REPORT BY THE BOARD OF DIRECTORS
Financial performance full year 2013:
- Revenue MEUR 300.2 (320.1), down 6.2%.
- Content revenue MEUR 115.3 (122.3), down 5.7%; advertising revenue MEUR 147.3 (160.8), down 8.3%; service revenue MEUR 37.6 (37.1), up 1.5%.
- EBITDA (Earnings before interest, taxes, depreciation and amortisation) excluding non-recurring items MEUR 37.5 (45.1), down 16.7%.
- EBITDA MEUR 45.3 (39.5), up 14.5%.
- Operating profit excluding non-recurring items MEUR 24.2 (33.5) or 8.0% (10.5%) of revenue, down 27.8%.
- Operating profit MEUR 27.0 (26.5) or 9.0% (8.3%) of revenue, up 1.9%.
- Profit for the period MEUR 16.0 (17.4), down 8.2%.
- The result for the review period includes a non-recurring item, proceeds of MEUR 8.3 from the sale of the Mascus business, as well as write-downs of Group’s assets and restructuring expenses, MEUR 10,3.
- Earnings per share EUR 0.20 (0.22).
- Proposed refund of capital EUR 0.10 (dividend 2012: EUR 0.10) per share. In addition, the Board proposes to the Annual General Meeting that it be given an authorisation to decide on an additional refund of capital of no more than EUR 0.10 per share.
Dividend proposal for the Annual General Meeting:
On 31 December 2013, the Group’s parent company had distributable funds totalling EUR 23,905,611 (8,014,054). No essential changes in the company’s financial standing have taken place after the end of the financial year. Alma Media’s Board of Directors proposes to the Annual General Meeting that a refund of capital of EUR 0.10 (0.10) per share be paid from the reserve for invested non-restricted equity for the financial year 2013. Based on the number of shares on the closing date, 31 December 2013, the total refund of capital would amount to EUR 7,548,685 (dividend for 2012: EUR 7,548,685).
In addition, the Board proposes to the Annual General Meeting that it be given an authorisation to decide on an additional refund of capital of no more than EUR 0.10 per share.
Outlook for 2014:
Economic growth is estimated to pick up gradually in Europe but remain weak during the first half of 2014 in Finland. The decline in media advertising is expected to slow down during the first half of the year.
Alma Media expects the revenue of the first half of 2014 to be on a par with the level of 2013 or slightly lower. The operating profit excluding non-recurring items is estimated to amount to MEUR 9,0–10,5. Revenue for the first half of 2013 was MEUR 151.2 and operating profit excluding non-recurring items MEUR 10.1.
Kai Telanne, President and CEO:
For media companies, 2013 was a year of strong renewal and efficiency improvements. Accelerated by the weak economic situation, print media sales dropped as media consumption increasingly shifted to digital channels.
Alma Media continued its investments in future business. The Group’s revenue from digital products and services increased by 8.4% in 2013. Digital products and services accounted for 28.1% (24.3%) of the Group’s revenue. Kauppalehti’s digital content sales increased by 22.1% in 2013.
The popularity of mobile services grew at a strong rate throughout the Group. For example, Iltalehti’s mobile advertising sales grew fivefold during the year. Performance-based network advertising turned to significant growth, and related products were developed.
Towards the end of 2013, Alma Media decided to expand its international recruitment business: the services of Monster in Poland, Hungary and the Czech Republic were added to Alma Media’s recruitment service offering at the beginning of 2014. The share of the digital recruitment business of total Group revenue was 10.7%. The profitability of Alma Media’s international business operations continued to develop favourably, and the decline in the Finnish recruitment business, which had continued all year long, slowed down towards the end of the year.
The development of Alma Regional Media’s regional newspapers’ online services proceeded. In order to improve profitability, it was decided to publish the print edition of Pohjolan Sanomat five days per week. The change will took effect as of the beginning of 2014. The announced terminations of early morning delivery agreements of papers and increases in the agreement prices will increase uncertainty in the business environment with regard to print media.
