Good day and welcome to the Schibsted Media Group Q4 2014 question and answer conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jo Christian Steigedal. Please go ahead, sir.
Good afternoon and welcome to this Q&A session in connection with the presentation of Schibsted's Q4 report for 2014. Thank you very much for joining us today. My name is Jo Christian Steigedal. I'm the IRO of Schibsted. Together with me here in Oslo are our CEO, Rolv Erik Ryssdal, our CFO, Mr. Trond Berger, and Anders Rønning also an IR. I'd like to hand the word over to Rolv Erik Ryssdal for a short introduction. Please go ahead.
Thank you. Welcome everyone to the Schibsted Media Group Q4 conference call. We'll soon open up for questions. I would first like to make some introductory comments to our results. The Q4 was an eventful quarter for us. Before commenting on the operational development, I'd like to mention some of the other things we achieved during that quarter. Most important was the joint venture agreement with Naspers that announced in November. We're joining forces in several emerging markets, with Brazil as the most prominent. This will create large benefits for our customers. History shows that combining sites releases a lot of potential as bigger marketplaces provide more value both for buyers, sellers, and advertisers. I might add also for shareholders.
We have also finalized our acquisition of Milanuncios, which is the biggest online classified site in Spain in terms of traffic. We have merged our site with Avito in Morocco, forming a market leader there. Today, we're delighted to announce that we made one more agreement with the Naspers. We are acquiring their OLX site in Hungary. By doing this and combining it with our own existing site, Jófogás, and our car vertical in Hungary, we'll get the sole position in the country, given the fact that we already have Jófogás and the car vertical. At the same time, we sell and divest our operations in Romania and Portugal to Naspers. When it comes to Switzerland, we have agreed with our partner there, Tamedia, that they will take the two sites, tutti.ch and CAR FOR YOU further, and hence buying our 50%.
After these transactions, we have a portfolio of online classified sites in different stages, mostly with market-leading positions in traffic terms. Among our key European markets, France once again stands out as the star performer. leboncoin grew revenues with 20% and delivered stable EBITDA margin at 65%. In Spain, we see very good results in terms of traffic growth and integration of Milanuncios, which effectively doubles the traffic in the country is on track. SEM Spain has a solid platform for revenue growth in 2015. Blocket in Sweden is growing in revenues and profit nicely, even with very tough comparison figures in Q4. FINN.no in Norway, however, had a disappointing quarter. Recruitment ad declined, which is in line with the somewhat softer macro climate in Norway.
We also see some revenues disappearing as a result of the freemium strategy that was implemented in May 2014. That is as planned. What we also saw in the Q4 was a decline in display advertisement. They're working hard now in FINN to develop new products to rectify that situation. The start of 2015 has been somewhat soft for a whole Norwegian market. Our media houses continue to develop well online. VG and Aftenbladet combined produce stable margins and close to stable revenues as a result of their success online. Subscription-based newspapers face some more headwind from print advertisement decline. They have a positive circulation trend as a result of well-received innovative online products. An important thing for Schibsted in 2015 and going forward is the ramp-up of tech capabilities.
To support both the online classifieds and the media houses, we're strengthening our efforts within digital development. Centralized teams for online platforms, login services, and advertising technology are being established. We're convinced that this will be a vital building block for continued success in online market. This was a brief run through on how we see development right now. The full presentation is recorded on video this morning and is available on our website. I'd like to hand the word over to our operator, so we can get started with questions and answers. Please, operator, go ahead.
Thank you. If you would like to ask a question at this time, please press the star or asterisk key followed by the digit 1 on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Again, please press star one to ask a question. We will pause for just a moment to allow everybody to signal. We will now take our first question from Catherine O'Neill from Citi. Please go ahead.
Hi. I've got several questions, please. Firstly, I want to just ask about Aspiro. Now you've disclosed about what the impact will be on a sort of full year basis. I noticed you said one of the reasons your other line was higher was due to investment there in the Q4. Secondly, on FINN, just wanted your thoughts on sort of growth expectations for 2015 and whether there was any specific reason why display advertising started to decline. Thirdly, on Spain, how we should think about margin in 2015 following the acquisition and higher investment in the Q4, whether that continues.
