Alma Media Oyj (ALMA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to this Interim Report session of Alma Media's Fourth Quarter and the Full Year of 2024. My name is Elina Kukkonen, I'm responsible of the Communications and Brand of Alma. We begin with the presentation shortly, and first to go on stage will be our CEO, Mr. Telanne. He will present the overall result of Alma Media and highlight the performance of each business segment. After Mr. Telanne, our CFO, Mrs. Taru Lehtinen, will present the financial position of Alma Media today. And then Mr. Telanne continues with the operating environment and our strategy going forward. We close the session with the Q&A. We first take the questions here at Alma premises, and then we also take out the online questions. Our Investor Relations Director, Mr. Teemu Salmi, he will speak up the questions from the online. Once again, welcome, and nice to have you here joining this session. I think we are set and ready for the presentation. So, once again, welcome. And Mr. Telanne, the floor is yours.

Thank you very much, Elina, and good morning, and welcome on my behalf as well. What a turbulent year we had in our businesses all over the Europe. The environment in, I would say, in all business areas has not been as pleasant as maybe expected in the beginning of last year. And as you might remember, we have had the so-called plan B in place with a heavy and well-disciplined cost initiatives in place in order to mitigate the difficulties that we have faced from the non-satisfactory environment. With the markets of houses and premises, cars, recruitment on a very low level, especially in the Nordic countries and Baltics, but also lately in the Central Eastern Europe. I'm very pleased to see that our business developed favorably during the last quarter. We had quite a satisfactory or even good performance in every business. Our revenue went up 4%, adjusted operating profit almost 17% from EUR 15.2 million to EUR 19.5 million. And for the full year, EUR 313 million and EUR 77 million EBIT, adjusted EBIT close to 25% EBIT percent, which has been the long-term target of ours. Our CFO, Taru, will later describe a little bit the changes of our target and target setting for long-term. I'll concentrate more on the fourth quarter and the full year result here. Our transformation from print to digital, from media to services has advanced as expected and as planned at the moment and at the end of the year. The share of the digital business close to 84%. So, we are approaching the final of the transformation from print to digital, and we are ready and set up for the new era of AI-assisted business development in the company. And because of the good cash flow and profitability, the balance sheet has been moving to a healthy level. Leverage at the moment, 1.5 net debt-to-EBITDA ratio, and the equity ratio close to 49%, which means that we have quite a good chance for future investments, maybe even a bigger leaps or bigger acquisitions for the future purposes. It's really good to see that the plan that we have had in place is working perfectly, meaning that all the business segments have been able to improve their performance, especially on the profitability side. Alma Career environment, so the demand on the recruitment side has been on a low side, like in Finland, especially, and also in the Baltics. On Alma Marketplaces, the demand has been slightly increasing. And the biggest jump here on revenues came from acquisition of Netwheels, but also, we have had quite good organic growth. And Alma News Media has been able to mitigate the decline of print media around 9% with a good development of digital content sales, more or less. And due to this, the adjusted operating profit, and with the good cost initiatives and discipline in the costs and other expenses, our adjusted operating profit step-by-step went up in every business. Alma Career, EUR 0.6 million; Marketplaces EUR 1.3 million; and News Media, EUR 0.6 million, ending up to EUR 19.5 million for the last quarter of last year. And as I said, the transformation, digital share of the business nicely up as planned, and this will continue. I can guarantee that. On the right side of this slide, you can see how these different business segments -- not the business segment of ours, but the revenue classes contributed during the last quarter. So, the increase came from -- mostly from digital services, and like the Netwheels is part of that, but other digital services as well like our other inside services and those. And the decline came from advertising, 8.4% decline in advertising, which is quite a lot. And that tells us something about the market and the investment rate of the companies, especially in Finland, but other places as well. Classifieds slightly up, depressed by the recruitment advertising or classified, but the others went pretty well up. And the good thing here is that the content revenues due to the good development of digital content on the news segment went up almost 4%. So, that's a good sign for us, and tells us that the plan and the initiatives are working. Okay. Let's take a brief look at the different business segments, which are these 3. You remember and know; Alma Career, Alma Marketplaces, Alma News Media. They are pretty much the similar sizes on a yearly basis, close to EUR 100 million or above -- a little bit above EUR 100 million each segment with a little bit different profitability profile. So, the Career is the biggest contributor on the profitability, around 40% profitability level. Marketplaces is secondly closing to the 30% and then the News Media closing to 20% target. So, every business is healthy enough to develop, to be invested in and to contribute also for the future targets of the whole