Alma Media Corporation Interim Report 22 October 2020 at 8:00 a.m. (EEST)
ALMA MEDIA’S INTERIM REPORT JANUARY–SEPTEMBER 2020: In Q3, profitability at the level of the comparison period despite the decline in revenue
Financial performance July–September 2020:
- Revenue from continuing operations MEUR 54.0 (58.2), down 7.4%.
- Adjusted operating profit from continuing operations MEUR 13.2 (13.5), down 2.3%.
- Operating profit from continuing operations MEUR 13.2 (13.6), down 3.2%.
- Earnings per share from continuing operations EUR 0.12 (0.12).
- Earnings per share including discontinued operations EUR 0.11 (0.14).
- The Group has a strong financial position, with net cash totaling MEUR 65.9 at the end of September, while the gearing ratio was -25.4%.
- Alma Markets: The decline of the recruitment business slowed down, while the growth of competitive tendering services and housing rental services mitigated the decrease in profitability.
- Alma Talent: Revenue increased and profitability improved, excluding the effect of the divested business operations in Sweden.
- Alma Consumer: The recovery of advertising and cost savings mitigated the decline of profitability.
Financial performance January–September 2020:
- Revenue from continuing operations MEUR 168.3 (184.5), down 8.8%.
- Adjusted operating profit from continuing operations MEUR 34.2 (36.9), down 7.4%.
- Operating profit from continuing operations MEUR 32.3 (36.9), down 12.4%.
- Earnings per share from continuing operations EUR 0.26 (0.31).
- Earnings per share including discontinued operations EUR 1.08 (0.39).
|Content revenue, print||8.9||11.6||-23.5||31.5||37.1||-15.2||50.9|
|Content revenue, digital||4.3||3.3||29.5||12.4||9.6||30.0||13.2|
|Advertising revenue, print||2.2||3.4||-35.3||7.6||11.6||-34.4||16.3|
|Advertising revenue, digital||28.3||31.4||-9.9||85.9||98.5||-12.9||132.2|
|Adjusted total expenses||41.0||44.8||-8.5||134.6||147.7||-8.9||201.1|
|Adjusted operating profit||13.2||13.5||-2.3||34.2||36.9||-7.4||49.4|
|% of revenue||24.5||23.2||20.3||20.0||19.8|
|Operating profit (loss)||13.2||13.6||-3.2||32.3||36.9||-12.4||49.5|
|% of revenue||24.4||23.3||19.2||20.0||19.8|
|Profit for the period||11.5||11.8||-2.9||25.8||30.2||-14.6||40.5|
|Earnings per share, EUR (basic and diluted)||0.12||0.12||-2.7||0.26||0.31||-16.3||0.41|
|Digital business revenue||38.5||40.1||-4.0||116.0||123.9||-6.4||166.7|
|Digital business, % of revenue||71.3||68.8||68.9||67.2||66.6|
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 (unchanged)
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
According to Kantar TNS, the total advertising volume in Finland decreased by 16.9 % (0.0%) in July–August 2020, while the development of advertising in online media was also negative at 6.2% (+10.1%). Advertising in newspapers declined by 22.8 % (13.0 %) and magazine advertising declined by 26.8 % (11.3 %). In terms of volume, the total market for afternoon papers in Finland declined by 16.4% (-9.2%) in the third 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% in 2020 and the unemployment rate will be 8.3%. For 2021, the Commission predicts that Finland’s GDP will grow by 2.8% and the unemployment rate will be 7.7%. The Czech GDP is predicted to decline by 7.8% this year and the unemployment rate is expected to rise to 5.0%. The European Commission predicts a quick recovery in 2021: GDP growth of 4.5% and an unemployment rate of 4.2%. The European Commission forecasts that Slovakia’s GDP will decline by 9.0% in 2020 and the unemployment rate will be 8.8%. In 2021, the European Commission expects Slovakia to see GDP growth of 7.4% and an unemployment rate of 7.1%.
