CEO's Review

Kai Telanne, President and CEO:

(Q3 interim report published on 28 October 2016)

The positive development of Alma Media’s business continued in the third quarter. The Group’s revenue grew by 19 per cent in July–September and totalled MEUR 80.9. As in the preceding quarters, the improved operating profit was attributable to the strong growth of Alma Markets and Alma News & Life. Adjusted operating profit grew by 20 per cent to MEUR 9.1.

Continued favourable economic growth in Alma Media’s operating countries in Central Europe supported the positive development of Alma Markets’ recruitment business. The segment’s revenue also grew in Finland in housing, automotive and recruitment services. Alma Markets’ third quarter revenue grew by 17 per cent and operating profit improved by 28 per cent.

Alma Talent’s profitability was unchanged year-on-year, as expected. Revenue development reflected the seasonality of the businesses acquired in the Talentum acquisition. The process of building the new business entity progressed as planned and the cost synergies achieved from integration were in line with expectations. In September, Alma Talent’s diverse media portfolio was complemented by the acquisition of Uusi Suomi.

The continued strong growth of online advertising and the shift to programmatic buying in digital advertising were clearly reflected in the performance of the Alma News & Life segment. The segment’s digital advertising sales grew by nearly 40 per cent. The unit’s adjusted operating profit tripled year-on-year and amounted to MEUR 1.8.

For Alma Regions, the third quarter was a difficult one in terms of both content revenue and advertising sales, which saw the segment’s revenue and profitability decline year-on-year. Measures to promote customers’ shift to digital are continuing.

Digital business now accounts for 40 per cent of the Group’s revenue and two thirds of its operating profit. The shift from analog to digital has accelerated further this year, with customer needs and the user experience guiding development. Examples of Alma Media’s digital development during the reporting period include a comprehensive renewal of the digital advertising distribution system and our key role in establishing the Automated Guaranteed digital advertising marketplace for Finnish media companies.

From the perspective of commercial media, the Finnish Ministry of Transport and Communications’ plan for reforming the Postal Act are problematic in many ways. The planned reform does not serve the interests of the individual consumer, the end customer. The legislative proposal is, in our view, also contrary to the EU Postal Services Directive. Posti shifting to making deliveries on three days per week would have a negative impact on the delivery of subscription-based magazines, national newspapers, regional newspapers and local papers. Daily postal delivery can be seen as being part of the basic services for citizens, and reducing this service level would affect the citizen’s constitutional right of access to information. In Alma Media’s view, delivery operations in accordance with the service obligation must be produced more efficiently through measures such as combining delivery networks and outsourcing delivery services.

Finnish enterprises need world-class marketing expertise to achieve success in highly competitive and increasingly international markets. Marketing is one of the engines of growth. Together with many other industry operators, Alma has distributed information on the effectiveness of marketing and its significance in achieving financial success. The Advertising Barometer published in September predicts that marketing investments will increase after several subdued years. It will be interesting to see whether businesses have the courage to turn their intentions into concrete actions. Increasing marketing investments would be an important means to increase the competitiveness of Finnish enterprises and the country as a whole.

Digital business now accounts for 40 per cent of the Group’s revenue and two thirds of its operating profit.