accelerated secular trends, largely impacting the entertainment, media and luxury categories.

The state of emergency related to COVID-19 still has the most profound impact on the Latvian ticket sales platform, where the Latvian State has imposed a 50% limit on the occupancy rate of events and starting from the middle of 4th quarter called the state of emergency and closed all the events. The Latvian government extended the state of emergency till 4th of April 2021. It is currently unforeseeable when major events can restart to a normal degree. The Group is positive about the vaccination process in Latvia and in Baltics in general and believes that in the second half of 2021 the local smaller events are back on the market.

Digital media is growing as expected. At the end of the 4th quarter of 2020, the Group's digital revenue accounted for 49% of total revenue and 71% of media segment revenue.

In 2020, media segment EBITDA was EUR 6.6 million (2019: EUR 6.0 million). As compared to the previous year, EBITDA increased by 11%. This was positively impacted by cost savings carried out throughout the Group and employee salary cuts as well as the salary subsidy received from the Estonian Unemployment Insurance Fun. The subsidy was accrued as income in the amount of EUR 0.8 million.

The joint venture Õhtuleht Kirjastus AS, a key media company on the Estonian market is recognised under the equity method and included as one-line item within finance income in the Group's results. In 2020, the revenue totalled EUR 13.4 million (2019: EUR 13.8 million). Despite the state of emergency in the 2nd quarter, the advertising and distribution revenue of Õhtuleht Kirjastus AS has remained stable throughout the year.

The Supervisory Board of AS Ekspress Grupp decided to merge UAB Login Conferences with UAB Delfi in Lithuania and dissolve the company UAB Sport Media. SIA Delfi Entertainment was dissolved in Latvia.
A new whollyowned subsidiary OÜ Ekspress Finants was set up through a spinoff from AS Printall and the Group’s financial unit was combined with it.
The real estate portal Kinnisvara24.ee broke its one-month visitor record when in the first month of the year people visited the portal for more than a million times and the number of visitors was higher than 400 000.

Kinnisvara24.ee is the only real estate portal in Estonia that collaborates with Rendin OÜ, a company that provides a rental contract service, as a result of which people who advertise their properties can rent them without requesting a deposit, and the real estate seekers can filter deposit-free rentals.
Ekspress Meedia arranged the icehockey game with HC Jokerit.

February

Ekspress Meedia consolidated all events that have taken or will take place into the portal Delfi Elamus.
Delfi Lithuania celebrated its 20-year anniversary with the event “Delfi Titans” that was broadcast to all Lithuanian TV viewers. At the festive ceremony held at the National Museum of Art in Vilnius, Delfi awarded prizes to the people who break stereotypes with their personal example and draw attention to key public phenomena and events.

Atverskapi, the classified ads portal of Latvian fashion goods, introduced a business model of feebased subscriptions.
AS Ekspress Grupp disclosed the unaudited consolidated interim report for the 4th quarter and twelve months of 2010.
DELFI-TV was launched as a national free-to-air frequency TV channel.
Delfi Lithuania was the first portal to introduce a new visual identity that Delfi will also adopt in Estonia and Latvia.
Ekspress Meedia organised a concert of Arvo Pärt’s children’s songs to the full house in Alexela concert hall.

March

AS Ekspress Grupp adopted measures across the Group to prevent the spread of the COVID-19 virus, protect its employees, continue providing reliable and timely news to its audience and offer other group services. Where possible, employees were allowed to work remotely and salaries were temporarily reduced in the subsidiaries of the Group and the parent company.
Delfi launched special designs and elements for the COVID-19 outbreak.
Ekspress Meedia effectively launched a social campaign "I'll Stay at Home".
In cooperation with the Estonian E-commerce Association, Delfi created a special project “Best E-offers”, the purpose of which is to use the huge traffic of the news portal to advertise the products and services of the members of the E-commerce Association.

Delfi Latvia updated its plus product with better original and exclusive content, and launched a function “Fewer Ads” for subscribers.
Ekspress Meedia arranged the Baltic E-Commerce Forum 2020.

