MFE-Mediaforeurope N.V. (MFEB) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and now welcome to the Mediaset 2019 Full Year Results Presentation. [Operator Instructions] I must advise you that this conference is being recorded today. Now I would like to hand the conference over to your speaker today, Simone Sole. Please go ahead.

Hello, everyone, and welcome to the Mediaset 2019 Full Year Results Conference Call. As you probably -- you're aware, the Italian government has recently extended its emergency coronavirus measures. Italy is currently under a lockdown, and the government has called on people to respect a list of restrictive measures until at least April 3 in order to limit as much as possible, the spread of the virus. We do hope that the situation could improve in the next days or weeks. As a company, at the first signal of the spread of the virus in our country, we have immediately put in place all the special crisis committee and procedure with a specific focus on employee safety. Our company was already -- fortunately, was already keep -- doing the smart working features. And this was absolutely important as it allowed us to guarantee as much as possible, the employee safety and at the same time, the business continuity. Thanks to this attitude and work organization, we have -- today, we have been able to perform all the processes in connection with the full year results. And this is also allowing us to hold the conference call and the Q&A session that will follow to provide you with all the visibility and -- on the business that the present time could offer. I would not spend more time in any other introduction, and I will immediately hand over to Marco Giordani, CFO; and Matteo Cardani, Managing Director of Publitalia. Matteo, I leave you the floor.

