Good day, and welcome to the Schibsted Media Group Quarter Two 2015 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, everybody, and welcome to this Q&A session in connection with the presentation of Schibsted's second quarter report for 2015. Thank you very much for joining us today. My name is Jo Christian Steigedal. I'm the Head of IR of Schibsted Media Group. Together with me here in Oslo are our CEO, Mr. Rolv Erik Ryssdal, our CFO, Mr. Trond Berger, and our IRO, Anders Rønning. I'd like now to hand the word over to Rolv Erik Ryssdal for a short introduction.
Thank you. Welcome everyone to the Schibsted Media Group Q2 Q&A conference call. We'll soon open up for questions. I would first like to make a short introduction to our results. This morning, we announced the results for the second quarter of 2015. It was a good quarter for Schibsted. Our online classified operations grew revenues by 16%, and the gross operating profit increased by 32%. Over the last few months, we have made significant steps forward along the value creative strategic path that we set out. We see continued good organic growth, and we have participated in consolidation and structural changes in the online classifieds market. Most recently, we have entered into an agreement to consolidate the Irish market, and we've acquired one of our competitors in Mexico. In both cases, we're strengthening our leadership position.
We expect to see more of this going forward. Our product pipeline is solid, and that will help us grow organically going forward. We've also established a second class of stock, the B shares. This will enable us to have the flexibility to pursue value-creative M&A or structural agreements when value-creative opportunities arise. In the second quarter, I'd like to highlight the development in Spain. The revenue growth was 17% and the EBITDA margin improved significantly. leboncoin in France also grew by 70%. This was somewhat affected by calendar effects that reduced the general activity level in France in May, but the underlying trend is unchanged. In Italy, Subito is still growing strongly, even though we temporarily reduced marketing spend somewhat in Q2. Within the media houses, we see continued growth in online revenues for most of our operations.
The continued decline for print combined with the speed of change in the online market creates concerns regarding the media houses profitability. Our competitors are increasing the global platforms, and we need to stay focused on developing our services fast. High quality independent journalism is and will remain the fundament of our winning recipe. This was a brief run-through of how we see the developments right now. A full presentation recorded on video this morning 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, sir. Ladies and gentlemen, 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 keypad. Please do ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star 1 to ask a question. We'll pause for a moment to allow everyone an opportunity to place a question. We take our first question from Sami Sarkamies from Nordea. Please go ahead. Your line is open.
Hi. Hi, thank you. There was quite a difference between Q1 and Q2 in terms of EBITDA margins for online classifieds. Could you open a bit factors behind this and should we assume margin levels we saw in Q2 going forward? Thanks.
Well, thanks for your question. That's an interesting topic. What we said this morning at the presentation was that margins will vary from quarter to quarter. This is to a large degree dependent upon advertisements, right? For instance, we saw that the in France, the margin was much higher in the first quarter, and then we ran several advertisement campaigns in the second quarter. In Spain, we know that we're going to run quite some advertising during the fall. I think, you know, it's, you shouldn't look at just single quarters. It's more interesting to look at the long-term trends.
Okay, thanks.
Our next question comes from Miss Catherine O'Neill from Citi. Please go ahead.
Thank you.
I've got a few questions actually. Firstly, you've announced or completed quite a few disposals in the last sort of quarter or so, especially on the print side. Are there any more sort of obvious disposals that, you know, that are likely? I know you talked about Aftenbladet this morning and said that it's not for sale. Secondly, on the investment level within the central sort of technology platform, as I understand it, I think you are reiterating the NOK 100 million-NOK 200 million of investment in that. If you could just clarify that and also talk about what kind of revenue uplift we should see from that over what period and where the benefits will come.
Thirdly, on leboncoin, we see the growth slowed in the second quarter, which you said was partly due to sort of holiday timing.
In France, should we expect the growth to get back to sort of 20%+ level from the third quarter? Will it continue more sort of around the high teens, the back end of the year? Thanks.
