ProSiebenSat.1 Media SE

Welcome to our 2018 Annual Results Conference. Since we're in the entertainment and infotainment business, we decided to run this conference from our top studio in Munich.

In a few hours from now Rebecca Mere who hosts the program will present her daily live show and Jan and I apologize that we're quite marginal downgrade vis a vis. Rebecca.

Tough by the way is the most successful magazine format in Germany and quite interesting it has has about the same amount of daily viewers and people to engage with Tough digitally as we have in TV. So maybe quite a good sign of what we're trying to do into the future.

We'll cover '18, Jan will talk about the financial update, and then I'll get into strategy. Pretty brief update on 2018.

I must say for us feels like rather long in the rear view mirror, because we're entirely focused on executing on our strategy and delivering 2019. I want to give you a first glimpse on 2019.

Importantly spend quite a bit of time to update you on how we're putting the strategy that we discussed at the Capital Markets Day into execution and I'll give quite a few examples of what has happening today in 2019 what will happen as we go through the year. And then just for transparency and clarity we'll give you some specifics on the financial outlook for 2019.

So let's do '18 first. Not a year we're satisfied with.

Though it came in with the guidance we set, so external revenues minus 2% adjusted EBITDA minus 4%, net income minus 2%, external revenues at an organic level growing 1%. And if you look at the flow through the year, I think we started to execute better in the second half.

And you can see how our diversification with new com what we show as commerce here going for 18% and content production global sales which is already our studio business going into '20s is really beginning to show effect. So that in the last quarter, we're growing 3% at a group level even though the underlying advertising markets were quite weak.

Dividend proposal. We're proposing a dividend of €1.19, which is in line with the 50% payout ratio that we communicated at Capital Markets Day.

And so with that, I will pass on to Jan to take the full year results of 2018, and then I'll be back to talk about strategy and outlook.

Thanks Max. And also good day from my side.

I will walk you through the financial review both for the fourth quarter as well as the full year 2018. So starting on Page 9, okay.

As Max said, the year was demanding and the performance was not where we wanted it to be. So in Q3, we sequentially had to lower our guidance for the full year.

And when we look now at the full year numbers coming in, we met those guidance. So at least ending the year on a positive note, and we dig a bit deeper into the different buckets.

Overall, reported numbers Max was commenting on both for external revenues but also adjusted EBITDA coming in low to mid-single digits declining. We have a significant deconsolidation effect in there, of roughly €100 million.

If I take that out, organic growth was about, slightly positive so 1%. But when we look at the 1%, I mean that development mass required diverse development in the different business segments below.

So we had a tough time in the TV advertisements or the advertisement space in general. And all the other business segments below being it whether our studios being it the commerce segment and also distribution and the like came in very positive growing nicely.

But we'll dig into that a bit later along the way. Max already commented on net income, there's one number that sticks out especially the development in Q4 that is mainly due to a lower tax rate in 2018, compared to 2017.

Jumping on the next slide, so let's have a closer look into our three segments first, starting with entertainment, revenues declined 4% for the full year and 10% in the fourth quarter that decline is especially driven by advertising revenues, that were declining 4% in the year and 8% for the fourth quarter, respectively. So when you break that down and look at TV advertisement first, because it's always the point of key interest, we saw stable development actually in the month of January to October, but then a week at on bookings this new especially at the end of the year, which led to a soft demand at year end.

Now we have like three reasons for that. First of all, we see a more challenging macro environment with the key indicators trending downwards.

Second, we have an increasing uncertainty in global trade with a global trade issues China, the U.S., but also the fear to what's a potential hard Brexit. And last but not least, not to be under, not to be overlooked the fourth quarter in 2017 was a very strong quarter with 6% growth thus the comparable for this year was relatively strong.

Digital access business was also declining double-digit as through the first three quarters of the year. So we saw that for the full year, but that and Max will come to that later in the presentation and thankfully some of reversed in the first quarter of 2019.

So we see the digital business is growing double-digits, although still on a lower absolute basis. All other entertainment revenues combined were growing at least mid-single-digits.

So if I take the deconsolidation of max dome and set the mix out overall, looking at adjusted EBITDA, so the profitability of the segment obviously when you're such a decline in the high margin business of advertising revenues, that hurts profitability. But still we were able to maintain a stable margin for the entertainment segment.

