Good morning, ladies and gentlemen, and welcome to the RTL Group Analyst Conference Call. My name is Indi, and I will be your coordinator for today's conference. For the duration of the call, you will be in listen only. However, at the end, you will have the opportunity to ask questions. I'm now handing you over to Andrew Buckhurst to begin today's conference.
Thank you.
Good morning, everyone. Thank you for joining this conference call for our results for the first half of twenty fifteen. On Page 2, you will find the agenda. First, the highlights, then a quick review of the financials, followed by a review of our main business segments and an update on our outlook. I'd like now to introduce our speakers for today, our Co CEOs, Anke Schaferkhart and Guillaume De Posch and the Group CFO, Elmer Heggen.
I will now hand over to Anker, who will begin today's presentation on Slide 3.
Thank you, Andrew, and good morning from me as well. Overall, we've had a good first half year with strong financial results. While advertising markets continued to show a mixed development, we have had strong growth from our German TV operations and outstanding growth from our digital activities. As a result, group revenue has increased by almost 4% to nearly €2,800,000,000 with EBITDA up more than 3% to €534,000,000 The group's EBITDA grew 2.6% to €628,000,000 The reported net profit for RTL Group shareholders rose by almost 74% to €351,000,000 mainly due to the effects of the impairments made last year. Given the group's solid financial position, the Board has decided to make an extraordinary interim dividend payment of €1 per share on the 10th September.
Moving on to the next slide. So to summarize, there are 3 main highlights to these interim results. The extraordinary digital revenue growth, up 94% year on year. This has been driven by excellent organic growth of 33% year on year, but also the full consolidation of Spot Exchange and Stylehall, which were acquired in the second half of last year. The almost 10% EBITA growth from Meeting Gruppe RTL Deutschland, our largest profit center and the fact that RTL Group has become the number one on YouTube globally.
On the next page, Slide 5, the dynamic growth we have seen in our digital revenue is broken out in a bit more detail. As this chart show, our digital revenue has grown very strongly over the last few years and has now become one of the drivers of the group's overall top line growth. Digital revenue now represents 8% of RTL Group's total revenue, double what it was the year before. This growth is a reflection of the early investments the group made in the online video world, both in the aggregation and monetization platforms. Organically, the pro form a growth rates for our MCN businesses and our monetization platform, as shown on the right hand side, are 80% plus.
Accordingly, we expect significant growth in digital revenue for the full year. On the next page, we can see what this means in terms of online video views. This chart gives an even clearer indication that we have a global leader in online video. Looking at our digital assets using the Comscore matrix, RTL Group is now the number 1 on YouTube worldwide with leading positions in the U. S, Europe and in Germany.
This makes us the most international and the strongest online video operator out of all broadcast groups, whether they are based in the U. S. Or Europe. I will now hand over to Elmer.
Thank you, Anke, and good morning to everybody. Turning now to the financial review on Slide number 8. Firstly, just a quick review of quarter 2 before moving on to the half year results. Revenue in our 2nd quarter was up 7.7 percent at €1,480,000,000 This was driven by an almost 7% growth in Germany, 6% in Belgium and a 10% growth at Fremantle as the negative phasing we mentioned around Q1 results unwound. Fremantle also benefited from a significant foreign exchange translation gain as was the case in the Q1.
Our digital activities, which are recorded in the other segment, grew very fast. The segment showed revenue growth of 48% in the quarter, up on Q1 growth rate of almost 43%. The group's EBITDA development was also strong, up 4%, resulting in a margin of 23%. Moving now on to the next slide, Slide 9. Reported group revenue for the first half year was up 3.8 percent to €2,788,000,000 Underlying revenue, which is at constant scope and exchange rates, grew by 1.2%.
Group operating expenses rose by 4% compared to a year ago. This increase partly reflects the investments in new businesses, but also increased investments Our EBITDA increased to 6 Our EBITDA increased to €628,000,000 resulting in a 22.5 percent EBITDA margin. Our EBITDA the group's net financial debt at the end of June was just over €1,000,000,000 pretty much in the middle of the group's target to have a net debt to EBITDA of 0.5x to 1x. Moving to the next slide. The net profit attributable to Alte Group shareholders for the period was up significantly at EUR 3 €51,000,000 compared to €202,000,000 last year.
This reflects the higher level of EBITDA, slightly lower interest charges and as expected a large swing in terms of impairments. I'm sure you remember that in 2014, we had a charge amounting to €88,000,000 €77,000,000 of which were recorded against our Hungarian operations. In 2015, we have no such costs. We have also reversed part of the impairments made in 2014 in Hungary against intangible assets and stock. In total, this resulted in €10,000,000 being credited to the income statement.