Finally, on your additional investment in the central sort of technology platforms, how much do you think that will sort of cannibalize your existing kind of print and online advertising revenues in terms of what you're trying to do there with data usages and targeting? How much will be sort of incremental revenue that you can generate? That's it. Thank you.
Well, I can start with the first one, the Aspiro, that hopefully that it goes through, meaning that a yearly burn rate of around NOK 70 million-80 million will disappear from our PNL, meaning that hopefully that is finalized end of Q1. Going to, I missed a little bit of FINN, but I can take the Spain question. The Spain is that we are happy with the integration Milanuncios. That was closed just before Christmas. You saw in Q4 that we actually did some actions throughout 2014 that we continued into Q4, meaning that we were cautious about monetizing it too much before we really had this closed and integrated.
That's why it's limited effect also on the positive development from InfoJobs, because that's a regular, a 12-month contract, so the effect will come mostly into 2015. I would say that Spain is on track on what we expect. Hopefully we see some macro upswing there. On the Schibsted technology, your question was more if there's an upside into future advertising taking a larger share of the advertising pie. I would say that it's a twofold. It is certainly to provide solutions that is even better than Facebook and Google when it comes to segmentation and identity login, because we have a really rich data in on our sites. The second...
That's why of course, we see that it is also defensive in a way to offset their taking share of the market in most of the world. I would say it's both defensive, but at the same time also gives opportunity to provide additional targeted revenue in some markets. FINN, I actually lost you on the FINN question.
Oh, sorry. I was just asking about growth expectations for 2015. It turned negative in 2014 and whether you expect 2015 or in the Q4, whether you expect 2015 to have positive growth, and also if there's any reason specifically why display started to decline.
Well, I would say that if you look at FINN, we guided the market when we had the capital market day in November, with a low single digit growth. Going forward for FINN, I would say that we were somewhat disappointed what we saw in Q4, fair to say, the end of Q4. I would also say that we are working on different product and enhancement in order to get this back on track. It could also be that it's somewhat slower start maybe in 2015 compared to what you may see going a little bit forward. We are sticking to the same guidance going forward in if you see through a couple of weak quarters.
I think it's fair to say that FINN has been a bit slow on the product development, especially as the migration goes from desktop to mobile, and they're doing now a lot of efforts what they can to rectify that situation.
Okay. Anything on display specifically in terms of why it was negative in the Q4? Is it cyclical or?
No, that was what I tried to explain. You know, I think that they've been a bit slow on their product development and they've lost some orders in the Q4. That's what they're working hard on to develop good solutions for display ads for also for mobile.
Okay. Thank you.
We will now take our next question from Rasmus Engberg from Handelsbanken.
Yes. Hi, guys. Just wondering, coming back to FINN, did you say that you still see a low single-digit growth rate for 2015 or not?
Yes, that was what we said.
Yeah, we said so. What I also said was that we were somewhat disappointed with Q4. It could be a couple of little bit softer quarters, but we stick to the guidance.
Okay. I think you said also in Barcelona, Blocket that you saw at a high single digit and that still stands.
There is nothing new on that.
No, there's no new information.
Okay, good. These additional, tech costs, of NOK 100 million-NOK 200 million, where will they be sort of be reported? Are they starting immediately or are they sort of growing throughout the year? How should we think about those?
Well, it is gradually built up, I would say. We have recruited, let's say, well, third or something like that. To compare to full recruitment end of the year. It will happen gradually. It will be most of it will be central cost, but some of it will be allocated to media houses and classifieds. In order to capitalize part of this according to IFRS, you need quite specific projects. We need to document and have that thorough work through. We will go through that in Q1 and come further back to how much we can capitalize out of the NOK 200.
At least, I would say that, at least NOK 100 million will be expensed. Maybe more depending on just the accounting treatment.
Is NOK 200 million sort of the full figure run rate 2016? Or how should I sort of think about this as it's sort of building throughout the year or?
It's close to that, I would say. Yeah.
Okay. Just a nitty-gritty. There's something in your divisional breakdown called other in EBITDA, which turned hugely negative in this quarter. What is that? Is that a one-off?
