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Edited Transcript of MMT.PA earnings conference call or presentation 19-Feb-19 5:30pm GMT

Full Year 2018 Metropole Television SA Earnings Call

Neuilly-sur-Seine Paris Feb 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Metropole Television SA earnings conference call or presentation Tuesday, February 19, 2019 at 5:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher Baldelli

Métropole Télévision S.A. - Vice Chairman of Executive Board

* Jérôme Lefébure

Métropole Télévision S.A. - CFO, Head of Finance, Director of Finance & Administration and Member of the Executive Board

* Nicolás Bellet de Tavernost Abel

Métropole Télévision S.A. - Chairman of the Executive Board & CEO

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Conference Call Participants

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* Conor O'Shea

Kepler Cheuvreux, Research Division - Head of Media Sector

* Jérôme Bodin

ODDO BHF Corporate & Markets, Research Division - Analyst

* Remi Grisard

Societe Generale Cross Asset Research - Equity Analyst

* Thomas Coudry

Bryan Garnier & Co Ltd, Research Division - Financial Analyst

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Presentation

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [1]

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Good evening, everybody. We're going to start the presentation of our 2018 results -- annual results. First of all, I wanted to tell you that we have had a good year since our operating income, thanks to the integration of the radio division throughout the year, over the full year, is the best we have had in a number of years. Same thing for net income, thank for -- thanks to the disposal of Girondins de Bordeaux and then monAlbumPhoto as we will see in detail.

So this has been an important year for us. And since 2017, with the acquisition of the 3 RTL Group radios, the disposal last year of the Girondins de Bordeaux and monAlbumPhoto, which were not core business, the acquisition of Lagardère radio signed end of January. We are hoping to do the closing this summer. Thanks to that, we've all have made a significant move in terms of disinvestment and reinvestment in core businesses. This explains part of the satisfactory results in 2018. This trend should continue with the successful acquisition of the Lagardère channels, the integration of the Gulli channel, a free DTT channel.

Contrary to what you can see here, TV occupies 90% in total viewing time of the French people. Though Netflix and SVoD are increasing, TV keeps a significant share in the audience share within households. Within that TV audience, we have an excellent position in terms of median age, since we have a ratio on the commercial target, and which is important, which means that we have the best radio in terms of television.

We also have -- regarding radio, we have media in France, which is doing well with good listening time, stable listening time. It is a robust media, both for musical radios in general. In total, with all of our media be it TV, radio and digital media, 96% of the French people are impacted every month by 1 media in the M6 Group at least.

So the group is very well positioned in the line-up. We're going to increase the scope of our TV channels. In the second half of 2019, after our 3 free channels, we should complement with the fourth free-to-air channel, which is an important one, called Gulli. And therefore, reinforce cab-sat channels Paris Première and Téva, which means that we'll have a positive ecosystem for the negotiation of distribution agreements at the end of next year, i.e. for the renewal of distribution contracts initiated over a year ago.

Regarding the highlights in 2018, as I said, we have a growth of TV -- strong TV brands, even though M6 has seen lesser audiences. So nevertheless, we have had a performance, as we can see in the audience regarding the commercial target, which is equivalent to the one we had in 2015, audience levels that are, therefore, satisfactory. We have had increases in our strong brands, information, prime-time brands, access primetime or brands like Zone Interdite, Capital, Top Chef.

We have renewed our distribution agreements in 2018. We have had success in movie productions, notably Astérix that came out last December. We have had successful January with 3.9 million viewers so far, which is the best audience for an animated film in the last 12 years, for a French animated film. We're going to have a turnover in our diversification portfolio. We have continued the rollout of synergies within the radio and TV division around the brands RTL, RTL2 and Fun Radio.

Regarding the key figures for 2018, the consolidated revenue has increased by 7.3%, advertising revenue with the integration of 3 quarters of RTL Radio has increased by 12.6% and the other operating expenditures -- other operating revenues have also increased. In total, the consolidated EBITA has represented EUR 266 million, up 5%. As for the net profit, thanks to the disposal of monAlbumPhoto and Girondins de Bordeaux. Thanks to the operating income, we have had a total of EUR 181 million.

One more thing about the variation of revenue, regarding TV, we've increased by EUR 28.2 million. But also for distribution contracts, 6play, the advertising revenue, the radio activity has benefited from 3 extra quarters, EUR 112.7 million. Regarding Production and Audiovisual Rights, minus EUR 19.1 million due to a lesser line-up. As for diversifications, minus EUR 25 million, both for scope effects, monAlbumPhoto and also a bad situation regarding Best of TV, that is one of our home shopping brands. That brand had a number of difficulties related to the choice of products. This is a situation we're going to remedy in 2019. We have had an increase in revenue by EUR 96.9 million.

