Vend Marketplaces ASA (VENDA) Earnings Call Transcript & Summary

Hello, everyone, and welcome from me and the Schibsted team here. First of all, thank you so much for taking the time on a short notice here. I guess you saw the news this morning, which we think are quite exciting. So we thought we'd give you the possibility to connect with me and management to ask some questions. And Kristin and PC have prepared some slides, which we'll go through in a couple of minutes. And then afterwards, we will have a Q&A session, where you can raise your hand feature in Zoom, and I will give you then the word. Or you can also write in the chat, and I can ask the question to the group here. So I think with this, we can hand over to you, Kristin, and the floor is yours.

Thank you, and a warm welcome from me as well. Thanks for joining. In the recent months, we have announced 2 landmark transactions. As you know, the first in November, the Adevinta offer, unlocking 20 years of value creation, enabling us to focus more on Schibsted's core business. The offer values our stake in Adevinta at approximately NOK 40 billion. And the transaction represents [Audio Gap] Schibsted's full potential, thanks to the reduction of our share in Adevinta by 60%, for which we'll receive cash proceeds of NOK 25 billion at closing. But at the same time, we're also securing a participation in the incremental value upside through the reinvested amount. And as you are aware, the offer period ended 9th February, and we then had an acceptance rate of 95%. And the second one, in December is the sale of Schibsted News Media to the Tinius Trust, unleashing the full potential of our 2 core businesses, Media and Marketplaces. And the scope of that transaction includes the Media business area and other media assets. And the total transaction value is NOK 6.3 billion. And as part of the final agreement between Schibsted and the Trust, which was signed today, the Trust will support the removal of Schibsted's dual class -- dual share class structure by January 1, 2026, and both transactions are expected to close in the second quarter of this year, subject to relevant conditions, of course. All right. So today, we're pleased to announce a comprehensive capital return package of approximately NOK 24 billion, we intend to use most of the cash proceeds related to the Adevinta offer and the media transaction to return capital to Schibsted shareholders. This represents another important milestone for us following the substantial value creation over the last 2 decades, where we have pioneered digitalization in News Media and also in the online classified industries. The proceeds are -- the proposed use of the proceeds and capital return package follows a very thorough process, which we carried out over the last few months, where we have focused on shareholder returns and maintaining a strong financial position. And today's announcement is a natural next step following our previous communication over the past months. And the aim is an efficient and timely distribution of most of the transaction proceeds to our shareholders while retaining some cash primarily for the purpose of strengthening our balance sheet. And with that, I will now hand over to you, PC, to dive into some more detail on this.

Thank you, Kristin. As Kristin mentioned earlier, the proposed capital return package amounted to NOK 24 billion. And now I will now quickly run you through the underlying components. Upon completion of the Adevinta offer, Schibsted will receive NOK 25 billion in total cash proceeds, NOK 24 billion as cash consideration in the exchange of the 17-percentage-point stake that we are now selling, plus an extra NOK 1 billion as a part of the cash settlement of the TRS previously entered into Danske Bank. And this, as you know, we received already in Q4 last year. In addition, Schibsted will receive approximately NOK 4 billion cash proceeds from the media transactions following the completion. This means that in total, we are expecting to receive approximately NOK 29 billion in cash proceeds in the coming months, most of which, as we have also talked about before, will be used to return capital to our shareholders. Then the update from today is that NOK 20 billion of these proceeds will be distributed via a special dividend and NOK 4 billion through a multiyear share buyback program. The remainder of the proceeds, as we also have alluded to before, amounting to around NOK 5 billion, is intended to be used to reduce our net interest-bearing debt and strengthen our balance sheet. Regarding the special dividend, this will be paid out in 2 tranches, taking into account Schibsted's existing dividend capacity, so our first tranche of NOK 18 billion and then a second tranche of NOK 2 billion. So let us go to the next slide and next steps. As you know, we have -- and Schibsted has an Annual General Meeting set up for 26th of April this year. Amongst other things, this AGM will vote for the approval of the proposed capital return package as described today as well as the media transaction. Subject to approval at the AGM, the first tranche of the special dividend amounting to NOK 18 billion will be paid out as soon as reasonably practical after receipt of the proceeds from the Adevinta offer. Then in Q3 this year, Schibsted will convene an Extraordinary General Meeting to improve -- to approve the interim balance sheet and then the second tranche of the special dividend. Thereafter, and subject to approval at the EGM, Schibsted will pay out the second tranche of the special dividend amounting to NOK 2 billion and to launch the first tranche of the share buyback program amounting up to NOK 2 billion. For each of these steps and more, further detail will be provided in due course along the way. And now back to you, Kristin.

