Afternoon, ladies and gentlemen, welcome to the Schibsted Media Group Q1 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 Steigedal. Please go ahead, sir.
Good afternoon and welcome to this Q&A session in connection with the presentation of Schibsted's first 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 CEO, Rolv Erik Ryssdal and CFO, Mr. Trond Berger. Today, Schibsted Media Group released the Q1 2013 report showing operating revenues of NOK 3.7 billion. The gross operating profit, EBITDA, was NOK 274 million. Excluding online classifieds investment phase, the EBITDA was NOK 514 million compared to NOK 564 million in the same period in 2012. The online classified operations increased their revenues with 11%. The revenues of the media houses in Norway declined by 5%, whereas the Swedish media houses increased the revenues by 2%.
This will be a Q&A session only. For a complete presentation of the results, please refer to the video webcast that is available on a link on our website. Okay, operator, please go ahead and give instructions for the Q&A.
Thank you. If you would like to ask a question at this time, please press the star or asterisk key followed by the one on your telephone. Please ensure that 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 now for a moment to assemble the queue. We'll take our first question from Catherine O'Neill from Citi. Please go ahead.
Hi. I've got a few questions, actually. Firstly, on the investment. It obviously came in probably ahead of where people expected. I know you're not gonna give guidance on absolute investment number, but could you give any kind of guidance or thoughts on how we should think about the phase and as we go through each quarter and whether the 1Q is in line with your expectations and should we extrapolate that? Secondly, on FINN specifically, growth seems to slow there, and I wondered if that was a lot to do with weather and Easter, et cetera, and whether we should expect an improvement in the second quarter. The final question is on the tax rate and interest charge in the P&L.
The tax rate went up and, should the 43% be the rate we use for the year? Also, on the interest charge with the IAS 19 change, how should we think about the absolute level of interest cost for this year?
Right. If we, I mean, the investment level, we, as we have said when we announced this result, we will not guide on investments. That is due to the competitive situation. We do see good pickup and good traffic development and are very satisfied with what we see in the different markets that we continue to invest in. These investments are in line with what we planned for during the Q1. What will happen going into the next quarters, is something that we will, we do have some plans, but we're not willing to reveal that to the market for time being. None of the other competitors and players are doing it either. That's the reason.
Going into the FINN situation. FINN hampered somewhat by some minor events like some technical problems and a little bit weather effect and the 5% top line was maybe a little bit weaker than what we expected. Also fair to say that the top line we saw in 2012 was maybe on the high side of what we expect going forward. Some sign a little bit weaker macro situation in Norway on display and car sales, fair to say. Tax rate, 43%. I think that could be a fair guidance. There we expense investments of course, and losses, we don't take that into the balance sheet as deferred tax assets.
That's why we are getting such a high tax rate. It, it could be a fair estimate for, for the year as such. Interest charge, I think you should expect that to be more or less in line with what we have. Of course, we have two events during 2013 being cash payout. The first is of course dividend now in May, just, and then of course we have also this put-call mechanism with Gonçalo as we have in Spain. That also of course is a mechanism that starts second half of 2013.
Mm-hmm. I mean, on the investment, is there anything we should think about on in, just in terms of seasonality?
No. Well.
That line.
There isn't really so much of seasonality. Of course, it varies from market to market. We don't run campaigns during summer in Europe and summer in Latam, which is of course a different season. It varies from market to market.
Okay, thanks.
Thank you. We will now take our next question from Nicholas Christopherson from Cheuvreux. Please go ahead.
Yes, hi, it's Nicholas here. I have two questions, and I guess I take them one by one. Firstly, comment in the report on significant competition in immature classified markets. I was wondering if you can give some examples of what you are seeing?
I don't know what you're referring to because in the, what we have, defined as e-established market, mature market, could be like.
Sorry, immature market.
Oh, yeah. I see. That makes sense. Well, I mean, we, as I said, we do see some more competition in, like in Brazil that we have stated. On the other hand, the investments we are having in that market, the payback on that is better for us than the competitor, if you take it per real spend in the market. That's why we are satisfied with the campaigns that we're running in that market. Other than that, it varies very much from market to market, but I wouldn't say that it's so much changed, overall.
No, I think, you know, there is increased competition in several of the emerging markets, but I think it's that also positive in the sense that it helps to build a category which isn't that developed in some of the big markets such as Brazil.
Is it new competition coming in in Brazil or is it?
No, it is not. No new competition.
In Brazil, you know, in Brazil, we have two sites. We have the input job site, which is competing with the other job players, and they're competing with the other existing players that's been there for a while. Catho is the biggest one. When it comes to the to our classifieds, generally, sites, the Blocket's platform, it's Bom Negócio that we are having, and we're competing with OLX. We have been competing with them for a while, but we've seen them from that day during the last eight, nine months, they've been really turning up their marketing efforts. That is, I think that is what is referred to when we said the great competition in Brazil.
