Good morning everyone, welcome to Sanoma's first quarter 2023 results 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, presenting the results. After the presentation, we will have a Q&A session. We will first take questions from people here at Sanoma House, so please wait for the microphone before you ask your question. We will hand over to the telephone line, you can also use the chat function in the webcast platform to ask questions. The full event will be recorded, and the recording will be available on our website shortly after the end of the event. With this short introduction, I would like to hand over to Susan to start the presentation. Please.
Thank you very much, Kaisa. Good morning to all of you. Also warm welcome from my end on this result presentation. In the first quarter, we saw sales growing with a slightly lower operational EBIT due to the inflation and the increased seasonality from our acquisitions. The quarter started and the year started fully in line with our expectations. We saw net sales increasing to EUR 280 million, which was the result of our Italian and German acquisition. We saw in Media Finland, to our satisfaction, that the sales was stable. If we look in the learning business, we saw slight organic sales decline, and that came from the typical small quarter, switches of orders between the quarters.
If we look at the operational EBIT excluding PPA, that decreased due to the inflation and the increased seasonality from a growing learning business, but also from a mix in sales in Media Finland, where the advertising sales declined as expected. It's good to realize throughout this whole presentation that the inflation impact is of course particularly strong in the first quarter, because this is comparing to 2022, where there was hardly any inflation yet in the first quarter. In the later quarters, that inflation year-on-year effect will be considerably less. If we look then at free cash flow, that is decreasing for the same reasons we see a lower result, but we also see the increased working capital from an increasing learning business.
We call that a seasonally negative operating cash flow that grows through those acquisitions. If we then look at the leverage, 3.2, slightly above our long-term target, but very much in line with year end, and that is two effects there that on the one hand, the, of course, increased cash need for the funding the working capital, but on the other hand, offset by a EUR 150 million hybrid bond that we issued in March. That strengthens our balance sheet also for strategic purposes. If we then take the outlook for the full year 2023, that is unchanged. This quarter is fully in line with our expectations, so also the point within that range that we have indicated still very much in place at the same point.
If we then look at learning, first quarter, always a very small quarter, in three months, we basically do only 10% of our sales. You see a slight increase due to the Italian and the German business, that is partially offset by negative organic net sales, that is a phasing between the quarters, but also the fact that we divested Eduarte, a small learning platform for vocational education in the Netherlands. We divested that in October 2022, that is in the comparable year still in our numbers. If we then look at the operational EBIT excluding PPA, loss-making, as you would expect for a learning business in K12. The growth of that learning business then makes also the loss larger.
You see that in all the learning businesses, the earnings come in in the second half of the year. Inflationary impact also impacted our learning business, paper, personnel, cost increases you now start seeing occurring and a slight increase in fixed cost, basically throughout all the cost elements that are hit by inflation. Now, as indicated, we have increased our prices and increased our prices significantly at the start of the year, but that positive impact on revenues and on profitability will only show in the third quarter because that's the start of school, so then those new books and platforms will be procured by the schools.
What we're selling at this moment is of course still the sales coming from last Q3, and that was a Q3 without significant price increases, because those were set in January last year. Therefore, the price increases are according to our expectations, but as we indicated, the full mitigation of the inflationary cost increases, that will take one to two years in learning. A little bit of margin pressure in 2023, but coming back in 2024 and 2025. All in all, small quarter, good performance, in line with our expectations and in full preparation for a successful high season. If we look at Media Finland, their sales was stable, but the earnings decreased for reasons of inflation and the different sales mix, so lower advertising sales.
That advertising sales declined for us with 5%, where the comparable market segments decreased with 1%. We saw two balancing elements, online and radio still growing, but a decrease in TV and in print. It is important also to realize that the market share, for example, in digital advertising, is still very much growing, but the decrease in market share happened in the TV business specifically, and that is because we're quite prudent with our content investments, and not everyone in the market operates in the same way.
