Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sarah Bressan. Please go ahead.
Good evening, everybody, welcome to the first half results of 2023 conference call of MFE-MediaForEurope . Today, the speakers are Marco Giordani, Group CFO, and Matteo Cardani, Managing Director of Pubblitalia. I will hand over immediately to Matteo for the our advertising and audience house. Okay, Matteo, please go ahead.
Thank you, Sarah. Thank you, everybody, for your attendance. Co- let's comment on H1 2023 results. We start with a review of the overall economic scenario. On consumer side, purchasing power for goods and services is still under pressure due to high level of inflation. Notwithstanding despite the inflation rate for consumption good is improving and is reducing from 11%-12% at the end of 2022 to 6%-7% rate mid-year 2023. This gradual improvement in inflation rate explains why in chart number three, we see a business consumer confidence indexes that are both positive. And this is also confirmed by the next chart, where we look at the consumption trend.
The one related to goods was slightly negative, while the trend for services remains positive. The overall picture is in a positive field, and this is connected to gross domestic product, where we have for Q1, conjunctural and trend variation that are both positive, +0.6 and +0.19. While the data we received yesterday with regard to Q2 are slightly negative, -0.3 for conjunctural variation, but are still positive, +0.6% for trend variation. All in all, the GDP forecast for the whole year is still in positive field, around 1% for Italy and around 2.5% for Spain. On average, our two territories are better than the euro area.
Having said that, now we, we turn to advertising market, both in Italy and Spain, Q2 registered a positive start in term of revenues. While for different reasons, the month of June was impacted by some unpredictable factors. In Italy, the company reshaped the programming schedule for some days, the three days, dedicated to the commemoration of its founder, our founder, President, Silvio Berlusconi. While in Spain, the new general election held on last weekend, the 23rd of July, was calling on advance in the beginning of June. These two facts, of course, are conditioned to some extent, both markets.
With regard to the Italian advertising market, on slide number five, you can see that the total market is registering a growth of +1.5% year-on-year in H1, and is benefiting from the growth of media such as the radio, digital and out of home. While TV is generally stable, a good resilience compared to TV trends in other, other main European countries, where TV suffer a single digit decrease. On the right-hand side, the graph shows the progression of MFE Advertising revenues on a yearly basis between H1 2020, indexed at 100 and H1 2023. Against the total market, the total market is to MFE.
In 2022, MFE recorded is its highest level of revenue since 2020, a level that remain stable also in H1 2023, while the rest of the market is gradually recovering the gap by 8 index points away from where we are. Next chart, chart number six, you can see the MFE performance in H1 2023, so - 0.6 year-on-year, registering a flattish trend compared to last year, broadly in line with the company's expectation and as I said, conditioned by the stop of advertising in the central days of June. As we usually comment, the two main drivers, and maybe let me see to achieve the results, are the balance dynamics among the economic sector and the growing audience share.
If we take a look at the number chart, the chart number seven, the sector dynamics in H1, is actually a balanced one. There is interestingly for all of us, the ongoing recovery in the automotive sector that is growing around 20% in advertising, reflecting the growth in vehicle registration that is above 20%. There is a growing finding in grocery, generally food, and also pharma and leisure, and a very slightly decreasing level of advertising for retail and personal objects. Telecommunications are the declining sector. As you can see from the chart, the majority of sectors, 69% are in the positive field, and this explains the balance dynamics.
We can get in chart eight, so the supporting evidence from the balance sector dynamics, and let's say some reassurance also for the outlook. If we take a look at the retail sales dynamic from sector to sector. The interesting thing is the 91% of MFE Advertising revenues are generated by sectors that in H1 2023 had a positive sales trend, of course, including the inflation company and only a minority, 9% of advertising revenue are connected to sectors that are experiencing some trouble in the retail trend. Coming to the second driver of our MFE results, we are quite proud to say that the total audience performance highlights the good health of our programming.
substantially shows our solid leadership in total audience and commercial target with a 40.6 audience share, and this combines, as in the past, quarterly call, the combined results of linear and digital audience share. It's remarkable that the main competitor is over 8 points behind MFE. The other interesting thing in slide number 10 is that we have still, let's say, a positive balance between the slight decrease in linear television, but then anyways is resilience -1.5. The combined effect of total audience bring us in the positive field in terms of total audience
The interesting thing underlying that is quantitative trend is the qualitative fact that the combination of connected TV and second screen keeps adding viewers with a younger profile, complementary to the linear TV audience. This is going on also in June, July programming with very exceptional results. There are some programs with 20%-24% of additional audiences due to digital audiences. There is additional benefit of a higher CPM compared to television, as you can see in chart number 12. With regard to monetization, you can see the pricing outside of inaudible, on addressable TV or digital TV, kind of derived by a higher revenue power compared to the other option. As we usually say, each hour moving from linear to addressable is a net positive gain for us.