Impacts of the epidemic and measures taken by business segment:
- Alma Markets
During the review period, the number of COVID-19 cases began to increase again in Alma Career’s operating countries after a quieter period. However, the local authorities did not set as strict restrictions on business activities as they did in the spring. This was reflected in the operating environment being somewhat stabilised in July–September. The revenue of the recruitment business decreased by 16% in the third quarter, compared to a 29% decline in the second quarter. The decline in Alma Markets’ recruitment revenue ranged from 13–36% depending on the country. Customer invoicing has begun to recover from the significant decline seen in the second quarter, but the recognition of the related revenue involves a delay, which means that the revenue performance of the recruitment business will continue to be negatively affected until the first half of 2021. The Czech koruna has depreciated by about 6% 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 online training business continued to develop favourably during the review period.
In the housing and automotive marketplace business, revenue was slightly higher than in the comparison period thanks to the positive development of competitive tendering services and rental advertising in housing-related services.
In the third quarter, the Alma Markets segment’s cost savings compared to the corresponding period last year were MEUR 1.4. The cost savings were achieved through reductions in marketing investments, fixed-term reductions in pay within the limits of the applicable legislation and a reduction in the purchasing of external services.
As the second wave of the COVID-19 epidemic increases in intensity, the economic outlook in Alma Career’s operating countries remains highly uncertain and the recruitment business is not expected to return to the pre-crisis level in 2020. There are signs of a gradual recovery in the housing and automotive marketplace business, but the business is highly dependent on the general economic development.
- Alma Talent
The sharp decline in Alma Talent’s Finnish media advertising revenue seen in the second quarter (-44%) slowed down significantly in the third quarter (-19%). Advertising in the automotive and financial sectors, in particular, recovered compared to the second quarter. Demand for high-quality media content continued, which was seen in strong growth in digital subscriptions. B2B marketplaces and telemarketing services also developed favourably during the review period, as did information services and book publishing. The COVID-19 epidemic has accelerated the transition to training via digital channels, and the sales of Alma Talent’s digital training services showed positive development during the review period. Alma Talent’s events were organised cost-efficiently by making use of digital channels.
Alma Talent achieved MEUR 0.8 in cost savings in the third quarter relative to the comparison period. The adjustment measures initiated in the second quarter continued in the period under review. They include, for example, partial 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. Alma Talent also continued to reduce its external service purchasing.
As the COVID-19 epidemic is again showing signs of escalating and there is continued economic uncertainty, advertising is not expected to return to the comparison period’s level in 2020. The favourable development of content revenue is expected to continue. Continued stable development is expected in Alma Talent’s other businesses.
- Alma Consumer
Alma Consumer’s advertising sales showed signs of recovery after the epidemic that overshadowed the spring began to slow down. Automotive and retail advertising, in particular, recovered during the review period. The coronavirus-related restrictions in the travel industry, for example, continued to have a negative impact on the single-copy sales of Iltalehti. After the outbreak COVID-19 of last spring, Iltalehti’s audience growth has stayed at a higher level than previously and reader engagement is stronger than before. Visitor volumes grew by about 15% year-on-year during the review period.
Alma Consumer’s cost savings in the third quarter totaled approximately MEUR 0.7. Employee expenses continued to be reduced by having employees exchange bonus holiday pay for time off and take previously accumulated time off during the third quarter. Volume-linked costs related to single-copy sales decreased. Reductions in external service purchasing continued.
The COVID-19 epidemic reduced Alma Consumer’s advertising revenue by 4% in the third quarter.
The sharp decline in advertising has levelled off but, as uncertainty continues, advertising is not expected to return to the comparison period’s level in 2020. The single-copy sales of Iltalehti decreased by 21% in the third quarter and by 13% in September.
