ALMA MEDIA GROUP’S FINANCIAL STATEMENTS BULLETIN 1 JAN. - 31 DEC. 1998

ALMA MEDIA CORP. STOCK EXCH. BULLETIN 18 FEB. 1999, 9.00 AM 1(11) ALMA MEDIA GROUP’S FINANCIAL STATEMENTS BULLETIN 1 JAN. - 31 DEC. 1998 Alma Media strengthened its market position despite stronger competitive pressure. The year ended in line with expectations for the Group apart from the effect of stronger than expected turbulence from Russia. Consolidated net sales rose 3 % to FIM 2,815 million. The operating profit was FIM 242 (270) million and the equity ratio was 51 % (47 %). The dividend proposal is FIM 4.00 per share (FIM 3.30). Alma Media Corporation began operating on 1 April 1998 following the merger of Aamulehti Corporation and MTV Corporation into a new media group. The shares of both companies were converted into Alma Media shares, which have been quoted on the Helsinki Exchanges from 1 April 1998. The merger was implemented using the pooling method and both companies have operated with a single set of accounts since the beginning of 1998. The figures for 1998 presented here are those of Alma Media Group and the 1997 figures are pro forma figures. Business environment The Finnish economy grew faster in 1998 than forecast. According to Merita Bank, GDP rose 5.3 % (6.0 %). Rapid economic growth continued with inflation and interest rates remaining low. Unemployment figures continued to decline, albeit more slowly than predicted. Strong economic growth also resulted in a rapid increase in media advertising. According to preliminary information released by Adfacts Ltd, the volume of media advertising rose 11 % on the previous year to FIM 5.7 billion. Radio advertising increased 19 %, magazine advertising 17 %, newspaper advertising 11 %, and television advertising 7 %. According to the Finnish Newspapers Association, newspaper advertising volumes rose 7 %. The circulations of Finland’s daily newspapers (4-7 issues per week) declined on average by 0.4 % (-0.3 %) but many regional newspapers in southern and central Finland increased their circulations. Demand for graphic products rose in Finland but the collapse of the Russian rouble in August, precipitated by Russia’s economic crisis, rapidly reduced exports and lowered price levels in Finland as well as the western export markets. Price levels for paper were 0-5 % higher than one year before. The weakening of the Scandinavian currencies against the Finnish markka at the end of the year dampened exports of printed products further. The figures for Alma Media’s divisions in this bulletin are based on the Group’s operational structure. Net sales and result Consolidated net sales totalled FIM 2,815 (2,727) million. The increase resulted from sharp growth in newspaper advertising revenues. Net sales of MTV and Alprint declined slightly on the previous year. Exports totalled FIM 359 (360) million, consisting almost entirely of exports of Alprint’s printed products. Altogether 52 % (55 %) went to Russia, 39 % (36 %) to the Nordic countries, and 9 % (9 %) to other countries, principally Great Britain. Other operating income totalled FIM 37 (25) million, comprising among other items MTV’s sponsorship revenues and profits on the sale of shares by the parent company. The largest associated company in Alma Media’s consolidated financial accounts is the Swedish company TV4 AB. This company recorded net sales of 2,057 (1,846) million Swedish krona and a pre-tax profit of Skr 115 (135) million. Its 1998 result was weakened by one-time items amounting to approximately Skr 30 million. Alma Media’s consolidated financial statements include its 23.4 % share of TV4 AB’s result, less depreciation of goodwill on consolidation. TV4 AB contributed FIM -7 million to Alma Media’s result. The aggregate contribution of associated companies to Alma Media’s result totalled FIM -3 (+5) million. The other major associated companies were Pohjolan Sanomat Oyj for January to October, as well as Oy Suomen Uutisradio Ab (Finnish News Radio Ltd), Suomen Tietotoimisto Oy (Finnish News Agency Ltd), and Tampereen Tietoverkko Oy. The Group’s expenses rose 5 % on the previous year to FIM 2,439 (2,316) million. Apart from the increased volume of operations, the increase was due to editorial and marketing investments in Kauppalehti and Iltalehti totalling FIM 19 million. These investments paid off since Iltalehti retained its position as the Finnish