Good day, ladies and gentlemen, and welcome to the Schibsted Media Group Q1 2014 Q&A conference call. For your information, today's conference is being recorded. At this time, I'll turn the call over to your host today, Mr. Jo Christian Stigedal. Please go ahead, sir.
Good afternoon, welcome to this Q&A session in connection with the presentation of Schibsted Media Group's first quarter report for 2014. Thank you very much for joining us today. My name is Jo Christian Stigedal. I'm the IRO of Schibsted. Together with me here in Oslo are our CEO, Mr. Rolv Erik Ryssdal, and our CFO, Mr. Trond Berger. I'd like to hand the word over to Trond Berger for a short introduction. Please go ahead, Trond.
Thank you, Christian. The Q1 highlight is continued online growth and stable margins before investments in new ventures. We have declassified the growth of 14% excluding Spain, which is a little bit special situation. It's 19% up, so we're happy with that. We just would like to remind you about that we have done some amendment to the reporting structure. IFRS does not allow pro rata consolidation in 2014. We have then included that equity accounting as part of operating result after the EBITA. That, of course, relates first of all to the JV that we have together with Telenor and Singapore Press Holdings. The losses as a result of that is NOK 202 included in our one-liner as a part of the operating result.
That, introduction, then I open up for Q&A.
Thank you very much, sir. Ladies and gentlemen, if you'd like to ask an audio question, please press the star or asterisk key followed by the digit one on your telephone keypad. Please also ensure that your mute function telephone is switched off to allow yourself to reach your equipment. If you find your questions being answered, you may remove yourself from the queue by pressing star two. Today's first question is coming from Ms. Catherine O'Neill calling us from Citi. Please go ahead, ma'am. Your line is open.
Hi. I've got three questions. Firstly on the investment level on the JV side in the online classifieds there, I think it was about EUR 16 million in the quarter. I just wondered how we should think about that in the quarters ahead, whether that's a level that's gonna sort of be a good level to use in terms of extrapolating it. Secondly, I know in your presentation earlier, you gave an outline of the real estate market in France, and you talked about it being EUR 250 million in terms of the value online. I just wondered if you could give more detail on the share that SeLoger has versus the SPIR sort of partnership you have and what the growth rate is of that.
Finally in Spain, I know you said revenues declined. I just wondered how much of that was due to macro versus sort of measured reductions that you're taking and when you expect that to improve?
Okay. Hello, this is Rolv Erik. I can take the last question first. I think in... What we're seeing in Spain is there's, is there is some signs of a more positive development in the macro. I would say that the decline in revenues are due to the measures that we're taking. When it comes to real estate market in France, we've said that we're optimistic as to developments. I don't have any exact figures for the market growth or to come with. But just suffice is to say that we have an agreement with SPIR that expires by the end of this year, and we're seeing this as a interesting opportunity for us going forward.
If we look at pure metrics like traffic, et cetera, then we're strong compared to the other players. Of course, respecting that there's an established number one player there, which is particularly strong in the Paris Region. I think that we can... I think however in other parts of France, we have a good opportunity to gain market share. When it comes to investment level, we have a competitive reasons not been interested in disclosing too much information. I would say that the reason we're doing this, and that's also shown in the documentation, is that we can see that the number of apps are growing quite rapidly in those markets where we are investing, and we're seeing good results of those investments.
Competitive reasons, we're not going to disclose levels. What I've said earlier today is that I think it will continue now, for the time being at a high level.
Okay. Sorry, just on France, of the EUR 250 million, do you know what kind of share SeLoger have? I know you said that's the sort of stronger competitor, but what share do they have in France?
Well, I mean, we just know that they have a little bit more than half of the market in France as such. What I can say is on a general note, I think that, you know, in markets like France, there are room for more players who can together expand the market. I think if we're talking about real estate, we're also today talked about the real estate in Sweden, and there of course there is a strong incumbent. We think that we can develop a good business and make a good profit there even as the number two player.
Okay, thanks.
Thank you much, ma'am. We'll now go to Mr. Mark Raleigh calling from Deutsche Bank. Please go ahead, sir. Your line is open.
All on FINN.no. The margin there relatively low in the first quarter. I mean, you specifically flagged the issue of Lendo diluting the margin there. I guess the fall away in job advertising is also quite a high margin impact. Can you just sort of give us a bit more color on that margin in FINN.no and how you think about the rest of the year there? Obviously, the freemium strategy is yet to come through. The second question, I guess just to try and get an overall feel for where numbers should be settling. If I look at the shift in the adjusted earnings figure year on year in the first quarter, you're down by more than 1 NOK. Last year, you reported slightly less than 4 NOK on a full year basis.
