ALMA MEDIA INTERIM REPORT JANUARY - JUNE 1998

ALMA MEDIA CORPORATION STOCK EXCHANGE BULLETIN 10 August 1998 1.00pm ALMA MEDIA INTERIM REPORT JANUARY-JUNE1998 Alma Media’s net sales for January to June 1998 totalled MFIM 1,429 (1997: MFIM 1,366). The Group’s operating profit was MFIM 132 (MFIM 151). The solvency ratio was 52 % (47 % on 31 December 1997). Alma Media Corporation began operating on 1 April 1998 On 1 April 1998 Aamulehti Corporation and MTV Corporation merged to form a new mass communications company called Alma Media Corporation. The shares of both companies were converted into Alma Media shares, which have been quoted on the Helsinki Stock Exchange since the beginning of April. The merger was effected using the pooling method and therefore the two companies have operated with a single set of accounts since the beginning of 1998. This interim report presents Alma Media Corporation’s consolidated income statement for the period 1 January to 30 June 1998 and the consolidated balance sheet at the end of the period. The per share data are the per share data for Alma Media Corporation and are based on the January - June figures for the Alma Media Group. The comparative data in 1997 are pro forma figures for the Alma Media Group. Business environment The Finnish economy continued to grow strongly, which was also positively reflected in demand for media advertising and printed products. For the first time since 1990 the circulations of Finnish daily newspapers (those appearing 4-7 times a week) increased on average. Paper prices were almost 5 % higher, depending on the grade, than in the same period last year. Demand for printed products in Russia showed further growth, which had a healthy impact on capacity utilization in Finland. According to Addfacts Ltd, expenditure on media advertising in Finland rose 13 % to FIM 2.7 (2.4) billion on the same period in 1997. Newspaper advertising increased 14 %, magazine advertising 24 % and TV advertising 5 %. Radio advertising grew 19 % after the start-up of the nationwide Radio Nova channel. Consolidated net sales and profit Consolidated net sales in the January - June period totalled FIM 1,429 (1,366) million, up 5 % on the same period last year. This was especially attributable to a strong increase in Aamulehti’s advertising revenue and to a sharp growth in delivery volumes by Alprint Magazine Printing Group Ltd both in Finland and to Russia. The unpredicted high load experienced by Alprint Magazine Printing Group Ltd increased subcontracting and payroll costs, which reduced profitability during the second quarter. Sales of MTV’s advertising time were 4 % down on the comparative period. Exports accounted for FIM 200 million or 14 % of consolidated net sales (FIM 159 million and 12 %). The Group’s share of principal associated companies’ results was FIM -4 (2) million. The Swedish TV4 AB’s share of this figure was FIM -5 million, which is included in MTV Oy’s result. During the review period MTV Oy acquired Alma Media Corporation’s 18.4 % holding in TV4 AB, which brings MTV Oy’s stake in TV4 AB to 23.4 %. Oy Suomen Uutisradio Ab recorded a small profit in the January - June period, which was better than forecast. Operating expenses and depreciation together totalled FIM 1,315 (1,229) million, which was 7 % higher than in the comparative period. Besides the growth in operating volume, costs were also pushed up by heavier investments in Kauppalehti and Iltalehti and by the one-time costs arising from the merger during the period. Group depreciation totalled FIM 85 (85) million. The consolidated operating profit was FIM 132 (151) million. Alpress’s operating profit increased FIM 9 million. Alprint’s operating profit decreased FIM 16 million, which included FIM 13 million transferred to Alpress following a change in pricing of printing services during the period. MTV’s operating profit decreased FIM 13 million. The Group’s net financial expenses came to FIM 8 (0) million. FIM 6 million of this increase was due to the acquisition of the TV4 AB shares subsequent to the comparative period. There were no extraordinary items during the period. Extraordinary items in the comparative period totalled FIM 37 million. FIM 35 (39) million in tax was deducted from the Group’s profit, which corresponds to the current tax rate. The Group’s net profit was FIM 87 (145) million and earnings per share were FIM 5.52 (7.34). Balance sheet The balance sheet totalled FIM 2,350 million on 30 June 1998 (FIM 2,450 million on 31 December 1997). The solvency ratio