Schibsted ASA

OSE:SCHA

Earnings Call Transcript 2020-Q1

[Kristin Skogen Lund, Chief Executive Officer]

Good morning, everyone, and welcome to the presentation of Schibsted's results for the first quarter of 2020. As usual, I will run you through the most important things from our operations after sharing some strategic perspectives. Our CFO, Ragnar Kårhus, will then present the financials before I come back and wrap it up. And then we will both be ready to answer your questions from the web afterwards. And during the presentation and the Q&A session, you are welcome to type in questions in the webcast browser. And I will also mention that our Chairman, Ole Jacob Sunde, is present in a 55, our head offices today.As you can see, the way we present the results is a bit different this time, just like the quarter itself has been different. COVID-19 has changed the way we interact, the way we live our everyday lives and the way we do business, and it will continue to impact us for the foreseeable future. For Schibsted, being a truly diverse family of brands means the impact of the crisis has been diverse as well. Advertising and classified listings have taken a hit across the board, while our News Media sees record traffic in digital subscriptions numbers and our home delivery volume grew at record rates. I will come back to how the different brands and divisions have been impacted by the corona crisis in a moment. But first, I want to say something about crisis management and crisis leadership in general because this is not the first crisis I have experienced in Schibsted. I was CEO of Aftenposten during the financial crisis about a decade ago, and I was CEO of Scandinavia Online SOL during the dot-com crisis a decade before that. Both Schibsted and I learned a lot from those experiences, perhaps especially the dot-com crisis. And I'll tell you what and why because I believe it is relevant.First, a bit of context. For those of you who don't remember this, the late '90s were an age of incredible optimism and soaring investments in everything dot-com. My company at the time, SOL, went public in the summer of 2000 to the tune of NOK 170 per share. But optimism had been too high and too much money had been thrown after bad ideas and not just the good ones. So come September that year, the bubble bursts, the SOL stock went from NOK 70 to about NOK 0.1 more or less overnight, and it was the same across all digital brands. Most companies then chose to stop or scale back their digital investments, but Schibsted went the opposite direction. We launched Finn and let it compete with a much more lucrative newspaper advertisements. That gave in a crucial first-mover advantage in the Norwegian market, a position that we still enjoy today and a position that we used to launch all our international marketplaces, including Adevinta ever since. And although it seems like the obvious choice in hindsight, I can assure you, it was controversial at the time because it wasn't profitable in the short run, and it did cannibalize our lucrative legacy business.And I take time saying this because there is an important lesson to be learned from the Finn example, and that is that you have to tell the storm apart from the climate change. When the dot-com bubble burst and the value of all digital companies plummeted, it was a passing storm. The digitalization of media, on the other hand, was the climate change, the lasting and fundamental transformation. And the fact that Schibsted acted on the climate change and not just the storm ensured unique market positions and future growth. And we really bear with us this lesson as we navigate the current storms and climate change because, yes, the corona crisis has certainly created a storm, a storm that we have to weather, and we are adapting at a faster rate than we would have thought was possible. Our employees have truly impressed me with their adaptability, hard work and team spirit and their ability to keep delivering despite these circumstances. Our system have handled the pressure of more than 80% of our people starting working from home in less than 24 hours. And our brands and divisions have shown true determination not to let this knock us down, but to keep chasing results. For instance, our people in ad sales, they have arranged customer meetings in record numbers despite the circumstances.Regardless, there has been a need to bring down costs. We have not sought cost cuts through company-wide temporary layoffs. Rather, we are cautious in how we spend our resources, bringing down cost levels across the board, refinancing a bond to secure liquidity and taking down spending on new initiatives like Svosj and the expansion of Lendo. But the coronavirus is not merely a passing storm we have to weather and cutting costs alone is not the answer to this underlying climate change because there are more fundamental changes going on, some created by the crisis and some propelled by the crisis. We are probably in the midst of a fundamental transformation of the world economy. There will be structural changes, less travel, more online interaction in e-commerce, more home delivery, more national value chains and less globalization. More weight would be placed on truthful and trustworthy news sources, more weight placed on the trustworthiness of brands and more weight placed on the way brands contribute to societal trust. And Schibsted is in a fantastic