I mean, can we actually be looking at an adjusted EPS loss for 2014 as a whole?
When it comes to FINN.no, I think we said for a number of years that as you add additional business to the traditional one, the margins are lower. Personal Finance is of course one of those. Although I would like to emphasize that it's value- creative to expand into those markets. You're also right that the FINN.no job impact that is also has affected the margin. I'm quite comfortable when it comes to FINN.no going forward.
I mean, when it comes to guiding going forward, we don't give forward-looking statements as you know. I would be hesitant to give too much when it comes to EPS because that's the same of course. The only thing I can say if you look at the Q1, and is that of course we have a high investment level that penalizes the P&L. At the same time, we have a very prudent accounting when it comes to tax losses in new ventures, meaning that we don't account for deferred tax assets that you may claim that we could win some of these ventures. We stick to a prudent policy.
I think that we just realized that we have a good underlying growth in the established businesses that allows us to continue to do investments.
Okay. I mean, I guess what I'm trying to get at is, you know, that as you say, th e tax approach you take is very conservative, but it does mean that you end up with this extremely high tax rate. The level of investment that you took in the first quarter is quite a big step up on where you were for most of last year. It just sort of feels like we've got a lot of downgrade pressure on earnings, but I suppose t hat's our job to establish that. Just one quick follow-up question. Can you give us a figure for how much your real estate revenues are in France at the moment? Your share of the P3 revenue, what's that?
I mean, we haven't really given that figure to the market. It is fair to say that there are some millions of EUR. I mean, you could say that it's we have a certain market share and some low teens of share of that in the real estate market in France.
I mean, it's limited, but we're having, so that's why we're seeing. I see an interesting upside there.
Right. Sorry, I didn't quite catch that. Did you say low teens?
Yeah. We don't disclose it, so we have some NOK million in effect of the P3 currently. But I would be hesitant to give too much detail into that.
Okay. Understood. Thank you.
Thank you much, sir. We'll now go to Rasmus Engberg calling from SHB. Please go ahead.
Yes. Hi. I wanted to ask you some questions on the cash flow here. You have a CapEx in this quarter, I think, if I understand correctly, of more than NOK 170 million. Is that a lot of capitalization of intangibles or what should we be looking at in terms of CapEx for the full year?
Well, in Q1 CapEx, we have, I mean, first of all, our normal maintenance CapEx, is NOK 400 million in Schibsted.
Yeah.
It's slightly higher Q1 because we have then relocation after Testa moving into the same premises that.
Yeah.
These are according to plans. That lifted the somewhat more investments Q1, but that shouldn't continue too much into the rest of the year.
Good, thanks. Also on the cash flow, you're paying a tax of NOK 300 million. I know that in the last few years, there's typically one quarter where you pay a lot of tax. I guess this might be that quarter this year, right? Because we're not running at that rate throughout the year, I suppose.
Certainly. I mean, that's the way, actually the tax payment is, first of all in Norway in Q1.
Yes.
It's just a payment schedule according to the authorities. We won't pay too much going forward as a result of that.
If I understand this correctly, you have invested some NOK 170 million or so in the joint ventures. Should we sort of assume that that follows the losses in the associates quarter by quarter, that, you know, this is what you have to inject each quarter more or less if losses stay where they are? Or how does that work?
No, I mean, these are equity accounting, which is then result or in this case, losses. It is taken into account then also financial, which may of course be limited in this setup, but also tax effects. We haven't taken that into account currently, but we will do some of that because we have been very prudent. That could be depending on the stages of these investment-based companies. In Q on your right, in your statement, it may be somewhat to changes to that going forward. Of course, we will give some more information about that.
In general, we should expect it to sort of continue as I guess, they're not billions of dollars in those companies that you sort of inject it quarter by quarter or year by year or something like that.
No. What I'm saying is that it's limited, actually balance sheet items in the JV as such. That's right.
Okay. Yeah. Yeah. Good. I just wanted to ask, I'm trying to reconcile my own numbers here for the international business. Are you profitable in Spain? I mean, it seems to be a very low figure if you are or am I totally mistaken there? In the online classifieds.
Yes. We're on the positive side.
We're on the positive side.
Lower than one year back.
Yeah. Also remind you that we have decided to.
Yeah.
-change a bit revenue model. These are something that is planned for and also in order to really boost the traffic and secure future positions.
I'd like to say that this is very much in line with our overall philosophy, is that, we believe it's better to forsake short-term monetization now and rather build strong traffic positions because that's what's really interesting in long run.
