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Edited Transcript of SCHA.OL earnings conference call or presentation 15-May-19 12:00pm GMT

Q1 2019 Schibsted ASA Earnings Call

Oslo May 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Schibsted ASA earnings conference call or presentation Wednesday, May 15, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jo Christian Steigedal

Schibsted ASA - VP & Head of IR

* Kristin Skogen Lund

Schibsted ASA - CEO & Country Manager for Norway

* Trond Berger

Schibsted ASA - Executive VP & CFO

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Conference Call Participants

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* Andrew Geoffrey Ross

Barclays Bank PLC, Research Division - Research Analyst

* Silvia Cuneo

Deutsche Bank AG, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Schibsted Q1 2019 question-and-answer conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jo Christian, please go ahead, sir.

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Jo Christian Steigedal, Schibsted ASA - VP & Head of IR [2]

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Good afternoon, my name is Jo Christian Steigedal, I'm the Head of IR in Schibsted. And a warm welcome from Oslo to this Q&A session in connection with the presentation of the first quarterly report for Schibsted in 2019.

So thanks a lot for -- to all of you for joining us today. Together with me here in Oslo are our CEO, Kristin Skogen Lund; and our CFO Mr. Trond Berger.

Let me briefly remind you that we held a webcast presentation in Oslo this morning, and the recording is available on Schibsted's website on the IR section there.

Adevinta reported its Q1 results yesterday morning and recording of their quarterly presentation is available on adevinta.com.

But now, I'd like to hand it over to Kristin Skogen Lund for a short introduction.

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Kristin Skogen Lund, Schibsted ASA - CEO & Country Manager for Norway [3]

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Thank you, Jo Christian, and hello, everybody. We released a good set of figures this morning with overall 6% growth in digital revenue when excluding Adevinta, corresponding to 3% overall growth.

Our Nordic marketplaces continue to deliver strong results and at the high-end of the 8% to 12% mid- to long-term revenue growth target range that we have communicated.

And I would say that the growth in FINN is particularly impressive. They grew 18% and that is despite a decline in advertising, but -- although, it is including a positive Easter effect.

But I'm also very happy to report that Blocket in Sweden is back to revenue growth this quarter after several quarters of revenue contraction. We have taken a range of measures to rectify the weakness in Blocket, and the company is now well-equipped to reinstate good growth going forward.

In News Media, digital subscriptions is the key to revenue growth for the future. And there we see that our editorial products delivered well in this respect, and digital revenue growth was 5% and the digital subscriptions were up by 16%.

We did see a bit of an unexpected decline in advertising in the first quarter, especially in Norway. But as we did state earlier today, we do see better figures for April, so we are confident that, that market will bounce back.

The EBITDA margin was stable, if we disregard the positive effect that we get from the change in IFRS 16, and this is also in line with our communicated target.

Within financial services, we still see vast opportunities. Lendo continued to grow in Q1. However, as expected and as communicated, the expansion into new markets is contributing to reduced margins. Sweden continued to be particularly solid in Q1, whereas the development in Norway is still influenced by a tightening regulatory regime that take down volume in the market altogether. But we do believe that these regulations is positive for the market and that in the longer term, this will be beneficial also for our business here.

And then finally, Prisjakt continues to do very well with healthy growth both in revenue and in margin.

And let me round up by saying a few words on our financial situation because after the demerger and the sell down of shares in Adevinta, Schibsted has a solid balance sheet being close to net debt-free. And at the Q1 presentation this morning, we did reiterate that we have the possibility to lever up if a particularly attractive investment becomes available. But at the same time we will look into addressing any overcapitalization through a dividend or share buybacks.

So in sum, Nordic marketplace is well on track, driving growth particularly in the verticals very strongly and Blocket returned to positive growth as well. In News Media, we see strong development in digital subscriptions and a stable profit margin. And in Schibsted Growth, we see large potential, Lendo doing well in Sweden, but a weaker market in Norway. And we -- our margins are hampered by the investments that's ongoing in the European rollout in new markets.

