Good morning everyone, warm welcome to Sanoma's Full Year Result 2022 presentation. My name is Kaisa Uurasmaa. I'm heading Investor Relations and Sustainability at Sanoma. Today, we have the President and CEO, Susan Duinhoven, and CFO, Alex Green, who will present the results. After the presentation, we will have a Q&A session, we will first take questions from the telephone line, then we'll hand over to the audience here at Sanoma House. This event will be recorded. The recording will be available on our website soon after the end of the event. With this short introduction, I will hand over to Susan to kick off the presentation. Please.
Thank you very much, Kaisa. Good morning to you all, and a warm welcome also from my end to this full year results presentation of 2022. In 2022, we still managed to grow our sales. Even though the operational EBIT was affected by inflation, we consider this a solid year in the business. If we look at the summary of the financials, we see EUR 1.3 billion in sales, up from EUR 1.25 billion last year. That was mainly driven by the acquisition of the Italian and the German business, some organic sales growth, specifically in learning of 1%, and stable sales in Media Finland. If we then look at the operational EBIT excluding PPA, that declined due to the extremely challenging operational environment.
We saw higher operating costs, especially paper cost increased across the businesses. That was partially mitigated by thoughtful cost management. Overall, also in Media Finland, we saw a change in sales mix. That meant that lower advertising sales, which is typically high margin, was replaced by higher event sales. That also impacted the operational EBIT. At the end of the year, the operational EBIT margin landed on 14.6%. That was within the pre-war guidance that we had given. If we look at the free cash flow, EUR 112 million, down from last year, due to the earnings impact on the one hand, also higher investment cost and costs related to remodeling our offices and cost of recent acquisitions. Quite a number of those investments we had already indicated at the start of the year.
This was, to a large extent, mitigated, through the working capital that came with the Italian business. At the year-end, we had a leverage of 3.2, due to the higher debt of the Italian and German acquisition that we closed in end of August. Slightly above, as you would expect, our long-term target so recently after a closing acquisition. The board proposed a reduced dividend of EUR 0.37, and that corresponds to 93% of the underlying free cash flow. The outlook, I will go into more detail later on, you see on this slide as well. That was sort of the financial summary. If we then look at the business summary, we had a solid year from performance in both of the businesses.
We see 2022 being another year of growth in our education business. The acquired Italian and German business already had, even in those last four months, a positive impact on earning and specifically on cash flow contribution. Also Spain. If you remember, first year of the large curriculum renewal, the LOMLOE, it went a bit more fragmented than we had anticipated at the start of the year, nevertheless, we saw solid sales growth in the Spanish market, good performance, and we also completed a successful integration of the Spanish business. By now all the temporary service agreements have been closed. We see then with these acquisitions, both the Spanish and the Italian, we see an increased scale and therefore increased opportunity for harmonization of our digital platforms.
We spent quite a bit of time and energy on that already in 2022, and we will continue doing so in the coming years. That gives opportunity for future operational benefits in that learning business, the scale now of being such a large leader in K-12 in Europe. Also in Media Finland, very good solid steps were made along our strategic path of increasing digitalization. We saw a very clear increase in the number of visits in our digital news platforms, and also solid growth both in Helsingin Sanomat, but also in the regional titles in digital subscriptions. Not only the news and feature increased its digitalization, you also see that on the entertainment side.
There, Ruutu+, the VOD service, the video on demand service of Media Finland, showed growing net sales and increasing paying subscribers, which was a positive trend post-COVID, where we had actually expected that we would suffer a little bit from a post-COVID discontinuation of that growth. But very solid continued performance in the media business. Then on sustainability, the ESG ratings further improved in 2022, and we clearly see that where sustainability is, of course, very intrinsic to the Sanoma business, we see that improved reporting and improved clarity on the strategy leads to increased ratings. ISS, for example, rates us now Prime C+, and CDP gives us an A- rating, which are truly industry top performance.
