Alma Media Q1: Revenue and adj. operating profit on previous year’s level. Coronavirus epidemic will have a significant negative impact on revenue and operating profit in following months.

Alma Media Corporation               Interim Report                   21 April 2020 at 8:00 a.m. (EEST)

ALMA MEDIA’S INTERIM REPORT JANUARY–MARCH 2020:

Revenue and adjusted operating profit for continuing operations on previous year’s level. The coronavirus epidemic will have a significant negative impact on revenue and operating profit in following months.

On 11 February 2020, Alma Media announced the sale of its regional news media business and printing operations to Sanoma Media Finland. The businesses to be divested are reported as discontinued operations. The businesses to be divested were reported under the Alma Consumer segment. The income statement figures presented in this Interim Report mostly represent only the Group’s continuing operations. The balance sheet and cash flow figures include both continuing and discontinued operations.

Financial performance January–March 2020:

• Revenue from continuing operations on a par with the comparison period at MEUR 61.9 (62.1).
• Adjusted operating profit from continuing operations MEUR 11.2 (11.5), down 2.7%.
• Operating profit from continuing operations MEUR 12.2 (11.5), up 6.2%.
• Earnings per share from continuing operations EUR 0.10 (0.09).
• Earnings per share including discontinued operations EUR 0.21 (0.12).
• The Group has a strong financial position and is next to free of net debt, with a gearing ratio of 0.8%.
• Alma Markets: Revenue and profitability remained on a par with the comparison period.
• Alma Talent: Digital revenue growth was strong (9%) and the share of digital revenue rose to 41.5%.
• Alma Consumer: Digital advertising revenue continued to grow, particularly in content marketing. The profitability of digital consumer services decreased.

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 decline 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 to 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

The coronavirus epidemic and the related restrictive measures have resulted in a sudden change in Alma Media’s operating environment, and uncertainty has increased to a significant degree. In the current exceptional circumstances, Alma Media considers visibility to be weak and the Group will not issue a guidance for 2020 at this stage.

On 25 March, Alma Media withdrew the guidance previously issued by the Group in February 2020.

Market situation in the main markets and the impacts of the coronavirus epidemic on Alma Media’s business

In previous descriptions of the operating environment, Alma Media has referred to Kantar TNS reports on the volume of media advertising in Finland as well as the European Commission’s forecasts regarding the development of GDP and the unemployment rate in the Czech Republic and Slovakia. The most recent published data is from January–February 2020, before the outbreak of the global coronavirus pandemic and the entry into force of wide-ranging restrictive measures. As the length of the coronavirus epidemic and the timing of the restrictions related to preventing the spread of the virus being lifted are currently unknown, the visibility of the economic impacts of the epidemic in Alma Media’s operating countries is weak and risk assessment is exceptionally uncertain. There are major differences between the economic forecasts of various central banks and research institutions.

Impacts of the epidemic and measures initiated by Alma Media by business segment:

• Alma Markets

With increasing restrictive measures introduced by the authorities to mitigate the coronavirus pandemic and growing economic uncertainty, customers have significantly scaled down their new recruitment activities and focused on replacement recruitment, which has a negative impact on the sales of recruitment advertising in the Alma Markets segment. During the epidemic, demand has been focused on jobs in logistics and health care. The recruitment events organised by Alma Markets have been postponed until the autumn. The epidemic also has a clear negative impact on the housing and automotive marketplaces business, but the effects are likely to be smaller than in the recruitment business. The online training business has developed favourably during the coronavirus epidemic.

The impact of the coronavirus epidemic on the decline in Alma Markets’ revenue in March 2020 is estimated to be approximately MEUR 1.5. The Czech koruna has depreciated by about 6% since the start of 2020, which will weaken the result of the segment’s operations in the Czech Republic in euros in spite of the fact that part of the future cash flows of the business have been hedged.

Alma Markets has commenced measures to adjust its cost structure. The measures include a significant contraction of marketing investments, temporary layoffs, fixed-term reductions in pay in April–June within the limits of the applicable legislation and a reduction in the purchasing of external services. The marketing of the mobile recruitment service in Poland is being significantly reduced, recruitment consulting activities in the Baltic countries are being contracted and the Workania business in Hungary will be discontinued.

These measures are expected to generate an estimated MEUR 3.6 in cost savings in the second quarter.

• Alma Talent

Advertising sales have slowed down due to the general uncertainty, with demand declining particularly in the automotive trade and recruitment advertising. At the same time, however, the coronavirus epidemic has given rise to growing demand for reliable and up-to-date information, which has been reflected in significant growth in the audiences of Alma Talent’s media brands, especially in financial media, along with a corresponding positive development in content sales for subscription media. In the event business, events have been postponed until the autumn 2020. Policies introduced by employers and restrictions imposed by the authorities have affected the numbers of training participants, and training events have been moved to digital channels to be attended remotely.

The impact of the coronavirus epidemic on the decline in Alma Talent’s revenue in March 2020 is estimated to be approximately MEUR 0.4.

Alma Talent has commenced measures to adjust its cost structure. Temporary layoffs have been initiated in the event and training business and employees are urged to exchange bonus holiday pay for time off and to take previously accumulated time off during the spring. External service purchasing is also being reduced and non-critical development projects have been postponed.

These measures are expected to generate an estimated MEUR 1.3 in cost savings in the second quarter.

• Alma Consumer and shared operations

In the Alma Consumer segment, advertising revenue has declined due to the general uncertainty, particularly in the areas of automotive and travel advertising. The restrictions on movement imposed to prevent the spread of the coronavirus and the closure of retail outlets selling magazines and newspapers in the travel industry, for example, have had a negative impact on Iltalehti’s single-copy sales. At the same time, the material costs of print media have declined. 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 impact of the coronavirus epidemic on the decline in Alma Consumer’s revenue in March 2020 is estimated to be approximately MEUR 0.3.

Measures to adjust its cost structure have been initiated in Alma Consumer and shared operations. Marketing expenses are being reduced in digital services. Employees are urged to exchange bonus holiday pay for time off and to take previously accumulated time off during the spring. External service purchasing is being reduced and non-critical development projects have been postponed.

In Alma Consumer (continuing operations) and Alma Media’s shared operations, the measures taken are expected to generate an estimated MEUR 1.1 in cost savings in the second quarter.

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 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.

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.

More information:
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

The report will be presented by President & CEO Kai Telanne and CFO Juha Nuutinen in a live webcast at 10.30–11.30 EEST and can be followed via https://almamedia.videosync.fi/2020-q1-results/register. Also written questions can be presented during the webcast. Conference call dial-in details are:

Finland: +358 981 710 310

Sweden: +46 856 642 651

United States +1 855 857 0686

United Kingdom Toll: +44 333 300 0804

PIN: 29251096#

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

- Interim Report for January–June 2020 on Friday, 17 July 2020 at approximately 8:00 EEST 
- Interim report for January–September 2020 on Thursday, 22 October 2020 at approximately 8:00 EEST 

The Annual General Meeting is planned to be held on Wednesday, 29 April 2020. The materials related to the Annual General Meeting will be available on the Alma Media 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, Aamulehti, 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 1,800 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