Ladies and gentlemen, good day, and welcome to the Schibsted Q3 2019 Q&A and 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 investor relations. Please go ahead.
Good afternoon, everybody. My name is Jo Christian Steigedal. A warm welcome from Oslo to this Q&A session in connection with the presentation of the third quarterly report for Schibsted in 2019. Thanks to all of you for joining us today. Together with me here in Oslo are our CEO, Kristin Skogen Lund, and CFO, Mr. Ragnar Kårhus. This morning, we held a webcast presentation of the quarterly results here in Oslo, and many of you may have seen it already, but anyway, it's available for replay on our website. Adevinta reported its Q3 results yesterday morning, and a recording of their quarterly presentation is available on adevinta.com. Now I'd like to hand the word over to Kristin Skogen Lund for a short introduction.
Thank you so much, Jo Christian. This morning, I would say we released a solid set of results, and we continue to perform well when it comes to the key strategic focus areas. Looking at the total figures, when we focus on Schibsted excluding Adevinta, our group's revenue grew 1%, and maybe more interestingly, digital revenue grew 4%. Our EBITDA increased 6% but was down when excluding the accounting impact from the IFRS 16. Our most essential revenue and profit driver continues to be the Nordic Marketplaces business, and here, both Finn.no in Norway and Blocket in Sweden had impressive progress past quarter, and a total revenue growth, sorry, of 9%.
Our key strategic focus is to grow revenues in the professional verticals as we did in Q3. At the same time, it's good to see that we're able to improve the revenue trends within digital advertising in both of those markets, especially strong performance there in Norway. I would say that growth comes both from competent employees and hard work. Margins are down in Blocket as they are increasing their cost to reinforce product and tech along with some new hires to ensure their long-term growth perspective. Digital subscriptions continues to grow very well in our News Media business area. We're now at 700,000 pure digital subscribers.
The revenue growth from our pure digital subscriptions were at 30%. That's a touch better than the already good trends we had in Q2. We are succeeding in converting more non-paying users to subscribers and at the same time improving revenue per subscriber with around 15%. On the other hand, we have been struggling with our digital advertising developments within the News Media business. I would say we have been hit by some structural changes, like the big drop in the gaming industry's marketing spend in general in Sweden. At the same time, we also see a competitive market in Norway with an increasing price pressure. To conclude on News Media, I think it's a satisfactory overall performance to deliver a 1% margin decline excluding the positive impact from IFRS on the back of a 4% revenue fall.
I would add that we will follow up the cost development in News Media closely going forward in order to address the negative margin effects of the revenue development that we are currently facing there. Within Financial Services, we see a strong trend of technology-enabled innovative services being launched, and Schibsted will continue to focus on developing our market positions and competence in this area. Operationally, I'm happy to report that our operations in the field regained momentum and grew their revenues now in the Q3 . Lendo Sweden continues to grow at a steady double-digit pace, and in Norway, the development has now stabilized after several tough months, and we now see flat revenue development month by month.
We continue to allocate funds to expanding Lendo internationally, and I'm happy to say that in the Q3 , international operations now contributed to NOK 9 million of revenues and that we are particularly encouraged by the signals coming from Denmark. In Schibsted Growth, our distribution business is the prime driver for the positive development. Product and tech innovation have positioned Schibsted Distribution to be a part of a strong mega trend of growth within e-commerce. Finally, let me say a few words about capital allocation. Schibsted, excluding Adevinta, has a low debt level, even after the 1% buyback that we've been doing during the Q3 . We have communicated to the market that we see the benefit of carrying some debt, and we have indicated a target range of net interest bearing debt over EBITDA, between 1 and 3.
We continue to see opportunities for value-creating M&A in the Nordics, and this is at the top of our management agenda and priority list. At the same time, we will continue to buy back shares, and the intention is to fulfill the buyback program of up to 2% of the company share in this coming quarter now. This is one way of step-by-step adjusting our balance sheet in the direction of the communicated target. To quickly summarize, Nordic Marketplaces is on track. Strong top line growth, both in Norway and Sweden, combined with good margins. News Media, good development in digital subscription, tight cost control, but increasingly challenging advertising market, which results in a revenue decline there. Good growth for Lendo in Sweden, signs of stabilization in Norway, and investments in new markets now show encouraging signals.
With that, 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. 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 from Silvia Cuneo with Deutsche Bank.
