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

Good day and thank you for standing by. Welcome to the MFE-Mediaforeurope 2022 9 Months Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I will now like to hand the conference over to your speaker today, Sara Bersan. Please go ahead.

Good morning, ladies and gentlemen. And welcome to the 9 months results presentation of MFE Mediaforeurope. Let me introduce immediately the speakers of this web conference call. Today's presentation will be hosted by our group CFO, Marco Giordani and by Matteo Cardani, Managing Director of Publitalia. Now let me hand over immediately to Matteo for the advertising and audience outlook material. Matteo, Please go ahead.

Thank you, Sara. Good morning. Thanks for your attendance. Today I comment on 9 months '22 results with an outlook on ongoing indicators for current trading. As we anticipated in the last conference call, we are still working in a highly uncertain context. The macroeconomic scenario and consequently, the advertising market are still impacted by the effects of inflation, as confirmed also by other broadcasters reporting the results in these weeks. Notwithstanding in the last 3 years, MSE has learn how to mitigate the impact of this uncertainty, acting quickly to adapt the business strategy. On top of that, unlike 2 years ago, the economic indicators are decreasing more gradually, and not registering a shock in the demand. In fact, as you can see in slides, #3 and #4, is that macroeconomic indicators demonstrate a significant change in market sentiment and behavior in Q3, definitely, with confidence index declining both for consumers and business. And consumptions on the other end are flattening year-on-year, both for goods and services, flattening, but not suddenly decreasing. So also the gross domestic product growth year-on-year as registered as low down, but not a shock, moving from plus 4.9% in Q2 to 2.6% in Q3 and the conjectural variation is still positive, plus 0.5 in Q3. So this is the macroeconomic scenario. And if we move to the advertising market dynamics. I'm commenting Chart #5. In Q3 many companies adjusted the allocation of advertising budget spending for the current year. And as you can see, in 9 months 2022, total advertising market is down minus 4.7% year-on-year with Q3 at minus 9.3% year-on-year, the market. In this context, our performance in the 9 months is minus 2.5% year-on-year, so better than the total market and the addressable market that includes TV, radio and digital. As anticipated in our H1 presentation, Q3 year-on-year trend is affected by the tough comparison with the 2 previous years. Q3 '21 was positively affected by the Euro Cup, the Olympics and the end of the spring lockdowns, so was particularly positive and even Q3 '20 was positively affected by the postponement of Serie A and Champions League in the summer period. And, again, the positive effects of the re-openings after the spring lockdowns. Therefore the most appropriate benchmark is Q3 2019, against which we are down low single digit. In this context, our better than market performance delivered, the fact that as you can see in Chart #6, our market share is further improving year-on-year, we moved from 40.8% last year to 41.5% in 9 months '22. So to better explain and understand both the current trading and outlook, we have to consider the dynamics on the demand side, so focusing on sector dynamics combined with our company of proposition, so focusing on MFE total audience evolution. Talking about the sector dynamics, and I'm now on Chart 7. It's interesting to observe that the impact of the current situation is strongly asymmetrical between goods and services. In fact, on the one hand, automotive and food are the sectors most affected by the energies cost and the shortage of raw materials components, resulting in a decreasing level of advertising investment. On the other hand, e-commerce, direct-to-consumers, telco sectors, tourism and leisure are maintaining or increasing the level of the advertising investment, counterbalancing the performance of the weaker sectors. That is why we comment again this scheme that is useful -- has been useful, also during the past conferences, to understand the market dynamics. We are growing sectors, this sector represent 48% of the market and bring a positive contribution to our performance that, as you can see, is better than market on these sectors and it includes personal care, media publishing, tourism with high double-digit picks. Then you have the second tier of our sector, the segmentation, stable or slightly declining sectors that's worth about 39% of the market. Here you have sectors impacted by the inflation crisis as food, pharmaceuticals, banking and finance. And the performance of these sectors is flat or down low single digit. Then last but not the least, the challenged sectors that's only worth 13% of the market and where the automotive sector represents 60% of this segment, which despite incentive is still declining double digit in the 9 month. It is worth commenting the fact that ecommerce and direct-to-consumer sectors are becoming more and more relevant and they are growing in terms of weight, they account for 20%, 15% of the total market. So the last comment on this chart is the graph on the right hand side where you see the weighted contribution by sectors on our revenue. And you see that the negative trend of some sectors is partially compensated by the positive dynamics of the other sectors. Still on sector dynamics. I want to comment in the Chart #8, that -- from where I stand, I think it's particularly significant is that because here you have the trend of value retail sales of the whole range of sectors contributing to our revenue. And you see with exception of automotive which represents 8% of our revenues, 92% of the sectors in MFE advertising perimeter are still reducing sales growth on a year-on-year basis, of course, including also the component of the inflation. But if we take into account the value, trend of retail sales is positive. And if we combine this positive trend in Q3 with a positive one in private