Metropole Television SA

F:MMT

Earnings Call Transcript 2022-Q3

[Operator]

Good evening, ladies and gentlemen, and welcome to this presentation of the Q3 results for M6. [Operator Instructions] This session is being recorded.

And I'll now give the floor to Nicolas de Tavernost, Head of the Management Board; and Jerome Lefebure, who is the CFO.

[Nicolas de Tavernost, executive]

Good evening, and thank you for attending this presentation of our Q3 results. I shall be brief. Jerome Lefebure will give you details on the numbers, and we'll be there to take your questions.

So Q3, 2022 has a number of features. The -- both the income and EBITDA was sound, if you leave out nonrecurring items, that is [ straight A's ] and the expenses related to the abandoned merger with TF1 stood at EUR 57.2 million compared to EUR 58 million in Q3 2021 and EUR 34.2 million in Q3 2019.

The decline in revenues, which was down to -- was compensated by savings on the programming costs, the optimizing of radio costs and the contribution of Stephane Plaza Immobilier to the results of Q3, which was not the case in 2021. If you leave out nonrecurring items, the operating margin was up 0.7 percentage points to 19.7% in Q3.

This year, if you look at the first 9 months of 2022, the revenues were stable at EUR 954 million. The increase in non-advertising revenue, about 11% was offset by the slight decline in advertising revenues at minus 2.4%. At the end of September 2022 the consolidated EBITDA, excluding nonrecurring items, stood at EUR 222.7 million, up 5.5% year-on-year, reflecting, in particular, the group's flexibility in managing its cost, the synergies developed between all its channels and the contribution again of Stephane Plaza Immobilier.

Including nonrecurring items, which include the government aid, EUR 1.1 million versus EUR 18.7 million in the first 9 months and expenses related to the M6/TF1 merger, EUR 6.9 million compared to EUR 6.2 million as at September 2021, the group's consolidated EBITDA stood at EUR 216.9 million, and the operating margin stood at 23.3%, excluding again, nonrecurring items, up 1.2 percentage points year-on-year.

The quarter was marked with several things. The revenue of television was slightly down 9.8%. First, because the summer wasn't good July and August, as mentioned during the presentation at the H1 results. The summer was poor for -- well, first comparison effect, you remember last year that we had the euro football competition, including the final. So of course, that's [indiscernible] the large audiences and the summer also made challenges in the market. September was better. And we'll give you our outlook for Q4 in a moment.

Then radio did rather well in terms of advertising revenue and digital also enjoyed some growth, which made it possible to contain the decline in advertising revenue to 8.2% over that quarter. So revenue was down in this last quarter -- in third quarter, but there were savings that compensated that. And so the operating profit was better than 2019, slightly down compared to last year. So these are the numbers for the first 9 months of the year and Q3.

In terms of if we focus on the actual businesses of the group, so after the failed merger with TF1, you may remember that overtime, we were still competitors while looking at the merger since August 2021 and the beginning of this year. The business was good for our television programs, especially on M6 and especially on Prime Time, where the performance was very good. Likewise, the digital business, as we said in the press release.

And radio enabled us to be leaders in private radios on that segment. So you can see that there is a contribution of new businesses, in particular, Stephane Plaza Immobilier, thanks to that, we were able to maintain good revenue. So what are our strategic objectives for the rest of the year and indeed for 2023? Now of course, the economic context has deteriorated on Q4, we're looking at stable results. October was okay, including compared to 2021. And let me remind you, that was a good month.

November and December may be more challenging. There's, of course, the World Cup effect that took some of the initial investment. And we have little visibility on November and December, but we're expecting to be below -- significantly below 2021, but pretty much in line with 2019, slightly down compared to 2019. At least that's our forecast today. So October should be satisfactory, then November and December more difficult.

