Welcome to the analyst conference call for RTL Group regarding the presentation of the half year twenty nineteen results. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Andrew Buckhurst, who will lead you through this conference.
Please go ahead.
Good morning, everyone, and thank you
for joining this conference call for
our results the first
half of twenty nineteen.
On Slide 2, you will
find the agenda. We will start with the highlights and a quick summary of the financials, followed by a review of our main business segments. We will end with an update on our strategy and outlook. I'd like now to introduce our speakers for today, our CEO, Thomas Rada and the New Group COO, Elmer Heggen. I'll now hand over to Thomas, who will begin today's presentation on Slide 3.
Yes. Thank you, Andrew, and good morning, everyone. Before starting with the financial and operational review, I would like to briefly explain the new leadership structure that we announced this morning and that is effective immediately. After 13 years as Group's CFO, the Board of Directors has appointed Elmer Heggen for the new role of Chief Operating Officer. He will take responsibility for coordinating and further optimizing the operations across the Group's international footprint.
Taking over as our Chief Financial Officer is Bjorn Bauer. He joins from Bertelsmann where he sales several senior executive positions, most recently as Executive Vice President, Corporate Controlling and Strategy. Prior to that for a period of 3 years, he was the Chief Financial Officer of the U. S.-based online learning provider, Reliance. He joined the Executive Committee alongside Elmer and myself.
Elmer and Bjorn, congratulations and I look forward to working with you in your new roles. We have also established a new Group Management Committee in short GNC. GNC is composed of the members of the Executive Committee and the CEOs of our 3 main business units, which are Artia Germany, MCEAT and Fremantle. The GMC brings together massive experience and different perspectives. It will drive the strategic agenda of the group and foster cooperation.
Moving on to Slide 4. In the first half of twenty nineteen, Arce Group continued its successful business development and to deliver on its total video strategy. Our leading market positions have resulted in operational results that are very solid: Revenue up, EBITA broadly stable, net result up, cash flow and cash conversion up. This means that the Group is well positioned to continue to invest as we lead it to the current transformation cycle. Group's growth drivers, mainly our digital and content businesses, reported very positive development.
Beyond the financial results, we have strengthened our businesses with a series of alliances and partnerships from content creation, advertising sales and advertising technology. I will come back to this later on in my presentation. Moving on to the next slide, Slide 5, revenue grew by 4.2%, our best first half year revenue growth since 2010. This leads to a record level of revenue for the first half year of Parsegg Group in its history. EBITA came in at €538,000,000 which was broadly stable on last year.
Higher investments in programming and video on demand services were largely compensated for higher profits from FreeMetal and Cohesys. Overall, this results in an EBITA margin of 17%. The gross profit for the period increased substantially to €443,000,000 which reflects the EBITDA performance and capital gains on portfolio. I'll come back to this later. Slide 6.
Looking at the group's overall revenue split, the share of TV ad revenue fell to 44.3% due to the growth of content and digital. Digital revenue amounted to €513,000,000 which is up 21% year on year and now represents 16.2% of total revenue. Platform revenue was €179,000,000 or 5.6 percent of group's total revenue. Digital revenue grew significantly despite the negative effects and stop changes and the winding down of iron ore. All the main categories of the group's digital revenue contributed to the growth with media on demand revenue up 27% and content revenue up 89%.
Moving on to the next slide. On Slide 7, we have given you an update on the KPIs that we announced in March of this year. As you can see, the growth drivers, namely video on demand content and digital are intact. The number of paid video on demand subscribers for German and Dutch services increased by 46% to just over 1,200,000 as of 30th June. FreeMaster revenue was up 23% with drama now accounting for 20% of revenue.
Revenue growth was boosted by the sale
of season 2 of American Gods and the reign to Amazon and Netflix, respectively. Additionally, overall NPN revenue growth was rather low, reflecting the wind down of Stylenol. But our largest asset, Opera and TV achieved solid growth of close to 30%. Our ad tech business reported revenue growth of 40% of the strong stack of growing media spend on OTT in the U. S.
With that, I will now hand over to Elmer, who will walk you through the financials in more detail.
Thank you, Thomas, and good morning from me as well in what will be my last formal presentation in my role of CFO to the financial community. Turning now to the financial review, starting Slide 9. As mentioned earlier by Thomas, revenue rose 4.2
percent to €3,173,000,000
The group's organic revenue growth, which adjust the scope changes and ForEx, was up 4.6%. The group's cost base rose 5.6% and was largely due an increase in the cost of life programs, mostly sports rights and program costs linked to the growth of the metric top line. This results in an EBITDA of €178,000,000 for the 1st 6 months of 2019 and a margin of 17%. The group's net debt at the end of the period was €739,000,000 Moving now on to Slide 10. The net profit targeted with shareholders for the period was up almost 24% at €393,000,000 From a solid Helvetica result, the net profit has been boosted per the gains generated on a number of disposals, the largest being Univarsson Film to KKR at the beginning of this year.
Lower tax charge reflects the higher cost and loss pulling commission, the recognition of new tax losses in the U. S. And the new deferred tax act. All elements are of a similar absolute amount. The group's strong net result translates into earnings per share of €2.56 Let's now move on to cash flow on Slide 11.
Net cash from operating activities increased to €354,000,000 for the first half of twenty nineteen with an income tax paid at €255,000,000 Overall, the quarter free cash flow increased to €513,000,000 resulting in a significantly higher cash conversion ratio of 95%, up 18 percentage points on the same period last year. I will now hand you back to Thomas for the business review. Yes.