position in many ways with so many consumer touch points, strong brands and high level of trust. Acting on the fundamental change means building on that position and taking it as an opportunity for new growth, just like we did with Finn 2 decades ago.And that is why we believe that the strategic framework we already have in place is the right framework in the current context as well. The bottom layer of our pyramids expresses how Schibsted acts as a unifying foundation for its brands, making us more than the sum of our parts. Schibsted is a family of strong brands, but part of our success stems from the fact that we work together. The middle layer illustrates that we are a growth company. We want to build, develop and keep succeeding through improvements in our core operations, also seeking out adjacent opportunities and developing entirely new ventures. The top layer illustrates our common purpose. In Schibsted, value creation is twofold. We create significant financial value to our shareholders, but we also create significant value to our other stakeholders in society through market transparency and the circular economy through democracy, enhancing quality journalism, through services that let people make better choices and through ventures that bring about innovative solutions. We believe that our purpose, the fact that what we do matters for people is and will be a key competitive advantage for us. And I think the role of our News Media in this current crisis served as the perfect illustration. Our media house's ability to provide the public with facts, to sort through the myriad of potential sources and relay the highest quality information is invaluable to society right now. They do an exemplary job in an extreme situation and really manifest their strength and role in society in the process.Take a look at this. We are currently seeing a demand for news and journalism that we have never seen before, and the corona crisis has quickly become the biggest news story of our time. Both Aftonbladet and VG are experiencing record traffic numbers and are strengthening their positions as the primary news destinations in Sweden and Norway. These figures show the explosion in traffic when COVID-19 broke out by number of visits. Number of unique daily visitors leaped as well, around 25% to 4.3 million in Sweden, 40% of the population. And in Norway, daily unique visitors increased by 51% in March to 3.7 million. That's 70% of the population. We also see that those who subscribe to our news services used their subscriptions more now than usual, which is good news for churn going forward. And there are many good examples of great coverage from all over our news brands, but I just want to give you 2 examples. First, I want to mention Aftenposten, the podcast corona called Forklart, which they introduced as part of their daily podcast shortly after the onset of COVID-19. It became the biggest podcast in Norway and has been a very popular addition to their editorial service.My next example is VG corona live, which shows real-time updates in all relevant COVID-19 statistics. The number of confirmed infected, how many are admitted to hospitals, the number of deaths, where in Norway, age and so on. VG has become the primary destination for this information in Norway and has also been one of the news sites included in Reuters selection of great coverage on the virus, along with the New York Times and The Financial Times.Okay. With that introduction, let me now move to go through the Q1 results more in detail. Looking at the overview of our financial performance, it is clear that we were hit by the consequences of the restrictions imposed in mid-March. The first quarter was softer in terms of revenue growth than what we have reported earlier for the whole group and the profitability is reduced. Adevinta announced their numbers yesterday, so I will not spend time on presenting details for that company. Schibsted, excluding Adevinta, though experienced revenue decline and margin contraction.Looking at the overview of our financial performance, it is -- oh, excuse me, here, sorry, I got the wrong chart there. Looking at Q1, we see a mixed picture. In Nordic marketplaces, Sweden continued to deliver well in terms of revenue growth, whereas the market slowdown brought down the growth in Norway. In total, it boils down to 1% currency adjusted revenue growth and a slight margin decline. News Media is hit by a decline in advertising revenues, whereas user-generated revenues, primarily digital subscriptions, continued to grow well. All in all, 4% underlying revenue decline and a margin drop from 6% to 2%.Looking at Lendo, we can report a very strong quarter in Sweden, and continued strong volume growth for our distribution business led to a very good top line growth number for Schibsted growth. Underneath the hood, it is clear, though, that the advertising-driven models within Schibsted growth, they struggle. And unsurprisingly, I may say, there was a huge shift in the market from February to March. Half of March was affected by COVID-19 restrictions, which is highly evident in the numbers for Nordic marketplaces and News Media. The listing volumes and traffic dropped rapidly for our marketplaces and advertising dried up quickly for News Media. Looking at the decline in new listings for our marketplaces, it is important to remember that we had an ad-based model and not a subscription-based