Good day, welcome to the Schibsted Media Group Q2 2014 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, welcome to this Q&A session in connection with the Schibsted second quarter report for 2014. Thank you very much for joining us today. My name is Jo Christian Steigedal. I'm the IRO of Schibsted. Together with me here in Oslo are our CEO, Rolv Erik Ryssdal, and our CFO, Mr. Trond Berger. Now I'd like to hand the word over to Trond Berger for a short introduction of the quarter, early results.
Thank you for that, Jo Christian. Our Q2 report show that we continue to deliver on our main classified sites in first of all, in Europe. We invest in traffic and strengthen that in Spain, giving results and in also many other countries. At the same time, we have decided to go for a freemium model in FINN. That was planned and reported earlier. Of course, some negative effect of that. We believe that the freemium model with extra payment for features or time is a better way of monetizing that segment of the market. When it comes to our investments, we continue to do significant investments and in emerging markets.
Also there, we are very happy with the underlying traffic development that we see and that we are able really to follow the plans that we have and that we should be well-positioned for future growth and later monetization in many of these key markets. All in all, our classified operations, we follow closely development in all markets. We are, as I said, very satisfied with first of all the traffic growth, but also the underlying revenue development in some of these key markets. The media houses structural shift continue, focus on taking out efficiency and cost savings in order to maintain healthy, good margins.
At the same time, invest heavily in digital transformation, which we really see effect of in VG and Aftonbladet, which is have more than 70% of their advertising coming from the online field. By this, we are opening up for questions.
Okay, operator, please, go to Q&A.
Certainly. If you would like to ask a question at this time, please press the star or asterisk key, followed by the digit one on your telephone. 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 will pause for just a moment to allow everyone to signal. We will now take our first question from Rasmus Engberg from SHB. Please go ahead, your line is open.
Hi, guys. This is Rasmus with Handelsbanken, if that was not clear. I had on Spain, when did you start this transition to reduce monetization, and how long will it continue, you think?
Well, I think in Spain, we started actually last fall, but you see the most of the full effect this year. To give a general perception of Spain, I'm positive to the outlooks there because in the report and in the presentation, if you go to the pages about Spain, which I believe is page number 16, there is you can see that the traffic is developing very positively. That has also continued now at the start of the second quarter. At the same time, we're seeing for the first time, I believe, some more fundamental signs that the economy is turning around. We're seeing that when it comes to the inflow of new jobs at Indeed jobs.
we're optimistic about the situation. I think, you know, the main strategy will continue to build our market positions. I can't give you kind of. I think it'll be a gradual development of the site as the traffic grows. It's hard to. We're going to continue on this strategy that we're having on building traffic. You know, it's giving and I think that's giving good results.
I'm just trying to remind myself what the timing was of that. Then I had two questions about the acquisitions in the online classifieds in FINN and in Blocket. Can you help us with, maybe it's a question for Trond, but what was the impact on sales from the acquisition in Sweden in online classified and in Norway in this quarter?
Well, in Sweden, it's a very minor impact of the steps of acquisition. We had, as you know, very limited revenue figures. It is, so to say, nearly no effect on the figures we were given there. The same I would say also to the FINN revenue figures because really the Lendo that was transferred to FINN is also in an early stage. No, not really significant impact into the revenue figures.
You say it does lower the margin by 2 percentage points, even though it's nearly at breakeven.
It's because typically what you see is that Lendo, which is a startup company in Norway building up in consumer finance, of course it's always startup costs and so it has a negative effect, first of all, on the margin. That's for sure.
Okay. Yeah. I thought the report said it was almost breakeven or.
Well, it is close to a breakeven but still somewhat negative and a slight negative effect on the revenue. Yeah.
Okay. Put it differently. The investment phase for these two units, is that a 12-month, or is it sort of... What kind of horizon should we use when we look at how long these investments will weigh on the margin?
Well, I think the, it really depends on how fast we can penetrate the digital market in Sweden, and at the same time, this marketplace in Norway. I would say that, if you look at maybe a year or more from now, it should certainly be some positive contributions, hopefully.
Okay. All right. Okay, thanks.
As a reminder, to ask a question at this time, please press star one. We will now take our next question from Torbjorn Olsen from Fearnley Securities. Please go ahead, your line is open.
Yes, thank you. A few more questions. First, can you give any idea of the impact from the restructuring you are doing in the media houses? You're charging about NOK 100 million this year, and do you have any idea of what this will do with the cost base?
Well, the restructuring will gradually take place during 2014 and will have full effect in 2015. It could typically have, let's say maybe up to 1%-2% margin effect, positive, into 2015.
The other one is for the classified media. On the new venture side, when should we expect to see some impact on the revenue on those new venture markets? Which one is hopeful to start contributing with some revenue short term?
Well, I mean, we As we really focus on building traffic positions and being long term into this, and we do see really strong growth on all the KPI metrics we have in these markets, both on web and mobile. I mean, out of the investment, the largest is of course Brazil, there we have different actions, so we can do some kind of monetization, but it won't be meaningful revenue figures compared with, of course, the significant in investments. I think you could see some effect in Brazil over time.
We're of course working constantly on moving sites from the investment phase and over to a more mature phase. In the last few years, of course, Muda has been transferred, and Subito and willhaben. We expect that also some of the other European sites such as Tori will move over and cross that line, and also a few of the emerging sites.
Yeah. Also we'd like to add on example like Chile doing great, also there. We're moving towards monetization and not too far away from a break-even situation going forward. There are a lot of promising development.
Thank you.
There are no further questions in the queue at this time. Thank you.
