2003 2002 2001
Sales, SEK m 768.7 724.6 718.9
Operating profit, SEK m 21.3 12.2 35.1
Market value, SEK m 553 429 518
Share price, SEK 94.00 73.00 88.00
Dividend per share, SEK 4.00* 4.00 4.00 Earnings per share, SEK 3.12 1.96 7.41
* Proposed by the Board of Directors
Price trends compared with the O-list index BRIEF FINANCIAL SUMMARY 2003
• Operating profit amounted to SEK 21.3 million (12.2)
• Net total sales increased by 5.5 percent to SEK 753.2 million (713.7)
• Cash flow from current operations was SEK 92.7 (38.1)
• Earnings per share amounted to SEK 3.12 (1.96)
• Investment in new printing works was completed when new press was started up
• Total circulation increased by 200 copies to 119,200
• Decision taken regarding new format and change of name for Vestmanlands Läns Tidning
• Results for 2004 are expected to be better than 2003
• The Board of Directors proposes a dividend of SEK 4.00 (4.00)
Operating profit (SEK m)
120
1999 2000 2001 2002 2003
* Including exceptional items for SEK 40.5 million
1999 2000 2001 2002 2003
732 719 769
1999 2000 2001 2002 2003
33.2 12.6 5.43.3
19.8
Earnings per share Earnings per share 2003 Dividend per share
(2003 = proposal of the Board of Directors)
* Excluding exceptional items
1999 2000 2001 2002 2003
11.69* 7.41
8.25 1.96 3.12
V L T ’ S T H R E E B U S I N E S S A R E A S • V L T A B 2 0 0 3
• One of Sweden’s primary cold set printing works
• Investments of SEK 320 million carried out in buildings, two presses and a packaging area
• Received several prestige orders in 2002 and 2003, including parts of Aftonbladet and Stockholm City
• Leanback Sweden develops and sells tools for digital communication
• Leanback Media System provides and operates advertisement server systems for interactive advertising
• Bra Radio operates Rix FM in Västmanland
• TVCheck registers and quality controls television advertising and newspaper advertisements
N E W S P A P E R S
P R I N T I N G W O R K S
E L E C T R O N I C M E D I A
VLT AB is composed of three business areas:
Newspapers, Printing Works and Electronic Media.
• Eight leading local newspapers
• Total circulation approximately 120,000
• Holdings in Nerikes Allehanda (17 %), Hallandsposten (10 %) and TT (4.5 %)
• Participates in advertising packages
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Sales and profit/loss (SEK m) Share of total turnover (%)
Share of total turnover (%)
Share of total turnover (%)
80 60 40 20 540
530 520 510 500 490 480
2000 2001 2002 2003
Sales and profit/loss (SEK m)
30 20 10 0 -10 200
190 180 170 160 150
Sales and profit/loss (SEK m)
40 30 20 10 0 -10
2000 2001 2002 2003 2000 2001 2002 2003
69.5 %
26.1 %
4.1 %
L E T T E R F R O M T H E C E O • V L T A B 2 0 0 3
VLT increased its total sales by 5.5 percent to SEK 753 million in 2003. The largest increase in revenue was achieved by Printing operations, although Newspapers and our Electronic Media have also reported rising revenues. Results for 2003 were better than last year, but just as in the entire media sector, VLT still has a long way to go before reporting results similar to those of the absol-ute top year of 2000. The consolidated operating profit for the Group was SEK 21 million, and cash flow from current operations amounted to SEK 93 million.
The sector
Advertising investments within traditional media stabilised in 2003 after two years of negative trends. Despite this situation, developments were slightly weaker than forecast at the begin-ning of 2003, and the overall increase in advertising investments was a very modest 0.2 percent. According to the Swedish Insti-tute for Advertising & Media Statistics – IRM, advertising invest-ments are estimated to amount to SEK 15.1 billion in 20041)which would imply growth of approximately 2 percent. All media groups apart from newspapers in major cities are expected to report in-creased advertising income in 2004.