The last part of my presentation is focused on Spain. Generally speaking, the TV advertising market in Spain was negative in H1, -3.5%. But honestly, it's a better performance compared to other countries, the northern countries or central European countries that is a worse performance, minus single digit negative or even double digit negative, in the UK, Germany, and France. In Spain, specifically, we are aligned to our main competitor, Atresmedia, in regard to.
As in Italy, we have a balanced sector dynamics with regard to, to the spenders or negative performance of some sectors, as telcos, beverages, and leisure, is almost counterbalanced by the positive dynamics of key sectors as personal care, finance, retail, and above all, the automotive sector that is recovering in Spain and supported, as in Italy, by the growth in car registrations. The overall trend of MF, as you can see in chart 13, is -3.6. This is a positive progression in Q2 compared to Q1, as you remember, and as we said before, Q2 was positive in April and May, while of course, in June, the advertising investments were affected by the general election. Some advertising investments remain in standby in such periods.
Having said that, the last chart I'd like to comment is the linear, the, the, the audience share performance. On our commercial target in H1, MFE is still a leader above Atresmedia, confirming the 28.5% share registered in Q1. Having said that, with regards to advertising, in Italy and in Spain, I hand over to Marco Giordani. Thank you.
Thank you, Matteo. From my side, welcome to the first half presentation of the MFE-MediaForEurope Group. Let's start with a brief overview of the results. In the first half of 2022, we were able to reach a higher level of profits than last year. That has been a great achievement also because we clearly face a still recovering advertising market in Spain. More than that, we missed more than EUR 40 million of dividends to be accounted in the first half of 2022. The result has been achieved through a very careful management of the cost base, both in Italy and Spain.
Also thanks to the start of the integration process with the two country teams joining forces, sharing best practice and sharing also project on innovation. This led us to maybe declare that she is 8% higher in 2023 compared to 2022. I mean, I take also the chance to tell you that in the second half of 2023, we will include the share of the net consolidated result of ProSiebenSat.1 Media, that from, starting from the 1st of July, 2020, will be recognized using the equity method as per the IFRS 28, that will start, as I said, from the 1st of July, 2023.
Entering in the number briefly, almost EUR 350 million of EBITDA, more or less in line with last year. EUR 120.9 million EBIT, up 8% compared to last year, and a net profit of EUR 87.1 million, 3% higher than last year. Lastly, group net financial position at the end of June was EUR 807.5 million, better, so lower debt compared to January 1, 2023. Entering in the P&L, I mean, clearly, Matteo has already explained the revenue, the advertising revenue line. Entering in the other revenue, we can confirm the guidance for the full year of EUR 380 million.
The result in the first half was almost similar to 2022. In that respect, you know that this is a line that includes a lot of components, all in all, they are all in line with our expectation, they are falling, falling out, following our guidance for the full year. In terms of cost, as you can see, we were pretty good in managing them. As I said, the group EBIT was 8% higher than last year, that was mainly due to a pretty efficient controlling cost. As I said before, some of them were also produced by synergies that we were able to generate between, between the Italian and the Spanish business that, joining forces are clearly leveraging new project on innovation.
In terms of guidance, we confirm the guidance for the full year of EUR 2.47 billion cost line. Again, this is a pretty remarkable number also taking into account the fact that we are facing a pretty high inflation on many items, not really the one related to content, but as you can imagine, inflation pressure on our costs are pretty, pretty high as everywhere in Europe. Moving below the EBIT, you can see the financial charges worse than last year. That, again, is the result mainly of interest rate trends. Really nothing really exceptional, a little bit better than expected.
