Alma Media Q3/2018: Adjusted operating profit up on the Markets segment’s continued profit improvement. Revenue down as expected due to divestments
Alma Media Corporation Interim Report 25 October 2018 at 8:00 a.m. (EEST)
ALMA MEDIA’S INTERIM REPORT JANUARY–SEPTEMBER 2018:
ADJUSTED OPERATING PROFIT UP IN Q3 ON THE MARKETS SEGMENT’S CONTINUED PROFIT IMPROVEMENT. REVENUE DOWN AS EXPECTED DUE TO DIVESTMENTS.
Financial performance July–September 2018:
– Revenue MEUR 81.6 (86.0), down 5.1%.
– Adjusted operating profit MEUR 15.1 (14.0), or 18.5% (16.2%) of revenue, up 8.3%.
– Operating profit MEUR 14.6 (14.3) or 17.9% (16.6%) of revenue, up 1.9%.
– Earnings per share EUR 0.12 (0.12).
– Alma Markets: Profitable business growth continued in Finland and in international operations.
– Alma Talent: Profitability on par with the previous year, content revenue benefited from the positive development of digital subscriptions
– Alma Consumer: The decline of print media sales still reduced profitability.
Financial performance January–September 2018:
– Revenue MEUR 262.7 (270.2), down 2.8%.
– Adjusted operating profit MEUR 40.2 (39.8), or 15.3% (14.7%) of revenue, up 1.1%.
– Operating profit MEUR 44.9 (40.7) or 17.1% (15.1%) of revenue, up 10.1%.
– Earnings per share EUR 0.38 (0.35).
*) Comparison data has been adjusted between advertising revenue and service revenue.
Operating environment in 2018
The Finnish economy is expected to experience strong growth in 2018. Alma Media’s significant operating countries in Eastern Central Europe, such as the Czech Republic and Slovakia, are expected to see economic growth of 3–4%. The structural transformation of the media will continue in 2018; online content sales will grow, while the demand for print media will decline.
Outlook for 2018 (Unchanged)
In 2018, Alma Media expects its full-year revenue to remain at the previous year’s level and its adjusted operating profit to increase from the 2017 level. The full-year revenue for 2017 was MEUR 367.3, and the adjusted operating profit was MEUR 51.1.
Market situation in the main markets
According to Kantar TNS, the total advertising volume in Finland decreased by 0.6% (2.2%) in July–September 2018, while advertising in online media increased in Finland by 2.4% (10.1%) in the third quarter. Advertising in city papers and newspapers declined by 7.5% (10.9%) in Finland. Advertising in magazines in Finland decreased in July–September 2018 by 2.8% (8.9%). In terms of volume, the total market for afternoon papers in Finland declined by 10.7% (12.1%) in the third quarter of 2018.
According to Sveriges Mediebyråer, the total advertising volume in Sweden increased by 6.7% (3.6%) in July–September 2018. Advertising in online media grew by 5.2% (9.8%) in Sweden. Advertising in trade magazines in Sweden decreased by 17.5% (8.1%).
Alma Media’s main markets in Eastern Central Europe are the Czech Republic and Slovakia. According to the European Commission’s forecast, the Czech Republic’s GDP will grow by 3.0% in 2018. The Czech National Bank estimates that the GDP will grow by 3.2% in 2018 and 3.4% in 2019. In Slovakia, GDP growth in 2018 will be 3.9% according to the European Commission. The Czech National Bank estimates that the GDP will grow by 4.3% in 2018 and 4.7% in 2019.
Kai Telanne, President and CEO:
Alma Media’s profitability continued to develop favourably in the third quarter. The adjusted operating profit for July–September was MEUR 15.1 and the operating profit margin was 18.5 per cent. Alma Markets, which specialises in digital marketplaces and the recruitment business, continued its strong profit performance. Relative profitability was also improved by the divestment of businesses with negative or low profitability. Alma Media’s revenue in July–September declined, as expected, due to divestments. Revenue decreased by 5.1 per cent and amounted to MEUR 81.6.
While the Finnish economy is estimated to be at the peak of its current boom period, the domestic media advertising decreased by 0.6 per cent in July–September according to Kantar TNS. The reason behind the low level of advertising investment is the ongoing shift from traditional newspaper advertising to digital advertising, advertisers investing in their own media and marketing technologies, and intensifying competition between domestic media agencies and international platforms.
