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Edited Transcript of MS.MI earnings conference call or presentation 19-Apr-17 4:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Mediaset SpA Earnings Call

Milan Apr 22, 2017 (Thomson StreetEvents) -- Edited Transcript of Mediaset SpA earnings conference call or presentation Wednesday, April 19, 2017 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Marco Giordani

Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director

* Matteo Cardani

* Simone Sole

Mediaset S.p.A. - Head of IR

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Conference Call Participants

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* Adrien De La Haye Saint Hilaire

Morgan Stanley, Research Division - VP

* Andrea Devita

Banca Akros S.p.A., Research Division - Sector Coordinator and Analyst

* Ian Richard Whittaker

Liberum Capital Limited, Research Division - Analyst

* Julien Roch

Barclays PLC, Research Division - MD and European Media Analyst

* Laurie Davison

Deutsche Bank AG, Research Division - Research Analyst

* Richard Eary

UBS Investment Bank, Research Division - Executive Director and Head of European Media Team

* Sarah Simon

Berenberg, Research Division - Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Mediaset 2016 Full Year Result Presentation. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Simone Sole. Please go ahead, sir.

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Simone Sole, Mediaset S.p.A. - Head of IR [2]

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Ladies and gentlemen, welcome to the 2016 full year results of Mediaset. The speakers today will be Marco Giordani, CFO of Mediaset; and Matteo Cardani, Managing Director of Publitalia. We would try to keep the conference call short as we understand there are many conferences and many earning releases today. So let's start immediately and then leave some space for the Q&A at the end.

I will hand over to Matteo for the introduction and the advertising part. Thank you, Matteo.

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Matteo Cardani, [3]

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Thank you, Simone, and good evening. Let's start at the advertisement section of this call with a quick look at the final consolidated 2016 data.

Total EBITDA market growth for 2016 is plus 2.0. This is total advertising market audited by AC Nielsen. So not including search and social. It's worthwhile noticing that we are considering the perimeter of approximately EUR 6 billion and that last 2.0% means that EUR 120 million of additional expenditure. And also this growth is directly (inaudible) to sport events. In this context, Mediaset performance is well above market average, actually plus 4.1%, we considered the new business perimeter, including radio from H2 2016 onwards. And the core business performance is anticipated in January plus 2.8%. In terms of market share on total attribute market, from now on the actual benchmark for our actual performance, we consolidated 37.5% points of market share, and the better than market dynamics results into plus 0.3 points of market share growth.

The following chart, we appreciate that the financial consolidated data confirm a result we're particularly proud of. Even in a year, with sport events and the launch of the new TV channel, Mediaset has both the highest absolute growth and the highest organic growth in core business versus key competitors, a clear signal that our core business is in good shape. Then if we try to explain market trend with sector dynamics, one can appreciate from this chart that if you take a look at the main sector, accounting for almost out of the total debt expenditure, the overall growth is the combined outcome of that stability in customer and consumer goods, single-digit but important growth, both in telco and automotive, a typical part of in here with sport events. On top of this, automotive growth has been driven by double-digit growth in sales.

Then the following chart, if we take a closer look to Mediaset advertising breakdown by sector in 2016, we defended our leading position in fast-moving consumer good, where our share is 10 points higher than the average in total market, then we strongly outperformed the market in the telco sector. We recorded almost 3x the average growth trend. And we keep pace with the market in 3 growing sectors: That's automotive, pharma and retail.

Then let's talk to the advertising part of today call with a quick look at the macroeconomic scenario and the curve indicators for 2016 -- 2017, sorry. Generally speaking, we can define the current situation as a dynamic of slow recovery. There are no particular concerns but a situation with life and travels that reflects that not fully consolidated status of our economy. We have consensus on a moderate growth of gross domestic product on the one hand while, on the contrary, there is not such a consensus on household expenditure. And household expenditure is quite correlated with other trend in expenditure. This is reflected in the fact that while there is growth and demand for services, so mobility, travel, communication services, there is stagnation in demand for goods, food, drinks and all other numbers of fast-moving consumer goods. There is positive inflation on the one hand, a typical indicator for correlated economic growth, but is mainly fueled by energy costs and so not by healthy dynamics of demand exceeding supply.