April

AS Ekspress Grupp disclosed the unaudited consolidated interim report for the 1st quarter of 2020.
The Chairman of the Supervisory Board of AS Ekspress Grupp Ahto Pärl stepped down from the position of the member of the Supervisory Board and the member of the Audit Committee of Ekspress Grupp and the member of the Supervisory Board of AS Printall effective from 16 April 2020.
The most popular programme of Delfi “Erisaade” was listened to for 152 000 times.
Delfi Lithuania launched the Russian-language version of Delfi news portal ru.delfi.lt that immediately started to strongly attract new visitors.

May

The initiative Debunk that was launched two years ago to focus on debunking international disinformation also expanded to Estonian and Latvia. Lithuania launched a localized version of a disinformation education game.
The monitoring survey of Kantar Emor on the state of emergency revealed that more than 70%, i.e. the majority of the population of Estonia followed Delfi in the crisis situation.
Delfi Latvia launched a new product in the market to debunk fake news.

June

The ordinary general meeting of the shareholders of AS Ekspress Grupp took place.
The Supervisory Board of AS Ekspress Grupp elected Priit Rohumaa as the new Chairman of the Supervisory Board and the member of the Audit Committee.
DELFI significantly increased the volume and quality of paid content during the COVID outbreak that helped the portal to reach the level of 6 000 active monthly subscribers in June.
In cooperation with the Baltic Centre for Media Excellence, Delfi Latvia arranged a series of talk shows about the impact of COVID on journalism freedom.
Delfi Latvia launched a sports vertical www.mvp.lv with new subscription options.

July

AS Ekspress Grupp disclosed the unaudited consolidated interim report for the 2nd quarter and six months of 2020.
Delfi Lithuania launched a social campaign concerning the authors’ fund and allocation of subscription revenue to the authors.

August

Ekspress Meedia organised the concert of Ruja “Stainless World” and the piece of Maria Faust “Maarja missa” (Maria’s Mass Liturgy“) that was performed only once in St. John’s Church in Tallinn and that was dedicated to all the women who have fallen victim to violence.

September

Delfi continued its successful social campaign "Don't Read While Driving" and the series of (virtual) lake marathons.
On 10 September, the corona conference of Eesti Päevaleht was held where the Prime Minister Jüri Ratas, medical chief of Saaremaa hospital Edward Laane, head of the Health Board's emergency medical department Arkadi Popov, Chairman of the Management Board of Tallink Paavo Nõgene and others talked about the corona lessons.

Delfi Latvia increased the volume and quality of paid content, in September the portal had more than 7000 active monthly subscribers.
Delfi Latvia TV studio participated in the web talk show of the conversation festival “Lampa”.
In Lithuania, the new season of Delfi TV was launched in the course of which more than 50 programmes were shown and more than six hours of daily live programmes were broadcast.
Delfi Lithuania reached a new record of paid digital subscriptions related to the new Delfi Plius service.
Delfi Lithuania’s public survey showed that most users named Delfi portal as their primary news portal and it is considered as Lithuania’s most reliable and objective portal with the greatest variety of opinions.

The Technology and Innovation Conference "LogIn" was held in Lithuania.

October

AS Ekspress Grupp disclosed the unaudited consolidated interim report for the 3rd quarter and nine months of 2020.
Delfi Latvia launched the new financial counselling vertical for the private sector finhack.lv.

November

In conjunction with the exercising of the employee share option programme, the Supervisory Board of AS Ekspress Grupp increased the share capital by 600 000 euros from 17 878 104.60 euros to 18 478 104.60, by issuing 1 000 000 new ordinary shares with the nominal value of EUR 0.6 per share.

December

AS Ekspress Grupp announced of a change in the structure of the shareholders with significant holdings. Between 22 and 28 December 2020, OÜ HHL Rühm acquired 1 096 475 shares of Ekspress Grupp, thereby increasing the indirect ownership of Hans Luik in AS Ekspress Grupp to 60.28%. After the transaction, OÜ HHL Rühm owns 34.42% (10 599 525 shares) and Hans Luik owns 25.86% (7 963 307 shares) of the shares of AS Ekspress Grupp.
The number of digital subscriptions of Ekspress Grupp increased in Latvia by almost 250% in a year and totalled 11 143 at the year-end 2020. There were 6595 digital subscriptions in Lithuania at the year-end, the number of subscribers had increased by almost 700% in a year.

