Ilkka-Yhtymä Oyj Interim Report 6 May 2013, at 2:00pm
ILKKA-YHTYMÄ OYJ’S INTERIM REPORT FOR Q1/2013
- Net sales: EUR 11.0 million (EUR 11.8 million)
- Operating profit: EUR 2.3 million (EUR 3.4 million)
- Operating profit excluding Alma Media Corporation and the other associated companies amounted to EUR 0.9 million (EUR 1.6 million)
- Operating profit totalled 20.6% of net sales, or 7.8% excluding Alma Media and other associated companies (13.4%)
- Pre-tax profits: EUR 2.1 million (EUR 2.7 million)
- Earnings per share: EUR 0.08 (EUR 0.10)
NET SALES AND PROFIT PERFORMANCE
The Group’s consolidated net sales for January–March showed a 6.6% decline. Net sales came to EUR 11.0 million (EUR 11.8 million in the corresponding period of the previous year). External net sales from the publishing business fell by 8.6%. Advertising revenues fell by 14.9% and circulation revenues fell by 1.9%. The decrease in net sales from the publishing business was caused by a weaker advertising market. External net sales from the printing business increased by 7.3%. Circulation income accounted for 44% of consolidated net sales, while advertising income and printing income represented 42% and 15%, respectively. Other operating income in January–March totalled EUR 0.1 million (EUR 0.1 million).
Operating expenses for January–March amounted to EUR 10.2 million (EUR 10.3 million), down by 0.8% year on year. Expenses arising from materials and services increased by 0.9%. Personnel expenses decreased by 0.2%. The national collective agreement for journalists expired on 30 April 2013, and the negotiations remain unresolved. Other operating costs increased by 8.8%. Depreciation contracted by 30.9%.
The share of the associated companies’ result was EUR 1.4 million (EUR 1.8 million). Consolidated operating profit amounted to EUR 2.3 million (EUR 3.4 million), down by 33.3 per cent year-on-year. The Group’s operating margin was 20.6 per cent (28.8%). Operating profit excluding Alma Media Corporation and the other associated companies amounted to EUR 0.9 million (EUR 1.6 million), representing 7.8% (13.4%) of net sales. Operating profit from publishing fell by EUR 0.6 million, while operating profit from printing remained roughly the same in euro terms as in the previous year.
Net financial expenses for January–March amounted to EUR 0.2 million (EUR 0.7 million). Net gain/loss on shares held for trading was EUR -0.01 million (EUR 0.2 million). Interest expenses excluding the fair value change in derivatives hedging them totalled EUR 0.4 million (EUR 0.6 million). In order to hedge against interest rate risk, in 2010 the company transformed some of its floating-rate liabilities into fixed-rate liabilities, by means of interest rate swaps. Given that the Group does not apply hedge accounting, unrealised changes in the market value of the interest rate swaps are recognised through profit or loss. In January–March 2013, the market value of these interest rate swaps grew by EUR 0.2 million (in January–March 2012, the market value fell by EUR 0.3 million).
Pre-tax profits totalled EUR 2.1 million (EUR 2.7 million). Direct taxes amounted to EUR 0.2 million (EUR 0.2 million), and the Group's net profit for the period totalled EUR 1.9 million (EUR 2.4 million).
BALANCE SHEET AND FINANCING
The consolidated balance sheet total came to EUR 169.6 million (EUR 199.5 million), with EUR 82.6 million (EUR 107.0 million) of equity. On the reporting date of 31 March 2013, the balance sheet value of the holding in the associated company Alma Media Corporation was EUR 126.7 million and the market value of the shares was EUR 83.2 million. According to the management’s estimate, write-down in this holding is unnecessary.
Interest-bearing liabilities totalled EUR 70.6 million (EUR 76.5 million). The equity ratio was 50.7 per cent (55.6%), and shareholders’ equity per share stood at EUR 3.22 (EUR 4.17). The increase in financial assets for the period totalled EUR 5.8 million (EUR 6.0 million), with liquid assets at the end of the period totalling EUR 8.1 million (EUR 16.9 million).
