Good morning. I'm Jorge Bujia, Head of Investor Relations and Director of Management and Risk Control at Prisa. Welcome to this presentation of results for the first half of 2023. In order to explain in greater detail the results that were published yesterday when market closed, today's presentations will be headed by Joseph Oughourlian, Chairperson of Prisa. We will also be joined by Pilar Gil, Deputy Chairperson and Chief Financial Officer of Prisa, Carlos Núñez, Executive Chairperson of Prisa Media, Francisco Cuadrado, Executive Chairperson of Santillana, and Julio Alonso, Chief Operations Officer at Santillana. Without further ado, I'd like to give the floor to our Chairperson, Joseph.
Thank you, Jorge. Welcome everyone, to this presentation of results for the first half of 2023. It's indeed our pleasure to share with you our analysis of Prisa's results for the first half of the year. Before going into figures in detail, I'd like to run through the chief highlights for the company so far this year. First and foremost, the company remains focused on reducing its debt load and bringing it under control, which is, as you know, the priority of the firm right now. In this regard, there's been a deleveraging event for the company, thanks to the inflow of funds from the convertible notes operation at the beginning of the year, worth EUR 130 million.
We've just been able to repay EUR 110 million of the junior debt early, resulting in a net debt to EBITDA ratio of 5x , which is obviously much lower than end of year 2022, which was above 6x. By May, 76% of the notes had already been converted into shares. Additionally, interest rates hedges have been arranged to mitigate the impact of Euribor at rate heights on our debt, as will be explained later by our Deputy Chairperson and Chief Financial Officer. The pursuit of this priority goes hand in hand with the growth of our businesses. Growth, which has been significant in the first half of 2023, and in line with our expectations, despite the uncertain environment.
Prisa continues to scrupulously meet the goals in which we committed ourselves last year when we announced our ambitious 2022/2025 strategic plan. I'd like to remind you that this plan is based on five strategic pillars that constitute the company's framework for future growth. These are financial stability, focus on continued business development, focus on growth, leadership in the sectors in which we operate, and sustainability. Talking about sustainability, the first half of 2023 has seen us strengthening the governance of the company. We now have a very talented board, reinforced with new members after the latest changes and appointments announced at the shareholders meeting in June. We've also got the appointment of two new vice chairperson, Pilar Gil, who's also our group CFO, and Fernando Carrillo.
Pilar will be in charge of the Spanish institutional side, and Fernando, of the Latin American side. Let me end this first introductory part with a brief summary of the group's main financial and digital indicators, which you find on slide one?
Six.
Six, sorry. That will serve to illustrate the robustness of the results achieved in the first half. Strong revenue growth, 14%, translated into a significant 53% improvement in EBITDA, boosted by margins that have improved by four percentage points. Although free cash flow for the first half is lower compared to 2022, this is chiefly explained by temporary issues affecting working capital that should be offset in the second half of this year.
Meanwhile, our commitment to digital transformation continues to drive the performance of our key digital indicators, with subscriptions of Santillana increasing by 9%, and the number of digital subscribers at El Pais is up by 51%. We remain firmly committed to promoting the development of PRISA Video and PRISA Audio in our media business, where consumption figures continue to grow quarter by quarter.
These indicators highlight the growth, the momentum of digital transformation, and the greater efficiencies that we've achieved in the first half of this year. Let's now take a closer look at these results for the first half. I'd like to hand over to Pilar, our group, our CFO, who will go into greater detail with regard to the group's financial results.
Thank you, Joseph. Hello, everyone, this is Pilar Gil speaking. Let's move to review in detail the key financial aspects of the first half of 2023. As a starting point, I would like to remark that despite the low impact of the Q2 of the year, due to the seasonality of our business, which is always the same in all our Q2. Overall, the first half shows very robust performance in terms of the group's main financial indicators, where I would like to highlight three main key points.
First, we can see persistent growth in our operating resource in both business lines and for all the company's key indicators. Second, free cash flow has performed in line with our expectations, since despite it was negative in the first half, this is due to temporary issues affecting working capital that should be reversed over the second half....
