ProSiebenSat.1 Media SE

Thomas Ebeling - CEO Jan Kemper - CFO Conrad Albert - Deputy CEO

So, I'll start. Then Jan Kemper and Conrad Albert will close the presentation.

I assume you're all familiar with the results. I think we have the ninth record year, uninterrupted.

What I like most is that in this year, despite a very soft TV advertising development, we were still able to grow by 7%, which shows the benefit of our diversification strategy. Specifically, through quarter four, as we have predicted, in quarter four, we have seen a rebound of our advertising share of our viewing share.

We have strengthened our competitiveness with significant M&A transactions. We concluded 10 deals in quarter four alone, four in commerce, four in entertainment and two in production and we started our reorganization and we continued to work on the transaction of General Atlantic, which we concluded basically yesterday evening.

Our dividend proposal, you can see here. So since 2013, we have seen a steady growth of dividend per share.

Here, you can see the performance since 2009. Some of you might have heard the number of more than 3000% total shareholder return since 2009, double digit revenue growth, double digit EBITDA, double digit net income.

Very important is that we have now 51% of our revenue shares, outside of our classical core TV advertising business. Our market capitalization grew by 18%.

Leverage went down and dividend obviously went up. Our equity story, we believe is very intact.

We believe the TV business can continue to grow at a low single digit rate. We are the most diversified broadcaster.

Our distribution unit is growing very nicely and are profitable. Digital entertainment is a meaningful extension of our TV business.

That is one reason why we have grouped our TV and digital entertainment into one unit. Red Arrow will allow us to participate in the organic growth potential of the production business.

Digital ventures and commerce, very nice growth and I think with the new partnership, this growth can even accelerate. Our M&A play is 10%.

Free cash flow return is very positive, a key driver of this is really our TV synergies, specifically the advertising synergies and we have a very stable dividend payout. This is summarizing the journey we have undertaken.

I think the key move for us to exit the smaller SBS TV territories, Benelux, Scandi and Eastern Europe and to move forcefully into the digital space. You can see here that we systematically have diversified the company.

We went first into adjacent and production and if you think back in 2009, we had zero US business. Today, 75% of our production business is realized in the US.

Studio71 is predominantly an US business. Then we started media for equity, which really allowed us to learn a lot about digital business models and to really build up a digital platform business.

Digital entertainment, commerce, Wellbeing and Adtech and Data. So this is, I would say, a very consistent approach to diversify the company.

By all of doing, we did all of this and we gave a lot of money to the shareholders and we were able to maintain our leading position in the TV market, both in terms of share of viewing as you can see here and as well in share of advertising in all three geographies; Germany, Austria and Switzerland. We have in all our major areas of operations, a leading position.

TV, addressable TV, Adtech, Global production, global multichannel network and digital commerce, we have 10 assets in our portfolio, which all I can say have a leading position in their respective segments. This chart was not as fully presented at the Capital Markets Day because we added four deals in quarter four to really have, I would say, an unparalleled and very competitive proprietary own at Adtech, which will help us to capitalize on the opportunities, which will arise with the growth of addressable TV and some of you might have heard about this.

This is an overview of the deals we did in quarter four. You can see on the left side here, the four entertainment deals, on the right side, the four commerce deals and the two production deals in the middle.

And as I mentioned before, our free cash flow ROI is very good with 10%. So we have now set up a three pillar strategy, entertainment at our studios and the Nucom Group.

Let me explain to you the units. So what has happened here is that Ventures entered in to a platform specifically maxdome and our digital advertising business are now combined with our TV operations and the reason is that we believe that any separation of these businesses is not any more meaningful.

They share the same sales resources, they share the same content. They share the same creative guidance.

What is new is that because of our acquisitions and the buildup of our operations, we can now participate in a much larger market. We believe that by 22, addressable TV and Hbb TV can have the size of 300 million to 500 million.

Performance marketing is a big market. We will be a very small player in this market with what we have now, but we will participate in this market with the acquisition of esome.

We started our digital platform sales operations and we entered the free share. So large segments, we are not a big player, but we have an opportunity to create new growth.

We see ourselves not anymore as a pure TV ad sales. We consider ourselves to be basically, full ad sales hours, covering all segments.

