Orkla Media

Orkla Media’s business concept is to focus on advertising media with strong, long-term market positions. Investments are concentrated on areas in which the Group can achieve synergy gains by coordinating resources and competence.

Orkla Media operates in the newspaper, magazine and direct marketing sectors. The Group has activities in Norway, Sweden, Denmark, Poland, Lithuania and Ukraine. The newspaper business in Norway comprises local newspapers with number one positions, which have a aggregate market share of 15 % of national circulation. The Berlingske Group is the largest player on the Danish newspaper market with a 32 % share of the daily market and a 42 % share of the Sunday market. Orkla is a leading player on the Polish newspaper market with a market share of 22.6 %. Through its 50 % interest in Hjemmet Mortensen, Orkla Media is market leader (54 %) on the Norwegian magazine market and fourth largest on the Swedish market. Orkla Media is also a major player in the direct marketing sector with operations in Norway and Sweden. As of 31 December 2003 the Group’s workforce totalled 6,410 man-years.

As reflected in the “publishing principles” adopted by Orkla Media, the Group is committed to defending freedom of expression, freedom of the press, freedom of information and fundamental democratic values. Based on these principles, Orkla Media will respect the identity and local tradition of individual publications and, regardless of the publication’s basic ideology, will defend and support its freedom and autonomy.

Orkla’s newspaper business in Poland, and particularly in Denmark, has faced strongly declining advertising markets in the past three years. Substantial cost cuts have been made to counter the effects of the decline, and the Group has concentrated on further developing its newspaper products. Although there now are signs that the fall in advertising is flattening out, improvement activities will continue with great vigour.

Results

Operating revenues totalled NOK 7,378 million in 2003, equivalent to underlying¹⁾ growth on a par with 2002. Operating profit before goodwill amortisation amounted to NOK 242 million, compared with NOK 148 million in 2002. This was a rise of 64 %. All business areas reported profit growth compared with 2002. Advertising revenues in Denmark continued to fall, though less than before. The downward trend in circulation figures continued in Poland.

Operational and cost improvements helped generate profit growth in 2003. Orkla Media, A-pressen and Norges Handels- og Sjøfartstidende formed a joint company, in which shares are equally distributed between the three players, to improve their clout on the market for sales of content and monitoring services. Furthermore, Orkla Media, A-pressen and Aftenposten have joined forces to establish Mediapost AS. The new company will market and provide distribution services for media products, thereby ensuring the rapid, reliable distribution of newspapers, magazines and books at competitive rates. Zett, the new digital classified advertising service established by Orkla Media’s Norwegian newspaper business and A-pressen, is currently being rolled out. All relevant newspapers will be linked to the service in the first quarter of 2004.

Berlingske

Operating revenues totalled NOK 3,359 million in 2003, equivalent to an underlying¹⁾ decline of 2 % compared with 2002. Despite the fall in advertising revenues, Berlingske achieved profit growth as a result of cost-cutting measures, lower paper prices and the positive performance of the free newspaper Urban. Advertising revenues dropped 5 % in 2003, while the total market fell by 6 %. The Group’s newspapers experienced a decline of around 6 % in weekday circulation figures and around 8 % in Sunday figures. This was 2 percentage points weaker than the total market decline. Ambitions and goals for the business in Denmark remain unchanged, but in view of the continuing uncertainty as regards future market and profit growth, the Group has adopted a conservative approach and as of 31 December 2003 wrote down book goodwill by NOK 712 million to zero.

Advertising revenues continued to fall, although less than before. Berlingske Tidende is encountering aggressive competition in the housing advertisement market, and there is considerable pressure on prices. The “Closer to our Readers” project that has now been completed at Berlingske aimed at increasing the paper’s readership and circulation figures. The newspaper’s target group has been redefined. In connection with this project, Berlingske Tidende made a number of editorial changes, including publishing several sections in tabloid format. Feedback from advertisers and readers has been favourable so far. B.T. also decided to carry out a major restructuring process that will result in substantial cost savings. Circulation figures were lower than in 2002, but readership figures for Urban continued to increase. In the course of 2004, Berlingske expects to start using the new printing plant established in partnership with its competitor Politiken.