was 52 % (47 % on 31 December 1997) and shareholders’ equity per share was FIM 72.27 (FIM 70.50 on 31 December 1997). Capital expenditure The Group’s capital expenditure totalled FIM 73 (57) million, which included FIM 63 million for maintenance and replacement investments in fixed assets. The largest single item, FIM 11 million, involved the transfer of Iltalehti’s printing operation from Alprint Kaivoksela to Alprint Tampere. Other investments related mainly to shares in fixed assets. Financing Liquid reserves totalled FIM 139 million at the close of the review period (FIM 212 on 31 December 1997). Interest-bearing debt amounted to FIM 612 million at the end of June (FIM 736 million on 31 December 1997), including FIM 15 million (FIM 227 million on 31 December 1997) in foreign currency loans which were hedged against exchange rate risks. Gearing was 42 % (47 % on 31 December 1997). Shares The Aamulehti Corporation and MTV Corporation shares were converted into Alma Media Corporation shares on 31 March 1998, after which the Aamulehti Corporation shares were no longer traded on the Helsinki Stock Exchange. The Alma Media Corporation shares were quoted from 1 April 1998 correspondingly. Altogether 99.9 % of the new Alma Media Corporation shares had been registered by the end of June. Alma Media Corporation’s share capital is FIM 157 million. FIM 68 million of this comprises Series I shares and FIM 89 million Series II shares. At the end of June 39.4 % of all the Company’s shares were held in nominee accounts or owned by foreigners. Alma Media Corporation’s Board of Directors has no authorization to increase the share capital. Personnel The Group had 2,862 (2,811) employees on average during the period and an additional 982 (963) part-time newspaper delivery staff. Alpress Total circulation figures for Finnish newspapers rose for the first time in several years. Circulations of Alpress’s newspapers improved better than the average. A competitor to Kauppalehti entered the Finnish market for business dailies in November 1997. Kauppalehti’s circulation increased 1.2 % and exceeded 80,000, despite the added competition. Aamulehti’s weekday circulation increased 1.2 % and its Sunday circulation 1.4 %. Satakunnan Kansa’s circulation was up 0.6 %. The only major Alpress newspaper to record a fall in circulation was Lapin Kansa, albeit only 0.3 %. Iltalehti’s format and printing arrangements were renewed at the beginning of April. The format was changed from eurotabloid to tabloid. At the same time printing of the daily edition was moved from Vantaa to Tampere and Jyväskylä and printing of the weekend edition was transferred to Pori. These changes were accompanied by substantial additions to the newspaper’s editorial resources. Iltalehti’s circulation will be audited in August. The afternoon newspaper market grew 4.9 % between January and June and Iltalehti achieved a slight gain in market share on its competitor. Alpress’s circulation revenue increased almost 3 % to FIM 240 (234) million. According to Addfacts Ltd, the volume of media advertising in Finnish newspapers increased 11 % and advertising expenditure 14 % between January and June , compared to the same period in 1997. Alpress’s advertising revenue was FIM 284 (258) million, 10 % up on the comparative period. Aamulehti’s advertising revenue increased 17 %, Lapin Kansa’s 12 % and Satakunnan Kansa’s 8 %. The advertising revenue of the Paikallissanomat group’s newspapers rose 8 % and Kauppalehti’s 7 %, while. Iltalehti’s remained at the comparative period’s level. Almost exactly half of the increase in Alpress’s advertising revenue was the result of higher advertising volumes. Consumer advertising showed the strongest surge. Alpress’s net sales rose 7 % to FIM 536 (503) million and the operating profit to FIM 77 (68) million. The best result was posted by the Aamulehti newspaper, although Lapin Kansa’s result also developed positively. Kauppalehti’s advertising and circulation revenues improved better than expected. Kauppalehti has invested heavily in the newspaper’s content as well as in customer service and marketing. These investments reduced Kauppalehti’s profitability compared to the same period in 1997 but it is still good. Iltalehti’s result for the review period was somewhat weaker than one year earlier owing to investments in content and marketing and to the costs arising from the change in printing location. Satakunnan Kansa and the Paikallissanomat group showed unchanged levels of profitability. Alpress’s result is expected to