Good day, ladies and gentlemen, and welcome to the nine months 2017 results conference call of RTL Group. Today's conference is being recorded, and at this time, I'd like to turn the floor over to Andrew Buckhurst. Please go ahead, sir.
Thank you very much, and good afternoon, everyone. Thank you for joining us on this conference call for RTL Group's results covering the first nine months of 2017. Today's speaker is our CFO, Elmar Heggen, and he will now start the presentation on page three.
Thank you, Andrew, and good afternoon from me as well. Over the first nine months of the year, RTL Group has continued to deliver good financial results. Group revenue increased by 2.8% to EUR 4.35 billion, with EBITDA coming in at EUR 889 million. This results in a group EBITDA margin of 20.4%. The reported net profit for RTL Group shareholders came in at EUR 434 million. This is just down EUR 9 million year-on-year, despite the fact that we had a significant positive one-off benefit from Groupe M6 last year. Moving to the financial overview on page number five. Page five shows the summarized result for the three months ending 30th of September. The results in the third quarter were strong, with all of our KPIs reporting a positive development.
Third quarter revenue rose 1.5% to EUR 1.372 billion, with our larger business units of Mediengruppe RTL Deutschland and Groupe M6 reporting growth of 7.8% and 4.2% respectively. Fremantle reported a slight quarter-on-quarter revenue decline, primarily due to a negative swing in Forex and some non-renewal of shows. In our other markets, other TV markets, RTL Nederland remained weak, while there was a slight improvement in Belgium, although the market was still down. Reported EBITDA in the third quarter came in at EUR 263 million, an improvement of 17.4% year-on-year. The main drivers for this increase were our German TV operations, which were up EUR 26 million or 24% during the quarter, and Groupe M6, which reported an absolute improvement of EUR 23 million. This equates to a growth of 36.5%. Let's now move on to page six, the nine-month results.
Reported group revenue for the first nine months was up 2.8% to EUR 4.35 billion. Underlying revenue, which is, as you know, at constant scope and exchange rates, grew by 2.1%. Group operating expenses rose by 2.5% compared to one year ago, reflecting investments in new businesses and increases in program costs. This results in a reported EBITDA of EUR 889 million with a margin of 20.4%. Adjusted for the positive one-off effect at Groupe M6 in 2016, the group's EBITDA rose 3.4% year-on-year. The group's net debt at the end of the period was EUR 1.097 billion, slightly higher than last year. This reflects the weaker cash conversion, which I will come to shortly. The net profit attributable to RTL Group shareholders for the period was only very slightly down by EUR 9 million at EUR 434 million.
This is largely due to the lower EBITDA offset to a certain extent by a non-cash gain on remeasurement and gains on disposal amounting to EUR 21 million in total. The group's net result translates into earnings per share of EUR 2.83. Turning now to page eight for the cash flow. For the first nine months, net cash flow from operating activities amounted to EUR 387 million. Our cash conversion came in at 76%, largely as a result of a buildup of long-term receivables at Fremantle, as already explained around the half-year results, and an increase in working capital driven by higher inventory at our German TV operations. In terms of acquisition of subsidiaries, the group has spent a net EUR 42 million so far in 2017. Moving now to the business review, starting with Mediengruppe RTL Deutschland on page 10.
Our German channels achieved a combined audience share of 28.8% in the target group, 14 to 59. During the first nine months of this year, Mediengruppe RTL Deutschland's family of channels increased the lead over the main commercial competitor to 4.6 percentage points, up 1.6 points from last year. RTL Television remains the clear market leader with an audience share of 11.5%, while our second channel, Vox, continued its strong growth trajectory with an increase of 4.2 points year-on-year. In terms of the financial results, the net TV advertising market is estimated to be still down year-on-year by between 2% and 3%, with Mediengruppe RTL Deutschland clearly outperforming the market as their advertising revenue increased by approximately 1%. Overall, revenue increased to EUR 1,573,000,000 in an increase of 4.8%.