consumption, let me say that the start and the outlook of Q4 does not look that negative. Then the last chapter of my presentation before the final remarks on outlook on Q4 is regarding the company offer proposition. Last week, Mediaset for Europe CEO, Mr. Pier Silvio Berlusconi pointed out our programming strategy with a very well balanced range of home production, fiction and entertainment, and that the diversified portfolio of generalist and thematic channel, each of them with a very distinctive positioning and on top of these the contribution of sport events. And all [indiscernible] as you can see in Page #9, is delivering on our main commercial target. A linear audience share that is growing by 2.8% year-on-year on the 9 month while our digital non-linear audience is perfectly aligned around 40%. So now I'm moving to Chart #10. And the interesting thing and this is thanks to our strong programming offer, despite all the talks around linear TV audience downturn, actually our linear TV audience is in a very good health, plus 0.6% versus 2019, which is the right comparable basis not only for revenues, but also for audiences. And on this baseline, as you can see, we had high double-digit growth of the digital screens, so connected TV, mobile, desktop, bringing our total audience performance to 2.5% growth rate versus 2019. The interesting thing is in the Chart #11. That is a chart that we are now able to produce, thanks to the total audience delivered by Auditel this summer. You see that if you take into account the total audience contribution, we are having plus 2.0% to the traditional audience performance. This benefit is not only quantitative, but also qualitative because as you can see, the total audience is having a younger viewers profile from digital screens. With the additional benefit of the higher CPM to one of linear television. Furthermore the audience data related to connected televisions now available from September, confirm the effectiveness of combining the 3 screens, the [indiscernible] linear TV, connected TV and digital screens reach all the most relevant target segments including the younger again. Last but not least on chart #12 With regard to monetization, you see the pricing upside opportunity we have on connected TV and digital screens with higher revenue per hour rate compared to linear TV. Now I'm closing my -- the first part of our presentation and I would like to summarize a few preliminary comments on Q4 outlook. Combining 3 main drivers, so sector dynamics to the offer and advertising trends in Q4. With regards to sector dynamics, in the first 10 months, we have seen the negative trend of the challenged sector reducing its speed for the first time over the past 18 months, in fact in October we have seen slightly positive signs in automotive new car sales and luckily this is reflected in our early indicators for advertising collection. Combining these with the fact that growing sectors are still growing high single digit and stable, our soft declining sectors are still low single digit down. We are confident that sector strengths will be balanced, helping us particularly in the second half of November and December. Second driver, our TV offer, you see, we commended about competitiveness, expressed by the quality of the programming schedule, and the very good audience trend, total audience trend we are registering. This will allow us to maintain the traditional level of prices for the advertising blocks even during the last part of Q4 when Rai will broadcast the World Cup. Then regarding the advertising trend in Q4, I tried to give you a bit more color. At this stage, the outlook for Q4 could be divided into parts, equally weighted in the quarter. The first part until mid-November, say, today before the start of the World Cup shows good level of resiliency, being more or less at the same level of the same period of the last year. We are almost flattish year-on-year, October plus mid-November. And remarkably we are up around plus 2.5% compared to the same period of 2019. With regards to the second part of the quarter from the beginning of the World Cup next Sunday, we are affected by low visibility in [indiscernible] and Christmas. It is clear, not being the owner of the rights, we will not be the first choice for advertiser. At the same time the talent team, unfortunately, is not part of the event and the World Cup this time comes in a period of high exploitation of the advertising inventories. So our performance will depend on how these 2 opposite effects will play out. Our best assumption at this stage is that we will be below the corresponding period of 2021; very, very difficult to say to what extent. It will also depend on the dynamics of the underlying market in the World Cup attractiveness for advertising. Just the very, very final remark, just to recap. What are the reasons of our performance in the first part of Q4? There is definitely a resilience of the Italian macroeconomic indicators compared to the other European countries. Okay. We are experiencing a slowdown in growth, but gross domestic product growth year-on-year as registered, if we say a slowdown, but not a shock. So moving from plus 4.9 to plus 2.6 and the conjectural variation is plus 0.5. And in relative terms, 2022 Gross Domestic Product forecast for Italy is equal to or slightly above the European average. So that's the first factor explaining the cue for start. Then there is a resilient advertising market in Italy, private consumption is still positive in Q3 2021 and 92% of the sectors in MFE advertising are still registering sales growth on a year-on-year basis. So let me say that the positive sign as we commented on the last part of September were confirmed by the first part of Q4. And then last but not the least, we have a unique proposition in the ITALIAN advertising market. Our cross media portfolio offer, as proven effective, in outperforming the market through the different cycle. So upside and downside is shown by the evolution of our revenue share on the total addressable market. So after this introduction on advertising, I hand over to Marco. Thank you.