Yeah. Yeah. Sure. Can I ask you a question which I'm not quite sure you will answer, but as you roll out real estate in France next year, do you sort of anticipate that your overall growth rate in France will accelerate? You know, if the bulk of the earnings you have now, I guess, might grow a little bit slower than this year, or how should we think about that? What is your best take on that?
I mean, you know that we don't give guidance to forward looking and growth rate in France. Just to remind you that SeLoger, of course, gradually increases prices and do price optimization and also have a volume growth. Of course, we are meeting somewhat strong figures also going forward. At some point, we will have of course, some effect of the real estate agreement, but that will be first from have an impact from 2015 onwards.
Yeah. Yeah. Had to ask it. Thank you.
Thank you much, sir. We'll now go to Sami Sarkamies calling from Nordea. Please go ahead.
Yeah, thanks. I would like to follow up the question Rasmus just asked. I would be interested in knowing a bit regarding the online classifieds operations in France and Spain. What kind of trends should we assume during the remainder of this year? Is it going to be in line with Q1 trends as far as top line and cost development are concerned?
Just to take Spain, we are a little bit in a wait and see modus in Spain. It is very much dependent upon the macro situation and also when we are able to, of course, include also Milanuncios and have even stronger grasp on that market. That of course at some point may pick up going over the next coming quarters. It is really a macro more question. Of course, we hope that the product changes and also go somewhat more free should give an effect over time here. When it comes to France, what I said is that we still believe that Leboncoin will have a good development, certainly both for traffic and revenue.
But also, bear in mind that we are meeting somewhat stronger figures because we have really had strong growth over many quarters. I'm don't have too much to add to that.
Okay. If I may add, what about the guidance after Q4? You were talking about higher monetization in Spain due to Milanuncios acquisition. This was no longer part of Q1 guidance. What should we interpret from that?
Well, you know, I think we're waiting for the approval so we can close the acquisition in Spain. What you said is that, you know, that's more in the longer or to medium term perspective, is that, we have generally hope to have a generally stronger position in Spain, which of course will lead to higher revenue. That's more on the, you know, on the medium term perspective.
Okay. Thank you very much.
Thank you much, sir. We'll now go to Mr. Marcus Ivar calling from Goldman Sachs. Please go ahead.
Yeah. Hi. I'm not sure if I'm repeating myself. I asked a few questions to the web this morning, but the web call somehow stopped working, and I'm not sure if you got the questions or answered them, but I will repeat them nonetheless. If I go back to France and the real estate effort
What I try to assess is, the design of the website and the functionality of Leboncoin. Will you be able to rather quickly kind of transfer the functionality and the design of Blocket Bostad to Leboncoin? It should be, I think, or at least I would assume relatively easy to include functions like maps and design and ease of use on the Leboncoin site quite substantially. Is this something that you can quickly kind of roll out in different markets and are you looking to do so? Thank you.
Right. You know, I'm sorry. I don't think we did get. There must have been something wrong with the webcast because we didn't get that question this morning. I think one of the advantages we're having as a group is that we can use since we have this common platform, is that we can if it's in duplicate functions around. We're able to do several things with with the French real estate product. We're, you know, we're ready to beef that up and add new functionality. The answer to that is yes.
Is that something we should expect kind of from 2015 onwards, or are you looking to do that even before the SPIR agreement expires?
Well, you know, I think that's something that we will really have to get back to. There are, you know, there's how to say, it's very competent staff in Leboncoin, who has many different plans and resources to do that. I'm quite confident at what they can achieve.
Okay. I just wanna make sure I understand one of your answers to previous questions regarding the P3 that you had a single-digit margin or single low double-digit margin. Not margin, sorry, market share. Is this I guess this is of the entire French real estate market rather than the P3 kind of market share per se?
Yeah. We don't really want to comment on our own figures. We can say it's I think it suffices for me to say that we have a limited part of the total market today through our share. That's fair enough to say.
It's not that you have a low teens % of the P3 revenue stream?
No. No, no, that was not commented on.
Okay.
We didn't comment on that. No, sorry, yeah.
Okay. Then just one question in regards to the other online established businesses. One person previously pointed out that the EBITDA had gone down quite a lot here to NOK 26 million versus NOK 48 million last year. You said it is partly Spain. Is this entirely Spain, or is it some other part of that, of those different businesses that actually see some margin pressure?
No, it is, first of all, Spain, I would say, and that we at the same time, I mean, we haven't really boosted some of the others. The development generally in all these other established is doing well, but the development is first of all hampered by Spain. By Spain, yeah.
Just one last question, if I may. Are there any of the new ventures that are close to being added to online established? Can you remind us on what the criteria is for anyone to be lifted up to the established kind of group? Thank you.