company. I start from the Career. And we have suffered with the currency of Czech koruna still. And for the full year, if I remember right, around EUR 3 million was the effect on the revenues and profitability. In Finland, the Baltics, the market has been struggling and weak macroeconomics also. During the last quarter, the Finnish recruitment market went down more than 30% still. So, more than 30% the whole market down, which is a really sad sign of our company's ability and willingness to invest into the people. So, that would say that the shift on the macroeconomics is not yet viable. But the profitability with a good discipline in expenses guaranteed a good profitability development, which is, of course, a good achievement. So, advertising here also down 30%, more than 30% services up more than 30% and so on. So, this is proceeding as we expected during the year. 40% profitability, it's quite good compared to the market, but it's still far below our own long-term target. And we are pretty confident, and we have a good plan in place to go much above that during the coming years. The good thing here is that for the first time last year, during '24, during fourth quarter, we saw the invoicing turning into green figures. So, we had positive signs there on invoicing, meaning sales in our case, even the revenue were on a negative side, slightly still. So, this is good for this year, of course. Alma Marketplaces, very good performance in every business on revenues and profitability as well. So, we have this kind of high investment cycle here, in different kind of business systems like for the houses and premises sector, and for the mobility sector as well. So, all segments were able to improve the revenues, and the profitability went nicely up more than 23%, close to 24%. And here, you can also see on the right side of the slide that we are lagging behind our own expectations on advertising. Like the car advertising, the construction industry advertising, and the common all advertising has been on a negative side. We've lost 7.5% of this kind of normal advertising in our classified or marketplaces services. But the good thing here is that according to our plan, the digital services side and also the classified business side is improving and growing. Digital services, 40% up. Most of this come from the net lease, but the others are performing as well like the Real Estate, Mobility and Comparison Services and Insights as well. So, very satisfactory development during the fourth quarter and the full year in this part of the business. The Swedish business on real estate has been extremely good, and surprisingly good even I would say, we have grown there even more than we expected on a high profitability profile as well. So that's been also a really good add-on on the whole segment's revenues and profitability. So, from EUR 22 million to EUR 26 million, EBIT during the last quarter was quite good. As said, there are smallish signs of recovery in the market. The housing market has been on a very low level, disappointing, of course. As we all know, the newly built apartments sales in Finland last year, 700 or something like that. Think about that 700 new build houses sold in Finland during the whole year or something like that, it's close to nothing. But it seems that now the market is picking up a little bit. There's more activities in there and the expectation for the recovery of the housing business has evolved. And the same in mobility business. The new car business has been suffering the whole year or many years already in Finland, but the sold cars business has been okay. And for us, we've been able to grow in our marketplaces, especially due to the good activities in the sold car business. So, we are pretty confident of the performance and the market development. If we were able to build again the new car business in Finland and the advertising in Finland, that would be really, really good for all of us, for all the stakeholders and for the business as well. Last but not least, the News Media, Kauppalehti, Iltalehti, Talouselämä, Tekniikka&Talous, and all the services around that. A very good match -- or match on defending, I would say, the poor economies. We have suffered quite a lot on the declining ad market. Our print has been declining more than 9%. So, the transformation is going on heavily. So, I would say that we have had that speed in the print digital transformation for quite a while, and we expect that to continue. So, the print business will step-by-step decline and the digital business will mitigate the decline as we have here been able to increase the revenues in the last quarter by 6%. And with a good discipline in expenses, the profitability went nicely up. 60% of revenues in this side of this segment now digital revenues. We are really happy with the development of digital content revenue. So, the subscriptions on Kauppalehti and IL Plus product has been growing for quite a while and seem to be growing quite well at the moment. We have now over 200,000 digital subscribers or subscriptions in place. So, I would say that the whole year from the first quarter until the fourth quarter, step-by-step, every quarter improvements in the profitability on this side is a result of a very heavy work and disciplined work during this period. And I would say that 17.5% compared to the market or the competitors is, on my mind, it's quite a good level in profitability. So, the people in the new segment should be and can be quite happy with the achievements. So that was my part. The first part of the presentation, the summary of the numbers, the figures. And now, our CFO, Taru, will continue with balance sheet and other issues, and then I'll finalize the session with the strategy and outlook. So Taru, please.

