Alma Media Half-Year Report: correction to key figure of Shareholders’ equity per share
Alma Media Corporation Half-Year Report 21 July 2020 at 11:15 a.m. (EEST)
Alma Media Half-Year Report: correction to key figure of Shareholders’ equity per share
Alma Media corrects its Half–Year report published on 17 July 2020 at 8.00. In Key figures table on page 7, the correct figure for Shareholders’ equity per share is 2.63 euros as at 30 June 2020. The figure published earlier was 1.86 euros. The corrected figure for Shareholders’ equity per share and figures for comparison periods:
Corrected January–June 2020 Half-Year report in its entirety is available as an attachment to this release.
Alma Media Corporation Half-Year Report 17 July 2020 at 8:00 a.m. (EEST)
ALMA MEDIA’S HALF-YEAR REPORT JANUARY–JUNE 2020:
The coronavirus epidemic significantly reduced revenue, cost savings slowed down the decline in adjusted operating profit. EPS improved by the capital gain from the sale of the regional news media business.
On 30 April 2020, Alma Media announced it had completed the sale of the regional news media business and printing operations to Sanoma Media Finland. The Group reports the divested business until the date of the transaction and the capital gain on the sale under discontinued operations. The divested business was previously reported under the Alma Consumer segment. The income statement figures presented in this Half-Year Report mostly represent only the Group’s continuing operations. The cash flow figures include both continuing and discontinued operations.
Financial performance April–June 2020:
- Revenue from continuing operations MEUR 52.5 (64.1), down 18.2%.
- Adjusted operating profit from continuing operations MEUR 9.8 (11.9), down 17.6%.
- Operating profit from continuing operations MEUR 7.0 (11.8), down 41.0%.
- Earnings per share from continuing operations EUR 0.04 (0.09).
- Earnings per share including discontinued operations EUR 0.76 (0.12).
- The Group has a strong financial position and net cash totalled MEUR 57.4 at the end of June, while the gearing ratio was -23%.
- Alma Markets: Significant cost savings dampened the decline in profit performance.
- Alma Talent: The positive development of other businesses mitigated the impact of the sharp decline in advertising revenue.
- Alma Consumer: Profitability was reduced by a significant decline in advertising.
Financial performance January–June 2020:
- Revenue from continuing operations MEUR 114.3 (126.2), down 9.4%.
- Adjusted operating profit from continuing operations MEUR 21.0 (23.4), down 10.3%.
- Operating profit from continuing operations MEUR 19.2 (23.3), down 17.7%.
- Earnings per share from continuing operations EUR 0.14 (0.19).
- Earnings per share including discontinued operations EUR 0.97 (0.24).
Operating environment in 2020
The global coronavirus epidemic creates significant uncertainty for economic development in 2020. As a result, the national economies of Finland and Alma Media’s other operating countries are expected to weaken substantially in 2020 compared to the previous year.
In the prevailing exceptional circumstances, the consumption of digital content and services has grown significantly in general. The coronavirus epidemic is expected to lead to permanent changes in consumer behaviour and to accelerate the demand for digital services. As a result, the structural transformation of the media sector is expected to continue and further intensify. Data, analytics, machine learning and automation will become increasingly important, which calls for increasing technology investments. The areas of digital advertising that are again expected to see the fastest growth are search engine, social media, mobile and video advertising as well as content marketing.
Outlook for 2020 (updated)
The uncertainty in Alma Media’s operating environment is continuing and visibility remains weak. Alma Media expects its full-year revenue and adjusted operating profit from continuing operations in 2020 to decline significantly from the 2019 level. In 2019, the full-year revenue of the continuing operations was MEUR 250.2 and the adjusted operating profit was MEUR 49.4.
Market situation in the main markets and the impacts of the coronavirus epidemic on Alma Media’s business
The COVID-19 crisis had a significant impact on advertising volume in the second quarter. According to Kantar TNS, the total advertising volume in Finland decreased by 38.2% (+4.8%) in April–June 2020, and the development of advertising in online media was also negative at 22.6% (+8.7%). Advertising in newspapers declined by 42.0%
(-3.2%) and magazine advertising declined by 30.0% (-1.7%). In terms of volume, the total market for afternoon papers in Finland declined by -21.9% (-4.9%) in the second quarter of 2020.
In addition to Finland, Alma Media’s main markets are the Czech Republic and Slovakia in Eastern Central Europe. According to the European Commission’s forecast, the restrictions introduced to reduce the spread of the coronavirus will result in a significant contraction in the GDP of these countries in 2020. The Commission published its latest GDP forecasts in July and its most recent unemployment forecasts in May 2020. The European Commission predicts that Finland’s GDP will decline by 6.3 per cent in 2020 and the unemployment rate will be 8.3 per cent. For 2021, the Commission predicts that Finland’s GDP will grow by 2.8 per cent and the unemployment rate will be 7.7 per cent. The Czech GDP is predicted to decline by 7.8 per cent this year and the unemployment rate is expected to rise to 5.0 per cent. The European Commission predicts a quick recovery in 2021: GDP growth of 4.5 per cent and an unemployment rate of 4.2 per cent. The European Commission forecasts that Slovakia’s GDP will decline by 9.0 per cent in 2020 and the unemployment rate will be 8.8 per cent. In 2021, the European Commission expects Slovakia to see GDP growth of 7.4 per cent and an unemployment rate of 7.1 per cent.
