Eniro position

Capital Market Day
October 13, 2004
Why Capital Market Day now?
„ Report back on strategy review and capital structure, as
promised at Q2
„ Give update on important strategic issues
„ Outline priorities and plan forward
ƒ Maximize value within 3-5 years
Q3 published November 2
1
Starting Point
Where We Want To Go
and Core Challenges
Tomas Franzén
ƒ CEO roadmap
ƒ Eniro position
ƒ Plan and priorities going forward
3
Revisiting Q2 - CEO roadmap
9 Three distinct phases:
9 June - July, phase one: Situation assessment
9 July - August - September, phase two: Planning
September - October, phase three: Start of execution
4
Revisiting Q2 - phase one:
Situation assessment
9 Industry development and Eniro´s position relative
competition
9 Industry trends
9 Eniro´s performance versus other YP Players
9 Best in class identification in selected areas
9 Offline, Online, Multi channel sales approaches, Pricing, Product
development
9
9
9
9
Assessment of internal plans and ongoing initiatives
Assessment of current organisational set-up
Assessment of the key managers
CEO-meetings with all key managers
5
Revisiting Q2 - phase two:
Planning
9 Develop the new company strategy
9 Based on the situation assessment develop the new company strategy
and engage the management
9 Develop the new organisational set-up
9 Work out the organisation structure and deploy the key managers
9 Evaluate the capital structure
9 Evaluate an appropriate capital structure
6
First impressions and major
issues at Q2
High-level description
A
B
C
Unfocused geographical
portfolio
Online possibly both
an opportunity and a
threat
Downward financial
trajectory; challenges in
Sweden, Finland and
overall cost position
-
Close to 100% of value in Sweden and Finland
Several markets with limited/negative contribution to Group
value
Value creation differences between markets largely driven
by industry position and market conduct
-
New opportunities with potentially strong growth prospects,
e.g., Internet YP, sponsored links, P4P, product search,
classifieds
-
New competitors, more demanding customer behavior and
risk of price pressure on print business
-
Downward trajectory of key financials
Sweden: Limited recent focus on product development,
sales approach, product offering, pricing, and a low degree
of automatization
Finland: Sustainability of the business in view of changed
market dynamics
High cost position for several support functions
-
7
ƒ CEO roadmap
ƒ Eniro position
ƒ Plan and priorities going forward
8
We are in an attractive industry
2003, print focus (online dynamics different)
Markets with one clear leader
France
Pages Jaunes (97%)
Spain
TPI (90%)
Norway
Findexa (80–90%)
Denmark
TDC Directories (~80%)
Sweden
Eniro (80%)
Belgium
VNU Promedia (~95%)
Italy
Seat PG (85%)
UK
Yell (~80%)
Ireland
VNU (95%)
Czech Republic
Yellow Brick Road (99%)
*
**
***
****
Source:
( ) = Market share
EBITDA margin
Percent
No. 1 on market
Filed for bankruptcy 2003
Storbyguiden
Well-established UK position since 1966
Restated excluding voice, including voice, ~41%
Annual reports; UBS 2002, IRM
No. 2 on market
36,5
34,2
48,2
38,7
44.1****
32,7
Findexa
Neg.*
Pages Jaunes
Neg.
TDC Directories
Neg.**
Eniro
Neg.
Kapitol
52,5
31,8
24,8
22,4
12,5
TDC Directories
Pagine Utili
Neg.
5,3
Seat
Thompson***
27,7
N/A
N/A
N/A
N/A
Average 37%
9
Offline under pressure –
Variation across countries
Organic growth in offline
revenues 2001–03
CAGR, percent
Yell (UK)
7,1
TPI Europe (Spain)
3,6
Pages Jaunes (Total)
3,2
Findexa (Norway)
0,6
SEAT PG (Italy)
-0,5
VNU
Eniro (Sweden)
ƒStrong performers
appear to focus on
sales and product
development
ƒOther drivers
include pricing and
online migration
-4,8
-11,0**
2004 H1
vs 2003 H1
-6,6
-3,8*
2002
vs 2003
* Non restated
** Like for Like
Source: Annual reports; ZenithOptimedia; Eniro, Market situation Sweden
10
Recognized as an industry
leader in online
Online
(incl. voice)
revenues
EUR millions
„ Online revenues (incl.
