CEO's review

President and CEO Susan Duinhoven:

25 October 2019

“Sanoma Group and each of our SBUs performed well during the first nine months of 2019. The Group’s profitability was good, and we closed the Iddink acquisition in mid-September. Due to the consolidation of Iddink into the Group for Q4 2019 and the continued solid business performance across SBUs, we raised our outlook on operational EBIT margin excl. PPA for 2019 from ‘around 15%’ to ‘above 15%’ (2018: 15.7%).

In Learning, net sales for Q1-Q3 were stable and in line with various curriculum cycles in our operating markets this year. Operational earnings improved thanks to the successful work our teams have done commercially and in the “High Five” programme during the year. In Q1-Q3 2019, Iddink’s performance has also been in line with our expectations. We have now started the integration and are working to realise the synergies.

In Media Finland, net sales for Q1-Q3 were at the previous year’s level, while we were happy to see the operational earnings improve. Both the number of subscriptions and subscription sales of Ruutu+ and Helsingin Sanomat (HS) have grown compared to the third quarter in 2018. To respond better to the transforming media consumption and increase focus on its three strategic key areas – news & feature, entertainment and B2B marketing solutions – Media Finland combined the operations of the news media brands HS and Ilta-Sanomat (IS) as well as seven of its magazine brands, having an existing digital audience and a close linkage to news feature content, into a new, shared business unit News & Feature. The new business unit started on 1 October and targets to being successful in both the subscribed and ad-funded journalism in Finland – both in the hybrid as well as in the digital era.

In Media Netherlands, the impact of the divestments we have made during the past year – LINDA. magazine, Head Office content marketing operations in Belgium, and Home Deco e-commerce operations – are visible in our reported net sales and operational EBIT for Q1-Q3. At the same time, development of the underlying business has met our expectations. Our online news site NU.nl is celebrating its 20th anniversary and double-digit growth in its usage and sales has continued throughout the year. Circulation sales have been impacted somewhat negatively by the increase in the VAT of magazines, which came into force on 1 January.

As a result of the completion of the Iddink acquisition, our net debt and leverage increased significantly, as communicated already at the signing. We expect our leverage (net debt / Adj. EBITDA) to return to its target level of below 2.5 during 2020. We have a EUR 200 million bond expiring at the end of November. We plan to pay the bond back and replace the required funding with more flexible debt instruments. This is expected to significantly reduce our financial expenses going forward. We remain focused on our strategic priorities: capturing growth opportunities, including synergetic bolt-on acquisitions and growing our dividend.”