Sanoma Corp Unsp/Adr

Good afternoon, everyone, and welcome to Sanoma's Q1 2025 results presentation. My name is Kaisa Uurasmaa. I'm heading investor relations and sustainability at Sanoma. Q1 is always a seasonally small quarter for Sanoma, but our performance improved, driven by learning. And today we have, as usual, President and CEO Rob Kolkman and CFO Alex Green telling you more about the results. After the presentation, we will have a Q&A session. We will first take questions from the audience here at Sanoma House. Please wait for the microphone. We will then hand over to the telephone line, or then you can also use the chat function in the webcast platform. After this event, a recording of the presentation, including the Q&A, will be available on our website. With this, I would like to invite Rob on stage, please.

Thank you, Kajsa. And good afternoon, everybody. It's my pleasure to present the quarter one results to you today. As Kajsa already mentioned, we saw improved performance across the business, but it is in a seasonally small quarter. So it's a good start to the year, but of course still a lot more to come. And you see that reflected in the numbers here. So the sales was overall stable, and the driving factors there were around growth in learning, particularly in the Netherlands and Poland, and that was offsetting the lower advertising sales in Media Finland. And I'll talk later specifically on media and also on advertising. If you look at the group's operational EBIT, that improved due to learning, and that is also a result again of the net sales growth and the improved cost efficiency. It's stable in media Finland overall. And here also good to keep in mind, of course, that this is a small quarter for us and therefore also seasonally loss making. Our free cash flow continues to improve on a year-on-year basis, and that's driven again by the strong performance and also the networking capital improvement. And Alex will talk about that more later on. Then Programme Solar already highlighted at quarter four the full year results that our initiatives there that we have taken and the decisions have been mostly completed. Of course, the execution of that continues, but that means that also the first impacts are visible in the free cash flow and also in our cost base, and that will only increase more when we go into 2026, and it also will benefit then from the growth in our curriculum. We also saw continued progress in deleveraging the balance sheet, very much the trend that, of course, we've seen over the last year as well. And again, Alex will touch on a few specifics there. Clearly, this is a very small quarter, therefore also our outlook for 2025 is unchanged, and I will give a few context around that later on. Let me now zoom in on both businesses, starting with the learning side. So learning, as highlighted, the net sales increased to 89 million in this seasonally small quarter, driven by the Netherlands and also driven by the digital sales growth, platform sales in Poland, which is mainly to do with our student information system we have there and also some exam preparation that is being provided to the students and parents directly. We also saw an improved operational EBIT. Again, of course, because it's quarter one, it's less loss effectively driven by the growing net sales, but also the first impacts of solar are visible in the cost base. And that results in the margin development that you see here on the slide as well. So a good start on learning, a lot more to come, and also a reminder for everybody that, of course, the phasing from quarter to quarter, that's both quarter one to quarter two, but also to quarter three, can depend quite a bit on earlier or later ordering from our customers. So that's something to keep in mind here as well. Let me now go to the media part. There we saw overall stable operational earnings. And the trends that we've seen for quite a while now continued, which is growth in the subscription sales, particularly, of course, driven by digital, Route 2+, continuing there so that's good to see and also the advertising sales are still decreasing particularly around tv print and and radio online continue to grow there and it's also good as a reminder that of course in these numbers we now also have the ending of the third party tv advertising deal we had so that's no longer in 25 revenue and it was in 24. it's at a lower profitability level but it's still there If you look at the operational EBIT, then that was, of course, supported by the elements that I just mentioned, especially the growing subscription sales, still also lower paper cost that's mainly driven by lower volumes. The lower advertising sales had obviously an adverse impact on our EBIT. And then Pia and the team, of course, continue to do a really good job when we look at operational efficiencies and keeping the cost, therefore, under control and optimizing that even further. A couple of words around the advertising market. In the broader context, of course, there's a lot going on if you look at the geopolitical situation. The US tariffs, as I've also highlighted in the quarter one report, is not impacting us directly. However, none of that, of course, helps for the economic situation also here in Finland, nor the sentiment around it. Therefore, we also see that the limited visibility we have in the advertising market, that the softness will continue, particularly in quarter two, and especially in comparison with quarter two 2024. So for the full year, our picture remains the same, but we do see that the advertising shifts between the half years might be more that some of the growth that we're seeing or improvement is more in the second half compared to the first half. And that links nicely to the outlook, which is unchanged. So we continue to say that it's between the 1.28 and 1.33 billion in revenue, clearly with quarter three for learning being the big quarter that will determine that mostly as well. And already the link with advertising, as I mentioned. Our operational EBIT between the 170 and 190 compared to the 180 from last year, so unchanged. Last comment here, just linking it back. On the learning side, this, of course, 2025 is the last year of the lower cycle in, for example, Spain, and we see growth particularly happening from 26 onwards. So for this year, our expectation is that overall a relatively stable learning content market. On the media side, we expect the advertising market to be relatively stable, but as I highlighted, more of the decline in the first half of the year and the stabilization more towards the second half of the year. So with that said, I would like to hand over to Alex to talk us through some more of the financials.

Thank you, Rob, and great to be with you here today for this Q1 presentation. So with the financials, let's start, as always, with the Q1 operational EBIT. Now, as Q1, it's similar to what you saw on the previous slide, so operational EBIT going from minus 24 last year to minus 19, so a 5 million improvement, primarily driven by the learning business. with the growth in the content sales in the Netherlands, which is partly driven by earlier ordering, and the increased digital platform sales in Poland. And together with we're seeing some impacts of solar visible in the cost base now, as Rob mentioned, we have substantially completed the tasks to have that program complete. In Media Finland, we have operational EBIT at a similar level to last year, which is the lower advertising sales being offset by continued growth in Ruta and the subscription sales, lower paper costs driven by volume, and then the ongoing improvement in operational efficiency to keep the costs managed and to keep the results in a good place. In terms of other and elimination, this is relatively similar to last year. And for a full year basis, we expect the 25 total to be the same as the full year 24 costs. If we move on to the financial table on the income statement, and first let's start with the items affecting comparability, the second line. And so there were four million in the first quarter of this year versus a credit of one and a half last year. Now last year we had a capital gain from some divestments of about five million. So if you exclude that, the IECs were relatively similar year on year. And the four million this year, about one million of it was related to solar. In terms of the overall EBIT, that gets the overall EBIT stable year on year with the improvement in the operational EBIT that you just saw being offset by the absence of that one-off positive in 2024. Net financial items are lower due to the lower amount of external debt. Average interest rates are slightly lower, but not that much lower. It's mainly the lower debt that's impacting that, which we can see on the next slide. where we continue to deleverage on a year-on-year basis. You can see their net debt down from 694 last year to 617, taking the adjusted EBIT leverage from 2.9 down to 2.4. Obviously, it goes up from December due to the fact that the... Free cash flow in the first quarter of the year is negative, as you'll see in a second. Equity ratio there at roughly 43, which is at the higher end of our long-term target range. And then finally here, as I said, the strong free cash flow improvement there, you can see the 12-month rolling average increasing up to past the 150 mark. So at Q1 2025, we were at minus 30 versus minus 44 last year. We saw the higher operational earnings that you saw, lower interest rates, but also continued positive working cash development on the learning side, optimising for inventory levels, optimising for for the receivables and those kind of hours, so feel good about that. So that gets us to a good, strong cash position for this quarter. And we expect, having gone up from 105 to 145 for the total of 2024 free cash, we expect to stay at those high levels, in fact, be a little bit higher in 2025. So with that, that finishes the slides. I'll invite my colleagues back with me to do the Q&A.