That then also led to Nasdaq Helsinki Sustainability Index inclusion in December 2022. Overall, sustainability, strong performance, and we're particularly glad that also our employee experience index again stayed strong in what was a more difficult year for our teams. We stayed at 7.3, clearly above the European benchmark of 7.1. In 2022, we also indicated our growth ambition. We indicated that we want to be over EUR 2 billion by 2030, so in the longer term, and at least 70% or 75% of that business is then learning business. That basically means that we're aiming to double the size of our learning business by 2030. Let me now go into a bit more detail in each of the two businesses' performance over 2022, starting with learning.
As said, we saw their net sales growing to EUR 681 million, and that was predominantly due to the acquisition of the Italian business. The organic growth in the overall learning business was 1%, and the strongest growth of that was in Spain and in the Netherlands. In Spain, it was logical. It was a consequence of the curriculum renewal, large renewal in that market. Even though it went a little bit more fragmented and will continue in 2022 and 2023, sorry, in 2023 and 2024, we still saw a good uplift in Spanish revenues.
In the Netherlands, the growth was really true to the market demand growth, where post-COVID, the schools wanted to make sure that students would not lose out from these two years of off and on in-school and at-home teaching, so they acquired more high-quality methods. Also the good performance of our Malmberg team in the Dutch market made that they had substantial share gains in their business. All the other content businesses also grew, and even the Dutch distribution business had modest growth. The expected decline was in Poland, because in Poland, the curriculum renewal ended in 2021, and as you typically have in a learning business, after such a big renewal, the year after, the sales drops quite significantly.
With that, we then saw the earnings being stable, and that at EUR 132 million, the acquired Italian business had already a EUR 5 million positive impact. Without that, we saw a slight decline in the other businesses. That came from the Polish business, where, of course, the decrease in sales was then followed also by decrease in earning and partially compensated by the other content businesses which grew and had improved EBIT. We saw within the portfolio, the Polish business going more down than the other businesses going up. The reason why the other businesses didn't go up that much was the inflationary cost, and specifically paper.
If you think about the whole of the group, the paper cost increased with EUR 15 million, and that meant in learning, about EUR 7 million higher cost just for doing exactly the same as the year before. That had significant adverse impact on our earnings. Overall, the inflation in the markets in which we operate, if you think about Poland, Belgium, the Dutch market, high inflation, countries, and it will take one to two years before we have increased the prices to such a level that it compensates those costs. Last year, it's good to realize that we were not able to increase the prices significantly because they had already been set at the start of the year, so what I would call pre-war. Therefore, 2023 will be the first year that we see in the learning business a benefit of increased prices.
What made a change, and we already discussed this in the third quarter, what made the change to the year was the Dutch distribution business making a loss. We have explained that after the Q3, it was a combination of inflationary cost pressure, but specifically also high shortage of labor in the summer period when that business needs to do the peak of its activities. Combined with late deliveries of one of the main publishers for that business and in the Dutch market. Those pressures in Q3 made that it was loss-making, even though we recovered and made a first step to improvement already in Q4, partially due to the late deliveries coming out of the high season. That made the Q4 a little bit stronger than you typically would see. So that's overall learning.
Growth through the acquisition, improved profitability throughout the businesses, but modestly, and then the Polish business going through its normal reduction after a strong curriculum change. If we then look at Sanoma Media Finland, their net sales remained stable, EUR 680 million, but the mix of the sales was quite different. We saw lower advertising sales, and there within that portfolio, you also see that digital and radio still grows and print and TV declines. That mix within advertising is also changing. Subscription sales was stable, with digital subscriptions continuing to grow and the print declining. That's also a trend that we've seen for the last year and is part of our strategy. What we did see that even though the absolute number of sales was stable, the mix different.