EBITDA is also up by 4.8% to EUR 500 million, resulting in a stable high margin across the first nine months of 2017 of 31.8%. Moving now to M6 on page 11. Audiences remain solid following a very strong performance this year. The main channel, M6, reported a slight decrease in audience share to 15.7%, which is not surprising given the record audiences generated by the Euro 2016 last year. 6ter and W9 continue to perform well, and the family of free-to-air channels achieved a combined audience share of 22.4%, 4.1 percentage points up when compared to the same period last year. For the first nine months of this year, the French TV advertising market was estimated to be stable, with Groupe M6 significantly outperforming the market. Revenue increased to EUR 937 million, largely as a result of the outperformance when it comes to advertising.
Reported EBITDA was EUR 258 million, down from the reported EUR 270 million last year. However, the 2016 results, as we mentioned earlier, includes a positive one-off amounting to EUR 43 million. Adjusting for this effect, EBITDA growth would have been 13.7% year-on-year. Let's now turn to RTL Nederland on page 12. Audiences continue to be satisfactory, with a family of channels reporting a combined share of 30.4%, slightly down on the same period last year. Overall, for the period January to September, we estimate the net TV advertising market to be down just over 6%. Within this overall market environment, our advertising revenue was down 9%. Accordingly, revenue decreased 4.9% to EUR 330 million for the nine-month period. Reported EBITDA came in at EUR 46 million as a result of weaker revenue and continued investments in programming in our local ad hoc business, Videoland.
Turning now to FremantleMedia on page 13. For the first nine months of this year, reported revenue is up 2.2% at EUR 983 million, with a revenue bridge on the right-hand side of the slide, where we break out for additional details. As you will note, Forex has turned negative, resulting in a swing of EUR 14 million in the quarter. In addition, in Q3, a number of shows in the U.K., including "Keith Lemon" and "Bang on the Money," were not renewed. EBITDA on a year-to-date basis was stable at EUR 60 million when compared to last year. This includes almost EUR 5 million of startup losses that primarily relate to the MPN TV move. Let's now turn to slide 14.
Here we provide you with an overview of just some of the drama formats that are in the pipeline and the expected production and revenue recognition windows. During the course of 2018, we'll provide updates on this so that you can track changes and follow how this impacts Fremantle in terms of revenue development. Coming back to this year, the 2017 revenue guidance for Fremantle has now been updated. The reasons for this are twofold. Firstly, the prudent view on the likely Forex impact on the revenue given the third quarter results, secondly, timing effects from two shows, "Hard Sun" and "Picnic at Hanging Rock." In terms of the two dramas mentioned, we have slightly different effects happening. In case of "Hard Sun," FremantleMedia is expecting to record the delivery to the BBC and hence the revenue from the show in Q4.
However, the international exploitation and the sale to Hulu has moved into early 2018. For "Picnic at Hanging Rock," the whole revenue recognition window has slipped into the first quarter 2018 from an expected delivery of Q4 2017. These effects result in a lowered revenue guidance for this year. Turning now to digital on page 15. We continue to benefit from dynamic growth in digital revenue. For the period to 30th September 2017, digital revenue grew 30% to EUR 560 million. However, revenue growth slowed in the third quarter across our MPN activities and our AdTech businesses. Our MPN businesses were impacted by lower indirect monetization and ad fill rates impacting RPMs and a slower than expected ramp-up in direct ad sales and branded entertainment. In the case of SpotX, a number of factors came into play in the quarter.
Firstly, brand safety was clearly a much-talked-about issue over the summer, and this led to a call for more transparency and quality. In response to these concerns, SpotX has, like Google, introduced an authorized reseller program that requires a wide list of partners. Not all platforms have been so rigorous in their approach, however, and this has hindered SpotX growth in the third quarter. In the medium to long run, we believe this strategy is the right one to follow, as quality and verification become key. SpotX has been very active in closing fraudulent sites and URLs in order to provide clean data to clients. Secondly, the market was slower as U.S. political spend around the presidential elections last year, was a clear one-off. Lastly, SpotX has to manage a shift from its business model from managed services to programmatic and a shift from open marketplaces to private ones.
Despite these short-term issues, we strongly believe that SpotX is well-positioned for future growth with a clear focus on quality accounts, particularly OTT inventory owners, such as MVPDs, broadcasters, and networks, OTT platforms, and device manufacturers. The platforms aims to provide massive suppliers that is fraud-free, high quality, and close possible to addressable TV. As we announced at the end of August, we are accelerating the execution of our total video strategy with an ambitious growth plan for our AdTech businesses. In October, we took the decision to combine both SpotX and Smartclip into one integrated AdTech company. This will be achieved by the end of 2018. The combined entity will focus on ad server development and addressable TV, while bringing dynamic ad insertion capabilities in-house. The close cooperation between the group's minority shareholdings, VideoAmp and Clypd, will also continue. Let's now move to page number 17, the outlooks.