Cash flow from operations for the period came to EUR 5.9 million (EUR 6.1 million). This includes EUR 3.6 million (EUR -2.9 million) from the Group’s own operations as well as EUR 2.2 million (EUR 9.0 million) of dividend income from Alma Media Corporation. Due to VAT changes, subscription fees for the Group's provincial newspapers were exceptionally invoiced in the amount of EUR 6.6 million in December 2011. Cash flow from investments totalled EUR -0.1 million (EUR -0.1 million).
SHARE PERFORMANCE
The Series I shares of Ilkka-Yhtymä Oyj were listed on the Helsinki Stock Exchange in 1981 and have remained listed ever since. The Series II shares have been listed since their issue in 1988, and on 10 June 2002 they were transferred from the I List of the Helsinki Stock Exchange to the Main List. At present, the Series II shares of Ilkka-Yhtymä Oyj are listed on the NASDAQ OMX Helsinki List, in the Consumer Services sector, the company’s market value being classified as Mid Cap. The Series I shares are listed on the Pre List.
In January–March, 12,695 series-I shares of Ilkka-Yhtymä Oyj were traded, accounting for 0.3 per cent of the total number of series-I shares. The total value of the shares exchanged was EUR 0.1 million. In total, 553,634 series-II shares were traded, corresponding to 2.6 per cent of the total number of series II shares. The total value of the shares traded was EUR 2.3 million. The lowest price at which series-I shares of Ilkka-Yhtymä Oyj were traded during the period under review was EUR 4.95, and the highest per-share price was EUR 7.95. The lowest price at which series-II shares were traded was EUR 3.61 and the highest EUR 5.19. The market value of the share capital at the closing rate for the reporting period was EUR 102.1 million.
RISKS AND RISK MANAGEMENT
In the current economic climate, major uncertainties are associated with the predictability of both net sales and operating profit. Ilkka-Yhtymä’s most significant short-term risks are related to the development of media advertising, in particular, as well as circulation and printing volumes, which affect the industry in general. Other risks associated with the Group's own operations and its holding in associated company Alma Media Corporation are described in more detail in the Annual Report 2012.
The Group’s major financial risks include credit risk of the Group’s operative business, the risk associated with the price of shares held for trading, liquidity risk and the risk of changes in market interest rates applied to the loan portfolio. In order to hedge against interest rate risk, on 21 December 2010 the company transformed some of its floating-rate liabilities to a fixed rate, by means of interest rate swaps. Given that the Group does not apply hedge accounting, changes in the market value of the interest rate swap are recognised through profit and loss. Other financial risks are discussed in more detail in the 2012 Annual Report.
EVENTS AFTER THE REPORT PERIOD
ANNUAL GENERAL MEETING DECISIONS
On 18 April 2013, the Annual General Meeting (AGM) of Ilkka-Yhtymä Oyj approved the financial statements, discharged the members of the Supervisory Board and the Board of Directors and the Managing Director from liability and decided that a per-share dividend of EUR 0.15 be paid for the year 2012.
The number of members on the Supervisory Board for 2013 was confirmed to be 25. Of the Supervisory Board members whose term had come to an end, the following were re-elected for the term ending in 2017: Markku Akonniemi (Töysä), Juhani Hautamäki (Ylivieska), Heikki Järvi-Laturi (Teuva), Petri Latva-Rasku (Tampere) ja Marja Vettenranta (Laihia). The employee representatives Terhi Ekola (Vaasa) and Niina Vuolio (Seinäjoki) were elected as new members of the Supervisory Board.
At the Annual General Meeting it was decided to maintain the payments made to the Chairman of the Supervisory Board and the board members at their current level: the Chairman will receive a retainer of EUR 1,500 per month and a fee of EUR 400 per meeting, and the board members will be paid a fee of EUR 400 per meeting attended. The board members’ travel expenses are reimbursed in accordance with the current maximum level specified by the tax authorities.