model like some peers. Hence, volumes are more volatile in such an environment. Later in the presentation, I will try to give a bit more insight into also what we experienced in April. I mentioned how we are working to handle the fundamental changes the Internet and media industry faces. Let me spend a few minutes on how we act right now in order to weather the ongoing storm. Schibsted has a strong financial position. We have a low net debt level compared to our target range, and our liquidity position is very healthy. This means that we will be able to act on interesting investment opportunities that might arise. We can't give you a prediction on how this year will turn out. The uncertainty regarding how the virus behaves and the nature and duration of the restrictions, not only in Norway, but globally, will determine that. But we are prepared for a rough period. In all our operations, we are reducing costs related to traveling and events. We are very restrictive when it comes to hiring new people, and marketing spending is being reduced significantly. At the same time, we will do our utmost to protect good projects, working on innovation in terms of business models and functionality for our users. And so far, we have, only to a limited degree, been forced to make temporary layoffs. In our Norwegian marketplaces operations, the cost flexibility is considerable, which means that we will target a fairly stable margin picture there in the 40% to 45% range. Sweden is in a somewhat different situation, ramping up product and tech capability. So we are likely to see some margin contraction there.Looking at News Media. I'd like to remind you that we announced a new round of cost and restructuring measures at our Q4 presentation. The goal is to take large steps in the direction of the News Media organization of the future, the pure digital future. It is of paramount importance for Schibsted that News Media continues to produce healthy profits on a stand-alone basis and to ensure this forceful action needs to be taken.During the first quarter, we have worked a lot more on the details for this program and the COVID-19 situation accelerates the process. Currently, we have identified concrete measures, which will reduce the cost base in News Media with NOK 250 million by 2021 compared with a nominal level in '19. In addition, we see the potential for another NOK 250 million of cost savings, bringing us up to a total of NOK 500 million of cost savings by 2021. And slightly more than NOK 100 million of these will be executed upon and visible in the figures for the second half of 2020. We are also taking measures in financial services and growth, where investments in organic initiatives like the expansion of Lendo International will be reduced compared to our previous plans.Let me then spend a few minutes talking in some more details on the business areas. But before I start, let me remind you that we changed our reporting structure affecting from this quarter. So costs from centralized product and tech developments and services are now allocated to the operating segments, affecting EBITDA for the operating segments. The numbers for '18 and '19 are restated accordingly to make sure that we compare apples and apples in the figures that you see.So looking at Nordic marketplaces first, we see that growth is limited. As touched upon earlier, January and February were relatively solid, whereas March was negative. The verticals continue to grow, whereas generalist declines almost with the same pace as we saw in Q4. Margin-wise, we are down somewhat. And here, the picture is mixed, and so I'll come back to.Looking at Finn. Finn saw completely flat revenues in the first quarter. At the end of February, Finn had revenue growth of 7% and had a positive outlook for 2020 with an expected incline in revenues. Real estate and motor showed good pace, both in volume and ARPU. Jobs was slightly more muted, which was a continuation of the trend that we saw even back in Q4 '19. Finn's classifieds revenues are, to a very large degree, linked directly to volumes of new ads. Hence, the situation looked very different from mid-March and onwards. Most affected are jobs and travel. Our largest vertical, jobs, ended March down 26%. Travel is a smaller portion of the total, but naturally, the impact was the strongest here with minus 65% versus last year in March. Real estate and motor decreased as well, but not as significantly, moving from 15% and 11%, respectively, for February, to minus 3% and minus 4% in March. Advertising was not as affected so far as a result of pre-bookings.With flat revenues, we are satisfied with the only slight EBITDA decline in Q1. The decline is, in fact, entirely due to the acquisition of the auction service Nettby, which is in investment mode. Based on the negative impact on revenues, cost measures have been taken to maintain a high EBITDA margin. This includes reduced marketing spend, stopping plans for external and internal events, decision of no bonus payments to management and personnel, et cetera. And most of them will have effect from the second quarter.Going forward, we have a clear target to continue with high and relatively stable margins in Finn and the measures I've just described should help achieve that. Some margin contraction might come during 2020 as a whole, and that will be because of Nettby.Because of the special circumstances this quarter, we decided