Bonnier 2017: Strong Underlying Development – Weak Year-End Financial Results

Bonnier AB’s operating profit (EBITA) for 2017 was SEK 625 million, compared to SEK 731 million the previous year. The group’s revenues were SEK 25.7 billion (25.5 billion).

Bonnier AB’s CEO Tomas Franzén says:

For Bonnier, 2017 has been a year of two faces. On the one side, the year-end results were affected by a number of turnaround cases that continue to run at a loss. In addition, we have comprehensive goodwill write-offs, primarily the result of investments in the U.S. in 2006-2008. On the other side, we see many breakthroughs in our underlying transformation, with strong digital growth for our products and services within journalism, storytelling and entertainment.

There were primarily two business areas that performed weaker than expected. Our U.K.-based book publishing house Bonnier Publishing has had several years of great expansion and acquisition, but during 2017 sales lagged and write-offs affected profits. After operational measures and write-offs, Bonnier Publishing has a good chance of sharply improving its profitability for 2018. Our Finnish TV operations, MTV, continued to have big challenges in a weak advertising market with tough pricing competition.

At the same time that the year-end results are weak, we’re taking big steps forward in our transformation with a focus on increased digital user revenues. Which is reason to be optimistic. This, in conjunction with a number of acquisitions and divestments, means we’re well-equipped to improve profitability during 2018. In particular, I would like to highlight a few milestones from the year:

Firstly, our two Swedish maximum-reach media, TV4 and Expressen, both increased advertising revenues and reach. The TV network TV4 had a record year with a sharp increase in digital advertising revenues, while linear advertising revenues also continued to grow. Growth for streaming service TV4 Play contributed to an increase in total reach. News daily Expressen increased market share in reach, page views and video, and digital advertising revenues grew, more than compensating for decreases in print advertising.

Secondly, that we’ve succeeded in building further on our digital subscription services at Swedish newspapers Dagens Nyheter, Dagens industri and HD-Sydsvenskan. After a year of fast customer growth, at the end of 2017 the entire business area News had nearly 200,000 purely digital subscribers. This was a signficant contribution to News’ year-end results, and important testimony to the willingness of our customers to pay for high-quality journalism, now and in the future.

Thirdly, in a number of areas we’re moving forward in our work to organically increase digital revenue streams and reduce our dependency on traditional revenues. In addition to the growth in digital subscribers for News, our book publishers’ digital sales are nearing SEK 500 million and our biggest publishing groups, Bonnier Media Deutschland in Germany and Bonnierförlagen in Sweden had strong years, yet again. Digital audiobook service BookBeat has some 70,000 users. Our Nordic online retailer the Adlibris Group continued to grow and has ambitious growth plans for the future, driven by expansion into new product categories, which informed our decision to put it into its own business area starting in 2018. Our Swedish paid streaming service C More has grown substantially during 2017, doubling the number of its subscribers and for the third year in a row, had the greatest growth in the Swedish subscription video-on-demand (SVOD) market.

C More still had significant losses, but continued customer growth and distribution of the newly started Sportkanalen channel to 1.5 million Swedish households is expected to contribute to further improvements to C More’s financial results for 2018.

We have made a number of interesting strategic acquisitions during 2017. In particular, I would like to highlight our acquisition of Fastighetsnytt and the German book publishing company Münchner Verlagsgruppe (MVG). Fastighetsnytt is a unique successful and profitable Swedish real estate industry news and event company. And MVG is a data-driven and fast-moving book publishing group, also with an unusually strong profit margin. Along with these companies performing extremely well, I’m also convinced that we will benefit from their skills and experience in our continued transformation.

At the end of the year, we made deals to sell Evoke Gaming, the Malta-based gaming company, as well our remaining shares in multi-channel network United Screens, both of which were concluded at the beginning of 2018. These acquisitions and divestments will together contribute positively to our financial results for 2018.

