Atresmedia Corporacion de Medios de Comunicacion SA

MAD:A3M

Earnings Call Transcript 2019-Q1

[David Gómez Baquero, Director of Investor Relations]

Hi, good afternoon. Welcome to this conference call in which we are presenting the first quarter results for this year, 2019. I'm David Gómez, Head of Investor Relations. And I am pleased to introduce Silvio José González and Antonio Manso, who will hand (sic) [ handle ] the presentation highlights and the Q&A session. So without further delay, please, Silvio.

[Silvio José González Moreno, CEO, MD & Executive Director]

Well, good morning. Let's begin with the presentation, and let's begin with the audience figures. As I'm talking about the audience, Atresmedia as a group has delivered a total audience of 27.7%, which is near 1 point better than the result we had last year. In spite of that, we don't have the UEFA Champions League. So I think this is a very good result taking account this thing. This is our highest rating since first quarter 2016. Talking about the commercial target. The audience has been in the quarter, 29.4% compared with 28.8%, which was a figure we got in first quarter 2018. So very good figure also. Talking about Antena 3, the audience share for the -- viewing share for the quarter has been 13% in total individuals, which compares with 12.5% that we obtained last year. Our leading position in news, programs and scripted content, which has been reinforced by new and successful formats like The Voice I think has been the key drivers of this result. laSexta has had an audience share of 7.3%, which is nearly 0.6 points better than on year-on-year and is the highest gap and wider gap we have with our main competitor, which is Cuatro. We -- our competitor channels, Neox, Nova and MEGA and Atreseries, has had a result of 7.3%. So very good results in terms of audience certainly on account that we don't have the Champions League that we had last year. Moving to the advertising market. And first of all, according to external sources, the total ad market seems to be up by near 1 point. It changes between 0.6% and 1.5%. So, I mean, make - - the average of these 2 sources, we -- they say the market will be up by 1%. In our case for our markets, the television advertising market has decreased 1 point; our radio advertising market has been positive, between 6% to 8% and digital advertising market has grown between high single digit and low double-digit according to these sources which are Infoadex and Arce. In our case, I'm talking about revenues. Total revenues for the group has been EUR 257.5 million, which means an increase of 2.1 percentage compared with last year. And regarding the audiovisual sector, total net revenues has come up to EUR 240.5 million, which means an increase of 1.8%. Atresmedia Television market share has been 42.4% with a power ratio of 1.5 and that our television net advertising revenues has been EUR 201.9 million, which is -- means a decline of 1.1% compared -- which is more or less the same decline as the market. In the case of digital, the revenues has been EUR 9.3 million, which means from 3%, an increase of 6.2%. Our new division of content production and distribution has been -- the revenues has been EUR 21.7 million, which means an increase of 24.6%, which is mainly driven by the first deliveries of our studio company productions. About radio, total net revenues has been EUR 20 million, which means an increase of 6.5%, which is more or less in line with the growth of the market. Total OpEx for the group has been EUR 212.4 million, which means a decrease of 3% on a -- when compared with the first quarter of last year, and the decline is mainly explained by the savings that stem from not having the Champions League this year. EBITDA for the period is EUR 45.1 million, which is the highest first quarter since 2008, which means an increase of 35.8%. The net profit, EUR 28.7 million, which means also an increase of 36.6%, which is also the first -- the best first quarter in the last 11 years. The debt -- the net debt for the quarter has finished with an amount of EUR 171 million versus the amount of EUR 231 million which was the one we had at the end of 2018, which implies a multiple of 0.86x net debt compared with the last 12 months of EBITDA. The operation cash flow has been EUR 69 million, which means a [ 1.5 ] EBITDA. Also, we had the general assembly yesterday. And in addition, the general assembly approved that in addition to the interim dividend we paid in December 2018, which was 2 -- EUR 0.2 per share, the general assembly has approved an extraordinary dividend in the amount of EUR 0.25 per share which would be paid in June 2019 this year, and this implies a 6% dividend yield at the current share price. So good news for the -- for our shareholders. I mean -- and [ looking ] upon the figures in the quarter, what we foresee the rest of the year, first of all, for the general market, it looks that it's very much on trend we foresee which is that we thought -- we think that the market will grow 1% for the total advertising market. So I think this trend will go on for the future, and we think that it is something which is achievable. In the case of the audiovisual sector and more deeply regarding to television, we expect[Technical Difficulty]Okay?