newspaper with the fastest growing circulation. Kauppalehti’s circulation increased as well despite the new competitor in the market. Depreciation amounted to FIM 171 (171) million and included depreciation of goodwill totalling FIM 13 (14) million. The consolidated operating profit was FIM 242 (270) million. Alpress’s operating profit rose FIM 30 million and MTV’s FIM 15 million, but Alprint’s operating profit decreased FIM 59 million. An internal change in pricing between Alpress and Alprint resulted in the transfer of FIM 30 million in operating profit from Alprint to Alpress. The economic problems in Russia reduced Alprint’s operating profit by FIM 20 million. Net financial expenses were FIM 18 (2) million. The increase was caused by the mainly debt-financed acquisition of the TV4 AB shares in December 1997. Financial expenses represented 1.0 % (0.7 %) of net sales. The consolidated profit before extraordinary items, taxes and minority interest was FIM 225 (269) million. Extraordinary items, net, totalled FIM 18 (31) million. A FIM 17 million extraordinary gain was recorded in the consolidated financial statements when Alma Media Corporation sold its 28.4 % holding in Alcap Oy. This disposal had no material impact on the 1998 result of the parent company Alma Media Corporation. The profit before taxes and minority interest was FIM 242 (300) million. Direct taxes totalled FIM 76 (66) million. Earnings per share were FIM 9.21 (12.71). Capital expenditure Capital expenditure totalled FIM 219 (661) million. FIM 97 million covered shares in fixed assets of the newspaper companies and similar items. The remainder, FIM 122 million, was employed for normal maintenance investments. During the year Alma Media Group raised its holding in Pohjolan Sanomat Oyj from 44 % to 78 % and acquired 27 % of the stock of Kainuun Sanomain Kirjapaino Oy. Financing The Group had FIM 158 (212) million in cash reserves and bank balances at the year end. Interest-bearing debt amounted to FIM 630 (736) million at the close of the year. The counter-value of debt denominated in foreign currency was FIM 14 (227) million. Gearing was 39 % (47 %). Shareholders’ equity and equity ratio The balance sheet totalled FIM 2,457 (2,450) million. Shareholders’ equity was FIM 1,205 (1,109) million. The accumulated depreciation difference was FIM 226 (214) million, which included FIM 163 (154) million entered under shareholders’ equity and FIM 63 (60) million as deferred tax liabilities. Minority interests totalled FIM 28 (20) million. The equity ratio at the close of the period was 51 % (47 %). Shareholders’ equity per share was FIM 76.60 (70.50). Shares and ownership structure Aamulehti Corporation and MTV Corporation shareholders became shareholders of Alma Media Corporation on 1 April 1998. Alma Media’s shares have been quoted on the main list of the Helsinki Exchanges since 1 April 1998. Listing of the Aamulehti Corporation share ceased on 31 March 1998. The MTV Corporation share was not listed. The Company’s Board of Directors had no authorization to raise the share capital during the financial period. Alma Media Corporation’s registered share capital at the year end totalled FIM 157 million. FIM 68 million of this comprised Series I shares and FIM 89 million Series II shares. At the end of the year 37 % of all the Company’s shares were held in nominee accounts or owned by foreigners. Personnel The Group had 2,905 (2,818) employees on average during the year, as well as 983 (970) part-time newspaper delivery staff. The same figures at the close of the period were 2,997 (2,821) and 1,026 (958). The increase was due to the consolidation of Pohjolan Sanomat Oyj on 29 October 1998. The Pohjolan Sanomat group had 138 employees at the year end, as well as 79 part-time newspaper delivery staff. Administration The Chairman of the Boards of Directors of the merged companies and of Alma Media Corporation was Mr Björn Mattsson and the Deputy Chairman was Mr Bengt Braun. The Board members were Mr Pekka Ala- Pietilä, Ms Pirkko Alitalo, Mr Matti Häkkinen, Mr Pentti Kivinen and Mr Olli Reenpää. The Chairman of Alma Media Corporation’s Supervisory Board was Mr Arjo Anttila and the Deputy Chairman was Mr Paavo Pitkänen. Mr Antero Siljola announced his resignation from the Supervisory Board on 14 September 1998. The Company’s auditors were KPMG Wideri Oy Ab and SVH Pricewaterhouse Coopers Oy. Alma