Sanoma’s Interim Report 1 January–30 September 2017: Operational EBIT improved across business units

Sanoma Corporation, Stock Exchange Release, 25 October 2017 at 8:30 CET+1

Third quarter

• Net sales adjusted for changes in the Group structure grew by 5.4%. Reported net sales amounted to EUR 405 million (2016: 438). The Dutch TV operations of SBS are not included in the third quarter figures as Sanoma completed the divestment of SBS to Talpa on 19 July 2017.
• Operational EBIT improved to EUR 89.3 million (2016: 77.7; adjusted for the SBS divestment 70.2) as a result of higher sales in Learning and lower costs across all businesses.
• Operating profit improved to EUR 86.3 million (2016: 75.1; adjusted for the SBS divestment 68.6).
• Items affecting comparability included in the operating profit totalled EUR -3.0 million (2016: -2.6) and consisted mainly of restructuring expenses.
• Operational earnings per share increased to EUR 0.39 (2016: 0.30), earnings per share increased to EUR 0.37 (2016: 0.29).
• Cash flow from operations was EUR 85.6 million (2016: 95.9). The cash flow was lower than in the comparable period mainly due to higher trade receivables in Learning. Capex was EUR 9.2 million (2016: 7.3).

First nine months

• Adjusted for changes in the Group structure, net sales were stable. Reported net sales amounted to EUR 1,190 million (2016: 1,241).
• Operational EBIT improved to EUR 182.4 million (2016: 166.5). Adjusted for the SBS divestment, comparable operational EBIT grew 19.1% to EUR 184.8 million (2016: 155.1).
• Operating profit decreased to EUR -252.0 million (2016: 219.8), due to the capital loss related to the divestment of SBS, which has been booked as an item affecting comparability.
• Items affecting comparability included in the operating profit amounted to EUR -434.4 million (2016: 53.3) and consisted of a capital loss related to the divestment of SBS, impairments and restructuring expenses as well as a capital gain on the divestment of Sanoma Baltics. Items affecting comparability in the same period last year included an EUR 74.6 million adjustment for the settlement of the pension plans in the Netherlands.
• Operational earnings per share were EUR 0.73 (2016: 0.58). Earnings per share were EUR -1.07 (2016: 0.85) due to capital loss related to SBS divestment.
• Cash flow from operations was EUR 48.2 million (2016: 52.1) and capex was EUR 28.0 million (2016: 22.6).
• As a result of the SBS divestment, Sanoma was able to continue deleveraging its balance sheet. Interest-bearing liabilities were significantly lower, totalling EUR 555.4 million (2016: 799.8) at the end of September.
• Net debt/adj. EBITDA ratio was 2.2 (2016: 3.3) at the end of September.
• Equity ratio was 34.2% (2016: 43.7%) at the end of September.

Outlook (as revised on October 24, 2017)

For 2017, Sanoma expects that the Group's consolidated net sales adjusted for structural changes, including the divestment of SBS, will be stable and the operational EBIT margin will be above 12%.

Comparable key indicators, adjusted for the SBS divestment

* Including finance leases.

Sanoma presents certain financial performance measures (alternative performance measures or APMs) on a non-IFRS basis. The APMs are provided to reflect the underlying business performance and to enhance comparability from period to period. APMs should not be considered as a substitute for measures of performance in accordance with IFRS. More information is available at Sanoma.com.

Key indicators

* Including finance leases.
** Rolling 12-month period.

Organic growth of net sales*, %

* Adjusted for changes in the Group structure.

Susan Duinhoven, President and CEO:

'Sanoma's results improved strongly in the third quarter, driven by successful sales in the seasonally important quarter for Learning and cost innovations in all of our businesses. Our net sales adjusted for changes in the Group structure grew by 5.4% and our operational EBIT improved by 27.1%.