[Antonio Carlos Manso Marcos, Chief Financial Officer]

Okay, [indiscernible]. Okay.

[Silvio José González Moreno, CEO, MD & Executive Director]

Sorry, there has been some technical problems. I don't know where I -- where was my last comment, but let's go with the TV market and -- which are the -- what we thought it could happen for the year. And when, I mean, when we talk about 2019 last year, we thought that -- we expected something similar to what happened in 2018, that is a decrease of low single digits in the range between minus 1%, minus 2%. In the first quarter, the decline has been minus 1%, so very much pretty in line what we thought it could happen. The thing is that -- what -- Easter was something important, and Easter this year, was in April. And so far, the -- what we expect in April is that the market will decrease by something in the range of minus 15%. So it -- that would mean that for the first 4 months, which is there's no Easter effect, the market will decrease something in the range of 4.8% to 5%, which is pretty in line with our initial expectations because we thought that for this first quarter, the market will be down by 4%. So it's that -- we see that we -- this scenario for the whole year could be very much in line with the minus 2% we expected at the very beginning of the year. So, so far, we are really following what we thought last year. I think that we will outperform the market because, I mean, when -- last year, there was the world championship, the football championship, and we didn't have that event. And so we had some bad effects because of that. This year, that won't happen, so we do think that we would have better performance because of that. So that's why we say and we maintain that we could outperform the market in the whole year. In the case of digital advertisings, we expect to grow very much in line with the market. So we expect that the revenues will grow in low double-digit or very much in line between 17% to 20%. So talking about the content production and distribution division, which is growing and growing at a good path, we maintain our view in that this could be a division that will increase revenues in a very good way for the company. And we have just begun to deliver our first production in line with the budget they already have and gaining new clients. So this is going -- oh, this is going well even if it's a very new business and we are in the very first steps of the business. On Radio, we do think it will go along with the same line, growing at the same rate at the -- of the market. So that's pretty in line with the market. Talking about the OpEx, we have, as you have seen, we have made some savings because, I mean, we -- because of the -- we don't have the Champions League and our guidance for the year that we will maintain these savings. So for the whole year, our OpEx guidance is -- will be EUR 855 million, which is the same amount we had in 2018. And taking account that in this -- in that year, we didn't have the content factory. So it means that we will reduce costs on a like-for-like basis, something in the range of EUR 10 million to EUR 12 million. And that's it, more or less what we have to say here. We should wait until May and see how the things evolve. It looks like the rest of Europe is not doing bad. France is not doing bad. And, well, let's see what's going on with the market. But as you can see, we could be flexible and adapt our structure and our work to the market ecosystem. So now we are open to the -- to your questions. Thank you.

[Operator]

[Operator Instructions] The first question comes from Annick Maas from Exane.

[Annick Tonie Maas, Analyst]

My first question is on OpEx. Just a clarification on the guidance. So before, you guided to EUR 855 million plus the studio costs. And now the EUR 855 million are including the studio costs already? My second one is ad trends, if you have any view on May already. And then also, in terms of pricing in terms of ad trends in Q4, how do you see pricing develop within Q4?

[Silvio José González Moreno, CEO, MD & Executive Director]

Yes. About the first one, OpEx. It's all included, EUR 855 million for the whole year. On the May visibility. We don't have any visibility on May yet, so I cannot -- we cannot talk about that because, I mean, there is no visibility. And about pricing, for the first quarter, the results has been a price increase on the range of 4% and a GRP decrease on the range of 5%. Thank you.

[David Gómez Baquero, Director of Investor Relations]

Thank you, Annick. This is fine or do you have some more questions?