voice) share of total, 2003
„ Percent
Eniro (Group)
27
Eniro (Sweden)
17
Pages Jaunes
(Total)
Seat PG (Italy)
16
24*
8
9
VNU
TPI Europe (Spain)
Yell (UK)
7
33
Voice
194
100
221
16
14
Findexa (Norway)
36
9
Online
24
85
27
37
1 8
6
27
59
* Including Minitel
Source: Annual reports; analyst reports
11
Eniro Internet position – Nordics
Source: Red Measure, Alexa – Sep. 2004
*) Total includes traffic at Portal, Search and IYP services
12
Eniro is well positioned –
Several strengths to build on
„
„
„
„
„
„
Strong, sustainable cash flows
Number 1 position in Sweden and Finland
Strong market position Online
Unique database of customers and users
Strong advertisers relationship
Multi channel capacity and competence
ƒ Print, internet, mobile and DA
ƒ Local yellow content, ability to handle large volumes
and structure content
„ Dedicated, committed staff
13
ƒ CEO roadmap
ƒ Eniro position
ƒ Plan and priorities going forward
14
Positioning statement 3 - 5 years
„ Eniro is the leading search company on the Nordic media
market
„ For active users, Eniro makes it easy to find people,
businesses and products
„ Eniro provides deep, local, quality assured information,
ever present in channels preferred by the users – and thereby
moves users closer to transaction
15
Strategic consequences
Eniro is the leading search company
on the Nordic media market
For active users, Eniro makes it easy
to find people, businesses, and
products
Eniro provides deep, local, quality
assured information, ever present in
channels preferred by the users –
and thereby moves users closer to
transaction
• Narrower geographical focus
• Knowledge in user friendliness
• New search possibilities: faster, simpler, better
• Focused and active product development – new
process needed
• Increased understanding of user information needs
(active research and interpretation)
• Improved content management
• Develop content collection competence – manual
and automatic
• Monitor preferred user trends and behaviors
• Adapt channel portfolio accordingly
• Bring knowledge to our advertisers: be better at
demonstrating the real value of our services
• Develop better segmentation, targeting and pricing
16
Our arena
”Department store”
Broad service offering
Ever present
Eniro
3–5 yrs
TV3
Passive
user mood/
amusement
Radio
Shallow
info
Eniro
Today
Deep
info
Google
Active user
mood/
benefit
One Channel
Gula tidningen
Blocket
Trade press
Ebay
”Specialist store”
Narrow service offering
Pricerunner
Market: The media in the
Nordic region
Arena: Search companies
17
5 core challenges
High level description
Sweden: Accelerating decline in
Offline revenues
„
2.
Finland: Challenges position
due to market structure
„
Fonecta launched competitive directory in
Helsinki and Tampere, following ending of
joint sales organization
3.
Potential in enhanced multichannel strategy
„
Industry leader in online, but with potential
to better capitalise on opportunities and
fend off threats
Broad product portfolio to build on, no
clear total offering
1.
„
„
Drop in number of advertisers and average
spend
Limited recent focus in product development,
sales approach, product offering and pricing
4.
High cost position
„
Cost take out required - possible areas
identified, e.g., Purchasing, consultants and IT
5.
Unfocused geographical
portfolio
„
Value creation differences driven by industry
position and market conduct
18
Organization International
Board
• Tomas Franzén (chairman)
• Andrew Pylyp
• Peter Schulze
• Mats Eklund
• Mats Lönnqvist
• Cecilia Geijer-Haeggström
President
Tomas Franzén
Business dev. &
M&A
Mats Eklund
Finance
Mats Lönnqvist
(acting)
HR
Ingrid Engström
Communication & IR
Boel Sundvall
IT
Bernt Lago
Purchase
Ingrid Engström
WLW
Product & Market
Cecilia GeijerHaeggström
Poland
Roger Asplund
Finland
Pär Kempe
Denmark
Henrik Dyring
Norway
Hans Petter
Terning
East
Pål Bruu
19
Organization Eniro Sweden
Board
• Tomas Franzén (chairman)
• Peter Kusendahl
• Mats Eklund
• Mats Lönnqvist
• Ingrid Engström
• Bengt Dahl
Din Del
President
Tomas Franzén
Business dev. &
M&A
Mats Eklund
Finance
Mats Lönnqvist
(acting)
HR
Ingrid Engström
Communication & IR
Boel Sundvall
IT
Bernt Lago
Purchase
Ingrid Engström
Product & Market
Cecilia GeijerHaeggström
Sales
Rickard
Jacobsson
Operations
Ingrid Engström
Eniro 118118
Barbro Sjölander
20
5 core challenges
High level description
Sweden: Accelerating decline in
Offline revenues
„
2.
Finland: Challenges position
due to market structure
„
Fonecta launched competitive directory in
Helsinki and Tampere, following ending of
joint sales organization
3.
Potential in enhanced multichannel strategy
„
Industry leader in online, but with potential
to better capitalise on opportunities and
fend off threats
Broad product portfolio to build on, no
clear total offering
1.
„
„
Drop in number of advertisers and average
spend
Limited recent focus in product development,
sales approach, product offering and pricing
4.
High cost position
„
Cost take out required - possible areas
identified, e.g., Purchasing, consultants and IT
5.
Unfocused geographical
portfolio
„
Value creation differences driven by industry
position and market conduct
21
Eniro by region
Operating revenues 2003/04
SEK 4,948 M*
Sweden 58%
EBITDA 2003/04
SEK 1,303 M*
Sweden and
Finland 72%
Sweden 76%
Finland 14%
Central Europe 14%
Finland 15%
Nordic excl. Finland 11%
Eastern Europe 3%
Central Europe 9%
Sweden and
Finland 91%
of positive
contributions
Nordic excl. Finland (neg)
Eastern Europe (neg)
* Rolling 12 months July-June
Other (neg)
22
Strategic priorities: Portfolio
review
Comment
Norway
ƒ Core
– Niched Online – piggyback on Sweden´s
development
Denmark
ƒ Core
– Niched local directory
– Niched Online – piggyback on Sweden´s
development
Poland
ƒ Core/non-core
– Core if position or market dynamics can be
improved
Germany
ƒ Non-core
– WLW in transition mode
– Potential for further value creation
Key evaluation criteria
ƒ Maturity of
market/directory
tradition
ƒ Potential market
position (leading or
niched)
ƒ Synergies with core
operations
ƒ Value creation
potential
Eastern Europe ƒ Non-core
Non-core positions to be turned into core positions or to be divested
23
5 core challenges
High level description
Sweden: Accelerating decline in
Offline revenues
„
2.