Statement of the chairman of the management board

The mission of AS Ekspress Grupp is to serve democracy. We wish to offer reliable, independent and timely information to our readers that would help Estonia, Latvia and Lithuania to become better- informed, open and digitally advanced societies. Our mission is especially important during the coronavirus pandemic. At the time when the number of users in all of our news portals reached an unprecedented level, we needed to quickly introduce remote working at our editorial staffs due to the state of emergency. Taking account of the interests of our readers turned out to be a challenge for all of us but the work of the periodicals never stopped for a second. I believe that solving such situations is one of the key reasons for a journalist to choose his or her profession. We continued to provide comprehensive services to our readers and the best possible services under the circumstances which meant major adjustment to new habits, practices and work procedures.

While the media sector was able to enjoy attention and plenty of work, the digital outdoor companies of Ekspress Grupp and the ticket sales platform in Latvia suffered the most during the pandemic. The main reason for setbacks was national restrictions that almost halted the activities of these businesses.

In summary, the year 2020 was a success for the Group: despite the state of emergency and the economic instability due to the coronavirus, the Group was able to strengthen its market position and significantly improve profitability. Sales revenue over the 12-month period decreased by 6% to 63.2 million euros and net profit increased by 80% to 2.5 million euros. The Group's digital revenue made up 49% of total and 71% of media segment revenue. Thus, it can be said that the year of the pandemic accelerated the Group’s digitalisation process to a significant degree.

The year 2020 started off on a positive note for the Group but since March the Group considered and applied all the necessary measures to avoid the spread of the COVID-19 virus in our organisation. The primary goal was to protect our employees while still providing our readers and viewers reliable and timely news and other services. A major setback hit the Group in mid-March when the Baltic States imposed a state of emergency to curb the spread of the coronavirus. This in turn led to sudden changes in the economic environment. The most susceptible companies to the effects of the restrictions were the Group’s media companies, especially outdoor media and the ticket sales platform in Latvia.

As we look back on the past year we can state that owing to our quick reaction, clear and open communication, keeping of promises, correct management decisions, and the loyalty and contribution of all Group employees, Ekspress Grupp was able to cope with the corona crisis and continue to provide our readers with what they needed the most - fast, relevant and reliable information in the most appropriate channels. We did not get stuck due to the virus and after our initial quick reaction to changed economic conditions we continued to focus on our key business goal – increase the digital revenue and profitability of Ekspress Grupp.

The year 2020 was a breakthrough year for the Group’s media publications in terms of the growth of digital subscriptions. The number of digital subscriptions of AS Ekspress Grupp increased by 73% in the Baltic States in 2020 and was more than 81 thousand at the end of December. The key reason for the growth in digital subscriptions was the change in the attitudes and habits of people: they are more willing to pay for high-quality digital content in their own language. The change was supported by the general background – objective journalism is more and more appreciated in a society dominated by global fragmented information. The hunger of people for balanced information increased further once the pandemic started.

In 2020, we tied social topics and initiatives with our brands. They do not represent short-term campaigns, but topics that really matter to the majority of the people of Estonia, Latvia and Lithuania: violence against women, mental health, use of smart devices while driving, and forestry and environmental issues. We have created an opportunity to cover these areas in more detail and tie them with different activities at the Group to reflect the Group’s values.

In 2020, Ekspress Grupp actively participated in the activities of the Estonian Association of Media Companies, the purpose of which is to increase equal competition in the Estonian media landscape, fight market distortions and increase availability of periodicals to the people of Estonia. The same focus is also in place in Latvia and Lithuania where people have similar concerns, but there are different ways to solve them. Therefore, we need to be active in all the markets to say competitive in the media landscape.

In the Estonian and Baltic media market, the global Internet platforms Facebook and Google create the largest market distortions, taking out tax-free about half of the local advertising market’s proceeds which in Estonia amounts to at least 100 million euros a year. This constitutes unfair competition which hampers the potential of media companies to invest in journalism. As a result, the media landscape will shrink and people are less informed which in a long term will be a threat to the region.

The second key factor distorting competition is the activity of broadcasting companies funded by the state. For example, the Estonian Public Broadcasting has expanded its activities into the areas which are not their key functions as laid down by law and where the activities of the media organisations funded from the state budget interfere with free competition. According to privately-funded media organisations, this constitutes unlawful state aid and the parties are taking legal steps to put an end to this market distortion.