I continue to be convinced that it would be beneficial to VLT and the sector if we succeeded in creating larger local media companies. Larger companies would have better long-term pre-requisites to produce high-quality local newspapers at a reason-able cost. The pressure for change will not decline in the future, simultaneously as the locked ownership situation currently ren-ders business more difficult. VLT’s strong solvency and business model should be attractive qualities for companies looking for a partner in the future.
Our three business areas
We have improved the operating profit within the Newspapers business area by 23 percent to SEK 40 million. Our eight news-papers developed relatively well during the year, although the advertising market was characterised in particular by a continued decline in job advertisements. The Mälardalen region continues to strengthen its position as an interesting neighbouring alterna-tive to the Stockholm area.
Our circulation increased in 2003 and totalled 119,200 copies at the end of the year, representing an increase of 200 copies.
Higher subscription prices combined with rising circulation led to circulation revenue increasing by 5.8 percent to SEK 173 million.
Within the Printing Works business area, VLT Press has completed the considerable investment started in 2001. The second new press was successfully installed in the spring of 2003, and has been in full commercial operation for some time now. I would like to take this opportunity of thanking all employees within VLT Press for their extraordinary work and efforts in conjunction with this investment that is so important for the entire VLT Group. The completion of the investment will enable the Group’s total cash flow to significantly improve, and investments will now return to more normal levels.
Because VLT Press now has one of Sweden’s leading printing presses within its niche, along with considerably greater capacity, it is important that we take market shares and once again increase capacity utilisation. Since
Jan-uary 2003, VLT Press prints parts of Aftonbladet’s circul-ation in Mälardalen and central Sweden, and since fall 2003, half of the circulation of the Stockholm City newspaper. The circulation of Stockholm City is currently between 230,000 and 250,000 copies. Further-more, VLT Press has signed a contract for the printing of about one third of Metro Hus&Hem.
The contract is multiyear and covers about 300,000 copies a week of Metro Hus&Hem.
The operating profit of the Printing business area was SEK 6 million, including a capital gain of SEK 8 million pertaining to the sale of one of the replaced printing presses. All in all, margins have been under pressure due to the decrease in number of pages in most of the titles that VLT Press prints. The fall in number of pages, which was a consequence of the level of the adver-tising market, affected margins negatively because in practice payment is made per printed page. VLT Press increased revenues by 15 percent during the year to SEK 201 million. Including these new assignments, VLT Press is well-equipped for an improved economic climate from both capacity and quality aspects.
The operating loss of the Electronic Media business area amounted to SEK -9.6 million. Increased competition from abroad resulted in pressure on prices for Leanback Media System. Despite this situation, both Leanback Sweden and Leanback Media System were able to report positive cash flows in certain months of the fourth quarter 2003.
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1) IRM Forecast 2004
Lennart Foss, CEO and Group President
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L E T T E R F R O M T H E C E O • V L T A B 2 0 0 3
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In the long-term, all units within VLT shall contribute to the Group’s financial results. Despite this policy, Electronic Media has shown negative results for several years. This is of course unacceptable, but I would like to draw a parallel with research and development.
The Internet continues to change people ’s behaviour and increa-ses its share of the advertising market. Many of today’s most successful Internet sites are owned and operated by media com-panies, and an increasing number of people want to be able to read the news via the Internet. In view of that VLT’s business con-cept is to package and mediate interesting information to our rea-ders, we will continue in the long-term to develop and learn within this area.
The VLT share
Earnings per share for 2003 amounted to SEK 3.12 and cash flow from current operations per share was SEK 15.76. At the same time, the VLT share increased in value by 29 percent to SEK 94.
If one adds the proposed dividend of SEK 4 to this rise in share price, shareholders received a total return of 34 percent on their investment in VLT AB. The O-list of the Stockholm Stock Exchange, which we use as a comparative index, increased in value by 27 percent in 2003, after several years of negative trends.
At the end of the year, the share price in relation to equity per share was 163 percent, and the share price in relation to total sales per share was 0.72 (P/S).
