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Headwinds for FremantleMedia

MUMBAI: For the period January to September 2014, European media company RTL Group reports slightly lower revenue and a decrease in EBITA, mainly due to the difficult economic situation in France and headwinds for FremantleMedia.

Reported RTL Group’s revenue decreased slightly to €3.9 billion (January to September 2013: €4 billion), mainly due to negative exchange rate effects, lower ad sales in France along with lower revenue from FremantleMedia and UFA Sports.

Net profit attributable to RTL Group shareholders decreased by 42.8 per cent to €306 million (January to September 2013: €535 million). As described at the half year, this was principally due to movements in impairment charges.

In the first nine months of 2014, RTL Group recorded a goodwill impairment on RTL Hungary amounting to €77 million. Conversely, the net profit for the first nine months of 2013 included a significant positive one-off effect of €72 million, resulting from the reversal of an impairment on RTL Group’s holding in the Spanish broadcasting company Atresmedia

At the same time it accelerated its digital expansion with recent acquisitions of the programmatic video advertising platform, SpotXchange, and the leading multi-channel network for fashion, beauty and lifestyle, StyleHaul.

Television format creator and distributor FremantleMedia’s EBITA decreased to €54 million (January to September 2013: €77 million), due to unfavourable exchange rates, lower revenue from ‘American Idol’ and increased investments in digital business and the content pipeline

TV ad markets across Europe continued to show signs of improvement over the first nine months of 2014. With the exception of France – which was stable – and Belgium – which was down 0.7 per cent – all European net TV advertising markets in RTL Group’s territories were up year-on-year

RTL Group’s digital revenue continued to show dynamic growth, up 16 per cent to €180 million benefitting from organic growth and new acquisitions. Reported EBITA was €679 million compared to €713 million in the first nine months of 2013. The decrease is mainly due to lower profit contributions from FremantleMedia and RTL Group’s broadcasting operations in France, which offset growth from Germany and the Netherlands

EBITA margin stood at 17.2 per cent (January to September 2013: 17.8 per cent). Net cash from operating activities was €586 million, resulting in an operating cash conversion of 86 per cent. Following the payment of an extraordinary interim dividend of €307 million on 4 September 2014, RTL Group had net financial debt of €926 million as of 30 September 2014 (30 June 2014: €475 million)

During the first nine months of 2014 EBITA of Mediengruppe RTL Deutschland increased significantly, by 5.0 per cent to €418 million (January to September 2013: €398 million). This improvement was mainly driven by higher TV ad revenue in the third quarter and a growing digital distribution business

The French TV ad market was estimated to be stable in the first nine months. Against this environment, Groupe M6’s EBITA was down to €144 million (January to September 2013: €154 million), mainly due to lower TV advertising revenue

RTL Nederland’s EBITA increased by 6.9 per cent to €62 million (January to September 2013: €58 million), mainly driven by higher digital distribution revenue and diversification activities

RTL Group co-CEOs Anke Schäferkordt and Guillaume de Posch said, “After nine months, we see a similar picture as at our half-year results in August. While Mediengruppe RTL Deutschland and RTL Nederland report significant profit growth, the economic situation in France and for FremantleMedia remain challenging. In the third quarter, significant revenue and EBITA growth in Germany led to stable Group results, and we had a good start into the important fourth quarter.

“Given our high cash flows and strong financial position, we won’t wait for the economic condition to improve, but invest today in new growth drivers for RTL Group. This year, we will invest more than €240 million in rapidly growing digital businesses – while also launching new channels and further diversifying our content production arm. This is the highest investment level for acquisitions since 2005. With the recent acquisitions of SpotXchange and StyleHaul, we have made strategically important progress to make RTL Group a global force in online video and online video advertising.”

RTL Group continues to make good progress across its three strategic pillars: broadcast, content and digital.

Broadcast: investments in core business

  • New TV channels strengthen RTL Group’s family of channels. During the reporting period, RTL Group companies launched three new channels: RTL Kockica in Croatia, Geo TV in Germany and RTL CBS Extreme HD in South East Asia
  • RTL Television broadcast the first of 20 matches of the German football national team. The first match was watched by an average 10.88 million viewers. The audience share among viewers aged 14 to 59 was 33.7 per cent

Content: bolstering the footprint

  • At the end of March 2014, FremantleMedia acquired a 75 per cent majority stake in the US-based reality production company, 495 Productions, and has the opportunity to acquire the remaining shareholding in the future. This allows FremantleMedia to expand its share of the valuable US cable market and complements and diversifies FremantleMedia’s existing portfolio of content and clients in the biggest TV market worldwide

Digital: continued investments into digital capabilities and footprint

  • With the acquisition of StyleHaul, RTL Group further accelerates its rapidly growing presence in the online video space. With 900 million video views per month, StyleHaul is the leading multi-channel network on Youtube for fashion, beauty and lifestyle – a highly attractive segment for major advertisers
  • FremantleMedia North America’s recently-launched digital content studio, Tiny Riot, has partnered with BroadbandTV on a multi-year original programming deal spanning entertainment, gaming and music content
  • In September, RTL Group completed the acquisition of a 65 per cent majority stake in the programmatic video advertising platform SpotXchange; the investment significantly strengthens RTL Group’s global scale across the entire online video advertising market and adds new technology- and data-based competencies
  • In September, RTL Interactive in Germany acquired Econa Shopping for €27.5 million. Econa operates curated advice and recommendation platforms for online shopping such as Sparwelt.de. It is the most significant acquisition in the history of RTL Interactive
  • RTL Group developed its strong and rapidly growing presence across all digital platforms. In the first nine months of 2014:
  • RTL Group’s catch-up TV services and websites, including the YouTube MCN Broadband TV, attracted a total 24.4 billion online video views, up 159 per cent year-on-year
  • thereof: FremantleMedia’s more than 175 Youtube channels attracted 6.2 billion views, up 34.8 per cent year-on-year
  • For the full year, RTL Group expects to more than double its online video views to around 40 billion.