Sanoma Corporation, Interim Report 1 January-30 September 2024: Solid quarter delivering improved operational EBIT for the first nine months

Sanoma Corporation, Stock Exchange Release, 31 October 2024 at 08:30 EET

Sanoma Corporation, Interim Report 1 January-30 September 2024: Solid quarter delivering improved operational EBIT for the first nine months

This release is a summary of Sanoma's Interim Report 1 January-30 September 2024. The complete report is attached to this release and is also available at www.sanoma.com/en/investors.

Q3 2024

• The Group's net sales amounted to EUR 540.0 million (2023: 580.3). In Learning, the net sales were mainly impacted by the planned discontinuation of low-value distribution contracts in the Netherlands and Belgium, while lower sales in Spain were largely offset by growth in other learning content markets. In Media Finland, net sales declined slightly mainly due to recent small divestments. The Group's organic net sales development was -6% (2023: 6%).
• The Group's operational EBIT excl. PPA amounted to EUR 170.0 million (2023: 179.4). In Learning, earnings were impacted by the lower sales in Spain. Earnings improved in Media Finland.
• EBIT decreased to EUR 116.9 million (2023: 146.7), mainly as a result of EUR 28 million impairments largely related to the planned discontinuation of low-value distribution contracts in the Netherlands and Belgium. As a result, the Group's items affecting comparability (IACs) increased to EUR -43.9 million (2023: -22.3). Purchase price allocation adjustments and amortisations (PPAs) amounted to EUR 9.3 million (2023: 10.4).
• Operational EPS was stable at EUR 0.70 (2023: 0.70).
• EPS was EUR 0.50 (2023: 0.59).
• The Group's Outlook for 2024 is narrowed: In 2024, Sanoma expects that the Group's reported net sales will be EUR 1.32?1.34 billion (2023: 1.4). The Group's operational EBIT excl. PPA is expected to be EUR 170-180 million (2023: 175).
• On 5 September 2024, Sanoma issued a EUR 150 million 3-year social bond. In accordance with Sanoma's Social Bond Framework, published on 2 September 2024, the funds will be used to finance or refinance expenditures aimed at improving access to essential education services.
• On 28 August 2024, Sanoma announced that the Supreme Administrative Court has rejected Sanoma's application for permission to appeal the administrative court's decision regarding the value added tax (VAT) payment decision given by the Finnish Tax Adjustment Board related to the tax audits at Sanoma Media Finland Oy for the years 2015-2018. The decision had no impact on Sanoma's financials or free cash flow, as the VAT claim has been paid in 2021 and booked in Sanoma's result in Q2 2023.

Q1-Q3 2024

• The Group's net sales amounted to EUR 1,103.4 million (2023: 1,139.4). In Learning, net sales were mainly impacted by the planned discontinuation of low-value distribution contracts in the Netherlands and Belgium. In Media Finland, net sales declined slightly, mainly due to recent small divestments. The Group's organic net sales development was -2% (2023: 3%), being -3% in Learning and 0% in Media Finland.
• The Group's operational EBIT excl. PPA improved to EUR 207.3 million (2023: 202.4). Earnings were relatively stable in Learning and improved in Media Finland driven by growing digital subscription and advertising sales and lower paper costs.
• EBIT improved to EUR 128.7 million (2023: 103.2). IACs decreased to EUR -50.8 million (2023: -68.0) despite higher impairments and restructuring costs in the third quarter, as the comparison period included a EUR 36 million booking related to VAT claims in Media Finland. PPAs amounted to EUR 27.7 million (2023: 31.3).
• Operational EPS improved to EUR 0.68 (2023: 0.61).
• EPS was EUR 0.45 (2023: 0.26).
• Free cash flow improved significantly and amounted to EUR 76.7 million (2023: 34.6). The improvement was mainly driven by lower investments in prepublication assets, partially resulting from the process and efficiency improvement Program Solar, lower investments in TV programme rights and continued active working capital management.
• Net debt/Adj. EBITDA was 2.4 (2023: 2.8), being within the long-term target level of 'below 3.0'.
• On 17 April 2024, the Annual General Meeting decided that a dividend of EUR 0.37 per share (2023: 0.37) shall be paid for 2024 in three instalments. The first instalment of EUR 0.13 was paid on 26 April, the second instalment of EUR 0.13 on 24 September and the third instalment of EUR 0.11 will be paid on 5 November.
• In January 2024, Sanoma announced two small divestments: Stark in Learning and Netwheels in Media Finland.
  