If you look at EBITA, TV has kept improving its margins with EUR 8.9 million -- an extra EUR 8.9 million. Radio, thanks to the integration of the 3 quarters plus EUR 15.4 million. Production and Audiovisual Rights, thanks to the success we have had in the catalogs, we've had plus EUR 4 million, minus EUR 12 million for diversifications. EUR 3 million related to the scope effect of monAlbumPhoto and a number of difficulties regarding Best of TV.

In total, the increase in restated EBITA versus 2017 is plus EUR 12.5 million. We're going to show you a little video as we always do, and then each of my colleagues will comment what is going on. I will come back for the questions after Jérôme gives you the details of the figures.

(presentation)

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Jérôme Lefébure, Métropole Télévision S.A. - CFO, Head of Finance, Director of Finance & Administration and Member of the Executive Board [2]

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Good evening to all. One word about audiences. The group M6 audiences are #2. We've been #2 since 2011. On the commercial target, on -- with a slight slowdown in 2018, but if you look at next slide, you see that during prime time, notably with all of our main major brands, we have had records last year in terms of audience ratings. 5-year record for Top Chef, 7-year record for France has a talent (sic) [France's Got Talent]. Zone Interdite has had its best year on the minus 50. And then last 9 years, Pékin Express with an excellent season, the best in the last 9 year. And Capital is also a 25-year-old brand, but has had an excellent season. So M6 major brands are progressing in this very competitive world because we know how to renew them.

The other important highlight is that during prime time, the audience of TV is not so much in the afternoon, it is in access primetime and prime time. So in prime time, M6 audience in this very competitive world has remained stable and even slightly up with the figures you're seeing since 2014 and through to 2018. And I would say, even better for access primetime, if we compare to our main competitor. If we compare M6 and TF1, on the audience share, WRP minus 50, we were at 89%. September, December, almost neck and neck with TF1 for access primetime. And the M6 news that are doing very well. Scènes de Ménages is the drama series that is doing the best. You know that there are 4 daily series on the 4 major channels. The best one that is doing better is Scènes de Ménages from Monday to Friday. So we have essentially good results. Also -- and a good performance of our DTT channels, W9 and 6ter. W9 last year was #2 on the commercial target, an excellent performance. Same thing for 6ter.

Behind those figures, there is an increase in 6ter in the last quarter that is continuing. 6ter is moving towards an important step. It's going to have an excellent year. A number of investment in access primetime and prime time with the production of the first daily access primetime series called Les Mamans, The Mothers, which is doing very well. So 6ter as part of a new DTT is getting closer to the group of the 4 -- the first 4.

One word about 6 -- one word about W9. First, W9 has an average audience, which is excellent with the access primetime reality TV shows for young viewers. They are very powerful in terms of cumulated viewer with 1 million, i.e. catch-up viewers on TV, but also all of the other OTT platforms. Also very powerful in prime time, W9 is DTT leader during prime time. It has been progressing with excellent magazine show evenings, best Europa League seasons with a peak of 4.7 million viewers and progress in films. So a very good balance between access primetime and prime time.

Now 6ter, here again, evenings are doing better. 6ter started in 2012. It was already the #1 on the commercial target and the building is -- building process is continuing. Prime time is getting better and better. Lunchtime series are still leading and very sound. As I said, Les Mamans, The Mothers, are going to be back in 2019, even more than last year. And during the day, the ready-made brands, with programs that are doing very well with family viewers.

Another important point, we're continuing our investments in the quality of programs for the -- all the 3 free-to-air channels, programming costs, that is growing by 1.1% at EUR 466.3 million. We've signed a 4-year contract with the -- a Coupe de France soccer team. You see the results for the first 3 matches with viewers and an increase in our prime time drama policy. This is what we're heading towards for the next few years with the increase in those investments.

Regarding our cab-sat channels, Paris Première notably is the most-watched pay-TV in cab-sat with 11 million viewers every month. Excellent results in prime time throughout the day, over the weekend. It's a very balanced channel. And Téva, which is still the #1 pay-TV channel viewed by women, leader in WRP under 50 for the past 8 years. An excellent renewal of programs for these 2 channels that are now part of this very competitive landscape.

