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For the ProSiebenSat.1 Group, 2013 marked another year of growth, in which we achieved our highest figures for revenues and earnings to date. We have also had a successful start to 2014: Our revenues in the core business of advertising-financed television and in our strategic growth areas are developing as planned, so we expect consolidated revenues to increase significantly by a mid- to high-single-digit percentage in 2014. In the 2015 planning period, revenues at Group level are likely to grow in this range too, while recurring EBITDA is likely to increase slightly. We assume that all segments will again contribute to the increase in revenues and earnings.
Our profitable growth is thanks to the consistent integration of our TV activities with the digital business area. This strategy forms the foundation of our vision of an integrated broadcasting, digital entertainment and commerce powerhouse. We will continue to use our prospective revenues in the core free TV business in future and at the same time consistently advance the dynamic development in the Digital & Adjacent and Content Production & Global Sales segments. Our high operating cash flow puts us in good position to make additional investments in growth. By 2018, we expect Group revenues to increase by EUR 1 billion compared to 2012, of which 25 % to 30 % will originate in the Digital & Adjacent segment. We have a strong financial foundation and will involve our shareholders adequately in the Company’s success in future. At the same time, we will adhere to the targeted leverage factor of 1.5 to 2.5.
Successful business conduct comprises two elements: The conscious handling of risks and consistent use of opportunities for additional revenue and earnings potential. The early identification and well-founded analysis of growth prospects are therefore a central task of management at ProSiebenSat.1.
In the ProSiebenSat.1 Group, the management of opportunities is centrally organized and controlled by the “Strategy & Operations” department. The department identifies growth potential on the basis of detailed market and competition analyses and maintains close contact with the operational units and their managers. The identified factors for success and possible synergy potential are summarized in the strategy plan and incorporated in the decision-making process during the annual strategy meeting. Relevant opportunities are prioritized and strategic objectives derived. Opportunity management is part of the intragroup management system. It is linked to the budget preparation process and is included in both the twelve-month and the multi-year plan.
Opportunities for our Group primarily result from
The most important opportunities in these categories are described below. Some of these are opportunities whose probability of occurrence we consider so high that we have already included them in our outlook for 2014 and the medium-term targets for 2018. We also report additional chances here, defined as potential future developments or events that could lead to a positive deviation from forecasts or targets for the Company and that have not yet been budgeted for.
|Budgeted growth potential||Additional opportunities|
|Development of general conditions||> TV is the no. 1 medium, the Internet and
TV mutually complement each other|
> Increasing market penetration of pay TV, video-on-demand and HD television
|> Economic, regulatory or technological conditions change more rapidly or more favorably than expected|
|Corporate strategy decisions||> Value creation through diversification and especially digitalization||> Expansion of the station portfolio|
|The Group’s economic performance||> Adequate price/performance ratio for
> Cost efficiency and potential synergies
Macroeconomic factors such as the development of gross domestic product and private consumption have a significant influence on the advertising industry’s investment behavior. This applies both to our TV and our online advertising business. Macroeconomic developments that turn out better than originally forecast could increase bookings from the advertising industry, driving our revenue and earnings growth. In particular, if the German TV advertising market grows more strongly than expected, this could positively affect the ProSiebenSat.1 Group’s attainment of its targets for 2014 and up to 2018. The institutes are currently forecasting growth in German economic output of just under 2 % (ifo Institut). The German TV advertising market is expected to grow by around 3 % net in 2014. For 2014, we also expect net TV advertising investment in our core market to grow by a low-single-digit percentage.
Alongside additional growth prospects from the economic environment, the expansion of the station family could give rise to potential that is not currently included in our planning. This includes both the establishment of new TV stations in Germany and expansion to Austria or Switzerland. In 2013, the ProSiebenSat.1 Group founded two new TV stations in Germany: SAT.1 Gold and ProSieben MAXX. The Group thus gained access to new target groups in the audience and TV advertising market.