- Shared operations and financial position
The cost savings of shared operations amounted to MEUR 0.2 during the period under review. The economic uncertainty caused by the COVID-19 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 third 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
The COVID-19 epidemic impacted Alma Media’s businesses in the third quarter less than we expected. The slowing down of the epidemic and the lifting of the restrictions imposed by the authorities led to a gradual economic recovery, which was reflected in the slower decline of our revenue.
In the highly exceptional operating environment, our operating margin of 24.5% for the review period exceeded our expectations. It was attributable to the cost savings we have achieved (MEUR 3.1), the recovery of the sales of digital advertising and recruitment services and, in particular, the strong growth of digital subscription-based revenue (29.5%).
The demand for recruitment services in our operating countries in Eastern Central Europe showed signs of normalising as the restrictions imposed by the authorities on business activities were not as strict as they were in the spring. The revenue performance of the recruitment business will be weighed down until the first half of 2021 by the steep decline in customer invoicing in the second quarter and the delayed recognition of revenue. In the housing and automotive marketplaces business, revenue was higher than in the comparison period thanks to the strong growth of competitive tendering services and rental housing advertising. The cost savings achieved during the review period were not as high as in the spring as we increased our marketing, employee and product development costs upwards to ensure our long-term competitiveness.
Alma Talent is undergoing a structural transformation aimed at moving away from unprofitable businesses with limited digital growth potential. The sharper focus on digital business in all of the segment’s business areas was reflected during the review period in a slight increase in revenue as well as improved profitability. The share of digital business exceeded the milestone of 50%. Demand for high-quality media content continued, which was seen in strong growth in digital subscriptions. Amongst Alma Talent’s services, growth was achieved particularly in telemarketing and B2B marketplaces. The steep decline seen in media advertising in the previous quarter levelled off and sales recovered in September, returning close to the comparison period’s level when the effect of the event business is eliminated.
For Alma Consumer, the past quarter was a defensive victory, with a recovery seen particularly in automotive and retail advertising during the review period, and profitability was supported by cost savings. Digital services developed favourably except for the digital service related to tourism. However, content revenue declined as the COVID-19 restrictions affected the travel sector and subsequently the number of outlets where single copies of print publications are sold. After the outbreak COVID-19 of last spring, Iltalehti’s audience growth has stayed at a higher level than previously and reader engagement is stronger than before. Number of visitors grew by about 15% year-on-year during the review period.
During the past few weeks, the incidence of COVID-19 has increased significantly in our various operating countries. The escalation of the second wave of the epidemic increases economic uncertainty and our business outlook for the final quarter remains weak. Nevertheless, I am confident that our highly committed employees, competitiveness and strong balance sheet further provide us with a stable foundation and adequate resources to tackle a potentially very challenging operating environment.
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 investor webcast and teleconference will be held in English by President & CEO Kai Telanne and CFO Juha Nuutinen at 11.00–12.00.
The live webcast can be followed via https://almamedia.videosync.fi/2020-q3-results/register.
To ask questions by phone during the live webcast, please join at least five minutes prior to the starting time by dialing one of the following numbers:
Finland Toll: +358981710310
Sweden Toll: +46 856642651
United Kingdom Toll: +44 3333000804
United States Toll: +1 6319131422
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
- Financial Statement Bulletin for financial year 2020 on Wednesday, 17 February 2021 approximately at 8:00 EET.
- Interim report for January–March 2021 on Wednesday, 21 April 2021, approximately at 8:00 EEST
- Interim report for January–June 2021 on Wednesday, 21 July 2021, approximately at 8:00 EEST
- Interim report for January–September 2021 on Thursday, 21 October 2021, approximately at 8:00 EEST
Financial Statements, Report by the Board of Directors, Auditor's Report and Corporate Governance Statement for financial year 2020 will be published on Wednesday, 3 March 2021.
The Annual General Meeting is planned to be held on Wednesday, 24 March 2021. Materials related with the Annual General Meeting will be available on Alma Media's website.
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