2012-02-20 14:06:00 CET
2012-02-20 14:07:44 CET
REGULATED INFORMATION
Ilkka-Yhtymä Oyj - Financial Statement Release
The Ilkka-Yhtymä Group's Financial Statements for 2011
Ilkka-Yhtymä Oyj Financial Statements Bulletin, 20 February 2012, at 3 p.m.
THE ILKKA-YHTYMÄ GROUP'S FINANCIAL STATEMENTS FOR 2011
FINANCIAL YEAR 2011
- Net sales: EUR 50.0 million (EUR 46.5 million), up 7.4%
- External net sales from publishing increased by EUR 2.0 million (4.8%) and
external net sales from printing increased by EUR 1.5 million (27.6%)
- Operating profit: EUR 17.6 million (EUR 14.5 million), up 21.5%
- Operating profit excluding Alma Media Corporation and the other associated
companies amounted to EUR 8.9 million (EUR 7.1 million), up 25.0%
- Operating profit from the publishing business increased by EUR 0.9 million
while that of the printing business increased by EUR 0.8 million
- Operating profit totalled 35.2% of net sales; 17.9% excluding Alma Media and
other associated companies (15.3%)
- Pre-tax profits: EUR 13.8 million (EUR 14.7 million), down 6.1%
- Earnings per share: EUR 0.49 (EUR 0.50)
- The Board of Directors proposes a per share dividend of EUR 0.40
Q4/2011
- Net sales: EUR 13.0 million (EUR 12.6 million), up 3.0%
- External net sales from publishing increased by EUR 0.2 million (1.5%) and
external net sales from printing increased by EUR 0.2 million (13.8%)
- Operating profit: EUR 2.6 million (EUR 4.7 million), a drop of 44.2%
- Operating profit excluding Alma Media Corporation and the other associated
companies amounted to EUR 2.1 million (EUR 2.1 million), up 1.4%
- Operating profit from the publishing business decreased by EUR 0.2 million
while that of the printing business remained at the previous year's level
- Operating profit totalled 20.0% of net sales; 16.5% excluding Alma Media and
other associated companies (16.7%)
- Pre-tax profits: EUR 1.6 million (EUR 4.7 million), down 64.9%
- Earnings per share: EUR 0.05 (EUR 0.16)
MATTI KORKIATUPA, MANAGING DIRECTOR:
Thanks to good economic growth, Finland's Parliamentary elections and new
customer relationships in printing, our net sales and profitability developed
favourably early in the year. The economic situation, however, began to
deteriorate during the summer, which slowed the growth of our net sales in the
latter half of the year. Advertising in Finland began developing negatively in
the final quarter and newspaper circulation volumes were in a slight decline
throughout the year.
In 2011, the focuses of the three-year development programme carried out
between 2009 and 2011 were on consolidating our revised functions and
management models, further developing our multi-channel services and preparing
for future changes in the media environment.
Predicting customer needs and consumer behaviour will probably be one of the
toughest challenges facing media companies in the coming years. The consumer
behaviours of different customer groups are diverging more clearly from one
another. On the other hand, the multi-channel needs of corporate customers for
advertising, communications and printing will increasingly require us to
implement Group-specific solution models, for which we will need services
provided by our network partners, in addition to our own service selection.
The new editing system introduced in the previous year created a good
foundation for renewed, more extensive online services. In 2012, we will renew
our online facsimile edition functions. Content cooperation was standardised
between provincial newspaper companies, and classified services provided by
Alma Mediapartners were well-received by our customers.
Consumers' environmental awareness and corporate responsibility are gaining
more emphasis. Newsprint is an almost completely recyclable product, printing
requires little energy and Ilkka-Yhtymä's distributions by Itella Corporation
are completely carbon neutral.
As for personnel, one of the biggest challenges is to meet the competence
requirements of the future media environment. Based on the results of personnel
surveys, we initiated leadership coaching for supervisors and a dialogue on
values involving the entire personnel, with the aim of developing management
and mutual interaction.
Our holding in Alma Media Corporation has significantly strengthened our
profits. Cash flow from business operations increased on the previous year
thanks to dividends paid by Alma Media and earlier invoicing of newspapers for
2012.
In a weakened economic situation, Finland's GDP is forecast to grow slowly
during the current year. The newspaper sector will also be burdened by the 9%
value-added tax on income from subscriptions, which entered into force at the
start of 2012, and increases in personnel and distribution costs. These factors
will have a negative impact on the trend in media companies' net sales and
profitability, creating pressures to increase productivity in all functions.
BUSINESS ENVIRONMENT
In its Economic Bulletin of 20 December 2011, the Ministry of Finance estimated
GDP growth in Finland to have attained 2.6% in 2011, and forecast growth of
0.4% for 2012. It is also possible that the economy will sink into a recession
during the current year. According to Statistics Finland, the inflation rate
decreased to 2.9% in December and averaged 3.4% for 2011.
The January consumer survey by Statistics Finland reported that consumer
confidence began to cautiously improve in January. In 2011, private consumption
is estimated to have grown almost 3.5%. In 2012, uncertainty and the weak
development of real earnings will slow down the growth of private consumption,
which will remain at about 0.5%.
According to a survey conducted by TNS Gallup Oy and commissioned by the
Finnish Advertising Council, media advertising increased by 3.7% in 2011.
Advertising in newspapers increased by 3.5%, while advertising in free sheets
grew by 5.3%. Newspapers and free sheets accounted for 36.0% and 5.5% of media
advertising, respectively. Web media advertising saw an increase of 8.2%,
representing a 15.8% share of media advertising.