Subscription sales was stable, and that is the two effects in there is increase in prices in order to mitigate the cost increases, resulting also a little bit lower volume, partly because of price elasticity, but also partially coming down from the peak post-corona. The growth in other sales offset the advertising sales, as you know, the advertising sales is very high margin sales. It reflected in our operational EBIT, which decreased to EUR 5 million in this small quarter. Inflationary impact and the different sales mix contributed to that. Here I remind you again that when we look at the full year, we have indicated before that for Media Finland, we expect one-third of the profit decrease.
That still very much stands, but this quarter of course compares to a very strong comparable quarter in 2022 still. That's Media Finland. All in all, also there, good, first start of the year. Therefore, our outlook for 2023 is very much unchanged. We indicate EUR 1.35 billion-EUR 1.4 billion in sales and an operational EBIT excluding PPA between EUR 150 million and EUR 180 million. The assumptions underneath this is that we expect that there is a mild recession in most of our operating companies, most particularly in Finland, and the advertising market in Finland will decline slightly. As far as we see now, the economic development is very much in line with these expectations and with our performance.
With that, I would like to hand over to Alex to go into a bit of details on the financials.
Thank you, Susan, and welcome from my side as well. It's wonderful to be with you here today. Digging into the financials a little bit, and I'll start with operational EBIT. As you heard, operational EBIT impacted by both seasonality with the addition of our new businesses and also to do with the fact that Q1 last year was a pre-inflation quarter versus where we are now. When we look at our overall results, and we do look at analyst reports and compare with consensus, we do see that whereas obviously the full year is in line with guidance, we do see that the Q1 and Q3 particularly, is not quite reflecting exactly what, you know, how our expectations.
'Cause as we say, we are entirely on track in terms of our expectations, and we see in the consensus that Q3 and Q1 are slightly differently laid out. Now, do appreciate it is hard to judge with the information, but just wanted to make that key point that we see that Q1 and Q3 to be switched, and we are very much on track to in terms of our expectations.
If I look, dig into the details on the learning side with that EUR 14 million versus last year, the acquired businesses, that's about EUR 5 million of that total, and then the rest is to do with both the inflation impact on paper personnel and fixed costs and also some timing of investments in terms of the curriculum changes in a number of markets this year versus, you know, the timing of investments last year. As we ramp up to deliver on the, on the high season. Also in there is, as reported earlier, the slightly lower comparable net sales versus last year does have an impact as well. The timing between quarters does impact this as well, slightly.
In terms of Media Finland, the two key reasons there, the inflation impact versus a low inflation or no inflation quarter last year, plus the lower margin sales mix with the less high margin advertising sales in there is impacting our operational EBIT as well in this small quarter. On the final line, other eliminations, we have a small change there, which is a more normalized personnel and technology expense this quarter versus lower levels last year. When I think about that line for the full year, we do expect the full year in this line to be higher than last year, because of more normal regular bonus provisions levels as versus the last year that we talked about in the full year presentation.
That's overall operational EBIT, very much on track, impacted by seasonal and the extra businesses and the comparison with a quarter with no inflation. If I move on to the balance sheet side and the leverage and the impact of the hybrid bond is very much seen here. Our net debt decreased to EUR 757 million from the year-end levels, and there are two things happening here. We have the investment, which creates the negative cash flow in Q1, which is more than compensated by the funds coming in from the hybrid bond that we issued in March. The net debt over adjusted EBITDA ratio at 3.2, slightly above our long-term target, but sort of flat versus year-end because of those two impacts offsetting.
Using the hybrid bond funds to partly net that reduces the debt on our balance sheet. Our equity ratio at 40.6 is well within long-term target range of 35-45. Our net financial items, which were EUR 7 million in Q1 this year versus EUR 3 million last year, is mainly due to the higher levels of debt with the acquisition and also the significantly increased interest rates. You can see there that the average interest rates of the external loans is roughly 3% versus 1% last year.