Thank you, Matteo, and Good morning to everybody. Today -- also on my side, we will briefly commence the 9 month results and we are going to confer broadly all the outlook and guidance for the full year that we gave 1 month ago. To briefly summarize, the results in the first 9 months are in line with our expectation in the Italian performance and is ahead of certain financial and operating metrics, especially on the cost side, but we will comment them afterwards. As you have seen from the press release and on the presentation, we have reached a little bit more than EUR 1.9 billion revenue and we closed the 9 month results with a positive group net profit of EUR 78.5 million. Clearly the comparison with last year's performance is largely affected by the extraordinary positive events of last year that is accounting for almost EUR 130 million and if you remind them, they were an extraordinary gains on the sales of the mobile tower business. Some financial gains on ProSieben instrument and derivatives and the positive effect in our other revenue line coming from the Vivendi settlement. These are clearly something that are not replicable in 2022, and so is affecting a lot the comparison with last year. As far as the group net financial position is concerned, the 9 months end with EUR 877 million debt; that is better than the last year number, so the '21 number. And debt clearly has to take into account the fact that we have distributed EUR 133 million dividends and the voluntary tender offer on Mediaset Espana share caused a cash outflow of almost EUR 184 million, so the improvement versus last year is really remarkable having accounted these 2 very important events. The free cash flow generation at group level was a little bit less than EUR 360 million, again, a pretty remarkable number. Then moving to the Italian business, clearly Matteo has already explained everything about advertising performance. If we go to the other revenue line, we registered EUR 194 million revenue, everything in line with our expectation and phasing. And in terms of guidance, we confirm the EUR 290 million we gave 1 month ago, everything is going in line with our expectation. Clearly we're still facing some uncertainty regarding, for instance, cinema revenue, taking consideration that clearly this is a season where cinema revenue are traditionally pretty high. And so clearly the results on the movie that are out on the cinema are clearly going to affect the full year numbers. However we are pretty confident, as Matteo said also, regarding the other revenue that we are collecting from third-party, let's say publisher like DAZN that clearly will be exposed to the macroeconomic trend as all the other publishers in the market. Just as a remind, in the other revenue lines, this year we will have the positive effect of the DAZN contract I mentioned already, movie already mentioned. Champions League on streaming platform is performing very well. Clearly now we are entering in a period where Champions is not on screen. But clearly for October, the revenue has been very good. And all the retransmission fee and sale of content to OTT platform. So again, this line is performing as expected 1 month ago. Few words about cost. In the 9 month we reached a level of EUR 1,325,000,000, so total cost. The trend is consistent with our guidance that we have confirming and clearly this big number is composed by several trends, which clearly are going to explain something more. Looking at the third quarter cost evolution. We are very proud of the performance because we were able to act very faster in terms of adaptation to the top line trends and clearly we put already in the third quarter some efficiency actions that allowed us to have a decrease in the total cost of 4.4% in the quarter compared to last year number. That number is even more remarkable if you exclude inflation and energy cost. And as I said, excluding this effect, the decrease would have been 6.5%. So in the quarter, we were able not only to offset the energy and inflation increase, but we were also able to be below last year and more remarkably also below '19 numbers. Clearly we are going to replicate everything on the fourth quarter with more effect for 2 reasons. First is timing. Clearly, in the third quarter, our reaction has been fast, but clearly some of the obligation of costs that were already there, so we were not able to tackle them. While in the fourth quarter, clearly that is going to be possible first, and secondly, also because the amount of costs, so the base cost is clearly larger. And so all our action will be more effective. And our target today is to have a decrease of 20% of the total cost compared to last year. This means roughly EUR 120 million cost savings in the last quarter compared to last year. And that's the reason for which we confirm our guidance of EUR 1.8 billion, thanks to this additional efficiency actions and that would be implemented -- has already been implemented in October and will only be implemented in November. Clearly that is also the result of what we learned during pandemic. The company is prepared to be, let's say, very tactical and opportunistic, and we will adapt our cost base very fast to all, let's say, macroeconomic trends we are going to face in the coming months. Looking below EBIT line, financial charges were clearly -- they are not charges, but I mean financial revenue were positive for EUR 12.4 million and associate, again, positive for EUR 9.9 million. In terms of guidance, we are confirming the EUR 10 million we gave 1 month ago. And also in terms of associate our guidance is still EUR 15 million for the full year. Moving to investment. You see the numbers on the chart, and we are confirming the guidance we gave, so to be in line with last year, EUR 270 million, EUR 280 million CapEx. That clearly looks pretty boring in terms of comparison, but in reality is the result of strong efficiency actions given the euro-dollar exchange rate trend, that is clearly, let's say, negative for us and also to the Cinema reopening that is clearly causing an increasing investment in that respect. Lastly, moving to cash flow. The company free cash flow is around EUR 200 million in the 9 months. So again, pretty remarkable. And again, if you compare these numbers to the '19 first 9 months, you can appreciate almost double in terms of generation and then, again, [indiscernible]. Finally, for the full year or year-end, let's say, net debt expectation, we are confirming that we are going to be around 1x net debt to EBITDA as forecasted. And this already including the voluntary turnaround on Mediaset Espana and the dividends I already mentioned. I finish my presentation. So I'll now give back the word to you in the Q&A section. Thank you.