Newspapers Norway

Operating revenues totalled NOK 1,972 million, equivalent to underlying¹⁾ growth of
3 %. Operating profit before goodwill amortisation increased substantially compared with 2002 due to revenue growth, lower paper prices and the effects of cost-cutting activities.

Advertising volumes for Orkla Media’s Norwegian daily newspapers rose 3 %, which was one percentage point higher than total market growth. Circulation figures for Orkla Media’s 31 newspapers in Norway were on a par with 2002, but were better than overall market performance.

Several of the Group’s newspapers switched to tabloid format in 2003. So far, the response of advertisers and readers has been positive, but it is still too early to draw any final conclusions. Work has begun on implementing new joint systems (advertising, editorial and photo/archive) for all the Norwegian newspapers.

Newspapers Eastern Europe

The newspaper business in Eastern Europe reported operating revenues of NOK 779 million in 2003. In terms of underlying¹⁾ growth, this was on a par with 2002. While advertising revenues declined slightly from 2002, they were better than total market revenues. Operating profit before goodwill amortisation increased as a result of positive effects of cost-cutting measures and lower paper prices. The Orkla Media Group’s newspapers in Poland had a 16 % share of the advertising market. While circulation figures were still negative, they were better than total market figures.

Orkla Press’ newspaper operations in Lower Silesia, Poland, were sold for NOK 83 million. The sale resulted in a gain of NOK 53 million, equivalent to a 12 % annual return on invested capital. The newspapers that were sold accounted for 7 % of operating revenues from the business in Poland, but due to their weaker market position their circulation growth and financial performance were weaker than the company’s other Polish newspaper companies.

Work has begun on implementing a joint editorial system for all of the Group’s newspapers in Poland. Activities have been established to increase revenues, such as the sale of classified advertisements through SMS services and paid digital services for the sale of archive material. As a result of the sale of the newspaper company in Lower Silesia, Orkla Media’s newspapers are now second largest in terms of circulation in Poland, accounting for 22.6 % of the circulation market at the end of 2003.

Magazines

The Magazines business reported operating revenues of NOK 768 million in 2003, equivalent to underlying¹⁾ growth of 2 %. Operating profit before goodwill amortisation improved satisfactorily due to a rise in magazine and advertising sales and cost savings.

Hjemmet Mortensen increased its advertising volume by 13 %, while the total market rose 8 %. Its market share, measured in terms of volume, was around 46 %, an improvement compared with 2002.

Hjemmet Mortensen achieved over 3 % growth in circulation, which was on a par with total market growth. The upward trend in circulation figures for the weekly TV/celebrity magazine Her og Nå reported in 2002 continued. A new celebrity magazine, “C!”, which is published on a monthly basis, was launched at the end of 2003. The Norwegian Automobile Association (NAF) and the Hjemmet Mortensen company HM Nordic AS are working on plans to establish a new jointly owned company to publish NAF’s membership magazine, Motor.

Direct Marketing

Operating revenues for Direct Marketing totalled NOK 505 million in 2003, which was an underlying¹⁾ decline of 3 %, primarily due to a weak IT market. Operating profit before goodwill amortisation was on a par with 2002, largely due to the effect of cost-saving measures. In early 2003 the Swedish business purchased Unimedia AB, thereby strengthening its market position.

¹⁾ Excluding acquisitions and divestments and currency translation effects.

Focus in 2004

Continue to implement operational and cost improvements
Initiate measures to increase revenues
Achieve growth through value-creating expansion of core business activities

Fredriksstad Blad is constantly winning awards. In 2002 it was elected Newspaper of the Year by the Norwegian Media Businesses’ Association. In 2003 it continued its success by being voted Company of the Year by the Fredrikstad Chamber of Commerce.

Romsdals Budstikke celebrated its 160th anniversary in 2003 and is one of the oldest newspapers in Norway.

Local newspapers have a strong position in Denmark. Nine out of ten Danes read a local paper.

The Warsaw-based national daily Rzeczpospolita is one of the biggest newspapers in Poland.

Bonytt (Home News) and Hytteliv (Cabin Life) are two highly successful special interest magazines that give Norwegian readers plenty of ideas, inspiration, practical advice and information.

Celebrity articles sell well. Her og Nå is continuing its success and strengthened its position on the Norwegian magazine market in 2003, selling almost 200,000 copies a week.

Annual Report 2003