Due to technical innovations such as large flat screens as well as HD-ready and internet-enabled
television sets, the appeal of television has continued to grow in the last few years. Technological
innovations open up growth opportunities for the ProSiebenSat.1 Group, such as in the distribution
of its HD stations. HD television is becoming increasingly popular and has now reached critical
mass: According to a media use study by SevenOne Media, 58 % of those surveyed have a
ready device. From 2013 to 2018, the market research institute TNS Infratest expects the number
of HD households in Germany to double to 20 million. If
In addition to ongoing digitalization, liberalizations of the regulatory environment offer growth prospects that are not currently reflected in our budget. While the TV industry is going through a dynamic change process, the German television market is comparatively heavily regulated. New revenue sources for ProSiebenSat.1 could result from a ban on advertising for the public broadcasters. The additional volume for private TV providers could amount up to EUR 50 million until 2018. Due to a change to the Interstate Broadcasting Treaty, a sponsorship ban already came into force at the start of 2013, which applies on public television on workdays after 8 p.m. and on Sundays and public holidays, with the exception of large sports events. The Broadcasting Commission of the German Federal States is currently negotiating changes in view of the current development of fees. Thereafter, a decision is to be made on the issue of a general advertising ban and other structural modifications.
Television remains one of the Germans’ most popular pastimes. This is shown by the latest results of the “Mediennutzung” study series by ProSiebenSat.1 advertising sales company SevenOne Media. On average, 14 to 49 year olds spend around ten hours (594 minutes) per day consuming media. At 35 %, a large majority of this time is spent on TV, the no. 1 medium, followed by radio (23 %) and the internet (19 %).
Since television is benefiting more from digitalization than any other traditional medium, the continuing strength and popularity of TV also offers the ProSiebenSat.1 Group numerous opportunities in the future. TV shows a considerably stronger online affinity than print. Video is the key driver on TV as on the Internet. In the years to come, the demand for media-compatible video content will therefore increase further. Around 13 minutes of daily online use is spent consuming internet videos. Two thirds of smartphone users and three quarters of tablet users watch video content on their portable devices in addition to traditional TV use, so this does not result in the cannibalization of TV. The ProSiebenSat.1 Group has a comprehensive library of rights with 13,000 hours of own and commissioned productions and 50,000 hours of licensed US programming. This gives the Group the opportunity to utilize its programming inventory efficiently via its various TV stations. The Group can also serve new target groups and user preferences on the internet with premium content. This is a strategic advantage over mere Internet providers who own distribution channels but not their own content.
In addition, the ProSiebenSat.1 Group has built up a media portfolio in recent years that serves both linear and non-linear forms of use thanks to the close integration of TV and online. The successful TV stations are the centerpiece and are flanked by numerous digital offerings. Taking TV, the no. 1 medium, as a starting point, content is aligned to the use behavior of the viewers and the strengths of the individual channels as early as the development and production stage in order to produce additional content for the individual media. With extensive offerings like backstage information, exclusive video clips, social TV services, episode guides and actor profiles, the Group extends its TV content onto the internet, thus strengthening the connection between consumers and content.
At the same time, the Group is benefiting from the fact that its media portfolio reflects various
revenue models. While the Group generates revenues from websites and video portals via traditional
online advertising, the revenues from the basic pay TV stations and the video-on-demand
portal maxdome are based on fees for subscriptions or pay-as-you-go views. Willingness to pay for
TV and online content is increasing all the time: According to the “Mobile Barometer” study by
SevenOne Media, people under 30 and especially male users are willing to pay a fee for added
value such as live TV streams or HD content. Moreover, in the years to come, dynamic development
is expected for the pay-video-on-demand business (pay-VoD), which includes the ProSiebenSat.1
platform maxdome. Up to 2018, the pay-VoD market is expected to grow by an average of 20 % a
year to EUR 480 million. The revenues in the overall video market, which includes DVD and Blu-ray
sales and traditional video rental, amounted to around EUR 3 billion in 2012. It can be assumed that
market shares will increasingly transfer to digital platforms in future. The ProSiebenSat.1 portal
maxdome would benefit from this greatly and offer the Group high growth potential. maxdome is market leader in Germany with more than 60,000 titles and a market share of 36 %. In addition, the online video library is already directly available on 80 % of all new smart TVs and intends to increase this figure to 90 % in the next five years. In the last few years, we have concluded
contracts with all major manufacturers relating to the integration of the service on their devices.
