Sanoma Oyj - Interim report (Q1 and Q3)

Sanoma’s Interim Report 1 January – 30 June 2014: Strategy proceeding well – new media sales grew by 7%

Sanoma Corporation, Stock Exchange Release, 25 July 2014 at 8:30 CET+1

Second quarter

  -- Net sales amounted to EUR 533.1 million (2013: 558.2).
  -- Adjusted for changes in the Group structure, Sanoma's net sales decreased
     by 1.0%.
  -- Operating profit excluding non-recurring items was EUR 66.3 million (2013:
     68.1).
  -- Non-recurring items included in the operating profit amounted to EUR -63.0
     million (2013: -27.3), mainly related to 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 -0.13 (2013: 0.14).
  -- Earnings per share excluding non-recurring items were EUR 0.23 (2013:
     0.27).
  -- Cash flow from operations was EUR -14.2 million (2013: -0.3).

First half

  -- Net sales amounted to EUR 971.3 million (2013: 1,028.8).
  -- Adjusted for changes in the Group structure, Sanoma's net sales decreased
     by 3.5%.
  -- Operating profit excluding non-recurring items was EUR 62.3 million (2013:
     65.5).
  -- Non-recurring items included in the operating profit amounted to EUR 103.0
     million (2013: -64.5), 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 0.64 (2013: -0.10).
  -- Earnings per share excluding non-recurring items were EUR 0.14 (2013:
     0.23).
  -- Cash flow from operations was EUR -66.3 million (2013: -65.9).

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 result in the joint ventures is presented as part of the
operating profit and in 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, 2013 operating profit excluding
non-recurring items decreased by EUR 0.2 million. 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. Transition from the proportional
consolidation method to the equity method also has impact on 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. 

Key indicators*



                                 Restat                 Restate          Restate
                                     ed                       d                d
--------------------------------------------------------------------------------
                           4-6/    4-6/  Change   1-6/     1-6/  Change    1-12/
EUR million                2014    2013       %   2014     2013       %     2013
--------------------------------------------------------------------------------
Net sales                 533.1   558.2    -4.5  971.3  1,028.8    -5.6  2,083.5
Operating profit           66.3    68.1    -2.6   62.3     65.5    -4.9    154.6
 excluding non-recurring                                                        
 items                                                                          
% of net sales             12.4    12.2            6.4      6.4              7.4
Operating profit            3.2    40.8   -92.0  165.3      1.0           -257.7
Result for the period     -17.6    23.4          108.7    -27.9           -320.3
Capital expenditure **     13.3    21.4   -37.9   22.9     32.8   -30.1     65.6
% of net sales              2.5     3.8            2.4      3.2              3.1
Return on equity (ROE), % ***                    -14.9     n.a.            -24.2
Return on investment (ROI), % ***                 -3.7     n.a.             -9.2
Equity ratio, %                                   40.3     38.1             37.2
Net gearing, %                                    76.6    102.5             95.7
Number of employees at the end of the period     8,721    9,524    -8.4    9,035
 (FTE)                                                                          
Average number of employees (FTE)                8,745    9,696    -9.8    9,446
Earnings/share, EUR       -0.13    0.14           0.64    -0.10            -1.89
Cash flow from            -0.09    0.00          -0.41    -0.40             0.73
 operations/share, EUR                                                          
Equity/share, EUR                                 5.79     6.61   -12.5     5.42
--------------------------------------------------------------------------------

* Comparable figures have been restated due to a new IFRS11 ‘Joint
Arrangements'. 
** Including finance leases.
*** Rolling 12-month period.

Harri-Pekka Kaukonen, President and CEO

“During the second quarter we took a number of good steps in implementing our
transformation strategy. Our year-on-year organic growth improved from -6% in
the first quarter to -1% in the second quarter and our new media sales
(non-print sales) grew by 7%. In the second quarter, more than 42% of our
consumer media sales in the Netherlands and Finland were generated from
non-print products and services. We continued to streamline our portfolio and
divested several non-core assets. 

The market conditions in the Finnish consumer media are still challenging, but
our profitability ended up close to last year's level due to cost savings.
Online- TV and pay-TV showed particularly robust growth. In addition, radio
operations performed very well, with market share gains supported by good
growth in the radio advertising market. 

In the Netherlands, our consumer media operations experienced a good quarter
supported by improvement in consumer confidence and advertising market. This
year our SBS TV operation has improved its viewing share month after month,
excluding international sports events. In May, the viewing share was at its
highest level in almost three years. Naturally the FIFA World Cup had a huge
negative but temporary impact on viewing shares for all commercial TV
operators. Overall profitability in the Netherlands in the second quarter was
below last year's level due to a lower result in the print business. 

The learning business has, by nature, an annual cycle and strong seasonality.
The seasonally strong second quarter saw solid performance supported by timing
shifts from the first and the third quarters. 

The cost savings programme is proceeding well. We have now passed the half way
mark, with the annual run-rate being just above EUR 50 million at the end of
June. Our focus is turning more and more towards growth, as multiple measures
regarding cost savings and divestments have already been carried out.” 

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-June 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 Nelonen studio, 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 / Netherlands: +31 (0)20 7965 008 / UK: +44 (0)20
7162 0077 / US: +1 334 323 6201 
Conference id: 944899

Financial reporting 2014

Sanoma will publish its Interim Report January-September on 29 October 2014, at
approx. 8:30. a.m. Finnish time 


Additional information
Sanoma's Investor Relations, Olli Turunen, tel. +358 40 552 8907 or
ir@sanoma.com 

Sanoma.com

Get the world. Sanoma helps people access and understand the world.

We believe in a world full of opportunities, feelings, reactions and
inspiration. A world that you can reach, influence, explore and share. We want
to make it yours. 

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.

Attachments:

Sanoma_2014_Q2_Report.pdf