[Annick Tonie Maas, Analyst]

It was more in terms of pricing. What do you expect for Q2 pricing to be like?

[Antonio Carlos Manso Marcos, Chief Financial Officer]

So, we do think that it will be more or less the same, the same performance. Although in the second quarter, you should take in account that it's Easter inside. So the prices will be a little bit lower. But, I mean, all in all, the -- for the price then, the price trend is more or less the same, that we are looking for high prices and the market is accepting them. So I should say that taking April apart, which is a digital month, this price increase is something that we could maintain in the future.

[Annick Tonie Maas, Analyst]

Okay. Great. And then just finally, question on the radio market, which did quite well actually in Q1. Is there any reason for that? And do you see that as being sustainable over the year? That's the last one.

[Silvio José González Moreno, CEO, MD & Executive Director]

We don't have a lot of reason why the market is doing that well, but it's happening. And it also -- it will do a little bit better even in next quarter because, I mean, as you know, in radio, political advertising is allowed. And so there will be money coming from the political parties which is something that's not allowed in television. So I think radio will be benefited by the general elections. So I think the next...

[Antonio Carlos Manso Marcos, Chief Financial Officer]

[indiscernible]

[Silvio José González Moreno, CEO, MD & Executive Director]

So I think next quarter, radio will have an even better performance than this quarter.

[Operator]

The next question comes from [ Harry Jackson ] from Deutsche Bank.

[Laurence Davison, Research Analyst]

It's Laurie here from Deutsche Bank. Just first question. So you're running down -- you're saying that the first 4 months, that you're down about 5% -- or the market is down about 5%. And then we've still got the election impact come and the tough World Cup comps as well, thinking about the market. So when you're talking about only minus 2% for the market, why is that? Why are you expecting a stronger result through the rest of the year? That's first question. Second is just a clarification. Can we be absolutely sure here that your guidance before did not include Atres Studios or it did? So have you actually cut guidance here by EUR 10 million to EUR 12 million or not? And third, just a follow-up on the radio market. Are you able to give at this point any view on what you expect the radio market to be for the full year?

[Silvio José González Moreno, CEO, MD & Executive Director]

Beginning with the last one, all the, I mean, research say that the market will grow something like 3% for the whole year. But so far, it's doing 6%. So -- and I think that for the radio, all the elections is something good for them. So it could be that the radio will be something more in line with the plus 5%, plus 6%, which I think with the actual trend could be the radio market growth for the whole year. On the -- talking about the OpEx, we -- what we said was 80 -- between 150 and -- between EUR 850 million and EUR 855 million, not taking account the [ EU ] studios. And now I say EUR 855 million with the studios included. So there will be the saving of studio costs, which means something in range of EUR 10 million to EUR 12 million. So savings of EUR 10 million all in all. And, well, it's difficult to answer your third -- your first question because, I mean, why do we say that? Because, I mean, we do think that the market should recover because, I mean, it doesn't make any sense why its -- the economy is doing well, private consumption is doing well. It's not -- it's difficult to explain why the Spanish advertising market is doing worse than the other markets of Europe. So we do think that after Easter, after these first months, the market should recover a little bit. I mean, I'm not -- we are not talking of big recoveries. We are talking of a market with an increase of 2%. That's -- what we -- we'll see. I mean, we don't have a crystal ball. Difficult to give you more color than this. Thank you.

[David Gómez Baquero, Director of Investor Relations]

Thank you, Laurie. I don't know. You have follow-up questions? Or...

[Laurence Davison, Research Analyst]

Yes. Okay. Just one final one as well then. Can you just -- we've seen a lot of subscription video-on-demand and advertising-funded video-on-demand services launched by your peers. We've got 7TV, TV Now in Germany. We've got ITV, with BritBox U.K., Salto in France. Are you considering any launch of a SVOD or AdVOD streaming service similar to those? Any OTT offer?