Ernst & Young Oy, Authorised Public Accountants, was elected as the auditor, with Authorised Public Accountant, M.Sc.(Econ.) Harri Pärssinen as the principal auditor. It was decided that the auditors would be reimbursed per the invoice.
The AGM authorised the Board of Directors to decide upon a donation to be put toward charitable causes or similar, totalling, at maximum, EUR 50,000, as well as to decide upon the recipients, purposes of use, schedules and other terms of these donations.
OUTLOOK FOR 2013
In the current economic climate, forecasting net sales in the media sector and, in particular, media advertising spending involves major uncertainties. Due to consumer caution, VAT on circulation revenues and media competition, newspapers’ circulation revenues are predicted to decrease. Printing business volumes have declined permanently in Finland and the prospects for growth in the sector are weak.
Advertising in Finland was weaker than expected in the first quarter.
The net sales of Ilkka-Yhtymä Group are estimated to decline from the 2012 level.
Group operating profit from Ilkka-Yhtymä’s own operations, and operating profit as a percentage of net sales, excluding the share of Alma Media’s and other associated companies’ results, are expected to decline clearly from the 2012 level. In addition, the year’s results will depend on interest-rate trends and the price performance of securities investments.
The associated company Alma Media Corporation (Group ownership 29.79%) will have a significant impact on Group operating profit and profit.
SUMMARY OF FINANCIAL STATEMENTS AND NOTES
DRAFTING PRINCIPLES
Ilkka-Yhtymä Group's interim report has been prepared in compliance with the recognition and measurement principles of IFRS, but not in compliance with all IAS 34 requirements.
The interim report has been prepared according to the same principles as the 2012 financial statements. New or revised IFRS standards and IFRIC interpretations that become effective in 2013 have also been complied with, as specified in the 2012 financial statements. These changes have not affected the reported figures. The principles and formulae for the calculation of the indicators, presented on page 61 of the 2012 annual report, remain unchanged.
The figures in the interim report have been presented unaudited.
CONSOLIDATED INCOME STATEMENT
| (EUR 1,000) |
1-3/ 2013 |
1-3/ 2012 |
Change |
1-12/ 2012 |
| NET SALES | 10 987 | 11 763 | -7 % | 46 158 |
| Change in inventories of finished and unfinished products | 5 | 11 | -54 % | |
| Other operating income | 93 | 109 | -15 % | 437 |
| Materials and services | -3 608 | -3 575 | 1 % | -13 980 |
| Employee benefits | -4 560 | -4 570 | 0 % | -17 824 |
| Depreciation | -524 | -758 | -31 % | -2 918 |
| Other operating costs | -1 532 | -1 407 | 9 % | -5 966 |
| Share of associated companies’ profit *) | 1 397 | 1 813 | -23 % | -16 774 |
| OPERATING PROFIT/ LOSS | 2 258 | 3 385 | -33 % | -10 868 |
| Financial income and expenses | -162 | -730 | 78 % | -2 550 |
| PROFIT/ LOSS BEFORE TAX | 2 097 | 2 655 | -21 % | -13 418 |
| Income tax | -170 | -206 | -18 % | -669 |
| PROFIT/ LOSS FOR THE PERIOD UNDER REVIEW | 1 927 | 2 449 | -21 % | -14 087 |
| Earnings per share, undiluted (EUR)**) | 0.08 | 0.10 | -21 % | -0.55 |
| The undiluted share average (to the nearest thousand)**) | 25 665 | 25 665 | 25 665 |
*) 1-12/2012: Includes the EUR 22 million non-recurring write-down on the holding in the associated company Alma Media Corporation.
