Sanoma Corporation, Stock Exchange Release, 31 October 2013 at 8:50 CET+1
Sanoma is launching a plan regarding the largest transformation in the Group’s history. The company’s operational model and organisation is planned to change. Its cost savings programme is planned to be extended from EUR 60 to 100 million (gross) and measures are likely to result in redundancies, including today’s announcements regarding the contemplated changes to the Helsingin Sanomat business unit (which includes Helsingin Sanomat, Nelonen News and Metro) and Dutch magazine operations. In addition, long-term financial targets are changed. The group outlook for 2013 remains unchanged.
“New technologies are fundamentally changing the behaviour of media consumers. Consequently, advertisers are following consumers. This implies a rapid increase in advertising in digital channels that enable targeting, measuring and performance-based pricing”, says Harri-Pekka Kaukonen, President and CEO.
“We are responding by planning to redesign our consumer media operations and focus our business towards more structurally attractive markets and transform it towards digital services. We will focus on two strong business pillars: leading multichannel consumer media assets with a growing digital media presence in Finland and the Netherlands; and uniquely positioned Learning assets in a number of chosen markets. Our consumer media assets in Russia & CEE and Belgium are under strategic review.”
As of 1 January 2014, Sanoma will consist of three strategic business units: Sanoma Media Netherlands, Sanoma Media Finland and Sanoma Learning. Within consumer media, Sanoma will establish a new unit, Sanoma Digital, to create critical mass for speeding up the growth of digital services and developing digital competences, as well as to accelerate the commercialisation of innovations.
Transform and strengthen offering in the core
In Finland, as announced previously, Sanoma plans to combine the News and Media Finland strategic business units to achieve greater collaboration, customer focus and cost efficiency. Following the same logic, Sanoma aims to capture media synergies also in the Netherlands.
To speed up the transformation and maintain the number one reach, offering is planned to be renewed in all media platforms. Core brands will be digitised to maintain the number one position in reach and relevance. In TV, Sanoma will establish competitive digital offerings in addition to its well-established linear TV position. In magazines, digital transformation of core verticals is essential, and in Finnish newspapers, Sanoma will move towards a digital-first multichannel approach. Sanoma will capture more value from content investments through cross-platform collaboration and new innovations. Consequently, advertising offering will be tuned towards a measurable and target-oriented approach. Furthermore, consumer insights and data will be utilised to enhance understanding of consumers.
The learning business is also in the midst of transformation. The company’s focus is to expand from publishing to providing solutions and services. Sanoma will also look to accelerate growth by consolidation. In addition, tutoring and emerging markets offer considerable future opportunities.
Planning the largest transformation in the company’s history
Harri-Pekka Kaukonen: “In order to implement the strategy, Sanoma plans to change its operational model and organisation. Our aim is to complete this transformation without compromising our financial performance for extended periods of time. We plan to achieve this by focusing our business portfolio and by targeting significant additional cost savings.”
Sanoma plans to extend the ongoing EUR 60 million gross cost savings programme by EUR 40 million (gross), aiming to save a total of EUR 100 million (gross). The full impact of the planned targeted savings is expected to be realised by the end of 2016.
The contemplated cost savings are likely to result in redundancies, including today’s announcements regarding the contemplated changes in Helsingin Sanomat business unit (which includes Helsingin Sanomat, Nelonen News and Metro) and Dutch magazine operations. Sanoma will initiate co-operation negotiations in accordance with local laws and regulations, and make the final decisions based on the outcome of these negotiations.
“Redundancies are unfortunate but are likely to be unavoidable in order for Sanoma to be able to invest and develop in innovation and growth also in the future”, says Harri-Pekka Kaukonen.
One-time investments and costs associated with the transformation of its business require Sanoma to pursue a prudent dividend policy in the near-term, implying lower than historical dividend payout.
“All in all, we are launching a plan regarding the largest transformation in Sanoma’s history. We will have to make tough choices to finance the investments needed to enable future growth, and to seize all opportunities in the businesses that we are focusing on”, Kaukonen summarises the situation.
Long-term financial targets (changed)
Sanoma’s long-term financial targets are a net debt to EBITDA ratio below 3.5, an equity ratio within 35% to 45% and gearing of less than 100%.
Sanoma conducts an active dividend policy and primarily pays out over half of Group’s result excl. non-recurring items for the period in dividends.
One-time investments and costs associated with the transformation of its business require Sanoma to pursue a prudent dividend policy in the near-term implying lower than historical dividend payout.
Group outlook for 2013 (unchanged from the revised outlook published on 23 July 2013)
In 2013, Sanoma expects that the Group’s consolidated net sales will decline more than 4% compared to 2012 and operating profit excluding non-recurring items is estimated to be below EUR 180 million.
Sanoma’s outlook is based on the assumptions that the European economic environment remains under pressure and adversely impacts advertising markets in Sanoma’s main operating countries. The likelihood of clearly improving market conditions in the second half of the year is estimated to be low.
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Get the world. Sanoma helps people access and understand the world. Sanoma is a front runner in consumer media and learning in Europe. We employ around 10,000 professionals in more than 10 countries. In 2012, the Group’s net sales totalled EUR 2.4 billion. Sanoma’s share is listed on the NASDAQ OMX Helsinki.