CEO's Review

 

Kai Telanne, President and CEO:

(published 25 April 2018)

The strong growth of the Finnish economy continued during the reporting period, and consumer confidence was high. The positive general economic development in the first quarter did not, however, result in a turn to growth in the domestic advertising market. According to Kantar TNS, media advertising volume declined by 2.3 per cent in the first quarter, with newspaper advertising decreasing by 11.0 per cent. Online advertising saw continued growth at a rate of 6.9 per cent.

The fact that the market developed in two different directions was also reflected in Alma Media’s business in the first quarter of 2018. The revenue and profitability of Alma Media’s businesses the furthest in digital transformation continued to see growth during the review period, but the result of print media businesses declined due to the weaker advertising market. Alma Media’s revenue grew by 1.8 per cent to reach MEUR 92.2, while the Group’s adjusted operating profit decreased by 3.0 per cent to MEUR 12.2.

In the Alma Markets segment, growth was again driven by the favourable international operating environment, strong market position and successful sales work in Eastern Central Europe and domestic marketplaces. The segment’s expenses were increased by the expansion of the Czech subsidiary LMC’s business into Poland as well as investments in sales, marketing and the renewal of online services, such as the Etuovi mobile service.

The development of Alma Talent’s operations in Finland was affected by a significant decrease in advertising revenue compared to the exceptionally strong reference period of January–March 2017. The decrease was due to a decline in advertising spending of a few key industries in decision-maker and financial media. The segment’s financial performance in Sweden was also influenced by declining advertising revenue in trade media. In the Finnish media business, digital content revenue and digital subscriptions increased in line with expectations, which compensated for the decline in print media content revenue.

In Alma News & Life, the digital transformation is continuing swiftly, with digital business now representing 55 per cent of the segment’s revenue. January–March was the segment’s tenth consecutive quarter of increasing advertising revenue. The growth of the segment’s advertising revenue outpaced the market and growth was achieved across all channels. The change in consumers’ media consumption habits was reflected in strong growth in video advertising, among other things. As expected, the single-copy sales of print media continued to decline. Costs were increased by the development of online services as well as investments in sales and marketing.

In the Alma Regions segment, advertising revenue decreased as advertising spending in the retail sector continued to decline. Content revenue from digital customers has seen positive development, which is evidence of the successful shaping of content and services to create a digital era customer experience. Our decision to sell Lapin Kansa’s media and distribution business to Kaleva is in the best interests of all of the parties concerned, and it offers improved opportunities for the further development of the newspaper business in Northern Finland.

Our plan, announced in March, to combine the Alma News & Life and Alma Regions business segments into Alma Consumer, a new unit with a strong focus on consumer media, will facilitate closer cooperation within Alma Media and, above all, improve our customer insight and capacity to serve Finnish media consumers and advertisers. We will continue to accelerate the digital transformation of our content, services and advertising at all levels: nationally, regionally and locally.

Alma Media is in a strong financial position with good cash flow. The equity ratio stood at 47.8 per cent at the end of March, while gearing fell to 25.4 per cent. The strong balance sheet provides a strong foundation for investments and Alma Media’s growth.

Consumer trust in our content and services is absolutely essential for Alma Media’s operations. One of our key priorities is to ensure transparency and fairness in the way we process customer information. We have taken steps to prepare for the General Data Protection Regulation (GDPR) to become applicable at the end of May. These steps include, among other things, allocating resources to and revising our data management and handling processes as well as arranging training for our employees and advertisers.

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The revenue and profitability of Alma Media’s businesses the furthest in digital transformation continued to see growth during the review period, but the result of print media businesses declined due to the weaker advertising market.