Good day, welcome to Schibsted Media Group Q2 2013 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 Lund-Steigedal. Please go ahead, sir.
Good afternoon, and welcome to this Q&A session in connection with the presentation of Schibsted's second quarter report for 2013. Thank you very much for joining us this afternoon. My name is Jo Christian Lund-Steigedal. I'm the CRO of Schibsted. Together with me here in Oslo are our CEO, Rolv Erik Ryssdal, and our CFO, Mr. Trond Berger. Today, Schibsted Media Group released its Q2 report, showing operating revenues of NOK 4 billion. NOK, the underlying revenue growth was 2%. The online classified segment increased underlying revenues with 15%, and the gross operating profit, the EBITDA, was NOK 555 million compared to NOK 600 million last year. Excluding online classified investment phase, the EBITDA was NOK 800 million compared to NOK 753 million in the same period in 2012.
This will be a Q&A session only. For a complete presentation of the results, please refer to the video webcast that is available through a link on our website. Please follow the instructions from the operator to sign up to ask questions. I now hand over to the operator to lead us through the session.
Thank you very much. Ladies and gentlemen, in today's Q&A session, if you would like to ask a question, please press star 1 on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Again, please press star one to ask a question. We will pause for just a moment to allow everyone to signal. We now take our first question from Ruchi Malaiya from Citi. Please go ahead. Your line is open.
Hi. Good afternoon. I've got three questions, if that's okay. Firstly, I understand that you can't give details on the investment levels for competitive reasons. I was wondering if you're able to talk around perhaps if there's any seasonal factors involved in your decision. For example, for example, over the summer, is there less need to go out with sort of larger branded advertising campaigns, or just any seasonal factors you could point us to that might going to be helpful. Secondly, also related to the investment phase sites, could you give us some idea of the types of decisions you make, in terms of when to pull out of a market when you see investment isn't working?
What types of factors would influence that decision, whether to stay in a market or to exit the market, and any indicators that you would look at? Finally, just on the outlook, you talked about the good margin outlook for the established online classifieds. Does good mean simply high, or does it mean stable or rising? As in, obviously a margin could be good and high but declining. I just wanted to clarify the outlook on the good margin for the established classifieds. Thank you.
Okay. When it comes to the investment level, you're right, we're not guiding on that. Historically, fair to say it has been some seasonality into it. Into, normally, a little bit front loaded through the year. However, since we now invest also heavily in LatAm, with the opposite seasonality, there will be continuous investments. It will, in a way, be not the same maybe seasonality as we have seen before, but traditionally it has been somewhat front loaded, right to say. Coming to the investment phase side, we do a thorough review of all the sites on a regular basis and deep dive into it each quarter. Of course, we look at traffic figures is always key.
How do we perform when it comes to number of new ads, page views, through different channels, and the competitive situation. There are many of these factors that we closely monitor and discuss. Some sites, of course, is not performing as good as we expected, but there isn't really any. I mean, we have stopped a few historically, like in Australia, like in Greece, and of course, it may also be some in the future, but there isn't anyone in our portfolio that sticks out as being really bad performance, I would say.
uh, coming to the outlook, uh, the, uh, I mean, uh, you shouldn't interpret too much about, uh, what you mean by good, because what you're asking is some kind of guidance, uh, for the established sites going forward. And, uh, when we say good, we mean that, uh, that, uh, we are satisfied with what we have seen and expect to be satisfied. Uh, but I wouldn't, uh, give any, uh, flavor to whether, uh, whether that is, uh, better or worse or what it really means. So sorry to answer on that.
No, that's great. Thank you for the additional color. Thanks.
We now take a question from Mark Braley from Deutsche Bank. Please go ahead. Your line is now open.
Yeah, good afternoon. My first question was a bit like Ruchi's, actually, was around trying to work out whether margins in the established online businesses, you think are gonna be higher or lower, a couple of years from now. If you don't wanna answer that one, maybe I could ask on the outlook commentary. Your old outlook commentary specifically referred to good growth being expected in the established online businesses. I think you now talk about continued revenue growth. Rolv Erik's comments at the end of the call this morning seemed to me to be trying to, if you like, sort of make us all be a little bit sensible about how long you can carry on growing at very fast growth rates for.
Are you becoming a bit more cautious on those established online businesses? That's my first very long question. My second shorter question is, I wonder if you could expand on the comments about investment into sales initiatives in France, in leboncoin.
When it comes to the outlook, again, we don't really give guidance on the established sites. But what we have said all the time and continue to repeat is that the established sites, they will continue to invest in new product areas, new verticals. Examples in Blocket is going into the job segment, into the real estate in Sweden. FINN is going I mean, has been going into travel. We go more into personal finance in Norway. You have, of course, leboncoin investing in and be ready to go into the real estate and may also be other product areas. What we have said is that these investments we will continue, we will be long term.