Okay. Thank you, Simone. Good morning, everybody. So let's start with our fiscal year 2019 presentation. I'm on Chart #3 now. So we comment -- published data for 12 months ending December 2019. They confirm the picture we already shared during our 9-month call. So Italian advertising market last year performed minus 5.1%, mainly due to lack of sport events, missing spending of betting sector and actually, weak demand in November, December. Both Black Friday and Christmas were below expectation, and therefore, both November and December gave a non-positive contribution to the overall trend. If we consider our addressable market, TV plus Radio plus Digital, thanks to the positive performance of Radio and Digital, this containable market is performing relatively better than the total market, minus 3.8% versus an average of minus 5.1%. If we move to Chart 4, we comment the total advertising revenue. So our consolidated results for last year is minus 8.2%. And this reflects the negative underlying market trend plus all business discontinuities we continuously reminded in our past call. Briefly, the discontinuity in pay-TV business football offer; the discontinuities in free-to-air Champions League offer that was absent in H1 and present in H2 and the World Cup '18 year-on-year comparison. And if we take these discontinuities out of the calculation, and we move to Chart #5, our underlying base trend is minus 3.6%. And on the other hand, it is correct to consider the underlying trend of the market without World Cup, and we have the like-for-like trend of minus 4.2%. So on a like-for-like basis, we did better than market. Now I move to the advertising breakdown by sectors. I'm on Chart #6. With regard to sector analysis, we could adjust a few words. Generally speaking, the Italian advertising market, as a whole, last year suffered from a significant lack in advertising expenditures in 3 key sectors plus one. So double-digit decrease in Telco; Automotive was suffering for sales, mainly negative in the main part of 2019; and the No Food, mainly personal care and household care. On top of these 3 sectors, there was also the lack of Betting sector due to the new regulation mainly in H2. Of course, we cannot manage the underlying overall trend from the sector perspective. We defended our market share. The main sectors that are negatively contributing to advertising market dynamics are No Food, Telco and Auto. And we must also say that these 2 last sectors, Telco and Auto, we were slightly worse than the market average due to the discontinuity in football offer. It is crucial for these 2 sectors. But the interesting thing in this scenario is that there are a few sectors that performed positively or relatively better in 2019, namely Pharma, Finance and Retail, including direct-to-consumer and e-commerce and also over-the-top players that are now important advertising players also for television. And in these sectors, we performed better than market average. And the other positive remark is that thanks also to the Champions League offer, in Q4, we performed better than market in key sectors as Automotive, Retail, Finance, Utilities and Tech. I spent some words on sector analysis because I do think it is important also in the Q&A session to understand what's going on in first part of the 2020. Now I move to Chart #7, the audience performance. We are particularly satisfied about audience performance because our strategy focused on our original product is delivering good results. We are leading by far on commercial target with almost 34 points of audience share. But the real driving force is the full implementation of our editorial model. Canale 5 is delivering a model of 5 to 6 original production each week, plus the Champions League. Retequattro is being completely revolutionized with the full lineup of access and prime time programs that are doing very well also during these weeks of 2020. And Italia 1 has a solid leadership of young, adult targets, and our portfolio is -- of thematic channel is in good health. I move to Chart #8. And this is a chart comparing our audience performance year-on-year. So we grew by 0.6 points year-on-year. And if we take out of the basis the contribution of the World Cup, the organic trend is even better, plus 1.1 basis points share compared to the previous year. The start of the new season -- and I'm on Chart 9. The start of the new season in Jan, Feb 2020 is absolutely positive because we have a positive performance in our -- on commercial target, we grew by 1.2 percent points. Remarkably, I want to underline the fact that we have a leading position also in the most difficult TV target namely millennials, 15 to 34. And our share is even higher and is growing faster, as you see from this Chart #9. And last but not the least, the publishing of new Auditel data for TV content on digital device confirm and extend this leadership beyond first screen. On average, our 34 audience per share on Linear TV first screen turns to an average of almost 36 on the Jan, Feb period on digital screens, including both browser and app. So we highlight the sort of extended digital audience power ratio for our TV programs. Just to give you an idea, each week, 7 or 8 out of 10 most-viewed programs on digital devices are Mediaset programs. And this consideration introduced me to the second part of my presentation. We will like to share with you the evolution of Mediaset advertising strategy. It is the advertising strategy we presented to the whole market in January and February. We had 10 minutes with more than 2,000 advertisers in Italy, and we presented this new approach. I'm on Chart #11. And the evolution of our Mediaset advertising strategy will be represented in this chart. So our mantra is now TV 4.0. That means that TV is and remain our core business but is evolving towards a more comprehensive approach that we define TV 4.0. So strength of our TV core business plus an acceleration in our total videos, total audience offer on 3 screens. So linear TV, connected, addressable TV and digital devices, combined with an extended audience offer by our digital vertical properties, so what we call total vertical. And last but not the least, a consistent total vision of all addressable advertising for all addressable touch points. And I go quickly through 5 charts that try to go deeper into these approaches. So I'm on Chart 12. So what we are offering the market is, of course, the baseline of our linear TV business. But we are evolving and enhancing the power of TV in the total video perspective, thanks to the audience extension of digital devices, the addressability, interactivity and retarget opportunities of connected television. And on top of this, the capability, we are already offering on -- of cross-device targeting. We have very important inventories on these 3 different screens, as you see from Chart 18, I don't want to enter into number details, but as you can see, we have billions of the videos offer also on digital devices. And the real interesting and encouraging thing is the fact that if we take a closer look in Chart 14, to connected TV, connected TV will play an increasingly central role in terms of consumption. In Italy, we have 16 million connected TV set on a basis of 24 million households. We reached almost the totality of this 6 million connected TV sets. And we are -- we have been offering since 2 years ago, a full lineup of new advertising formats. So display, overlay and video advertising formats with high capability of geographic targeting, socio-demo targeting, behavioral targeting on the first screen, connected television. And the response, I'm on Chart 15, from the demand side is absolutely encouraging. Here, you see the progression in terms of clients and campaign year-on-year. We are on more than 200% increase in the adoption of connected TV offer 2019 versus 2018 and even the early indicators on Q1 2020 versus Q1 2019 is absolutely positive because we are keeping positive inertia also at the beginning of 2020. This is, now I'm on Chart 16, is sustained by hard facts and key numbers you see in this chart. So we had last year at plus 68% increase in total video views, and the increase in total video views is even higher at the beginning of this year, so plus 248%. We have a number of total active video viewers that is increasing. We are around 37 million monthly total active video viewers. There is a high consumption of share live TV program, 33% of our total consumption in the total video perspective. So we have a baseline that is increasing. And in this perspective, now we are trying to move in the total video offer. I'm on Chart 17. So we are now offering the market, new product offer that will be easily included in TV planning. So we call this offer Mediaset All Screens. So we are offering advertising formats that allow advertisers to follow the content on all the 3 screens. So I choose a program, and I dominate these programs through all screens or the other way around I choose a target. And in the audience extension perspective, I can combine the full offer of 3 screens in audience extension perspective. Last 2 charts on my part, and thank you for the attention, I'm on Chart 18. We also had a very interesting total vertical offer. Here you have the example with our sport and news offer. Taking into account that Sport Mediaset and Mediaset TGCOM are 2 of the 10 most of viewed TV properties also on digital devices. So we can combine horizontally the reach of linear television with vertical reach offered by our properties, vertical properties, so total video plus total vertical. And last but not the least, when we say TV 4.0, we end up with a total vision of consumer to all addressable advertising. What we are already offering, and we have been offering over the past 18 month is full all addressable advertising offer across connected television, digital properties and digital audio properties, and we are combining this offer also with mobile proximity marketing and digital out-of-home offer. So this is, let's say, the go-to-market approach, and it was very well received by all the advertisers we met during the first 2 months of the year, and we are absolutely confident that after this period of, let's say, contingent and temporary crisis, this will be the approach, the winning approach here to stay with us for -- in the medium, long term. So now I hand over to Marco Giordani for the second part of the presentation. I thank you.

