SanomaWSOY's net sales totalled FIM 4,131.8 million (FIM 3,692.2 million), or EUR 694.9 million (EUR 621.0 million), up 11.9% on 1999. The Group's profit before extraordinary items totalled FIM 541.1 million (FIM 314.4 million), or EUR 91.0 million (EUR 52.9 million), up 72.1%. Earnings per share totalled FIM 2.77 (FIM 1.52), or EUR 0.47 (EUR 0.26), an increase of 81.8%. Equity per share was FIM 33.85 (FIM 31.81) or EUR 5.69 (EUR 5.36), up 6.1%, and the Group's equity ratio 70.6% (69.6%).
The SanomaWSOY Group comprises four sub-groups: Helsinki Media, Sanoma, WSOY, and Rautakirja. SanomaWSOY owns 54.7% of Rautakirja, which is listed on the HEX Helsinki Exchanges. A new electronic media subsidiary group, made up of Helsinki Media's TV and other electronic media activities and the Group's electronic media development projects, will become operational as a separate legal entity at the beginning of October. A new Helsinki Media group focused on magazine publishing, will become operational at the same time.
SanomaWSOY's net sales between January and June rose by some 12% compared to the first half of 1999, to FIM 4,131.8 million (1999: FIM 3,692.2 million). All the Group's sub-groups recorded increased net sales. The largest growth was seen at Helsinki Media, spurred by positive developments at Channel Four Finland. Net sales at Rautakirja also rose appreciably. Comparable net sales for the Group as a whole rose by some 10%.
SanomaWSOY recorded a profit before extraordinary items of FIM 541. 1 million during the first half (FIM 314.4 million), up 72% on 1999. This significant increase resulted in large part from an excellent asset management result. Group depreciation was over FIM 31 million higher than last year, and a total of some FIM 55 million (approx. FIM 27 million) in development-related investments were booked as direct expenses. Helsinki Media and Rautakirja recorded the largest improvement in performance. The Group's operating profit rose 32% to FIM 203.7 million (FIM 154.2 million). Earnings per share rose to FIM 2.77 (FIM 1.52).
The Finnish economy continued to grow during the first half, and forecasts indicate that GDP will rise by some 5% for the year as a whole. Consumer and business confidence has continued to be strong. The retail sector began the year more positively than last year and this favourable trend is expected to continue during the rest of the year.
Advertising expenditure rose faster than projected during the first half, and the total advertising spend rose 7.7%. Newspapers further strengthened their position as a key advertising media, and their advertising revenue rose by 8.5%. Magazine advertising also increased, by 7.1%. Television advertising rose by 4.4%.
Key first-half events
In May, SanomaWSOY decided to create two new sub-groups focused on electronic media and magazine publishing. Helsinki Media's TV operations (Channel Four), cable-TV activities (HTV), and digital-TV project will be transferred to the new media sub-group, as will the Group's virtual portal (Lumeveräjä) and mobile portal (Swwap) development projects. In addition, the new sub-group will also take over the video and audio services provider Tuotantotalo Werne, the video duplication and CD producer Måndag, and iMedia, a producer of Internet solutions, all from Helsinki Media.
The new Helsinki Media created by this reorganisation will focus on its core business of magazine publishing, in which it is Finland's largest publisher in terms of net sales and the largest publisher of special interest magazines.
The new sub-groups started operations under the new structure from the beginning of July, but the new legal entities will become operational as of October 1.
Swwap Oy's 2ndhead open mobile portal went live in June. Version 1.0 of the portal includes news, sports results, share price information, and navigation and street finder services, from an initial group of over 30 content providers, of which 10 were SanomaWSOY companies or units. Tens of new content providers are expected to become 2ndhead partners in the near future.
WSOY is consolidating its IT publishing activities into a single organisation known as the Docendo Group. This will include Teknolit Oy and Swedish-based Docendo Läromedel AB, acquired in March. Pro forma net sales of the Docendo Group in 1999 totalled FIM 77 million, and the group employed 90 people.
In May, Rautakirja subsidiary Eurostrada Oy signed an agreement with Neste Markkinointi Oy to transfer the Motorest chain of service stations to Eurostrada on a phased basis by the end of 2003. The two companies have set up a new company, Foodstop Oy, of which Eurostrada owns 99%, to handle service stations operations.
SanomaWSOY's holding in Norwegian-based A-pressen ASA stood at 29.7% at the end of the period under review.
