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      THURSDAY, 13/06/2024 - Scope Ratings GmbH
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      Scope affirms Schibsted’s BBB issuer rating and revises the Outlook to Positive

      The Positive Outlook reflects Scope’s expectations of strongly improved credit metrics following the divestment of the news media operations and reorganisation of the company.

      The latest information on the rating, including rating reports and related methodologies, is available on this LINK.

      Rating action

      Scope Ratings GmbH (Scope) has today affirmed Schibsted ASA’s issuer rating at BBB and revised the outlook to Positive from Stable. Scope has also affirmed Schibsted’s short-term debt rating at S-2 and its senior unsecured debt rating at BBB.

      The Outlook is Positive, reflecting Scope's expectation that the reorganisation of the company with the divestment of its news media operations and the partial sale of Adevinta shares, the proceeds of which will partly be used to repay debt, combined with the refocusing of Nordic Marketplaces on verticals, will lead to a strong improvement in credit metrics, exemplified by Scope-adjusted Debt/EBITDA below 2x in the medium term.

      Key Rating Drivers

      Business risk profile: BBB-. The lowered business risk reflects Scope's view that, while Schibsted is expected to maintain a strong presence in the Nordic region, the divestment of its news media operations acts as an overall market share constraint according to Scope's methodology, also resulting in reduced diversification. Scope expects Schibsted to remain a leading player in the digital landscape and that the company's strategic focus on digital innovation and cross-border synergies will further strengthen its leading position in Norway and Sweden and improve its position in Denmark and Finland.

      The divestment of the news media operations means the separation of several established and well-recognised newspaper and media brands in the Nordics, most notably VG and Aftenposten in Norway; and Aftonbladet and Svenska Dagbladet in Sweden, and thus a reduction in potential customer reach. The sale of the news media operations, although a segment with a lower EBITDA margin contribution, has removed an element of balance in the cyclicality of the industry, resulting in a more concentrated revenue base that is more susceptible to market fluctuations and economic downturns.

      Schibsted’s business risk continues to be supported by its extensive presence across the Nordic region, which includes leading online marketplaces in the digital landscape. Operating profitability strongly supports the rating, as the divestment of the news media operations segment means that Scope expects profitability, as measured by the EBITDA margin, to improve to 26% in 2025 onwards from 16% at the end of 2023 - after the reorganisation has been fully implemented and News Media no longer dilutes Schibsted’s EBITDA. Service Strength, a new metric introduced with the publication of Scope’s business services methodology in January 2024, supports the assessment as Schibsted has regionally known brands with low customer churn and high integration in customer’s lives.

      Financial risk profile: A-. The improved assessment of the financial risk profile is driven by i) some of the proceeds from the divestment of the news media operations and the sale of the Adevinta shares will be used to deleverage the company (this has already been partly done in June 2024 when Schibsted repaid the NOK 2bn term loan, of which NOK 1.8bn was drawn); ii) the divestment of News Media will improve the group’s overall EBITDA margins by removing a segment with historically lower margins, and iii) Scope’s expectation that the reorganisation of Schibsted will result in a leaner organisation focused on delivering higher EBITDA margins.

      The divestment of the news media operations and the sale of the Adevinta shares has resulted in net proceeds of approximately NOK 29bn. According to Scope’s understanding, approximately NOK 5bn of these proceeds will be used to deleverage the balance sheet. The remainder of the proceeds will be returned to shareholders, with NOK 18bn already paid out as an extraordinary dividend in May 2024, a further NOK 2bn expected in H2 2024, and NOK 4bn through share buybacks. Historically, Schibsted's leverage, as measured by scope-adjusted debt/EBITDA, has been between 2.0-3.0x and funds from operations (FFO)/SaD has been around 25%. Following the divestment of the news media operations and the payment of substantial dividends, Scope expects Schibsted's leverage to be significantly reduced, resulting in a near net cash position at the end of 2024, albeit distorted by all the transactions during the year. Given the ongoing shareholder remuneration through share buybacks over the next two years, Scope expects a temporary increase in leverage, but a normalised leverage of below 2x in the medium term, which is well below previous levels.

      As a result of higher interest rates, Scope-adjusted EBITDA interest cover at the end of 2023 was 7.9x, below historical averages of well over 10x. With some deleveraging already achieved and further deleveraging announced, Scope expects Schibsted's interest cover to improve to over 10x again in the medium term.

      Cash flow cover has historically been the weakest credit metric, hovering around 10% in the recent past. Scope expects cash flow cover to improve significantly after the reorganisation, although the achievable level is linked to execution risk and Schibsted's appetite for investment and bolt-on acquisitions.

      Liquidity: adequate. Liquidity is supported by NOK 1.2bn cash on balance sheet (year-end 2023), good cash flow generation in addition to more than NOK 3bn of unutilised, committed credit lines and good access to capital markets. Scope therefore assesses the liquidity as adequate.

      Supplementary rating drivers: credit-neutral. Supplementary rating drivers have no impact on the issuer rating.

      Outlook and rating sensitivities

      The Outlook is Positive and reflects Scope's expectation that the reorganisation of the business into verticals and the sale of the news media operations will lead to higher Group margins, increased focus on the core business and significantly improved credit metrics. With the proceeds from the partial sale of Adevinta shares and the sale of the news media operations being used in part to repay debt, Scope expects much stronger credit metrics going forward. This is exemplified by SaD/EBITDA below 2x in the medium term.

      The upside scenario for the ratings and Outlook is:

      • Scope-adjusted debt/EBITDA below 2x, sustained.

      The downside scenario for the ratings and Outlook is:

      • Scope-adjusted debt/EBITDA at or above 2x, sustained.

      Debt ratings

      All debt is issued by Schibsted ASA.

      The senior unsecured debt rating has been affirmed at BBB, in line with the issuer rating. This is based on the company’s standard bond documentation, which includes a pari passu and negative pledge.

      The S-2 short-term debt rating has been affirmed, based on the underlying issuer rating of BBB/Positive, as well as the company’s strong short-term debt coverage and good access to bank and capital markets.

      Environmental, social and governance (ESG) factors

      Schibsted demonstrates a strong commitment to ESG principles, integrating sustainability, social responsibility and robust governance into its business operations. By continuing to focus on ESG factors, the company is well positioned to address emerging risks and opportunities, ensuring sustainable growth and positive societal impact. Overall, ESG factors have no impact on this credit rating action.

      All rating actions and rated entities

      Schibsted ASA

      Issuer rating: BBB/Positive, Outlook change

      Senior unsecured debt rating: BBB, affirmation

      Short-term debt rating: S-2, affirmation 

      Stress testing & cash flow analysis
      No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

      Methodology
      The methodologies used for these Credit Ratings and/or Outlook, (European Business and Consumer Services Rating Methodology, 15 January 2024; General Corporate Rating Methodology, 16 October 2023), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

      Solicitation, key sources and quality of information
      The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
      The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
      Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
      Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

      Regulatory disclosures
      These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
      Lead analyst: Kristine Bugge Lie Owe, Associate Director
      Person responsible for approval of the Credit Ratings: Thomas Faeh, Executive Director
      The Credit Ratings/Outlook were first released by Scope Ratings on 23 August 2021. The Credit Ratings/Outlook were last updated on 9 June 2023.

      Potential conflicts
      See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties. 

      Conditions of use/exclusion of liability
      © 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.

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