[Operator Instructions] We will now take the first question. It comes from the line of Fabio Pavan from Mediobanca.

Thank you for such a detailed presentation and for taking my question. I would love to go back to the outlook you provided for Q4 as it seems to be much better than the outlook provided by other European broadcasters. So can you provide more granularity on the evolution in the quarter eventually which sectors are driving this outperformance? And also if you start to assume you have already managed to capture the results in a better audience in the quarter. Thank you.

Okay. I answer the question. Thank you, Fabio, Matteo. So with regard to outlook, Q4, I can, to some extent, repeat what I already said. We had -- how to say, the reality is we are in a market with high variability and low visibility. You can easily check this. If you think that when we met 1 month and half ago, we were commenting on a tough September period with the second part of September, recovering. So it was judged as an early indicator for October, but who knows actually October and the first part of November confirmed this positive trend. Our interpretation is that, as I said, probably what happened is that the majority of advertisers adjusted the budget allocation with a shift from Q3 to Q4, of course, the general trend is a downward trend, but they rebalanced to cover Q4 that typically is very important in terms of sales. For sure, we are benefiting from a positive audience trend, both in terms of share and in terms of total audience. That is why we had a conference price last week with Pier Silvio Berlusconi commenting on this, because, as I said, we are, let's say, positive compared to 2018 baseline. But to some extent, we know we are an exception -- a positive exception while the other broadcasters are below year-on-year performance, and this definitely helps. I would also add to comment about our resilience is that we have -- we were, let's say, recognized by the fact that we have a good portfolio of thematic channels. A good part of our growth is part of the thematic channel strategy. They account for 11, 12 points of audience share. And so this definitely helped. And on top of this, our cross-media offer, so TV plus radio plus connected TV plus digital. And even digital out of home is definitely helping in managing the context. Having said this, you should take into account that, as you know, Q4 is the most important quarter in our year. You know from our past track record that it accounts for 30%, 1/3 of our total year revenue. And as I said, they are equally weighted between the first half and the second half. So some positive, let's say, lights on the first half. But honestly, the second half will be definitely impacted by the World Cup. And as we said, we don't know to what extent, but we know in advance that it will be a negative second half of the quarter. And you know the weight of the 2 parts of the quarter. So it's very important, and that is why we stay very cautious with our year forecast. That's my answer. I hope to have answered and give you more color.