Finland: Challenges position
due to market structure
„
Fonecta launched competitive directory in
Helsinki and Tampere, following ending of
joint sales organization
3.
Potential in enhanced multichannel strategy
„
Industry leader in online, but with potential
to better capitalise on opportunities and
fend off threats
Broad product portfolio to build on, no
clear total offering
1.
„
„
Drop in number of advertisers and average
spend
Limited recent focus in product development,
sales approach, product offering and pricing
4.
High cost position
„
Cost take out required - possible areas
identified, e.g., Purchasing, consultants and IT
5.
Unfocused geographical
portfolio
„
Value creation differences driven by industry
position and market conduct
24
Cost reduction program
„ Cost reduction program initiated
„ Based on 2003 cost base (SEK 3,7 bn) extrapolated with
inflation over time
„ No major staff reductions
„ Savings on newly established residential (white) database in
Sweden included
25
Cost reduction program
Net EBITDA effect ambition 2007
SEK millions
Purchasing
Total ~1,200 MSEK
Consultants/external
services
Total ~300 MSEK
IT
Total ~400 MSEK
Business
processes/Back-office
Marketing spend
Expense cut
All types of purchases
~115
Consultant embargo from September
2004
~70
Ongoing integration and efficiency
programs
~35
Automation of back office processes.
Savings from investment in own white
database included
~30
~30
~70
Synergies from Group purchases of
media & consultants. Common toolbox
for Nordic countries
Addressing the overall cost level in Group
~350
26
Cost reductions
Impact over time
Full year effect
Geographical split
„ ~ 75% Sweden and HQ
„ 2005: SEK 100 million
„ ~ 25% Rest of Group
„ 2006: SEK 250 million
„ 2007: SEK 350 million
27
Product development
Cecilia Geijer-Haeggström
Positioning statement 3 - 5 years
„ Eniro is the leading search company on the Nordic media
market
„ For active users, Eniro makes it easy to find people,
businesses and products
„ Eniro provides deep, local, quality assured information,
ever present in channels preferred by the users – and thereby
moves users closer to transaction
29
Commercial search in
Sweden 2003
Channel
User sessions Share of user
(m)
sessions (%)
Eniro user
sessions - M
Eniro Market Share
of channel (%)
Print Directory
670
76%
539
80%
Web search
(hybrid)
110
12,5%
21
19%
19%
Internet
Yellow Pages
54
6%
52
97%
97%
Directory
Assistance
(calls)
Mobile*
46
5%
42
90%
90%
5
0,5%
4
80%
80%
885
100%
658
74%
74%
TOTAL
80%
Source: Research International (SIFO) Jan 2004, Red Measure/Gallup/Alexa Jan 2004, Doublemeasure Jan 2004
* Rough estimate on total market for 2003.
30
Today’s and tomorrow’s
product portfolio online
Today
ƒ Strong user position with high
traffic, but….
ƒ Current IYP product not
sustainable
ƒ Low pace of product launches
and level of innovation
(repacking existing services)
ƒ No leverage of technology
(assisting in search and
selection)
ƒ In many ways supplying ”a
digital telephone book + Google
search”
ƒ Offline pricing model (inclusion)
but at a lower absolute price
level
Tomorrow
ƒ Keep up with
ƒ User
ƒ Market
ƒ Competitors
ƒ Leverage use of technology –
”moving the user closer to the
transaction; search and select”
ƒ Develop more with user in mind –
”an online feel to services”
ƒ Develop price strategy based on ROI
ƒ Enhanced bundling
31
Strategy
ƒ As the leading Nordic search company Eniro’s mission
in the online channel is to connect users with relevant,
local commercial information - connecting buyers and
sellers; if there is no commercial information available,
or when the commercial information fail to be relevant,
our mission is to deliver a local result - delivering a
truly “Find It Easy” user experience.
ƒ Compared with other search services, as for example
Google, Yahoo!, or local search services as Gule Sider
or Hitta.se, Eniro´s vision is to be perceived as Best-inclass in everything we offer on our sites, hence having
the best local content, being no. 1 in attracting the users,
and no. 1 in delivering value to the advertisers.
32
Eniro.se - Integrated search engine
A new search-all-service in
the Nordic countries:
„
Yellow Pages
„
White Pages
„
Maps and directions
„
Classifieds
„
Web search
„
Image search
„
Link guides
„
Municipal and Health information
„
Local news search
“One
“One search
search site,
site, catering
catering for
for multiple
multiple needs.”
needs.”
33
It is all about channelling users
to meet our advertisers
Best of breed
- White search
- Map search
- Classifieds
- Search engine (Google)
WEB
YELLOW
PEOPLE
MAP
CLASSIFIEDS
serve as traffic generators.
The future will mean
competition, co-operation
and co-existence with
search engines, depending
on the market situation.