Thank you, Kai, and good morning also from my behalf. As we are closing year 2024, I'm quite pleased to report quite nice figures for Alma Media and our excellent result in the last quarter of 2024 despite of the continuity in the -- and difficulties in the market in that self. Our profitability improved really nicely, and we were able to keep our revenue baseline supported our acquisition -- revenue growth from acquisitions. And our balance sheet is in a good position. So really nice numbers. But let's continue with financial key figures and start with the balance sheet. And like you can see, we have been improving our balance sheet ratio step by step during the past years. Our equity ratio is slightly above previous year level, amounting 49% and gearing going down nicely to 60%. We made loan repayments of EUR 15 million during the Q4. And it's good to also mention that our interest cost is like stabilizing. So, our average interest rate for the whole year 2024 was 3.8%. And this also includes the effect of our interest derivative almost EUR 2 million during 2024. Our interest-bearing net debt amounting EUR 140 million in the end of 2024. So stable development in the balance sheet, and also nice development in our cash flow. We were able to improve our operating cash flow during Q4 by almost EUR 2 million or EUR 1.6 million, and that was mainly driven of our good operational result. But when we look at the 2024 full year numbers, we see really nice improvement for the whole year. So, the improvement is more than EUR 10 million, ending up to EUR 73.8 million in 2024. And this was mainly driven by the operating result. So, our adjusted EBITDA increased the cash flow by EUR 3 million. But on the other hand, we had an extra tax burden in 2023 regarding taxes for year 2022, and that quite nicely improved the cash flow. And like you can see from the graph, from the full year point of view, the net interest paid doesn't have that big effect on our operating cash flow due to the interest derivative gains that we had in 2024. And there wasn't any big changes either in net working capital. Our advance received from customer was EUR 1.4 million less in the end of 2024 than in 2023. Our cash flow after investments amounted EUR 17.9 million, which was more or less in the same level than in the previous year. It was quite peaceful quarter for the investment point of view. We had a small acquisition in Czechia. We bought this kind of social media advertising company, Nelissa, quite small company moment. And our purpose is to utilize the Nelissa's products in our recruitment services. Our normal CapEx was quite decent level. We continue to invest. There weren't any big surprises. Equity and return on investments. Those KPIs are in a really good level as we have seen in the past, also, which shows quite well our ability to invest to profitable and efficient manner. And what comes to the earnings per share, we were able to increase the level in the last quarter by EUR 0.02. But when we look at the full year numbers, our earnings per share was below 2023 level, amounting EUR 0.64. This was mainly driven the bigger one-off items during 2024 than in 2023. And finally, we have the preliminary Board's proposal of dividend, which is amounting EUR 0.46 for the year 2024, slight increase from the previous year and effective dividend yield a little bit below previous year due to the higher market prices. The payout ratio is quite high, 72%, which is also a good sign from our balance sheet ability to increase the financial liabilities, also in the future, our shareholders. And finally, our new long-term targets, which has been published today. So, revenue growth target is still unchanged, and our target is to have at least 5% revenue increase in the long-term. This is quite demanding target for us while we all know that we have also declining elements in our business portfolio. So, in practice, this means that if we are gaining this 5% increase, we have to increase approximately 10% in the digital service lines. During 2024, our revenue increase in digital products was more or less like 5%. So, this target is based on, of course, that we need support from the acquisitions and also from the market, but also good development of our digital services. Then the leverage is also kept unchanged. So, our target is to keep the net debt-to-EBITDA ratio below 2.5x. This is a target that we have met during the past 5 years period. And like I said, our balance sheet is in a good position at the moment so there's quite good room to use our balance sheet also in the future. But we wanted to add a little bit more ambition to our adjusted EBIT margin target and raised the long-term target to 30%. And our goal is to improve the profitability of all of our business segments. And like you saw quite nicely in our Q4 results, we were able to have the profitability improvement in all of our segments or investments supporting, and we continue to execute our strategy with the discipline and consistent actions, and this way to support our long-term profitability target of 30%. That's all from me. So Kai, you can…