We confirm our outlook of moderate revenue growth, provided that there is no substantial negative effect from Forex movements and no major changes in the economic climate across RTL Group's markets. We are, however, revising upwards our guidance for EBITDA for the full year 2017. This has now been increased to slightly up, i.e., between 1% and 2.5% growth off the reported number last year. This brings us to the end of the formal presentation. Andrew and I are now available for all sorts of questions you might have.
Ladies and gentlemen, if you do have any questions, you can join the queue by pressing star one on your telephone keypad. If you're using a speakerphone, just make sure that your mute function is turned off to allow us to receive that signal. Once again, that is star one for any questions, and we'll pause for just a moment. Okay, we will take our first question from Annick Maes with Liberum.
Hi, good afternoon. My first question is if you could give us an idea of what the TV advertising market is doing for you in Q4, and also maybe comment on the different advertising categories. What do you see specifically for the FMCGs, in Q4? If you could comment on Belgium. You've said that you've seen an improvement in Q3, which coincides with TF1 also launching in Belgium. If you could give us just a comment on what you're seeing there, that would be great. Thank you.
Okay, Annick, I'll try to start. Let's maybe go market by market and start with the biggest market in which we operate, which is the German market. In Q4, our TV advertising revenue will be fully in line with our expectations, which is, overall, a flat development compared to Q4 2016. Please keep in mind that we had very aggressive comps, because last year, the fourth quarter was particularly strong, even more so in September. In December, sorry. We are comparing against very ambitious targets in that respect, but we believe that we should be pretty flat for the fourth quarter, which basically means that.
What would be the add-on assumption in this Q4 advertising assumption for Germany? Does that assume a very strong add-on period or not at all?
I mean, relatively modest, to be honest, Annick. December, as Elmar mentioned, was up so strongly last year. We clearly don't believe that we're going to have such a record amount this year, and we can hope. At the moment, given the very low visibility, we can't see December at all, but we are not anticipating in our guidance a strong add-on booking.
Yeah. We believe that overall, Mediengruppe, for the fourth quarter, should be pretty flat compared to the fourth quarter of 2016. We look into France, we had a solid start into the fourth quarter, and also M6 communicated recently, that they are satisfied with what they have seen in October, and they remain confident that also November, December should be a good month. The other markets, talking about, they continue to be soft. Overall, we see a continuation of the trends that we have reported for January to September when we talk about the other markets.
Your second question was on Belgium?
Yeah. Also just on the advertising categories, the type of advertisers I meant by that. What do you see, for instance, do you see the FMCG companies spending more with you again, or are they still withholding their spend? If you can just comment on the different type of advertisers as well.
To be honest, Annick, we don't have that detail here at the moment.
Okay.
Not across all the various territories.
Okay.
We haven't heard anything when I've been speaking to the sales teams saying there's been a comeback from any one particular type of category or another.
Okay, great. Then the last one, yes, was on Belgium.
On Belgium. Yeah, I mean, Elmar mentioned on the call during the script that Belgium improved slightly, i.e., the rate of decline slowed in Q3, but it's still overall negative. What we're seeing in Q4 is perhaps a slightly better picture as well, so the rate of decline again is decreasing. To be honest, the impact of TF1 in the advertising market in Belgium at the moment has been, should we say, very limited.
For this year, yes.
Okay. Thank you.
Moving on, our next question will come from Lisa Yang with Goldman Sachs.
Hi. I have a follow-up question on the TV advertising market. Could you maybe give us a sense of how October has trended for RTL in Germany? I understand that December comps are very difficult and that's why you have a more cautious view on the quarter. Obviously you heard ProSiebenSat.1 saying mid-single digit growth.
Yeah
similar trends or you lost market share. Secondly is on your AdTech businesses. I'm just wondering how you think about the impact of GDPR, who's going to basically be in place in May next year. The third question is on the other revenue. Just wondering why it was so weak in the quarter and what drove that, how should we think about Q4? Thanks.
