Good afternoon, ladies and gentlemen, and welcome to the TF1 Group Conference Call. At this time, I would like to turn the call over to Philippe Denery, CFO. Sir, please go ahead.
Yes, thank you. Good evening, ladies and gentlemen. Thank you for joining us. I will start with the main key points and then give an Overview of our Results for the First Nine Months of 2021. Then I will be happy to take questions as usual. Let's move to the Financial Results for the First Nine Months of 2021. The TF1 Group posted strong results for the first nine months of 2021, thanks to the combination of a positive trend in the TV ad market, a strong demand for content as far as our production business is concerned, and cost control in line with our expectations. Group revenues stand at EUR 1.661 billion. They are up by 21% compared to the first nine months of 2020, and they are EUR 37 million higher compared to end of September 2019 level.
I would like to point out that revenues from our activities are up by EUR 88 million year-on-year, which is +22%, compared to last year, and EUR 33 million versus September 2019, +7%. This performance illustrates the success of our group capacity to extend its core business to complementary activities like production, distribution, services. The current operating profit stands at EUR 223 million, +EUR 98 million versus last year, and around EUR 40 million higher than nine months of 2019. Thanks to this, the group delivered a high current operating margin at 13.5% at end of September 2021, 11.8% excluding government support of EUR 27.7 million. The TF1 remains focused on its ESG involvement.
The Ad Safe House launched in July an environmental advertising fund called EcoFunding in order to support responsible advertising initiatives. This commitment has been recognized by the main extra-financial agencies. The group was recently awarded the third place in the GAIA ranking for companies over EUR 500 million in sales by EthiFinance, a French extra-financial agency. As a summary, I would point out the result of our two main activities for the first nine months as follows. First, at the end of September, media revenue rose by 18%, thanks to EUR 202 million increase of ad spending on our linear and non-linear screens. Investments in programming helped us secure higher ratings than last year. These higher ratings, as well as positive momentum in advertising, helped us regain value and score a significant increase. Profitability of this segment is 13.5%.
The Newen Studios segment performed very well, with revenues up by EUR 69 million at end of September. That is to say, a 45% increase in a market where demand for content is high. Studio benefited from a catch-up effect as well as organic and external growth. Profitability stands at 13.3%. Let's now get into the details of our activities. I will start commenting on the performance of the media segment. Revenues rose by EUR 221 million year-on-year, with an increase of the operating profit of EUR 72 million. First, advertising revenues significantly increased year-on-year by 21% growth. Our ad sales has worked to improve the value of our screens in specific day parts, such as access prime time, as a means to better monetize increasing audiences.
The positive trend on the TV ad market, with only a few sectors still underperforming compared to 2019, cars, cosmetic, travel, also explain the growth of the ad revenue in Q3. Even if the basis of comparison stood at a high level last year, I'll remind you that we outperformed the market last year Q3 by 8.2%. Digital ad revenues, which rose by 12%, benefited from synergies and combined offers that we've developed between our linear and non-linear activities. Other revenues within the media segment are up by EUR 19.2 million, led by higher business services and music revenues. Regarding the cost of programs, the group has shown again its agility and its ability to seize opportunities.
It stands at EUR 685 million, higher than in 2020, of course, when we had made significant one-off savings in a lockdown context. In a dynamic ad market, the group has continued to reinvest in fresh, innovative programs to offer stronger ratings to our clients. This led to a very good performance for the group's channel, whose ratings are up by 1.2 points for women below 50 and 0.8 points for people aged between 25 and 49. Moving on to the Newen Studios segment, revenues stand at EUR 220 million. They increased by EUR 69 million versus last year due to an excellent performance since the beginning of the year. Excluding the effect linked to the deconsolidation of the game sector, revenues of Newen Studios were up by 58%.