And this will allow us to grow a little bit above the low single digit rate, which we would have for TV only by entering and making business and revenues in these segments as shown here on page 20. Red Arrow studios, I think the new idea is to combine classical production with digital production, digital platforms, namely Studio71.

So Jan Kemper will now be in charge as well for Studio71 and we have now really a very sizable US operation and we hope that we can create synergies there. Omnichannel platform, Nucom Group, you see here our four segments.

We believe that all four segments will continue to grow. So we are present in very attractive segments.

You can see here our 10 assets and we have a leading position basically in all of the segments we're operating and we announced today the deal with General Atlantic, which values this operation at 1.8 billion and Jan Kemper will take you through more details in his part. For the strategic rationale, it was not really necessarily about creating additional funds, but we believe we have an opportunity to accelerate M&A by having access to a better deal flow, contributed as well by GA.

GA is very experienced and skillful partner for digital operations. I personally believe that a lot of talent is easier to be attracted in this construction with the PE partner than a classical company and we have full focus on this business and the whole confusion of why are we doing this is a little bit that are sorted out and we will maintain the synergies by having arm's length agreements as it relates to advertising and data.

So entertainment can still use the data created by our digital businesses and the digital business can still get preferred access to advertising, at a little bit higher rate now, it costs a bit more, but nevertheless the synergy is maintained. So having said this, the value creation part going forward in my opinion is very dynamic.

We see 1 billion revenue growth coming from each unit from entertainment, from production and from Nucom. We have announced to realize 50 million in cost savings and efficiencies.

There are further opportunities with our media lines partnership in Europe to create even more synergies and we have not basically included in our base plan larger and bolt-on M&A. So I think the value creation part looks positive and can certainly tolerate some softness in individual segments.

So what you should remember, we have a strong entertainment and TV business. Our strategy has proven to be attractive, synergistic and has led us to a strong diversification that no other broadcaster have in the world.

And we expect strong revenue and value growth going forward. So with this, I would like to hand over to Jan who will take you through the financials.

Yeah. Thank you, Thomas and also good day actually from my side.

I will walk you through the financial section, so the financial side in 2017 and also give you a bit more background on the transaction we announced this morning with General Atlantic. So jumping on page 30 that summarizes the key themes that we faced actually last year.

As you know, we had a more demanding year in terms of our share price performance up to November, which was both a result of a de-rating for the European FDA broadcaster sector in general, but also obviously due to a couple of unfavorable company specific developments we've seen. Nevertheless I'm really proud to sit here today and present a very good overall performance of the financial year and also very successful M&A activity that happened in Q4 of 2017 actually.

As the following pages will illustrate, we have achieved several very positive developments, but also saw some headwinds, such as the temporary weaker TV ratings, but also the TV advertisement in the first three quarters of the year, but a very strong rebound of both key indicators actually in Q4 of this year. So jumping to page 30.

Quickly showing numbers. So overall, I think very, very good jump out of the year with 7.3% revenue growth and both on the adjusted EBITDA and adjusted net income side, 3% especially given the communication we had over the entire year.

I think a very pleasant year end and very positive, especially in Q four. When we jump on page 31, so jumping a bit more into the different segments, broadcasting German speaking first.

So as said, despite a more demanding market environment in the advertisement space, especially in mid-2017, we were able to increase the group revenues. As said, overall, for the broadcasting German speaking segment, we could achieve a slight growth of 1%, both in terms of external revenues and adjusted EBITDA.

It is worth mentioning that our total revenues grew by 4%, which is predominantly the result of higher internal revenues contributed actually by the digital ventures and commerce business and we'll come to that when we talk about the Nucom deal, also with a new media agreement in place, we actually created the biggest customer of our advertising unit ourselves with the Nucom group sitting there. We're certainly great about the fact that we could turn around a low single digit revenue decline in the first nine months into 1% growth for the year overall and this is especially due to a strong recovery in Q4 with a 6% growth in TV advertising revenues and a very strong 15% growth with regards to our distribution business.

With regards to digital entertainment, we saw a similar development that could be observed in that segment after rather soft development in the first nine months of the year with slight decline in external revenues, the segment returned to a dynamic 17% growth in Q4, despite the continuing decline of our adjacent business. So for the full year, we achieved 5% revenue growth on a reported basis and 9% organically.