continue to develop positively during the remainder of the year. In June Alpress acquired 25 % of Suomen Lehdentekijät Group Oy, which publishes customer and corporate magazines. It has net sales of approximately FIM 40 million and 24 employees. MTV Television accounted for 22 % (23 %) of media advertising during the first half of the year. MTV3 Channel’s share of television advertising was 88 % (96 %) and of total media advertising 19 % (22 %). MTV’s sales of advertising time totalled FIM 524 (545) million, which was 4 % less than one year ago. MTV’s net sales totalled FIM 545 (568) million. The reasons for the decrease were the new competitive situation and a change in the system for pricing advertising. This system, introduced at the beginning of the year, enabled advertisers, contrary to previous practice, to receive volume discounts and other related benefits from the beginning of the year. Other operating income was FIM 4 (9) million. MTV posted an operating profit of FIM 55 (68) million. MTV3 Channel’s viewing time remained at the level of 42 %. According to a TV measurement survey performed by Finnpanel Oy, the channel was most successful in reaching 10- to 24-year-olds and 25- to 44- year-old female viewers. MTV3 Channel reached almost half of both these sought-after groups. A study performed in May 1998 by Gallup Finland to determine the appeal and image of Finland’s TV channels indicated that 51 % of the Finnish population, and 77 % of 15- to 24-year-olds, switched on to MTV3 Channel if they did no know what was on television. The corresponding figures for the other channels were YLE1 29 %, YLE2 8 % and Nelonen 4 %. MTV3 Channel signed three major multiyear programme contracts for foreign films and television series. The contracts were made with Twentieth Century Fox International (USA), British Independent Television Enterprises, BRITE (U.K.) and Southern Star in Australia. MTV3 Channel’s total transmission time was 3,498 hours; it comprised 2,895 hours of programme time, 443 hours of advertising time and 160 hours of other items. Transmission time was increased by about 10 % on the previous year. Of total programme time, 33 % was produced by MTV itself, 16 % by other Finnish producers, and 51 % by foreign producers. European content accounted for 52 % of the total. An increase in the volume of annual contracts for advertising time is expected to raise net sales of advertising time during the remainder of the year. MTV’s full-year result is expected to remain on a par with last year’s level. Alprint Overall demand for graphic products is clearly increasing, especially in Russia and Finland. This growth has been most pronounced in magazines and printed promotional products. The change in pricing governing Alprint and Alpress reduced Alprint’s operating profit by FIM 13 million. Paper prices this year have been roughly 5 % higher on average than last year. Alprint’s net sales increased 12 % to FIM 469 (420) million. Exports rose 26 % but intragroup invoicing fell 6 %. Deliveries to other domestic customers increased 13 %. Exports accounted for 43 % (38 %) of Alprint’s net sales. The increase in exports of printed products to Russia has clearly raised capacity levels. No significant changes were noted in the Russian market during the second quarter. Competition in the Western markets continues to be stiff. Alprint’s operating profit was FIM 22 (38) million. In addition to the change in internal pricing policy which reduced the Newspaper Printing Group’s performance, the operating profit was also adversely affected by a weakening of the Magazine Printing Group’s gross profit and an increase in raw material costs. Export growth and a sharp increase in demand for printing of promotional products in the domestic market caused bottlenecks in the Magazine Printing Group’s production processes. As a result of increased overtime and subcontracting the Magazine Printing Group’s result was weaker than in the comparative period, despite the increase in its net sales. Profitability declined, especially in Western exports. Alprint Magazine Printing Group’s net sales increased 23 % to FIM 257 (209) million. Domestic net sales rose 21 % and exports 24 %. The growth in exports was the result of stronger sales in Russia. Alprint Newspaper Printing Group’s net sales increased one per cent to FIM 214 (212) million. Exports, principally to Russia, rose 30 %. Intragroup net sales fell 6 % and net sales to other domestic customers fell 9 %. Alprint’s profitability is expected to improve during