North Media - Takeaways from FK Distribution conf. call
FK Distribution to end 2020 with EBIT increase of 53-63% Commercial leaflets seem to be increasingly effective Upbeat thoughts prior to the 2021-23 strategic update Commercial leaflets are common in Denmark Today we hosted a management conference call focusing on FK Distribution (90% of group revenue). FK Distribution packs and delivers ~1.8m commercial leaflet bundles every week. Volumes have declined by ~10-13% (10Y avg. -8%) in 2020, and with price increases FK Distribution guides for a y-o-y revenue decline of -1.7% to -3.3%, but an EBIT (bsi.) increase of 53%-63%.
The significant increase in EBIT is driven by output optimisation and a distribution transition (from two to one weekly deliveries). 86% of recipients now read the leaflets (avg. 2.5 minutes) and 64% go shopping after reading them – as a result ROI has increased to 2.2x for 2017-19 (1.8x for 2016-18) whereas other comparable mass media channels have lost their effect (e.g.
reduction of flow TV). On 30 June, Danish competition authorities ruled that FK Distribution had ‘misused its dominating position’ and digital and physical distribution contracts were separated. The case is appealed.
Today 30% of Danish households opt-out for receiving commercial leaflet bundles and 20% receive tailored bundles. There have been discussions of changing the default, but FK Distribution has (with multiple organisations), organised a defense to explain the societal benefits associated with their offering. On track to deliver ambitious 2021-23 objectives in FY report This year, FK Distribution has tested packaging for Deutsche Post’s delivery of Einkaufakutell (unaddressed direct mail).
On today’s call we learned that it has developed (patent pending) a banderole packaging solution which will be used on 143k household packages in N. Germany. Deutsche Post is considering using it for up to ~20m-23m household deliveries.
This is in line with North Media’s plans for ‘international expansion’, ‘new products’ and ‘fu....