Okay. Maybe I'll start with the German ad market for the fourth quarter. October, November, two months together, we believe we will be pretty flat compared to prior year. As Andrew pointed out, even though we don't have a very strong evidence at this point in time, we are rather kind of confident to be able to be operating a similar amount of business for December. That was particularly a strong month last year, but still, when we talk to our colleagues, they are confident that overall for the fourth quarter, Mediengruppe, and I'm not talking about the market, but Mediengruppe should be flat. I cannot really give you any kind of reliable guidance for the market, but, provided that ProSiebenSat.1 will be able to live up to their expectation, the market might be slightly up with them gaining share in the fourth quarter.
Still, for the full of 2017, Mediengruppe will have out-performed the market because we believe we will see in a market that is going to be down -1 to maybe a bit less. Clearly, Mediengruppe is expected to gain share.
Your second question was on GDPR, I think, Lisa.
Yes.
Clearly, this is a massive amount of work that's ongoing at the moment across all of our business units, not just our digital business, but even our broadcasting operations, where we've got obviously outward facing websites. Obviously, the whole idea of consentment is a massive consequence of GDPR. As I said, there's a lot of internal work going on. There's an awful lot of compliance work going on, but also a lot of development work going on in terms of new IT software being created. We're in a massive data mapping risk assessment process. There's a lot of, obviously, exchange of information. We've got a software tool that's also being put in place to help us progress through the GDPR questions. There's a big questionnaire, which I've also had to fill in four times with 63 different types of questions.
What we can say, I think, yes, it's going to be a massive amount of additional compliance work. We can't give you a number as to what that might mean, because a lot of that's internal development. We can't tell you at this stage what it might mean in terms of our businesses, so to say, post May, June 2018 when GDPR becomes live. You can rest assured that we are taking this incredibly seriously and there's a lot of work that's ongoing. Your third question, Lisa, I didn't quite catch that.
It's the other revenue, which I thought was quite weak in Q3. Just wondering what happened there. I think it was down 1%.
It is down 1.4%, but that's just the picture for the third quarter. If you take the year-to-date figures, actually our other revenue is up 12.7%.
It comes back down to the slowdown, effectively, in our digital activities, which Elmar talked about. Obviously, in terms of our AdTech businesses, in particular SpotX, issues around brand safety, migrating business models. One-off political spend in 2016, which obviously didn't happen in 2017 around the U.S. elections.
Okay.
On the MCN, the old MCNs. Clearly, YouTube was a much talked about brand safety concern through the summer, with brands being maybe not so happy having some of their adverts next to certain types of videos. That had an impact on what we call RPMs, the equivalents in the digital world of the CPMs, the cost per thousands, cost per mille, on YouTube. They're a very specific set of scenario around digital.
Yeah.
There's no reason why that should get better in Q4?
No, in all honesty.
Okay.
Obviously, we work through these problems and we would anticipate that 2018, again, we should be on a good growth path.
Okay. Thank you.
Next from Deutsche Bank, we'll hear from Laurie Davison.
Hi there. First question. ProSiebenSat.1 came out today and said they are reinvesting EUR 20 million-EUR 30 million in programming in fourth quarter. They're not ruling out more reinvestment over 2018. Does this potentially make you rethink margins for the German TV business? Is there a risk that margins go down next year? That's the first question. Second question was, you just mentioned some non-renewals on Fremantle, as well as the phasing impacts. Can you just explain what those were? Thank you.
First question. Laurie, we've been very consistent around our programming spend in Germany, and it's always been up around inflation, 2%-3% per annum. There obviously may be different phasings in terms of how that is spent. Across a year, we would expect our programming budget to increase by 2%-3%. We see no change in that going forward at the level of Media Group or RTL Deutschland. We don't feel as though we need to make a sudden aggressive investment in new programming. We have a very good programming grid, which we renew regularly and update as when we see fit, but it's not about throwing a check at it. As I said, 2%-3% is a good estimate for program cost increases next year. The margins in Germany should be maintained. In the Fremantle question in terms of the non-renewals.
The non-renewals in the U.K. There were several shows, but in particular, it was, as Elmar mentioned-
Lemon is the thing.
