Schibsted’s advertising revenues are to a certain extent affected by developments in real economy figures such as GDP growth and unemployment. Advertising revenues came to 56 per cent (50%) of the total revenues in 2010. Advertising revenues from the recruitment markets, and in part the real estate markets, are the segments that are most subject to cyclical fluctuations. Especially the print newspapers in Media Norge, InfoJobs.net and parts of Finn.no have advertising revenues in these segments. The total advertising revenues from the recruitment and real estate segments came to just under 15 per cent of the Group’s overall revenues in 2010. Future growth is expected to a large extent to come from consumer-oriented classified ads services such as Blocket and Leboncoin. These revenues are not considered to be very cyclical.
Although Schibsted has Norwegian krone (NOK) as its basic currency, its operations outside Norway mean that it is also exposed to fluctuations in the exchange rates of other currencies, mainly the Euro and Swedish krone (SEK). Schibsted has exchange rate risks linked to both balance sheet monetary items and the 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 exchange rate risk. The loans in foreign currencies and forward contracts are actively managed in accordance with the Group’s strategy in order to reduce the exchange rate risk.
Exchange rate fluctuations may affect the ratio of net interest-bearing debt to operating profit (EBITDA). A general 10 per cent deterioration in the Norwegian krone (NOK) will increase the Group’s net interest-bearing debt by around NOK 177 million as at 31 December 2010 and weaken the ratio of net interest-bearing debt to EBITDA by around 0.08.
Virtually all of the Group’s debt as at 31 December 2010 had a variable interest rate. The Group’s debt is affected by changes in the interest rate market. A change of 1 percentage point in the variable interest rate changes Schibsted’s interest expenses by approximately NOK 25 million.
Schibsted uses newsprint and is therefore exposed to price changes in the paper market. A 1 per cent change in price alters the Group’s raw materials costs by around NOK 8 million per annum. The price of newsprint in Norway, Sweden and Spain is negotiated with suppliers each year and is already fixed for 2011.
At the end of 2010, the Group had limited exposure to the stock market and therefore low risk of losses.
Since many of the Group’s products are sold on the basis of advance payments (the subscription newspapers) or cash payments (the single-copy sales newspapers), there is little credit risk associated with the Group’s circulation revenues. Deposit schemes and credit insurances have been established for much of the Group’s advertising revenues. A lot of the private online ads are paid for by credit card when the ad is ordered.
The Ministry of Culture appointed Mediestøtteutvalget in 2009 with the mandate to undertake a comprehensive assessment of the use of economic instruments in the media field, including the direct press subsidy and exemption from value-added tax (VAT). The committee submitted its report in December 2010. The committee is split on the question related to a continuation of the zero rate of VAT for newspapers. The majority suggests a continuation of the zero rate for newspapers, combined with low VAT (8%) on digital services, while the minority would like to introduce a low VAT (8%) for all types of media. Ministry of Culture has set the deadline for submissions to Monday 18 April 2011, and the case will be subject to further political consideration.