Lower advertising, which is typically high margin, and then more events and printing services, sales, which is typically lower margin. That explains why the earnings in Media Finland were lower than last year with EUR 66 million. That is this mix, advertising sales declining, being compensated by lower margin, and on top, the EUR 8 million higher paper cost. That had a significant impact, of course, on the cost level of the business, even though the team did very good and early start already on fixed cost reductions, being very prudent in their cost levels, also in their paper use. Team has done a very good job in mitigating this to the maximum, but slightly lower EBIT. That concludes the two deep dives.
The conclusion from that results then also in a free cash flow that was lower in 2022. Underlying business, if you look at this chart, and Alex will go into a bit more detail on this, but our reported total free cash flow, EUR 112 million, was significantly helped by the acquisition from the working capital with the Italian business. When you acquire a business at the end of high season, you of course get the average working capital with the business and some cash on the balance sheet that you actually pay for. Due to the timing, there was quite an inflow of working capital. That working capital we will need to bring the Italian business through the first half of this year before their high season.
That is something that when we then look at dividend, and our calculation for dividend, we typically, and also in the past years, have corrected for the, what we think, unjustified VAT claim that we have prepaid also last year. We add that for the dividend calculation, but we subtract from the EUR 112, we subtract the operational cash flow that came with the Italian business. If we then look forward to 2023 and think about cash flows, it is also important to realize that with an increasing scale of our learning business, the swings in the year, so the seasonality between the quarters of our cash consumption does change significantly.
That means that the Q1 becomes more and more loss-making, just like the Q4, and the Q2, is also still quite negative on the cash flow generation, but the Q3 then becomes much higher. The swings over the year become bigger. That then also translates in the board's proposal for the dividend. The board proposes a reduced dividend of EUR 0.37, and the board tries to strike in that recommendation to the AGM, tries to strike the right balance between capital use for dividend and capital use for continuing investments in the business to grow our digital platforms and our learning content.
This dividend still represents EUR 60 million in payments to the shareholders, a payout of slightly above 90% of the underlying free cash flow, and it represents a yield of close to 4% of the year-end 2022 share price. In order to accommodate what I just explained, that increasing seasonality in our free cash flow during the year, we propose to split, the board propose to split the dividend in tjree parts. One part end of April, EUR 0.13, then EUR 0.13 early September, and the final EUR 0.11 late October. That is a late October record date and payment in November. The dividend policy will remain unchanged.
it aims to pay an increasing dividend 40%-60% of the annual free cash flow, but it will also remain that the board always takes into consideration the economic environment, the capital structure, the investment needs of the business, as well as the underlying cash flow, in its recommendation to the AGM. With that, rounding off the 2022, and then going to look forward to 2023. In 2023, we will continue to build our business and the long-term strengths of this business. We've split this into the two parts, the two different businesses, to give a bit more detail. If we look at the Learning business, there you see that we expect continued organic growth. The logic there is the Spanish new curriculum, the second phase of the implementation will be this year.
In addition, Poland will be returning to growth because there it start with a small renewal in some of the parts of the curriculum. Organic growth. The additional focus will be on the successful integration of the Italian business. We have started that project, started well. We're very happy with the team there, but it is a long and heavy project. We indicated this is a year-and-a-half project, so it will take all of 2023 to be busy integrating processes and systems. In the business, we do expect that increasing cost levels will impact the profitability. The impact comes from a slight increase still in paper cost, but specifically on personnel, we will see an increase.
We need to remember that we're in countries with high, where the inflation last year was very high and the salary increases are typically at start of year or in the first quarter, and therefore, the salary increases of last year were only reflecting the very modest inflation of the year before. 2023 is the first year that we will see significant request for salary improvement. Therefore, we estimate that in Learning, it will take one to two years to mitigate those cost increases through the prices because we are predominantly a government-run, and the government is our customer, and they can handle 5%-6% price increase, but not the double-digit increases that the inflation would warrant. That will take one to two years from now.