And that was due to a very tight cost management overall in the group and nicely growing distribution business, which is obviously high margin and additional internal revenues, so more revenues or more advertising we were selling especially to the NuCom Group, which is progressing very nicely. On the next page, just to touch briefly, we commented on during the last two calls that we want from 2019 onwards also give out more operational KPIs, not only the financial grid, we were always talking about, but also additional operational KPIs that give you a better feeling on how the operational progress especially with regards to the transformation is continuing.

We are also and only to pick one KPI on that slide introducing one new figure total video view times which is the gross volume of content usage measured as viewing time in minutes across all platforms. And for us, that's the first essential step to a holistic KPI framework in the entertainment space.

Next one to come is actually across campaign rating, which measures all advertising exposure the client then has across all of our screens and platforms. And that in the end will give us the opportunity a.

to say what is the reach we are creating across all of our inventory and in the end okay what is monetization we can actually get on the respective impact. So it's on that one for 2018, you still see a slight decline of total video view time, that is due to the fact that linear was declining around 2% for the year.

So linear reach and digital was growing but was not able to compensate that development yet. Again when I look at the development year-to-date 2019, for the first time digital reach increased was able to overcompensate linear decline.

Another important topic to touch, we concluded the review of our content strategy. So the last time we came together we elaborated on that we want to go more live more local, and that we just have to so we have to do evaluation adjustment with regards to existing or still to be receive U.S.

content. Now we're talking about 400 million at max.

And we went through a detailed analysis over the last couple of weeks, we negotiated with the respective studios involved. And the final total P&L expense that comes out at €354 million with the total negative cash impact after-tax of €90 million.

We paid a bit of that already in the fourth quarter, so the remaining cash impact we see over the next three to four years is just shy of €70 million. If I take that block to €354 million and I can split it into two blocks.

The first one is the package of €290 million, of programming rights we sold a fair market value to [indiscernible] our new joint venture. That includes like Linear and Catchup rights for series like Quantico, Homeland, or Shooter.

And there will be used for launch of a respective channel on the [indiscernible] joint venture later this year. And then there is a second bucket to reach the €354 million which is bucket of €63 million that is content with no further use for us neither in the linear space nor the digital space.

And we simply built a provision for anticipated losses and unscheduled consumption going forward. Now there were titles included like Mambo King, Cora Unchained so eventually no titles you ever heard of.

We cannot literally play on both ends of the equation. Up to the next segment content production global sales.

We have actually very satisfied with the dynamic development we saw especially in the second half of the year. Just to recall in the first half of 2018 we saw 12% decline year-over-year and that was transformed over the last six months into the 6% reported growth and 5% portfolio adjusted, portfolio and FX adjusted.

Looking at Q4, production was growing 38%, Studio 71 actually 31%, so organic net growth reached a number about 30%. And when you recall the last two times we came together especially after Q2 last year, that was really tough segment to discuss.

The drivers behind that first of all the production business U.S. is recovering.

The U.S. business is especially like Kinetic or 44 Blue came in very nicely and with Studio 71 also the international business is progressing very very nicely especially U.S.

is picking up somewhat on a trajectory as we seen in Germany somewhat before. Adjusted EBITDA is also up significantly, two reasons for that.

First of all operating leverage at Studio 71 and also the nice production and production uptake especially in the fourth quarter of the year. As for entertainment, we also putting out operational KPIs for content production global sales, and just two quick comments on that one and especially because you see two numbers that were actually declining.

So the number of productions and the hours of produce, the hours produce, and that is due to given a temporary focus of on larger productions of those companies just to pick too deep stayed at [indiscernible] or the weekly left right we simply consumed a lot of resources in those production assets. So that shall be a trend to be reversed somewhat in 2019.

For Studio71, I think those KPIs quite nicely illustrate the operating performance of the business and from my perspective are pretty straightforward. Jumping to commerce and overall when we look at revenues, very satisfying results across all of the call, the four core verticals we put out there.

16% portfolio of FX adjusted revenue growth for a year and when we look at the reported numbers on the plus two that is given to the fact that we have the net deconsolidation effect of $100 million, just to recall, we sold each [indiscernible] and triple had some constant balancing effect of your slides on eHarmony and aboalarm, but overall still a net negative effect of $100 million to the top line. When we look at adjusted EBITDA development, obviously not where we wanted to be, three major effects.