Thank you. Good afternoon. My first question is on Finn.no, and its revenue growth potential. In light of your comments from the results presentation this morning about jobs being somewhat more challenging entering Q4 and real estate being soft, can you please remind us of the sensitivity of your revenue base? Do you typically offer any volume-based discounts or subscription packages that could protect you from the cycle? Second question, just on the new app you've launched, Svosj. This morning you talked about the economics, so this is a follow-up question on the potential. Have you thought at all of offering on-demand delivery services as well? Why did you choose the before breakfast delivery window? Also, can you please talk about how this proposition is different from maybe Amazon Prime currently in Norway?
If you could finally share some metrics about the reach of your distribution network, that would be great. Thank you.
Sure. Okay. To Finn first. Well, both jobs and real estate are obviously very important verticals for Finn. What I signaled today was that we have seen some very early signs late last quarter of some more volatile job markets. This might not materialize into anything, but we thought it was correct to say it, so you just don't put, like, a linear automatic growth on the signals that we've shown so far. And on real estate, it's basically that the real estate market as such is actually quite positive here. Sometimes the market and the number of ads do not necessarily correspond. For example, if it's really easy to sell something, you don't need that many ads.
We've just seen a slight decrease in volumes of real estate, ads, but there is really no reason to be very concerned about the market as such. When it comes to Svosj, the reason we deliver before breakfast is because it's delivered together with our newspaper. This is being distributed on top of our already existing distribution network that is set up for the newspaper distribution. We have a 90% reach of all households in Norway, because this distribution system is made up of three main media partners. It's Schibsted, it's Amedia, our competitor, and it's Polaris, where we are a part owner. All of these networks are joined together in one company called Mediapost that we own together with Amedia.
and Helthjem and our other e-commerce distribution systems or concepts, they are buying services from this physical network. The Svosj is the Svosj concept is quite similar to Amazon Prime, actually. Amazon is not present with their concept here in Norway. I would say that it carries quite a lot of similarities to that business.
Thank you.
We will take our next question from Lisa Yang with Goldman Sachs.
Good afternoon. Couple of questions, please. First one, Prisjakt. It looks like, you know, the trends have been degrading quite meaningfully recently. Could you talk a bit about the plans or, you know, what are you exactly going to do to potentially turn this asset around? Maybe at some point, you know, would you be considering maybe other strategic options such as, you know, even, maybe selling the asset? That's the first question. Secondly, the advertising growth at Finn.no was pretty impressive, I think +15%. Just wondering to what extent you think that's sustainable into Q4, into next year, and what has kind of really happened beyond just the easy comps.
Certainly on capital allocation, could you maybe give us a more precise timing in terms of where you think you can get towards, let's say, the mid to upper end of your target leverage of one to three times? Are we talking about six months, a year? If M&A doesn't materialize, in that time frame, would you consider maybe more aggressive buybacks or dividend to get to your target? Thank you very much.
Sure. Prisjakt. Well, you know, there are a couple of effects there. First of all, I mean, the consumer electronics market has seen some difficulties in general, but this is also due to the fact that we did a platform change on Prisjakt, and then we have had some trouble with our leads generation and conversion, and it has to do with that you sort of need to re-optimize, for example, your search engine optimization on Google and other effects like that. I think this is something that we're gonna work through, and we have very good plans for how to grow Prisjakt further.
I'm nowhere near, you know, sort of, thinking that this is something we should give up upon or sell or something. I think this is a good concept that we will be able to turn around again. When it comes to advertising in Finn.no, I hope, of course, to see the good results continuing because this is partly due to good sales work, but also because we have optimized the formats on the site. In that sense, I think it's due to more permanent circumstances. I have to remind you that the advertising market is so volatile that it's very difficult to predict how it will develop.
When it comes to capital allocation, the timing, the thing is that, you know, we are pursuing several very interesting opportunities for M&A, but as you all know, it's hard to say exactly when they will materialize. We hope to, we certainly hope to have achieved something concrete within a timeframe of the next 6 to 12 months, indeed. I would say that if by 12 months we still have not, then I think it's, it would be pertinent to reevaluate whether we would then need to do more of an extraordinary dividend or further buyback. I think if in a year's time we are there, then we would need to signal, send some new signals on that.
Let me say, I'm pretty confident we will deliver something within the next 12 months.
Thank you. That's extremely helpful. Can I just follow up on the last question? I think you mentioned this morning you're pursuing a lot of M&A opportunities in Sweden. And just like looking at the different verticals, like, where do you see, I would say, the most exciting opportunity, especially from a regulatory perspective, given you have a, you know, relatively high share already, I mean, with the exception of real estate. How would the regulator, you think, would look at this?
