Métropole Télévision S.A. (MMT) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. Welcome to the presentation of the Half Year Results 2023 from the M6 Group. [Operator Instructions]. We will have the Q&A session after this presentation. I would like now to give the floor to Nicolas de Tavernost, Chairman of the Executive Board. You have the floor.

Thank you very much. Good evening. These results for the first half of 2023 are sound in a more difficult context, which we're going to explicit. First of all, the beginning of the year was marked by the renewal of the frequency for 10 years by ARCOM within the M6 Group, that was an important operation. Regarding the activity, the uncertain economic context weighs on the advertising market, which is down this half year, estimates give us more than 8%, but we will have a specific figures in a few days or weeks. In this context, the group has made an advertising revenue, slightly above EUR 500 million down 4.9% for the semester. The second quarter was worse than the first one. The group has preserved its profitability, nevertheless, and still has a margin above 20%, thanks to cost optimization. The margin is 21.7%. The net result -- net profit is EUR 106.5 million, thanks to 2 structuring transactions; one, on GSG, which is -- and the disposal of CTZAR to the group. Among the key figures, revenue reaches EUR 629 million on a constant scope outside of the consolidation of Best of TV sold in November '22. The advertising revenue down 4.9%. Therefore, we have an EBITA reaching EUR 135 million versus EUR 161 million in the first half of '22. The net profit is up 14.5% at EUR 106 million. In the first, the Individual Viewing Time was down since it is 3 hours and [ 15 ] minutes, i.e., a reduction of 8 minutes out of -- we have 2 hours and 16 minutes, minus 11%. So the marketing of advertising was done on a lower element than the first half of '22. Television remains the most used media and the increase in nonlinear has made it possible to increase quality contents, both for linear and streaming. In the face of this diversification, M6 is offering its offers in all markets, linear TV with free-to-air and pay-TV of 6play and 6play Max. We've also signed agreements with social media. We will keep increasing our presence on all of the social media. Regarding the 25-49, the group M6 is resisting the free-to-air channel have the same audience share of 20.6% with a limited drop of 0.2%. The DTT performance were satisfactory with the target commercial W9 remains first -- remains third, 6ter and Gulli increased by 0.1% in comparison with this quarter. The group has focused its efforts regarding M6 on strategic slots in the evening, historic brands make excellent performance on the commercial target of Top Chef, Pekin Express, Capital, et cetera. The channel makes good successes with its information magazine with Capital, 21% with the 25-49, the best season in the last 25-years ; Enquete Exclusive, the second best season; Zone Interdite the best season. The channel is making progress. It benefits from a number of successes, notably what is done with the morning magazine, Julien Courbet in relation with RTL. Finally, the news bulletin worked very well. They are the second most watched by the 25-49 target. The group has been successful, thanks to diversity of DTT, W9 has recurrent offer of magazine that is very powerful for DTT. 6ter [ consolidates ] is positioned as a first target, and it has a second best audience on this target. And the first -- Gulli is the first youth channel, Gulli Prime is very successful. And the pay channels have also reinforced their position Paris Premiere [ consolidates ] its status as -- with its best wave ever is really increasing its audience and it has been doing very well with women responsible for purchases. 6play is also very important on all media at all time. 6play is continuing its development in AVOD. We are privileging AVOD on SVOD, that has been our policy since the merger failed. We've decided to develop through 6play a destination brand, the AVOD offer, we have a comfort offer without advertising around 6play Max. In total, 6play, 16.8 million users a month, a leader in free platforms in terms of time per day, 1 hour a day. 6play is also the youngest platform, 53% is under 50, which is a natural complement in terms of advertising for linear channels. The enlargement of the AVOD offer was done with productions like C'est la famille. C'est la famille was very successful before it was put on linear channels. 6play Max offers an even more the linear offer with exclusive programs, lives and downloading. Regarding the Radio division, RTL remains a leader in the private groups with an audience share of 18% for 13 -- above 13. RTL is the first private radio in France with an audience share of 12.5%. RTL2 reaches the best audience first music station, Fun Radio has an audience share of 2.6% growing again over a year. The diversion is reinforced on commercial targets on all -- with an increase of 15.3% on the half year for all of its channels. As far as the advertising activity is concerned, advertising revenue were down versus the first half of '22 after first quarter, down 2.4%. The advertising revenue is down in the second half with minus 9.4% with a revenue of EUR 427 million, minus 6%. So much for TV activity, advertising in revenue were impacted by the reduction in viewing time and in worse economic environment. But radio is resisting between advertising revenue up 2.9% in the first half '23. I'd like to give the floor to my colleague -- to my colleague, Jerome, who is going to tell us about the sector and us.