Let's go to Slide 13. We will start with the business review of Medigropper at the launch Our family of channels reported an audience share of 28.1 percent, up 0.8 percentage points and therefore remains the clear market leader in Germany. Altria Television is the only channel in Germany with a double digit audience share in its target group. Its audience share was up 2.3 percentage points to 11%. The net TV advertising market is estimated to have decreased by approximately 4% to 4.5% with meaningful payout sale outperforming the market by around 2 percentage points.
Accordingly, overall, revenue fell only slightly by 1.4 percent to €1,079,000,000 The EBITA performance reflects the increased program spend, mostly sports related and video on demand investments. This was clearly signaled by the beginning of the year and accordingly EBITA came in at €330,000,000 down 9.1%. This results in a very healthy EBITA margin of 30.6%. Building purpose hybrid video on demand offer, TV Now had a strong start into 2019 with the number of paying subscribers growing at 36% year on year, while average number of monthly video views amounted to 44,500,000, up 26% year on year. The joint venture with Prosim Verdeins called D Force was announced and was announced and on 5th August, received regulatory approval.
It will help drive growth in the adjustable TV marketplace, which works incredibly well as announced by Sky recently, as higher engagement and increase in spontaneous ad recall and a halving of channel switching. And when combined with linear, addressable TV advertising increases ad awareness for nearly a quarter. Moving on to MCS on Slide 14. As you're aware, KUKAmp Sys reported its results at the end of July. In advertising market estimated to be stable, Kupen's deep advertising revenue grew by 2.3%.
Overall reported revenue was €750,000,000 compared to €739,000,000 for 2018. Adjusting for scope changes following the sale in 2018 of the Super Bowl Club and Ronald Vonfortu, revenue was up 3% year on year. EBITA came in at €150,000,000 with the year on year performance helped by the one off costs recorded at the level of Le Guilland and Gordo for book club during the first half of twenty eighteen. Audience shares reached 21.1 percent for the family, which was stable year on year. In July, we received regulatory approval for the acquisition of Geely, the leader in kids TV and a highly complementary addition to our family of channels.
And finally, mid of August, regulatory approval was received for the Seltzer project with the commercial offer due to launch in the Q1 of 2020. And Christian will come back to this later, will provide a technical platform for SALTOR. Moving on to Slide 15, RTL Net Element. The combined audience share was down at 29.9%, mainly as a result of weaker performance from our main channel, RTL4. The television advertising market in the Netherlands was estimated to be up by 1.7% so far in 2019.
ATHENA's lower ad revenue reflects the weaker audience performance with overall revenue decreasing by 2.1% to €236,000,000 The strong subscriber growth of 58% and hence revenue performance at the VideoLAN, the Video on Demand service, has offset a large part of the advertising revenue decrease. EBITA came in at €18,000,000 To move on to Slide 16 on Free Management. Revenue increased strongly by 23.2 percent to 820 €8,000,000 As you can see in the revenue pitch, this was primarily driven by strong organic growth amounting to €128,000,000 of which €49,000,000 came from digital. Growth was driven by the sale of the 2nd season of American Dance and strong performances in nearly all of 3 United's territories. EBITA was accordingly up at €52,000,000 resulting in an EBITA margin of 6.3%.
Turning now to Slide 18 and the start of a short strategy asset. Postpoint, alliances, partnerships, collaboration and cooperation will be a key theme for the group over the coming years. We believe that with our pan European broadcasting footprint, content and digital expertise, we are well positioned to actively shape the future of the media landscape and much has already been done. Let me provide you with 3 examples. Our advertising alliance in Germany would expand significantly by representing the digital media assets of Akstras Springer and Funkmadingrope, Adelines in Germany reaches 99% of German households.
2nd example, we entered into a sales representation agreement in the Netherlands where we acquired Brandeli and in Belgium where our sales sales will start acting on behalf of ClearPoint. And on the content side, we announced the creation of the format creation group, which is a RTS setup and funded by our large broadcasters. FC Group will develop innovative formats with intellectual property fully owned and controlled by RTF Group. The unit will focus on special entertainment formats and reality stores. Moving on to Slide 19.
As I mentioned earlier, the role now of the the group's media and demand activities is one of our top priorities. It is also an area where we can leverage the group's scale and know how on the technology front and creatively to programming. On the tech front, we have taken a very recent decision to move forward instead with the objective from one common fully integrated tech platform. This is based on the EMC's technology that is currently or will be shortly used for Cylto and in multiple territories across the Artio footprint. On Creative side, the number of exclusive titles for Video on Demand offers continues to grow with 48 programs exclusively on our TV Now and Video on Demand platforms.
Moving on to the next slide, 20. A quick word on the group's Ad Tech business. As you might have seen this morning, we announced a strategic review of our Ad Tech business, BotEx. Medigobee Arte Nordland will take over responsibility for the European operations, excluding the U. K.
Under the brand SmartClick. SmartClick's objective is to create an open advertising technology development unit based on the technology developed by them and used by Germany to tailor this to the needs of European broadcasters and streaming services. At the same time, Arteo Group has started reviewing strategic partnership options for the SpotX Global Business. SpotX Global is positioned as a leading platform to monetize digital video, including premium video on demand and live TV streamed on any Internet connected TV device. We will continue to operate on a global basis, bringing some of the world's largest media owners, device manufacturers, platform operators and publishers.