“Attractive
“Attractive wrapping
wrapping and
and traffic-driving
traffic-driving cross-functional
cross-functional content
content integration
integration””
34
Nordic – all search
"..Eniro
"..Eniro can
can thank
thank strong
strong digital
digital products
products for
for turning
turning negatives
negatives into
into positives.
positives. ..Eniro
..Eniro and
and
Sensis
(Australia),
have
embraced
multi-product
strategies,
including
acquiring
their
way
Sensis (Australia), have embraced multi-product strategies, including acquiring their way into
into
the
the classifieds
classifieds business
business to
to strengthen
strengthen the
the content
content assets.”
assets.” Kelsey,
Kelsey, 9/8/04
9/8/04
Source: RedSheriff + Internal analysis based on Nielsen NetRatings September 2004
35
Nordic - commercial search
"Eniro
"Eniro is
is no.
no. 11 in
in Sweden
Sweden regarding
regarding online
online revenues
revenues and
and online
online commercial
commercial search.”
search.”
Source: RedSheriff + Internal estimates based on Nielsen NetRatings. Commercial Search = 30% user sessions September 2004
36
Sweden – all search
"..Eniro
"..Eniro can
can thank
thank strong
strong digital
digital products
products for
for turning
turning negatives
negatives into
into positives.
positives. ..Eniro
..Eniro and
and
Sensis
(Australia),
have
embraced
multi-product
strategies,
including
acquiring
their
way
Sensis (Australia), have embraced multi-product strategies, including acquiring their way into
into
the
the classifieds
classifieds business
business to
to strengthen
strengthen the
the content
content assets.”
assets.” Kelsey,
Kelsey, 9/8/04
9/8/04
Source: RedSheriff + Internal analysis based on Nielsen NetRatings September 2004
37
Sweden – commercial search
"Eniro
"Eniro is
is no.
no. 11 in
in Sweden
Sweden regarding
regarding online
online revenues
revenues and
and online
online commercial
commercial search.”
search.”
Source: RedSheriff + Internal estimates based on Nielsen NetRatings. Commercial Search = 30% user sessions September 2004
38
User offering vs. competitors
Service Sweden
Eniro.se
Google.se
Web Search
Yes
Yes
Yellow Pages
Yes
White Pages
Yes
Maps
Yes
Local news
Yes
Classifieds
Yes
Image Search
Yes
Municipal Info
Yes
Multi-Channel
Yes
a
a
a
a
a
a
a
a
a
a
Hitta.se
No
No
No
No
Yes
No
Yes
No
No
No
No
Yes
a
a
a
No
No
No
No
Partly
39
Advertising offering vs.
competitors
Advertising
Product
Eniro.se
Google.se
PPC
Yes
a
Yes
Media/Sponsorship
Yes
a
No
Not yet, but is
coming
Paid Inclusion
(Listings)
Yes
a
No
No
Paid Placement
(Info Pages)
Yes
a
No
No
Multi-Channel
Yes
a
No
No
a
Hitta.se
No
“Only
“Only Eniro
Eniro can
can offer
offer aa complete
complete Portfolio
Portfolio of
of Products
Products in
in Sweden”
Sweden”
40
Key initiatives 2004/2005
Local product and service search – project “deep
yellow”
ƒ Local content is a key success factor for Eniro
ƒ More searchable yellow content
– Step up in gathering, organizing and displaying “deep yellow”
information
– New user interface
ƒ Top of mind position for users to find and compare products and
services in Sweden – Find it easy
41
Key initiatives 2004/2005
„ Sponsored Links (Pay-Per-Click)
ƒ Eniro will step up the efforts within Sponsored Links/PPC, to monetise
even further on the more than 25 million web searches on eniro.se every
month. The effort include a self-service interface for advertisers, as well
as a gradual launch in the big sales force in Sweden
„ ROI – Transparency
ƒ To broaden the advertiser base and raise the retention rate Eniro will,
during 2005, give the customers a more distinct picture of Eniro´s
complete Online and Offline product delivery and the customers ROI
42
Usage Gula Sidorna directory
Commercial Usage of Gula Sidorna Directory
700
2002
2003
2004 (Prognos)
600
538
500
400
463
454
384
407
430
300
200
156
126
101
100
80
151
84
0
User Sessions (M)
Contacts (M)
Purchases (M)
Generated Value (B SEK)
Source: Research International (SIFO), September 2004 (7.141 respondents)
43
Stockholm canvass January 2005
New product offering
Aim
Sales initiated
Improved community
information offer
Secure strategic
information
January 2005
Improved heading structure
Modernize product, vitalize
sales, increase revenues
January 2005
Improved lay-out
Increase usability and
advertiser value
January 2005
Introduce inserts and foldouts
Increase attractiveness of
product, increase revenues
January 2005
Launch life style sections
Increase attractiveness of
product, increase revenues
January 2005
Restaurant guide
Stockholm
Increase attractiveness of
product, increase revenues
January 2005
Review distribution policy
Enhance distribution and
increase visibility
December 2004
44
Exploring new products 2005
Project
Aim
Review completed
Pocket directory
Address new user situations, October 2005
increase accessibility
Re-scoping
Evaluate re-scoping
directory coverage
October 2005
45
Pricing and offerings
Project
Launch
Pricing
Review price list
Review discount strategies and policies
Clarification and simplification
First wave – January 2005
Second wave – During 2005
Value based pricing
Implementation of heading based pricing
End 2005
Industry specific offering
March 2005
High level multi-channel offering
Q3 2005
46
Finland
Pär Kempe
5 core challenges
High level description
Sweden: Accelerating decline in
Offline revenues
„
2.
