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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, ladies and gentlemen. Welcome to the Q1 2018 Results Call for the ProSiebenSat.1 Media SE. This conference is being recorded. Today's call is hosted by Mr. Ralf Gierig. Please go ahead, sir.
Good morning, ladies and gentlemen. Also a warm welcome from my side. We welcome you to our Q1 2018 Results Conference Call. Today's call is hosted by Conrad Albert, our CEO; and Jan Kemper, our CFO. Conrad and Jan will first lead you through our presentation which is made available on our webpage and via the provided download link. The presentation, as always, will be followed by a Q&A session.With this, I hand over to Conrad.
Good morning, ladies and gentlemen. Sorry for the delay. I was on the mute button for a little too long. This is Con Albert. Let me start with giving you an overview on Page 3, operational update for Q1 2018. As you can see here, we have started working at the beginning of the year with our new group setup. We've implemented our 3 pillar strategy of 3 pure play setup as I may say, as per January of this year. TV ratings have seen a very nice and robust development. We are year-to-date, slightly above prior year by 0.4 percentage points in our channels compared to last year and that's especially good news, as I think that in view as we had the Winter Olympics, Champions League and other strong sports coverage, that's we -- despite that have shown that ratings performance is very strong, especially if you take that in comparison to our competition. So we are on a positive trend here, also by the way, the year-to-date.TV advertising, positive development in Q1 as well. Also given the surrounding factors, I think that's a very solid, reassuring sign. We have implemented our data strategy by founding netID, that's the foundation that we created together with United Internet, RTL, us and we also [indiscernible]. We'll go into that a little bit deeper later on.The distribution business, as always, let me say, it brought joy and satisfaction here as a couple of new distribution deals, especially in the satellite population and the continuing growth in HD subscribers. Red Arrow Studios, our global sales business has been significantly strengthened by recent acquisition of Gravitas, a large content distribution entity with a strong footprint in the U.S. and with NuCom Group, we've started now executing our growth strategy and our new partnership -- growth partnership I may say, with General Atlantic as we have closed the transaction on April 4 of this year.Now moving ahead to Page 4, an overview on our key financials for Q1. On the revenues, was EUR 881 million. You can see that we report a slight decline by 3%. However, if you look at this from an organic and foreign exchange adjusted view, you would see a slight positive growth that is by the way, driven by a strong TV advertising performance in Q1 that is ahead versus prior year by 2.5% adjusted EBITDA, up by 7% with EUR 200 million and adjusted net income up by 6% to EUR 93 million.I said before and as you can see here on Page 5, we've implemented our new group setup with the entertainment pillar, The Red Arrow Studios for content production and global sales, and our NuCom Group, again the entertainment segment, the biggest part of these 3 good setup is sort of one-stop shop as I always like to say, for everything that is about content, including all monetization models, [ free pay ] transaction and this basically embodies our wholesale -- our holistic and 360-degree approach to our content business. And what's always important to reiterate and make it clear that we should always look at facts and let us not be guided by this so much.TV continues to lead both in a reach and in viewing time, and you can see that here. But here on Page 6, with television linear TV are still remaining the superior and medium for mass reach consumption across all age groups of penetration or reach of more than 90% whereas paid video-on-demand nonlinear, is obviously, I would not neglect that on an increasing path, but still in the 30%, 35% range as it comes through to reach. So you can see here that we are operating on a very strong reach basis still and it looks like this will be sustainable for quite a bit into the future. And the overall video usage here on the right hand side makes that even more transparent with still more than 220 minutes of linear TV consumption per day versus a couple of minutes, single-digit minute number for video-on-demand nonlinear consumption TV in our core market remains the lead and the key and the most important medium.And this is -- if we turn to Page 7, the company is buying ongoing panel upgrades that are to include online usage and that's communicated to us by AGF. As you can see here, in last year in H2 2017, we have already implemented browser TV usage into the reach measurement and gradually catch up apps and so forth, will be included into the AGF data as it was announced to us across or along the year 2018, and even the implementation integration of the YouTube usage will be part of the reach measurement development roadmap.On Page 8, let's have a look at the ratings development, really as said earlier, robust ratings despite a strong counter programming by especially the public broadcasters in Q1, with the Winter Olympics with generally a lot of sports coverage. On Q-by-Q comparison, we have seen a stable rating development. As I said earlier, if we look at it on a year-to-date basis, the current ratings development this past has been developing in a more positive way, even I said year-to-date with 0.4% ahead versus prior year, and that's very much different from our competitors.Just a quick highlight also for Austria. The colleagues in Austria have supported our overall business with the new record market share and all-time highs for our PULS 4, and including other channels in April amounting to 31.2% and that's really a great achievement and that's why I would like to point that out that it's complemented by PULS 4 of [indiscernible] and also ATV, our recent acquisition in Austria is increasing its ratings on a continuous basis with now 4.1% in April.Now moving on, the German TV market as you can see here, we have increased our audience share leads versus our competitors in Cologne versus Q1 last year to now 1.1 percentage points. And that -- and I would really like to point that out, is driven by stable ratings and solid performances of U.S. and local commission content. So in our view, the smart mix of our program grid is key. We will always have a strong foothold in U.S. We will also -- and that has proven to be very positive in the first month of this year, develop our local program reach.And as you can see on the following Page 10, U.S. license content continues to deliver solid TV ratings. Young Sheldon has started tremendously well on [indiscernible] in January, but also established long runners like The Big Bang Theory continue to deliver as well as feature films, blockbusters, for example Deadpool with 15.3% on ProSienben.And here on Page 11, again you can see that also local commission -- local commissioned formats have been not only well established now, a couple of new ones like Das Ding Des Jahres and Mord Mit Ansage or a format that we have revitalized on ProSieben's late night show, Monday evening Late Night Berlin with Klaas Heufer-Umlauf. All of them performing really good and that on the basis of well-running established formats like [indiscernible] expanding our morning show that is now on really long-term continuous basis, the highest performing morning TV show in German television. And as you can see on the right hand side of the slide, a couple of new formats and renewed seasons of established formats are up in our slate funnel.Obviously, it's really important to note that TV is not only performing