And thank you in keeping with IFRS. These are the main figures for the activity of the group. TV is down by 5.7%, EBITA minus [ EUR 30 million ], identical reduction of [ EUR 30 million ], reflecting this pressure on revenue with reinvestment in nonlinear programs. For the Radio segment, revenue is growing 4.9%, reflecting the advertising trend presented by Nicolas and EBITA is up integrating the increase in advertising revenue and also more synergies with other channels of the group, plus cost control, we have stopped at the beginning of '22. Regarding Production & Audiovisual rights, we have an increased revenue of 2.3% on the half year, thanks to the SND Rights session with good activity in catalogs and broadcasting and distribution rights. Regarding EBITA, the Cinema have made only 1.5 million admissions versus 2.5 million last year. Based on the successes of the movies, the result has integrated a reduction of EUR 1.8 million, 10.3% and [ 37.7% ] of operating margin. Diversifications are down EUR 2.6 million on a constant like-for-like basis, as Nicolas said, we have sold Best of TV, which was fully present in the first half of '22. The gap is EUR 14 million in revenue. Regarding the rest of activity, revenue is slightly down. Stephane Plaza maintains its high performance in a real estate market that is slowing down kind of. And the revenue of portals is slightly down because of the overall economic situation. Regarding -- now the equity methods, the diversifications in our portfolio and major factors to underline. Last year, we had minus EUR 20 million, whereas this year, the result is positive, plus EUR 4.3 million. The gap is explained by 3 important activities, Bedrock, which is continuing its activities in investment and streaming for all of its customers. And of course, the absence of costs related to Salto in '23 because discontinuation was in March, and the winding up was totally provisioned. Therefore, a positive effect on the comparison of performance, EUR 12 million. Finally, Global Savings Group, beginning of January has had a major growth operation that has revalued our participation because during that operation, a significant part in acquisition was paid in shares, which has revalued our participation. Besides, the group Pepper.com has brought a positive result, which has also made a positive contribution. So that's it for the EUR 25 million increase of the equity affiliates. Regarding the financial statements, I will come back to the overall results that we've just commented on. Regarding the balance sheet, there are a few major changes, excluding the traditional seasonal change in the first half especially with some WCR effects and also the equity impact of dividend distribution and the net impact on noncurrent assets with the revaluation of GSG, which is included with other impacts. The impact of GSG is [ EUR 13 million ] regarding the revaluation. And in the cash flow statement for the half year, maybe a few comments. The self-financing capacity from operations is mostly the reflection of the lower operating income and also the diminished financial income and the -- we had better control over WCR than last year. So far, a similar period, a EUR 20 million improvement. And the tax disbursements were low in 2023 because of the traditional impact of the remainder of taxes. Last year, we had an additional tax, whereas last year we had -- this year, we had a tax reimbursement at the end of May when we liquidated our pending taxes. No significant changes on the other lines as we started the half year with a higher level of cash than last year. So we ended at a higher level, EUR 305 million in -- on assets. Regarding ESG -- EUR 199 million closing balance. For ESG and CSR, we have a number of measures and action plans in place. And so here, you've got quantitative illustrations with the facts that -- we can see that we complied with the 30% requirement of the Rixain Law 2025. We already have 34% of women in the group's leadership bodies and 44% of leadership roles are filled by women. I'll throw it back over to Nicolas.

Now regarding the outlook for the second half of the year and our game plan. First of all, we'll strengthen our presence in content. We have a program to strengthen our presence in all contents for the group that will be applied mostly from 2024 onwards, but will accelerate in streaming and the AVOD platform by focusing in AVOD investment with 6Play Max, which is working well on this comfort offer. Then to support the growth of diversifications and rotate and recycle our diversifications. We're are in exclusive negotiations with [indiscernible] to sell off the brands -- [indiscernible] Cuisine AZ, Passeport Sante, Deco, Turbo, M6 meteo, Croq’Body and others. These 8 brands are covered by exclusive negotiations. We developed that digital portfolio with 18 million unique visitors with growing revenues and profitability, but faced with the big digital players, there is a need for consolidation faced with social media in this context, the M6 Group. We'll allow its digital cluster to become bigger by joining Prisma Media, which is growing internationally. The considered operation should be concluded after the summer, and there will be a positive contribution to the net income of the group so that it can have additional resources for extra investment to transform its business where there's an action plan. And now I'll take your questions about that. And regarding the advertising outcome -- outlook, the future is still uncertain with a lot of volatility simply. Since the beginning of the summer, we've been recording positive signals for this second half. So ladies and gentlemen, we are ready to answer your questions.

