Sanoma Corporation, Interim Report, 29 April 2020 at 8:30 EET
Sanoma’s Interim Report January–March 2020: Solid start to the year, long-term priorities unchanged
This release is a summary of Sanoma’s Q1 2020 Interim Report. The complete report is attached to this release and is also available at sanoma.com.
Q1 2020
- Net sales grew to EUR 188 million (2019: 163) mainly as a result of the Iddink acquisition. Comparable net sales growth was 2% (2019: -3%).
- Operational EBIT excl. PPA declined to EUR -8 million (2019: -5) due to planned, seasonally higher TV and marketing expenses in Media Finland. The first quarter is a structurally small quarter, both in Learning and Media Finland, and typically loss-making due to the annual seasonality in Learning.
- EBIT was EUR -18 million (2019: -11). Items affecting comparability (IACs) totalled EUR -4 million (2019: -4). PPA amortisations were EUR 5 million (2019: 2).
- Operational EPS was EUR -0.06 (2019: -0.05) and EUR 0.01 (2019: 0.01) including discontinued operations.
- EPS was EUR -0.08 (2019: -0.07) and EUR -0.02 (2019: 0.05) including discontinued operations.
- On 11 February, Sanoma announced it signed an agreement to acquire Alma Media’s regional news media business in Finland, with an enterprise value of EUR 115 million. The acquisition was approved unconditionally by the Finnish Competition and Consumer Authorities on 19 March and will be completed on 30 April.
- On 11 February, Sanoma also announced it is evaluating strategic options for its online classifieds’ business Oikotie in Finland. The evaluation is ongoing.
- On 24 March, Sanoma temporarily withdrew its Outlook for 2020 due to the corona virus pandemic.
- On 25 March, the Annual General Meeting decided that a dividend of EUR 0.50 per share shall be paid in two equal instalments. The first instalment was paid on 3 April and the second instalment will be paid in November (estimated timing).
- On 20 April, Sanoma completed the divestment of Sanoma Media Netherlands to DPG Media with an enterprise value of EUR 460 million. Sanoma’s net debt / Adj. EBITDA and equity ratio will return to their long-term target levels after the divestment.
Outlook for 2020 (temporarily withdrawn due to the corona virus pandemic on 24 March) and key impacts of the corona virus pandemic
On 24 March, Sanoma temporarily withdrew its Outlook for 2020, which was given on 7 February, due to the corona virus pandemic. In the current continuously and rapidly evolving situation, it is too early to make reliable and specific estimates for an adjusted Outlook. Sanoma expects to give an updated Outlook for 2020 later during the year.
Sanoma estimates that the corona virus pandemic will have significant impacts on its business during 2020. For its own part, the Group’s well-balanced business portfolio mitigates the impacts to a certain extent; after the acquisitions completed in Learning in 2019 and the divestment of Media Netherlands, a majority of the Group’s operational earnings will come from Learning in 2020.
In Learning, no major impacts on net sales and profitability are currently expected. In Media Finland, subscription and other B2C sales represent more than half of the total net sales and are not expected to be significantly affected, unless the exceptional situation is prolonged or intensifies. Sanoma estimates that the corona virus pandemic will have a material impact on the net sales and profitability of Media Finland’s B2B advertising business, but it is too early to make reliable and specific estimates of the size of the impact. On 22 April, the Finnish government decided to prohibit all large events until end of July 2020. As a consequence, all Media Finland’s festivals for the summer season 2020 will be cancelled. Sanoma estimates that net sales and operational EBIT for Media Finland’s events business will be close to zero in 2020. In 2019, net sales of the events business was approx. EUR 35 million and its operational EBIT margin was above the margin of the Media Finland SBU (12.0%).
Key indicators for continuing operations
| EUR million | Q1 2020 | Q1 2019 | Change | FY 2019 |
| Net sales | 187.7 | 163.0 | 15% | 913.3 |
| Operational EBIT excl. PPA 1) | -8.4 | -4.5 | -87% | 135.2 |
| Margin 1) | -4.5% | -2.8% | 14.8% | |
| EBIT | -17.6 | -10.7 | -64% | 102.1 |
| Result for the period | -12.9 | -11.4 | -13% | 63.1 |
| Operational EPS, EUR 2) | -0.06 | -0.05 | -34% | 0.49 |
| EPS, EUR | -0.08 | -0.07 | -10% | 0.38 |
| Average number of employees (FTE) | 3,959 | 3,391 | 17% | 3,567 |
| Number of employees at the end of the period (FTE) | 3,970 | 3,396 | 17% | 3,953 |
Key indicators incl. continuing and discontinued operations 3)
| EUR million | Q1 2020 | Q1 2019 | Change | FY 2019 |
| Result for the period | -3.8 | 7.3 | 13.3 | |
| Free cash flow | -60.2 | -41.3 | -46% | 131.3 |
| Equity ratio | 25.2% | 35.3% | 30.5% | |
| Net debt | 856.3 | 531.1 | 61% | 794.7 |
| Net debt / Adj. EBITDA | 3.0 | 2.0 | 46% | 2.7 |
| Operational EPS, EUR | 0.01 | 0.01 | 34% | 0.80 |
| EPS, EUR | -0.02 | 0.05 | 0.07 | |
| Free cash flow per share, EUR | -0.37 | -0.25 | -46% | 0.81 |
1) Excluding IACs and purchase price allocation amortisations (PPAs)
2) Excluding IACs
3) In 2020 and 2019, discontinued operations include Sanoma Media Netherlands and certain minor subsidiaries acquired in 2019 and planned to be divested in the future. In Q1 2020, result of discontinued operations include further EUR 3 million (FY 2019: 105) capital loss mainly related to costs to sell for the divestment of Media Netherlands.