In accordance with its strategy, Alma Media will continue to make its publishing operations more multi-channel and increase its digital business. The aim is to increase the share of digital revenue to 50% by 2020. This will be achieved by developing the digital capacity and moving paid content to online and mobile environments. Through these measures Alma Media is well set for the future, regardless of economic cycles, and starts the year on a solid foundation.
Strategy and related activities during the review period
The cornerstones of the strategy are the development of multi-channel publishing, growing digital services and increasing the operational efficiency of the company.
During the fourth quarter of the year, Alma Media continued to implement measures to increase the competitiveness of publishing operations. Iltalehti launched the fiidi.fi service, distributing content in digital media. The successful launch has resulted in an average of 400,000 unique visitors a week. The renewal of Aamulehti was continued by publishing a new mobile site in December 2013 and opening a fee-based online service in January 2014. Pohjolan Sanomat, a newspaper published in Kemi, opened its fee-based online site at the beginning of 2014. At the same time, the print edition began to be published on 5 days a week. Kauppalehti continued its development project to redesign digital media content, subscription products and media sales.
In November 2013, Alma Media signed an agreement on closer cooperation in the digital recruitment business with Monster Worldwide. In the restructuring that materialised at the beginning of 2014, the services of Monster in Poland, Hungary and the Czech Republic were added to the company’s recruitment service offering.
Performance-based network advertising has turned to significant growth, and related products have been actively developed. In October, Alma Media launched the Almascope online advertising service, making it possible to better target advertising to users of digital services. The company is also preparing a new marketing service for self-service purchasing, Alma Meedio, to allow companies to manage their digital marketing via a digital desktop. The service was rolled out on January 2014.
The development of Alma Media’s mobile applications has been accelerated as a result of strong growth in mobile services. Kauppalehti launched a new application for Windows 8 tablets and the online service Telkku.com launched applications for Android, iOS and Windows. Etuovi.com launched a new mobile site. The Group also adopted a new mobile advertising delivery system.
Video content plays an important role in Alma Media’s strategy. For example, IL-TV launched two new programme formats: the Rikos & oikeus (Crime & justice) format on court cases and the Sohvalla (On the sofa) format featuring entertaining interviews. Alma360, a provider of customer media services, has also increased its video offering as a result of increased demand.
Alma Media published its long-term financial targets in November 2013. Alma Media aims to grow its digital revenue by more than 15% a year, achieve an annual return on investment of a minimum of 15% and distribute a minimum of one-half of the profit for the period as dividend.
According to TNS Media Intelligence, total advertising volume decreased by 8.5% (decreased by 4.1%) in 2013. Advertising in newspapers and city papers decreased by 15.7% (decreased by 7.6%), while advertising in online media grew by 5.8% (increased by 10.0%) from the comparison period. The total market of afternoon papers in terms of volume declined by 12.0% (8.9%) in 2013.
Changes in Group structure in 2013
On 14 June 2013, Alma Media acquired the entire share capital of Julkaisupalvelu Lounais-Lappi Oy. The company publishes the local newspaper Lounais-Lappi in the Kemi-Tornio economic region. Lounais-Lappi will be reported under the Newspapers segment.
Alma Media is focusing on recruitment and home sales portals in its international marketplace business, and sold Mascus, the marketplace for heavy machinery and vehicles, to Alma Media’s licence partner in the Benelux countries, Mascus International B.V., on 30 April 2013.
On 3 April 2013, Alma Media sold its marketplace for used cars in Slovakia, Autovia.sk, to Azet.sk. The principal owner of Azet.sk is Ringier Axel Springer Slovakia.
Group revenue and result full year 2013
Revenue declined by 6.2% to MEUR 300.2 (320.1) in 2013.
Revenue from print media was MEUR 191.9 (217.2), with a share of 63.9% (67.9%) in the Group’s revenue. Revenue from digital products and services was MEUR 84.8 (77.8), an increase of 8.4%. Digital products and services accounted for 28.1% (24.3%) of Group revenue. The growth of digital products and services revenue was accelerated by the recruitment service companies acquired in Slovakia and Croatia in November 2012, as well as the February 2012 acquisition of CV Online, a recruitment service company operating in the Baltic region. Other revenue totalled MEUR 23.1 (25.1), constituting 8.0% (7.8%) of Group revenue.
