Sanoma

Sanoma owns newspapers, magazines, radio stations, TV companies in 20 countries of Europe (October, 2013).

Performance Indicators

2014: Decline of revenue by 4.7% to 1.9 billion euros

Total sales of Sanoma Corporation in 2014 were 1.9 billion euros that for 182 million euros it is less, than the previous year^[1]. The falling of revenue calculated by Sanoma, taking into account change of company assets, is 4.7%. The company expects similar falling of revenue in 2015 and growth of revenue of an indicator in 2016, when preserving profitability at the level of 10%. Not the inherent companies of an event are reflected in an indicator of operating profit which was 15 million euros, said in the reporting of the company. Capital gain, depreciation of a goodwill and other tangible assets, the financial losses in Russia connected with jump of currency rate, expenses on restructuring and also the losses of the capital and write-offs connected with sale of TV-business in Belgium affected this indicator. The reporting of Sanoma does not include the transaction on sale of 50% in the Russian publishing house "Fashion Press": it should be still approved by the regulator.

Net proceeds of Sanoma in 2014 from business in Russia and in Ukraine against 111.8 million euros were 54 million euros the previous year. It is said in the published reporting of holding. At the end of 2014 Sanoma recorded in these countries 40.4 million euros losses from asset impairment and local currencies.

Business in Russia

Основная статья: Sanoma Independent Media

In 2005 the Dutch shareholders of the Russian publishing house Independent Media announced its sale to Sanoma Magazines International (SMI) company which is division of the Finnish media holding Sanoma.

History

1878: Creation in Finland of book publishing house WSOY

WSOY (Werner Söderström Oyj) is the largest book publishing house of Finland founded on December 18, 1878.

1999: Consolidation of three companies and creation of SanomaWSOY

In May, 1999 WSOY integrated with Helsinki Media and Sanoma companies in the SanomaWSOY company which became the largest media company in Northern Europe.

2005: Purchase of the Russian Independent Media for 142 million euros

In January, 2005 SanomaWSOY purchased the Russian publishing house Independent Media for 142 million euros.

2011: Purchase of TV-business in Belgium and Holland, a debt of 1.6 billion euros

After the company in April, 2011 purchased for 1.23 billion euros television business in Belgium and Holland, its net debt almost doubled — from 878 million euros in 2010 to 1.6 billion euros in 2011 (at revenue in 2.8 billion euros and 2.4 billion euros respectively).

Revenue of all East European division where also Sanoma Independent Media enters, in 2011 made €213.1 million. From them more than a half provided advertizing receipts. At the same time Sanoma consolidates only those companies of the Russian ID where is the controlling shareholder^[2] in the reporting^[2].

2012: Sale to R-kioski network

On March 5, 2012 the concern sold the trading activity known in Finland, Lithuania, Estonia and Romania on R-kioski retail network, the Norwegian company Reitan Servicehandel. With respect thereto the Rautakirja trademark takes over new owners. The cost of the transaction was 130.7 million euros.

In 2012 the net debt of the company made 1.24 billion euros at revenue of 2.4 billion euros.

The first quarter 2012

For the first quarter 2012 operating profit of the Finnish media holding Sanoma dropped by 40% and was €16 million. As a result losses made €17 million. Decrease in indicators is connected, in particular, with sale to network of booths and distributor business in Finland, Lithuania and Estonia.

For the same period the division of Sanoma Media which is responsible for Russia, Central and Eastern Europe showed drop in sales for 5% and decline in income for €2.5 million. However advertizing sales suffered. In Russia and Ukraine the market of advertizing remains stable. Here 53% of revenue in the region were the share of advertizing. Total sales of the publishing giant at the beginning of 2012 were €544 million^[3].

The second quarter 2012

Revenues of Sanoma in April — June, 2012 dropped by 7.8% in comparison with the second quarter 2011: the publisher earned from net sales in the macroregion where Russia, 50.1 million euros while a year ago — 54.3 million euros^[4] enters].