well with the audience, but also with our customers, with the advertisers and as you can see here on Page 12, TV remains the key for especially FMCG, FMCG is really seeing a nice rebound on year-on-year comparison. The only, let's say, downers obviously automotive and we all know where this is coming from. Very challenging climate in the automotive industry, the car emissions fraud scandal. VW especially has been and think it's not surprising for cutting gross spending across the board, and by this also in TV. Telecommunication is still showing the aftermath of consolidations that have taken place. Very nice, finance is developing increasingly well. TV ad spend in Q1 in the finance segment is significantly -- was 31.7%, up above total media expense growth. And within this insurance, the sector is very strong. And it's interesting because traditional finance service companies apparently they need to accelerate the customer value creation in order to avoid losing customers to new startups in tech firms. And therefore, they need to do image campaigns and there is no better medium for that than television, of course. So the key takeaway here is FMCG, very strong, important development, very important for TV as a medium.And just a quick glance on what this means, or what we do with this on day-to-day operational basis, obviously, we continue to maximize reach across all platforms. If you see here, for example, a recent example from Q1, Germany's Next Topmodel not only performing very strong in the traditional TV rating, currency was 21.5%. We're essentially doubling its reach through digital as you can see here. So that's one really synergistic effect of our setup and I'll show you in a second what this means in terms of monetization.Same thing comparably holds true for the -- this week effects we can generate certain formats. For example, Jerks Season 2 and Netflix original will now come or actually yesterday -- actually it will be also broadcast and aired on ProSieben MAXX and supports continues reach. And that in turn, enables and you can see this on the following page, our 360 degree sales approach. And for certain customers, this is really interesting because we can deliver TV, online, mobile, social print. We can work in the licensing segment and point-of-sales and retail with all our outlets and platforms. And we cannot only do that, we are doing that and that's something that customers value very highly with us. That's why Q1 has seen a really good start.On Page 15, as mentioned in the regular summary and the overview, you can see here netID, our single sign-on platform is legally established. We will launch this platform this summer. What our key objectives here, obviously, we want to have a single sign-on platform that's very reach-oriented, and by that, will be very convenient and very transparent in terms of privacy management for users. It will also from our point of view, will be key enabler for future-ready data strategy. It will be compliance with the upcoming GDPR regulation. And it will also by the way, make us more independent of these GDPR and potential future regulations, as we have active single sign-on opt-ins by the participants or by the users to sign up through netID and they will have huge access outside of any graphs of Facebook and Amazon and what have you, to all the products that we are offering, that United Internet is offering. We have outlets at RTL, it's offering as well an underlying potential of future partners of course, so that's an important step going forward.Turning to Page 16, a quick glance on our distribution business. You can see here the HD subscription development, very well on track. I think we said that also in our Annual Press Conference to reach our 9.2 million subscriber target as per end of 2018. So I said earlier, a very stable non-cyclical growth business that nicely adds up to a bottom line with every subscriber that we add. I just would like to point out 2 new deals that we did in Q1. A new deal with Diveo and a deal with freenet TV. Why would I like to point these out because these are new HD marketing platforms for the satellite population. And as you know, satellite has so far since the start of HD in 2010 only been catered to by HD Plus. So what does this mean, we will see competition in the larger wholesale population in Germany and we think and hold and are confident that they will gain traction fast and we will see an increase in HD subscriber take-up this year.Page 17, I will not stop for too long. Just again, we have shown this in recent calls I think a couple of times, that we are on all relevant platforms with all the features that customers, the viewers today would like to have traditional platforms, but also as you can see on the right hand side, we are present on all relevant over-the-top platforms.On this next Page 18, jumping to Red Arrow Studios, you can see that like we have given our global content distribution business a significant boost by acquiring Gravitas Ventures, a global distribution sales entity that we acquired in the U.S. They are adding 3,300 titles into our sales catalog and that's basically a factor of 4 as compared to our situation before the acquisition. They also adds more than 140 customers to the sales portfolio and this is really something that will put Red Arrow Studios International into a new realm, and push us -- our business on this app.On Page 19, let's jump to NuCom Group, as you have seen and as you can see here, we have now our closed transaction with our growth partner General Atlantic. We will continue to consolidate and control NuCom by holding 74.9%; General Atlantic came in with 25.1%. And I'd also like to point out that this was not really just 1 transaction, but essentially 4 transactions that we did, thanks at this point also to the team because there was really a lot of work. We have essentially bought out all relevant minorities at ParshipElite Group, Verivox, billiger-mietwagen and Amorelie. So we really cleaned up the setup of NuCom as we -- now having closed this transaction, can really focus on growing the business organically, but also together with General Atlantic really speed up and boost on the inorganic growth path with further acquisitions coming up.Operationally, we have started very strong into 2018, partial testing and excellent development of registrations and new subscribers, and I would like to point out that this is also significantly driven by upgrades and development and reaching out more into the mobile realm. So that's really an expansion performance that the entity is showing. Amorelie, a very strong development of B2C sales. And Flaconi also continuing with dynamic sales performances. They strongly focus on marketing and that's a perfect example of our playbook of cross-fertilization between TV and commerce and online vice versa.Almost closing with my part of presentation, I would really like you to take away 3 things. Our 3 pillar strategy is implemented, is working in full force, 3 pure plays where we really have shown [indiscernible] value, but we also can show a strong focus and more efficient growth across the board. I'm very happy to say that TV is showing a solid performance in Q1, our quarterly business is there to deliver and we are also very well positioned in our non-TV businesses.So by closing my part of the presentation with confirming our financial outlook, group revenues will continue to grow on a low to mid-single-digit basis, adjusted EBITDA margin will be in its -- in the mid 20%, adjusted net income will be at 50% conversion adjusted EBITDA to net income. Our financial leverage records will continue to be between 1.5x and 2.5x and our dividend payout ratio and that's what we will propose to the AGM next week will stay and will go into more detail in the 80% to 90% range.And with this, I thank you for your attention and would like to hand over to Jan.