Thank you, Matteo, and welcome, everybody, also on my side, and thank you for joining the call today. Before starting the traditional results presentation, I want to spend a few words on the -- on our pan-European project. European scale is key to remain relevant and to foster growth within the TV broadcasting industry. 9 months ago, in June, we announced the MediaForEurope. Today, in the light of the most recent industry trends, we are even more convinced that this project can represent the natural strategic evolution, not only for Mediaset and Mediaset España but for the whole broadcasting sector across Europe. Consolidation is a prevailing trend in material sector, and this can help and drive return on invested capital. Over the past years, together with Mediaset España, we have tested different forms of operation with the objective to extract efficiencies and savings. We have been facing legal and administrative hurdles to comply with complicated and time-consuming procedures for related-party transactions. The complexity is stemming from the need to allocate the value generation between the 2 listed companies in compliance with minority shareholders' interest protection. The result of the process just described has been disappointing. MediaForEurope will now allow for a full alignment of interest of all shareholders. This, in our opinion, is crucial with the crucial benefit of the project, and it is -- and it's real differentiating element versus the past comparative experience. This is why Mediaset -- MediaForEurope will provide effective execution. Looking closer to the media sector, many players operating at different level of value -- of this value chain have already relied international footprint. This is the case of content provider, media agency, advertising investor, OTT player, TV and devices manufacturers, pay-TV operator is to -- on continental scale. The only exception is represented by local free-to-air broadcaster. Through the consolidation proposed with the MFE project, we have identified 18 levers to achieve synergies and savings for more than EUR 100 million at run rate. The new European scale would also enable additional revenue opportunities that we have clearly identified. MFE would be able to attract these new revenue streams, thanks to a strategy that would combine the traditional mass audience of broadcaster with the advanced advertising solution brought by digital, and Matteo has just explained a few examples. We have also identified additional strategic opportunity, particularly in relation to the content area that can be developed in the medium and long-term once the business scale will be redefined. Finally, MediaForEurope would also contribute stable governance and a currency for growth. Indeed, as showed by some recent precedents, choosing Netherlands and implemented -- and implementing a loyalty scheme are the key factor of strength. The speculation that have been fueled by some players are misleading and are contradicted by the fact -- by the current shareholder structure of the group. The level of complexity within the media industry is increasing. Change is the master. Missing the opportunity of business transformation would expose the industry to a further downsize margins, returns and valuation. And then a few words about, let's say, our -- let's say, almost daily -- let's say, story on the -- on Vivendi stuff. In Italy, the Court of Milano has rejected the request of suspension proposed by Vivendi. In Holland, the Vivendi assets -- the Amsterdam Court has rejected the request of suspension proposed by Vivendi. In Spain, the litigation is still pending. We are waiting for a ruling on the request to lift the provisional suspension on the merger plan dated -- the merger plan approved by the shareholders meeting of the 4th of September '19. Decision is expected by the end of March, beginning of April. So according to Italy and Holland, we will be able to execute the deal, and we should only wait for the Spanish outcome. We already know that Vivendi appealed both in Italy and Holland. And as they declared in September, they will try to do as much as they can to prevent Mediaset and Mediaset España to complete the merger. In any case, I mean, we are positive. We believe that in all the courts the background rationale of the project has been, let's say, cleared, and there's been, let's say, showed clearly to everybody, and so we are very positive. MFE will go on more and more also because of the recent trend of the market. Then move to the '19 financial results. We start the presentation at Page 21. As you can see, '19 has been a very good year. At EBIT level, we reached EUR 354 million profit, almost 4x better than last year and showing a 12% EBIT margin. Net profit is EUR 190 million, showing a remarkable improvement compared to last year. Last year, clearly, excluding the extraordinary, let's say, cost we had as a result of the EI Tower deal of '19 -- on 2018. As far as the net financial position, we closed the full year '19 with EUR 1.358 billion debt. That number includes the Mediaset España buyback of almost EUR 100 million, the acquisition of 15.1% ProSieben stake and the purchase of additional shares of Mediaset España that Mediaset Italia carried out in the last quarter last year. So if you adjust the net financial position to take it comparable to the last year one, also excluding the financial liabilities according to IFRS 16, the net financial position would have been EUR 768 million that would be compared to the last year one, so very close. So in the sense that we can say that the balance sheet is pretty solid, and '19 has been a year in which the debt stayed at the same level. Stepping in the Italian business. And Matteo has just -- and I'm now in Page 22. Again, Matteo has already explained everything about the advertising performance. We said already in the third quarter results call, something about the other revenue. The full year ended with EUR 317 million, in line with the budget and the declaration of the last call. As you know, we have postponed the release of Tolo Tolo, the -- a movie that has been a Bookmaster, that has been released on the market on the 1st of January of the year, while in the previews forecast will be in launch before Christmas. And then moving to cost. You can see we had a reduction of more than EUR 700 million compared to last year, around EUR 390 million of less TV rights amortization and EUR 320 million of lower OpEx. Clearly, we had also some layoff cost of 21 -- almost EUR 22 million as expected. I believe that these numbers are a clear example of how we manage the development of the top line. And in fact, we have reduced cost by almost 27% compared to a reduction of almost 18% of the revenue line. And I have also to state that this cost base is also including the one-off costs related to the MFE project, the launch of the SVoD platform that, as Matteo said, has been pretty successful during '19. The platform called Mediaset Play. And clearly, it's also including all litigation cost we had to suffer for the Vivendi attack of MFE project. Then moving to below EBIT line. I mean no great, let's say, things to say on that. The financial charges are positive for EUR 10 million is because it includes also the dividends related to the ProSieben stake. So -- but I mean, that has been also already, let's say, accounted in the 9-month result. Regarding associate -- I mean, we have several minor associates in this line, but the main contributor to the line is EI Towers that contributed for almost EUR 50 million already, including purchase price allocation cost of EUR 12 million that was not present last year. So another, let's say, noncash item that showed how the '19 result has been good compared to '18. As far as tax rate, we had a 33% tax rate in line with our estimation and guidance. Moving to Page 24, investment. Also on that line, no major, let's say, surprises. We have a pretty sharp decrease of TV rights investment. That's clearly something that has been expected. As you know, we have decided already a couple of years ago to focus our production of local content. And clearly, we are investing less and less on purchase rights mainly from U.S., and that's clearly something that will go on in the next years. Moving to cash flow. The last chart. As tradition, I mean, the free cash flow, I think, productivities has been radically different and better from last year. That's clearly another example of how good has been 2019. We have a cash, let's say, improvement in working capital, and that's, again, something you already -- we already experienced in the -- during the course of '19. And that is clearly due to the lack of football and the payment of the football. In the line of the equity investment, you can see the purchase of Mediaset España shares that I mentioned in the first part of my presentation for almost EUR 32 million. As you probably know, today, we own 55.7% of Mediaset España. And clearly, it's the line where we accounted the ProSieben stake acquisition carried out clearly by Mediaset Italia. Ending up with the financial position. I mean we are -- as I said, we are in line with last year one, and so I can confirm that the balance sheet is pretty solid, and the company is ready, also from the financial point of view, to face the future project of consolidation that we have announced to the market. I end my part. And now I'm leaving -- going to the Q&A session. Just beware that about the coronavirus situation, clearly, we are not able to predict the impact. As you can imagine, it's very hard to tackle something that is clearly changing every day. The only thing that I can say is that Mediaset will go on clearly to manage on a day-to-day basis the situation and to be ready to react and maximize the company flexibility. This is what we have done in the last 2 weeks, and I believe -- and I can tell you, in a very, very efficient way, all the people working in Mediaset has been very, very flexible, understandable, and they're all working at maximum to maintain the maximum flexibility. As you are aware, we are going on, and we're continuing to work on a transformational project that are clearly named with MFE, but the -- in practice means many projects that we are starting to be implemented as soon as the process -- the formal process will be cleared definitely. Then now I can leave you to the question session, and thank you for the time.

