Sanoma Corporation, Stock Exchange Release, 7 February 2020 at 8:30 EET

Sanoma’s Full-Year Result 2019: Net sales grew and operational EBIT improved

This release is a summary of Sanoma’s Full-Year Result 2019. The complete report is attached to this release and is also available at sanoma.com.

On 10 December 2019, Sanoma announced it had signed an agreement to divest its strategic business unit Sanoma Media Netherlands. Media Netherlands is consequently reported as discontinued operations in this report. Unless otherwise stated, all income-statement-related quarterly and FY figures presented in this report, including corresponding periods in 2018, cover continuing operations only. Figures related to balance sheet and cash flow cover both continuing and discontinued operations. Continuing operations include Sanoma Learning and Sanoma Media Finland SBUs, which are also Sanoma’s reporting segments starting from this report. After the divestment, the remaining Group costs have been allocated to Learning and Media Finland SBUs and SBU-level comparative information for 2018 and 2019 has been adjusted accordingly.

Q4 2019

• Net sales grew to EUR 206 million (2018: 184) mainly as a result of the Iddink acquisition. Comparable net sales development was -1% (2018: -4%).
• Operational EBIT excl. PPA improved to EUR 2 million (2018: -5).
• EBIT was EUR -10 million (2018: -14). Items affecting comparability (IACs) totalled EUR -8 million (2018: -7). PPA amortisations were EUR 5 million (2018: 2).
• Operational EPS was EUR -0.03 (2018: -0.05) and EUR 0.07 (2018: 0.06) including discontinued operations.
• EPS was EUR -0.06 (2018: -0.09) and EUR -0.63 (2018: -0.03) including discontinued operations.
• In November, Sanoma repaid a EUR 200 million bond.
• On 10 December, Sanoma announced the divestment of its strategic business unit Sanoma Media Netherlands to DPG Media with an enterprise value of EUR 460 million. Due to the divestment, Sanoma booked a EUR 105 million capital loss in discontinued operations Q4 2019 result.
• On 17 December, Sanoma amended its long-term financial targets with SBU-level targets on net sales growth and profitability.
• During November-December, Sanoma announced three acquisitions in Learning: Essener, itslearning and Clickedu.

FY 2019

• Net sales grew to EUR 913 million (2018: 891) mainly as a result of the Iddink acquisition. Comparable net sales development was -1% (2018: -4%).
• Operational EBIT excl. PPA was EUR 135 million (2018: 123). The corresponding margin was 14.8% (2018: 13.8%).
• EBIT was EUR 102 million (2018: 107). IACs totalled EUR -23 million (2018: -10). PPA amortisations were EUR 11 million (2018: 7).
• Operational EPS was EUR 0.49 (2018: 0.49) and EUR 0.80 (2018: 0.84) including discontinued operations.
• EPS was EUR 0.38 (2018: 0.44) and EUR 0.07 (2018: 0.76) including discontinued operations.
• Net debt / Adj. EBITDA was 2.7 (2018: 1.4). Due to the Iddink acquisition and the implementation of the IFRS 16 standard, the ratio increased temporarily above the long-term target level (below 2.5).
• Free cash flow was EUR 131 million (2018: 109), including continuing and discontinued operations. Free cash flow included a positive EUR 25 million impact 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 28 June, Sanoma announced it had increased its ownership in the Finnish online classifieds company Oikotie Ltd. from 90% to 100%.
• On 13 September, Sanoma completed the acquisition of Iddink, a leading Dutch educational platform and service provider.
• The Board proposes a dividend of EUR 0.50 per share to be paid for the year 2019 in two instalments, EUR 0.25 in April and EUR 0.25 in November (estimated).

Outlook for 2020

In 2020, Sanoma expects that the Group’s comparable net sales will be stable, and operational EBIT margin excl. PPA will be around 15% (2019: 14.8%).

Key indicators for continuing operations

Key indicators incl. continuing and discontinued operations 1)

1) In 2019, discontinued operations include Sanoma Media Netherlands and certain minor subsidiaries acquired in 2019 and planned to be divested in the future. In addition, discontinued operations in 2018 include Belgian women’s magazine portfolio, which was divested on 29 June 2018. In 2019, result of discontinued operations include EUR 105 million capital loss related to the divestment of Media Netherlands. More information on discontinued operations’ financial performance is available on p. 35.

2) 2019 is a proposal of the Board of Directors.