Alma Markets continued to grow in the third quarter while maintaining an excellent level of profitability (operating profit margin 39.3 per cent). Revenue growth in the recruitment business slowed down slightly compared to the first half of the year, but the demand for recruitment services in Eastern Central Europe remains at a good level due to strong economic growth. Marketing investments in a new mobile recruitment service in Poland continued during the period. In Finland, favourable economic development boosted the sales of online services related to housing and cars.
Alma Talent’s adjusted operating profit for July–September was on a par with the comparison period, at MEUR 2.8. Alma Talent’s transformation strategy is focused on the renewal of media and pursuing growth in digital content revenue and digital subscriptions. The segment performed in line with targets in these areas during the review period, which helped compensate for the decline of print media. The measures aimed at reorganising operations in Sweden continued during the period. The focus of the segment’s operations has also been sharpened by divesting unprofitable and non-synergistic businesses.
Alma Consumer’s revenue was reduced by the divestment of newspapers in Lapland. The development of profitability was affected by the lower single-copy sales of Iltalehti and the decreasing print media advertising revenue of regional and local media, although the rate of decline in print advertising revenue was slower than in the market in general. In the segment’s digital advertising, mobile and video advertising developed favourably and content marketing grew substantially year-on-year. The programmatic buying market has partially recovered of the entry into force of the GDPR, which affected its development in the previous quarter.
In July, we sold an office and production property in Tampere. The sale did not have a significant effect on profit, but it frees up capital for the development of the core businesses. Our equity ratio stood at 56.0 per cent at the end of September, while gearing was 12.1 per cent.
The decision of the EU Council to allow value added tax on digital publications to be lowered from 24 per cent to 10 per cent represents a positive outcome. We believe the decision will lead to increased demand and consumption of digital services and content in Finland. This, in turn, will help maintain the vitality of domestic media companies and improve their ability to perform their duty of maintaining the education and awareness of the public, which is an important role played by high-quality media.
Kai Telanne, President and CEO, telephone +358 (0)10 665 3500
Juha Nuutinen, CFO, telephone +358 (0)10 665 3873
News conference and audio webcast:
An analyst and media conference will be held on the same day at 11.00–12.00 EEST in the Alma House (address: Alvar Aallon katu 3 C, Helsinki). In addition to the presentations held by President & CEO Kai Telanne and CFO Juha Nuutinen, participants will have an opportunity to discuss with other members of the company’s management. Please note that the conference will be held in Finnish. The presentation material in English will be available on www.almamedia.fi/en/investors/reports-and-presentations/presentations at 11.00 EEST.
To participate in the conference, kindly register beforehand by e-mail, firstname.lastname@example.org.
A conference call and audio webcast concerning the financial result of January–September 2018 will begin at 13.00 EEST and will be held in English. You can participate in the conference by calling +44 333 300 0804 (confirmation code: 15513470#) or follow it at http://www.almamedia.fi/en/investors/reports-and-presentations/presentations.
Alma Media’s financial calendar 2019
Alma Media Corporation will publish its financial reports in 2019 as follows:
– Financial Statement Bulletin for financial year 2018 on Thursday, 14 February 2019 approximately at 8:00 EET.
– Interim report for January–March 2019 on Thursday, 25 April 2019, approximately at 8:00 EEST
– Interim report for January–June 2019 on Wednesday, 17 July 2019, approximately at 8:00 EEST
– Interim report for January–September 2019 on Wednesday, 23 October 2019, approximately at 8:00 EEST
Financial Statements, Report by the Board of Directors, Auditor’s Report and Corporate Governance Statement will be published on Friday, 22 February 2019.
The Annual General Meeting is planned to be held on Friday, 15 March 2019. Materials related with the Annual General Meeting will be available on Alma Media’s website.
ALMA MEDIA CORPORATION
Board of Directors
Distribution: NASDAQ Helsinki, main media, www.almamedia.com
Alma Media in brief
Alma Media is a media company focusing on the service business and journalistic content. The company’s best-known brands are Kauppalehti, Talouselämä, Affärsvärlden, Iltalehti, Aamulehti, Etuovi.com and Monster. Alma Media builds sustainable growth for its customers by utilising the opportunities of digitalisation, including information services, system and expert services and advertising solutions. Alma Media’s operations have expanded from Finland to the Nordic countries, the Baltics and Central Europe. Alma Media employs approximately 2,250 professionals (excluding delivery employees), of which approximately 30% work outside Finland. Alma Media’s revenue in 2017 was EUR 367.3 million. Alma Media’s share is listed on NASDAQ Helsinki. Read more at www.almamedia.com.