First of all, the $100 million deconsolidation effects on top line transformed into a 20 million drag on the bottom line. Second, revenue media agreement between the commerce segment of NuCom Group and the entertainment segment which is an additional 20 million drag one time this year and there's a 6 million provision related to an insolvent energy provider very walks the diesel, I think you're picked it up or you read in the press.

So those regularly effect that break down profitability. Again for 2019 as Max will elaborate on a bit later, we still that development, we see that development continuing on top line but expect a similar development and also on the bottom line even accelerating.

Some operational KPIs to illustrate the drivers, so yes we put out the revenues as already communicated that's kind of the market state but also at least one operational KPIs per vertical. Maybe two to slack first one matchmaking, very positive development last year with a high number of first time registration plus a very nice shift towards mobile, something the team was working on very hard over the last 18 months and we finally see in order which happening and actually going into the right direction.

And the second piece to be picked on beauty and lifestyle, Flaconi is simply the growth engine of that segment at the moment and simply pushing along, which is also reflected in the number of transactions we see on that page. Page 17, quick comment on net debt, net debt increased by about $500 million this year.

Three reasons to that, first of all the acquisitions we did both on the majority side but also minorities we bought out, especially in the context of the transaction with general Atlantic. Second we have a certain weaker free cash flow due to lower operating profits.

And last but not least, we have a temporary effect where we had some program spendings that were shifted into 2018 and also some tax prepayments and actually at the end of 2018, but we should see a counter balancing effect in the first half of 2019. So overall, financial leverage is at 2.1 time at the end of 2018, well inside our leverage target range.

And now in combination with the lower dividend as communicated at the Capital Markets Day, we have sufficient headrooms for the investments. Max will touch upon a bit later and also selected add on M&A we are aiming for.

Last but not least, a quick update on our share buyback program. In November December last year we brought back 2.9 million shares, which is equivalent to 1.25% of our group shares.

Average purchase price was €17.2 so we spent an amount close to €50 million. So we concluded the first tranche of the share buyback, and we do not anticipate further tranches for now.

So this summarizes the financial section of this year's full year presentation. And it's also my last appearance as CFO for ProSiebenSat.1.

As I'm leaving the company end of March, this year, Rainer Beaujean will takeover as new Group CFO July 1. And in the meantime Ralf will lead the pack from April to June.

You all know Ralf over the last 20 years plus so a very experienced finance professional. I guess he knows the company inside out has very long standing relationships with all key stakeholders in equity side being at debt side.

And I guess also with his short stint on the press side also the free cast communications well connected. So I think the finance organization is in good hand and the transition to the new CFO should be seamless.

And let me also quickly use this opportunity to thank all my colleagues at ProSiebenSat.1 for their strong support over the past two years, and also the significant workload they actually put in order to shoulder the heavy workload we had to navigate the company's through challenging waters and also to transform the company into a more agile and more modern organization. It has been a great pleasure to work at this dynamic company.

And I really enjoyed also our dialogue over the past two years. Last but not least, I wish Max and the entire ProSiebenSat.1 team best of luck in every success in terms of executing the gross strategy going forward.

You deserve it. And with this, I will hand back to Max for the strategy part of the play.

Thank you Jan. So 2018 clearly results was not as satisfying as we wanted it to be, but I think as you show in Jan's presentation, it was a very important beginning of the reset and the transformation journey that we want to be on.

We are now structured in three key pillars. We have KPIs, which made very good progress on NuCom and other areas and I'll comment in a moment on how that continues into '19.

Before I do that maybe just a quick comment on Jan, because I think is an opportune moment to thank him for his stewardship and leadership. We wouldn't have NuCom and I'll talk about that later, it's quite amazing what he's done in the year here and he's really been a key leader and shepherd in this.

But also as we were meeting the finance organization I think he's brought a fresh and more agile spirit to that, and I will comment on organization a bit later. We also have a Sabina here who after 15 brilliant years at ProSieben I think all of us can't wait to see what she does next.

And you know is beloved by the organization and has really taken us on a very important commercial journey. And again a lot of the things that you will see coming alive in 2019 going after smart reach, you know, having built an agency organization, a two front organization and so forth, I think she has built.

So they are, they've been very important part of the ProSieben journey they're friends of ours, we wish them well. And I'll talk about some of the evolution and team going forward in a second.

So first quarter 2019, well really both for the first quarter, but for the year focus on accelerating organic top line growth. And, of course, as we said previously, we're making investments in 2019 to get our business setup right for the future, in terms of digital footprint, we'll talk about streaming, we'll talk about technology and all of those kinds of things.

