Tamedia invests in digital - print business becomes a burden
The media company Tamedia continues to invest heavily in digital—including in journalism, but above all in commercial digital offerings and equity investments. Its former core business in print media continues to be optimized, but is increasingly becoming a burden for the group as a whole.
Two figures illustrate the problem. While the print business was still responsible for almost 47% of total sales in 2018, printed products only accounted for just under 14% of operating profit at EBIT level. In other words, less and less money can be earned with print. This is reflected not least in the EBIT margin of the Paid Media division, which fell to a low of 3.2 per cent in 2018 and was rated "unsatisfactory" by Tamedia CEO Christoph Tonini. No improvement in sight here. Tamedia's management expects sales in the print advertising market to continue to fall in 2019.
Against this backdrop, it seems only logical that the available funds will flow primarily into promising digital activities. The majority of the money received from the sale of the minority stake in Localsearch is to be used for the purchase of new digital investments. As the majority owner of Localsearch, Swisscom is paying Tamedia just under CHF 240 million for its 31 percent stake.
Tamedia CEO Tonini sees a possible investment focus in the fintech sector. The Group has gained initial experience in this area with its investments in Lykke (global blockchain marketplace) and Monito (comparison portal for money transfer services).
But the digital paid media are also to be strengthened. Tamedia plans to invest 30 million over the next three years: Two thirds will go to the editorial department and one third to the commercial sector.
The management's confidence in investing in publishing is based on the recent positive development of the digital reader market. The number of digital subscriptions rose to over 70,000 at the end of 2018, compared to just under 50,000 at the end of 2017. 100,000 day passes were also sold last year. Speaking to the media on Tuesday, Chairman of the Board of Directors Pietro Supino spoke of a "breakthrough". He also expressed his conviction that there will continue to be a willingness to pay for quality journalism in the future.
In order to meet the increasingly divergent challenges, growth prospects and development speeds of the Group's various business areas, Tamedia is planning to adapt its corporate structure. The new organization should make Tamedia more open and agile for partnerships. As an example, CEO Tonini mentioned the Classifieds business segment, where international partnerships could lead to accelerated growth. Tonini sees the bundling of the existing organizational units in the area of advertising marketing and placement as another sensible organizational adjustment.
Thanks to the takeovers of the advertising marketing companies Neo Advertising and Goldbach and the continued success of its commercial digital offerings, Tamedia grew its revenues by just under 4 per cent to over CHF 1 billion in the 2018 financial year. However, operating profit before interest and taxes (EBIT) fell significantly by 27.2% to CHF 131.6 million. The margin thus amounted to 13.0 per cent after 18.6 per cent. However, Tamedia benefited from various one-off accounting effects in the previous year, while in 2018 the bankruptcy of Publicitas had a negative impact of CHF 6.0 million and higher pension expenses. Excluding all special effects, the operating result was only slightly below the previous year, Tamedia wrote.
The bottom line was a net profit of 129.5 million francs (minus 24 percent). Shareholders are to participate in the profit with an unchanged dividend of 4.50 francs. (SDA)
