President and CEO Kai Telanne, how would you describe Alma Media’s year 2013?
The past year was characterised by two very different forces. First of all, the weak development in the economy at large had a negative impact on the financial success of the media industry. The structural change concerning media consumption and advertising accelerated, as did the transition from traditional media to digital channels. In 2013, investments in advertising in Finland declined by 8.5 per cent in comparison to the year before. In addition, the circulation and single-issue sales of print magazines and newspapers continued to decline. Because of this, media companies – Alma Media included – had to increase the speed of their adjustment measures and organisational restructuring.
On the other hand, we also had many things to be happy about at Alma Media. Our digital media development projects were successful both in our publishing business as well as in our services business. The profitability of our international investments also developed favourably, and our efforts to integrate the digital businesses we’ve acquired into Alma Media were successful, both at home and abroad. Our new printing facility at Tampere also began operations, and our expectations with regard to its competitiveness are high.
What has been Alma Media’s response to the uncertainties in the business environment?
As the digitalisation of media increases and consumer behaviour becomes more fragmented, we have developed our publishing operations towards multimediality. What this means in practice is that all of our key contents and services will soon be available online and in mobile environments. Alma Media is furthermore actively developing tools that facilitate the purchasing of digital advertising for the purposes of targeted online advertising and the traffic measurements and analytics of online and mobile services, for example. Alma Media’s network advertising, which reaches nearly five million consumers a week, has indeed been growing strongly.
In terms of the print media, we have adjusted our operations and renewed our ways of working and thereby improved productivity while volumes have declined. The new regional media operating model implemented through the organisational restructuring of our publishing business, for example, has resulted in significant cost savings. The consolidation of editorial cooperation aimed at improving consumer services is still under way.
In addition to this, we have decentralised our business beyond the borders of Finland, to the emerging markets in central Eastern Europe, and thereby reduced our dependence on the weakly developing domestic market.
How well did Alma Media do in terms of achieving its financial targets for 2013?
The changes and weak business conditions affecting our industry also had an impact on Alma Media’s financial development. We lagged behind the budgeted revenue development. Our revenue declined by 6.5 per cent in 2013, totalling approximately EUR 300 million. We also missed our performance targets. Operating profit excluding non-recurring items – EUR 24.2 million – declined by 27.8 per cent from the year before, mainly due to the decline in print media revenue. Alma Media’s result was boosted by the corporate acquisitions and streamlining efforts implemented in 2012, but despite the cost adjustments, we were not able to fully compensate for the sharp decline in revenue.
On the other hand, we can be very satisfied with the strong growth of our digital business. The focus of our growth strategy and development, digital products and services, accounted for 28.1 per cent of the Group’s total revenue in 2013. Kauppalehti’s digital content revenue, for instance, grew by 22.1 per cent in comparison to the year before. Our digital recruitment services, which accounted for 10.9 per cent of Alma Media’s revenue in 2013, also continued to perform well.
What do you think were Alma Media’s most important development measures in 2013?
I am very happy with the development of our international digital investments. We invested in a number of digital recruitment services in the Czech Republic and Slovakia in 2012, and these services were successfully integrated with Alma Media in 2013. In addition, we made an important decision on the expansion of our cooperation with Monster Worldwide, which operates on a global scale.
Regarding multi-channel publishing operations, I would like to mention the launch of the paid digital content implemented in the context of Kauppalehti. The lessons learned have been put to use when developing paid content in Alma Regional Media. We have also managed to develop various mobile services very quickly. The number of visitors to Iltalehti’s mobile site has grown fivefold in the course of a year. The positive experiences gathered from IL-TV have also increased our belief in the potential of the online TV business and its development.
How has the organisation’s competence developed in the midst of the digital transition?
Our digital know-how has improved alongside the increase in international digital operations and new market areas, for example – particularly in terms of recruitment and career services. We have increased our experience of paid digital content, the management of consumer interfaces, the application of new technology and the building and utilisation of multi-channel platforms. The mobile business, in particular, as well as the building of related content and the production, sales and marketing of digital video have been at the heart of our development work. We have also made significant progress in the use of behavioral data and the productisation of targeted advertising and marketing.
Alma Media invested EUR 70 million in a new printing facility that was completed in the spring of 2013. At which stage will the new printing facility begin to produce additional financial value?