The third central problem is raising the home delivery fees of paper periodicals by local state-run postal delivery companies. Raising the home delivery fees and unsatisfactory arrangement of home delivery puts the biggest pressure on traditional regional newspapers under the conditions of decreasing circulations, but has a negative impact on the future of the entire local printed press. The Estonian Association of Media Companies has made specific proposals to the state of Estonia to resolve the problem and it will continue to garner political support for their proposals.

In 2021, we will continue with the implementation of our strategy primarily aimed at growing digital business and revenue despite the challenges outlined above. The digital transformation has had a good momentum and as an innovation leader in our markets we are making a bigger contribution to the development of media companies so as to ensure greater satisfaction of current subscribers and thereby growth of subscription revenue.

As the digital market leader, we are dedicated to high-quality journalism and advanced product innovation that support growth and profitability in the years to come.

Thank you for the trust and support placed in us!

Yours sincerely,
Mari-Liis Rüütsalu

Performance indicators (EUR thousand)	2020	2019	Change %	2018	2017	2016
Sales revenue	63,243	67,456	-6%	60,489	54,070	53,324
EBITDA	7,004	6,772	3%	4,263	6,261	7,280
*EBITDA margin (%)*	*11.1%*	*10.0%*		*7.0%*	*11.6%*	*13.7%*
Operating profit*	3,078	2,722	13%	1,211	3,475	4,328
Operating margin (%)*	4.9%	4.0%		2.0%	6.4%	8.1%
Interest expenses	(877)	(784)	-12%	(443)	(400)	(471)
Profit (loss) of joint ventures under equity method	102	(38)	365%	(273)	(2)	772
Net profit/(loss) for the period*	2,536	1,407	*80%*	25	2,952	4,406
**Net margin (%)***	*4.0%*	*2.1%*		*0.0%*	*5.5%*	*8.3%*
Net profit /(-loss) in the financial statements (incl. write-downs and gain from a change in ownership interest)	2,536	1,407	80%	25	3,146	4,406
Net margin (%)	4.0%	2.1%		0.0%	5.8%	8.3%
Return on assets ROA (%)	2.7%	1.6%		0.0%	4.2%	6.1%
Return on equity (%)	4.9%	2.8%		0.0%	6.1%	8.9%
Basic earnings per share	0.08	0.05		0.00	0.11	0.15
Diluted earnings per share	0.08	0.05		0.00	0.11	0.15
* The results reflect the outcome of regular business activities and do not include impairment losses on goodwill, gains from the changes in ownership interests in joint ventures, etc.

Balance sheet (EUR thousand)	31.12.2020	31.12.2019	Change %	31.12.2018	31.12.2017	31.12.2016
As of the end of the period
Current assets	18,482	19,472	-5%	15,631	16,725	16,250
Non-current assets	75,696	75,935	0%	63,286	62,597	61,507
Total assets	94,177	95,407	*-1%*	78,917	79,322	77,757
incl. cash and cash equivalents	6,269	3,647	72%	2,228	2,818	4,572
incl. goodwill	43,085	42,628	1%	39,799	39,920	38,904
Current liabilities	18,945	21,647	-12%	14,207	11,081	12,223
Non-current liabilities	20,613	22,137	-7%	14,276	15,747	14,462
Total liabilities	39,558	43,784	*-10%*	28,483	26,828	26,685
incl. borrowings	22,202	24,342	-9%	15,554	15,791	16,603
Equity	54,619	51,622	6%	50,434	52,494	51,073

Financial ratios (%)		31.12.2020	31.12.2019	31.12.2018	31.12.2017	31.12.2016
Equity ratio (%)		58%	54%	66%	69%	69%
Debt to equity ratio (%)		41%	47%	31%	29%	31%
Debt to capital ratio (%)		23%	29%	22%	21%	20%
Total debt/EBITDA ratio		3.17	3.59	3.63	2.44	2.17
Liquidity ratio		0.98	0.90	1.13	1.65	1.37

Key results in 2020

Statement of the chairman of the management board

Major business results

Summary of
business results

Summary of
business results