Good day, welcome to the Schibsted Q2 , 2019 Q&A 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. My name is Jo Christian Steigedal. I'm the Head of IR in Schibsted. Well, welcome from Oslo to this Q&A session in connection with the presentation of the second quarterly report for Schibsted in 2019. Thanks to all of you for joining us. Together with me here in Oslo are our CEO, Kristin Skogen Lund, CFO, Mr. Trond Berger, and my colleague on IR, Espen Vesaas. Let me briefly remind you that we held a webcast presentation in Oslo this morning, and recording is available on our website. Adevinta reported its Q2 results yesterday, and the 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, Jo Christian. This morning, we released a set of results which were record strong, in fact slightly more than NOK 1 billion of EBITDA for the Q2 . When focusing on Schibsted excluding Adevinta, we also see good development with an EBITDA of NOK 557 million. The most important growth driver for us is our Nordic Marketplaces business. In the Q2 , this business continued to deliver strong results. The revenue growth was 6%, remember that this was cut by the Easter effect. If you look at the verticals in isolation, that number was up 11%. FINN.no continued to grow fast in the Q2 , driven by good development in the verticals. It's also great to see that Blocket in Sweden accelerates and confirms its path to growth.
Still, not more than 2%, but they are definitely on the right track. This growth in the quarter came from both professional cars, jobs, and display advertising. I am optimistic when it comes to this prospects of continued good development over time for Nordic Marketplaces. We see now that the pipeline for new products and innovations is rich, both in FINN.no and increasingly in Blocket. The two companies are gradually working closer together on the product development. Right now, they're in the process of improving their auto customer journey in order to make the process to buy a car more frictionless and consumer friendly. An example is C2C payment solutions. Digital subscriptions continues to be the key growth revenue driver for News Media, and the revenue growth from these products were 22% in Q2.
When it comes to digital advertising, the picture was mixed. Aftonbladet ran into significant challenges when the Swedish gaming industry reduced its marketing spend significantly this quarter due to changes in regulation. In Norway, the digital advertising development was positive if we compare to the same quarter last year. All in all, News Media produced a slight revenue decline but improved EBITDA in the quarter, and we think that's a strong performance. Within Financial Services, the growth almost came to a halt in Q2. Lendo Sweden continued to grow well, but the reason for the slowdown is the performance of Lendo Norway, and the negative effect of the newly imposed regulations turned out to be stronger than we have anticipated. We are reducing our cost in Norway, but at the same time, we see this as an opportunity to strengthen our market position.
We're also working on how we can expand our Financial Services, both in terms of geography, in terms of taking a bigger part of the customer journey, and finally, to broaden the scope of services into new customer segments, such as the business segment. We still see vast opportunities, and we're happy that the newly launched operation in Denmark is looking good so far. We believe Norway will start to improve again when the market regains its balance, but right now it is unclear when this will happen, and we do realize that it can take some time. In the rest of the next business area, we see good development, especially within three jobs and our new distribution business. I would like to mention that we have managed to close several interesting venture investments during this quarter. Finally, Schibsted, excluding Adevinta, is now debt-free.
At the same time, we have communicated to the market that we see the benefit of carrying some debt, and we have indicated a target range for net interest-bearing debt over EBITDA of one to three times. Let me underscore that we do see opportunities for value creating M&A in the Nordics and other growth opportunities, for example, in Online Classifieds. At the same time, the board yesterday decided to activate a buyback program of up to 2% of the company's shares. We intend to initiate the buyback during this quarter three, that means that we will start adjusting our balance sheet in the direction of the target that we have provided to the market. To quickly summarize, Nordic Marketplaces is well on track, high pace of innovation and good growth in the verticals. Blocket confirms its growth path.
News Media, good development in digital subscriptions and improved profit margin. In Schibsted Growth, we see large potential, Lendo doing well in Sweden, but a weak market in Norway. We are continuing our investments into new markets.
Now with that, I would like to hand the word over to operator, and we will be happy to hear your questions. Thank you.
Thank you, ma'am. Ladies and gentlemen, if you would like to ask a question over the phone at this time, please signal by pressing * 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 your phone line will indicate when your line is open. Please state your name before posing your question. Once again, please press * one at this time to ask a question. We'll pause for just a brief moment to give everyone the opportunity to signal for questions. We'll now take our first question. Please go ahead, caller, your line is open.
Hello. It's Silvia Cuneo from Deutsche Bank. My first question is on Sweden. The reported overall revenue growth of 2% in local currency. Given that jobs and cars verticals both grew by 6%, it's clear that real estate is growing more slowly if not declining. Can you please discuss the latest development in the real estate market? Is maybe Blocket facing some increased competition from Hemnet, or is the market overall soft for housing? Second question still on Sweden, just a clarification. Was there any Easter effect similar to Norway, and how much was the impact on growth? Third question on the buyback, can you please give more color on your decision about timing and size? Also share some thoughts around the private market for Online Classifieds.
