RTL Group, Europe’s leading broadcaster and content provider, announces its interim results to 30 June 2002.
| EUR million |
Half Year |
Half Year |
Change |
| Revenue |
2,102 |
2,000 |
5.1 |
| Reported EBITA1 |
181 |
235 |
(23.0) |
| Restructuring |
(6) |
(22) |
|
| Start up losses2 |
(10) |
(16) |
|
| Adjusted EBITA |
197 |
273 |
(27.8) |
| Adjusted EBITA margin (%) |
9.4 |
13.7 |
|
| Reported EBITA margin (%) |
8.6 |
11.8 |
|
| Amortisation and impairment of goodwill3 |
(115) |
(2,438) |
|
| Gain on sale of subsidiaries, joint ventures and other investments |
- |
75 |
|
| Net financial expense |
(8) |
(53) |
|
| Income tax expense4 |
(37) |
(130) |
|
| Reported net result |
17 |
(2,314) |
Business Headlines
Continued difficult advertising market conditions
Focus remains on audiences, ratings and cost efficiency
Didier Bellens, Chief Executive Officer (CEO) of RTL Group:
“Our proven long-term strategy of focusing on free-to-air television and radio plus content has continued to be successful and has helped us to weather the difficult current market conditions. We will continue to leverage the enormous potential of our channels and programme brands to increase audience shares in our main markets.
At the same time, our ongoing campaign to control costs and build synergies is helping us to operate in a lean and efficient manner. We have streamlined our operational management structure to help facilitate this and we have named a senior creative executive to further help to identify and progress opportunities for synergy.
Our achievements in tightening cost structures will also prove to be extremely beneficial when the rebound of the markets eventually comes. However, the state of the market has not changed since we issued our trading update in July. Visibility is still extremely low, and while there are some small positive signs in the UK and the Netherlands, the weak German market and a flat French market do not encourage us to call any sort of recovery at this stage.
It should be noted that the first half of 2002 is compared to a relatively strong first half of 2001. Whilst the second half of 2001 saw a dramatic downturn, we are not foreseeing a similar picture for 2002.”
Listing on London Stock Exchange
Following a review of the stock exchange listings of RTL Group, the Board of Directors has decided that RTL Group will apply to the UK Listing Authority (UKLA) and the London Stock Exchange (LSE) to cancel the admission of its shares to UKLA’s Official List and to trading on the LSE. This decision has been taken in view of the continued low trading volumes in RTL Group shares on the LSE. The intended delisting in London does not affect the existing listings at the Luxembourg and Brussels stock exchanges.
A circular providing further details regarding the delisting will be distributed to RTL Group shareholders in due course. It is currently expected that the delisting in London would become effective in November 2002.
A conference call will be held for analysts and investors today at 9.30 AM London time. To participate in the conference call dial +44 (0) 20 8240-8242 quoting RTL and chairperson Didier Bellens. The call will be available on replay until 16 September by dialling +44 (0) 20 8288-4459, passcode 735562.
1 EBITA represents earnings before interest and taxes excluding amortisation and impairment of goodwill and gain from sale of subsidiaries, joint ventures and other investments. RTL Group’s EBITA reported by Bertelsmann is EUR 173 million due to a different presentation of financial results other than interest and allocated, non re-charged, Bertelsmann overhead.