And finally, the tax charge came in lower, primarily due to higher commission income on the tax pooling agreement in Germany. This income amounted to EUR 28,000,000 from €21,000,000 last year following the new ruling with the local tax authorities. The group's net result translates into a very strong earnings per share of €2.28 per share, up in line with our net result, I. E. 73% on last year.
Let's now move on to cash flow, Slide number 11. Our cash conversion ratios remain high at 74% of EBITDA, but below last year. The main reason for this are slight worsening in days sales outstanding, especially in the Benelux region, lower cash generation at FreeMetal Media, reflecting the changing program mix, higher prepayment at Group and slightly higher start up losses, notably in our digital businesses. Management expects the cash conversion to improve throughout the remainder of the year, but we will probably not reach the accustomed 100% level. For the full year of 2015, we expect cash conversion to come in at around 90%.
I will now hand you back to Hanke, who will start the business review.
Thanks, Alma. Starting on Slide 13 with Milton Roper Ehrtell Deutschland. This has been a very strong first half year for the business with another set of record results. Our family of general remains the clear market leader with a lead of 2.3 percentage points over Pro 7 SART 1. In a good advertising environment, revenue and EBITDA both grew substantially by 7% and almost 10%, respectively, leading to a record EBITA margin of 34.5% at the half year.
Moving on to Slide 14. Overall, we had a satisfactory first half in Germany with regards to audiences. We have a clear leadership position with our main channel as we reported an audience share of 12.5% and remain the only channel with a double digit audience share. We continue to experience some weaknesses in our daytime schedule on RTL Television, but this is being addressed and we are confident that we are on the right track. Within the next few weeks, we will launch several new formats, which based on audience test results, we believe will bring in well above average audience share.
In terms of the Access Primetime and Primetime slots, which is where our main channels earn approximately 65% of its revenue, we maintain a structurally very sound lead. For the 1st 6 months of 2015, RTL Television's audience share was 12.8% in excess primetime, 3.8 points ahead of its newest commercial lead. The family of channels as a whole grew audience share in both of these important time slots when compared to last year. Our 2nd tier channel Box reported a stable share of 6.6%, while RTL Nitro continues to report strong growth with an audience share of 1.8%, up 0.3 percentage points on last year. In terms of financials on Slide 15.
Overall revenue was up strongly, outperforming in advertising market estimated to be up between 3% 4%. EBITDA improved to €343,000,000 a new record half year result with the margin also up at 34.5%. I will now hand over to Guillaume for the remainder of the business review.
Thank you, Anke, and hello, everyone, from my side. Turning now to Groupe M6 in France on Slide 16. As you know, Groupe M6 reported their results at the end of July. Performance was solid, helped by a recovering French TV advertising market. Total advertising revenue was up 1.3% with EBITDA in the TV segment up 0.7 percentage points.
Audience shares were good for the family as a whole with robust growth from sister, our DTT channel, compensating for a slight decrease at the main channel. Moving on to the next page, Slide 17. M6 delivered an audience share of 14.9% in the key commercial target group. Long running series such as Farmer Once A Wife, Top Chef, along with new launches such as The Island, helped ensure that M6 remains the 2nd largest channel in its main target group. W9 in turn attracted an allusion share of 3.7%, flat on the same period last year.
It also now holds the record of the highest ever absolute audience for DTT channel, with 4,100,000 viewers having watched the Ladies World Cup match between France and Germany. Sister grew 0.6 percentage points to 1.9 percent firmly establishing itself as the leader among the new DTD channels launched 2.5 years ago. Overall, as I say, the family of free to wear channels reported a stable audience share of 20.5%, while the market leader lost share. We now move to the next slide. The French advertising market is in a state of fragile recovery.
We estimate the market was slightly up by some 2% over the first half of twenty fifteen, with M6 advertising revenues across its free to air channels up 0.8%. And as M6 mentioned on their call on H1, there is a degree of optimism in the marketplace with both volumes and pricing showing signs of a recovery for the year. Overall, revenue was down, mainly due from an RTI Group perspective to the sale and deconsolidation of Mr. Good deal, which happened at the end of quarter 1 last year. Excluding this effect, revenue would have declined by just 0.8% year on year.
Due to the weak results from the diversification while the margin remained flat year on year. We now expect the while the margin remained flat year on year. We now turn to the Netherlands. Our Odeon share leadership remains very strong with a growing lead over our commercial rival of 12.3 percentage points. Revenue grew slightly, thanks to the non advertising business, in particular retrans fees.