Media Corporation’s President and CEO for the full year was Mr Matti Packalén. Alpress Alma Media’s newspaper publishing operations are the responsibility of its Alpress division. Alpress publishes two national newspapers, Iltalehti and Kauppalehti, and four leading regional newspapers: Aamulehti, Satakunnan Kansa, Lapin Kansa and Pohjolan Sanomat, all of which appear daily and are also the top advertising media in their regions. Alpress also publishes 19 local, town and free-distribution newspapers. Alpress newspapers have altogether roughly two million readers. Alpress recorded net sales of FIM 1,101 (1,014) million. This comprised advertising revenues of FIM 579 (512) million, circulation revenues of FIM 496 (481) million and other net sales totalling FIM 26 (21) million. The main items in other net sales were the external distribution revenues of Aamujakelu Oy, invoicing of the Treffi supplement and revenues from the Internet newspaper editions. The increase in net sales was mainly attributable to favourable growth in advertising revenues. The circulations of the Alpress newspapers increased over 2 % on average, whereas the circulations of all Finland’s newspapers declined by 1.6 % on average and the daily newspapers by 0.4 %. The circulation increases recorded by Iltalehti, 7 %, and Kauppalehti, over 1 %, were particularly commendable achievements in the new competitive conditions. Alpress’s circulation revenues rose more than 2 %. The 11 % increase in advertising revenues of the Alpress newspapers corresponded with the national average. Aamulehti’s advertising revenue increased 15 %, Kauppalehti’s 13 % and Lapin Kansa’s 18 %. Editorial and marketing investments in Iltalehti and Kauppalehti, coupled with profit-based bonuses, increased Alpress’s expenses by almost FIM 30 million. Alpress recorded an operating profit of FIM 150 (120) million. MTV Television advertising expenditure increased 7 %, i.e. slightly more slowly than average growth in media advertising expenditure, which meant that the share of television advertising fell one percentage point to 20 % of all media advertising. MTV3-Channel’s programme schedule proved a success. The new competitive environment had no noticeable impact on MTV3-Channel’s share of viewing time, which was 42.2 % (43.6 %) of total television viewing time. The MTV division’s net sales declined by about one percent to FIM 1,068 (1,079) million. Sales of advertising time at the start of the year were lower than in the same period in 1997 but began to increase in the latter half of the year, exceeding the level for the same period in the previous year. However, sales of advertising time for the full year declined by FIM 15 million on the year before to FIM 1,020 million. Other net sales totalled FIM 48 (43) million and included income from production of commercials, recording sales, and revenue from MTV3 Internet and text TV. Despite the slight drop in net sales, the MTV division’s operating profit improved by FIM 15 million to FIM 111 (96) million. The main reason for this was a reduction in the operating license fee and network leasing payments. MTV’s share of the Swedish TV4 AB’s result and depreciation of goodwill on consolidation had a net impact of FIM -7 million on MTV’s operating profit. At the close of the period MTV Oy owned 23.4 % of TV4 AB’s stock. This is a long-term and strategic holding. Alma Media holds a 48 % stake in Oy Suomen Uutisradio Ab, i.e. Radio Nova. Nova’s net sales rose during 1998, its first full operating year, to FIM 53 million and it showed a slight profit. Alprint Alprint is Alma Media’s printing and graphic services division. Its operations are divided into two business units: Alprint Magazine Printing Group Ltd, which prints heat set products; and Alprint Newspaper Printing Group Ltd, which specializes in cold set and hybrid products. At the end of the year Alprint had 12 printing plants in Finland. Market conditions fluctuated strongly during the year. During the first half of the year demand for magazines and other heat set products was extremely lively in Finland. Together with a rapid increase in export volumes, this led to capacity problems which generated extra costs. Conditions began to deteriorate significantly in August when Russia began experiencing economic difficulties and the Swedish and Norwegian currencies weakened against the Finnish markka. The collapse