GROUP STRUCTURE
The Ilkka-Yhtymä Group is a media group that consists of the parent company
Ilkka-Yhtymä Oyj, the publishing company I-Mediat Oy as well as the printing
company I-print Oy. The Group also includes two property companies, Kiinteistö
Oy Seinäjoen Koulukatu 10 and Seinäjoen Kassatalo Osakeyhtiö, as well as
Pohjalaismediat Oy. Our main products are the regional newspapers Ilkka and
Pohjalainen, five local newspapers (Viiskunta, Komiat, Järviseutu, Suupohjan
Sanomat and Jurvan Sanomat), two free sheets, Vaasan Ikkuna and
Etelä-Pohjanmaa, as well as the online and mobile services of these papers, and
the printing products and services of I-print Oy.
The associated companies included in our consolidated financial statements are
Alma Media Corporation, Arena Partners Oy, Väli-Suomen Media Oy and Yrittävä
Suupohja Oy.
CONSOLIDATED NET SALES AND PROFIT PERFORMANCE
Consolidated net sales increased by 7.4%, amounting to EUR 49,952 thousand (EUR
46,530 thousand in 2010). External net sales from publishing operations
increased by 4.8%. Advertising revenues grew by 5.2%, and circulation revenues
grew by 1.6%. External net sales from the printing business increased by 27.6%.
The higher net sales from publishing resulted from a recovery in advertising
volumes, due to, for example, election advertising early in the year. The
growth in net sales for the printing business came as a result of new
customers, recovering volumes and price increases due to printing materials.
Circulation income accounted for 39% of consolidated net sales, while
advertising income and printing income represented 46% and 13%, respectively.
Other operating income totalled EUR 435 thousand (EUR 429 thousand).
The Group operating expenses for the financial year amounted to EUR 41,468
thousand (EUR 39,813 thousand), up by 4.2% year-on-year. Expenses arising from
materials and services increased by 13.1%, particularly due to growth in
printing volumes as well as a rise in the prices of printing materials and
distribution. Personnel expenses increased by 0.5%.
The share of the associated companies' result was EUR 8,659 thousand (EUR 7,337
thousand). Consolidated operating profit amounted to EUR 17,590 thousand (EUR
14,479 thousand), up by 21.5% year-on-year. The Group's operating margin was
35.2% (31.1%). Operating profit excluding Alma Media Corporation and the other
associated companies amounted to EUR 8,931 thousand (EUR 7,142 thousand),
representing 17.9% (15.3%) of net sales. Operating profit from publishing grew
by EUR 911 thousand, and operating profit from printing grew by EUR 775
thousand. The considerable rise in operating profit from printing was due to
higher volumes, a modest rise in costs early in the year and the fact that the
first quarter last year included costs for ceasing operation of the Vaasa
printing unit.
Net financial expenses amounted to EUR 3,817 thousand (net financial income for
the 2010 financial year: EUR 192 thousand). Net gain/loss on shares held for
trading was EUR -949 thousand (EUR 495 thousand). Interest expenses excluding
the fair value change in derivatives hedging them totalled EUR 2,544 thousand
(EUR 1,062 thousand). In order to hedge against interest rate risk, on 21
December 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. For the 2011
financial year, the market value of these interest rate swaps fell by EUR 1,398
thousand.
Pre-tax profits totalled EUR 13,773 thousand (EUR 14,670 thousand). Direct
taxes amounted to EUR 1,098 thousand (EUR 1,779 thousand). The Group's net
profit for the period totalled EUR 12,675 thousand (EUR 12,892 thousand), with
earnings per share standing at EUR 0.49 (EUR 0.50).
Q4 NET SALES AND PROFIT PERFORMANCE
In Q4/2011, consolidated net sales totalled EUR 12,979 thousand (EUR 12,601
thousand), up by 3.0%. External net sales from publishing operations increased
by 1.5%. Advertising revenues decreased by 1.5% and circulation revenues grew
by 2.5%. External net sales from the printing business grew by 13.8%.
Circulation income accounted for 38% of consolidated net sales in
October-December, while advertising income and printing income represented 46%
and 14%, respectively. Other operating income in October-December totalled EUR
92 thousand (EUR 109 thousand).
In Q4, the Group's expenses totalled EUR 10,925 thousand (EUR 10,593 thousand),
up by 3.1%. The associated companies' impact on profit and loss totalled EUR
462 thousand (EUR 2,548 thousand). Q4 operating profit amounted to EUR 2,599
thousand (EUR 4,657 thousand). Operating profit decreased by 44.2%
year-on-year. The Group's operating margin was 20.0% (37.0%). Operating profit
excluding Alma Media and the other associated companies amounted to EUR 2,137
thousand (EUR 2,108 thousand), representing 16.5% (16.7%) of net sales. In Q4,
operating profit from publishing decreased by EUR 155 thousand. Operating
profit from the printing business remained at the previous year's level.
Net financial expenses amounted to EUR 964 thousand (EUR 0 thousand). Net
gain/loss on shares held for trading was EUR -5 thousand (EUR 293 thousand). In
Q4, interest expenses excluding the fair value change in derivatives hedging
them totalled EUR 641 thousand (EUR 519 thousand). The market value of these
interest rate swaps fell by EUR 352 thousand in October-December 2011.
Pre-tax profits in Q4 totalled EUR 1,636 thousand (EUR 4,656 thousand).
CONSOLIDATED BALANCE SHEET AND FINANCING
The consolidated balance sheet total came to EUR 196,998 thousand (EUR 197,035
thousand), with EUR 104,440 thousand (EUR 105,030 thousand) of equity. On the
reporting date of 31 December 2011, the balance sheet value of the holding in
the associated company, Alma Media Corporation, was EUR 153.7 million and the
market value of the shares was EUR 138.1 million. According to the management's
estimate, write-down in this holding is unnecessary.
