Sanoma Corporation, Interim Report, 29 October 2020 at 8:30 EET Sanoma’s Interim Report January-September 2020: Strong performance: Net sales grew and operational EBIT improved This release is a summary of Sanoma’s Q3 2020 Interim Report. The complete report is attached to this release and is also available at sanoma.com. Q3 2020 The Group’s net sales grew to EUR 401 million (2019: 285). Net sales of Learning grew mainly driven by acquisitions, in particular Iddink, and strong comparable net sales development during the high season especially in Poland. Net sales of Media Finland declined slightly. The Group’s comparable net sales development was -2% (2019: -1%).Operational EBIT excl. PPA improved to EUR 111 million (2019: 78) driven by acquisitions, in particular Iddink, as well as good comparable earnings development in Learning.EBIT was EUR 267 million (2019: 69). Items affecting comparability (IACs) totalled EUR 161 million (2019: -7) and included a capital gain of EUR 165 million related to the divestment of Oikotie. PPA amortisations were EUR 6 million (2019: 2).Operational EPS was EUR 0.50 (2019: 0.32) and EUR 0.50 (2019: 0.39) including discontinued operations.EPS was EUR 1.49 (2019: 0.29) and EUR 1.50 (2019: 0.35) including discontinued operations.On 28 October, the Board of Directors decided the record date and payment date of the second dividend instalment of EUR 0.25 per share. The dividend record date is 30 October and the payment date 6 November.On 19 October, Sanoma announced the acquisition of Santillana Spain with an enterprise value of EUR 465 million.On 8 October, Sanoma published an updated Outlook for 2020.On 16 July, Sanoma announced and completed the divestment of Oikotie to Schibsted with an enterprise value of EUR 185 million. Q1-Q3 2020 The Group’s net sales grew to EUR 835 million (2019: 708) mainly as a result of the Iddink acquisition, while net sales development of Media Finland was adversely impacted by the coronavirus pandemic. The Group’s comparable net sales development was -6% (2019: -1%).Operational EBIT excl. PPA grew to EUR 156 million (2019: 133). Earnings improved in Learning mainly as a result of the Iddink acquisition, while declining in Media Finland.EBIT was EUR 291 million (2019: 112). IACs totalled EUR 151 million (2019: -15) and included a capital gain of EUR 165 million related to the divestment of Oikotie. PPA amortisations were EUR 17 million (2019: 6).Operational EPS was EUR 0.64 (2019: 0.51) and EUR 0.73 (2019: 0.73) including discontinued operations.EPS was EUR 1.59 (2019: 0.44) and EUR 1.67 (2019: 0.71) including discontinued operations.On 30 April, Sanoma completed the acquisition of Alma Media’s regional news media business in Finland with an enterprise value of EUR 115 million. The acquisition was announced on 11 February 2020.On 20 April, Sanoma completed the divestment of Sanoma Media Netherlands to DPG Media with an enterprise value of EUR 460 million. Outlook for 2020 (published on 8 October) In 2020, Sanoma expects that the Group’s reported net sales will be around EUR 1,050 million (2019: 913). The Group’s operational EBIT margin excluding PPA is expected to be around 14% (2019: 14.8%), which in this case means the margin is not expected to be below 13% or above 15%. The outlook is based on the assumption that the advertising market decline in Finland in 2020 will be between 15-20% compared to 2019. President and CEO Susan Duinhoven: ”Our business and financial performance was strong during the important third quarter, which is typically the high season of the learning business. Based on the improving performance we have experienced in the last months of the coronavirus pandemic, and the prospects that we see for the final quarter of the year, we were able to give an updated outlook for 2020 on 8 October. We expect reported net sales to be around EUR 1,050 million (2019: 913) and operational EBIT margin excl. PPA around 14% (2019: 14.8%), which is a relatively small adjustment compared to the around 15% margin outlook that we had given in the beginning of this year. I am very proud of and grateful for the agile, supportive and inventive way in which our teams across Sanoma have approached the exceptional challenge that the pandemic put to our customers and our business. Thanks to their hard work, our performance has been much stronger than we would have dared to hope for when the pandemic started, and we now have a good outlook for the full year. We have also progressed well on our strategic objectives. In July‒September, we again saw an increase in subscription sales for both news and entertainment. The number of subscriptions for the largest daily newspaper, Helsingin Sanomat, is now above 400,000, of which about one third are digital-only. Also, our VOD service Ruutu+ has reached more than 300,000 subscriptions. During the past months, our teams have been working hard with the integration of the regional news media business acquired at the end of April, and are proceeding as planned. After summer, the recovery in advertising sales, which were significantly impacted by the coronavirus pandemic in March-July, has accelerated and exceeded our earlier expectations. That being said, we believe that there continues to be significant uncertainty related to advertising demand in the coming months, which