A Keith Lemon show and a show called Bang on the Money. Those were the bigger shows, shall we say, in the U.K. that were not renewed. The slippage effects were on slide 14. In terms of why the revenue guidance has been changed for Fremantle. It's effectively the international exploitation and the sale to Hulu of Hard Sun, even though the sale to the BBC will be recorded in this quarter. The show actually won't be on air until 2018 on the BBC. The other effect effectively was Picnic at Hanging Rock, where the whole revenue recognition window slipped out of 2017 into 2018, in terms of both the delivery and also the international exploitation.
If you think about the guidance change from where we were in August to where we are now, we're looking at a two or three percentage point move. It's effectively split 50/50 between FX and this slippage in terms of the dramas.
That should also mean that next year, revenue of Fremantle should be up significantly because we also will have I-slot, which we didn't have in 2017, and the slippage will obviously also be helpful for 2018.
Sorry, just a quick comeback on that. In terms of the cash impact of that, presumably that's quite negative in terms of the working capital shift this year as well, in terms of cash conversion. Though we should be thinking, in terms of cash conversion again, sort of a lower year than the 100% you've done historically.
It will clearly be below 100% because we are about to transform also the portfolio of Fremantle in a way that we have a stronger contribution coming from the drama and from the scripted business, and that, as you know, comes with a different cash status. I continue to believe that for the full year, the 76% that we have reported on the 30th of September will be higher for the full year. I think that the fourth quarter will help us to correct the average for 2017 to a higher figure, 85% plus. I believe that the fact that we built a number of receivables at the level of Fremantle, and that is basically linked to the business that we conduct with the various AVOD platforms, that will probably continue to also be a subject for 2018 and 2019.
Okay. That's very clear. Thanks.
Our next question comes from Charles Bedouelle with Exane.
Good afternoon, everyone. Thanks. Most of the question has been answered, I just want to follow up the AdTech and the digital video revenues because, they're slightly different issues, today, clearly your digital revenues are slowing deliberately. I calculate only 3% in Q3, and we've seen that ProSiebenSat.1 has also been much more cautious on its overall outlook for the digital video portfolio, I know the mixes are slightly different. What does that tell you maybe when you think about next year, both in terms of revenues and profitability? Do you think it's a hiccup and you go back to strong growth, then back to profitability, or do you change your outlook maybe for some of your assets in that part of the portfolio? Thanks.
Yeah, Charles, you're right that the third quarter has shown a significant slowdown in revenue development. Yet, if you look at the bigger tickets that we run in this digital bucket, BroadbandTV, for example, if you take the growth rate January to September, it's still up 60%. If you take StyleHaul, it's still up from January to September, 27%. It's basically the kind of necessary brand safety measures that we had to introduce at the level of SpotX and the fact that we didn't benefit from presidential elections in 2017, that basically generated the level of SpotX, a minus 10%. I believe that we should see stronger growth rates that we were used to in the recent past, also for 2018.
We continue to believe that we will grow double-digit, and that the fact that we had to introduce some brand safety measure, is not going to, in the mid- to long-run, decrease our revenue expectations.
Okay, that's very clear. Thank you very much.
Ladies and gentlemen, if you find that your question has been answered, you can remove yourself from the queue by pressing star two. Our next question comes from Conor O'Shea with Kepler Cheuvreux.
Yes, thank you for taking my questions. First question is on Fremantle. I just wonder if you could just precise again, what now is the full-year guidance for revenues and margins. Just not clear from the release what exactly you're guiding now. Second question on the German TV advertising. I think you said, Elmar, plus 1% through nine months. Can you just remind us what it was in the first half, or give us directly the third quarter number? The third question, just on the digital side, just SpotX minus 10% through nine months. Can you give us a number in the first half, if that's possible? Any update on the BroadbandTV sale? Thank you.
I'll take the first one, Conor, on Fremantle. Revenue guidance is now to be broadly stable, that in our official language means plus one minus one on the reported revenue, the EUR 1.5 billion reported last year. The EBITDA will be higher than last year.
Okay.
Which will mean, obviously, that the margin will be improving.
Okay, thank you.
Briefly, on your question on the German ad market for the Q3. Mediengruppe generated an additional advertising revenue of 3.4%, which is a bit even better than what we guided, because I think that we mentioned that we expect Q3 for Mediengruppe, in terms of advertising revenue, to be up 3%.
