CEO's review

President and CEO Susan Duinhoven:

27 April 2018

”Sanoma did relatively well in the first quarter. First quarter typically is seasonally the smallest for us both in the media and especially in the learning business. In Learning, we have already during the last years seen some structural shifting in ordering from Q1 to later quarters, and while it moderated slightly last year, this year it accelerated. The learning business has, by nature, an annual cycle with strong seasonality. The business accelerates towards the start of the new school year creating a peak season in the second and especially third quarter.

Softness in advertising markets continued and had an adverse impact on our media businesses. Profitability of Media BeNe improved – mostly thanks to the actions we have taken to adjust our operations to the post-SBS scale and reduced complexity. In Media Finland, the comparable earnings (excluding the one-off correction in Q1 2017) declined somewhat following the negative advertising sales development.

We progressed on our strategic path during the quarter with two recent transactions. The divestment of our Belgian women’s magazine portfolio is going as planned; agreement with our social partners and employee representatives has been reached and the transaction is expected to be finalized early Q3 2018. In Finland, we acquired the festival and events business of N.C.D. Production and strengthened our cross-media entertainment proposition. Live events is a growing market with above average profitability compared to media industry in general. This acquisition is a very good example of our growth strategy: a bolt-on acquisition that complements our existing businesses and creates advantages for advertisers, consumers and the creative talent. We will integrate our existing events business into the acquired business and our enhanced offering opens up new opportunities for our customers.

During 2018, the pattern of our business and financial performance will be different compared to previous year with more emphasis on the second half of the year. On the cost side, we expect to see some higher increase in paper costs compared to last years, especially for the newsprint in Finland. We see interesting business opportunities and continue to improve profitability in our SBUs. We continue to focus on our long-term strategy of synergetic bolt-on acquisitions and increasing dividend, and our outlook for this year remains unchanged.”