At the end of the financial year, interest-bearing liabilities totalled EUR
76,467 thousand (EUR 83,011 thousand on 31 December 2010). Loan maturities of
the company's interest-bearing liabilities range from 2 to 9 years. EUR 3.6
million in interest-bearing loans were repaid in July on an accelerated basis.
EUR 2.4 million of said amount was for loan repayments originally scheduled for
2012. In order to safeguard its long-term financing, Ilkka-Yhtymä has renewed
the EUR 15.5 million bullet loan originally maturing in 2013, to 2018.
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. While 3% of the company's interest-bearing liabilities had
been tied to a fixed rate, some 40% of floating-rate interest-bearing
liabilities were transformed to a fixed rate through interest rate hedges.
Presently, some 42% of the loans in the company's total loan portfolio have a
fixed rate and some 58% a floating rate. These hedging measures included, the
average interest rate for interest-bearing liabilities on 31 December 2011 came
to 3.19%. The loan providers of the EUR 30 million loans taken out at the end
of the 2010 financial year have the opportunity to adjust the loan margin five
years after the loans have been drawn.
As at 31 December 2011, the impact of floating-rate interest-bearing
liabilities on profit before taxes would have amounted to -/+ EUR 442 thousand
over the next 12 months, if the interest level increases or decreases by one
percentage point. Of interest-bearing liabilities existing during the 12 months
following the financial year, a total of EUR 3,999 thousand will fall due for
payment.
With regard to liquidity, the year-end current ratio stood at 0.86 (0.88).
Group gearing was at 60.9% (72.9%) at the end of the financial period. Equity
ratio was at 55.5% (53.8%) and shareholders' equity per share stood at EUR 4.07
(EUR 4.09). Cash and cash equivalents amounted to EUR 10,926 thousand (EUR
3,047 thousand). Cash flow from operations totalled EUR 31,171 thousand (EUR
12,652 thousand). Cash flow from operations for 2011 included, among others,
the dividend of EUR 15,742 thousand (EUR 6,088 thousand in 2010) paid by Alma
Media and subscriptions invoiced in advance by the provincial papers that
normally would have been invoiced in Q1/2012. Around 80% of the value of this
advance invoicing was recognised in cash flow in December 2011. Cash flow from
investments totalled EUR -3,633 thousand (EUR -32,607 thousand). In 2010, cash
flow from investments included investments in Alma Media Oyj's shares. During
the financial year 2010, a significant event not affecting the cash flow
involved the issue of convertible bonds. The aggregate value of these bonds was
EUR 20 million, which forms part of the cost of Alma Media's shares.
PUBLISHING
The Group's publishing segment comprises the publishing company I-Mediat Oy.
During the year, net sales from publishing totalled EUR 43,318 thousand (EUR
41,386 thousand). Net sales from the publishing business grew by 4.7%.
Advertising revenues grew by 5.2% and circulation revenues grew by 1.6%. Net
sales for both provincial papers belonging to the publishing segment, Ilkka and
Pohjalainen, and for local newspapers increased. Aggregate net sales for free
sheets remained at the previous year's level. Operating profit from publishing
increased by 13.4% year-on-year, to EUR 7,697 thousand (EUR 6,786 thousand).
Due to Finland's weak and uncertain economic situation, it is difficult to
forecast media income in 2012. Media advertising is estimated to grow mildly,
while circulation income is expected to decrease as a result of the
introduction of a value-added tax. Net sales of I-Mediat Oy are expected to
remain almost at the same level as before.
PRINTING
The printing segment comprises the printing house I-print Oy. The segment's net
sales amounted to EUR 15,235 thousand (EUR 13,052 thousand). Net sales grew by
16.7% year-on-year. External net sales from the printing business increased by
EUR 1,458 thousand (27.6%,). The growth in net sales came as a result of new
customers, recovering volumes and price increases due to printing materials.
Operating profit from printing increased by EUR 775 thousand year-on-year, to
EUR 1,953 thousand (EUR 1,177 thousand). The considerable rise in operating
profit from printing was due to higher volumes, a modest rise in costs early in
the year and the fact that the first quarter last year included costs for
ceasing operation of the Vaasa printing unit.
Within the printing business, the 2012 market situation is expected to be more
challenging than that of the previous year. The general uncertainty surrounding
the economy will also impact corporate customers' media investments. Finland
still has overcapacity in printing and the related operations, which will pose
major challenges to the profitability of operations. Energy and raw materials
expenses are expected to develop moderately. Net sales of I-print Oy are
expected to remain almost at the same level as before.
ASSOCIATED COMPANIES
Ilkka-Yhtymä Oyj's associated companies are Alma Media Corporation (29.79%),
Arena Partners Oy (37.82%), Väli-Suomen Media Oy (40%) and Yrittävä Suupohja Oy
(38.46%). Alma Media focuses on publishing operations and digital consumer and
corporate services. Its high-profile newspapers are Aamulehti, Iltalehti and
Kauppalehti. Arena Partners Oy is an electronic business development and
production company jointly owned by five provincial newspaper companies. Arena
Partners owns a 35% share of Alma Mediapartners Oy, which is Alma Media's
housing sales, vehicle and consumer advertising marketplace company operating
in Finland.
On 9 September 2011, Arena Interactive Oy acquired the entire capital stock of
Steam Communications Oy. Arena Interactive Oy is owned by Ilkka-Yhtymä Oyj's
associated companies Arena Partners Oy and Alma Media Oyj, which hold 65% and
35% of its shares, respectively. Both Arena Interactive and Steam
Communications specialise in the development and production of mobile services,
and message communication.
