Sanoma Oyj · OMXHEX:SANOMA
Sanoma Oyj — Investor Day (November 2023)
71 slides from Sanoma Oyj's investor day presentation, Nov 22, 2023
Slide 1: Sanoma: A unique sustainability profile with increasing profitability
Capital Markets Day 2023 Sanoma: A unique sustainability profile with increasing profitability 22 November 2023
Slide 2: Agenda
Agenda 9:30 EET / 8:30 CET Welcome Sanoma: A unique sustainability profile with increasing profitability Susan Duinhoven Learning: Reaching our long-term profitability target in 2026 Rob Kolkman Q&A Simulation of blended learning in primary and secondary education Break 11:30 EET / 10:30 CET Media F
Slide 3: A unique sustainability profile with increasing profitability
Sanoma: A unique sustainability profile with increasing profitability Susan Duinhoven, President and CEO Capital Markets Day 2023
Slide 4: Three strategic focus areas to deliver increasing profitability and prepare for future growth
Three strategic focus areas to deliver increasing profitability and prepare for future growth 1. Increasing profitability of Learning and Media Finland ▪ In Learning, we benefit from our increased scale and will reach the long-term profitability target in 2026 through Program Solar ▪ In Media Finlan
Slide 5: We are a leading European K12 learning company and #1 digital media company in Finland
We are a leading European K12 learning company and #1 digital media company in Finland ▪ We are a leading European K12 learning company serving 25 million students – Focusing on stable and resilient K12 market (ie. 6−18 year-olds) with high barriers to entry #1 – Teachers and schools are our primary
Slide 6: We have more than doubled Learning's net sales creating a leading European K12 learning business
We have more than doubled Learning’s net sales creating a leading European K12 learning business… Italian integration Successful nearly integration and completed implementation Pearson Italy of LOMLOE Italy Group net sales Iddink ITS Learning the Netherlands, 9 countries Santillana Spain Pearson Ger
Slide 7: Deleveraging will be central to our near-term capital allocation
…deleveraging will be central to our near-term capital allocation In recent years, we have grown Short-term cash flow will be In 2024−2026 we will focus Learning through M&A impacted by on deleveraging to build − Higher financing costs headroom for future growth − Costs related to Program Capital al
Slide 8: Sanoma represents a unique sustainability profile
Sanoma represents a unique sustainability profile MSCI Sustainalytics We have a unique sustainability profile… Intrinsic positive impact of both business in the lives of millions of people every day combined with ambitious AA 10.9 Scale 100-0, targets and solid ESG performance Scale CCC to AAA lower
Slide 9: Experienced team for future growth
TODAY’S SPEAKERS Experienced team for future growth Rob Kolkman Pia Kalsta Alex Green President & CEO, Sanoma Corporation CEO, Media Finland CFO, Sanoma Corporation (as of 1 January 2024) 9 CMD 2023
Slide 10: Learning: Reaching our long-term profitability target in 2026
Learning: Reaching our long- term profitability target in 2026 Rob Kolkman, CEO Sanoma Learning Capital Markets Day 2023
Slide 11: We are a leading European K12 learning company serving more than 25 million students
We are a leading European K12 learning company serving more than 25 million students We will reach our long-term profitability target in 2026 supported by process and efficiency improvement program Solar Operational EBIT margin excl. PPA We have a leading blended offering of digital and print in all
Slide 12: We have a strong and experienced Learning management team
We have a strong and experienced Learning management team Led by Rob Kolkman Extensive Extensive experience experience in in leading global Experienced various senior transformation and HR and Talent Executive leadership roles in continuous with extensive understanding strategy, product improvement
Slide 13: Solid performance in 2023
Solid performance in 2023 ▪ Organic growth expected to be in the high end of the long-term target range of 2−5% mainly driven by price increases and growth in Spain – Strong 10% growth in learning content business in January−September showing the impact of price increases ▪ Final phase of the LOMLOE
Slide 14: In Spain, major educational reform and curriculum renewal LOMLOE was successfully implemented
In Spain, major educational reform and curriculum renewal LOMLOE* was successfully implemented Key market factors, 2023 est ▪ Santillana is the leader in Spain’s 5.8m 2.9% 90/100€ fragmented K12 learning content market ▪ The reform is driving fluctuations in 2022–2024 K12 student Public spend on K12
Slide 15: K12 learning services offer attractive opportunities