[Silvio José González Moreno, CEO, MD & Executive Director]

We, I mean, already have one, which is ATRESPLAYER. ATRESPLAYER is our online video platform which is a mix of advertising revenue funded and also subscription funded. And so we will try to work on that and better the offer and so try to work on that side. We are increasing our subscription space significantly. Now we have something like 54,000 people who pay for the [ Atres ] premium service of ATRESPLAYER. And we are also trying to get a better result of the online platform. We were -- we are in conversations with TV and maybe a [ standing offer ] to create a free-to-air streaming platform, but all the conversations now are -- have stopped. So I don't -- I cannot tell you if finally we can get something like Salto in France with our peers, TVE and Mediaset. But with them or without them, we will go on trying to increase and better our online video platform because we do think that we can get better results out of it.

[Laurence Davison, Research Analyst]

Okay. So there's not a big plan here, given the collapse of those talks, to reinvest more aggressively at this point?

[Silvio José González Moreno, CEO, MD & Executive Director]

No. Not in this moment. Although this is something that we are analyzing if it would make sense to make some content effort on the platform. But so far, we are not at that point.

[Operator]

The next question comes from James McKenzie from Fidentiis.

[James McKenzie]

Just a couple. Firstly, on your content sales. I see your content sales have grown very strongly. If I look at the growth year-on-year, it's EUR 5 million. And yet when I look at the variable costs that you define as linked to revenues, there they've grown, but they're nearly as much. So, I mean, using growth in revenues of EUR 5 million and growth in costs of just EUR 2 million, is it that you're getting a bit -- got a much better margin on your content sales than either previously or that you guided to us in the, I think, in the Investor Day in December? So that was question number one. And then a simple question on the net debt, EUR 170 million at the end of the first quarter. Consensus seems to be around EUR 230 million. I was wondering if that might not be a bit too high given the performance of the first quarter.

[Silvio José González Moreno, CEO, MD & Executive Director]

Antonio, [indiscernible].

[Antonio Carlos Manso Marcos, Chief Financial Officer]

Certainly. At the end of this quarter, we said EUR 170 million, EUR 171 million. We have -- the cash flow has been very positive and we maintain the idea of being around 1x EBITDA. Remember that in June, we'll pay the extra dividend of around EUR 50 million. For the rest, the cash generation is very positive and we don't have to -- [ in growing ] in the investments. The working capital is working in our favor. In this case, though we had changed a little bit our planning, we don't need the number of things considered that we have in the past. This is what you might take in account.

[James McKenzie]

Okay. Okay. So...

[Silvio José González Moreno, CEO, MD & Executive Director]

On the first question, James, is that this includes different things. This includes the product produced by the content production house, which imagine is what we told you. But there's also some other things like, for example, cinema and the product we sold at the fixed price. So that's why there's an increase in revenues and not the same increase in costs, so -- because they're different things, not all related with the content production house.

[Operator]

The next question comes from Julien Roch from Barclays.

[Julien Roch, MD & European Media Analyst]

First, a follow-up question on cost guidance. So the full year, you said EUR 850 million to EUR 855 million, plus studio of EUR 5 million to EUR 6 million. And so your guidance was EUR 855 million to EUR 861 million. Today, you're saying EUR 855 million, but you're mentioning a cost saving of EUR 10 million to EUR 12 million. So either your investment in studio has doubled from EUR 5 million to EUR 6 million to EUR 10 million to EUR 12 million from the full year to now or your guidance in costs is actually EUR 850 million, not EUR 855 million. That's my first question. The second question is I'm a bit confused when you say that you were in conversation with Mediaset España and TVE to launch a common platform and the conversation has stopped. I thought Spain was the first country to launch a common platform with LOVEStv, and that was actually before BritBox and Salto. So can you update us on LOVEStv ? Is that going anywhere? That's my second question. And my third question is, the overall consumption is all full year-to-date. So TV is down 7%. Young adult 13 to 24 is down 14%. It's a big acceleration in the detail of television versus last year. Why you think? And then when will TV consumption on other screen be included in the audience measurement?