But really the proof process to deliver accelerated top line growth and then as we move from 2019 into ‘20 and following years to continue to deliver accelerator top line growth but combine that with this dropping through into bottom line growth and delivering the total shareholder returns that our shareholders rightfully both demand and deserve. So if you look at the first quarter, I'll actually do the slides from the bottom up.

So if you look at both NuCom Group and our studio for having a super start to the year and we would expect all in actually both of those businesses to come in with growth rate of 20% plus which I think is quite astounding. If you look at entertainment, I think it's worthy to separate the bit out a little bit in entertainment.

So the first thing that matters to us is are we winning with viewers and the answer is yes we're winning with viewers, our audience there in admittedly the old TV universe is the strongest we’ve seen in 2016 and that in the first quarter where our competitors are usually strong because of some of performance sequencing, and we tend to be weaker. But importantly, we’re also up in video views, and I'll talk later about the work that we are doing with the industry to help get more holistic metrics.

So that's good. If you look at TV court advertising, that's more mixed.

We’ve seen January, February pretty decent, March looks weak. There's a pretty meaningful Easter effect on this, because Easter is very late.

And so we think we really need to have the first four months under our belt to have a good sense of where the advertising trends are going. Encouragingly we are growing digital is smart advertising revenues, double digits, you know, that's still of a relatively small base so we need more and we'll talk about how we're doing this and then distribution revenues and other revenues are where they about I think also in a good place.

So the elephant in the room really is can we, and by the way, it's an industry question. Can we grow against the declining TV market?

And there's many ways to answer this, but here is I think the simplest way to look at which is to just look at the market a little bit different. If you look at the market as entertainment as total video of moving pictures and you know, total video is a term coined by our friends at RTL actually good phraseology.

So we have no problem with using the same terminology and you look at the advertising market then you know the first question is are consumers are viewers consuming more entertainment, absolutely yes. Are they viewing more video more moving pictures?

Absolutely. Yes.

Are advertisers spending more money on total video and the answer is absolutely, yes. What, of course, statement of the obvious is changing underneath is that TV so linear reach is declining, if you look at the numbers which are here, maybe somewhere around 2%, the advertising associated declining somewhere around 3% to 4%.

But that is more than offset by the growth in the online video market. If you then look at our business.

So our total entertainment segments in 2018 is 2.6 billion, of that 2.1 billion is what we will call TV core advertising and 0.5 billion its digital smart distribution and others. And so for every percentage point of TV advertising decline, you need 4 percentage points of growth in the rest and then of course, if you want to grow.

Let's say you have 2% decline, you need 8% to offset, you want to grow another 2 points on top of that need growth of about 16% in that portfolio. And so really the key question is, if you if you assume some declines the underlying TV market, do we think that we can develop the balance of our digital portfolio at starting double-digit but then accelerating more than that rate?

And the answer is absolutely, yes. We're still very underdeveloped in digital viewing, we're re-launching and launching our [indiscernible] platform later this year.

We are working on developing intelligent, better advertising products and I think as these efforts come to fruition, we can counterbalance this and by the way, do not forget that underneath as you look at total viewing, which in Germany is about 240 minutes or so a day very close to 180 minutes of that is still core TV. So it's not that one is going away, but it is correct that if we want to win in the future, we need to better balance and we need to pivot until more of our business to those channels that people are consuming more and that can be done.

At the capital markets day, we took you through our updates and strategy, our vision to create a consumer centric entertainment and commerce champion entertainment more speaking, more local, more relevant commerce businesses that address mass consumers needs that people love and all that back together platform agnostic made available everywhere monetize them. And by the way I should make one comment, because I get that question here and there on how well these fit and I have huge conviction that the combination of entertainment and commerce assets, which is a unique model that we have certainly in the Western world is incredibly value adding, because what entertainment gives us as asymmetrical marketing power, reach audiences that can feed our commerce business or commerce gives us is direct to consumer access.

They gives us technology and gives us data view, which if that happens all the things that entertainment needs to win in the future handled by the way that combination also gives us a better diversification footprint than pure play, media or broadcast companies. Now really we're focused on seven top priorities in how we bring this to life across the three pillars of our business.