Finally, 6play, which is part of our overall broadcasting policy today since 2015. In the last 10 years -- sorry, since 20 -- 2009, with 25 million OTT subscribers, registered users, which allows them to access data for OTT. We have information on these 25 million people. 3 out of 4 are young people. It's a very important consumption basis and it is also -- it gives us a lot of data. 1.4 billion videos views with an average viewing time, that is very high. It is the longest for all catch-up services and the contribution to audience. You know that the audiences measured by Médiamétrie include live TV, but also part of catch-up TV on -- so the contribution of TV catch-up for the group is higher than for the other groups, corresponding to the fact that our audience is slightly younger and our technological platform is also doing very well and adapted to users, viewers and Internet users alike.

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [3]

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That was 6play, before I hand over to Christopher for radio ratings.

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Christopher Baldelli, Métropole Télévision S.A. - Vice Chairman of Executive Board [4]

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Good evening. Well, before we look at the results for the radio stations in the M6 Group, as Nicolás de Tavernost said, radio in 2018 held up well because the ratings were stable at 2.5 hours on average, per listener per day with more or less constant number of listeners close to 43 million per day.

If you look at the performance of our group throughout the year, we are the biggest private radio operator. We grew by 1.5 percentage points to 19.5%, which is an audience share record over 10 years. And so we are the only private group to grow over 4 years.

Of course, that went through the results of each of our stations. RTL for the whole year 2018 had a record in audience share because it had its highest audience share of the last 10 years, and it was the leader on all criteria, listening time, cumulative audience, listening time and audience share. It ended the year very strongly because -- in November, December, with 13.4% in audience share. It had the highest audience share on a Médiamétrie survey since the new measurements introduced in 2002. So a good end of the year and a good year overall for RTL.

Now looking at our 2 music radios stations, Fun Radio and RTL2. For the audience share music aggregate, they are in the top 3 for the main commercial targets for the 25 to 49 year olds. Fun Radio is #2 at 6.3%. RTL2 ranks third. And if you look at the upper- to medium-income professionals, we rank second and third, but with RTL2, first, and Fun Radio coming in second.

That was the performance of our radio stations.

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Unidentified Company Representative, [5]

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Good evening. A word about the 2 main markets where we operate, television and radio. We'll have the final figures around the 15th of March, but our estimates are for the TV market, the market growing slightly for 2018 around plus 1% and slight growth also for radio, which was a first in long time, a slight growth of around 0.5%. If you look at of our own media growth, it's around EUR 120 million between 2017 and 2018. A large chunk of that is due to the integration of the advertising revenues of the 3 radio stations for the first 3 quarters of the year. The fourth quarter is in 2017/2018, so EUR 110 million coming from a change of scope and EUR 10 million in growth for our traditional media, EUR 5 million roughly for our free-to-air channels and EUR 5 million roughly from digital.

In terms of market share, we stabilized market share. It's around 25% of the advertising market share for the TV market and the figures are relatively equivalent for radio, that's it.

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Unidentified Company Representative, [6]

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So just in terms of key figures, for the TV segment, we had revenue growth of 3%, reaching EUR 966.5 million and EBITA growing by 4.4% to reach EUR 214 million.

As regards the radio segment. With 100% consolidation over 12 months in 2018 versus only 1 quarter in 2017, that explains the 54% last year. Economically, that 54% was equivalent to 164%. So this year, we published EUR 167 million in revenue contribution to M6 Group. And in terms of EBITA, EBITA of EUR 28 million versus 19.4% economically speaking last year and 12.4% in the accounts published by group M6 in 2017.

Regarding the Production and Audiovisual Rights segment, key figures that we discussed in passing earlier. First of all, revenues are down by around EUR 20 million. Film line-up was smaller in 2018 than in 2017. And in 2017, we had a one-off effect because of international sales for the movie Seven Sisters, What Happened to Monday, where we were coproducer, that had an impact on sales, but also on amortizations that explains the major impact.

Regarding EBITA and profitability, there was an improvement this year compared to the last year of EUR 4 million, mostly because of better sales of our movie catalogs, especially French movies, both on the domestic market and the international market. And also, ramp up in the Golden Network subsidiary, which is devoted to video production on IPTV, YouTube and the Internet and it halved its losses this year, thus contributing for half of the improvement in profitability, which reached EUR 8.7 million last year for this segment.

With regards to diversification, I'll remind you that this is the segment that was deeply overhauled after the operations carried out during the year in terms of divestments of the Bordeaux Football Club and monAlbumPhoto. There was a lot of rotation and churn in the portfolio that ended the year with revenues down by 10%, EUR 211 million versus EUR 236 million and there is a slight effect due to monAlbumPhoto in that variation. And also, a bad year in terms of products sold by Best of TV in large French supermarkets.