We will continue our investments in the digital platforms, in the content. We see this as a highly attractive business, and we see our scale as also our future asset to, over time, improve our margins. If we look at 2023, then we see organic growth and higher operational EBIT coming from the inclusion of the acquisition then for the full year. In the long term, we stick to our long-term target for Learning, organic growth 2%-5%, and an operational EBIT margin excluding PPA to be above 23%. We see that growth in margin coming from our scale, and our excellent working practices to then also roll out across these larger businesses that we have recently acquired.
If we look at Media Finland, there we're expecting a mild recession in Finland to impact both the advertising revenue with a slight decline there in a declining market, even though the digital component within that mix will improve. We also expect a weakening B2C demand, and that is due to lower consumer confidence. We will need to be quite careful in using the price elasticity and quite careful in how to price our products, because we are in this business for the long term, and we want to make sure that we can provide everyone with high-quality products, both on the news side and on the entertainment side.
We will therefore have continued focus for our process improvements and very much continue with the thoughtful cost management that the management team in Media Finland has already exhibited for years. They will continue to be focused on that, improve their ways of working in order to mitigate those inflationary cost impact. If we look at Media Finland for 2023, we see modest net sales decline due to the recession, but a significant impact of inflation on the overall operational EBIT. There, from an order-of-magnitude perspective, you need to think that we expect to lose about a third of our profitability in 2023 in Media Finland. Long term, we do see also for Media Finland, the long-term targets still to hold. We know the media business is a fluctuating business.
The long-term target of stable revenues and an operational EBIT margin 12%-14%, that comes from increasing digitalization. That increasing digitalization, we only see going faster due to these inflationary pressures on paper and distribution. We see that the trend faster to digital, actually supported by the trends in the market that will give us temporarily a decline in our profitability, but our long-term target stays in place. The outlook for 2023, when we then look for the whole of the group, we see the reported net sales will be EUR 1.35 billion-EUR 1.4 billion, going up from the EUR 1.3 billion last year.
The group's operational EBIT, excluding PPA, is expected to be between EUR 150 million and EUR 180 million, coming from EUR 189 last year. For this outlook, the assumptions that we have put underneath it, from an operating environment perspective are that in most of the operating companies that we operating countries in which we operate, and particularly in Finland, there will be a mild recession. The advertising market in Finland is expected to decline slightly, with most of the decline during the first half of the year. We expect that the second half of the year will already show a slight improvement.
If we look at our growth ambition that we have set out for 2030, we clearly aim to be above EUR 2 billion as a group, with 75% of our business coming out of learning. The key drivers for that are the organic growth in line with our long-term targets in learning and the stable revenues in Media Finland. In learning, we will focus in the coming year when we're very much also busy with the integration of the Italian business. We will focus on in-market acquisitions in the short term, highly synergetic in markets that we are familiar with, while we always stay open for all value-creating M&A opportunities if they arise. Our long-term targets for the SBUs, as I have explained, are unchanged. Also, our long-term financial targets for the group are unchanged.
Net debt over EBITDA below three, that might take, of course, a bit of time. Equity ratio, 35-45, but these targets are in place. All in all, with that, I would like to conclude my part of the presentation and hand over to Alex to give a bit more details on the financials. Alex.
Thank you very much, Susan. Thank you, Susan. Welcome here. It's great to be with you for this presentation. I will start off with operational EBIT, and this is, remember, for Q4 2022, and we had an improvement in operational EBIT versus last year, whilst you remember that this is always seasonally negative due to the seasonality of the learning business. The operational EBIT went from EUR -5 million last year to EUR -2 million this year. Learning contributed to that with a solid performance in most learning content markets, but also an improvement in the Dutch distribution business due to delayed deliveries from Q3. These positives offset the impact of including the Italian and German businesses, which as learning businesses are also seasonally negative and obviously weren't included in the previous year.