Thank you, Conrad, and also good morning from my side. Let me continue with a closer look at the financial performance of the group in the first quarter of the year and give you some more details regarding the performance of our 3 new segments. So Page 4 -- 24 summarizes our few financial topics in the first quarter. On the revenue side and earning side, and as well in terms of our financial leverage, thanks to a solid start of our entertainment and commerce operations, we achieved portfolio and currency adjusted group revenue growth of 1%. This development was in particular, driven by our TV advertisement and distribution business as well as our key commerce assets.In the content production and global sales, we were operating in a still more demanding market environment combined with some FX headwinds, which led to revenue decline in the segment. Despite this, the group was able to achieve a very satisfying earnings performance both in terms of adjusted EBITDA and adjusted net income predominantly as a result of efficient cost management. As a result and due to a healthy free cash flow generation, our financial leverage declined to 1.5x net financial debt to adjusted EBITDA at the end of the quarter. With this development, we also reached the low end of our financial leverage target range, which gives us sufficient financial headroom to execute on our M&A deal pipeline.Let's now have a closer look how that translates into the numbers. As indicated earlier, our group revenues and earnings are temporarily affected by the deconsolidation of etraveli and COMVEL, which is our former package tour, as well as adverse currency effects mainly in our Red Arrow Studio segments, which were only partly compensated by first time consolidation benefits. In Q1 2018, this led to a decline in reported revenues by 3%. On a portfolio and currency adjusted basis, group revenue growth was at 1%. Due to an efficient part of program cost management and reduced other operating expenses, both adjusted EBITDA and adjusted net income increased in the mid-single digit percentage range. Please note that adjusted EBITDA partly benefited from IFRS 16 implementation, however, positive IFRS effect, negative currency and M&A effect are literally awash on EBITDA level. In terms of adjusted net income, IFRS 16 did not have a positive impact.Let me continue with the review of our segment performance on next page. Looking at our 3 segments, entertainment revenues increased by 2% to EUR 624 million. At the same time, revenues of both content production and global sales and commerce declined by 13% and 14% respectively. Let's now dig a bit deeper in order to understand the factors behind that.On Page 27, you can see that overall entertainment revenues were up 2% in the first quarter, which is -- within this, advertising revenues remain flat, which is a result of 2 somewhat a closing development of positive TV advertising revenue growth at around 2.5%, as well as an offsetting performance mainly of SevenVentures, but also softer AdVoD business. Distribution revenues again, increased dynamically by 14% helped by HD and certain new products. In addition to that, other revenues, which comprise our program sales, Pay VoD and Advertising Platform Solution showed solid double-digit revenue growth. In terms of profitability, adjusted EBITDA increased notably by 15% due to a combination of TV advertisement, distribution and internal revenue growth as well as good cost control, lower programming of cost and the benefit of IFRS 16.Let me now continue with the review of our content segment. External revenues of the segment declined by 13% to slightly less than EUR 100 million in the first quarter, while organic segment revenue development was also negative. Reported revenues have been meaningfully affected by a weakening U.S. dollar, which was about 15% versus the euro quarter-over-quarter. Revenues from our content production declined by 32%, mainly owing to an overall higher production volatility and phasing. Given our existing production pipeline, we expect the business to return to growth in second half of the year. The increase in global sales revenues can largely be attributed to the first time consolidation of Gravitas Ventures, and in terms of segment profitability, the operating margin remained about stable. However, due to the revenue performance, adjusted EBITDA declined by 8%, although as you can see, on the low absolute basis.Let's now move to commerce. The second revenues were down 14% due to the deconsolidation of etraveli and our former package tour business weg.de, which was only partly offset by the first time consolidation of Jochen Schweizer. Excluding these effects, the commerce segment had a solid organic revenue performance in the high single-digit range, primarily driven as Conrad mentioned, by assets such as Parship, Flaconi and Amorelie. Adjusted EBITDA was below prior year levels, which reflects 2 developments. First, the aforementioned deconsolidation in the -- deconsolidation effect in the amount of more than EUR 10 million. As a result, this implies prior year like-for-like comparable for the segment of about EUR 15 million adjusted EBITDA. Second, profits were affected by the already announced implementation of new media contract between our TV ad sales on SevenOne Media with an equivalent positive impact and entertainment. This being said, the operating margin would have been broadly stable on a like-for-like basis.Let's move to the next page with an overview of our financial net debt and leverage. Here as you can see, we continue to benefit from our strong balance sheet and at the end of March 2018, the group had a financial leverage of 1.5x net financial debt to adjusted EBITDA, which provides us with sufficient M&A firepower, which we intend to use in the next couple of months. Please note that our IFRS net debt definition does not include EUR 167 million of financial lease liabilities as easily footnoted on that page. Free cash flow before M&A reached a strong level of more than EUR 500 million in the past 12 months. And please note that our free cash flow in the rest of the year is expected to be negatively affected by a meaningful amount of severance payments and other reorganization expenses as mentioned at our Capital Markets Day end of last year. We expect this to turn into targeted EUR 50 million net savings by 2020.Moving to Page 31, let's have a look at our 2017 dividend proposal. Given the increase of both adjusted net income as well as free cash flow, the Executive Board of ProSiebenSat.1 proposes a dividend per share in the amount of EUR 1.93 to our shareholders. This is in line with our dividend policy and reflects a dividend payout ratio of slightly above 80%. The proposal will result in an expected total dividend payment of EUR 442 million subject to Supervisory Board and AGM approval on May 16 as well as the number of treasury shares being held at that time. With this proposal, we will continue our strong dividend track record over the past few years. The dividend yield, based on the closing price at year-end 2017 amounts to 6.7%.As you might have noted, we include the section on the quarterly adjusted EBITDA development in the outlook statement of our press release as we expect the phasing of program cost to normalize in 2018 after a deviating seasonality in the financial year 2017. More specifically, this return to normal seasonality we'll see program cost increase in Q2 and Q3 with an almost similar counterbalancing effect in fourth quarter of the year.In combination, we're still remaining overall negative consolidation effects. We expect this to lead to a decrease of group adjusted EBITDA, both in the second and also the third quarter of the year. This seasonality will have no impact on our adjusted EBITDA guidance on the full year basis with our financial outlook remaining unchanged for adjusted EBITDA in the mid-20% range.This being said, I would like to reconfirm our financial outlook for 2018 on the next page. We continue to target a low to mid-single-digit revenue growth on a full year basis. This development reflects the before mentioned deconsolidation on currency effects and also takes the higher level of revenue growth in the second half of the year into account. Adjusted EBITDA margin is expected to be in the mid-20% range. And last but not least, we continue to target an adjusted EBITDA to adjusted net income conversion of about 50%. Financial leverage target range and also our dividend payout ratio remain untouched.With this, I'd like to open the Q&A session.