I'll take the first question, Trond, and I'll leave it to you. These disposals you're referring to, that's true that many of them have been announced recently, and that is a bit of a coincidence because sometimes some of these processes will take some time. I think we're, you know, we found good new owners for these businesses, and there are no further disposals planned.
Well, when it comes to the investment in tech, we said in Q1 report, NOK 100 million-NOK 200 million, 2015. Just to reiterate, that's the same we're sticking to, the same figure. The revenue uplift, I mean, we are building new ad tech platform ad systems that will mostly be rolled out in 2016 and onwards. As the revenue effect will first of all come from that. We will also do some measures during this autumn, but first of all, 2016. When it comes to the Leboncoin and the margin, I mean, we have stated that there was some calendar and holiday effect in May.
However, we do not give guidance when it comes to margins going forward. I'll, I'm sorry to give you any more precise answer to that.
Oh, sorry. I was talking about the top-line growth in Leboncoin. I know you didn't give guidance, but do you expect the 2Q at least to be the sort of trough in terms of growth levels for Leboncoin when you think about the growth rate across the year?
No, as I said, I mean, it, I know when it comes to guidance, it goes also for top line. We guide on overall for the classifieds, but not for specific assets like leboncoin. I've just commented upon what happened in Q2, but I'm not going to give any top-line guidance going forward.
I think it's fair to say that you will see the results vary a little bit from quarter to quarter.
Yeah. I mean, but there are some effect. No, I think we stay with that.
Okay, thank you.
Our next question comes from Rasmus Engberg from SHB. Please go ahead. My apologies. We'll take our next question from Per Nordal from Arctic Securities.
Hi, guys. I'm just a bit more curious on the holiday effects in leboncoin, during May. Could you give us more bits, a bit more color on what specific days, that was and how that changed from Q2 2014 to Q2 2015?
Well, I mean, I don't think we would like to go into detail, because this, as Rolv-Erik said, May also vary a little bit from quarter to quarter, from month to month, depending on activity level. We have just stated that it was some negative effect in May as a result of calendar effect and holidays. To give more precise... I mean, this will vary somewhat, so, we are not going be giving any more detail on this.
Okay. And, and, second question, if I may. It seems like from your cash flow, you made quite significant investments in quarter, and I assume a large part of that stems from the Anuntis acquisition. Could you give us a bit more detail into how much that was?
When it comes to the Anuntis, well, we have agreed with the sellers not to disclose the purchase amount. It's also fair to say that, the majority of course of the outflow of investment side was coming from the Anuntis in Q2.
Yeah. Yeah. If I can follow up on that, could you just then detail to us how much, you know, in regular maintenance CapEx you had in the quarter?
Yeah. The regular maintenance CapEx was on the same level as before.
Around the NOK 125.
125, if I recall, right, in the, in, isolated in the quarter.
Okay, thank you.
Our next question comes from Rasmus Engberg from SHB. Please go ahead. Your line is open.
Hello? Can you hear me?
Yes.
Okay. I thought I was connected before. Right. Yes. Were there holiday, extra holidays in France or not in this quarter? I mean, holiday days or what are you referring to here? I'm just trying to understand what I should add back here.
There was one. There was one extra holiday in May. That's correct. Yeah.
Okay. Right. Great. I have a sort of just trying to understand one thing which I've never dared to ask before, but when you say that your, the online classifieds should grow 15%-20%, is that, is that sort of an organic assumption or does it include any bolt-on acquisitions or how should we think about that really?
It's first of all, organic, the way we see our target.
Mm.
It's getting complicated, of course, if you have bolt-on acquisition to really separate if you have some small ones, but it's organic, yes.
Yeah. Just coming back to Spain and Italy, which were, you know, seemed to be very strong on EBITDA in the quarter. Is this a temporary thing that the costs are so much lower or does it reflect something else that we might have been missing here that the cost growth isn't that high anymore in those businesses, or is it just a quarterly thing?
Well, you know what? I think for Italy it's a quarterly thing, and we've started bringing to invest there, more in the second half. I think it also was, shall I say, a good margin this year in this quarter in Spain. I think that you'll see that also varying a little bit going forward, depending on the investment level of the marketing.