These announcements further demonstrates our willingness to build partnerships both at European and international level and to share technology. Moving on to priorities on Slide 21. Clearly, our first priority is operational performance and achieving the targets defined in our outlook statements, which I will comment. Secondly, we will build national streaming channels to benefit from the rise of nonlinear viewing. This will require us to invest in technology, marketing and exclusive content.
Thirdly, we will accelerate the development of our own IP via Free Marshall and our broadcasters. Fourthly, we'll create Europe's leading ad tech development unity, Surf Power and 3rd party broadcaster leads. And on the last two priorities, we'll continue to pursue internal and external collaboration and partnership options in the field of advertising sales, concentration, sourcing and in data and technology, and in particular, video on demand technology. This brings us to the outlook statement. In terms of guidance, we update and confirm the outlook given in March and most recently on 16th May 2019.
We continue to expect a moderate revenue growth and a moderate EBITDA decrease before restructuring costs. Within our revenue guidance, we've increased FEMA's organic revenue growth rate for 2019 to between 10% and 12% plus from 4% to 7%. We expect our revenue guidance to be achieved despite the impact of disposals of a number of businesses. And lastly, following a review with the Board of Directors, we have decided to simplify our dividend policy, which will be effective immediately. The new dividend policy is based on the group's full year net results adjusted for any material non cash impact such as for example, goodwill impairment.
For clarity's sake, we will no longer be paying an interim dividend and will revert to the market standard of a once a year dividend payment. The new dividend policy targets a payout ratio of at least 80% of the adjusted full year net results as defined. The payout ratio compares favorably with our larger competitors and demonstrates our faith in our businesses, but also our focus on organic growth going forward. This concludes the formal section of the call. Thank you for listening to us, and we are happy to take your questions.
The first question is from Anik Ras, Exane BNP Paribas.
My first question is with the group guidance reiterated by the Fremantle guidance improved, what is going to be worse than expected in the second half of this year? And also related to Fremantle, so the 10% to 12% guidance, that means that everything which is at risk of financing next year would mean you would have 10% organic revenue growth? My second one is if you could give us an indication of the at market performance for Q3 so far? And then thirdly, if you could just confirm your leverage target remains unchanged despite the trade dividend policy? Thank you.
Yes. Eber, you want to comment on the leverage side?
Yes. No, this will remain unchanged. We continue to strive for a net net to EBITDA between 0.5 and one time. So the position that we have added to the dividend policy will not have any impact on our leverage target. And maybe briefly on Fremantle.
Because Fremantle has already shown a growth north of 10% for the 3rd 6 months, we decided to upgrade our full year expectation from 4% to 7% to 10% to 12% because otherwise it would have meant that we expect almost negative growth for the second half, which we don't. But premedals, even though it has a rate of roughly 20% in the overall revenue mix, it won't change our overall revenue guidance. So we continue to expect that for our sales group, we will see revenue growth of between 2.5% and 5% for the full year of 2019.
Yes. We're looking at the revenue guidance and its composition, I mean, clearly, free metal and digital are growing strongly, free metal stronger than we expected. That's why we increased the outlook for free metal. What you've got to take into account as well are scope changes in the revenue outlook, in particular, this disclosure of Unidaz and Plume and the wind down of Styl Hall. So there's no weakening of other businesses.
If you look at revenue mix and contribution in the first half, it is fairly wise to say that broadcasting businesses have not grown, reflecting advertising market conditions. Broadcasting revenue and advertising revenue has been down. On the Q3, I mean, first thing to say, of course, Q3 is not the most important quarter in our business. It's the smallest quarter. Based on the numbers which we're seeing, there is a mix picture.
July was relatively strong in Germany. August was 4 and weaker. And frankly, the focus is now on the new season starting in September. And given as the market is frankly quite volatile and advertising bookings become more and more short term, it is difficult today to make a clear prediction for September. And as I said, the important thing for you is to know that we are confirming our outlook for the full year on the revenue and EBITA basis.
We're confident to do this. We wouldn't be able to be confident on this without having some confidence in the performance of the advertising markets in the second half of the year.
Great. Can I just ask one more question? On the €3,000,000 flat subs, can you just remind us how you expect the ramp up to be? Because I guess if you add €200,000 per half year, you won't get to the target by 2021. So but I suspect you might have a different marketing strategy in place that just the ramp up is going to be more significant in the coming quarters.
Yes, well, absolutely. I mean, first of all, we're 1.2%, as I said, significant growth compared to the same time last year, almost 50%, which we consider to be significant. Our operations in Netherlands, Idylland exceed our expectations, same applies to RTL in Germany. Don't forget RTL Germany C4 Now was relaunched in December of last year. We're ramping up investments.
And as I said before, our investments were 3 fold: platform, which drives user experience, which is absolutely key. And here clearly the market standard is set by Netflix and Amazon Prime. Secondly, marketing and certainly content. We're really ramping up. We're very confident to get to the €3,000,000 mark, which we announced earlier this year.
We will also in the course of this autumn review our ambition level in video demand, because it's fair to say that since we made the last announcement, the competitive environment has changed and we're talking about Netflix and Amazon Prime. But now we know that Disney Plus is going to come to Europe and Apple TV at some point. So the competitive landscape is changing. It shows that the online video market is highly attractive. We are deeply convinced that with our strategy, which is based on local content, will be successful.
There are many examples for this in other territories and regions. We'll ramp up the investments, which we're certainly going to review our ambition level in the course of autumn and in all likelihood are going to increase our investment in media and demand going forward.
