CEO's Review

Kai Telanne, President and CEO:

21 April 2020

The development of Alma Media’s business was stable in the early part of 2020. The revenue and adjusted operating profit of the Group’s continuing operations was on a par with the previous year in the first quarter. 

The rapid progress of the coronavirus pandemic has been reflected in Alma Media’s operations since March. Immediately after the epidemic escalated, we implemented special precautions to protect the health and well-being of our employees and customers and to ensure the continued functionality of our services. At present, we are producing our services remotely for the most part, and we have been able to adjust to the exceptional circumstances without any service disruptions. 

The substantial changes in the operating environment and our markets caused by the epidemic creates significant uncertainty for our business in the coming months. We estimate that the epidemic reduced our revenue by approximately MEUR 2 in March 2020. We have initiated measures to adjust our operations and we expect these measures to yield approximately MEUR 6 in cost savings in the second quarter. The duration and depth of the economic slump caused by the crisis remain to be seen. We maintain a constant readiness to take additional measures to protect our future profitability and competitiveness. The impacts of the coronavirus epidemic on our business segments and the measures we are taking to mitigate the impacts are described in more detail above, on pages 2–3 of this Interim Report.

The recruitment business of the Alma Markets segment performed well in January–February and developed in line with our plans. The impact of the coronavirus epidemic was seen since March in the form of declining revenue as the demand for recruitment advertising and services slowed down significantly in the Group’s operating countries, especially in Finland and Slovakia. The development of the housing and automotive marketplace and system business was stable during the review period. While the coronavirus epidemic also has a clear negative impact on that business, the effects are likely to be smaller than in the recruitment business. The profitability of Alma Markets was on a par with the previous year in the first quarter, as the segment had already taken steps to prepare for slower economic growth in the early part of the year by implementing stricter cost control. 

The Alma Talent segment continued its rapid move towards digital media and service business models during the review period: digital business grew to account for 42% of the segment’s revenue. The significant increase in demand for up-to-date and relevant financial news saw digital content revenue in Finland reach a record level with growth of 33.9%. Content sales also developed favourably in Pro’s digital business. The positive development seen in advertising and the training business in the early part of the year took a downward turn in March due to the coronavirus epidemic. Alma Talent’s revenue during the review period was weighed down primarily by a decline in the revenue of the Swedish media business and the effect of the Affärsvärlden divestment. Profitability was on a par with the previous year. Expenses were reduced by divestments, cost saving measures implemented in Sweden and the restructuring of Alma Talent Pro. 

The digital advertising revenue of Alma Consumer’s national consumer media, Iltalehti, was at a good level during the early part of the year, with content marketing growing in particular. In March, advertising related to the automotive trade and travel, for example, declined due to the epidemic. Content revenue was on a par with the comparison period. This was supported in part by the change in value added taxation that entered into force in July 2019, but the trend of falling single-copy sales sharpened towards the end of the review period as many sales outlets closed due to the restrictions imposed by the authorities. The number of visitors to Iltalehti’s online service was at a record-high level during the early part of the year, and visitor volumes have continued to show exceptionally strong growth due to the high interest in coronavirus news.

The most significant business event during the review period was the sale of Alma Media’s regional news media business and printing business to Sanoma. The transaction will be finalised in late April. In discontinued operations, the decline of print media advertising sales continued in January–March, with the epidemic having a significant impact on advertising revenue in March. Revenue from discontinued operations was also reduced by the outsourcing of delivery operations to Posti and the decline of print revenue.

Thanks to our digital transformation, profitable growth and successful acquisitions and divestments, our financial position is very strong and our balance sheet was nearly free of net debt at the end of the review period. 

In the prevailing exceptional circumstances, the consumption of digital content and services has grown significantly. The epidemic is expected to change consumer behaviour and also accelerate the demand for digital services aimed at businesses. Buying a home digitally may soon be the prevailing practice. At the same time, working life is undergoing a transformation. Virtual solutions for working, organising events and studying online have become part of people’s daily life. The current crisis opens up new growth opportunities for companies with strong digital competencies. 

In the past quarter, the growth in digital content sales exceeded the decline in print media content sales for the first time at the Group level.