Third, we have reduced debt and maintained a solid liquidity position, with available cash amounting EUR 162 million. Let me now turn to reviewing the group's operating results in detail. In the period between January and June, revenues reached EUR 441 million, a growth of 14% compared to the first half of 2022. By line of business, we should highlight the growth in education sales, plus 17%, driven by the strong performance of the
southern campaigns, the growth of subscription models, and the extraordinary institutional sales in Argentina, which offset lower CONALITEG public sales in Mexico. Meanwhile, advertising sales have grown by 5% in the first half, with increases in both offline and online advertising, both on the radio and in the press, outperforming the overall market evolution.
Circulation revenues grew slightly in the first half, up by 1%, boosted by subscription growth, which offset the recurrent offline circulation decline. We can see, therefore, how despite persistent macroeconomic and sectoral uncertainty, our business remained resilient and enjoyed solid growth in the first half. This improvement in revenues translates into an
improvement in EBITDA, which in the first half reached EUR 68 million, representing growth of 53% compared to the first half of 2022. EBITDA margin reached 16.5%, improving by 4% points compared to the same period in 2022. EBIT is 3.5x higher than in the first half of 2022, a clear example of very positive operational performance in first half 2023. Let's now review the PNL evolution from EBIT to net profit.
Despite the solid operational performance, the evolution has been conditioned by the financial results decline. In addition to the increase in financial expenses due to the iinterest, the financial results have been impacted by, first, the higher financing cost for fair value of the debt, since refinancing had a positive accounting impact of EUR 16 million in 2022,
while in 2023, there has been a negative impact of EUR 9 million due to the early repayment of part of the junior debt. Second, adjustments for inflation and negative exchange rate difference, differences that are largely explained by steeper inflation in Argentina. I would like to remark that we continue to work tirelessly to reduce our level of indebtedness and to mitigate the risk from upward trending in labor interest rates.
In this regard, we have arranged two new heads for the interest rates during the first half, and this means that now we have almost half of the debt covered, especially EUR 400 million nominal, with an average cut on our, on our labor of 2.6%. All the above explained translates into a net resource for the first half of 2023, amounting to minus EUR 36 million, compared to minus EUR 14 million in the first half of 2022. Let's now analyze the group's cash flow generation. First half 2023 has been positive cash generation of EUR 62 million, which means EUR 127 million more than in 2022, mainly supported by the inflow of funds from the convertible notes and lower costs with regards to corporate transactions.
All this despite the increase in labor interest rates, that has led to a higher interest cost of EUR 40 million, and the fact that the operational improvement of the results is not yet reflected in cash flow due to temporary issues affecting working capital. I'd now like to focus on the performance of free cash flow over the first half of 2023, and how it compares to the same period last year.
First of all, let's remember that the Q2 is not a significant quarter in terms of cash flow generation due to the aforementioned seasonality of our business. The cash flow was negative at EUR 50 million compared to positive EUR 10 million in the same period, 2022, mainly due to temporary issues affecting working capital.
Therefore, the improvement in EBITDA is not yet reflected in cash, mainly because a large portion of the public sales in Argentina and Brazil registered in first half are pending to be collected. Our expectation is that this temporary effect will be reversed in the second half, and the resulting improvement in EBITDA will then be reflected in the free cash flow. As well as being impacted by EBITDA and working capital, free cash flow is affected for purposes of our comparison with 2022 by lower CapEx and lower severance expenses, which contributed to a EUR 7 million cash improvement in this first half of the year.
In summary, this ensures positive and growing cash flow generation compared to the first half of 2022, with the inflow of funds from convertible notes and lower costs with regards to corporate transactions that offset the higher interest payments and the temporary negative effect on working capital. Let us now turn to the performance of net financial debt. Net debt stands at EUR 801 million compared to EUR 856 million in December 2022, with a decrease of 6% and an improvement in the net debt to EBITDA ratio of 1.2 to 5x mainly due to the net funds from the convertible notes, of which EUR 110 million have been used to the early repayment of junior debt.