President and CEO Susan Duinhoven:

“2019 was a good year, marking the successful transformation of Sanoma into a learning and media company. We strengthened our learning business with four acquisitions – Iddink, Essener, itslearning and Clickedu – and announced an intention to divest Media Netherlands to DPG Media. After the divestment, we have two strong businesses, Learning and Media Finland, ready for growth, and a EUR 400 million headroom for M&A. Our business portfolio is well-balanced: after the recent acquisitions and the divestment approx. 45% of the Group’s net sales and 55% of operational earnings will come from Learning.

In Learning, the most sizable step on our growth path in 2019 was the acquisition of Iddink, a leading Dutch educational platform and service provider, which was closed in September. Iddink operates in the Netherlands, Belgium and Spain. It provides us direct access to the school management in addition to our earlier contact predominantly with teachers. Altogether, with the recent acquisitions we have grown our customer base by 50% to about 15 million primary, secondary and vocational education students and expanded our offering of blended learning materials and methods with learning material distribution, digital platforms for teaching and school administration as well as testing and analytics.

During the year, Learning’s financial performance was strong. Operational earnings improved by EUR 10 million, or 15%. Half of this was attributable to the Iddink acquisition, while the other half was a result of the good work our teams have done as part of the “High Five” business development programme.

Rob Kolkman, CEO of Media Netherlands, was appointed as CEO of Sanoma Learning as of 1 January 2020. Rob is an experienced, well-respected and results-driven business leader for our Learning team and I am happy that he continues at Sanoma. Rob succeeds John Martin, who will leave Sanoma in spring 2020 to pursue other career opportunities.

In Media Finland, digital subscription sales of both Helsingin Sanomat and Ruutu+ continued to grow. The number of Helsingin Sanomat subscriptions grew for the third consecutive year and subscription sales were at an all-time-high – great achievements also in an international comparison. Advertising sales were stable, with digital advertising sales growing by 6%, and print advertising sales, which today represents only 7% of the Group’s total net sales, declining. In total, Media Finland’s net sales and earnings were stable at the previous year’s level.

The divestment of Media Netherlands creates a EUR 400 million headroom for acquisitions. We see solid M&A pipelines for both Learning and Media Finland. In Learning, we are looking for growth opportunities in new geographies and in expanding our offering in the current markets. In Media Finland, we will be interested in synergistic acquisitions in news & feature, entertainment or B2B marketing solutions. With growth in mind, we remain committed to our dividend policy: an increasing dividend corresponding to 40-60% of annual free cash flow. Our focus is especially on increasing dividend per share in euros and thus we may temporarily exceed the pay-out range of 40-60%. For 2019, the Board proposes a dividend of EUR 0.50 to be paid, representing 58% of free cash flow (incl. the settlement of a rental contract related to Belgian women’s magazine operations paid in Q1 2019).

In December, we launched new SBU-level, long-term financial targets on comparable net sales growth and operational EBIT margin excl. PPA, while keeping our earlier Group-level targets on leverage, equity ratio and dividend unchanged. With the clear long-term vision on our SBUs’ net sales and profitability development, our outlook for 2020 is that the Group’s comparable net sales will be stable, and operational EBIT margin excl. PPA will be around 15%. We are looking forward to another successful year in 2020.”

Dividend proposal

On 31 December 2019, Sanoma Corporation’s distributable funds were EUR 354 million, of which loss for the year made up EUR 62 million. Including the fund for non-restricted equity of EUR 210 million, the distributable funds amounted to EUR 564 million. The Board of Directors proposes to the Annual General Meeting that:

• A dividend of EUR 0.50 per share shall be paid for the year 2019. The dividend shall be paid in two instalments. The first instalment of EUR 0.25 per share shall be paid to a shareholder who is registered in the shareholders’ register of the company maintained by Euroclear Finland Ltd on the dividend record date 27 March 2020. The payment date for this instalment is 3 April 2020. Record date for the second instalment of EUR 0.25 per share will be decided by the Board of Directors in October, and the estimated payment date will be in November 2020.
• A sum of EUR 350,000 shall be transferred to the donation reserve and used at the Board’s discretion.
• The amount left in equity shall be EUR 482 million.

According to its dividend policy from 2017 onwards, Sanoma aims to pay an increasing dividend, equal to 40–60% of the annual free cash flow. When proposing a dividend to the AGM, the Board of Directors looks at the general macro-economic environment, Sanoma’s current and target capital structure, Sanoma’s future business plans and investment needs, as well as both previous year’s cash flows and expected future cash flows affecting capital structure.

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 today at 11:00 EET at Sanomatalo, Töölönlahdenkatu 2, Helsinki. To join the event at Sanomatalo, please register by 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 at 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.

Today, with 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

• Sanoma Full-Year Result 2019