Sanoma Corporation, Interim Report, 30 April 2019 at 8:30 EET
Sanoma Corporation, Interim Report January–March 2019: Solid start to the year
This release is a summary of Sanoma’s Q1 2019 Interim Report. The complete report is attached to this release and is also available at sanoma.com.
Q1 2019
- Net sales declined to EUR 248 million (2018: 262). Comparable net sales development was -5% (2018: -6%).
- Operational EBIT excl. PPA was stable, amounting to EUR 10 million (2018: 10).
- EBIT was EUR 12 million (2018: 8). The EBIT improved as a result of positive net IACs of EUR 5 million (2018: 0), including a capital gain related to the divestment of Mood for Magazines. The EBIT also included EUR 3 million (2018: 2) of PPA amortisations.
- Operational EPS was EUR 0.01 (2018: 0.02).
- EPS was EUR 0.05 (2018: 0.02).
- Free cash flow was EUR -41 million (2018: -44), including a positive EUR 6 million impact due to the implementation of the IFRS 16 standard and an adverse impact due to a settlement of rental contract related to Discontinued operations in Belgium.
- Net debt / Adj. EBITDA was 2.0 (2018: 2.0), including an impact of +0.5 due to the implementation of the IFRS 16 standard.
- On 4 February, Sanoma signed a EUR 550 million syndicated credit facility.
- On 14 February, Sanoma announced the divestment of Mood for Magazines, publisher of LINDA. magazine, in the Netherlands. The divestment was completed at the end of February.
- On 17 April, Sanoma announced that the Dutch Authority for Consumers and Markets will take, as part of its standard procedure, a further assessment in order to reach a final decision with regard to the acquisition of Iddink. Sanoma expects the acquisition to be completed by the end of Q3 2019.
Outlook for 2019 (unchanged)
In 2019, Sanoma expects that the Group’s comparable net sales will be in-line with 2018 and operational EBIT margin excluding PPA will be around 15% (2018: 15.7%).
The outlook is based on an assumption of the consumer confidence and advertising market development in Finland and in the Netherlands to be in line with 2018. The outlook does not include any assumptions of the intended acquisition of Iddink (announced on 11 December 2018), which is expected to be closed by the end of Q3 2019.
Key indicators
| EUR million | Q1 2019 | Q1 2018 | Change | FY 2018 |
| Net sales | 248.2 | 261.6 | -5% | 1,315.4 |
| Operational EBIT excl. PPA | 10.1 | 10.3 | -2% | 206.2 |
| Margin | 4.1% | 3.9% | 15.7% | |
| EBIT | 11.9 | 8.4 | 42% | 168.5 |
| Result for the period ¹) | 7.3 | -5.1 | 125.6 | |
| Free cash flow ¹) | -41.3 | -44.4 | 7% | 108.9 |
| Impact of IFRS 16 standard | 6.2 | |||
| Equity ratio ¹) | 35.3% | 34.1% | 44.7% | |
| Net debt ¹) | 531.1 | 438.9 | 337.8 | |
| Impact of IFRS 16 standard | 183.5 | |||
| Net debt / Adj. EBITDA ¹) | 2.0 | 2.0 | 1.4 | |
| Impact of IFRS 16 standard | 0.5 | |||
| Average number of employees (FTE) | 4,370 | 4,393 | -1% | 4,463 |
| Operational EPS, EUR, continuing operations | 0.01 | 0.02 | -50% | 0.83 |
| Operational EPS, EUR ¹) | 0.01 | 0.03 | -64% | 0.84 |
| EPS, EUR, continuing operations | 0.05 | 0.02 | 0.68 | |
| EPS, EUR ¹) | 0.05 | -0.03 | 0.76 | |
| Free cash flow per share, EUR ¹) | -0.25 | -0.27 | 7% | 0.67 |
| Impact of IFRS 16 standard | 0.04 |
¹) In 2018 including continuing and discontinued operations.
President and CEO Susan Duinhoven:
”Sanoma had a solid start to the year 2019. Typically, the first quarter is seasonally the smallest for us both in the media and in particular in the learning business. The learning business has, by nature, an annual cycle with the majority of earnings generated in Q2 and Q3, around the time when the new school year starts.
During the past years, we have persistently worked in line with our strategy to increase the share of more stable subscription and learning businesses of the Group’s net sales. After the first quarter, our Learning SBU is in a good position preparing for its high season in all its markets. Regarding our intention to acquire Iddink, the Dutch Authority for Consumers and Markets (ACM) is, as part of its standard procedure, currently assessing the transaction. We are looking forward to proceeding with the acquisition once their assessment is finalised, and expect closing by the end of the third quarter.
Both in Finland and in the Netherlands, the development in advertising markets continued to be weak, and our advertising sales declined. Overall, our exposure to advertising has decreased from 36% of the Group’s net sales in 2016 to 26% in 2018, out of which less than one-third is print advertising.
In Media Finland, good development of both HS and Ruutu+ subscription businesses continued. The number of subscriptions of Ruutu+ grew by 25% – an excellent achievement especially when keeping in mind that in 2018 we still had Liiga (the Finnish national ice-hockey league) in our portfolio.
Net sales of Media Netherlands decreased, half of this due to divestments. In February, we sold Mood for Magazines, publisher of LINDA. magazine to its founder, Linda de Mol, and Talpa. We are satisfied with the EV/EBIT multiple of 7.9x, especially as LINDA. had a higher dependency on single copy and advertising sales than the rest of our titles in Media Netherlands. The increase in the VAT of magazines in the Netherlands from 6% to 9% came into force in the beginning of this year and impacted our pricing capacity and thus the subscription revenues of the quarter. During the quarter, our advertising sales were impacted by changes in Scoupy’s product portfolio. As a result of lower net sales our profitability decreased, though being significantly mitigated by prudent cost management.
In the first quarter, we saw the impact of the IFRS 16 Leases standard implementation on our financials. While the underlying financial development was favourable, our reported net debt and net debt to adjusted EBITDA increased and equity ratio weakened due to this accounting change. Implementation of the standard also improved our free cash flow, but a similar size decrease in cash flow from financing neutralised the impact on net cash flow.
Our Outlook for 2019 remains unchanged, and we continue to focus on our long-term strategic cornerstones: growth through synergetic acquisitions and increasing dividend.”
Analyst and investor conference
An analyst and investor conference will be held in English by the President and CEO Susan Duinhoven and CFO and COO Markus Holm at 11:00 EET at Sanomatalo, Töölönlahdenkatu 2, Helsinki. To join the event, please register via email to ir@sanoma.com.
A live webcast of the conference can be followed via www.sanoma.com/investors. To ask questions by phone during the live webcast, please register by email to ir@sanoma.com. Dial-in details will be sent for registered participants. An on-demand replay of the webcast will be available shortly after the conference via www.sanoma.com/investors.
Interview opportunities for media are available after the conference. Media representatives are asked to book interviews via Communications Director Marcus Wiklund, marcus.wiklund@sanoma.com.
Additional information
Kaisa Uurasmaa, Head of Investor Relations and CSR, tel. +358 40 560 5601
Sanoma
Sanoma is a front running learning and media company impacting the lives of millions every day. We enable teachers to excel at developing the talents of every child, provide consumers with engaging content, and offer unique marketing solutions to business partners.
With operations in Finland, the Netherlands, Poland, Belgium and Sweden, our net sales totalled EUR 1.3 billion and we employed more than 4,400 professionals in 2018. Sanoma shares are listed on Nasdaq Helsinki. More information is available at www.sanoma.com.
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