Based on our strategic plans for 2015-2020, we will continue to develop Bonnier from a marked long-term perspective, with an ambition to build a group that is strong and well-positioned for the future. Our steps forward in 2017 give us every opportunity to improve our profitability in 2018.


Our Business Areas

For Books, 2017 was a year of contrasts, where above all the German and Swedish publishers continued to perform strongly, while physical retail had a challenging year. On the publishing side, the two biggest publishing groups, Bonnier Media Deutschland in Germany and Swedish Bonnierförlagen, had strong publication lists together with growth in digital as well as physical book sales – and continued good profitability. The U.K.-based Bonnier Publishing wrestled with profitability problems as the result of rapid growth, which had a strong negative effect on the financial results.

Within physical retail, the substantial increase in e-commerce sales hit bookstores hard, where Pocket Shop, Academic Bookstore in Finland and Tanum in Norway altogether had a negative effect on the financial results.

The Adlibris Group continued to grow, however the end of 2017 was marked by logistics problems that affected profits. The EBITA for Books was SEK 105 million (427 million).

For Broadcasting, EBITA amounted to SEK 423 million (373 million). The businesses continued their digital transformation at a rapid pace. As part of a continued reorganization, news production unit Nyhetsbolaget’s employees moved back to TV4/Bonnier Broadcasting and TV4 and C More continued to work ever more closely together. The reorganization also resulted in some 90 positions being made redundant.

Swedish TV network TV4 had a record year, both in revenues and reach. Successes with streaming service TV4 Play, which had 3.8 million registered users, resulted in a significant increase in digital advertising revenues, and even advertising sales for linear TV increased. The record results are a consequence of recent years’ investments in Swedish high-quality content in all genres. Despite a slowdown in linear TV viewership, the total reach for TV4 increased thanks to TV4 Play’s strong growth, a rise that was well-received by advertisers.

Pay service C More increased both in streaming (SVOD) and digital TV revenues, and it was the fastest growing SVOD service in Sweden for the third year in a row. During the year, C More released its first original drama series and also launched a completely new sports channel, Sportkanalen, and a new OTT sports package. The financial results were somewhat improved compared to the previous year, but the company continues to experience significant losses.

Finland’s MTV continued to have challenges, with a very tough macro-economic market, where advertising investments continue to fall and consequentially profits. The investments of MTV in Finnish high-quality content continued to result in viewer successes, and now 2 million registered users for MTV’s ad-financed streaming service. During the year, MTV also launched C More as a pay SVOD service in Finland.

Business to Business had an EBITA of SEK 131 million (164 million).  The business area, which comprises B2B media and digital B2B services, increased revenues slightly during 2017. The decrease in profits is due to investments in new products and launches in new markets. The biggest single initiative during 2017 was the continued rollout of digital learning portal Clio Online on the Swedish market. During 2017, a complete product portfolio of subject portals geared toward Swedish middle schools was launched, an addition to the existing products for secondary schools. Deximed, a digital clinical decision support tool for general practitioner physicians based on the Swedish Medibas and Norwegian NEL models, was launched in Germany. In January 2017, 49.9 percent of ownership in the Danish business daily Børsen was sold to JP/Politikens Hus. At the beginning of 2018, Bjarne Corydon, former Danish Finance Minister, took over the helm as editor-in-chief and CEO for Børsen.

Magazines includes the Swedish Bonnier Magazines & Brands (formerly Bonnier Tidskrifter), the Copenhagenbased Bonnier Publications and the U.S.-based Bonnier Corporation. The EBITA for the business area was SEK 167 million (267 million). The two Nordic publishers had a strong year and contributed positive results in line with expectations. The U.S. market has been undergoing very substantial change, and Bonnier Corporation couldn’t repeat its successes from 2016. In the beginning of 2018, a significant restructuring as instituted at Bonnier Corporation, which included as well some 120 positions made redundant. Despite growth for digital and adjacent services, the traditional core business of print magazines continues to dominate. One-time costs for the restructuring at Bonnier Corporation and Bonnier Magazines & Brands’ move to the Bonnier Building in Stockholm affected the financial results.