2 RTL Shop and Broadband (2001 only)
3 Impairment of goodwill in 2001 relates to the acquisition of Pearson TV (now FremantleMedia).
4 2002 income tax expense reduced by release of tax provision; 2001 number includes tax expense on disposal of Premiere
5 Stripping out the first time consolidation of Phoenix Productions in Germany as well as of smaller TV, radio and content participations, the entry of Sportfive under the proportional consolidation method, the exit of businesses sold such as Atlantic 252, VCF and RTL 7, and the increase in the participation in M6 from 43.8 per cent to 45.8 per cent
Financial review
|
Revenue |
Half Year to |
Half Year to |
Per cent |
Underlying |
Year to |
| Television |
1,421 |
1,462 |
(2.8) |
(2.5) |
2,866 |
| Content |
633 |
522 |
21.3 |
(5.9) |
1,148 |
|
Radio |
108 |
98 |
10.2 |
5.2 |
213 |
|
New Media |
55 |
38 |
44.7 |
- |
91 |
|
Other |
48 |
53 |
(9.4) |
- |
64 |
|
Eliminations |
(163) |
(173) |
(5.8) |
- |
(328) |
|
Group revenue |
2,102 |
2,000 |
5.1 |
(2.0) |
4,054 |
| EBITA Eur million |
Half Year to |
Half Year to |
Per cent |
Year to |
| Television |
151 |
222 |
(32.0) |
297 |
|
Content |
48 |
35 |
37.1 |
48 |
|
Radio |
20 |
19 |
5.3 |
26 |
|
New Media |
(11) |
(27) |
59.3 |
(55) |
|
Other |
(27) |
(14) |
(92.9) |
(40) |
|
Reported Group EBITA |
181 |
235 |
(23.0) |
276 |
|
Adjustments for: |
|
|
|
|
|
Restructuring |
6 |
22 |
|
36 |
|
Non recurring items |
- |
- |
|
27 |
|
Start up losses |
10 |
16 |
|
22 |
|
Adjusted Group EBITA |
197 |
273 |
(27.8) |
361 |
RTL Group revenue rose by 5.1 per cent to EUR 2,102 million due to scope changes and a significant increase in non-advertising related revenue. Non-advertising revenue (diversi-fication revenue) contributed 38.8 per cent of total revenue, a 20.5 per cent improvement over the same period last year. This has helped offset the decline of 2.8 per cent in advertising related revenue (minus 3.7 per cent underlying).
The underlying revenue figure strips out the first time consolidation of Phoenix Productions in Germany plus smaller TV, Radio and Content participations, the entry of Sportfive under the proportional consolidation method, the exit of businesses sold such as Atlantic 252, VCF and RTL 7, and the increase of the participation in M6 from 43.8 per cent to 45.8 per cent.
Group operating expenses increased 5.1 per cent to EUR 1,985 million in the first half of 2002 from EUR 1,888 million at 30 June 2001. Stripping out the effects of scope changes, one-off items and restructuring, the operating expenses were flat.
EBITA was impacted by the weakness of advertising markets in mainland Europe, particularly Germany, which was down around 7 per cent. Before restructuring costs of EUR 6 million and start up losses of EUR 10 million, EBITA decreased to EUR 197 million. The EBITA margin before these costs and losses declined to 9.4 per cent from 13.7 per cent; after these items it was 8.6 per cent.
RTL Group’s TV revenue fell 2.8 per cent over the period to EUR 1,421 million with underlying TV revenue falling 2.5 per cent. Good performances at Channel 5 in the UK and M6 in France partly offset revenue declines elsewhere. The television business continued to be the biggest contributor to Group revenue with 67.6 per cent of total revenue. EBITA fell 32.0 per cent compared to 2001, due primarily to a decline of adverti-sing revenue at the German stations and the weak performance of Holland Media Group (HMG), which was impacted by write-downs of programme rights and provisions for specific business risks.
Content revenue was up 21.3 per cent to EUR 633 million from EUR 522 million in 2001 due to the Sportfive merger in 2001, further scope changes and the acquisitions of Phoenix Productions in Germany and Be Happy in France, both fully consolidated from January 2002 and July 2001 respectively. Underlying revenue declined 5.9 per cent due to the reduced scope of the FremantleMedia’s US business, following the restructuring in 2001, seasonal effects in the sports rights businesses and a lower level of rights trading activities. EBITA increased to EUR 48 million, up from EUR 35 million.
Radio revenue increased to EUR 108 million from EUR 98 million in the half year to 30 June 2001. EBITA increased to EUR 20 million from EUR 19 million at 30 June 2001, mainly due to the better revenue generation.