The digital activities revenues were enhanced during the period following the step up to full ownership of the VOD platform VideoLAN and the acquisition of the online restaurant guide, Dynaside, which strengthens our table reservation portal, there. Moving on to the next slide, Slide 20. The combined audience share was 32.7 percent ahead of both the public broadcasters and DSBS Group. Year on year, this represents a progression of 0.9 percentage points. In terms of financials, as seen on the next slide, revenue was flat year on year in an advertising market estimated to be down 5%.
Lower advertising sales were compensated by higher diversification revenue across all business lines, including SVOP, Ventures and Distribution. EBITDA was down at €27,000,000 as a result of the lower margin on our diversification businesses and start up costs in digital. This results in an EBITDA margin of 11.9% for the 1st semester. As we had hoped, we have seen an improvement in the advertising market from June onwards, which gives us some optimism that the market will recover after decline experienced at the beginning of the year. We now turn briefly to the other broadcast market on Slide 22.
In Belgium, the combined Odeon share was 35.9 percent, up 0.7 percentage points on last year's and some 17.1 percentage points ahead of the public broadcaster. Revenue has slightly increased to €104,000,000 with EBITDA stable at €26,000,000 In a net radio advertising market estimated to be down 2.4%, our radio business in France reported revenue of EUR 78,000,000 in line with the market decline. EBITA was stable at €7,000,000 In Hungary, the advertising market was slightly down by an estimated 1.4%. But thanks to a good performance from our cable channels, total revenue rose 2.2% to €47,000,000 Following the reduction in the advertising sales tax, which has been applied very attractively, The group has been able to reverse part of the impairment made against program stock last year. This had a positive effect on the EBITDA of €3,000,000 In total, EBITDA amounted to €16,000,000 In Croatia, revenue was stable in a TV advertising market that is also flat year on year, a breakeven position has been maintained.
And finally, a few words on Spain. Atres Media reported its results last month. The Spanish TV advertising market continues to recover, with the market up 9.9% during the 1st 6 months of the year. Atres Media outperformed the market, growing its total revenue by 12.2 percent to €506,000,000 The Group EBITDA rose strongly by 55 percent to €93,000,000 Archael Group recorded a contribution to its EBITDA of €11,000,000 up from the €7,000,000 last year. On Slide 23, we have provided detail on the retransmission fees across the group.
These continue to develop positively, reaching €118,000,000 at June. This represents a growth of 18%, driven mainly by new contracts in the Netherlands and the continued subscriber growth in the HD model in Germany. We now turn on to Fremantle Media on Slide 20 4. With more format development, more drama and more digital, Fremantle Media is preparing its future. New shows are being created and launched, while of course some of the older shows such American Idol in the U.
S. Are coming to idle. But let's not forget that Idol is still by far the number one entertainment show of Fox and has been recommissioned for an additional season in 2016. Following a strong Q2, where EBITDA was up 25% year on year, EBITDA came stable at €28,000,000 for the 1st 6 months as a whole. As part of the renewal process, both internal and external growth company called Wild Side, more of which later.
Revenue from Fremantle's Media's digital activities grew 149%, led by our Canadian games company, LUDIA, which launched Jurassic World at the beginning of the year. In terms of the financials, on the next page, Slide 25. Revenues slightly increased by 2.2 percent to EUR 637,000,000. Positive foreign exchange differences amounted to EUR 70,000,000 as of June 30. Scope changes, notably the effect radical media at the end of last year, resulted in turn in a reduction in revenue by €63,000,000 Net production volume, phasing and new shows are overall positive.
And given that this first half year includes lower American ILO revenue when compared to last year, this is overall a good result. In terms of current trading, the non scripted business continues to perform very well with in particular a big success for Family Feud, also to name Britain's Got Talent or American's Got Talent on NBC, which premiered to an audience of nearly 14,000,000 viewers on NBC, making it once again the highest rated summer entertainment shows in the U. S. Looking ahead, in the UK, Fremantle Media has just secured 2 daytime shows, a game show and a quiz show for ITV. In kids and family entertainment, the big news has been around relaunch of the classic format Danger Mouse, which premieres on CBBC in the UK, this autumns and rolls out internationally on Netflix from next spring.
On Slide 26, there is more detail on Fremantle's push into scripted primetime entertainment. Wild Side, a leading Italian production company, specializes in scripted drama television programming as well as commercial feature films. Their pipeline includes the Young Pope, which is a wild side's first international co production with top notch partners including HBO, Sky, Canal Plus. The series stars Jude Law and D. Ed Keaton with Oscar winner Paolo Saladino working as co writer and director.
