Sanoma Corp Unsp/Adr

Good morning, everyone, and welcome to Sanoma's first half 2025 results presentation. My name is Kaisa Uurasmaa. I'm heading investor relations and sustainability at Sanoma. During the first half of the year, our results, operational EBIT increased, and that was mainly driven by learning. And today, we have President and CEO Rob Kolkman and CFO Alex Green presenting the results. After the presentation, we will host a Q&A session. We will first take questions from here at Sanoma House. We will then hand over to the telephone line, and then you can also use the chat function in the webcast platform. After the event, the recording, including the Q&A, will be available on our website. With this, I would like to invite Rob on stage, please.

Thank you very much, Kaisa. And good morning, everybody. It's my pleasure to present the half-year results to you. And as Kaisa was mentioning, they are good first half results with our operational EBIT improving, driven by learning. So as per usual, I would like to go through a couple of the key points, then zoom in on learning and media before handing over to Alex to dive a bit more into the financials. So if you look at the net sales, they were overall stable, with growth in learning, offsetting the lower advertising sales that we still see here in Media Finland. The operational EBIT, excluding PPA, improved, again driven by that net sales growth that we saw in learning, but also continuing the improvement of the cost base, and it was slightly declining in the second quarter in Media Finland, and therefore also for the half year. We continue to see our free cash flow improving. That's driven by the higher operational earnings and also lower financial items. And Alex will zoom in on that a little bit more in a minute. Like mentioned in the previous presentations as well, program Solar, the impact of that continues to show already in our free cash flow and increasingly also in our improved cost base. And as a result of all this, we continue to see good progress in deleveraging the balance sheet. So overall, good first half of the year. At the same time, for our type of business, of course, there is a big quarter three still coming towards us in learning. So that's one reason why we are keeping the outlook for 2025 unchanged at this point. And the other one is, of course, that the visibility on the advertising sales, as always, is limited if you think about the second half of the year. So we also keep the outlook unchanged for that reason. Let me now zoom in on learning first and the top line on learning. There you saw growth driven by growth in the Netherlands, Italy and Poland, and that was more than offsetting, as we also thought it would, the expected lower cycle that we see in Spain. And obviously this is still a relatively smaller revenue number, so you will see this trend we expect continuing for the full year as well. In Poland, like I mentioned in quarter one, there the growth is also very much supported by an increase in what we call B2C demand. In other words, selling directly some of our digital solutions to parents and students. What also is continuing, like it has been now for a couple of years, is our approach to the low-value distribution contracts. So we do see that discontinuation happening. That remains a very tough part of the market, and our actions are very much focused on limiting the losses for that particular bid. If you look at it for the full year 25, just to basically reiterate the key points there, the growth in our other learning businesses, we do expect that to more than offset that last year of the lowest cycle in Spain. And the total amount of discontinuation of those low-value distribution contracts is about 25 to 30 million, roughly the same as we also saw last year. If you then look at the operational EBIT, That improved overall, driven by the net sales growth that I mentioned, also slightly more digital sales mix, if you look at the element that I mentioned for Poland as well. And we do see the improved efficiency with some of the solar impacts already visible in the cost base as well. And that leads to that slightly increasing operational EBIT margin that you see on the right-hand side. For the full year, that more efficient cost base, largely driven by all the actions taken by Programme Solar, that leads to a slightly improving margin in 25 versus 24 and puts us in a really good position for the larger curriculum renewals and being ready for that with our improved cost base in 2026. So overall, good first half of the year in learning. We are well positioned to deliver on the important quarter three school start. Let me now zoom in on the media part. There, you do see that the advertising sales is lower year on year, largely driven by TV. But if you take a step back, the overall trends are continuing, which means our subscription sales increases slightly, driven by Route 2 Plus, and a continuing good performance there. And the advertising sales continues to decline, mainly on the TV side. And I know at this time of the year, there's always a great interest in our events business as well. Keeping in mind, of course, it's a relatively small part of our overall business. High quality events. We're very happy how the team organizes those and how we do it. We had more events as well, but overall with lower attendance. So we're very happy with how the team organizes them. We are less happy with the financial results that come out of them. for this year and also good to keep in mind year on year that can be quite a bit different as well last year was a relatively better year this year we see a bit less on the the attendance on the events overall it's higher mainly because we did organize the rock fest this year If you then look at full 2025, there we see the trends continuing. So that growth in subscription sales to continue, mainly driven by digital, also by carefully considered price increases. And at the same time, we do see the lower B2B advertising sales to continue. And the growth in digital there mostly, but not completely, offsetting the lower print and TV. And I think good to mention for media overall as well is that, of course, this continuous focus on improving our cost base, improving our efficiency, Pia and the team continue to do a great job on that. And that is also reflected in our numbers as well. If you look at the earnings side on the media, there you see these effects coming through that I just mentioned. So the lower advertising sales, the weaker events performance on the negative side, but the higher subscription sales and also lower paper and fixed costs. So that continuous efficiency improvement I just mentioned really driving that stable operational earnings. And because it's on a lower top line, that's also showing slightly improving margins if we think for the full year 25. That's our... current expectations. So more or less for the full year our expectation is a stable operational earnings compared to the year before. Coming back to the outlook being unchanged, that's for the two key reasons that I mentioned, the important quarter three for learning for which we are in a really good position to deliver, but that's of course very much a big quarter for us and that limited visibility on the advertising sales is also the reason why we, for now, keeping our outlook unchanged. And the two assumptions underneath that remain the same. So for learning overall, relatively stable demand. If you think about the learning content side, of course, there is the discontinuation that I mentioned of the distribution contracts. And then the advertising market in Finland overall for the full year being relatively stable. Clearly, we have seen more of a decline still in the first half of the year, and that's also where part of that uncertainty lies for the full year. So, overall outlook unchanged, in a good position to deliver on that. With that said, I would like to hand over to Alex to zoom in on more of the financials.