the remainder of the year. Despite the increase in net sales, the result for the full year is expected to remain weaker than last year, even including the change in internal pricing. In April Alprint announced a three-year investment programme aimed at safeguarding its competitive strength. The programme involves upgrading technically outdated production machinery and rationalizing the production processes, and will not introduce new capacity to the market. The programme includes replacing the Kaivoksela newspaper rotation press, rationalization and modernization of the Magazine Printing Group’s production machinery, and an analysis to establish the feasibility of starting production in Russia. Kaivoksela’s new four-colour combination press will replace the outdated hybrid newspaper rotation press started up in 1980. The investment is scheduled for implementation in 1998 - 2000 and, including construction work, will cost around FIM 140 million. The second part of the investment programme calls for the modernization of Alprint Magazine Printing Group’s entire production facilities to enhance their competitiveness. These investments, which will be implemented between 1998 and 2001, will total approximately FIM 90 million. Various alternatives for starting production in Russia will be examined by the end of the current year. Parent company and other operations The figures include Aamulehti Corporation (1 January - 31 March 1998), Alma Media Corporation (1 April - 30 June 1998) and other operations including Alexpress Oy and the Group’s local radio broadcasting activities. These operations generated net sales of FIM 39 (38) million and an operating loss of FIM 16 (-19) million. Associated companies Alma Media’s principal associated companies are TV4 AB (23 %) in Sweden and Oy Suomen Uutisradio Ab (48 %). The Group’s other major associated companies and its holdings in them are as follows: Pohjolan Sanomat Oy (44 %), the Finnish News Agency (28 %), Alcap Group (28 %) and Tampereen Tietoverkko Oy (35 %). TV4 AB’s net sales between January and June totalled 1,002 (870) million Swedish krona, an increase of 15 %. The operating profit was 36 (51) million Swedish krona, the decrease being caused mainly by single payments in connection with the change of management, an increase in the cost of local television and a loss recorded by the Internet company. Radio Nova (Oy Suomen Uutisradio Ab) became operational on 12 May 1997 and in less time than forecast has achieved both its financial and listener targets. Nova has become the most popular radio channel among young adult listeners, more than one million of whom tune in on the best days. Radio Nova’s net sales between January and June were FIM 27 million and its operating result was marginally positive. Network business Alma Media’s network business sector includes MTV3 Internet, the electronic newspaper editions of the Alpress publications, digital media development, technology for the distribution and maintenance of network products, and electronic trading trials. Alma Media invests some FIM 15 - 20 million in its network operations annually. A study of Internet home pages performed by Taloustutkimus in spring 1998 indicated that MTV3’s Internet pages are the most popular in Finland with 50 % of Internet users having visited them. About 100,000 Finns use Alma Media’s Internet services daily. According to Addfacts Ltd Internet advertising grew 81 % compared to the same period last year. Alma Media’s market share of Internet advertising is almost 40 %. Short-term prospects The media markets are forecast to continue growing to the end of the year. Alpress is expected to return a distinctly better result than last year and MTV to remain at last year’s levels, but Alprint’s result is expected to remain notably weaker. Financing of the acquisition of the TV4 AB shares will increase the Group’s financial expenses. Alma Media Group’s net sales are expected to increase. Additional spending behind Kauppalehti, Iltalehti and MTV contributed to maintain and even increase market shares in the new, more competitive situation. This has, however, also increased costs. The Group will continue these efforts during the second half of the year and therefore the decrease in operating profit in the first half of 1998 is not expected to be recovered in the full year results. The figures in this interim report are unaudited. Alma Media Corporation will publish its January - September interim report on 6 November 1998. ALMA MEDIA CORPORATION BOARD OF DIRECTORS ALMA MEDIA