Ladies and gentlemen, good day and welcome to the Schibsted fourth quarter 2018 Q&A conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jo Christian Steigedal, Head of IR. Please go ahead.
Thanks a lot and good afternoon, and a warm welcome from Oslo to this Q&A session in connection with the presentation of our fourth quarter results, this morning. Thanks a lot for joining us. Together with me here in Oslo are our CEO, Kristin Skogen Lund, who joined the group first of December, and CFO, Trond Berger. We're also supported by my colleague on IR, Espen Ritholm. Let me briefly remind you that we held a webcast presentation in Oslo this morning, and the recording is available on our website, schibsted.com/ir. Now I'd like to hand the word over to Kristin Skogen Lund for a short introduction.
Thank you very much to Christian. As you touched upon, I had the pleasure of presenting Q4 earlier today with record high EBITDA and record high revenue. Now I'm looking forward to discussing it more in detail with you, but first I'll make a brief introduction. As you may have seen, the profit improvement was driven both by marketplaces operations and publishing. Looking at marketplaces, across many of our operations, we see strong growth in revenue from the verticals, whereas display advertising is growing at a slower rate. The French operation delivered solid revenue growth along with the margin improvement. The development was also strong in Spain and Norway. I would like to highlight Norway, particularly, delivering a revenue growth of 17% and a healthy margin improvement, despite being such a developed market.
They're really doing well in terms of improving value proposition for customers, developing adjacencies and keeping up the entrepreneurial spirit. Sweden is still on the soft side, but we see improved underlying trends, and we are working to get back to revenue growth for the calendar year of 2019. We have a new management team in place, and we do have high ambitions for Blocket going forward. Our investment phase losses continued to go down in Q4, even though OLX in Brazil concentrated a large part of their annual marketing spend in Q4. The revenue growth in Brazil was, however, still very solid with a 55% increase. This is driven particularly by the verticals. And then the cost reduction in Shpock has continued, as we have communicated earlier.
When it comes to publishing, which we are renaming, News Media, I am really impressed with the Q4 achievement, with both improved profitability and strong growth in digital subscription revenue and digital advertising sales. The foundation of this positive development is the high standards of quality and relevance which guide our editorial teams. Our loan comparison site, Lendo, continues to be a key growth driver in the growth segment. This growth was very solid in Sweden, whereas Norway is hampered by new regulatory environment in the short term. However, we do believe this regulatory change is positive for the quality and transparency of the market. We have initiated our new international rollouts, which are diluting margins in the quarter, but we do see significant potential for value creation in this going forward.
We can inform you that the spin-off process for MPI is on track for first day of trading on April 10th, and that we will have a capital markets day in London on March 7th. Finally, the board of MPI has been announced today, and we are also very pleased with the very highly experienced and competent board that we have in place now for driving that company further. Finally, the board has proposed a dividend of NOK 2, which compares to 1.75 last year. In sum, marketplace is well on track, driving growth in verticals, although display advertising is soft. We see stable development in publishing or now called News Media. Schibsted growth has a large potential. Lendo doing well in Sweden, but weaker market in Norway.
Lastly, spin off of MPI on track for listing in Oslo, in April of this coming April 19. I would like to hand the word over to our operator who will organize the Q&A session. Operator, please go ahead.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Please state your name before posing your question. Again, it is star one if you would like to ask a question, and we will pause for just a moment to allow everyone an opportunity to signal for questions. We will take our first question. Caller, please go ahead.
Good afternoon. It's Silvia Cuneo from Deutsche Bank. Thank you for taking my questions. I have a few. First one is on publishing. Given that the Q3 results you guided for second half EBITDA to be in line with the first half, but then today you reported 50% higher number. I'm wondering what is the visibility in this business, and can you explain a little bit more how to think about this division going forward? Second is on Lendo. Just wondering when will the investment start to contribute to the revenue growth, so in terms of the expansion in the other countries. Third is on Sweden. Just a clarification, when you say you expect to return to growth in 2019, does it mean on a full year basis or by the end of the year?
On the headquarter costs, just taking the number you reported overall in 2018, that was NOK 766 million. Should we add NOK 100 million on top of this number when we think about group costs going forward after the spin-off? Maybe just a final quick one on the decision to raise the dividend after all these years of paying the same NOK 1.75 amount. I mean, why now given you have highlighted some potential consolidation and bolt-on opportunities in the business? Thank you.