All this is in the books. Deutschland 1983, which we talked about in March of last year, has had a very successful launch and international rollout. It became the first ever German language drama to be aired to critical acclaim in its original language version in the U. S. It has been sold internationally across multiple territories.
We have also solid hopes for a new drama called American Gods, which just been granted by the U. S. Premium cable channel Star. Fremantle Media will produce this show, which is currently planned to be 10 episodes in length and scheduled for a 2016 delivery. The drama has great potential across distribution, brand partnerships, licensing and digital in our view.
I will now hand back to Anke to take you through digital and the outlook.
Thank you, Guillaume. As you know, our digital strategy revolves very much around online video. Earlier this year, we announced the creation of the RTL digital hub in order to manage and provide support for further international expansion in the online video space. We started laying the foundations of this up just 2 years ago with the acquisition of Broadband TV. Further acquisitions of both Spot Exchange and StyleHaul and more recently Klipped and Yovohull have only added to our digital presence.
Across the group, we now generate more than 8,000,000,000 video views per month, including mobile. This means that at the end of June, our online video views reached almost 43,000,000,000 up 171% compared to last year. On Slide 28, and as I mentioned at the beginning of this presentation, we are a global leader on YouTube With more than 45,000 channels and over 700,000,000 subscribers, we are far ahead of other U. S. And European Media companies.
And our monetization platform, Spot Exchange, has also had an excellent first half year as can be seen on the next page, Slide 29. With 100% growth in ad decisions and pro form a revenue growth of 90%, we are delighted with the way this profitable platform has developed. At the same time, we are also laying the foundation for further growth having launched new offices in Belfast, Amsterdam, Hamburg and Singapore. We have also made additional hires across engineering and sales, taking the total headcount to 235 people, up from 173 last year. The management team in Denver is especially excited about the growth in mobile.
As mobile video viewing increases, we have seen the associated ad spend growing at a stunning 800% on quarter 2 last year as advertisers embrace the medium for big budget brand building video campaigns. So to summarize on Slide 31. Overall, we've achieved a strong operating performance with record results from our biggest profit center in Germany. Atell Group has become a leader in online video. Our revenue from digital has doubled in just 1 year and now makes up 8% of group revenue, a significant impact in a short period of time.
The group continues to be highly cash generative, and again, we are paying an extraordinary interim dividend. Our strategic priorities are clear and we have the benefit of being able to implement this strategy from a strong operational and financial base. In terms of guidance, we currently expect slight revenue growth for the full year, but please keep in mind that visibility still remains low. Reported EBITA is expected to be in line with last year despite lower contributions from one off gains. That concludes the formal section of the call.
Thank you very much. We are now available to answer any questions you might have.
We have a question coming through from the line of Christopher Jowen from HSBC. Please go ahead with your question, Christopher.
Yes. Good morning, guys. Thanks for taking my questions. First, on the current trading, maybe you can quickly discuss how you see, for example, Germany running into tougher comps in Q3, whether you've seen any changes in momentum? And maybe same thing also for the Netherlands.
And with respect to France, maybe a quick comment whether you are already seeing the price increases you were hoping or M6 were hoping to have. That would be the first one. Then on the dividend and I guess related also to M and A, maybe you can share your thought process going to the €1, and then maybe a quick comment on how the
M and A
pipeline looks for the rest of the year based on what you can see currently? And then a bit of a housekeeping question. Maybe you can give us a quick update on the earnouts on the digital assets. What sort of range should we be expecting given how they are doing at the moment? Also maybe a quick comment on the cash pooling for the rest of the year.
It seems that Bertelsmann found a bit more tax losses for you guys to pull. Thanks.
Yes. I start with the outlook or with the trading update for July August. What we see when we have a look at the European market that July was up based on the comps of last year that was what we expected. August is slightly down in the market. So overall, we expect European markets to be slightly up in a combination of July August.
In regard to the German market, we approximately see the same picture. And of course, we are running against very high comps in last year where Medigrooper reported revenue up 7.8% in the Q3. So we expect the Q3 to be much lower than last year. And given the figures in July August to be approximately flat or slightly up.
As far as Farland is concerned, we see a positive Q3. It's a little bit too early to draw final conclusions because we're still in the booking phase for September. But we're Q3. And therefore, Q4 will be absolutely essential to basically come to final conclusions on the end market on a full year basis in the Netherlands. So as France is concerned, to answer your question, yes, we see definitely improvement in pricing.
We believe that Q3 will be up. Again, too early to say, but it's profiting nicely, and we don't see any short term issue in the booking dynamics in France.
