Financial Results for Q1 2011

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TVN Group Financial Results for Q1 2011

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Financial Results for Q1 2011

  1. 1. TVN Group Financial Resultsfor the first quarter of 2011Markus Tellenbach, CEO TVN Group, CEO ‘n’Piotr Walter, VP TelevisionŁukasz Wejchert, VP Online, CEO OnetJohn Driscoll, Board Member, CFOWarsaw, May 12th, 2011 1
  2. 2. Disclaimer• This presentation (the “Presentation”) has been prepared by TVN S.A. (the “Company”) solely for use by its shareholders, clients or analysts and should not be treated as a part of any invitation or offer to sell any securities, invest or deal in or a solicitation of an offer to purchase any securities or recommendation to conclude any transaction, in particular with respect to securities of TVN S.A.• The information contained in this Presentation is derived from publicly available sources which Company believes are reliable, but TVN S.A. does not make any representation as to its accuracy or completeness. TVN S.A. shall not be liable for the consequences of any decision made based on information included in this Presentation.• The information contained in this Presentation has not been independently verified and is, in any case, subject to changes and modifications. TVN S.A.’s disclosure of the data included in this Presentation is not a breach of law for listed companies, in particular for companies listed on the Warsaw Stock Exchange. The information provided herein was included in current or periodic reports published by TVN S.A. or is additional information that is not required to be reported by Company as a public company.• In no event may the content of this Presentation be construed as any type of explicit or implicit representation or warranty made by TVN S.A. or, its representatives. Likewise, neither TVN S.A. nor any of its representatives shall be liable in any respect whatsoever (whether in negligence or otherwise) for any loss or damage that may arise from the use of this Presentation or of any information contained herein or otherwise arising in connection with this Presentation.• TVN S.A. does not undertake to publish any updates, modifications or revisions of the information, data or statements contained herein should there be any change in the strategy or intentions of TVN S.A., or should facts or events occur that affect TVN S.A.’s strategy or intentions, unless such reporting obligations arises under the applicable laws and regulations.• This Presentation contains certain market information relating to the television broadcasting sector in Poland, including information on the market share of TVN S.A. and certain of its competitors. Unless attributed exclusively to another source, such market information has been calculated based on data provided by third party sources identified herein and includes estimates, assessments, adjustments and judgments that are based on TVN S.A.’s experience and familiarity with the sector in which TVN S.A. operates. Because such market information has been prepared in part based upon estimates, assessments, adjustments and judgments and not verified by an independent third party, such market information is, unless otherwise attributed to a third party source, to a certain degree subjective. While it is believed that such estimates, assessments, adjustments and judgments are reasonable and that the market information prepared is appropriately reflective of the sector and the markets in which TVN S.A. operates, there is no assurance that such estimates, assessments and judgments are the most appropriate for making determinations relating to market information or that market information prepared by other sources will not differ materially from the market information included herein.• TVN S.A. hereby informs persons viewing this Presentation that the only source of reliable data describing TVN S.A.’s financial results, forecasts, events or indexes are current or periodic reports issued by TVN S.A. in satisfaction of its disclosure obligations under Polish law. 2
  3. 3. Agenda1. Introduction 5. Financial review2. TV segment 6. Conclusions3. ‘n’ platform 7. Q&A session4. Online segment 3
  4. 4. TVN Group Highlights• Strong first quarter driven by revenue diversification initiatives – ‘n’ platform improves all financial metrics: increases customer base and ARPU with continued cost management – Onet maintains high pace: double-digit revenue growth and high operating leverage – TV segment stable: non-advertising revenue growth offsets muted roll out of advertising campaigns; profitability performance reflects investments in programming schedules• Key strategic initiatives yield expected results – Non-advertising revenue sources reached 43% of total compared to 40% year ago – Launch of first retail bundled offerings with TP Group in 2Q are well on track – Strong balance sheet with high liquidity and a distant maturity of debt maintained 4
  5. 5. Revenue growth driven by Pay TV Revenue TV broadcasting top line stable with growth in content sales, call TV, carriage + 7% 600,0 fees and other revenue offsetting shortfall in advertising and sponsoring 550,0 Pay TV revenue up 27% reflecting growth 500,0 582 in subscriber base and ARPU 547 450,0 Online revenue growth of 12% driven by 400,0 continued migration of advertising budgets 1Q 2010 1Q 2011 from traditional to online mediain PLN million 5
  6. 6. EBITDA growth reflects operating leverage in Pay TV and online segments EBITDA Strong operating leverage in Pay TV and 200 Online segments provided PLN 29 million + 19% of EBITDA growth 150 117 98 Making prudent investments to further 100 strengthening TV programming schedule 50 20% 18% Solid margins with the Group 0 transforming more than half of revenue 1Q 2010 EBITDA 1Q 2011 EBITDA growth into profitability improvementin PLN million EBITDA margin 6
  7. 7. TV segment 7
  8. 8. TV segment highlights: investing now, ROI will follow• Revenue diversification results in stable year-on-year performance – Advertising and sponsoring decrease by 3% vs. TV ad market growth of 2% • Impacted by slow start of advertising market and increased distribution of main competitor – Content sales, carriage fees, call TV and other revenue compensated for the shortfall with 16% growth rate• Profitability reflects programming investment and market environment – TV segment EBITDA margin at 32%• TVN again leads the market in the opening of spring season – TVN main channel outperformed key competitors by differences ranging from 3 to 5 pp of peak-time audience share in the basic commercial target group 8
  9. 9. TVN spot sales reflect shift in audience shares TVN audience was impacted by distribution of the main competitor widened at the end of last year, reflected in the relative shift of ad spend in a muted market TVN on TV advertising market 1 TV advertising market shares 21 000 792 + 1.5% 804 1Q 2010 1Q 2011 800 TVP TVP 600 30,2% 29,4% 528 + 3.3% 546 Polsat Polsat 400 TVN 26,6% TVN 27,2% 33,6% 32,4% 200 9,7% 11,0% 264 - 2.5% 258 0 1Q 2010 1Q 2011 TVN TV advertis ing revenue Other TV advertis ing revenue 1 Source: Starlink for total market and TVN for own data, airtime only, in PLN million 2 Source: Starlink, airtime and sponsoring 9
  10. 10. Stable top line with profitability impacted by investments Stable top line reflects growth of non-advertising revenue and slow start of advertising market EBITDA and margin driven by early investments in programming Revenue EBITDA and margin 175400 + 0% 358 + 10 358350 150 - 12% - 10 130 +1300 125 - 17 114 36%250 100 32%200 75 1Q10 Advertising and Content sales, 1Q11 1Q10 Revenue im pact Cos t im pact 1Q11 Sponsoring carriage fees, call TV and otherin PLN million X% change vs. 1Q 2010 Revenue / EBITDA EBITDA margin 10
  11. 11. TVN entered spring season at #1 position Good audience share performance at the entry to spring season Year-on-year evolution impacted by improved distribution of main competitor Autumn 50% - 0.5pp + 0.2pp - 2.5pp Low season Spring season Low season Low season season 40% 34,8%22% 32,3% 30% 18,9% 18,4% 20% 16,6% 16,8%20% 10% 0% TVN Polsat TVP1 & TVP218% 1Q 2010 1Q 201116% 50% - 0.3pp + 1.2pp - 1.9pp 40% 37,2% 35,2%14% 30% 23,1% 22,8% 21,4% 22,6% 20%12% 10% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 0% TVN Group Polsat Group TVP Group 1Q 2010 1Q 2011 TVP1 TVP2 Polsat TVN Source: Nielsen Audience Measurement Jan 2010 – Mar 2011, Peak time, 16-49 11
  12. 12. Healthy contribution of thematic channels Average increase in subscriber base of 6%TVN CNBC 5,1 + 6% Advertising and sponsoring revenues up 6% driven by continuous growth ofTVN Meteo 8,2 + 7% audience sharesTVN Turbo 8,3 + 6% Carriage fees up 8% with subscriber TVN Style 8,3 + 6% base increase and 2% year-on-year TVN 24 8,3 + 5% depreciation of PLN vs. EUR 0 2 4 6 8 10 … Number of CATV & DTH subscribers in March 2011 in million …% Percentage growth in number of CATV & DTH subscribers in March 2011 (yoy) 12
  13. 13. ‘n’ platform 13