Thank you Marco and Matteo. The Q&A session could start now. Thank you. Thank you very much.

[Operator Instructions] We have our first question coming from the line of Lisa Yang from Goldman Sachs.

I mean the first question, obviously, on the advertising trends, understand lack of visibility and the situation is changing every day. But could you just help us understand what you're actually seeing in the last 2 to 3 weeks in Italy? Just want to understand, like, what -- the current trends as opposed to guidance on the quarter. And what's the weighting of March in Q1? Secondly, could you maybe give us a bit of color in terms of what sort of costs you would expect for the full year? Usually, you always give a cost guidance, at least, for TV rights amortization? And thirdly, just on the MFE merger process, could I just double-check, like what is actually really needed for the merger to go through? Do we just need the Spanish court to remove the suspension? Or we still have to wait for the decision on the appeals in Italy and Netherlands? And how should we think about as well the ECJ ruling, which I think is due sometime in the first half? Like if they were to rule that, I guess, by -- is not complying with the EU rules, how does that change the whole kind of merger situation?

Sorry, I will start from, let's say, my part of the question, and then I'll leave Matteo for answer to the advertising. Cost guidance. I mean clearly, 2 weeks ago, we were prepared to give you guidance. But now, I believe it's a little bit unuseful in the sense that what happened in the last 15 days is clearly changing. Let's say, at least this week's grades and this week's cost, you will see already in the first quarter, where certainly, we will have probably effect on revenue, but also cost will adjust. I mean, when I mentioned flexibility, I mentioned that because it is what we are applying. The visibility, as we said, is very short, but we are keeping the company cost as flexible as possible. Clearly, we need to maintain our editorial role, and I have to say that the most recent audience number is showing that this has been accomplished. That if you want, not the financial objective, but certainly, it's -- editorial needs and editorial willing of the company, it's -- as you can imagine, it's a very difficult period of -- for the population. But we are here also to assist and to take, let's say, some kind of entertainment to the people. We have adopted all the kind of, let's say, measurement to help the population in their staying home, let's say, period. I mean, a few examples, maybe just to give the flavor of it. Now the OTT portal, Mediaset Play is a pretty large family, let's say, related content, always available to help [indiscernible] people and keep the [indiscernible] school. We have granted them further, let's say, free trial period for Infinity, so our SVoD activity. So we are clearly trying to help population, but also we are also keeping the company cost structure as flexible as possible. Some of the nonurgent and non, let's say, important material program has already been stopped. And so as you can imagine, for us, giving it, let's say, a target on a specific line, it's almost impossible today. Also because we have the MFE project going on. So the present situation of flexibility and the MFE project that we -- as we said, will take additional synergy is not making us possible to give you a guidance. And as soon as the situation will be more stable, we will certainly guide that. I mean '19 results has proven that we are clearly applying a very strict discipline on cost, and this will go on. Our focus is on cash flow. Clearly, in a so difficult period, our main objective is to protect and maximize the cash flow. As far as MFE is concerned -- the MFE former project is concerned, maybe in a not so perfect legal, let's say, world, but maybe it would be clear for us that we have no closure. I think MFE could be implemented today or can be implemented as soon as Spain will release the suspension that they have pronounced on the 4th of October. So let's say that today, Italy and Holland are okay, spain is not okay, and we are clearly waiting for, let's say, the waiver, let's call it in this way of the suspension that has been decided on the 4th of October. We are very optimistic because everything that happened from the 4rth of October until now, it has already removed some or mainly all the element that the judge in Spain has pointed out as a problem. So I believe that as soon as the court will appeal again, these element will be taken away. And as far as the Gasparri Law, so the EU, let's say, suspension on the other hand, we are very positive in the sense that we don't think that there would be any effect. You probably don't know, but I mean, in the early January, Vivendi appealed to TAR, it is a sort of administrative court in Italy, exactly to say -- asking to the court saying, EU is deciding so suspend everything, that's clearly very general, let's say, summary on what they ask. But the TAR rejected the proposal of Vivendi saying that, in any case, it will take the time, not precisely defined because we don't know. And in any case, a new law has to be approved by the Italian government to change the present situation. Till that moment, the law is the present one. And that's clearly not only for Mediaset or Vivendi, but clearly, you can change it all with a new law. I mean, that's pretty normal. And so I mean, on that side, we are -- I mean, we don't think that EU will really affect MFE project. I'll leave Matteo to answer on advertising.