New Media revenue rose to EUR 55 million, up from EUR 38 million in 2001. EBITA loss was EUR 11 million compared to a loss of EUR 27 million in 2001. This reflects the significant reduction in the level of investments. A provision for restructuring of EUR 2 million has also been booked as at 30 June 2002 following the announcement earlier this year to re-align the cost base.
Other EBITA loss of EUR 27 million includes a provision of EUR 20 million relating to specific business risks covering trading and distribution rights and Group commitments and guarantees.
The tax expense was EUR 37 million on continuing operations. It has been reduced by the release of a tax provision and other items amounting to EUR 26 million. The 2001 tax charge included a tax expense of EUR 26 million relating to the disposal of Premiere. The effective tax rate was 35 per cent, an improvement on 2001.
The net interest expense in the first six months of 2002 was EUR 8 million, which includes interest income of EUR 6 million on tax receivables. The level of net debt6 increased from EUR 569 million as at 31 December 2001 to EUR 624 million at 30 June 2002. This is mainly due to timing differences between tax payments and receipts, notably in Germany, dividend payments and acquisitions.
The net profit for the six months rose to EUR 17 million, up from a loss, before goodwill impairment, of EUR 38 million for the first half of 2001.
The combination of all of the above factors helped drive up adjusted earnings per share (EPS) by 79.2% to EUR 0.86 per share, from EUR 0.48 per share as at 30 June 2001.
6 After restatements of Channel 5 financing and sale and leaseback restricted cash
Television
| Revenue EUR million |
6 months to |
6 months to |
Per cent |
Year to |
| Germany |
829 |
894 |
(7.3) |
1,713 |
|
- RTL Television / VOX |
766 |
856 |
(10.5) |
1,592 |
|
- RTL Shop |
32 |
7 |
>100 |
32 |
|
- Others |
31 |
31 |
- |
89 |
|
France |
212 |
209 |
1.4 |
433 |
|
- M6 |
212 |
181 |
17.1 |
378 |
|
- VCF |
0 |
28 |
- |
55 |
|
Holland and Belgium |
207 |
201 |
3.0 |
405 |
|
- HMG |
156 |
149 |
4.7 |
303 |
|
- RTL Tvi |
51 |
52 |
(1.9) |
102 |
|
United Kingdom |
149 |
139 |
7.2 |
279 |
|
- Channel 5 |
121 |
105 |
15.2 |
213 |
|
- London Playout Centre |
28 |
34 |
(17.6) |
66 |
|
Others |
24 |
19 |
26.3 |
36 |
|
|
|
|
|
|
|
Television revenue |
1,421 |
1,462 |
(2.8) |
2,866 |
| EBITA EUR million |
6 months to |
6 months to |
Per cent |
Year to |
| Germany |
103 |
163 |
(36.8) |
232 |
|
- RTL Television / VOX |
93 |
164 |
(43.3) |
230 |
|
- RTL Shop |
(10) |
(12) |
16.7 |
(22) |
|
- Others |
20 |
11 |
81.8 |
24 |
|
France |
45 |
53 |
(15.1) |
82 |
|
- M6 |
44 |
51 |
(13.7) |
78 |
|
- VCF |
0 |
1 |
- |
1 |
| - RTL 9 |
1 |
1 |
- |
3 |
|
Holland and Belgium |
(3) |
21 |
>(100) |
27 |
|
- HMG |
(8) |
10 |
>(100) |
11 |
|
- RTL Tvi |
5 |
11 |
(54.5) |
16 |
|
United Kingdom |
(1) |
(11) |
90.9 |
(39) |
|
- Channel 5 |
(3) |
(18) |
83.3 |
(49) |
|
- London Playout Centre |
2 |
7 |
(71.4) |
10 |
|
Others |
7 |
(4) |
>100 |
(5) |
|
|
|
|
|
|
| Reported Television EBITA |
151 |
222 |
(32.0) |
297 |
| Adjustments for: | ||||
| Restructuring |
4 |
- |
|
- |
| Non recurring items |
- |
- |
8 |
|
| Start up losses |
10 |
12 |
22 |
|
|
Television revenue |
165 |
234 |
(29.5) |
327 |
The RTL Group family of channels maintained their leading market position in Germany despite very difficult market conditions. The German television market saw a cumulative fall in gross advertising spend of 7.2 percent (source: AC Nielsen S+P) in the first half of 2002, against a fall of 1.6 per cent over the same period in 2001. RTL Group’s share of gross advertising spend fell slightly to 40.5 per cent, down from 41.9 per cent in 2001, and the share of the 14-49 target group declined to 29.6 per cent, from 30.4 per cent in 2001, a direct result of the World Cup and Winter Olympics effects.