We, some of these product areas may also drag a bit down, of course, the marginal level, we think it's right to do that kind of an investment anyhow. That's the status for those. When it comes to the investment in sales in leboncoin, yes, we, I mean, we do invest in some sales force. We are now around 108 people. Of course, they build up some sales force for the professionals, first of all, car market.
Also it, we start to prepare of course for the real estate, to build up some sales force because that's the thing we need to have in place when the agreement with SPIR expired end of 2014. But that we will come back to later.
Okay. Just to follow up, if I can, a technical one, interest cost for the rest of the year, should we think about the Q2 level as being indicative of where the following quarters would be?
To bear in mind that in the financial cost, it is included some currency losses. The underlying interest cost is around NOK 35 or something, which is slightly lower than the Q1. I'm just picking up the right precise figure. We have net interest bearing costs in second quarter of NOK 34, currency loss of NOK 24, and then some other of NOK 6, summing up to NOK 64. The level that was in Q1 on net interest expense was NOK 40, is now NOK 34 in Q2. There shouldn't be any surprises on that, depending of course a little bit on net interest bearing debt level.
Okay. Great. Thank you very much.
We now take our next question from Jérôme Bodin from UBS. Jerome, go ahead.
Oh, hi. Good afternoon, gentlemen. Well, not just, but it's three questions, please. The first one would be in cars, you've shown in your presentation that you've done very well and that you're now bigger than La Centrale in term of listings. I was just wondering, can you give us a bit of detail in term of like penetration? Are you do you still have room to grow? Like with how many car dealers do you work with? How do you explain your better performance than La Centrale? Do you are you a bit cheaper than them? That'd be my first question. On real estate, I'd just to like to get your views on like on the French market.
If you look at the market now, it's quite a few players. Do you think that we could end up having some of the duopoly situation like in England with Rightmove and Zoopla? I mean, yeah, just your sort of general views on that. Maybe last questions. Would you mind please remind us the cost saving that you guys have already done in in the print businesses out of the NOK 500 million and the NOK 225 million plans. Can you just remind us how much you have done already? Yeah, that'd be great. Thank you.
Yes, okay. Hello, this is Rolv Erik. Concerning your questions about the French market, I think the French market is a very interesting market for classified. I think that the market is so large that there is room for several for more than one player in each vertical. If you look at La Centrale, you can see that, you know, they're still doing well. We're actually then now increasing our market share quite significantly. I think the reason for that is that we're seeing that also from other countries is that.
Can collect the critical mass of private cars, the car dealers will also be interested in following up that. I think that's actually what's happening in France. The car dealers is actually seeing that this is a very useful channel for them to use. That's for La Centrale. For the real estate, likewise, I think there could be room for more players. I think that, obviously, the SeLoger is very strong. I think based on the share size and traffic volumes in leboncoin, I think there are interesting business opportunities for us. Meaning that we don't have to be a number one to have an interesting market, whether it's a duopoly or several players.
you know, I've, I don't want to give any clear predictions about that. I think that based on our traffic and our situation, we can make this a nice business for us. Whether there's one or more other players there at the same time. I think I'll pass on to Trond to comment on the cost savings.
Well, the cost savings, go according to plan at the NOK 500 million plan is gradually taken out or a little bit front loaded in 2013 compared to 2014 as Sweden was somewhat earlier in the phasing. That's about it.
Okay. Well, thank you very much. Yeah, well done on the results.
Ladies and gentlemen, as a reminder to ask a question in today's question and answer session, please press star one on your telephone. We take now our next question from Rasmus Engberg from Handelsbanken. Please go ahead. Your line is open.
Yes. Hi. I have some rather different questions than the ones that have been posed. With regards to, I mean, you have a negative cash flow now in the first half of the year, even before CapEx. Can you sort of outline for the second half of the year, given that you're obviously also paying for the minority in Anuntis in Q3, if we exclude that, do you think that your sort of cash flow will turn positive again in H2 from here?
When it comes to the cash flow, first half. You have to take into a couple of things. First of all, we have some pension payment across NOK 200 million, which is early payment, which certainly will have a positive effect as second half. Then we also have some restructuring payment that is also around NOK 100 million. That is not likely to. I mean, there will be some going forward, not at this level. Then we have said that we have a new advertising system that we are still lagging around NOK 100 million in effect of also in first half. Seasonality is that we also have a little bit weaker in the first half
Normally this should really come back in second half and be improved. That's the main reason for the early explanations.
That is it in working capital except for the provisions.
Yeah, the, as I said, the some lagging in a new advertising system that we also informed about in Q1. Then we're having some prepayment of pension and then also a little bit on tax. Seasonality is that we have a weaker development first half compared to second half. That's always been the situation.
Yeah. Yeah. Okay, onto the online classifieds then. Spain, is it down as much in this quarter as before or how is that performing?