On 4 October 2011, Arena Partners Oy acquired 36.16% of Uranus Konsultointi Oy.
Uranus is engaged in two business sectors: matching experts with employers
(www.uranus.fi) and managing the recruitment process (www.laura.fi). Uranus is
also a member of the world's leading international electronic recruitment
network, The Network (www.the-network.com), providing its services in Finland.
Väli-Suomen Media Oy produces, among other things, a joint Sunday publication
for six newspapers (Ilkka, Karjalainen, Keskisuomalainen, Pohjalainen, Savon
Sanomat and Etelä-Suomen Sanomat) called Sunnuntaisuomalainen. Yrittävä
Suupohja Oy publishes Suupohjan Seutu, a free sheet distributed in the Suupohja
region.
In 2011, the share of the associated companies' result was EUR 8,659 thousand
(EUR 7,337 thousand).
RESEARCH AND DEVELOPMENT EXPENSES
The Group's publishing business has carried out multi-channel product
development in cooperation with Arena Partners' associated papers. Product
development has been focused on customer-oriented services relating to news
reporting, transactions and communities. With regard to the Group's printing
business, development activities focused on the development of value-added
web-based services and products. Additional human resources were allocated to
the development of commercial content design.
CAPITAL EXPENDITURE
Reported capital expenditure for the year totalled EUR 4,414 thousand, with
printing accounting for EUR 227 thousand and publishing for EUR 601 thousand.
In 2011, a total of EUR 3,477 thousand was invested in available-for-sale
shares.
ANNUAL GENERAL MEETING, SUPERVISORY BOARD AND BOARD OF DIRECTORS
On 14 April 2011, 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 0.50 be paid for the year 2010.
The number of members on the Supervisory Board for 2011 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 2015: Lasse Hautala (Kauhajoki), Perttu
Rinta (Mikkeli), Satu Heikkilä (Helsinki), Ari Rinta-Jouppi (Vähäkyrö) and
Raija Tikkala (Jurva). Minna Sillanpää (Seinäjoki) and Jorma Vierula
(Seinäjoki) were elected as new members of the Supervisory Board for the term
ending in 2015.
The AGM decided to raise the remuneration of the Chairman and members of the
Supervisory Board. The Chairman of the Supervisory Board will be paid a monthly
fee of EUR 1,500 and a meeting fee of EUR 400, while other members will be paid
EUR 400 per meeting. 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 Tomi Englund as the principal auditor. It was
decided that the auditors would be reimbursed per the invoice.
The AGM approved the Board of Directors' proposal on amending the Articles of
Association. The amendments include the following:
(i) that Section 5(2), concerning the retirement age of a Supervisory Board
member, be removed;
(ii) that Section 8(1) be amended by removing the regulations concerning the
retirement age of a member of the Board of Directors and by increasing the
maximum number of Board members to six (6), and Section 8(3), concerning the
quorum for the Board of Directors, be removed; and
(iii) that Section 11(2), concerning shareholders' initiatives to the General
Meeting, be removed.
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.
The proposal by Osakesäästäjien Keskusliitto ry (Shareholders' Association) and
Kari Karpoff to eliminate the Supervisory Board was not approved.
On 2 May 2011, the Supervisory Board re-elected Seppo Paatelainen and Tapio
Savola, whose term had come to an end, to the Board of Directors of
Ilkka-Yhtymä Oyj. Lasse Hautala will continue as chairman of the Supervisory
Board, while Perttu Rinta will continue as vice-chairman. At its membership
meeting, the Board of Directors re-elected Seppo Paatelainen as its chairman,
while Timo Aukia will continue as vice-chairman.
At its meeting on 7 November 2011, the Supervisory Board decided to increase
the number of members on the Board of Directors of Ilkka-Yhtymä Oyj to six (6).
Esa Lager, M.Sc.(Econ.), LL.M., was elected as a new member to the Board of
Directors of Ilkka-Yhtymä Oyj.
SHARE PERFORMANCE
At the end of 2011, the company's share capital totalled EUR 6,416,302. The
number of shares was 25,665,208, of which 4,304,061 were Series I shares (20
votes per share) and 21,361,147 were Series II shares (1 vote per share).
Shares of both series entitle the holders to the same dividend.
According to the Articles of Association, a single shareholder at a General
Meeting may not use more than one twentieth (1/20) of the entire number of
votes represented in a meeting.
The transfer of Series I shares is restricted by an approval clause. According
to this clause, Series I shares cannot be transferred to another holder without
the approval of the Board of Directors.
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.
The number of Series I shares of Ilkka-Yhtymä Oyj traded in 2011 was 76,617,
which represents 1.8% of series share stock. The trading value of shares was
EUR 0.8 million. The number of Series II shares traded totalled 1,446,992,
which equals 6.8% of the series share stock. Their trading value was EUR 11.1
million. During the report period, the lowest quotation for Ilkka-Yhtymä Oyj's
Series I share was EUR 8.50 and the highest EUR 11.69, while the lowest
quotation for a Series II share was EUR 5.95 and the highest EUR 8.99. At the
period-end closing price, the share capital market value was EUR 179.7 million.
The Board of Directors has an effective authorisation to decide upon a share
issue and/or granting stock options and/or other special rights and upon their
conditions. On 4 November 2010, Ilkka-Yhtymä Oyj purchased 7,250,000 shares in
Alma Media Corporation from Oy Herttaässä Ab. From the share purchase price,
EUR 30 million was paid in cash. In addition, Ilkka-Yhtymä decided to issue
freely negotiable convertible bonds, with a value of EUR 20.0 million, to the
seller. The bonds issue decision taken by Ilkka-Yhtymä's Board of Directors is
based on the authorisation granted to it by the AGM on 19 April 2010.