On the Media Finland side, we had savings in fixed costs and lower personnel expenses due to full-year incentive adjustments. This was offset by the lower advertising sales with the declining advertising market and also the higher paper costs that Susan talked about earlier and we've talked about before, which at a full-year level impacted the whole business by about EUR 15 million, with a little bit more than half of that impacting Media Finland. On the other and elimination side, we saw lower personnel expenses due to the adjustments to the long-term and short-term incentive provisions. Looking forward to 2023, we will see that cost level increase as we go back to more normalized bonus provisions.
Looking at the net debt chart, you can see on the top right, the net debt over adjusted EBITDA was at 3.2 above last year, primarily due to the acquisition, late in 2022. Coming down and as Susan mentioned, the long-term target of being below three is still very much in place. Our interest-bearing net debt was at EUR 823 million, again higher due to the loan related to the acquisition, and our equity ratio was at 35.8% at year-end, which is within the long-term range of 35%-45%, albeit at the lower end. In terms of net financial expenses, we are seeing increases here due to the interest rates.
Q4 amounted to EUR 6 million, considerably above last year with the higher debt levels and the interest rate increase, and the full year increased to EUR 13 million. In 2023, we do expect a significant increase of that with the higher interest rates we saw at the back end of the year continuing in 2023. To emphasize again, the larger scale of the learning business with inflation, with these higher financial expenses, will mean that our quarters are a bit more seasonally expanded, if you like. The Q1 will be more negative with the increased business, but then offset by higher performance in Q3. The quarters will become more emphasized, the seasonality.
Moving to the free cash flow and showing again the slide that Susan Duinhoven showed on the right-hand side, the build-up from 2022 free cash flow going from EBITDA all the way to the total. The total on the right of EUR 112 included this significant one-off impact from acquiring the Italian and German business due to the timing. We bought it at the end of August and therefore had the business. In learning businesses, a lot of money goes out the first half of the year, comes in in the second half, and so we had that impact in our numbers, which we have excluded for the purpose of the dividend calculation. Looking at the movement, 2022 significantly down last year, mainly due to the investments we're doing in the business.
Lower EBITDA, which includes the transaction and integration costs related to the acquisition. Higher investments in learning content. Higher working capital with a build-up in inventory, particularly in Spain, with the LOMLOE curriculum change, but also longer payment terms and the timing of collections in Southern Europe, in Spain and Italy. We also saw higher CapEx with the investment in our digital platform harmonization, but also office adaptation, coming out, the ways of working changes coming out of COVID. Finally, higher taxes paid because we paid taxes in 2022 for the 2021 results, which were stronger. On this slide, I showed that the normal free cash flow by quarter slide on the right.
Focusing on 2023 and connected with what Susan was talking about in 2023, we do expect a lower cash flow in 2023 versus the full number of EUR 111 million shown in the previous slide, but about in line with the adjusted, the underlying cash flow. Whilst we'll see improvements in working capital as the timing impacts of 2022 reverse in 2023, we do see the lower EBITDA in Media Finland, the integration project cost the Italian business, the continued thoughtful investments in the business development and the digital platforms, and the higher financial expenses that I mentioned. All this will have then a normalized operating cash flow of the acquired Italian and German businesses versus the one-off impact we saw in 2022.
Here you have your information, the timeline for the financial reporting. With that, we will move on to the Q&A part of the presentation.
Thank you, Alex. Thank you, Susan. As promised, we will now hand over to the telephone line for any questions. Please, operator.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Maria Wikström from SEB. Please go ahead.
Yes, thank you. Thank you taking my question. I actually have three questions. The first one is relating to the guidance range, so the EUR 150 million-EUR 180 million. If you could discuss about the uncertainties, which contribute to a quite wide range that we are currently having here.
