As promised in our first brief this morning, we attended the Schibsted Q3 results presentation and what follows is what CEO Rolv Erik Ryssdal said in his presentation.

You’ll remember (it’s in our first brief) Ryssdal said Schibsted had its best third quarter ever. We checked the record a few financial years back, and found another good third quarter in FY2010. Then the gross operating profit came to NOK 567 million ($69 million U.S.). In Q3 of FY2016 the gross operating profit came in at NOK 572 million. In other words, it broke the record by a mere NOK 5 million.

It goes without saying that every CEO loves to report good numbers, and Ryssdal presented a whole range of them. There were some really bad numbers for print advertising – maybe some of the worst in Schibsted’s history – but the stock market seems to be ignoring the old print business.

Advertising revenue generated by the flagship Aftenposten in Oslo was down 28 percent and worse – its digital advertising was down 30 percent. Still, and that was impressive, the EBITDA of the newspapers didn’t slip into the red. It’s just that their numbers are not driving the share price.

Most numbers in the report were better than expected by analysts, and the share price jumped 6 to 7 percent in early trade in Oslo today, driven by the nice classified numbers.

Schibsted is the story of how an erstwhile very profitable Norwegian newspaper business, transformed into a global conglomerate of different classified companies, and which is in the process of transforming into a truly international classified company, with a product line being developed from the center.

Schibsted runs online classified companies in 24 markets. Recently, countries such as Malaysia and Colombia have matured into the so-called developed phase, together with the European sites in Norway, Sweden, France, Spain, Italy, Austria and Ireland.

Ryssdal emphasized strongly the importance of going into verticals. For the first time he showed a PowerPoint slide with the revenue-split of classifieds broken into different customer groups (below).

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The slide confirms the importance of verticals to Schibsted. Verticals of top interest in France are the job vertical, where LeBonCoin just entered, and where the real estate efforts can already be said to be successful (71 percent of the agents already use LeBonCoin).

In Sweden, Blocket and Schibsted are still considering what to do after the Hemnet fiasco in the real estate vertical. But, there is no doubt that Schibsted will reposition itself.

OLX in Brazil is now monetizing from real estate agents and auto dealers, who have to pay when they list more than two items on the site.

“What happened in the beginning, was the expected: the number of listed ads dropped. But, (for that) we got a significant boost in revenue,” explained Ryssdal.

But, going into verticals also means hiring more sales people and customer support people. This will happen at LeBonCoin, which will also increase its marketing spend for the job vertical.

As usual, Ryssdal gave glimpses into the most important markets:

+ The business in France is doing best, growing revenue quarter-to-quarter by 17 percent.

+ Spain had a revenue growth rate of 8 percent, which was a slowdown brought on by the economic conditions, but probably also because of toughening competition.

+ In Scandinavia there was single-figure revenue growths all around – in Sweden 9 percent and in Norway 7 percent. The margin in Sweden took a step up from 59 percent to 62 percent. The growth driver in Sweden was the auto vertical. Ryssdal said Sweden will not show the same strong revenue growth in Q4, because of a price increase in Q4 last year.

In the current financial year, Schibsted expects to invest €90 to 95 million (from €96 million last year) – most of it on marketing. Investment is expected to drop significantly in the next financial year, because of the deals with Naspers and Telenor on key developing markets, which diminished competition, and are boosting profitability.

When it comes to investment, the exception next year will be stuff app Shpock. It will get resources to continue its conquering ways in the U.K. and Germany. Italy is another important market to Shpock, which might be the most important weapon of Schibsted against Facebook, who recently took its Marketplace to the U.K..

“So far Shpock has not seen much of competition from Facebook. Maybe Facebook is even expanding the market,” Ryssdal said in the Q&A session.

Back to Norway for more news: Finn.no is enjoying strong traffic growth, and its free listings on Torget increased by an astonishing 33 percent from Q3 in FY2015.

Finn is partly owned by Polaris Media (owns 9.99 percent) and Schibsted owns 29 percent of Polaris Media. Finn paid Polaris NOK 37 million in share dividends this year for FY2015. In the Q3 report of Polaris Media, published last week, the value of Finn was written down.

In its FY2015 annual report Polaris Media valued its 9.99-percent stake at NOK 1 billion; by Q3 of FY2016 the value of the 9.99-percent stake had dropped to NOK 899 million – a loss of NOK 112 million in just nine months.

Interesting (to those who follow the valuations of Schibsted), is the new principle used for valuation of the shares held in Finn.no – a principle that was introduced at Polaris, and is applied continuously. It is based on a real “sum-of-the-parts” valuation, done by five analysts who regularly follow Schibsted and do “sum-of-the-parts analysis”.

In 2015, Polaris Media “gained” NOK 957 million, as per the new valuation method. In 2016 there will be a loss. Luckily, it will not affect the cashflow of the ailing Polaris Media, which has joined Schibsted in the Appnexus project, selling programmatic advertising in the Schibsted eco-system.

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