Annual Report 2017 Accelerating sustainable growth CONTENTS YEAR 2017 Alma Media – accelerating sustainable growth. 3 Responsibility as an employer . 59 CEO’s review . 4 Equal and diverse work community .. 59 Key figures 2017 . 6 Developing competence and well-being . 62 Calculation and data collection principles for CR reporting . 66 OPERATING ENVIRONMENT AND STRATEGY Environmental and personnel figures in 2017 . 67 Forces of change in the operating environment . 8 GRI index . 69 Strategy . 9 Global Compact index . 73 Long-term financial targets . 15 Value creation model . .16 REPORT BY THE BOARD OF DIRECTORS AND FINANCIAL STATEMENTS Responsibility at the core of business . 17 Report by the Board of Directors . 76 Stakeholder interaction . 18 Financial Statements . 93 Parent company financial statements . 144 BUSINESS SEGMENTS Signatures to the report by the Board of Directors and Business segments in brief .. 20 the Financial Statements . 157 Alma Markets . 22 Auditor’s report . 158 Alma Talent . 24 Alma News & Life . 26 GOVERNANCE Alma Regions . 28 Corporate Governance Statement . 165 Remuneration Statement . 183 CORPORATE RESPONSIBILITY Responsible Alma Media . 31 NON FINANCIAL INFORMATION REPORT 2017 . 187 Materiality . 32 Management of corporate responsibility . 33 Description of the management of corporate responsibility . 34 Social responsibility .. 39 Responsible journalism . 39 Social influence . 42 Responsible products and services . 45 Information security and data protection . 45 Responsible marketing .. 47 Responsible business . 50 Transparency and ethics in business . 50 Responsibility throughout the supply chain . 53 Environmental impacts of operations .. 56 2 Alma Media – accelerating sustainable growth Alma Media is a media company focus- Our ongoing transformation into a ing on service business and journalistic provider of digital services began in the content, with the mission of boosting mid-1990s. In 2017, digital business ac- the sustainable growth of individuals, counted for 43 per cent of our revenue. companies and society. In addition to We have been particularly successful in journalistic content, we provide services the digitalisation of our national media related to lifestyle, career, competence products and our expansion in Eastern and business development. Our prod- Central Europe. Digitalisation presents ucts are leading media and service many opportunities to us – our services brands in their respective fields, such as are available to our customers in exactly Kauppalehti, Talouselämä, Affärsvärlden, the manner they want to use them, Iltalehti, Aamulehti, Etuovi.com and regardless of time and place. Monster.fi. We are building sustainable media and Alma Media has employees in 10 responsibility is an integral aspect of our European countries, from the Finnish operations. By providing high-quality Lapland to the Balkan Peninsula. In independent media content, we act as Finland, our business includes national, a responsible member of society. At the regional and local media, digital consum- core of our operations is earning our er and business services, training, events, customers’ trust every day, by providing trade literature publishing as well as the sustainable media and service business printing and distribution businesses. solutions that create added value. We Finns encounter Alma Media’s nearly also operate responsibly with respect 100 media and service outlets some 20 to our employees by supporting the million times every day. Alma Media’s development of Alma Media’s corporate international business in Sweden, the culture and the competence of Alma’s Baltic countries and Eastern Central employees. Europe consists of recruitment services, financial and trade publications, an online marketplace for commercial properties and telemarketing services. 3 CEO’s Review Alma Media continued on the path of strong organic growth in 2017 . The factors behind the excellent development in financial performance included the growing digital business, internationalisation and closer internal cooperation . In 2017, Alma Media’s revenue increased synergies of the Talentum merger were by four per cent to 367 million euros and achieved in full. The positive develop- the Group’s adjusted operating profit ment of the Alma Regions segment grew by 45 per cent to 51 million euros. was achieved through cost savings that All three of the long-term financial compensated for the decline in media targets we set a few years ago were sales. The profit performance of the reached ahead of schedule. business segments reflects the broad transformation of the media sector: All of Alma Media’s business segments digital businesses performed very well, improved their result during the year, for while businesses that are still depend- the first time in a decade. Alma Markets ent on print media revenue and are in again led the way in growth and the earlier stages of their digital transforma- development of profitability in 2017. In tion saw slower development. Alma News & Life, digital advertising saw strong growth and reached a record In spite of the rapid growth of the level at the end of the year. In Alma Finnish economy, the advertising market Talent, the planned and promised cost in Finland remained subdued in 2017. 