Thank you. [Operator Instructions] We will take our first question today from and Laurie Davison from Deutsche Bank.
It's Laurie here from Deutsche. First question is just on the offsets, which you mentioned within the overall advertising figure from AdVoD and from SevenVentures, how do you expect -- the AdVoD as I understand, is a -- the loss of the contract is still 1 to Springer. SevenVentures is quite lumpy. Can you just talk about how you expect that to evolve for the full year? Second question is, the weakness in content production. You've mentioned this division is under review. Any update on this review, and would you consider selling the Red Arrow business? Lastly, can we just get an outlook -- some comment on emphasizing outlook for the second quarter, and what you're seeing in terms of audience share over May?
Laurie, I'll take the last question maybe and Jan will focus on Red Arrow and can also elaborate also on the -- your first offset question. Q2, TV outlook, well Q1 we've seen development in line with our expectations and that comprises by the way also somewhat weaker April due to the Easter phasing that has been this year part of Q1. Then we'll also execute positive developments in May due to some pull forward effects ahead of the World Cup Soccer Championships. So Q2 will most likely be in the neutral but could also be slightly negative because that leads to your second question with regard to ratings development. World Cup, that will happen in summer will obviously lead to a little bit higher TV overall reach, but private television, as this is only broadcast on public television, will most likely not benefit from that too far. So it's kind of difficult to foresee the Q2 development. It will certainly as part of the usual seasonality pattern of quarters be softer to what extent, it's hard to say yet. With regard to your questions, the different components of our ad TV revenue, again I said core TV ad revenue was 2.5% above prior year, has seen a very solid performance. A little bit of a decline in the ventures and in online advertising, not only attributable to the loss of one specific contract, but generally, we are seeing certain weaknesses in online advertising due to brand safety issues as for robot traffic and something that we can obviously potentially benefit from in our core business. Will we see a positive rebound here, we are working strongly on that. And we're also positive with all the 360-degree sales focus that our very innovative sales team is deploying on an everyday basis, and then maybe kind of lever it to our strategic review as regards to Red Arrow.
Sure. As said also at the full year presentation, I mean, the strategic review is ongoing. So obviously, you'll be the first to know once we have some information on that one. But until now, I can only reconfirm that the process is ongoing and we'll let you know.
So just a quick follow-up. When you were speaking about the initial slightly negative result, of the market or is that for your TV advertising year-on-year?
That's what we're seeing for TV advertising, generally advertising on year-on-year comparison for Q2 potentially, right.
For the market view or --
No, no, that's for us.
Our next question comes from Adrien de Saint Hilaire from Bank of America.
I've got 2 of them. You mentioned your guidance for 2018 is repeated, but there is something which I have not seen in your presentation is for organic sales growth. I think you talked about mid-single digit increase before. So do you confirm that guidance? And then the second question is around NuCom. Can we have please your Q1 organic sales growth? And I believe it's around flat. So if you can confirm this, why is it so weak and what is your outlook for the remaining of the year?
Sure. First of all, with regards to the guidance slide, yes, we confirm that. Just wanted to make the slide look a bit cleaner, but we can confirm that the second part of the slide is also reconfirmed. With regards to the NuCom Group, was a number of 7% -- 7% growth. But it doesn't change our outlook for the year and if you recall the mid-term guidance we gave out with 10% to 15% growth, that is also the quite opposite we target for this year. And please bear in mind that, especially our NuCom businesses are somewhat more skewed towards the second half of the year. Also, when you think about recent acquisitions we did, for example [indiscernible] also paying on the fourth quarter. So overall, that has some seasonality effect here.
I just have a quick follow-up for you. Can you tell us what's the remaining impact in terms of etraveli deconsolidation in terms of EBITDA for Q2, presumably because the business was sold in August last year?
I mean you can expect a similar impact as in Q1. So it's about EUR 30 million -- I think, not for [ etraveli ], let's say, taking the overall impact into account of the deconsolidation and consolidation, so the aggregate would be somewhere between EUR 30 million to EUR 40 million on the revenue side and about EUR 10 million plus on the EBITDA side.
Our next question comes from Chris Johnen from HSBC.
Thanks for taking my questions. First, on the change in disclosure, I mean you regularly put out 50, 60 page part tax on quarterly results, yet on the change here for your key advertising figure, there is no breakdown on the sort of bridge. What has changed, I mean, what was the thinking here? Why do you think that was a good idea? First question.