In addition to this, the company has not issued any option rights or other
special rights.
The Board of Directors is not authorised to acquire or sell the company's own
shares.
FLAGGING ANNOUNCEMENTS
As a result of a share purchase completed on 10 June 2011, Pohjois-Karjalan
Kirjapaino Oyj's holding in Ilkka-Yhtymä Oyj's share capital exceeded 10%.
Holding increased to 10.0039% of the share capital and 2.3914% of the voting
rights.
PERSONNEL
The Group had an average of 382 employees during the year under review (388 in
2010), while the average number of personnel expressed as full-time equivalents
was 341 (343).
On 31 December 2011, the Group had 333 full-time employees (333).
Since 2000, Ilkka-Yhtymä Group's entire personnel has been covered by an
incentive scheme, with the exception of 2009 when the scheme was not in use.
The Articles of Association provide for two employee representatives to serve
on the Supervisory Board of Ilkka-Yhtymä Oyj.
ESTIMATED OPERATING RISKS AND UNCERTAINTIES
Ilkka-Yhtymä's most significant short-term risks are related to the development
of media advertising and printing volumes, which apply to the entire sector. A
long-term risk in the sector lies in the potential decrease in circulation
volumes, if consumers transfer to using electronic devices for reading
newspapers. At this point, it is difficult to evaluate the impacts of the 9 per
cent value-added tax, imposed on newspapers' subscription fees at the start of
2012, on circulation and printing volumes. Through its holding in Alma Media
stock, the company is also exposed to risks related to Alma Media's
profit-making capacity, dividend policy and the price development of its share,
as well as risks resulting from the development of Alma Media's ownership
structure.
Communications industry
According to the company's estimates, risks attendant on the Group's core
business are those normally associated with the sector. Such industry risks are
mainly associated with the development of media advertising and media
consumption, since more and more alternatives are being offered to consumers
and advertisers. A prolonged weak economic situation and a slow recovery may
have a negative impact on the consumption of media products and services.
Competition in the industry is being affected by the digitalisation of content,
the emergence of new distribution channels, growth in freely available content,
changes in media use and ways of spending time, as well as the new operating
methods and actors these are enabling.
Publishing
In the long term, regional demographic and economic developments will have an
impact on provincial and local newspapers' circulation and advertising income.
On the other hand, the current reduction underway in the average number of
individuals in households will maintain circulation figures. A healthy
circulation coverage percentage, a competitive contact price and strong
relationships with readers are enhancing provincial and local newspapers'
competitiveness in the advertising market. Provincial papers' overall reach has
increased as a result of steep growth in the number of online media visitors.
In general, ordinary economic cycles have not had a major impact on local or
provincial newspapers' circulation income. On the other hand, media advertising
volumes reflect changes in economic cycles, competitive situations and the
outlook of advertisers' own industries. Media sales took an upward turn in the
autumn of 2010 and continued to grow modestly until the autumn of 2011.
The market entry and exit of new media, such as new free sheets, depends on
economic cycles, regional volumes of the advertisement market and the
competitive environment. Most newspaper groups, including Ilkka-Yhtymä Group,
have decades of experience with respect to their free sheets, the high quality
and local customer relationships of which provide a competitive edge.
Due to the consumer behaviour enabled by new technology, some classified
advertisements, such as car, housing and job advertisements, have shifted
online. In response to this development, Ilkka and Pohjalainen are engaged in
collaboration with Arena Partners. Arena Partners Oy has acquired a 35% holding
in the Etuovi.com, Vuokraovi.com and Autotalli.com services displaying housing
and car advertisements. This will enable us to provide the sector's best
services to customers. New players in the markets include international search
engine companies.
In order to face the challenges posed by changing reading habits among young
people and growing volumes of content available free of charge on the Internet,
Ilkka-Yhtymä Group is providing its provincial newspapers' premium online
services for the benefit of the region's consumers. In line with the allied
Arena Partners' strategy, our online services aim at becoming the leading site
for electronic news, services, transactions and commerce for consumers,
communities and companies in our operating provinces.
Graphics
The aggressive price competition in Finland's printing sector is continuing.
Developments in circulation and advertising volumes are reflected in the
numbers of pages in newspapers, while general economic trends are affecting the
use of other advertising media. Exports to the Nordic countries are dependent
not only on market conditions, but also on the development of exchange rates.
The availability of newsprint has been good and price developments in recent
years have been moderate, even declining, in spite of large annual pricing
fluctuations and the fact that the paper industry has downsized its capacity.
Pricing pressures are increasing, since the paper industry's capacity cuts were
intended to safeguard future profitability. Similarly, there is potential for
an increase in pricing fluctuations as the paper industry strives to achieve
shorter delivery agreements than before. I-print Oy has prepared for both
supply and price risks, by attempting to divide its purchasing between several
suppliers.
Newspaper delivery has been outsourced to Itella Oyj and Suomen Suorajakelu Oy.
Risks in delivery operations concern price developments. The price risk depends
on the availability of deliverers, competition between delivery companies and
the reform of the Postal Services Act.
Financial risks
The Group is exposed to an interest-rate risk and a risk associated with share
prices. The EUR 15.5 million bullet loan originally maturing in 2013 has been
refinanced until 2018.