I guess the question here is, you started a buyback because maybe there is high competition for buying assets or valuations are not attractive. Thank you.
Well, it's Jon here. Just on the first question, I think you're referring to the Blocket development. It's right to say that the job and car continue well. Blocket do not have sizable real estate, so it is private cars that is going somewhat down. I think that we are now doing a lot of mitigating actions. We do believe that Blocket is on the right track and also going further in the value chain on the car segment, so a lot of opportunities there. When it comes then to Sweden and Easter effect, well, it's a minor effect on Easter. We haven't quantified, but, of course, there are maybe a percent or 2 on Blocket effect, which you could adjust for.
Going to the buyback. Well, I mean, we have said that we will initiate the buyback now, we have said up to 2%. Clearly it's, of course, first of all, to adjust the capital structure. We will report to the market on a daily basis when we have conducted the buybacks, it will be both in the A and Bs. I think we will have the flexibility, not stating if it's A or Bs, so that we have to report back to the market. There are a lot of opportunities in the OLC markets, of course, a lot of things going on.
This buyback is of course, first of all, to adjust the capital structure in Schibsted as such.
Thank you. Maybe just a follow-up on the first question. Thank you for mentioning about the private cars. Who is the main competitor in that segment? Because I think Wayke is mostly for professional dealers, right?
Yeah. Well, there is actually, I would say, limited competition in the car segment in Sweden. I would say that Blocket is keeping its market share, so it's some little slowdown in general, in the market for private cars in Sweden, but nothing to do with our position as such.
Thank you.
We'll now move on to our next question. Please go ahead, caller, your line is open.
Erik Karlsson from CapeView Capital . Thanks for taking my questions. My first question is on M&A in the Nordics, that you talked about. Would you be able to say if it's more about strengthening existing positions or if it's likely going into adjacencies or new businesses here? My second question would be just as a follow-up on the private car market for Blocket Sweden, when do you think you may return to growth there? Thank you.
Okay. When it comes to the M&A in the Nordics, I mean, we did, we love to do bolt-on in market consolidation. That's of course always most value enhancing. On the other hand, it could also be adjacent type of business. I mean, one thing that we have disclosed earlier is like the Casa acquisition. That was what we call an adjacent business, meaning that we broaden, so to say, the product space in the classifieds. It could also be new, I think, but we are doing already some venture investments to test and monitor the market when it comes to certain segments, but it's more modest in the total shift.
It's first of all, existing and adjacent, but I wouldn't outrule some new investments. The private car market is, I mean, we are doing now a lot of initiatives, like Kristin mentioned, both for payment, for making a smooth transaction, financing. I mean, there are a lot of activity going on to broaden, so to say, and deepen the value chain. That should lead to growth coming back in this segment. To be precise, when that will happen, I mean, hopefully, we can see that over the next couple of quarters, but that's really up to what's going on in the volume also in the market.
Very clear. Thank you so much.
We'll now move on to our next question. Please go ahead, caller, your line is open.
Hi there. You've got Andrew here from Barclays. I've got 4 questions, if that's okay. First 2 on Blocket. Perhaps could you give us a sense as to how Blocket trended through Q2 between April, May, and June? I guess I'm thinking about June when you were back on the Google Exchange, and you decided to cycle against the impact of GDPR. I would be interested to know if it was going much better in June. Second question on the margin at Blocket. Can you give us a sense as to how much of a reduction is due to timing of marketing and how much is due to more investment? I guess therefore, how we should think about the margin going into the second half and 2020. Third question is back to the buyback.
You've kind of phrased that as being motivated by capital structure, I guess, as opposed to value of the underlying Schibsted rump, if you strip that out of Adevinta. Can you just give us a bit more of a sense as to if that is the case or if there is an element where this is driven by value? I guess, at what level you'd think about doing additional buybacks, if this weren't to work during Q3. Final question, just on the ventures you guys have talked about. I know you've got Hypotec, you've got Bynk, but is there anything else you've invested in but it's getting you really excited of any size beyond now or is it really those two? Thanks.
Well, I mean, to comment directly on what happens on a monthly basis, like in Blocket, I think we are cautious about. We have seen some improvement during the quarter, so that has, of course, good. When it comes to the Blocket margin, I would say that some of the margins that now somewhat below 50 is due to that we have invested somewhat more in product than tech. I think we from time to time would like to broaden our scope. That is, yeah. Also again, we are not really guiding too much on the margin. Of course, if you see some pickup in revenue, that should also improve the margin.
