CEO's review

President and CEO Susan Duinhoven:

7 February 2019

“2019 was a good year, marking the successful transformation of Sanoma into a learning and media company. We strengthened our learning business with four acquisitions – Iddink, Essener, itslearning and Clickedu – and announced an intention to divest Media Netherlands to DPG Media. After the divestment, we have two strong businesses, Learning and Media Finland, ready for growth, and a EUR 400 million headroom for M&A. Our business portfolio is well-balanced: after the recent acquisitions and the divestment approx. 45% of the Group’s net sales and 55% of operational earnings will come from Learning.

In Learning, the most sizable step on our growth path in 2019 was the acquisition of Iddink, a leading Dutch educational platform and service provider, which was closed in September. Iddink operates in the Netherlands, Belgium and Spain. It provides us direct access to the school management in addition to our earlier contact predominantly with teachers. Altogether, with the recent acquisitions we have grown our customer base by 50% to about 15 million primary, secondary and vocational education students and expanded our offering of blended learning materials and methods with learning material distribution, digital platforms for teaching and school administration as well as testing and analytics.

During the year, Learning’s financial performance was strong. Operational earnings improved by EUR 10 million, or 15%. Half of this was attributable to the Iddink acquisition, while the other half was a result of the good work our teams have done as part of the “High Five” business development programme.

Rob Kolkman, CEO of Media Netherlands, was appointed as CEO of Sanoma Learning as of 1 January 2020. Rob is an experienced, well-respected and results-driven business leader for our Learning team and I am happy that he continues at Sanoma. Rob succeeds John Martin, who will leave Sanoma in spring 2020 to pursue other career opportunities.

In Media Finland, digital subscription sales of both Helsingin Sanomat and Ruutu+ continued to grow. The number of Helsingin Sanomat subscriptions grew for the third consecutive year and subscription sales were at an all-time-high – great achievements also in an international comparison. Advertising sales were stable, with digital advertising sales growing by 6%, and print advertising sales, which today represents only 7% of the Group’s total net sales, declining. In total, Media Finland’s net sales and earnings were stable at the previous year’s level.

The divestment of Media Netherlands creates a EUR 400 million headroom for acquisitions. We see solid M&A pipelines for both Learning and Media Finland. In Learning, we are looking for growth opportunities in new geographies and in expanding our offering in the current markets. In Media Finland, we will be interested in synergistic acquisitions in news & feature, entertainment or B2B marketing solutions. With growth in mind, we remain committed to our dividend policy: an increasing dividend corresponding to 40-60% of annual free cash flow. Our focus is especially on increasing dividend per share in euros and thus we may temporarily exceed the pay-out range of 40-60%. For 2019, the Board proposes a dividend of EUR 0.50 to be paid, representing 58% of free cash flow (incl. the settlement of a rental contract related to Belgian women’s magazine operations paid in Q1 2019).

In December, we launched new SBU-level, long-term financial targets on comparable net sales growth and operational EBIT margin excl. PPA, while keeping our earlier Group-level targets on leverage, equity ratio and dividend unchanged. With the clear long-term vision on our SBUs’ net sales and profitability development, our outlook for 2020 is that the Group’s comparable net sales will be stable, and operational EBIT margin excl. PPA will be around 15%. We are looking forward to another successful year in 2020.”