We will now take the next question. It comes from the one of Julien Roch from Barclays.

My first question for Marco. The total cost in Italy were EUR 1,325 million after 9 months. Last year, in Q4, it was EUR 535 million. You said you would save EUR 120 million, EUR 535 million less EUR 120 million is EUR 415 million. EUR 415 million plus EUR 1325 million is EUR 1740 million, not EUR 1800 million, which is your cost guidance. So can you reconcile the 2, Marco? That's the first question. Second question for Matteo. Can you give us an estimate of how much you think Rai will get for World Cup advertising? Now I understand it's very difficult. It's the first time it's in the autumn. Italy is unfortunately not playing. Rai does not have advertising in prime time, but still a guesstimate will be appreciated. Is it EUR 20 million, EUR 40 million, EUR 60 million? And my last question, which is the usual one on Page 10. Can you give us a split of your audience between the 3 components you put on Page 10?

Thank you, Julien. You're right. But you have to consider 2 elements last year, as you remind, we had almost EUR 50 million of extraordinary cost that clearly is not going to be replicated. And then you have also, let's say, to remind the inflation that clearly is going to impact it. In any case, we are going to have EUR 474 million cost in the fourth quarter. So that's exactly reaching the 1.8%. So that's looking at 2002, Matteo, then you can answer to the other 2 questions.

Okay. Thank you, Julien. And with regard to the impact of World Cup, honestly, we don't know. We made a lot of assumption calculation, but honestly, it's difficult. It will be definitely material. But we actually -- we don't know because there is a high uncertainty about the audience performance. The first match is Qatar versus Ecuador, just to say, so not very attractive. There are also some very important matches like Germany versus Spain. And for sure, the second part of the World Cup will be definitely interesting. So I assume December probably more impactful than November. But honestly, we don't know -- it's really the first time. And while in the past edition when we own the rights in 2018, it was, for sure, a positive sum game because it was a big event with no TV current programming running around, while November, December, TV programming, Mediaset and also other commercial television is running smooth and there are no major discontinuation in TV offer. So if the event is not attractive, audience will stay -- the audience could split in a different way. And I assume that also advertiser will be, to some extent, quite tactical. They should wait and see the audit results of the first part, and there could be an uplift in the second part. So we have, let's say, elaborated our scenarios. As I said, they are material. So we are considering dozens of millions, but we don't know the exact numbers. With regard to the split of free screens is a never recurring question and we don't comment on the split. Again, what I can say is that the total contribution of our cross-media offer beyond the linear TV is, again, material is a relevant percentage of our offer. And moreover, 80% of clients in terms of our weighted revenue have adopted this media mix, so TV plus connected TV plus digital, plus radio. So we are used to adapt our cross-media offer according to TV audience performance and connected TV growth to offer the best mix. The only thing I could add is that, as you know, from any country in the world, the connected TV growth is a global phenomenon is very attractive advertiser and it has grown significantly year-on-year despite all the upside and downside of the economic cycle. So that's it.

If I can ask a follow-up question on the World Cup. Now I understand it's really difficult to give a number. So to help us, maybe could you give us how much revenue you made in 2018 when you had the World Cup? And then how much revenue in Italian TV is in prime time. So the percentage of prime time as a total advertising 2 numbers, if possible?

Yes. Okay. We -- I remember that we also declared [Technical Difficulty] 2018 when we commented on the World Cup, the total revenue collection was around EUR 95 million at that time. And sorry, I lost the second part of the question. Could you kindly repeat, please?

Yes. What percentage of television advertising is in prime time because Rai does not have prime time advertising, so they obviously won't have any prime time advertising with the World Cup?

Okay. Prime time, it depends on what do you consider by prime time because there are a lot of definitions. There is the typical prime time, from which time band?

So the one where Rai don't have advertising, which I think is after 8:00, is it?

No, it's not, Julien. That's not the case. In Italy, we don't have any limitation in prime time for Rai. They have a daily limit and a weekly limit, but they don't have a specific limitation for prime time.

Sorry, my bad.

No, actually, I didn't catch your question because actually, they can offer prime time. And for them, it's important, I would say, at least 2/3 of the revenues are in prime time that, again, there is a mismatch with the World Cup schedule because 2/3 of the matches runs in daytime, mainly in the first part. That is why we say, okay, it's attractive, but probably not so attractive. And that is why it's very difficult to judge in advance the potential. For sure, again, as the World Cup goes on, the audience potential will grow definitely, I would be surprised.