of the Russian rouble virtually halted exports of cold set products to Russia, which rapidly created heavy overcapacity throughout the printing industry in Finland. The effect of this was to reduce price levels of all printed products. Alprint’s net sales decreased roughly one percent compared to the previous year to FIM 880 (888) million. Exports totalled FIM 354 (358) million. Exports to Russia declined slightly to FIM 185 (195) million, following several years of uninterrupted growth. In the summer exports were still expected to rise substantially on the year before. Russia’s economic difficulties had a particularly hard impact on publications dependent on local advertising for their revenues. For Alprint, adjustment to the rapid shrinking of its export volumes gave rise to unscheduled costs. Newly-released capacity also reduced prices of printed products throughout Alprint’s business. Magazine products contributed FIM 494 (442) million and newspaper products FIM 391 (449) million to net sales. Despite the large increase in sales by the magazine printing plants, Alprint’s result was clearly weaker than in the previous year. A change in internal pricing reduced Alprint Newspaper Printing Group Ltd’s operating profit by FIM 30 million. The direct and indirect effects of Russia’s economic crisis reduced Alprint’s operating profit by roughly FIM 20 million. Alprint recorded an operating profit of FIM 29 (88) million. Alprint has started three projects to improve its competitiveness and profitability by concentrating its operations in larger business units. Four of Alprint’s printing plants will be closed during the following two years. Concentration of operations will not create significant one-time costs. Parent company The aggregate net sales of Aamulehti Corporation and MTV Corporation between 1 January and 31 March 1998 totalled FIM 16 million and their result was an operating loss of FIM 1 million. Since 1 April 1998 the Group’s parent company has been Alma Media Corporation. In addition to managing the businesses of its subsidiaries, the parent company also owns real estate, trades in securities and engages in other investment activities. The parent company is centrally responsible for the Group’s financial control and treasury functions. Alma Media Corporation’s net sales between 1 April and 31 December 1998 amounted to FIM 50 million and it recorded an operating loss of FIM 31 million. Its net sales are derived mainly from rental income from properties and from charges for administrative services. Alma Media Corporation has systematically released capital from its properties to support its core business. Divestments during the year included an industrial property in Helsinki and a commercial site in Tampere, totalling approximately FIM 80 million. A loss of over FIM 3 million was entered on these disposals. New media Alma Media Group has been pioneering research and development in new media in Finland for several years. The Group invests some FIM 20 - 25 million in this field annually. Today, more than 100,000 people avail themselves of Alma Media’s digital services. Alma Media holds almost 40 % of the Finnish market for Internet advertising. Alma Media has placed all its new media operations under common management and established separate subsidiaries for planning and production. The new organization took effect on 1 January 1999. Sales and marketing of Alma Media’s Internet services have been grouped under Alma Media Interactive Oy. This company is responsible, among other things, for editorial production of MTV3 Internet and for strategic planning. Besides MTV3 Internet, Alma Media’s largest Internet services are Iltalehti Online, Kauppalehti Online and Network-Aamulehti. Alma Media Net Ventures Oy provides the technical services to support Alma Media’s new media operations. This company also produces DIME, Finland’s most comprehensive electronic marketplace for housing, office premises and recreational sites; Jobline recruitment services; and the DIME Shopping Mall, which operates only on the Internet. Alma Media Net Ventures Oy is also responsible for handling the Group’s new media partners, coordination of R&D in new media, and collaboration with Finnish and international universities. Local radio broadcasting Alexpress has been responsible for Alma Media’s local radio broadcasting activities and for a substantial proportion