So I would like to hand back to the operator now, and then we will have a Q&A session. Thank you for listening.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will take our first question from Silvia Cuneo from Deutsche Bank.

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Silvia Cuneo, Deutsche Bank AG, Research Division - Research Analyst [2]

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The first one is on the News Media business. You've been able to cut costs for a number of years now. How much more potential there is to control costs? Any comments about what percentage of the cost base is valuable and related to print would be great.

Then the second is on Lendo and the growth in Sweden. In the presentation slide, you mentioned that margins were reduced also in the established phase due to poor performance in Finland. Can you share some thoughts about what is a normalized revenue growth and EBITDA margin for this business? Is it the growth rate within -- in Sweden in this quarter?

And then final question just on your latest comments about the strong balance sheet and the possibility to lever up if attractive investments become available. Just wondering, if they don't become available, would you consider maybe investing organically in some of your business areas, for example, leading a bigger push on Lendo?

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Trond Berger, Schibsted ASA - Executive VP & CFO [3]

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Right. As to your question about News Media. First of all, we have been able to take out a lot of efficiency over the last years, and I think that we still strive for efficiency measures, but there is no plan for, so to say, a new kind of cost program. We will do the best in order to have efficient and smooth operations. And if you look at the cost split, there is, of course, in -- especially in the morning newspapers close to 40% of the cost base is print and distribution. So if you look ahead, of course, you will get, over time, a business with high margin and lower revenue. So -- but we will certainly do necessary measures to -- in order to keep, so to say, what we guide for as [rapid per share] development. But we are very pleased with what we see on digital revenue in News.

To your question on Lendo. I will say that Lendo continue to do well, but of course, some slowdown in Norway as expected, by the way. In the first half, we have decided to continue to do marketing activities both in Norway and Sweden in order to take market share. I think that goes well. And so the development in Lendo is more as expected, I would say that Sweden was a little bit softer in -- towards the end of the quarter. We have done some changes in the marketing mix now. But with over time, we really hope could bring Lendo Sweden some more and more back to what we have seen. And in Lendo in Finland, I -- we have changed the management, we're not satisfied with what we have seen there. So it has been a little bit more competitive situation and not so well-run. So that's little bit disappointment. But we have taken actions. So Finland should come back to track.

And then, of course, the national expansion is just as planned, we have guided for NOK 70 million to NOK 100 million, but that's still in the plan. But we closely monitor KPIs like in Denmark, it goes well, been there in market 2, 3 months. So that's looks promising. But the other markets are too early. So -- but we will certainly then look at our investments, depending on the availability of successful KPIs.

The leverage question, I would say that I mean we have the financial target of 1 to 3x net interest debt over EBITDA, and that's of course, something we would like to be within over time. So we will look into measures like as Kristin mentioned, both dividends and buybacks. And certainly, we do also believe that through our many opportunities in market consolidation, that goes -- also stake for some opportunities in the marketplace or classifieds and also some niche players in that area. And also it goes also for some other financial services that we think there are opportunities and also in some growth areas. So in market consolidation within existing business, it is quite important, that value enhancing. So that's something that we would like to pursue.

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Operator [4]

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(Operator Instructions) We will now take our next question.

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Andrew Geoffrey Ross, Barclays Bank PLC, Research Division - Research Analyst [5]

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You've got Andrew Ross here from Barclays. I've got 3 questions as well. First one is just a follow-up on your comments on capitalization. Is there anything you can share with us on how you're thinking about the dividend now kind of at the Schibsted level obviously, excluding the consolidation of Adevinta going forward?

And as an extension to that, at what point would you look at doing kind of special returns on the dividends or buybacks? Kind of what are you waiting for there, just to give us a sense? Is it the -- you're waiting to see if you can deploy that cash via M&A? Or is there a point at which kind of the value of [your output changes] the way you look at those type of measures? Just some color there would be helpful.