Thank you, Marco. I'll answer the question on the advertising trend. I'll start with the good news. And the good news is that the early indicator of 2020 for our group are actually positive. So what I mean is that January, February period was positive. TV performance is around a single low digit positive basis. And this is also thanks to the good audience performance, I commented before. We actually reached the all-time highest performance in Jan, Feb. So definitely positive. Radio is very close to double-digit trend in Jan, Feb period. And digital, thanks also to the high growth in video views, I commented before, is evolved, double-digit growth trend. So we had a very good start in January, February. So 2020 opening was definitely positive. Of course, and unluckily, the coronavirus crisis has brought in and has turned down March to a negative month, but the point is, 2 of the 3 months in Q1 are actually positive. As Simone and Marco explained before, the situation is changing, I would say, week by week, day by day. Till Friday, we were in a situation with a moderate impact. Of course, the new restriction rules approved by the government on Sunday and Monday changed the situation. And I want to be honest with you. We can not -- we are not able to assess the overall impact on March, and therefore, possible impact of Q1 overall. But I want to share with you 3 possible, let's say, guidelines to understand and analyze the situation. My motto is keep calm and stay rational. The first thing that is really important for us, as Marco and Simone mentioned before, is that the business communities, advertiser agencies and ourselves reacted very quickly. Just by the end of February, we all moved to a smart working situation. So the business continuity is guaranteed. We are keeping on having our meeting with clients and agencies in video conference. And so we are, let's say, keeping on things as usual. This is the first thing. The second thing I want to remark is that it's a [indiscernible] situation. But now it's, I would say, clear to everyone that in the media system, TV is more central and live than ever. Total audience is increasing by 10%, 15%, even 20% according to different targets. We have a lot of Gen Z and millennial in front of the screen. Advertiser are benefited by the fact that the advertising campaign performance is plus 10%. What I mean is that compared to the estimates, the actual delivery of gross rating points is plus 10% on an average basis. And as Marco mentioned before, we are in a strange situation, the situation where each Italian family can fully experience the multiscreen consumption offer we put in place with Mediaset Play. So we have a high increase also in video consumption. So I do believe that at the end of this crisis, the strength of TV, to some extent, will be even perceived as higher than ever. Also because TV offer reliable information and free of charge with no payable to have this information. Last but not the least, I do think that the sector analysis can help in understanding the differentiated impact of this crisis. What we observed, and in this, we are aligned with the main communication group is that the most part of fast-moving consumer goods, distribution, retail, e-commerce, consumer electronic, durables, tech and telco are, to some extent, benefited from this situation. Think about, I don't know, pharma products, personal hygiene products, household cleaning products and even food, there are positive consumption trend during this period. And in this situation, they are rational players, and they have maintained their advertising plan, I would say, almost or mainly unchanged. Of course, and this is the first group of advertisers. The second group of advertisers, I would say, mainly automotive. They rationally decided to reconsider on a case-by-case basis. There are product launches scheduled. In some cases, there were scheduled product launches, and they simply decided to postpone advertising campaign already scheduled by 2, 4 or 6 weeks. So no panic but a rational behavior. And last, the third group of sectors, of course, is those sectors that are most significantly impacted by this situation, a limited range of sectors are cinemas, movies, leisure time activity, travels, out-of-home food chains and, of course, luxury good, jewels and perfumes. But of course, due to the social life restriction rules, are forced to consider possible cancellation. But just to give you the weighted impact of this situation, the first 2 group of sectors I mentioned, they represent more than 90%, 92% of our business while the third group of sectors, both that are forced to consider the possibility of cancellation, represent no more than 68% of our business. So this is the most, let's say, honest thing I can share with you considering the limited visibility and the fact that no one can judge the actual length, the possible duration of this situation. So I hope to have answered the question.

Our next question comes from the line of Omar Sheikh from Morgan Stanley.