Please note that the segment margin slightly declined due to a mix effect which reflects both, A, the decline of the adjacent business, as well as an above average segment growth of the still loss-making Studio71. Margins also have been affected by the continuing investments, as pointed out by Thomas, in the advertising platform solutions.

Digital Ventures & Commerce, very pleasant results in 2017. Again, the segment delivered significant revenue growth where of almost half of that was organic.

Adjusted EBITDA also improved notably by approximately €40 million, both as a result of organic and inorganic growth, like acquisitions of the Parship Elite Group. It is worth mentioning that Etraveli was sold at a very attractive valuation of above €500 million in July this year.

And this in those numbers Etraveli has not contributed to the overall results, as of August. As indicated in our Q3 call, revenues and profits for our Content Production & Global Sales segment were expected to be low prior year, in Q4, mainly due to three reasons.

First of all, a sizable one-time license income from Amazon in Q4 2016, four months of first-time consolidation effects of 44 Blue in Q4 2016, and last but not least the phasing of certain projects into later periods of the year. So as a result, the segment did not grow on a full-year basis, and external revenues fell slightly by 3% to €352 million.

Please note that a large share of this decline was related to a weaker U.S. dollar, which became more visible in late Q4.

Also, the segment is more and more contributing actually to our grid in the Entertainment side. Shifting to M&A in the fourth quarter, the M&A deal flow has been strong across all segments, as pointed out by Thomas already.

The net M&A spend was more than €100 million for all the deals being signed. In Entertainment, we expanded our AdTech stack with the acquisition of AdClear as well as a social advertising company, esome.

With the acquisition of the majority stake in the U.S. film distributor, Gravitas, we strengthened our position in the international distribution business.

In Commerce we complimented Verivox services and products by acquiring aboalarm. And in addition, we expanded our position in the OTC business, actually adding the Zirkulin brand to our existing Windstar asset, forming the number two in Germany.

At the same time, we disposed our package tour asset, weg.de, as a part of our ongoing strategic review of the travel segment. Shifting on the next page to our financial position at year-end 2017, we had a net debt of €1.6 billion, which is an improvement of almost €300 million.

With this level our financial leverage is at the lower end of the envisaged target range of 1.5 to 2.5 times, and gives us enough debt financing headroom also for the next months to come. Net debt has mainly improved as a result of the generated free cash flow before M&A in 2017, of €468 million, as well as the Etraveli disposal in mid-2017.

This was counterbalanced by the dividend payment of €435 million as well as the aforementioned M&A activity. So on the next page let me continue with our dividend proposal for this year.

Given the increase of both adjusted net income as well as free cash flow, the Executive Board of ProSiebenSat.1 will propose a dividend per share in the amount of €1.93. 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 €442 million, subject to the supervisory board and the AGM approval on May 16th, and obviously dependent on the number of treasury shares being held at that time. With this proposal we will continue our strong track record with regards to dividend payout.

The dividend yield based on the closing price at year-end amounts to 6.7%. Now, I'm really happy to announce or like give you a bit more details and background on the transaction we announced this morning with the partnership with General Atlantic with their investment of 25.1% acquisition of the NuCom Group, and in combination with the buyout of the existing minorities of the big cornerstone assets of our portfolio.

As Thomas already mentioned, it's - I mean, as said, the combination NuCom plus minority buyout in Parship Elite Group, Verivox, and SilverTours. And also we intend to acquire a large of the outstanding minorities in Amorelie.

So this transaction announced this morning comprises four M&A deals including Amorelie. Given certain capital commitments in the deal that will allow us to, A, accelerate the M&A activity in the existing verticals of the NuCom group, but also in potentially new advertising responsive businesses.

This would include assets where GA already holds a stake in, like [indiscernible] and others around. We also expect to GA's operational know-how and excellence, its deal flow, as well as its strong international deal pipeline as we also intend to take our portfolio international.

The transaction will simplify the portfolio structure significantly as the number of partners overall will be used and the interests aligned. And you can see that on page 38 here, as mentioned before, we will acquire the outstanding minorities.