The Board of Directors of VLT AB proposes that the dividend for 2003 be a total of SEK 23.5 million, representing SEK 4 (4) per share. The proposed dividend represents 128 percent of the year’s earnings per share, and a direct return of 4.1 percent in relation to the share price as per 15 March 2004. I believe that a good direct return continues to be important for the valuation of our share, given VLT’s limited potential for sustainable and substantial organic growth. VLT’s market value was SEK 553 million at the end of the year.
The weak liquidity of the VLT share has been an obstacle for several years for a correct valuation of the share. We therefore entered into a liquidity provider agreement with Handelsbanken, whereby Handelsbanken becomes our liquidity provider (LP). The agreement implies that the bank, under certain preconditions, undertakes to quote both purchase and sell prices of the VLT share.
Further to the beginning of the year, we have noted that the spread of the share, that is to say the gap between the purchase and sell price, has decreased to approximately 2 percent.
Forthcoming changes in financial reporting
Work with the implementation of the new International Financial Reporting Standards (IFRS) will be commenced in 2004. The new regulations must be implemented in 2005 and will place increased demands on our accounting function. A positive side from a stock market perspective is that unlisted shares that VLT AB holds shall no longer be reported at their historical acquisition value, but at their real value. What real value implies is a complicated ques-tion, but I am able to indicate that VLT’s shareholdings of 17 percent in Liberala Tidningar (Nerikes Allehanda), 10 percent in Hallandsposten, and 4.5 percent in TT have a book value of approximately SEK 11 million. I believe that the real value of these shareholdings is currently significantly higher. In 2005, these assets will be more visible in our share-related key ratios and figures, including most probably an increase in equity per share.
Expectations for 2004
I believe that the economic prerequisites for 2004 are relatively stable. Moderate economic growth, combined with a slightly positive advertising market, imply that we must have realistic expectations for 2004. The Group will therefore continue to focus on cost control and revenue-stimulating investments and measures. We anticipate that results for 2004 will be better than those of the previous year.
Lennart Foss
CEO and Group President
A C T I V I T I E S , B U S I N E S S C O N C E P T , O B J E C T I V E S A N D S T R A T E G Y • V L T A B 2 0 0 3
The VLT AB Group comprises:
Newspapers Electronic Media Printing Works
Vestmanlands Läns Tidning Leanback Sweden VLT Press
Trollhättans Tidning Leanback Media System Västsvenskt Tidningstryckeri (10 %)
Elfsborgs Läns Allehanda Bra Radio
Arboga Tidning TVCheck
Bärgslagsbladet RadioHästen (30 %)
Sala Allehanda Fagersta-Posten Avesta Tidning
Prolog Tidningsdistribution och Logistik Direct advertising distribution Nerikes Allehanda (17 %) Hallandsposten (10 %)
Västsvensk Tidningsdistribution (12.5 %) TT (4.5 %)
CityGate (9 %)
Business concept
VLT shall be active within the media sector with a focus on the local newspaper industry, printing operations and electronic media.
Objective
Our objective is to create long-term value for shareholders by building up an expanding, coherent and cost-effective media group.
VLT strives to attain a position as local market leader in order to make economies of scale and attain price leadership in media services.
Strategy
VLT shall fulfil its overall objec-tive of creating value through organic growth supplemented by synergy-creating acquisitions and alliances. It shall also focus on increasing the efficiency of existing operations and creating an adequate financial structure.
This strategy demands a long-term balance between invest-ment, cost-efficiency, acquisit-ions and capital rationalisation.
Our overall objective is to create long-term value for shareholders by building up an expanding, coherent and cost-effective media group.
The Group embraces newspaper publications in eight local areas, distribution, printing works, activities within the Internet and radio sectors, as well as registration and quality control of television advertising and newspaper advertisements.