to give you a flavor of what we have experienced in April. And please note that the situation is volatile and it fluctuates from week-to-week, so we don't really know yet how well suited April numbers are to predict May and June. Anyway, the chart on the left illustrates the change in new listings compared to the same month in '19. The first half of March showed normal levels, followed by a significant drop in the second half. During April, however, we have seen a continuous increase in new listings, leaving April month above our expectations, especially within real estate and motor. And looking to the right, we can see that traffic is picking up, and we even saw an all-time high now in week 16.If we then move to Blocket, despite COVID-19, Blocket had a strong quarter for classified revenues, which grew 8% in total. This was driven by a solid growth in motor professional and as a result of the visibility product bump. Looking at the other verticals, job experienced the biggest effect of COVID-19 in Blocket with a 13% revenue decrease in the first quarter. And Blocket is in addition to Aftonbladet affected by the challenging Swedish advertising market and display revenues decreased 13% in the quarter. But despite these effects, Blocket's top line is growing 5% in the first quarter as the strong growth in motor classifieds is offsetting the decline in advertising.On the cost side, it is primarily investments in product and technology capabilities that is affecting the margin negatively. Going forward, based on a slower revenue growth in Q1 and so far, in Q2, measures have been taken on the cost side. Recruitment freeze, decision of no bonus payments to management and also decreased marketing spend will have the largest effect.If we then also look at April for Blocket, you can see there is a weakening trend in motor and jobs in March and April. And as you know, motor is the most important revenue driver in Blocket, while the jobs is less important. On the other hand, looking at traffic numbers, we see that also Blocket has high traffic numbers in April, which is 5% above last year, and this is may be -- mainly driven by mobile traffic.Then let's move to News Media. We have touched upon the overall number for News Media in Q1, so I'll be brief here. The main message is that digital subscription revenues continue to grow well, which is more than -- but it's more than outweighed by the decline in advertising revenues, both print and online. We have tight cost control, but the top line decline leads to a margin decline. Note that this is the first quarter since we divested some of our regional and local newspapers in the south of Norway. The revenue growth numbers we show on these slides are adjusted for this. So what we see here represents like-for-like development. The absolute amounts in Norwegian kroners, though, are unadjusted.Looking at subscriptions. First, as mentioned, the attention to our news sites is very high at the moment, traffic is much higher than normal and in total, our subscription revenue grew by 7% in Q1, then I include online and print subscriptions. Strategically, it is, of course, most important for us to continue to grow our digital subscriber base and the ARPU. As the chart on the left indicates, we succeeded with this in Q1, showing 25% growth. This growth rate accelerated towards the end of the quarter. We see 2 main trends that are promising for our long-term development. One, there is a high willingness to pay for our journalism. We are experiencing good growth in our digital subscription business and the net subscriber numbers is growing for all brands, and the development is driven by these record high editorial sales. Another important development for us is the increased usage of our digital products, meaning very high engagements. So that means our subscribers are coming more often to our sites, they spend more time and they read more articles. And this is a critical metric for us following the long-term -- to follow, sorry, for the long-term sustainability of our news brands.If we then move to advertising, the picture is a bit more bleak. The advertising markets in both Sweden and Norway are still challenging, and COVID-19 has brought new insecurity to the market. Advertisers are looking for more flexibility. Campaigns are booked on shorter notice, and they are looking for end-to-end solutions for media companies. The pressure on prices is also intensifying due to COVID-19. It is, however, important to distinguish between Norway and Sweden here. In Norway, digital advertising declined by 6% in Q1, whereas the decline was 10% if we include print. Content marketing is performing really well in Norway. In Sweden, the situation is more challenging, with advertising revenues down 26% in total in Q1. Digital advertising revenues declined 27% compared to Q1 '19, and remember that Q1 '19 was a strong quarter as companies in the gaming industries back then were positioning themselves for the tightening of the legislation to come. The development for digital advertising revenue, excluding gaming, is minus 5%, so quite similar to the figures we see in Norway.Looking into the second quarter, we expect the advertising markets to continue to be challenging. All big sports events like the Summer Olympics and European Soccer Championships have been canceled, and this will have an effect on advertising revenues, both in Norway and Sweden. But even