365 hf. - Annual report/ annual accounts

Annual report 2007

A considerable turnaround in the operating results of 365 hf.

EBITDA for the year 2007 amounted to ISK 1,162 million but was negative in 2006
by ISK 12 million for regular operations** 

Sales for the year 2007 amounted to ISK 12,381 million, an increase of 12%
between years 

A turnaround of ISK 1.364 million between years when comparing the profit/loss
before taxes of continuing operations.  Which was a loss of ISK 136 million in
the year 2007 

Net loss of ISK 2.283 million including the write down of the shares in
Wyndeham Press Group amounting to ISK 2.095 million 


The main operational entities of 365 hf. are 365 media ehf., Sena ehf. and EFG
ehf. 

Main results for year:

•	Sales during the year amounted to ISK 12,381 million and increased by ISK
1,283 million or 11.6% from the year 2006 
•	Pro forma sales increased by 10.5% from the previous year
•	Earnings before interest, taxes, depreciation and amortization (EBITDA)
amounted to ISK 1,162 million but was negative by ISK 12 million for the year
2006 for regular operations** 
•	EBITDA ratio was 9.4% but was calculated at 0% for regular operations**  in
the previous year 
•	Net finance cost amounted to ISK 646 million, including a foreign exchange
gain to the amount of ISK 184 million 
•	Net loss after taxes amounted to ISK 2,283 million
•	Equity amounted to ISK 4,545 million and the equity ratio was 31%
•	Current ratio was 0.87, whereas last year it was 0.62


Main results for Q4:

•	Sales during the year amounted to ISK 4.051 million and increased by ISK 871
million or 27.4% from the prior year 2006 
•	Pro forma sales increased by 10.6% from the previous year
•	Proceeds from the company's sale of the sound studios amounted to ISK 33
million 
•	Earnings before interest, taxes, depreciation and amortization (EBITDA)
amounted to ISK 404 million but amounted to ISK 25 million in Q4 in year 2006
on ordinary operation. 
•	EBITDA ratio was 10% but was 1% for regular operations in the year 2006
•	The results of impairment test resulted in writedown of goodwill amounting to
ISK 89 million 
•	Net finance cost amounted to ISK 262 million, including a foreign exchange
loss to the amount of ISK 117 million 
•	Net loss after taxes amounted to ISK 2,243 million


Ari Edwald, CEO: "The Company is advancing""Operating results for the year 2007 reveal that the Company is advancing both
in terms of growth and rate of returns of core units, which confirms the
turnaround in the Company's operation from last year.  The operating results of
the media sector are good with an EBITDA amounting to ISK 900 million, which is
without doubt one of the best results achieved in free mass media in Iceland. 
Sales and distribution in the entertainment sector showed good results in the
year meanwhile the production sector did not meet management's expectations. We
are being very cautious in evaluating the share in other companies and
therefore have fully written down the shares in Wyndeham Press Group in order
to eliminate any uncertainty and increase transparancy.  During the year,
important steps were taken in order to reinforce the Company's financial
standing; which includes the selling of assets and settlement of debts.  The
Company's current ratio at year end is 0.87 and equity ratio is 31%.  The
Company intends to reinforce the Company's financial strength even more in the
near future by increasing share capital to the sales value of ISK 1,500
million."

* In a pro forma calculation the media now under the Company's operation are
compared between years and allowance is made for the fact that Sena and D3
became a part of the Group as of February 1, 2006. 
**In the definition of regular operation, proceeds from the sale of television
distribution system, totalling ISK 1.563 million, has been excluded in the year
2006. 









Accounting methods and approval of accounts
365 hf.'s financial statements are prepared in accordance with International
Financial Reporting Standards as approved by the EC.  The Group's financial
statements include the consolidated financial statements of the Company and its
subsidiaries, as well as the Group's share in associated companies.  EFG ehf.
became a part of the Group as of 1 October 2007.  The Company's Board of
Directors approved the financial statements on 6 February 2007. 

Income statement
The operation of 365 hf. is divided into two operating sectors in the financial
statements. 
Firstly there is the media sector known as 365 media ehf. and secondly there is
the entertainment sector encompassing Sena ehf. and EFG ehf. 

Consolidated results
Sales revenue for the year 2007 amounted to ISK 12,381 million compared to ISK
11,096 in the year 2006, which is an increase of ISK 1,285 million or 12%
between years. EBITDA for the year amounted to ISK 1,162 million compared to a
negative EBITDA of ISK 12 million in the year 2006 and has thus increased by
ISK 1,174 million between years for regular operations. 

At the end of September, the Company sold some real estate at Vatnagardar 4 and
the operation of its sound studios. Proceeds from the sales amounted to ISK 68
million. 

Sales revenue amounted to ISK 4,051 million in Q4 of year 2007 and increased by
27.4% from the previous year.  In addition pro forma growth was 10.6%.  The
gross margin for the fourth quarter amounted to ISK 1,347 million and the gross
margin ratio was 33.2%* compared to 28,0% for the same period the previous
year.  Earnings before interest, taxes, depreciation and amortization (EBITDA)
amounted to ISK 404 million and increased by ISK 379 million from last year for
regular operations. Earnings before financial expenses and taxes (EBIT)
amounted to ISK 194 million but was negative by ISK 226 million** at the same
time last year. The operating recovery amounts thus to ISK 420 million 

Media
Sales revenue for the media sector amounted to ISK 8,182 million during the
year 2007 and increased by ISK 432 million or 5.6% from the last year. Pro
forma sales increased by ISK 881 million or 12.2% from the previous year.
EBITDA for the media sector amounted to ISK 900 million in the year 2007
compared to ISK 165 million excluding the proceeds from the sale of the
distribution system and one-time cost due to reorganizing in the year 2006.  
An increase of ISK 735 million from the previous year which reflects a
successful reorganizing of the media operation last year. 