Next question is from Chris Jornan, HSBC. Your line is now open.
Yes, good morning guys. Thanks for taking my questions. I'd like to take them 1 by 1. First, comments, maybe you could give us a view on consolidation. I mean, if you are if you would confirm that you're not a seller of broadcasting assets, you say that you are in theory a buyer or how should we see consolidation?
Well, our view on consolidation is that the consolidation, if you look at European markets, it's actually quite advanced. And just look at the German television market and the combined advertising market share for RTL and Proseeben And then you make the same comparison in the U. S. And you look at the combined advertising market share of the 2 largest networks or broadcasters, you see the German market is much more consolidated. That's the first point.
2nd point is, we will continue to consolidate within our existing broadcasting footprint. And that is demonstrated by the acquisition of Unilever MCs. And this makes perfect sense as we said before because kids' TV is highly attractive. It's very, very complementary to the family of channel services and highly synergistic both on the cost and on the revenue side. We would produce similar opportunities in other markets as we operate.
We say very clearly, competition law is
a real obstacle.
Competition authorities have a very traditional historic view on markets and relevant markets and competition. And that is a real obstacle for further consolidation in the markets in which we operate, for example, in Germany. So we are consolidators within our footprint. And we are certainly interested in growing our free mantle business, growing it primarily organically and with, I'd say, very smart agreements with Curtis, producers, other developers and the like. And as I said before, in the context of the dividend policy, we think that the growth of the half year will primarily be organic going forward, but we're interested in consolidation opportunities exist, which require M and A, really M and A.
Very clear. The second question on Luxembourg. I mean, it seems that still there's nothing precise to be announced yet, but maybe you could still share a bit of a view on the scope of restructuring. And there's also still I mean, you have a couple of 1,000,000,000 in potential tax loss carry forwards in the market. If you see any sort of changes here, any sort of early comments on Luxembourg would be the same question.
Well, absolutely. And I'll put this in a slightly broader context. We announced yesterday that we would reduce our headcount in Luxembourg, which is 1400, 190, cross corporate functions and service provider functions by 1 third and would move a significant part of the corporate staff functions to Cologne. The effect will be manifold. First effect obviously is a cost reduction of direct personnel cost and indirect personnel cost.
Secondly, in Cologne, we will be able to make use of our corporate costs in terms of tax deductibility, which is not possible in Luxembourg because our Luxembourg activities are not profitable. And we have significant tax loss going forward from which there is limited use. So this reorganization of the Corporate Center will be implemented in the next month as an information consultation process, which we quite in detail in Luxembourg Labour Law. This would start next week. And we are confident that we'll complete it by the end of the year and that we will be up and running in the new structure much smaller, but I believe also more Texas in the course of the first half of twenty twenty.
The additional benefits of doing what we're doing as follows. 1st of all, running the group, Arte Group out of Cologne, at least in part, means that we were able to make use of the resources of RT in Germany, which is by far our largest business unit. And secondly, to be honest, the restructuring or the reorganization which we're undertaking at the level of corporate is clearly the beginning. It is absolutely clear in our minds that we will have to make cost reductions across the board to be able to invest significantly in the new businesses, which we described as advertising technology and video on demand technology, marketing and content. So what we're effectively doing is we're reshuffling resources from traditional businesses to new businesses.
That unfortunately requires restructuring, which we're undertaking. In Luxembourg, there's also some restructuring in Partia, Germany. And we're winding down Stylenol, which is effectively also restructuring. So it's a much broader theme applicable to RTL Group, but frankly to all companies I know in many different sectors. As I said, not necessarily just to reduce cost, but I mean to free up resources to invest in new businesses and to invest in the future of this company.
So that's what we're doing.
Okay, very clear. And then a last set of questions on the EdTech part of the business. It seems that you I mean between splitting up SpotEx and focus on U. S. Versus EU, it also seems that there is somewhat of a different view on investing in the 2 businesses.
So what I could use for clarification on would be what looking for a strategic partner in the U. S. Really means, whether I'm right thinking that you don't see yourself investing in both platforms. And then related to that, I'm also not exactly clear on what you mean by an open platform for SmartClick. So does that mean you're open to a broad concept taking equity?
Are you open to just licensing other product and development? I mean what is the open platform part really?
Yes. I mean strategic partnerships in the U. S, I mean, SpotX today is a standalone operator in the U. S. Market.
We're not sure that's the best positioning going forward. Products is a highly attractive business. So it's very successfully migrated to the OTT business, which drives the growth, which I've just explained. But we don't think, as I said, that will be as strong as we are today as a standalone business for us to 18 months. A significant interest in AdTech businesses, we're not our objective is not to sell the business, but to find a strong U.
S. Partner to invest in the platform to We are deeply We are deeply convinced that if we don't want to become dependent on the totally dependent on the U. S. Tax platforms, we have to build our own technology. And there are 2 areas of technology which are most relevant for broadcasters.
This is video on demand technology and advertising technology. And our philosophy on video on demand and advertising technology is that the best way to invest in these platforms is to share these platforms and to share the costs.
And that's why we said from
the beginning that our ad technology sorry, our demand technology platform, Bedrock, which is operated by MCs is an open platform. It's now focused on the launch of CITOR, but it's already providing its services to a large number of RTI broadcasters. And there's interest from other parties, RTI broadcasters outside of the Ade Group to use the platform. And exactly the same philosophy applies to advertising technology. We have started discussions with a number of large European broadcasters and there's real interest in pursuing these discussions, which we do in the course of autumn of this year.
