DISCLOSURE OF AN INSIDE INFORMATION ACCORDING TO ARTICLE 17 MAR: Adjustment of financial outlook for the full year 2018, announcement of strategy update results
Financial year / financial outlook 2018:
- Group full-year revenues adjusted for consolidation and currency effects now with an increase in the low-single-digit percentage range due to a more moderate organic revenue growth
- Decrease of Group full-year revenues in the low-single-digit percentage range to around EUR 4 billion expected due to de-consolidations and a more moderate organic revenue growth
- Review and renegotiation of US studio contracts until year end 2018: One-time negative earnings impact from license rights of up to EUR 400 million for the 2018 financial year possible
- Confirmation of 2018 financial targets for adjusted EBITDA margin and conversion rate of adjusted net income
Strategy update 2019 et seq:
- Confirmation of Group’s mid-term capital market targets
- Additional investments recognized as expense in the Entertainment segment will impact the Group’s results development in 2019
- Adjustment of dividend policy: future pay-out-ratio of 50% of adjusted net income
- Announcement of a share buyback program of up to EUR 250 million with a term of 12-24 months; short-term buyback of a first tranche with a volume of up to EUR 50 million
Munich, November 7, 2018. ProSiebenSat.1 Media SE adjusts its financial outlook for the full year 2018. This was concluded tonight by the Company’s Executive Board as a result of an analysis of recent business developments and current forecasts for the fourth quarter 2018. As part of the announced strategy update, the Executive Board also resolved tonight additional investments recognized as expense in the Entertainment segment, an adjustment of the dividend policy and a share buyback program. In the completed third quarter of 2018, the business of ProSiebenSat.1 Group developed as expected.
Financial outlook 2018: As announced, the de-consolidations of the video-on-demand-portal maxdome, the online fitness provider 7NXT and the tour operator Tropo, which all took place until the end of the third quarter, will affect the Group’s revenue growth for the full-year. There will also be a more moderate increase of organic revenues in total. ProSiebenSat.1 is adjusting its Group revenue target for 2018 accordingly: The Group now expects a revenue decrease in the low-single-digit percentage range to around EUR 4 billion (2017: EUR 4.1 billion). Adjusted for consolidation and currency effects, Group revenues are however expected to grow in a low-single-digit percentage range. Previously, ProSiebenSat.1 had targeted an unadjusted revenue increase of the Group in a low- to mid-single-digit percentage range and an adjusted revenue increase in a mid-single-digit percentage range compared to the previous year.
In parallel to the increased local focus in its Entertainment content strategy (see strategy update), the Group is currently reviewing its existing US studio contracts. In this regard, ProSiebenSat.1 has approached the respective licensors in order to achieve relevant improvements in the scope of rights and/or volume inflow for license volumes both from existing agreements and for future agreements. Depending on the negotiation results and the evaluation of further alternatives, the Company does not exclude a one-time negative earnings impact of up to EUR 400 million in 2018 by already capitalized and by contracted, but not yet capitalized, license volumes. Due to payments already made in the past as well as scheduled and non-scheduled tax relief effects, the negative impact on free cash flow would be up to EUR 110 million due to payments for these license rights to be made in the future. This amount would be spread over the next four years essentially.
Regardless of this, the 2018 financial targets for the adjusted EBITDA margin and the conversion rate of adjusted net income remain unchanged. Here, the Company continues to expect an adjusted EBITDA margin in the mid 20 percentage range and a conversion rate of adjusted EBITDA to adjusted net income of around 50%.
Strategy update: In order to set up a modern and future-ready Entertainment business, ProSiebenSat.1 will invest additionally in local content, the expansion of digital platforms and an improved monetization of reach from 2019 onwards. In consideration of offsetting cost efficiency measures as well as an expected moderate segment revenue increase, this will lead to an adjusted EBITDA decrease in the Entertainment segment in 2019.
Regardless of the future investment requirement, ProSiebenSat.1 confirms the Group’s mid-term financial targets: The Company continues to aim for an average annual revenue increase (CAGR) in the mid-single-digit percentage range for the next around five years. At the same time, the Group still anticipates profitability at Group level in the mid 20 percentage range in terms of adjusted EBITDA. While the Group anticipates a revenue increase in the mid-single-digit percentage range also in 2019, the Group’s profitability and earnings performance will however be affected in particular by planned investments recognized as expense in the Entertainment segment. Under consideration of expected profitable growth of the Content Production & Global Sales and Commerce segments as well as the offsetting cost efficiency measures, the total Group’s adjusted EBITDA will be negatively impacted in 2019 by about EUR 50 million. The objective is to further improve the Company’s competitiveness through these investments and to accelerate revenues and earnings growth in the mid-term.
Against this backdrop, ProSiebenSat.1 is adjusting its dividend pay-out policy. The Group targets a maximization of total shareholder return along various components, which particularly includes an increase in earnings growth next to an attractive dividend yield. The Group thus intends to pay out 50% of adjusted net income as a dividend (previously 80 to 90%) for the first time in the financial year 2018 (to be paid in 2019). ProSiebenSat.1 will use the funds thus released primarily for earnings-increasing investments in organic and inorganic growth. In addition, the Group will also opportunistically carry out share buybacks in the future. Besides the announced investments in core areas as well as bolt-on acquisitions, ProSiebenSat.1 thus plans a share buyback program of up to EUR 250 million with a term of 12 to 24 months. At the current valuation level, the Group thus uses share buybacks as an instrument to improve its capital efficiency. In the context of this share buyback program, a first tranche with a volume of up to EUR 50 million will be repurchased in the short term, beginning with November 9, 2018.
Note on reporting: With the adjusted net income and the adjusted EBITDA, ProSiebenSat.1 Group also uses non-IFRS figures. Information regarding the composition of the adjusted net income and the adjusted EBITDA can be found on page 110 in the Annual Report 2017 which is available at our Group website www.ProSiebenSat1.com.