In entertainment, how we make content more local, more relevant and win audience here turning that into digital attacks and how do we win audiences on the devices in the way that people want to access it turn all of that into total reach vis-à-vis segregated TV and digital reach make that reach intelligent that's one through four on whether studios increase our internal content feed on NuCom continue to rapidly accelerate that focus portfolio and then importantly build all of that and our organizational setup that's really make sure we're tuned to support the transformation and the future growth we're going after. So I'll take you through all seven with some examples and some detail.

So the first one local content, we are winning with audiences, we're winning with audiences in TV we're winning with audiences digitally and we do that across quite a wide slate. I commented on Tough earlier which is where we are today but fairly [indiscernible] tougher leading magazine formats by the way with very, very large digital audience.

Germany’s Next Topmodel has had the best start since 2011. We've have voice senior and now we have voice kits which those that want to drop a few tears on a Sunday evening.

That is really the most heartwarming way to do this. We've expanded our comedy slate with just trying to deal with Constantine for another slate of German movies and in sports we've had 2 million people watching the Super Bowl and that was rather late in the middle of the night and really a great event.

But we've also just expanded our eSports portfolio and we're doing other things. And we have a wide slate of programs and formats we're working for the balance of the year.

I think we just announced today that we signed to write on a program called masked singer which comes out of South Korea and has been that smash hit in the U.S. I think 30 million people watched it.

It's completely over the top, silly you know, you have people mask and really weird ways who're then singing and you have a celebrity panel that needs to identify who they are. I mean it's just if you ever want to watch the trailer is just fantastic fun.

And I think, as we know work to execute this for Germany, audiences will love it. Digital attack, this is an interesting one because I don't want to say too much because of course everybody wants to know exactly how [indiscernible] you will look like, exactly when we will launch it and all those kinds of things was a very competitive space.

And so we don't want to give away quite all of those details other than to say that we are well on track. That we have what I think is now the strongest management team in the space, we have 200 people working on it.

We're absolutely slated to launch this summer. We by the way have on the current 7 TV platforms 3 million to 3.5 million monthly active users that's growing by about 27% but doesn't really matter that much, because what we're focused this to build a completely new product will have a new name, will have great UI UX, great architecture and then importantly, I think first and foremost offer for free and with no access barriers, the most the widest amount of content that U.S.

want to see in Germany. And you know, those of us that are in Germany will know that that is actually still quite special.

I mean, try to work yourself through all the apps and all the ways that you try to access content. A lot of that doesn't work really well.

And so I think if we can come up with a product, we can feel the things that you love, you can see many times, you can see the mobile, we bring in quite a bit of exclusive content that we have lined up, it will be really interesting. I have a demo on my phone that I've been using for quite some time that I won't show you.

We had a board meeting this week and took everybody through that demo. And we by the way are lucky on the supervisory board to have some of the most experienced streaming and digital people on the planet, [indiscernible] sits on our supervisory board has helped us here he built BBCI player he's been a leader in streaming.

We have other folks who have built significant mobile infrastructures in the U.S. and so forth.

And they were all blown away. And so I think we're onto something special, but of course it has to launch.

And so you need to just wait until we're ready and when we're ready we will launch. And when we launch, we launch with everything we got.

I think as we looked at efforts in the past, one of the views we've had is, the challenge right away for all broadcasters is the worry about cannibalization trap. And I think is a wrong strategy.

I think you really need to not worry about cannibalization. But focus on building incremental audiences.

We have 30 million people in Germany every week that are watching our programs. We have 16 million people that are accessing content that we create through digital platforms.

And so if we just go in and take the entire trailer volume that we have, and focus all that trailer volume on the best digital experiences you can have in Germany, I think very quickly, we will get lots of people trying out what we have to offer and then when they try out, we have to deliver on our promise. And if we do that, I think very quickly, this will become one of the go to places for entertainment.

Okay, so if we then do that, the next step is what we call total reach. And it's really interesting it's really important to understand that still, largely today, you know, TV linear and digital are segregated world, now the segregated selling models they're segregated measurement systems and so what we're trying to get to it is get to a world that mirrors more how consumers interact.

Because when we watch things everyday we don't think, I just watched linear.And now I watch something that was streaming and now I watched on this device. We just watch stuff and we want to enjoy it and we wanted to be barrier less.

And so we've been working very closely with IDF which is the it's the body we're all media houses put into drive the overarching measurement system they're doing very good work. And I think there's a unique advances in Germany that we have one trade body that brings everybody together.

