Welcome to the Schibsted Media Group Q3 2012 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 Stigdal. Please go ahead.
Good afternoon, and welcome to this Q&A session in connection with the presentation of Schibsted's third quarter report for 2012. Thank you very much for joining us today. My name is Jo Christian Stigdal. I'm the IR officer in Schibsted. Together with me here in Oslo is our CEO, Mr. Rolf Eg Kristoffersen, and our CFO, Mr. Trond Berger. Today, Schibsted released its Q3 report, which shows operating revenues of NOK 3.5 billion. This was underlying an increase of 2% compared to the same period last year. The online classified operations increased their revenues by 16%, and the revenues of the media houses in Norway and Sweden declined by 2% and 1% respectively. The EBITDA was underlying unchanged compared to last year.
Please follow the instructions from the operator, as this will be a Q&A session only as from now. Please, operator, go ahead.
Thank you. 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 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'll now take our first question from Catherine O'Neill of Citi.
Hi, it's Catherine from Citigroup. I've got three questions. Firstly, in your release, you talked about there being some softness, or you expect to see some softness in the margins for the media houses. I just wondered if you could give some idea on what level of decline you're expecting and over what period or when you expect that to recover, because I can see consensus has margins down this year but then recovery from 2013 onwards. Secondly, on the investment level, you talk about it being higher next year. Could you give us any idea of range? Finally, on 20 minutes, whether you have any plans or what your thoughts would be on closing the print operation, which is clearly still suffering?
Right. If you start with the margin in media houses, we do see some margin pressure, especially in Sweden as there is some cyclical weakness in that market. Of course, the structural shift continues as before. Although we're doing a NOK 500 million savings over the next couple of years in the media houses, main part being in Norway, we do think it would be tough to keep the same margin. Some decline in margins expected over the next couple of years despite of the saving program. Investment levels, we have given guidance for this year, and we expect that we deliver in that range approximately going forward.
Due to the competitive situation and that we disclose fairly precise information about our investments in different markets, compared with our competitors like eBay or OLX, Naspers, et cetera. We have come to the conclusion that it is better to not give such a pre-precise figure and it's expected to increase because we do see many window opportunities, many places with good development, and therefore, also, we think it's right to increase the investments going forward. When it comes to the 20 minutes, we don't have any immediate plan on that. France is going fairly okay. Spain is still in a struggle and a harsh environment. We have done a lot of savings in Spain and...
We monitor the situation closely and see what to do going forward based on the situation.
Okay. Sorry, can I just check on the investment? Does this mean you won't be giving any kind of guidance as we go into 2013 on the level?
Yeah. Only we're saying it will increase, but we won't give any.
You won't give a numerical?
No.
Okay, thanks.
We'll now take our next question from Nicholas Christopherson of Cheuvreux.
Yes. Hi, it's Nicholas at Cheuvreux. I have two questions. Just to follow up basically on the expansion in Naspers, I know that you maybe don't want to reveal too much, but maybe if you can just share some light on the increased activities going into next year. I mean, is it existing markets or is it new markets, or is it a shift in the terms of ad budgets, i.e. going more into TV? That's the first question. Just a second question regarding tax rate. You're running at 35% currently, and given how Sweden is lowering their tax rate down to 22%, I guess there should be some opportunity to lower that going into next year. Is there anything I'm missing there in that equation?
We can take tax rate first. The decrease to 22% in Sweden, of course, is a positive. Bear in mind that our investments in different countries in an investment phase is charged directly to P&L, and the tax loss is not accounted for. Therefore, as we have also discussed that it's likely that investment will go up. I think it's fair to say that the tax rate will be approximately around what we have seen currently. Coming to the expansion investments, answered that previously, I don't think we can give so much guidance other than it's a combination of existing markets.
We do see some new market opportunity, of course, and it's a combination of different kind of marketing activities, but also much the product technical development. Of course, marketing in TV and online is probably the main part.
Okay. Just to follow up on basically the first question. I mean, I guess this refers to your aim of being number one global in terms of online classifieds. I mean, do you think you can reach that without then a larger M&A?
Well, you know, there's, there are many different ways to define the global leadership. You could say in terms of revenues or traffics or positions. The way we define it is that we say that we want to be the number one in the markets we operate already. I think if you compare us with other players in terms of visits, then, we're already bigger than both, eBay Classified and also than Naspers. Probably Craigslist is bigger than us, but then they are, you know, predominant in U.S. market. The important thing for us is really to become number one in the markets we operate in. Then we think we'll become a global leader, according to our definition of achieve that.
Okay, thank you.
Question from Mark Bradley of Deutsche Bank.