In addition, we have launched our own app for Apple iOS, which is available on smartphone and
tablet. maxdome is also available on the Android operating system. In 2014, the ProSiebenSat.1
Group will focus on increasing maxdome’s mobile coverage. For this purpose, the Group has already
concluded a contract with the
Among European media corporations, the ProSiebenSat.1 Group is a pioneer and market leader in the digital field. In order to consolidate this strong position, the company will continue pushing the integration of its traditional TV activities with the digital business areas and invest in dynamically growing markets. We have identified major growth areas in digital commerce, where we focus on sectors that target a mass market and have high affinity with TV. Based on this strategy, we added digital portals to our existing travel portfolio in 2013 and now cover the entire travel-booking cycle, from flights, hotels, and rental cars to local climate data. Approximately 40 % of travel bookings are now processed by online portals. This share is likely to grow dynamically in the years to come and offer the ProSiebenSat.1 Group attractive opportunities for growth. Following the travel model, the Group will build up additional digital commerce areas in the next few years, for example fashion and home & living. Strong growth prospects are forecast for digital commerce: E-commerce business in Germany is expected to grow by 12 % a year up to 2018. Here, too, it can be assumed that market shares will transfer from traditional commerce to the digital field, meaning that the market could cover revenues of approximately EUR 430 million in 2018. In addition to the strategic investments, we also extended our value chain in 2013 by founding several start-up companies such as the pet products website Petobel via our incubator EPIC Companies. The objective is to establish e-commerce portals using the incubator model and to participate in their growth.
Performance opportunities for the ProSiebenSat.1 Group can arise from operating business as well as from cost management and the increase of efficiency. Opportunities from operating business result in particular from the possibility to capitalize sufficiently on our ratings successes and to generate additional revenues on the basis of innovative sales concepts. The largest opportunities for growth will result from the leading position in the TV advertising market if ProSiebenSat.1 further increases the audience market share of its TV stations and continues to achieve adequate purchase prices for its high-quality media services through a corresponding price policy.
The ProSiebenSat.1 Group taps into related business areas such as online games, mobile and
by also selling its own products via its free TV stations, which have wide coverage. On the
basis of this strategy, the company has built up an attractive Ventures portfolio with more than
50 partnerships and strategic investments since 2010. With its innovative
Besides the growth perspectives from operating business, performance opportunities arise from the optimization of costs. The implementation of efficient processes and structures and the identification of synergies between the individual areas form a crucial basis for sustainably increasing our profitability. As part of its cost management, the Group reviews the entire value chain on a continuous basis and includes future events in its cost planning as far as possible.
After the global economy had a real growth of 3.1 % and 3.0 % in 2012 and 2013, the International Monetary Fund (IMF) forecasts a further upturn in the years to come. The primary reason for this is the growing economic momentum in industrialized nations, for which the IMF forecasts a 2.2 % increase in economic output in 2014 (2013: 1.3 %). Globally, a growth rate of 3.7 % is expected.
In the eurozone, signs of an end to the recession appeared in mid 2013. Compared with the previous year, the year as a whole will still end with a contraction of approximately 0.4 %, but a slight recovery of investment activity and exports is expected in 2014. Domestic demand could also increase slightly. For the current year, the IMF forecasts real economic growth of 1.0 % in the eurozone.
A significant upturn is expected in 2014 for the German economy. Exports are expected to be revived by the brightening global economic climate and stabilization within the eurozone. At the same time, the domestic consumer climate remains positive with good labor market data and incomes expected to rise. The forecasts for 2014 are currently between 1.5 % (Rheinisch- Westfälisches Institut für Wirtschaftsforschung) and 1.9 % (ifo Institut) real growth.