So when you look at the 10 assets already mentioned by Thomas at the end of this transaction we will have in eight, close to 100% shareholding, and can thus together with GA actually go on through. As we both own [indiscernible] there is the next opportunity to actually roll that up to 100%.

So, overall this transaction included - transaction valued up to approximately €350 million, clear benefits here to simplify the governance within the NuCom group, have the clear ownership structure, align the interest, and actually establish a read-to-grow setup especially for more M&A to come in the future. And that brings me to page 39, where we expect also intensified accretive M&A activity in 2018.

So we also remain fully committed to our dividend policy, which we have underpinned with our dividend proposal for the full-year 2017. And in the rather unlikely event that we cannot deliver on the deal pipeline, so deals will not materialize.

We also would consider to return cash to our shareholders for additional shareholder returns. Let me now conclude my presentation with the new financial outlook for 2018 on the next page.

We anticipate low-to-mid single-digit increase of revenues. Please bear in mind that we're talking reported-to-reported numbers here on an organic level that would yield mid single-digit increase on the revenue line, adjusted EBITDA margin in the mid-20s, and an adjusted net income of roughly 50% adjusted EBITDA to adjusted net income conversion.

We still stick to our financial leverage target range, and also the dividend payout ratio of 80% to 90% of adjusted net income in the next year. And with this, I would like to hand over to Conrad.

Thank you, Jan, and good morning from my side, ladies and gentlemen, as well. Before we jump into the outlook for 2018, a brief recap with regard to our three-pillar strategy, and you've seen already and as you've heard from Thomas, we are working under this new structure since the beginning of this year, since January 1.

Three business segments, the Entertainment segment which comprises our former broadcasting business and all other entertainment offerings, so to speak a one-stop-shop for all our content offerings based on all our business models, advertising, subscription, pay per view, and obviously the monetization of that through Sabena's 360 degree marketing platform. So all in all it's basically - that's the new multi-channel advertising and marketing platform that we have built.

That's comprised - that's of value segment, and that's comprised and complimented by our other two segments, Red Arrow Studios and NuCom group, on which Jan has just elaborated on this fantastic deal that we've done today. Going into each of the different three segments, what are our key priorities for 2018 with regard to the Entertainment segment, clearly on the content side it's further building and elaborating on our content strategy, leveraging U.S.

highlights, besides leaving aside all the myths and the discussions about U.S. content, U.S.

content is and will continue to play an important role for us in our program grid. We've just recently launched in January a new sitcom, Young Sheldon, which is performing fantastically.

Albeit that, obviously we continue to increase and invest into the share of unique local content, because that will continue to play a larger role in our grid going forward. Also for advertising customers we will launch a new sitcom on Monday evenings soon with [indiscernible], who I suppose most of you are familiar with.

And certainly that sometimes is forgotten, we have really built a strong footprint in second tier sports, sports rights that are affordable and that are monetizable. NFL, the American National Football League, that's traditionally now it's fair to say with us.

We've made market shares in excess of 40% for the Super Bowl, but also rights or contents like E Sports work very well, especially on our smaller channels. On the sales side, complementing that we continue to leverage all 360 degree sales set-up, and that's beyond just pure TV, we consider ourselves - we see ourselves and we work on the basis of being a really multi-channel sales platform.

I'll come to that in a few moments with a few more details. And alongside with that, obviously we will push - continue to push addressable TV and new products such as our first overlay cases that work very well.

And we will increase our data and AdTech capabilities, especially to your people out there advertising customers and media agencies, the destination for programmatic, for analytics, for tracking, beyond the grasp and control, so to say, of the Google and Facebook universe, and it's very important and seems to be received very well. All this leads to the fact that we are by now a platform agnostic set-up.

We have fully transition all our entertainment offerings into this Entertainment segment, and we've left behind the distinction of what's classical broadcasting, what's digital, because these days everything is digital of course. And last but not least, this is accompanied by a significant efficiency increase and cost saving program.

We are working on generating an excess of €50 million net savings in our organization in the segment by the end of 2019. We always stress that again and again TV was, is, and will continue to remain the key entertainment medium.