News had a strong year with EBITA of SEK 303 million (294 million), which for Swedish news daily Dagens Nyheter, business daily Dagens industri and Southern Swedish newspaper group HD-Sydsvenskan was marked by successful digital subscription initiatives. Swedish news daily Expressen continued to show strong growth in digital ad sales, following initiatives to increase reach and consequent strong rise in traffic.

For HD-Sydsvenskan, which was integrated fully into the rest of the business area, the year saw considerable financial improvements. The group had its best year financially since Helsingborgs Dagblad and Sydsvenskan merged. In conjunction with the integration, business area head Anders Eriksson took over as CEO for HD-Sydsvenskan.

In January, Fastighetsnytt was acquired. The company, Sweden’s leading media and event business within real estate, had a very strong first year as a part of Bonnier.

The value of Growth Media’s investment portfolio increased considerably during the year. The investment business, which goes by the name Bonnier Ventures, comprised a portfolio of nine growth companies, and the holdings in these companies were valued at SEK 550 million at the end of 2017, which reflects an internal rate of return (IRR) of 28 percent.

Bonnier Ventures made several additional investments during the year in connection with new investment rounds in companies including Acast, Natural Cycles, Refunder and FLX. Both Natural Cycles and Acast experienced very substantial increases in their value. Bonnier Ventures also made a new investment in DaisyGrace, a content-driven omni-channel company, as well as engaged financially with the U.S.-based startup platform Betaworks and the Nordic fintech player NFT Ventures. Two exits were concluded shortly after the end of the year, in the form of the wholly owned Evoke Gaming, which was sold to Malta-based Mr Green, as well as all shares in the partially owned multi-channel network United Screens, which was sold to the German RTL.

Film and TV production and distribution company SF Studios, the business area’s largest company, improved its profits and had strong growth in its production business, both in terms of number of TV productions as well as in the feature film segment. The movie Borg vs McEnroe won a number of industry awards, both in Sweden and internationally. Solsidan, a co-production of FLX with distribution by SF Studios, ended the year with very strong ticket sales.

The EBITA for the business area was SEK -106 million (-205 million). From Jan. 1, 2018 SF Studios will be reported as its own business area, which means the Bonnier Ventures will be a business area purely with an investment focus and IRR as primary performance indictor.

Write-offs: During 2017, Bonnier had goodwill write-offs of SEK 1.6 billion, of which the majority (SEK 1.3 billion) are related to the acquisitions of the magazine business in the U.S. during 2006-2008. The write-offs do not affect liquidity.

Other comprises common group activities and functions. This had an effect of SEK -397 million (-589 million) on EBITA in 2017.

Net Sales by business area SEK M 2017 2016  
Books 8,098 7,690
Broadcasting 7,497 7,397
Business to Business 1,130 1,111*
Growth Media 1,806 1,806
Magazines 3,441 3,782
News 4,890 4,679*
Other -1,121 -973*
Bonnier AB total 25,740 25,492  
Operating profit (EBITA) by business area SEK M 2017 2016  
Books 105 427
Broadcasting 423 373
Business to Business 131 164*
Growth Media -106 -205
Magazines 167 267
News 303 294*
Other -397 -589
Bonnier AB total 625 731  
Earnings SEK M 2017 2016  
Net sales 25,740 25,492  
EBITA 625 731  
EBIT -1,423 630**
Net financial items -212 -239
Earnings before tax -1,635 391**
Earnings after tax -2,239 276**

*The comparative figures have been adjusted for a transfer of business from segment Business to Business to News.

**The comparative figures have been adjusted due to a reevaluation of the group’s accounting of intangible assets and inventory relating to development costs and publishing rights and correction of errors.