if we see a more challenging advertising market, the situation is also an accelerator for creativity and introduction of new products, and our salespeople are tremendously active nowadays. And product-wise, we are continuously working to meet advertisers' changing needs as good as we can.Okay. We have already been clear that it is of paramount importance to Schibsted to secure long-term healthy profits for our News Media operation, not the least to maintain the important societal role we play as providers of independent and reliable news. We continue to see 2 main structural challenges for the news industry. It's the continued decline for print, which still represents a large part of revenues, and the competitive situation in the advertising market. A potential effect of COVID-19 is that the digital transformation is accelerating and that we need to prepare for digital sustainability sooner rather than later. At the Q4 '19 presentation, we announced the plan to improve the profitability. Today, we announced that we target cost measures amounting to NOK 500 million with full effect in 2021. At least NOK 100 million will be effective in 2020. Around half of the program is already planned in a fair amount of detail. The rest will be identified in the coming months. Execution is already underway. And as of now, we are working with 4 key areas. We will aim for a more agile and less complex organization. We will continue to align our technology stack when that creates value and reduces cost. A good example of this is the plan to align advertising technology stack between Sweden and Norway. We're also planning a specific program for Aftonbladet, which has seen a substantial part of its advertising revenue base evaporate over the last 2 years, mainly due to the reduced advertising that relates to gaming.And as print is declining, it is as always important to reduce costs wherever possible in our print value chain. And this work continues with full strength.Our ambition is to have digitally sustainable media houses. This means that our media brands should be profitable based on digital revenues only. And we're going to continue to deliver high-quality journalism in the long run. And to do so, it is important to secure long-term profitability on the basis of digital products. News Media has, for several years, been undergoing a substantial transformation. And now we are stepping up this with a forceful program for '20 and '21. Looking beyond 2021, it will be important for News Media to continue to be highly adaptable to structural changes.Let me then round off with next. We will, as usual, divide this into financial services and growth. And within financial services, Lendo is the most important. So let me share with you some of the developments in Lendo. This first quarter was an excellent one for the Swedish part of Lendo. The revenue growth was 19%, and EBITDA margin was quite stable compared to last year. And remember that Sweden still is the key market for Lendo. As you can see on the chart to the left of this slide, almost 80% of the Lendo revenue is generated in Sweden. The last 3, 4 quarters, we have talked about regulatory tightening in Norway, which has led to lower volumes in the market. We still feel that effect. And in addition, we saw a negative COVID-19 effect in March. Borrowers want to borrow less and lenders are less keen on lending in this uncertain situation. But even if the revenue decline in Norway is severe and we are able to run the business with double-digit EBITDA margin and the cost flexibility is considerable, so we don't foresee Norway running into any severe negative results.In Finland, it is still a highly competitive market, and we are closely scrutinizing this part of the business in order to find the best road map going forward. We continue to focus on tapping the potential of Lendo by expanding selectively internationally. The geographic rollout in Denmark is continuing to get traction with solid development of most of the KPIs. Q1 revenues were 23% higher than Q4, and number of weekly applications have grown 8x since launch. A decision to shut down Poland was made in late March, and we also decided to significantly scale back Austria and test remote operating models.Costs connected with the geographical expansion affected EBITDA with NOK 28 million in the first quarter. In 2020, total EBITDA investment level is expected at NOK 60 million to NOK 70 million compared to the NOK 100 million in '19. And this is due to the shutdown and scale back of Poland and Austria.Then looking at growth, several of the operations in Schibsted growth experiences increased activity level and demand during the COVID-19 pandemic. This goes for both the distribution business and the marketplaces for services meet on bridge. We can also mention that the dating service Möteplatsen is really thriving these days. This means that the total revenue of Schibsted growth grew well in the first quarter. However, the cost level has increased in this quarter related to investments in the new subscription-based distribution product, Svosj, and margins are also down in Prisjakt this quarter. And as you know, these can fluctuate a bit from quarter-to-quarter. The top line and margins are negatively affected by the advertising-driven services such as Klart and TV.nu.And with that, I will hand over to our CFO, Ragnar, who will go through the financial part. Thank you so far.

