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

Good day, and thank you for standing by. Welcome to the MFE MEDIAFOREUROPE 2024 Full Year Results Web Phone Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Sara Bersan. Please go ahead.

Good evening, ladies and gentlemen, and welcome to the full year 2024 results presentation of the MFE MEDIAFOREUROPE. Today, the speakers are Marco Giordani, CFO of the Group; and Matteo Cardani, Managing Director of Publitalia. I will hand over immediately to Matteo for the audience and advertising outlook. Matteo, please go ahead.

Thank you, Sara. Thank you, everybody, for attending. Today, we will go through our fiscal year '24 results and provide a brief outlook on key indicators for the current trading period. We'll begin by analyzing the overall economic scenario with closing data '24 and early indicators '25 in Italy and Spain, countries where the outlook is still moderately positive despite the current period of high uncertainty. Actually, if we consider the 4 key indicators of the macroeconomic scenario, which are relevant to advertising evolution, generally speaking, before the tariff war exploded, they were moderately positive, low inflation under control, GDP is showing positive progression, low single-digit, moderate positive trend for consumption of goods and services. And therefore, confidence index is fluctuating around stability with very low variance. This is what is shown in Chart # 3. And turning to the advertising market at Page 4, the overall 2024 performance is positive, Italy, plus 3.9%, Spain, plus 4.2%. As you can see, in the chart with the positive trends of our main media, TV, radio and digital, television in Italy had a particularly stronger positive trend in '24, thanks to sporting events and the generally good performance of the medium overall. While in Spain, linear TV remains stable. And if we had connected TV, the overall trend for the main medium is single-digit positive. In this context, MFE cross-media strategy continues to combine the stability of traditional media, TV and radio, with opportunities for growth in new market segments. And -- so by adopting a flexible approach, we integrate legacy and digital media, leveraging synergy between Italy and Spain to announce local and international business opportunities. As we can see in Chart # 5, we enable our clients to plan a campaign across different media platforms, delivering a total reach that even over the top players cannot match. As shown on Slide #5, we achieved a higher monthly reach among orders, higher than Google and Meta in both countries. So now speaking about volume and product growth, MFE remains an essential part of any medium plan, whether considering broadcaster only, first screen only or total screen. We're leading commercial target total audience within the broadcaster only segment, as you can see in Chart #6. And we hold 40% share in Italy and 27% in Spain, as you can see in Chart #7. If we expand the view to first screen only and we include over-the-top estimates, the 2 graphs at Chart #8, reveal that the over-the-top services account for just 6.1% in Italy and 15.3% in Spain. The difference of this percentage in the 2 countries is due to differences in the digital adoption and also the subscription video-on-demand services penetration. We have estimates that they are around 40% in Italy versus 65% in Spain. Going ahead, we must remark the fact that the key factor in strengthening our total video, total audience proposition with the solid performance of our in-house content production which reinforces both the resilience of linear television and the growth of our digital platforms. If you can appreciate in Chart #9, in both countries, our top programs benefit significantly from connected TV and digital screens uplift, delivering net audience growth ranging from 8% to 50% depending on each program, and they enhance both reach and audience profile. And this content strategy has an impact on our digital offering that is evident in key performance metrics shown in Slide #10 because in terms of total time spent, we are experiencing a double-digit growth. The combined growth rate is above 30%. And we rank among the leading European broadcaster with over 1.2 billion hour views in both countries over the past 12 months. As you can see from this dashboard with all digital KPIs, they are all positive except unique browsers in Spain and that this is a work in progress. We are addressing through a single OTT brand strategy aimed at migrating the current brand Mitele to the Infinity platform, the well-known successful brand in Italy. So these 2 remarks with regard to content and technology are quite significant in MFE perspective, because they offer evidence about potential synergies in content exploitation, technology platform beyond the cross-country, cross-selling commercial opportunities. Then another interest in the market. We already commented on this KPI in the past conferences call. On Slide #11, you can appreciate the fact that there continues to be a positive multiplier effect between linear and digital. So we'll have to say that each of our content consumption, from linear to digital, generates higher revenue per hour. And now we can, therefore, affirm that the variety of our cross-media offering, which generate unmatched volumes compared to competitors, combined with technology-driven price leverage has led to a shift in our clients' media mix. And you can appreciate this number in Chart #12 for Italy and 13 for Spain. In both countries, advertisers are increasingly investing across multiple MFE platform. As said, so far, nothing matches the scale and the baseline reach of linear media, which, when integrated with addressable advertising creates an unparalleled cross-media reach. And the pursuit of the maximum reach is one of the key drivers and growth of cross-media advertising we did our client base. In Italy, the share of MFE clients investing in free media platform has increased from 66% in 2019 to nearly 82% in '24. And it's remarkable for the fact that digital out-of-home is entering the perimeter -- the new consolidated medium in '24. And in Spain we have significantly a similar trend rising from 30% in 2019, sorry, to 63% in '24. Now let's move on the final chart of my presentation before passing over to Marco. The advertising performance in fiscal year '24 is definitely very positive, plus 4.7%, the combined result of MFE. And it's the combined result of plus 6.8% in MFE Italy, better than the advertising market and minus 0.5% in Spain, aligned with linear TV trend. So as I said, the overall performance reflects the combination of steady or slightly positive trends in linear media and a strong double-digit growth in addressable media, which continues to represent a growing share of our business. So thank you, and I hand over to Marco.