We will now take the next question -- it comes from the line of Thomas Singlehurst from Citi.

Yes. 2 questions, if it's okay. The first one was just on that topic about visibility. I see exactly what you're saying. Visibility is contracted. Can you just talk about the phenomenon of visibility? Is that do you think now are just a permanent feature of the Italian sort of TV advertising landscape that visibility will be fairly restricted going forward? Or do you think that we will get back to a point where you do get more forward bookings and more visibility on advertising revenue as hopefully things come down. So that's the first question. And then the second question was on the cost saves. Obviously, a very significant number for the fourth quarter. Is there -- I mean, is that true cost savings in the sense that it's actual reductions in cost? Or is it cost deferral? And I'm interested in whether there is scope for incremental cost savings for the full year 2022?

I'll take the latter. Actually, the cost saving program has started in -- already in the first part of the year. The problem is that we had some cost increase in the first part of the year that was, if you want, adding a little bit the efficiency in the sense that probably you remember, we acquired the Coppa Italia rights last year. And so cost of that started September last year. And being the larger number of matches played in, let's say, starting from January. The biggest part of the cost rate has been in the first half. And so first half '22 had a non-comparable cost increase due to the football rights. And also, also the dozen contracts we mentioned before, was started to be implemented with the last year's Italian championship. And that, again, started to be accounted in September last year. And so again, the first half 2002 has been affected by a non-comparable cost increase. Actually, the underlying efficiency was already present, but you didn't see them because of that non-comparable events. Clearly, last quarter this year is the first quarter where this compatible -- these non-comparable items are now comparable because they were already last year. And so the efficiency are there. So that are the main reason. Clearly, in addition to that, there are also some tactical cost savings. We implemented already in July, looking at the schedule for 2 reasons. First one, because our revenue was clearly a little bit weaker than expected. And secondly, because audience performance was so good, that frankly now, we don't need a strong program. This program has been postponed to us next year. And so that are the main reasons. So I hope I have answered before leaving to Matteo just a personal comments on visibility. I believe that, let's say, the new word, it's all on time. So clearly, if you book a web campaign, you don't have visibility just because you can decide really day-on-day. So I believe that the industry trend is making these out of standard. I mean the digital world that's taking new way of behaving in business, and that's also affecting industry that in the past was managed in a different way. But then I'll leave to Matteo to a more precise answer to visibility.

Thank you, Marco. I simply build my answer on your remark. As I said, visibility couples with variability, that's the reality. And honestly, over the past few years, 2020, '21, '22, we all get used to this market that is, on the one hand is resilient and proactive because the markets definitely proved very reactive, but with an increased degree of volumes to tell the true, the beginning of September was quite concerning, while the second half of September was encouraging, but none of us would have bet on the performance we had in the first quarter of Q4. So that does not mean that we are not in control because that comes to our portfolio offer. And we are lucky because, okay, leading linear television combined with an important Connected TV offer plus digital we are the leading publisher in Italy, and we are also the leading radio group in Italy. And for example, over Q3, we combine -- you have the market data, so the Nielsen data. So you know that the Net TV is down in Q3, while for example, radio and digital are experiencing a single-digit positive trend. I'm talking about the market, not our portfolio. And again, connected TV is a double-digit growth business. So our capabilities, let's say, to absorb the upside and downside of the market, thanks to this offer and limiting the downside leverage on those segments of our offer that are still growing. An important effect that they had on visibility, Marco mentioned the sports rights, the football offer and this definitely helped because we are -- we have 3 offers Serie A, Coppa Italia and the third-party partnership with [indiscernible] Serie A, and then Champions League. All the 3 football competition are offered to the market with a forward-buying mechanism, and this helps to understand to have a better visibility compared to our competitor in a range of 2, 3 months because we try to sell in advance this competition. And at least for a part of the market, we know if clients are active with advertising campaigns in the following months. We don't know the amount, but we gained some competitive edge because of the football trading that is a forward buying approach. That is why having no full of for November and December and time of World Cup, we are so cautious for the remaining part of the Q4. Okay. I hope to have answered.

One very quick thing to say is should we -- should I infer from your comments about cost saves that your approach for 2023 will be to just remain flexible, see where the top line comes out and then react as you see the top line evolving? Or will there be a follow-through effect?