Yes.
Final figure was, as I mentioned, 3.4%. We believe that the market in Q3 did -1.5% to -2%.
Okay. Great. On SpotX, do you have the revenue number for the first half?
Market for the first six months was a positive 2.5%.
Okay. Positive 2.5%. Okay, great. Thank you very much.
Moving on from Barclays, we have Julien Roch.
Yes. Hi, there. My first question is on the working capital weakness. Can you explain more, because you mentioned inventory in Germany, I didn't really understand. That's my first question. The second question is the relative weakness in digital in Q3. You mentioned SpotX because of brand safety, MCN because of monetization on YouTube impacting RPM. What about online advertising in Germany, which must be your highest market? ProSiebenSat.1 also mentioned that as a cause for their weakness, and you both have a large presence in online advertising in Germany. I wanted to know what was your performance in Q3 there versus the first half. The last question is, your friend in Unterföhring said one of the reason why they're weaker than you is they put internal revenue or media for revenue in venture, in the venture line, while you put it in advertising.
Can you tell us by how much advertising was boosted year to date by you helping digital companies?
Okay. Let me start, Julien, with the last question. You know that we do not do that much media for equity. We do far less than, you called them our friends in Unterföhring. They do it, I think, much more than we do. I can honestly not give you a very precise figure as we speak. We can look it up, but it's tiny. It's very small. I think that there is almost no different force by us including this, and them not, simply because I'm not even sure what we have done in the third quarter, if any. I cannot tell you. In terms of working capital, yes.
It's not that we do a jump from one quarter to the other, but we continue to slightly build up the inventory of matches simply because we were at a kind of almost all-time low in the recent past. Here, when we talk about building up the inventory, it's mainly around football. You know that we own the rights of the friendly matches of the German national soccer team, and obviously has led to the fact that we haven't been able to broadcast for the time being.
They were effectively rights held at the end of September, Julien, for matches in the first 10 or 11 days of October. There were a couple of matches, I think on the eighth and then the 11th, in terms of the qualifying matches for Germany for World Cup 2018. There was just a temporary, shall we say, buildup in inventory, which had been paid for, which obviously now reverses in October as we use the stock.
Okay. Online advertising in Germany in Q3?
Can we go into definitions? Are we in-page, in-stream?
Overall, everything. Everything that's online, whether there was a change in trend versus the first six months.
I've got the Q3 numbers. In Germany, they were up mid to high single digits in terms of advertising, digital advertising.
Were they up far more in the first half, or?
I don't have those numbers with me, Julien.
Okay. One for later, then.
Exactly.
Okay. Thank you.
No problem.
Thank you.
Moving on, we'll hear from Sonia Rabussier with Commerzbank.
Yes, good afternoon. First, congratulations. Really good results. Three questions from my side. First, on Fremantle, maybe you just said stable for Q4. What should we expect now for 2018 because of the slippage on the growth and EBITDA margin? Second point, just to come back to your guidance for digital revenues. You just said that they will accelerate double-digit growth in 2018. What about Q4? Last but not least, maybe I missed information, but what about the strategic review on BroadbandTV? Thank you.
In terms of Fremantle, Sonia, the revenue guidance for 2018 will be a very strong moderate growth. The moderate means two and a half to five, and obviously we are very confident it's going to be at the upper end, if not slightly above that moderate guidance range for 2018.
EBITDA?
EBITDA will be an improvement again.
Okay.
Digital revenue for Q4. My guess is it will probably be slightly better than Q3, but we won't see it getting back to the growth rates that we experienced probably at the beginning of this year. I think we've seen a dip in Q3, we'd expect a slight improvement in Q4, but it won't be massive.
Okay.
It takes a bit of time to get things back to normal.
Then, an update on BroadbandTV. We're still currently working through the strategic options for the company with all of the shareholders. No decision has been made as of yet, it's likely that this discussion will continue through into 2018. As you can imagine, it's a pretty complex exercise, given the recent events, we've just talked about a few of them, the well-publicized brand safety concerns on YouTube, for example. We have, along with our minority shareholders, decided to take our time and find the optimal solution, that means that it will extend in terms of the process into 2018.
Okay. Thank you.
Our next question comes from Richard Eary with UBS.