Since advertising expenditure consists of investments by companies, the development of advertising markets is always closely tied to the current and expected future general economic situation. If the economy performs well, companies and consumers are more willing to invest additional money in advertising or consumption than in phases of economic weakness. 2013 ended with relatively low economic growth of 0.4 %. At the same time, the net advertising market fell by 1.4 %, according to the forecast of the Association of German Advertisers (Zentralverband der deutschen Werbewirtschaft, ZAW). In contrast, the TV market showed a contrary trend: The World Advertising Research Center (WARC) forecasts growth of 1.1 % (2014: +3.2 %) in TV net advertising revenues in 2013. This development clearly shows that the effect of the economy is outweighed by the structural changes among media types, namely the shift of print as an advertising medium to TV. Because television can count on economic support as well as further gains in the media mix in 2014, the TV advertising market has good prospects on the whole.
The advertising market forecasts for Austria and Switzerland, the international TV markets for the ProSiebenSat.1 Group, are likewise positive, as the following charts show:
Due to a positive economic environment, the forecasts for the German advertising market remain optimistic: The ZenithOptimedia agency group and the World Advertising Research Center (WARC) predict net growth of around 3 % for the German TV advertising market in 2014. The ProSiebenSat.1 Group also expects net growth by a low single-digit percentage in 2014. In 2013, the ProSiebenSat.1 Group generated around 63 % of its revenues by selling traditional TV advertising in Germany. The development of the TV advertising market therefore is our most important planning assumption.
The ProSiebenSat.1 Group has concluded framework agreements on volumes to be taken and conditions with a large number of its advertising customers. However, final budgets are sometimes confirmed only on a month-by-month basis, as the price level is aligned to current audience shares, among other things. The advertising industry reacts not only very quickly but also extremely sensitively to positive and negative changes in the economy. This Company Outlook can therefore only provide a qualitative forecast for the relevant key financial figures of the 2014 to 2015 projection period. The qualitative indicators “slight increase”, “mid single-digit increase”, “mid to high single-digit increase”, “high single-digit increase”, and “significant increase” described below are based on expected percentage deviations from the respective previous year. Further specification or quantification is impossible in view of the limited visibility in the industry at this time.
We had a positive start to the financial year 2014 and continued to benefit from a favorable economic climate. Our revenues in the core business of advertising-financed television and in our strategic growth areas are developing as planned, consequently we expect consolidated revenues to increase significantly by a mid to high-single-digit percentage in 2014. In the 2015 projection period, Group revenues are also likely to increase by at least a mid single-digit percentage.
The extension of our value chain is part of our growth strategy. In the core business of TV, the ProSiebenSat.1 Group will benefit from the expansion of the station portfolio that took place in 2013, and the Distribution business is likely to continue developing dynamically. In addition, we will not only grow organically in the Digital & Adjacent and Content Production & Global Sales segments, but also strengthen our competitive position with strategic investments. The associated cost increase will be offset by additional growth in revenues, therefore we expect recurring EBITDA to increase by a mid single-digit percentage. Compared to the relevant European peer group companies, we are likely to continue achieving above-average margins. We expect underlying net income to grow by a high single-digit percentage in 2014 and 2015.
|EUR m||2013||Forecasts1 for 2014 and 2015|
|Revenues||2,605.3||mid to high single-digit increase|
|Recurring EBITDA||790.3||mid single-digit increase|
|Underlying net income||379.7||high single-digit increase|
|Leverage factor2||1.82||1.5 – 2.5|
|1 Percentage change vs. previous year; continuing operations.|
2 After reclassification of cash and cash equivalents from the Eastern European business. Adjusted for LTM recurring EBITDA from the Northern and Eastern European business.
With our strategy, we have set a course for sustainable profitable growth. In 2013, we increased our revenues in all segments and again achieved high profitability. In the 2014 to 2015 forecast period, our revenue growth will again form the basis for a continued increase in earnings. By 2015, we expect revenues on the basis of continuing operations to increase by at least EUR 800 million compared with 2010. Originally, the Group had forecast a revenue increase of at least EUR 600 million by 2015 compared to 2010. Due in particular to the dynamic developments of the Digital & Adjacent activities, however, we raised our 2015 growth target by EUR 200 million in October 2013. We expect additional potential revenues primarily from the segments Digital & Adjacent (+ EUR 175 million) and Content Production & Global Sales (+ EUR 25 million). At the same time, we announced our financial targets for 2018.