4 According to TNS Kantar, investments services in many different publishing in media advertising fell by 2.8 per channels in 2017, including online ”An increasingly cent to EUR 0.9 billion during the year. TV and radio. Cross-segment joint Alma Media’s domestic media sales initiatives and close cooperation at the significant share of grew by 2.7 per cent over the same Alma Media level are integral aspects Alma Media’s growth period of time. This growth in market of our digital transformation. In 2017, share was due to strong performance we revamped our digital advertising comes from international in content and mobile marketing as distribution system and developed well as the programmatic buying new and innovative digital advertising business. ” market. International platform operators solutions. One of our key joint initia- account for around half of the Finnish tives was establishing the joint eCom digital advertising market. Together team between the business units to with other Finnish media companies, develop digital subscription sales as we nevertheless achieved a defensive well as increase and share knowledge In 2017, we defined corporate re- victory when the international operators’ related to content e-commerce. We also sponsibility objectives to guide our share of digital advertising did not grow enhanced our IT-related capacity for the responsibility-related efforts, and we in Finland last year, unlike in many other responsible utilisation of data, taking planned measures to follow through on countries. into account the requirements of the our commitments related to sustainable EU General Data Protection Regulation, business. As a company, Alma Media An increasingly significant share of which will take effect at the beginning is committed to, among other things, Alma Media’s growth comes from of May. supporting the universally accepted international business. Our operations in principles in the areas of human rights, Eastern Central Europe grew, supported Alma Media’s growth is driven by our labour, environment and anti-corruption by favourable economic development, people. They also ensure our continued laid out in the United Nations Global and achieved a very good level of prof- competitiveness in the future. In 2017, Compact initiative. We are also commit- itability for the year. Our inter national learning and development were incor- ted to the UN Sustainable Development units have also been active in building porated into the personal targets of Goals and the Paris Climate Agreement. new growth initiatives through success- every Alma Media employee. We placed ful product development. In 2017, our special emphasis on the recruitment of I would like to take this opportunity to operations outside of Finland accounted digital developers and launched our first extend my warmest thanks to all of our for 23 per cent of our revenue and 39 trainee programme for developers. stakeholders for their excellent co- per cent of our adjusted operating operation in 2017 as well as Alma Media’s profit. Alma Media’s purpose is to boost the employees for their strong performance sustainable growth of companies, and dedication to achieving our shared Our digital transformation is progress- individuals and society. One of our goals. ing well, but we are only halfway there. most important functions is to produce In 2017, digital business represented 43 responsible and reliable journalism Kai Telanne per cent of our revenue, or 157 million while preventing the spread of fake President and CEO euros. We continued the development news and disinformation. Alma ­Media and renewal of our digital content 5 Key figures 2017 DISTRIBUTION OF REVENUE REVENUE BY REGION Content revenue Advertising revenue Service revenue Finland Other countries 15% 34% 77% 23% 51% ADJUSTED OPERATING PROFIT BY REGION Finland Other countries 61% 39% 6 7 Forces of change in the operating environment MEDIA CONSUMPTION ECONOMIC TRENDS IN OPERATING COUNTRIES • Mobile devices are the primary means of media ECONOMIC TRENDS IN OPERATING COUNTRIES • The Finnish economy is consumption for most users. • Finland growing but the advertising market remains subdued. • Social media has changed • Eastern Central Europe media consumption to a • Eastern Central Europe