The report provides answers to these at least in part, but perhaps not quite directly.
Digital transformation:
Keskisuomalainen has invested in digital platforms, so how does the company intend to accelerate the growth of digital subscription and advertising revenues compared to other major players in the industry, such as Sanoma and Alma, who have presumably progressed further in the digital transition?
2. Acquisitions and their efficiency:
Acquisitions have been a significant part of the growth strategy, but hasnât their profitability been variable, so⊠is the company considering a shift toward an organic growth model, or will we see more acquisitions in the future? How are previous acquisitions evaluated now, and what are their return expectations in the long term (more than a couple of years)?
Sorry, these are touched upon a bit in the report, plus my questions are partly impossible to answer.
Back then, ten years ago, no one really believed in any media companies.
Ten years ago, Sanoma was available for 4.5 euros and nine years ago for 3.3 euros. In the latter case, dividends would have accumulated for roughly the entire purchase price and the share price is now 6.81 euros.
Ten years ago, Alma would have been available for approx. 3 euros and nine years ago for approx. 2.6 euros. I believe dividends have accumulated for the purchase price even in the first-mentioned option, and the share price is now hovering around 11.15 euros.
Unfortunately, the position of the printed newspaper will only get more difficult in the future. And itâs not just about consumersâ willingness to buy, but about the ever-worsening distribution challenges on the cost side. In remote areas and smaller towns, these challenges are even more emphasized.
Personally, media companies interest me a lot as investments, and I have Sanoma in my portfolio. However, I donât think Keskisuomalainenâs media portfolio seems the strongest in terms of content. The Karjalainen newspaper does, however, offer exceptionally high-quality cultural journalism.
I would consider the major owner / CEO to be one of the risks. I remember how some time ago he was putting investorsâ money into the catastrophically poor Alfa-TV project. It was in no sense an investment, but pure hobbyism. Alfa-TV was loss-making, and there was no evidence of a turnaround.
When some regular guy working at Vincit tweeted on the former Twitter asking whether this Alfa-TV was a good investment from the investorsâ perspective, the CEO of Keskisuomalainen went publicly on Twitter to tell Vincit how their employee was insulting such an important person. That was the point at the latest when I started to wonder how amateurish the companyâs management is. Could there be similar poor use of money or other such nonsense as with Alfa-TV in the future?
In Keskisuomalainenâs editorial, Alfa-TV was once hyped as an ideological counterweight to Sanoma and Yle. One can, of course, have whatever opinion they want about those media houses, but when that counterweight was a channel that hosted all kinds of religious nonsense and politiciansâ own programsâwhere journalistic independence was non-existentâit was also a far cry from good journalistic practice.
Last month, Keskisuomalainen got to demonstrate its journalistic skills by joining Seiskaâs witch-hunt against the editor-in-chief of Yleâs news and current affairs department. Seiska had to publish a long correction regarding the matter, and the first error in the story was found right in the front-page headline. Keskisuomalainen, on the other hand, didnât apologize for anything; they simply removed three articles they had published on the subject from the web. One is certainly welcome to criticize Yle, for example regarding its staffâs business trips, but that is a completely different matter than spreading false information related to private life.
Some might think that talking about journalistic credibility or quality doesnât belong in an investment discussion. But when competing for the euros of consumers and advertisers, these are anything but insignificant matters. And the more the business is based on print media, the more essential the quality of content becomes.
I completely agree. I wonder how no one in a position of responsibility at the company stepped up to challenge the decision. It was clearly the CEOâs own pet project, which used investorsâ money instead of his own. Will we see similar investments in the future?
AlfaTV is making a comeback; will Keskisuomalainenâs purse strings loosen again?
Arttu, that diligent, evening-working proletarian, has prepared a new company report on Keskisuomalainen.
In the Finnish media advertising market, no significant changes have occurred since Keskisuomalainenâs H1 report. The company announced structural cost-saving measures aimed at the coming years, which we believe will gradually support the companyâs turnaround during 2026-27. In our opinion, the stock has fallen below its fair value, which thus offers investors an attractive return expectation.
Media advertising accounts for 36 percent of Keskisuomalainenâs revenue, so Petriâs comments on Finnish media advertising in December might be of interest in this thread.
(Of course, this also applies to Alma, Ilkka, and Sanoma)
Here are Arttuâs preliminary comments as the company releases its results on Thursday.