Finland: Challenges position
due to market structure
„
Fonecta launched competitive directory in
Helsinki and Tampere, following ending of
joint sales organization
3.
Potential in enhanced multichannel strategy
„
Industry leader in online, but with potential
to better capitalise on opportunities and
fend off threats
Broad product portfolio to build on, no
clear total offering
1.
„
„
Drop in number of advertisers and average
spend
Limited recent focus in product development,
sales approach, product offering and pricing
4.
High cost position
„
Cost take out required - possible areas
identified, e.g., Purchasing, consultants and IT
5.
Unfocused geographical
portfolio
„
Value creation differences driven by industry
position and market conduct
48
Our business
„ Leading media provider in print and online products
„ Operates in all media channels (in 2003)
– TOTAL Revenue 78M€
ƒ Regional Directories
– Revenue 32M€ 41%
– Helsinki & Tampere
ƒ Other Revenues
–
–
–
–
–
–
New competition
situation
– Revenue 46M€ 59%
eniro.fi
Eniro Telephone Directories (31)
Kaupunki-Info (7 Local Directories)
Yritystele (B2B - #1)
Suomi24 (Portal)
Directory Assistance
„ Strong Online position – close to Top 3
ƒ
Passed >3 million Unique visitors in September (1million in 2003)
„ A nation-wide publisher of Regional Directories
49
Competition overview
„ Fonecta
ƒ
ƒ
ƒ
Portfolio:
– Regional & local directories
– Directory Assistance (020202.fi)
– Online( Fonecta Finder)
Launched competitve regional directories in Helsinki
and Tampere areas
Nation-wide offering
„ Findexa (INOA)
ƒ
Number one competitor in B2B segment
„ TDC (Blue Book)
ƒ
Portfolio: B2B directories, CD-rom and web tools
„ Online search engines
ƒ
Yahoo and Google (and others) equipped with
technology to match buyers and sellers
50
What has happened?
„ Transfer from ‘cartel’ to pure market economy
ƒ The Excemption Rights (7) that enabled the cartel market ended in Sept. 2003
ƒ Historical ‘marriage’ of complex cooperation
– Combination of ownerships across 16 regions (Eniro, Fonecta, Finnet)
– Commonly owned sales agent (SKS)
– Common distribution of directories
– Revenue split by Telcoprinciples (# of subcribers)
„ The cooperation with Fonecta ended in April 2004
„ The operational independency liberated many of the cooperative activities:
ƒ Sales activities and control incl, pricing strategies
ƒ Product development
ƒ Marketing activities
ƒ Selective cooperation and partnerships contracts
ƒ Customer management
„ Impact
ƒ Confused customers – huge interest in press
ƒ Number of court cases
– Eniro owner of the brand ”Yellow pages”
– No material impact to Eniro operations
51
What will happen now?
„
„
„
„
„
Double distribution to all households
Fierce competition in all regions
Increased # of tenders to public sector
Continous legal battles
Price discounts of 20-30%
52
Our strenghts
„ Sales organisation
ƒ 240 sales reps under ”own control”
ƒ Used to competitive environment since 1986 as a ”challenger”
„ Multi-channel offerings nation-wide
ƒ
ƒ
ƒ
ƒ
100 % of the population
Present in all channels (Incl. Portal)
Attractive advertiser scope based on natural trade areas
Continues to be the strongest B2B (Yritystele) offering in Finland
„ Owner of ”Yellow pages” brand
„ Independent in relation to partners
ƒ Pricing, distribution, marketing and product development
„ Strong Online usage position (+91%)
ƒ >3 million unique visitors
ƒ Profitable portal business
53
What are we doing?
- Building independent operations
Product
Product
positioning
positioning
„ Focus: securing customer base while re-positioning product offering
„ Refined sales concept towards strong Eniro single-brand portfolio offering
ƒ A competitive nation-wide offering with multi-channel solutions
ƒ Simplified message to market: Find-It-Easy!
54
What are we doing?
Product
Product
positioning
positioning
„ Focus: securing customer base while re-positioning product offering
„ Refined sales concept towards strong Eniro single-brand portfolio offering
ƒ A competitive nation-wide offering with multi-channel solutions
ƒ Simplified message to market: Find-It-Easy!
„ Multi-packaged offer incl. offline, online, voice and mobile components
Sales
Sales actions
actions
„ Establishing a solid customer-oriented and independent sales organization
„ Capturing the potential in the White Business A-Z
„ Marketing focused on two main areas
Marketing
Marketing
ƒ Securing and strengthening the market position in Helsinki and Tampere
ƒ Establishing a strong nation-wide product: Eniro Telephone Directory
Business
Business
Support
Support
„ Focus on content and database management
„ Operation efficiency through IT system consolidation (independency)
„ Structure under review to increase flexibility and process efficiency
Organisation
Organisation
„ Strong competence and skills development to drive customer-oriented
culture
55
Step Up Sweden
Tomas Franzén
5 core challenges
High level description
Sweden: Accelerating decline in
Offline revenues
„
2.
Finland: Challenges position
due to market structure
„
Fonecta launched competitive directory in
Helsinki and Tampere, following ending of
joint sales organization
3.