So I've got 3 questions. Maybe starting with a couple for Marco. Marco, on the ProSieben stake, could you just update us on where we are on that because if you listen to their public statements over the last few months, they don't seem to be, I guess, very constructive towards the MFE project and the possibility of perhaps joining at some point in the future. So I wondered if you could just explain to us, what benefits you think Mediaset will get from owning that 15% stake? And if you think ProSieben's [indiscernible] towards joining MFE in future might change? That's the first question. Secondly, Marco, I just wanted to just check on leverage. If you look at the post-IFRS 16 numbers, based on the 2019 numbers you've just reported, I think net debt-to-EBIT at group level is 3x. So could you just confirm that's correct? And could you just remind us of the repayment schedule for the debt that you have? And any covenants that might be associated with it. I seem to remember, there aren't any covenants, but if you could just remind us of that. And then the final question is for Matteo. Matteo, I understand that there is no guidance for the year, obviously, but could you just maybe give us your sense of whether you think advertiser behavior might follow a pattern of catching up on advertising that might be paused or postponed during the coronavirus emergency that we're currently seeing? Or do you think that we should anticipate any advertising revenue that doesn't come through in, I don't know, March, April, May, will just be lost for the year?

Yes, I'm starting my question first. I mean, let's talk about ProSieben . I mean, and maybe let's start again where we added. I mean clearly, we had no agreement with the management, but we started to invest in ProSieben in spring last year. The decision to invest was related to the fact that the share price of ProSieben was clearly declining. And being in Germany, the largest media market in Europe, I mean, the idea that someone else or some other interloper could have taken a stake there, could have probably, let's say, taken away from possible consolidation market, one of the most important player. Clearly, I mean, I didn't say, but I mean, it's well aware to everyone, I mean, that at that time, there were no relevant shareholders in ProSieben. So the decision was clearly to enter without having the consensus of the management, clearly, and that was a decision taken by us. And we knew already the position of max on the consolidation that I would like to repeat, clearly, is not really excluding the possibility to get synergies but is preferring to follow a different plan that if you want this, the one that you know better than me of ProSieben. So it was saying that the amount of synergy was limited to, let's say, maximum 35% of the cost base because content will remain local, and we fully agree on that. Actually, our project with Spain is exactly stating that we are going to have cost saving only on 30% of the cost base. But any case, these -- on this cost, the actual saving achievable, it's in the range of 25%, 30%, that it's creating a pretty large EUR 100 million, I mentioned before, cost savings and efficiency. In addition to that, we believe that there are many other opportunities in terms of revenue that can be activated by a larger scale and that are not included in the EUR 100 million, but they are all very relevant. And I have to say that after 9 months, I believe that the industry needs more of the consolidation than 9 months ago. I don't want to [indiscernible] what happened in the last 9 months. But certainly, no other, let's say, trend has been discovered and showed. And we believe that there is more need of consolidation now than 1 year ago. Having said that, clearly, we are the largest shareholder in ProSieben. We are not present in the Supervisory Board. So clearly, the company is managing their strategy and their, let's say, execution of the strategy by their owns, clearly, without really asking us anything as it is normal and correct. We are part of the European Media Alliance, as you know, together with other 10 European broadcaster. And again, unfortunately, in the alliance, we didn't find real solution to the challenge that the industry is facing. And that is another element of reinforcement of the need of alignment of interest throughout Europe. But having said that, we are clearly very focused on ProSieben. As you know, from the financial point of view, we have structured the acquisition in a way that basically, we can also leave investment if, for any reason, we will decide that the consolidation will not be possible or there will be other way to get the synergies. We will go on in monitoring the situation. I believe that the company will approve a new business plan or a new strategy. We heard from the last release that they have invested in additional resources in e-commerce [indiscernible] I mean, I hope that divestment would be successful and value enhancing. We are more focused on media, and we believe that our consolidation project, it's focusing more on the broadcasting side and the content side rather than the e-commerce ones, but we will see. I mean as I said, we are the largest shareholder, who will focus on the situation. We are very flexible, and we will decide following the next month, let's say, decision of the company is to stay, to leave or to increase. As far as the covenants, I have to say that, yes, I mean, it's very difficult for media company to calculate the right element of comparison for evaluating the debt level. The only thing that I can say is that all our covenants are based on the consolidated reported EBITDA, and we have a covenant limit that is clearly listed in the last year and also within the annual report is 2x. So as you can see from the number -- sorry, in these covenants, the -- let's say, the financing of the acquisition of ProSieben is excluded. So in terms of [indiscernible] let's call it [indiscernible] our covenant limit is far away from the present level. I can say that roughly, we have doubled the rooms that we are ready. We can, let's say, so we have less than 1x and the limit is 2. So you can then mathematically consider that as you like. So -- and in addition to that, it clearly started when the, let's say, the coronavirus situation started to affect Europe, let's say, in Italy in particular. We have clearly already closed prolongation of the lines where we don't have expiration during 2020, and we are pretty, let's say, relaxed in terms of the next, let's say, expiration in the tenure. So I believe that from the financial point of view, coronavirus cannot be an issue, clearly, at least for the next month or year. We'll see about the rest. So as I said before, the balance sheet is solid. The company is strong, and we can face every kind of scenario we are going to face. Matteo, it's up to you.