We see ourselves frankly as a driver of this, providing these platforms to European markets, sharing these resources with other broadcasters, which means that we'll be able to build better platforms to do that at lower cost. That's the idea.
Okay. Very clear. A final one, could you maybe give us, since we don't have you on record commenting on addressable key, what's your sort of personal view in terms of the potential addressable maybe starting with Germany where your competitor has put out the target of as much as a new quarter of overall to your advertising potentially becoming addressable in the, I think, 5 year period. Do you have a view on this year?
Yes. Yes, we have a view on this and we've looked at it quite a bit of detail. And as we said, there are really 2 levels in our business. 1 is reach, in particular, nonlinear reach and the second is monetization of the reach, better monetization we are targeting and addressable TV is part of the targeting. So no doubt, it's a subject we are very interested in.
SmartClip offers technology for addressable TV based on the BBTV standard, which has successfully applied a new strategy for the role of addressable TV in a meaningful way. A number of conditions need to be fulfilled, including agreements with distributors and the like. So we think the potential is huge. We see the significant price uptick, which you achieve on advertising eventually by targeting by addressing advertising, put it in these terms. The market share today is very, very low, not only in Europe but also in the U.
S. So everybody sees the benefit of addressable TV. Everybody wants to do it, but there's a number of significant technical and other hurdles to take. But it's one of our focus areas. And as I said before, we've entered into a partnership with Crosline on D Force.
D Force is effectively a demand side platform
for addressable TV. So if
you want to book addressable TV in Germany, you've got to go severe D Force to book this on ProSieben and Assia. We think this is a pretty solid offer by the way shows that Assiaben and ProSieben are willing and open minded to work together where this makes sense.
The next question is from Mr. Zixin, Deutsche Bank. Your line is
open. It's Laurie here from Deutsche. On the dividend, you said over 80% and that compares with the 50% to 75% that you had on the final dividend before. But we had got used and you've been paying a interim for the past few years. So you've been basically tracking about €4 total DPS payout.
Are you still committed to the €4 payout for this year and for next year, given the guidance you've got in? 2nd question is valuation for Spoktex. Just thinking about potential partners here, if they were to take equity stakes. I'm estimating here that revenues are about £140,000,000 for the non European sales for the full year. Would a 3 to 4x sales total be what you would be looking at as a fair valuation for that group?
And then third question, you said you'd need to review the 3,000,000 subscriber target for on demand given the competitive launches. So is it fair to assume this €3,000,000 target is going to be revised downwards? And as a result, are EBITDA losses going to be higher on on demand?
Thank you.
Emma, maybe on the dividend.
Yes. I mean, Laurie, what we did is we obviously checked what the application of the geopolitics would have meant for the year 2015, 'sixteen, 'seventeen, 'eighteen. I can confirm that we have also led to payouts of €4 a share. So the dividend policy for the last year's results in material differences, the dividend policy that we have applied so far. And again, for the future, Laurie, you know that we will continue to invest in some of the businesses that we just talked about, the media on demand offers and so forth.
We would see whether or not we believe it would be in best interest of our group to accelerate this investment. That probably already leads to the demand question that
you have. Just on dividends, I mean, I'd maybe go a step further and say that if we achieve our outlook statement for the year and given the capital gains which we've already realized in the first half of the year on the disposal of 2017, I'm confident. If we achieve the outlook, then the dividend is likely to be €4, But let's clear, there's no certainty on this. It's a dividend. It's not a fixed income instrument, right?
Secondly, on advertising technology and evaluation of Spatex, I really don't want to speculate. But as I'm sure you know, a number of listed ad tech companies in the market. And if you look at the valuation of the ad tech business, the key driver is top line growth. And as I just said, top line of Sportex was up by 40%. And it was not only up by 40%, we believe the quality of the revenue significantly increased because the share of OTT significantly increased and that's a big, big growth driver in the U.
S. Market. But as I said, we are at the beginning of the process. The market will tell us who the right partner is and really what the right valuation is. Our primary objective is to fully get the strategic positioning for Sportex and we'll deal with the valuation in this context.
We're convinced that Spodex is a highly valuable business. And to subscribe us, probably the contrary is what you say it applies. Let's say we review our ambition level, it's certainly not downwards but upwards. And subject to the review we're going to undertake in autumn. But frankly based on those numbers, which I've seen, we're going to increase our ambition levels significantly.
But that clearly means, I mean, let's not kind of fool ourselves. If you want to grow the business faster and achieve a high subscriber base, we'll have to invest more and faster and this could have a negative impact on short term profitability. But quite frankly, that I think is what investors should expect from us, not only to make sure that short term profitability is impacting these dividends, but that we make good use of the assets we have and competencies, develop in the future of our business on the basis of a strategy in media on demand, which I think is highly, highly convincing based on local content. In the number of territories, take the example of India, take the example of Southeast Asia or take the example of Scandinavia, local players with local content offers outperform Netflix and Amazon Prime and number of subscribers. So we think our model works, but it requires a real effort and a repositioning of that for regularly in light of the changing competition.
Okay. You've previously spoken about a breakeven for the deal on demand for 2021. Is that going to have to be pushed out now on these new investments?
Honestly, it would be too early to tell. I mean, I think we honestly would be wrong given the uncertainties in the market and the significant transformation of the business as it's required to make statements like this with this level of precision. It is just not possible. As I said, we are in all likelihood going to increase our level of condition, primarily measured in terms of subscribers and revenues resulting from that and we're going to invest accordingly. We believe that the group is sufficiently profitable to afford to do this.