Revenues at Newen for the first nine months of 2021 were positively impacted by a strong demand for content as well as a catch-up effect, since in a COVID context, some productions initially planned to be delivered in 2020 were postponed in 2021. Newen is pursuing its international development and acquired a majority stake in German production company Flare Film in September after the acquisition of the Spanish studio iZen in April. Newen also keeps on pursuing a high value-added partnership with platforms like Liaison for Apple TV+, which has entered the post-production phase, and the book of orders stands at more than 1,800 hours and offers strong visibility for 2022. This segment posted a current operating profit of EUR 29 million, up by EUR 25 million year-on-year. Just a quick word on the net profit.
Net results attributable to the group stands at EUR 147 million for the first nine months of 2021, including the investment in Salto. This level is higher than 2019 and already close to what was achieved at end of December 2019. Let's now comment on the cash position. Excluding lease obligations, the TF1 Group had net cash of EUR 36.3 million positive at end of September 2021, compared to net debt, EUR 0.7 million at end of December 2020. The TF1 Group generated at end of September the free cash flow of EUR 165 million versus EUR 51 million at end of 2020. It has a sound financial position and access to available bilateral credit facility for more than EUR 1 billion. Now let's conclude with the outlook.
For the end of 2021, our audiences and clients will benefit from a very strong and diversified lineup available both on linear and nonlinear. It will include new premium French scripted programs as well as entertainment programs that create a unique link. Convergence between TV and digital will reinforce the value creation for the benefit of our clients. Newen Studios will pursue its objective of increasing international revenues and grow its book of orders with pure player platforms. Given these very good results, the TF1 Group increased its guidance and now anticipate a double-digit current operating margin rate above 12% for 2021. Well, that concludes my review on the TF1 Group's results for the first nine months of 2021. Well, thank you again for having joined us, and should you have any questions, please do not hesitate to ask.
Finally, I remind you that a recording of this conference call will be available. You will find the connection details on our website.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press zero one on your telephone keypad. We have the first question from Annick Maas from Exane BNP Paribas. Madam, please go ahead.
Good evening. My first question is on margin target for this year. Just looking, you know, into next year, why would you not be able to achieve that sort of margin level again? My next question is on Black Friday. If you could tell us how much Black Friday as an isolated event is making in terms of advertising revenues in Q4? Just I guess generally for Q4, if you could give us an indication about ad trends, what you're seeing, which industries are performing well and which are not so much? Thank you.
Yes. Well, your first question, sorry, was on margin target for next year.
Yeah.
Well, I would say that we have limited visibility, and as I mentioned, the nine months this year, the margin includes some tax credit in our EBIT. Nevertheless, I would say that we will go on developing synergies and activities in production and services. I can't give any guidance today for 2022, definitely not. That will depend on the global context and the economy in France. Of course, we are really focused now on maintaining the profitability, which is in line with the expectation of our shareholders. Too early to give you any kind of guidance. Now, your second question on the Black Friday.
The Black Friday has some impact mainly on our digital business, more limited for the advertising on TV. Nevertheless, that will contribute. I can't give any figures specifically for the Black Friday, but that should help. I think, compared to 2019 and previous years, is of course a basis of comparison favorable, as compared to 2020, not different from the previous year. Now concerning Q4, the ad market. I just want to remind again that, in terms of percentage, two things. First of all, as you know, one is the fact that we have to take into account for a specific part of the year the basis of comparison.
I remind you that on Q3, we made 8.2% outperforming the market last year, and the basis of comparison for Q1 2021 is rather high as compared to other competitors and even compared to the market. We have delivered a bit more than 4% growth based on the 8%, 8.2% last year, and we consider that compared to Q1 2019, the basis, the performance is quite significant. Second point is on Q4, we have viewed that for October, November altogether, the demand remained rather strong, in line with what we have already seen during the first nine months trend. Nevertheless, the basis of comparison, of course, is nothing to do with the first six months of the year.
I would say that Q4 is for the moment in line with the trend we had, taking into account the basis of comparison of last year, which was positive. It's too early, to date, to have any kind of visibility on December, which is important for us in order to deliver the target we have for Q4.