For Spain, the performance in Spain? Well, you know, I think Spain is still a very, very tough market, and we're seeing that on both InfoJobs and Anuntis. I think, our focus just has to be to run the businesses as good as we can. There we have said that the Anuntis business that we have now taken our just a couple of weeks back.
Yeah.
Our strategy will be long-term with focus on volume growth, and that will be somewhat at the expense of monetization.
Okay.
I think we're putting a long-term strategy in place that will make us in a good position when the market turns up. I think it's just too early for me or anyone else to say actually what economy is picking up in Spain. You know, obviously the unrest of last week hasn't actually helped the situation because what we're seeing from many different situations is that, you know, when there's uncertainty about political leadership, advertisers tend to cut back on their spending quite rapidly.
My question was actually quite a bit simpler. I was just wondering whether decline in Spain in the second quarter was roughly the same as in Q1 or whether it was worse or less bad.
I think it was about the same decline.
Okay. And when you say that your margins are stable, do you mean year-over-year, or quarter-over-quarter?
year-on-year.
Year on year. Yeah, good.
What you're saying is then that the margins in Spain probably will go down somewhat in the short to medium term?
Sure. We can keep track of traffic because that will be much more important than revenues for you in the, in the shorter term, I suppose.
Yeah.
I think Blocket has had a huge number of quarters now with falling EBITDA. Should I expect that to turn around when the car market recovers or is it when you have success in recruitment and real estate? Which one is the biggest factor there?
Well, the biggest factor for Blocket is cars.
Yeah, on the earnings, I mean. I understand it's more important for revenues, but I guess you have scaled up costs quite a bit.
Yeah. That is to take those positions, that we talked about…
Yeah.
in real estate and jobs.
Yeah.
I still expect that to take some time, before we really get a high return on it. I'm, you know, I'm confident that of the positions we're building because they're moving in the right directions.
Do you see anything in the car market? Is it getting any easier?
Well, from what I saw, a statistic was that, you know, the first two months of the second quarter, new build, new car sales was had a more positive trend, but it was down again in June. I'm a little bit at loss with trying to predict that. Obviously the second quarter was better than the first.
Okay. All right. Okay. That was what I was going to ask. Okay, thank you so much.
Ladies and gentlemen, as another reminder, to ask a question today, please press star one on your telephone. We now take a question from Lars Andersen from REM Group. Please go ahead. Your line is open.
Okay. I will be quite basic. It seems to me that you're running two completely different businesses, even if Classifieds has its heritage in the media houses. It's quite different now from the from the media houses businesses. My simple question to you is, could you explain the synergies between of having Classifieds and media houses together in one business?
Yes. Historically, you're right. They have the duration there. The history is also that the media houses, they have helped building the classified positions online in Scandinavia, both. That happened both with Finn and Blocket. Then Finn and the newspapers, they are taking new positions together. Especially in Sweden, you can say that these two news, both Blocket and Aftonbladet, have jointly built Hitta, and they're now jointly building new marketplaces for personal finance with the Growth media. That's where we're seeing. I think that, you know, as Our newspapers are very strong online and as the digital process then proceeds, there will be the business will converge more again.
I think, what you're seeing is that, what is important for us now is user knowledge and know our customers better, so that it would come with better offerings, both to Classifieds and to readers of print and advertisers. The share size that we have in Scandinavia enables us to use data analytics and big data in a better way than we could have done without them on a separate basis.
What you're saying is you're saying that the media houses and the classified sites in Scandinavia is actively working together, having synergies, using the same resources?
Yes. They have done quite a lot this year, and they're also now collaborating on several other things. Yeah.
Okay. It's a natural thing to run it together because it seems that if you have a business which is slowing down, as the media houses is, and one which is expanding in a very aggressive way and on completely new markets, it seem like it's two different businesses.
Well, so far the synergies that I just mentioned have outweighed the other, you know, other arguments. Of course, if we had a severe capital constraint, that could be a situation. So far We have the financial ability to pursue what we think is worthwhile pursuing in the Classifieds world.
I mean, if you see it out of an owner aspect, it's more value, I guess, in Classifieds than in running old media houses.
I mean, we don't think we argue with respect to the capital markets valuation of Schibsted and what's happened on the different parts. That's up to the market to decide. What we are saying is that for time being, we do see that there has been synergies, and it certainly will be taking up more. Also, with respect to the Growth media in Sweden, it's important as an example, that is to have both the media house and the Classifieds together. There are clearly some positive elements into that. Okay. I think we'll need to move on to the next question.
There are in the moment no further questions in the queue, I would like to give a final reminder. To ask a question, please press star one on your telephone. There are still no further questions in the queue, gentlemen.
Okay. I thank you very much for taking part in this conference call, and I wish you all a good afternoon.
Ladies and gentlemen, this will conclude today's conference call. Thank you for your participation. You may now disconnect.