I mean just take the example about here Germany, despite reduction in profitability in the first half of the year, which is due to program investments, finally 4 flights on the main channel and video on demand, we generated an EBITA margin of 10%, which is very, very healthy. I also said we're not going to exactly, we're not going to make significant M and A except market consolidation and maybe some content, which means that we grow the business organically at least partly goes through P and L and has an impact on profitability. So it's too early to tell now. We'll give you a full update on our revised plans in at the latest when we present a full year numbers. But I can tell you based on preliminary plans, the ambition level will be significantly higher.
The next question is from Conor Schier, Kepler Cheuvreux.
Three questions from my side. Firstly, just to follow-up then on the additional investments in SVOD and TV Now. And you mentioned promised on the call that the D Force platform was an example of how the main broadcasters can work together. Obviously, you're not doing that in Germany on SVOD and Perfiben has managed to get content from recovery in the public stations and so on. Can you just respond in terms of the reasons for going it alone?
And is there a potential to come back on that decision and go a different way in the future as part of the review of the ongoing investments in the fall? That's a first question. 2nd question, just on the German market. I think you said you'd outperformed the market by between 2% and 2.5% in the first half of the year. Just wondering, was that roughly even between the Q1 and the second quarter?
Or was there a significant difference in that outperformance? And then last question on the Netherlands business. You mentioned that the TV market was up in the first half of the year by 1.5%. And you underperformed, but in a sort of non sports year, it's somewhat surprising to see that market, which is more especially challenged because of the high penetration and efforts and so on in positive territory? And can you maybe explain why the overall market is growing?
All right. Let's start with the situation in Germany. Let me make a more general point. I mean, the fact that we are building title in partnership with in France, in fact, with the F1 and shows that we're open minded on joining forces on video on demand and creating strong local players. As I said before, we obtained regulatory approvals, rebuilding the platform and we launched the service and the partners will launch the service in Q1 2020.
That's one approach. The approach in Germany is slightly different. If you look at TD Now today and joined, these are 2 very different businesses. I don't know whether you've ever used them at Safranil or join. To join is not a pay offer, it's just not a business.
At this stage, frankly, it just doesn't make sense to join forces. We're really talking with different businesses. And I'm not going to rule out anything in the future because I think it would be foolish given the level of uncertainty. But we are off to a very good start on TV now. This business is run jointly with our traditional TV and TV business of RTL.
I think that in medium demand time to market is of essence. I don't want to waste my time negotiating joint ventures and partnership agreements. And frankly, I don't know whether the German competition authorities would allow a tie up of CIFAR now and join. Just by way of history, but nonetheless interestingly, proceed and not yet had the intention to build a joint video streaming platform many years ago, and we ended up being fined by the German competition. So given all of this uncertainty, including on the regulatory side, our focus in Germany is building PD now.
We think we've got a very nice kind of package because we're well positioned. And the other thing which we have in Germany, which I'm sure you talked about with my colleagues in the past, is that we've got very strong local content because the strategy of RTL has been many, many years to replace international content with German content, which we produce, we have others produce and which we own. And that is clearly the basis for our medium demand service and we believe this puts us in a very, very strong competitive position. From Germany, we are very happy where we are. We are also talking to the public service broadcasters to licensed content.
We're very confident that we'll make progress in the course of time. But at this point, we don't think it's going to be now in strength to join forces with ProSieben. The next question was on the Netherlands, right?
German ad market. Sorry, German
ad market, excuse me. Well, our estimate, you know that there's no official data here, right?
But our estimate, the bulk market
is effectively out here and for the a bit of public service for our presence, a few smaller operators. We said the market was down by 5.5% in the 1st quarter and by 3.2% in the 2nd quarter. We were down by 4.4% in the first quarter and by 0.5% in the second quarter. So we increased our outperformance of the market, so to say, in the Q2. On the Netherlands,
yes, I mean revenue was slightly down 2.1%. We have advertising revenue that has been partly compensated by additional coming from LEGOLAND. Probably know that the Netherlands are a geography driven market, and we have seen slight decreases in terms of order performance mainly on the main channel RTF 4 that has led to the fact that we have lost advertising revenue. We hope that the strengthening of the grid will help us to gain higher orders that we can catch up for the course of
the year. Okay. That makes sense. But why was
the overall market up in the first half of the year? Is there anything driving that? Well, I mean, first
of all, the main reason for this is that advertising inventory was up because surprisingly and maybe it's good news to everybody and television viewing was up in the Netherlands in the 1st 6 months of the year. Remember, we see significant decline, I believe, between 5% 8% in the last years. Viewing was up by, I believe, 1 or 2 percentage points in the first half of the year. Now this is a reversal of trends that we are going back to lead resolution, I don't think so. This was partly driven by kind of weather, which was very good in 2018, very good in 2019.
And the better the weather, the lower the viewing. The worse the weather, the higher the viewing. And therefore, this will be benefited from weather, which was worse than the prior year. But it's positive, of course. So more inventory in the market means more inventory to be sold.
And therefore everything else remaining the same, in particular price levels and advertising revenue up. But fierce, fierce, fierce competition in the market with Tylenol TV in particular was also an aggressive sales approach of the public channels, which, as you know, competes with us on an equal setting currently without restrictions on advertising. But this latter may change in the future.
Future. The next question is from Jean Marc, Barclays. You're now open.