It's Trond here, CFO. I can start with publishing. I mean, you're right that we guided on somewhat slower growth in the publishing, that we are pleased to see that we actually have performed quite well, especially in VG, I must say, and also in the subscription papers. Also right to say that we have seen a quite weak display historically that actually did somewhat better, especially in Norway in the second half, so t hat's the reason. Going forward, I would say that, I think that we expect still the digital part to continue to do well. Of course, we still have some exposure into print.
This may variously, but we expect it to continue to do well. When it goes into Lendo, when the revenues, we see visibility on that. Just on, I mean, we have just launched in Denmark. We will launch rather soon in Austria and Poland. Of course, now we are doing some marketing. We do have quite good traction in Denmark, but of course, modest revenue figures yet. Certainly we'll see some revenue in 2019, but it will be modest in totality, I would say. Lendo should continue to do well in Sweden and also Norway come back later in 2019.
If we take Sweden has been really hampered by a weak or soft display, first of all, because we also have taken a different GDPR standpoint than what we have done in Norway. If you look at, especially now, Blocket, I mean, all the car dealers are back. We've seen some flattening out of the display. I think there is good reason to believe that we're able to come back to growth both within the verticals and also that the display should do somewhat better. Also we have some integration for some new products. That's why we believe it should improve going forward on a quarterly basis. On headquarter, NOK 768 is the figure for 2018.
We have said that, if you look at the headquarter in itself, MPI establishment in Barcelona will be a rather slim organization, guided, that it may cost up to SEK 100 million extra. At the same time, we expect also the Schibsted to go slightly down, but in some SEK tens of millions up, safe to say. Then on the dividend, I mean, we have kept stable dividend. We have a solid financial position. I think that is the signal that we would like to give a little bit more back to the shareholders.
There is no changes in our ambition when it comes to do further bolt-on acquisitions and growth in the markets we already are in. We think that the situation being solid, that also our shareholders deserve somewhat higher dividend.
Thank you.
We will take our next question. Caller, please go ahead.
Hi, this is Oliver Pisani from Nordea Markets. Thank you for taking my question. I was wondering regarding France, we see organic growth slowing slightly in France, but the margin is very strong. Did you pull the brake on marketing in Q4, or was marketing expenses extraordinarily low in Q4 so that we should expect higher marketing, spend going forward? Secondly, on France then, have you seen any effect of the economic slowdown in France, and how should we think about that going forward?
You're right that the organic growth was slightly lower than what we have seen over the last quarters. That's only due to the display market being soft and right to say that the uncertainty that the situation in France on the economic slowdown has also some impact already, campaign being held back. That goes for the display, which is around 20% of the revenue of leboncoin. The verticals continue to do quite well both in real estate, job and cars. The underlying vertical I would say is quite strong. Marketing, we always get this question, will it be harder over the next quarter? I mean, something that we do not like to guide on.
I mean, we do give campaign from time to time. fair to say that in Q4 did a little bit lower marketing activity compared with the older quarters. I don't think we will give any guidance on that going forward.
Okay v ery good. Thank you. Perhaps a last question from me as well. I think you mentioned on the presentation previously today that there was a NOK 300 million revenue potential from the acquisition you made in Sweden of Qasa. Could you perhaps elaborate on that and perhaps also on the timing of any eventual growth synergies regarding that acquisition?
Sure. We completed the acquisition of Qasa just one week ago, but we have been doing a three-month test period. What we see that in with Qasa combined with Blocket, in that test period, Qasa almost doubled its revenue run rate. Qasa, which is then for those of you who do not know, it's a full service rental site with an ARPU of SEK 4,500, which is very high compared to Blocket's average of 125. Simple calculation would be that if we manage to convert 20% of our Nordic marketplaces real estate rental ads, this would potentially then generate SEK 300 million of yearly revenue because it has that high value increase potential.
Okay. That's very good. Thank you.
We will take our next question. Caller, please go ahead.
Hi. Henriette Johnsen in Arctic. Two questions from me. First, you might come back to this on the CMD, but related to the spin out of MPI, you talked about potential consolidation. Do you target to expand your footprint into new markets or just in-market consolidation? Second question on Lendo. Could you quantify the cost in Lendo split it between the Nordics and the expansion into Denmark in Q4? Also, how should we think about the cost development in the Nordics for Lendo the coming quarters since 2019? Thank you.