Okay. Thank you very much.
Thank you.
Thank you. Next question from Conor O'Shea from Kepler Cheuvreux. Please go ahead.
Yes. Thank you. Good evening, everybody. Three questions from me as well. First question on the digital advertising revenues in Q3 seem to be down year-on-year versus, I think, up 12% through nine months. So just wondering what was going on there. Second question on Newen. Obviously, excellent revenue figures again in Q3, but only a small drop through to the EBITA line. Again, just to talk us around that and also whether the 1,800 hours in the order book at this stage of the year is higher or lower than it was at the same time last year, or if you prefer at the half year, sorry, in June. Then a final question.
I think you mentioned, Philippe, that the margin benefited from tax credits this year. Can you just maybe give us an estimate of how much that was or any other government aid that you benefited so far this year, which might cycle out next year? Thank you.
Yes, Conor. I would say on the first question, digital in Q3, it's a combination of stable on revenues from a website. In the same time, we has a perimeter difference, which is due to the fact that we sold our business in Italy and in Germany. We closed Spain and the digital. There is a perimeter effect which explain the fact that we are down as compared to last year, Q3. Apart from that, there is a good performance on MyTF1. As we are reconfiguration of our website, the revenues, digital coming from web, from our website, as zero minus during the Q3.
On the full nine months, we have an improvement and a growth of 11.6%. That explains the down of the digital and the perimeter change in the perimeter with digital site we were operating, and we had last year we don't have any more in Italy and Germany. Now, concerning Newen, we have 1,800 hours compared to 1,500 previously. So the book of order has increased end of September, and it has increased because of a combination of perimeter.
We include now in the order book the Spanish activity with a number of hours which is rather significant as compared to the size of the company because they are doing work a lot with local broadcaster. So they produce a lot for local broadcaster which is part of the reason of the increase. The other part is the link with and the result from order book coming from a platform like Liaison I mentioned in my introduction. Altogether, the profitability of this segment is in line with what we have always said, between 10%-50% profitability. When we have 13.4% margin, it's probably in line.
Again, it's always creation of value on the balance sheet and the profitability directly on the PNL, which have to be looked at with a good book of order for in the lineup. Now, I remind you also that normally globally for the group historically, Q3 was a quarter which was delivering a negative EBIT or zero, around zero. Now for the second time compared from 2019, we have a significant EBIT during Q3 with EUR 54 million this year for the first nine months. That is due to the contribution of course the optimization on the broadcasting as well as from other activities which are contributing to the EBIT more significantly.
On tax credit, end of September, the amount in our EBIT correspond to EUR 27.7 million for the first nine months. Not very significant. Expecting no significant change in Q4 because we have taken most of the tax credit, which has been based on the investment we've made last year in the programs and which are taken as a benefit when we broadcast the programs we have invested last year when the situation was very tough. That's just a compensation of what we have invested and the low performance linked with the COVID, which is taken into account in our PNL this year. That's what I can say on the tax credit.
Perfect. Very clear. Thank you, Philippe.
Thank you. Next question from Christophe Charlot from Société Générale. Sir, please go ahead.
Yes, good evening. Two questions from me, please. First, on programming costs, I think last year in Q4, you had started to reinvest in programs. It's fair to assume that the programming cost base of Q4 last year is going to be a good base, let's say, stable base for Q4 this year. The second question is about the tax rate, which is super low in Q3. In fact, it's very low also at the nine-month stage. What should we expect for the full year? Can you remind us whether Salto is reported, I mean, the associate contribution of Salto is reported pre-tax with the tax saving associated in the tax charge. Is that the right way to look at the issue? Thank you.
On your first question, programming cost, no. The Q4 last year is not the right basis of comparison just because we had the Rugby World Cup. Or last year, sorry, I was just comparing with 2019. On 2020, well, I would say that it's a rather good basis of comparison, or probably we could do a bit better. We will try to optimize and be a bit lower than last year Q4. If you compare with Q4 2019, we should be lower due to the fact again that we had the Rugby World Cup, and we won't have any sports events this year.