Thank you, Rob. Good to be here again and to take you through the financials. So let's start, as usual, with the Q2 operational EBIT, where we see higher operational earnings driven by learning, as you can see on the right-hand side. So on the learning side, although in Q2 sales were relatively stable, we had a profitability mix, higher in digital, driving higher earnings. higher margin, and that together with the improved cost base that Rob referred to with lower paper and printing costs particularly, so a lot of solar impacts coming in to help us with our efficiencies here. On the Media Finland side, as you saw, we do have positives coming from the growth in the digital subscription sales. Also lower paper and print costs with, sorry, paper and fixed costs with the continuous move to digitalization. But this was offset by the lower advertising sales and also the weaker events performance. On the other elimination line, which is in line with last year, the full year version of that will also be similar to 2024. So we move on to the key income statement related items. And if I focus on the Q2 columns, you see there the operational EBIT improvement that I just talked about. Further helping to improve EBIT is lower IACs, although part of that is a one-off capital gain of 2 million related to a property sale in Finland. Without that IACs, we have the restructuring expenses of about 6 million, which includes some of the costs relating to program solar as we finish off that program again further below you see a real gain from our net financial items which a big decrease as a result of both lower debt lower net debt and also lower interest rates we have the interest rates here so for q2 specifically 3.4 percent on average across our our loan portfolio versus 5.3 giving us that lower lower cost here That leads to a stronger result for the period and obviously flowing into operational EBIT and EPS, operational EPS and EPS. I mentioned the lower net debt. So you see here net debt coming down to 659 as at June versus 730 last year, giving us an adjusted leverage number of 2.5, which is lower than the 2.9 last year and significantly lower than our long-term target of three. And as usual, because Q3 and Q4 are positive cash generating quarters, that will come down as we go towards the year end. And then equity ratio well within our a long-term target range there and then finally this is helped by the free cash flow improvement so minus 52 versus minus 58 last year you can see the 12-month rolling average going improving through those those periods now the improvement in h1 is due to a number of factors the higher operational earnings led by learning that we talked about earlier the lower financing costs that I just mentioned, but also lower investments in learning, partly coming from or driven by our solar improvements. So we have lower capex, more efficient capex with our technology hubs, and we also have more efficient prepub there as well. So lower investments in learning. So those three things offset slightly by actually working capital timing impacts going the other way this time, which will unwind later in the year. and leading us to a full year free cash flow expectation of an increase versus the 145 million we saw in 2025. So that concludes the Friday's presentation. I welcome my colleagues back on stage for the Q&A.