The cost increase in Lendo in Q4 is split with 60% marketing in existing markets and 30% is due to international expansion. That international expansion in Q4 amounts to SEK 12.8 million, that's mostly personnel and other establishment costs. We are starting full-fledged marketing as of Q1. When it comes to the MPI consolidation, I mean, we will definitely look at different ways of consolidation. When we speak about it, I guess we also allude to the fact that there are a few major players on the scene where we see sort of movements and activities that we follow closely, and it could be a potential for larger structural plays going forward. Of course, we don't know that.
We have signaled that if the right opportunity occurs, we will be open to change our ownership and also go below majority.
Thank you.
Just on MPI, we first of all focus on existing markets. There is no plan for new expansion in itself in the markets MPI are in, for time being. Yes. Just on the cost of the Nordics, I don't think we will give that going forward. I will say that we expect Norway to come back to our growth models, throughout 2019. Maybe slow in a couple of quarters to come, due to regulations. Then, of course, we'll continue to do marketing as before, yes.
Thank you.
We will take our next question. Caller, please go ahead.
Hi there. You've got Andrew Ross here from Barclays. Just a few left from me. First one's just to follow up on Silvia's question on the new central cost at MPI. Did you say Trond it was NOK 200 or NOK 100? Sorry if that's a stupid question, but I couldn't hear it properly. Just to clarify. Second question is on CapEx, both for Schibsted and MPI. It looks like on the slides, MPI was spending about or is spending about 5% of sales on CapEx. Is that sensible going forward? What do you think for Schibsted? Third question is to come back on that comment you just made on future consolidation to MPI.
Can you just confirm that what you're talking about there is, when you talk about global players, you're talking about horizontal players as opposed to vertically focused, portfolios? Final question, within growth, it's helpful that you've given some new disclosure on Prisjakt. Apart from Prisjakt and Lendo, can you give us a sense as to what the big contributors to growth are? If there's anything in there that's kind of sucking up a lot of losses that you're investing behind, so the rest of the portfolio perhaps looks a bit more profitable than the overall blend. Thanks.
Yeah. Just to restate, we said that MPI central headquarter cost being established out of Barcelona may increase up to NOK 100 million, and we expect may slight down in Schibsted. Yes. CapEx, I mean, we don't guide for CapEx. I would say that if you're talking about the maintenance CapEx, I think that they will more or less continue in the same level, I would say, as we have seen in 2018. We will give a little bit more breakdown of this also in the capital markets day. On.
I guess we could add on MPI, the CapEx is related to product and tech development. Going hand-in-hand with that, so to speak, a major part of it is central product and tech development.
Yeah. When it comes to future consolidation, I think that Kristin, our CEO, she talked about what is going on in the classified field. So that is generally different players with I would say first of all, strong vertical positions in different countries. So that's what she was elaborating on. When it comes to what we have said before on what is our target, we would like to strengthen the vertical position in markets we already are in, and also would like to do, of course, bolt-on acquisitions in that space, first of all. Then.
Just to follow up there, Trond. Sorry to interrupt. In terms of the big players you alluded to in terms of big scale consolidation, is the type of thing that might be possible a big portfolio of horizontal kind of Schibsted type classified sites, or might it be interesting to MPI and I guess, to Schibsted in terms of sanctioning it to get together with one of the big kind of vertically focused players, be that in real estate, autos or whatever?
I didn't speculate on that. I mean, the only thing that Kristin said was that there are movements on some of these big classified players. How that may end up, it's too early to say. I wouldn't allude more to that. When it comes to the growth, I mean, Prisjakt and Lendo, we have a portfolio of some financial services, and it's it is I would say a diversified portfolio. We would like to take also some venture position that we already have done in Sweden.
You would also see that we have some investments and cost in that part of the business, which we believe is right to scale up over time if you see some of this venture is actually doing well. It's a quite broad portfolio of smaller assets.
Yes. Thank you.
We will take our next question. Caller, please go ahead.
Hello, Hans Rosenberg from Catella. Congratulations to a good quarter. I just wondered if you can help us a little bit understand the organic versus acquired growth and also if there is any impact from accounting changes, IFRS 15 in places like leboncoin, FINN.no, Spain, et cetera. Is there some inorganic growth or is it pure organic? Also has the accounting rules had an impact? Thanks.
No, it's, as we have said before, it's our targets, that we also have delivered on the midterm 50-20. If you or especially if you include also, some of our JVs. I mean, It is first of all organic growth. It's only a small portion being acquired, about 1% or so.