Potential in enhanced multichannel strategy
„
Industry leader in online, but with potential
to better capitalise on opportunities and
fend off threats
Broad product portfolio to build on, no
clear total offering
1.
„
„
Drop in number of advertisers and average
spend
Limited recent focus in product development,
sales approach, product offering and pricing
4.
High cost position
„
Cost take out required - possible areas
identified, e.g., Purchasing, consultants and IT
5.
Unfocused geographical
portfolio
„
Value creation differences driven by industry
position and market conduct
57
Market situation – Sweden
„ EIU (The Economist) forecasts the Swedish economy to strengthen steadily
over the next couple of years. GDP is projected to rise by 2,8% in 2004 and by
2,7% in 2005
„ Advertising market are also showing positive trends – forecast +2% for 2004
and 3,4% for 2005*
„ Internet advertising is forecasted to grow by 10% during 2004*
„ However, competition on the internet market is heating up with new entrants
such as hitta.se (Teleadress) and Google opening a Scandinavian office
„ The competition on the classified business is intensifying with Eniro’s launch
of Eniro Köp & Sälj, Bonnier’s launch of Koll.se and Schibstedt’s launch of a
print product (blocket.se)
* IRM, June 2004
58
Growing share of advertising
spend
Eniro Market Share: Total Advertising Market
1997
2000
10%
2003
11%
13%
Eniro Market Share: Internet Advertising Market
1997
15%
2000
2003
34%
51%
Source: IRM 2004 June
* Total Advertising spend = Traditional Media (TV, Radio, Newspapers, Magazine, Outdoor and Cinema) + Directories +Internet
59
Multi-channel offering in Sweden
Online Revenues
Offline Revenues
40%
60%
Gula sidorna.se
Eniro.se
Passagen.se
Bilweb.se
Emfas.com
Mobile / wap
SMS
118 118
Gula Sidorna
Din Del
Emfas
CD Rom
Book sales
”Ever present”
Total Sweden revenues LTM July 2003 – June 2004 incl Voice proforma
60
Customer base and ARPA 2002
Top 1% advertisers
Top 1% advertisers
Revenues
1%
Advanced
advertisers
18%
Medium
advertisers
39%
26%
41%
Basic
advertisers
ARPA: 346 000 SEK
1700 advertisers
ARPA: 29 200 SEK
32 800 advertisers
42%
173 200 customers
26%
ARPA: 8 200 SEK
73 200 advertisers
7%
ARPA: 2 300 SEK
65 400 advertisers
Revenues 2’313 Mkr
61
Customer base and ARPA
Stock
2002
Change
Stock
2003
34 590 #
-8,9%
31 508 #
1’563,3 Mkr
-2,3%
1’527,5 Mkr
45 195 kr
7,3%
48 479 kr
ADVANCED
ADVANCED
73 181 #
-12,5%
64 066 #
599,6 Mkr
-9,6%
541,8 Mkr
8 194 kr
3,2%
8 457 kr
MEDIUM
MEDIUM
65 448 #
7,3%
70 208 #
150,9 Mkr
7,1%
161,6 Mkr
2 306 kr
-0,2%
2 302 kr
BASIC
173 219 #
2 313,8 Mkr
13 358 kr
Effects of publication shifts
+39,1 Mkr
BASIC
-4,3%
-3,6%
0,7%
165 782 #
2 230,9 Mkr
13 457 kr
Effects of publication shifts
+66,4 Mkr
62
Opportunity to strengthen
performance
Product development/
management
Sales
approach/pricing
Operations
Eniro position relative to peers
„ Viewed as leading in Online
„ Limited integration between
development of Online and Offline
„ Low product development for print
„ Need to better understand user
behaviour in all channels
63
Opportunity to strengthen
performance
Product development/
management
Sales
approach/pricing
Operations
Areas of improvement
Actions
„ Customer focus vs. product
focus
„ Increase customer penetration
„ Segmented sales and offerings
„ Customer interface process
„ ROI-tools
„ New incentive system
ƒ More performance based salary
ƒ Quality improving
„ New customer focus
ƒ Customer visits
ƒ Segmentation
ƒ Strict control
„ Differentiated sales approach incl.
differentiated offerings
„ Improvement in customer interface
ƒ Confirmation of order at customer site
„ Strengthening of industry/customer
knowledge
„ Development of and education on
new ROI-tools
64
Opportunity to strengthen
performance
Product development/
management
Sales
approach/pricing
Operations
Areas of improvement
Actions
„ Unclear pricing strategy/vision
„ Not full pricing compliance, e.g.
discounts
„ Pricing not based on transparent
value proposition
„ Integrated pricing strategy, e.g.
ƒ Customer and competitive analysis
ƒ Integrated Online/Offline view
„ Value based pricing
ƒ Usage
ƒ Heading
ƒ Article
„ Strict discount policy
65
Operations
Ingrid Engström
Current situation from an
operational point of view
Customers
„ Not satisfied with internal coordination between different
departments
„ Not satisfied with complaint handling
„ High demand for internet based updating and communication
„ Not satisfied with billing information
67
Fullfilment process - ”as-is”
Fulfilment 2
Fulfilment 1
2-5 days
250 000
orders
Order entry
Order
confirmation
10%
Of orders are
not processable
Ad
production
40%
of confirmations returns
to customer service
Distribution
40%
of ads returns for correction
(10% of total orders)
68
…..getting better during 2005
Fullfilment 1
Fullfilment 2
0-2 days
250 000
orders
Order
entry
Order
confirmation
5%
Ad
production
20%
Distribution
20% (5%)
Customer Portal introduced
69
….aiming for perfection during 2006
POS
250 000
Fullfilment 1
Order
Order
entry confirmation Ad prod.