President and CEO Susan Duinhoven:
“We had a good start to the year with solid business performance both in Learning and Media Finland.
In Learning, the first quarter of the year is always seasonally small, and together with our customers, we prepare ourselves for the forthcoming high season of the second and especially the third quarter. This year, the corona virus pandemic put a challenge to our customers and our teams, who have jointly done an amazing job in turning the operating model into remote work and digital support for the teachers and students overnight. During March, we have seen strong growth in the user numbers of our digital platforms across our operating countries. Currently, we estimate that the pandemic will not have a significant impact on Learning’s business performance of 2020. We are well prepared for orders and deliveries for the start of the new school year in autumn as well as for mitigating the possible risks and capturing opportunities arising from the increased penetration of our digital platforms in the short- or long-term.
In Media Finland, our business performed well during January-February, and among other things, we successfully prepared for the launch of Supla+, our subscription-based audio-on-demand service, in March. We started to experience the first signs of the corona virus pandemic impact on advertising in the second half of March. In the B2C business, the success of Helsingin Sanomat in growing the number of digital subscriptions continued during the quarter, offsetting the decline in the number of print subscriptions of HS and magazines. Ilta-Sanomat has hit new all-time records in the number of daily site visits, proving to be a source of reliable news for all Finns. The number of subscriptions for VOD service Ruutu+ has also grown well. Our teams have done a great job in serving the readers with free and paid up-to-date news and entertainment across all media channels, while working completely remotely, and in supporting our B2B customers with insight and innovative ideas for advertising to fit for these unprecedented times.
In mid-February, we announced the acquisition of Alma Media’s regional news media business. The acquisition was unconditionally approved by the Finnish competition authorities on March 19 and will be completed tomorrow, 30 April. The acquired business will support further growth of Media Finland’s digital subscription base in its news & feature business. We are looking forward to integrating the business, learning the best practises from each other and welcoming about 365 new colleagues to Sanoma - while working safely and mostly remotely. At the same time in February, we started a strategic evaluation of our online classifieds business Oikotie in Finland. The evaluation is proceeding according to our plans and is ongoing with all possible outcomes still open.
Last week, we completed another important transaction, the divestment of Media Netherlands. I want to thank the team that created excellent value for Sanoma during the past nearly 19 years and wish them all the best as part of DPG Media, the most prominent cross-media business in the Dutch and Belgian markets. The divestment provides Sanoma with a EUR 400 million headroom for future acquisitions in both of our continuing businesses.
During this corona pandemic, our first and foremost priorities are maintaining the health and safety of our employees and giving solid support to our customers. Practically all our teams have successfully shifted to remote operations and many of them have performed clearly above our expectations. Remote work is largely supported by our improved, cloud-based IT infrastructure, in which we made a major investments in the last years. Due to the current uncertainty in our markets, we have temporarily withdrawn our Outlook for 2020, while we remain committed to our long-term strategy and financial targets as well as the payment of our second dividend instalment, EUR 0.25 per share, in November as decided by the AGM in March. I am grateful for the agility and commitment of our team across the Group to take us and our customers through the current challenges – with a focus on our long-term strategic priorities.”
Analyst and investor conference
An analyst and investor webcast and teleconference will be held in English by the President and CEO Susan Duinhoven and CFO and COO Markus Holm at 11:00 EET. A live webcast of the conference can be followed via https://sanoma.videosync.fi/2020-q1-results.
To ask questions by phone during the live webcast, please join 5-10 minutes prior to the start time by dialling one of the following numbers:
Finland: +358 981 710 310
Sweden: +46 856 642 651
United Kingdom: +44 333 300 0804
United States: +1 631 913 1422
Confirmation code for the call is 61615885#
An on-demand replay of the webcast will be available shortly after the conference via www.sanoma.com/investors.
Interview opportunities for media by phone 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.
Today, we have operations in ten countries including Finland, the Netherlands and Poland. Our net sales totalled EUR 900 million and we employed approx. 3,500 professionals in 2019. Sanoma shares are listed on Nasdaq Helsinki. More information is available at www.sanoma.com.
Attachment