[Silvio José González Moreno, CEO, MD & Executive Director]

Now about OpEx. Our guidance was EUR 850 million or EUR 855 million ex studios. And studios could be something like EUR 5 million, EUR 6 million, EUR 7 million, EUR 10 million. What I say now is that all included, also studios, the cost guidance would be EUR 855 million. I think now that's clear. About [indiscernible] LOVEStv, I mean, it's already -- I mean, the -- our agreements with Mediaset and TVE has 2 steps. First of all, create the HbbTV platform, which is Loves television. And if it stand and is working, and this will go on for the future. And it will allow us, and we will begin that in May, to begin with the project of putting addressable advertising. And that's going on, and we go all for the future. There was a second step, which was to create an OTT of all these 3 groups, and that's why, in this moment, things are stopped. I don't think they are -- will not go on in the future. But in this very moment. It's not evolving. That's it. But LOVEStv is already done, it's working and will go on for the future. That will allow us to create the addressable advertising. And the third one, well, there could be various reasons. First of all, there are more offer, audiovisual offer. And so people needs -- has to distribute their spare time with different offers. So that could be one of the reasons. The second reason is that the first quarter in Spain has had very good weather so that means people's going, spending more time outside in streets and the bars, going -- so that affects also TV consumption because, for example, in April, which the weather has been very bad, the consumption has -- the decrease has stopped. So I think it's very much related with the weather. And also, that's more offer, more audiovisual offer. And so people can elect -- can select their -- how to spend their -- the free time. And, well, that should be -- I think these are the reasons that could strain the TV consumption evolution in this quarter.

[Antonio Carlos Manso Marcos, Chief Financial Officer]

[indiscernible]

[Silvio José González Moreno, CEO, MD & Executive Director]

And about the -- and about when will we have all the audience included, the mobile devices and the -- well, they are working. They are still working, and I don't think -- I don't know when we will -- when will they solve the technical problems. Because, I mean, as you know, they have different databases, and they need to do that and have a result that is honest and scientific point of view consistent. They are working on that, and I don't know. I think that perhaps at the end of this year, they could provide a figure that is consistent and could be used in order to know which is the real TV consumption with all the different devices involved. Thank you.

[Julien Roch, MD & European Media Analyst]

And just coming back on LOVEStv. So you said there were 2 steps. First, the HbbTV platform. And then second step, create an OTT platform. But I guess LOVES is like a portal of all of the kind of catch-up and content of all the free-to-air channel, at least Mediaset España, Atresmedia and TVE, that you can access on your TV. So you're saying that there's not an equivalent portal that you can access online?

[Antonio Carlos Manso Marcos, Chief Financial Officer]

[indiscernible]

[Silvio José González Moreno, CEO, MD & Executive Director]

No. No. I mean now, what we have is that we have all this HbbTV platform, and the next step would be the OTT platform. And we have not developed yet the OTT platform, and we are -- we have -- we are in a -- like in a new proposition. The thing is not evolving. I stopped conversations in this very moment on what's going on. But LOVES is working. It's working well. And so let's see how the OTT project evolves in the future.

[Operator]

[Operator Instructions] The next question comes from Fernando Cordero from Banco Santander.

[Fernando Cordero Barreira, Equity Analyst]

Two questions, if I may. The first one is related with one initiative that you have implemented in the first quarter, which is the insourcing of some of the outsourced news activities in laSexta. I would like just to know if there is any other initiatives like this one that we can expect in the future. And so in that sense, did you see other activities now outsourced that could be insourced in the future? And the second question is related with your commercial policy. Partially, you have already answered that with the performance of projects for the second quarter. But I would like just to also [ obtain ] some insight on how the clients and how the advertisers are accepting your new commercial policy. And I understand this commercial policy is already reaching the OTTs, particularly in the sense of inclusion prices in those time frames where you are reducing the inventory.