Just a reminder, the interest expense relating to the hybrid bond are not included in the net financial items are in the P&L, but they're recognized directly in equity because the net, the hybrid bond is booked as equity, and so interest just sort of is a flip between the balance sheet line, so it goes directly to equity. Talking about the hybrid bond, just wanted to redo the basic facts here. A 150 million EUR hybrid bond was issued in March, and we saw this as the best way to strengthen the balance sheet in order to increase or give us the financial flexibility to execute on our strategy at all times of the year.
As you know, our learning business is highly cyclical, and as we grow it through acquisitions and organically, we get that more extreme working capital needs in the different parts of the year. A lot of cash out in the first half, coming in in the second. In order to execute on our strategy at all times of the year, we needed the financial flexibility, examined all the options, and this was the best way to do is to strengthen our balance sheet. It's treated as equity in the consolidated financial statements, and therefore is not included in the net debt or leverage calculations. The fixed coupon interest rate is at 8%, which is tax-deductible, and so therefore net cost to us is lower than that. The reset date is 16th of March, 2026.
Finally on the free cash flow. The free cash flow is lower than the prior year due to that increased seasonality that we're talking about. The addition of the Italian and German learning businesses where we're adding their investments for the high season onto that as well, which just brings this down. It's a big part of the change. Also the lower results in the SBUs, which is partly timing, and then the phasing of the investments in TV and Media Finland as well. Difference between quarters, the phasing there is impacting these numbers, as well as the higher interest paid that I just talked about. This is all offset a little bit by some lower taxes paid due to the results.
For the full year 2023, we're expecting the free cash flow to temporarily decline versus the absolute last year. Remember, the absolute last year did have a one-off impact of the acquisition of the Italian and Stark businesses, which as we bought them at the back end of the year when all the capital comes in, that gave us a one-off impact in our cash flow. We now will see normalized cash flow of an Italian business sort of through the year. As Susan mentioned, our expectations in Media Finland to be a third lower in terms of operation EBIT, that will impact our cash. In addition, we continue to invest both in integrating our new acquisitions and in also in developing our digital platforms and our platform harmonization.
This together with the significantly higher financial expenses means that overall the cash flow will be temporarily lower in 2023. That concludes the presentations bit. Here you see the timing of our financial reporting. With that, I'll invite Kaisa and Susan back to the stage, so we go to our Q&A.
Thank you, Alex. Thank you, Susan. We are now about to start the Q&A session. First, the audience here at Sanoma House, please.
Hello. Pia Rosqvist-Heinsalmi from Carnegie. A question regarding the advertising market in Finland. You declined also more than the market in the first quarter. What is happening? Who is gaining market share? Is this something we should be worried about?
I would say worries are not needed. The key thing as indicated is the TV market. This is where the smaller players in the TV market and MTV are the ones that are gaining a bit of market share and we're losing a bit of market share. Those are sort of choices that you at some point make when you do your content investments, how many big shows do you acquire? That is very much a return on investment type of decision that you make. Everyone makes their a little bit different decisions. We're seeing a declining advertising market and therefore are careful with heavy content investments.
The carefulness then also reflects that you lose a bit of share, but the benefit of that is that you're then sold out and that everything that you have bought, you're using to the maximum effect.
Good. Thank you. To the online part of the advertising market. There you are gaining market shares. What's behind this? Are you fighting with aggressive prices or what's behind this?
Yeah. I hear that some people are thinking that and sometimes making those statements, but that's not the case.
We arehHaving a good price level because that is what we know is our long-term perspective in the market. What you see is that our total media set, so both on the VOD, the advertising-based VOD, but also, and most specifically, Ilta-Sanomat are performing very well. Not only with regular digital ads but also with video developments. A lot of audience and then very efficient and good propositions for advertisers that makes that we're gaining step by step. Definitely not. We have heard those rumors as well that we would be in. That, of course, is always something that we also check in our teams because that would not be that would not be a good development.
This is real market share growth, you know, just by good actions.
Good. Thank you. On the subscription sales, the good balance now between price increases and unexpected volume decline.
Yeah.
Should we expect this to persist for the remainder of the year? What, what is the outlook?