TV reach is very stable at an excess of 90%, and as you can see here, also to clear up the miss and talk more about facts, VOD usage with a little bit over 30% is still by far lagging behind that. And if you translate that into actual video usage, it's 227 minutes a day, classic TV, linear TV usage against the couple of minutes VOD that sends a clear message.

Additionally, TV reach and viewing time, we expect to be stabilized further in 2018. And that's because of TV panel adjustments and the measurement of our reach, which will now capture live streaming on other devices that probably - live streaming on other devices equals about 7% of overall device usage and sports events, you will see the sport here will also increase the general TV reach in 2018.

Here just you know, to fill you in on that we've done our own let's say sensitivity analysis with regard to where could pay V OD penetration go and how could it impact the TV usage, remember today it's around 30%. If this would double, which might seem likely in the near to midterm future, so it would be a 60% penetration.

It would mean only an incremental and a loss of 1.5 percentage points going forward until 2020. Factoring in already that especially younger demographics in Pay VOD connect to households have reduced TV viewing time, so that's a really conservative use.

So, even worst case scenario. This will not have a major impact on TV viewing in Germany.

So TV, as said was, is, and will continue to be the most relevant medium for advertisers, nothing can deliver you as much reach in as shorter time with as much emotional power of the moving image as TV and that will actually increase to be crucial for sales and for brand growth and will be key for brand building and short-term activation, why because if you have a product out there in the digital world. The fight for attention for eyeballs for attention with the customer with the consumer becomes brutal, more brutal every day and that plays into the hands of TV in helping customers and brands to build their awareness.

Performance channels are taking advantage of TV2 and that's basically supported by our TV ad cycle, where we can deliver data now tracking, targeting accretion models. Again outside of the universe of Google and Facebook and there is numerous models out there marketing mix models that again-and-again support the TVs by far the most effective advertising medium.

And of course, you have to combine that and that's what we are doing. The reach and the premium content, the quality and our reach is only one side of the coin, the quality of the program environment of the content phone advertiser.

This plays an important role leading TV reach extend this across all relevant platforms what we are doing, combine that with quality content with a high relevance for the target group and patch onto that innovative 360 degrees advertising concepts that all sounds nice. But here you can see how that actually looks like, what we are doing with our sales forces delivering into the market with regard to one of our strongest brands.

Germany's next top model, which I'm sure all of you know our advertising customer Opel has done a campaign with us. We delivered almost €280 million in reach and classical TV, combined that with almost €290 million ad impressions through our digital outlets and also did with Opel together a virtual reality video that was very efficient, very targeted, very target group within that delivered additional €4 million in view.

So that's what we mean with the comprehensive 360 degree product and sales approach. This obviously is combined by a strong content line-up for 2018.

As said, U.S. highlights unique local content, second tier sports, and that will further stabilize the audience share development, and as said, enjoy a high quality program environment for our customers.

There is a couple of major underlying trends that support TV growth in 2018, the continuing adoption of addressable TV still very young, the high potential going forward ecommerce brands, driving the brand advertising especially in the commerce business. We've mentioned that I think on numerous press conferences in the past and this is a very continuous stable factor.

The online industry invests about 60% to 70% on a continuous basis versus sustainable in TV and that especially in the ecommerce around and our colleagues from NuCom Group have signed as part basically off the transaction we just announced. This will be more and more important to create brand awareness for ecommerce brands.

The aging population is something that is essentially good and especially good for TV because yes older people tend to watch more TV than use online. A lot of opportunities driven by tech - AdTech and data thematic and contextual advertising and we are not getting tired to mention that again and again.

Digital does have quality issues reach issues and brand safety issues all around ad cluttering, ad blocking, ad fraud, online traffic and so forth that is something that the issues that TV doesn't have that combines with potential upcoming future restrictions as regards to cookie advertising in the digital world, in the commerce world and will present an additional upside for TV because if you can use cookies anymore and your TV advertising, why don't you go to TV and your online advertising, why don't you go to TV in the first place where you get additionally the reach and the speech of our campaigning. In addressable, we are clearly the market leader in our market, you can do a lot of stuff with addressable.