The President of WSOY and Deputy President & CEO of SanomaWSOY, Antero Siljola, announced his resignation from his two positions and from the Boards of Directors of SanomaWSOY Corporation and Rautakirja Oyj and the Boards of Directors of the Group's subsidiaries on July 18. WSOY's Deputy President, Jorma Kaimio, will act as WSOY's President until further notice.
The Group's consolidated balance sheet at the end of June totalled FIM 8,063.3 million, an increase of FIM 487.2 million compared to the end of June 1999. Consolidated shareholders' equity totalled FIM 4,683.5 million (FIM 4,411.0 million). The Group's equity ratio stood at 70.6% (69.6%) and equity per share at FIM 33.85 (31.89).
The Group's gross investments totalled FIM 443.1 million (FIM 900.5 million). The largest single investments were WSOY's acquisition of Docendo Läromedel, the modernisation of Sanoma's printing facilities, and share purchases. Sanoma acquired a majority holding in Uutisvuoksi, a local paper published in the Imatra area of south-east Finland, and a 10.4% holding in the voting rights of shares in Top Press, the owner of Esan Kirjapaino Oy.
The Group's financial position is strong. The book value of financial asset securities, cash, and bank at the end of June totalled FIM 1,796.4 million (FIM 2,158.4 million), and their market value, FIM 2,253.8 million. Interest-bearing liabilities totalled FIM 609.3 million (FIM 387.0).
SanomaWSOY's Annual General Meeting (AGM) held on April 18, 2000 decided to increase the number of Company shares through a four-for-one share split, which came into force on May 10. Following this and the conversion of a number of Series A shares into Series B shares by the Company's main owners in April, the number of Series A shares now totals 23,220,492 and the number of Series B shares, 122,301,104. Through its Tiikerijakelu Oy subsidiary, the Group holds 7,187,276 Series B shares.
The AGM also decided to redenominate the Company's share capital in Euro, abandon the use of nominal values for Company shares, and increase the Company's share capital through a bonus issue.
A total of 61,604 Series A shares and 1,283,302 Series B shares were traded during the first half at an average price, after adjustment for the share split, of EUR 18.41 (FIM 109.49) and EUR 17.20 (FIM 102.30) respectively. The highest price paid for Series A shares after the same adjustment was EUR 21.88 (FIM 130.13) and the lowest EUR 13.00 (FIM 77.32); the highest price paid for Series B shares was EUR 21.00 (FIM 124.90) and the lowest EUR 12.50 (FIM 74.34). Total share turnover was EUR 72.3 million (FIM 428.2 million). SanomaWSOY's market value as of the end of June, minus Company shares held by the Group, stood at EUR 2,406.2 million or FIM 14,306.7 million.
The average number of people employed by the Group's various companies between January and June totalled 13,161 (12,428). Converted into full-time positions, this was equivalent to 10,165 (9,612).
Outlook for the future
The strong growth projected for Finland's GDP this year will have a positive impact on advertising volumes. Confidence in the economy also continues to be strong. Overall, the economic situation is largely favourable for SanomaWSOY, although its impact on the Group's individual businesses varies.
On the basis of developments and prospects during the first half of 2000, we forecast that the Group's net sales will rise to some FIM 8,600 million for the year as a whole, slightly higher than our original estimate earlier this year.
In accordance with Group practice, development-related investments are treated as direct expenses. Despite the negative impact of investment costs on the Group's result, we expect SanomaWSOY's operating profit and result before extraordinary items to be clearly better than in 1999.
SanomaWSOY's new media strategy is based on four key platforms: fixed and mobile networks, cable-TV, and digital-TV. A major part of these activities will form the Group's new electronic media sector. The Group's other sectors also have their own significant electronic media projects.
SanomaWSOY is by far the largest content provider on the Finnish market and the market leader in the media business. The Group has over two million registered customers; and its extensive resources and strong cash flow provide a good foundation for further developing these strengths in line with our strategy.
Our long-term growth target is based on our plan to increase our net sales not only through organic growth and new business development but also through acquisitions. Growth in the Group's traditional businesses will be driven primarily by international expansion. In electronic media-related services and applications, the Group's target is to achieve leadership in selected markets.
HELSINKI MEDIA Magazine publishing and television and network communications. Activities are now split operationally between two new sub-groups.
The net sales of the Helsinki Media Group between January and June rose by 23%, to FIM 702.3 million (FIM 569.5 million). Fully comparable growth, allowing for the transfer of Tuotantotalo Werne to Helsinki Media on May 1, 1999, was 21%. The largest single contribution to this increase, accounting for over 60%, was made by Channel Four Finland, where sales of advertising time rose faster than the market average. Channel Four's national viewing share has also continued to rise.