No. I do think that continuity in offer, combined with flexible adaptation both of TV programming and of our commercial policy has been the successful recipe over the past 3 years. So we are not concerned. We are, let's say, we are in alert mode and we are very, very reactive and that's the way it goes.

As far as cost is concerned, clearly in 2023 will be a mix of effect. Clearly, we will have inflation increase to face. Anyway, we will have efficiency actions that are going on, that are structural efficiency. Among them, we have also to include some of the synergies. We have declared already with Spain that will probably start to show some effects already in 2023. So in the structural part of our cost base, we have 2 -- these 2 elements to face next year. And so these will certainly imply some net decrease in cost. In addition to these structural and fixed [indiscernible] cost base, we have the scheduling and we've shared, clearly, we will adapt the powerful and the power of the scheduling depending on the macro trends. In any case, from the content point of view, we are very happy. The lineup is very good and powerful. So we are, in any case, projecting a pretty strong audience trend also in 2023, and that's clearly a great help because this is allowing us to be very flexible on scheduling depending on the top line. But all in all, I would say, a minus can be also next year in terms of cost.

We will now take the last question. It comes from the line of Stefano Gamberini from Equita.

As regard to cost, Marco, could you just explain in the case of flat advertising trend 2023, could we expect a decline in OpEx and what is more or less the magnitude of this decline? The second is what is the flexibility that you have in terms of a decline of 100 basis points in advertising trend in terms of cost savings that you see right now. The second question regarding the TV sector, you underline, you were able to outperform all the other players, which are suffering in terms of audience AGCOM underlined that in the third quarter -- sorry, in the second quarter this year, the total viewers were down more than 10% compared to pre-pandemic levels. So could you elaborate a little bit about this problem of TV, how you can solve as sector overall? And if this trend will continue next year, what are the risk in terms of advertising trend as well? Then 2 final questions. One, regarding the situation of Persian there were some rumors of interest of ProSieben there were some room of interest of ProSieben for Sky Deutschland and then denied. The new CEO arrives there. So do you really expect an acceleration towards the market consolidation from ProSieben or not? And finally, my typical question regarding 8 hours according to the highway, something happened. Now there are some talks. Could you update us on the situation and if you see some interest on your stake that I understood you want to dispose or to maximize the value, we can say this way from some investors considering that probably deal should arrive shorter.

As far as costing is concerned, the budget is not yet there. So it's very hard to answer to your question precisely. But I mean, I will give you some -- we are working in any case, the major trends we are going to face -- we are expecting an inflation impact on our cost base next year in the region of EUR 15 million, EUR 20 million coming from energy cost mainly, but also some contracts, as you can imagine are linked to inflation, like, for instance, lotteries and in any case offices will use. So that's clearly the first objective we have to assess, not a big one, but in any case, material. And that will be certainly financed through all the effect of all the efficiency plan we put in place this year. And that's the reason for which I said before that we are, in any case, targeting lower than 2021 -- sorry, lower than 2022 number for 2023. The magnitude of this reduction clearly will be very much depending on, as we said, the advertising trend because clearly will depend on how strong our scheduling will be and will be clearly adapted to the advertising trends. But what I can say is that certainly next year, we are going to generate cash more than this year. And also operating profit margin will be higher. So we will recapture a little bit of profitability next year. And moving to the total audience answer to material. But I mean I will complete with the answer regarding ProSieben. I mean it's a difficult situation to comment because clearly, we were not informed about the firing of their CEO. We clearly learned it as you did it. Clearly, it was something that was a bit shocking for us also because, I mean, he was -- the former CEO was just confirming the guidance. And so clearly, the profit warning after, let's say, the changes in the CEO clearly cannot be considered well accepted by us, fair enough. It's part of the life. I never met Bert, so clearly, I cannot comment on his strategy. I mean, as far as I -- I mean, I got it, we don't have a clear view on what the strategy will be. That's clearly not the perfect word. I hope that soon the company will say something. Share price performance clearly is also reflecting the fact that the market is not so happy about the conglomerate strategy that the ProSieben was trying to implement in the past. So we hope that the future will be different. Clearly, Bert is coming from media, and that's good. We speak the same language, if you want. So we are waiting to see what can be the plan for the future. Clearly, outside in, we didn't see ProSieben actually answering to the big challenge that the industry is facing today, one of which is the question you just posed to Matteo and then Matteo will answer you. For instance, audience decline, but also monetization is a big challenge, lack of scale compared to the digital giants. It's another challenge. And digital transformation is the further one. So there are many industrial challenges that, frankly, were not facing an answer from ProSieben the past. I hope that Bert can give an answer. As far as our position is concerned, we just disclosed to the market. We have secured close to 30% of the voting. Just to confirm that we are a long-term investor. And we clearly believe in the industry. We clearly believe in Germany, and we clearly believe in Europe. As far as the rest, as I said, it's a little bit up to the company to say what will be their strategy in the future. And let's hope that this new strategy will be different from the past and will show some value creation for the future. But I mean, clearly, we are going to be -- we are ready to help the company if needed. We are ready to talk to the company. They want to share business trend, business, let's say, projects, whatever. It's important, I believe, that we give answer to the challenge because otherwise, it's difficult to make the share price increasing without giving answer to what is impacting on all the media company in Europe. Lastly, on 8 hours. I mean, frankly, I got some news regarding consultant appointed by Rai, but frankly, I didn't see any news on talks. And actually, as far as I know, there are no talks with Rai regarding the possible consolidation. As you said, we are sure that the consolidation will happen, clearly taking, probably longer than expected. Changes on the government is clearly not helping but I believe that it's good for everybody, not only for us because it's an infrastructure that can have a lot of benefit in the consolidation for all the stakeholders. And so I think that will happen. Time is more in the Rai end than anything else. But I repeat there are no talks as far as I know, currently Matteo, maybe you can answer on total audience.