Perfect. Clear. Just my second question. You just maybe talked about this in your meeting this morning, but just on your cash conversion, it seems to be declining for a little bit over than a year, and I guess this quarter was probably the worst seen in the past couple of years. I mean, what's going on there?
No, as we said this morning, it has to do with the negative working capital development, first of all, in Norway and new advertising system being implemented. This should be back to normal during second quarter.
What's normal?
Now, what you have seen if you look into 2012 and 2011, development into Q2, the negative, working capital development, should be adjusted for and coming back to more normalized level in Q2.
The high tax charges?
The tax charges is first of all the effect of that we're not taking into deferred tax asset in the balance sheet for the investment we're doing in markets in the classifieds because that is not allowed for that accounting-wise. That therefore the tax rate will be around 43% that we have this quarter, and that also could be a fair guidance going forward.
Is it easier for you to guide on the absolute number on taxes in the P&L, given that's not dependent on how much you spend in Brazil, for instance? For instance.
No, I don't think so, because. No, I think we. No, I don't have more to add on that.
Okay. That's all for me. Thanks.
Thank you. We will now take our next question from Mark Braley from Deutsche Bank. Please go ahead.
Yeah, good afternoon. I asked a question about the dividend this morning. I just wanted to follow up on that. You know, you're probably not gonna have a 40% payout ratio if you hold the 3.5 NOK payouts. The ratio is gonna be rather higher than that, looking at where earnings are probably going this year. Just to confirm, there is besides the 25%-40% corridor, there is also an aspiration to have a stable dividend as well. You would not be likely to cut downwards from 3.5 NOK. That's my first question.
I think it's too early to give any guidance on dividend for 2013. I mean, we have the policy, and you're right that it may be in the upper part of that, of course. I think we will monitor and see the development during 2013 and give maybe some more guidance towards the end of this year. I think that's what we can say for time being. We have in addition to the 25%-40%, we also have in the policy to have a stable to increasing dividend in our policy, but at the same time monitor the development. All these are factors that we have to look into.
Okay. Okay. My second question was on France. You obviously flagged the fact that eBay are pulling out of the classifieds market there. Just to clarify, did you get any benefit from that during the first quarter, or is that still to come ahead?
No, you know, I don't see that we got any benefits, and I'm also unsure whether we will have any real benefits from that because, you know, eBay is pulling out of their classifieds. As far as I understand, they're not pulling out of their auctions, so how they're coordinating the auctions, I'm not sure. So, we haven't, we haven't put in our calculation any major effects from that.
Okay. Sorry, just on the cash flow point again. I just want to understand, the outflow in Q1, does that reverse now that you've got the new invoicing system up and running?
Yeah.
Is it a sort of you've changed the terms of trade? I suppose that's what I'm trying to understand.
No. No. We haven't changed the terms. It is just a delay effect, that will be come back to a normal situation, around NOK 200-300 million negative development that will be catch up in Q2.
Okay. Brilliant. Thank you very much.
Thank you. We'll now take our next question from Rasmus Engberg from Handelsbanken. Please go ahead.
Yes. Hi, good afternoon. I wanted to ask you firstly about how you think that Easter impacts your business. I can understand on the morning newspapers that it would be quite negative, but as far as tabloids and online advertising, would you say that Easter is a positive or a negative for Schibsted?
You know, Easter is the phenomenon about the Easter effect is mainly in Norway because here, you know, the newspapers don't come out.
Yeah.
For the morning newspapers, you're right. It will have an effect of a few percentage points down on advertisements. For the tabloids, they're actually also saving some costs since they're not coming out, and they're selling their newspapers over more days. There, the effect is less than that. It's actually mainly the morning newspapers, and Norway. When it comes to FINN and online, I think it might have a little bit effect. There, I think that's combined with the weather, it's probably hurting the business a little bit, but not substantially.
Mm-hmm. Mm-hmm. All right. If it's a completely different question then. In terms of real estate, there are some developments in Sweden as, as you referred to this morning. If I was to ask you sort of more philosophically whether you're closer to monetizing the Swedish real estate market than, say, fully go after the French market, you know, in what order will things play out in your mind?
Well, I think that depends on what you mean by monetizing in the Swedish market. I think, we're not planning to charge for ads there. We'll make money in other ways through this traffic and developing, you know, developing, advertisement products and banners, et cetera. I think that might give a good contribution. You know, I think in the medium term, the potential for the real estate in France is the most interesting of the two.
Okay. All right. Thank you.
Thank you. There are no further questions in the queue at this time, but as a reminder, please press star one to ask a question. Okay, there are no questions in the queue.
Okay. I think, we'll just say thank you very much for participating. We'll talk to you later and have a good afternoon.
Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen.