TF1 (EPA:TFI) - Press release H1 2018 TF1 group

Transparency directive : regulatory news

25/07/2018 07:46

Press release

Boulogne, 25 July 2018

                      TF1 GROUP 2018 FIRST-HALF RESULTS

            Group share of target audience(1) held steady at 32.5%
                           Revenue growth of 3.9%(2)
                    Current operating margin rate of 9.3%(3)
       World Cup audience ratings success: 9 million viewers per game(4)

The TF1 Board of Directors, chaired by Gilles Pélisson, met on 24 July 2018 to
close off the financial statements for the first half of 2018.
The results below are presented using the new segmental reporting structure
adopted by the TF1 group starting in the second quarter of 2018, and in
accordance with IFRS 9 and IFRS 15 (applicable from 1 January 2018). Historical
revenue and operating profit data (published and restated) are available in our
Financial Information Report for the first half of 2018 and on the TF1 group
corporate website: https://www.groupe-tf1.fr/en.

CONSOLIDATED FIGURES (EURm)   Q1 2018 Q1 2017 Q2 2018 Q2 2017 H1 2018  H1 2017

Revenue                       499.3  503.4   584.3    539.4  1,083.6 1,042.8
TF1 group advertising revenue 368.7  366.0   443.7    418.2    812.4   784.2
Revenue from other activities 130.6  137.4   140.6    121.2    271.2   258.6
Current operating profit/(loss)38.3   36.9    62.2     71.1    100.5   108.0
Current operating margin rate   7.7%   7.3%   10.6%    13.2%     9.3%   10.4%
Operating profit/(loss)        32.6   31.1    56.9     65.3     89.5    96.4
Cost of net debt               (0.4)  (0.9)   (0.6)    (0.2)    (1.0)   (1.1)
Net profit/(loss) attributable
to the Group                   24.8   28.0    41.0     46.8     65.8    74.8

Chg. EURmChg.%
40.8   3.9%
28.2   3.6%
12.6   4.9%
(7.5) -6.9%
  -   -1.1pt
(6.9) -7.2%
0.1  -9.1%
(9.0)  -12%

Consolidated revenue of the TF1 group for the first half of 2018 was EUR1,083.6
million, versus EUR1,042.8 million for the first half of 2017, an increase of
EUR40.8 million (+3.9%). This comprised:
- Advertising revenue of EUR812.4 million, up EUR28.2 million (+3.6%)
  year-on-year, reflecting growth for the five free-to-air channels (+1%) and
  in H1 2018 digital advertising revenues.
- Revenue from other activities of EUR271.2 million, up EUR12.6 million (+4.9%)
  year-on-year, mainly as a result of the first distribution revenue streams
  from telecoms operators for the TF1 Premium offer.

Current operating profit for the first half of 2018 was EUR100.5 million,
versus EUR108.0 million a year earlier, a fall of EUR7.5 million. The cost of
the World Cup (EUR46 million impact in H1 2018) was largely offset by control
over the cost of programmes and growth in production activities.
The current operating margin rate was down 1.1 points at 9.3%, versus 10.4% a
year previously. Excluding the cost of the World Cup (EUR46 million impact in
Q2 2018), the 2018 first-half current operating margin rate would have been
13.5%.

Operating profit for the period was EUR89.5 million, after charging EUR11.0
million of non-current expenses related to the amortisation of audiovisual
rights remeasured in connection with the Newen Studios acquisition.

Net profit attributable to the Group was EUR65.8 million, down EUR9.0 million
year-on-year. Bear in mind however that the 2017 first-half net profit figure
included part of the gain on the divestment of the equity interest in Groupe
AB.

(1) W<50PDM: Women aged under 50 purchasing decision-makers.
(2) First-half revenue growth was 0.8% excluding the effect of changes in
    structure.
(3) Current operating margin rate of 13.5% excluding the cost of the Football
    World Cup (impact of EUR46m in Q2 2018).
(4) Average across all 28 World Cup games.

