Sanoma Corporation, Stock Exchange Release, 29 October 2014 at 8:30 CET+1
Third quarter
- Net sales amounted to EUR 477.8 million (2013: 537.3).
- Adjusted for changes in the Group structure, Sanoma’s net sales decreased by 3.3%.
- Operating profit excluding non-recurring items was EUR 62.1 million (2013: 76.9).
- Non-recurring items included in the operating profit amounted to EUR 15.5 million (2013: -312.9), mainly related to sales gains, restructuring expenses, impairments as well as an IFRS-pensions curtailment effect.
- Earnings per share were EUR 0.34 (2013: -1.59).
- Earnings per share excluding non-recurring items were EUR 0.24 (2013: 0.27).
- Cash flow from operations was EUR 89.9 million (2013: 111.3).
First nine months
- Net sales amounted to EUR 1,449.1 million (2013: 1,566.1).
- Adjusted for changes in the Group structure, Sanoma’s net sales decreased by 3.4%.
- Operating profit excluding non-recurring items was EUR 124.4 million (2013: 142.4).
- Non-recurring items included in the operating profit amounted to EUR 118.5 million (2013: -377.3), mainly related to sales gains, restructuring expenses as well as a capital loss and a write-down related to the sale of Belgian TV operations.
- Earnings per share were EUR 0.97 (2013: -1.69).
- Earnings per share excluding non-recurring items were EUR 0.38 (2013: 0.43).
- Cash flow from operations was EUR 23.6 million (2013: 45.3).
Change in reporting
Sanoma has adopted the new IFRS 11 Joint Arrangements as of 1 January 2014. The standard permits only the equity method in the consolidation of joint ventures, and the proportional consolidation method is no longer allowed. In the income statement, the share of results in joint ventures is presented as part of the operating profit, and on the consolidated balance sheet as equity-accounted investees. The change primarily relates to Media Russia & CEE and Media Belgium.
Adoption of IFRS 11 reduced 2013 consolidated net sales by EUR 135.2 million. The impact on profitability is minor; the 2013 operating profit excluding non-recurring items decreased by EUR 0.2 million. The balance sheet total on 31 December 2013 decreased by EUR 164.9 million, and the total equity of the Sanoma Group reduced by EUR 59.1 million. The transition from the proportional consolidation method to the equity method also impacts the cash flow statement.
As of 1 January 2014, Sanoma consists of two segments: Consumer Media and Learning. Sanoma reports net sales and profitability for three strategic business units: Media Netherlands, Media Finland and Learning. Media Belgium and Media Russia & CEE are reported in the category ‘Other’. Sanoma's financial reporting for 2013 has been adjusted to account for the changes.
Correction to Sanoma’s 2013 earnings per share excluding non-recurring items
Sanoma corrects earnings per share excluding non-recurring items reported for 2013. The correction relates to certain non-recurring items included in the line item ‘non-controlling interests’ in 2013. The correction has no impact on the reported earnings per share.
Earnings per share excluding non-recurring items in 2013:
- 1–3/2013: -0.10 (previously reported -0.03)
- 1–6/2013: 0.16 (previously reported 0.23)
- 1–9/2013: 0.43 (previously reported 0.53)
- 1–12/2013: 0.44 (previously reported 0.54)
Key indicators* (based on reported figures, not adjusted for structural changes)
| Restated | Restated | Restated | |||||
| 7–9/ | 7–9/ | Change | 1–9/ | 1–9/ | Change | 1–12/ | |
| EUR million | 2014 | 2013 | % | 2014 | 2013 | % | 2013 |
| Net sales | 477.8 | 537.3 | -11.1 | 1,449.1 | 1,566.1 | -7.5 | 2,083.5 |
| Operating profit excluding non-recurring items | 62.1 | 76.9 | -19.2 | 124.4 | 142.4 | -12.6 | 154.6 |
| % of net sales | 13.0 | 14.3 | 8.6 | 9.1 | 7.4 | ||
| Operating profit | 77.6 | -236.0 | 242.9 | -234.9 | -257.7 | ||
| Result for the period | 57.0 | -261.3 | 165.7 | -289.2 | -320.3 | ||
| Capital expenditure ** | 9.1 | 14.0 | -34.8 | 32.0 | 46.8 | -31.5 | 65.6 |
| % of net sales | 1.9 | 2.6 | 2.2 | 3.0 | 3.1 | ||
| Return on equity (ROE), % *** | 11.0 | n/a | -24.2 | ||||
| Return on investment (ROI), % *** | 9.7 | n/a | -9.2 | ||||
| Equity ratio, % | 41.9 | 33.9 | 37.2 | ||||
| Net gearing, % | 65.4 | 115.2 | 95.7 | ||||
| Number of employees at the end of the period (FTE) | 7,731 | 9,284 | -16.7 | 9,035 | |||
| Average number of employees (FTE) | 8,452 | 9,605 | -12.0 | 9,446 | |||
| Earnings/share, EUR | 0.34 | -1.59 | 0.97 | -1.69 | -1.89 | ||
| Cash flow from operations/share, EUR | 0.55 | 0.68 | -19.2 | 0.14 | 0.28 | -48.0 | 0.73 |
| Equity/share, EUR | 5.92 | 5.04 | 17.6 | 5.42 | |||
* Comparable figures have been restated due to the new IFRS11 Joint Arrangements.