Fullfilment 2
Production
Automation
Distribution
Multi channel access
70
Din Del break out
„ Decision taken in April 2004 to operate the local directory Din
Del (178 editions) at arm length´s distance
ƒ Independent sales-force
ƒ Stand-alone organization
ƒ Din Del branding
„ Achieving focus on revitalizing declining local Offline
business (1991 – 370 msek → 2004 – 200 msek)
„ Strengthening the flank protection towards the main
competitor Lokaldelen (TDC Förlag) and go for a head-to-head
competition
71
Negative growth Offline Sweden
SEK millions
2,7403
2,3523
Online
Voice
383
1,969
Offline
442*
458
2,8413
632
Offline
Organic (like for like)
Offline revenues down
11% in H1 2004 vs H1
2003
488
Sales decline in H2
2004 at same pace
Target: Reduce fall in
revenue to halfening in
2005 and flat in 2006
1,840
1,721
Online (excl. voice)
Sales is to continue to
increase above 10%
2002
2003
2003-04
July-June
* Consolidated from May 1, 2003
72
Understanding Eniro
Mats Lönnqvist, acting CFO
Understanding Eniro’s financial
performance
Key areas
ƒ Sales cycle and Revenue recognition
ƒ Seasonality and Publishing dates
ƒ Cost structure
ƒ Cash flow
ƒ IFRS – implications
ƒ Capital Structure considerations
74
Operating revenue per region
2002
Other
2%
4%
2003/04 (LTM)
Eastern
Europe
Eastern
Europe
3%
14%
18%
Central
Europe
Central
Europe
52%
58%
Sweden
25%
Sweden
Nordic
24%
Nordic
4.597 MSEK
4.948 MSEK
75
Revenue Online and Offline
2002
2003/04 (LTM)
Online
24%
1 110 MSEK
Online
41%
Offline
2 031
MSEK
59%
Offline
2 917 MSEK
76%
3 487 MSEK
76
Sales cycle
Offline
„ Day 1- x
„ Day 1
„ Day 15
Canvass starts
Order confirmation
ƒ Small Customers (AOV < 3,5 KSEK), invoiced full amount
ƒ Large Customers invoiced with part up-front payment
„ Day 50
„ Day 150
„ Day 185
Initial Payment received from
customer (average ~25% of Total Offline Revenue)
Distribution of Directory
Final Invoice to Customers
Revenue recognized in P/L
Final Payment received from Customer
„ Lead time between order intake and distribution 3-11 months,
5-6 months average
77
Sales cycle
Online (Swedish example)
„ Day 1
Order confirmation (12 month contract)
„ Day 5
Publication of Data on Internet
Invoice to Customer (full amount)
Revenue recognition in P/L starts (1/12 per month)
„ Day 40
Payment from Customer (full invoiced amount)
78
Revenue recognition
„ Matching principle – no change
ƒ Revenue and Direct Cost recognized simultaneously
„ Offline – no change
ƒ Revenue and Direct Cost recognized at distribution
ƒ Direct Cost capitalized as WIP until recognized
„ Online – new principle 2004
ƒ Revenue and Direct Cost recognized over the duration of the customer
contract (normally 12 months)
ƒ Direct cost capitalized as WIP until recognized (month by month)
ƒ Received customer payments capitalized as prepaid revenues until
recognized (month by month)
79
Online revenue recognition
Illustrative example
Before Year 1
New sales every month 100
MSEK
New Sales
Growth
Revenue in
P&L
January
110.0
+10%
100.8
+1%
February
121.0
+21%
102.6
+3%
March
133.1
+33%
105.3
+5%
April
146.4
+46%
109.2
+9%
January - April
510.5
+28%
417.9
+4%
Year 1
Growth
80
Seasonality in Eniro
„ Offline
ƒ Publication of printed directories weighted towards Q2 and Q4
ƒ Changed publishing dates have to be taken into consideration
when comparing between years
„ Online
ƒ No apparent seasonality in sales to new customers
ƒ Renewals (and “up sales” on existing customers) tend to affect
revenue more during the second half of the year
81
Seasonality
Revenues and EBITDA for last 10 quarters
(MSEK)
Q1/02
Q2/02
Q3/02
Q4/02
Q1/03
Q2/03
Q3/03
Q4/03
Q1/04
Q2/04
Revenues
711
1322
647
1917
751
1300
898
1859
867
1324
% of
annual
revenues
15%
29%
14%
42%
15%
27%
19%
39%
18%*
27%*
EBITDA
113
314
65
321
204
388
188
512
199
404
% of
annual
EBITDA
14%
39%
8%
39%
16%
30%
15%
39%
15%*
31%*
* Calculated on LTM
82
Costs per function
2003/04 (LTM)
3%
Production costs
11%
Sales costs
8%
41%
Marketing costs
Administration costs
37%
Product Development
costs
Total Cost 3.705 MSEK
83
Production costs
2003/04 (LTM)
29%
38%
Salaries
Paper
Printing
Distribution
10%
7%
Other
16%
84
Cost per geography
2003/04 (LTM)
5%
9%
Sweden
Finland
7%
Denmark
5%
49%
Norway
Poland
11%
Germany
East
14%
Total Cost 3.705 MSEK
85
Very strong cash flow
„ Strong and predictable EBITDA-margin
„ Low Capex
ƒ in line with Depreciation
ƒ ~2% x Revenue
„ Negative Working Capital!