Also here, in terms of EBITA, there was a decline from EUR 37 million to EUR 25 million. That EUR 12 million variation was presented earlier by Nicolás and I'll remind you what it is due to. There is a EUR 3 million scope effect because of monAlbumPhoto, which contributed for almost EUR 3 million in 2017 and it's no longer there at the end of the year. Its contribution was 0 in 2018 and a one-off loss because of those poor product choices offered to consumers.

Now regarding other projects. M6 Digital Services, which is the new name of formerly M6 Web, operating all portals and digital marketing activities. It had a nice year, driven especially because of the dynamism of iGraal, it's a cash-back subsidiary that we acquired over 2.5 years ago -- 3 years, it's been ramping up with the ramp-up of e-commerce. This business helps us promote sales for big e-tailers. That was diversification for the year 2018. A quick comment. We've launched a new growth driver, Joikka, at the bottom right, to try and sell jewelry online and it will effectively start in 2019.

Now regarding the financial statements. Fewer pictures here. So we've just commented on the details of the P&L. Here, you can see all the main variances, contributions in terms of capital gains from monAlbumPhoto and the capital gains and the IFRS treatment of the Bordeaux Football Club. So that, at December 31, 2017, we restated for IFRS 5. And at the bottom line, the contribution for 2017 was a EUR 3.5 million loss in net income and the 2018 contribution is a profit of EUR 7.3 million, including the capital gain on the divestment and a net income after tax of the 11 months, the first 11 months of the football club between January and November, the net income is EUR 181 million versus EUR 158.4 million last year. Our highest net income, as we said, in the last 12 years, the year 2006, where we had the recognition of the capital gain from the divestment of TPS.

Regarding the balance sheet, you can see that there has been little change there in spite of the operations carried out. Just some comments. We finalized the goodwill allocations because of the radio, hence, the decline in EUR 42 million. You can see also the divestment from the Bordeaux Football Club. In the assets, there has been a turnaround in cash that I'll explain in a few minutes and in the liabilities, various aspects related mostly to scope effects.

Regarding the cash flow statement, 2018 was entirely different from 2017. 2017, however, although the years were similar in terms of self-financing capacity from operations, there were higher income tax in 2017 because of down payments on income tax that reversed positively in 2018. That explained the decline in the income burden paid out and we also benefited in early 2018 from our cash repayment of the dividend tax where the government had to reimburse the various companies and we got the monies in 2018. Hence, the cash disbursement, that's much lower from one year to the next by EUR 50 million, that is a resource.

If you look at investment, 2018 was mostly a year of divestment. Hence, the nonrecurring items, net for EUR 98 million that includes the 2 divestments and also various other smaller investments. But to broaden the product scope for the brokerage, in particular, last year, there was the investments in radio. And in recurring items, in terms of investment in 2018, we kept up our efforts, especially in terms of production in contents because there was the finalization of Astérix just before it was released in December.

Cash flow from financing activities, now completely different in nature. Cash consumption, as you can see it in the format of the table, but it also reflects, in particular, in the line, financing of the radio division. We benefited from resources because of our undrawn bilateral funding lines in 2017. We already rebate some of those credit lines in 2018, hence, the EUR 34 million in use of financing. So the overall variation is EUR 78.5 million and cash at closing EUR 122 million in assets and EUR 94 million versus minus EUR 28 million last year.

These financial statements and results help us put to the general meeting that will take place on the 24th of April. The payment of a dividend of EUR 1 versus EUR 0.95 last year. And this -- thus, offering significant yield on the share, the coupon will be paid on the 17th of May.

So the challenges that we have ahead of us for 2019, the current year, first of all, carry on with innovation and the creation of strong brands for the group. We have a good example tonight with Le Sens de l'effort, The Sense of effort, a return to nearly military values. I invite you to watch it. It's a great program. And so a number of formats will be developed on our channels. Developing internal production and also formats will accelerate creation around Golden Studio and Studio 89. We have 4 production entities, the biggest one is M6 Studios, SND. M6 Film for movie, of cinema films. Then C. Production, producing magazine similar to 66 Minutes, Capital, Zone Interdite. Then Studio 89, flow programs like Top Chef. And the fourth one is now Golden Studio, that will produce programs, more specifically flow and stock programs for young people where we are investing. That is important for us to control our brands and control our contents for 2019, so we'll continue in that direction.