will most likely be seen next year as well. The third quarter is always an important one in the learning business, and this year we saw solid growth driven by curriculum renewals especially in Poland and to some extent also in the Netherlands. Teams across Sanoma Learning performed very well during this busy time of the year and under the continuing exceptional circumstances caused by the coronavirus pandemic especially in our distribution operations. Iddink was, for the first time, part of Sanoma Learning during the high season, and its business performance and integration have proceeded well and according to our plans. Last week, we announced the next major step on our learning growth path: the acquisition of Santillana Spain, a leading provider of learning content in Spain. This acquisition is a strong next step in Sanoma’s strategic transformation into a growing European learning company and a leading cross-media company in Finland. It will grow Learning’s share of our earnings (operational EBIT excl. PPA) from 55% to over 65% and further strengthen our cash flow generation capabilities. We see great potential in the Spanish market, related not only to the upcoming curriculum renewal expected to be implemented in 2022–23, but also to increasing digitalisation, which has been further stimulated by growing need for remote learning tools during the coronavirus pandemic. We are planning to use our experience in highly digitalised countries and our digital platforms developed over the past 10 years to accelerate the growth of Santillana Spain over time. The acquisition of Santillana Spain will not have an impact on our long-term strategy, financial targets or dividend policy. We want to continue our current growth strategy: aiming to grow our European learning business further through M&A in current operating countries or new markets, and to strengthen our media business in Finland in its chosen core businesses: news & feature, entertainment and B2B marketing solutions.” Key indicators for continuing operations EUR millionQ3 2020Q3 2019ChangeQ1-Q3 2020Q1-Q3 2019Change FY 2019Net sales401.1284.941%835.1707.718%913.3Operational EBIT excl. PPA 1)111.377.544%156.4133.118%135.2 Margin 1)27.7%27.2% 18.7%18.8% 14.8%EBIT266.569.1286%291.2112.3159%102.1Result for the period243.948.5402%260.273.2255%63.1 Operational EPS, EUR 2)0.500.3257%0.640.5124%0.49EPS, EUR1.490.29417%1.590.44261%0.38 Average number of employees (FTE) 4,2253,48521%3,567Number of employees at the end of the period (FTE) 4,2173,74013%3,953 Key indicators incl. continuing and discontinued operations 3) EUR millionQ3 2020Q3 2019ChangeQ1-Q3 2020Q1-Q3 2019Change FY 2019Result for the period244.359.2313%274.0116.6135%13.3 Free cash flow129.697.533%64.556.314%131.3 Equity ratio 48.5%33.8% 30.5%Net debt 234.2797.8-71%794.7Net debt / Adj. EBITDA 1.02.8-64%2.7 Operational EPS, EUR 2)0.500.3930%0.730.731%0.80EPS, EUR1.500.35323%1.670.71137%0.07Free cash flow per share, EUR0.790.6033%0.400.3514%0.81 1) Excluding IACs and purchase price allocation amortisations (PPAs)2) Excluding IACs3) In 2020 and 2019, discontinued operations include Sanoma Media Netherlands and certain minor subsidiaries acquired in 2019 and planned to be divested in the future. In Q1-Q3 2020, result of discontinued operations includes a capital loss of EUR 2 million (2019: 105) related to the divestment costs of Media Netherlands. Analyst and investor conference An analyst and investor webcast and teleconference will be held in English by the President and CEO Susan Duinhoven and CFO and COO Markus Holm at 11:00. The live webcast can be followed via https://sanoma.videosync.fi/2020-q3-results. To ask questions by phone during the live webcast, please join in 5–10 minutes prior to the starting time by dialing one of the following numbers: Finland: +358 9 8171 0310 Sweden: +46 8 5664 2651 United Kingdom: +44 33 3300 0804 United States: +1 631 913 1422 Confirmation code for the call is 58838770#. An on-demand replay of the webcast will be available shortly after the conference at www.sanoma.com/investors. Interview opportunities for media by Teams or by phone are available after the conference. Media representatives are asked to book interviews via Communications Director Marcus Wiklund, firstname.lastname@example.org. Additional information Kaisa Uurasmaa, Head of Investor Relations and CSR, tel. +358 40 560 5601 About Sanoma Sanoma is an innovative and agile learning and media company impacting the lives of millions every day. Our learning products and services enable teachers to develop the talents of every child to reach their full potential. We offer printed and digital course materials as well as digital learning and teaching platforms for primary, secondary and vocational education, and want to grow our business across Europe. Our Finnish media provide independent journalism and engaging entertainment also for generations to come. Our unique cross-media position offers the widest reach and tailored marketing solutions for our business partners. Today, we operate in eleven European countries and employ close to 4,500 professionals. In 2019, our net sales totalled 900m€ and our operational EBIT margin excl. PPA was 14.8%. Sanoma shares are listed on Nasdaq Helsinki. More information is available at www.sanoma.com.
Sanoma Q3 2020 Interim Report