In any case, we are still guiding for the full year, EUR 10 million higher financial expenses for the full year compared to 2022 numbers. Again, a pretty remarkable number, if you can just remind the interest rate trends. On the associate line, it's where you can, we can guide you on the EUR 50 million on... for the full year, 2023. Moving then to the different geographical area, as far as the Italian business, revenue were more or less in line with last year. The same, a little bit better, frankly, on the other line, in line, but this is a phasing effect.
As I said before, for the full year, we are confirming our guidance. You can appreciate the, at EBIT level, the great job done on cost, that is allowing us to reach an EBIT of EUR 39 million, almost double the last year. Again, part of them, part of this saving were due or were coming from synergies with Spain. As far as, I mean, a specific number concerning the second quarter alone, costs were down 2.5% compared to last year. Again, that brings the cost reduction for the full semester to EUR 24 million cost, cost reduction.
In Spain, in revenue has already been commented in terms of trend, but also Spain, we were good managing costs, and so we were able in any case to keep the EBIT line at almost EUR 82 million, a pretty remarkable number for the first half. Moving to CapEx, we had, let's say, a first half of 2023, that has been affected by some phasing effect in Spain, in order to support audience trends. In terms of guidance, we can confirm EUR 410 million for the full year, so nothing really new in the last conference call. Then as technically material investment on the other hand, this case of EUR 10 million was just a phasing effect.
Everything will be in line with last year for the full year. Lastly, I mean, everything has been here already. Free cash flow from operational was above the last year's number, again, a good result for, for, for the first half. You can see in the equity investment line, the investment related to the withdrawal right payment in Mediaset España, and the share purchase agreement of some Mediaset España shares that we carried out in February. That has been already recorded in the first quarter, we commented last conference call. In the incoming dividends line, you can appreciate the sharp decrease due to the ProSieben reduction of dividend of almost EUR 40 million, as commented before.
As far as the full year 2023, we can confirm the guidance of the one time net debt to EBITDA for the end of the year. Already taking in account the dividend distribution we paid out one year, one week ago. Also, the cash out related to the mergers with Mediaset España. That is the proof that we can, with the free cash flow generation, we can finance development and also pay out dividends to our shareholders. I have completed my presentation, so I can give you room to your question. We are here to answer. Thank you.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. We will now take the first question. From the line of Julien Roch from Barclays, please go ahead.
Yes, good evening, Matteo, good evening, Marco, good evening, Sarah, good evening, Lucrezia. First question for Matteo. Could we get ad trends for Italy and Spain? Now you have to do both for July and August. First question. The second question, Marco, you confirm all the guidance, that's the first time you give them with Italy and Spain combined. Just to make sure I got the right number, for other revenue, you're saying EUR 380 million. For cost, you're saying EUR 2,470. For interest, EUR 10 million higher than last year. Associate, you're saying EUR 15, that has to be without ProSieben, right?
Then, on the key rights, I don't think I got the right number, 'cause I, I, I got 220, but that's too low, as you did more in the first half. Could you, confirm all those numbers? Then the last question is, any update on ProSieben board conversation? What is going on? Thank you.
I'll, I'll start with you, and no, yes, everything is perfect. All the guidance has been captured correctly by you. Everything confirmed, maybe I just remind the investment guidance. The total investment, the guidance is EUR 410 for the full year. Clearly in that number, also technical and material are included, and that will be, let's say, compensating in the second half, because if you look at the first half result, they are higher, EUR 10 million more than last year, and so that will be compensated in the second part. If you want to have the split is EUR 370 for the TV rights and EUR 40 for technical material for the full year, total EUR 410.
I'll leave, to Matteo, to give you the outlook on, on, on the summer.
Yeah, Q3. Thank you, Julian, for your question. No, we, we don't comment each single month, but with regard to Q3, you know that in both countries, the first quarter, the advertising collection in the month of September, usually corresponds to the cumulative advertising collection of the months of July and August. For the, for the Q3 result, September will be the decisive month. Anyway, based on the current level of visibility that in Spain for the general political situation, of course, is quite limited. We can say that both in Italy and Spain, we expect a year-on-year trend of nine months advertising collection to be aligned with the year-on-year trend that we just commented for H1. This is our best, let's say, forecast for the next three months.
Align with the ongoing evolution.
Sorry, Julien, I forgot to answer you too on ProSieben. I mean, clearly, we don't know anything more than you. We don't have any insight. We are waiting for the conference call, conference call, next Thursday. I mean, as far as we can collect from the advertising market, I mean, the general advertising market is still, is still facing a pretty difficult, let's say, time. We heard that June has been better, then July is still, still difficult, so this information we collected, mainly by the media agency and, and, and customer. As far as Mediaset is concerned, we don't have any insight, and so we are waiting for their announcement this week.