Sure. I think -- I mean, first of all, we look at the disclosure the company gave over the last 2 years plus. I think recently we took a step back and said okay, let's reconsider and think what is an adequate set of numbers to guide on, first of all, not doing the guidance on market figures, as of now, really played out well in 2017 for us as you might recall. Second, coming up with a consistent set on the group level with the 3 KPIs respective to 5 KPIs, then coming up with the KPI set on the segment level, which we consistently report over the next quarter and quarter and quarter, just to [indiscernible] models. We are aware that that's also necessities some of the [indiscernible] given the deep dives, case study and the like to give more disclosure on the development here and they are some of the assets. I think overall, there is a framework which is very -- which we are very comfortable with and overall we are talking about 15, 15 plus KPIs and this is where we want to go forward.
And related to that, I've seen that in commerce you no longer are providing sub segment guidance for style, health and beauty et cetera. I presume this is going to maybe change their way. I mean, you've put out quite a few guidances on individual assets and I'm thinking double-digit revenue category for WindStar, high-single digits Parship, I could go on. How we are supposed to track whether or not you're on delivering on both figures? I guess a lot of people are nervous when they are -- for example on the online price comparison site, within the low average growth, but there is no figure associated with that. Maybe you could comment on that.
Sure. I mean with regards to the NuCom Group, as we said when we announced the transaction with GA obviously for the first time we are now in a position to steer the overall NuCom Group portfolio that is deliberately [indiscernible] making the freedom here and there to let 1 specific asset grow a bit faster and then they comprise of margin on the other asset in order to literally optimize the portfolio overall. So not to strive for local optimum but rather for operative optimum. I think the overall guidances we gave out if I recall correctly, was at Capital Markets Day of 2016, obviously a broad range, you can use somewhat in order to roughly or take an indication where those businesses aim for. In general, we want to see the business overall together with GA and despite -- there is a revenue line and there is a bit amount we're looking at. I think here it makes sense somewhat to split into physical groups and digital groups. And overall, and maybe also to add for sure here and there, we will dig a bit deeper and give you also specific numbers, here and there for some assets, but not on a regular basis.
Okay. And then on Verivox, I mean how do you know that the below-average growth is in the Q2 energy price related topics and that you are not losing share to Check24?
That is what we get out obviously, out of the discussions we have here with the management team and looking at the pipe, we see where we're working on different elements here. So first of all, yes developing the core vertical with regards to energy, but also taking more and more steps to diversify anything -- any more segments and scaling them and also actually the development is quite nice and going into the right direction. With regards to energy, at the moment we see some weakness in the market. But that is not something that makes us overly nervous because we've seen that also over the last couple of years here and there, we will sum it up at the end of the year.
If I may just briefly add to that. We are simply not in Q1 or switching season, especially in the energy segment and wholesale prices have been relatively stable and therefore there are no new tariffs. And so that's more of a general energy market-specific issue that should not differentiate us too much from our competitors.
Okay, so you don't think you've lost share?
No.
Our next question comes from Julien Roch from Barclays.
3 questions. The first one is, you said 7% organic for NuCom or commerce. Can you give us organic in entertainment and content as well in percentage? That's my first question. Could we get organic for Parship commerce lifestyle and online price comparison within NuCom? And then lastly Jan, you said in an interview this morning that you are targeting Q3 commerce acquisition in 2018, any more color you can give us on those acquisition?
First of all, as I said before, it's about reducing disclosure here a bit. So more than happy to give all the 7% as -- that was also a number we gave out in the past and I think it's important to understand whether business overall is going to especially in combination here with the deconsolidation effect, we talked about, we'll not dig a lot deeper into organic and inorganic for the different segments. With regard to the NuCom Group, it's correct. As you know, we have a lot of cash at the moment at the balance sheet and we are planning to deploy a major part of that in the course of 2018. And so especially on the NuCom Group side, that will translate into 2 to 3 transactions we would target. As also pointed out at the full year presentation, we will be looking at different angles, first of all, some potential assets in European space where we say okay, we have some cornerstone assets that reached a certain market penetration and also market share for them. It simply makes sense, some more to join forces and go international, but also as in the past, looking at additional verticals, we could add to the NuCom Group in order to -- for the benefit also from the TV at -- capacity of TV reach we have in order to make those businesses bigger.
Okay, I understand you don't want to give any more disclosure by division, but can we at least get organic for the 3 main segments, you said 7% for NuCom, what was organic in entertainment and content to get to the 1% overall?
Sure and that's compromise. For the Red Arrow Studios, there was probably a difference between organic and inorganic, and with regard to the entertainment piece, the growth was like-for-like around 1% plus.
Our next question comes from Lisa Yang from Goldman Sachs.
I have 1 follow-up question on the known TV advertising revenue. So that was down 17% in Q1. I mean, do you expect this to be a further drag in the coming quarter? So then you commented on Q1, but not on the outlook. The second question is on advertising in Q1. I think initially you said January and February would be very positive and you ended with [ 2.5% ]. Is it because March was -- was it weaker than expected, and kind of what drove that? And you also gave us guidance for the restructuring charges, I think with EUR 68 million in Q1. So any color for the full year would be helpful? And lastly, I'm just curious why you want to review Red -- why you want to potentially, I mean, sell Red Arrow given you know it could give you a little bit of a edge from the content perspective?