At Group level, we expect revenue growth of EUR 1 billion by 2018 compared to 2012. We expect to generate over 40 % of our consolidated revenues outside of traditional TV advertising in 2018. The Digital & Adjacent segment is expected to contribute 25 % to 30 % of consolidated revenues in the medium term. The Group has identified the biggest potential in the interlinking of the high-reach TV offering and the dynamically growing digital industry. The Group is thus diversifying its business areas and tapping into new sources of revenues that are independent of the advertising market which is sensitive to the economy.
|EUR m||2013||2014 and 2015 forecasts1|
|External Revenues||Recurring EBITDA||Revenues||Recurring EBITDA|
|Broadcasting German-speaking||1,997.8||678.6||Slight increase||Slight increase|
|Digital & Adjacent||483.7||105.4||Significant increase||Significant increase|
|Content Production & Global Sales||123.8||10.6||Significant increase||Significant increase|
|1 Percentage change vs. previous year; continuing operations.|
We let our shareholders participate in the Company’s success appropriately. We intend to continue
our dividend policy and distribute an annual dividend of 80 % to 90 % of underlying net
income. For 2013, we will propose a dividend of EUR 1.47 per dividend entitled registered common
share. This represents an estimated payout of EUR 313.2 million or 82.5 % of underlying net
income. This results in an attractive dividend yield of 4.1 % in relation to the closing price at the
end of 2013. We will also continue to pursue an earnings-oriented dividend policy while maintaining
to our defined
For 2012, EUR 5.65 was paid per dividend entitled bearer preference share and EUR 5.63 per dividend entitled registered common share. In total, the dividend amounted to EUR 1.201 billion. After the successful completion of the sale of the Northern European activities in April 2013, the ProSiebenSat.1 Group reinvested part of the proceeds in the Group’s operating business. As a result, the operating cash flow was largely available for other purposes, such as the dividend payment.
The ProSiebenSat.1 Group also used a portion of the proceeds from the disposal of the Northern European portfolio to repay financial indebtedness of EUR 500.0 million. However, the Company not only repaid loans in 2013, but also extended the remaining portion of its term loans and its revolving credit facility to July 2018.
With an equity ratio of 16.4 % as of December 31, 2013, the Group shows a solid balance sheet structure, even though the equity base decreased due to the dividend payment at the end of the year. On the basis of the forecast earnings increase, we anticipate an equity ratio of around 20 % by the end of 2014. The expected operating performance is also likely to have a positive impact on our liquidity level and our free cash flow before M&A activities. We therefore expect sufficient financial headroom and liquidity for investments and dividend payments in 2014 and 2015. In the future, the largest part of our investments — between EUR 800 and EUR 900 million — will continue to be made into the programming assets of the Broadcasting German-speaking segment. Another focus is the Digital & Adjacent segment. Here, investments will be used in particular for acquisitions and intangible assets. In addition to further investments, this also includes media-for-equity deals.
By developing strategically relevant areas, the ProSiebenSat.1 Group is investing in its future growth. In recent years, we have gained an early foothold in markets that offer high revenue potential in the long term. These include ecommerce business and the market for online video advertising and digital home entertainment. We have here forcefully established our own brands in recent years. We will benefit from this in the next few years.
|Our forecast is based on current assessments of future developments. Examples of risks and uncertainties which can negatively impact this forecast are a slowing of the economic recovery, a decline in advertising investments, increasing costs for program procurement, changes in exchange rates or interest rates, negative rating trends or even a sustained change in media usage, changes in legislation,regulatory regulations or media policy guidelines. Further uncertain factors are described in the Risk Report. If one or even more of these imponderables occur or if the assumptions on which the forward-looking statements are made do not materialize, then actual events may deviate materially from the statements made or implicitly expressed.|