[Ragnar Kårhus, Chief Financial Officer]

Thank you, Kristin. And I'm happy to provide some more details on certain financial topics.Let me first start by picking up where Kristin left and summarize the EBITDA development in the first quarter. EBITDA for the group, exclusive of Adevinta, in the first quarter came in at NOK 285 million, a reduction of NOK 133 million compared to the first quarter last year. The development in News Media is the main reason for the drop in EBITDA, and there are 3 main drivers for -- behind this development. The first being reduced advertising revenues in Aftonbladet and as in previous quarters, primarily driven -- primarily due to lower revenues from the gaming industry. The negative effect this quarter compared to last year is approximately NOK 45 million. Secondly, COVID-19 effects from reduced advertising and accelerated decline in casual sales is amounting to roughly minus NOK 30 million this quarter. And thirdly, there are some increased costs in VG from increased marketing in the beginning of the quarter and new growth initiatives included this quarter. It's also worth mentioning here that continued strong growth in subscription revenues contribute positively to the EBITDA in News Media.Nordic marketplaces are margin-wise quite resilient despite a softening revenue trend. The net nominal reduction in EBITDA from Q1 last year is primarily due to the investment into in trend consolidation of Nettby. But we also have higher costs in Blocket, primarily from investments into product and tech.Within financial services, Lendo Sweden contributes positively with NOK 10 million this quarter, whereas primarily Lendo Norway and Lendo Finland contributes to the net negative development compared to last year. Lendo has invested NOK 28 million in growth markets in Q1, NOK 7 million more than last year. This amount will be reduced in the quarters to come as a result of the close down of Poland and changed operating model for Austria.Finally, growth with a more mixed picture. The decline of NOK 27 million compared to last year partly comes as a result of organic investments in the distribution business, primarily in Svosj, which is our Norwegian home delivery subscription business. But we also have negative profit development within the portfolio of smaller businesses with advertising-driven business models and then primarily due to the COVID-19 effects. The growth area also received somewhat higher allocation strength in costs this quarter than previously.Looking at some of the main items below the EBITDA line in our income statement. We had a negative result of NOK 30 million from share of profit and loss of associates and joint ventures. The loss is mainly explained by increased organic investments in the financial services portfolio, where Bynk and Hypoteket are the most important ones. We have a gain within other income of NOK 55 million compared to a negative of NOK 40 million in Q1 last year. The gain is primarily related to the divestment of Fædrelandsvennen and certain related local newspapers in Southern part of Norway.On the other hand, we had some minor costs related to severance packages and reorganization costs.Financial items is reduced from minus NOK 10 million to minus NOK 40 million this quarter, primarily due to reduced interest income from Adevinta entities as a result of Adevinta now carrying their own external financing. And I'll get back to taxes in a moment. But all in all, this led to a net profit of NOK 48 million compared to NOK 99 million in Q1 last year.This slide shows the group P&L, including Adevinta. Since Adevinta announced their results yesterday, I won't go into details here. Just mention that net financial items is heavily affected by change in fair value of currency derivatives that Adevinta has established to hedge the exposure related to the commitment to buy Grupo ZAP in Brazil, an agreement that was announced in Q1, but expected to close later this year.We have certain tax losses where -- for which no deferred tax assets is recognized, meaning that our reported tax rates is higher than the underlying actual tax rate. In this quarter, the reported tax rate was at 36%, whereas the underlying tax rate was just below 25%.Here, I'll just comment on the operating cash flow, which was reduced from NOK 276 million in Q1 '19 to NOK 98 million in Q1 this year. The decline is explained by the reduced EBITDA and working capital fluctuations. CapEx is somewhat up due to increased investments into product and tech, primarily within Nordic marketplaces.As mentioned by Kristin earlier, Schibsted has a solid financial position. We successfully issued a new NOK 1 billion bond loan in April with maturity in October 2023, which will effectively replace a similar bond -- size bond that are maturing in June this year. This contributes to our strong liquidity profile, also strengthened by the proposal to the general assembly not to pay out dividend for 2019. The 2% share buyback program that was announced in July 2019 was completed this quarter, but our financial gearing is still low. So net interest-bearing debt divided by EBITDA is 0.6x, well below our financial target or the target range of 1x to 3x. All in all, this means that financially, we are very well equipped to stand firm through difficult period related to COVID-19, but potentially also, we are being able to act on interesting strategic and structural opportunities that might arise in times like this.We will also continue to invest in specific organic initiatives, but in the light of the market uncertainty and the size -- the size of the investments are reduced or postponed. EBITDA losses related to Lendo's international expansion are likely to be between NOK 60 million and NOK 70 million this year, down from NOK 100 million, as previously indicated. And then in distribution, we take spending down from previously communicated NOK 50 million to a level around NOK 25 million.I will end my part of the presentation by giving some comments on our financial targets and policies. Due to the effects from the COVID-19 pandemic, the expected economic downturn that will follow and the timing and speed of -- and the uncertainty around timing and speed of recovery, the visibility of our short- and medium-term financial performance is low. For Nordic marketplaces though, we maintain that our long-term revenue target is in the range of 8% to 12%. As Kristin said, it's also of paramount importance to Schibsted that News Media continues to produce healthy profits on a stand-alone basis. The announced NOK 500 million cost reduction program is an important milestone towards our recovery over time to a 6% to 8% EBITDA margin for this business. Our policy for M&A remains unchanged, with focus on strengthening our market positions and bolt-on adjacent businesses.And then I will emphasize that it's in -- just in extraordinary circumstances, like we are in the midst of that we will deviate from our dividend policy to pay a stable to increasing dividend over time.Thank you, Kristin. I invite you back to wrap up the takeaways before we moves into Q&A.