Impacts of the epidemic and measures taken by business segment:
Due to the coronavirus epidemic and economic uncertainty, customers significantly reduced their new recruitment and focused on carrying out only the most essential replacement recruitment. The online training business developed favourably during the coronavirus epidemic. The recruitment events organised by Alma Markets have been postponed until the autumn. During the period under review, the decline in Alma Markets’ recruitment revenue ranged from 16 per cent to 60 per cent depending on the country. The revenue of the recruitment business decreased by 29 per cent (MEUR 5.6) in the second quarter. However, customer invoicing during the corresponding period declined more steeply, -44%, which will weaken the development of revenue from the recruitment business in the second half of the year, as invoicing turns into revenue over the 1–12 months following the invoicing month. The Czech koruna has depreciated by about 4 per cent since the start of 2020, which reduces the euro-denominated result of the segment’s operations in the Czech Republic in spite of the fact that part of the future cash flows of the business have been hedged.
The epidemic also had a negative effect on the housing and automotive marketplaces business, but the start of the recovery has been faster than in the recruitment business. Competitive bidding services among housing-related services and rental advertising developed favourably during the coronavirus epidemic. In the housing and automotive marketplaces business, revenue decreased by 10% (MEUR 0.6) in the second quarter, but there were signs of recovery in June, with revenue from these businesses being on par with the comparison period.
In the second quarter, the Alma Markets segment’s cost savings compared to the corresponding period last year were MEUR 3.9, exceeding the previous estimate. The adjustment measures included a significant contraction of marketing investments, temporary layoffs, fixed-term reductions in pay within the limits of the applicable legislation, employee reductions and a reduction in the purchasing of external services. The marketing of the mobile recruitment service in Poland was significantly scaled down, recruitment consulting activities in the Baltic countries were contracted and the Workania business in Hungary was discontinued.
The recruitment market has shown slight signs of recovery since May, but the economic outlook remains very uncertain. The recruitment business as a whole is not expected to return to the pre-crisis level in 2020. There are indications of a gradual recovery in the housing and automotive marketplace business, but the business is highly dependent on the general economic development.
Advertising sales declined sharply due to the general uncertainty, with demand declining particularly in the automotive trade and recruitment advertising. At the same time, however, the coronavirus epidemic gave rise to growing demand for reliable and up-to-date information, which was reflected in significant growth in the audiences of Alma Talent’s media brands, especially in financial media, along with a corresponding positive development in content sales for subscription media. In response to the coronavirus restrictions, Alma Talent’s training activities were moved to digital channels for remote participation. Information services, book publishing, digital business premises services and telemarketing services brought stability to the segment’s operations. Alma Talent’s event business was contracted to a significant degree.
Alma Talent achieved MEUR 1.9 in cost savings in the second quarter relative to the comparison period, which exceeded the previous estimate of the cost savings to be accomplished. The adjustment measures included temporary layoffs of employees in the training business, employee reductions in the event business, exchanging bonus holiday pay for time off and having employees take previously accumulated time off. External service purchasing was also reduced and non-critical development projects were postponed.
In Alma Talent Finland’s media business, advertising revenue declined by -42% in the second quarter. In June, the advertising market recovered slightly and the decrease in advertising was -26 per cent. Due to the continued economic uncertainty, advertising is not expected to return to the comparison period’s level in 2020. The exceptional circumstances have led to higher demand for media content and the favourable development of content revenue is expected to continue.
In the Alma Consumer segment, advertising revenue declined due to the general uncertainty. Media advertising spending declined particularly in the automotive and travel sectors as well as among companies in the retail trade. The coronavirus-related restrictions and the closure of retail outlets selling magazines and newspapers in the travel industry, for example, had a negative impact on the single-copy sales of Iltalehti. There was a concurrent decline in the delivery and printing costs of print media. The unprecedented growth in Iltalehti’s audience levelled off slightly after the worst of the epidemic had passed. Visitor volumes for the second quarter as a whole were approximately 20 per cent higher than in the comparison period.
Alma Consumer’s cost savings in the second quarter totalled approximately MEUR 1.3, exceeding the previous estimate. Marketing costs were reduced in digital services. Employee expenses were reduced by having employees exchange bonus holiday pay for time off and take previously accumulated time off during the spring. External service purchasing was reduced and non-critical development projects were postponed.
The coronavirus epidemic reduced Alma Consumer’s advertising revenue by 32 per cent in the second quarter. While the advertising market recovered slightly in June, Alma Consumer’s advertising sales did not rebound to a significant degree. The single-copy sales of Iltalehti decreased by 13 per cent in the second quarter and by 10 per cent in June.
- Shared operations and financial position
The cost savings of shared operations amounted to MEUR 1.3 during the period under review. Costs were also affected by a year-on-year decrease in expenses associated with acquisitions and divestments as well as provisions related to incentive schemes.