You may or may not have seen that they have just published for the first time combined data that now includes YouTube. And they with our and other partners support are working very hard on creating a new market currency that can measure total return.

I think that really, really matters because then we can understand what is the total return we go after what is the total reach that we're generating. And then of course, we are working with our sales and advertising team to package this into products so that we can go to our agency partners and to advertisers and give them what they really want which is total and aggregated reach packaged in a way that works and makes sense.

So once we do that, the next step in that journey is to make that reach smart. And smart is by the way, not that complicated concept.

Smart is simply that we know who we talk to. I'll give you an example on [indiscernible] where we are, the leading matchmaker in Germany, it makes a difference whether you talk to women or you talk to men.

And so the very simple ability for us to target women with a slightly different message than men was a slightly different message increases advertising efficiency by 30% or 40%. And that's very meaningful.

And by the way, is also meaningful for viewers because if we can serve you with more advertising that's more meaningful and relevant to you it also means less advertising irrelevant or annoying. So it's something that advertisers need them wonder something that helps audiences, and we're making good progress on it.

So actually, in the first half, we are in the midst of launching what's called addressable TV spots. So we can take the 6 million TVs, which was about 10% of our total reach.

And on those 6 million TVs, we can then offer targeted spots that are addressable and we are in the midst of working with a number of advertisers how we execute and campaigns and then importantly, in the second half, we're launching was called across device bridge where we're able to bring together one advertising message across different devices because we can synchronize or identify the IP addresses. And then I'm not going to talk this in detail because I need an hour to explain this to you.

But that is the tech stack that the team is working on very actively to enable all of that and it's a tech spec that both looks at the advertising offering so that we can work with advertisers in different ways know if you want to buy total reach we can work with you on total reach, if you want performance campaigns, we can work with you on performance campaigns and for example ISAM which is an asset we own are the market leader in performance marketing and in Germany, if you want us to bring an influencer marketing we've [indiscernible] and phone and then importantly on the tech platforms, virtual minds is working through and aggregating all the technology infrastructure that is required to do this because the plumbing is that makes sense the plumbing of advertising. So how advertising is played out, how it served and how it's measured.

Is the biggest barrier of why smart and addressable TV adoption rates have been lower than maybe we want in the past, but all of that we are solving, not in one day, but we're solving and I think we can build a future business from there. So then to add our studios, we’ve talked a couple market say that we will take great speed up by 16% to 20% this year and then 30% in the following years, we're well on track.

We have a couple of very exciting programs that are coming in just to mention one Top Chef Germany will feature a catalytic man, you know, who is one of these [indiscernible] on this planet has never done a cooking or TV show. And so we're quite excited about that.

But there's more formats and also quite a few we're not yet ready to show you. So watch that space.

NuCom Group, it's been quite a journey. It's important to remember that NuCom Group and the whole set up a GA is just one year old.

But in that year, I think the team has done a brilliant job and operationalizing the business, delivering coherent, consistent, double digit growth, clearly structuring it around four big consumer verticals and I’ll not talk all these in detail. But if you, for example, just look here, we’ve meaningfully strengthened the team, both in leadership and so forth, and we have a great partnership with GA, because they understand the spaces we operate in well.

I think we, you know, we're bringing what presumed as well what they do well, and I think we're mixing this in a way that really puts us in place to build one of the commerce internet platform champions on this planet and we're well on track for this business to be a billion plus this year. We find a way I think you saw a while and home was the last folding so that means now all the assets are clearly structured and ownership with GA and us and there's actually something we're quite excited about because it's the market leader serving millions of consumers in Germany around all services and products around the home and then eharmony acquisition, we're well on track to take the tech engine that we have and some of the marketing learnings we have and apply that to your eharmony and I will provide an update on how we're getting on with this sometime later this year.

And then 71 company and how we're setting up. So maybe just a couple of words our structuring.

What we are really trying to do and to quite some extent, executive for supervisory board and localizations on this. We were quite inspired by what we did a NuCom, which is have a really focused company and focused leadership that cannot get on with things.

And if you look at the progress we've made over a year, I actually think is quite amazing. And we have an entertainment, we've always had holding entertainment all a little bit entangled them.

So the intent here really is first to run our businesses, really operationally focused with leaders that bring a diverse set of skill sets. And then to wrap that together in an executive board that has holding and has those leaders and has key functions together so that we run the business wider.