Thank you, Taru. We were able to reach our long-term profitability targets that we raised from 20% to 25% in 5 years. So we went from 2020, 19.7% to last year's close to 25% in 5 years. Now we've improved the target to 30%, and our plan is to reach the target in 3 years. So at the end of the next strategy period, we are aiming to reach the 30%. And as Taru said, we have a very good plan behind that to do that. But of course, would like to see the operating environment to develop a little bit more favorably so that we could get also the revenue targets to be reached. A few words about the operating environment and the forecast and the view on that, firstly, and then a few words about the strategy. And then lastly, the outlook for the year. So as we can see from here, this is the newest forecast from European Commission of the operating countries of ours. And we can see a little bit of increase and development here in every market. And I would say that these kind of figures are not like the best ones we have seen so far. And there's more cautiousness, I would say, in place, among the forecasters than we had at the end of the last year. But anyway, we are going forward. So it seems that the market starts to grow. So far, that has not happened. Unfortunately, we have seen the same situations many times already like after the COVID time by the year shift. We have had this kind of forecast and saying that now the development starts remains to be seen. But if this happens, I would say that the market is pretty okay for us. It's not super good, but if the figures are like this, we can do a proper business here. We know that the inflation is close to the target of the European Bank and the National Banks. The unemployment rates have not increased or developed to any kind of unpleasant direction. And the interest rates have begun down and are expected to come down. So all these should improve the confidence of the consumers and the companies as well, which are both on a very low level at the moment. So there are no signs at the moment of the consumer or company confidence increase. Hopefully, that will happen, okay? Now we see different kind of turbulence in the global market and the war is still going on there. But there are signs that are on a positive sign yet. The environment in long-term stays a little bit challenging for us as well. I just talked about the economic growth, of course, which is lagging behind of our expectation. Consumer behavior changing rapidly in a new era. Regulation, heavy burden, different kind of regulation coming in all the time, and we have to put more money and effort on tackling that. And of course, the geopolitics, which is more or less quite unknown at the moment. So we have challenges to tackle with, but we have quite a good plan in place. Unfortunately, the Finnish ad market is not picking up. You know the numbers, the last quarter, and especially the December sales were on a very negative level, which tells us that for the consumer goods and others, the sales in our home market has been really poor. And for the first half of the year, that might be the case, at least for the first quarter of the year, that might be even the case that no big changes here. Okay. So these are the circumstances. A lot of uncertainties in place, but some signs of recovery. Anyway, our strategy is to continue with the core in the first place to keep the leading positions in the markets and the businesses where we are in. And then we continue leveraging the businesses in new geographical areas in the Europe. At the moment, we are moving in the Bakken area, but we are looking at other places as well. Moving step by step to the next phase of the company development. As we remember from print to digital, from media to services, and now from digital to integrated AI-assisted platform. So, we are in the beginning of a new era and a very, very intensive and thorough plan in place, how to put all the best available technology in place in every business of ours. So as mentioned before, we have a lot of initiatives. Using AI, are we talking about the News Media or Marketplaces or the Career business? Tens of initiatives at the moment that we will discuss deeper later during the year step by step. I would say that maybe in every interim presentation from now on, we will show you something about the AI initiatives and the development of ours. So, the idea is to expand our role in the value chains to streamline the customers' processes with the AI-assisted platforms. And in order to do that, go to the new revenue streams as well. So, we have talked about the transactional businesses and now we are moving on that direction. And of course, we will continue with the help of good balance sheet to drive the growth through M&As. And as you noticed, we just disclosed the newest investment, which is the Edilex Lakitieto this week, which is a nice add-on to our Insight business inside the Marketplaces segment. So, 3 points, 3 core points in the strategy that we have refined a little bit to transform the core businesses with the help of AI and to speed up the agility and strategic flexibility in order to tackle all the difficulties in the market in a speedy manner. We are quite good at this. We will grow by diversifying and building new products and revenue streams from traditional advertising business to transactional businesses in different ways. Of course, the new era is a heavy organizational learning era. We have the learning targets for every Alma Medias on AI at the moment, and we will be the master of this assets and to create new products and services by the help of AI, by the help of the learning the new things and how to expand the new geographies is the big question, of course, the effort of ours. We have extremely good team play here, and we are cherishing that all the time, and that will, of course, continue. We will continue on the 3 strategic business areas, meaning Advanced Marketplaces, Intelligent Insight Services and Inspiring Media. This is where we put all the money and effort, and we do that as a combination of shared audiences, data technology and ad sales, the recipe for a prosperous future. As an example, in classified businesses, that means that from advertising to transactions, we have showed this picture for you for a couple of times. We are at the moment in the phase where we are working like in the Marketplaces segment like for the OviPro service for the customers in housing, like for the housing agents. And other kind of services inside the segments like Career and Marketplaces are moving to help to streamline the partners and our customers' management and ad sales processes and environment. So, this is moving smoothly forward with the help of AI. A few words about this newest acquisition, Edilex Lakitieto. You might have noticed that we're building up the fourth foothold for the company on the Insight business, meaning that this kind of company services, inside services are a growing part of our business. And we do and build up the business with -- of course, with the organic development and growth, but also by acquisitions. This Edilex Lakitieto is a nice complement and add-on to our legal insight business where we are a market leader in Finland. And that business includes legal database, new service, legal training, legal literature and so on. So, that will be as a combination of our current legal inside services, even a better combination for all the parties that are using this kind of services. So, the size of the business is about EUR 8 million. And more is to come. So that will be a vital part of the development of the Marketplaces segment and especially the insight services business of ours. And finally, the outlook. Because of the turbulence of the market and the late start of the recovery in the macroeconomics, we expect our full year revenue and adjusted operating profit to stay at last year's level. And I just want to remind you that last year's profitability came from disciplined execution of our plan B with the cost initiatives in place that we started from the beginning of second quarter. Meaning that we had the cost cuts in place in order to guarantee the profitability development. Meaning that at the moment, if we have a normalized level of costs that will be a little bit above the plan B cost, and that's why the outlook is looking like that. But as said, during the strategy period, the 30% target will be reached, right? So, that's it. If you have any questions, we are now ready to answer those.

