Sanoma Corporation, Stock Exchange Release, 27 April 2018 at 08:30 CET+1
Sanoma’s Interim Report 1 January–31 March 2018: Seasonally small quarter with structural ordering shifts
This release is a summary of Sanoma’s Interim Report 1 January–31 March 2018. The complete report is attached to this release and is also available at sanoma.com
First quarter
- Net sales declined to EUR 262 million (2017: 330; adjusted 282) mainly due to structural shifting to later ordering in Learning and soft advertising markets.
- Operational EBIT decreased to EUR 8.2 million (2017: 15; adjusted 20) mainly due to Learning’s net sales decline and one-off corrections included in Media Finland’s earnings in Q1 2017. Corresponding operational EBIT margin was 3.1% (2017: 4.6%; adjusted 7.2%).
- EBIT was EUR 8.4 million (2017: -412; adjusted 18).
- Net financial items decreased significantly to EUR -3 million (2017: -7).
- Operational EPS were EUR 0.02 (2017: 0.04; adjusted 0.06).
- EPS were EUR 0.02 (2017: -1.74; adjusted 0.05).
- Cash flow from operations was EUR -37 million (2017: -42; adjusted -40) and capital expenditure was EUR 7 million (2017: 8; adjusted 7).
- On 16 January Sanoma announced the intention to divest its Belgian women’s magazine portfolio.
- On 7 March Sanoma announced the acquisition of the festival and event business of N.C.D. Production in Finland. Net sales of the acquired business in 2017 was approx. EUR 20 million. The transaction was closed on 18 April.
Outlook (unchanged)
In 2018, Sanoma expects that the Group’s consolidated net sales adjusted for structural changes will be slightly below 2017, and operational EBIT margin will be around 14%.
The outlook is based on an assumption of the consumer confidence and advertising markets in the Netherlands and Finland being in line with that of 2017.
Key indicators*
| EUR million | Q1 2018 | Q1 2017 adjusted | Change | Q1 2017 | FY 2017 |
| Net sales | 261.6 | 282.2 | -7% | 329.8 | 1,434.7 |
| Operational EBITDA | 44.4 | 57.9 | -23% | 85.8 | 392.3 |
| margin | 17.0% | 20.5% | 26.0% | 27.3% | |
| Operational EBIT | 8.2 | 20.4 | -60% | 15.2 | 176.7 |
| margin | 3.1% | 7.2% | 4.6% | 12.3% | |
| EBIT | 8.4 | 17.7 | -53% | -412.1 | -240.5 |
| Result for the period ** | -5.1 | 8.4 | -160% | -420.0 | -299.3 |
| Cash flow from operations ** | -37.2 | -40.4 | 8% | -42.4 | 141.2 |
| Capital expenditure ** ’ *** | 7.2 | 6.7 | 8% | 7.5 | 36.5 |
| Cash flow from operations less capital expenditure ** | -44.4 | -47.0 | 6% | -49.9 | 104.7 |
| Equity ratio ** | 34.1% | 27.3% | 38.2% | ||
| Net debt ** | 438.9 | 864.2 | 391.8 | ||
| Net debt / Adj. EBITDA ** | 2.0 | 3.5 | 1.7 | ||
| Average number of employees (FTE) | 4,393 | 4,627 | -5% | 5,002 | 4,746 |
| Operational EPS, EUR, continuing operations | 0.02 | 0.06 | -67% | 0.04 | 0.70 |
| Operational EPS, EUR ** | 0.03 | 0.06 | -55% | 0.04 | 0.72 |
| EPS, EUR, continuing operations | 0.02 | 0.05 | -58% | -1.74 | -1.02 |
| EPS, EUR ** | -0.03 | 0.05 | -168% | -1.74 | -1.00 |
| Cash flow from operations per share, EUR ** | -0.23 | -0.25 | -8% | -0.26 | 0.87 |
| Cash flow from operations less capital expenditure per share, EUR ** | -0.27 | -0.29 | -6% | -0.31 | 0.64 |
* Q1 2017 and FY 2017 figures have been restated due to a change in IFRS 15 and were originally published on 27 March 2018. More information on the restatement is available in Accounting principles on p. 20.
** Including continuing and discontinued operations.
*** Earlier capital expenditure was presented on an accrual basis.
President and CEO Susan Duinhoven
”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.”
Financial review Q1 2018
Net sales declined to EUR 262 million (2017: 330; adjusted 282). In Learning, the structural shifting of business to later ordering had an adverse net sales impact. Due to the soft advertising markets, net sales of Media BeNe and Media Finland also declined. Net sales development adjusted for all structural changes was -6% (2017: -1%).
