International expansion of SanomaWSOY Group’s magazine operations continued in the review period. In January, Sanoma Magazines acquired the leading Russian magazine publisher, Independent Media Holding, and at the same time gained a firm foothold in Ukraine. The deal was closed and Independent Media consolidated with Sanoma Magazines International at the beginning of March. Operations began in Serbia and Montenegro in February. The first magazine launch by the company was Elle in April.
The divisions continued to invest in developing business and strengthening market positions. WSOY particularly focused on sharing best practices and making use of synergy benefits in its new educational publishing business.
The Sanoma Kaupunkilehdet business unit for free sheets continued to grow. After the review period, SanomaWSOY entered into the radio business when Helsingin Sanomat acquired the operations of a local radio station Radio Helsinki. The deal will strengthen the cross media strategy and the position of Helsingin Sanomat in the Helsinki metropolitan area.
Rautakirja continued both to expand internationally and to focus on core businesses. The units for press distribution in Romania and Lithuania were consolidated with Rautakirja in the first quarter, and the restaurant operations were sold in January.
SWelcom continued to improve its profitability.
Profitability, internationalisation, growth, and development are SanomaWSOY’s key strategic objectives. The Group’s financial targets have been redefined. SanomaWSOY’s strategic target is to increase net sales faster than the growth of GDP in the operating countries. The Group’s strategic operating profit target is 12%. The target is based on the assumption that the development of the operational environment remains stable. Previously, the operational profit target was set at 9%. SanomaWSOY reports according to the IFRS standards as of 1 January 2005. IFRS reporting will improve the Group’s operating profit margin by some 2.5 percentage points.
SanomaWSOY’s net sales grew by 2.4% in January–March, and amounted to EUR 582.1 (568.6) million. After adjustment for changes in Group structure, net sales grew by 0.7%. Advertising sales represented 21% (20%) of the Group’s total net sales.
SanomaWSOY’s operating profit increased by 8.4% in the first quarter and amounted to EUR 48.9 (45.1) million. Operating profit was 8.4% (7.9%) of net sales. It increased in all divisions except WSOY, where seasonal fluctuation at the new businesses affected the first quarter result. The most substantial non-recurring gains on the sales of assets totalled EUR 4.0 (0.0) million. Operating profit excluding these gains remained at the previous year’s level.
The Group’s net financial items amounted to EUR -6.1 (-0.6) million. Financial income totalled EUR 2.6 (9.6) million. In 2004, SanomaWSOY divested its share portfolio. There was no corresponding financial income in the review period. Financial expenses amounted to EUR 8.8 (10.1) million. The majority of financial expenses consisted of interest expenses on interest-bearing liabilities totalling EUR 7.6 (8.4) million.
Result before taxes was at the previous year’s level, reaching EUR 46.0 (46.2) million. The Group's taxes decreased as a result of decrease in tax rates in the Netherlands and Finland, among others. Earnings per share grew to EUR 0.22 (0.17).
The Group’s cash flow from operations decreased to EUR 19.2 (31.3) million, mainly due to seasonal fluctuation in WSOY’s new businesses. Cash flow from operations per share was EUR 0.13 (0.20).
The consolidated balance sheet totalled EUR 2,930.8 (2,448.0) million at the end of March. The Group’s financial position remained good. The equity ratio was 36.8% (35.0%) and gearing 99.1% (81.9%). Shareholders’ equity grew to EUR 1,010.9 (805.3) million because the decision on dividend payment was made in the second quarter of 2005. The investments made in the first quarter were financed by existing credit facilities. Interest-bearing liabilities increased to EUR 1,061.3 (715.1) million mainly due to acquisitions and net debt to EUR 1,001.7 (659.9) million.
Liquidities amounted to EUR 59.6 (55.2) million at the end of March.
In January–March 2005, SanomaWSOY invested EUR 254.0 (21.3) million. The largest investments were Sanoma Magazines’ acquisition of Independent Media and the transfer of JHC Arena Holding and its multi-purpose arena in Hamburg to Rautakirja’s ownership. EUR 154.7 million was recorded as investment in Independent Media. Investment in the multi-purpose arena in Hamburg increased Rautakirja’s balance sheet by EUR 76.5 million. R&D expenditure recorded as expenses totalled EUR 4.3 (3.8) million.
In Finland, media advertising grew in January–March 2005 by 6% according to TNS Gallup Adex. Newspaper advertising increased by 6% and job advertising by 12%. Advertising in magazines grew by 1% and on television by 7%. According to advance information, magazine advertising remained stable in the Netherlands. Magazine advertising began to decline in Belgium, but grew slightly in Hungary. In January–March, the retail trade in Finland was at the previous year’s level according to the Finnish Food Marketing Association.
SanomaWSOY’s Annual General Meeting of 12 April 2005 re-elected Robert Castrén, Jane Erkko, Paavo Hohti, and Robin Langenskiöld as members of the Board. Chairman Jaakko Rauramo, Sari Baldauf, who was elected as Vice Chairman, and members Sirkka Hämäläinen, Seppo Kievari, Hannu Syrjänen, and Sakari Tamminen continued on the Board.
In line with the decision of the AGM, SanomaWSOY distributed a dividend of EUR 0.80 (1.00) per share for 2004. The record date for dividend payment was 15 April 2005 and the dividend was paid on 22 April 2005.
Trading in SanomaWSOY shares grew significantly in the January–March period. The turnover of shares totalled EUR 638.6 (110.2) million. Most of the shares traded were Series B, of which some 33 million were traded. In the review period, the average price of Series A shares was EUR 19.23 with a low of EUR 16.85 and a high of EUR 22.10. Series B shares were traded at an average price of EUR 19.20 and the price varied between EUR 17.07 and EUR 20.90. SanomaWSOY’s market capitalisation at the end of March was EUR 2,959.7 (2,218.8) million and the Company did not own any of its shares.
The conversion period of SanomaWSOY’s convertible capital note began on 2 January 2002. The conversion price is EUR 15.91. SanomaWSOY has redeemed and invalidated a total of 4,944 debentures. Redeemed debentures are invalidated every six months.
In January–March, a total of 15 debentures were converted to 9,427 Series B shares. The increase of share capital was registered on 29 April 2005 and trading in the new shares began on the Main List of the Helsinki Stock Exchange on 2 May 2005. After the conversion, the nominal value of the loan totalled EUR 150.4 million. SanomaWSOY’s share capital was EUR 65,842,278.97. The number of Series B shares on the market was 129,922,087 and the number of Series A shares was 23,199,492.
The AGM of 12 April 2005 authorised SanomaWSOY’s Board to decide, within one year of the AGM, on an increase of share capital by one or more rights issues, issuance of one or more convertible bonds loans and/or option rights. The new shares issued shall be of Series B, and their aggregate number may not exceed 30,622,430 shares. The total increase of share capital may not exceed EUR 13,167,644.90. The authorisation excludes the personnel incentives.
The AGM also authorised the Board to decide, within one year of the AGM, to acquire the Company’s own Series A and B shares. The acquisition will be made by using distributable funds. The aggregate book counter-value of the shares or the total votes conferred by such shares after the acquisition may not exceed 5% of the share capital or of the total votes of the Company. The shares will be acquired in the existing proportion of the different share classes.