Good day. Welcome to the Schibsted Group second quarter 2017 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. A warm welcome to this Q&A session in connection with the presentation of Schibsted's second quarter report for 2017. Thanks a lot for joining us today. Together with me here in Oslo are our CEO, Rolv Erik Ryssdal, and our CFO, Mr. Trond Berger. I'd now like to hand the word over to Mr. Ryssdal for a short introduction.
Thank you very much, Jo Christian, and warm welcome to all of you. Together with the team here, I'm looking forward to answer your questions regarding our report. Please allow me first to make a short introduction. The second quarter was the strongest quarter ever for Schibsted in terms of gross operating profits. It is good to see that all our main businesses segments contribute to this, publishing Schibsted Growth and Online Classifieds. In our largest online classified market, France, we saw a continued strong development in the verticals. Both within cars and real estate, where we're able to improve our position through product development and good execution out in the market fields. Triple class position, the job market is also being strengthened, and this part of the marketplace starts contributing in terms of revenues as well.
The biggest problem in France is display advertising, where the revenues have grown slowly due to adverse market conditions. In Spain, the development has been mixed for a few quarters. The growth in cars and jobs is excellent. We're now also cross-selling across all our sites and cars, whereas there is tough competition and limited revenue growth in real estate. Display advertising has also been rather slow. We remain full committed to the Spanish market, which we should see, where we expect to see good development over time. In Scandinavia, I would highlight the good development in Norway when it comes to revenue for FINN. This goes for all the verticals. We also see that there are new initiatives like personnel planning and marketplaces for services work well.
It's been important for us to strike back at competing efforts in Norway, and we have succeeded very well in doing that. Some native apps have been spending rather large amounts for marketing recently, but both Shpock and FINN are growing faster than the challengers. However, the marketing spend has been quite high in that quarter. Looking at Sweden, the picture is somewhat mixed. We're doing very well in jobs and cars, whereas real estate and display advertising is contracting. In Q2, we saw strong development for our native app, Shpock, not only in Norway, but in other markets too. Especially the development in UK is good. The good traction means that we can be somewhat lighter on the throttle in terms of marketing.
This has led to a reduction in revenue-based losses in Q2, and we expect that trend to continue in the second half of 2017 and into 2018. Our increased ownership in Brazil came into effect as of 1st July. We have great expectations for Brazil, and we're very happy with the quarter that has passed. The revenue growth remains strong both in cars and real estate. We expect to reach a break even during second half 2017. A few comments on our media houses. I'm proud of the many good journalistic achievements and innovative product development in our media houses. On the financials, we see that good online development combined with cost control resulted in margin enhancement in Q2. I would particularly highlight VG, where total revenue grew, revenues grew with 4%, and the EBITDA margin increased from 15%-20%.
Unique for a traditional media house. It's obviously strong digital ad growth that is the main driver for the revenues. Wrapping up with Schibsted Growth, I would say that Lendo continues to lead the way with strong revenue growth and good margin development. Lendo has also an international potential, and besides the success in Sweden and Norway, we see promising development in Finland. Before opening up for questions, I would just remind you that the full presentation recorded on video this morning is available on our website. I'd 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're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one if you would like to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. We'll take our first question from Lisa Yang with Goldman Sachs.
Hi. I have a few questions, please. Firstly is in the other developed market within classified, could you explain the slowdown in growth this year? I think previously you mentioned some sales of issues in Ireland. Just wondering what's the impact of that issue and how temporary do you think that could be? If you can also give an underlying trend, you know, for each industry, that'd be helpful. Secondly, on France, I was also wondering why the growth was a bit slower than Q1, given the comp was easier and normally should be also ramping up the monetization of jobs. In France, I was just wondering, are you starting to see any impact as well from the merger of SeLoger and Logic-Immo? Lastly, it's on Shpock.
I think Naspers recently said they will be investing more in Letgo. I'm just wondering if you're seeing them being more aggressive in any of your markets, especially in the Nordics, and that's why, you know, you feel the need to also step up your investment there, and which explained the decline in the margins? Thank you.
Well, thank you. Let me start with the latter. In Shpock, what we've seen is that letgo has invested quite a lot, especially in Norway and Sweden. That's why we have also responded to that and invested quite a lot in marketing in Norway. We're seeing a very positive effect from our marketing. FINN is the one that's growing most. That also explains the somewhat higher marketing spend in FINN and part of the higher spend in Shpock so far. Going forward, we'll continue to respond to any threats from competitors. We feel that our marketing is very effective and really underlines our strong position.
When it comes to France, we're happy with our development there in real estate. I think the specific question was about the merger of Se Loger and Logic-Immo, and we haven't seen an effect of that. I think this is this deal has not yet been completed. It probably needs to go through competition authority or something like that before. We haven't seen any effect of that yet. What is important for us is that we're doing quite well or very well in France and I think that both real estate and Motor are the strong engines behind that. We're seeing an exciting development on jobs. The first question, perhaps you can take that here, Christian.