Content revenue* declined by 5.7% to MEUR 115.3 (122.3). Content revenue decreased from the comparison period due to the declining circulations of print media.
Revenue from advertising sales decreased by 8.3% to MEUR 147.3 (160.8). Advertising sales accounted for 49.1% (50.2%) of Group revenue. Advertising sales for print media decreased by 18.1% from the comparison period, totalling MEUR 80.0 (97.7). Online advertising sales increased by 7.6% to MEUR 66.5 (61.8). Sales of Alma Media’s digital network products grew significantly during the financial period.
Service revenue totalled MEUR 37.6 (37.1). Service revenue includes items such as the business operations of Kauppalehti Information Services, the custom publishing house Alma 360 Group and the online dating service E-kontakti.
Total expenses excluding non-recurring items decreased by MEUR 10.3, equalling 3.6%, and totalled MEUR 276.7 (287.0). Total expenses decreased by 4.1% and amounted to MEUR 282.4 (294.5). The reorganisation of the various business operations during 2012, as well as the savings realised in 2013, contributed to the decrease in expenses.
Depreciation amounted to MEUR 18.3 (13.0) during the fiscal year 2013. The depreciation for the financial period includes impairment losses related to assets in the total amount of MEUR 4.9. The depreciation for the comparison period included impairment losses in the amount of MEUR 1.6. Depreciation of the businesses acquired in late 2012 and new system investments also contributed to depreciation being higher than in the comparison period.
Operating profit excluding non-recurring items was down 27.8% to MEUR 24.2 (33.5), constituting 8.0% (10.5%) of revenue. Operating profit was MEUR 27.0 (26.5), rising to 9.0% (8.3%) of revenue. The operating profit includes net non-recurring items in the amount of MEUR 2.8 (-7.0). The period’s non-recurring items were related to the sales gains from the heavy machinery business Mascus, impairment losses related to assets as well as restructuring costs. The non-recurring items in the comparison period were mainly related to operational restructuring as well as capitalised impairment losses relating to the research and development costs of the Marketplaces business.
The financial result for 2013 was MEUR 16.0 (17.4), and the period’s result excluding non-recurring items MEUR 18.1 (29.3). A non-recurring write-down of MEUR 5.0 was recognised in the value of associated companies during 2013. The review period’s result included changes in the fair value of contingent considerations and debt incurred by the reorganisation of the Marketplaces business in the amount of MEUR 1.1 (3.6).
*Alma Media has earlier reported content revenue under the term “circulation revenue”, but the term was changed to “content revenue” from the beginning of 2013. The new term better describes the content income of the publishing operation from consumers through both print and digital distribution channels.
The Newspapers segment reports the Alma Regional Media and IL-Media business units, that is, the publishing activities of over 30 newspapers. The best-known media in this segment are Aamulehti, Iltalehti and Iltalehti.fi.
The segment’s content revenue declined by 6.5% in 2013 to MEUR 98.5 (105.3). The decline was due to the decreasing single-copy sales of Iltalehti and declining circulations of other newspapers. Online business only has a minor contribution to the segment’s content revenue. Iltalehti’s market share was 39.8% (40.9%) in 2013.
The segment's advertising sales totalled MEUR 83.9 (98.0), down 14.4%. Advertising sales for print media decreased by 17.3%. With regard to advertising sales, the volume of the advertising of daily consumer goods as well as recruitment and housing notices decreased in particular. The segment’s online advertising sales grew by 7.6%, amounting to MEUR 12.1 (11.3). Online business accounted for 6.9% (5.6%) of the segment’s revenue. Online advertising sales represented 59.1% (53.4%) of IL-Media’s total advertising sales.
Savings from the restructuring measures in 2012 have been realised as expected. Additional savings measures have been implemented in 2013.