Then, we need to follow new users and development of our nonlinear applications. 6play had 1.4 million videos viewed in 2018. We'll keep up with 6play's growth with a technical aggregator that is working very well. In parallel, with our colleagues from French -- from France Télévision and TF1, we're working -- waiting for the go ahead to develop SALTO. And depending on the date of the authorization that we get from the competition authorities, it should be up and running by year-end. Moreover, we're also waiting for the go ahead for the Gulli integration. We hope to be able to integrate it in September -- well, sorry, over the summer of 2019, says Mr. Tavernost, depending, well, our main regulators. Well, we also need to wait for the go ahead from the employee representatives and also the Competition Authority that was referred to as well as the CSA. And with the authorization from the Competition Authority, it will have to decide on the divestment of the Lagardère channels.

We also continue to integrate the radio activities with synergies and the RTL Radio stations located here in Neuilly, that will continue. And also, we'll relentlessly continue to fight on regulatory aspects and it's not where we are moving the fastest, we have to admit. So around the regulatory aspects, I'll remind you that the Audio Visual act that was announced was pushed back probably to the end of the year, maybe more likely, the first quarter of 2020, given the election schedule. What we've been saying to the government is of several natures. A lot of provisions can be adopted with decrease, so you needn't wait for an act of Parliament. To name -- but one example that costs EUR 0 for the public domain, the authorization of movies on free-to-air channels on the day on which it is currently forbidden and also opening up of advertising to new segments, for instance, geo-positioned advertising. We are asking for the same rules as those applied by the GAFAs. We have the same technical capabilities to have targeted advertising with various systems. So we're asking for the possibility to do so with long-term experiments.

We are asking the government to allow us to do that so that we follow the same rules as the big Internet players, such as social media and YouTube. We're just asking for the same rules, and I think that we should be heard on that. It's -- well, we are happy that the Prime Minister can talk about social media -- talk on social media, so the same rules should apply. So with our colleagues, we'll continue to struggle on regulation and also other areas where we hope for rules to change in terms of production, especially so that we can develop production with partners where we can have longer rights and mandates. There too, we are prehistoric in terms of production compared to our European colleagues that we are very familiar with. So it's very important for historic media like ours can carry on investing in production as we've been doing successfully in animation and also in other areas.

So I think that this is not over. This will not be over when we disclose the 2019 results, but I mean, we can keep hoping and we'll be relentless in our efforts. Regarding the project to acquire the TV division from Lagardère, we agreed on 31st of January on the acquisition conditions for that division. The price will be definitively adjusted once the operation is finalized, and that's when we'll communicate about it. Right now, the main parameters of that in terms of 2018 results -- 2017 results, based on those revenues were EUR 98 million with an EBITA of EUR 20.6 million. It's a very well-managed division. We could see for ourselves that Gulli has great image and great consumption with young people as well as Canal J and TG. The other channels will warrant some contract renegotiation with operators. However, they dovetail very well with our group. And so that's why it's a beautiful acquisition for the group, let me say that.

First, the firepower of our programs, thanks to the position on the children and family positioning that we have, that we'll keep up. Also the advertising position, advertising brokerage will offer additional TRPs on families and children. Also, distribution strengthens our power -- firepower in the distribution of all our channels and services. And also, sharing of skills and support functions as well as group -- the group's acceleration in nonlinear broadcasting because VOD, SVoD and free VOD is very strong with children because it's a guarantee. It's - it accounts for a big chunk of consumption and it's a guarantee of lasting subscriptions. So we have a lot that we can do in this area in terms of applications between the technological applications that we have and the know-how that Gulli has in channel for young people will have a major VOD, SVoD offering for children, and also, will strengthen our merchandising activity that the group has not really developed for children. There is a lot that we can do on theme parks and so on.

So this is a very significant division for the group and therefore, a major acquisition -- a major proposed acquisition. So that is it for the presentation. Now we are ready to take questions.

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Questions and Answers

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [1]

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Yes. Here, please.

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Conor O'Shea, Kepler Cheuvreux, Research Division - Head of Media Sector [2]

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O'Shea, Kepler Cheuvreux. I have 3 questions. First, can you tell us just somewhat about the advertising market beginning of the year. I'd like to know whether the yellow vest effect is behind us. What is it that you can tell us on the first 2 months of the year? That's my first question. Second question. Your main competitor has said it could save money next year, thanks to the number of measures. Do you see the same savings in your group? Regarding Gulli, I think you've launched a number of objectives in terms of synergies for 2021. Could we anticipate a similar rhythm regarding RTL Radio and an improvement in results or will you have major integration expenditures?