Thank you, Matteo, and good evening also from my side to everyone and welcome to the full year 2024 presentation. At Page 16, you get the highlights that clearly show how the fiscal year ended in a very outstanding way, honestly, much better than we thought at the beginning of 2024. Consolidated net revenue amounted to almost EUR 2.950 million, plus 5% compared to 2023. And adjusted EBIT, excluding nonrecurring items of EUR 370 million. Just to remind that the nonrecurring components was almost EUR 50 million and refer to layoff and reorganizational expenses. Reported operating profit grew by 18% compared to 2023. Clearly entering below the EBIT, you can see and probably you have already read from the press release, we were forced, following the ProSiebenSat.1 Supervisory Board decision to, let's say, use the treasury shares in the deal -- let's say, signed with GA regarding the minority interest of the noncore activities. We were forced, as I said, according to IAS 36, to align the shareholding -- our shareholding to the value that the Supervisory Board, let's say, decided for their shares. And for this reason, we were forced to have, let's say, a write- down of EUR 128.2 million on our ProSieben 29.9% stake. As you know, clearly, that has been a noncash, let's say, item. But clearly, that's a pretty, let's say, not forecasted, let's say, action, we were forced to carry out our balance sheet following the ProSieben Supervisory Board decision. Adjusted net profit, excluding the just mentioned, ProSiebenSat.1 write-down amounted to EUR 266.1 million with an increase of 27.2% compared to the same figure of last year. Another important element was the free cash flow that was extremely high and reached EUR 343.3 million, much more higher than last year number, plus 23%. And that's clearly something that caused a pretty sharp reduction in our net financial position that fell from EUR 900 million at the end of 2023 to a little bit less than EUR 700 million in the end of 2024. And that has been achieved despite the distribution of EUR 140 million of dividends during the year. As far as the group net financial position for financial covenant purposes, that was below EUR 600 million compared to EUR 740 million of the previous year. This outstanding result will enable the group to finance its strategic development and once again, reward also all our shareholders. And that's the reason for which the Board of Directors today resolved to propose to the shareholders' meeting the distribution of a gross ordinary dividend related to the financial year 2024 of EUR 0.27 per each ordinary Class A and Class B shares with a pretty important increase of plus 8% of the previous year dividend payment. Then entering in Page 17, in the operating segment, Italian and Spanish operating segment. I will not comment again the advertising revenue, just a little comment on the other revenue line for which we registered an increase of 13.3% over 2023, reaching EUR 322 million. At the EBIT level, we registered an impressive plus 50% -- almost 50% increase with the EUR 221 million level. In terms of cost, we are fully aligned with the guidance we gave you. We were managing the cost base with a great efficiency approach. We built up a strategy to adapt the cost base in relation to the revenue worth evolution allowing the company to increase the profitability quarter-by-quarter. As far as the Spanish business is concerned, again, without commenting the advertising revenue, the other revenue line went up to EUR 84.7 million, and the cost was EUR 678 million in 2024. We have anticipated the fact that we wanted to focus on the local content. And so our programming grid was financed with new money to, let's say, to achieve the local content strategy. In any case, at the year-end, the EBIT in Spain was EUR 150 million, almost -- representing almost 18% EBIT margin that is the highest number among the European broadcasters. Moving to Page 18. And at the group level, I can give you also some guidance regarding 2025. We are expecting other revenue to be roughly flat compared to 2024. In that respect, a great, let's say, not certain and variable forecast is the one regarding theater -- theater revenue, that clearly will depend a lot on many conditions and also depending on, let's say, distribution of fiction and movie to other platforms. But I mean, again, our guidance for other revenue at the group level is roughly flat on 2024. Regarding the cost side, clearly, we are navigating in a very complex and unpredictable macroeconomic