When then about the buyback, we certainly look at the capital structure. That's the. Because as you know, that's an equal treatment of all shareholders. It also, of course, something that we have to look into when it comes to the valuation and discount and a particular total picture. That's something that we're not willing to comment upon from that perspective. When it comes then to the venture, I mean, we have had two very successful investment like Bink and Hypotec. I mean.
If you know, if you take the three companies that we closed in Q2, it's quite representative. One is within e-health, basically, online booked doctor services. One is called Podme, is typically an aggregator for quality podcast, and the other one is called Insurello, which is an insurance aggregator, basically. It's typically things across the board. If you ask for a specific area, I would say that e-health is something that we're looking into. We bought into a portfolio of e-health companies called Add Health Media, and it's a way to learn, and it's a small stake for the time being, but it could become an interesting sector.
Super. Thank you.
As a reminder, ladies and gentlemen, if you would like to ask a question today, please press * one on your telephone keypad. We'll now move on to our next question. Please go ahead, caller, your line is open.
Thank you. This is
I think it's fair to say that what's happened is that the regulation, you know, they have, you know, the effects have manifested now. Of course, we have seen, we have seen this coming, and you could say that the regulation is so that it particularly targets, let's say, the heavy users of betting, which are the most profitable ones. At the same time, I think it's fair to say you've had maybe an over-investment and over-establishment in the betting market in Sweden, and also the players who have been active have invested a lot to take position. You have sort of a, you know, accumulated effect of several factors hitting at once here. There is quite a strong contraction in the market as such. Thus, you know, that's the main effect.
There is a secondary effect that part of this regulation has also opened up for betting to be allowed in other channels. It's fair to say that some volume might have gone over to more, let's say, social media-based channels, but I'm not able to quantify that in any way. I think that, you know, Aftonbladet with its incredible digital footprint, is very well-positioned to restructure the advertising portfolio. You could maybe say that that would, you know, would have been a necessary step to take anyway. It is better to have a more diversified portfolio. We're quite comfortable that Aftonbladet will be able to do that. We already see good uptake in things like within food and travel and other sectors, so we are quite confident on their behalf.
Perfect. Thank you.
It appears we have no further questions queued over the phone at this time. I would like to turn the call back to our hosts for any additional closing remarks.
Yeah. Shall we give the audience, 10 more seconds to sign up? We want to make sure that they are, that you've answered all your questions.
Certainly, sir. It does appear we have one further question signaling in. We'll now take our next question. Please go ahead, caller, your line is open.
Hi there, you've got Andrew again from Barclays. Thanks for squeezing one more in. It's just on Blocket. You talked about the C2C piece on autos. Could you talk a little bit about the trends you're seeing on the C2C piece in generalish, and I guess I'm thinking, Well, how you folks are evolving on pricing for basic listings on C2C and how the competitive dynamics are evolving there? Thanks.
First of all, there is no change in the competitive landscape in Blocket. When it comes to pricing, we still believe that we have a fair and adjustable justifying price or level in the C2C for auto and Blocket. What we see as an opportunity for going forward is we need to go much deeper in the value chain in a car transaction, and that's our main focus for time being. Of course, be able to take up more on pricing in C2C and B2C in the auto market in Sweden as in Norway. That's our main priority, I would say, on the product side.
Thanks.
Just as a gentle reminder, ladies and gentlemen, please press * one at this time if you wish to ask a question. We'll now move on to our next question. Please go ahead, caller, your line is open.
Just another question from Eirik Karlsson of CapeView, if I may, then. On the Blocket margin, any reason why it couldn't return to prior levels as you grow into the new level of investments?
Uh, I mean, we. Uh, that-that's something that we are hesitant to be too precise on the Blocket margin. It has been, uh, in the area of fifty, uh, fifty plus, uh, for many quarters. But, uh, I mean, we have done some more product, uh, investments now. Of course, if we, uh, now can see some result of what we are doing in all the product side in increased revenue, I mean, it's easier to, uh, come back to the levels that we had before.
On the other hand, it's fair to say that, uh, Schibsted is both for FINN.no and for Blocket are broadening, so to say, the product space, and also think it's right to go into some areas with some lower margin than the pure vertical in itself. So, so, uh, it. So of course, it could come back.
I mean, I think that we have, a strategy that is a little bit more focused on growth, and not just milking too much the vertical, in itself.
You could say that the launch of travel in Blocket is an example of the last point from Trond.
Very clear. Thank you so much.
Mr. Steigedal, there are no further questions queuing over the phone at this time.
I think we are, we'd just like to say thanks a lot for participating at this call, and wish you all a nice afternoon and warm and nice summer, and talk to you later. If you need any more assistance, please reach out to us on email or phone me more. Okay, thanks.
Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.