Taking into account IFRS 16 liability, total net financial debt stands at EUR 866 million, compared to EUR 926 million in December 2022. This means a decrease of EUR 60 million. The group continues to present, as of June 2023, a strong liquidity position of EUR 162 million. Although we have improved our financial leverage and our efforts are allowing us to strengthen our balance sheet, as I said before, we will continue working on debt reduction so that our business can continue taking advantage of the enormous growth potential, as evidenced by the results sustained quarter by quarter. These are the group's financial results of the first half of 2023.
Let me end by remarking that PRISA's performance to date confirms that we remain committed and on course to meeting our guidance of, our 2023 guidance for all target indicators, which means exceeding EUR 900 million in revenue, achieving an adjusted EBITDA margin, excellence in the range of 17%-18%, and achieving free cash flow in excess of EUR 40 million. I would now like to give the floor to Carlos, who will be explaining in detail the results of PRISA Media.
Thanks, Pilar. This is Carlos Núñez speaking. It is my pleasure to present Prisa Media results for the first half of 2023, which show an improvement in operating and financial indicators. We continue to forge ahead with our strategic roadmap. We are on course to achieving the goals set for 2025. Needless to say, the business environment in which we develop our activities is certainly complex.
Prisa Media's overall results are evidence that the quality of our assets and the efforts we make in all businesses areas are obtaining results. This is a great motivation for us to continue forging ahead. First of all, I would like to start by highlighting the global reach that both our assets enjoy. Our online and offline indicators show our position of leadership in terms of audiences during the first half of 2023.
In radio, we exceeded 23 million daily listeners worldwide, a figure 2% higher than in 2022. Our radio stations are the absolute leaders, both in talk radio and in music radio, in all the markets where we operate. As for our digital reach in unique browsers, we have a total monthly average of 231 million unique users, 4% down on last year. Bear in mind that we were coming from historic highs. We are experiencing the effects of digital distributors, as Google Discover, that are biased towards clickbait content that we do not produce, or the deprioritization of our journalistic content in social networks as Meta. We keep growing our paid audience at our flagship outlet, El País.
On the other hand, our focus now is on increasing the engagement and qualification of our digital audience as key assets for the coming cookieless era, and as our key competitive advantage for monetization throughout the places. Meanwhile, we remain firmly committed to audio, and we have significantly increased both the number of downloads, +4%, as well as the streaming hours, +12%, to reach a monthly average of 50 million downloads and 88 million listening hours. With regard to print newspapers, only in Spain, we register an average of 1.2 million daily readers for all our titles, which represents an increase of 2% compared to the first half of 2022. El País almost double the audience of the second newspaper in Spain.
In addition, in the video area, we clocked up a monthly average of more than 135 million reproductions in the first half 2023, which represents an increase of +16% to the same period in 2022. Our audience figures continued to improve in the first half of 2023, and our brands continue to be leaders in the markets in which they operate. Meanwhile, the successful evolution of the El País subscription model also goes from strength to strength, with high levels of subscriber acquisition. We closed the first half with more than 300,000 subscribers, an increase of more than 40% compared to the first half of 2022. The total number of subscribers has grown by 89,000.
That's a quarterly average of 21,000 net subscribers per month, or an increase of 7,000 net registrations per month. In the first half of 2023, we have continued to strengthen the leadership of our model in the Spanish language market for digital press subscriptions, and we have managed to grow at higher rates than expected, which brings us closer to the goal set for 2025 of exceeding 400,000 subscribers.
In terms of exclusively digital subscribers, we have reached 271,000 subscribers after growth of 51% in the first half of 2023. All this makes El País subscription model the absolute leader in the digital press subscription market in Spain. Let's now look at how advertising fared in this first part of the year. Advertising is Prisa Media's main revenue source, accounting for 73% of revenue.
In the Q2, advertising markets have a slowdown versus the behavior in the first quarter. For example, in Spain, total market has grown 1.7% in the Q2, while it had grown 3.9% in the first quarter, mainly as a result of elections. In Colombian Chile, advertising is also slowing down, linked to macroeconomic evolution. However, we have managed to increase our net revenue from advertising by 5%, and we have increased our market share compared to our competitors, thanks to a diversified portfolio of assets, radio, press, and digital. If we exclude the impact of exchange rates, particularly the Colombian peso, growth is even higher, plus 7%. All advertising markets have shown improvements. Online advertising has grown by 13% and offline by 2%.
