Sanoma’s Interim Report January-September 2019: Operational EBIT stable, margin improved in Q1-Q3


Sanoma Corporation, Stock Exchange Release, 25 October 2019 at 8:30 EET

Operational EBIT stable, margin improved in Q1-Q3

This release is a summary of Sanoma’s Interim Report 1 January–30 September 2019. The complete report is attached to this release and is also available at sanoma.com.

Q3 2019

  • Net sales declined to EUR 372 million (2018: 393). Comparable net sales development was -2% (2018: ‑3%).
  • Operational EBIT excl. PPA was EUR 93 million (2018: 94).
  • EBIT was EUR 83 million (2018: 89). Items affecting comparability (IACs) totalled EUR ‑7 million (2018: -2) and included costs of EUR 4 million related to the Iddink acquisition. PPA amortisations were EUR 3 million (2018: 3).
  • Operational EPS was EUR 0.39 (2018: 0.42).
  • EPS was EUR 0.35 (2018: 0.41).
  • Net debt / Adj. EBITDA was 2.8 (2018: 1.6). 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).
  • On 13 September 2019, Sanoma completed the acquisition of Iddink, a leading Dutch educational platform and service provider, and improved its outlook for 2019 on operational EBIT margin excl. PPA from around 15% to above 15%.
  • On 24 October, the Board of Directors decided the record date and payment date of the second dividend instalment of EUR 0.20 per share. The dividend record date is 28 October and the payment date 4 November.

Q1-Q3 2019

  • Net sales declined to EUR 974 million (2018: 1,017). Comparable net sales development was -3% (2018: ‑3%).
  • Operational EBIT excl. PPA was EUR 184 million (2018: 186). The corresponding margin was 18.9% (2018: 18.3%).
  • EBIT was EUR 168 million (2018: 168). IACs totalled EUR -8 million (2018: -11). PPA amortisations were EUR 9 million (2018: 7).
  • Operational EPS was EUR 0.73 (2018: 0.77).
  • EPS was EUR 0.71 (2018: 0.71).
  • Free cash flow was EUR 56 million (2018: 40) and included a positive EUR 18 million impact due to the implementation of the IFRS 16 standard, partially offset by EUR 10 million settlement of a rental contract related to Discontinued operations in Belgium.
  • 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%.

Outlook for 2019 (as revised on 13 September)

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 above 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.

Key indicators

EUR million Q3 2019 Q3 2018 Change Q1-Q3 2019 Q1-Q3 2018 Change FY 2018
Net sales 372.2 393.0 -5% 973.9 1,017.4 -4% 1,315.4
Operational EBIT excl. PPA 93.2 93.6 0% 184.1 186.0 -1% 206.2
  Margin 25.0% 23.8%   18.9% 18.3%   15.7%
EBIT 83.0 88.9 -7% 167.7 167.9 0% 168.5
Result for the period ¹) 59.2 67.6 -13% 116.6 130.5 -11% 125.6
               
Free cash flow ¹) 97.5 82.4 18% 56.3 39.6 42% 108.9
  Impact of IFRS 16 standard 5.7     17.5      
               
Equity ratio ¹)       33.8% 40.9%   44.7%
Net debt ¹)       797.8 391.9   337.8
  Impact of IFRS 16 standard       189.4      
Net debt / Adj. EBITDA ¹)       2.8 1.6 73% 1.4
  Impact of IFRS 16 standard       0.4      
               
Average number of employees (FTE)       4,399 4,453 -1% 4,463
               
Operational EPS, EUR, continuing operations 0.39 0.42 -8% 0.73 0.77 -6% 0.83
Operational EPS, EUR ¹) 0.39 0.42 -8% 0.73 0.78 -7% 0.84
EPS, EUR, continuing operations 0.35 0.41 -14% 0.71 0.71 -1% 0.68
EPS, EUR ¹) 0.35 0.41 -14% 0.71 0.79 -11% 0.76
Free cash flow per share, EUR ¹) 0.60 0.50 19% 0.35 0.24 43% 0.67
  Impact of IFRS 16 standard 0.03     0.11      

¹) In 2018 including continuing and discontinued operations. Discontinued operations include the Belgian women’s magazine portfolio, which was divested on 29 June 2018. More information on the Discontinued operations’ financial performance is available in the Full-Year Result 2018, on p. 36.

Result for the period for continuing operations was EUR 68 million for Q3 2018 and EUR 118 million for Q1-Q3 2018.

President and CEO Susan Duinhoven

“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.”

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 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, Sweden and Spain, 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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25.10.2019