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [3]

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Thank you for that. Regarding the advertising guidance, we won't give you any because it's not our habit. It's very complicated. We have assumptions on which we base our budgets. Well, it's very difficult to predict. The only thing we could say is that, January is -- contrary to December, January was good, contrary to December, even though we had yellow vest in both months, so I don't know what you can draw in terms of conclusion, it's still too early. Will the first quarter will be decent or not? We have no reasons to have any worries, despite a complicated social climate. Second comment regarding the taxes you mentioned. Yes, the finance law vote at the end of the taxes, the co-pay taxes that would represent a savings of about EUR 10 million in 2020, since the implementation of that measure is postponed. I'm always careful in terms of taxes announced cuts, sometimes you can be disappointed so you have to be careful. That's why I think we should not anticipate too much. We don't even know what the corporate income tax will be this year, so I don't want to make any predictions about other taxes. Regarding Gulli, we have specific synergy plans. Here again, let's wait for the acquisition to be finalized. Until we give you the sequencing of synergies, there is a lot to do. 2019 will be the integration year. 2020 will be the year of the first synergies on the group. And we are hoping to double the operating income in 4 years over this division, but we're conservative in our approach. Undeniably, there is good match between the 2 groups. They are very complementary with one another. We can congratulate the teams that have managed this division independently. They've done an excellent job, especially for TV channels for young people.

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Jérôme Bodin, ODDO BHF Corporate & Markets, Research Division - Analyst [4]

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Jérôme Bodin, ODDO BHF. I had a few questions. One, to go back to Gulli. Do you want to develop an audiovisual production activity for young people? Do you have the equivalent project to develop catalogs for television? Regarding Gulli, are you going to renegotiate the distribution agreements with telecom operators since you're going to have much more attractive offer? Regarding Best of TV, I understand you're having problems. Is it only for marketing reasons because 2019 will be better or is it more structural in terms of a problem? Financial question. On the out of division, which is significant, why is it that you have doubled your loss there?

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [5]

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Before Jérôme tells you about the financial implications, regarding Gulli, we're going to keep working with independent animation producers that have done most of Gulli's success. There are talented producers in France which have brought us animation. If we can partner with some of them to develop production and accelerate the development of production abroad. Well, let me remind you of the fact that the RTL Group owns Super RTL, a major channel for children. It's very successful in Germany. And there are already people working on Gulli and Super RTL. Working together, we're going to try and develop bridges between France and Germany to develop such productions, that is one possible synergy we can have. But I can't tell you more because we're waiting for authorizations and we need to know more about Gulli. There are a number of contracts to be renewed. We'll see how we renew them for Lagardère. Regarding the other distribution contracts, obviously, the better, the wider our offer, the higher the value of our service in linear and nonlinear. I'm not anticipating on the discussions. I know there will be rediscussion of our contracts, but a telecom operator already told me to not take our children hostages. It's a good sign. It means that this person is very much interested in those children channels. Regarding Best of TV, it's true, the year has been very difficult both for consequences of 2017. We had problems in 2017 with 1 product. There were stock effects, returns of the product in 2018. And secondly, a series of products that didn't work in retail. A number of measures have been taken to remedy this situation. We are hoping this will not occur again. If that was to occur again, we will draw conclusions. Our teams are working on improving the situation of that channel.

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Jérôme Lefébure, Métropole Télévision S.A. - CFO, Head of Finance, Director of Finance & Administration and Member of the Executive Board [6]

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Regarding the last point, the EUR 3.9 million loss on other, as we said, in Q3, this is related to taxes on free shares. In 2018, we've paid taxes on free shares delivered last year. Whereas the year before, in 2017, we delivered share for which that same tax had been paid in 2015. Between -- and between the 2, Mr. Malcolm changed the law. This has led to the -- a change of the date of payment before the tax were to be paid when the shares were allocated regardless of the shares delivered. And he has, in fact, aligned taxes on actual delivery. In 2018, we're going back to a different situation. Hence, it's just the fact we have to pay an amount of tax that we didn't pay before, hence, the difficulty.

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Jérôme Bodin, ODDO BHF Corporate & Markets, Research Division - Analyst [7]

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(foreign language) Regarding your question on Best of TV, TF1 decided to sell teleshopping. You have also put some order in diversification with Girondins de Bordeaux and monAlbumPhoto. Aren't you tempted also to focus even more on your core businesses by selling whatever is left in diversification? Regarding Production and Audiovisual Rights, there is a big drop in 2018. Can you tell us about the 2019 line-up, what is it?