My first question is on the restructuring, moving most of your Luxembourg operation to Kyung. Could we have the cost of the restructuring this year and then the cost saving generated next year? Number 1. Number 2, you said there would be some tax benefit because you had tax loss going forward. There were stuff in Luxembourg you could not use.
So could we have the impact on the tax rates and the size of those tax laws going forward? That's my second question. The third question is you gave us ad trend in Germany for July August, but you didn't say anything the France, Spain, Belgium and Berlin. 4th question is, could we have spot tax revenue in 2018 outside of Europe, I. E, mostly U.
S, I. E, the business you will have a partner joining? And then lastly, can we have a split of the €1,200,000 being serviced between Germany and the Netherlands? Thank you.
Julia, I'll start with the restructuring and the tax question. You should know that in the 1st 6 months of 2019, we already have in €18,000,000 worth of restructuring charges. Already in the first half, we've had €18,000,000 worth of restructuring charges. We will only start the social dialogue as of next week, as Thomas mentioned earlier. So it's a bit early, but if you want to feed your model, it would be wise to double up the restructuring charges.
So I think that it is fair to assume that we should expect something around €35,000,000 to €47,000,000 for the full of 2019. Briefly on the tax benefit. I mean, if we were to successfully put cost that currently is based in Luxembourg into the German environment, we'll automatically benefit from the possibility to include this in our tax pool. And there was the cost will be like will basically reduce by certain tax rate, which is 31.5%. So there will be a mechanical benefit of shift in costs that are currently located in Luxembourg, Germany, and that will lead us to an automatic saving of 31.5%.
And roughly how much of cost would move from Luxembourg to Germany so we can calculate
the benefit? Honestly, we need to have these discussions with both the staff representatives and the unions to form a better picture on what we talk about, and I wouldn't want to prevent that. I think we already mentioned the size of the restructuring. I think that gives you already quite good idea on what I wanted to talk about.
Then in terms of the subscribers, I mean between Netherlands and Germany, I mean, assume it's approximately fifty-fifty at this stage. On SpotX, I mean, we don't really break down these numbers further but assume that more than twothree of the revenue is in the U. S. And on the advertising market in summer, I mean, SSAP-forty is a small month, so we shouldn't read too much into the month. There was a mix picture, but it was a slightly positive trend in most markets in July and slightly different in August.
But as I said, let's not read too much into this. This doesn't tell us much for the all important September, October, November, December period, which drives 40% 40% of the advertising revenue in the year.
Just follow-up on the restructuring. The cost savings generated by
significant, but it's too early. We'll get back to you when we present the full year numbers. If we really we can't do this, we informed staff yesterday. We are starting discussions with the staff representatives next week. The plans will be refined in the next week.
The plans are currently preliminary. So I mean, we wouldn't be talking about this if this wasn't significant. But it's really too early to say precise numbers. Would be wrong. And it's I wouldn't say it would be misleading, but it would be wrong either be our employees and others.
So we don't want to do this at this stage.
And 2020 is expected to be a transition year. I think it will take us until 2021 to see benefits in full swing. Thank you.
There are no further We have another question. It is from Richard Eiry. Please introduce your company's name. Your line is open.
Yes. Hi. It's Richard Eary from UBS.
Just a couple of questions for me, just on clarity.
If you look at this, obviously, the wind down of Styl Hall and we look at the impact on the NPN revenue number in the first half, How much is Starzoil revenues out of the €153,000,000
That would be the first question.
Yes. We're checking the numbers, Julien. Broadband TV was up 30% in the first half. Stylo was of course down. And the NPM businesses, I believe, were up by, I believe, we have the number.
9% overall. Yes, we believe it was up NPN approximately 10%. But it's a mix, right, spiral down, broadband to be up and leading move in the United screens up as well.
The stock in percentage terms, down
about 40%. Yes. And it will
be down to How much of the CHF153 is dialed?
20%.
20% of TASOL, okay.
So this will go to 0 by October and will be 0 over the next year on a full year basis.
Yes, okay.
I presume that will we get write downs in the half of that investment or the write downs that we can hold on Starhall?
Everything has been done last year. There will be no further write downs.
Okay.
Now then some cleanup in the first half, but the goodwill impairment as you know was booked last year. There was more cleanup in the first half. Without the cost related to Steinhall, EBITDA in the first half would have been higher than last year's. So this had a big impact. But expect a nice swing next year.
We expect the MPN business to be negative around minus 25 this year. We expect them to be maximum minus 2 or minus 3 next year. So we'll see a very, very nice swing in the MPN business because we'll be focusing on the European operations of EDU Move and United Streams, and we're also changing the business model, moving away to the extent possible from indirect sales via YouTube to businesses which are which have a more attractive margins like branded content, FPU production, effectively production rights management, talent representation and as well as that.
So, you said that you've said the NPN business this year to be 25% because of
the start of
the year? No, to generate an EBITDA of minus 25%. Okay. So 25,000,000,000 sorry, no, no, no, I'm getting confused. And so next year this minus 25,000,000 should go to approximately 2 or 3.
So what I'm saying is you'll see a very nice EBITDA swing on the NTM business year on year.
The second question just comes in terms of the other sort of moving parts. So sort of you've a universe and I presume that's very low single digit basically revenues, is it? Or it comes out? And is that where is that booked? Is that booked in other regions for the other thing down?
Yes. No, no, no, no, that's part of RCA Germany, that's part of RCA Germany and it's approximately SEK70 1,000,000 on an annual basis.