At the same time in the Netherlands and Belgium at holding the positive income behavior was observed.

However the advertizing markets of Russia and Ukraine developed favorably for group, follows from the reporting. The share of advertizing revenues from net sales in this business region grew to 54.4% (in the second quarter 2011 — 52.2%). Income from a subscription and retail sales of paper versions of editions in the majority of regions of the publisher of drop.

"Really, the income of publishers from sale of newspaper and journal circulations is reduced. It is the general trend. At the same time profitability of on-line and digital products of the same publishers, as a rule, does not compensate drop in sales of printed materials" — the vice president of Guild of publishers of periodicals Evgeny Abov explains a situation.

2013: The plan of sales of assets in Russia and in Eastern Europe, a debt of 1.24 billion euros

In 2013 the company several times reduced the forecast for income and profitability. In the II quarter revenue decreased by 8.5% to 591 million euros. The CEO of Sanoma Harry-Pekka Kaukonen explained falling with a state of disrepair of the advertizing markets of Europe and added that chances of improvement of a situation in the second half of year are very small. He said who Sanoma will attentively revaluate all the assets:

"We need to make a choice to be as much as possible competitive in the key markets to save focus on our strategy".

Commenting on results of Sanoma, the analyst of FIM broker company Mona Granenfelt told Reuters that the company needs to cut off expenses, to get rid of a part of magazines, to sell the Russian assets and to be engaged in development on the Internet more. The analyst of Inderes Sauli Vilen agreed that Sanoma needs to sell out a part of assets. In the last two years Sanoma got rid of such non-core businesses as networks of booths of printing and movie theaters, bookstores, book publishing houses and ice-hockey team. In the summer of 2013 it sold the magazines in Bulgaria and Romania.

In the III quarter revenue of Sanoma continued to decrease: for these three months its income dropped by 5.1% to 568.1 million euros, for the first nine months 2013 — for 7.1% to 1.66 billion euros. The debt of the company was reduced for 6% to 1.29 billion euros at operating profit of 142 million euros.

In the III quarter the company recorded the operating loss in the amount of 240 million euros which arose first of all because of asset revaluation. Sanoma stated that it will cease to release 32 of 250 magazines.

In October of the 2013th Sanoma Group announced plans to lay off number of employees — 500 people in the Netherlands and 70 in Finland.

Also in October, 2013 it became known that Sanoma will carry out strategic revaluation of the divisions in Russia, Central and Eastern Europe and also in Belgium, the CEO of this media holding Harry-Pekka Kaukonen said on a conference call with investors. The company decided to concentrate efforts on the markets of the Netherlands, Finland and on division of educational literature, he explained, and for development needs available funds.

"We consider the different possibilities for the assets in Belgium and Russia with Central and Eastern Europe. We are ready to sell them if we receive the correct price" — Kaukonen said. He refused to discuss details of possible transactions.

Sanoma revenue in Central and Eastern Europe in 2013 dropped by 13%, to €173.5 million (against nearly €200 million in 2012).

2014

Sale of printing houses, buildings of the headquarters and share in De Vijver Media

At the beginning of 2014 Sanoma sold printing houses and office spaces in Eastern Europe. The total cost of transactions is about €65 million. Sale of the headquarters in Helsinki brought to holding €176 million more^[5].

In June, 2014 it became known that Sanoma sells the share in the Belgian media company De Vijver Media. Besides, within the transaction of Sanoma returns full authority of property for the HUMO magazine, with 2010 belonging to De Vijver Media.

The media holding agreed about sale of 33.3% in De Vijver Media with the Belgian Corelio media group and a private equity fund Waterman&Waterman. Sale of shares of the Finnish company should be approved by antimonopoly authorities of the European Union therefore it is going to close it in the 3rd quarter 2014^[6].