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [8]

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So you're talking about a drop in revenue, not income?

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Jérôme Bodin, ODDO BHF Corporate & Markets, Research Division - Analyst [9]

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Yes.

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [10]

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There is a good line-up in 2019. I'm careful because sometimes you have postponement. Well, in releases, we don't know whether those releases will be successful or not. We have a good line-up this year. Regarding home shopping, this is an activity we want to keep. It is based on our antennas. The -- it's broadcasted on our antennas. We get commissions from that. What you don't see here is that with home shopping, we have a double benefit. We have the commission paid by our company HSS and there's also HSS profit in the last few years. So there is no reason to sell those activities. So we will be keeping those activities. We have significant competencies in this sector. And apparently, there are a number of competitors leaving the market. I think it's no time to leave. We'll take stock of the situation end of 2019 depending on the measures we will have taken on this segment. Regarding your other question, what was it?

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Jérôme Bodin, ODDO BHF Corporate & Markets, Research Division - Analyst [11]

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I have third question, yes. Netflix, next year, is going to have to propose more European works and programs. Are you worried, since you have yourself focused -- refocused on French series? How do you anticipate that evolution?

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [12]

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Well, Netflix is a serious competitor for the audiovisual consumption. They are not a competitor for advertising. They're a competitor on viewing time. Netflix is going to have rules that are closer to ours. Obligations are different. We have to keep developing our production activities. For example, Golden Studio will eventually work for entities outside of the group and same thing for Studio (foreign language), Studio 89. Regarding competition, it's not so much on drama. It will occur elsewhere. The replacement of U.S. programs is done more with flow programs and this is not necessarily where Netflix is best equipped. Let me remind you of the fact that we are always -- now is the end of TV, we've increased our margins in TV this year as we did last year. TV's margin rate this year must be about 22%, between 22% and 23%. We've increased our TV activity margin rate, thanks to distribution receipts, 6play receipts. Thanks to an adaptation of the model, we've maintained our advertising revenue and we've looked for complementary receipts in nonlinear. This is going to continue in distribution revenue like what is done elsewhere, so the model adapts. Some people seem to be pessimistic about the model. Regarding the margin, our margin should be -- is at 18.7%. Last year, I had given an objective for 20%. I didn't say when we would reach it, but I'm sure that we will reach that figure. We have companies that we're acquiring that already have higher margins, so that should increase with synergy effects. So the actual figure is 22.15%.

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Remi Grisard, Societe Generale Cross Asset Research - Equity Analyst [13]

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Remi Grisard from Societe Generale. About the TV business and its margins, we can see that revenues grew by EUR 20 million, which was roughly what we estimated for distribution revenues, which were supposed to be earnings enhancing. And then EBITA only increased by EUR 9 million, whereas programming costs increased by EUR 5 million. Could explain where the EUR 6 million difference comes from? Was there investment in some TV activities? And second question about SALTO. TF1 was talking about a launch in 2019. Do you think it's realistic? Where are we in terms of budgets? We always heard about EUR 15 million for each of the 3 operators. Have these EUR 15 million already been consumed? Is that in the 2019 budget?

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [14]

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The answer, if TF1 said that it would start at the end of 2019. It will start at the end of 2019. Well, then anyway that's the goal we set ourselves. And the only thing that now stands in the way of us telling you about a precise start update is that we're waiting on the green light from competition authorities. You know that it was refocused in Paris. So France has to give the green light. It's ongoing. We're impatient and we are already waiting to start, but it's EUR 45 million budget that was set per year for SALTO right now. Keeping in mind that the budget could be revised depending on the goals. It's not an initial investment, it's the running cost. It's not an initial investment, it's a bit more complicated than that because there are both operating expenditures and capital expenditures, but I -- well, my colleagues from SALTO ought to be here, but the late 2019 is the goal date for us. These are major times in terms of subscriptions, December and January, and also, the team is ready for each division, the experience that we have in catch-up TV and will adapt CapEx as need be when identified, keeping in mind that SALTO will benefit from the firepower of the programs for all 3 groups because there will be exclusives granted to SALTO compared to the programs. I hear a lot of things being said about SALTO from competitors. It's usually a good thing when they talk about us. It brings together the 3 companies that invest the most in television in France. SALTO will have major firepower in terms of TV programs because if you add up the programming expenditures of France Télévisions', TF1 and us, that's the biggest. And then you need to organize it in marketing terms, especially what you have in terms of exclusive programs, preview, postview, all the marketing organization will be very important.