Yes. The first question was regarding the growth trajectory in Ireland specifically and in the other established countries. In Ireland, we've seen a slow revenue growth in real estate. It has been a good real estate market as such, but the volumes in real estate markets are quite low, and they seem to actually go down somewhat in the general market. That has been less of a help. In addition, there's been certain challenges in the display advertising sales in Ireland, partly related to some transition from the sales operations there, but also a little bit in the underlying development in the market.
When it comes to outlook for Ireland, I'd be hesitant to be specific on that. Partly it's related to market issues and partly internally, which we can obviously improve going forward. When it comes to the trend in Italy, that you also ask about, that has been a steady, fairly high growth rate in Italy. Marketing spend rather low in Q2, which obviously helps the EBITDA margin of their development segment as such.
Can I just follow up on the Shpock letgo situation? I mean, clearly in the emerging markets, you know, you signed a JV with Naspers, and it looks like, you know, you're not really competing against each other. Do you see, you know, in the foreseeable future potential, so, you know, partnership with them on the mobile native apps front?
Well, that's not something that has been discussed. I think, if I remember correctly, Naspers is also a minority owner in Letgo. That is not something that we would certainly have discussed.
Thank you very much.
We'll take our next question from Rasmus Engberg with SHB.
Yes. Hi, thank you. Just wondering, when you think about leboncoin, for the longer term, do you think about it as being roughly around 60% margin? I mean, it fluctuates a lot. It's difficult to know if there is a trend or not. Is this kind of a sustainable margin, or should it go up because you monetize more in jobs and real estate, or how should we think about that?
Well, I think we don't comment too specifically on margins, as you very well know, Rasmus, and I understand that you're asking the question. The important thing for us is do we believe it's a good growth prospect for France in the years to come? Yes, I really believe that. I think they have many things to do both in their main verticals, and I think jobs will be important. I think they can develop additional services like we've seen in the Nordics, and some of those will have lower margins. It'll be a little of a mixed effect.
I think we could say that France has good prospects to grow with healthy margins without being too specific on exactly what the margin will be.
Thank you. Thank you. Very clear. In terms of, as you now guide for lower spend in investment phase, is that going to impact Sweden and Norway as well, or is it primarily UK, Germany that you refer to here, or which is it?
Well, I, I think, Rasmus, that the investment spend, we do see good traction on Shpock, meaning that we believe there is scope for further marketing spend reduction. That also actually for all our markets. It depends on what letgo will exactly do in Norway and Sweden. As we do see strong development for Finland, for Blocket and for Shpock as such, we, of course, see the rationale but they also are a little bit careful, but you never know. In general, it goes across all the markets that we see that the marketing spend will go down.
Okay. It's also in the, in the larger markets than U.K. and Germany.
Yes. Yes.
It's not just the defensive part. Right. Finally on Spain, I think there was a, you know, the consolidation effect of the acquired Habitaclia. That's bigger in Q2 than in Q1, right? That it was for the full quarter.
No. It's fairly similar, I would say. Yeah.
The acceleration in sales growth is at least partly underlying.
The acceleration in Q2 is first of all due to a strong job and car market.
Mm-hmm. Very good. Okay. Thank you.
We'll take our next question from Silvia Cuneo with Deutsche Bank.
Hi, good afternoon. A few questions from me. First, on the media houses, after a number of good quarters, just wondering if there is still scope for further cost reduction and margin upside. just going back to leboncoin, can you please talk more about how successful the monetization of the jobs vertical has been so far, and how important it is the jobs vertical in the context of the other ones? secondly, on the real estate vertical, what do you think the competitive landscape will look like after the merger, of SeLoger and Logic-Immo you just mentioned, just referring to your slide. one last one on Shpock. Can you please give us an update on growth in the number of active users and the app downloads?
It would be very helpful to understand why lower investments will be sustainable going forward. Thanks.
The first question was the margin in media houses. There, I believe that we're happy with that we have seen a positive development in the margins. I don't expect the margins to increase there a lot further, but we're quite happy with the picture we're having because we're, you know, there's also pressure on the print revenues. I think that I think it's fair to say that we're very alert on the costs, so we're constantly reviewing them and done especially a lot in printing and infrastructure. We're quite, we're actually pleased with the margin levels that we have seen. We don't expect them to increase substantially after this.
I think you have a question on monetization of jobs in France.
I mean, the job market in France, EUR 130 million total market. We are attacking that at leboncoin, from, I would say, somewhat the lower end, but are improving our products to go upward in the value chain to also more towards the white collar type of jobs. There is, in the start only a few million EUR in monetization, we are very happy and follow the plan. Actually, it's better than the plan we had when we launched the job product. That goes well.