All right. Nikko Ruokangas from SEB. I have a couple of questions and maybe starting with the new long-term profitability target. So, if you're aiming to reach that in 3 years, so could you discuss how do you see reaching that through improved scale, so meaning higher sales and then improved efficiency/mix? So, I mean, that how much more sales do you need to reach that target?

Yes. A very good question and clear. So, in short, every segment has its own profitability improvement targets. And as said before, every segment will improve their profitability during the strategy period. And yes, that's right. Part of the profitability improvement comes from the fact that the best growth comes from the most profitable businesses and the increase in profitability businesses, meaning classified businesses, insight services, digital insight services and so on. So, on a new sector, the growth comes from digital content. We are not betting on the advertising market to grow rapidly, but our ability to improve the profitability and the cost side with the help of AI on the new segment is also in place. But yes, the growth comes from clear organic growth in every business, M&As that we will continue. And the profitability comes with the improvements in the cost effectiveness led by the development of AI and the deployment of AI into the different businesses, and we are well on track with that. So that is the case. So, higher growth in most profitable businesses is the driver of the long-term target setting and plan.

All right. That's clear. Then on Career sides, you have had this Career United project. So, could you give us a bit update on how that is progressing? Should we expect to see results in '25? And should we expect also to see somewhat decreased extra costs related to that?

Yes. Vesa-Pekka Kirsi is actually here, so he can continue. But we are well on track on that as well. But closely, if you want to comment on the specific question, please?

Yes. Thank you, Kai. Just briefly, the first stage of Career United was to form an organization that has shared resources, and that was already implemented '24 in the beginning. Last year, we also created one product unit, which is aiming to deliver the one product platform for all the countries. Implementation of this platform has already started. So, it's a component-based platform and the components will be implemented country by country, and that will take us through '25 and '26. So, the improvements efficiencies as well as cost improvements will take us through this year and next year to materialize all in full.

Thank you. So, the next one.

Yes, I can take one more on News Media profitability as well, which you said was quite solid now, all '24 and Q4. But was there something exceptional now which you may not be able to keep when you enter '25? And then how much room do you see there to improve if you look at maybe a bit longer-term?

No, we don't disclose specific targets for the year. But the cost cuts that we got, they came from the divestments of specific titles like Optio and Fakta. And there's something else, Mediuutiset. So, we do this kind of refinement of the portfolio all the time. Now we don't have any plans to refinements during this year. But we have been able to give out the print-related costs that we have in place, while the print business is declining like 9% during the fourth quarter. And I would say that around 10% per year during this period and coming years. So, we have that ability to get rid of the print-related cost if the volume is decreasing. So that is one part of the cost-effectiveness. And then, of course, we can do more with the same people when we deploy the AI properly. So, we have very good experiences already there. So, if we want to increase the volume of the business, we don't need to increase the people more or much because we can do it with the best technology. So that is one thing. So we have a good plan in increasing the subscriptions in digital, both Iltalehti Plus and Kauppalehti, Talouselämä, and those. And we do it effectively as a collaboration inside the company with the help of AI as well. So, I would say that maybe, [ Juha-Petri Loimovuori ] who is here as well, can agree that we don't have this kind of extra cost that would come in place this year compared to the last year. But of course, if we need to apply the plan B again, we are able to cut cost if needed, would be the right answer.