The Group's interest-rate risk consists of changes in market interest rates
applied in the loan portfolio. The company follows an interest-rate management
policy confirmed by the Board of Directors. With respect to interest-rate risk
management, the goal is to reduce the volatility of interest expenses in order
to keep interest expenses, and the associated risk that they will grow, at an
acceptable level. Interest-rate risk is managed by selecting both fixed and
floating interest rates in loans, and using interest-rate fixing periods. If
necessary, in order to hedge against interest-rate risk, the company can rely
on interest rate swaps, interest rate options and their combinations. The
Group's loan arrangements and hedging against interest-rate risk have been
described in further detail above, under ‘Consolidated balance sheet and
financing'. The company's loan arrangements involve ordinary collaterals and no
special covenants.
In its operations, the Group is exposed to price risks arising from the
volatility of market prices of quoted shares. In order to ensure the
availability and flexibility of financing, the Group has available credit
limits. On 31 December 2011, unused credit limits totalled EUR 13 million (On
31 December 2010, EUR 13 million).
EVENTS AFTER THE FINANCIAL YEAR
Matti Kalliokoski, Chief Editor of the Ilkka provincial paper, which is
published by I-Mediat Oy, one of the Ilkka-Yhtymä Group's companies, has
announced that he will join the Helsingin Sanomat newspaper as from 1 August
2012. Later in the autumn he will be appointed as Helsingin Sanomat's Senior
Editorial Writer. Kalliokoski has served as Ilkka's Chief Editor and Executive
Chief Editor since 2007. The Board of Directors of I-Mediat Oy has begun
preparations for filling his position.
In connection with the introduction of Ilkka-Yhtymä's new management system in
2010, it was agreed that the joint editorial unit of the provincial papers will
be led by a management team, the chairmanship of which will alternate between
the Chief Editors of Ilkka and Pohjalainen. The Chairman of the editorial unit
management team is also a member of the Group's Executive Team. As from January
2012, Kalle Heiskanen, Chief Editor of Pohjalainen, became the Chairman of the
editorial unit management team and, consequently, a member of the Group's
Executive Team.
THE BOARD'S PROPOSAL ON PROFIT SHARING
The Board of Directors proposes to the Annual General Meeting of 19 April 2012
that a per-share dividend of EUR 0.40 be paid for the financial year 2011,
representing a total dividend payment of EUR 10,266,083.20. The Group will
distribute 81.0% of its profit in dividends. Dividends will be distributed to
those who are listed on the matching day, 24 April 2012, as shareholders in the
Ilkka-Yhtymä Group's list of shareholders, maintained at Euroclear Finland Oy.
Dividend payments are issued on 2 May 2012. On 31 December 2011, the parent
company's free capital amounted to EUR 93,937,033.69.
No substantial changes have taken place in the company's financial position
after the end of the financial year. In the view of the Board of Directors, the
proposed dividends do not jeopardise the company's liquidity.
Ilkka-Yhtymä Oyj practices an active dividend policy and aims to distribute at
least half of its consolidated annual income as dividend payments, taking into
consideration the financing required for profitable growth and the company's
future outlook.
PROSPECTS FOR 2012
In the current economic climate, major uncertainties are associated with the
predictability of both net sales and operating profit. Media advertising is
forecast to grow slightly in Finland. 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 have deteriorated.
The net sales of Ilkka-Yhtymä Group are estimated to remain almost at the 2011
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 decrease from the 2011 level due
to cost developments. 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
CONSOLIDATED INCOME STATEMENT
(EUR 1,000) 10-12/ 10-12/ Change 1-12/ 1-12/ Change
2011 2010 % 2011 2010 %
NET SALES 12 979 12 601 3 49 952 46 530 7
Change in inventories of -9 -9 -7 12 -5 349
finished and unfinished
products
Other operating income 92 109 -16 435 429 1
Materials and services -3 769 -3 416 10 -14 830 -13 108 13
Employee benefits -4 420 -4 546 -3 -17 275 -17 183 1
Depreciation -771 -797 -3 -3 098 -3 182 -3
Other operating costs -1 965 -1 834 7 -6 265 -6 341 -1
Share of associated companies' 462 2 548 -82 8 659 7 337 18
profit
OPERATING PROFIT 2 599 4 657 -44 17 590 14 479 21
Financial income and expenses -964 0 316678 -3 817 192 -2093
PROFIT BEFORE TAXES 1 636 4 656 -65 13 773 14 670 -6
Income tax -273 -545 -50 -1 098 -1 779 -38
PROFIT FOR THE PERIOD UNDER 1 363 4 111 -67 12 675 12 892 -2
REVIEW
Earnings per share, undiluted 0.05 0.16 -67 0.49 0.50 -2
(EUR)*)
The undiluted share average, 25 665 25 665 25 665 25 665
adjusted for the share issue
(to the nearest thousand)*)
*) There are no factor diluting the figure. CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
(EUR 1,000) 10-12/ 10-12/ Change 1-12/ 1-12/ Change
2011 2010 % 2011 2010 %