**) There are no factor diluting the figure.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| (EUR 1,000) |
1-3/ 2013 |
1-3/ 2012 |
Change |
1-12/ 2012 |
| PROFIT/ LOSS FOR THE PERIOD UNDER REVIEW | 1 927 | 2 449 | -21 % | -14 087 |
| OTHER COMPREHENSIVE INCOME: | ||||
| Items that may be reclassified subsequently to profit or loss: | ||||
| Available-for-sale assets | 2 | -3 | ||
| Share of associated companies' other comprehensive income | 85 | 158 | -46 % | 100 |
| Income tax related to components of other comprehensive income | 1 | |||
| Other comprehensive income, net of tax | 86 | 158 | -45 % | 98 |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 2 013 | 2 607 | -23 % | -13 989 |
SEGMENT INFORMATION
| Group net sales (EUR 1,000) | 1-3/2013 | 1-3/2012 | Change | 1-12/2012 |
| Publishing | 9 425 | 10 304 | -9 % | 40 528 |
| Printing | 3 372 | 3 524 | -4 % | 13 710 |
| Non-allocated | 567 | 534 | 6 % | 2 139 |
| Net sales between segments | -2 377 | -2 599 | -9 % | -10 219 |
| Total | 10 987 | 11 763 | -7 % | 46 158 |
| Group operating profit/ loss (EUR 1,000) | 1-3/2013 | 1-3/2012 | Change | 1-12/2012 |
| Publishing | 778 | 1 356 | -43 % | 5 046 |
| Printing | 317 | 342 | -7 % | 1 379 |
| Associated companies | 1 397 | 1 813 | -23 % | -16 774 |
| Non-allocated | -234 | -126 | -86 % | -519 |
| Total | 2 258 | 3 385 | -33 % | -10 868 |
CONSOLIDATED BALANCE SHEET
| (EUR 1,000) | 3/2013 | 3/2012 | Change | 12/2012 |
| ASSETS | ||||
| NON-CURRENT ASSETS | ||||
| Intangible rights | 981 | 1 052 | -7 % | 1 008 |
| Goodwill | 314 | 314 | 314 | |
| Investment properties | 220 | 277 | -20 % | 233 |
| Property, plant and equipment | 11 926 | 12 918 | -8 % | 11 862 |
| Shares in associated companies | 128 029 | 147 072 | -13 % | 128 796 |
| Available-for-sale assets | 10 682 | 10 747 | -1 % | 10 723 |
| Other tangible assets | 214 | 214 | 214 | |
| TOTAL NON-CURRENT ASSETS | 152 367 | 172 594 | -12 % | 153 151 |
| Current assets | ||||
| Inventories | 577 | 614 | -6 % | 647 |
| Trade and other receivables | 6 422 | 6 556 | -2 % | 2 950 |
| Income tax assets | 510 | 762 | -33 % | 118 |
|
Financial assets at fair value through profit or loss |
1 672 | 2 067 | -19 % | 1 695 |
| Cash and cash equivalents | 8 060 | 16 898 | -52 % | 2 263 |
| TOTAL Current assets | 17 241 | 26 897 | -36 % | 7 673 |
| Total assets | 169 609 | 199 491 | -15 % | 160 823 |
| SHAREHOLDERS’ EQUITY AND LIABILITIES | ||||
| SHAREHOLDER’S EQUITY | ||||
| Share capital | 6 416 | 6 416 | 6 416 | |
| Invested unrestricted equity fund and other reserves | 48 622 | 48 623 | 48 621 | |
| Retained earnings | 27 541 | 52 008 | -47 % | 25 529 |
| SHAREHOLDER’S EQUITY | 82 579 | 107 047 | -23 % | 80 567 |
| NON-CURRENT LIABILITIES | ||||
| Deferred tax liability | 54 | 392 | -86 % | 23 |
