North Media A/S
CSE:NORTHM
Earnings Call Analysis
Summary
Q3-2023
In Q3 2023, North Media experienced a slight revenue decline of 2.5% year-over-year, with revenue totaling DKK 940-960 million. BoligPortal continued to drive digital services growth with a 13% increase in revenue and a 41% rise in EBIT, counterbalancing FK Distribution's ongoing revenue challenges, which dropped by 4.2% but managed to maintain a stable EBIT margin of 15.6%. Ofir is adapting to a job market with fewer ads, impacting earnings negatively, while Bekey's revenue grew by 5% despite increased costs. Moreover, the company improved its cash flow from operations to DKK 40 million and holds capital resources at DKK 972 million, despite an unfavorable return on securities. Adjusted guidance reflects better visibility and strong BoligPortal performance, while the management focuses on capital structure strength and strategic priorities, including new appointments for faster decision-making.
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Welcome to North Media Q3 2023 Conference Call. Today's call is being recorded. [Operator Instructions] I will now hand it over to CFO, Kare Wigh. Please begin.
Hello, and welcome to the presentation of our business and financial results for Q3 2023. My name is Kare Wigh, I'm the Group CFO, and I will be your host today. We begin with a few highlights from our businesses, and then I will cover the financial development afterwards. As expected, FK Distribution saw a lower revenue decline this quarter compared with the development seen during the first 2 quarters of the year, I will come back to that later. In BoligPortal, the marketplace, which is the core of our business and the main revenue stream continued the positive development in the quarter. In Ofir previous CEO, Karsten Vikke, decided to seek new challenges outside the company. Therefore, Lucas Castenborg was appointed new CEO, he is to develop Ofir further and make the company the preferred digital job portal in Denmark. In Bekey, the Homecare business, which is also the largest continued to be the main contributor to a 5% revenue growth this quarter. Let's turn to our financial performance. Overall, the Q3 financial development was as expected. Q3 revenue came in only slightly lower, 2.5% compared to the same period last year. This development covered lower revenue in FK Distribution, which was partly offset by improved performance in digital services, driven by BoligPortal. EBIT was largely on par with the same period last year at DKK 30 million and so was the margin. Cash flow from operations increased and was DKK 40 million against DKK 26 million last year. Lastly, we had a negative return on our securities this quarter of DKK 8.6 million with total capital resources amounting to DKK 972 million. I will now look at the development in the businesses. The financial development in FK Distribution was as expected, revenue was 4.2% lower compared to last year, and the decline was lower than we have seen during the first half of 2023. Our packaging and distribution business remained impacted by structural and market changes. But as already mentioned, in August, some customers also expand the leaflet distribution because reality continues to show that leaflets do drive sales. It's also worth mentioning that selected mail continued delivering moderate growth. Selected mail is a data-driven solution where advertisers communicate in print to specific mailboxes where the interest in a product or service is expected to be particularly high. Despite the revenue development, FK maintained a stable EBIT margin of 15.6%, supported by lower distribution and logistics costs from the lower volume. And now let's go to BoligPortal. Once again, BoligPortal delivered a double-digit revenue growth rate this time 13%. Just like the previous quarters this year, the main driver was the marketplace with increased income from advertising fees. In Sweden, we continued to establish BostadsPortal.se as a professional partner and we did see more market communication to increase the number of owned rental units. EBIT increased by 41%, mainly from higher revenue. Costs increased slightly but with minor impact on overall earnings. Net cost for Boligmanager is on the same level as last year. With this, let's turn to Ofir. In Q3, we continued to see the impact of fewer new job adds, a trend that started in the same period last year. The number of new job adds per month is now at the lowest level since 2019, excluding the COVID-19 period. Customers continued adapting to the economic development by selecting smaller advertising packages. Earnings were impacted accordingly. As already mentioned, we announced the appointment of Lucas Castenborg as the new CEO of Ofir early October. His focus is to ensure growth in Ofir as the preferred platform for both companies and candidates looking for the best match. Lucas already knows the business well as he comes from a position as CFO, in Ofir. We end with Bekey, where the Homecare segment continued to generate most of the revenue. The proportion of recurring license and service fees from this segment continued to grow. Despite the higher revenue, EBIT declined due to increased fixed cost. Bekey continued standardizing and automating internal processes as well as building a new in-house IT development team. And now to the full year outlook of 2023. Our results year-to-date developed largely in line with our initial expectations for the full year. And based on that, we now further narrow our guidance for full year revenue and earnings. We adjust the overall revenue range to between DKK 940 million to DKK 960 million. In August, we reported improved visibility for the development in FK Distribution for the rest of the year, and that trend has continued during the past 3 months. It means that we can adjust both the lower end and the upper end of the revenue range. Earnings guidance is adjusted accordingly, reflecting the better visibility in FK Distribution, but also the strong performance by BoligPortal. In general, it's important to mention that we continue to see a number of uncertainties in our markets that may impact our business negatively. We continued executing on our strategic priorities. At a group level, our focus was to ensure a strong capital structure to explore opportunities to grow. After balance sheet date, we acquired approximately 644,000 owned shares, and now hold 10.4% of the votes and share capital. March last year, it was decided to strengthen the group Executive Board to ensure faster decision-making and strategic execution as well as stronger coherence across the group. In that context, Martin Tobberup was appointed Chief Digital Officer and member of the Group Executive Board this October. He will oversee that all our companies and functions apply the best digital tools and software solutions to enhance revenue, productivity and profitability. Martin will also set the direction for building the digital platform of the future for the companies within the group. Within the businesses, FK Distribution continued to grow the selected mail segment while minetilbud revenue progressed slower than expected. As already mentioned, BoligPortal generated higher revenue than expected, while the other parts of the businesses were not growing at that pace we had foreseen. Ofir new website was covered in our Q2 webcast and as explained, Ofir currently challenged by a job market with fewer job ads which means that developing partnerships and collaboration with large companies is not progressing as planned. Bekey, we have already covered their efforts to standardize and automate a number of processes, the pace of growing the distributor and property segments remains slower than expected. With this overview, it's now time to take your questions. Operator, please go ahead.
[Operator Instructions] It does not seem like we have anybody on the telephone who has a question at this point, so I will hand it back to you, Kare.
Thank you. There's a written question where a person is asking whether we will continue the dividend policy. Our policy is to pay out attractive dividends. We don't set a specific amount for the dividend or sort of have decided that it will be. So -- but in general, the policy is to pay out attractive and yearly dividends. There's another question. Are you considering more buybacks as you did on October 18. We continue to buy back treasury shares every now and then. So I cannot say that we will. I cannot say that we will not but we will continue to do buybacks every now and then. Second question, what are you and your team currently most worried about. Last question, when do you expect peak to start improving profitability? I think we in North Media are privileged with a strong capital financial base that gives us the freedom to look long term to grow the businesses. We are worried that things are not growing as fast as we would like in Bekey but we also see that we have the financial strength to make Bekey a profitable business. I cannot put a date or a year on when that will happen, but we continue to believe that Bekey and the NetKey and all the sort of the things that Bekey have in line will make Bekey a profitable business later. There's another question. Will you consider selling the equities portfolio on buying back more store -- more stock. I think we have talked about buying treasury stocks. We do not consider selling the equities portfolio. We are long term. Please bear in mind that we are not an investment company. We are long term in our in our securities portfolio, where we place our financial resources until we are to use that to grow the business. And I do not see any more questions. So with that, I will thank you all for listening in today. I wish you all a nice day.