Yes. As we come to the end of this presentation, I just want to reiterate that we are proud about the outstanding value creation that this represents and that Schibsted has achieved over the past 2 decades. We're also very excited about the journey ahead. We're pleased to announce the substantial capital return package today, the result of a thorough process focused on shareholder returns and a strong financial position for Schibsted. And with that, I see you have several questions for us, so let's open the floor.

Thank you, Kristin. Yes, I think first in line today is Adrien.

Yes. I hope you can hear me okay. I've got a few questions, please. First of all, can you now clarify a bit the bridge from the NOK 6.3 billion of transaction value for News Media to NOK 4 billion of proceeds? I know there are some lease liabilities, but I'm still missing NOK 1 billion somewhere. Secondly, can you just clarify the year-end '23 net debt that you reported? Does that already include the unwind of the TRS? I think so, but I'm not 100% sure. And then after this announcement, I think your net debt position will still be very close to 0. Does that mean that M&A is off the table? Kristin, I think you alluded to potentially an interest in buying out the minorities in FINN. Is that completely off the table? Or is that something that could still be considered?

Yes. I guess those -- I can start, Kristin, and then you can add if there is something you want to add. So on the media transaction of NOK 6.3 billion down to the around NOK 4 billion that we have guided on as expected proceeds, leasing is a big component, as you mentioned. Other big components is pension liabilities and other liabilities. So that is what brings it down to in order to mention around NOK 4 billion. I think we haven't -- we don't know the exact numbers before we have closed the transaction. But the update is slightly higher than the NOK 4 billion that we have used here, but not significant. Yes, you are correct on the second question around the net debt at the year-end. That includes the proceeds from the TRS of NOK 1.2 billion. So if you normalize for that, you will have, I guess, around the NOK 5.6 billion in net debt. So your question around reserving then NOK 5 billion for strengthening our balance sheet will bring us to plus/minus 0 as it stands now. Then we will continue to work on our strategy and our financial framework and plans for the rest of the year, and then we'll come back to you in Q4 on the CMD when we will kind of lay out more details around what we see as a feasible -- as a capital structure for the revised company in the future. And so I think it's -- don't read more into it than that. There is no specifics around kind of do we want to do M&A or not do M&A. I think we would expect to have a company with a strong cash flow generation, and we expect to have a company with a strong balance sheet, and that will give us a good starting point, but more details to come later in the year.

Adrien, does this answer your question? Or do you have some follow-ups?

No, I'm all good.

I think next in line -- Will, we can't see you, but Will, your next in line.

Firstly, could you update us on dis-synergies? How should we think about that as the media assets are separated? That central cost number, is there upside, downside? Could you just help us think about that? And then could you just talk through the relationship with the Delivery assets with the media assets? Will there be some kind of long-term contract signed? How should we think about that? Because obviously, the Delivery assets are staying to help with the pay and ship side.

Should I take this? Yes. So we haven't disclosed any details around dis-synergies or synergies, any way upsides on that. We are in the middle of the process of preparing the separation of the companies. We still haven't closed. Even if now have announced the signing of a formal agreement, we're still working on preparing and actually doing the closing. There will be some dis-synergies. We have talked about in the advertising area where we have a good collaboration today between these assets, and also by separating out several of the common functions, we were doing that. So what we are doing now is to prepare and execute the separation, trying to mitigate as much as we can of dis-synergies. And then on the other side, I mean, also what we talked about before is we believe that there are opportunities when we become a smaller and a simpler company to take a review of how we are organized and what is our agenda. And this is the core of what we are working on now, and we will bring it back to you in the CMD towards the end of the year. So where exactly it ends and how, I think we will come back to. When it comes to Delivery, Delivery will be part of Marketplaces as we have updated you before, basically supporting media, obviously, of the distribution of newspapers but also a very core component of the -- supporting the e-commerce business in the Norwegian market. So what we have agreed is a commercial agreement to continue support in line with the current terms and conditions that we have for some time. We will have flexibility both to kind of extend that and opt out of that going forward. As we expect, the distribution of physical newspapers will continue to go down in the coming years and become smaller and smaller part of that business.