On the dividend, I think it's important to look where we stood in terms of net debt at 30th June. We were slightly above EUR 1,000,000,000 dollars CHF 1,000,000,000 to be very accurate. We are talking here about the extraordinary dividend, not the ordinary full year dividend. But clearly, when you look at the target gearing, we always said that we'd like to be between 0.5x and 1x in relation to EBITDA. Now at €1,300,000,000 we are already slightly in the upper part of that gearing range.
So we are about to crawl our way up to the higher part of it. Having now paid €1,000,000 in September, will even increase the net debt position further. So I think that here clearly we'll continue to focus on paying ordinary dividends amounting to 50% to 75% of the adjusted net result. So you might look at to the CHF 250,000,000 we paid ordinary dividend in prior years as a kind of floor dividend going forward. And then obviously, whether we pay on top of that will depend to what extent we've been able to invest into our portfolio.
As we said, we'd like to do so wherever we see the opportunity to be to build value for our shareholders. And if we have excess cash available within the guidance of gearing given, then obviously, we will pay this extra to the shareholders as we did in the past.
And on the pipeline in terms
of size?
We are currently reviewing a number of options. You will remember that in 2014, we spent €246,000,000
on M
and A. For the first half, we spent roughly €45,000,000 on M and A. We are looking into additional opportunities. It's too early to say we never give a forecast. To a certain degree, this is also opportunity driven because we have to see what targets will become available whether they fit our strategy and whether we believe that they are financially viable.
So we can't really tell you what this is going to be. But obviously, we'll continue to focus on small- to medium sized acquisition targets. The big ones, you shouldn't expect to come. So I think, as we did in the past, a proxy of €150,000,000 to €250,000,000 as an average in the midterm future is a good value to take in order to model this at year end. Talking briefly about earnouts.
As you know that all of our earnouts are very much linked to the development of revenue, but also operational profitability. It's difficult now to put a final value on what this would mean. But yes, we expect a number of step ups that will occur in the next years. We'll have to take the decisions when we come to it. But this could potentially mean that this is going to increase the money that we need to spend for those step ups by the tune of €250,000,000 to €300,000,000 over the years to come, depends on whether or not the businesses will continue to perform in line with expectations.
This is too early to say. I'm talking about step ups here, not only earn offs, just to make sure that this got misunderstood. Tax pooling, yes, in the first half, we have seen a higher commission income, CHF 28,000,000 compared to CHF 21,000,000 in previous years. Typically, what we've seen over the last years is that in the first half, the total amount that we have seen was representing around 40% of the total yearly commission income. That has been a proxy for the past.
Now, obviously, most of those debt losses have been consumed. But still, I believe that going forward, without having clear visibility of what purpose bond we'll be able to deliver in terms of additional tax losses, but I think that we should see additional positive impact also for the second half in that regard.
Perfect. That's clear. Thank you.
Our next question comes from the line of Lisa Wang from Goldman Sachs. Please go ahead with your question, Lisa.
Good morning. I have a few questions. Firstly, on Germany, you're right to say that comps get 9 points tougher in the second half. And given that Q3 is slightly positive, is there a risk that Q4 could actually be negative? Or you're confident it could be in line with Q3, which is basically slightly positive?
And second question is on Fremantle. You still comfortable with your guidance of €100,000,000 to €105,000,000 of profit for the year? And is it possible to have the FX impact as well that you expect? And on Fremantle Steel, can we have an impact coming from the lower revenues and profit of American Idol this year and next? And what kind of level of impact we should expect in 2017 when American Idol will be decommissioned?
And the last one is on your guidance. So you're raising it basically by 40,000,000. Just wondering what are the moving parts behind that thought process? Thank you.
Okay. Starting with a question relating to the German advertising market and our performance in the market. Of course, you're right, the comps in the Q4 are even tougher. You remember last year, we generated increase in reported revenue of almost 10%, 9.7 percent. So yes, at the moment, of course, we have low visibility on the advertising market.
But at the moment, we expect for Medien Group, the last quarter to be slightly negative.
As far as Fremantle is concerned, yes, we confirm our guidance. €100,000,000 is central point €105,000,000 would be, in my view, the max. Please bear in mind that if you look at 1st semester, our EBITDA was €28,000,000 So there is still a lot of ground to cover till this year end. We at this stage, we confirm this guidance. As far as the FX impact is concerned within the EBITDA count on a couple of 1,000,000, it's not that massive overall.
And obviously, we'll need to see how this U. S. Pans out in the months to come. As far as idle is concerned, you're right, revenues this year for American Animal will be lower simply because the number of episodes ordered have been reduced from 56 to 42 episodes, so less episodes. And there was also a negotiation obviously on the unit prices.