The outlook, you know, it depends of course a little bit on sort of how the economy will develop. We will be quite agile in this. We also do a constantly re-productizing, offering different type of subscriptions and those type of thing. We'll stay very closely on track, this is where we expect, you know, potentially a little bit lower B2C revenues. All in all, that was our expectation for the full year. Yeah, let's see if that also comes out. First quarter started well.
Good. Still on Media Finland, you said that growth in lower margin sales compensated the decline in ad sales. What is happening in this other row in other sales?
Yeah. That is, you know, We do, for example, quite a bit of printing services and distribution services, for other newspapers, for other publications. Those increase in price because paper is increases in price, energy, everything. This is where we translate, of course, those cost increases very directly into the price increases and that makes it grow. In addition, you also see that, of course with our printing facilities that we have, the team is doing a good job in making good offers for people who might have their own printing plants but now decide to come to us and to go into that total volume. It is a bit of volume increase, but quite a significant part of that is also just straightforward inflationary costs that are translated in the prices.
Thank you. A few on Learning. The investments and integration roadmap maybe in Italy and Germany, can you shed some light on how that is going and where your focus is right now?
Yes. No, it's going very well. We've added a great team to Sanoma, and we're connecting with very well, particularly on the technology side of unplugging them in, plugging them into the business and looking at the synergies, working with procurement to make the most of the pricing power that we have. In numerical terms, we talked about a EUR 14 million investment in integrations. We will see the bulk of that coming in in 2023, about EUR 10 million of that, 'cause there's a little bit last year and a little bit going into 2024. Overall, going very well, very pleased to have them on board, and every day they're becoming more and more part of Sanoma.
Yes.
Good. I was reflecting upon, the divestment of Eduarte, and I think that was discussed already in Q4.
In Q4.
In Q4.
Yeah, yeah.
Yeah. Regarding this German business you acquired with the Pearson-
Yeah
... acquisition, is that really core for Sanoma?
Yeah. It is definitely a business. It's a small business that is a little bit on the side of what we have. It is so small, that we have now first sort of, the first task is to separate it out of Pearson and to make it standalone. That's the first element. We will work with the team to sort of see through how that, how that can develop and if we might need to consider other options.
Okay, that's all. Thank you.
Thank you. Next question's from Sanoma House, please.
Hi. Sanna Perälä from Nordea. Continuing on the other sales in Media Finland, you mentioned that there were price increases that impacted to the growth. How should we look at the development going forward? When were the price increases implemented, and what kind of growth rates should we expect?
Yeah. Well, you know, I think that that is, what we're doing there is these are typical printing contracts, let's say for, people who want folders printed or anything. These are not very lengthy contracts, so that can be three or six months contract. And we, translate the prices, and these have, very clear clauses on inflation correction. It depends a bit on what the inflation will be and what the cost increases will be in the different categories, and most pronouncedly, what the cost increase in paper is. It's hard for us to forecast that going forward.
Okay, thank you. In general, on the price increases you mentioned that you have implemented, are they mainly in Learning or in Media Finland, and are you happy with the results so far?
Yeah, they are in both businesses. In every part of the business, we're increasing the prices. The way you increase prices is a bit different between Learning and Media. In the Learning business, there is a once-a-year pricing moment that is typically at the start of the year in January, when you produce your price list and schools then know what the books will cost. We're very satisfied with the way we have been able to price, and also with the response from the schools? You can, of course, always increase your prices. You can also increase them much more, but then you know that you have a massive risk on your volume.
We have, in very good cooperation also with schools, with governments, with municipalities, we have discussed these increases, and that's where we have indicated that on the Learning side, it will take a bit longer. On the Media side, you're of course selling to consumers, and therefore the pricing analysis is a very different one because that is more you try, in a bit of research, you try to see what the response will be, and based on that, you then make your estimations which increases are still value-creating and which increases would be value-destructing. They're very different mechanism, but in both businesses, we of course do to the max.
