”The third quarter was, as always, the high season for our learning business due to the start of the new school year, creating a peak in book deliveries and activation of digital licenses. We were very pleased to see the delayed Spanish sales from the earlier months coming in during the quarter. As this is the first implementation year of the major educational reform and curriculum renewal LOMLOE, demand in Spain is expected to continue to grow also in 2023, extending even into 2024. The related earnings improvement is typically not yet seen in full during the first year when the majority of the content and marketing investments related to the new materials takes place.

Across our Learning operating countries, the third quarter high season was successful for our content publishing businesses. We were successful in largely mitigating the impact of the higher-than-expected paper costs – one should note that learning content is typically sold only once a year, thus giving us only one opportunity to adjust our prices to the changing operating environment. However, the financial performance of the Dutch learning content distribution business was adversely impacted by increasing labour costs and supply chain issues, leading to slightly lower January−September earnings for the whole segment. Although we expect these issues to be temporary in nature, they may have an impact next year as well.

At the end of August, we completed the acquisition of Pearson Italy and Germany, and I am very happy to welcome these strong teams and businesses to Sanoma. We also saw these businesses contributing positively to our third quarter financial performance during September. The integration has started according to our plans and playbook – all-in-all the separation from Pearson and integration into Sanoma will be a sizable project taking some 18−24 months."

"In Media Finland, overall third quarter net sales were stable, while softening B2C demand over the past quarters led to a slight decline in subscription sales. This is something we had expected given the strong growth during the coronavirus pandemic and the currently weaker consumer confidence. Advertising sales were also slightly lower compared to the previous year, but have been surprisingly resilient during the current economic turmoil. The lower B2C and B2B sales were offset by growing sales in the lower margin events and external printing services businesses. Throughout the year, we have experienced a significant increase in paper costs, with prices per tonne currently up even 75% compared to the previous year. Despite active cost containment across spend categories, Media Finland’s operational earnings declined during the quarter. While we expect low visibility, high volatility and inflationary pressure to continue, the team in Media Finland has proven to be able to mitigate a major part of the impact through strict cost containment and regular price increases across the portfolio.

Our free cash flow for the first nine months is behind last year. Main reasons for this are higher investments in digital development in Learning and adaptation of our offices to the hybrid way of working as well as higher taxes paid based on higher earnings in earlier reporting periods, now compounded by lower EBITDA. It is important to realise that with the most recent acquisitions of Pearson Italy and Germany and Santillana in Spain, our business has become more focused on Southern Europe, where the schools start later in September, and where longer payment terms are market practice. This will cause a partial delay in the accumulation of the operational cash flow in Learning towards the end of the year.

At the end of August, we updated our Outlook for 2022 for the acquisition of Pearson Italy and Germany. The Outlook is since unchanged, as are our long-term financial targets. Given the ongoing challenging operating environment, we expect the final outcome of the year to be towards the lower end of the net sales and operational EBIT ranges. For 2023, the challenging operating environment is expected to continue to have some impact on our performance.

Sustainability is at the core of our businesses, and the latest acknowledgement of our progressive and holistic approach is the improvement of our ISS ESG rating to the industry-benchmark level of Prime C+. Our scoring in different ESG ratings has improved significantly over the last years (for latest status, please visit our website).

To conclude, I would like to extend my warmest thanks to all Sanoma employees for their great work and strong commitment in supporting our customers and thus enabling our continued growth, operational development and solid financial performance.’’

27 October 2022