For example, place your advertising product in environments that you like son or like here weather in this example and Sabrina and her team have managed to double the number of campaigns year-on-year turnout 2010 campaigns that equals an increase of 123%. The outlook here as Thomas has mentioned earlier this is very promising, we see a potential of this market of which we tap into in about 40% share of €0.3 billion to €0.5 billion and the important factor here is not so much the number but the budgets we are tapping into that's niche budgets, regional de-central budgets and retargeting our customers that are interested in retargeting and there is a further additional upside when you factor in the future Smart TV and Hbb penetration.

The success factors for addressable campaigns are you got to do the best sport overlays, you got to offer technology that is HbbTV for us, programmatic excess data and targeting the attribution models and performance management and all of this can be delivered through our programmatic and AdTech stack and that clearly distinct us from anyone outside in the market and the media houses especially in Europe, a recent acquisition, ease up for example taps into the social marketing performance management. So, Christof has really rounded up that very well, and that gives the advertisers and agencies a destination to go to that it's not within the dominance, so to speak, of the big Google's and Facebook's.

A quick word to the outlook for the TV market in Germany 2018, the experts, industry analysts foresee single low single-digit growth in the realm of 1% to 3.5%. We feel comfortable with that.

Distribution, as you can see here on this chart, we've become little bit more bullish, we're actually well on track to exceed our 2018 capital markets targets, I would like to draw your attention to one of our latest deals here on the bottom right-hand side of this page 53, we closed the deal with M7. M7 is a satellite marketing platform that will offer an HD distribution platform product.

And as most of you know, the satellite population in Germany was roughly 70 million homes, it's the single largest individual distribution platform that has to-date only been serviced by HD plus. So with the advent and the launch of M7 that will start this month in February, there will be competition in the satellite population, and we're very positive that that will boost the pick-up and the take-up rate of HD.

In our second segment Red Arrow Studios, key priorities for Jan here are synergies leveraging the new set-up with Studio71 and with Gravitas to the benefit of the whole group continue to do M&A. That's a major part of Red Arrow studio strategy.

And we always have a nice pipeline of potential targets in the core market, especially in the U.S. And from a group perspective, we will evaluate something, you know, you could say similar to what we just did with our Commerce segment, the potential partnership, either with the strategic partner or financial sponsor going forward.

NuCom Group, I will not go into too much detail, because Jan has done that already, what's the key priorities integration further continuing - continuation of the integration of our recent acquisitions like Jochen Schweizer, for example. On the product development side, keep on the good work, for example, evolve partnership dating business more into the mobile realm, and obviously now with GA, which is a fantastic partner, continue the M&A track bolt-on acquisitions in the existing verticals.

Actually to speed that up that's one of the plans we jointly have, and potentially also the development of new verticals in the German-speaking market segments. You've seen this chart in Jan's part already, but obviously it's important one, so it's good to repeat that.

We do see a lot of mid-single-digit increase of the top line, but if you look at this from currency and portfolio adjusted perspective, it is actually a mid single-digit increase. And all other margin will be in the mid 20s, very interesting still, and all other KPIs to stay pretty much in the range as the cause was a good way going forward.

And again, the value creation, it's also looking a little bit beyond 2018 at least a €1 billion revenue growth throughout the segments combined with continuing work on the efficiency side and cost saving. We're now ready to really look into partnerships in the infrared business and selectively also in the Pan-European business, and watch us, this has enough powder in it to do a good larger bolt-on M&A, and that will create substantial additional value.

So closing my presentation, all presentation, if that's one thing we would want you to take home is just remember that's in the one of the no peer group that has this set-up of unique value creation through our Entertainment segment combined with our growth segments Red Arrow Studios and our Commerce business, especially NuCom Group. And that's it from my side, but before we now go into the Q&A part, I would like to take the opportunity as its Thomas' actual last day today and his last press conference with us to express my personal, as well as the gratitude, and thank you from the whole Executive Board.

And I can say also from the whole staff of ProSiebenSat 's for nine extremely exciting years, for nine extremely successful years, you've left no stone unturned. And we jointly under your leadership, yes, develop ourselves from a company with a low valuation to a company with a today very high valuation.

At this company, it's been an incredible trip. And I think none of us would want to miss that.

We really thank you for that. And it's been a pleasure, yes, flying with you.

Thank you, Thomas.