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Remi Grisard, Societe Generale Cross Asset Research - Equity Analyst [15]

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A question. It's also about the renegotiation contracts of -- with telecom operator?

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [16]

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The answer. No, it will be available as OTT.

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Remi Grisard, Societe Generale Cross Asset Research - Equity Analyst [17]

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Will there be a free-to-air offer?

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [18]

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Well, it will be inexpensive, but not free-to-air. About your first aspects, in terms of additional programming cost in 2018, there was an increase in cost, especially with 6play, given the increase in volumes of videos viewed and we needed to expand the content with new distribution contracts, so additional costs. But we also started broadcasting the French football team in the second half of the last 4 months of 2018. And these are contents costs that were included in 2018. And let me remind you that margins increased for free-to-air television.

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Thomas Coudry, Bryan Garnier & Co Ltd, Research Division - Financial Analyst [19]

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Thomas Coudry, Bryan Garnier. A couple of questions on the relations with telcos. I wanted to come back to address TV addressable advertising. We all have a lot of hopes about this. It probably won't be possible without a number of data points that you'll communicate to telcos that are in charge of the set-top box. Could a significant part of the value created on the advertising market on TV, thanks to address TV, could you go back to -- into the pockets of telcos in the process? And also coming back to Molotov, Molotov is being acquired by Altice SFR. I wanted to know whether that could change anything in your ability to maybe -- and the litigation that you have with Molotov and to derive some additional distribution revenues from the platform. Or maybe Molotov as led by SFR could be one of the most serious competitors to SALTO in the future?

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [20]

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Thank you. Well, as regards to Molotov, as you know, we have 2 lawsuits ongoing with Molotov, 1 by Molotov vis-à-vis M6 that was one in the Tribunal de Grande by Molotov because we were imposed a payroll for Molotov. We wanted to provide our signals, offer our signals as long as these signals will be part of a paying offer. The Tribunal de Grande, the court judged that this was unlawful and so that's the first thing. Then we have a lawsuit against M6 at the Tribunal of first instance, where we have our signals being broadcasted on Molotov without any contract or authorization. These are 2 separate lawsuits. The first one was decided in the first instance by the Tribunal when we appealed that verdict and the second hasn't been adjudicated yet about our signals being broadcasted even though it is to be distributed free-to-air, it should be subject to our authorization and with specific financial conditions that we've published and that are well known, that are the conditions that we set ourselves. So these are 2 separate lawsuits. And then possible acquisition of Molotov by Altice. They will be very interested in that. Because one of the reasons, the main reason why we wanted to include a payroll on Molotov was to protect ISPs. So not to provide, not to allow for free distribution of our signals to ISPs that provided against money. When we told them it will be nice if you paid us for our channels and services, and they said, well, yes, okay because you charge for us a triple-play subscription. And so we didn't want those signals to end up for free on Molotov and Facebook. And so we want to know what SFR is going to do because they've signed a contract regarding the distribution of their set-top boxes. And so we'd like to know what will happen to Molotov once they finalize the acquisition. So we're paying great attention to that matter. Will that be a competitor for SALTO? Well, there are SALTO competitors left, right and center. Anything that is about TV consumption is a competitor for SALTO. It's just that TF1, France Télévisions and ourselves, we have a very abundant programming offer. This offer will be organized both linearly and nonlinearly, so that we can pool our programs together on SALTO with a marketing offer that will be significantly appreciated compared to the competition others have done that in other countries. Then there are others, other competing offers, Orange TV and CANAL PLAY. We have functional technology. M6 technology is working quite decently and by the way, we exported it to other countries with the RTL Group. So we are ready to take the gauntlet. And your first question, could you remind me what it was about?

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Thomas Coudry, Bryan Garnier & Co Ltd, Research Division - Financial Analyst [21]

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Addressable TV.

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Nicolás Bellet de Tavernost Abel, Métropole Télévision S.A. - Chairman of the Executive Board & CEO [22]

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Well, with our contracts, we can do that with ISP providers on the day that it develops, then we'll need to agree with these operators. We do not want to share advertising value in this area. We have our own advertising and it should be our own as it is currently the case with OTT on HBV TV (sic) [HDTV]. So we don't intend to be very generous in value-sharing for addressed advertising.

More questions? Well, in that case, thank you for attending our results presentation and see you at the end of July for the interim results. Thank you.