Yeah, many thanks. A number of questions have been answered, but just some clarity, actually, if you could. Reading through the big report, correct me if I'm wrong, it's indicating that the gain from the Paris property sale is EUR 86 million. Is that correct? That's the number that we're going to get booked in the fourth quarter that's driving some of the EBITDA upgrade. Is that correct?
It won't be less. Yes, it's correct.
if I just look at the EUR 86 million addition this year onto the EBITDA that you delivered last year, EUR 1,418 million, that suggests a 6% increase year-over-year, which suggests, obviously, the business is down year-over-year ex property. Is that correct? Is that how we should read the new guidance, or have I missed something?
Not really, because you know that our Belgian management team also announced that they are in a process to transform their company, there will be a necessity to book a provision for restructuring in the fourth quarter. Obviously, that is something that when we do outlook statements, we always do them on a reported basis, so reported against reported. There will be the necessity to book provision. I can't tell you how much this would be as we speak. We are looking into it. There will be some known negative one-offs that you need to basically also take into consideration, and that would bring down the 6% to a lower percentage increase.
remember, essentially, that the starting point, Richard, as well, last year's reported obviously included the very positive impact from M6 on the mobile, M6 mobile contractual settlement.
No, I was aware of that. I was just looking at when you actually upgraded the guidance, if in that include the property.
It does
The property just seemed to be a bigger number. I was just wondering whether I was missing something.
Yeah. It also includes, as Elmar mentioned, an internal estimate that we've got in terms of the potential restructuring charges at the level of Belgium.
Okay. I presume, just doing some quick math, that's in the tune of circa EUR 50 million. Is that right?
No.
No, it will be less than this.
It will be a EUR double digit million.
Yes. It's too early to really give you a good figure, but it's not going to be EUR 50 million. Definitely not.
Okay.
All right. Moving on. Our next question comes from Markus Holst with equinet Bank.
Yeah, good afternoon, guys. I find that slide 14, in terms of the schedule of production for the key drama lines at Fremantle, extremely useful conceptually. I've listened to your answers to questions in terms of stable sales this year, or broadly stable this year, and a modest increase next year. To make that diagram more usable for me, which of those bars, what are the top two important or the most important bars of those different drama series, please?
For 2018, Mark?
Yeah. No, in terms of what's more important, "Hard Sun" or "Picnic at Hanging Rock?" Which are the big ones as far as revenue productions for Fremantle?
Hard Sun" and "Picnic" are similar sizes.
Okay.
obviously you'd have to say that the first season or episodes of the Elena Ferrante novels, the "L'amica geniale," is also a pretty big one. "Deutschland 86," which obviously is with Amazon, is also quite important.
Okay. I've got you. Thank you.
Next, we'll move back to Laurie Davison with Deutsche Bank.
Yeah, sorry. Just a quick follow-up on the SpotX option. Given that slowdown in SpotX and your comments that these issues are going to continue, has that changed your view of the valuation or the right valuation for the option on SpotX? Can you just talk about the likelihood now of that actually being exercised? Thanks.
Not really, Laurie, because we really believe that this is a one-off, so to say. It will take a bit of time until we will have fully recovered from the measures that we had to introduce. That is not going to put into question the mid-to-long-term prospects of that company. Thus, the resulting implication on valuation is small.
Okay. Just lastly, on the net effects of the provisions, the MCNs dropout, and the property sale, is it fair to say that that would be broadly neutral year-on-year?
We lose EUR 43, we gain EUR 86, and then we lose a double-digit million in Belgium. Net, there is going to be an increase in, shall we say, one-offs from 2016 through to 2017, or 2017 compared to 2016.
It won't be massive. Because we had one-offs then in both years, but if we do a comparison, probably we look at a difference which is not extremely meaningful.
Okay.
All right. At this time, it appears we have no further questions from the audience. I will turn the floor back to Mr. Buckhurst for any additional closing remarks.
Thank you everyone for listening, for joining us. I realize it's been a busy results day at your end, appreciate the time you've taken and for your questions and interest in RTL. Obviously, I'm around for any more questions, should you have them, today, tomorrow, whenever. We'll be in touch as a management team in March around the full year results. Thanks once again, have a good rest of the day.
Ladies and gentlemen, that does conclude today's conference call. We do appreciate you joining us. You may now disconnect.