Going forward in 2016, we hope to basically compensate these lower fees a margin basis, lower EBITDA through other shows that Fremantle is launching. And going forward in 2017, it is really too early to say. But again, since the margins generated idle are now significantly lower than what they were 3 years ago, we're not taking talking about a massive compensation amount. So we should be able to organically compensate that. On the guidance, I'll turn to Lamar.
Yes. On the back of a very strong revenue delivery in the first half, we have now decreased our guidance on revenue and set that for the full year, we expect it to be slightly up. EBITDA, there we said that we expect to be in line with prior year. You might wonder what happens to all the extra revenue. There are three reasons that I'd like to mention.
The first one is that we don't expect to be in a position to benefit from a similar amount of positive one offs that we've been able to see in 2014. For example, as we also disclosed in all the accounts and in the notes, we have been in a position to have one off gains coming from the redevelopment of our Luxembourg site. This is not going to reoccur in the same order of magnitude in 2015. Plus also and I think also very important, obviously, the ForEx gains that we discussed earlier, €70,000,000 at the level of Fremantle, €82,000,000 if you look at it for the entire RTA group, that obviously also does not translate in a similar boost of profitability plus also one of the cause and factor for an improvement in terms of revenue came from the digital business. And that is, as you know, not yet operating at a similar margin than our free to air broadcast business.
So yes, we will believe that we should make up for the one offs that we've been seeing in 2014, even though they will be lower in terms of oxygen and amount in 2015. But a lot of additional revenue comes from ForEx, digital activities and yet does not carry the same average margin than our free to air broadcast business.
That's great. Thank you very much.
The next question comes from the line of Adrian St. Helier. Please go ahead with your question.
Good morning, everyone. Thanks for taking the questions. A couple of them, please. First of all, on platform revenues and carriage fees, going forward, I mean, how much drop through should we expect from them? Mean, so far the margins in Germany have been pretty steady despite the rising in carriage fees.
So do you intend going forward to keep those incremental revenues? Or do you want to reinvest them into programming costs or elsewhere? The second question, maybe following up on previous ones, you rate your outlook for stronger European advertising markets. I'm just wondering which markets specifically are actually performing stronger than you initially expected? And last question back to anchor maybe.
Are you concerned by your levels of audience in Germany? And do you feel that you need to raise maybe investments to offset for lower audiences? Thank you very much.
Okay. In regard to platform revenue, we expect further growth in the future. In the first half, revenue growth was mainly driven by the Netherlands and Germany. We will see further growth, although we expect in Germany that the rise of AHD will probably slow a little bit down. As we have seen in the first half of this year, we added less subs than in the first half of last year, but it will be a steady income in the future and we will see further growth.
In terms of reinvestments in programming, we have seen in the first half of the year that we invested more into programming. But I expect over the next time to be in single digit growth rates only in programming expenses growth.
What was the
Maybe on the ad markets very quickly before Ankers answers about the audiences. Basically, on the ad markets, we have one positive and one negative to make it simple in our anticipation. The positive was really coming from France where going into the year, we were anticipating a kind of negative growth. And I think that overall market should pan up positively for 2015. And as far as Holland is concerned there, it's just the negative of the positive.
We were basically expecting a growth in the market and actually I think the market might pan out at best flat. So in essence, these are the 2 main variations.
Yes. In regard to the audiences, overall, it was a solid first half. I'm not totally happy with the results of RTL. In terms of audience shares, as I pointed out, we still see the same weakness, especially in daytime, but we expect with a lineup of new shows to increase audience shares in daytime from the fall season. There will also be a strong lineup of new shows in fall with Deutschland, Rhein, Arce, Starfighter, new entertainment formats and the comeback of our most successful shows, Pharmacyxo Wife and Got Talent.
So there's a strong lineup in fall and this is why, of course, I'm not 100% happy with the first half of the year, but I look forward to the start of the season. Overall, we have to take into consideration that the lead we have, especially in the access prime time and prime time is a strong lead in comparison to our competitors. And this is why I'm quite confident because we are the one to deliver mass audiences and access prime time and prime time far ahead of our competitors. So it's a solid situation. I'm not 100% happy, but I'm confident in regard to our lineup in the next season.
Thank you. Thank you very much.
Thank you. Our next question comes from the line of Julian Rosch from Barclays. Please go ahead with your
First question on advertising. You gave us your view on the trends in Q3 in Germany, the Netherlands and France for the market. Coming back on France, can you give us some view on M6 market share in Q3? Do you expect them to continue to lose share like in the first half or maybe stable or improving? That's my first question.