[Silvio José González Moreno, CEO, MD & Executive Director]

Yes. I'll be -- insourcing, we are not expecting to change that, to make any operations as we did at the end of last year with laSexta newsroom. So there's no plans to go on with the -- with this type of operation. And about the commercial policy, well, we do think it's working quite well. I think that that it has allowed us to increase prices because, I mean, it's making this type of breakthrough for [ 3+3 ] and all these things has helped us to give value to our commercial proposal. I mean the joint inventories -- joint bundle selling was good because it was easy. And at the same time, you could not differentiate the product and you could not really get [ it ]. As for the price, you think that product will represent. So I think that with this new policy, it's all flexible even for the customers. But at the same time, we can ask for higher prices because we offer different things with a better quality and it's very well perceived by them. At the same time, I think that this new policy has helped us in order to compensate lacking of the championship. Remember that championship was a good product in terms of pricing. We don't have that. And the way we have used -- we have created in order to compensate this effect has been this new policy. So, so far, we are quite happy about the results because of the pricing, because of the new approach to the customer in order to sell quality and ask for the right price for that. Thank you.

[Fernando Cordero Barreira, Equity Analyst]

Just one question, if I may, a follow-up?

[David Gómez Baquero, Director of Investor Relations]

Yes. Go ahead, yes.

[Fernando Cordero Barreira, Equity Analyst]

Yes. Talking about the commercial policy, do you have any additional insight on how is the [ proceeding ] from the antitrust body and looking into your commercial policy going on? Can you give us some insights on that process?

[Silvio José González Moreno, CEO, MD & Executive Director]

We are -- as you know, it's quite a complex process. We are now in the part of the process that it's called the settlement agreement. And so we are having conversations with the competition authorities in order to see whether we can get an arrangement. But, I mean, we don't have -- we have offered them some proposals in order to change our policy in a way they think that they could feel comfortable with them, but we don't have yet their answer. So we're just in the middle of the process. But, I mean, as we told you, we do think that on a legal basis, I think their opportunity is very weak. But we do think that perhaps making some changes which are not significant for us, it could help us to get another arrangement for -- with them and so everything will be more easy. But at this very moment, things are -- and we expect -- we are waiting for them to give the answer for our proposal. Thank you.

[Operator]

The next question comes from Richard Eary from UBS.

[Richard Eary]

A lot of my questions have been asked already. But just one thing just on the studios business. Obviously, this is quite a lumpy business depending, obviously, when deliveries are due. I'm just wondering whether you can help us. You talked about one delivery coming through in first quarter that actually helped. But you talked about 3 to 4 or 4 to 5 deliveries for the full year. So I'm just wondering whether you can sort of guide us through how that's going to impact Q2, Q3 results in terms of when we should expect those shows and who are the buyers of those shows again?

[Silvio José González Moreno, CEO, MD & Executive Director]

Although it's difficult to say because, as you know, you have the project and you develop it and it's not very clear when you begin the production and all that. But, I mean, now what we can say is that we have had a fiction in Q1. There could be a fiction in Q2 and probably one more in Q4. So for this year, there could be 3 productions in the top line working so far. Perhaps the one in Q4 could move to next year or not because, I mean, it's something that does not depends on us, it depends on the customer. But, I mean, more or less, this -- for this first year of the company, there could be 3 fictions in the pipeline. Thank you.

[Richard Eary]

And sorry, can I just ask a follow-up? I mean, if we look forward a couple of years, I mean, where do you think the number of deliveries will get to in terms of production? Is this -- are we thinking this ramps up and scales up to 10 to 15 deliveries a year? Or is it not that possible? Or maybe you can give us some thought process for that.

[Silvio José González Moreno, CEO, MD & Executive Director]

No. I mean so far, what we do see now is that in this very first year, I mean, we don't know what will happen in 10 years' time. We are talking about some -- delivering something to 4 to 6 fictions per year. That's the -- that's our goal in the short term, let's say, the next 3 to 5 years.

[Operator]

Thank you. Ladies and gentlemen, there are no further questions. I now give back the floor to the company. Thank you.

[Silvio José González Moreno, CEO, MD & Executive Director]

Okay. Thank you very much for your attendance. As usual, if you have any other further questions, just contact with the Investor Relations department. And wish you all a good afternoon. Thanks very much.