For the first nine months our operational EBIT improved by 19.1% and sales were stable, when adjusted for the divestment of SBS. Our operational earnings per share improved by 25.8%, mostly due to lower financial costs resulting from significantly lower debt levels. Based on our good performance, we revised our FY 2017 guidance on October 24 and expect the operational EBIT margin to be above 12%.

We continue to focus on cash generation. In the third quarter, our cash flow from operations was EUR 85.6 million (2016: 95.9), slightly lower than in the prior year due to sales-driven growth of trade receivables in Learning.

Media BeNe's comparable operational EBIT, adjusted for SBS, continued to improve in the third quarter and was 9.0% higher compared to the previous year. The SBS divestment was completed in July. Profitability of our remaining print and online portfolio improved following our cost innovations and streamlining of the organisation. Sanoma's brands continued their good performance in BeNe.

In the third quarter, net sales in Media Finland were stable, while operational EBIT grew by 38.3%, supported by cost innovations. Nelonen TV channels continued to hold their market-leading positions, and our Ruutu VOD service grew its reach, strengthening our non-print sales. Helsingin Sanomat showed an increase in both the total number of subscriptions and the share of digital subscriptions, reaching new heights during the third quarter. Our ability to keep sales stable in Finland in a challenging advertising market shows the strength of our portfolio and good work of our teams.

In Learning, net sales grew strongly by 22.5%, and operational EBIT increased by 23.8% in the third quarter. Momentum in the Polish market has been exceptionally positive in 2017 with two simultaneous curriculum changes impacting the market volume positively. The efforts and costs we have put into developing and marketing 46 new methods as part of the educational reforms paid off, as our market share in the Polish learning market grew. Part of our growth came from third party products as we operate in the the local market both as a publisher and as a distributor with our 'one-stop-shop' concept.

As a result of the divestment of SBS, we have significantly decreased our debt, and our balance sheet ratios have improved. At the end of September, our net debt to adjusted EBITDA ratio was 2.2, being at our long-term target level, below 2.5, and equity ratio at 34.2% was already close again to our target of 35-45%. This will allow us to pursue opportunities to enhance our portfolio of leading brands and businesses, and to serve our customers in the best ways: providing consumers with informative and entertaining content and advertisers with the combination of reach and targeting to grow their business.'

January-September 2017 Interim Report webcast

The event for analysts and investors will be held in English by President and CEO Susan Duinhoven and CFO and COO Markus Holm on 25 October 2017 at 11:00 am Finnish time (9:00 am UK time) at Sanomatalo, Töölönlahdenkatu 2, Helsinki, Finland.

Interview opportunities for media will be available after the investor webcast. Media representatives are asked to book interviews via Communications Director Marcus Wiklund, marcus.wiklund@sanoma.com.

The live audio webcast can be viewed on Sanoma's website at www.sanoma.com/en/investors and on demand after the event. The presentation material will be available on Sanoma's website after the report has been published.

For dial-in details to the live audio webcast by phone, please register via email at ir@sanoma.com. Conference ID and dial in numbers will be sent after registration.

Financial reporting 2018

Sanoma will publish its Full-Year Result for 2017 on 8 February 2018 approx. at 8:30 am Finnish time. Interim Reports and the Half-Year Report will be published in 2018 as follows:

- Interim Report January-March on 27 April 2018, approx. at 8:30

- Half-Year Financial Report January-June on 24 July 2018, approx. at 8:30

- Interim Report January-September on 24 October 2018, approx. at 8:30.

Additional information

Head of IR and CSR, Kaisa Uurasmaa, tel. +358 40 560 5601

Sanoma.com

Sanoma

Sanoma is a front running media and learning company impacting the lives of millions every day. We provide consumers with engaging content, offer unique marketing solutions to business partners and enable teachers to excel at developing the talents of every child.

With companies operating in Finland, the Netherlands, Belgium, Poland and Sweden, our net sales totalled EUR 1.6 billion and we employed more than 5,000 professionals in 2016. The Sanoma shares are listed on Nasdaq Helsinki.