Thank you. We will now take the next question from the line of Fabio Pavan from Mediobanca. Please go ahead.
Yes, hi. Thank you for taking my question. One for Marco. You have managed to beat the expectations on the EBIT for domestic business. You said in the press release, results are also exceeding your expectation, but you are confirming the full year guidance, of course, while adding you are working on efficiency. My question is, you are just playing tactical approach and we may expect some good news into year-end, or you are concerned about some increase in the cost for the second half? Thank you so much.
I mean, clearly, we are still facing a pretty, let's say, important lack of visibility and uncertainty on the second half. It's very hard to say what is gonna happen. Clearly, we have some flexibility on the second half, so we are ready also to, let's say, both way, if the market will recover, let's say, to push on content to capture, let's say, new money, but we are also prepared, to a certain extent, also, to cut costs if the second half will not be as forecasted. That's the reason for which we are keeping our guidance, because, unfortunately, everything is so uncertain that it's very hard for us to, to make a different view.
We are still holding the same, let's say, forecast for full year as we had at the beginning of January, even if, as we said in the press release, the first half has been better than expected. Just because it's hard to make a different projection with a so short visibility. That's the main reason. Then, you can consider it prudent or not, it depends on what top-top line you are expecting for second half.
Okay, thank you, Marco. Thank you.
Thank you. We will now take the next question from the line of Stefano Gamberini from Equita. Please go ahead.
Good afternoon, everybody, and thanks for taking my question. The slide 12, if I may, if you can elaborate a little bit more about this difference between the linear and addressable advertising. If I understood correctly, the price of the advertising is more or less 70% higher than the linear one. Could you give us a little bit more color of how addressable are going? What is the total share? What is the share out of the total of linear, addressable advertising? If the trend was by far better in the first half versus the linear TV?
The second, Marco, if you can give us the split between the costs and other sales, and also TV right between Italy and Spain, if just to understand if the trend is the same, then we already expected. Third, my, typical question regarding El Towers . Marco, if I'm not wrong, you made some statements about this topic. Are there some novelties or not? Many thanks.
I'm starting from the last part for- last part of your question. I mean, it's very hard to answer, because as I said before, we have several projects that are now, let's say, joined. Where the saving would be in, in Italy or Spain, would be clearly a little bit nonsense, because clearly, saving will be and independently whether it will be accounted in Italy or Spain. That's the reason for which we are not giving, let's say, guidance, in, for Italy and Spain separately, because our target, as I said, is combined. In any case, you can see that, the, the total amount, it's already delivering a pretty high level of efficiency.
Coming to your question, so with regard to the positive trading up between linear and addressable, now, it's remarkable to say that this is a positive trading up with our colleagues in Spain. This is one of the synergies Marco was commenting before. The main reason why is that luckily, we have a linear business in good health, and mainly with regard to Italy, the fact that we have a total audience that is showing our clients, showing advertisers that there is an on the top-selling programs an additional audience ranging from +5, +10, to +20.
These additional audiences mainly focus on those targets called light TV viewers, so mainly younger targets up-
... scale upfront targets allow us to command a higher price on this inventory, and that explains the, the, the chart number 12. For the time being, the, the, the combination of the two dynamics is the positive one. For sure, the fact that we have a very successful, anyway, linear audience program is, is crucial for for the sustainability of our business. I hope to have answered. Thank you.
Okay.
Then we have the EI Towers? A quick comment on EI Towers, right away.
Unfortunately, you asked me the same question, and I answer the same. We, we, we don't know anything more here. As we said several times, we are pretty flexible in our approach, so we can accommodate our position more or less, whatever [audio distortion] would like to do, but we are minority shareholders, so at the end of the day, we are only looking at the stake value and the liquidity value of it, and... clearly, we are not on the driving seat.
Thanks a lot.
If news will happen, will not come out from us.
That's okay. Many thanks again.
Thank you very much, guys, for the time of today. Thank you, Marco, thank you, Matteo, and the investor relation department will be available for any questions you may have. Have a nice evening.
That does conclude our conference for today. Thank you for participating. You may now disconnect.