K12 learning services offer attractive opportunities… K12 is an attractive business We are #1 in K12 learning services in ▪ Stable and predictable as teachers only Europe and see benefits from scale change learning materials every 4−8 ▪ Harmonising our digital platforms and years K12 learning techno
Slide 16: ...and we retain our strategy for sustainable long-term growth
…and we retain our strategy for sustainable long-term growth M&A: enter new geographies in K12 and expand offering in existing markets 2−5% long-term organic growth target 2030 M&A pipeline Ambition focused on Increase value per student through 1.5bn€ in-market extending offerings consolidation in 2
Slide 17: Long-term cycles are the nature of K12 learning business
Long-term cycles are Net sales development m€ the nature of K12 learning 900 14% business 800 12% Accelerated organic growth during 700 10% 2019−2023 driven by 8% 600 ▪ Strong market share growth in 6% primary education 500 Long-term 4% ▪ Mostly stable or slightly growing positions in 400 target for
Slide 18: Resilient, but not immune
Resilient, but not immune Profitability development m€ 200 25% Long-term margin target Since 2021, our profitability has been impacted by… 20% ▪ Headwinds in the distribution business, which was hard hit by the rapidly accelerating inflation in its high season 2022 15% ▪ Structurally lower margin (a
Slide 19: Program Solar will help us reach our long-term profitability target of 23% in 2026
Program Solar will help us reach our long-term profitability target of 23% in 2026… ▪ Solar brings full benefits from the increased scale of the business Solar benefits are split between ▪ Program streams touch our key business operations across program streams % countries Organisational ▪ Post-curr
Slide 20: ...and most program streams will be completed by the end of 2024
…and most program streams will be completed by the end of 2024 2023 2024 2025 2026 ▪ Majority of the project work will be Organisational completed by the end of 2024 optimisation ▪ Two main reasons drive the increase in financial impact Publishing process towards 2026 improvement – Phasing of projec
Slide 21: In 2026, net sales are expected to be stable vs. 2023 with higher share of more profitable learning content business
In 2026, net sales are expected to be stable vs. 2023 with higher share of more profitable learning content business Average net sales split and margins over the cycle Printed and digital ~75% ~80% learning content Local margins varying between 15−35% Learning content main driver of organic growth a
Slide 22: We continue to take steps to improve the performance of our distribution businesses
We continue to take steps to improve the performance of our distribution businesses ▪ Distribution businesses are an integral part of our overall learning services offering ▪ We expect the Dutch market continue to be challenging and we are taking actions to improve our financial performance there e.
Slide 23: Learning content sales vary driven by curriculum renewals in our major operating countries
Learning content sales vary driven by curriculum Learning renewals in our major operating countries content 75% of net sales ▪ Expected development of learning K12 publishing market values in Sanoma’s key in 2023 content sales in 2023−2026 is a operating countries indexed to 2020 function of changes
Slide 24: Different blended offerings across Sanoma today reflect the different stages of our markets
Blended Different blended offerings across Sanoma today learning is the reflect the different stages of our markets preferred solution for teachers Print Different levels of blended learning Digital Print book with Print book with Print and digital fully blended digital version digital version and e
Slide 25: Generative AI brings opportunities and will change our way of working
Generative AI brings opportunities and will change our way of working Hyper- personalisation Saving time for teachers Supporting different Automated pupils’ needs and Insights and New skills and generation of preferences time-savers for ways to teach / More efficient core content teachers learn Leve
Slide 26: We are making good progress on our Sustainability strategy and our inclusive learning activities
We are making good progress on our Sustainability strategy and our inclusive learning activities Inclusive learning Our inclusive learning solutions support diversity, accessibility and differentiation 26 CMD 2023
Slide 27: We are a leading European K12 learning company serving more than 25 million students
We are a leading European K12 learning company serving more than 25 million students We will reach our long-term profitability target in 2026 supported by process and efficiency improvement program Solar Operational EBIT margin excl. PPA We continue with our ambitious strategy for sustainable long-t
Slide 28: Q&A
Q&A
Slide 29: Media Finland: Progressing towards our long-term margin target through successful digital transformation