Of France, yeah. Yeah. 1% of France.
Of France. It is modest. When it comes to the IFRS 15 question, that has also a limited impact on 18 figures. However, we have some negative effect on IFRS 15 in the first half, I would say.
First quarter.
First quarter in FINN.no, and a little bit of it, I think. Somewhat easy comparison as a result of that IFRS 15, but it is leveling off on a yearly basis.
Okay. It helped the second half and it hurt the first half of 2018.
Yeah, we are talking about rather modest figures. I wouldn't put too much into that.
Okay, thanks. Also, on leboncoin was a fantastic margin in the quarter. I think you said something about holding back a little bit on marketing spend. How should we think about margins when we start 2019 in leboncoin?
Yeah. Well, we always get this question, and the same answer as before. We are not guiding on margins going forward for leboncoin. Fair to say that the marketing spend fluctuates between quarters, and being somewhat lower in Q4. That's the only thing we are saying on that.
Okay thanks.
We will take our next question. Caller, please go ahead.
Yes. Hi, this is Rasmus with Handelsbanken. I just have one remaining question. It seems like a fairly big figure to have SEK 700 million of central costs in Schibsted. Is that something that you will sort of work to lower over time? Or is there something in there that which I don't quite understand, so it needs to be that way?
Well, yeah. But first of all, you have to split this down to, I mean, headquarter cost, which is a bit less than SEK 300, so that you have to take away. Then we are remaining with central product and tech cost. If you split those, being around SEK 400 or so, then it is about 50/50 split between MPI and Schibsted. So it's not right to say that this only relates to Schibsted. That's a wrong calculation.
Okay. it's not NOK 100 million of sort of NOK 800...
Well, I mean, due to the, this SEK 700 million that is SEK 768 million, that is the figure for combined Schibsted in 2018. When I break that down, that was 2018 figures. Of course, we will get some extra cost, some SEK tens of millions of extra head office cost in Barcelona coming in 2019 compared with 2018 figures.
Yeah. Yeah. Okay. When will we get a prospectus for MPI? Is that at the Capital Markets Day, or will we get the data and figures later?
The Capital Markets Day, seventh of March. The prospectus will come closer to the actual listing day, so towards the end of April. Sorry, end of March. I don't think we have a specific date for that, but it will be later than the Capital Markets Day.
Okay, thank you.
Yeah.
As a reminder, it is star one to ask a question. We will take our next question. Caller, please go ahead.
Hello, this is Stefan Billing from Kepler Cheuvreux. I have a couple of questions. One is on Brazil. If you could please quantify the impact from the management incentive program in Q4, that would be helpful. The other one is regarding the minority buyout in Spain. I was wondering if that transaction was had any mechanism, such as a put call option that triggered this with a predefined valuation or so, or if it was basically an agreement based on a new market valuation, so to speak. Thank you.
I mean, Brazil, fair to say that there are some effect in our incentive program. We are not disclosing any further details on that. Brazil, we are very happy to see the development in Q4 with strong growth both in cars, real estate and also jobs. That's good performance. Also, marketings fluctuate somewhat there. When it comes to the Spanish situation, there was some kind of arrangement, but there was no fixed price, so this has been a negotiated price. We are very happy with the price as we have been in an agreement with the minority holder. Also, the underlying development in Spain, both in cars, jobs and also we are doing some of that real estate.
We believe this was the right thing to do, but it is a negotiated price.
All right, thanks. Just back to the Brazil thing. Since you mentioned the incentive program, I guess that it had a fairly significant impact. Or is it incorrect?
Yeah. Some impact, you know, we don't disclose these kind of details. I'm not prepared to say anything more on that.
You know we could, if you look at the full year margin, of course that is apples to apples. That will of course.
Yes.
It's talking about accrual that should have been throughout the whole year that then you would have that effect spread out over the whole year. If you look at full year numbers, they would be representative. Of course Q4 was hampered by a huge or fairly large concentration of marketing in addition to this more one-off. Yeah.
All right. Thank you.
There are no additional questions at this time, so I would like to turn the conference back to our presenters for any additional or closing remarks.
Okay. I think, we are, we just would like to thank you all for participating this afternoon. We will of course be available for further follow-ups on email or phone calls later if you, if you have more questions as you go along. Please reach out to the IR team if that's the case. All right. Thanks a lot and bye-bye.
Thank you.
Ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.