Good afternoon. Just a couple of questions. Sorry, just again on the investment level. You say you're not giving a sort of forward guidance as to what the amount is for 2013. Just to clarify, once we're in 2013, quarter by quarter, will you tell us what you have spent?
That's the plan to do that, yes.
Yeah. Okay. My other one, again, on the investment level. Should we think about 2013 as being the peak level, or, you know, could 2014 be higher still?
It's a difficult question to answer. I think we, it depends on the opportunity that we see going forward and the development. I would say that 2014 could... I mean, if you continue to go into new markets, new opportunities, you could still see fairly high levels. If-
It's a bit early to tell, really, because, you know, these are very dynamic markets, and, I think, you know, we better come back to that during next year.
Sure. Okay.
One other one, not on investment levels, you'll be glad to hear. Could you just sort of talk a bit about how you're developing in France in online classifieds and how you see the fourth quarter there?
Well, you know, I think that leboncoin is developing very well. They are traditionally, they've been very strong in the private markets. It was only last year actually, we started to tap into the big professional market, and that's really the car segment for car dealers that we started marketing towards last summer. That has gone very well. If you look at the growth rate for this quarter, you see it's so much lower than last quarter. The reason for that was that last summer we really started to take off in the car dealers. I think. Therefore, I think it's natural that the growth will, the growth rate will be reduced somewhat.
I'm very optimistic when it comes to the future of leboncoin, because I think they only started to tap into the professional markets. I'm very happy with the way they're building and developing their organization. You know, it's a very young organization, and now they're, you know, building a professional sales force, for example. I'm very pleased and also optimistic regarding their future.
Okay, great. Thank you.
As a reminder, if you would like to ask a question, please press star one. We'll now take our next question from Rasmus Engberg of Handelsbanken.
Yes. Hi, guys. I had no questions on the new venture costs, actually. I just wanted to come back to France, whether you could help us understand if it's a price or volume effect or how does that break down in, in the growth in the quarter?
I think it's a combination. Remember that we imposed a new model for professional car dealers in June of 2011. That we increased gradually throughout 2011. Also we do see underlying good traffic growth, so it's a combination.
Have you raised any significant price levels in France during this quarter?
I think we're doing constantly some price mix changes, other than that I don't think we will disclose about what we precisely do.
That's right. Just a balance sheet question. How much cash outlays do you have in the fourth quarter? I get it to NOK 275 million, roughly, for Polaris shares, and then you have some CapEx, obviously. Is there anything else?
No, I think that's the two main parts. Yes.
What do you think your run rate for CapEx is?
I mean, run rate, if we, if we exclude M&A, maintenance CapEx, around, roughly NOK 350 million-NOK 400 million per year, I would say. Then, Polaris was a special situation. Other than that, M&A will most likely, of course, be within, the classifieds and B2C, and growth media business.
Yeah. All right. Okay. Thanks.
As a reminder, if you would like to ask a question, please press star one. We'll now take a follow-up question from Nicholas Christopherson of Cheuvreux.
Yes, hi. Just on your Tillväxtmedier and rolling out that in Norway and potentially elsewhere in Europe, where do you stand there currently, and how should we look on that going forward?
Well, you know, we actually started the organization in Norway a couple of years back. We have a few investment managers working there. They have started three ventures. Beginning next year, they're going to start two others from Sweden, both in the personal finance sector. That is progressing well. In addition to that, we would want to experiment in France on the back of the traffic in Local quad. To be frank with you, we actually hired a manager that unfortunately left us after a short period. Hopefully first quarter next year, we'll be up and running.
Okay. Thank you.
We'll now take a follow-up question from Mark Bradley of Deutsche Bank.
Hi. Sorry, just one more. You sort of referred to, some additional worsening in advertising trends into Q4. I wonder if you could just put a bit of, color on what that's coming from. Is it, particular display segments? Is it the classifieds to the extent there are those within the Swedish newspapers? Where, where is it coming from?
No. It's first of all, the traditional media business in Sweden, like Aftonbladet and Svenska Dagbladet, and the print part of that. Also may speak something into the online display part. Nothing to do really with the classified and especially not online classified.
No, I mean, within the, within the traditional business, is it display advertising in the newspapers, or is it the small amount of classified advertising that there is in the newspapers?
It is both, actually. It is, some deterioration both on the print classified and on the display.
Right. Okay. That's good. Thank you.
As a reminder, if you would like to ask a question, please press star one. There are no further questions at this time.
Okay. No further questions. I'll just, thank you very much for joining us this afternoon, and I'll wish you a good evening. Thanks a lot.
Ladies and gentlemen, that was the end of today's conference call. Thank you for your participation. You may now disconnect.