PROFIT FOR THE PERIOD UNDER 1 363 4 111 -67 12 675 12 892 -2
REVIEW
OTHER COMPREHENSIVE INCOME:
Available-for-sale assets 682 -100 -517 682 -176
Share of associated companies' 150 103 45 -53 344 -116
other comprehensive income
Income tax related to components 4 -203 -102 138 -203 -168
of other comprehensive income
Other comprehensive income, net 154 583 -74 -432 824 -152
of tax
TOTAL COMPREHENSIVE INCOME FOR 1 517 4 694 -68 12 243 13 715 -11
THE PERIOD
CONSOLIDATED BALANCE SHEET
(EUR 1,000) 12/2011 12/2010 Change
%
ASSETS
NON-CURRENT ASSETS
Intangible rights 1 120 1 284 -13
Goodwill 314 314
Investment properties 295 390 -24
Property, plant and equipment 13 481 15 150 -11
Shares in associated companies 154 097 161 248 -4
Available-for-sale assets 10 714 7 754 38
Other tangible assets 214 214
TOTAL NON-CURRENT ASSETS 180 236 186 354 -3
Current assets
Inventories 602 757 -20
Trade and other receivables 3 079 3 322 -7
Income tax assets 254 144 76
Financial assets at fair value 1 902 3 412 -44
through profit or loss
Cash and cash equivalents 10 926 3 047 259
TOTAL Current assets 16 762 10 681 57
Total assets 196 998 197 035 0
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDER'S EQUITY
Share capital 6 416 6 416
Fair value reserve and other reserves 48 623 49 002 -1
Retained earnings 49 401 49 612 0
SHAREHOLDER'S EQUITY 104 440 105 030 -1
NON-CURRENT LIABILITIES
Deferred tax liability 532 1 443 -63
Non-current interest-bearing liabilities 72 438 78 465 -8
Non-current interest-free liabilities 115
NON-CURRENT LIABILITIES 73 085 79 909 -9
CURRENT LIABILITIES
Current interest-bearing liabilities 4 029 4 545 -11
Accounts payable and other payables 15 383 7 368 109
Income tax liability 61 183 -67
CURRENT LIABILITIES 19 473 12 096 61
SHAREHOLDERS' EQUITY AND LIABILITIES TOTAL 196 998 197 035 0
CONSOLIDATED CASH FLOW STATEMENT
(EUR 1,000) 1-12/ 1-12/
2011 2010
CASH FLOW FROM OPERATIONS
Profit for the period under review 12 675 12 892
Adjustments -683 -2 586
Change in working capital 7 395 -364
CASH FLOW FROM OPERATIONS 19 387 9 942
BEFORE FINANCE AND TAXES
Interest paid -2 491 -844
Interest received 102 63
Dividends received 15 955 6 368
Other financial items 322 -750
Direct taxes paid -2 104 -2 128
CASH FLOW FROM OPERATIONS 31 171 12 652
CASH FLOW FROM INVESTMENTS
Investments in tangible and -785 -916
intangible assets, net
Acquisition of shares in associated companies -30 487
Other investments, net -3 477 -1 509
Repayments of loan receivables 58
Dividends received from investments 628 247
CASH FLOW FROM INVESTMENTS -3 633 -32 607
CASH FLOW BEFORE FINANCING ITEMS 27 538 -19 955
CASH FLOW FROM FINANCING
Change in current loans -6 930
Change in non-current loans 25 261
Dividends paid and other profit distribution -12 728 -8 908
CASH FLOW FROM FINANCING -19 658 16 353
INCREASE (+) OR DECREASE (-)IN FINANCIAL ASSETS 7 879 -3 602
Liquid assets at the beginning of the financial period 3 047 6 648
Liquid assets at the end of the financial period 10 926 3 047
KEY FIGURES
2011 2010
Net sales, Meur 50.0 46.5
change % 7.4 -4.7
Operating profit, Meur 17.6 14.5
% of net sales 35.2 31.1
Profit before taxes, Meur 13.8 14.7
% of net sales 27.6 31.5
Result for the financial period, Meur 12.7 12.9
% of net sales 25.4 27.7
Return on equity (ROE), % 12.1 12.6
Return on investment (ROI), % 9.6 9.6
Equity ratio, % 55.5 53.8
Gearing, % 60.9 72.9
Gross capital expenditure, Meur *) 4.4 53.5
% of net sales 8.8 115.0
Balance sheet total, Meur 197.0 197.0
Current ratio 0.86 0.88
Average no. of employees 341 343
Earnings per share (EPS), eur 0.49 0.50
Cash flow from operations per share, eur 1.21 0.49
Shareholders' equity per share, eur 4.07 4.09
Dividend per share (Series I), eur **) 0.40 0.50
Dividend per share (Series II), eur **) 0.40 0.50
Dividend per earnings (Series I), % 81.0 99.5
Dividend per earnings (Series II), % 81.0 99.5
Effective dividend yield (Series I), % 4.4 5.1
Effective dividend yield (Series II), % 6.1 6.1
Price per earnings (P/E) (Series I) 18.2 19.7
Price per earnings (P/E) (Series II) 13.4 16.3
Market capitalisation, Meur 179.7 217.6
Weighted average of adjusted number of shares during the 25 665 208 25 665 208
financial period
Adjusted number of shares at the end on the financial 25 665 208 25 665 208
period
*) Includes investments in tangible and intangible assets and shares in
associated companies and in available-for-sale financial assets (shares).
**) 2011: Proposal of the Board of Directors
CONSOLIDATED NET SALES AND PROFIT BY QUARTER
(EUR 1,000) Q1/ 2011 Q2/ 2011 Q3/ 2011 Q4/ 2011
NET SALES 12 143 13 180 11 650 12 979
OPERATING PROFIT 4 174 4 972 5 844 2 599
PROFIT FOR THE PERIOD UNDER REVIEW 3 673 4 247 3 391 1 363
(EUR 1,000) Q1/ 2010 Q2/ 2010 Q3/ 2010 Q4/ 2010
NET SALES 11 100 11 859 10 970 12 601
OPERATING PROFIT 2 521 3 482 3 819 4 657
PROFIT FOR THE PERIOD UNDER REVIEW 2 297 3 134 3 350 4 111
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY (EUR 1,000)
Change in Share Fair Invested Other Retain Total
shareholders' capita value unrestricted reserv ed
equity 1-12/2010 l reserv equity fund es earnin
e gs
SHAREHOLDERS' EQUITY 6 416 48 498 24 45 359 100 298
1.1.