Okay. Thank you, Marco. I answer to the question in this way. We are in touch with our clients on a day-by-day basis. We share with them their, let's say, rational approach to the present situation. And what I can share with you is the fact that the totality of our advertiser, notwithstanding the sector they belong to, are obsessed by a key thing, business continuity. They say, top for us business continuity is crucial. And communication is a key leverage in ensuring this business continuity. This is a key leverage now during these days, this week, to stay in touch with consumers, and they are fully aware that will be even more strategic the day they need to recover as soon as this crisis finishes. So I'm personally in touch both with the association of advertising agency and with the association of advertisers, and they have a clear awareness of the fact that the day it will be possible as sort of, let's say, recovery plan in terms of communication will be crucial to sustain consumption. What can I say. The point is that, we have the first 2 months of the year positive, as I said at the beginning. March and April, we cannot assess the impact. But as you know, it's reasonable to say that will be the 2 months for sure affected by this situation. And then we have at present, at least 8 months for progressive and hopefully full recovery of what's going on during this day. This is, let's say, the most rational thing I can share with you. So for the time being, we stay, let's say, positive on the fact that there is still large room during the current year to recover the most or the full part of what's going on during these days.

Our next question comes from the line of Julien Roch from Barclays.

I got a new first name. Coming back -- I'm sorry, Matteo, on the impact of COVID-19. I completely understand it's impossible to forecast. Nobody knows how long it's going to last. But do you just kind of run, I mean, scenarios, when you said January, February were up low single digit, are we talking 1%, 2%, 3%? And then maybe from a weekly standpoint, when last couple of weeks, where things were starting to be bad, but pre-quarantine, what kind of the market was down? And then in the midst of the worst period, which is the quarantine period, which is now -- maybe on a weekly basis, what's the kind of the worst number is this? Are you down 10%, 15%, 20%? So we can -- I understand nobody knows, but -- so we can try to run some scenarios. That's my first question. The second one, is -- I mean, Marco, usually you give you guidance on other revenues, operating costs, interest and tax rate, maybe you can give us other revenue interest tax rate? And then on operating cost, assuming no MFE, what was the number you were supposed to give us pre-corona and kind of give a range of the cost mitigation, what's the lowest operating cost you can get to? And then my third question will be, you only give 1 number for advertising that includes TV, Digital and Radio. Could we get an approximate split in percentage in 2019? And also how much did Digital grow in 2019 because on Digital, you had 9 slides out of 31. So almost 1/3 of the presentation saying that Digital was great and all your offering were very strong, but we -- but your total advertising number was down 8% in 2019. So if Radio and Digital were great, TV must have been awful. So if we can get some idea -- approximate idea of the split so we can judge the potential that Digital will bring you in the future?

I'll try to be also give my view on the last part of the question. I mean, it's really hard. I mean, the only thing that I can say is that, I mean, tax rate will be -- I mean, the normal tax rate. So the one that we are now -- it's a normal tax rate. So whatever profit will be that will be the case. Also, if you want financial targets. I mean as I've said, we are not expecting any big differences in terms of debt. So again, and ProSieben [indiscernible announcement that you know exactly -- you know better than me. So I believe that interest rates and so financial charges would be not far from the [indiscernible] Tax rate would be exactly the same in terms of percentage. As far as the rest, it's very difficult for me. I mean clearly, we are flexible. We have -- let's say, we are stronger than 1 year ago. We are stronger because results are giving strength to the company. We were very, very early in reaction in terms of everything that we could have done has been done, in terms of, let's say, not wasting. It's a bad word. But I mean, if you like to understand in terms of financials, let's say, outflow, not wasting resources. I mean, what [indiscernible] the beginning is that we need to protect, let's say, the content and take them ready when the market will be back again. So now we are not really canceling anything. We are just saving resources to be put on the grid as soon as the market will be back to normality. So I mean, it's very hard for us. And I would -- I don't want to give guidance because in any case, guidance would be, in any case, adjusted. The only thing that I can say is that certainly, cost will go down, for sure. And as soon as we will have a clear view on how long it will last, we will give you guidance. Maybe just a few words on Digital. I mean, others prefer to put all the Digital cost for the platform as investment. We have chosen a different way. We're not commenting what the other are doing. I mean, this is part of our business. I mean -- and the reason for which we are not really disclosing the numbers in terms of differences -- in different mean is because we don't see different mean. We have our content, and we have to advertise them. Distribution, I mean, it's mutual, if you want it. It's up to us to manage at best the different platform. The issue we are facing -- we, in the sense of industry is facing, is that today, monetization on digital is more difficult. Why? Because we have big U.S. giants that are dominating, let's say, the intermediation software, and they are killing -- keeping away, let's say, profitability of this distribution method. I believe and I hope that the EU will take care about that in the future because, I mean, their share is,, frankly speaking, a little bit unacceptable. But that's something we cannot comment because we are part of the market and we have to clearly fight with the present rule. But we don't disclose cost for Digital, we don't disclose revenue from Digital because we have 1 single business up to now in Mediaset, produce content, generate attention and monetize attention. Platform -- distribution platform, frankly speaking, is an internal, let's say, fine-tuning message. So unfortunately, Julien, I cannot give you more than that. The only thing that I can repeat is that we are stronger, and we will protect the cash flow for sure. Matteo, I don't know if you want to comment more on that.