Business activities
The Newspaper business area includes Vestmanlands Läns Tid-ning in Västerås, Bärgslagsbladet in Köping, Arboga TidTid-ning, Sala Allehanda, Fagersta-Posten, Avesta Tidning, Trollhättans Tidning, Elfsborgs Läns Allehanda i Vänersborg, newspaper distribution and the delivery of direct advertising, as well as a shareholding in the Internet developer CityGate (9 %).
Printing operations comprise VLT Press in Västerås. Up until 2002, Trollhättans Tryckeri was also part of this business area, but now belongs to Västsvenskt Tidningstryckeri AB (VTAB) in which VLT has a 10 percent shareholding.
Electronic Media is composed of the Internet companies Leanback Sweden and Leanback Media System, which develop and sell tools for digital communication, hosting, as well as pro-viding and operating advertising server systems for interactive advertising in the Nordic market, TVCheck, which registers and controls quality of television advertising and newspaper adver-tisements, Bra Radio, which operates the Rix FM radio station in Västmanland, and RadioHästen (30 %), which operates radio stations in Dalarna within the Mix Megapol network.
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T H E V L T S H A R E • V L T A B 2 0 0 3
VLT’s focus on creating a good total return on investment for its shareholders, combined with the Company’s strong solvency, implies that the Board of Directors is able to propose a dividend that exceeds the year’s profit.
Financial goals and performance
From a stock market perspective, VLT’s paramount objective is to create good long-term total return on investment for its share-holders. Total return means the product of average annual growth in the share price and direct return in the form of divi-dends to the shareholders. In order to create the prerequisites to achieve good total return on investment for shareholders, a number of financial sub-goals have been established:
Return on equity 15–25 percent – Return on equity for 2003 amounted to 5.4 per-cent (3.3). The average return has been 7.1 percent for the last three years, which is lower than the established goal. Con-tinued measures to improve profitability and to reduce costs along with further growth will therefore be taken.
Solvency 30–40 percent – The VLT Group’s solvency was 52.9 percent (56.3) at the end of 2003, and an average of 56 percent over the last three years. This implies that VLT has bound more equity than motivated by the prevailing risk level in business operations. The high level of solvency means that return on equity is relatively poorer than the established goal. One way of influencing solvency downwards and to simultaneously increase the total return for VLT’s shareholders is that dividends exceed earnings per share. The Board of Directors of VLT therefore pro-poses a dividend for 2003 of SEK 4 per share, representing 128 percent of the profit per share.
Faster growth than GNP increase – Revenue increased in 2003 by 5.5 percent (0.4), with an average of 1.4 percent for the last three years. The origins of the Group and indeed its con-tinued central focus are to be found within traditional media with long-term growth in line with total growth of the nation, GNP.
The objective is therefore that existing operations shall grow or-ganically more rapidly than GNP over the period of an economic cycle. With an increase of GNP in 2003 of 1.6 percent, VLT’s increase in revenue exceeded the long-term goal. VLT’s dence on the advertising climate, which in turn is strongly depen-dent on the general economic climate, implies good prerequisites for revenue growth to continue to exceed GNP when the economic climate improves.
Growth through acquisitions – A value-creating acquisition strategy is an important supplement to the organic growth goals.
No companies were acquired in 2003. At the same time as there are many structural measures being taken within both the newspaper and printing areas that are sound from a company perspective, the locked ownership situation currently renders business more difficult. VLT intends to play an active role in the restructuring of Swedish media when the occasion arises.
The VLT share during the year
VLT’s B-share is listed on the O-list of the Stockholm Stock Exchange with the abbreviation VLT B. During 2003, the price of the B-share increased by SEK 21 from SEK 73 to a closing price for the year of SEK 94, representing a rise of 29 percent. Relevant comparisons are the OM Stockholm Stock Exchange’s All Share Index (SAX) and the O-list, where VLT is to be found, which during the same period rose by 30 percent and 27 percent respectively2). As in 2002, the stock exchange witnessed a number of cor-porate scandals in 2003, at the same time as share prices of many companies rose after a couple of negative years. The in-crease in price of the VLT share led to the Company’s market value increasing during the year from SEK 429 million to SEK 553 million.