The second one is on your guidance. You said that EBIT R would be flat because of lower exceptional and partly for that. So when you say flat operating profit, you're talking about operating profit including exceptional, so on the base of 1,145,000,000 just to be 100% sure? And then the third question is on Fremantle. Looking at or interpreting Guillaume's answer on Liza's question about the impact of American Idol, where you said in 2016, you would compensate with new programs.
And in 2017, it was too early, but with idle having lower profitability, you could compensate as well. So are you kind of saying that we should expect Fremantle to have flat operating profit for the next 3 years, I. E, kind of around the $100,000,000 to $105,000,000 level? That's my third question.
Okay. So I'll take the first one, France. Too early to say is the answer. It's too early to say whether M6 will gain market share or not, because obviously we don't know how the other competitors are performing. So I'd like to reserve my answer on this one.
I'll take the Fremantle question before going to guidance. On Fremantle, so just to reiterate, no, we anticipate growth in the EBITDA overall of Fremantle through organic and let's not forget that we are doing also acquisitions. So there will be a revenue impact, but obviously, as I indicated for 2016 and 'seventeen onwards, there will be an EBITDA offset of the non renewal of idle. Again, I only repeat that most of the idle negative effect is behind us. We had this negative effect, in particular, last year and obviously this year.
But afterwards, we're up on top of the hill, so to speak, yes, on the guidance.
Yes. Julian, I can confirm that the reference point in our outlook statement is the reported EBITDA, I. E, the €1,145,000,000 that we have shown for 2014.
Okay. Thank you.
We have the next question come through from the line of Conor O'Shea from Kepler Cheuvreux. Please go ahead with your question Conor.
Yes. Thank you. Good morning. A couple of questions from my side as well. First question on the German business with revenue growing more strongly than expected in the expectation on margins?
If you can give us some indication of the phasing of programming spend in the second half of the year, if there's anything unusual in that respect? 2nd question on other revenues. Obviously, you're putting a lot of your digital M and A. Can we have a sense of overall what the operating leverage is for additional revenue growth, which obviously is spectacular on the digital side? And as a related question to that in terms of the deal you've announced from Fremantle in TV production in Italy, what the impact could be in terms of reported revenues in the second half of the year or on a 12 month rolling basis?
And then the final question just in terms of Hungary. I think you mentioned €3,000,000 exceptional relating to the pullback of the ad tax, ad sales tax retrospectively. Can you then confirm what the underlying level of EBITDA is on Hungary for a 12 month basis for 2016 and also for the second half of this year?
Okay. Starting with Germany and program expansions, we do not expect any extraordinary effect in the Q4. So the guidance we gave for the full year that program expenses will be slightly up, is still valid. Overall, no extraordinary effects in the Q4.
Okay.
I'll take the Fremantle question and then the Hungarian questions. Fremantle Italy, obviously, will consolidate starting August this year. EBITDA contribution will be just a few million. Most of the revenue ramp up of Wildside will happen next year with the delivery of the Yonge Pope, where we'll have a revenue step up, which will be quite important. On Hungary, you're right, euros 3,000,000 of reversal of program impairments.
On a full year basis for Hungary, we obviously expect to be above €15,000,000 on a full year basis, probably between 15,000,000 and 20,000,000. 1,000,000. Going forward, we'll going forward, too early to say for 2017 run rate. Obviously, like in any other markets, we hope to have growth.
Okay. And in terms of the drop down in terms of additional digital revenue growth overall? We're looking at
digital revenue. This one developed extremely well in the first half twenty fifteen. We are up 94% or €106,000,000 because revenue grew from €113,000,000 to €219,000,000 And you'll remember when we talk about digital revenue, this is always excluding e commerce, home shopping or platform revenue. It's pure online and digital revenue. Looking at this growth rate, it's important to make the differentiation between the scope entries and the scope adjustments, which accounts for roughly half of the growth in the first half because we have been able to record the scope entry of, for
example, spot exchange but also style out. The other half is
basically down to organic growth. The businesses that we have in our portfolio, they continue to grow significantly. So I think in order to model this, it's good to assume 50% of the growth is due to scope entries and the other 50% are due to a climate matters.
Okay, great. Okay, thank you.
Thank you. We have one more question from the line of Charles Perdue from Exane. Please go ahead with your question, Charles.
Good morning all. Thanks for taking the question. Just a follow-up on Conor's question on digital. Actually, can you give us maybe a broader view of where you think profitability of your digital portfolio could be in the coming years or even a range? I know it's difficult given the how fast it's growing, but just to give us an idea.
