Sanoma’s Full-Year Result 2018: Improved operational EBIT across all SBUs

Sanoma Corporation, Stock Exchange Release, 6 February 2019 at 8:30 EET


Sanoma’s Full-Year Result 2018: Improved operational EBIT across all SBUs

This release is a summary of Sanoma’s Full-Year Result 2018. The complete report is attached to this release and is also available at sanoma.com.

Q4 2018

  • Net sales declined slightly to EUR 298 million (2017: 306). Net sales development adjusted for structural changes was -3% (2017: 0%).
  • Operational EBIT improved clearly to EUR 18 million (2017: 4) as a result of earnings growth in all SBUs.
  • EBIT was EUR 1 million (2017: 21). The EBIT included EUR -17 million (2017: 17) of IACs, which mainly related to restructuring actions across SBUs.
  • Operational EPS improved to EUR 0.06 (2017: 0.01).
  • EPS was EUR -0.03 (2017: 0.10).
  • Free cash flow was EUR 69 million (2017: 84).
  • On 15 November, Sanoma announced the divestment of its content marketing operations, Head Office, in Belgium.
  • On 11 December, Sanoma announced its intention to acquire Iddink, a leading Dutch educational platform and service provider.
  • On 4 February 2019, Sanoma signed a EUR 550 million syndicated credit facility.

FY 2018

  • Net sales were stable at EUR 1,315 million (2017: 1,435; adjusted 1,328). Net sales development adjusted for structural changes was -3% (2017: 1%).
  • Operational EBIT improved by 10% to EUR 197 million (2017: 177, adjusted: 179) driven by good profitability development across all SBUs. Corresponding margin was 14.9% (2017: 12.3%; adjusted 13.5%).
  • EBIT was EUR 169 million (2017: -241, adjusted 186). The EBIT included EUR -28 million (2017:-417; adjusted 7) of IACs, which mainly related to Discontinued operations as well as restructuring actions across SBUs.
  • Operational EPS improved by 17% to EUR 0.83 (2017: 0.70; adjusted 0.71).
  • EPS was EUR 0.68 (2017:-1.02; adjusted 0.76).
  • Free cash flow improved slightly to EUR 109 million (2017: 105; adjusted 106) and included EUR 17 million of one-off costs related to Discontinued operations, which will be added back to the free cash flow for dividend calculation purposes. Free cash flow excluding the one-off costs related to Discontinued operations was EUR 126 million.
  • On 7 March, Sanoma announced the acquisition of the festival and event business of N.C.D. Production in Finland. The transaction was closed on 18 April.
  • On 29 June, Sanoma completed the divestment of Belgian women’s magazine portfolio, reported as discontinued operations.
  • The Board proposes a dividend of EUR 0.45 per share to be paid for the year 2018 in two instalments, EUR 0.25 in April and EUR 0.20 in November (estimated).

Outlook for 2019

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 around 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. The outlook does not include any assumptions of the intended acquisition of Iddink (announced on 11 December 2018), which is expected to be closed in Q2-Q3 2019.

Key indicators 1)

EUR millionQ4 2018Q4 2017 Change  FY 2018
FY 2017
adjusted
Change
Net sales298.0 305.7 -3%1,315.4 1,328.0 -1%
Operational EBITDA51.7 48.4 7%326.3 328.5 -1%
  margin17.4%15.8% 24.8%24.7% 
Operational EBIT17.6 4.4  196.6 179.0 10%
  margin5.9%1.5% 14.9%13.5% 
EBIT0.6 21.2 -97%168.5 186.4 -10%
Result for the period 2)-5.0 14.8  125.6 126.8 -1%
       
Free cash flow 2)69.3 83.5 -17%108.9 106.2 3%
       
Equity ratio 2), 3)   44.7%38.2% 
Net debt 2), 3)    337.8 391.8  
Net debt / Adj. EBITDA 2), 3)   1.4 1.7  
       
Average number of employees (FTE)   4,463 4,562 -2%
       
Operational EPS, EUR, continuing operations0.06 0.01  0.83 0.71 17%
Operational EPS, EUR 2)0.06 0.01  0.84 0.74 14%
EPS, EUR, continuing operations-0.03 0.10  0.68 0.76 -10%
EPS, EUR 2)-0.03 0.09  0.76 0.77 -1%
Free cash flow per share, EUR 2)0.43 0.51 -17%0.67 0.65 3%
Dividend per share, EUR 4)   0.45 0.35 29%

1) 2017 figures have been restated due to the implementation of IFRS 15 and were originally published on 29 March 2018. More information on the restatement is available in Accounting policies on p 25.
2) Including continuing and discontinued operations.
3) Not adjusted for the SBS divestment.
4) 2018 proposal of the Board of Directors.