Comprehensive income 480 13 236 13 715
for the period
Dividend -8 983 -8 983
distribution
TOTAL SHAREHOLDERS' 6 416 480 48 498 24 49 612 105 030
EQUITY 12/2010
Change in Share Fair Invested Other Retaine Total
shareholders' capita value unrestricted reserv d
equity 1-12/2011 l reserv equity fund es earning
e s
SHAREHOLDERS' 6 416 480 48 498 24 49 612 105 030
EQUITY 1.1.
Comprehensive -378 12 621 12 243
income for the
period
Dividend -12 833 -12 833
distribution
TOTAL SHAREHOLDERS' 6 416 101 48 498 24 49 401 104 440
EQUITY 12/2011
GROUP CONTINGENT LIABILITIES
(EUR 1,000) 12/2011 12/2010
Collateral pledged for own commitments
Mortgages on company assets 1 245 1 245
Mortgages on real estate 8 801 8 801
Pledged shares 81 332 109 679
Contingent liabilities on behalf of associated company
Guarantees 2 767 2 458
SEGMENT INFORMATION
Group net sales (EUR 1,000) 10-12/ 10-12/ Change 1-12/ 1-12/ Change
2011 2010 % 2011 2010 %
Publishing 11 208 11 051 1 43 318 41 386 5
Printing 4 006 3 654 10 15 235 13 052 17
Non-allocated 497 479 4 2 002 1 942 3
Net sales between segments -2 731 -2 582 6 -10 603 -9 850 8
Group net sales total 12 979 12 601 3 49 952 46 530 7
Group operating profit (EUR 10-12/ 10-12/ Change 1-12/ 1-12/ Change
1,000) 2011 2010 % 2011 2010 %
Publishing 1 867 2 023 -8 7 697 6 786 13
Printing 492 492 1 953 1 177 66
Associated companies 462 2 548 -82 8 659 7 337 18
Non-allocated -222 -406 45 -719 -821 12
Group operating profit total 2 599 4 657 -44 17 590 14 479 21
AUDITED CIRCULATION OF NEWSPAPERS
Ilkka 52 651
Pohjalainen 24 692
Jurvan Sanomat 2 152
Järviseutu 5 314
Komiat 6 510
Suupohjan Sanomat 4 092
Viiskunta 5 987
Vaasan Ikkuna (delivery) 52 338
Etelä-Pohjanmaa (delivery) 44 500
Drafting principles
This financial statements bulletin, issued by Ilkka-Yhtymä Group, was prepared
in accordance with the recognition and measurement principles of the
International Financial Reporting Standards (IFRS), excluding some requirements
of IAS 34.
Since 1 January 2011, the Group has complied with the following new or updated
standards and interpretations:
- IAS 24 Related Party Disclosures - the revised standard. This revision
clarifies and simplifies the definition of a related party, in particular with
regard to the parties' significant influence and joint control. The revision
has no impact on the financial statements.
- IFRS 32 Financial instruments: Presentation - Classification of Rights
Issues. The amendment concerns the classification of share issues, options and
subscription rights denominated in foreign currencies. In the future, share
issues, options and subscription rights may, under certain conditions, be
classified as equity rather than derivative instruments, as previously. This
amendment has no impact on the financial statements.
- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. The
interpretation addresses certain situations (sometimes referred to as ‘debt for
equity swaps') where an entity renegotiates the terms of a financial liability
and issues an equity instrument to a creditor of the entity to extinguish all
or part of the financial liability. Such swaps are primarily considered as
repayment of debt. The difference between the carrying amount of the financial
liability (or part) extinguished and the fair value of the equity instruments
issued is recognised in profit or loss. This interpretation has no impact on
the financial statements.
- Annual improvements to IFRS and IFRIC (5/2010). These improvements will
chiefly enter into force in 2011. Several minor changes made have no bearing on
the financial statements.
As regards other parts and issues, the same drafting principles have been
applied to the financial statements bulletin as used in the previous financial
statements on 31 December 2010. Moreover, the calculation formulas and
principles for indicators also remain unchanged.
The figures in the financial statements bulletin are unaudited.
PROPOSALS TO THE ANNUAL GENERAL MEETING
The Board of Directors proposes to the Annual General Meeting of 19 April 2012
that a per-share dividend of EUR 0.40 be paid for the financial year 2011,
representing a total dividend payment of EUR 10,266,083.20. The Group will
distribute 81.0% of its profit in dividends. Dividends will be distributed to
those listed on the matching day, 24 April 2012, as shareholders in
Ilkka-Yhtymä Group's list of shareholders, maintained at Euroclear Finland Oy.
Dividend payments will be issued on 2 May 2012. On 31 December 2011, the parent
company's free capital amounted to EUR 93,937,033.69.
AUTHORISATION TO DONATE
The Board of Directors proposes to the AGM that the Board of Directors be
authorised to decide upon a donation, totalling a maximum of EUR 50,000, to be
made towards charitable causes or similar, and that the Board of Directors be
authorised to decide upon the recipients, purposes of use, schedules and other
terms of these donations.
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.
Seinäjoki, 20 February 2012
ILKKA-YHTYMÄ OYJ
Board of Directors
Matti Korkiatupa
Managing Director
For more information, please contact:
Matti Korkiatupa, Managing Director, Ilkka-Yhtymä Oyj
Tel. +358 (0)500 162 015
DISTRIBUTION
NASDAQ OMX Helsinki
Main media
www.ilkka-yhtyma.fi
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