Media Finland: Progressing towards our long-term margin target through successful digital transformation Pia Kalsta, CEO Media Finland Capital Markets Day 2023
Slide 30: Our successful digital transformation progressing towards long-term margin target of 12−14%
Our successful digital transformation progressing towards long-term margin target of 12−14% Key actions Leading provider of digital ▪ Grow the digital subscription base and average revenue per user (ARPU) independent journalism in across all Finnish households Long-term Finland ▪ Grow lead of high r
Slide 31: We have a strong portfolio of independent and complementing brands with substantial digital synergies
We have a strong portfolio of independent and complementing brands with substantial digital synergies News & Feature Entertainment (~2/3 of Media Finland net sales) (~1/3 of Media Finland net sales) Ad-funded journalism Linear TV and Radio Large audiences to build reach for B2B (<50% of Media Finlan
Slide 32: We have an experienced team leading our digital transformation over the last six years
We have an experienced team leading our digital transformation over the last six years CEO, Media Finland Entertainment B2B CFO & COO Pia Kalsta Kari Laakso Tuomas Airisto Juha Kauppinen News & Feature B2C CIO HR (as of 4 Dec 2023) Petteri Putkiranta Niina Ryynänen Turo Mäki Riikka Mattila 32 CMD 20
Slide 33: We are increasing the value of digital for our customers to prepare for digital-only future
We are increasing the value of digital for our customers to prepare for digital-only future Up to 2023 In 2024−2026 Digital transformation push Increasing value of digital for our customers Subscriptions ▪ Strong digital portfolio of independent and complementary We reach 97% brands with potential f
Slide 34: News media subscription base has become highly digitalised
News & Feature News media subscription Digital subscription base in news media has grown by 20pp in last 5 years base has become highly thousands of subscriptions, annual avg. 600k digitalised +1% p.a. ~5% Print ~25% 95% ▪ >95% of news media subscribers pay for a digital component ▪ Going forward we
Slide 35: Transformation away from 7-day hybrid improves B2C contribution
News & Feature Transformation away from 7-day hybrid B2C contribution of Helsingin Sanomat (HS) subscription types improves B2C contribution 2023 ▪ Currently price paid by customer contributes relatively similar irrespective of the product – Customer pays for the printing and logistics costs on top
Slide 36: We still have growth potential in digital subscriptions throughout Finland
News & Feature We still have growth potential in digital subscriptions throughout Finland ▪ Our news brands have strong subscription penetration in their core areas News media subscription ▪ Digital news consumption is growing, and local products’ regional regional media is published less frequently
Slide 37: Ilta-Sanomat reaches two thirds of Finns on a weekly basis
News & Feature Ilta-Sanomat reaches two Out of a population of 4.5m (16−85 y/o) IS has thirds of Finns on a weekly basis 3m 45m ▪ Highly digitalised IS is the largest news media in readers site visits a week a week Finland and performing well against social media players ▪ Digital B2B sales compensa
Slide 38: AI presents significant opportunities without compromising our foremost priorities of trusted journalism
AI presents significant opportunities without 10+ years experience compromising our foremost priorities of of using AI e.g., in segmentation, content trusted journalism personalisation, and forecasting ad Example use-case: audience reach Editorial Code written Multiple ongoing by AI Generative AI us
Slide 39: We have leading entertainment brands in selected segments
Entertainment We have leading entertainment brands in selected segments TV & video Radio & Audio Live ▪ Grow subscription VOD through ▪ Maintain strong national ▪ Focus on organic growth own content and successful radio position while mitigating risks partnerships ▪ Grow Supla in digital ▪ Develop t
Slide 40: In TV, we focus on domestic high engagement content and complement our offering with content partnerships
Entertainment In TV, we focus on domestic high engagement content and complement our offering with content partnerships Domestic entertainment Domestic sports Partnerships Strong track record of the largest Focus on cost efficiency Partnerships strengthen domestic programming phenomena in and local
Slide 41: FTA balancing between profitability and growth
Entertainment Our share of total commercial viewing has FTA balancing between decreased slightly profitability and growth Media Finland commercial share of viewing in 25−54 y/o 60% 40% ▪ Economic environment combined with overcapacity 20% and low prices has been challenging for all FTA 0% players –