Right. Well, I think, I think, some of the circumstances have, maybe, are slightly altered. For example, the fact that we no longer are ourselves involved in direct, you know, real estate for sale, activities and things like that. It's, it is, it is, still a bit of a delicate regulatory situation, and that's why we need to just proceed very diligently with how we, how we, how we evaluate this opportunity. There are other opportunities, you know, we can consolidate within jobs. There are opportunities in Finland, there are many options for us to look at.
Great. Thank you very much.
As a reminder, it is star one if you would like to ask a question. We will take our next question from Eirik Rafdal with Carnegie.
Yes. Hi. A lot of questions covered now. I just have one on the digital advertising within News Media in Norway. I was just wondering, you say that you have some aggressive competitors there on price. I was just wondering who in particular, if there is any particular ones, or number 2, if it's kind of a more structural shift towards more aggressive pricing, like my kind of understanding is that you see in Sweden. Thanks.
Yeah. Well, let me also start by reminding you that VG had a very good strong quarter, Q3 and also Q4 last year. We are comparing to very strong numbers. I don't say that to excuse, but to explain a little bit. It is at the same time true that the market is becoming more competitive. VG, in particular, has an advertising mix that's made up of nationally based brand type advertisers, and their TV is a strong competitor. I think it's fair to say that TV 2, among others, have probably taken some of that some share in that segment. It is also true that there is a price pressure. I would not like to name anyone.
There certainly are some players out there that are not helping in keeping prices up these days, to put it that way.
Okay. Perfect. Thanks.
We will take our next question from Andrew Ross with Barclays.
Hi, everyone. Thanks for squeezing me in. I've just got two, both on Lendo. First one, I wonder if there's anything you can share with us about what you've learned from your expansion strategy. It sounds like Denmark is going really well, and you sound a little bit less warm on Austria and Poland. Is there anything different between those markets, that explains that? Is it just how much investment you've put in? I guess anything you can share with us about which other markets you may go into next. Second question also on Lendo, can you update us about what's going on in terms of competition within Norway?
I imagine things must have been pretty tough, and as to decide of regulatory changes, how do you think about kind of your market share and how Lendo looks in that context next year?
Great. Okay. Lendo, yes, we have learned a lot, you know, this past year, in these different markets. What you see is, you know, and it varies from market to market. I could take Poland as one example, where we see that we actually are, you know, we hit really well when it comes to the consumer interface. We have big traffic, take up on our site and good brand liking and all of this. The conversion when it's, you know, into the banks is too slow. The main explanation we see for it is that this is quite a new and unfamiliar way of doing credit checks and loan handling or loan processing.
It takes too long. Hence, the leads that we bring in, they don't convert the way they should, and the trouble is on the banking side. We just, you know, we're not giving up on Poland, but we need to work more on that, and it's gonna take longer. Denmark, on the other hand, it was a really quick adoption and has just hit really well, both in traffic and brand liking and perception, and also the way things are handled with the banks. That has to do also with that it's a Nordic context and very digitalized, so it's easier, and it's worked almost better than planned there. Then Austria, I think you have a bit of both.
You have still some very manual processing within the banking systems, which sort of hampers the whole concept of Lendo, which is to be a quick aggregator and lead generator. When you have some extremely manual processes, for example, a requirement that an offer needs to be handed by paper, things like that really makes it difficult for now to have the sufficient progress. Let me also say that, of course, we don't pour marketing into markets where we don't see that the concept is ready to fly. We monitor that very closely. In terms of new markets, I don't think I would name any markets, although we have some hot candidates in mind, but I don't think I'll say it now.
We have concrete plans for potential expansion, and we are excited about the prospects in some other markets. Of course, the more we learn, the better we will be able to nail it better at the next entry. When it comes to competition in Norway, I think it would be fair to say that we have been rather prudent in Lendo in our business practices. I think you will find some more sluggish players in the Norwegian market. I think it's also reasonable to say that our market share recently has at least not increased. I don't know if it's fallen that much, but I don't think we have taken market share because I think we have been rather prudent.
I'm absolutely convinced that that will pay off long term with the new market sentiment and the new regulation and regulatory environment.
Super helpful. Maybe just to follow up on that last one, there's no further change in regulation that you see coming into next year, right, that we should be worried about?
Not that we know about, no.
Great. Thank you.
As a reminder, it is star one if you would like to ask a question. There are no further phone questions at this time. I would like to turn the conference back to our speakers for any additional or closing remarks.
Okay, thanks a lot everyone for asking good questions. We are of course available later for follow-ups on email or on phone to the IR team. For now, thanks a lot to all of you, and goodbye.
Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.