Kati Niemelä, CFO, Nordic Morning Plc
Added value for stakeholders
For Nordic Morning, financial responsibility means producing financial added value for the company’s key stakeholders, employees, customers and owner. Important stakeholders for added value also include partners, service providers, investors and the countries and municipalities in which we operate.
Financial management is based on the Group’s policies as well as good corporate governance, effective risk management, and the principles of internal control.
The CFO, the Group Finance unit and, ultimately, the CEO and the Board of Directors are responsible for matters related to finance and the financial statements, as well as broader issues related to financial responsibility.
Profitable change management
Nordic Morning’s business operations have been systematically transformed over the past decade toward solution-oriented consulting and data driven service design to meet the customer needs in the digitalized world. While the rate of change has been rapid, we have managed to transform our business profitably.
In 2004, printing operations accounted for 90 percent of the Group’s net revenue. In 2016, they accounted for only 33 percent, with digital, multichannel, and other services representing 67 percent of the net revenue (see the chart below: Nordic Morning's transformation).
In order to achieve this change, the Group has made several acquisitions. Bringing a new company into the Group is always a challenging and many-sided process that requires integration of company cultures, people, services, systems and ways of working. Successful integration is essential, as it impacts the profitability of the acquired company and Nordic Morning as a whole.
Customers’ increasing needs for data and analytics services were met by acquiring a data management company CountQuest Interactive AB in March, and by developing and recruiting talent in the area.
Considerable restructuring measures were done in Ottoboni Sweden and Sitrus Agency AB which led to EUR 10.0 million impairments of goodwill in the Visibility & Service Design and Content business areas. Mainly because of these measures, Nordic Morning’s operating profit was weighed down to EUR -14.3 million. Operating profit excluding non-recurring items was EUR -2.0 million (EUR -0.1 million).
Despite of profitability challenges, the net cash flow from operating activities improved by EUR 3.0 million, and was EUR 3.5 million (EUR 0.5 million). The Group’s equity ratio was 36.3 percent (48.6 percent).
We succeeded in the strategic goal of increasing collaboration in sales, customer projects and service development within the Group, thus strengthening the base for the future growth.
In 2016, Nordic Morning sold products and services to its customers for the total amount of EUR 105.7 million (108.1) and spent EUR 56.7 million (52.5) on buying goods and services from partners.
We produced financial added value for stakeholders totaling EUR 49.0 million (55.5). Most of this value, EUR 49.5 million (50.6), was distributed to personnel in the form of salaries, pensions and social costs. Dividend EUR 2.0 million (2.0) was distributed to the owner.
Nordic Morning will reinforce its position in the Nordic region by providing innovative, data-driven services that combine strategic content, user-oriented design, optimal visibility and customer dialogue. For being able to meet our customers’ needs, we will invest in continuous competence and service development. Nordic Morning’s strength lies in broad-based talent and close internal cooperation, which enable us to take a comprehensive approach to our customer’s challenges.
Internal control and risk management
Good governance, along with active internal control and risk management, effectively secure the profitability of business operations.
We conduct a risk analysis annually in conjunction with budgeting. Risks are reported and dealt with immediately. Taking into account the good level of the company’s internal control and the size of the company, the Board of Directors decided not to issue a separate assignment for 2016 regarding internal control.
Nordic Morning Group pays taxes on its business income to each operating country in compliance with local laws and regulations. More information on the Group’s tax policy and operating principles is in a table below.