No, no. I am happy to answer to you, Julien. And with regard to the advertising trend, the honest thing I can share with you is that, as I said before, is a week-by-week situation. So just to give you the idea, we had the first breakthrough situation on the 22nd of February. And -- but the impact on February, so there was -- the last week of February, 23 to 29 was really, really negligible. Then we entered Phase 2 at the beginning of March. So there were some, let's say, adjustment and the postponement from the first part of the month to the second part of the month. But the real escalation, let me say, happened 48 hours ago when we opened our, let's say, smart working offices on Monday morning after the Sunday decision of our government. So there are some, let's say, adjustment, they are impacting the second part of March because the first part of March has been already mostly on air, so to some extent consolidated. So honestly, the impact will be relevant for sure, but we cannot assess up to now to what extent will be relevant on March. The important thing is that the first 2 months of the Q1, so 2/3 of the Q1 were in positive field. So this definitely will help when we will do final calculation on Q1. And with regard to the -- our trend, as I commented before, so our consolidated minus 8.2% is due to discontinuity. I would like to remark the fact that our organic trend is minus 3.6%, so better than the market. You know what, we do not comment on media split. But I can tell that we are obsessed to -- with the key performance indicator. We have to be better than market in Television, in Radio and in Digital. And we did it last year, and we are keep on doing this year. And the last thing I would like to add there, consistent with the presentation I gave before, is that the combined rate of our Radio Digital, Audio Digital and Connected TV offer is growing and will be larger and larger in the -- for coming years. And our expectation in this, let's say, advanced advertising offer is in the position to compensate the linear TV organic trend. So this is the best I can say. But the combined offer of Radio Digital, Audio Digital and Connected Television is a relevant part of our business. So positive trend in this area are contributing positively to the overall trend of our business. Okay.

And Julien, Simone here. Just to add, I mean, the January, February performance was up 2.1% was in the press release. Okay. Unfortunately, we are running out of time. So this is maybe the last question available.

Our last question comes from the line of Sarah Simon from Berenberg.

2 questions, if I may. First one was on Slide 16, are you saying that 1/3 of your total video consumption is coming from online? And then can you just give us a quick explanation, the enormous growth in video viewing that you reported, the 248%. I mean, that -- I get the year-on-year, it could be up very high, but it's also very significant against December. So are there -- is it specific television programming that's stimulating that that is going to normalize or what is driving that explosive growth in February?

Okay. So could you remind me the first part of your question, sorry?

Yes, just on Slide 16, you showed a figure of 33% consumption share of live TV. Is that 33% of your total consumption? What is that number basically?

I thank you. Your question is absolutely straight to the point. The point is that we're talking about Mediaset Play. So our offer on Connected Television plus digital devices. What we want to remark is the fact that we have a consumption composition made of 1/3 live TV. So I'm watching in live streaming a TV program that is running now. But I'm not at home, and I want to watch from my mobile or tablet or whatever, and the 2/3 of the consumption is on-demand consumption. So -- okay. And that leads me to the second part of the answer. The crazy thing is that -- and this is, for us, a positive thing because we clearly decided to invest in our own production, in our products, in our flagship programs and there is a huge consumption of our, let's say, 8 to 10 leading TV programs on digital devices. Just to give you an idea, we have flagship programs on Italia 1 that is called Le Iene. And on average, you have 60% of the population that watch this program at least once during the season. And we have something like 40 millions of video views of this program during the season. So it's actually the strength of our, let's say, offer of program that is breaking through the first screen to all other screens. So it's -- let me say, the strength of our core business that is extending to all digital screens.

Okay. And the audience shares -- sorry, the audience shares that you quoted earlier on, are they including all of this streaming consumption?

A lot. I come back to Chart# 14. And the point is that, for the time being, with regard to official audience measurement currency, we are in step 1 of the total audience projects. So when you see the linear TV audience is measured on people, individuals, while for the time being, the digital audience is a bit of views on devices. So we don't -- we haven't yet disclosed, probably will be available in 2021. And the day it will be available, it will be a new positive factor on the total video audience software because we could combine, let's say, reaching frequency [indiscernible] 13 points and whatever.

I'm sorry Matteo. Sarah, it's clear. So the daily and monthly audience share is not including the streaming audience.

Exactly.

Neither the on-demand, for the time being. As Matteo said, we hope that in 1 year time, the 2 numbers would be added.

And the important thing is that on our leading programs, the estimate that we do is an uplift from a plus 5%, plus 8% in total audience, for instance, to the extended audience on digital devices.

Okay. Thank you very much, everyone, for being -- joining the conference call today. And for any further questions, you may have Investor Relations department is at your complete disposal. Thank you very much, and bye-bye, everyone.

This concludes the conference for today. Thank you for participating. You may all disconnect.