Yes. The range is, as you indicate, wider. I think the economic environment, the uncertainties that are laid within that, they give rise to a bit wider range than you would normally see. We do think that over time, and for us, that will mean after the third quarter when we have had the high season in learning, we will be able to narrow that range. Most likely not much earlier. If you think about where these uncertainties are, they are, of course, predominantly on the media side to see how the market responds, but at the same time also the expenses and then particularly on the personnel expenses side, where the different negotiations will land in the different territories.
Okay, thank you. My second question is on the more on the leverage, given that you ended up in a net debt/EBITDA of 3.2. I would be interesting to know that do you have a covenant on the current debt? More of the structure of the debt. How much of the debt is tied to the variable rates and how much is fixed?
Yes. We do have covenants on the debt, but we don't disclose them publicly. In the appendix to this deck, you see a breakdown of the debt into the different parts. You see there's a bond, which has a fixed sort of low interest rate. You can see the other loans that we relate to the acquisitions, together with the element of it, which is in commercial paper. The term loans for the acquisitions were related to the variable rates. You can see on that slide the breakdowns.
Okay. I'll revert back to that. The final question is, you said that your digital subscriptions have been performing well, I guess, I mean, with on cost of the print subscription. Obviously the sales component is smaller with the digital subscription. If we talk about the absolute EBIT, what is a impact if a person changes from a print subscription to pure digital?
Yeah. We have indicated that change to be a 50% higher EBIT in absolute terms for an incremental user in digital. That, of course, assumes that the changes are going to be modest during the years as we have seen and as we have also seen in 2022. You, you're absolutely right that the revenue is typically about half of what in digital versus in print, but there is a 50% uplift in profitability for a digital subscriber. Because that is, you know, just to elaborate on that, it is just a fixed cost business in digital. Where in the print, of course, you need to print and particularly in Finland, a high cost of distribution.
Just to be 100% clear that this 50% incremental that's on absolute level, not on a percentage.
No. No, no. On an absolute level.
Absolute. Okay.
Yeah.
Perfect. Thank you. I'll let other ones to ask questions.
Thank you. Thank you, Maria.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you. Maybe at this point, I would like to ask the audience, we have a small group of people who have survived the storm here at Sanoma House. If anyone has any questions from here, we have a few from the chat still, but, giving the opportunity. Please. Wait, yeah, use the microphone please. Thank you.
Yes. Thank you. Samuel Williamson from Nordea Credit Research. First of all, thank you for the presentation. I could go back to the leverage levels 'cause what we, what we've seen here, first of all, you're guiding lower margins for this year for obvious reasons. Your leverage has been above your long-term target since last summer. The dividend payout has been from last fiscal year above your dividend policy now. It was 93% of free cash flow if I remember. Your equity ratio was in the lower limit of your policy. That might raise a concern that what is your commitment to the targets relating to the capital structure?
Yeah, for example, we understand that of course it might take some while, for example, for the leverage to come down. Is this something that you're expecting, you know, to fix by itself with new acquisitions, which are also expected to increase the net leverage? Is there, like, any measures that you are, you know, able or planning in order to, you know, quickly, like for example, fix the leverage situation? You're just waiting it to, you know... I wouldn't like to say that fix itself, but if you understand what I mean.
I understand. Maybe I start answering it-
Please do.
then I hand to Alex. I think the waiting for it fixing ourselves is not our attitude. I would say we will work hard to make sure that the cash flow from the business improves this. Of course, there is, you know, with the investment levels that we are committed and keen to do to make sure that we have our long-term business full, the full benefit, it might take a bit of time. We are in a strong position, I think also with strong sponsors, both on the banking and on the shareholder side. Yes, we are going to work hard on that. I don't believe, generally speaking, in growing yourself out of troubles, you know?
I don't believe that you should now sort of increase at high speed all at once in investments. We're on a solid path. We want to do M&A. Only very selective M&A we will do while we have limited headroom. Improve the business. We have done quite some acquisitions in the last years. There is still quite some work and some improvements and some scale benefits to be gotten. We see good opportunities to work hard and bring the leverage and the other financial targets all within within line.