Nordic Morning’s transformation
Added value for stakeholders
|Customers||Sales||105 710||108 060||114 628||123 576||115 491||107 611||110 882|
|Suppliers||Cost of goods, materials and services purchased||56 703||52 546||56 583||65 590||58 634||50 443||50 745|
|Added value created (tEUR)||49 007||55 514||58 045||57 986||56 857||57 168||60 137|
|Employees||Wages and salaries, pensions, social costs||49 513||50 645||45 671||48 393||51 273||48 798||50 342|
|Public sector||Direct taxes||-143||-132||-102||123||-255||-40||244|
|Financers||Net financing costs||254||131||-49||-19||600||707||923|
|Owners||Dividends||2 000||2 000||1 500||0||0||990||1 740|
|Investors||Investments||5 297||7 786||3 980||3 379||7 368||5 017||3 312|
|Total added value distributed to stakeholders||57 055||60 569||51 127||52 200||59 111||55 591||56 689|
|Value added remaining in the company||-8 048||-5 055||6 918||5 786||-2 254||1 577||3 448|
|Added value created / FTE (tEUR)||75||78||88||87||81||77||73|
Tax policy and operating principles
The Nordic Morning Group pays taxes on its business income to the countries it operates in, in compliance with local laws and regulations.
Nordic Morning’s main markets are Finland and Sweden. The company also has minor operations in Ukraine and, through an affiliate, in India. Nordic Morning has no companies nor business in countries considered as tax heaven. The Group’s aim is to secure and increase shareholder value through profitable and efficiently managed business operations. The Group’s tax policy is also aimed at securing shareholder value by ensuring that the local tax legislation of each operating country is always complied with and that taxes are paid to the country in question.
In the Group, tax matters are managed by the Group CFO, who reports on relevant tax matters to the Board’s Audit and Structure Committee and if needed also to Group’s Board. The day-to-day tax affairs of individual legal entities are managed in shared service center in Nordic Morning Plc in Finland, the operations of which are monitored by auditing.
In tax matters that are open to interpretation or otherwise complicated, support is obtained from external tax advisors, or the tax authorities are requested to provide advance rulings and advice. The Group’s objective is to handle its taxes and other levies in as appropriate and timely a manner as possible, in full compliance with the law.
The Group has prepared a transfer pricing policy that defines the pricing principles for the Group’s internal cross-border trading. The transfer pricing policy is in line with current official guidelines and legislation.
Tax report 2016
In 2016, the Group’s profit before taxes was EUR -14.5 million (-0.4 million). The majority of the taxable profit was accrued in Sweden. The Group paid income taxes of EUR 0.1 million (0.1 million). The low amount of income taxes paid was due to confirmed tax losses carried forward from the previous years in Finland and Sweden, which amounted to EUR 9.5 million (12.0 million) at the end of the 2016 financial year. In 2016, the Group’s effective income tax rate was -1 (-37%).
At the end of the year, deferred tax assets stood at EUR 0.1 million (0.1 million) and deferred tax liabilities stood at EUR 0.8 million (0.8 million). According to principal of cautiousness the Group has not booked any deferred tax receivables from taxes carried forward from previous fiscal years.
Of the taxes paid for the financial year, the most significant item was statutory employer’s contributions at EUR 7.1 million (6.0 million), the majority of which was paid to Sweden.
Of the taxes remitted for the financial year, value added tax payments totaled EUR 13.8 million (10.8 million) and withholding taxes totaled EUR 10.6 million (9.4 million).
In addition, the Group also pays other mandatory contributions and, other tax-like contributions and indirect taxes related to its purchases, such as road tolls, energy taxes and insurance taxes.
|Profit before tax||-0.3||-0.4||-14.2||0,0||0.0||0.0||-14.5||-0.4|
|Utilized tax losses||1.3||1.3||0.0||2.8||0.0||0.0||1.3||4.1|
|Taxes borne 2015-2016|
|Corporate income tax||0.0||0.1||0.1||0.0||0.0||0.0||0.1||0.1|
|Taxes on property||0.0||0.0||0.0||0.0||0.0||0.0||0.0||0.0|
|VAT, returns in P&L||0.0||0.0||0.0||-2.0||0.0||0.0||0.0||-2.0|
|Taxes collected 2015-2016|
|Tax at source||0.0||0.0||0.7||0.6||0.0||0.0||0.7||0.6|