SeLoger, France's largest and most popular property portal, has just released its revenue numbers for the 2008 financial year ending December 30. Overall revenues were up 25% year on year to EUR 71.7 million. In addition the business confirmed that it would deliver an EBITDA of between EUR 36 million and EUR 37 million. However, further analysis of the numbers showed that the business suffered a decline in the December quarter – lead by a sharp decline in revenues from its core business of sales of classified ads in the Paris region. What does this all mean for 2009?
Revenues for 2008 were EUR 71.7 million, up 25.2% over 2007 in which revenues were EUR 57.2 million. While there was strong growth across most revenues streams, it was the sales of classified ads outside of the Paris region that showed the strongest growth with revenues increasing 44.5% over the course of the year to EUR 28.3 million. Classified ad sales to agents within the Paris region grew over the course of the year by 24.8% to EUR 26.2 million.
The one area that shrank over the course of the year was web design revenues, which contracted 14.6% to EUR 5.9 million reflecting agents reducing their operating costs.
Over the course of the year, SeLoger was able to increase its yield per agent from EUR 373 per month to EUR 408 per month for agents in the Paris region and from EUR 256 per month to EUR 277 per month for agents outside of Paris. While this modest increase is a good sign, in the Paris region, the overall number of agents decreased by 1.2% over the course of the year.
Often year on year comparison masks the true underlying trends of the business. Therefore, a closer analysis is required of the quarterly numbers. What is interesting is that the business suffered a strong decline in the fourth quarter.
Overall, revenues contracted by 2.4% in the fourth quarter (versus the 3rd quarter). Revenues from classified sales to agents in the Paris area contracted 11.3% and sales of web site design contracted 29.4%. Counteracting these decline in revenues were a slight increase of 3.4% in revenues from agents in regional areas and a strong 48.7% increase in display advertising revenues.
The company also announced a loss of 453 customers – 136 in Paris and 317 in the regions. The decline in revenues in the Paris region in Q4 was due to a decrease in customers and potentially some discounting to keep customers. Although they lost 317 customers in regional France, revenues increased in Q4, indicating that they are still signing up customers.
The real question is what these results tell us about how the business may perform in 2009. Assuming the French real estate market is depressed for most of the year, it is likely that real estate agents in France will go out of business. This will mean that agents will cut back on costs and some will go out of business. Therefore, as SeLoger already has a very strong penetration of agents within the Paris region, we will likely to see the number of agents using SeLoger in the Paris region decline as they go out of business. Assuming the average yield increased by 10 – 15%, SeLoger is likely to maintain, but not grow, revenues from the Paris region.
For the regional areas, agents will disappear at a greater rate as they are likely to be harder hit by a depressed market. However, SeLoger has not penetrated this region as strongly and can offset any lost agents with new sign ups. Therefore assuming a slight yield increase from Regional agents, I would expect to see a slight growth in revenues from these agents.
Additional revenues streams, such as web design, will continue to be hit hard as agents cut back costs.
Finally, display advertising sales will probably increase over the course of the year as advertisers look for low cost (versus print) ways to target a highly defined and attractive audience.
Therefore, for 2009 I would expect to see a slight increase in revenues. I would also expect the business, under their new CEO, to cut some costs so that they can maintain or slightly increase their already high EBITDA margins.
Finally, the business will probably look for ways in which it can develop new revenues streams; therefore, I would not be surprised to see more acquisitions from them – more likely within the French market.
2009 will certainly be an interesting year for SeLoger.