| Non-current interest-bearing liabilities | 66 349 | 72 448 | -8 % | 63 954 |
| Non-current interest-free liabilities | 102 | 115 | -12 % | 102 |
| NON-CURRENT LIABILITIES | 66 504 | 72 956 | -9 % | 64 079 |
| CURRENT LIABILITIES | ||||
| Current interest-bearing liabilities | 4 241 | 4 022 | 5 % | 6 633 |
| Accounts payable and other payables | 15 929 | 15 041 | 6 % | 9 390 |
| Income tax liability | 355 | 425 | -17 % | 155 |
| CURRENT LIABILITIES | 20 525 | 19 488 | 5 % | 16 177 |
| SHAREHOLDERS’ EQUITY AND LIABILITIES TOTAL | 169 609 | 199 491 | -15 % | 160 823 |
CONSOLIDATED CASH FLOW STATEMENT
| (EUR 1,000) |
1-3/ 2013 |
1-3/ 2012 |
1-12/ 2012 |
| CASH FLOW FROM OPERATIONS | |||
| Profit/ loss for the period under review | 1 927 | 2 449 | -14 087 |
| Adjustments | -546 | -131 | 22 867 |
| Change in working capital | 2 813 | -4 474 | -6 732 |
|
CASH FLOW FROM OPERATIONS BEFORE FINANCE AND TAXES |
4 194 | -2 156 | 2 048 |
| Interest paid | -224 | -244 | -2 235 |
| Interest received | 7 | 12 | 46 |
| Dividends received | 2 257 | 9 004 | 9 117 |
| Other financial items | -12 | -14 | -53 |
| Direct taxes paid | -331 | -489 | -947 |
| CASH FLOW FROM OPERATIONS | 5 890 | 6 111 | 7 976 |
| CASH FLOW FROM INVESTMENTS | |||
|
Investments in tangible and intangible assets, net |
-204 | -106 | -1 083 |
| Other investments, net | 97 | -33 | -16 |
| Dividends received from investments | 15 | 529 | |
| CASH FLOW FROM INVESTMENTS | -92 | -139 | -570 |
| CASH FLOW BEFORE FINANCING ITEMS | 5 798 | 5 972 | 7 406 |
| CASH FLOW FROM FINANCING | |||
| Change in current loans | -3 925 | ||
| Change in non-current loans | -1 964 | ||
| Dividends paid and other profit distribution | -1 | -10 180 | |
| CASH FLOW FROM FINANCING | -1 | -16 069 | |
| INCREASE (+) OR DECREASE (-)IN FINANCIAL ASSETS | 5 797 | 5 972 | -8 663 |
| Liquid assets at the beginning of the financial period | 2 263 | 10 926 | 10 926 |
| Liquid assets at the end of the financial period | 8 060 | 16 898 | 2 263 |
KEY FIGURES
| 3/2013 | 3/2012 | 12/2012 | |
| Earnings/share (EUR) | 0.08 | 0.10 | -0.55 |
| Shareholders' equity/share (EUR) | 3.22 | 4.17 | 3.14 |
| Average number of personnel | 320 | 325 | 336 |
| Investments (EUR 1,000) *) | 561 | 141 | 1 311 |
| Interest-bearing debt (EUR 1,000) | 70 590 | 76 470 | 70 587 |
| Equity ratio, % | 50.7 | 55.6 | 50.7 |
| Average number of shares during the financial period | 25 665 208 | 25 665 208 | 25 665 208 |
| Number of shares at the end on the financial period | 25 665 208 | 25 665 208 | 25 665 208 |
*) Includes investments in tangible and intangible assets and shares in associated companies and in available-for-sale financial assets.
Taxes included in the income statement are taxes corresponding to the profit for the period under review.