Sales revenue amounted to ISK 2,368 million in Q4 and increased by ISK 303
million or 14.7% from the previous year. By selecting the media units that are
currently operated by 365 media ehf. pro forma revenues have increased by
approx. 18.4% between years. There was a relative growth in all areas of the
media component in the quarter compared to the previous year. This applies both
to advertising and subscription income. EBITDA of media amounted to ISK 319
million in Q4 of year 2007 compared to ISK 17 million for the same period last
year for regular operation and thus increased by ISK 302 million between years. 

Entertainment
Sales revenue of the entertainment segment in the year 2007 amounted to ISK
4,955 million and increased by ISK 1,187 million between years or 31.5%.  Pro
forma growth of the entertainment segment increased by 12.7% between years. 
EBITDA of the year amounted to ISK 345 million and increased by ISK 40 million
or 13% between years. Operating results of the sales and distribution segment
(Sena ehf.) were good during the year but he production segment did not meet
management's expectations. The firm was restructured in the second half of the
year when a new management team was introduced. 

Revenues of the entertainment segment amounted to ISK 1,839 million in Q4 of
year 2007 compared to ISK 1,420 million last year and increased thus by ISK 419
million or 29.5%.  EBITDA of the entertainment segment in Q4 amounted to ISK
152 million and increased by ISK 115 million from the previous year. The
operating recovery is traced to a better return in retail sales and
distribution of the entertainment segment (Sena ehf.). 






*Gross margin is calculated as sales less cost of goods or services sold as a
percentage of sales. 
**Proceeds from sales due to the sale of the distribution system to the amount
ISK 1,563 million is excluded. 



Balance sheet
Total assets according to balance sheet dated 31 December 2007 amounted to ISK
14,683 million compared to ISK 18,769 million at year end 2006. Current ratio
was 0.87 at year end 2007 compared to 0.62 at year end 2006. Equity ratio was
31% compared to 32.7 at year end 2006. 

The Company's total liabilities has decreased by ISK 2,494 million from year
end 2006, whereof the Company's loans have decreased by ISK 1,434 million, but
the Company sold its share in Hands Holding at the beginning of July and the
proceeds were used to reduce debt. Trading liabilities and other liabilities
have decreased by ISK 1,106 million from the previous year.  Net interest
bearing liabilities at year end 2007 amounted to ISK 7,078 million. 

Cash flow
Cash used in operation before financial income and expenses amounted to ISK 354
million. Negative cash flow is mainly explained by the settlement of debt
incurred earlier due to investing activities in the previous year.  During the
period, prepaid expenses increased, which is mainly explained by the purchase
of sports programming. During the period, interest expense amounted to ISK 812
million which is unusually high due to an early settlement of the Company's
loans following the sale of assets. Total investment activities amounted to ISK
1,784 million, including investments in operating assets to the amount of ISK
426 million.   In addition operating assets were sold to the amount of ISK 194
million. Finance activities were negative by ISK 1,458 million. The Company
sold its share in Hands Holding in the period to the amount of ISK 1,620
million and the proceeds were used to settle loans. Cash and cash equivalents
at year end amounted to ISK 190 million and decreased by ISK 756 million from
the beginning of the year. 

Outlook 2008
The management is satisfied with last year's results. Following lackluster
performance in the year 2006, the Company's operation was reorganized where
emphasis was placed on reinforcing the Company's core media units, which are
Fréttablaðið, Stöð 2, Bylgjan and Vísir. Parallel thereto, other operating
units were either discontinued or sold and emphasis was placed on decreasing
cost. Those actions have resulted in an increased contribution margin. 

By writing down the share in Wyndeham a certain uncertainty has been eliminated
and the company is a clear choice for investors within the media and
entertainment sector. 

During the year, important steps were taken in order to reinforce the Company's
financial standing; which includes the selling of assets and settlement of
debts. In order to further reinforce the Company's financial strength,  it is
planned to offer new capital to the sales value of ISK 1,500 million and the
Company's Board of Directors has put a motion in relation thereto before the
next shareholders' meetings.  Pending the outcome of the meeting an agreement
has been made with Saga Capital Investment to underwrite the sale of the share. 

Management estimates that revenues in the year 2008 will be from ISK 13.5 -
14.0 billion and EBITDA will be from ISK 1,300 to 1,400 million. 


Presentation meeting
A presentation meeting for shareholders and market players will be held
Thursday 7 February, at 12:00 at Skaftahlíð 24 north bulding (offices).  At
which time Ari Edwald, the CEO, and Viðar Þorkelsson, CFO, will present the
Company's performance and operation. 

Further information will be provided after the meeting on the Company's website
www.365.is and on the website of OMX Nordic Exchange in Iceland,
www.omxgroup.com/noricexchange. 


Publishing dates for the year 2008
Q1: 6 May 2008
Q2: 30 July 2008
Q3: 30 October 2008
Q4 and financial statements for the year 2008: 4 February, 2009


Further information will be provided by:
Ari Edwald, CEO, tel. 821 0365 and Viðar Þorkelsson, CFO, tel. 669 9100














**Proceeds from sales due to the sale of the distribution system to the amount
ISK 1,563 million is excluded.

Attachments:

press release - 2007

ársreikningur2007.pdf