Thanks, Will. I think next in line is Pete.

I'll continue with the same topic actually. So as you said PC that print distribution continues to go down over time as it's structural. Do you think the Delivery business is going to be part of Schibsted even if prints go away? So is the e-commerce side like scalable or sufficient enough to maintain the Delivery business as a stand-alone? I have other questions as well, but maybe we'll go one by one.

Can I, that one?

Yes.

I think what we have said is that for now, it is important to keep it both to -- it has been important for media, but it is also important to secure the ramp-up of our e-commerce offering and make sure there is competition in the market. And we know that the transaction model is very sensitive to good distribution and reasonable -- reasonably priced distribution. Our goal is that once paper has declined so much that we -- that we might live without it that we will have a sustainable business based on parcels and that, that business could potentially then be divested. But a divestment of Delivery would entail that we, one way or the other, would need to secure that we have a good offering for e-commerce going forward. But we also need to consolidate the ownership around Delivery, which is not complete yet because right now, as you know, it has a bit of a complicated setup in terms of ownership. So there are some things that need to fall in place, and I think we will have much more clarity about that in, let's say, 2 to 3 years.

All right. And the next question is on CapEx and leases. So can you give some indication like what should we expect for CapEx and lease cost as News Media goes away? I think you have commented before that you expect CapEx to be stable or flat or -- I don't remember what was the word that you used. But is this on a group level or for the Nordic Marketplaces alone? Because obviously, News Media is a sizable -- it's not the largest, but it's still a sizable CapEx spender. So if the group level CapEx is flat, then it means that like-for-like Nordic Marketplaces CapEx is going up. So can you clarify like which one is it?

So any guidance or perspective that we have given so far has been in our current structure. So we haven't given any kind of updates on how we expect the development to be in the revised sort of shift at Marketplaces' scope. So what we have said for the current scope that CapEx this year to be relatively stable. We haven't -- and I think you could assume that, that is also a general message for both the media side of the business and the market side of the business. So don't expect any sort of significant deviations there also after. I don't think I can go into more details at this stage. We are now working on both doing the actual separation. So we have a clear picture of the, let's say, starting point financially and then also the agenda ahead. But don't expect any major shifts.

All right. Understood. And one last, and I will go back to the queue. So on HQ cost, there was a question on dis-synergies already. But is the discussion now basically the level of dis-synergies? Or is it really that there's no synergies or no potential to reduce HQ cost after this divestment?

Yes. So what I said there's absolutely potential to take a relook of our current cost structure, how we organize, how we set up because we have a group structure today that is set up to support a much bigger company than what will be the case going forward. So I mean we are obviously now looking into what is the sort of a feasible organizational structure, what type of functions do we need, what are the dimensioning of those functions, and we are in the middle of that work. And that could yield sort of good cost reduction opportunities. But of course, it needs to be connected to what is our strategy and our agenda going forward. And given that we are in the middle of this phase as we speak, we need to bring these different components together towards the end of the year in one Capital Market Day.

I think, Henriette, you had your hand up. I don't know if your questions are clarified now or...

Yes, I had a question about your costs, but if you can give an estimate going forward on how much -- or what we can think about the -- your cost [ estimate ] and [indiscernible] that goes away, but you have -- part have answered my question. I don't know if you not to say...

Yes, I cannot -- I have no more to say at this point, right? So we need you to be a bit patient with us, and we promise to come back with more details in due time.

Pete, I'm just looking for the chat, but while we're reading, you can just go ahead, please, and unmute.

Okay. Well, we'll -- yes, I'll then ask on -- you mentioned on the Delivery potential future divestment and the ownership structure that needs to be solved before that. But what is your thinking on the acquisition of the minority stake in FINN? Is the logic somehow the same? Or are those 2 separate?