Oh, perhaps 100% agree with that.
Okay.
I mean, that's. We're totally aligned.
Yeah. Thank you. Well, just a quick elaboration on that, if, for example, it's due to the improved cash flow, which you're expecting to be weak next year, so if I'm reading correctly that you are, for example, comfortable of running the leverage above your target for the next four quarters, for example, but, you're more looking on the long term?
Yeah, exactly.
All right.
Exactly.
Thank you.
Thank you for the question. If not further questions from the room, I just heard that we do have active people still on the telephone line, so I will hand back over there, please.
The next question comes from Sami Sarkamies from Danske Bank. Please go ahead.
Okay. Hi. I have two questions. Firstly, starting from the sort of profit outlook. If we look at the development over the past couple of years, you know, guiding for EUR 165 million this year. Two years ago, the level was almost EUR 200 million. During these years, you have acquired Pearson, which brings in about EUR 20 million in EBIT. I mean, if we look at the underlying EBIT contraction, it's more than EUR 50 million over a two-year period. We know the reasons. I mean, could you somehow elaborate on how sort of quickly you think you will be able to recover from the current margin pressure?
I mean, is this like something where you can make a lot of progress even in one year, assuming that inflation and sort of macroeconomic situation is favorable for you? Is it something that will require much more time, let's say two to three years?
Yeah. We have indicated that take the learning business, which is of course 70% of our profitability, in the learning business, it will take another one to two years before we have been able to mitigate the cost increases through the prices. That is a business with only an annual sales cycle. Therefore is a bit slower than you would normally see in, for example, a consumer business in working in these cost increases. In addition, as I just said, we also see, of course, opportunities to start using more and more our scale. We have just integrated the Spanish business. We're now at the start of the Italian business.
In that same timeframe of these two to three years from now, we would see significant return to that logical profitability level in the learning business. The media business is fluctuating. That goes typically much faster. It goes faster down, but it also goes faster back up. We've seen that in the corona pandemic even within a year, an return to normal levels. Here it will largely depend on how the economy goes. That I'll be honest, you know, I don't have a glass wall for that. It will of course very much depend on also the geopolitical stability. That's where we indicate it will fluctuate down, but then it typically fluctuates back up. The team is on top of it.
Solid products, increasing user base. All the ingredients are there, and we are going to be careful not to go for short-term gains, and then lose our long-term perspective. We're in businesses that are well-performing, solid operation. We are going to take then a little bit of that 2023, accept that lower margin in order to be able to come back and then have that long-term growth perspective.
Okay. Thanks. Then I would have a second question regarding the dividend proposal. There was an earlier question regarding debt covenants, but if I would formulate it this way that, I mean, you obviously did give in on the promise for a growing dividend. Was this like a forced decision by the debt covenants? Or are you sort of more thinking about your ability to deleverage ahead of future learning acquisitions?
Yeah. It was, as you say, it was a difficult decision for the board to take. It was also difficult for management to recommend a reduced dividend because we have been promising increasing dividend. However, a reset at this point is important, and it's important, as you indicate, for being able to continue to invest to continue to grow in line with our long-term targets and our long-term growth perspective. In addition, we see a 4% yield on a company with a profile like ours, more of a learning company. We see that still being above market. If we look at companies like a Pearson, we see lower yield levels.
That's where we have tried, the board has tried to struck the balance between the interests of the company to continue to invest in its future and the dividend. Of course, the difficulty there is the promise of increasing. The underlying free cash flow in the last year was not of that level that we could continue to increase. That's where you should see this as a reset to a level at a 4% yield.
Okay. Thank you. I don't have any further questions.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Just double-checking. Are there more questions on the telephone line? No? Okay. We will move on to chat, and we can always come back if needed. We have some questions on the 2023 expectations on Learning and Media Finland, so we're maybe taking those first. The first one related to price increases. Is there any indication that we can give on average price increases in both businesses? Yeah.