Consequently, consolidated revenue of the family fell to EUR 829 million (RTL, VOX, Super RTL, RTL Shop)7, from EUR 894 million in 2001. This was partially offset by cost reductions, especially in the area of programming in both non-prime and prime time. EBITA fell to EUR 103 million, from EUR 163 million in the first six months of 2001.
RTL Television continued to attract mass audiences, reflected in the ratings success of strong formats like “Who Wants to be a Millionaire” with a peak of 39.1 per cent in the target group 14-49 and “Good Times, Bad Times”, with a peak of 38.6 per cent for its 2,500th episode. Other highlights include sporting events such as “Formula 1” which peaked at 12.6 million viewers in June and football with the “Champions League” final being watched by 43.5 per cent of the target market. Continued investments in film rights were made with a significant supply deal entered into with Warner, which includes films such as “Ocean’s Eleven”, “The Matrix”, “Harry Potter” and “Lord of the Rings”.
VOX was by far the strongest performer amongst the German family of channels in 2002 due to successful programme launches such as “Dark Angel” and strong audience demographs and profiles. This has enabled VOX to drive up both advertising market share and audience share by 0.8 and 0.2 percentage points respectively.
Against a gross advertising market that rose 2.7 per cent year-on-year (source: SECODIP), M6 in France has consolidated its position as the second most popular channel over the six months to 30 June 2002 through the success of formats like “Loft Story” and “IQ Test”. M6 has generated strong diversification revenue, primarily from L5 (“Popstars” winners), the Jean-Paul Belmondo video and CD sales. The channel maintained its high audience share (15-34) at 21.8 per cent (2001: 22.8 per cent) and pushed its share of advertising spend to 23.2 per cent from 23.1 per cent. RTL Group’s share of M6’s revenue went up 17.1 per cent to EUR 212 million; EBITA fell 13.7 per cent to EUR 44 million. Underlying revenue was up 7.1 per cent and EBITA down 17.6 per cent respectively. The reduced EBITA reflects increased programme investment, scope changes and increased merchandising.
In a market that continues to be impacted by the advertising downturn, down net 1.8 per cent (source: BARB) in the first half of this year, Channel 5 succeeded in driving its advertising market share up to 7.3 per cent from 6.2 per cent a year earlier. Audience share increased to 6.4 per cent, from 5.6 per cent as at 30 June 2001, reflecting all-round improvements in the programme schedule. Access to better film stock helped drive up audiences with films such as “Independence Day” and “Armageddon” which generated audience shares of 22 per cent and 21 per cent respectively, being particularly successful. The continued halo effect of “Home & Away” on the schedule has also contributed to the success of the channel. As a consequence, revenue increased to EUR 121 million, up 15.2 per cent, and the EBITA loss fell to EUR 3 million from EUR 18 million a year earlier. Channel 5 continues to invest in programming and a significant deal with Columbia was signed during the first half of this year, which will result in free-to-air premiere’s for films such as “Spiderman” and “Men In Black 2”.
HMG channels in the Netherlands lost 1.1 per cent audience share and 2.4 per cent share of advertising spend (source: Infomart, BBC) compared to 30 June 2001. This partly reflects the impact of one-off events such as the Royal Wedding, the Winter Olympics and the World Cup. Yorin continued to under-perform due in part to unsuccessful programming such as “Starmaker” and “The Bar”, and further action is being taken to arrest the decline. Revenue increased to EUR 156 million or 4.7 per cent, while EBITA fell to EUR minus 8 million. EBITA was impacted by the write-off of unsuccessful programmes and provisions for specific business risks.