The dividend for 2003 amounts to SEK 4 (4), representing a direct return for the Company’s shareholders of approximately 5.5 percent. Including the rise in share price, the total return for the year is 34 percent. On 15 March 2004, the price of the VLT share was SEK 97, representing a rise of 3 percent compared with the share-price at the end of the year.
Dividends and policy
The Board of Directors is of the opinion that the payment of divi-dends in the long-term should follow the Company’s profit and equity trends, assuming that there be an adequate financial structure, and that the Company will not require further capital for value-creating investments. The surplus solvency now apparent in the balance sheet will be used for expansion and/or capital transfers to shareholders. It is proposed that the dividend for the year be SEK 4, which is the same as for 2002. The proposed divi-dend exceeds earnings per share for the year and represents 7 percent of equity per share at the end of the year.
Shareholders
The total number of shareholders at the end of 2003 amounted to 1,088 (1,092). Institutional shareholders represent about 26 percent (29) of the total capital in VLT, while the remaining 74 percent are private holders. The proportion of capital controlled by non-Swedish investors was about 17 percent (19) at the end of the 2003.
Financial goals and performance
Goal 2003 2002 2001 Three years*
Return on equity, % 15–25 5.4 3.3 12.6 7.1
Equity/assets ratio, % 30–40 52.9 56.3 59.1 56.1
Growth, % > GNP 5.5 0.4 -1.8 1.4
2) Monthly report of the Stockholm Stock Exchange – December 2003 * Average 2001–2003
T H E V L T S H A R E • V L T A B 2 0 0 3
Principal shareholders Number Number Total number Percentage Percentage
A-shares B-shares of shares of shares of votes
(1 vote) (1/10 vote) (%) (%)
Pers Family 905,440 1,249,672 2,155,112 36.7 73.5
Länsförsäkringar Bergslagen 592,658 592,658 10.1 4.2
Tidningsaktiebolaget Stampen 561,360 561,360 9.5 4.0
Morgonpress Invest 561,360 561,360 9.5 4.0
Mellon Omnibus, USA 451,398 451,398 7.7 3.2
Fidelity Low-Priced Stock, USA 225,000 225,000 3.8 1.6
Catella Fokus 214,800 214,800 3.7 1.5
Södermanlands Nyheter 118,800 118,800 2.0 0.8
Sydostpress i Kalmar 100,000 100,000 1.7 0.7
Deutsche Bank AG, England 66,370 66,370 1.1 0.5
Northern Trust, England 53,498 53,498 0.9 0.4
State Street Bank and Trust Co, USA 38,100 38,100 0.7 0.3
Goldman Sachs Int. Ltd, England 36,650 36,650 0.6 0.3
Erik Anund Hallin 31,000 31,000 0.5 0.2
Royal Trust, England 29,600 29,600 0.5 0.2
Others 645,294 645,294 11.0 4.6
905,440 4,975,560 5,881,000 100.0 % 100.0 %
Definitions
Operating margin Operating profit/Total sales Net margin Profit after tax/Total sales Earnings per share Profit after tax/Average number of
shares during the period
Equity per share Closing equity/Closing number of shares Return on equity Net profit/Average equity
Return on capital employed Profit after net financial items + financial costs/Average capital employed Dividend/profit Dividend/Net profit
Cash flow per share Cash flow current operations/
Closing number of shares
Share turnover Total number of shares bought and sold during the year/Number of outstanding shares Solvency (equity/assets ratio) Closing equity/Closing total assets Debt/equity ratio Interest-bearing debts/Equity Interest coverage ratio Profit after net financial items
+ financial costs/Financial costs P/E ratio (Price/Earnings) Market capitalisation value/Net profit P/S ratio (Price/Sales) Market capitalisation value /Total sales EBIT multiple Enterprise value/Operating profit
+ financial costs/Financial costs P/E ratio (Price/Earnings) Market capitalisation value/Net profit P/S ratio (Price/Sales) Market capitalisation value /Total sales EBIT multiple Enterprise value/Operating profit