Schibsted’s advertising revenues are to a certain extent affected by the developments in real economy figures such as GDP growth and unemployment. Advertising revenues amounted to 59 per cent (56 per cent) of total revenues in 2011. Advertising revenues from the recruitment markets, and to some extent real estate, are the segments most subject to cyclical fluctuations. Especially the print newspapers in Media Norge, InfoJobs.net, Anuntis.es and parts of Finn.no have advertising revenues from these segments. The total advertising revenues from the recruitment and real estate segments came to 11 per cent of the Group’s overall revenues in 2011. Future growth is expected to a large extent to come from consumer-oriented classifieds services such as Blocket and Leboncoin. These revenues are not considered to be very cyclical.
Schibsted uses Norwegain krone (NOK) as base currency but is exposed to exchange rate fluctuations from operations abroad, mainly the Euro and the Swedish krona (SEK). Schibsted has exchange rate risks due to both balance sheet monetary items and the currency translation of investments in foreign operations. The Group makes use of loans in foreign currencies, forward contracts and an interest-rate and currency swap to reduce its foreign exchange exposure. The loans in foreign currencies and forward contracts are managed actively in accordance with the Group’s strategy, in order to reduce the currency risk.
Exchange rate fluctuations may affect the ratio of net interest-bearing debt to gross operating profit (EBITDA). A general 10 per cent deterioration in NOK will increase the Group’s net interest-bearing debt by around NOK 118 million as at 31 December 2011 and weaken the ratio of net interest-bearing debt to EBITDA by around 0.05.
Virtually all of the Group’s debt as at 31 December 2011 was subject to a variable interest rate. The Group’s debt is affected by changes in the interest rate market. A change of one percentage point in the variable interest rate changes Schibsted’s interest expenses by approximately NOK 24 million.
Schibsted uses newsprint and is therefore exposed to price changes in the paper market. A change of one percentage point in price alters the Group’s raw materials costs by around NOK 8 million per year. The price of newsprint in Norway, Sweden, the Baltics and Spain is negotiated with suppliers each year and is already fixed for 2012.
At the end of 2011, the Group had limited exposure in the stock market and therefore less risk of losses.
As many of the Group’s products are sold on the basis of advance payment (subscription sales), there is little credit risk associated with the Group’s circulation revenues. Deposit schemes and credit insurance policies have been established for parts of the Group’s advertising revenues. Many of the private online ads are paid for by credit card or by phone when the ad is ordered.
In 2009, the Ministry of Culture nominated the Mediestøtteutvalget (Media Support Committee) with the mandate of carrying out a comprehensive assessment of the use of financial instruments in the media sector, including the direct press subsidy schemes and exemption from VAT. The committee made its recommendation in December 2010. The committee was split on the question of continuing the zero VAT rate for paper newspapers. The majority believed that the zero rate for newspapers should be continued, combined with a low VAT rate (8 per cent) for digital services, while a small minority suggested that the low rate (8 per cent) should be introduced for all types of media. The recommendation was being distributed for consultation during the first half of 2011. The case has since been frequently debated in Norwegian media circles and in the cultural-political environment. However, the Ministry has still not finished its deliberations and it is still not clear when a proposal will be presented to the Norwegian Parliament.
16 May 2011, the Norwegian Government appointed an expert group to examine the rules concerning media ownership. The great changes in the media, particularly within technology and ownership structure, means it is time for a full review of media ownership rules.
Schibsted has submitted its opinions to the expert committee, and participated in a hearing. The Group has actively participated in the public debate on the matter. Schibsted continues to follow the ongoing process and debate on media ownership.