And actually on the analyst call somebody asked me, but does that mean is all going to become more siloed Max, and the answer is no, the opposite direction to be either less siloed, because we'll have clear CEOs who're operating the business, but we'll unify that in one group and we're actually making very good progress for example between entertainment and NuCom on how we strengthen and drive the next level of synergies. On people, there's a very good mix I think off really strong continuity class handled and has been with NuCom of course zero euros you know Florian has done many things for us [0:41:38.0] [indiscernible] is not actually is the one of the founding members of Studio71 James Baker has been in the entertainment business.

All this license with us for a long time was on a link has been running our entertainment content and channels that are very successfully for many years. You know Conrad obviously is a key pillar and part of the group also for many, many years.

So sometimes I read orders so much changed and there is no stability, we have great backbone, great leaders and great stability, but it's also combined with some change and freshness, which I think is the most normal thing in the world. [indiscernible] is coming on broad pretty imminently actually and we'll take over as co-COE on entertainment.

She has worked many years for Dyson or for agency before that. And the last thing for Dyson she did was build up the China business, which one she started has 50 people and when she finished had 1,500 people and this is an absolutely unbelievable business.

But importantly very pure digital and so she has a very deep digital skill set in the most sophisticated digital market of the planet. And I think that can be helpful and bode well for some of the things that we want to do.

[indiscernible] Jan commented on earlier will come on board in the summer and is super thrill pumping excited to be part of the transformation journey going forward is a very, very experience see if well-known to the capital markets. And has come across that kind of transformation challenges that we're facing many times in his career and so again I think a helpful addition.

Further to that so first point I talked we just announced I don’t know yesterday or so Nick Thexton as our CTO, it's, I think it's the same it'll be obvious that the media companies want to win the future they need to be as much technology companies as media companies whether that's consumer screening technology, whether advertising technology, whether it's data technology and so I'm very pleased especially the first time that we've been able to secure a CTO for the group and we're now working on how he can help take us to the next level and I think you already know that we have been able to attract Christina Schettler who's worked for [indiscernible] many others and she's actually been with us for the last eight weeks really helping us to, focus on how we develop the organization forward because in our business the creators of passionate people of course even designs are the ones who do everything. We don't have factories, we don't have metal, we don't have much patterns and so this is a people business and I think it's really important that we work with and drive our people forward.

Jan commented on KPIs as I think we operationalizing the business better and we are having continual conversations on where and how we can drive scale across the industry whether that's netID, whether it's the European Broadcaster Alliance or other conversations. Just to remind you that the ambition we set it's an ambition we're comfortable with, it's an ambition, so it's not a walk in the park but I think it's stretching yet achievable and we're very focused on the first steps in 2019 that are required for us to move.

Now outlook, let me just make a few comments on what is our view on the year and how that relates to the advertising market. So overall we're focused on accelerating top line growth and get good revenues back into the single-digit growth territory.

If I can then again comment from the bottom up if you look at NuCom Group, we are guiding 10% to 15% growth, we're very comfortable with that and all in it will grow faster than this one but Arrow Studios we're guiding 5% to 10% growth, we're very comfortable with that. On entertainment, what we have previously guided is that we can marginally grow entertainment as long as the underlying advertising market reflects a slightly declining and let me kind of put selected slightly declining to know more than minus 2%.

If you than take the EBITDA bridge, so if you go back to 2018 we closed the year at $1.13 billion we've communicators that we're investing $120 million in local content, digital and technology that that will be offset by about $70 million of revenue and cost out so there's a net drop through investment of $50 million than the landing point for 2019 would be say about 960, 963 and that's indeed is what the team is focused on as long as the underlying TV co-advertising market of which we have limited control if any is in a range of flat to minus 2%. If that market is worse than every further point of decline costs us about $20 million in EBITDA so should which we don't think but do not know the advertising markets be as weak as they were in '18, which is on 3% to 4% that would cost us another 20 million to 40 million and if you look at the guidance we've provided to capital markets was an EBITDA range of 22 through 25.

The bottom end of that guidance is 900. Two other financial points, 170 investments.

So we are making a gross investment of 50, about 50 million this year. Next again, about by the same number by discovery.

So as partners, we're investing $100 million to build the leading digital streaming. Platform, that's a net for us of 30 because there are some advertising revenue and services that are all setting it.

And then last financial comment on phasing. It's the nature of the investments we're making that they are front faced because if you're investing in content you need to commission and pay for the content.