The economic uncertainty caused by the coronavirus epidemic is causing a decline in Alma Media’s cash flow from operating activities, but the Group’s financial position nevertheless remains very strong. Credit loss risks did not increase substantially during the second quarter. There is currently no evidence of impairment risk concerning goodwill.
Alma Media is monitoring the development of the market situation in its business segments and additional measures will be taken as necessary.
From the President and CEO
Alma Media’s operating environment changed quickly during the early part of the year as the coronavirus epidemic spread globally and the authorities imposed restrictions on movement and business activity to reduce the spread of the disease and uncertainty increased to a significant degree. Alma Media’s revenue declined by 18.2 per cent in April–June to MEUR 52.5. Relative profitability remained on par with the comparison period with the operating profit margin at 18.7 per cent. The cost savings achieved in the second quarter exceeded the previously issued estimate and totalled MEUR 8.4.
The impact of the coronavirus epidemic was the hardest on the recruitment business. Revenue declined between 16 and 60 per cent depending on the country. The rate of decline was less sharp than expected in the Czech Republic, for example, where stability was brought by sales to small and medium-sized enterprises developing better than anticipated. The demand for recruitment services is now recovering to some extent, but the outlook remains unclear and a significant year-on-year decline in customer invoicing in April–June will have a negative impact on the development of revenue in the second half of 2020. The coronavirus epidemic also had an adverse effect on the housing and automotive marketplace business during the review period, although these businesses began to recover midway through the quarter. Thanks to significant cost savings of MEUR 3.9, particularly in marketing and employee expenses, the segment’s profitability remained at a good level (operating profit margin 36.3 per cent).
Alma Talent’s advertising revenue declined significantly, but the business was stabilized by other businesses, such as information services, book publishing, digital business premises services and direct marketing. The coronavirus crisis led to record-high growth in the demand for high-quality media content, with digital content revenue increasing by 46 per cent. The sale of Alma Talent AB to New Technology Media Group in June represents the continuation of the consistent process of exiting the traditional media business in Sweden and shifting the strategic focus more clearly to digital business and services. Thanks to cost savings of MEUR 1.9, the segment’s relative profitability was on par with the comparison period (operating profit margin 12.4 per cent).
In the Alma Consumer segment, advertising related to the automotive trade and travel declined particularly substantially. Advertising in general recovered slightly in June, but Alma Consumer’s advertising revenue has not rebounded to a significant degree as the market situation remains very challenging. The rate of decline in Iltalehti’s single-copy sales decreased slightly as a number of retail locations reopened and restrictions on movement were lifted. Among the segment’s digital services, the loan comparison service Etua.fi developed well during the review period. The visitor volumes of Iltalehti’s online service showed good growth in April–June, although growth levelled off after the epidemic subsided. The segment’s cost savings totalled approximately MEUR 1.3.
The exceptional circumstances continue and estimating the demand for media content and services remains challenging. To ensure our long-term success and profitability, we are preparing for the future by developing various scenarios and planning adjustment measures for each scenario. Thanks to our strong financial position, we are also very well prepared to take advantage of future growth opportunities. The past spring has reinforced our view that the digital strategy we have chosen and our expansion from media to digital services will continue to be the right path for us going forward.
Kai Telanne, President and CEO, telephone +358 (0)10 665 3500
Juha Nuutinen, CFO, telephone +358 (0)10 665 3873
News conference and live webcast
An analyst and media conference in English will be held on the same day at 11.00–12.00 EEST in the Alma House (address: Alvar Aallon katu 3 C, Helsinki). The report will be presented by President & CEO Kai Telanne and CFO Juha Nuutinen.
The conference can be followed also via https://almamedia.videosync.fi/2020-q2-results. To ask questions by phone during the live webcast, please join at least five minutes prior to the starting time by dialling one of the following numbers:
Finland Toll: +358 981710310
Sweden Toll: +46 856642651
United Kingdom Toll: +44 3333000804
United States Toll: +1 6319131422
To participate in the conference, kindly register beforehand by e-mail, email@example.com.
An on-demand version of the webcast and the presentation material will be available on the company’s website later on the same day www.almamedia.fi/en/investors/reports-and-presentations/presentations.
Alma Media’s financial calendar 2020
– Interim report for January–September 2020 on Thursday, 22 October 2020 at approximately 8:00 EEST
ALMA MEDIA CORPORATION
Board of Directors
Distribution: NASDAQ Helsinki, main media, www.almamedia.com
Alma Media in brief
Alma Media is a dynamic digital service business and media company with a strong capacity for renewal. The company’s best-known brands are Kauppalehti, Talouselämä, Iltalehti, Etuovi.com and Monster. Alma Media builds sustainable growth expanding its offering from media to related digital services fulfilling the needs of users’ everyday life as consumers and as professionals in business. Alma Media operates in 11 countries in Europe. Alma Media employs approximately 1,500 professionals. Alma Media’s revenue from continuing operations was EUR 250.2 million in 2019. Alma Media’s share is listed on NASDAQ Helsinki. Read more at www.almamedia.com