RTL Group reports record revenue for the fourth consecutive year. More original content on the way.

Bert Habets, Chief Executive Officer of RTL Group, says:

With rapidly changing consumer behaviour and the rise of global tech giants and streaming platforms, we’ve moved from a local to a global competitive landscape. At the same time, international media markets are experiencing unprecedented change and consolidation. This is why 2018 saw the start of our transformation journey to foster organic growth within our portfolio, through our Total Video 2.0 strategy."

Habets clarified what Total Video 2.o is; “Total Video 2.0 means building local streaming champions and strengthening our content creation.”

Bert Habets © Ramon Haindl

RTL Group has identified two clear priorities streaming and content building. Habets indicates that RTL Group will invest at least an additional €350 million to boost the expansion of streaming services over the next three years – €300 million of which will be dedicated to content investments across all genres.

At the end of 2018, RTL Group passed the first million mark of paying subscribers which Haebts suggests is in large part due to the combining of subscriber bases, TV Now Premium in Germany and Videoland in the Netherlands. "We plan to start similar services in other countries. Over the next three years, we aim to grow our total number of paying subscribers to at least 3 million.

Changing markets

"Our streaming services already show very promising growth rates in a highly dynamic market – thus we will always have the flexibility to further increase our ambitions in this space. This growth will help to further diversify RTL Group’s revenue streams."

Habets was also at pains to point out that original materials will be at the core of future plans; "With Fremantle we continue our push into drama production. As drama series are also key for the expansion of our streaming services, we have developed an ambitious growth plan for scripted series. Based on this growth plan, international drama productions are forecast to generate more than €500 million in revenue in 2021.”

Elmar Heggen, Chief Financial Officer of RTL Group, echoed these statements and reflected on the companies ability to be ahead of the curve.

"For 2018 we once again report record revenue and strong EBITDA results. RTL Group’s digital revenue continues to grow dynamically, and we reached our target – that at least 15 per cent of the Group’s total revenue originates from digital – clearly ahead of time."

Elmar Heggen © Ramon Haindl

Despite these ambitious goals Heggen is clear that this will require significant investments; "RTL Group confirms its dividend policy as we have the strength to provide attractive dividend payments to our shareholders. The Group stands for an excellent earnings profile and high cash generation. That is why the Board of Directors has once again decided to propose to the AGM a final dividend of €3.00 per share on top of the interim dividend of €1.00 per share paid in September 2018.”

Key points and figures

•Group revenue increased 2.1 per cent to €6,505 million (2017: €6,373 million), once again reaching a record level. This was mainly driven by higher revenue from RTL Group’s rapidly growing digital businesses, Fremantle and RTL Nederland. Organic revenue growth was at 2.8 per cent, in line with previous guidance •Platform revenue increased 7.5 per cent to €343 million (2017: €319 million)

•Digital revenue grew to €985 million (2017: €826 million), and already accounted for 15.1 per cent of RTL Group’s total revenue (2017: 13.0 per cent)

•RTL Group’s revenue is well diversified, with 45.8 per cent from TV advertising, 20.0 per cent from content, 15.1 per cent from digital activities, 5.3 per cent from platform revenue, 4.1 per cent from radio advertising, and 9.7 per cent from other revenue

Targeted development

Strengthening video-on-demand services - Over the next three years RTL Group aims to grow its total number of paying subscribers to at least 3 million and to grow VOD revenue from €216 million in 2018 to at least €360 million in 2021, further diversifying RTL Group’s revenue streams

Local original content shows such as Videoland’s Mocro Maffia and TV Now’s M – eine Stadt sucht einen Mörder drive strong growth on their respective platforms

Developing more exclusive content - Scripted productions were again very successful in 2018 with the launch of My Brilliant Friend, Picnic at Hanging Rock and Deutschland 86 and local shows such as Mocro Maffia

Fremantle – together with broadcasters and streaming platforms – is working on the realisation of at least 35 scripted series ideas. As a consequence, international drama productions are forecast to generate more than €500 million in revenue in 2021 (2018: €300 million)

Picnic at Hanging Rock

Outlook

RTL Group is reverting back to guidance on EBITA in its outlook statement. The Group believes this will provide a better operational KPI than continuing to use EBITDA.

The Group notes that the analyst community continues to use EBITA – some on an exclusive basis – as the main KPI for the Group’s profitability. Reverting back to EBITA will therefore align the Group’s guidance to the expectations of the investment community. In addition, the Group’s EBITDA will be affected by the new IFRS 16 (Leases) standard from 2019 onwards. Both EBITDA and EBITA will continue to be reported on for the Group’s business segments.

As outlook guidance will revert back to EBITA, RTL Group will also comment primarily on EBITA as the KPI for operating profit in 2019.

•RTL Group expects its total revenue for the fiscal year 2019 to grow moderately (+2.5 per cent to +5.0 per cent) excluding foreign exchange rate effects, driven by the Group’s digital businesses and Fremantle

•RTL Group expects its reported EBITA to decrease moderately (-2.5 per cent to -5.0 per cent), reflecting investments into the broadcasters’ TV schedules and VOD services

•RTL Group will keep a leverage target of 0.5 and 1.0 times net debt to full-year EBITDA for the fiscal year 2019

•RTL Group will continue to focus on cash conversion and targets 2019 levels not below 85 to 90 per cent

•The dividend policy remains unchanged: RTL Group plans to pay out between 50 and 75 per cent of the adjusted net result for the fiscal year 2019