Good day, ladies and gentlemen, and welcome to the Schibsted Media Group Q3 2013 Q&A conference call. For your information, today's call is being recorded. At this time, I would like to turn the call over to host today, Mr. Jo Christian Steigedal. Please go ahead, sir.
Good afternoon, and welcome to this Q&A session in connection with the release of Schibsted's third quarter report for 2013. Thank you very much for joining us this afternoon. My name is Jo Christian Steigedal. I'm the IRO of Schibsted. Together with me here in Oslo are Rolv Erik Ryssdal, the CEO, and the CFO, Mr. Trond Berger. Today, Schibsted released the Q3 report, where we had the underlying growth for the online classifieds of 13%. The growth was 17% including the Spanish operations. The gross operating profit was NOK 437 million, compared to last year's NOK 518 million. Excluding the investment phase in the online classifieds, the EBITDA was NOK 672 million, which was a growth of 4% compared to the same period in 2012.
After this brief introduction, we would just like to go straight to Q&A. This is a Q&A session only. If you want a complete presentational results, you can refer to the video webcast that is on our website. Please follow the instructions from the operator and please go ahead.
Thank you, sir. Ladies and gentlemen, if you wish to ask a question at this point, please press star one on your telephone keypad. Please ensure that the mute function on your phone is switched off to allow your signal to reach our equipment. Once again, ladies and gentlemen, please press star one to ask a question. We will pause for just a moment to allow everyone to signal. Our first question come from Ruchi Malaiya from Citigroup. Please go ahead.
Hi, good afternoon, everyone. I had a couple of questions. On Spain, it seems like the revenue weakness is twofold. Firstly, because of the weak macro, and secondly, because of your strategy to drive traffic growth at the expense of revenue. Focusing on the macro, if we accept that Spain is weak, can you tell us, was Spain any worse than you expected at the third quarter, or was it weak as expected? My second question is on Blocket. It seems to have had a good acceleration into double-digit growth in the third quarter. Can you tell us a bit more about what's driving that pickup and if you think it can be sustainable in the coming quarters? Thank you.
Right. I think the macroeconomic situation in Spain is has been as we expected at that level. What we're seeing in Spain is an interesting situation where we need to focus more on reviving the traffic growth. What I expect to see for the last quarter and also for the next year is that we will not monetize as much as has been done traditionally, and we'll probably spend more money on marketing. It's very important for us to revive the growth in traffic. That's concerning Spain. When it comes to Blocket, I think it's fair to say that they've had a good quarter that has been driven by good brand advertisements and also by some new product developments and price adjustments that they've that they've done.
Looking forward, Trond?
No, I mean, Blocket is certainly doing local product development, but also it depends upon the new car sales in Sweden. That has been somewhat sluggish earlier this year. There are some sign of improvement, but it's too early to say. That may represent a bit in line with what will be the case for that.
Yeah. We could also add that, in Q2, the previous quarter this year, there was a special effect, which, made the growth seem a bit, lower than the underlying, rate. If you compare the underlying rate from Q2, the difference is not that big in growth rate.
Thank you.
Our next question come from Mark Broadie with Deutsche Bank. Please go ahead, sir.
Yeah, good afternoon. Two or 3 questions. Just on Spain, just picking up on your comments there. Are you saying that revenues in Spain could actually go backwards next year? When you talk about less monetization, are we talking about monetizing the growth less aggressively, or are we actually talking about taking pricing down in some categories to revive revenue growth? Related to that, and picking up on one of the topics that came up at the Investor Day, the nature of the 15%-20% overall growth target for online classifieds. Thinking about 2014, if you're gonna deliver 15%-20% in 2014, we do need quite a big re-acceleration in, you know, some of the major businesses there.
The only one of those businesses that's growing clearly at that rate this year is France, that has actually decelerated quite a lot in the third quarter. You flagged the sort of scale issues there and pre monetization there. I guess that's a very long-winded way of asking which of the businesses can grow 15%-20% in 2014? Which of the big four established buckets, Norway, Sweden, France and other? My final briefer question just on minority. Can you give us a feel for how much the loss in this, in Aspiro is so that we can sort of work out the minority line going forward?
Yeah, I think in Spain, it's a bit hard for me to predict at this moment what will happen because, you know, we're living in a dynamic market where things change over time, and there is a fierce competition. To answer your question, I think we probably not see so much price decrease, but you'll probably see some products that are going to be dropped so that the pages will be purer in the sense for consumers. That's why you might see that revenues might not increase and perhaps will go slightly down. When it comes to the guiding trend for that part of the business.
Just to, I would just like to also repeat what we said at the Investor Day, that we guided at the lower range of the 15%-20%. That's the situation when it comes to the growth rate. We do see of course, I think we foresee good underlying growth in many of the assets that we're having, and that we have somewhat more courses when it comes to Spain. Also bear in mind, stronger comparables for leboncoin. It's a question of how much the other new sites will then contribute of course.