RTL TVi in Belgium was negatively impacted by the strength of the French channels, notably TF1 with the “Star Academy” effect and the launch of a new competitor, AB3. A new management team was put in place to re-vitalise the schedule. Revenue was stable at EUR 51 million but EBITA was down to EUR 5 million, due mainly to restructuring costs of EUR 4 million.
7 RTL II is equity accounted.
Content
| EUR million |
6 months to |
6 months to |
Per cent |
Year to |
| Content revenue |
633 |
522 |
21.3 |
1,148 |
|
|
|
|
|
|
|
Reported Content EBITA |
48 |
35 |
37.1 |
48 |
|
|
|
|
|
|
|
Adjustments for: |
|
|
|
|
|
Restructuring |
- |
22 |
|
23 |
|
Non recurring items |
- |
- |
|
9 |
|
Adjusted Content EBITA |
48 |
57 |
(15.8) |
80 |
Content revenue was up 21.3 per cent to EUR 633 million, from EUR 522 million in 2001. Underlying revenue fell by 5.9 per cent, after stripping out the impact of the accounting change resulting from the Sportfive merger in December 2001, further scope changes and the acquisitions of Phoenix Productions in Germany and Be Happy in France, both fully consolidated from January 2002 and July 2001 respectively. EBITA rose to EUR 48 million from EUR 35 million in 2001.
The outstanding success has been the launch of “Pop Idol” both in the UK and internationally. The final episode in the UK attracted over 13 million viewers (57.4 per cent audience share) and set the record for the most number of telephone votes in a two-hour period (9 million). In the US, Fremantle has been successful both with its’ on-going productions such as “Price Is Right”, where a number of one-off specials have been produced for CBS, but also in securing new deals such as with Fox for “American Idol” and with “Whammy! The All New Press Your Luck” which was launched on the Game Show Network. As a result, the US business contributed an EBITA of EUR 8 million.
Sportfive continued to do well although the results in the first half of 2002 are down on 2001 due to the timing of World Cup and European Cup qualification matches. The June 2001 comparative results included these qualification matches. Another factor that impacted the Sportfive business in 2002 was the bankruptcy of PSN, one of Sportfive’s customers for the South American sales of the Italian soccer rights.
Radio
| Revenue EUR million |
6 months to |
6 months to |
Per cent |
Year to |
| France |
91 |
86 |
5.8 |
186 |
|
- RTL |
62 |
61 |
1.6 |
133 |
|
- RTL2 |
15 |
14 |
7.1 |
27 |
|
- Fun |
14 |
11 |
27.3 |
26 |
|
Germany |
7 |
7 |
- |
15 |
|
Netherlands |
4 |
4 |
- |
10 |
|
Belgium |
6 |
0 |
>100 |
0 |
|
United Kingdom |
0 |
1 |
- |
2 |
|
Total Radio |
108 |
98 |
10.2 |
213 |
| EBITA EUR million |
6 months to |
6 months to |
Per cent |
Year to |
| France |
16 |
16 |
- |
21 |
|
- RTL |
7 |
9 |
(22.2) |
8 |
|
- RTL2 |
6 |
5 |
20.0 |
8 |
|
- Fun |
3 |
2 |
50.0 |
5 |
|
Germany |
1 |
2 |
(50.0) |
3 |
|
Netherlands |
1 |
2 |
(50.0) |
4 |
|
Belgium |
2 |
0 |
- |
0 |
| United Kingdom |
0 |
(1) |
- |
(2) |
|
Reported Radio EBITA |
20 |
19 |
5.3 |
26 |
|
Adjustments for: |
|
|
|
|
|
Restructuring |
- |
- |
- |
8 |
|
|
|
|
|
|
|
Adjusted Radio EBITA |
20 |
19 |
5.3 |
34 |
RTL Group’s radio revenue increased by 10.2 per cent to EUR 108 million with EBITA increasing to EUR 20 million. A provision against specific litigation risks, amounting to EUR 3 million, has been included in the results.