All together, it's a maximum it could stand Q4 2020, we should be a bit better. Now, concerning the second question, tax rate. Yes, it's a lower tax rate just because the tax credit we benefit is not taxed as such. So the basis should of the tax exclude the EUR 27.7 million and as well as some specific credit we benefit in the production sector. So that the two component which explain why the nominal tax rate is significantly lower and significantly lower this year just because the tax is not based of on the EBIT including the credit.
Next year, we will not benefit from the tax credit, and so we will come back close to the nominal rate in terms of tax.
Okay.
On Q4, your question, your second question, I missed your second question in Q4, if any. There was a question of associates. Yes, you will find, on the line, associates, an amount of EUR 19 million, a bit more than EUR 19 million, and that was mainly due to our share in the losses of Salto, and that doesn't include the tax benefit, when we present on our side our losses, the share of losses we take in our accounting. So it's a pre-tax.
Mm-hmm.
Pre-tax benefit.
Just to be clear, the EUR 27 million of tax credit, which is tax-free, so to speak, is there more to come in Q4?
Limited, very limited.
Very limited.
Probably a bit more than one, around two. Not more.
Okay. Thank you.
You're welcome.
Thank you. Next question from Julien Roch from Barclays. Sir, please go ahead.
Oui, bonjour, Philippe. Coming back on your answer on Q4 advertising, I'm sorry, but you're telling us that the trends are still good, but we need to mind the basis of comparison. Now, the problem is that you have now presented advertising differently, so we actually don't know what the basis of comparison is. If I look at the numbers of advertising in the media division, ex-digital, so what I would call non-digital advertising.
Yes.
which was 316 Q3 and 314 last year. You were up 14.6% this quarter. I estimate that last year in Q3, you were up 7%, which would be a 22% two years ago, so this is 2019. I think that in Q4, you were only up 6% versus 2019. Trying to reestablish, you know, the numbers on a new basis. One, can we get Q3 and Q4 growth versus 2019 under the new basis last year? Can you re-explain what you mean by the trends are good, but mind the basis of comparison? 'Cause on the numbers I have, it seems to me that the basis of comparison are easier in Q4 than in Q3.
Coming back on your margin this year. Your more than 12% includes the EUR 30 million, so the 27.7 plus the EUR 2 million of tax credit, which are kinda one-off. The underlying margin, we should take at least 12% less the EUR 30 million to have a basis for next year, the right way to think about it. Lastly, on the timing of the Autorité de la concurrence, they said summer, now I think they're saying autumn, so it looks like we moved from June to September, if not October. Can you still close the deal before the end of 2022? Thank you.
Yes. Well, on the first question, let's make things simple and not too complicated. There is a line which is called TF1 Group advertising revenues. You get the first line of the table in the press release. That's mainly in the media sector. There is, if you compare, it's not a mistake. If you look at advertising revenues in the media sector, it's exactly the same figure except EUR 100,000, which are advertising in the Newen Studios. So make things simple. We established last year the advertising revenue for the group, which is basically digital and TV. Now, based on that, we had last year in Q4 for advertising TV revenue +4.5%, which are revenues, advertising revenues, TV and digital.
I'm just saying that we have a basis of comparison we can rely, and that we have to take into account this basis of comparison to understand that even if the trend remains good and the demand is there, well, in terms of rates, we have made a good performance last year in Q4, and we hope that we can make a rather good performance, but we have to take into account this basis of comparison. We have tried to make things more simple for you. If it's more complicated, tell us. We'll try to improve. I think that with those two sectors, you get the understanding through our publication to what is coming in line with the strategy which has been explained for the last two or three years.