The second quarter: revenue of-4.5%

Sanoma sales in the second quarter decreased 2014 by 4.5% to 533.1 million euros, operating profit – for 2.6% to 66.3 million euros, advertizing revenue – for 2.1% up to 182.7 million, follows from the financial report of the company^[7].

Sales in digital grew by 6.7% to 145.7 million euros, however could not offset losses from printing, it is specified in the report.

"In the second quarter we took a number of successful steps to implementations of our strategy for business transformation. Organic growth improved from-6% in the first quarter up to-1% in the second quarter, digital-sales grew by 7%. In the second quarter 2014 more than 42% of our sales in media in the Netherlands and Finland were the share of unprintable products. We continued to optimize our portfolio and got rid of several non-core assets. Market conditions in the Finnish media market still difficult, but profitability was close to the level of 2013 due to cost reduction", – the president of Sanoma Harry-Pekka Kaukonen noted.

At the end of 2014 Sanoma expects reduction of sales in comparison with 2013 because of the continuing falling of the market of the press and a weak economic situation. In 2016 the holding is going to reach positive dynamics of sales.

2015: Restructuring results

Falling of financial performance, the analysis of internal resources and factors of the external environment of the company made obvious the fact that the business model on the basis of which the company functions is not effective any more. At this conjuncture transformation of all business processes became a necessary condition for survival of the company. The Internet, or adaptation of all business processes and assets of holding to digital space became the vector which set the direction of transformation.

Sale of unprofitable assets:

After the decision on concentration of media industry only in the markets of Finland and the Netherlands the wave of closing of Sanoma regional offices followed. During 2013 - 2014 the company stopped activity of the divisions in Romania, Bulgaria, Serbia, Hungary, the Czech Republic and Russia.

Sale of non-core assets:

Before transformation the holding had a huge set of non-core assets: movie theater chain, construction company and so forth. The company begins to get rid gradually of non-core assets, like actions in ownership of sports stadium Hartwall Arena. In the Sanoma portfolio there were also several distribution companies, including R-kioski subsidiary company. With the translation of editions in a digital medium all these assets become unnecessary. So Sanoma got rid of one more segment of business — the distribution companies: Lehtipiste and R-Kioski.

Enlargement of business to several divisions:

Existence of a set of affiliated enterprises and divisions complicates not only structure, but also complicates functioning of the company, adding a set of excess transactions. After sale of unprofitable and non-core assets in a portfolio of the company there were only key brands like the leading Finnish newspaper Helsingin Sanomat, a television network of Nelonen Media and a number of magazines. Consolidation of these company assets in uniform division of Sanoma Media Finland became strategic decision. In department there are thematic divisions on different types of media: television, magazines and newspapers.

Reduction of jobs and change of top managers with more competent employees having experience of management of Internet resources:

Having got rid of excess divisions in the structure, Sanoma redistributed resources for benefit of multifunctional convergent edition which is capable to perform activity at the cross-platform level. So, for example, in connection with restructuring of the division in the Netherlands work was lost by 500 employees^[8].

Upgrade of the remained assets using integration of digital opportunities:

The company aimed to upgrade the media which remained in a portfolio and to transfer them to a digital medium. The image component of transformation is clear: positioning in the market as leading multimedia holding in whose portfolio there are most demanded brands which easily adapt under requests of consumers. In addition, the company transforms assets to develop the most convenient method of monetization of the product.

As a result all brands entering a portfolio of the company were transformed to multimedia resources which represent a row mobile and Internet-applications. The business model of the company moves towards the multiplatform offer both for consumers, and for advertisers. In the conditions of adaptation to a digital medium by key partners there are IT companies (Microsoft, Google) which will allow to enter the new market and to cover the necessary consumer segments in an Internet environment.

All media were integrated by digital resources therefore the convergent multimedia product turns out. As a result one media product can adopt information at another, and development of several, earlier different media, one can be engaged, convergent, edition.

Notes