The segment's operating profit excluding non-recurring items was MEUR 13.5 (25.6) and operating profit MEUR 11.5 (22.1). Operating profit excluding non-recurring items accounted for 7.2% (12.4%) of total revenue. An impairment loss of MEUR 1.6 million related to the goodwill of Pohjois-Suomen Media was recognised as a non-recurring expense in the fourth quarter. In addition, restructuring expenses of MEUR 0.3 were allocated to the business unit, resulting from making the Kemi-based regional newspaper Pohjolan Sanomat a five-day publication from the beginning of 2014.
The Kauppalehti Group specialises in the production of financial information as well as providing information and marketing solutions for businesses. Its best-known product is Finland’s leading business paper, Kauppalehti. The Group also includes the custom media house Alma 360 Group, and the news agency and media monitoring unit BNS Group that operates in all of the Baltic countries. Starting from the beginning of 2013, the digital service Objektvision.se has been reported under the Kauppalehti Group.
The segment’s content revenue declined from the previous year to MEUR 16.8 (17.0). Online content sales increased by 22.1%, which offset the decline in content revenue for print media. Content revenue for print media decreased by 5.1%.
Advertising sales for 2013 declined to MEUR 16.2 (17.3), down 6.2%. Advertising sales declined as the result of decreasing advertising sales for print media. Online advertising sales increased by 10.9% from the comparison period.
Service revenue decreased to MEUR 23.8 (24.7). The decline was due to the Alma 360 custom publication business where some of the printing procurement of non-profit organisations has been transferred directly to the organisations due to changes in value added tax regulations. This has resulted in a decrease in revenue, but the change has not had an effect on profitability.
Online business accounted for 33.4% (29.0%) of the segment’s revenue.
The segment’s total expenses excluding non-recurring items were MEUR 49.1 (52.5) and total expenses MEUR 49.1 (53.6). The decrease in total expenses is the result of last year’s reorganisation measures, as well as savings measures implemented in early 2013.
The Kauppalehti Group’s operating profit excluding non-recurring items was MEUR 7.8 (6.6), and operating profit MEUR 7.8 (5.5). Operating profit excluding non-recurring items accounted for 13.8% (11.1%) of total revenue. The segment did not report non-recurring items during the review period.
Digital Consumer Services
The services of the Digital Consumer Services segment in Finland are Etuovi.com, Vuokraovi.com, Monster.fi, Autotalli.com, MyyJaOsta.com, Telkku.com, Kotikokki.net, E-kontakti.fi, Nytmatkaan.fi and Suomenyritykset.fi. The services operating outside Finland are Jobs.cz, Prace.cz, topjobs.sk, CV Online, Profesia.sk, MojPosao.net and City24. In addition, the segment includes the development of the technology platform for the online services of regional and local papers.
In January–December, the Digital Consumer Services segment’s revenue was MEUR 55.9 (54.4), up 2.6%.
The full-year revenue of the segment’s recruitment-related business grew with the support of international acquisitions made in 2012. Recruitment-related business accounted for 58.3% (49.8%) of the segment’s revenue in 2013. The acquired businesses create synergy benefits through a variety of recruitment-related added-value services and through competence sharing.
The Etuovi.com service succeeded in improving its profitability compared to the previous year despite the slow cycle in the home sales market in Finland.
The total expenses during the review period, excluding non-recurring items, were MEUR 48.2 (48.3) and total expenses MEUR 48.4 (50.8).
In April, the Marketplaces business unit sold the business operations of the heavy machinery and vehicles marketplace Mascus, recording a non-recurring sales gain of MEUR 8.3.
The Digital Consumer Services segment's operating profit excluding non-recurring items rose to MEUR 7.9 (6.3). The operating profit was MEUR 16.2 (3.8). The operating profit includes net non-recurring items in the amount of MEUR 8.3 (2.5). The non-recurring items during the period were related to the sales gains of MEUR 8.3 from the heavy machinery business Mascus, non-recurring contractual income of MEUR 0.2 and impairment losses of assets in the amount of MEUR 0.3. The non-recurring items in the comparison period were mainly related to operational restructuring as well as capitalised impairment losses relating to research and development costs.