By business, both press and radio show growth, +11% and +2% respectively. The significant growth of radio in Spain, +7%, and radio in Chile, +15%, are especially noteworthy. This growth has offset the drop in advertising in Latin America, impacted by a change effects in Colombia. Market share in advertising areas where we compete has grown both in Spain and Latin America. Specifically in Spain, it has grown by 1.4 percentage points to reach a 29.1% market share. In Colombia, market share for radio is up by 0.6 percent point to reach 14.4%. Meanwhile, Chile has enjoyed growth of 3.3 percentage points to reach a share of 28.2%.
Additionally, we keep growing our footprint in the U.S. market, with a 32.5% growth versus last year. All in all, we keep overperforming the market, thanks to the combination of four critical levers: our diversified portfolio, the quality of our audience, both offline and online, the prescription power of our brands, and the best-in-class adtech operations. Turning now to operational performance of the business, our revenues for the period were up by 10% in the first half of 2023, with a digital revenue mix 3 percentage points higher than in the first half of the previous year. As we mentioned earlier, advertising has grown by 5%. Circulation revenues have grown by 1%, thanks to the growth of the paid subscription model, which has offset the decline in offline circulation.
In addition to advertising and circulation, our other business lines have contributed 29 million EUR to the total for Prisa Media in the first half, an increase of 62%, thanks to the diversification of revenues and the incorporation into the perimeter of Lacoproductora, which you will recall, we integrated in the Q2 of 2022, to boost the group's audiovisual production for our own outlets and for third-party platforms.
Regarding costs, there has been an increase in variables associated with revenue growth, but fixed costs are controlled and barely grew +2% compared to the first half of 2022, despite inflation pressures. What's more, we are committed to ongoing of efforts to improve the efficiency of our cost structure. This improvement in efficiency has translated into a year-on-year improvement in our EBITDA margin, which reaches 7%.
First half EBITDA is up by 26% compared to the same period in 2022, reaching EUR 14 million compared to EUR 11 million in the first half of last year. Before finishing up here today, I would like to emphasize that we are most definitely on course to achieving all the objectives that we set for ourselves in Guidance 2023, and in the strategic plan 2021. I would now like to give the floor to Julio, who will be telling us about our education business, Santillana.
Thanks, Carlos. Hello, everyone. I am Julio Alonso, Chief Operations Officer at Santillana. First of all, I would like to give an overview of the first half of 2023. Santillana has had a very satisfactory first half across all its lines of business. With regard to the private market and in terms of subscription models, we closed the more recent quarter with 2.7 million subscriptions to our learning systems, which represent an increase of 9% compared to the previous year.
This growth has been 100% organic, that is to say, without any acquisition of business. Of the 2.7 million subscriptions, our Festival and Go! core systems account for 2 million subscribers, while the remainder correspond to complementary and supplementary systems, mainly for English language learning, but also for reading and socioemotional content.
The overlap between systems is around 50%, which provides us with avenues for growth through cross-selling and accompanying campaigns. In fact, thanks to this strategy, the complementary and English system has grown by 15% compared to 2022. This growth in subscription models, as foreseen in our plan, has been favored by an acceleration in the rate of transformation of our clients away from the
traditional deductive model and the stock performance of our state networks, with a retention rate of 85%. In terms of revenue, the subscription models have seen growth of 7% compared to 2022. If we look at the figures in terms of the whole campaign, which includes data for the last quarter of last year in the countries belonging to the southern region campaign, growth is 13.5%.
Meanwhile, traditional derivative sales have grown by 40%, that is due to the extraordinary public sale in Argentina, already mentioned before. Without considering the figures for Argentina, growth is 10%, thanks to the general improvement in the countries we operate. Public sales have continued to grow compared to last year, thanks to the boost in sales in Brazil and Chile, and despite the lower sales of CONALITEG in Mexico, where our government began to provide the secondary school textbooks by its own means, in passing punctually the Q2 of this year. Turning now to the main financial indicators, Santillana total revenues have grown by 16% compared to the first half of last year, reaching EUR 235 million.