RTL Radio maintained its market leadership position as number one commercial station with an audience share of 13.0 per cent8, - a lead of 5.3 points over its nearest commercial rival. This increasing lead is due to the actions taken by the new management team, particularly in the fields of improved programming.
RTL Group’s other French radio stations, RTL2 and Fun Radio, maintained relatively stable audience shares at 2.6 per cent and 4.5 per cent respectively. RTL2 increased its revenue by 7.1 per cent to EUR 15 million, and its EBITA by 20 per cent to EUR 6 million. Fun Radio generated revenue of EUR 14 million, up by 27.3 per cent, and an EBITA of EUR 3 million.
8 Mediametrie figures 15 July 2002.
New Media
| EUR million |
6 months to |
6 months to |
Per cent |
Year to |
| New media revenue |
55 |
38 |
44.7 |
91 |
|
Reported EBITA |
(11) |
(27) |
59.3 |
(55 |
RTL Group continued to enhance its strong position over the period and its approach of controlled investment in New Media, building on strong brands like RTL World (www.rtl.de) and M6 Web (www.m6.fr). Accordingly, New Media EBITA losses for the first half of the year were reduced sharply to EUR 11 million from EUR 27 million in 2001. The review of investments and cost base is ongoing, in particular at RTL NewMedia. The New media activities are set to be close to break-even at EBITA level in 2003.
Net debt / cash position
| EUR million |
30 June 2002 |
31 December 2001 |
| Cash, cash equivalents and restricted cash9 |
436 |
378 |
| Loans receivable10 |
190 |
187 |
| Marketable securities and other short term investments |
60 |
78 |
| Loans and bank overdraft |
(1,310) |
(1,212) |
| (Net debts / cash position) |
(624) |
(569) |
Net debt increased from EUR 569 million to EUR 624 million, due primarily to tax pre-payments in Germany, increased tax receivables from EUR 157 million to EUR 418 million as well as the dividend payments in respect of the 2001 results. Operating cash before tax payments but after investments in programme and sports rights as well as other tangible and intangible assets was EUR 253 million, resulting in an EBITA cash conversion of more than 100 per cent. Cash used for acquisitions was EUR 54 million, mainly for the purchase of M6 shares, the purchase of Sportfive shares from Canal Plus (following the offer to the minority shareholders to achieve the same level of shareholding), the German production company Phoenix and some other smaller acquisitions. The net working capital remained broadly stable.
On 26 March 2002, Standard & Poor’s lowered the long-term corporate credit rating of RTL Group to BBB+, from A-. RTL Group’s short-term A-2 rating was re-affirmed and the outlook was stable.
On 26 July 2002, Moody’s lowered RTL Group’s long term-rating from A3 to Baa1, with a stable outlook.
9 The restricted cash relates to the cash held for sale and leaseback transactions in the UK regarding programme production costs (2002: EUR 120 million; 2001: EUR 76 million)
10 Loans receivable relate to the Channel 5 financing
Auditors’ report on the consolidated interim financial statements
for the six months ended 30 June 2002
To the Shareholders of RTL Group S.A.
Dear Sirs,
We have reviewed the consolidated balance sheet of RTL Group S.A. (the “Group”) and its subsidiaries as at 30 June 2002, and the related consolidated income and cash flow statements for the period then ended. These consolidated interim financial statements are the responsibility of the Board of Directors. Our responsibility is to issue a report on these consolidated interim financial statements based on our review.
We conducted our review in accordance with the International Standard on Auditing applicable to review engagements. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the interim financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial statements do not give a true and fair view of the financial position of the Group as at 30 June 2002, and of the result of its operations and its cash flows for the period then ended, in accordance with International Financial Reporting Standards, including International Accounting Standards and Interpretations issued by the IASB.
Luxembourg, 3 September 2002
PricewaterhouseCoopers S.à r.l. KPMG Audit s.c.
Réviseur d’entreprises Réviseurs d’entreprises
Pascal Rakovsky Philippe Meyer