The Other operations segment reports the operations of the Group’s printing and distribution company Alma Manu as well as those of the parent company. The financial characteristics of both are similar, as they primarily provide services for the other business segments.
The full-year external revenue of the Other operations segment was MEUR 7.1 (6.3), up 12.3%, mainly due to sales of printing services outside the Group. The segment’s total expenses excluding non-recurring items increased by 1.1 % during 2013 and totalled MEUR 90.6 (89.6). The operating loss of the Other operations segment excluding non-recurring items was MEUR 5.0 (5.0). The operating loss was MEUR 8.5 (5.0). The full-year expenses excluding non-recurring items increased by 1.1%. Early in the year, expenses increased due to project expenses related to the commissioning of a printing press, while savings measures in support functions in particular decreased expenses towards the end of the year.
The company’s new newspaper printing facility was taken into use in Tampere during the first months of 2013. The investment cost for the printing press was MEUR 49.5, with a further investment of MEUR 24.0 in the property reported in 2012.
In the second quarter, the procurement cost of the new printing press was increased by MEUR 3.4 in value-added tax related to a partial delivery. The leasing company that financed the new printing press has filed a tax appeal related to the case in the Finnish Supreme Administrative Court, a decision on which is expected no later than in spring 2014. During the second quarter, the leasing company received a preliminary decision from the Finnish Central Tax Board stating that the value-added tax related to the printing press delivery was undeductible insofar as the value-added tax concerned advance payments to the now bankrupt supplier manroland AG. After the bankruptcy of the printing press supplier, the delivery was continued on the basis of a new order to the new owner.
An agreement signed in September confirmed that the printing of Hämeen Sanomat and Hämeenlinnan Kaupunkiuutiset will be moved to the printing facility in Tampere from 1 January 2014 onwards.
In April, the company decided to close down printing operations in Rovaniemi by the end of March 2014. As a result of the shutdown decision, Alma Media recorded a non-recurring expense of MEUR 3.5 for the second quarter consisting of impairment loss on fixed assets and other reorganisation costs.
Alma Media recognised an impairment loss of a total of MEUR 5.0 on the goodwill included in the book values of associated companies. Of the impairment loss, MEUR 3.5 concerned the associated company holding in Talentum Oy, reported under the Kauppalehti Group, and MEUR 1.4 concerned the associated company holding in Tampereen Ykkösjakelu Oy, reported under the Newspapers segment.
Alma Media Group holds a 32.14% stake in Talentum Oyj, which is reported under the Kauppalehti Group. The company’s own shares in the possession of Talentum are included in the total number of shares. In the consolidated financial statements of Alma Media, the own shares held by Talentum itself are not included in the total number of shares. Alma Media’s shareholding in Talentum is stated as 32.64% in Alma Media’s consolidated financial statements of 31 December 2013.
The Group’s parent company
The reported revenue of the Group’s parent company Alma Media Plc in 2013 was MEUR 27.1 (25.8) and the loss for the period was MEUR 76.6 (14.2). The parent company recorded a write-down of MEUR 93.4 (27.0) on investments in subsidiaries and associated companies in 2013. At the end of December 2013, the parent company’s balance sheet stood at MEUR 471.1 (573.2).
A non-recurring item is a comprehensive income or expense arising from non-recurring or rare events. Gains or losses from the sale or discontinuation of business operations or assets, gains or losses from restructuring business operations as well as impairment losses of goodwill and other assets are recognised as non-recurring items. Non-recurring items are recognised in the profit and loss statement within the corresponding income or expense group.
The non-recurring items in the 2013 financial period comprised restructuring costs, gains on sales of assets and impairment losses related to fixed assets.
Balance sheet and financial position
At the end of December 2013, the consolidated balance sheet stood at MEUR 272.8 (245.1). The Group’s equity ratio at the end of December was 34.9% (36.5%) and equity per share rose to EUR 1.17 (1.08).
The consolidated cash flow from operations in January–December was MEUR 24.4 (24.9). Cash flow before financing was MEUR 26.7 (-38.0). The cash flow for the comparison period included the recruitment business-related business acquisition in the Digital Consumer Services segment.