Sanna Perälä. From Marketplaces or this could apply to other segments as well? What has been the price volume mix in the organic sales growth? Could you elaborate on that?

So, we have had both organic due to the new development of the products, meaning we have a new setup in the products, especially on the car sector. Here's also our Head of the Marketplaces, who can continue. But I can't say how the mix goes with the price increases and the volumes. I would say my -- Santtu, you can continue.

There has been some volume increases, obviously, but especially in the Mobility business unit, we have improved our packaging and via that pricing as well. So, we did a large harmonization project concerning the prices for our clients. For some clients, this meant price increase and for some clients, it meant price decreases. So, the packaging project, Tupa, as we call it, by its project name has proved to be quite successful, and we expect beneficial results from that also during this year.

And then regarding the 2025 guidance, it seems a bit cautious, and you mentioned the reasons behind it. But what would happen -- what would need to be happening in the market or in your performance for you to possibly upgrade the guidance later in the year?

Yes. That's easy. So, the first thing is the consumer confidence and the company confidence to change. So, it seems that the consumable resources, meaning money is already there, while the interest rates have been declining. So, there is this kind of pent-up demand in the market for our businesses, meaning houses and premises, cars, recruitment as well, and so on. So, I would say that if the consumer confidence recovers, the company confidence would follow. And these 2 to happen, something should happen with the war in Ukraine. Some positive signs of the stop of the aggression. The inflation should stay on close to 2%, and that's it, more or less. And if these happen, the markets of houses and premises, cars and recruitment and other stuff like that would recover quite quickly.

That's clear. Perhaps a clarification. You had the high investment cycle in 2024 in Marketplaces specifically. How should we view this profitability boost in 2025 regarding your guidance? Or is there a boost in your guidance from this lower investment cycle this year?

So, the investments that we have made in Marketplaces sector, part of that will continue. And we have this kind of customer deployment phase there in place. So, step by step, the return of those investments will be there. And I would say that, of course, at the end of the strategy period, that will be finalized more or less, and we would have that business and market there. But it's a long journey, of course. And we have the same journey more or less in mobility business and development. So, partly that will continue. We can do with the same speed all the investments and initiatives at the same time. So, we have to focus on some of them in the beginning. But yes, the results will start to be viable during this year. Definitely, yes.

It's Pia Rosqvist from Carnegie. A few questions regarding the future outlook. So, starting with 2025. Given your recent acquisition of Edilex, what revenues should we expect to decline this year? I mean, in addition to the weak start of advertising sales. Are there any divestments you have included in that guidance?

No, not really. So, the advertising is the biggest question mark, of course, in our case. That market is the difficult one, most difficult one.

Okay. Then the updated long-term target, you mentioned the time frame already. So, thank you for that. Are there any larger changes in your portfolio included in this target? Or are you happy with the set you have discussed today?

So, I showed you the focus areas, this kind of 3 parts. So, the investments should go into these 3, so meaning Marketplaces, Insight Services or News Media. So, all we do is this kind of combination of businesses that are complementary to each other. We can share the audience and technology and sales. So, we are actually not planning to do anything outside of this frame or framework. But inside this framework, there will be new businesses and M&A during the strategy period, of course. So that is the answer more or less. And the Insight business, Insight services are included in the strategy.

With regards to the leverage target of staying below 2.5x, I haven't read the fine print, but kind of, does it allow you to go beyond that? Should you…

Yes, it allows. We can easily go above the threshold with this kind of cash flow cash conversion rate and profitability for a short period. But we are quite conservative in long-term with these figures. So, we want to keep the balance and we want to keep the flexibility of the company to move fast if needed in any situation. But yes, we can go. So, we have, the banks, for example, they are quite in favor of us at the moment with these figures. So, if we need it to go above the 2.5x, we can easily go to 3.5x or even to 4x, but not for a long time. Step-by-step, they start to ask questions that are you serious? And I have to have the answer that what is the plan to go below that. But yes, that is the case more or less. So, we are really comfortable with the 2.5x. We don't want to be debt-free because we want to keep the good revenue level of the equity, which is around 23-ish at the moment for the equity. Return on equity, that's quite okay in our case, and we want to at least keep that also in the future. I guess that it will also improve with the plan that we have here.