President and CEO Susan Duinhoven:

”2018 was another good year for Sanoma. We improved our profitability in all three SBUs despite the challenging business environment in media. During the year, we also took pre-emptive actions to ensure we remain competitive in the months and years to come. Thanks to our solid financial position, growth returned to our agenda and we announced several acquisitions during the year. I am proud and grateful of the hard work and commitment that our teams have again shown.

In Learning, our teams have been particularly successful with the curriculum renewals in Poland and in Finland in recent years. In 2018, we also launched a business development programme, “High Five”, which focuses on creating lean, harmonised and efficient operations and processes for our five operating countries. The positive effects of the programme were already visible in our 2018 profitability. The “High Five” will continue in the years to come and we expect further cost benefits with modest additional investments in 2019.

In December 2018, we took a significant step on our growth path from a predominantly media company into a learning and media company. We announced our intention to acquire Iddink, a leading Dutch educational platform and service provider. The transaction enables the development of seamless digital learning solutions, improving our products and services for the pupils, parents, teachers and schools. Iddink provides Sanoma Learning a platform for future growth not only in the Netherlands, but also in Belgium and Spain, and significantly increases Learning’s share of Sanoma’s operational EBIT excl. PPA.

In Media Finland, our success in transformation was visible in the growing number of digital subscriptions for Helsingin Sanomat and Ruutu. In HS, the total number of subscriptions increased for the second year in a row. Growth in digital subscriptions compensated the decline in print, and we experienced new, younger audiences being attracted with new product combinations, such as a digital subscription complemented with printed HS Viikko. Unfortunately the continued decline in print advertising volumes was not fully compensated by the increase in digital advertising. With this trend expected to continue, we conducted targeted co-operative negotiations in certain parts of B2B sales, printing operations and media units in the fourth quarter to prepare for the coming years. We are actively seeking growth and completed several smaller synergetic bolt-on acquisitions during the year. Most prominently, the expansion into the growing markets of live festivals and events by the acquisition of N.C.D. Production strengthens our cross-media proposition in entertainment and creates advantages for advertisers, consumers as well as the creative talents.

In Media Netherlands, we had a particularly strong year both in the magazine subscription sales as well as in the news business NU.nl, where both the usage and revenues grew. We continued to focus our business portfolio even further and divested both the women’s magazines and the content marketing operations in Belgium. To align with the simplified business portfolio, we continued to streamline our organisation during the year and our profitability improved significantly. At the end of the year, we took some one-off costs (booked as IACs) in order to prepare for the discontinuation of the Home Deco e-commerce operations, which have been licensed to a third party. Growth in digital advertising was partially supported by the data-driven marketing and cashback service Scoupy, of which we own 95% since June and have now integrated it into our organisation.

In addition to improved profitability in all SBUs, our balance sheet strengthened further during the year, and our leverage was 1.4 at year-end. In 2019, the main impacts on our leverage will come from the new IFRS 16 standard, effective as of 1 January, and the closing of acquisition of Iddink, expected in Q2-Q3 2019. We have decided to prudently maintain our long-term leverage target unchanged at “below 2.5” although the new IFRS 16 by itself is expected to increase our leverage roughly by 0.6. The impact of the Iddink acquisition is partially dependent on the timing of the closing, but it is expected to temporarily take our leverage above the long-term target level.

The Board proposes a dividend of EUR 0.45 to be paid for 2018 (2017: 0.35). Our 2018 free cash flow improved slightly from the previous year, and for dividend calculation purposes we have added back EUR 17 million of one-off costs related to the divestment of the Belgian women’s magazine portfolio. The dividend represents a pay-out ratio of 58% (2017: 55%) of this way adjusted free cash flow. We remain strongly committed to our policy of paying an increasing dividend equal to 40-60% of annual free cash flow.

With the attractive bolt-on acquisitions done in 2018 and our organisations well prepared for the coming year, we look forward to integrate these acquisitions successfully in 2019 and grow our business further.”


Dividend proposal

On 31 December 2018, Sanoma Corporation’s distributable funds were EUR 486 million, of which profit for the year made up EUR 85 million. Including the fund for non-restricted equity of EUR 210 million, the distributable funds amounted to EUR 695 million. The Board of Directors proposes to the Annual General Meeting that:

  • A dividend of EUR 0.45 per share shall be paid for the year 2018. 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 29 March 2019. The payment date for this instalment is 5 April 2019. Record date for the second instalment of EUR 0.20 per share will be decided by the Board of Directors in October, and the estimated payment date will be in November 2019.
  • 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 622 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 at 11:00 EET at Sanomatalo, Töölönlahdenkatu 2, Helsinki. To join the event at Sanomatalo, please register by email to ir@sanoma.com by 4 February 2019.

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 by 4 February 2019. 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.

With operations in Finland, the Netherlands, Poland, Belgium and Sweden, 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.

Attachment

06.02.2019