The Group’s interest-bearing debt at the end of December amounted to MEUR 109.9 (79.4). The total interest-bearing debt at the end of December comprised MEUR 74.9 in finance leasing debt and MEUR 35.0 in commercial papers.
The Group’s interest-bearing net debt at the end of December stood at MEUR 97.6 (62.3). The increase in net debt was due to including the finance leasing debt for the new printing press in the balance sheet.
Alma Media has a EUR 25 million and two EUR 20 million financing limits at its disposal, of which all, a total of EUR 65 million, were unused on 31 December 2013. In addition, on the balance sheet date, the company had a commercial paper programme of EUR 100 million in Finland. Of the commercial paper programme, MEUR 65 was unused on 31 December 2013.
The fair value of the financial assets recognised at fair value through profit or loss resulting from business reorganisation was MEUR 2.0 (0.9) on 31 December 2013, and the fair value of debt MEUR 0.3 (2.7). The contingent considerations resulting from mergers and acquisitions are tied to the companies’ operating profit for 2013.
Research and Development Costs
The Group’s research and development costs in 2013 totalled MEUR 5.3 (MEUR 4.1 in 2012). Of this total, MEUR 4.2 (MEUR 3.1) was recognised in the income statement and MEUR 1.1 (MEUR 1.0 in 2012) was capitalised to the balance sheet in 2013. There were capitalised research and developments costs to a total of MEUR 2.0 on the balance sheet on 31 December 2013.
Alma Media Group’s capital expenditure in January–December 2013 totalled MEUR 62.8 (111.3). The capital expenditure during the review period comprised normal operational and replacement investments and the newspaper printing press investment in Tampere, MEUR 49.5.
During 2013, Alma Media had on average 1,965 (1,910) employees, calculated as full-time employees. The number of newspaper delivery staff was 998 (1,006) on average.
Alma Media Corporation’s Annual General Meeting (AGM) held on March 14, 2013 elected Timo Aukia, Niklas Herlin, Petri Niemisvirta, Perttu Rinta, Kai Seikku, Erkki Solja, Catharina Stackelberg-Hammarén and Harri Suutari members of the company’s Board of Directors. In its constitutive meeting held after the AGM, the Board of Directors elected Harri Suutari as its Chairman.
The Board also elected the members of its committees. Catharina Stackelberg-Hammarén, Perttu Rinta and Kai Seikku as Chairman were elected members of the Audit Committee. Petri Niemisvirta and Erkki Solja, as well as Timo Aukia as Chairman, were elected members of the Nomination and Compensation Committee.
The Board of Directors of Alma Media Corporation has evaluated that with the exception of Timo Aukia, Perttu Rinta and Niklas Herlin, the elected members of the Board of Directors are independent of the company and its significant shareholders. The three members named above are evaluated to be independent of the company but dependent on its significant shareholders.
Mikko Korttila, General Counsel of Alma Media Corporation, was appointed secretary to the Board of Directors.
The AGM appointed Ernst & Young Oy as the company’s auditors.
Virpi Juvonen was appointed Vice President, Human Resources of Alma Media Corporation starting April 26, 2013.
Olli-Pekka Behm was appointed Executive Editor-in-Chief of Satakunnan Kansa starting December 1, 2013.
Alma Media Corporation applies the Finnish Corporate Governance Code for listed companies, issued by the Securities Market Association on June 15, 2010 and in effect since October 1, 2010, in its unaltered form. The Corporate Governance Statement as well as the details of salaries and bonuses for 2012 has been published on the company’s website at www.almamedia.fi/investors.
The AGM resolved to distribute a dividend of EUR 0.10 per share, a total of MEUR 7.6 (30.2) for the financial year 2012 in accordance with the proposal of the Board of Directors. The dividend was paid on March 26, 2013 to shareholders who were registered in Alma Media Corporation’s shareholder register maintained by Euroclear Finland Oy on the record date, March 19, 2013.
