Good day, and welcome to the Schibsted Q1 2019 Q&A conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jo Christian. Please go ahead, sir.
Good afternoon. My name is Jo Christian Steigedal. I'm the Head of IR in Schibsted, a warm welcome from Oslo to this Q&A session in connection with the presentation of the Q1ly report for Schibsted in 2019. Thanks a lot for to all you for joining us today. Together with me here in Oslo are our CEO, Kristin Skogen Lund, and our CFO, Mr. Trond Berger. Let me briefly remind you that we held a webcast presentation in Oslo this morning, the recording is available on Schibsted's the website on the IR section there. Adevinta reported its Q1 results yesterday morning, 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, and hello, everybody. We released a good set of figures this morning with overall 6% growth in digital revenue when excluding Adevinta, corresponding to 3% overall growth. Our Nordic marketplaces continue to deliver strong results and at the high end of the 8%-12% mid to long-term revenue growth target range that we have communicated. I would say that the growth in FINN is particularly impressive. They grew 18%, and that is despite a decline in advertising, but although it is including a positive Easter effect. I'm also very happy to report that Blocket in Sweden is back to revenue growth this quarter after several quarters of revenue contraction.
We have taken a range of measures to rectify the weakness in Blocket, and the company is now well equipped to reinstate good growth going forward. In news media, digital subscriptions is the key to revenue growth for the future, and we see that our editorial products deliver well in this respect, and digital revenue growth was 5%, and digital subscriptions were up by 16%. We did see a bit of an unexpected decline in advertising in the Q1, especially in Norway. As we did state earlier today, we do see better figures for April, so we are confident that market will bounce back. The EBITDA margin was stable if we disregard the positive effect that we get from the change in IFRS 16, and this is also in line with our communicated targets. Within financial services, we still see vast opportunities.
Lendo continued to grow in Q1. However, as expected and as communicated, the expansion into new markets is contributing to reduced margins. Sweden continued to be particularly solid in Q1, whereas the development in Norway is still influenced by a tightening regulatory regime that takes down volume in the market altogether. We do believe that these regulations is positive for the market and that in the longer term, this will be beneficial also for our business here. Finally, Tretti continues to do very well with healthy growth both in revenue and in margins. Let me round off by saying a few words on our financial situation, because after the demerger and the sell down of shares in Adevinta, Schibsted has a solid balance sheet being close to net debt free.
At the Q1 presentation this morning, we did reiterate that we have the possibility to lever up if a particularly attractive investment becomes available. At the same time, we will look into addressing any overcapitalization through dividends or share buybacks. In sum, Nordic marketplaces is well on track, driving growth, particularly in the verticals, very strongly, and Blocket returned to positive growth as well. In news media, we see strong development in digital subscriptions and a stable profit margin. In Schibsted Growth, we see large potential, Lendo doing well in Sweden, but a weaker market in Norway, and we, our margins are hampered by the investment that's ongoing in the European rollout in new markets. I would like to hand back to the operator now and we will have a Q&A session. Thank you for listening.
Thank you. If you wish to ask a question, please press star one on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star one to ask a question. We'll take our first question from Silvia Cuneo from Deutsche Bank. Please go ahead. Your line is open.
Good afternoon, and thank you for taking my questions. The first one is on the news media business. You've been able to cut costs for a number of years now. How much more potential there is to control costs? Any comments about what % of the cost base is variable and related to print would be great. The second is on Lendo and the growth in Sweden. In the presentation slide, you mentioned that margins were reduced also in the established phase due to poor performance in Finland. Can you share some thoughts about what is a normalized revenue growth and EBITDA margin for this business? Is it the growth rate we've seen in Sweden in this quarter? Final question, just on your latest comment about the strong balance sheet and the possibility to lever up if attractive investments become available.
Just wondering if they don't become available, would you consider maybe investing organically in some of your business areas, for example, giving a bigger push on Lendo? Thank you.
Right. To your question about news media. first of all, we have been able to take out a lot of efficiency over the last years. I think that we still strive for efficiency measures. but there is no plan for, so to say, a new kind of cost program. We will do the best in order to have efficient and smooth operations. If you look at the cost split, there is of course, in, especially in the morning newspapers, close to 40% of the cost base is print and distribution. If you look ahead, of course, you will get over time a business with higher margin and lower revenue. So.
We will certainly do necessary measures to in order to keep, so to say, what we guide for also our flattish development. We are very pleased with what we see on digital revenue in news. To your question on Lendo, I would say that Lendo continue to do well. Of course, some slowdown in Norway, as expected, by the way, in the H1. We have decided to continue to do marketing activities both in Norway and Sweden in order to take market share. I think that goes well. So the development in Lendo is more as expected. I would say that Sweden was a little bit softer in towards the end of the quarter.