Well, it is, now I would say, three things. It is Aspiro. We decided to invest in the U.S. HiFi. That actually proved to be successful, and that's also the reason why a Jay Z company bidding on that. That actually been the right thing to do. It's also little bit weaker in our small dating side, Møteplassen. Also little bit stepping up our central tech costs.
Okay, that's We shouldn't extrapolate that or?
No, you shouldn't, you shouldn't. I mean, as I explained earlier.
Yeah.
we expect Aspiro to be sold in the Q1.
Okay. good. Okay. Thank you.
As a reminder, to ask a question at this time, please press star one. We will now take our next question from Alexander Høst from ABG.
Hi, guys. I had a question on VG. You talked a little bit about some investments in web TV there. I know you've discussed this earlier, but I was just wondering what's incremental versus what we've seen, you know, in 2014. Is all the NOK 100 million incremental or is it just a part of it? Second, I was wondering how much of that is likely to be capitalized, and if so, or if it is capitalized, what the depreciation schedule might be on that. Thank you.
No, it's actually, it's a good question because most of the run rate of NOK 100 million in 2015 is actually, a slightly up on what we've seen in 2014. It's not really a step-up in any significance. Most of that, this will be expensed as such.
Okay. Thank you.
We will now take our next question from Martin Stenshall from Danske Bank.
Yes. Hi, guys. Good afternoon. Just a question on the leboncoin. Would you be able to tell us how many real estate agents you have signed up on your own platform or product now? Also it would be great to get some comments on the pricing in that vertical in France. Because I think we were seeing, you know, kind of different ranges on, let's say, advertising spend among agents. Since I was just wondering what kind of price levels we should think about. Thank you.
Well, you know, we were pleased with the development, but it's early days. It seems that many of the large advertisers of the real estate agents seems to be willing to sign up for leboncoin. We haven't, but it's early days, so I think we have to wait till a little bit later this year to provide more details on exact how many. When it comes to the pricing level, I think we've been rather conservative, and we have developed a pricing list that is not too far from actually the old offer of Petites- Annonces, but it's significantly below the market leader SeLoger. I noticed also that SeLoger did increase their prices this year.
I think there's good sustainability in that market. Okay, we're ready for the next question.
As a reminder, to ask a question at this time, please press star one. We will now take our next question from Sami Sarkamies from Nordea. Please go ahead. Your line is now open.
Yes, thanks. I have a question on the additional tech investments you'll be making this year. Is the range due to the fact that you still don't know how much you will be capitalizing? Then, should we assume that this level of investments will be staying, so you will be having these costs also the following year as you're basically recruiting a team of developers to do these activities? Then a separate question, are you planning on doing any acquisitions, for example, to beef up your tech competence? I think this would be allowed now given the progress you'll be making with online classifieds and their consolidation. Thanks.
Well, when it comes to the level of tech cost in 2015, as I said, the total cash burn and level is close to NOK 200 million. Out of that, it's dependent upon how much you're allowed in a way to capitalize with respect to IFRS. I can say that we may capitalize up to NOK 100 million out of the NOK 200 million. Also it could be that we, depending on the work we're doing now in Q1, that we decide to expend somewhat more on P&L. We haven't concluded on that due to the rather specific requirement that we need to do this documentation. We will report back on that.
When it comes to the 2016 total spending level, I think it's fair to say that we will continue with somewhat the same level. It's also right to say that we, at the same time, are developing products, especially targeted advertising products in many of our sites that we will launch, first of all, at full rig, I would say, in 2016. Now that should also give additional advertising revenue as a result of these investments.
I think for acquisitions, we're finding that we're so far having good traction in building up the staff ourselves. I wouldn't rule out that we would do acquisitions of, you know, smaller or medium-sized companies, but I don't think that's the most likely. The most likely is that we're the tech people that we want is we hire them directly, and then of course, we have partnerships with others, but that's a different story.
Okay. Thank you very much.
As a reminder, to ask a question at this time, please press star one. There are no further questions in the queue at this time.
Okay. If there are no more questions, we will just thank you all for participating in this call, we wish you a good afternoon and a nice weekend when that time comes. Bye-bye.