Other decisions by the Annual General Meeting
The AGM on March 14, 2013 resolved to reduce the share premium fund shown on the balance sheet December 31, 2012, EUR 419,295,759, by a total of EUR 100,000,000, which will be transferred to the company's invested non-restricted equity fund. The equity of the company consists only of restricted equity, and it is expedient for the equity structure and distribution of profits to change the structure in a way that reduces the proportion of restricted equity in total equity. The share premium fund constitutes part of the company’s restricted equity, which is why reducing the fund requires a public notice to creditors in accordance with the Limited Liability Companies Act prior to the registration of the reduction of the share premium fund. According to a notification received from the National Board of Patents and Registration of Finland on July 19, 2013, none of the company’s creditors indicated opposition to the reduction of the share premium fund. The company has recorded the reduction of the share premium fund in the parent company’s accounts. The transfer from the share premium fund to the invested non-restricted equity fund has been eliminated in the consolidated financial statements.
The AGM authorised the Board of Directors to decide on a share issue. The authorisation entitles the Board to issue a maximum of 15,000,000 shares. This maximum amount of shares corresponds to approximately 20% of the total number of shares of the company. The share issue may be implemented by issuing new shares or transferring shares now in possession of the company. The authorisation entitles the Board to decide on a directed share issue, which entails deviating from the pre-emption rights of shareholders. The Board can use the authorisation in one or more parts. The Board may use the authorisation for developing the capital structure of the company, widening the ownership base, financing or realising acquisitions or other arrangements, or for other purposes decided upon by the Board. The authorisation may not, however, be used to implement incentive programmes for the management or key employees of the company. The authorisation is valid until the following ordinary AGM, however no longer than until June 30, 2014.
The Alma Media share
In January–December, altogether 8,130,118 Alma Media shares were traded on the NASDAQ OMX Helsinki Stock Exchange, representing 10.8% of the total number of shares. The closing price of the Alma Media share at the end of the last trading day of the reporting period, 31 December 2013, was EUR 2.99. The lowest quotation during the review period was EUR 2.49 and the highest EUR 5.00. Alma Media Corporation’s market capitalisation at the end of the review period was MEUR 225.7.
Option programme and share-based incentive plan
Alma Media has the option programme 2009 in effect. The programme is an incentive and commitment system for Group management. If all the subscription rights are exercised, the programme 2009 will dilute the holdings of the earlier shareholders by a maximum of 2.0%. Further details about the programmes are given in the notes to the financial statements.
The Board of Directors of Alma Media Corporation decided in 2012 on a new share-based incentive plan for the Group’s key employees. The new Performance Share Plan consists of three performance periods, the calendar years 2012, 2013 and 2014. The Board of Directors will decide on the plan’s performance criteria and the achievement targets at the beginning of each performance period. No rewards were paid for the performance periods 2012 and 2013. The potential reward from the plan for the performance period 2014 will be based on Alma Media Group’s profitability, and it will be paid partly in the company’s shares and partly in cash in 2015. For the members of the Group Executive Team, the plan additionally includes one three-year performance period, the calendar years 2012–2014, based on the profitable growth of the Group. No reward is expected to be paid for these performance periods. The Performance Share Plan includes approximately 20 persons.
Other authorisations of the Board of Directors
The Board of Directors has no other current authorisations.
Market liquidity guarantee
The Alma Media share has no market liquidity guarantee in effect.
In the year 2013, Alma Media did not receive notices of changes in shareholdings pursuant to Chapter 9, Section 5 of the Finnish Securities Markets Act.
Risks and risk management
The purpose of Alma Media Group’s risk management activities is to continuously evaluate and manage all opportunities, threats and risks in conjunction with the company’s operations to enable the company to reach its set objectives and to secure business continuity.
The risk management process identifies the risks, develops appropriate risk management methods and regularly reports on risk issues to the risk management organisation. Risk management is part of Alma Media’s internal control function and thereby part of good corporate governance. Limits and processing methods are set for quantitative and qualitative risks by the corporate risk management system in writing.