Slide 42: Strong Ruutu+ performance with growing subscription base
Entertainment Strong Ruutu+ performance with growing subscription base ▪ Growth in SVOD service Ruutu+ demonstrates the continued demand for domestic content ▪ Creating subscriber demand and value despite challenging market conditions – Signs of global players pulling back from local content ▪ Conti
Slide 43: Advertising market is expected to gradually recover
B2B Advertising market is expected to gradually recover Ad market continues to be uncertain… …but our long-term advertising sales outlook is stable Domestic measurable media market by segment, m€ ▪ Digital advertising sales Media Finland B2B 1 200 22% compensating for the media sales split -2% -4% ~
Slide 44: Our business is resilient, but not immune to economic downturn
Our business is resilient, We can remain profitable even in challenging but not immune to market m€ economic downturn 700 20% 600 15% ▪ Market conditions have had an impact on our 10% 500 profitability in 2023 5% ▪ Solid track record of efficiency improvements 400 while transforming the business int
Slide 45: Our successful digital transformation progressing towards long-term margin target of 12−14%
Our successful digital transformation progressing towards long-term margin target of 12−14% Leading provider of digital independent journalism in Finland Long-term targets unchanged Organic growth +/-2% Operational EBIT margin Strong position in domestic excl. PPA 12−14% high-reach entertainment Thr
Slide 46: Q&A
Q&A
Slide 47: Solid position and clear path to meet our long-term profitability targets
Solid position and clear path to meet our long-term profitability targets Alex Green, CFO Capital Markets Day 2023
Slide 48: Solid position and clear path to meet our long-term profitability targets
Solid position and clear path to meet our long-term profitability targets… Long-term financial targets Learning Increasing profitability Organic growth 2−5% Operational EBIT > 23% margin excl. PPA (from 2026 onwards) Media Finland Organic growth +/- 2% Improving cash flow Operational EBIT generation
Slide 49: ...and making good progress towards our ambitious sustainability targets
...and making good progress towards our ambitious sustainability targets Our key sustainability targets (FY 2022 in brackets) Annual Scope 1 & 2 Annual Scope 3 emission reductions of emission reductions of 95% of our total -4.6% -4.2% GHG emissions from the value chain (scope 3) in line with SBTi by
Slide 50: We have a strong portfolio with growing seasonality
We have a strong portfolio with growing seasonality Growing share of learning content, Seasonality between quarters is typical for reducing share of print advertising K12 learning business Net sales 2023 est, m€ Net sales, m€ 2−5%* +/-2%* 800 600 700 500 600 Learning content 400 500 Subscriptions B2
Slide 51: Solid performance in 2023, cost inflation and price increases expected to continue in 2024
Solid performance in 2023, cost inflation and price increases expected to continue in 2024 Solid operational year in both Cost levels in key categories businesses led to narrowed fluctuating in 2022−2024 Outlook for 2023* Successful ▪ Successful implementation of ▪ Paper and printing costs (2022: ~1
Slide 52: Learning will reach its long-term profitability target of 23% in 2026 through program Solar
Learning will reach its long-term profitability target of 23% in 2026 through program Solar ▪ Solar brings full benefits from the Costs related to Solar totalling Annual Solar benefits split increased scale of the business 45m€, booked as IACs between program streams m€ % ▪ Program streams touch our
Slide 53: We have margin improvement initiatives running in both Learning and Media Finland
We have margin improvement initiatives running in both Learning and Media Finland… Learning’s profitability to reach the long-term Media Finland’s profitability to improve towards target of 23% in 2026 supported by Solar the target of 12−14% in the long-term Operational EBIT margin excl. PPA, % Oper
Slide 54: ...and a relatively stable sales outlook for the Group in 2024
…and a relatively stable sales outlook for the Group in 2024 Distribution business and lower cycle in Spain Media Finland net sales expected to be relatively will impact Learning net sales in 2024, other stable in 2024 Net sales, m€ content markets growing Net sales, m€ ~800 ~600 Learning …mitigated
Slide 55: Free cash flow in 2023 expected to be somewhat higher vs. underlying free cash flow of 2022
Free cash flow in 2023 expected to be somewhat higher vs. underlying free cash flow* of 2022 Key impacts on free cash flow in 2023 Active cash flow management mitigating + Improved working capital management seasonality of free cash flow m€ − Italian acquisition (due to its timing) − Higher financin