  14. 14. ‘n’ platform highlights: on track with guidance• Subscriber base growth of 15% coupled with 5% improvement in ARPU drove top line increase – 25 thousand net post-paid additions in 1Q• EBITDA nears breakeven owing to operating leverage and impact of cost restructuring – 27% higher top line with only 7% increase in programming costs• Both subscriber and profitability metrics are well on track to reach the full year guidance 14
  15. 15. Subscriber and ARPU growth drive financial performance 27% revenue growth reflects increasing subscriber base and ARPU Strong operating leverage with almost two thirds of revenue growth to EBITDA Revenue EBITDA 200 0 176 -2 + 27% 150 138 -10 + 92% 100 -20 - 25 50 -30 1Q10 1Q11 1Q10 1Q11in PLN million X% change vs. 1Q 2010 Revenue / EBITDA 15
  16. 16. Subscriber base growth in line with expectations Active post-paid subscriber base up 15% with pace of growth well on track to reach full year target Quarter-end subscriber base 81 thousand new post-paid 1000 + 15% subscribers acquired in 1Q 25 thousand of net additions 500 830 724 Active subscriber base up 0 1Q10 1Q11 by 106 thousand year-on-year Post-paidSubscriber numbers in thousands 16
  17. 17. Healthy ARPU maintained despite impact of 4Q promotions Quarterly post-paid ARPU evolution (in PLN) 60,1 60,3 59,2 60 60,3 60,2 59,960 50 58,3 57,3 40 Jan11 Feb11 Mar1150 Quarterly ARPU at PLN 59.9 ARPU growth at 5% year-on-year40 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 Quarter-on-quarter evolution reflects temporary impact of Christmas sales promotions on January figures 17
  18. 18. Strong shift in pre-paid towards HD offer Quarter-end active customer bases 50 40 30 Successful introduction and 20 10x 38 roll-out of pre-paid HD offering 10 17 thousand new cards 0 4 2Q10 1Q11 activated in 1Q Pre-paid HD recharged400 - 17% Pre-paid HD ARPU at PLN 16.6200 307 256 ARPU of pre-paid SD offer at 0 1Q10 1Q11 PLN 12.2 Pre-paid SD rechargedCustomer numbers in thousands 18
  19. 19. Online segment 19
  20. 20. Online segment highlights: strong growth reflecting market leadership position• Double-digit top line growth driven by continuous development of online advertising market – Total revenue, both reported and cash, increased by 12% – Display cash revenue up 22% year-on-year compared to display market growth of 14%• EBITDA up 42% to PLN 20 million, reaching 34% margin – Cash EBITDA margin improved to 33% from 32% year ago – Onet portal standalone cash EBITDA margin stable at 41%• Onet’s focus on premium inventory drives leadership in online display 20
  21. 21. Online advertising continues to post double digit growth Robust internet advertising market High operating leverage drove significant increase in EBITDA Revenue EBITDA and margin 80 30 58 + 12% 52 20 60 4 + 42% 20 4 14 2 40 -2 18 + 15% 16 34% + 12% 54 10 48 33% 20 32% 27% 0 0 1Q10 1Q11 1Q10 1Q11 Cash revenue Barter revenue Reported EBITDA marginin PLN million X% change vs. 1Q 2010 Revenue / EBITDA Cash EBITDA margin 21
  22. 22. Onet maintains leadership position focusing on premium online inventory Onet Group leads Polish online market in key commercial thematic services Utilisation and inventory of main portals in Poland Page views (in billions) 14 Total Real Users reached 13.5 million, Onet up by close to one million year-on-year 12 2,7 Usage is driven mainly by key premiumReal users (in millions) 1,9 10 thematic services such as News, WP Interia Entertainment, Business, Lifestyle Gazeta 8 0,8 0,4 Pricing for advertising in premium inventory is 2-4 times higher than online 6 o2 average price and more than 10 times 0,3 4 pricing for social media 00:30 01:30 02:30 03:30 04:30 05:30 06:30 07:30 Time spent per user Source: Megapanel PBI / Gemius for February 2011 22
  23. 23. Financial review 1Q 2011 23
  24. 24. TVN Group financial highlights• Top line growth of 7% reflects further solid uptake in Pay TV and Online revenues, coupled with stable TV performance• EBITDA improved by 19% owing to: – significant operating leverage in Pay TV and Online – lower profitability of TV business reflecting muted market uptake coupled with increased programming investment aimed at further strengthening of our schedules• Net finance result driven mainly by interest expense with impact of FX offset by risk management activities• Net loss attributable to the owners of TVN S.A. amounted to PLN -40 million• Gross Debt consists primarily of Eurobonds while Net Debt to comparable EBITDA ratio maintained at 3.9x 24
  25. 25. Revenue - Growth driven by Pay TV and Online 800 + 7% + 35 mn +6 600 +1 + 38 - 11 400 547 582 200 0 1Q10 Revenue TV n Online Other revenue and 1Q11 Revenue conso adjustmentsin PLN million 25