Regarding our -- and well, the outlook for 2023 is pretty difficult at this stage to tell you what the advertising trends will be. We're looking at the budgets. A number of steps we've taken first to contain programming costs, well, cost in general, but programming costs in particular. And well, for instance, we give up on the football World Cup because that generate major losses. And so we can reallocate these sums to -- and make savings on programming.

We have an outlook on streaming. 6play is still growing. This month, we launched 6pay MAX, which is sort of a comfort version of 6play that enables viewers to have an easier access, and this is doing quite well, and this will continue throughout 2023. We will be -- we'll have to think about Salto as regards -- the future of Salto, we'll have to discuss this with our partners at France Televisions and TF1 to take stock. Right now, Salto is on track for 2022.

So it's a pretty ambitious policy regarding streaming. And we have renewed our agreements with Canal Plus for multi-annual agreement starting in 2023. So this has been secured. We are looking at developing new programs, especially on Prime Time. Diversification is still underway. We have taken a number of options, especially on major diversifications that will be developed in 2023 and 2024. But of course, the economic circumstances are beyond our control. And at this stage, we simply haven't got enough to look at 21st -- [indiscernible] 2023.

So this is what we had to say about the performance. And now Jérôme and myself are here to take your questions.

[Operator]

[Operator Instructions] Question #1 comes from Christophe Cherblanc Societe Generale.

[Christophe Cherblanc, analyst]

I have 3 questions. Number 1, on the cost of the [ Française Television ] [ 46 ] gains a year and you said it's a EUR 2 million loss. Is that in EBIT, or is it something that is simply programming cost?

Question number two, on Netflix. They have launched their new offer. And I'd like to know whether -- what was your assessment of their offer, their relevance, its potential? And do you think this is a threat for your own programming business or indeed say, to all other traditional operators?

And final question is on programming costs. For 2022, H1 was the same as 2019. In terms of top line do you -- is this realistic, you talked EUR 260 million in H2? Is that sort of a tough ceiling? Or do you think you can do better than that?

[Jérôme Lefébure, executive]

Thank you. Regarding the French football team. Well, we cannot disclose the cost of broadcast, but the economic loss is about EUR 2 million per batch -- per game. And that's the balance between what's the price we pay and the advertising revenue, but there's also a lost earning of about -- from other programs. And so it adds up to EUR 2 million per game.

And that's significant, especially because large sports then, of course, can not -- do not generate much streaming revenue. And so we've decided to spend that money on other products. We had in fact 5 games planned. And we had -- so we had 2 more this year with the French national team because there was the Nations League as well.

But on average, this was 5 games a year that we used to broadcast. And so we will be simply sharing out EURO 2024. And -- but we also have audiovisual rights on W9, and that's the Europa League and the Conference League. Now that's been broadcast on W9 and that's much more profitable, more so, of course, than the National football games. And then this women's league that is also shown on W9. And this is sort of a one-off, but in 2024, we'll have the final of the Champions League in there. We certainly hope that a provision club can be part of that competition. That's the football.

Regarding advertising revenue and the platforms. So we're looking at Disney+ and Netflix, but Amazon as well as its own platform, and indeed, they were a serious competition during the football final. These are competitors that decided to enter the market with high prices, and we can only welcome that. In fact, they are much more expensive than traditional TV. So that's what we can see. We have no further information at this stage. I mean that's all we know in terms of price and competition.

This -- regarding advertising, we have only a very sort of limited duration because these are hybrid platforms, partly SVOD and partly Lille. So these are competitors, of course, and in terms of volume, they have -- their advertising business is not much competition but price is high. So we'll see how it goes. But we will be competitors, not so much in terms of volume of SVOD services or consumption of the services but we're competitors on the digital mode. That is all our streaming operation and the VOD. They will be competing at pretty high prices on addressed advertising and other services.

Regarding programming costs, on the year as a whole, we'll be looking at lower cost. We've been able to reduce same by about 4% compared to 2021 for television.

[Operator]

The next question comes from Julien Roch from Barclays.