[Kristin Skogen Lund, Chief Executive Officer]

Thank you, Ragnar. I think we have spent a lot of time talking. So I'll just leave you with this key takeaway on the slide here, and then we are ready to take any questions you might have through the webcast, please.

[Jann-Boje Meinecke]

Yes. Good morning, everyone. We just have a few follow-ups from the webcast. First one on Nordic marketplaces. Kristin, Ragnar, can you comment a bit on price cuts or payment deferrals in Nordic marketplaces given the current COVID-19 environment?

[Kristin Skogen Lund, Chief Executive Officer]

Sure, you want to take that one, Ragnar?

[Ragnar Kårhus, Chief Financial Officer]

In general, we have a very sort of close dialogue with the customers of both Blocket and Finn during this time of period. And we are, of course, focused on also listening in and understanding sort of the situation they are in. In Blocket, we have sort of, for the month of April, taken some reductions in the average prices. And then we are following sort of the situation quite closely.

[Jann-Boje Meinecke]

Second one, also on marketplaces here. I mean you had strong growth in advertising in Finn in Q1. Can you comment a bit like what's the driver here? And maybe also when you -- what we can expect for the coming month or quarters?

[Kristin Skogen Lund, Chief Executive Officer]

Yes. I can take that one. We already saw a strong effect in the previous quarter as well for Finn advertising, and it has to do with that they have changed and improved of their formats, which has worked really well with customers, and that has helped boost advertising revenues in Finn. There was also earlier a bit of a -- some changes in the algorithms which made some of the inventory in Finn a bit more favored as compared to some of our other Schibsted inventory. That's also part of the effect. The strong numbers in Q1 is a result of this, and it's also so that some of -- we have some pre-bookings, meaning that we were not as much affected by the cancellations towards the end of the quarter. I think it's fair to say that we must expect it to be somewhat softer in the second quarter, but we still believe that Finn can actually uphold a reasonably good level of advertising going forward.

[Jann-Boje Meinecke]

Very good. Then also going to other growth a little bit. EBITDA was negative here in the first quarter. What's the strategy here? Like do you follow like cost cuts here to look in the margin going forward? Can you comment on that?

[Kristin Skogen Lund, Chief Executive Officer]

Yes. We have done some temporary layoffs in several of the advertising-dependent companies. In Let's deal, we have also had to scale back part of the operation. Let's deal was obviously very hard hit also by the COVID-19. So yes, there are cost measures taken. And as I mentioned, in total, in Next, we will have a cost effect this year north of NOK 100 million. And of course, a lot of this is then attributed to the advertising-based brands that we have.

[Jann-Boje Meinecke]

Then going back to Nordic marketplaces, you showed a little bit on the slides and commented on the development in listings or ads for Finn and Blocket. Can you comment a bit like on the second quarter, would you expect here on volumes? Do you see an improvement? Or is it too early to comment on that?