Second question is on Blocket. Could you help quantify the impact of Qasa on the growth in Q1? So would Blocket have grown on an organic basis?

And then third question also on Blocket. I've been seeing some press articles by you guys rejoining the Google Exchange in Sweden. Can you talk a bit about that? A, if it's true? B, kind of how is it going and what kind of impact is that making on the growth as you think about Blocket for the rest of the year?

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Trond Berger, Schibsted ASA - Executive VP & CFO [6]

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Right. Well, on the -- just to repeat a little bit of what we have stated when it comes to the capital structure. I mean we have, as I said, a capital structure over time that should be 1 to 3x net interest debt over EBITDA. That implies, of course, that we, over time, look into measures. We have just now completed as [are] the IPO of Adevinta. Well received. And certainly, we need to, in a way, make the way for new Schibsted. But no doubt that we will look into different measures. But we will come back to the market in due time, when it comes to what kind of measures we are planning in that respect. And I think also as I commented upon M&A, we'll certainly also be, first of all, within the in-market consolidation that we think is value enhancing. So we will handle that capital structure in accordance with the policy that they have.

When it comes to the Blocket, just -- yes, okay. I hand over to Kristin, yes?

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Kristin Skogen Lund, Schibsted ASA - CEO & Country Manager for Norway [7]

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And on the Blocket, the impact in Q1 is NOK 1.2 million. But we just started the integration, and we're working hard to change to break it further, so we will see the impact of Qasa growing in the times to come. Well, I can [encourage to] do that, [we spend time thinking] as well. So we open up some of our inventory on Google the first week of April, and we also got the 1-year inventory on to our AppNexus platform. So we believe that these will have a positive effect, but it's not going to be like a quick effect because user habits, et cetera, will need to be reworked a bit, so it will come gradually. But it will make a positive impact.

But I think it's fair to say also that the Swedish advertising market in general was somewhat -- it's showing some general improvement, although, it's still not strong, it's, let's say -- it's less negative than it has been in the past quarters.

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Andrew Geoffrey Ross, Barclays Bank PLC, Research Division - Research Analyst [8]

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Great. And maybe just a follow-up on first question. Just in terms of the regular dividend that Schibsted's going to be pay out now, is there anything you can give us in terms of how you're thinking about that, in terms of how much of your cash flow do you might want to give in a regular dividend?

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Trond Berger, Schibsted ASA - Executive VP & CFO [9]

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As we -- our dividend policy is that we will have steadily increasing dividend. And of course, since we have, I will say, a strong cash flow, certainly, we will look into to live up to that also increasing over time our dividend. But it also may be relevant going forward at some point to look into other kind of distribution. So that's something we will come back to in due course.

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Andrew Geoffrey Ross, Barclays Bank PLC, Research Division - Research Analyst [10]

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So sorry. So when you said about stable, it's increasing versus the NOK [2] you announced for '18, despite the fact you've spun Adevinta? Or...

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Trond Berger, Schibsted ASA - Executive VP & CFO [11]

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What we have said is that when we had the spin-off, we paid a higher dividend for '18, and we have seen that we have a strong cash flow going forward as well. So that's something of course, that we need to look into for the dividend policy for '19. And it may be relevant also there to increase of course, the dividend, in line with our policy. So, yes.

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Operator [12]

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(Operator Instructions) As there are no further questions at this time, I'd like to hand the call back for any additional or closing remarks.

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Jo Christian Steigedal, Schibsted ASA - VP & Head of IR [13]

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Thank you very much. Please make sure to sign up for questions if you have any now at the very end. If not, we would like to thank you all for participating at this call. We are available from the IR side of Schibsted to answer any questions offline, of course, on phone or e-mail later, if you like that.

But other than that from Oslo, thanks a lot for participating and have a nice afternoon.

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Operator [14]

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Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.