CORPORATION Ahti Martikainen Vice President, Corporate Communications Further information: Mr Matti Packalén, CEO, tel. +358 (0)9 507 8715 Ms Ritva Sallinen, CFO, tel. +358 (0)9 507 8708 Distribution: Helsinki Stock Exchange Principal Media ALMA MEDIA (1997 FIGURES PRO FORMA) CONSOLIDATED INCOME STATEMENT (MFIM) NET SALES (NS) 1,429 1,366 2,727 Share of profits of associated companies -4 2 5 Other operating income 22 12 25 Expenses -1,315 -1,229 -2,487 OPERATING PROFIT 132 9.2 151 11.1 270 9.9 Financial income and expenses-8 0 -2 PROFIT BEFORE EXTRAORDINARY ITEMS 124 8.7 151 11.1 268 9.8 Extraordinary items 37 32 PROFIT BEFORE TAXES AND MINORITY INTERESTS 124 8.7 188 13.8 300 11.0 Taxes -35 -39 -66 Minority interests -2 -4 -3 NET PROFIT 87 6.1 145 10.6 231 8.5 NET SALES AND OPERATING PROFIT (MFIM) I/97 II/97 III/97 IV/97 1997 Net sales 649 717 595 766 2,727 Operating profit 50 101 39 80 270 I/97 II/98 Net sales 694 735 Operating profit 45 87 CONSOLIDATED BALANCE SHEET (MFIM) ASSETS FIXED ASSETS Intangible assets 86 101 93 Goodwill on consolidation 94 110 100 Tangible assets 944 996 978 Investments 654 124 663 CURRENT ASSET Inventories 173 122 158 Receivables 260 252 246 Cash and bank receivables 139 281 212 CONSOLIDATED BALANCE SHEET (MFIM) SHAREHOLDERS’ EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY 1,137 991 1,109 MINORITY INTERESTS 22 32 20 OBLIGATORY PROVISIONS 5 5 6 LIABILITIES Long-term 536 377 304 Current 650 581 1,011 CAPITAL EXPENDITURE (MFIM) Gross capital expenditure on fixed assets 73 57 661 GROUP CONTINGENT LIABILITIES (MFIM) Against own debt Pledges 10 21 402 Mortgages on land and buildings 252 151 252 Chattel mortgages 141 142 141 Guarantees 2 4 2 On behalf of associated companies Guarantees 4 4 7 On behalf of others Guarantees 1 Other own commmitments Leasing commitments 11 10 10 Buyback commitments 44 44 44 Other commitments 1 Total 464 378 858 Group leasing payments falling due (MFIM) Between 1 July and 31 Dec. 1998 3 2 4 After 1998 8 8 6 DERIVATIVE INSTRUMENTS Foreign currency loans totalling FIM 15 million were hedged against exchange rate fluctuations using forward contracts and currency swaps. The exchange rate differences on loans and the derivative results compared to the balance sheet exchange rates are entered under Other Financial Income and Expenses. PLEDGES The TV4 AB shares held as loan collateral were no longer pledged at the end of the period. NET SALES BY DIVISION (MFIM) Alpress 536 503 1,014 MTV 545 568 1,079 Alprint 469 420 888 Parent company and other operations 39 38 76 Intragroup sales -160 -163 -330 Total 1,429 1,366 2,727 OPERATING PROFIT BY DIVISION (MFIM) Alpress 77 68 130 MTV 55 68 96 Alprint 22 38 88 Parent company and other operations -16 -19 -44 Group entries -6 -4 Total 132 151 270 AVERAGE PERSONNEL BY DIVISION Alpress 1,053 1,073 1,068 MTV 721 686 681 Alprint 970 953 963 Parent and other companies 118 99 106 Total 2,862 2,811 2,818 In addition part-time newspaper delivery staff 982 963 970 PER SHARE DATA, FIM Earnings per share 5.52 7.34 12.71 Shareholders’ equity per share 72.27 66.09 70.50 10 PRINCIPAL SHAREHOLDERS ON 30 JUNE 1998 Series I Series II Total % % sharesvotes 1. Tidnings AB Marieberg 1,549,155 2,089,523 3,638,678 23.1 22.9 2. United Magazines Ltd 914,636 1,114,778 2,029,414 12.9 13.4 3. Nokia Group 390,993 520,219 911,212 5.7 5.7 - Nokia Oyj 151,276 201,274 352,550 2.2 2.2 - Nokia Mobile Phones 150,450 200,175 350,625 2.2 2.2 - Nokia Telecommunications 59,000 78,500 137,500 0.9 0.9 - Nokia Multimedia Network Terminals Oy 30,267 40,270 70,537 0.4 0.4 4. Pohjola Group 422,579 120,887 543,466 3.4 5.7 - Pohjola Insurance Company Ltd 350,469 65,940 416,409 2.6 4.7 - Pohjola Life Assurance Company Ltd 47,089 32,560 79,649 0.5 0.7 - Suomi Mutual Life Assurance Company 25,021 22,387 47,408 0.3 0.4 5. C V Åkerlundin fund 276,810 15,419 292,229 1.9 3.6 6. Ilmarinen Pension Insurance Company Ltd 243,087 214,169 457,256 2.9 3.4 7. Pension Varma Mutual Insurance Company 228,898 228,898 1.5 3.0 8. Industrial Insurance Company Ltd 193,197 137,180 330,377 2.1 2.7 9. The Local Government Pensions Institution 104,170 246,200 350,370 2.2 1.7 10. Federation of Finnish Textile and Clothing Industries 128,600 128,600 0.8 1.7 Total 4,452,125 4,458,375 8,910,500 56.5 63.8 Nominee-registered 216,164 2,345,776 2,561,940 16.3 5.9 Others 2,103,297 2,154,323 4,257,620 27.2 30.3 Total 6,771,586 8,958,474 15,730,060 100.0100.0
  • Date: 10.8.1998, 08:00
  • News type: Stock exchange release

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