The improvement in Helsinki Media's operating loss continued, as a result of improved profitability at Channel Four and the group's printing associate company, Hansaprint; the loss for the half totalled FIM 10.4 million (FIM 53.7 million).
Magazine subscription revenue and advertising sales developed positively. Sales of magazine advertising space at Helsinki Media grew at twice the market average. Book sales also increased. Operations at Hansaprint progressed positively.
Investments continued to be made in the various new titles launched in 1999. Cosmopolitan's circulation continued to grow at a rapid rate, while the men's lifestyle magazine, MG, and ITviikko, which has become Finland's largest IT publication, both expanded their advertising sales. Other publications still in their first phase of development include gourmet magazine, Gloria ruoka&viini, the Sisters Club book club for young girls, and two titles launched in May and June 2000, the Lego Book Club for young children, and GTI-Magazine, a specialist magazine on European cars.
Helsinki Media's first-half investments totalled FIM 30.2 million (FIM 170.9 million). The largest of these were made in Helsinki Television's (HTV) cable network and cable modems, and in equipment for Tuotantotalo Werne.
As of the end of June, 206,000 households were connected to the HTV network, of which 154,000 were digital connections. HTV's network will be fully digital and duplexed by the end of 2000. An Internet service based on the digital capabilities of the cable-TV network has been launched, and 5,800 cable modem customers were connected as of the end of June.
Helsinki Media was divided operationally as of July 1, 2000, and two new sub-groups created within the SanomaWSOY Group. The associated legal entities will come into force as of October 1, 2000, after which their figures will be reported separately. The President of Helsinki Media Company Oy, Tapio Kallioja, has been appointed President of the new electronic media sector; and Eija Ailasmaa, Helsinki Media's current Deputy President, President of the new Helsinki Media, focused on magazine publishing.
Helsinki Media's net sales and operating profit for the year as a whole are both projected to develop positively compared to 1999. Net sales are projected to rise by around 15%, and operating profit to improve clearly.
Magazine publishing-related net sales for the full year are projected to rise some 8% on 1999, to around FIM 900 million, driven by the group's new titles. Magazine profitability is also expected to improve slightly.
The net sales for the full year of the new electronic media sector are projected to be close to FIM 500 million. Net sales at Channel Four are expected to increase by some 40% on 1999, and the business' result is also expected to improve clearly. The good performance projected for Channel Four will compensate for the direct expenses incurred as a result of developing new businesses. As a result, the new sector is expected to record an operating loss of some FIM 90 million.
Preparations for the start of digital-TV broadcasting in Finland in autumn 2001 are focused on Channel Four's new digital pay film channel and associated company Suomen Urheilutelevisio Oy. Mobile portal activities coordinated by Swwap Oy, which has been transferred to the new electronic media sub-group, are expected to grow rapidly, particularly with the introduction of new network technologies in 2001. The target is to expand the 2ndhead concept internationally in the near future.
SANOMA Newspaper publishing and printing, business information publishing, and new media.
The Sanoma Group's first-half net sales rose 6% to FIM 1,357.1 million (FIM 1,285.6 million), driven in particular by higher advertising sales at Helsingin Sanomat. Positive developments at Taloussanomat, Startel, and Esmerk Oy also contributed to increased sales. Operating profit increased to FIM 166.8 million (FIM 151.3 million). Rautakirja accounted for FIM 15 million (FIM 11.1 million) of the operating profit total.
Sanoma's gross investments totalled FIM 210.0 million (FIM 493.5 million); this figure includes printing-related investments covering the expansion of four-colour capacity, purchases of shares in companies in Sanoma's business area, and the purchase of production premises in Kouvola. Part of investments went on modernising two printing machines at the Sanomala facility. The latter investment, decided on in February, forms part of a larger programme to be implemented between 1999 and 2003 designed to completely modernise all of Sanoma's production process.
In May, Sanoma acquired a 10.4% holding in the voting rights of shares in Top Press, the owner of Esan Kirjapaino Oy, and sold two local papers to the latter. Sanoma also acquired a majority holding in Uutisvuoksi, a local paper based in and around Imatra in May.
Net sales and operating profit at Helsingin Sanomat, the largest part of the group's Newspaper Publishing and Printing business, both improved. The paper's net advertising sales continued to grow at a faster rate than the market generally, and the paper's position as Finland's largest advertising medium was further consolidated. The slight drop in circulation seen during the first quarter continued into the second. Certified weekday circulation figures for Helsingin Sanomat during the first half were 451,463, 0.7% down on 1999. Sunday circulation was down 1.6%, at 524,919 copies. Distribution-related mainframe and labelling operations were outsourced, and a major revamp of activities and organisation in the circulation marketing area was launched.