The most critical strategic risks for Alma Media are a significant drop in its print newspaper readership, a permanent decline in advertising sales and a significant increase in distribution and delivery costs. The media industry is undergoing changes following the transformation in media consumption and technological development. Alma Media’s strategic objective is to meet this challenge through renewal and the development of new business in digital consumer and business services.
Fluctuating economic cycles are reflected in the development of advertising sales. Advertising sales account for approximately half of the Group’s revenue. Business operations outside Finland, such as in the East and Central European countries, include country-specific risks relating to market development and economic growth. The expansion of business outside Finland has reduced the risks inherent in operating in one market area.
The most important operational risks are disturbances in information technology and data transfer, as well as an interruption of the printing operations.
With its Code of Ethics, Alma Media is committed to supporting the universally accepted principles in the areas of human rights, labour, environment and anti-corruption laid out in the United Nations Global Compact initiative. Alma Media participates in the annual Carbon Disclosure Project (CDP) climate reporting directed at investors, and was the only media company to make it to the Nordic Climate Disclosure Leadership index in October 2013. In addition, the Alma Media share is included in the OMX GES Sustainability Finland index. Alma Media is a member of the corporate responsibility networks Nordic Media CR Forum and Finnish Business & Society.
The most significant environmental impacts of Alma Media’s business operations are related to purchases, printing and delivery operations and real estate. In 2013, the company’s printing facilities used approximately 24,900 (26,400) tonnes of newsprint. Alma Media used 16,333 (16,696) MWh of electric power in 2013. Additional information on the company’s Sustainable Media programme is available on the Alma Media website.
Events after the review period
Alma Media Corporation and Monster Worldwice Inc. have agreed that they will strengthen their cooperation to cover Eastern Central Europe and the Baltic countries. The expansion of the cooperation will see Monster’s services being added to Alma Media’s recruitment service offering, which will be available in Finland, Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary and Croatia. The business will be run by Alma Career Oy (previously Monster Oy), and it will be reported under Alma Media’s Digital Consumer Services segment.
Monster Worldwide Inc. becomes Alma Career Oy’s minority shareholder with a 15% holding. Against its holding, Monster transfers its recruitment service business in Poland, Hungary and the Czech Republic to the company and purchases the shares in the joint venture for MEUR 4.7. Alma Media owns 85% of the joint venture’s shares. Monster has an option to increase its holding to 20% by 2017. The arrangement was implemented on 1 January 2014.
The arrangement will not have any effects on Alma Media’s profit or loss at the time of its implementation. The arrangement will have a positive cash flow impact of MEUR 4.7 million for the first quarter of 2014.
Alma Media and five other Finnish newspaper publishers signed a letter of intent in February 2014 as part of a plan to significantly expand their journalistic cooperation. Aamulehti, Satakunnan Kansa, Lapin Kansa, Kainuun Sanomat, Pohjolan Sanomat, Turun Sanomat, Kaleva, Ilkka, Pohjalainen, Hämeen Sanomat, Forssan Lehti and Keskipohjanmaa are planning to establish a new company, named Lännen Media, in 2014 to produce common content for all of the newspapers involved.
Proposal by the Board of Directors for distribution of profit
Alma Media’s Board of Directors proposes to the Annual General Meeting that a refund of capital of EUR 0.10 (0.10) per share be paid from the reserve for invested non-restricted equity for the financial year 2013. Based on the number of shares on the closing date, 31 December 2013, the total refund of capital would amount to EUR 7,548,685 (EUR 7,548,685).
On 31 December 2013, the Group’s parent company had distributable funds totalling EUR 23,905,611 (8,014,054). The parent company’s profit for the period amounted to EUR -76,559,758.04 (-14,169,546). No essential changes in the company’s financial standing have taken place after the end of the financial year. The refund of capital will be paid to shareholders who are registered in Alma Media Corporation’s shareholder register maintained by Euroclear Finland Oy on the record date, 25 March 2014. The payment date of the refund of capital is 1 April 2014.
In addition, the Board proposes to the Annual General Meeting that it be given an authorisation to decide on an additional refund of capital of no more than EUR 0.10 per share.