With the revenues coming from advertising and the other revenues, because it's very important, as already explained, that all the components which is not directly linked with advertising, production, distribution, services to telecom operators, services to our clients, through our core we have developed during the last two, three years, are clearly developed and explained in terms of figures. Just for the first question on Q4 advertising trend is good. Basis of comparison, 4.5%. We can expect, for the moment in October, November, some improvement, but limited due to the basis of comparison.
If you look at it versus the total number, Q4 was at 4.5. How much was Q3 up?
Q4, 4.5. Yes. Q3 was yes. I get you the figures for Q4, yes. I will answer. Yeah, I will come back on this. I think it was +2%.
Sorry, which is which? Is 4.5 Q4 and Q3 was 2%, or is it Q3 4.5 and Q4 2%?
Q3 was 8%. As I mentioned, Q3 was 8.2% on TV and 8% globally for Q3 on advertising. Is that clear?
That's okay.
8% Q3 last year and 4.5% Q4.
Okay. Why are you talking about basis of comparison if they're easier?
Yeah.
The basis of comparison is 3.7% easier, so growth should accelerate in Q4 then.
No, I'm just saying that it's a rate, right? It's not an absolute value. Take that also into account when you look at advertising and growth. I mean, it's easier to make 10% on zero than 10% of a hundred, right? Easy to understand. Basically, I'm just saying that we've made 4.5% on a high basis last year in Q4 on advertising, and that this basis of comparison, if you compare to 2019, we all know that the market every year is not growing at a double-digit level. I'm just saying that in Q4 we made 4.5%, which is rather high as compared to Q1 or Q2 this year, which were down significantly.
As a basis of comparison, compared to the outperforming of our business activity and advertising activity in H2 last year, combined Q3 and Q4, we have a high basis of comparison to go further, significantly further in terms of rates. I'm not saying that we will not improve, but I'm just saying that it's a high basis of comparison, and I can't compare Q3 and Q4. You are well aware of the fact that those two quarters are very different in terms of absolute value, that July and August are definitely low months, that we are not delivering in absolute value the same amount in Q3 and Q4. Of course, Q3 is comparable to two months as compared to any other quarter.
Again, we are just basing on mathematical division and the rate which is based on an absolute value in terms of component of this rate, which is basically the fact that the absolute value is higher in Q4 than in Q3. If you're just saying, "Well, why should we have not more?" Because the basis of comparison is lower. I'm just telling you, just take into account mathematics in order to understand why basically when the basis is higher, the rate is more difficult any basis of comparison to achieve the same rate. Right? That's it. I'm just trying to make things simple and not too complicated. Now concerning your second question, concerning the 12%, yes, it includes the tax credit.
You have in our press release the recurring effect of this tax credit, and the rate is 11.8% on the first nine months as compared to 11.4 for 2019, and 9.2% rate for last year. In the first nine months of this year, we have improved the margin rate by 0.4 points, sorry, 11.8 as compared to 11.4 in 2019. We are just saying that again, globally, we will deliver an EBIT of more than 12% for the year, which is the same reference as the 13.5 we have delivered on the first nine months.
I remind you that in absolute value, we always in Q3 deliver a better absolute value in terms of amount of EBIT, but the rate for the Q4, for the reason I already explained, is lower than in H1. Now concerning your third question regarding the Autorité de la concurrence, well, we have no reason to think that in the process the target of a clearance before the end of the year would not happen, and we are still exactly on track. On our side, as we see, the process is in line with what we have, and there is no delay. Things are progressing.
Whatever you read or whatever is said, we think that we are in the calendar and in the right timing.
That's it.
Yeah.
Thank you. We have no more question for the moment. Ladies and gentlemen, just a reminder, if you wish to ask a question, please press zero one on your telephone keypad. It's zero one on your telephone keypad to ask a question. Thank you. Sir, we have no more question. Back to you for the conclusion.
Well, thank you. Thank you for having joined us today. I hope that I made things a bit clear for you. I will just remind you that this call, you can get it on our website on replay. Thank you very much. Have a good evening, and thank you to all of you.
Thank you. Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.