scenario. But in any case, this is something we have already proved to manage pretty efficiently. And so we can anticipate that also in 2025, our performance on cost will be driven by efficiency. In Italy, the cost base will not grow more than 1%, probably a little bit less than that. But in any case, that's our target. And in Spain, on the other hand, we will have some cost increase of roughly EUR 20 million caused by 2 main factors. The first one is not really caused by us. I mean the cost of labor rules in Spain changed, creating a pretty substantial increase in the unit cost of labor. And the second reason is the one that I already mentioned the pretty important intention to invest in local content to further boost our audience share. Frankly, the first result in the first quarter are already pretty clear, we are now on track and the investments we carried out last year and the ones that we carried out in the first quarter of 2025 are proving to be efficient and directed to the target. Always in Page 18 and moving below EBIT line. At the group level, financial charges was negative last year for almost EUR 24 million, in line with our expectations and guidance. Clearly, a lower number compared to last year, thanks to the ability of the group to generate cash and to decrease the debt level. In the result from investment accounted with equity method, you can clearly find the write-down already mentioned on ProSiebenSat. As I said, it was a noncash item, but it's something we were forced by the rule to take it. And clearly, if I have to move to the next year, the 2025, let's say, guidance in that respect, we can guide you on a EUR 25 million of financial charges. And on the associate line, we confirm the guidance of around EUR 15.5 million, excluding any impact on ProSieben because, as you know, and you can imagine, we don't know anything about, and so it's very hard to make any forecast in that respect. Moving to the investment. CapEx, mainly Page 19. Clearly, everything in line with what we guide you. I mean, no big issue, EUR 375 million. On that number, frankly, it's EUR 10 million below our expectations because we had some phasing issues. So probably moving to 2025, we will have this phasing effect affecting 2025. But all in all, we are targeting the same amount than 2024, also into 2025. Lastly, Page 20, free cash flow we already mentioned at the beginning of my presentation was a very outstanding performance. EUR 343 million, let's say, cash flow generated in 2024, plus 23% compared to 2023, a remarkable, I believe, performance. That clearly helped to reduce the financial debt that went down from EUR 900 million at the end of 2023 to EUR 692 million at the end of 2024. And I am sorry to remind you again, but in this number, we have distributed EUR 150 million -- EUR 140 million in dividends to all MFE, MEDIAFOREUROPE shareholders. I mean, MFE has, once again demonstrated the ability to convert profit in free cash flow because that, we believe, is our main objective. And we did it while maintaining a high level of industrial investment. And we had a cash flow conversion of almost 96.5%. And that's clearly the best result we could have thought about. Entering -- before entering in the Q&A section, I would like to remark that the future is pretty uncertain. But we are pretty sure and we have also proved in the recent year to manage good years and bad years and always generating a pretty remarkable cash flow and reducing the debt level on a like-for-like basis. And that has always been done without forgetting about our shareholders. And so we were able to combine industrial investment and shareholder remuneration. That's more or less all I have to say. I just leave you with Page 21. That's something that is reminding a little bit the dividend that the Board of Directors has just approved, how it's compared to the past and also how it's compared to the price of the shares gained in the stock exchange. And I just wanted to end my presentation saying that on a like-for-like basis, we are still targeting our net debt-to-EBITDA ratio below 1x also for 2025. Now I'll leave you the room for any questions. Just to remind you that in any case, we are not in the position to answer to any question regarding the offer of ProSieben because, as you can imagine, we are restricted by confidentiality. And so the only thing we can say it is what has been already announced. And so please don't ask anything more because we're not in a position to answer. So it's now time for you to pose any questions.