  26. 26. EBITDA - Growth reflects operating leverage in Pay TV and Online, coupled with increase in TV programming cost 150 + 19% + 18 mn +6 +6 100 + 23 - 16 117 98 50 20% 18% 0 1Q10 EBITDA TV n Online Other EBITDA and 1Q11 EBITDA conso adjustmentsin PLN million EBITDA margin 26
  27. 27. Financing costs - Driven mainly by interest expensePLN million 1Q 2011 1Q 2010Interest income +6 +3Interest expense - 92 - 68 - including interest on foreign exchange forward contracts - 10 -Foreign exchange gains (losses) net, of which: + 12 + 120 - unrealized foreign exchange gains (losses) - 41 + 105 - fair value hedge impact + 47 -Other finance expense, net -5 -9Net finance result - 78 + 46 27
  28. 28. EBITDA to Net Profit Bridge140120100 - 64 80 60 117 40 + 47 - 35 - 85 20 0 - 26-20 -5 - 40 - 15-40-60 1Q11 EBITDA Depreciation and FX loss before fair Fair value FX hedge Interest income & Other finance costs, Earnings before Income tax Net result to owners amortisation value hedge impact expense, net net income tax of TVN S.A.in PLN million 28
  29. 29. Cash flow - Generation supported by gain on FX hedge 1 000 + 38 - 55 +3 + 37 750 -5 - 139 +6 500 802 785 688 250 0 Cash EoY Operating CF CAPEX Tax paid Interest, net Cash after Cash gain on Repurchase Other Cash EoP 1 1 2010 operations FX hedges of PLN bonds 1Q11in PLN million1 Cash, cash equivalents, liquid financial assets available for sale and bank deposits above 3 months. 29
  30. 30. Stable leverage with Net Debt neutral repurchase of PLN bonds PLN million March 31, 2011 Maturity Distant maturity of gross debt 10.75% Senior Notes 1 2 379 2017 2017 and beyond 7.875% Senior Notes 1 702 2018 High liquidity PLN Bonds 1 6 2013 PLN 688 million in cash and bank deposits Accrued interest 2 116 - Cash and liquid assets 3 - 688 - FX exposure successfully hedged in 1Q Net Debt 2 515 - Comparable EBITDA 4 Redemption of remaining 647 - (12-month rolling) PLN bonds to be completed Net Debt / EBITDA 3.9 - by mid 20111 Nominal value.2 Please note that according to our revised definition of Gross Debt bank guarantees are excluded from its calculation.3 Cash, its equivalents, liquid financial assets available for sale and bank deposits above 3 months, excluding restricted cash.4 Reported EBITDA excluding ‘n’ restructuring costs in 4Q 2010. 30
  31. 31. Conclusions 31
  32. 32. Positioned for growth: diversified revenue base and revised positive market outlook• Solid growth and contribution to profitability by Pay TV segment reconfirming full year EBITDA positive guidance for ‘n’• Online revenue performance in line with expectations while profitability enhanced by high operating leverage• Revision of 2011 guidance for expected TV advertising market growth rate: mid single-digit• Muted TV advertising market evolution in the beginning of 2011 triggered implementation of all measures necessary to maintain TV segment’s leadership position in audience whilst securing profitability 32
  33. 33. Additional financial slides 33
  34. 34. TV channels: 1Q revenue and EBITDA evolution TVN channel revenue TVN24 channel revenue Other thematic channels revenue300 - 5% 80 80 252 + 16% 238 + 9% 66 54 57200 49 40 40100 0 0 0 1Q10 1Q11 1Q10 1Q11 1Q10 1Q11 TVN channel EBITDA and margin TVN24 channel EBITDA and margin Other thematic channels EBITDA and margin - 23%100 93 60% 40 80% 30 60% 71 + 15% 26 23 + 15% 16 50 37% 40% 20 60% 15 14 35% 25% 24% 30% 49% 47% 0 20% 0 40% 0 10% 1Q10 1Q11 1Q10 1Q11 1Q10 1Q11 in PLN million EBITDA margin 34
  35. 35. Revenue breakdown (by source) PLN million 1Q 2011 1Q 2010 % change Ad revenue 305 301 + 2% (including online and ‘n’) TV ad revenue (incl. ‘n’) 258 259 0% Online ad revenue 47 41 14% Sponsoring 26 29 - 10% Audiotele, Teleshoping 10 7 + 35% Internet subscription fees 4 6 - 21% Carriage fees (incl. ‘n’) 44 40 + 10% ‘n’ subscription revenue 164 133 + 23% Other 29 31 - 5% TOTAL REVENUE 582 547 + 7% 35
  36. 36. Revenue breakdown (by segments)PLN million 1Q 2011 1Q 2010 % changeTV Broadcasting & Production 358 358 0% TVN channel 238 252 - 5% Ad revenue 209 219 5% Sponsoring 20 24 - 14% Others 9 9 - 4% TVN 24 channel 54 49 9% Subscription fees 31 29 7% Ad revenue 20 18 16% Sponsoring 3 2 2% Others 0 0 - 56% Thematic channels 66 57 16% Subscription fees 17 15 10% Ad revenue 28 28 0% Sponsoring 3 3 10% Others 18 11 67%Online 58 52 12% Onet 51 45 12% Ad revenue 43 36 17% User generated 6 7 - 21% Others 3 2 24% Other 8 7 12% ZUMI 6 6 - 4% Other 1 0 239%‘n’ Platform 176 138 27% Subscription fees 164 133 23% Other 12 5 152%Other revenue 12 22 - 45%Other reconciling items -23 -24 - 5%Total revenue 582 547 7% 36
  37. 37. Thank you 37

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