[Kristin Skogen Lund, Chief Executive Officer]

I believe it's very dangerous these days to try to predict because things are really volatile. Like I said, it fluctuates from week to week. But as you saw in the numbers, and especially given that March was only halfway affected by COVID, we had 2 normal weeks and 2 abnormal weeks, the fact that April is looking that much better for both real estate and motor, I think, is encouraging. So let me just leave you with that. And I'm very -- I will be very cautious of giving any predictions because we don't really know how this will evolve. But we are cautiously optimistic, let's put it that way.

[Jann-Boje Meinecke]

Then maybe more like strategic questions on opportunities here, like first one is like M&A. How do you think -- or what do you see here in the current COVID-19 environment? Is there like a change in what's happening in the landscape? And the second also related, like do you see possibilities here due to the current situation that some companies struggle or the new opportunities arise? Can you comment a bit on that?

[Kristin Skogen Lund, Chief Executive Officer]

Sure. My impression is that some of the planned M&A activity is pursuing as normal. So I think it's not like everything will stop. It will, of course, be more difficult to navigate some of these deals because it's -- it will be harder to estimate fair value in an unpredictable macro environment that we're in. That might make some of the deal-making a bit more complicated. But my general impression is that the activity is continuing. I would also like to mention that on our venture side, we will try to, very specifically, keep supporting the -- our investments that we believe the most in, and we will look for new opportunities that might arise. And of course, there is a chance that some of the pricing will be more favorable going forward. And being reasonably liquid, we believe that puts us at an advantage.

[Jann-Boje Meinecke]

Very good. Then going to News Media, you announced today that you stepped up the cost program in a way, now targeting NOK 500 million until the end of 2021. Can you comment a bit like, if that means layoffs in News Media or give more color like of how you cut costs here?

[Kristin Skogen Lund, Chief Executive Officer]

Right. So it's important to say that we do not wish to -- it's not like we wish to reduce headcount because we have brilliant people, and the activity level is very high, as we have heard. But at the same time, personnel cost is a substantial part of the total cost base. So it will be difficult to do this amount of cost reduction without that affecting the employees. But we will try to avoid it to the degree possible, but we probably will not entirely -- we will not be able to do all this without it affecting also the employees. But like I mentioned, we have a quite complex matrix organization setup, and we believe there is a potential to simplify our own structure, maybe reduce the layers of also -- the layers of managers that we have to a certain degree. We believe there is quite a lot of cost to be taken out from our technology stacks. We can combine and run fewer stacks than we run today. So that is another good area for improvement. As mentioned, we believe it is particularly important to look at the cost base in Aftonbladet, specifically given the fact that they have been so hard hit from the short fall of advertising revenue. And finally, we're looking at our whole value chain when it comes to print, print and the distribution of newspapers, et cetera. So those are the main areas that we're looking into. The first NOK 250 million that we already have quite detailed plans for, I would say, is a pretty good mix of cost cuts from various brands and various functions. And we have a pretty clear picture of how we're going to do that.

[Jann-Boje Meinecke]

And maybe a last one on Nordic marketplaces before we round up the Q&A. Looking at Nordic marketplaces, does the strategy when it comes to Finland and Tori differ for 2020 in comparison to Finn and Blocket? Or is it like business as usual before COVID-19?

[Kristin Skogen Lund, Chief Executive Officer]

No, I would -- Finland is still an interesting market for us, where we would like to grow, and we are specifically now being more active in the car vertical in Tori, and I think they have made some interesting moves in the market that we hope will improve their customer offering into the Finnish car dealers and that we -- that way, we'll be able to increase our position actually. Tori also has undertaken some very interesting circular economy efforts, it's an initiative called circle retail. Which we believe strongly in. And we also believe actually that project can be a guide for similar -- to implement a similar project in Sweden and Norway. So we very much continue our efforts in Finland going forward.

[Jann-Boje Meinecke]

Okay. I think then we can round up the Q&A from the web here. But let me just remind you that we also have a conference call at 2:00 today for analysts and investors. And of course, like, please contact us if you have more questions.

[Kristin Skogen Lund, Chief Executive Officer]

Thank you.