[Operator Instructions] And your first question comes from the line of Julien Roch from Barclays.

Yes. Two questions for Matteo, one for Marco. On Page 10, you are giving us for the first time, I believe, your number of hours on demand. Could we get the total number of hours in both countries or the linear hours in both countries? That's my first question. Then the second one is you gave us Q1, but can we have some indication on April? And then the last one for Marco. I know you just said don't ask me anything about the ProSieben offer. So I won't ask anything about the offer. But once the offer is finished, you are already above 30% because there was a press release today saying you were at 30.09%. And according to German regulation, if you have more than 30%, then you can buy the shares in the market. So after the offer, so I'm not asking a question regarding the offer, but after the offer, as you can buy shares in the market without paying a premium, what's your intention post offer regarding buying ProSieben shares in the market?

So I'll start answering very, very directly. I mean we said in the press release that the main intention of the offer was to gain flexibility on the future and having a little bit more to say on ProSieben. And so we have no target in that respect. We will see what will be the outcome and then decide. We don't have any specific plan, and we will decide afterwards also depending on external conditions and specific condition of the company. So no target in that respect.

Okay. Thank you for the question. So if I got it right, the question is about how to compare the digital KPIs shown in Chart #10 with the trend of linear television in both countries. Am I right?

Yes. So you gave us the total -- you gave us the on-demand hours. So 919 in Italy. Can we get the linear hours or the total hours?

No, the things I can share is that compared to this double-digit growth and total time spent in our, let's say, extended television or connected TV and digital on-demand consumption, the baseline for linear TV is quite stable in Italy, around 0, minus 1 or minus 2 according to different periods. But the combined effect is definitely positive. We are honestly in '24 suffering a little bit more in Spain where both of us, I mean, Atresmedia and Mediaset Espana are suffering for a single-digit decline in linear TV audiences. But the interesting thing, as Marco mentioned before, we are investing a lot in our own content and the initial results in Q1, even Spain are quite positive and encouraging results. We have definitely positive results, mainly in prime time. We gained leadership in 5 peak times out of 7 days a week in Spain. So that's why I say we are, generally speaking, confident even for the outlook of Q1.

Okay. And then on the April trend?

Okay. Now with regard to our -- if we want to go higher than -- just sharing some initial indicators for outlook Q1. This is what has already written in our press release. So for the time being, we do not see any negative impact on the group advertising sales in the short term referring to the macroeconomic uncertainty and continued tariff overhang weighing on budget. For Q1, we have Italy that is growing around 1% compared to the same period of the last year. . And it's remarkable the fact that last year in Q1, we grew by 5.7%. And while in Spain, the advertising market had a slower start in Q1, also due to the difficult comparison with the same period last year when it grew by 8%, but however, as I say, the group sales in Spain are recovering during the quarter thanks also to the positive and encouraging audience results, although they remain slightly negative overall. So we do -- we can share the fact that overall, the MFE Group advertising revenue in the first quarter '25 are similar to those we had in the first quarter '24 and that's it.