Lisa, just starting with your last question, just not to have any misunderstandings here, we're not looking at selling Red Arrow Studios or disposing off it. The other, it's more into the other direction for us, the access to IP. I think a stronger footprint to IP on a global basis remains strategic important -- strategically important factor. We do constantly review our setups, our -- do we have the right ownership structure, should be bring in partners to boost growth or to, in this case, potentially increase access to IP beyond our current graph. We are certainly not looking at the full disposal of Red Arrow Studios, so make that very clear. As regards to your second question, advertising in Q1. No, we have actually seen a very solid development across the board in Q1. March has been somewhat impacted this of course, but we're very confident across the first 3 months, but please also note, we will not -- we are not going and we will not go -- going forward too much into monthly, let's say, observations and disclosures because that could lead to misperceptions now, because you have to see this in a more holistic way. You know that the bulk of our business is coming into the second half of the year and therefore, let's look at it from a holistic picture. We started solidly into 2018, with a strong program in line up, very innovative sales force and so we're convinced that we are maintaining, and will maintain our market-leading position and advertising share going forward.
Yes. And then taking the foot into the third question here with regards to FUD or the development, the counterbalancing effect against the TV advertisement here, and as quickly pointed out beforehand, so we have 3 main effects, right. So first of all, the loss of Sport 1 to Springer. The second one, coming -- seasonality effect coming out of a strong Q4 and then with some softness in the first quarter, and last but not least, also some ventures. And with regards to SevenVentures, you have to recall it's a contract-by-contract business, which -- there are some swings from quarter-to-quarter and we have the confidence here that, that some of the development we've also seen somewhat in the last couple of years to normalize over the course of the year and will end in good terms on that side.
Because do expect a drag for the full year?
Well, the Sport 1 client has obviously gone, so it is safe to assess who has to do a good job somewhat to get new ones on that side with regards to the seasonality effect and also with regard to SevenVentures because [indiscernible] was in Q1, which will normalize over the course of the year.
And what's the full year impact of the loss of Sports 1, please?
It's about EUR 10 million. And with regards to the restructuring charges, I mean due to accounting rules, somewhat we had to book at this amount at the moment. Please bear with me that at the moment. I cannot really provide you with a further breakdown of that because as we still in negotiation with our work council, I would like to give you an update somewhat in the next call.
Our next question comes from Ian Whittaker from Liberum.
Two questions please. First of all, just want to pick up on the remark you said earlier in terms of your AdVoD revenues getting impacted by price of the concerns brand -- sort of concerns about brand safety. Surely one day you saw the strength of your sort of [indiscernible] for brand safety sort of a new environment unlike, some of the online platforms. Could you just sort of explain why that doesn't seem to be the case and sort of what your conversations are with advertisers about that? Second of all, linking with that, just in terms of your integrated offering, obviously it's done very well, but sort of when you speak to advertiser or the media buys what's the interest in actually buying integrated packages across TV online, sort of old platforms, and is it still very much segmented and do people have the TV budget and online budget and so on? And third question, just really sort of in terms of the full year because the revenue is totally the same here when you get monthly sort of -- of monthly ad trends, but just given how you've done in the first quarter, any comments on Q2, flat maybe slightly negative advertising. Can you just give us a sort of overall view on how you think we should think about revenue progression throughout the year? Should we be thinking about, sort of a very strong rebound in Q2 -- Q3, Q4? Is there anything sort of you think will particularly drive that we should be aware of, I guess, just to give us greater confidence on that full year revenue target?
All right. I'll try to address all your questions. You're a little bit difficult to understand. Let me first point out that our -- the brand safety discussion doesn't affect our revenues, doesn't affect our TV revenues and also not our AdVoD advertising revenues. Conversations with advertisers across the board, obviously you only can see that by recent announcements, but not only agencies but our bigger customers are that, in digital and online you have issues like, ad blocking of issues like, a robot traffic, you have issues like ad clattering, all that is something that our core medium TV -- it obviously doesn't have the problems. So some of the big customers are -- have been shifting back to more -- what's more reach driven medium like television that's good for us. We've all -- not just the trust debates around Facebook and what that means also for the brand environment that you need on those platforms, all this obviously could bring certain rebound or a more again truth versus myth-based decision-making process when it comes to [indiscernible]. As to your second question interested in buying interrelated packages, that's -- and we are talking about innovative products that are in our -- sales base have not been around for too long. We certainly see us as leading the pack in terms of innovation offering, stuffs like that. There is interest out there and that's with numbers of course, it's still small, but it has huge potential. And as we've shown in our Annual Press Conference, we expect until 2022 to have a market increase by 3.5x up to overall market volume of EUR 28.5 billion, as compared to the current EUR 8 billion of traffic video and -- or a TV and [indiscernible] for us. And a lot of that comes obviously from addressability and being able to target better, and to offer our customers the opportunity to really play out their advertising, and by that advertising money to where they want to see it and the environment they want to have. Again, as regards to ad trends, I would say for H1 seeing the good growth in TV advertising in Q1, depending on the development in Q2, we look at being on prior year's level. And as you rightly pointed out, it -- and as I pointed out earlier, depends on how it all comes in with certain seasonality effects. We [indiscernible] worked up and other things could also be slightly negative. But again, let's also look at Q3 and Q4 where we usually see a balancing out, also given the commitments and the media agency contract structures that we have in our market, and that's obviously always a reassuring factor for us.
And hopefully, you can understand the -- you can understand the follow-up. And just coming back to the first question, I think the -- sort of the point was more, your AdVoD revenues were down in Q1 and you said that was due to advertisers being concern about online brand safety and so forth. So just wondering why your -- sort of you in particular, your AdVoD revenues will be down because presumably, one of the strengths of the TV broadcasters in VoD is to say that you can offer brand safety -- a brand safe environment, unlike other online platforms?
Right. And that's why -- and maybe you are misunderstanding. Our AdVoD revenues are not impacted by brand safety issues, that's more I would say, general performance issue with regard to potentially certain clients that where we would expect also from us and our teams to have a -- to see a rebound and recovery acquisition of new revenues. But we've certainly -- on AdVoD we don't suffer any brand safety issues. I have not seen any cancellation based on that.
Our next question comes from Conor O'Shea from Kepler Cheuvreux.
