An Unexpected Journey - Yellow Search TODAY!

NORDICS
CIS
An Unexpected
Journey
November 2014
BALTICS – REGIONAL GATEWAY
CEE
ESTONIA Tartu mnt. 2, 10145 Tallinn, Tel +372 6650 280, Fax +372 6650 281
LATVIA Ulmana gatve 86F, LV-1046 Riga, Tel +371 6721 4225, Fax +371 6735 6395
LITHUANIA J.Jasinskio 16B, LT-01112 Vilnius, Tel +370 5254 6713, Fax +370 5254 6978
§ 
About BaltCap
§ 
Investment rationale
§ 
An industry in transition
§ 
Acquisition strategy
§ 
Future prospects
2
BaltCap is the leading Baltic private equity firm
Experienced team
§ 
Most seasoned team in the Baltics – 100+ years in PE
§ 
Over 60 investments and 30 exits
§ 
On the ground coverage of all three countries through
local offices
Proven strategy
§ 
Active operational involvement and partnership with
first-class management teams
§ 
Clear emphasis on buy-and-build and organic growth to
create regionally leading companies
Attractive market
§ 
Outperforming results in both good times and bad*
§ 
Baltics is showing strong growth
§ 
The region has solid economic fundamentals
§ 
Baltic PE market has limited competition providing
many attractively priced acquisition opportunities
* According to EBRD private equity funds data, BaltCap has been consistently outperforming other Baltic managers.
BPEF I shows top quartile performance according to Pevara benchmarking data as of 30.09.2013 for small and medium sized buyout funds in Europe
3
Pan-Baltic investment activity since 1995
1995-97
Baltic Investment
Fund I & II ($25m)
§  14 Investments
§  14 Exited
2000-01
Baltic Investment
Fund III
(€36m)
§ 10 Investments
§  8 Exited
Baltic SME Fund
(€10m)
§ 12 Investments
§ 11 Exited
Offices opened
in Tallinn, Riga,
Vilnius
2007-08
BaltCap fully
independent (MBO)
BaltCap Private
Equity Fund
(“BPEF”)
(€63m)
§ Pan-Baltic buy-out and
later-stage expansion
§ 8 portfolio companies,
fully invested
§ F irst successful exit
completed
Signatory of UNPRI
2010
2014
BaltCap Latvia
Venture Capital
Fund K.S. (€30m)
BaltCap Private
Equity Fund II
(€100m target)
§ E a r l y - s t a g e a n d
expansion capital to
local SMEs
§ Actively investing
§ 11 portfolio companies
§ F irst successful exit
completed
§ First close at €51m in
Jan 2014
§ Second close at €82m
in July 2014
§ First transaction
completed in March
2014
Lithuania SME Fund
KŪB (€20m)
§ E a r l y - s t a g e a n d
expansion capital to
local SMEs
§ Actively investing
§ 8 portfolio companies
4
§ 
About BaltCap
§ 
Investment rationale
§ 
An industry in transition
§ 
Acquisition strategy
§ 
Future prospects
5
In 2008 BaltCap acquired FCR Media (Prev. Interinfo), a leading YP
company in the Baltics
Estonia - #1 directory operator
§ 
§ 
§ 
§ 
Online:1182.ee, ee.ee, kontakt.ee, Arikataloog.ee
Print: Ekspress Kontakt!, Arikataloog
Voice/Call: 1182, call center
Other: Google AdWords services
§ 
§ 
Latvia - #1 directory operator and official Lattelecom partner
Online:1188.lv (owned by Lattelecom)
Print: Google AdWords services
Lithuania - #1 directory operator
§ 
§ 
§ 
§ 
§ 
Key highlights
• 
Acquired in February 2008
• 
Aggressive structure - 8.1x 2007
EBITDA, 75% debt financed
• 
In hindsight, market timing was
bad (at the time economic
forecast ‘hard landing’ scenario
was 0% GDP growth)
§ 
Online: visalietuva.lt, imones.lt, 1588.lt
Print: Visa Lietuva, Statyba Plius
Voice/Call: 1588, 1666, Call centre services
Other: Google AdWords services
Projections
+9,6%
Revenue
CAGR
EBITDA
margin
9%
17%
17%
18%
18%
18%
2010F
2011F
+10,7%
E B I T D A
CAGR
2006A
2007F
2008F
Source: Investment Recommendation (2007)
2009F
6
Investment decision was based on 6 core hypotheses
§ 
Catch-up to Western European levels by growing AVO
§ 
Double-digit growth of the Advertising market
Potential for
improvement
§ 
Limited effort from the previous owner, particularly in product
development
Capable
management
§ 
Local management quite strong based on initial evaluation
Broad customer
base
§ 
Customer base is large and diversified
§ 
More defensive than general ad market
Strong cash flow
§ 
Possibility to use leverage and in such way increase equity value
Solid exit
opportunities
§ 
Excellent expected ROI
§ 
Large pool of potential buyers, including Telcos, international
Growth
directory publishers, and other PE-backed directory players
7
§ 
About BaltCap
§ 
Investment rationale
§ 