And the second question, just to tidy up, what would be in your view the total one off impacts you can have this year? So just give us a better tool to forecast your real, I would say, guidance for 2015? Thank you very much.
I'd like to start with a profitability question on digital businesses. I think if you take our digital portfolio in aggregate, this is already profitable business. What we don't do is we don't put a profitability figure on the revenue simply because a lot would basically be very close to decisions on how to treat intercompany pricing because a lot of those activities like catch up TV, for example, those are integrated parts of our broadcasting business. So it's an obvious figure and we can make the profitability work almost in that direction. What we can say is for example that spot exchange is profitable on a standalone basis.
But also, we expected that, for example, the MCN Businesses, there it would take more time, a number of years until we will see a profitability impact. It's a bit like the situation was in the middle and the end of the 80s where when we basically started to build our presence in Twitter broadcasters, we wanted to first establish the audience and then basically convert this into a profitable business model. We wouldn't mind this to happen in the near future, But I think here, we are clearly in a situation in which everybody is trying to grab market share. It's still a kind of gold rush. And it will take a couple of beers until we will be there.
So on Aggregates, it is already profitable businesses. Profitability rise between loss making activities because of the nature of start up losses like in the situation of MCNs to high profitable businesses like in Catch Up TV. But it's difficult to give you a rival figure because most of it would be down to intercompany pricing.
Okay. Very clear, I understand the difficulty. But if you were okay, let's say just maybe to carve out the catch up TV and just think about your stand alone like new digital activities. If you think in the next 2, 3, whatever years you want, giving a balance of MCN and some other platforms like Yes. Do you think it's profitable overall?
Do you think it might be profitable? Because basically, when you look at your numbers in H1, it's more than 100% of the organic growth of the group. So I think it's very interesting for us to see how those good performances kind of lead the profitability in the medium to long term.
I think what we should briefly discuss is what do we believe is the terminal growth and the profitability of those businesses. They are my belief that they will be eventually, here we're talking about 4, 5, 6 years down the road. I think that they will come close to the profitability that we see from our core gross cut activities, but they don't match with that figure with these figures. Because if you look, for example, the profitability of our free to air broadcast business, this is north of 20%. And I think even if you look at the situation in 5 years from now, I'd be surprised to see a similar amount of profitability coming from the MCN business.
So I think that here we'll be in a position to grow to double digit, but I don't believe it will hit the profitability that we've been able to achieve with our free to air broadcast business. So we still owe you an answer on the one offs. If you look at the 2014 reported EBITDA, EUR 1,145,000,000 I think you should take roughly €30,000,000 as a positive one off, which I included there. It's difficult now to give you a forecast. Obviously, we have benefited from the reversal of the impairments in the first half.
And there's still a bit to come from our redevelopment project that we are entertaining here in Luxembourg, but I don't expect this to be €30,000,000 but it's going to be less. How much? It's honestly too early to say because we're only half year And there might be a bit of movements here and there throughout the course of the second half, but I would forecast it to be less than EUR 30,000,000.
Okay. Thank you very much.
We have a follow-up question from the line of Christopher Jerwin from HSBC. Please go ahead with your
Just a follow-up on the digital side. I mean, looking at how the growth is progressing there, maybe next year already, the MCNs and SpotEx will contribute more than Belgium, for example. How do you think about splitting that out into a new segment? I mean, what needs to happen for you to consider that? Can you maybe elaborate a bit on your thought process on that?
Thanks.
In terms of revenue, you might be right. But in terms of EBITDA, I don't see it's too early. It will take more time because we just mentioned this the length grabbing mood that is still around the MTN businesses and this is not going to be solved next year. I think it takes more time. In terms of reporting and disclosures, I think we have started to give you more details and we'll continue to do so as the businesses continue to grow.
But we need to think about what are really meaningful key performance indicators. And we just discussed earlier the difficulties to put a solid profitability figure onto our digital activities. We need to find ways to find figures that are robust and reliable and that are very easy to be interpreted. We already gave you revenue figures for the combined activities of Stylehold, Broadband and Smart Exchange. And we're just discussing internally what are meaningful disclosures and we'll introduce those as time comes.
Comes.
We have no further questions in the queue. There are no further questions. So I'll hand back to your host to conclude today's conference. Thank you.
Thank you very much everyone
for joining us today and for your questions. A brief special mention to Catherine, whose birthday it is today. And obviously, we'll be speaking to a number of you over the next few weeks and we'll see speak around the quarter 3 results in November. Thanks very much and goodbye.
Thanks, Brian. Thank you.
Thank you for joining today's call, ladies and gentlemen. You may now replace your hands there.