Just a couple of questions, couple of follow-ups from previous questions. The first question just on the AdVoD revenues in the first quarter. I wonder if you could -- maybe you have missed this in your comments, the percentage decline year-on-year in the first quarter, that would be useful to know. And secondly you mentioned that the entertainment activity had benefited from IFRS 16, the EBITDA, I kind of wondered if you -- could you give us an idea by how much that benefited? And then the third question, if you -- can you give us an idea of the revenues and EBITDA full year 2017 of etraveli and your cons value?
Sure. Let me start with the entertainment segment. So that was EUR 7 million with regards to IFRS 16. And with regards to the activity as effect, it's not a specific number we are going to disclose under the new grid. With regards to the revenues and EBITDA of ETI, I think for 2018 we had planned and communicated the last time EUR 220 million in revenues and about EUR 55 million in GA. And with regard to Schweitzer, let me have a quick look one sec. Let's continue with another question, I will come back and give you the number because --.
Okay and just wondering if you could just try -- just in answer to the previous question, I think -- if I understood properly, the reference to potentially flat advertising revenues, I think it was full year, depending on Q3, Q4. Is that TV advertising or does that include all advertising in the entertainment division?
Sorry, that was difficult to understand. Could you just --
Sorry, yes. I think in reference to one of the answers to the previous question, was looking forward on a full year basis that advertising would be -- could be around on a similar level to 2017. I just wanted to clarify, if you were referring to TV advertising or advertising revenues in the entertainment division?
Last time was TV advertisement. With regards to Jochen Schweitzer, we were talking about EUR 30 million in top line and about EUR 3 million in bottom line.
Thank you. Our next question comes from Sarah Simon from Berenberg Bank.
Yes, sorry, just a couple of follow-ups. And just back on TV advertising, when you said flat, is that guidance for the year or were you talking about the first half in terms of slightly down Q2, and obviously up during half in Q1? That was the first one. And the second question, with the distribution revenues in the increasing competition, do you expect that to increase the growth rate in the distribution revenues, and I guess, [ one stays still, ] it become effective, say second half and into next year?
Let me take the first one. So with regards to TV advertisement, maybe to step back and give a bit more clarity. So what Conrad mentioned was that we had a strong first quarter with 2.5% growth and with our planned seasonality and when we look at the second quarter with Easter being part of the first quarter and also the World Cup coming up somewhat in June, when looking at the seasonality, we rather expect a weaker Q2 which might lead to a flat H1 overall. And then obviously, it highly depends on the outcome of Q3 and Q4 and with respect to equipments coming in, how the overall yield will turn out. And we will give you further clarity then in the next call. Maybe --
So there was not a guidance that's flat, full year was flat, the first half is your best case at the moment. Your working assumption?
Exactly.
And Sarah, as regards to your second question, it probably is a little bit too early to say or to assess the impact of these new competitors and the satellite population where have they just recently soft launched in April. So hopefully, we'll be able to give more color in our Q2 call or later in the year. We have seen a certain slump, I should say in the satellite HD population pick up. So that's being compensated and hopefully over compensated. But again, too early to say at this point because they're just starting to go out there into the market.
Our next question comes from Richard Eary from UBS.
I just got a couple of questions. Just going back to the revenue guidance, I'm just listening to what you said with regard to flat H1 for TV advertising, we've lost obviously a contract with Sport 1, with AdVoD and that business remains weak. We've got weakness essentially at Verivox. We've got headwinds within Red Arrow. I'm just a little bit confused in terms of how you expect to get that mid -- low mid-single digit reported revenue growth for the full year. And that means quite a strong Q3, Q4 and bear in mind that Q4 was actually quite a good number for you on TV now, and Q3 is still going be cycling the impacts of the [indiscernible] in the World Cup. So I'm just a little bit confused in terms of actually how you get to your guidance for the full year and I just wondered whether you can just elaborate on that a little bit more? That's the first question. The second question just on programming, there was a slide in there that talked about obviously the seasonality of that. Just can you explain what your guidance is for the full year in programming costs and also why we've got a big step-up in programming costs in Q3 and Q2, when audience numbers are likely to be down based on what we've seen historically around sport events? So yes, if you can just elaborate on those 2, that would be helpful.
Sure. First, with regards to revenue guidance, I mean, when we look at the entertainment business, you picked out 1 or 2 factors right, but overall, I mean, the entertainment business grew by 2% in the first quarter. And looking at the year, I mean there is something well -- somewhat in the range we also gave out at our Capital Markets Day, somewhat last year where we could see the business overall. So that's, at least from our point of view at the moment nothing to be worried about. Yes, there was a certain weakness in the first quarter, but as commented on Verivox, as Conrad pointed out, at the same time, we had an over-performance with regards to Parship, Amorelie and Flaconi. With some counterbalancing effect and looking at the portfolio overall as it stands, we see or like we anticipate also a strong second half of the year on that side. Red Arrow Studios is supposed to bounce back in the second half of the year, coming back to revenue growth looking at the development slide at the moment. And overall, when you look at the development of the quarter, as such as the business ends there's always a certain [indiscernible] to launch in second half of the year in Q4. So that will be, I mean, from our perspective, something that will come, that will come from naturally and also gives us confidence here to be in the call and reconfirm our guidance for the year. With regard to a specific slide, we entered into the presentation, as you know, we always had a certain flexibility when it comes to program costs and we react from TV advertisement environment out there. And if you recall in Q2 last year, we had somewhat soft start in April and also in May and just took the conscious decision somewhat to spend less on the content side. And in the fourth quarter actually, we spent a lot based on the very strong TV advertisement development and on the high note just also something you can see now resulting a very strong performance with regards to [indiscernible] in the first quarter and also thereafter. So in 2018, that somewhat swings back. We expect year-over-year as a first impact like a mid to high single-digit increase with regards to lower cost in the second quarter. And that combined with the deconsolidation effect that was simply the 2 points we wanted to flag in this call, also to give the respective information to modulate in -- to put it into your models. With regards to the overall increase, we stick to the guidance we also gave out in the past. We want to increase like the program spend some of the line with revenue growth, both on the linear and digital side. And that is also something I can reconfirm here.
