There wasn’t much news in the Schibsted Q3 report released this morning. Still (or maybe because of), the share price dropped more than 5 percent in early trade on Friday.

CEO Rolv Erik Ryssdal made a shorter presentation than usual. No new acquisitions were presented and we heard the Hemnet deal hasn’t been closed yet. This time around information on the talks with the real estate agents in Sweden where given by CFO and vice president Trond Berger. Discussions among the real estate agents can – according Berger – drag on for another two months.

The EBITDA of NOK 556 million was about five percent better than expected, but the report included information that might have surprised and disappointed investors, such as the slower growth in France, where revenue growth rate is now expected to be only between 15 and 20 percent in 2016, but in Q4 it will be relatively slower.

Some shareholders might also have reacted on the so-called “massaging” accusation of profits. Schibsted increased its stake in app-only marketplace Shpock from 82 to 91 percent in Q3. That was one the main reasons why Schibsted revalued the asset. Shpock stands for the greater part of gains of remeasurement of previously held equity interest of NOK 794, which stands for a substantial part of reported profit before taxes of NOK 965 million.

In the same report Schibsted said Shpock now is accounted for as a subsidiary, which will affect EBITDA negatively going forward.

So for the time being Shpock profit-wise made great impact in Q3. In coming quarters we will probably hear the investments in marketing for Shpock are significant, because the company is very eager to go investing in new markets.

Shpock is clearly the answer to Naspers’ LetGo, which is already out there making progress in the traditional markets of Schibsted. Ryssdal, however, called LetGo one of several apps. He believes strongly in the Shpock app. Describing it as “very fast-growing, reaching young users for small goods with a fast ad insertion”. He also said it topped download rankings in the U.K., Germany and Austria and that the organization is very eager to add additional markets.

The plan is to roll the Shpock concept out to several markets in addition to Austria, Germany and the U.K..

In fact, mobile apps are a top priority for Schibsted. And the company does not only rely on Shpock. Other solutions will roll out in several markets in 2016. The newly released Blocketmode.se is probably a solution, which will be seen in other countries.

Here are some key points from the separate Schibsted markets:

France

Revenue of Leboncoin grew by 20 percent in Q3 to € 43.2 million but the EBITDA fell to 56 percent (67%). Leboncoin has run large marketing campaigns, which affected the EBITDA margin. But also the number employed has increased both in tech and in sales. Ryssdal revealed Leboncoin has new mobile products in pipeline for 2016. That is necessary since Leboncoin has difficulties selling premium paid solutions, when customers goes mobile. Therefore Leboncoin needs new mobile products also to increase ad targeting.

Schibsted did not reveal much from the crucial real estate market and did not answer questions about how many real estate agents who has signed up.

What discourage the market is probably the information that the revenue growth in Q4 and in Q1 2016 will be relatively low.

Spain

Only good news come out from Spain in this Q3 presentation. Revenue is growing 22 per cent. Jobs and real estate are the key revenue driver. But display ads also show a good development.
Spain had € 25.2 million (20, 7) in revenue in Q3 and an EBITDA margin of 30 per cent.

Sweden

Also Sweden is doing well where Blocket showed a revenue increase of 11 per cent. SEK 143 million(126 million) but news were given that in Q3 the car ad volumes continued to shift from private trading to trading through dealers, where the average revenue per sale is lower. No key to where the private seller where going was given. The private car ads are not yet at Facebook so what Blocket experience might be a changed consumer behaviour.

Norway

Finn managed to increase its revenue in a tougher Norwegian economy, especially the west coast with the oil related economy is facing an economic downturn, which has affected the Schibsted newspapers in that region fast. But Finn manages to increase its revenue and it is especially real estate which is doing well.

The revenue in Q3 was NOK 365 million (340) and the EBITDA margin 47 per cent coming down from 48 last year in the same quarter. In this traditional market traffic for Finn increased rapidly by 29 percent year on year. It is the mobile which drives traffic but no numbers were given on the time spent on the site or the number of ads being viewed.

Italy

Subito is becoming more important in the Schibsted family of classified as a site with potential to become a money generator. The site is doing very well increasing its monthly visits in Q3 with 30 per cent and revenue growing with 31 per cent in Q3.

It is not random selection when Schibsted gives news about the different sites. Some just get a mentioning like Muday.my which in the Q3 report describes as a Blocket copy in Malaysia which is the clear market leader and no more informationis given.

What is happening there you might ask? About Jofogas in Hungary Schibsted tells us it shows a very god traffic development after merger with OLX. Visits and page views are 2 times higher and the site is on clear path to increased monetization and a positive EBITDA. Jofogas is not the only example of how traffic is increasing in the investment phase.

In most markets the return on investments is positive in terms of improved reach for sites and strengthened positions compared to competitors.

To show how great the success is Schibsted measures the number of new ads. In Q3 the increase per day on the sites in investment phase was astonishing 375 000 and increase of 47 percent compared to Q3 2014. Behind the success is of cause the deal with Naspers last year creating joint ventures or much less competition.

The sites in the so called investment phase spent NOK 112 million (119) mostly on marketing which was charged to the EBITDA. But another NOK 93 million was spent in joint ventures and associated companies which were not included in the EBITDA but in the EBIT.

This is of cause a way to follow accounting rules. It is not too bad for Schibsted to have the remeasurement of 794 million, mostly from revaluing Shpock in the EBIT numbers.
Because the biggest part of the business of Schibsted, the old newspaper business is not doing very well. The downward hill for newspapers is hitting the Norwegian newspapers especially hard. Schibsted is now cutting jobs in Bergen and at other places in a more rapid way than ever before.

Links to full reports:
Interim report Q3:http://hugin.info/131/R/1962721/715951.pdf
Presentation Q3: http://hugin.info/131/R/1962721/715952.pdf
Financials: http://hugin.info/131/R/1962722/715956.pdf
Webcast: http://webtv.hegnar.no/presentation.php?webcastId=25255257

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