  

Outlook for 2024 (narrowed)

In 2024, Sanoma expects that the Group's reported net sales will be EUR 1.32?1.34 billion (2023: 1.4). The Group's operational EBIT excl. PPA is expected to be EUR 170-180 million (2023: 175).

Regarding the operating environment, Sanoma expects that:

• The advertising market in Finland will decline slightly.
• The development in the economies of the Group's operating countries is expected to be relatively stable.

Previous outlook (given 7 February 2024)

In 2024, Sanoma expects that the Group's reported net sales will be EUR 1.29?1.34 billion (2023: 1.4). The Group's operational EBIT excl. PPA is expected to be EUR 160-180 million (2023: 175).

Regarding the operating environment, Sanoma expects that:

• The advertising market in Finland will decline slightly.
• The development in the economies of the Group's operating countries is expected to be relatively stable.

President and CEO Rob Kolkman:

"We had a solid third quarter in both Learning and Media Finland, which - combined with our strong performance during the first half of the year - led to improved operational EBIT excl. PPA and strong free cash flow for January-September.

The third quarter is always the important high season in Learning, and this year it made the expected decrease in net sales driven by the planned discontinuation of low-value distribution contracts in the Netherlands and Belgium visible in our numbers. In the learning content business, the decline of net sales in Spain resulting from the lower curriculum cycle was in line with our expectations, and it was more than offset by growth in other learning content markets, in particular Poland and the Netherlands. In Italy, we saw a successful transition of users to the new Sanoma platform My digital book, with nearly half a million students and teachers already logging in. Our organic growth was largely driven by the continued above average price increases implemented across the learning content business. As the cost inflation in our operating markets has largely normalised, we also expect the price increases to mostly normalise going forward. We are satisfied with the earnings development in Learning and continue to expect a stable margin for the full year 2024 compared to 2023.

The implementation of Program Solar has continued throughout the year according to our plans. We are continuing the post-curriculum renewal optimisation in Spain and the newly established Tech hubs have started to contribute significantly as well. Supported by our increased scale and Program Solar, we are on track to reach Learning's long-term profitability (operational EBIT margin excl. PPA) target of 23% by 2026.

In Media Finland, the good development in both digital subscription and advertising sales continued. Growth in digital subscriptions was driven by the SVOD service Ruutu+, accelerated by new partnerships started in 2023. In advertising, we are happy to see the continued growth in digital offsetting the impact of the expected, longer term declining trend in print. Supported by lower paper and printing costs, the operational EBIT excl. PPA continued to improve slightly. We continue to expect the advertising market in Finland to decline slightly for the full year 2024.

Our free cash flow improved significantly. The stronger free cash flow was mainly attributable to lower investments in prepublication costs, partially resulting from Program Solar, and TV programme rights, active working capital management across the business and higher operational earnings in particular in Media Finland. The deleveraging of our balance sheet is progressing well. Our net debt and leverage improved year-on-year and Net debt / Adjusted EBITDA was well below the long-term target of < 3.0.

In September, we established our first Social Bond Framework and issued a EUR 150 million 3-year Social Bond, which became the first social bond issued by a corporate in Finland. The Social Bond Framework emphasises the unique positive impact our learning business has on society, offering investors the ability to support equal access to education by investing in Sanoma. Together with the extension of the maturity of the majority of our EUR 300 million Revolving Credit Facility by one year to November 2027, the Social Bond clearly extended the average maturity of our external debt portfolio and diversified our funding sources. During the third quarter, we also improved our scoring in two key ESG ratings, ISS Corporate Rating and S&P Global Corporate Sustainability Assessment, and both ratings are now among the leading levels in our industry.