An industry in transition
§ 
Acquisition strategy
§ 
Future prospects
8
None of the 6 initial investment hypotheses held true by early 2009
Expectations
Reality
Growth
§ 
Sales fell by 50% in 18 months to Q3 2009, exactly the same rate as
the Baltic ad market
Potential for
improvement
§ 
Limited product development options
§ 
Most significant improvements came from a number of cost-cutting
rounds (personnel, print-runs, offices, marketing)
Capable
management
§ 
Management was strong in growing market, but not prepared for
serious strategy change (MDs, CFO, CEO changed)
Broad customer
base
§ 
Internet has become the key channel for information search
significantly reducing the need for the print directories
Strong cash flow
§ 
Leverage clearly too high 12 months into the investment (EBITDA
negative), continuous bank negotiations since 2009
Solid exit
opportunities
§ 
Double trouble: more rapid industry change than anticipated in 2007
& economic collapse with double-digit GDP declines in markets
§ 
Deteriorating market sentiment for YP companies
9
Rapid changes in consumer behavior led to a significant revenue
decline in the YP industry
Changes in consumer
behaviour…
§  Internet has become the key
channel for information search
reducing the need for print
directories
…led to revenue decline of majority YP companies worldwide
Revenue 2009-2013 (m€)
Solocal Group (Pages Jaunes)
§  Customers increasingly rely on
Google search
Seat Pagine Gialle
-14%
1,164 1,125 1,102
-58%
1,066 999
1,210
§  Due to increasing penetration
of mobile internet and
smartphones the number of
contact info DA queries is
decreasing (since contacts are
easily “googled”)
1,986
1,034 957
§  Consumers look for a
particular product rather than
company or industry
§  User generated content is
becoming more important as
people look for reviews, ratings
and opinions of other
customers
Supermedia
659
-46%
930
503
1,298
1,071
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
2009 2010 2011 2012
Eniro
Greek Yellow Pages
Dex One
-44%
716
579
470
60
435
44
398
1,741
-77%
34
20
2009 2010 2011 2012 2013
-41%
784
1,171 1,028
14
2009 2010 2011 2012 2013
2009 2010 2011 2012
Source: Company Financial Statements
10
Falling revenues, unclear growth potential and deteriorating market
sentiment is reflected in the share price of listed YP companies
Share price development of peer companies
5 years
Share price development of peer companies
52 weeks
+25%
+150%
0
+100%
-25%
+50%
-89%
-50%
0
-47%
-75%
-50%
2010
2011
2012
2013
2014
Nov
2013
Jan
2014
Mar
2014
May
2014
Jul
2014
Sep
2014
Nov
2014
Source: Investing.com stock quote data
11
After a long and painful industry transition YP companies have to
adapt to a low-margin business model with limited growth prospects
§ 
Market position eroding
• 
Competition for SMEs increases from online (Google) and apps
• 
Product usage declines as Google and other search engines
become users’ preferred tools for search
§ 
Revenues declining, online growth not yet offsetting print decline
§ 
EBITDA and margins shrinking rapidly
§ 
Lack of systems for efficient non-print product development and
publishing
§ 
Many companies have unsustainable debt loads
• 
Restructurings and Chapter 11 processes follow as a result
12
§ 
About BaltCap
§ 
Investment rationale
§ 
An industry in transition
§ 
Acquisition strategy
§ 
Future prospects
13
Recession fuelled a large number of takeovers, divestments, and
distressed transactions in 2009-2013 and opened a growth opportunity
2009
2010
2011
2012
2013
§ 
2009 - Zap (form. Golden Pages Israel), creditor takeover when Babcock Brown
went into administration
§ 
2009 - SuperMedia (form. Idearc) - Chapter 11
§ 
2010 - Dex One (form. R.H. Donnelley) - Chapter 11
§ 
2010 - Truvo Group (former World Directories) - Chapter 11
§ 
2010 – FCR Media acquired Ekspress Hotline from listed media company Ekspress
Group in Estonia
§ 
2010 – Eniro divested Finnish (Suomi24, Eniro Finland) operations
§ 
2010/2011 – Truvo Group sells its Irish operation to FCR Media Group
§ 
2011 – European Directories’ Danish company De Gule Sider acquired by Eniro from
bankruptcy estate
§ 
2012 - Contact Holding (Baltics) debt restructuring, creditors take partial
ownership, PE-fund invests new cash
§ 
2012 - European Directories - Triton seizes control ending a long debt restructuring