ƒ Impact from new accounting principle for Online revenue
„ Strong Customer relations
„ Well known and stable customer base
„ 10 – 20% of total payment before publication of book
„ High customer renewal rates
86
Free cash flow
2003
Q1
Q2
Q3
204
388
Free Cash Flow by Q
Free Cash Flow by LTM
195
437
FCF per Share by Q, SEK
FCF per Share by LTM, SEK
1,16
2,48
176,2
176,2
Eniro Group, MSEK
EBITDA
Average No of Shares
Q4
2004
Q1
Q2
188
512
199
404
275
406
412
1313
153
1271
1246
1,57
2,42
7,84
0,91
7,59
2,46
7,44
174,8
167,4
167,4
167,4
FCF excl Acquisitions and
Dividends
87
Eniro and IFRS
Impact of IFRS/IAS well analysed and Eniro’s IFRS-project is
proceeding as planned
„ 10 IFRS/IAS-standards with relevance to Eniro identified
„ Only two IFRS/IAS-standards with significant impact on P&L
ƒ IAS 36 Impairment of Assets
ƒ IAS 38 Intangible Assets
Both give positive P&L-effects!
88
IFRS / IAS - standards of potential
influence and relevance
IAS 36 Impairment of Assets
„ Goodwill to be allocated to cash generating units (at least
primary reporting segment)
¾ Already done in Eniro
„ No amortization of Goodwill
¾ Annual run rate 2004 340 MSEK
„ Intangible assets with indefinite useful life shall be tested for
impairment annually
¾ GW impairment test already made quarterly; (write down 304 MSEK at 200312-31)
89
Goodwill
Goodwill
(MSEK)
2004-06-30
2003-12-31
1 004
974
Sweden Voice
820
841
Finland
984
977
Poland
680
676
Denmark
230
269
Germany (WLW)
947
972
Norway
16
17
-
-
4 681
4 726
Sweden excluding Voice
East
Total
90
IFRS / IAS - standards of potential
influence and relevance
IAS 38 Intangible Assets
„ Development expenses
¾ Eniro’s present practice is conservative
¾ Non-recurring expenses during Q3 - Q4, 2004 of around 35 MSEK anticipated
to meet the criterion to be recognized as intangible assets (half of 70 MSEK
effect to develop Swedish white information database)
91
Capital structure considerations
New Strategy
™ Nordic Focus
™ Cost Containment
Less Operational Risk
™
Healthy Margins & Cash Flow
™ Predictability!!
Higher Leverage Possible
(as in many other companies of our industry)
92
Capital structure considerations
BUT – There are Restrictions!
ƒ BANK COVENANTS
– Net Debt/EBITDA
– Interest Cover Ratio
– Net Debt/Equity
< 3.5
> 4.5
< 1.75
ƒ AVAILABLE FREE EQUITY
– Parent Company Balance Sheet
– Consolidated Group Balance Sheet
93
Capital structure considerations
Position June 30, 2004
ƒ Net Debt/EBITDA
ƒ Interest Cover Ratio
ƒ Net Debt/Equity
1.7
10.4
0.98
Net Debt
2.273 MSEK
Group Equity
thereof RESTRICTED
FREE
2.314 MSEK
2.019 MSEK
295 MSEK
94
Capital structure considerations
What’s Happening?
„ Net debt/equity – relation
• Main banks have waived or is in the process to waive the present
covenant (1.75 times)
• Already today Eniro has committed credit lines > 3.000 MSEK not subject
to net debt/equity – covenant of 1.75
„ How to increase Group Free Equity
•
•
•
•
Net Income!!
Approx 380 MSEK will be reclassified from restricted to free equity
Reclassification makes utilization of share buy back-mandate possible
Is there a viable “Big Bang”-solution to increase free equity and leverage
in one transaction?
„ New Swedish Companies Act expected 2006 or 2007
95
Capital structure considerations
Many ideas for a ”Big Bang”-transaction have been tested. None
of them has been deemed viable.
„ Public to Public
A new company is created with the sole purpose of launching a public bid
on Eniro for shares and cash. Eniro shareholders become shareholder of
Newco. Newco gets listed on the stock exchange.
„ Merger
A new company is created to re-capitalize Eniro. Eniro and Newco merge
and the merger consideration consists of shares in the surviving
company and cash. The surviving entity gets listed on the stock
exchange.
„ Dividend
A major part of the Eniro group is dividended out to the Eniro shareholders
and listed separately on the stock exchange. Eniro then launches a cash
bid and buys back the separated entities.
96
Wrap Up
Tomas Franzén
Positioning statement 3 - 5 years
„ Eniro is the leading search company on the Nordic media
market
„ For active users, Eniro makes it easy to find people,
businesses and products
„ Eniro provides deep, local, quality assured information,
ever present in channels preferred by the users – and thereby
moves users closer to transaction
98