Following our solid performance in January-September, we have narrowed the ranges in our Outlook for 2024 to the upper end of the original ranges. Beyond 2024, discontinuation of the low value distribution contracts in the Netherlands and Belgium will continue to have an adverse impact on Learning's net sales development. In Media Finland, we expect the solid growth in digital subscription sales to moderate somewhat, driven by continuing uncertainty among Finnish consumers and more demanding comparison figures, and the uncertainty in advertising demand to continue. Particularly attributable to Program Solar, we expect our free cash flow for 2024 to improve compared to the previous year, and the same trend to continue going forward.

During the first nine months of 2024, we have achieved solid progress in Learning and a profitability improvement in Media Finland, deleveraged our balance sheet, completed the refinancing of our long-term funding and generated a strong free cash flow. We continue to be fully focused on delivering on our strategic focus areas for 2024-2026, which are 1) increasing the profitability of Learning and Media Finland, 2) growing organically and through in-market acquisitions, and 3) deleveraging the balance sheet. I would like to extend my warmest thanks to all our teams for delivering the good results and supporting our customers in the best possible way."

Key indicators

EUR million	Q3 2024	Q3 2023	Change	Q1-Q3 2024	Q1-Q3 2023	Change	FY 2023
Net sales	540.0	580.3	-7%	1,103.4	1,139.4	-3%	1,392.9
Operational EBITDA 1)	211.8	220.9	-4%	337.4	330.5	2%	358.3
Margin 1)	39.2%	38.1%		30.6%	29.0%		25.7%
Operational EBIT excl. PPA 2)	170.0	179.4	-5%	207.3	202.4	2%	175.4
Margin 2)	31.5%	30.9%		18.8%	17.8%		12.6%
EBIT	116.9	146.7	-20%	128.7	103.2	25%	51.7
Result for the period	84.0	99.7	-16%	80.8	48.7	66%	4.1
Free cash flow	134.8	118.5	14%	76.7	34.6	121%	105.1
Equity ratio 3)				40.8%	39.5%		42.5%
Net debt				615.5	691.4	-11%	639.7
Net debt / Adj. EBITDA				2.4	2.8	-14%	2.8
Operational EPS, EUR 1)	0.70	0.70	1%	0.68	0.61	11%	0.39
EPS, EUR	0.50	0.59	-16%	0.45	0.26	72%	-0.03
Free cash flow per share, EUR	0.82	0.73	14%	0.47	0.21	121%	0.64
Average number of employees (FTE)				4,858	5,141	-5%	5,119
Number of employees at the end of the period (FTE)				4,751	5,095	-7%	5,017

1) Excluding IACs
2) Excluding IACs and purchase price allocation adjustments and amortisations (PPAs)
3) Advances received included in the formula of equity ratio were EUR 186.1 million in Q1-Q3 2024 (2023: 174.1)

Analyst and investor conference

An analyst and investor conference will be held in English by the President and CEO Rob Kolkman and CFO Alex Green at 11:00 EET at Sanomatalo, Flik Studio Eliel, 1st floor, Töölönlahdenkatu 2, Helsinki.

The conference can be followed as a live webcast at https://sanoma.videosync.fi/q3-2024.

Management presentation is followed by a Q&A session. Questions can be placed through the webcast chat function or by phone. To ask questions by phone, the participant is required to register at https://palvelu.flik.fi/teleconference/?id=50051376. After the registration you will receive the phone number and conference ID to access the conference. If you wish to ask a question, please press *5 on your telephone keypad to enter the queue.

An on-demand replay of the webcast will be available shortly after the conference at www.sanoma.com/en/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, [e-mail].

Additional information
Kaisa Uurasmaa, Head of Investor Relations and Sustainability, tel. [phone]

Sanoma
Sanoma is an innovative and agile learning and media company impacting the lives of millions every day. Our Sustainability Strategy is designed to maximise our positive 'brainprint' on society and to minimise our environmental footprint. We are committed to the UN Sustainable Development Goals and signatory to the UN Global Compact.

Our learning products and services enable teachers to develop the talents of every child to reach their full potential. We offer printed and digital learning content as well as digital learning and teaching platforms for primary, secondary and vocational education, and want to grow our business.

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 twelve European countries and employ more than 5,000 professionals. In 2023, our net sales amounted to approx. 1.4bn€ and our operational EBIT margin excl. PPA was 12.6%. Sanoma shares are listed on Nasdaq Helsinki. More information is available at sanoma.com.