[Operator Instructions] take a moment to compile the waiting queue. The first question is by Julien Roch from Barclays.

My first question after the failed merger with TF1, you said that the goal was to switch audiences from linear to AVOD and there was a priority, and you would invest consequently. Could you give us an order of magnitude of the additional investment envelope maybe the programming cost goal for the year? That was the first question. Second question, could we have a measure of your total ratings in daily minutes in H1 with the split between linear and nonlinear because your goal is to switch viewers, but so we don't really know where you are. So you can't track your progress. That was question two. And third question, to come back to your comment on advertising, positive signal since the beginning of the summer, what does that mean? Does that mean that advertising is positive on TV in July and August?

Thank you for those questions. Regarding the investment program in content, programming costs account for about EUR 0.5 billion total budget for the year. We should stay within this envelope for the year '23 with a number of redeployments, in particular, we didn't renew the French soccer contracts which led to significant losses to reinvest in other program categories that are more suited to streaming and we'll show a plan for the years '24. And subsequently, when we present the budget to shareholders for '24 and subsequent years with stronger content that we are currently modeling. Regarding total ratings, it's difficult to give you the results of linear ratings for the group on the commercial target with 20.6% audience rate for all channels, all free-to-air channels, 20.6% on the commercial targets of viewers. As you said, we can't agglomerate replay audiences because the measurements are not the same. Now regarding the DRP and CPM measurements on replay viewers, there should be a change in 2025 to identify the CPMs on our assets. But what I said on the 6play platform is that we have significant ratings with 1 million visitors consuming at least 1 hour on average a day for all of our programs offered on the 6play platform, but we'll probably have an opportunity to give you more details about all of our streaming activities. On advertising, what I told you is that we have positive signals for July. Indeed, it's a bit early to say anything about the other months. I would simply say that we have base effects that are a bit more favorable in H2 than they were in H1. I'll remind you that for the year 2022, we had a more complicated base effect. So we should have an easier second half compared to 2022. Well, that remains to be confirmed by the economic activity with relatively high volatility.

If I could come back over my second question, I understand that advertising right now is [ told ] differently on linear with GRP and digitally. So the commercial office can't be compared, but I wanted to know regarding the minutes consumption because if you said that you have 16.6 million viewers -- users on average and they spend at least 1 minute. You know how many minutes they consume, and you know the numbers of linear minutes. So why can't you compare total minute consumption of all your programs on all media?

Well, those are internal analysis that we do program by program, but that would get very complex. What matters is the number of people registered on 6play, the age of those subscribers, the average viewing time on 6play. And we can discuss that very concretely. But simply, this is high consumption, and that will match and there will be a match. And secondly, advertising on our 6play platform is sold in 2 ways. One is on the managed networks that are the telco networks, the 4 ISPs and also on devices and directly. And advertising is sold more in value on nonmanaged networks. So we are in discussions with managed networks to improve the value of advertising and the volume of advertising on 6play -- for 6play on managed networks. That's a big battle for us because we want to claim back control of our data in order to have more effective advertising on managed networks where we have more room for growth.

[Operator Instructions] We have no further questions, so I will give the floor back to Mr. Nicolas de Tavernost to wrap up this session.

Well, so our first half was fairly challenging, given the advertising activities. So we are going to significantly grow our 6play platform in the next few months. And in connection with our linear content because most of our audience comes from linear content to answer the previous question, we can reckon that nonlinear viewers are 7% to 8% of our overall viewership for our channels. And so this needs to grow because the decline in viewing time -- linear viewing time is slightly higher than 10%. We need to be able to offset that. That's why we have an investment program. Secondly, the diversification policy helps because as you saw with GSG, we made major investments because there's now an improvement in our net income, thanks to GSG, and we are rotating our investments, and there will be disposal gains after the projected disposal of our digital business with Prisma, mostly focused on those 8 brands. So our first half of the year with -- work well underway. And the second half, I hope will confirm a recovery on the advertising market compared to the second half of 2022. So have -- enjoy your summer, everyone, and we'll meet again for the full year results at the beginning of the year -- of next year in February, the date has not been definitively set. So thank you very much and enjoy your summer.

This conference call is now over. Thank you for taking part in it. You can now disconnect. [Statements in English on this transcript were spoken by an interpreter present on the live call.]