Net sales by SBU
| EUR million | Q1 2018 | Q1 2017 adjusted | Change | Q1 2017 |
| Media Finland | 137.0 | 144.1 | -5% | 144.1 |
| Media BeNe | 95.8 | 101.9 | -6% | 149.5 |
| Learning | 28.9 | 36.2 | -20% | 36.2 |
| Other operations | -0.1 | -0.1 | 0% | -0.1 |
| Group total | 261.6 | 282.2 | -7% | 329.8 |
Operational EBITDA declined to EUR 44 million (2017: 86; adjusted 58). Operational EBIT decreased to EUR 8 million (2017: 15; adjusted 20), corresponding to a margin of 3.1% (2017: 4.6%; adjusted 7.2%). The decline was mainly due to lower net sales in Learning and one-off corrections of EUR 4 million included in Q1 2017 earnings of Media Finland. Earnings improved in Media BeNe and Other operations.
Operational EBIT by SBU
| EUR million | Q1 2018 | Q1 2017 adjusted | Change | Q1 2017 |
| Media Finland | 13.1 | 19.0 | -31% | 19.0 |
| Media BeNe | 14.9 | 14.2 | 5% | 8.9 |
| Learning | -18.0 | -10.9 | -66% | -10.9 |
| Other operations | -1.7 | -1.9 | 12% | -1.9 |
| Group total | 8.2 | 20.4 | -60% | 15.2 |
EBIT was EUR 8 million (2017: -412; adjusted 18). EBIT included EUR 0.2 million (2017: -427; adjusted -3) net of items affecting comparability, consisting of restructuring expenses in Media Finland and in Learning as well as a release of earlier provision for unused office space in Media BeNe. In Q1 2017, IACs mainly consisted of the capital loss related to the divestment of SBS.
Items affecting comparability and reconciliation of operational EBIT
| EUR million | Q1 2018 | Q1 2017 |
| EBIT | 8.4 | -412.1 |
| Items affecting comparability | ||
| Restructuring expenses | 0.2 | -3.6 |
| Capital gains / losses | -423.7 | |
| Items affecting comparability total | 0.2 | -427.3 |
| Operational EBIT | 8.2 | 15.2 |
A detailed reconciliation on SBU level is presented in p. 16.
Net financial items totalled EUR -3 million (2017: -7). The improvement was due to the significant decrease of interest-bearing liabilities and lower average interest rate.
Result before taxes amounted to EUR 5 million (2017: -419). Income taxes were EUR 2 million (2017: 2). Result for the period was EUR 4 million (2017: -420) and including Discontinued operations EUR -5 million (2017: -420).
Operational earnings per share were EUR 0.02 (2017: 0.04; adjusted 0.06). Earnings per share were EUR 0.02 (2017: ‑1.74; adjusted 0.05) and including Discontinued operations EUR -0.03 (2017: -1.74; adjusted 0.05).
Financial position and cash flow
At the end of March 2018, the consolidated balance sheet totalled EUR 1,578 million (2017: 2,168). The decrease is mainly attributable to the divestment of the SBS TV operations.
Interest-bearing net debt amounted to EUR 439 million (2017: 864). At the end of March 2018, net debt to adjusted EBITDA ratio was 2.0 (2017: 3.5) being clearly below the Group’s long-term target level (< 2.5).
Equity totalled EUR 487 million (2017: 550). The decrease is due to the negative total comprehensive income of continuing and discontinued operations as well as declaring the dividend to be paid. Equity ratio was 34.1% (2017: 27.3%).
In January–March 2018, the Group’s cash flow from operations was EUR -37 million (2017: -42). The positive impact of lower net financial items was partially offset by lower profitability and higher taxes paid, which were mostly related to the real estate sale in Helsinki, Finland in Q4 2017. Capital expenditure was EUR 7 million (2017: 8). Cash flow from operations less capital expenditure was EUR -44 million (2017: -50) and EUR -0.27 per share (2017: -0.31).
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 Finnish time (9:00 UK time) at Sanomatalo, Töölönlahdenkatu 2, Helsinki. To join the event, please register via email ir@sanoma.com.
Live audio webcast of the conference can be followed via www.sanoma.com/investors. To ask questions by phone during the live audio webcast, please register by email to ir@sanoma.com. Dial-in details will be sent for registered participants. An on-demand replay of the audio webcast will be available shortly after the end of the conference at 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
Investor Relations, Kaisa Uurasmaa, tel. +358 40 560 5601
Sanoma
Sanoma is a front running media and learning company impacting the lives of millions every day. We provide consumers with engaging content, offer unique marketing solutions to business partners and enable teachers to excel at developing the talents of every child.
With operations in Finland, the Netherlands, Poland, Belgium and Sweden, our net sales totalled EUR 1.4 billion and we employed more than 4,400 professionals in 2017. Sanoma shares are listed on Nasdaq Helsinki.
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