The that is very hard to do, and that's not sort of unwillingness, but these price increases, they are very operational and very flexible. If you take price increases, for example, in the TV business, they go on a daily basis and on a daily rate.
In the learning business, you set the prices once a year, but you do that on a book-by-book basis or a method-by-method basis. If in Poland, the math method is doing very well and very strong, they might increase that a little bit more. If the English has a little bit weaker position, it will not increase that much. These are very precise ways of adapting and measuring our elasticity. The same is true in the whole of Media Finland, not only on the B2B side but also on the B2C side, that it goes product by product, package by package, and then over time. This is where, you know, the deduction also to say if we were to increase prices by 5%, it doesn't mean revenue increases by 5% because there is elasticity.
There are then, typically, you know, reductions in volumes, and you try to balance it in such a way that you don't hurt your competitive position, you improve your profitability. That's the, you know. Large teams in our company are going through this on a daily basis to do this math and these underlying researches to prepare for that. A long answer to actually say, "No, I cannot." I cannot, at least not in a sensible way, give you any details on that.
Thank you. Going on the cost side and the inflation impact in particular and Susan, you mentioned in your presentation the one-third decline in Media Finland's expected earnings. Alex, is there any kind of, you know, elaboration then that you can give on the breakdown of the drivers behind that? Are there paper and printing costs, personnel?
Yes. As we saw, there was a large impact on paper and printing costs in 2022. There will be an element of that in 2023, particularly in the early part of the year when the comparison to, is quite large. In addition, we will see the impact of the personnel inflation coming through salary rises and these increased personnel costs. We obviously didn't see that in 2022 'cause that tends to trigger in as you do pay rises, and that will be different across the different countries that we have in Europe, and come in at different stages in the first half of 2023. That will be a big impact in the year.
Worth noting that, although we have a large number of people in Finland, where inflation is lower than, say, average, in places like Poland and the Netherlands, Belgium, and also Southern Europe, the inflation has been much higher. This will all impact into our cost base.
Thank you. Moving a bit to the longer term, we have two questions. On the long-term targets, have they been reconsidered, especially when what comes to the segment level, profitability targets and now in particular when we moved, the guidance from the absolute, sorry, from the margin to the absolute EBIT, the long-term targets actually are margin targets?
Yes. Yes. Yeah. The honest answer is no, we have not reconsidered the change to apply that also at this moment to the targets, to also make the targets in absolute sense because given the fact that this is such a long-term target, I think the margin is more telling, as long as we don't do sizable acquisitions. That is a little bit where the difference comes, that if we do sizable acquisitions and they have a different margin profile, that might change the target. We have carefully reconsidered, are these long-term targets still valid also in light of, you know, the temporary margin pressure that we will experience in 2023?
There we say wholeheartedly, "Yes, we stand behind these long-term targets, both on the learning side and on the media side.
Thank you. The other question, you maybe touched this already a bit with the dividend, kind of that now when the dividend proposal is clearly below previous year's dividend, should it be interpreted like that we actually prioritize M&A and the cash flow use or the capital use for M&A over the dividend in the future as well?
I think dividend continues to be an important part of our equity story, and we consider the 4% yield as an important and the EUR 60 million of cash going to the shareholders as an important part of our equity story. It stays a balance between investments, M&A, and dividend. It is not going all the way one way or the other. It's that balance that the board has tried to strike and in this economic environment and with the investments that we have in the business, the EUR 0.37, the EUR 60 million, has been considered as the right balance.
Thank you. We have some detailed questions on the debt maturity. I think that we can come back to those offline because we don't have the data either here. I don't think that we remember it from the heart. They can be still published on the webcast platform as well as written answers. With that, I would like to conclude the presentation and the Q&A. Thank you for all participants. If any further questions, please be in contact with us at IR in the afternoon or next week. We wish you all a good weekend. Thank you.
Thank you.