In general, we in Schibsted are of course, we could have monetized more, but we also would like to really strengthen the traffic position in some of the core markets that we're focusing on.
Okay. If I can just follow up on that. I mean, at the Investor Day, a lot of the questions were around, you know, will you or won't you do 15% in 2013? I suppose my question is, will you do you think you can do 15% in 2014, or is the target more medium term than that?
No, I mean, we don't give guidance like that, so I don't think I have further things to add on that question. When it comes to Aspiro, it is minus 11 NOK in Q3.
Okay. That's a reasonable kind of number for us to use going forward?
Yeah. I think that's okay.
Yeah. Okay. Okay. Thank you very much.
Our next question come from Rasmus Peinberger from Handelsbanken. Please go ahead, sir.
Yes. Hi. I just had two questions. They both relate to the deal with Telenor. Firstly, the capital gain you expect to record, will that be subject to tax or not? The second question is that the overhead costs or the unallocated costs that you have in online classifieds, will they in any way be impacted by that deal? i.e., will Telenor take a part of those costs as well? Those were my questions.
When it comes to the transaction gain, that will be it will not trigger any taxes as such. It might be very small amount, but basically tax-free. When it comes to the overhead allocation, I mean, it will be a rather small organization and the JV with Telenor. I wouldn't put too much emphasis into those figures being affected either way.
Okay, thanks.
As a reminder, ladies and gentlemen, please press star 1 to ask a question. We will move now to Jerome Stix with UBS. Please go ahead, sir.
Hi. Good afternoon, gentlemen. I have maybe three questions, if I may. The first one is, can you give us a bit of color about your progress in Italy? I think if we look over the summer, you've been also widening the gap with eBay. How does that translate in term of growth for you guys there? On the Norwegian print business, you had a pretty good performance in term of revenues and margin for the online advertising. I mean, if you look at online advertising, it's been accelerating quite a lot over Q1, Q2, Q3. I'm just wondering if there's anything so specific to flag and what we can expect going forward.
My last question is on, actually on FINN and Blocket. I think you mentioned that price sort of optimization has been helpful for both countries. Does that price sort of optimization positive impact continues in Q4 or that was gonna dawn at the end of Q3? Thank you.
Well, I think when it comes to Italy, let me answer that first, then can take the others from.
Okay.
The situation is in Italy is, I think things are going well for us there, and we are focusing on traffic growth, and we'll continue to do so. We're also experiencing still a competition from eBay, where they are also using still TV ads and other things. We have consistency that we are focusing on traffic growth and growth in number of apps. Since the traffic growth is on ad growth is around 30%. We're pleased with the development there. So I don't think you should expect anything in a short-term big shift in terms of the revenue takeout or something. We'll continue to build our position there, and we're happy with the development.
Okay.
When it comes to the online advertisements, I would say that I think what you're seeing in the both the Norwegian and Swedish markets, that there is more, there's a clear shift towards more online advertisements. When you talk to media agencies and others, they say, "Well, this is really now becoming the prime source for some advertisers." I think you'll you can expect that shift to continue.
Last question, Trond.
The price optimization, we certainly continue with that both in Rocket and FINN. I would be hesitant to give any precise guidance, or effect of that into Q4. This is something that we focus more and more on and do gradually in different sites, all I can say.
Okay, thank you. That's helpful.
Once again, ladies and gentlemen, please press star 1 to ask a question. We now have a follow-up question from Mark Broadie with Deutsche Bank. Please go ahead, sir.
Yeah, thanks. Sorry if I'm two goes on this. I was just wondering actually on the headquarters line. Traditionally, the fourth quarter headquarters EBITDA number or EBITDA loss has been bigger than the other quarters. Is that down to sort of share options, incentivization, other forms of bonuses? If so, is that gonna be quite sensitive to the very, very strong performance of your share price over the last 12 months? Should we have a quite a big number in for the fourth quarter of this year on that line?
Well, I think the effect of the bonus on and long-term incentives is of course something that you do calculation each quarter and try to do some different calculations. I wouldn't expect any significant step change in Q4. Normally, there are a higher activity level in Q4. Normally you should see some increased cost effective compared with Q3, for instance. That's typically the situation. Also we have to, according to our forex, accrue holiday pay, meaning that that has a cost effect in Q3 and more cost effect in Q4, things like that.
Okay, nothing more than the normal step-up that we've seen in Q4 before?
No, no. Not that as you see for time being, right.
No. I think, on a more general note then looking forward, what we're doing is that as we talked about in Investor Day, is that we're building up competencies in advanced data analytics, pricing, conversion, et cetera. I think those are good investments. They'll be good for the group. I think it's fair to say that that will increase, the overheads somewhat, going forward.
Okay. Okay. Thank you.
As a reminder, ladies and gentlemen, please press star one to ask a question. It appears that we have no further question at this point.
Okay. In that case, I will just thank you all for dialing in, and I wish you a good nice afternoon.
Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation. You may now disconnect.