And a change coming up, that relates to the gambling market in Europe -- sorry, in Finland and the advertising. So, have you included this into your long-term target, some kind of boost from that?

We have planning in place and ongoing at the moment. So there is a chance. There's a window of opportunity, I would say, that will help the revenue targets of the -- especially the new segment of ours around Iltalehti, Kauppalehti, and those by the end of the strategy period. It seems now that, that change will happen '27, not '26, but '27 at the moment. And there's a new revenue streams coming to the market and maybe some other possibilities around the gambling as well. So, the planning is going on. It just started.

And would you like to quantify the opportunity in any way?

No, not from our part because we don't have the plan, but it is said that the ad market should be around for Finland. Is there an estimate for the market? You pay EUR 150 million? Around? For the market. Yes, yes. Nobody knows. And it depends very much on the legislation. So, what the authorities decide. What is allowed to do and so on. So that will be the -- it's too early to estimate the market, but 10s or even more than EUR 100 million would be available or should be available in 2 years.

Then finally, or my second last question relates to M&A. So, are there any active targets on the market, larger ones outside Finland?

Yes, there are. There is.

Has the transaction market been active?

No. Not really during the difficult times, not really, but it will speed up. So, we have had our investigations going on all the time and the discussions going on all the time. So definitely, there are targets and the activity level in the market will speed up step-by-step.

Then finally, in the report, you also mentioned development costs for 2024, close to EUR 10 million. They have been activated on the balance sheet or capitalized on the balance sheet. They were up quite much from the previous year. And I'm trying to grasp now if these development costs now are kind of representative of the investments you have made in Career and Marketplaces.

Taru can comment on that.

So, you are talking about the development cost of not CapEx, but OpEx related?

They are not capitalized.

They are not capitalized, the OpEx level development costs.

Okay. Maybe I have misread it. I need to check.

Yes. Our CapEx during 2024 are below 2023, the CapEx.

So, the way we operate is that this kind of organic development that we do, we mostly don't capitalize if it's this kind of man work. Some of the system hardware or software developed might be capitalized like we did for the houses and premises, OviPro development. Part of the so-called investments went to the balance sheet and mostly to the P&L. So, we try not to capitalize this kind of ongoing development processes because we know that this will happen all the time. So, the market and the technologies is evolving and developing so much and rapidly that it's really difficult to estimate that this for 3 or 5 years or 10 years. It's better to do it just for the P&L. And the level is around EUR 10 million for us. Isn't it around EUR 10 million or something like that?

CapEx?

No, no, the OpEx. Yes. So that has been the case for quite a long, and we will more or less keep the pace and the speed of that kind of development like that. Yes. Other questions? Salmi?

Yes. I have 3 questions. I'll take this one by one. Firstly, coming back to guidance. The flattish guidance looks a bit cautious. Is this because you're assuming weakness in some parts of your business, which could offset any recovery? Or is it just that you're not assuming any recovery in your forecast for this year?

No, no. It's because a very slow start of the recovery in every business and every market. So, our case is more that we want to see the change before we change the forecast or the outlook. So, we haven't actually seen any movement so far in the markets, or smallish movement in the markets in the houses and premises and Central European Career. But like for the Finnish Career business, the market minus 30 something. So, there's no sign of recovery at the moment. So that remains to be seen. So, the question is that we estimate the first half of the year or at least the first quarter of the year to be sluggish and flat.

Okay. Then second question would be on current trading conditions. You may have answered this already, but if we forget Q4 and just look at the more recent weeks and outlook for the coming weeks, are you seeing any sort of improvements in certain parts of your business? Just thinking mostly Finland and Czech.

Not really. No big changes, I would say or what about the business leaders, can we say that there is a remarkable change or just minor changes.

Santtu Elsinen, again, here. Remarkable is a strong word. So, we have seen small scale improvements in housing. If you look into the current market forecasts, they suggest about 7% to 9% volume growth perhaps for this year. This coming from different analyst houses and the larger real estate agents. That started in the latter half of last year. There has also been some increasing in the, let's say, ad volumes from the construction companies, nothing major, but small improvements there. The new car sales market is very sluggish. And from my discussions with the companies operating in this area, nobody expects a recovery there. Vesa-Pekka Kirsi, you can probably comment on carriers.