In Spain, I think you mentioned in the past, how your separate businesses performed, the recruitment side and the generalist side. Did you say anything on that this morning?
I said that, at the InfoJobs is the strongest performer with increase in both new sales and also revenues, approximately 20%. Fotocasa is also growing well and also thinking in the revenue-wise and traffic-wise.
The recruitment that is kind of deferred. When you have great new sales, it takes some time for that to materialize. That's correct, right?
That's why I emphasize actually that, you know, both in terms of new sales.
Yeah.
Also revenues, because the new sales were on par level with what we saw same quarter last year.
Right. Great. Thank you.
Our next question comes from Alex Balakhnin from Goldman Sachs. Please go ahead, sir.
Sounded quite reassuring on the prospects of Hemnet acquisition. I was just wondering what makes you relatively confident that you will be able to complete this deal and the offer will be ultimately accepted by the remaining shareholders. My second question is also on Spain. I was wondering to what extent the revenue growth acceleration is a result of Milanuncios acquisition, i.e., how much the traffic you utilize now across all your verticals helps drive these revenues up? It was just the macro recovery and basically business as usual and the Milanuncios acquisition effect hasn't kicked in yet. Your comments on that would be very helpful. Thank you.
Well, I think, could you repeat your first question because, again, we didn't hear all of it.
No, it was about Hemnet.
Could you repeat? Okay.
The first question was on Hemnet acquisition. Today in the presentation, yeah, this morning, you were quite confident about Hemnet deal prospects. I was wondering what makes you confident that the offer will be accepted?
You know, I think it's fair to say that we have a good dialogue with the sellers, and we believe that we would be a good owner for Hemnet. That's actually what makes me which gives us, you know, confidence that we believe that this is a good chance for us to come through. Of course, there is no guarantee for anything because, you know, there are a few, and this is a great company. There are a few other interest buyers and or seems to be at least. But I believe that we have that we've kind of will be a very good owner for Hemnet, and we have a good dialogue with the sellers.
When it comes to the second question, Trond, you wanna answer this?
Yes. Well, I mean, we generally, of course, Milanuncios helps when it comes to the overall traffic acquisition going forward in Spain. In this quarter, it is, I would say, the major effect is coming from the other verticals and the general trend in Spain. Milanuncios is not really a main factor as such into the figures that we have seen in this second quarter.
That's very helpful. May I just ask a quick follow-up here? You mentioned that you integrate the real estate listings and the traffic between your properties and Milanuncios. Do you think this will come into effect from the third quarter or later this year?
I think it will gradually come be effect in this, the rest of this year. I don't think that will give any big revenue effect isolated, but it will certainly give the build the products and give a better reach.
Okay, thanks so much. That's very helpful.
Ladies and gentlemen, as a further reminder, should you wish to ask a question at this time, please press star one on your telephone keypad. We'll now take our next question from Lars Herlin from AIM Group. Please go ahead, sir.
Okay. Thank you. Hi, guys. I'd like to ask you a couple of questions about building, finding the right people for your tech, your tech investments and finding and building up these tech teams in London. For example, how difficult is it to find the right people? How many empty chairs do you still have? The 2nd question is about Hungary. I find Hungary on 2 places, both in the established phase and then in the investment phase. Could you explain that? I have a 3rd question on Svenska Dagbladet in Sweden, a newspaper question that's not so common in these meetings. You are planning to sell Svenska Dagbladet into this joint venture with Mittmedia.
What will happen to the minority owner who has less than 0.1% of the shares, but a position in the board of Svenska Dagbladet? How will they get influenced for their politics in coming years? Those were the questions.
Starting with the first question, it's obviously a challenge to attract the right tech people. It's something we're working very hard on. I think I'm very happy with the success we made so far. We've recruited a number of people in London. We actually made a little bit of a step change when Yahoo closed down their office there this spring, and we took over a number of those. In London, I think it's I think so far the hiring is going well, and we're actually a little bit ahead of our schedule there. When it comes to Hungary, Christian.