And your next question comes from the line of Milo Silvestre from Equita.

Two questions from my side. The first one is a follow-up on advertising. So if you can elaborate a little bit more on what you expect on the year. The second one is on the free cash flow guidance. If you could provide some update on that. And if you see achievable level, the EUR 340 million achieved in 2024?

I'll start answering to the free cash flow question. I mean clearly, it's all depending on the top line. So it's very hard to answer having so uncertainty and scarce visibility. Whatever we can say is that we have proved to convert profit in free cash flow. And that is our main objective. As far as what the market will do, clearly, we cannot do anything about. The only thing is that we need -- and we will certainly maintain and probably increase our market shares. And the cost discipline will allow us to maximize the cash flow. In terms of the absolute amount, honestly, if you give me the top line, I can answer you, but I don't have the top line. So it's very hard for me to answer you. Last year was really an outstanding performance, but was also driven by a strong top line development. So unfortunately, no precise answer. I think that the track record is there to say, and I can confirm that cash conversion and free cash flow generation are our top priority. Nothing else. Matteo?

Okay. Thank you for the question. Regarding what is our outlook for the full year. Of course, it's reasonable to say that due to the high uncertainty and volatility of the international macroeconomic environment it's difficult to say, but we are, let me say, quite positive because -- I start from the end. My point is that we continue to have comparison with 2019, the year first, the COVID outbreak. And it's quite significant because if you consider the last 5 years time period, we went through. I mean, when I say we, I mean, advertisers, broadcaster agencies. We went through a series of, let's say, black swan situation, COVID, the outbreak of the war in Ukraine, the energy crisis, high inflation then down. Now the uncertainty and unpredictability of the tariff war. But let me say that there are a lot of lesson learned on the advertiser side, and there are strong reasons for brands to decide that the best course is to stick with existing plans to protect the baseline of our business. And let me say that our offer with television at the core and cross-media reach offering the best in terms of maximize, reaching for the advertising investor is a safe harbor in times of uncertainty. And the -- that means that if we take a look after the Q1 to the remaining part of the year, we do expect that the advertising collection could be expected to be more favorable in the coming quarters because we have some easier comparison with last year. And it is worth mentioning that the group, both in Italy and Spain, another case for synergy across country. We have secured the availability of the free-to-air TV rights of the best peak time match of the first edition of the Club Football World Cup, that will be held in North America in June and July. While last year, our competitors broadcasted a major international sporting events. So let me say that thanks to the short-term stability in advertiser decision on their budget combined with the strength of our offer plus the added value of sport events in June, July, the rights of the FIFA World Cup for clubs. Our outlook combined with a limited viewability, but it's moderately positive. So I hope that answer to your question.

And the question comes from the line of Andrea Randone from Intermonte.

Just a couple from me. The first one is about your average cost of financing for 2025. If you can remind us this number? And the second one is just an update -- I mean it's a very frequent question. But still, I'm asking if you can tell us something new about El Towers. So any deal is approaching or not?

Yes, as far as the cost of debt, our plan is that it's going to be below 2%, all included. So we are not expecting, frankly, any material changes in that respect. And it is also a similar number we had last year. As far as El Towers is concerned, I mean, clearly, I have nothing to say in particular. As you know, we are working with Rai. Clearly, it's not a fast process. There are a lot of, let's say, bureaucratic steps to pass through, clearly not -- or which clearly we're not so accustomed to, but that's the case. So what I can tell you is that I don't see any major step in the near future. We are working, let's hope that one day or the other, something will happen. But for the time being, no foreseeable step in the next week or month.

Okay, thank you Marco and thank you Matteo. Thank you very much guys for your time. As always, the Investor Relations department will be available for any questions you may have. Have a great Easter break.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.