Net sales at Ilta-Sanomat remained at 1999 levels, while operating profit fell. The strong growth in net sales and operating typical of the paper in recent years levelled off in the first quarter. The increased availability of free papers cut into tabloid sales, particularly in Greater Helsinki. The tabloid sector also failed to benefit to the full degree from the overall increase seen in newspaper advertising. Development work on Ilta-Sanomat's content also cut into the paper's operating profit. The partial transfer of printing to Kaleva Kustannus Oy in Oulu increased sales in northern Finland, as expected.
Net sales and operating profit at Kymen Lehtimedia both dropped, as a result of a fall-off in print sales to the Russian market and changes in the pricing of national advertising packages. Circulation revenue remained at 1999 levels, despite a slight fall-off in circulation figures.
Net sales at Financial and New Media Products continued to grow at a strong rate, driven by increased advertising sales and circulation at Taloussanomat, Startel, and new businesses. The unit's operating loss was similar to last year's. Taloussanomat's certified weekday circulation during the first half totalled 23,454 copies, an increase of 28% on 1999. Circulation of the Saturday edition rose 16% to 30,390 copies.
Esmerk Oy, part of the Startel Group, expanded its activities to Miami and opened a new office there in April, and signed a cooperative agreement with Siste Nytt Gruppen AS of Norway in March, to improve its news monitoring coverage of Central and South America and Norway. Startel's holding in Swedish-based Ecovision AB rose to 39.9% following a share purchase in March. Following Ecovision's listing on Stockholm's Aragon List in June and a share issue, Startel's holding fell to 33.4%.
In June, Startel and Oy Radiolinja Ab's jointly owned new media business company, Onbusiness Oy, launched an SMS-based share price and news service. In July, Suomen Nettirahastot Oy opened the first phase of its new Internet-based electronic marketplace, for which Taloussanomat and Startel provide the news feed. Suomen Nettirahastot (previously known as Online Funds Oy) was founded at the beginning of the year by Startel and three financial management companies. The partners were joined by Helsinki Exchanges Group Ltd Oy, the parent company of the HEX Helsinki Exchanges, which took a 15% holding, in June.
Sanoma's full-year net sales are expected to grow by around 5%, and its operating profit by slightly more. This increase in net sales is based primarily on the projected development of advertising revenue at Helsingin Sanomat and on the positive development forecast for financial information and new media publishing. Kymen Lehtimedia's print exports to Russia are expected to fall slightly compared to 1999. Export prospects are dependent to a decisive extent on the recovery of the Russian economy.
WSOY Publishing, printing, calendars.
Net sales at the WSOY Group totalled FIM 516.3 million (FIM 498.5 million). Comparative net sales, accounting for the impact of acquisitions and divestments, rose FIM 25 million or 5%.
Operating profit, at FIM 28.0 million (FIM 29.6 million), was slightly below 1999, as a result of acquisitions and investments in electronic products. Printing operations, in contrast, turned in a better performance. Changes in the group's structure served to cut operating profit by FIM 3 million. WSOY's associated company, Rautakirja, contributed FIM 19.7 million (FIM 14.2 million) to the group's operating profit.
WSOY's gross investments totalled FIM 97.7 million (FIM 56.2 million), of which acquisitions accounted for FIM 71 million. The largest single investment was the acquisitions of the Swedish-based IT publisher and IT learning solutions specialist, Docendo Läromedel AB, in March.
The traditional general literature market grew positively during the first half, in contrast to the relatively weak development seen during the first half of 1999. On the important book club market, WSOY's book clubs increased their market share; and SanomaWSOY's book clubs as a whole now hold around 50% of the Finnish market. Finland's first Internet book club, Bookmark, launched in January, failed to meet its membership target and development of its operating model is being continued.
In the educational materials area, the volume of comprehensive school orders remained at 1999 levels and WSOY retained its strong market position. Orders for Weilin+Göös' multi-volume reference works moved up. Various internal operational enhancements and developments in the company's sales network were introduced.
In terms of new publishing initiatives, WSOY focused on developing WSOY Koulukanava Oy. A specialist in developing digital TV- and Web-based learning products, WSOY Koulukanava will launch the pilot stage of its open learning portal in the autumn. In June, WSOY and the Union of Finnish Writers agreed a new type of writer's publishing contract taking account of print on demand and e-book issues. Geodata Oy launched its Gekko map server and related location services.
