Media group Schibsted bets on online ads spin-off

By Gwladys Fouche and Douglas Busvine

OSLO/FRANKFURT (Reuters) - The much-anticipated spin-off of media group Schibsted's online classified ads business is expected to grow revenues by 15-20 percent a year in the medium to long term, shrugging off recent weakness, Schibsted said on Thursday.

The Norwegian group is splitting off the division, which saw revenue growth of an average 19 percent a year between 2016 and 2018, on April 10, and will name it Adevinta.

In addition to expected organic growth, the company could expand further if it pursues mergers and acquisitions in the years ahead.

Schibsted's financial targets for the new company, announced for the first time on Thursday, were similar to the current revenue growth targets for the online classified ads division.

It had previously reported some weakness in demand for online display advertising which will negatively impact the new business this year. However, it expects this to be temporary, it said.

"Adevinta expects low to mid-teens revenue growth in the first half of 2019," it said. "The company is working both strategically and with short-term initiatives to address this display advertising softness."

The Schibsted group, which will retain a collection of newspapers and the Nordic online ads business after the split, expects revenue growth in its remaining ads business of 8-12 percent over the same period.

Schibsted shares traded down 1.2 percent at 1152 GMT, lagging an Oslo benchmark index down 0.4 percent, but have risen 63 percent in the last 12 months, valuing the company at 79 billion Norwegian crowns (6.9 billion pounds) before the split.

Schibsted's classifieds spin-off has been warmly welcomed by investors who have been less impressed by strategy at rivals such as German publisher Axel Springer and broadcaster ProSiebenSat.1.

The migration of classified ads online has been a major contributor to the decline of local print newspapers, which depended on paid advertising for jobs, cars and homes before the rise of the Internet.

Internet classified ad revenues are growing at an average annual rate of 6.2 percent, while newspaper advertising is declining 4.5 percent a year, according to media buying agency Zenith Media.

Share price of Schibsted v Axel Springer - https://tmsnrt.rs/2UmLJOP

Investors are prepared to reward digital pure-play media companies far more richly than those with substantial traditional media operations.

Schibsted enjoys an enterprise value to core earnings multiple (EV/EBITDA) of more than 20, Refinitiv data shows.

That puts it just shy of the valuation for German property and autos site Scout24, which recently agreed to be bought by a group of private equity investors for 5.7 billion euros (4.9 billion pounds) .

By contrast, Springer has been saddled with a conglomerate discount that puts its EV/EBITDA multiple – a broad measure of a company’s ability to support its debt and equity costs – at 8.

Similarly, British broadcaster ITV is valued at 7.9 times and ProSieben at 7.4 times, Refinitiv data show.

ProSieben chief executive Max Conze on Thursday batted back a suggestion that he might split up the group's three divisions – entertainment, content and e-commerce.

"There're no hidden plans that would lead us to splitting any of these businesses," he told reporters in answer to a question. "We are very focussed on operating and running the businesses."

(Additional reporting by Terje Solsvik in Oslo and Joern Poltz in Munich)