Audiences(5)

The TF1 group maintained its share of target audiences at high levels in the
first half of 2018: 32.5% for the key target of W<50PDM, unchanged from 2017,
and 29.2% for 25-49 year-olds (-0.2 of a point year-on-year). The second
quarter of 2018 saw a substantial rise versus the first quarter: +0.5 of a
point among W<50PDM and 1.0 point among 25-49 year-olds, the strongest growth
of any French media group.

The TF1 core channel grew its share of the W<50PDM target audience for the
third consecutive quarter, posting a 22.4% share in the second quarter of 2018
(+0.5 of a point year-on-year) and strengthening the lead over its nearest
private-sector rival in the first half. The channel recorded all of the top 20
audience ratings among 25-49 year-olds in the first half of the year, including
six Football World Cup games that drew a share of over 40%. The four games
involving the French national team averaged 11.2 million viewers (68% of
individuals aged 4+), while the final and semi-final each attracted over 19
million viewers. Other programmes on the channel also attracted healthy
audience ratings: highlights included the French dramas Traqués (6.6 million
viewers) and Coup de Foudre à Bora Bora (5.7 million viewers); the daily soap
Demain nous appartient (on a constant uptrend, and a record month in June with
a 22% share of W<50PDM); and flagship entertainment brands Koh-Lanta (5.8
million viewers for the finale) and The Voice (average of 5.7 million viewers
over the season).

The channel's regular news bulletins are still by far the leaders in France,
and grew their audience share among individuals aged 4+: year-on-year(6), the
audience share was up 1.0 point for the weekday evening bulletin, 0.8 of a
point for the weekday lunchtime bulletin, and 0.7 of a point for the weekend
lunchtime and evening bulletins. The TF1 core channel has optimised the
strategic 8pm-9pm time slot on weekdays by screening Le 20H Le Mag, which is
attracting additional audiences every month and up to 5.9 million viewers.

The DTT channels (TMC, TFX, TF1 Séries Films, LCI) are a leading pole in
French DTT broadcasting, with a combined share of 10.2% among W<50PDM target
audiences, and 9.3% among 25-49 year-olds. During the first half of 2018, TMC
posted 16 of the top 20 DTT audiences among 25-49 year-olds, 15 of them for the
successful prime-time comeback of Burger Quiz which attracted up to 2.3 million
viewers, including 500,000 in catch-up. TFX and TF1 Séries Films were boosted
by their rebranding, and grew audiences among their respective targets: TFX
attracted a 3.7% share of its target audience among younger viewers (15-34
year- olds), stable year-on-year, while TF1 Séries Films upped its share of
the W<50PDM target audience by 0.3 of a point to 2.5% year-on-year.

LCI held its audience share at 0.6% among individuals aged 4+ during the first
half of 2018, and has now been France's no.2 news channel for more than a year.
The weekday morning show La Matinale continues to attract additional viewers,
and pulled in an all-time high 2.5% audience share in April.

MYTF1 performed well during the first half with 704 million video views(7), up
12% year-on-year, largely driven by flagship programmes such as Demain nous
appartient (83 million video views), La Villa des coeurs brisés (77 million),
The Voice (63 million), Paw Patrol (45 million) and the Football World Cup (25
million(8)).

(5) Source: Médiamétrie-Mediamat.
(5) For the period from January to mid-June (schedules were affected by the
    Football World Cup from mid-June onwards).
(7) Excluding news content, XTRA content, and live sessions
(8) Data up to and including 15 July 2018.

Analysis by segment

Following the acquisition of the aufeminin group on 27 April 2018(9), a new
segmental reporting structure is being applied, starting in the second quarter
of 2018. The main change is the creation of a new "Digital" segment, which
combines the operations of the aufeminin group with those of Neweb, Studio71,
TF1 Digital Factory and MinuteBuzz(10). Given the immateriality of the impacts
on 2017 and the first quarter of 2018, prior periods have not been restated.