In the special publishing area, the integration of Docendo Läromedel progressed well. The launch of Docendo's Simultan Open IT interactive teaching package has been received well on both the Swedish and Finnish markets. In May, WSOY decided to consolidate Docendo and Teknolit Oy into a single IT publishing unit to be known as the Docendo Group. The new structure, which is designed to exploit synergy benefits, is projected to be well-placed to succeed both in the Nordic marketplace and internationally.
The spin-off of the WSOY Printing Unit into a separate company, WS Bookwell Oy, was formally completed on April 1. The book market continued to be favourable, and the company recorded a good result. Tougher competition saw commercial printer Lönnberg Painot Oy record a weaker result. Digital printing specialist Tummavuoren Kirjapaino recorded a satisfactory result.
Progress on turning around performance at Norwegian calendar company Emil Moestue went according to plan. New plans for enhancing operations at Swedish-based Chrono AB were completed at the beginning of the summer. Operations are to be rationalised and cooperation with Ajasto in Finland to be extended. These various development measures are expected to see Calendar Operations turn in a positive result for the year as a whole.
WSOY's full-year net sales are projected to increase by nearly 10% as a result of acquisitions made to date. The group's operating profit is expected to rise slightly, despite continued development-related investments.
RAUTAKIRJA Kiosk-based retailing, newspaper and magazine distribution, bookshops, cinemas, and restaurants.
Rautakirja's net sales rose by nearly 14% during the first half, to FIM 1,814.6 million (FIM 1,593.5 million). All the group's businesses increased their net sales, with investments in recent years in areas such as outlet and concept development and multiplex cinemas driving this upward trend. If the impact of new businesses is eliminated, comparative net sales rose by some 10%.
The group's higher level of net sales was also reflected in its operating profit, which, at FIM 76.4 million (FIM 57.3 million), was a third up on 1999. In contrast to previous years, performance bonuses totalling FIM 12 million were booked during the first part of the year. Operating profit was up in the kiosk business, newspaper and magazine distribution, and cinema operations. Performance at the group's highway service areas fell off slightly, but was still clearly profitable. Despite development and cost-saving measures, the Pizza Hut chain continues to have profitability problems.
Rautakirja's profit before extraordinary items totalled FIM 93.1 million (FIM 65.3 million). Contributory factors to this over 40% increase, in addition to business operations, included the doubling of revenue from treasury and asset management activities. Earnings per share rose to FIM 10.11 (FIM 7.16).
Investments totalled FIM 75.9 million (FIM 144.8 million). The largest single investments were the start-up of the multiplex cinema project by Finnkino's Estonian subsidiary AS MPDE, costs associated with the extension of the kiosk chain in Estonia, and increasing Rautakirja's holding in Jokerit HC Oyj from 21% to 28%.
Following its purchase of additional shares in January, mainly from Otava, Kesko Oy is now Rautakirja's third-largest owner as measured in terms of voting rights.
Construction of a new EEK 170 million multiplex cinema in Tallinn began early in the year and the project is due to be completed in spring 2001. The R-kiosk chain in Estonia was expanded in May when Lehti-Maja Eesti AS acquired 22 kiosks in the Tarto area from OÜ Müügigrupp, part of Eesti Media. Also in May, Eurostrada Oy and Neste Markkinointi Oy agreed the transfer of the Motorest chain of highway service areas in Finland to Eurostrada. Rautakirja's chain of R-kiosks, in collaboration with Pakettilinja, part of the Kiitolinja group of logistics companies, launched a new system in May enabling customers to pick up products ordered over the Internet or by mail order from their nearest R-kiosk.
Following very positive development during the first part of the year, Rautakirja's sales slowed slightly during the second quarter. The growth in net sales is projected to continue to slow during the rest of the year. Comparing full-year expectations with last year's figures is complicated by the exceptionally strong growth in net sales at the end of 1999 resulting from acquisitions and good retail sales development. Forecasting the level of revenue from treasury and asset management activities during the rest of the year is somewhat uncertain as it is linked to stock market developments. No changes are expected, however, in the positive prospects projected for private consumption and the retail trade.
Net sales for the year as a whole are expected to rise slightly more than previously projected, by in excess of 8%, to some FIM 3.8 billion. The group's full-year result is expected to show a slight improvement over 1999, despite increased personnel bonuses.
Rautakirja published its own half-year interim statement on August 8, 2000.
Helsinki, August 16, 2000
Board of Directors SanomaWSOY Corporation