I think actually, I didn't mention it earlier, and I don't think I have anything further to add right now. I don't think it would be prudent to comment on that now.

And there's one question from the chat related to the transaction with the Trust. PC, maybe if you can comment for the reason why there was a change from the earnout to fixed upfront fee amounts in the signed agreement now?

Yes. I -- we -- once we look into it, I mean, I would rather have the money in -- clarified and in the bank now than having it sort of depending on a future number. And this is quite a lot of complexity of setting up and agreeing and then having a different ownership structure during the year and so on. So I think both sides just looked at this and figured out this simplification for the whole structure just to agree on a fixed amount, and that fixed amount is NOK 118 million, which I think is a good number, given that we get money a lot earlier, and it is a certain portion. So don't read more into that than that. And then, of course, that is mainly the difference from the numbers that we communicated in December because that is now added to the value and the expected numbers.

And then there's another question on the chat. Do you have an assessment of the withholding tax or any other tax frictions for investors and also Schibsted as a company?

Yes. So I think Schibsted as a company, we don't expect these transactions to have any significant tax implications. For our investors, of course, it does. And this has been a main topic over the last 5 to 6 months. We have had dialogues with most of our key investors trying to understand their situation and getting their feedback into what will be kind of the most appropriate capital return package. And I think we have reached a good kind of conclusion and a balanced approach where there is -- a big part of our investor base has a strong preference for cash, but we also have a sizable portion of share buyback, and we also are able to take almost like 1/4 of the cash proceeds as a capital repayment. So these are things that is -- we have put in place in trying to balance the different perspectives amongst our investors.

Thanks, PC. Then I think Adrien is back in the queue.

Yes. Sorry to bother you actually, PC. My question was related to this. Like how did you decide between the dividend and buyback allocation? Because, of course, there's a withholding tax that will apply to the dividend, whereas the buyback is largely tax free. [ We've seen ] a bunch U.K. of companies have led to tender offers, for example, on their stock. Is that something which has been explored? Why so much into dividend and a bit less into buyback? Was it to protect liquidity of the shares? Anything that you can bring, please?

Yes. So I mean this is not an exact science, right? So it's been clear long away that the amount of money we're talking about here, you should expect a cash component. And then we have been quite clear that we explore all options. We have explored more, let's say, structural, not so common options as well, but concluded that that's not really feasible and doesn't solve any issues. So we're kind of left with share buyback and a cash dividend. Then a sort of regular market-based share buyback program has limitations on how much we can do, given our liquidity in the stock. In general, we can run around NOK 2 billion a year. And we felt that having a bigger portion than a kind of a 2-year kind of program where we kind of split it into 2 tranches of NOK 2 billion. It's not so common and probably will be a bit tricky to explain to the market. So that's why we kept it at NOK 4 billion. Then we have had discussions around should we be kind of a tender offer on share buyback. But it's been pretty clear feedback from a majority of our investors that they will write to prefer a cash dividend versus a tender offer, and that's the reason why we ended where we are.

I think we have no questions on the chat. But yes, I think Pete is back in the queue, so please go ahead.

Yes. One more for PC. You mentioned in the News Media divestment or the kind of the difference between EV and the cash proceeds. Can you give any kind of indication on the pension liability size that is going to come off the Schibsted Group balance sheet?

Yes. Have we said anything about that before? No, we haven't. So I think it is a sizable amount. But we don't think we have disclosed the details around that.

And while we wait maybe for the queue again, there's a question on the CEO transition in the chat. Has the Board described the profile you're looking for a new CEO?

I think you'll have to ask the Board about that.

Okay. Currently, no more questions on the chat. So let's see if someone wants to use here the possibility in the -- with the raise hand feature.

Seems like we have answered their questions?

Yes, it seems like there are no new questions. So then thanks from my side for joining. And of course, if you have follow-up questions, please reach out by e-mail or just call me. And Kristin, maybe you want to say maybe a few words in the end.

No, just thank you. Wish everyone a Happy Easter, and thanks for your interest.

Bye-bye.

Bye.