This growth comes, as we have mentioned, mainly from the private market. It's worth highlighting that sales of learning system now account for 54% of sales in the private market, 55, without the extraordinary sales in Argentina, thanks largely to the company's transformation strategy. This growth in sales, together with the exhaustive cost control, has resulted in a significant improvement in
EBITDA, which has gone from EUR 37 million in the first half of last year to EUR 55 million in the first half of this year, solid growth of 50%. I would have previously commented, the results have been boosted by the extraordinary sales in Argentina. Even including this one-off, EBITDA growth is significant, up by 16% compared to the first half of last year.
Finally, EBITDA margin for the first half grew by 5 percentage points, from 18.1% previous year to 23.4% for this year. In summary, Santillana presents robust first half results, thanks to the growth of the private business, with a positive contribution for the public business, too. I would now like to give the floor to Pilar, so that she can comment on the group's progress in terms of ESG.
Thank you, Julio. On the ESG front, I would like to briefly share with you that during the first half of the year, Prisa has continued to make progress in its sustainability strategy, as set out in our sustainability master plan, with a focus on impact, responsible management of the organization, and transparent and committed governance. In the environmental front, we continue to raise awareness among our audience about the effects of climate change through our content and with specific projects, award recognitions, and making progress in incorporating sustainability criteria in the planning and management of our events.
In the social area, in recent months, we have implemented several initiatives in the sense of equal opportunities, also to disseminate ESG criteria to society, with some examples being the launching of sustainability school's contents in Latin, or the launching of radio program, Caracol, a new space to bring current social and environmental challenge closer to the audience.
In the area of governance, following recent changes in the composition of the board of directors, Prisa now has 46.7% women, close to parity and well above the 40% established by the law on equal representation in decision-making bodies. In summary, a strong progress and committed with our sustainability master plan. Thank you very much, and now I'd like to give the floor back to Joseph.
Thank you, Pilar. Great to hear the progress we're making on sustainability. Let me briefly summarize the key takeaways from the first half results. First of all, both our education and media businesses continue to grow, thanks to digitization. Second, we are comfortable, very comfortable, with the 2023 guidance that we gave the market. Third, we're still on track to meet the 2025 targets of the business plan, which were set out last year. Targets which are very demanding, very ambitious, but we're on track. Last but not least, we continue to deleverage, and our debt is in check, post-refinancing in 2022, and the convertible issuance in January of this year. Thank you, everyone, for listening in, and I guess we'll open the floor to questions.
Thank you. If you would like to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one a nd one again. If you wish to ask a question via the webcast, please type it into the box and click submit. Once again, that's star one and one to ask a question over the phone, or you may ask them via the webcast. Thank you. We'll now take our first questions from the phone lines. Please stand by. First question today is from the line of Fernando Cordero from Banco Santander. Please go ahead.
Hello, good morning. Can you hear me?
Yes. Yeah.
Yes. Okay, perfect. Thank you. Just two questions from my side. The first one on education. I'm just trying to understand a little bit better the performance of the number of subscriptions in learning systems during the Q2. If we take a look on the historical performance of your subscriptions, it is quite difficult to find such a level of net losses. I just would like to understand at which extent we should understand the outlook, having a little bit more bumpy performance, or is it just something that is not recurrent? Also, at which extent this performance of subscriptions should be linked as well with the nice performance of the didactic model in education. The second question is on the media business.
Despite the fact that the Q2, the ad market in the Q2 has not been so strong as in the first, you have been improving materially your press revenues, particularly on the advertising side. I just would like to understand which are the drivers, particularly in online advertising, that have underpinned your performance in the Q2 in press. Thank you.
Thank you, Fernando. We'll let Julio answer the question on education, and Carlos Núñez will take the media question.
