CEO's Review

Kai Telanne, President and CEO:

(Q2 Interim Report published on 21 July 2017)

Alma Media achieved a strong financial result in the second quarter. The Group’s adjusted operating profit grew by 34 per cent to MEUR 13.2. Profitability was improved by the continued excellent development of sales in the Alma Markets segment as well as cost savings generated by previously implemented restructuring measures in Alma Talent, Alma Regions and shared operations. Alma Media’s revenue grew by 2 per cent in April–June and amounted to MEUR 93.7.

The economic climate in Finland is the brightest it has been for several years and consumer confidence in economic development is the highest it has been since its measurement began. Nevertheless, the advertising market mostly developed in the opposite direction in the first half of the year. According to Kantar TNS, media advertising volume declined by 7.1 per cent in April–June. One of the bright spots in the subdued advertising market has been online advertising, which grew by 1.3 per cent over the same period. Alma Media’s growth in digital advertising sales has outpaced the market.

In the Alma Markets segment, the adjusted operating profit grew by 45 per cent to reach the record-high level of MEUR 7.3. Our business in the Czech Republic was particularly successful. The growth of our marketplaces in Finland was attributable to active marketing efforts and online service development as well as the favourable economic cycle. The segment’s result was also improved by lower depreciation. 

Alma Talent’s adjusted operating profit remained almost on a par with the comparison period, at MEUR 3.3, thanks to cost savings achieved in the segment. Revenue was reduced by discontinued operations in the service business as well as the decline of print media subscription revenue and book sales. The new entity created by the integration of Talentum has a comprehensive reach among decision-makers, investors, entrepreneurs and other professionals in Finland and Sweden and it provides opportunities for the development of new multi-channel services.  

The digital transformation of Alma News & Life has progressed rapidly and digital revenue, which increased by 30 per cent year-on-year in the second quarter, now accounts for more than 50 per cent of the segment’s total revenue. Adjusted operating profit grew by 32 per cent to MEUR 2.4. The strong profit performance was particularly attributable to programmatic ad buying and mobile advertising. The single copy sales of afternoon papers continued to decline.

The second quarter was a challenging one for Alma Regions. The segment’s advertising revenue declined in spite of advertising related to the municipal elections in April. The retail sector, in particular, has reduced its spending on print media advertising. Content revenue, on the other hand, grew thanks to the good sales of online content. Service revenue was increased by growth in the external revenue of printing operations. The segment’s adjusted operating profit declined by 11 per cent to MEUR 2.0. 

Alma Media’s strong cash flow improved the Group’s financial position further. The equity ratio stood at 48.7 per cent at the end of June, while gearing was 31.0 per cent. The strong balance sheet provides us with a solid foundation for accelerating our growth and building an even more competitive media and service company.

It is unfortunate that the meeting of the EU’s finance ministers in June did not yet reach a unanimous decision on lowering the value added tax rate of digital publications to match that of print publications. The Finnish government has confirmed it is prepared to make the corresponding decision in its autumn budget session, provided that permission from the EU is obtained before that time. The change, which could potentially enter into force at the beginning of 2018, would be a step towards appropriate taxation that would support the development of Finnish media companies, which are important for democracy, as well as the creation of multi-channel media consumption experiences for customers. The government’s supplementary budget decision on a narrowly targeted news subsidy, on the other hand, is problematic. In practice, the subsidy would only be directed at one media outlet. 

One of the bright spots in the subdued advertising market has been online advertising, which grew by 1.3 per cent over the same period. Alma Media’s growth in digital advertising sales has outpaced the market.