What is important for us is that we are in here for the long term, we want to make sure that we're not just for one year or one quarter optimizing our prices, but that we optimize in such a way that we meet our long-term growth targets. Take the Learning business, the 2%-5% and the 23% margin, that long-term target stays in play. The same for the Media business, that we will be stable and 12%-14% margin. Those long-term targets, we put quite central. We accept that there will be a bit of margin pressure in 2023. That needs to come back in 2024, 2025.
Thank you. Lastly, I have to ask, there have been discussions about the impact of AI on your peers recently. How do you see this discussion, and is there any threat to Sanoma's Learning business?
Yeah. Yeah, I think, let me upfront say we don't see a threat to Sanoma's business. Let me explain why there is such a difference. It started out with Chegg in the U.S. as a company that is focused on higher education and within that segment, more on tutoring and add-on content. If you do the comparison to Sanoma, you see higher education for Chegg, K12, so six to 18-year-olds in Sanoma. It's very different for a six year-old versus a 26-year-old in how they will use ChatGPT. You know, that's one big difference. The fact is it B2C, like in the case of Chat? We're selling to schools and teachers, and what we're selling is not content.
It is a workflow tool that helps a teacher bring a student from one level to the next. Each content element is not unique. I mean, one and one is two, and you can get that out of AI, and you can get that out of our books, and, you know, that's always the same thing. What we're helping a teacher is not with that fact, but we're helping them to teach in 40 weeks, four hours a week, to help children how to do math. That is such a different mechanism than, you know, for a university grad student providing answers on tutoring. I think the business is very different. Of course, you know, we will be constantly following, are there opportunities in it? Are there threats?
We will be following it, but we don't see any immediate impact on our business. I think business is quite different, as the core reason.
That's very clear. Thank you.
Mm-hmm.
Thank you. If no further questions from Sanoma House, I would like to remind our audience that the chat function is also available for questions. I would like to hand over for the telephone line, please.
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 Sami Sarkamies from Danske Bank. Please go ahead.
Hi. I have two questions. Firstly on Learning, can you provide color on the country-specific growth outlooks for this year? Have there been any changes to that during Q1?
Yeah. If we talk about the Learning countries, no changes that we have seen in Q1 other than the sort of the reassuring information that all the markets are doing well and are going according to expectation. The most prominent that your question might be around is Spain. I think in Spain, we see, of course, and with the experience of last year, that some of the decisions come in quite late. At the same time, we see in Spain good growth for this year, according to what we now see as decisions being taken. Will it be a very good year, or will something still move into the next year? That we will probably only learn closer to the summer break.
Okay. Then I have a question on Media Finland and trading conditions. Any comment development of advertising media market and consumer spend during Q1 and in the early part of Q2?
No, I think, this went according to expectation. In the segments in which we're active, advertising market declined slightly, with around 1%. You saw of course that the total advertising market increased a bit, but that's with categories like outdoor and cinema who are still recovering from the Corona dip. Advertising markets in line with our expectations and then the consumer market, also in line. Consumers are cost conscious. We do see, you know, that our new sales is doing well, but, you know, it takes quite a bit of effort. The digital, the lower cost subscriptions a bit more in favor, compared to the full hybrid seven day subscription.
You know, we see the trends that you would expect with a country where, yeah, the economy is, you know, putting a bit of pressure on consumers in their spending pattern.
How would you characterize the trends? Is the situation still getting worse or already getting to the better?
Yeah. That.
If you think about monthly developments.
Yeah. No, that is of course, what every one of us is looking for, that glass bulb that we can look into. The honest truth is that the visibility on that is quite short. We do expect that the consumer trends, which are typically a bit longer trends, that they will continue for the full year. As we said, we are expecting that the second half, the advertising sales is already a little bit better. Also, of course, with a lower comparable, but that it is a little bit better in the second half of the year, and that's still what we see. We're in that sense, Q1 went as expected and also doesn't give any very concrete new insights.
Okay, thanks. I don't have any further questions.
The next question comes from Maria Wikström from SEB. Please go ahead.
Yes. Hello, this is Maria from SEB. I have few questions. Maybe the first one might have been answered, but just wanted to double-check. If in the learning business, the operational EBIT, it was some EUR 14 million weaker compared to last year. Can you split this to the Italy as well as the, I mean, the cost inflation? I really wanted to know that, I mean, how much was the Italy negative out of this EUR 14 million, please?