§ 
2012 – AT&T sells majority stake in the most successful YP publisher in the US to
Cerberus at 1.8x
§ 
2013 – Dex One and SuperMedia complete merger creating Dex Media
14
FCR Media successfully used the market opportunity to consolidate
YP companies across Europe
2010
2011
2012
2013
2014
FCR Media Group countries
• 
Estonia
Acquisition of
yellow pages
company Ekspress
Hotline
15
FCR Media successfully used the market opportunity to consolidate
YP companies across Europe
2010
2011
2012
2013
2014
FCR Media Group countries
• 
Ireland
Acquisition of
Golden Pages,
the leading YP
company in
Ireland
16
FCR Media successfully used the market opportunity to consolidate
YP companies across Europe
2010
2011
2012
2013
2014
FCR Media Group countries
• 
Sweden
Acquisition of
yellow pages
company
Lokaldelen
• 
Czech
Republic &
Slovakia
Acquisition of
yellow pages
company
Mediatel
17
FCR Media successfully used the market opportunity to consolidate
YP companies across Europe
2010
2011
2012
2013
2014
FCR Media Group countries
• 
Finland
Established
Finland startup
• 
Hungary
Acquisition of
MTT Media, the
leading
Hungarian YP
company
• 
Russia
Acquisition of
local YP company
• 
Romania
Acquisition of
Romanian YP
company Pagini
Aurii
18
FCR Media successfully used the market opportunity to consolidate
YP companies across Europe
2010
2011
2012
2013
2014
FCR Media Group countries
• 
Croatia
Acquisition of
MTI, a local
Croatian yellow
pages company
19
Even at low margins reasonable returns can be achieved through
high sales volume in newly acquired geographies
FCR Media markets and number of clients in 2014
Revenue (m EUR)
TOTAL:
§  12 markets
§  145k clients
73,6
71,3
2013
2014B
39,1
33,825
500
11,5
11,0
11,9
2009
2010
2011
2012
EBITDA (m EUR) and EBITDA margin (%)
5,000
9,408
5,444
4,7%
-7,0%
1,4%
4,1%
2,7%
3,0%
1,6
2,0
2,2
2012
2013
2014B
+IE, CZ,
SK
+SE
+RO, RU,
HU, FI
10,216
11,956
29,062
11,321
24,927
0,5
2,500
1,000
0,2
-0,8
2009
2010
LT, LV,
EE
2011
Source: Company data
20
§ 
About BaltCap
§ 
Investment rationale
§ 
An industry in transition
§ 
Acquisition strategy
§ 
Future prospects
21
We expect the market to maintain low profitability levels in the
medium term with slow margin growth
Revenue (m EUR) and CAGR (%)
+5%
71,3
69,3
73,4
2,2
4,1%
6,0%
2,9
4,4
Revenue growth projections are
fairly moderate in the medium
term
§ 
Sales are forecast to pick up pace
again as late as 2017
§ 
EBITDA margin is expected to
grow but remain at a fairly low
level
§ 
Low CAPEX levels due to
increasing share of 3rd party
product sales and cautious
expenditure on internal product
development
81,6
EBITDA (m EUR) and EBITDA margin (%)
3,0%
§ 
9,3%
7,6
CAPEX (m EUR) and CAPEX as a share of revenue (%)
1,2%
0,7%
0,6%
0,7%
0,9
0,5
0,4
0,5
2014B
2015F
2016F
2017F
*Does not include Russia, Finland, and Croatia
Source: Company data
22
We have embraced the ‘new industry standard’
§ 
After losing the dominant position in competition for SMEs to
Google and apps, Yellow Pages providers should shift the focus to
sales and maintaining the client base
§ 
Declining product use and increasing competition leaves no choice
but to accept low EBITDA and profit margins
Profitability
through volume
§ 
Low levels of profitability forces Yellow Pages companies to seek
growth by increasing sales volumes
3rd party
products
§ 
Up-sell of third-party products to a large client base is a viable
solution to increasing volume
Focus on sales
Low margins
23
What’s next?
Exit
ü Optimal capital structures
Recapitalisation
ü Bank financing
ü Co-investors
ü Restructuring
Corporate
governance
ü Strengthening management team
ü Incentive schemes
ü Alignment of interest
ü Monitoring
Capital
structure
Strategy
Entry
Strategic planning
ü Buy-and-build
Organic growth
ü International expansion
ü Repositioning
CSR
û Reasonable valuation
û Avoid auctions
24
Contact us
§ 
Simonas Gustainis
Managing Partner, BaltCap
§ 
§ 
§ 
T: +370 5254 6713
E: simonas.gustainis@baltcap.com
Jon Martinsen
Group CEO, FCR Media
§ 
§ 
T: +43 676 660 7000
E: jon.martinsen@fcrmedia.com
ESTONIA Tartu mnt. 2, 10145 Tallinn, Tel +372 6650 280, Fax +372 6650 281
LATVIA Ulmana gatve 86F, LV-1046 Riga, Tel +371 6721 4225, Fax +371 6735 6395
LITHUANIA J.Jasinskio 16B, LT-01112 Vilnius, Tel +370 5254 6713, Fax +370 5254 6978