When it comes to the real estate market in France, if SeLoger goes together with Logic-Immo now, then I think, you know, there are two big players there, and that is SeLoger and that is leboncoin. I expect that to still be the picture, and I guess they will have some advantages of going together. They are, you know, they also have some overlap, and those services are more similar, whereas we have another approach coming more from the consumer on the volume side. I think that we will continue to grow healthily and be a strong competitor. You know, I think there's room for two strong players in that market. The question on the last question was on Shpock.
Christian, do you want to comment on that?
Yeah. I think the question was whether as how the growth trajectory of Shpock has continued. We don't disclose specific figures on that, but we've seen a continued strong download development overall for Shpock. The number of monthly listings is growing, I would say, as it has been over the last few quarters, so very strong growth. We see that the share of returning listers is very high. We have good data also when it comes to retention. All in all, we're happy with that.
If you look at some of the specific markets, I would say that in, of course, in Norway and Sweden, Shpock is really leading the way when it comes to the native apps and growing faster than the competitors. Also, as we've shown on the chart in the presentation, today, Shpock is about to overtake or has in some way, in some ways also overtaken Gumtree as the number one native or marketplace app in the UK.
Great. Thank you.
As a reminder, if you would like to ask a question, that is star one. We'll take our next question from Henriette Trondsen with Arctic Securities.
Yeah. Hi. Thank you. First on Sweden, have you seen anything from the new competitor in cars, Wayke? On Spain, how much of the revenue improvements in cars in Q2 is related to the revenue stream from Milanuncios? I guess you still see limited threat from Wallapop in cars. Can you give any more color on the real estate competition in with SAP in Brazil, which from my staff has slightly extended their market leadership in real estate. Thank you.
Well, I think on Sweden, we have not seen anything yet of the competitor Waze. That's where in cars we'll monitor their launch when it comes quite closely. What we're doing is we're increasing our efforts all the time with rolling out new products to cars and customers, especially car dealers. The second question, Jo?
Yes. It was the revenue improvement for cars. I think it's twofold. It is Coches doing well in itself and also because of expiry of the license agreement with Milanuncios part. Also some effect of that, but it comes from both sources. When it comes to Wallapop in Spain, we haven't really seen any effect of that into the car segment. Our understanding also is that they have prolonged their free offerings in order to try to capture more of the low-end car market. We do see limited traction when it comes to car dealers for Wallapop, but you never know.
Then if you go to the real estate in Brazil, just to remind you that the real estate market in Brazil is very much a new construction market, heavily dependent still on print. We believe therefore there is a really good scope for online players. SAP is certainly have a good position, especially the professional, little higher end market, but Wallapop we also see a strong growth. We don't see any changes in the potential in Brazil when it comes to real estate. But the market is very also different from city to city.
Yeah. Thank you.
Once again, if you would like to ask a question, that is star one. We'll take our next question from Hubert Jeaneau with UBS.
Hi. Thank you for taking my question. I have a couple of questions actually on Shpock. The first is, if you could help us understand a bit the difference in user profile between the Shpock app and your, I guess the more classical horizontal website and how much cannibalization there is between the two, and maybe the rationale for having especially two brands in a country. The second question, more on the monetization aspect of it. I'm a user of Shpock in the UK, and I noticed there's quite a few professional sellers.
I was wondering if that's an important avenue of monetization and if you could comment on the other, kind of the other ways, if you see it as similar as the, as the horizontal website. Thanks.
Yes. For the user profile, I would say that Shpock, a native app in general, they are very much directed towards the younger group and also quite urban segment. What we're seeing in most markets is that they actually extend the markets. So in Norway, Shpock has gained lots of new users at the same time as Finn is actually growing. They seem to complement each other. When it comes to the monetization, we are experimenting then with features that will build for professional professional sellers, typically car dealers, to see if they're interested in expanding their presence there in UK, where we believe that there is a strong desire among car dealers to have new alternatives.
Great. Thank you.
We'll take our next question from Preeti Sukha with Standard Bank.
Hi. I was hoping you could provide some color on the revenue, EBITDA, and daily active users for the second quarter for OLX Brazil.
Well, when it comes to OLX Brazil, we do not disclose detail of revenue and EBITDA. What we have said is that the growth rate continue in the Q2. Also we have said that during second half that we should reach a break-even situation in Brazil. When it comes to monthly active users, that continue to grow. I don't know, Ryssdal, if you recall a figure there.
I don't have a specific number at hand now, but obviously we've seen a good development also in users. What is really encouraging and strong with OLX is that they have a very, very high share of app users on their platform. That's a strength for that site.
Okay. Thanks.
Once again, if you would like to ask a question, that is star one. At this time, I have no further questions in queue.
Okay. Is there another question?
No, I'm sorry. They removed themselves.
Well, I think we say thank you very much for participating at the call. I would just like to wish you a very good day and also best wishes for the summer. Bye-bye.
This concludes today's call. Thank you for your participation. You may now disconnect.