Yes, sure. The Italy, or the Pearson Italy, Stark was about EUR 5 million of that EUR 14 difference this year, obviously, versus last year. That's the additional part. The remainder is both the inflation versus a no inflation sort of Q1 last year, and then at a time where we're ramping up some investments to get ready for some curriculum changes as well. The timing of those investments are a little bit different from last year, so particularly in Poland. Those things were also inflated. It's EUR 5 for the Italy, and the remainder is the inflation and increased activity.
The shift between the quarters.
The shift between the quarters.
Yeah.
Yes, yes. Yeah.
The sales is of course directly impacting.
Yeah. Sorry, yes, that's that third part. Yeah.
Perfect. Thank you. Then on the Media Finland, with a flat sales development, the EBIT came down as much as 49%. The question is here more that, I mean, what, like, what your plans are to basically improve the profitability trend in this division? Would you plan for more cost saving efforts, or what about the price increases in the subscription sales? How will you mitigate this? I mean, is this basically the run rate that we. I think you said that, I mean, we shouldn't expect this run rate going forward.
No. I think the run rate going forward, then my explanation on that in the presentation was, I think, clear that the overall full year impact is a third, and that still stands. The fact that the Q1 is more, you can say 50%, I would say EUR 5 million, and that also shows how small the quarter is. The comparable in 2022 was impacted. We were using paper from stock from the year before, no salary increases of any significance and no inflation. The comparable year was quite strong pre-war, also on the advertising side, compared to now. The run rate is a third in decline. What we're doing in the Media Finland business is a constant cost efficiencies and cost innovation.
Constant changing of practices, cost reductions. The fair point is that we have done so also during the past years. We are coming out of two years of Corona, in which we have, of course, also, in order to keep the result at a good level, we have also done cost decreases. There is a point where we actually say we now want to continue, for example, our investments in journalistic content in order to make sure that when consumers have the money and the willingness to spend, that we have the content to attract them into these subscriptions. Our long-term goals are key to us, and that is why we are accepting for 2023 a bit of a decrease in profitability.
Knowing that when the advertising sales comes back, the way it impacts quite heavily, of course now on the profitability is because it's very profitable revenue. That also is true when the advertising sales comes back. You also know that that is a very profitable revenue to return. That's how we're looking at it. We leave no stone unturned, and that I can guarantee you. No stone unturned in cost savings, efficiencies, but without going to the core of our business and the core of the attraction of our product.
Okay. Thank you. On the Dutch distribution business. Just, I mean, that was, of course, the disappointment, I guess, was Q2 last year. I think you told at that time that you have long contracts which, limits the price increases. Little bit just, I mean, getting the figures right that, I mean, how does it look like for the Dutch distribution business, the price increases for the upcoming season? Have you figured out other ways to basically improve the profitability, which would be further cost-cutting measures? How should we look at this year profitability of the Dutch distribution business?
Yes. What we have indicated there, and that is still with all the preparations that are in play, what we have indicated is that that business will be around breakeven this year, and that still holds. Let me give some color behind it. Last year we had a bit of a perfect storm, specifically in the summer. That is the complexity of this distribution business, of any distribution business in any of our countries in learning, is that that distribution needs to happen in two months, July and August, typically. Mid-June to mid-July, depending on when the school start is exactly. You have only a very short period. This is where you need to have the labor, you need to have all the products from the publishers.
Any hiccup that you would have in those flows, it needs to perform in those two months. This is where we have done, of course, all the preparations. We have done all the cost reductions, all the tying up the labor contracts. In the end, in the Dutch market, you need 500 17, 18-year-olds who want to work for two weeks and pick those parcels together and put them, you know, ready for sending. Those 500 you need. If you miss a week, or you have only half, then you have a major thing to recover. That happened last year. We are now again fully prepared. These are the intrinsic complexities, let's say, of this business. Now we have taken structural actions.