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY (EUR 1,000)
| Change in shareholders’ equity 1-3/ 2012 |
Share capital |
Fair value reserve |
Invested unrestricted equity fund |
Other reserves |
Retained earnings |
Total |
| SHAREHOLDERS’ EQUITY 1.1. | 6 416 | 101 | 48 498 | 24 | 49 401 | 104 440 |
| Comprehensive income for the period | 2 607 | 2 607 | ||||
| TOTAL SHAREHOLDERS’ EQUITY 3/ 2012 | 6 416 | 101 | 48 498 | 24 | 52 008 | 107 047 |
| Change in shareholders’ equity 1-3/ 2013 |
Share capital |
Fair value reserve |
Invested unrestricted equity fund |
Other reserves |
Retained earnings |
Total |
| SHAREHOLDERS’ EQUITY 1.1. | 6 416 | 99 | 48 498 | 24 | 25 529 | 80 567 |
| Comprehensive income for the period | 1 | 2 011 | 2 013 | |||
| TOTAL SHAREHOLDERS’ EQUITY 3/ 2013 | 6 416 | 100 | 48 498 | 24 | 27 541 | 82 579 |
GROUP CONTINGENT LIABILITIES
| (EUR 1,000) | 3/2013 | 3/2012 | 12/2012 |
| Collateral pledged for own commitments | |||
| Mortgages on company assets | 1 245 | 1 245 | 1 245 |
| Mortgages on real estate | 8 801 | 8 801 | 8 801 |
| Pledged shares | 53 451 | 70 735 | 65 730 |
| Contingent liabilities on behalf of associated company | |||
| Guarantees | 4 096 | 4 182 | 4 096 |
CHANGES IN PROPERTY, PLANT AND EQUIPMENT
| (EUR 1,000) |
1-3/ 2013 |
1-3/ 2012 |
Change |
1-12/ 2012 |
| Carrying amount at the beginning of the financial period | 11 862 | 13 481 | -12 % | 13 481 |
| Increase | 484 | 75 | 542 % | 838 |
| Depreciation for the financial period | -420 | -638 | -34 % | -2 456 |
| Carrying amount at the end of the financial period | 11 926 | 12 918 | -8 % | 11 862 |
RELATED PARTY TRANSACTIONS
Ilkka-Yhtymä Group’s related parties include associated companies, members of the Board of Directors, members of the Supervisory Board, the Managing Director and the Group Executive Team.
THE FOLLOWING RELATED PARTY TRANSACTIONS WERE CARRIED OUT:
| (EUR 1,000) | 3/2013 | 3/2012 | 12/2012 |
| Sales of goods and services | |||
| To associated companies | 55 | 66 | 288 |
| To other related parties | 213 | 201 | 823 |
| Purchases of goods and services | |||
| From associated companies | 136 | 128 | 463 |
| From other related parties | 5 | ||
| Trade receivables | |||
| From associated companies | 14 | 30 | 13 |
| From other related parties | 77 | 108 | 47 |
| Accounts payable | |||
| To associated companies | 15 | 19 | 4 |
Transactions with related parties are conducted at fair market prices.
EMPLOYEE BENEFITS TO MANAGEMENT
| (EUR 1,000) | 3/2013 | 3/2012 | 12/2012 |
| Salaries and other short-term employee benefits | 247 | 222 | 936 |
Management comprises the Board of Directors, Supervisory Board, Managing Director and Group Executive Team. The stated figures based on the cash method do not differ significantly from those based on the accrual method.
FAIR VALUE HIERARCHY OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES MEASURED AT FAIR VALUE
| Fair value at end of period | ||||
| (EUR 1,000) | 3/2013 | Level 1 | Level 2 | Level 3 |
| Assets measured at fair value | ||||
| Financial assets at fair value through profit or loss | 1 672 | 1 672 | ||
| Available-for-sale financial assets | 9 243 | 9 243 | ||
| Total | 10 915 | 1 672 | 9 243 | |
| Liabilities measured at fair value | ||||
| Interest rate swaps | 2 199 | 2 199 | ||
| Total | 2 199 | 2 199 | ||
Available-for-sale assets also include EUR 1,439 thousand for unlisted shares, which are measured at cost since no reliable fair value was available for them.
At Level 1 of the hierarchy, fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
At Level 2, the instruments’ fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
At Level 3, the instruments’ fair value is based on inputs for the asset or liability that are not based on observable market data.
General statement
This report contains certain statements that are estimates based on the management's best knowledge at the time they were made. For this reason, they involve a certain amount of inherent risk and uncertainty. The estimates may change in the event of significant changes in general economic and business conditions.
ILKKA-YHTYMÄ OYJ
Board of Directors
Matti Korkiatupa
Managing Director
For more information:
Matti Korkiatupa, Managing Director, Ilkka-Yhtymä Oyj
Tel. +358 (0)500 162 015
DISTRIBUTION
NASDAQ OMX Helsinki
The main media
www.ilkka-yhtyma.fi