Okay. Thanks a lot for participating. We'll give you one more chance if there's anyone else with some questions.
We will now take our next question from Sami Sarkamies from Nordea. Please go ahead, your line is open.
Hi. Thanks. One more question still. Just wanted to ask on the margin outlook for second half of this year. You have a lot going on in France, Sweden, so you will be investing in these countries. You're also developing new platforms in Norway. You will be taking over Milanuncios. How will you manage the margins going in the second half of the year? Maybe some further color on this.
Well, we don't really give guidance when it comes to margin outlook on the short term for next half year or so. What we can say is that we are very well positioned for future growth, first of all in France. The real estate that will have the most impact, of course, from 2015 onwards. We have a very strong position, as you can see in some of the slide material, that we are really strong on traffic and are preparing ourselves to enter into the French real estate market. At the same time, we continue to gain market share in cars.
France is of course important and will continue well. The same we see in some other core markets. We also continue to invest, but I'm hesitant to give any more concrete guidance other than, of course, the classified will continue to grow and with generally strong margins.
some of the bigger sites you mentioned, like leboncoin, I believe will continue to do well. What you said is that FINN will the rest of this year also be affected by the same factors as in the first half, which are then the premium for generalists. Also we've said that, also the job markets in Europe, which is a bit weaker, dependent on how it's going with that.
Okay. As a follow-up, just trying to understand that, how are you sort of managing this internal that, all these areas have pretty sizable investment needs. Is there a limit on how much you're prepared to sort of invest overall, at certain point in time? How do you manage this?
Yeah, sure. I mean, we're following up our sites. When it comes to the big sites, we're following up on the individuals basis. If FINN and leboncoin have good investment opportunities, they're allowed to pursue that. What we said previously also is that for FINN, for instance, which is pretty big in some of the traditional verticals, when they present new things, such as they're now doing with Lendo and the personal finance stuff, then we're able to, we're willing to go ahead with that if it's positive from a NPV perspective, even if it might dilute the margins somewhat.
Of course, when it comes to the emerging portfolio, what we're saying there is that we're working closely to follow the development in the key KPIs.
Okay. Thank you very much.
We will now take our next question from Raj Shant from Newton Investment Management. Please go ahead, your line is open.
Hi. Good afternoon. Two quick questions. Firstly, just on the FINN margins. There were clearly a couple of issues during the second quarter, but could you give us a longer-term view of where you would expect the FINN margins to be, say, over the coming several quarters or the next couple of years? The second question is on the French real estate expansion. Clearly, you have had involvement with French real estate before, but would you just give some more of an idea in terms of the initial investments, and what you'd expect the potential revenue opportunity to be there?
Starting with the latter one, I would say that for France, we're optimistic as to the investment or the opportunity in real estate. You know, we're going to obviously do some things to the site and improve the user experience. We're also going to build a stronger sales presence. I don't think that would be, you know, that shouldn't be the most heavy investment. I think that the opportunity is quite good. I think you're seeing a big market where there's a very strong player, especially in the lucrative Paris market, of course, SeLoger.
I think that, you know, that we can in the rest of the country and subsequently also more in the central regions, be able to achieve a very interesting slice of that total market without going into too much detail. I think we can do it based on the strength that we're already having by adding sales people and increasing and enhancing the technical some technical parts of the site that will provide a better user experience. When it comes to FINN, I think I should without being too concrete on margins, I think it's fair to say that the.
What I mentioned with the two factors affecting the margins so far this year will continue for the rest of this year. It's important for us to continue to have FINN going back to or maintaining a growth track. That's why on the presentation we lined up some thoughts about what is the experience and what is the next generation marketplace look like. By adding new services, also enhancing the experience, adding payment, peer-to-peer payments, profiles, ratings, et cetera, we believe that we will be able to monetize that in an even better way than today, which will also be beneficial for the margins medium to long term.
We will now take our next question from Lars Herlin from AIM Group. Please go ahead, your line is open.
Okay. Good afternoon. I'd like to talk about the mobile development. As you say, it's top priority. First, the acquisition of Shpock
What does the path to full control mean? Do we have a timetable for that?
Well, I mean, first of all, Shpock is a very interesting concept mobile only. We do see very good growth in Austria and Germany, and also launched in the U.K. It's in a way, a different approach to the classifieds markets, and with very good functionality. Something similar actually to the functionality that we built into our mobile app in also in future launches in the classifieds. It's we have a path to control, and it is likely to exercise maybe towards the end of the year.
Okay. I'd like to put a question on the new app. As I understand it's iPhone app, as you presented on the PowerPoint picture. Have you already developed the Android variant of this? On how many classified sites have you already?
We have.
put it out on the market?
We have developed both the Android and the iOS version of it. I believe it's in, it's been rolled out in Brazil, and then the other markets will follow suit eventually.
Could you tell us which markets?
This is a dynamic development. You know, although a new version is launched out, that will also constantly be upgraded with new versions and new features. We have rolled this out in one country, and we'll do it in the next month in other countries. For other competitive reasons, I don't want to be too specific about we are coming at what time.
I found the iOS, and it's a good app, but I couldn't find the Android app on Google Play for Brazil.
It is launched or about to be launched also on Android.
Okay.
picture on the slide. It's actually were two pictures. One is iOS and one is Android. It's on both platforms.
Okay. Thank you.
There are no further questions in the queue at this time.
Okay. I think we will wrap up. I will thank you all for participating this afternoon. I wish you all a nice weekend.
That will conclude today's conference call. Thank Thank you for your participation, ladies and gentlemen. You may now disconnect.