And we are 0.17. 7.0. Okay.
On a full year basis.
On a full year basis and this year clearly we deconsolidated the business, I believe, in May. So yes, some revenue for 11% and our revenue this year and 0% next year.
Okay.
And the benefits of Geely as we wind up, even obviously Q4 is going to be the big impact when that deal closes?
Yes. This will have a nice impact on revenue and profitability because the profitability of this business is geared towards the Q4. The timing of the deal could not be much better.
And rough magnitude in terms of revenues for Q4 for Geely?
We don't provide this number. Please ask him, please.
Okay.
And then just the last question, just on total viewing. A number of your competitors, particularly ProSieben and ITG, are now sort of looking at providing total viewing numbers, so including just linear and nonlinear to obviously track how their content is resonating with consumers. I'm just wondering whether you have any stats that you can share so we can track linear and nonlinear performance in terms of viewing hours or viewing minutes.
Well, I mean, first of all, I mean, on viewing and linear television, I think the numbers are in the public domain, right?
We're looking at the obviously
Well, We don't have a combined view. And as you know, even on linear TV, the measurement of viewing time is incomplete. And mobile viewing is not captured and so on and so on. So the numbers actually understated, but we're not seeing progress being made in capturing the full viewing time and the full audience. And this will actually have a positive this will have a positive impact on television viewing, which I think will become more transparent in the course of next year and the year after as the company's measuring audience improve their systems.
In terms of viewing time, I mean, at RPL Germany, that is our channels and our digital offers. The viewing time in I'll give you an example, Q2 2018 was that the 1,000,000 hours, 4,358,62, in Q2 2019 was 4,005 and 67, so it was actually up by 409, I believe, 1,000,000 hours, which is 4.8%, right? That's our estimate. That includes all channels, I mean, the traditional channels, but also all the digital offers. It shows that combined, we're actually not in the bad shape.
And if you look at
the same numbers on a half year basis, half year 2019 to half year 2018, the viewing time is actually only down by 0.8%. And what is also clear is that the digital offers are the share of younger viewers in digital offers is higher. It is lower in the traditional viewing. As so, via the digital offers, we partly compensate for the decline in younger DMOs in the traditional viewing.
Why was Q2 was up 4.8 and H1 was Page 1 was down minus 0.8?
No, I mean, they're
all sorts of factors. I mean, this relates, as I said before, partly to the weather. I mean, it sounds probably bizarre, but it is true. It's a strong correlation between viewing and weather, in particular, on a year on year comparison. It also depends on programming, etcetera.
So there are many, many, many factors. And the other thing is, of course, that the audience share, as we said before, of RTL Germany has increased year on year for the family of channels and for the main channels. So there are many factors influencing this. It would, I think, go a little bit too far to try to depict all of the numbers. I think the public channels had a very strong start into Q1 on German linear TV with some very big formats, which partly explains I think as Thomas said, it's quite complicated, it's certainly moving parts.
So there is not a simple explanation for this. But I think the overall statement of saying that in Germany, where linear viewing has been down quite a bit, total viewing, including online office, has actually been relatively stable year on year. I think it's a positive message to you.
Just one final question, going back to 3,000,000 subs on the T box. What was the actual target by when? Because obviously, you talked about €150,000,000 increase in the total revenues from SVOD and AVOD by 2021? Where was the €3,000,000 target?
2020
absolutely. Yes, not absolutely. The number we're trying to compare, but end of 2021, of course. So 2 and a half years to go.
Okay. Thank you very much indeed.
On the old metric, exactly.
Good.
Any other questions?
The last question is from Patrick Schmid, Raabeg Research. Your line is now open.
Yes. Thank you. Just a quick follow-up on the restructuring costs and referring to Stylehall. So should we expect anything in H2 as well? And you also mentioned some restructuring in German and your group.
So these your indication of €35,000,000 to €40,000,000 is that including everything? Or is that mainly the overall headcount reduction in Luxembourg moving to Germany? Or is there some extra bits?
On StarLeaf or the second half, you should not expect any additional restructuring charges. It has all been booked in the first half. And the kind of €35,000,000 to €40,000,000 range we gave for the full year 2019 would include also restructurings that we are currently foreseeing for our German business. So it would be all included per se.
Okay. And in terms of
your guidance, you said before restructuring costs, so we could deduct these €35,000,000 to €40,000,000 from your given range from the minus 2.5% to minus 5%, correct?
That's correct. That's why we clarified this at this point. But then looking at the first half of the year, our EBITDA was down by less than 2%. And as I said, now without the style of restructuring effects, which we did not normalize in the first half of the year, where EBITDA would actually be would have been higher in the first half of the year compared to 2018, which made it mean that for the first half twenty nineteen, we're well ahead of the outlook we provided. That should give you a little bit of comfort that we've achieved the outlook of minus 2.5 to minus 5 on EBIT cut on a full year basis, but as I said, largely depending on advertising market performance in our 2 largest markets, Germany and France, and these markets are unfortunately very hard to read.
Okay. Thank you very much. That's clear. Thank you.
So there are no further questions. I hand back to the speakers.
Thank you very much, everyone, for joining the call today. Thank you to our speakers, Thomas and Panama. If you have any more questions, you know where to find me. I'm in the office, so please don't hesitate. And we'll obviously see each other at some of the conferences over the next few months, and we'll be in and you'll see the management team in March next year around the full year results.
Thank you and have a good day.
Thank you. Thank you. Bye bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.