Hungary, we have two companies, the Használtautó.hu, the car vertical, which is very well established leader with good profitability. That is reported as part of the established space. Whereas Jófogás, the generalist site, is still in investment phase. That's why you see it two places.
Yeah. When it comes to Svenska Dagbladet, I think this is kind of an internal dialogue between us and the other parties there. I don't think it's right to comment on that in here and now in this stock market update.
Okay, thank you.
Our next question comes from Markus Diebel from JP Morgan. Please go ahead.
Hi, everyone. It's Markus here. Yeah, most of my questions have been asked, but since I have you on the phone, I think, Trond, what would be quite helpful, one question on the newspapers, fortunately. Could you share with us a bit your thoughts about the margin progression? I mean, you obviously made the comment that obviously margin will remain under pressure, which probably doesn't surprise anyone. I think now we're getting into a territory where obviously revenue levels make it harder and harder to offset on the declines with cost savings. Is it fair to assume that if I look at the media houses, that there will be kind of a U-shaped form of margin development from here?
Do you think still there's a chance that we see maybe gradual small declines for the next few years? I mean, any comments would be quite helpful here. Also, at the presentation this morning, Rolv-Erik, your comment on Aftonbladet was very precise. It's not up for sale. Does it mean that we are at least at the end of potential disposals in the papers? That's just my question on that part of the business. One on the classifieds operations obviously growing very, very strongly. Could you share with us a bit more on Spain and the job market there? I mean, where are we in terms of migration to digital?
I mean, what I'm trying to find out is how much of that business is just structural or just cyclical, and how much is still coming from just a structural migration? That would be very helpful. Thank you.
Well, when it comes to the newspaper, it's a tough question to really answer whether we are able to keep the margins or if it will be a slight deterioration going forward. I would be prepared at least because it's still a challenging market for some slight deterioration in newspaper margins over coming quarters. We are doing the utmost, especially on the ad tech system, to actually come up with better products that we can in a way regain something as a result of that, and continue to do cost reductions in newspapers. Well, Aftonbladet, I mean, we commented upon that, of course, end of disposals, well, I mean, we don't have any plan for further disposals.
so that's the way we see it.
Then I can maybe comment a bit on the job market. I think the recovery we're seeing is to a large extent because of market improvements. If you look back a few years, back to 2007 and 2008, the revenues of InfoJobs was significantly higher than what you see today. But we don't have any specific data at hand now about how much is left on the print, but it's still a lot to do in terms of macro.
Okay, thanks a lot.
Ladies and gentlemen, as a further reminder, should you wish to place a question, just please press star one on your telephone keypad. We now have a follow-on question from Alex Balakhnin from Goldman Sachs. Please go ahead. Your line is open.
Good afternoon again. I had a question on the real estate vertical, size assessment in France. I recall in Barcelona presentation, you stated that the real estate classified vertical is EUR 250 million. Now you estimate the value at EUR 300 million.
Also you seem increased the estimate of the print classified in real estate. I was just wondering what drove this revaluation of the market, if you could share like your observations and assumptions, that would be very helpful. Thank you.
I think there's gone some time, and we have done some. You've seen some developments in the market, and we have done some additional research on this and come up with with a number that we think is the correct at the moment. There is nothing else behind that.
The market is indeed bigger than you thought, like 7 months ago?
Yeah. There's always some uncertainty. We don't have, sort of, precise sources on this. It's an assessment that is being done partly internally and partly through external input.
Thanks. That's very helpful.
Ladies and gentlemen, as a further reminder, please press star one to place a question. Just to advise that there are no further questions in the queue, I'll turn the call back to you for any additional or closing remarks.
Okay. If there are no more call questions, operator, are there anyone signaling now or should we?
No, there are none. There are no questions in the queue at present, sir. Thank you.
Okay. I would just take the opportunity to thank you all for participating in this call, and I will wish you all a nice day and a good summer. Thank you.
Ladies and gentlemen, that now concludes today's conference call. Thank you for your participation. You may now disconnect.