Slide 56: Deleveraging will be central to our near-term capital allocation
Deleveraging will be central to our near-term capital allocation In recent years, we have grown Short-term cash flow will be In 2024−2026 we will focus Learning through M&A impacted by on deleveraging to build − Higher financing costs headroom for future growth − Costs related to Program >1bn€ Capit
Slide 57: Leverage has improved to long-term target level of < 3.0
Leverage has improved to Annual seasonality visible in our balance long-term target level of < 3.0 sheet metrics Long- ▪ Strengthening the balance sheet will be our key priority 3.3 3.3 term 3.2 3.2 3.2 target for near to mid-term enabling the repayment of the 3.1 hybrid bond 2.8 2.8 < 3.0 2.6 2.6 2
Slide 58: We have refinancing in place for 200m€ bond maturing in 2024
We have refinancing in place for 200m€ bond maturing in 2024 ▪ 200m€ bond maturing in March Maturity profile External debt structure* 2024 will be paid back with m€, 30 September 2023 m€, 30 September 2023 – New 100m€ term loan that was Extended signed in October and will be drawn to November 1 down
Slide 59: Solid position and clear path to meet our long-term targets
Solid position and clear path to meet our long-term targets Increasing profitability Improving cash flow generation Strengthening the balance sheet 59 CMD 2023
Slide 60: Q&A
Q&A 60 CMD 2023
Slide 61: A unique sustainability profile with increasing profitability
A unique sustainability profile with increasing profitability 1. Increasing profitability of Learning and Media Finland Our purpose Through learning and media, we have 2. Growing organically and through smaller in-market acquisitions a positive impact on the lives of millions of people every day 3.
Slide 62: Appendix
Appendix
Slide 63: Sanoma in 2022
Sanoma in Learning Media Finland 2022 Net sales 681m€ Net sales 618m€ NET SALES Non-print 62% Non-print 52% 1,298m€ Margin 19.4% Margin 10.6% NON-PRINT SALES NET SALES, m€ NET SALES, m€ 57% Netherlands Subscription Spain Non-print advertising OPERATIONAL EBIT MARGIN Poland 14.6% Belgium Finland Prin
Slide 64: Our Sustainability Strategy emphasises the positive impact of learning and media on society
Our Sustainability Strategy emphasises the positive impact of learning and media on society Trustworthy data Valued people Target: Continuous Target: Employee privacy and security Engagement Index (EEI) training for our above 7.5 employees No Inclusive learning major data Empowering learning of EEI
Slide 65: Continuing our growth investments in content creation and digital development
Continuing our growth investments in content creation and digital development… Balance sheet Income statement Cash flow Group - Content creation ▪ Prepublication costs ▪ D&A when learning material ▪ Paid when the cost is incurred ▪ Learning materials capitalised when incurred sold or TV show broadca
Slide 66: We have built our unique position during the past 20 years through acquisitions
We have built our unique position during the past 20 years through acquisitions Malmberg the Netherlands Tammi (Sanoma Pro) Nowa Era Finland De Boeck Pearson Italy Poland Belgium Italy Sanoma WSOY Van In Sanoma Utbildning Essener Santillana Spain STARK Finland Belgium Sweden the Netherlands Spain Ge
Slide 67: Key market features in our major learning content countries
Key market features in our major learning content countries (as of 2023) Annual spend per Sanoma market K12 student Public spend on Level of digitalisation Funding student Total annual spend position in learning population K12 as % of GDP mechanism primary/secondary content ▪ Primary via public subs
Slide 68: We are leading the way in digitalisation across all our markets
We are leading the way in digitalisation across all our markets Stage Print Free digital Paid digital Subscription digital Digital Model Print only Free digital Paid digital Subscription digital Markets Poland Finland Netherlands Italy Belgium ~65% Spain Sweden of learning material France UK sales G
Slide 69: Teachers also see opportunities in AI
Teachers also see opportunities in AI Key insights Teachers would use materials generated by AI when edited and reviewed by publishers We conducted a survey among more than 7,600 Teachers are cautiously beginning to implement AI, but they have teachers to gain concerns about its influence in educati
Slide 70: Disclaimer
Disclaimer The information above contains, or may be deemed to contain, forward-looking statements. These statements relate to future events or future financial performance, including, but not limited to, expectations regarding market growth and development as well growth and profitability of Sanoma
Slide 71: Please contact our Investor Relations
Please contact our Investor Relations: Kaisa Uurasmaa, Head of IR & CSR M +358 40 560 5601 E kaisa.uurasmaa@sanoma.com ir@sanoma.com www.sanoma.com