EURm            Q1 2018 Q1 2017 Q2 2018 Q2 2017 H1 2018 H1 2017 Chg. EURm Chg.%
Consolidated
revenue           499.3   503.4  584.3    539.4 1,083.6 1,042.8  40.8    3.9%
Broadcasting      402.3   404.9  466.7    452.6   869.0   857.5  11.5    1.3%
TV advertising
on unencrypted
channels          349.8   348.9  404.6    398.4   754.5   747.3   7.1    1.0%
Studios &
Entertainment      97.0    98.5   88.8     86.8   185.8   185.3   0.5    0.3%
Digital *            -       -    28.8       -     28.8      -   28.8     N/A
Current operating
profit/(loss)      38.3    36.9   62.2     71.1   100.5   108.0  (7.5)  -6.9%
Broadcasting       26.4    26.6   52.9     64.9    79.3    91.5 (12.2) -13.3%
Studios &
Entertainment      11.9    10.3    6.7      6.2    18.6    16.5   2.1   12.7%
Digital *            -       -     2.6       -      2.6      -    2.6    N/A
Cost of
programmes       (230.0) (233.5)(269.2)  (248.7) (499.2) (482.2)(17.0)   3.5%
Football World Cup   -       -   (46.0)      -    (46.0)     -  (46.0)   N/A

* The aufeminin group is included in the consolidation with effect from May
  2018.

Broadcasting

Broadcasting segment revenue for the first half of 2018 was up EUR11.5 million
at EUR869.0 million. This mainly reflected a good advertising revenue
performance from the five free-to-air channels (up EUR7.1 million), combined
with revenue from distribution of those channels and add-on services as the
distribution agreements secured with all the telecoms operators gradually ramp
up.

First-half advertising revenue from the Group's five free-to-air channels was
EUR754.5 million, up 1.0% year-on-year. In the second quarter, year-on-year
growth reached 1.6%, boosted by excellent performances from the exclusive
unencrypted coverage of the Football World Cup on TF1.

The cost of programmes on the five free-to-air channels was EUR499.2 million, a
rise of EUR17.0 million. That figure includes the EUR46 million cost of
screening 18 games from the Football World Cup during June(11). Excluding the
impact of this special event, the cost of programmes was EUR453.2 million. The
savings - achieved while maintaining audience shares - reflect the benefits of
the rights buying strategy adopted over the last two years, lower unit prices
achieved by renegotiating programme buying deals, and optimization through
multi-channel screening.

Current operating profit for the Broadcasting segment for the first half of
2018 was down EUR12.2 million at EUR79.3 million, after taking account of the
cost of screening the Football World Cup.

Studios & Entertainment

Studios & Entertainment segment revenue for the first half of 2018 was stable
year-on-year at EUR185.8 million. Increased revenue at Newen Studios, organic
growth for the La Seine Musicale concert venue and expansion of the music
production activities of Play Two all offset lower revenues at TF1 Studio(12),
mainly on a weaker performance from films that went on general release in the
period (there were two big hits in the first half of 2017) and from the Home
Shopping business.

Current operating profits for the segment reached EUR18.6 million, up EUR2.1
million year-on-year (+12.7%).

(9)  Acquisition of the Axel Springer group's 78.1% stake on 27 April 2018. On
     completion of the public tender offer (4 July), TF1 held 93.28% of the
     aufeminin group.
(10) Accounted for by the equity method.
(11) The cost of replacement programmes in the second quarter of 2018 was
     EUR8.8 million.
(12) TF1 Studio produces and distributes made-for-cinema films.

Digital

Revenue from the new Digital segment for the first half of 2018 totalled
EUR28.8 million, and includes revenue from the aufeminin group (consolidated
from May 2018 onwards).