The companyâs operating environment has remained challenging, but we believe the acquisition in Publishing Operations helped the group achieve revenue comparable to the reference period. We anticipate the company improved its earnings level from a weak reference period, aided by efficiency measures. Despite a low earnings level, Keskisuomalainen will generate good free cash flow in 2024, which, combined with a stable cash position, in our opinion, enables dividend distribution comparable to the reference period. The guidance for fiscal year 2025 should communicate growing revenue and significant earnings growth.
Here are also Petriâs comments on January media advertising, including Keskisuomalainen (and Alma, Ilkka, and Sanoma).
According to statistics published by Kantar, the amount of media advertising in Finland decreased by 5% in January compared to the reference period, following the trend of recent months. This is not surprising, considering the development of previous months and the operating environment, i.e., the economy in Finland.
MTV will not be the last major media industry arrangement. Keskisuomalainen has led the industryâs consolidation by acquiring numerous smaller media houses. In Ilkka, as a major owner, it is now publicly pushing for changes that would facilitate Ilkkaâs restructuring. I would be very surprised if Ilkkaâs media operations did not end up with Keskisuomalainen one day. All in all, more on media industry consolidation and the current situation on inderesTV.
Topics:
00:00 Start
00:15 âTV advertising is not at a sustainable levelâ
04:04 Redistribution of regional media â is Ilkka next?
06:45 âTS-YhtymĂ€âs doors have surely been knocked onâ
08:24 Media business plays mainly a supporting role in companies
10:44 Advertising revenues are being redistributed
12:55 âSanoma will one day separate its media businessâ
Petri has published a new company report on Keskisuomalainen immediately after H2.
Keskisuomalainenâs H2 progressed as expected, and the company succeeded in improving its full-year result. In our view, the companyâs earnings growth prospects have improved due to changes in the competitive landscape and digital conversion. We believe the stockâs return expectation remains attractive despite the risks associated with the transitional phase. We reiterate our Add recommendation. At the same time, we raise the target price to EUR 8.0 (previously 7.5), driven by operational forecast changes.
Quoted from the report:
Cash flow calls for improved results, balance sheet position under control
In 2024, free cash flow turned negative (-8 MEUR) due to a subdued earnings level, corporate acquisitions, and higher-than-normal investments. Adjusted for corporate acquisitions, free cash flow would have been approximately 2 MEUR negative, which highlights the need for improved results. The net debt to EBITDA ratio at the end of Q4 was 2.9x. This takes into account the companyâs assets comparable to liquid assets. In our opinion, the companyâs debt position is currently under control, and the expected improvement in earnings during 2025 will correct the indebtedness to a healthy level during 2025-26.
Here is an example that Keskisuomalainenâs distribution business price increases have not been universally accepted:
âWe have a large city newspaper in our group, whose distribution price the distribution company raised by 200 percent with a single announcement. It was a take-it-or-leave-it situation. We didnât take it, and it was the right decision. Independent city newspapers must quickly act to arrange new distribution solutions, otherwise they will face ruin,â says Jukka KuusanmĂ€ki, Chairman of the Board of Letterbox Media Oy.
Things are happening in the media landscape. Ilkkaâs media operations could well have ended up with Keskar (Keskisuomalainen), and in my opinion, Keskisuomalainen would have been interested in this. At the same time, the competitive landscape is changing, as the merger of Ilkkaâs media business and Kaleva improves the overall competitiveness in digital media.
Here are Petriâs comments on media advertising in March. I put them in this thread because 34% of Keskisuomalainenâs revenue comes (or came in 2024) from media advertising.
Hereâs an excerpt from the autumnâs new book releases: Kauppalehti
Mission in Central Finland â Vesa-Pekka Kangaskorpi and the Greatest Media Coup of All Time, as its name suggests, tells about our countryâs most important media influencer of the 21st century, whose empire spreads across the map of Finland like an inkblot on blotting paper.
Kangaskorpi is a colorful personality who likes fine cars, stylish clothes, and cow-sized English Mastiffs. He has strong political passions, which he readily shares on social media.
Mission in Central Finland, written by Elina Grundström, is a compelling, humorous, and touching story about Kangaskorpi, the future of media, and Finnish democracy.
Arttu has published a new company report on Keskisuomalainen.
There have been no significant changes in the Finnish media market situation since Keskisuomalainenâs H2 report. Internal efficiency measures and changes in market dynamics should propel the companyâs earnings to strong growth already in H1. We reiterate our target price of EUR 8.0 for Keskisuomalainen and our âaddâ recommendation due to the attractive return potential.
Here are Arttuâs comments on media advertising in May, I put them in this thread because media advertising accounts for about a third of Keskisuomalainenâs revenue.