Quickly on Finland, especially the Finnish market, as Kai has been pointing out, has been declining year-on-year now for 2 years in a row. So, we are really in the rock bottom. However, it's still not growing fast or recovering fast. Good news for us is that the market in Finland, the competition environment has changed. So Oikotie closing doors will, of course, make room into the market and make our spring and the quarters easier expectation, but the market itself is still where it has been, growing hopefully this year, but slowly.

And then finally, regarding your balance sheet, you consider it to be strong, maybe some M&A headroom. Should we assume opportunistic bolt-on acquisitions going forward? Or could you also do something more transformative?

Yes, we try to find a more transformative acquisition as well. Anyway, we do this kind of bolt-on acquisitions to develop the current businesses around the current businesses. But yes, both are in our plans.

Petri Gostowski from Inderes. Starting with Career, looking at the way of the invoicing line is trending, what should we expect on classifieds revenue going into H1 of this year?

So, Vesa-Pekka can continue, but the direction changed on the invoicing during the last quarter. Meaning that if that continues, the revenues will follow after the first quarter, I would say, or at least the third quarter of this year, if you have the same revenue recognition system like we have had. Vesa-Pekka, would you like to add on something?

Just a quick one. Our problem child or children last year were basically the 3 Baltic countries and Finland. The rest of the Europe, we did well. Both in the value as well as in ad volume. But the growth -- so the growth for this year, we expect that the recovery of the North will do the biggest part of that recovery. The ad volumes, however, are not in a huge growth. We're looking for us to create more growth on the value side by improving the services and rolling out packages as well as price development to sustain the growth. The volumes are still in the slowest growth. There is room for volume to grow, though, in all of our countries. The countries are not done yet, but it will slow down.

And then the big question is, of course, for the Central European businesses is the economy of Germany. How the German car industry is going to evolve. What kind of decisions they have to make in long-term. So far, they haven't withdrawn the factories or businesses from the Eastern Europe and so on. But are they able to improve and develop their businesses there in order to recruit more people in their factories.

Next one is on the new profitability target. I recall you've mentioned a few times earlier that News Media should reach a 20% EBIT margin. Is this baked in the new group level profitability target?

Yes, of course.

Is this then something your digital content is going above this?

It's the biggest driver for this improvement is the digital content, the subscription, both in Iltalehti and Kauppalehti, which are the biggest contributors for that. So, we are not betting on -- very much on the ad market to develop more favorably than we have discussed. But still, we have a positive forecast for the digital advertising, but that is not the biggest driver for the change -- driver of the change of the segment.

One more then on this year's guidance. If I read correctly, you were trying to say that '24 had a lot of cost savings in and maybe some things coming back now this year. Can you elaborate on what would be the cost delta if you went to plan B this year and squeeze the belt again?

No, no, we can't disclose that. But you can estimate what kind of cost initiatives you have in place, and we did last year. So, they were this kind of employee-related costs like for the -- how do you call it in English, the holiday pay, holiday bonus or holiday pays, isn't that the right word? And then some marketing expenses, and those that we postponed because of the lack of the demand in the market. So that will be something. If the market starts to recover, we will have the marketing in place in order to speed up the revenue growth. If it doesn't, we are able to cut the cost from the marketing or postpone the marketing procedures and so on if there's not room for revenue growth and so on. So, we have flexibility in there. And then we have the normal plan B for traveling, personnel-related costs and those on a couple of millions per segment easily to be done that we can do. We don't want to cut that kind of costs from long-term competitiveness of the company. So, like we have this kind of investments into the software development or service development had in place for the full year last year, which will guarantee the competitiveness of the company and the business in the segments for the future. So that is something that we don't want to stop and cut off, even the market doesn't recover as we expected. So that's the case. Other questions?

Just one online question from Anders Backstrom. And I don't know Vesa-Pekka, you already mentioned this, but unless you want to elaborate, you or Kai. It's about ships that we travel from jobs in Sweden and Finland. Does it open up better advantages for you there?

Yes. As Vesa-Pekka said, there's a little bit of room -- more room for us to maneuver with Jobly. So, one play out from the market. And if the market starts to recover, there would be room for growth for us in Finland. So that is the short answer for that. Yes. For us, that is a good sign. Okay. So, thank you very much. If you don't have any further questions, you can always post the questions for us. We are at your use, Taru, Teemu, Elina or everybody of us. Next time, we will meet with the first quarter interim report that we disclosed in March 25 -- April 25 and so on. So, thank you for your attention and attendance. I hope you had got the answers that you needed and hope that we have all better start for the year than we had last year. Thank you very much.