The segment made a 2018 first-half current operating profit of EUR2.6 million,
including the results of operations from the aufeminin group for the final two
months.

Financial position

Shareholders' equity attributable to the Group was EUR1,511.6 million at 30
June 2018 out of a balance sheet total of EUR3,374.3 million.

Cash and cash equivalents amounted to EUR120.4 million at 30 June 2018, versus
EUR495.5 million at end December 2017. This reduction was mainly due to cash
outflows on the acquisition of the 78.07% stake in the aufeminin group held by
Axel Springer, and of the additional interest acquired on 30 June through the
public tender offer(13) for the remaining shares. As of 30 June 2018, the TF1
group had an equity interest of 82.99% in the aufeminin group. With the public
tender offer now completed, the TF1 group holds a 93.28% interest in the
aufeminin group.
Net debt was EUR122.2 million at 30 June 2018 (versus a net cash surplus of
EUR256.7 million at end December 2017), after taking account mainly of the
commitment under the terms of the public tender offer to buy out the remaining
listed shares of aufeminin as of 30 June (17.01% equity interest), plus the net
debt carried by Newen Studios and options to buy out minority interests.

Outlook

Since the start of 2018, the Group has signed distribution agreements with all
the telecoms operators; the creation of SALTO(14), a French OTT platform
developed in partnership with France Télévisions and M6, will ultimately
deliver an offer that combines television programmes (live and in catch-up)
with exclusive content.
During the second quarter, TF1 has acquired a majority stake in the aufeminin
group; the ongoing negotiations with the Lagardère group to acquire Doctissimo
will enable us to expand our footprint in the health, nutrition and family
verticals(15). Finally, TF1 has bought out the remaining 30% minority interests
in Newen Studios(16).

Our 2018 first-half results confirm that we are well on track to achieve our
guidance with:
- current operating margin (excluding major sporting events) up 3.1 points
  year-on-year;
- cost of programmes (excluding major sporting events) of EUR453.2 million,
  versus EUR482.2 million a year earlier;
- advertising revenue from the free-to-air channels representing 69.6% of
  consolidated revenue, versus 71.7% a year earlier.

We will mark the back-to-school period by screening new series (The Good Doctor
and La Vérité sur l'Affaire Harry Quebert), plus entertainment shows with the
comeback of Ninja Warrior and The Voice Kids and the launch of Big Bounce. We
will continue to support French drama, bringing Jacqueline Sauvage and
Insoupçonnable to the screen.

Based on our first-half results, we are able to reiterate our guidance:
- from 2018 onwards: growth in current operating margin rate at Group level
(excluding major sporting events);
- average annual cost of programmes at EUR960 million (excluding major sporting
  events) for the five free-to-air channels for the 2018-2020 period, thanks to
  optimisation of investment in content;
- growth in revenue from activities other than advertising on the five
  free-to-air channels, with those other activities expected to account for at
  least one-third of consolidated revenue in 2019;
- a target of double-digit current operating margin rate in 2019.

The statutory auditors have conducted a review of the financial statements, on
               which they have issued an unqualified report.
The presentation and financial information report for the first half of 2018
    are available on our corporate website: http://www.groupe-tf1.fr/en.
    A conference call is scheduled for 25 July 2018 at 9.00am (Paris time).
         For details of how to connect to the conference call go to
                http://www.groupe-tf1.fr/en/investisseurs/en

                                 TF1 GROUP
            CORPORATE COMMUNICATIONS DIVISION - vduval@tf1.fr
                  INVESTOR RELATIONS - comfi@tf1.fr
                                 @GroupeTF1

(13) The public tender offer was open from 14 June 2018 to 4 July 2018.
(14) A stand-alone company, owned in equal shares by the three groups, will be
     set up to operate the platform once clearance has been obtained from the
     competent authorities.
(15) Any final agreement will be subject to scrutiny by employee representative
     bodies as required by legislation.
(16) Acquisition completed on 3 July 2018.

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