of the Group’s research and development in new media. In 1998 Alma Media’s local radio operations in Helsinki, Tampere and Oulu generated aggregate net sales of FIM 7 (11) million. This activity was unprofitable and in January 1999 Alma Media sold its three fully-owned local radio broadcasting companies. The euro Alma Media Group has decided to adopt the euro officially from the beginning of 2002. The Group operates principally in Finland and it has only a minor presence in the countries scheduled to adopt the euro first. Also, since most of the Group’s foreign payment transactions take place in non-euro currencies, earlier adoption of the euro would not achieve savings or competitive advantage. However, the Group is prepared to adopt the euro earlier if market conditions or the basis for introduction of the euro change. The year 2000 Alma Media’s divisions have been taking measures since spring 1996 to eliminate the possible risks posed by the year 2000. The company has surveyed its information systems, identified the systems likely to be affected, and prepared upgrading plans. Separate project teams were set up in each division during 1998 to supervise the progress towards Year 2000 compliance. These teams reported directly to the division managers. Alma Media Group’s common financial control, payment and telecommunications systems have been assessed and upgraded to Year 2000 compliance. The BIOS systems in all the Group’s almost 2,500 workstations and servers are being tested during 1999 and they will be upgraded with virus prevention software. The Group has 185 information systems critical to its business operations which will be examined, upgraded or replaced to achieve Year 2000 compliance. This work is progressing according to plan. The total costs of the Group’s various Year 2000 projects are estimated to be over FIM 10 million. Subsequent events In January Alma Media Corporation sold its local radio broadcasting companies in Helsinki, Tampere and Oulu to a newly established local radio chain and local entrepreneurs. This disposal will have no material impact on Alma Media’s result for the current year. In December 1998 the Council of State (the Finnish government) invited applications for new television licences. MTV Oy has applied for a licence to extend its current MTV3-Channel licence for analogue broadcasting operations for a further 10 years. The current licence expires in December 1999. MTV Oy also has a 44 % stake in CityTV Oy Helsinki, which has applied for a licence for regional analogue broadcasting in Greater Helsinki. This company’s other shareholders include four universities in Greater Helsinki. In addition to licences for analogue broadcasting, MTV Oy is applied for a licence for four digital broadcasting channels: MTV3 Digital, which will convert MTV3-Channel for digital broadcasting; MTV Plus targeted at teenagers and young adults; MTV Sport; and a regional digital channel, CityTV. Separate applications based on the CityTV format have also been submitted for licences for digital television broadcasting in Tampere and Turku, in cooperation with local enterprises and organizations. Kainuun Sanomain Kirjapaino Oy became a subsidiary of Alma Media Group in February. Its consolidated net sales in 1998 totalled FIM 84 (80) million and it posted an operating profit of FIM 5 (5) million. Prospects New legislation concerning television and radio broadcasting came into effect in Finland on 1 January 1999 defining the licence fees payable by commercial television operators. These are now required to pay an operating fee on annual net sales exceeding FIM 20 million. The fee is FIM 6.5 million for net sales of FIM 60 million, and 24.5 % of net sales in excess of this level. The fee base was broadened as well since, in addition to net sales from advertising time, the fee is also levied on sponsoring revenues and advertising on text TV. These changes mean that the licence fee will account for an extra one percent of MTV’s net sales, compared to 1998. A change in calculation principles will reduce the impact of changes in net sales on the licence fee. MTV Oy’s net sales are expected to increase and its result to remain at last year’s level. Alma Media owns 48 % of the nationwide radio channel Radio Nova. Nova’s net sales are expected to increase faster than the market average and its result to improve. No major changes are forecast to take place in paper prices. The profitability of the graphic products industry in Alprint’s main businesses depends on how the Russian market develops, and above all on the spin-off effects of changes in this market. 