Can I just ask a follow-up just on Red Arrow. What was the FX headwind in terms of magnitude of number in the first quarter? And can you just expand on the development slate slightly you expect to come through in sort of the second half?
Sure, the FX effect was about EUR 13 million in the first quarter. And with regards to the developments slates, it's obviously something we are looking at we closely along the way, and hopefully over the next couple of days. We will be also be able to give the first positive signal with regards to the development at the second half. But overall, it's like taking one step back here, looking at the businesses, obviously something you start into the year with the bank sheets and then progress along the way and get more and more clarity also what we realize -- what we can realize in Q3 and Q4 and looking at the sheet at the moment that gives us a comfort actually to anticipate a swing back in the second half of the year.
When you say swing back, was the magnitude of the swing back -- I mean is it double-digit earnings growth, double-digit revenue growth?
Yes.
Your next question comes from Catherine O' Neill from Citi.
Just wondered if you could elaborate on the phasing of the cost savings. I know you can't give much detail of the restructuring, but how you are thinking about the phasing of cost savings and you -- the new CEO will be joining next month, what do you expect him to bring into the group? You are only get -- you really have not detailed on what drove the appointment of the new CEO in particular?
Catherine, obviously, I would like to elaborate on your last question. Max is joining as you say on June 1, we're very much looking forward to that. What this next brings to the table as far as we can say and we've spent a lot of time with him and my colleagues as well over the last days and weeks. Max is absolutely a consumer viewer user-driven guy, he will bring to the table a really market and consumer-centric approach and that in combination with, let's say, our expertise in the business, it should and could be really a wonderful amalgamation. So we are really looking forward to him in joining the board. Obviously, all questions about the rationale of his appointment should naturally have to be addressed to our Supervisory Board because they are the ones that took the decision and appointed Max. But from -- let's say, from the operational ground here from the executive point of view, we can really say that we are positive about this addition to us, to this new leadership and we will work very closely in a very team-based approach with him bringing the best together of us and our know-how and what Max is bringing from the outside world. He's having a tremendous track record of really converting his former company where he was having as full position in Dyson and to company that's extremely successful in the digital world. And obviously, I think these are pretty very good prerequisites for him in our half year possible times continuing to be the leader in media and all markets and then also on the digital world.
Yes, and with regards to your first question, so the phasing of the cost savings is obviously highly dependent on the outcome of the negotiations for the Work Council at the moment. So we are in negotiations and as soon as they are finished, we can get into implementation and so still hopeful in somewhat Q3 to get going. And then the phasing of the cost savings will follow accordingly.
Can I just, sorry to get back -- on the TV advertising point, in terms of -- it should benefit from more of visitors' concerns around online and potentially I guess -- and [indiscernible] coming from the pipe. I just wanted to understand why you don't think TV has rebounded more and how was your performance in the third quarter, how did it compare to the market, in line or outperforming?
This is Conrad. We do not provide general market guidance on competitors. We've seen a strong and I repeat that a solid performance in Q1. Also here, it's -- I think it's a little too early to say how restrictive regulations and so for us, like GDPR will convert into revenue development on our side because it hasn't even come into place. The only thing that we really see in our day-to-day discussions with agencies, with customers out is that TV as the medium delivers you the highest return on investment on euro. You know what you're getting, you really have a very serious again, brand safe environment and all the question marks that are out there in the market with regard to digital advertising, these are questions that we for our core medium TV don't have to discuss and that's positive. And that's why people are saying marketing CEOs or heads of marketing we get from CGs, maybe we've gone targeted -- targeting too much or we've gone online too much and we should go back more into TV. It took us 2 weeks to generate the same reach that we can have in a day of TV and online.
Okay. So you are thinking that TV has rebounded more then, over we've done more in the first half of the year?
Again, we shouldn't take a short-term view on that. That doesn't -- just as through how this business is working, you should see that in overall perspective. I can tell you that all commitments on a year-to-year by date comparison are higher. The agency commitments are a mid-single percentage point higher than in the previous year. So if that could be an indication, let's have that -- let that be an indication. But let's regroup and look at the whole year, especially again, marketing due to seasonality, our business is very much Q3 and Q4 driven.
Our final question today comes from Patrick Wellington from Morgan Stanley.
Two questions, the first one, General Atlantic, the deal with NuCom was completed in April. Did we ever find out exactly how much they paid for their 25.1% stake. There may have been a press release, I may have missed it, but what is the figure? And second point, going back to commitments, last year commitments stands out to be very important. I was confident all year along that advertisers would deliver on their commitments and they did in the fourth quarter. We just had the commitment season and I think you just told Catherine that commitments are up 5% year-on-year. So can you tell us a bit more about the level of commitments this year, how are you feeling about them? Is the 5% a good number?
I don't recall having said 5% actually, I've said that commitments are above prior year level in a single-digit number, I didn't say 5%. Let me say they are above prior year in single-digit number and a lower-single digit number. But we will not disclose the specifics here. But that makes us very confident by the way with regard to what you just said, commitment levels, how's the year evolving, how did growth in Q4 come in.
And with regards to the GA number, as also communicated in the -- I guess, I think the last time we met, it's around EUR 300 million. [indiscernible] I also mentioned in the report, I guess on Page 42, so the exact number is EUR 286 million.
Okay, ladies and gentlemen. This was our last question for today. As always, the Investor Relations team will be ready and available for your follow-up questions. With this, I thank you and wish you a good day.
That concludes today's conference call. Thank you for your participation, ladies and gentlemen, you may now disconnect.