The initial stages were difficult due to technical problems. We nevertheless managed to secure production during the third quarter. The new printing facility was able to provide production-related benefits to the Group’s internal printing jobs as early as late 2013, and external sales of its capacity have also fared well. We are expecting good performance development on this front during the current year. All in all, the commissioning of the new printing facility has represented a significant step in securing the future business of our print media.
Alma Media has recently made a number of investments in the recruitment sector in eastern Central Europe. How has the profitability of these investments developed?
Alma Media’s successful acquisitions in recruitment and career services in recent years have made it the market leader not only in Finland, but also in the Baltic countries and several countries in eastern Central Europe. Our investments in eastern Central Europe have been very successful despite the weak economic situation. We have managed to increase our business and improve our profitability both in the Czech Republic and Slovakia. The new services have also given a boost to the sharing of international know-how and the development of various value-added services related to recruitment.
The latest strategic step consisted of including Monster’s services in Poland, Hungary and the Czech Republic in Alma Media’s recruitment service offering in the beginning of 2014. In the future, we will therefore also be able to take advantage of Monster’s technologies, service concepts and sales network in selected market areas. We believe these will bring plenty of added value to Alma Media’s existing recruitment service offering.
What are Alma Media’s future sources of growth?
We will continue our strategy of increasing the multi-channel aspects of our publishing business and our digital business. Our goal is to increase the share of digital revenue from the current 28 per cent to 50 per cent by 2020. In practice, this requires us to build new and varied digital services alongside traditional publishing operations.
We will also continue to invest in various digital market place businesses and increase our digital consumer services business, of which we have good experiences in terms of services such as Telkku.com, Kotikokki.net and E-kontakti.
In addition, we will seek growth from digital services aimed at businesses. Alma Media is the Finnish market leader in the provision of financial and company information. We will continue to reinforce the digital media and service offering in this area.
We also plan to increase our online TV business. We will increase our digital video services in both desktop and mobile user interfaces. Online TV provides consumers with freedom of choice: digital video can be watched anywhere and at anytime. The online TV business may be more profitable for a media company than traditional broadcasting operations. Even small audiences are sufficient, since production is inexpensive.
Which issues in 2013 were important in terms of corporate responsibility?
One of the most important focal points of Alma Media’s Sustainable Media programme in 2013 was analysing the media’s brainprint, or the impacts media content has on society. Alma Media was involved in the international discussion on brainprint and also introduced the concept in Finland. Moreover, we raised the idea of constructive journalism into societal discussion.
I am happy that our long-term environmental work also gained recognition: we were the only media company to rise to the Climate Disclosure Leadership index of the best Nordic companies in the context of the climate initiative of Carbon Disclosure Project. In addition to environmental responsibility, our new printing facility and business premises furthered the well-being of our employees, in the form of an improved working environment.
We will continue our work in relation to the brainprint of media content this year. We also intend to pay increasing attention to the globally topical subject of data protection, and the development of related practices.
What does the future of the media market look like in Finland? What does it look like in the rest of the world?
The development of the media market is closely linked to general economic trends. When the general economy improves, the media market will follow. This is now taking place elsewhere in the world, but in the case of Finland, it seems that the pick up in the economy will be delayed. Finland’s structural problems are slowing down the emerging growth, which is why the growth outlooks for the coming years are not necessarily similar to those in the rest of the world.
The volume of advertising in Finland right now is weak, even in proportion to the GDP. The low advertising volume of products and services plays a role in fueling the negative cycle in trade, media companies and the entire society. Tax increases and the unreasonable distribution price increases of Itella have a further negative impact on the operating conditions of the commercial print media. Alma Media must be able to operate profitably and find the means for growth in a weakly developing market as well.
The industry is going through a difficult period of transition, but I do see a brighter future. Thanks to our active digital development and increased operational efficiency, our situation will be a lot better than it was before once the economy recovers. Our strength lies in our competent and professional employees and in our successful brands. The work of media is never over, it merely changes its form.
I would like to take this opportunity to thank our customers, employees and investors for the past year. Due to our smooth cooperation, Alma Media holds all the cards for taking the company to a new level – this is a good point from which to forge ahead.