Yeah, no, it is first of all when the it goes from investment phase into established, when we do see that this will be profit on a yearly basis. We have to look it a little bit over time, I mean, stabilizing over a few quarters. I mean, we have some companies that are doing well, but we haven't said anything about which of those that we expect to go into the established. But it certainly over the next 2-3 years should be a few.
Yes. That is again, I mean, since we're trying to build this long-term value, we're, we should have moved some over right now, but we're continuing to invest.
Okay. Thank you.
Thank you much, sir. We'll now go to Lars Herlitz calling from The Raine Group. Please go ahead. Your line is open.
Okay. Thank you. I'd like to ask you about the Next- Generation app that you talked about that will come out now in the next six months. I guess it's from the Shpock, your Austrian acquirer in the autumn. I also heard that you start in the markets of Brazil, Mexico, Portugal and Austria, but not here in Scandinavia. Could you tell us a little bit more about the app and what it can do? Is it just, for example, just a freemium app or is it how will it works and how could you generate revenue from it?
Well, when it comes to Next Gen app project, I mean, that's something that we're working on of course in the classifieds. This has nothing to do with Shpock as such. It is an internal work development, based on lot of experience in mobile in many sites. We think it will be a strengthened and improved product that we will certainly launch into many of our classified site. We haven't disclosed which of the markets this will be launched into, but it will be relevant in the most markets I would say. I think we're really looking forward to that improvement, product improvement.
When it comes to Shpock, that's something that is outside this and we have an ownership in this and we don't comment more on that.
You have acquired Shpock, right? I haven't seen anything about it on your site.
No. I mean, we have an ownership stake in Shpock. Of course that ownership has been acquired, of course.
Okay.
We haven't disclosed it, on our website and details about it, because, there are many things that we don't really disclose, due to the size, et cetera.
When can we see how it works? On which site? Who will be first?
The next project. That is going to. We have a rollout plan, I mean.
We will comment on that.
We're not disclosing details. You'll see it soon in different sites.
Yeah.
Okay. I have to surf around then. Okay. Thank you.
Yeah.
Okay.
Thank you, Mr. Herlitz. Ladies and gentlemen, once again, as a reminder, if you have any questions or follow-up questions, please press star one. We'll now go to Mr. Rasmus Engberg from SHB. Please go ahead.
Yes. Hi. Thanks for allowing me to come back here. I just wanted to ask you, with the Milanuncios deal, have you thought anything more about, you know, firstly, is there any risk that you cannot go through with it for regulatory reasons or such that you have heard of? Secondly, if you go through with it, have you thought about how you will differentiate between your many different sites in Spain? Secondly, I'm trying to come to some sort of level of underlying tax rates. I wanted to ask you whether this revaluation gain that you have in Hungary, whether that is tax-deductible, or fully taxable. Thank you.
Right. We have filed with the Spanish Competition Authority. We expect that deal to be closed. I think, believe we have a good dialogue with them. Of course, they are reviewing it. So far it seems to. I don't expect any major difficulties because we have a good dialogue here with them. I think this Spain is a very interesting market, I think to further strengthen our position and open up for some for new ways to sell, for instance, add to the on the general display market, on the brand market, for instance. There are numerous things that we will look up on once that deal is completed.
Okay.
When it comes to the tax rate front, well, no, there is no effect of the revaluation as such. It means that it has no tax effect of that. It's a pure IFRS accounting thing.
Okay, thanks.
Thank you, sir. Ladies and gentlemen, as a final reminder, if you have any questions, please press star one. We have a follow-up question from Mr. Marcus Ivar calling from Goldman Sachs. Please go ahead.
Thank you. Thank you for letting me ask one more question. It's just regarding consolidation in the marketplace. You announced, I guess, a couple of them last quarter, in Morocco and Spain. How is your approach and thinking towards consolidation? Has it developed and changed over the last 12 months? Do you see any other actors in this marketplace really actively looking for consolidation opportunities? Thank you.
Well, you know, I think that answer, the question is the same as I'd say I said previously, is that we are, we're generally happy with the progress that we're making, and that's really what we're focusing on. We believe that we have a good position to take leaderships in the markets that we operate in. Then. Yeah. I think that's really the answer. We're focusing on our business, and that's working well for us.
Mr. Ivarsson, does that answer your question, sir?
Yes. Thank you.
Thank you very much. If there are no further question, operator?
There are no further questions at this time, sir.
Okay. I thank you all for participating in this conference call, and I wish you all a nice afternoon.
Ladies and gentlemen, that will conclude today's presentation. We thank you much for your participation.