** Including finance leases.
*** Rolling 12-month period.
Harri-Pekka Kaukonen, President and CEO
“The third quarter was again a step in the right direction in implementing our transformation strategy. Our new media sales grew by 7%. Already 40% of our consumer media sales in the Netherlands and Finland have been generated from new media products and services during the last 12 months.
Our Finnish consumer media operations had good performance in the underlying business. The favourable development is mainly attributable to robust growth in digital sales and cost savings. TV and radio businesses have developed particularly well. However, the profitability level of Finnish consumer media business is still too low. We are continuing to improve its profitability by increasing operative efficiency.
In the Netherlands, our strategy is moving ahead. The divestments of non-focus magazine titles enable us to develop our domain strategy further. Overall profitability in the Netherlands in the third quarter was below last year’s level due to investments in the digital business, a lower result in the print business and higher costs in TV programmes. Currently it seems that the fourth quarter will be challenging for the Dutch TV advertising market.
The learning business showed solid organic performance again. We have continuously and successfully introduced new digital tools and services to cater to the needs of teachers and pupils. Market conditions in all operating countries except Poland remained stable. In Poland, the new legislation is expected to have a material negative impact on the educational textbook market in the coming years. We estimate that the negative impact will be partly compensated for by new products and services as well as cost savings across the segment.
We are particularly happy with the development of the Group-wide cost savings programme, which is proceeding well. The annual run-rate was above
EUR 60 million at the end of September. In addition, our balance sheet has strengthened significantly compared to the previous year. We are on the right track in our strategy and will speed up the pace in the coming quarters.”
Group outlook (unchanged)
In 2014, Sanoma expects that the Group’s consolidated net sales adjusted for structural changes will decline somewhat compared to 2013. The operating profit margin excluding non-recurring items is estimated to be below the previous year’s level (2013: 7.4% of net sales).
Sanoma’s outlook is based on three major factors:
(1) continued negative pressure on sales and operating profit due to declining print markets and weak economic development in Sanoma’s core operating countries,
(2) strong positive impact from the EUR 100 million cost savings programme, and
(3) increased investment levels to fund digital transformation and growth in Consumer Media and the expansion into tutoring and emerging markets in Learning.
Mid-term outlook (unchanged)
Based on the execution of the strategic redesign, Sanoma expects that from 2016 onwards, the Group’s consolidated net sales will return to organic growth. The operating profit margin excluding non-recurring items is targeted to be around 10% of net sales. Sanoma is targeting for a net debt to EBITDA ratio below 3.5.
January-September 2014 Interim Report webcast
The event for analysts and investors will be held in English by President and CEO Harri-Pekka Kaukonen and CFO Kim Ignatius at 11:00 Finnish time (9:00 UK time) at Sanomatalo, Töölönlahdenkatu 2, Helsinki. The live webcast can be viewed on Sanoma’s website at www.sanoma.com/en/investors and on demand after the event.
Please join by dialing
Finland: +358 (0)9 2313 9201 / US: +1 334 323 6201 / UK: +44 (0)207 1620 077 / Netherlands: +31 (0)20 7965 008
Conference id: 948478
Financial reporting 2015
Sanoma will publish its Full-Year Result for 2014 on 5 February 2015 approx. at 8:30 am Finnish time. Interim Reports in 2015 will be published on quarterly basis:
- Interim Report January-March on 29 April 2015, approx. at 8:30
- Interim Report January-June on 23 July 2015, approx. at 8:30
- Interim Report January-September on 29 October 2015, approx. at 8:30.
Additional information
Sanoma's Investor Relations, Olli Turunen, tel. +358 40 552 8907
Sanoma.com
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Sanoma is a front running consumer media and learning company in Europe. In Finland and the Netherlands we are the market leading media company with a broad presence across multiple platforms. Our main markets in learning are Belgium, Finland, the Netherlands, Poland and Sweden. In 2013, Sanoma’s net sales totalled EUR 2.1 billion. Sanoma is listed on the NASDAQ OMX Helsinki stock exchange.