1998 showed that changes in the Russian market have a significant effect on price levels throughout Scandinavia. Current forecasts indicating growth in the Finnish economy are based on an increase in consumer demand. Barring significant economic deterioration, Alma Media’s net sales are expected to rise and Alpress, in particular, is expected to post a strong result. The Russian situation, recent news on weakening industrial prospects, and announcements of personnel layoffs are casting uncertainty over consumer behaviour. The formation of the results of the media companies is subject to strong seasonal volatility and in this respect the second and fourth quarters of the year are far more significant for Alma Media Corporation’s performance than the first and third quarters. Board’s proposal to the Annual General Meeting The Board of Directors of Alma Media Corporation will propose a dividend of FIM 4.00 per share to the Annual General Meeting on 24 March 1999. ALMA MEDIA CORPORATION BOARD OF DIRECTORS The figures in this bulletin are unaudited. Alma Media Group’s interim report for the first quarter of 1999 will be published on 11 May 1999. CONSOLIDATED INCOME STATEMENT MFIM MEUR MFIM MEUR NET SALES 2,815 473 2,727 459 Share of profits of associated companies -3 -1 5 1 Other operating income 37 6 25 4 Expenses -2,607 -437 -2,487 -419 OPERATING PROFIT 242 41 270 45 Financial income and exp. -18 -3 -2 0 PROFIT BEFORE EXTRAORDINARY ITEMS 225 38 269 45 Extraordinary items 18 3 31 5 PROFIT BEFORE TAXES AND MINORITY INTERESTS 242 41 300 50 Taxes -76 -13 -66 -10 Minority interests -4 -1 -3 -1 NET PROFIT 163 27 231 39 CONSOLIDATED BALANCE SHEET MFIM MEUR MFIM MEUR ASSETS FIXED ASSETS AND OTHER LONG-TERM INVESTMENTS Intangible assets 84 14 93 16 Goodwill on consolidation 95 16 100 17 Tangible assets 924 155 978 164 Investments 713 120 663 111 CURRENT ASSETS Inventories 207 35 158 27 Receivables 276 46 246 41 Cash and bank receivables 158 27 212 36 MFIM MEUR MFIM MEUR SHAREHOLDERS’ EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY 1,205 202 1,109 187 MINORITY INTERESTS 28 5 20 3 OBLIGATORY PROVISIONS 5 1 6 1 LIABILITIES Long-term 637 107 304 51 Current 582 98 1,011 170 CAPITAL EXPENDITURE MFIM MEUR MFIM MEUR Gross capital expenditure on fixed assets 219 37 661 111 GROUP CONTINGENT LIABILITIES MFIM MEUR MFIM MEUR Against own debt Pledges 16 3 402 68 Mortgages on land and buildings 185 31 252 42 Chattel mortgages 152 25 141 24 Guarantees 3 1 2 0 On behalf of associated companies Guarantees 4 1 7 1 Other own commitments Leasing commitments 6 1 10 2 Buyback commitments - - 44 7 Total 366 62 858 144 Group leasing payments falling due (MFIM ) In 1999 3 4 After 1999 3 6 DERIVATIVE CONTRACTS Foreign currency loans totalling FIM 14 million were denominated in DEM and FRF and were hedged using forward contracts and currency swaps. The exchange rate differences on loans and the derivative results are entered under Other Financial Income and Expenses. PLEDGES The TV4 AB shares held as loan collateral were no longer pledged at the end of the period. NET SALES BY DIVISION MFIM MEUR MFIM MEUR Alpress 1,101 185 1,014 171 MTV 1,068 180 1,079 181 Alprint 880 148 888 149 Parent company and other operations 79 13 76 13 Intragroup sales -313 -53 -330 -55 Total 2,815 473 2,727 459 OPERATING PROFIT BY DIVISION MFIM MEUR MFIM MEUR Alpress 150 25 120 20 MTV 111 19 96 16 Alprint 29 5 88 15 Parent company and other operations -50 -8 -44 -7 Group entries 2 0 10 1 Total 242 41 270 45 AVERAGE PERSONNEL BY DIVISION Alpress 1,085 1,068 MTV 726 681 Alprint 971 963 Parent and other companies 123 106 Total 2,905 2,818 In addition part-time newspaper delivery staff 983 970 PER SHARE DATA FIM EUR FIM EUR Earnings per share 9,21 1,55 12,71 2,14 Shareholders’ equity per share 76,60 12,88 70,50 11,86 ALMA MEDIA CORPORATION Ahti Martikainen Vice President, Corporate Communications Further information: Mr Matti Packalén, CEO, tel. +358 (0)9 507 8715 Ms Ritva Sallinen, CFO, tel. +358 (0)9 507 8708 Distribution: Helsinki Exchanges Principal Media
  • Date: 18.2.1999, 08:00
  • News type: Stock exchange release

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