Now for it to impact if you're investing in technology you need to buy or build or hire the technology now. And so in terms of EBITDA flow for the year, we would expect for the first quarter to be more pronounced in the decline rate and then for that to reverse out in the fourth quarter.

So with that, I'll close. My summary to you would be I think we are making good progress on our strategic priorities, whether that's winning with U.S., which we are whether that's expanding reach digitally, whether it's building smart advertising products, whether it's growing NuCom accelerated and creating more synergy across the business.

I think all of those things we're well on our way. The underlying TV advertising market is difficult to call and a bit of a worry for us.

And I think as I said, when I came on board last spring or summer, the transformation is not easy. It's a marathon, not a sprint, they'll be bumps in the road, but do we have absolute conviction that we're working on the right things, that we're going to win with those things?

The answer is yes. Do we have great passionate people who are excited about this and with us think that we can really create that German and European champion - absolutely.

And we now and that's what we spend all of our day on need to execute and deliver every single day. Thank you.

Perfect. So we will open the floor for the Q&A session.Wait a second I would like to ask to ask Marat to come on stage just to the fact that Jan will hand over his duty to Ralf we thought it's the best addition we can get.

Okay, so the first question I think from -- Stanford.

Hello. Thank you.

And my first question is on the fact that Mr. Kemper leaving the company after only two years.

There have been rumors that the two of you Mr. Conze and Mr.

Kemper have differences on the strategy and on leadership. So could you please comment on that?

And then my question to Mr. Kemper also is could you let us know where are you heading to?

And I've further question, but maybe you first will reply to my questions.

Do you want to take that one or so I take on those matters?

I mean, literally for me overall yes, there were some rumors in the past, no doubt. For me as always and I commented that a lot when I got the question internally, but also externally.

In the end it's about the company, right. So we internally discussed -- and some with the Executive Board or Supervisory Board and alike and aligned.

And I think that is what I was at least driving for all the time like two years I spent at ProSieben it's like an open discussion culture. And then what I expect from the company is to say there are people agreeing or disagreeing, but in the end is committed.

And I guess what we also do when we stand here it's like we're committing and we say what we decided like two weeks ago that isn't the best interest of the company going forward. And, you as a team that's going to execute.

Yes, the strategy everybody's aligned.And as you know, also in Germany, all the executive board members has to agree we agreed. So everything we can present that we can reaffirm today is like that there was there was an alignment, what to do going forward.

And where I'm heading next not client, but I’ll do that soon.

What's your comment on this these rumors Mr. Conze

Look, there’s one of the things that I've learned coming into media company that we're surrounded by scores of rumors and I think that's just a fact of life and people always want to make stories of things and they mostly have it wrong. What we do is all well planned as well orderly you know there's no, you know this isn't we don't run into this business on chemistry or misalignments just good relationships all around and I think there's just the mix of evolutions that drive us into the future.

I think is the most normal thing on this planet.

Thank you. And my next question is on different issue.

So then you holding structure, you’ve recently announced got to wait for the conclusion there are some predetermined breaking points between the three pillars. So my question is do necessarily the three pillars need the same owner, and you already have a second owner in one of the pillars, so could you please elaborate on that the three pillars, although you've emphasized they need to work together, but do they need this same owner?

Yeah, I think what we're really focused on is creating the best set up for us to operationalize the strategy that we discussed with all of you last year at Capital market day. And that requires for us to accelerate organic growth to also in certain areas operate better and tighter and so we think there's an opportunity by having better and more clearly structured operating companies like we stand with NuCom also an entertainment, and then to rethink what are the levels of value add inflows that we need to provide at a holding level, that just give us a better setup going forward.

That's what we're focused on. There is no hidden plan that would lead us to splitting any of these businesses.

Having said this in principle, I think I've commented on this before, we think we are in the world where strategic and smart partnering where it creates value can be meaningful and in fact we're leader on this in Europe with European broadcaster lines and so forth, so I’ll never exclude anything.

So that means the pillars are open to further owner for example as you might you mentioned it before. And I’ll suggest that their production on could get a second owner like the commerce arm.

No I think we're nice for you to try again but no we're very focused on operating and running the businesses, I think I commented earlier that we always have partner conversations, but we're waking up every morning and looking to on the content side find and create the best performance on the entertainment side get people to cry and laugh and on the commerce side make sure we offer the best services.

Sarah, do you have any [indiscernible]. [Foreign language]