[Julien Roch, analyst]

I do apologize. You may have already partly answered the question, but it took me 15 minutes before I could be connected. So I missed the beginning of your presentation. Question number 1 was about advertising trends for Q4. Can you give us any kind of guidance? And also, although these are early days, I believe you've been talking with the major advertising agencies for next year, so Q4 and next year regarding advertising?

Question number 2 is about advertising on platform. So you said that the prices were high. And indeed, everywhere they're higher than the VOD. There's only 4 minutes of advertising, it is very short duration for advertising. How much of an encroachment is this on the market? And also, would the money come more from targeted advertising as you have said, with Facebook or Google? Or would it be straight TV advertising? So these are my 2 questions.

[Jérôme Lefébure, executive]

So regarding Q4 advertising revenue. October looks okay, as I said, especially compared to 2021, which itself was a good month. But November and December will be more difficult. The -- there will be a World Cup effect. As you may remember, there was lots of money invested in that. So Q4, we cannot give you much guidance. Well, of course, Q4 is still underway, but we are expecting a decline in advertising revenue for Q4 compared to last to Q4 2021. And we certainly hope that we will be close to 2019, which is the baseline.

You may remember that 2021 had a post lockdown boom, which we haven't got this year. So we tend to look to 2019 as a reference as a benchmark. Platforms indeed, the rates, the prices are high. They do use -- address on targeted advertising. We are competing on digital advertising. But of course, we're not in a position to give you any indications on the part of either customers or advertisers. I imagine some customers will try it out, see what kind of return on investment they're getting on these platforms, and they will make their decisions for 2023, but the competitive environment is more targeted than mass market advertising.

So we're looking at digital advertising. And indeed, the social media, you may remember that in the U.S., some of the social media experiencing challenges there. And so we ourselves have got to be on the lookout for such competition. What we can expect is that there will be an upscaling throughout 2023. I do not expect much competition in terms of volumes for 2023.

[Operator]

No further questions on the waiting list. [Operator Instructions]

[Nicolas de Tavernost, executive]

I believe there must have been some sort of technical problem. The operator may not have connected everyone. It looks as though not everybody was able to connect. Some people were left out at the beginning of the session.

You -- we give you the numbers for Q3. Operating profit was about 20% on Q3. We are in line with last year for the first 3 months -- 9 months. We had good programming revenue, both on radio and TV and digital TV, which meant that we were able to keep our market share. So all in all, this is a transition year. But compared to 2019, we are expecting an acceptable landing compared to 2019.

Maybe one final question then.

[Operator]

Christophe Cherblanc from Societe Generale.

[Christophe Cherblanc, analyst]

I'd like to take this opportunity. There are not many of us on this call. I had 2 follow-up questions. The contribution of Stephane Plaza, the consolidation effect, can Jerome Lefebure give us details?

And another question I was asked time and again on management. I believe you will be staying on to supervise the merger with TF1, but that's not happening anymore. So what are your plans in terms of governance?

[Jérôme Lefébure, executive]

On Stephane Plaza, it says so in the press release, the consolidation brought in EUR 7 million in revenue for Q3. And in terms of EBITDA it's significant. At least it -- we go from 6.4 million to 14.4 million in EBITDA. So that's mostly due to Stephane Plaza.

Regarding governance, well, there were 2 years while the application was being considered for the merger that fell through. Shareholders and the Supervisory Board wanted some stability during that period. And so as I mentioned at the end of this merger planned, we intend that we'll have partnerships. And so this is still being done. So this is not a good time for changes in management.

[Operator]

Well, no further questions. I will give the floor to your host to complete this presentation.

[Nicolas de Tavernost, executive]

Well, thank you. Well, we will be back for the full year's performance for 2022 and the outlook for 2023 hoping, we haven't got major disasters. Thank you.

[Operator]

Well, this brings the call to an end. Thank you for attending. You may now put your phone down. [Statements in English on this transcript were spoken by an interpreter present on the live call.]