We have done some changes in the marketing mix now going forward that we really hope could bring Lendo Sweden some more back to what we have seen. In Lendo in Finland, I, we have changed the management. We're not satisfied with what we have seen there. It has been a little bit more competitive situation and not so well run, so that's a little bit of disappointment. We have taken actions, so Finland should come back to track. Of course, the international expansion is just as planned. We have guided for NOK 70 million-NOK 100 million, and that's still in the plan. We closely monitor KPIs, like in Denmark, it goes well, been there in market 2, 3 months, so that looks promising.
The other markets are too early. We will certainly look at our investments depending on the development of successful KPIs. The leverage question, I would say that, I mean, we have the financial target of 1x-3x net interest we get, EBITDA, and that's of course something we would like to be within over time. We will look into measures like, well, as Christi mentioned, both dividend and buybacks. Certainly we do also believe that there are many opportunities in market consolidation. That goes also still for some opportunities in the marketplace of classifieds, and also some niche players in that area.
Also it goes also for some of the financial services that we think there are opportunities and also in some growth areas. In-market consolidation within existing business is quite important and value-enhancing, that's something that we would like to pursue.
Thank you.
As a reminder to ask a question, please press star one on your telephone keypad. We will now take our next question. Caller, your line is open. Please go ahead.
Oh, hi there. Can you hear me?
Yes.
Hi, hi, Trond. You've got Andrew Ross here from Barclays. I've got 3 questions as well. First one is just a follow-up on your comments on capitalization. Is there anything you can share with us on how you're thinking about the dividend now, kind of at the Schibsted level, obviously excluding the consolidation of Adevinta, going forwards? As an extension to that, you know, at what point would you look at doing kind of special returns, either dividends or buybacks? Kind of what are you waiting for there, just to give us a sense? Is it that you're waiting to see if you can deploy the cash via M&A, or is there a point at which, kind of the value for Rump would go where you'd look at those types of measures? Just some color there would be helpful.
My second question is on Blocket. Could you help quantify the impact of Cado on the growth in Q1? Would Blocket have grown on an organic basis? Third question also on Blocket. There's been some press articles about you guys rejoining the Google Exchange in Sweden. Can you talk a bit about that? A, if it's true, B, kind of how's it going and what kind of impact is that making on the growth as you think about Blocket for the rest of the year?
Right. Well, on the, just to repeat a little bit what we have stated when it comes to the capital structure. I mean, we have, as I said, a capital structure over time that should be between 1 to 3 times net interest-bearing debt over EBITDA. That implies, of course, that we over time look into measures. We have just now completed, as already IPO of Adevinta, well received. Certainly we need to, in a way, make the way for new Schibsted, no doubt that we will look into different measures. We will come back to the market in due time when it comes to what kind of measures we are planning in that respect.
I think also, as I commented upon, M&A will certainly also be, first of all, within the in-market consolidation that we think is value enhancing. We will handle that capital structure in accordance with the policy that we have. When it comes to the Blocket, I hand the word over to K ristine.
On the Blocket, the impact in Q1 is NOK 1.2 million. We just started the integration and we're working hard to integrate it further. We will see the impact of costs are growing in the times to come. Well, I can briefly do the advertising thing as well. We open up some of our inventory on Google the first week of April, and we also got the Bonnier inventory onto our AppNexus platform. We believe that this will have a positive effect, but it's not gonna be like a quick effect because user habits, et cetera, will need to be reworked a bit. It will come gradually, it will make a positive impact.
I think it's fair to say also that the Swedish advertising market in general was somewhat, it's showing some general improvement, although it's still not strong. It's let's say it's less negative than it has been in the past quarters.
Great. Thanks. Maybe just to follow up on that first question, just in terms of the regular dividend that Schibsted's gonna pay out now, is there anything you can give us in terms of how you're thinking about that in terms of, you know, how much of your cash flow you might wanna give, in the regular dividend?
Our dividend policy is that we will have stable to increasing dividend. Of course, since we have I would say a strong cash flow, certainly we will looking to live up to that, also increasing over time our dividend. It also may be relevant going forward at some point to look into other kind of distribution. That's something we will come back to in due course.
When you said about stable to increasing versus for 2 NOK you announced for 2018, despite the fact you spun out of Adevinta or?
What we have said is that when we had the spin-off, we paid a higher dividend for 18. We have seen that we have a strong cash flow going forward as well. That's something of course that we need to look into for dividend policy for 19. It may be relevant also there to increase of course the dividend in line with our policy. Yeah.
Okay. Thanks.
As a reminder to ask a question, please press star one on your cell phone keypad. We'll pause for a moment to allow everyone to signal. As there are no further questions at this time, I'd like to hand the call back for any additional or closing remarks.
Thank you very much. Please make sure to sign up for questions if you have any now at the very end. If not, we would like to thank you all for participating at this call. We are available from the IR side of Schibsted to answer any questions offline, of course, on phone or email later if you like that. Other than that, from Oslo, thanks a lot for participating and have a nice afternoon.
Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.