We have renegotiated with schools where we could not, where we didn't have, for example, an inflation correction clause. Renegotiated with some with success, others with a bit less success or less than we wanted. We have outsourced part of the physical handling, so that we have more spread across the country when it comes to labor resources. The team has really done a great job in getting everything, all the learnings out of last year, getting in place. I'm comfortable with our expectation that it will be breakeven. In the next years, with the continued negotiations with schools, with new contracts coming in, you know, that will become back to a normal, profitable business.
It also shows, that's the good thing, that in these discussions in the full educational market in the Netherlands, you also see how much of a need there is for a distributor to take the role that we have. That's, I think, the good thing that we learn out of this, is that when we go to a school and indicate that we need to take actions in order to keep a profitable business, schools are with us there because they also fully realize they cannot do without. That's the realization that comes out of that. It's a good business intrinsically, but it has operational quite some challenges. You can believe me that we have dug deep into all the practices and processes to improve.
Yes. Thank you, Susan. If I may, one more on the balance sheet. I mean, you of course fix the immediate balance sheet risk by issuing the hybrid bond of EUR 150 million. You still are quite high on net debt, EBITDA, and you are guiding for lower free cash flow this year versus last year. Can you I mean, how relaxed I mean, you are with the current balance sheet structure? Do you think your hands are now tied? I mean, what comes to further in, let's say, short term?
We're pretty comfortable with where we are in our balance sheet. As you say, our net debt over adjusted EBITDA is at the level of 3.2, which is just slightly above our long-term target. Let's just remind that the adjusted nature of the adjusted EBITDA is that we add to our EBITDA our investments in Prepub, our investments in TV, which creates a much lower EBITDA, which creates a very conservative kind of position that we try to stick to. In terms of our ability to continue on our strategic plan, as we said, the hybrid bond was unable to give us the financial flexibility to do that, and we do have headroom to continue on our strategic plan, and that includes M&A.
We have said for this year or in the near future, we will concentrate on in-market bolt-on acquisitions that have clear synergies that we can add in while we work on integrating our Pearson acquisitions from last year. We do have the headroom to continue on our strategic plan and the financial flexibility to do that at all times of the year. We feel we're in a good position. Pressure on margins this year. Long-term plan, long-term outlooks are still very much long-term margins still very much what we're working on, we're working for.
Okay, perfect. No further questions from my side. Thank you.
Thank you.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers.
Thank you. I still remind that you can use the chat. We have two questions on the chat at the moment. One for media business and one for the learning business. I think that we already discussed the subscription development and the media side, I will start with that one. Did the subscription sales development in Media Finland surprise us, and how do we see the short-term development there? Flat year-on-year seems a bit, kind of, very solid development if it happens.
Yeah. Yeah. We were not surprised, but positively reassured, let me call it that way, that the overall development is flat. We do see that, you know, this is campaign- driven, so, you know, there can be quarters where you're a little bit more successful and a little bit less successful. For the full year, I would not put out the flag already and keep quite prudent. We're happy with the development in the first quarter.
Okay, thank you. The other one, maybe Alex, on the learning phasing, differences between quarters, could you please comment on the different phasing of orders in learning in Q1?
Oh, yes. Remember, Q1 is a relatively small quarter, and there's sort of almost like overly impacted by relatively small changes between Q1 and Q2. Again, we will likely see that a little bit in Q2 as well, going between Q2 and Q3. It's not unexpected. It's not unusual. Because later in the year, everything is very focused on the back-to-school date, so things happen in a very contained, you know, as Susan was talking about in terms of the Dutch business, very contained period. But in this early stage, people have more flexibility about when they order, so we do see this timing change. It's not a significant thing.
The impact was a few million.
Yeah
... euros on top line.
Yeah
level. Yes. I don't see any further questions on the chat. I'm still checking people here at Sanoma House. You're happy at the moment. I would like to thank all participants in this conference. Any questions kind of later today, next week, please come back to us at Investor Relations. We are happy to help. Now, thank you for participating, and have a nice day.
Thank you.