Yes. Thanks, Marco. So just a quick, and I think a final answer in our conference call, the total audience is a very passionating question. I have in mind Stefano, the AGCOM report on the long-term trend. The nice thing is that if you read the magazine and newspapers commenting on that, Auditel servers forgot to mention the fact that if you compare, for example, Q2 '22 versus Q2 '21, you have probably, I remember double digits minus 10 in total TV audience tender. But anyone -- they forgot the fact that there was a lockdown in April and the European football championship in June. So taking into account these 2 facts that the organic trend is low single digit. So what I'm saying is that no one is hiding the fact that there is a long-term single-digit erosion of the linear TV. But again, we are really confident on the fact that a lot of the audience is moving towards Connect TV and digital. And this is almost compensating for this downward trend. I say this because I saw editorial data, for example, the last fiction we had. Each episode, 3.0 million viewers on linear and the total series got 50 million streams on connected TV and digital. The point is that as soon as Auditel will be ready -- is ready to deliver not only the editorial audience, but also the advertising audience we will be in the position to offer the market the incremental reach coming from nonlinear TV viewing. So time-shifted viewing on the mind viewing that is definitely an important part. Anyway, this should happen in the first half of next year. In the meanwhile, it's over 2 years that we have been delivering our clients' campaign records with the incremental reach. And we know that the contribution of connected TV and digital is more than proportional. So if you plan a 1%, 2%, 3% of Connected vision, you get to 4%, 6% of incremental reach, and that is why this is driving high the connected TV. And last but not the least, again, the strength of our portfolio, we should not forget the ready contribution. We note that each time we offer TV plus radio we get from 5 to 10 and even to 15 points of additional reach, thanks to the radio offer. That is why it's so strategic. And so we have, let's say, a perfect shock absorber in terms of reach, thanks to this combination of media. And I hope to answer we could talk about this topic.

May I ask you a quick follow-up, Matteo, regarding how many new connected TV for the total market arrived in the last quarter? I don't know what figure you have compared to last year?

Okay. Probably I don't have the number here immediately available. I would run the risk to tell you a wrong number. I can grant that it's growing, but they also changed the way of calculating this penetration. But the connected TV penetration is definitely higher. It's growing up, is over 50%, and we do expect that the last part of this year, also thanks to the World Cup and the state incentives will deliver an additional growth to the organic trend. So I will manage with Sara Bersan's team to give you the right number in the immediate follow-up.

Stefano, we can provide you the data after. Thank you, Matteo, Marco, and thank you, guys, for all the questions and for taking the time for the conference call today. As always, we'll be available for any questions or information you would like to ask. Have a good day. Bye-bye.

That does conclude our conference for today. Thank you for participating. You may all disconnect.