Yes, thanks, William. The number of students in systems is initially estimated based on the contracts signed with the schools. Data are disclosed with the official student census, which is usually slightly lower. This year in Brazil, specifically, the process was delayed until April instead of March, as usual. There is a small adjustment in the figures between first and second Q. Additionally, this year, some contracts in Peru included the small supplemental products. We decided to report together now in this quarter, but in the last quarter, we reported separate. I think that is puntual things that happened this year that is not repeat more.
Last, we continue with the strategy to transfer the contracts of the traditional textbooks market. It's the clear strategy of the company. For last, in the Q3, the data from Mexico in the learning systems, we think that this will be positive. We expect solid growth with these figures.
Regarding your question on digital, our digital advertising growth, three key leaders here that explain our, our performance. First, the quality of our audience. In terms of engagement, we have the best engagement in media, in digital media, in across all sector, which is a key asset for advertisers because they know where they are investing and the quality of the audience we are providing to them. Second, our adtech operations. We have best-in-class teams and best-in-class adtech ecosystem. Third, the power of our brands. Obviously, we are differentiating our value proposition to advertisers based on the prescription for our brands. All in all, this results in other performing the market growth.
Okay, many thanks. Just a follow-up on education and particularly on the didactic model. Have you seen any kind of, on a top-down approach, have you seen any kind of, let's say, immigration or immigration from private schools to public schools in your main markets, particularly in Brazil? Is just, in order to understand the growth in didactic model, or is just, let's say, a slower than expected immigration to lower learning systems?
Well, as you know, with the pandemic situation, the didactic market suffer a lot. They decrease very high the number of students in the private market to the public market or to his home. This year is the recovery completely of the private market, the didactic increase significantly with the public market transfer or with the continual or recover the scholarity. The conversion to the learning system market is clear, the future. We are with this strategy, we are very comfortable with this.
Many thanks for the call.
Thank you. We'll now take our next question. Please stand by. This is from the line of Antonio Marquina from JB Capital Markets. Please go ahead.
Hi, good morning. I have two questions. The first one is, at what level of net debt do you expect to end the year? The second one is, if you are open to a sale of any asset to reduce this level of debt, like the radio unit, as we have seen rumors in press that Mediaset is interest, to buy this unit? Thank you.
Well, on the net debt question, Antonio, I mean, the main thing here is that we have confirmed with these results, the free cash flow that we are expecting to happen by the end of the year, which is to be in excess of EUR 40 million. But this means that, you know, we will be, you know, now we have the second half of the year, I mean, six months of cash flow generation, and therefore, this figure is going to be reduced. Okay. We will keep on meeting that target, and this means that our objective is to reduce the level of debt that we have as of today because of the cash flow generation that we are expecting in the second half of the year.
Yeah. Your question on us being open to selling assets, I think that when you look at, you know, our debt load, and our leverage ratio, certainly selling assets is an option for our group to deleverage.
Okay. Thank you.
Thank you. As a reminder, if you do have questions over the phone, you can press star one and one on your keypad, or you can submit those questions via the webcast. No further questions on the phone lines for the moment.
Okay. We have a couple of more questions through the webcast. First of all, Rodrigo Garcia Delgado, on Santillana, are Mexico public sales expected to come back at some point, or will the government continue to provide these books by their own means?
The no purchase of secondary books by the government in Mexico, that has affected the figures of Q2. We estimate that it will be offset by higher sales of other products in this country, and with a very good year of public sales, both federal and local, in Brazil and some public sales in Chile.
Okay. Now, from Fernando Abril-Martorell. First question: How long does the EUR 2.6 head last?
I mean, the head gains that we have, they are until June 2025.
Okay. Also from Fernando Abril-Martorell, second question, and for Santillana: How did you expect learning system subscribers to evolve in second half of the year?
We thought before that in Mexico, we expected very good campaign, and we expect increase, almost 150,000 subscribers more.
Okay. Then one more from Fernando Abril-Martorell, similar to a previous question. Based on recent press leaks, would you be considering selling the radio business?
Well, as I mentioned, I think, I can't exclude selling assets in our plan to deleverage the company. I'm not going to make any comments on any specific assets that we have.
Okay. We have no more questions through the webcast, so I think we are done for this call.
Thank you, everyone. Thank you, operator.