Then even the unemployment rate, dynamics is controversial. (inaudible) previous is the result of the modest actual growth in a number of improving people, but at the same time, there's a bit statistic growth due to increasing portion of people that decide not to actually engage in the search for a job. Overall, retail sales are almost flat (inaudible). Automotive sales are still moving up to 3 years of double-digit growth. So as said, the overall picture is lower -- slow recovery with some areas of uncertainty -- sorry, and those systems we concluded.

The last chart, this is controversial scenario is very well highlighted by the opposite dynamics of growth manufacturer confidence index, helped also by positive growth of foreign demand for Italian goods and services versus a less stable consumer confidence index. Consumers has a positive perspective on the overall economic situation that's (inaudible) has not turn into a personal positive perspective. Again, not big words but light and shadows. As an inclusion, this scenario of slow recovery in the economy is, to some extent, reflected in the advertising expenditure trend. We do not have yet official consolidated forecast for 2016 -- '17, but generally speaking, we can say that we do not tell a very different situation from the one we showed 3 months ago during our meeting in January. 2017 should be considered as a year of consolidation after 2016 growth rate. In off year, we thus far present moderate positive growth rates that should be considered as a positive sign. In this scenario, what we can anticipate is that our performance in Q1 is a revenue growth of plus 2.4%, considering the new business perimeter.

So I mean -- I will close the advertising chapter of this program. I hand over to Marco Giordani for our financials.

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [4]

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Hello to everybody, and I'll take you through the P&L part of the presentation. As you can imagine, the full year 2016 has been affected by several nonrecurring items for that region. And also to provide a representative feature, we, let's say, show those column of adjusted 2016 numbers in order to provide a fair and representative situation. And during my presentation, all my comments will be based on the full year 2016 adjusted financials.

At group level, we generated EUR 140 million of higher revenue compared to 2015. Thanks to good performance in revenue in all the geographical area, both in Italy and Spain, and also thanks to a good performance in terms of revenue of both pay TV, radio and free-to-air activities in the 2 countries. EBITDA was positive for EUR 152.8 million. And at group level, the net asset declined. So let's say, the debt increased compared to the previous year. And this is clearly due to some one-off items that accounts for almost EUR 370 million. In particular, on the Spanish side, the second part of the buyback carried out by Mediaset España for EUR 91.4 million and also the dividend distribution to third-party of EUR 83.4 million.

On the Italian side, on the other hand, we had clearly the cash out for the Finelco radio business acquisition. The EUR 50 million -- the more -- the EUR 50 million one-off cost caused by the interim management of following the Vivendi agreement. And in addition to that, we had the investment in M&A made by EI Towers for about EUR 55 million. And always regarding the EI Towers, we had the EUR 60 million buyback part of the fourth quarter 2016.

And turning to the Italian business, P&L, I would like to underline the adjusted P&L in discussing points towards a strategic plan that we had presented to the market in January. So this is where the strategic plan we start from. I repeat that as far as the Italian business revenue is concerned, we have the EUR 120 million more revenue compared to last year. A very quick comment on financial charges, and we had explained in the 9 months presentation, we had in the financial charge line 2 extraordinary elements. The first one was EUR 33 million incremental charges due to the hedging of the Vivendi share we were forced to do after the deal signed the 8th of April. In addition to that, we accounted almost the EUR 9 million charges for, let's say, for an enclosed some committed lines. Again after the 8th of April Vivendi deal signed, we were forced to close some lines that we're not foreseeing a possibility like the one contemplated in the contract of the 8th of April. Excluding these 2 one-off elements, financial charges would have been EUR 45 million, better than guidance for 2016. And as far as the guidance for 2017, our target is financial charges of EUR 40 million, 4 0. The entering in, let's say, the split between (inaudible) split of the operating profit. Clearly, revenue has been already commented by Matteo. Regarding pay TV revenue. We did better than expected. In fact, the third quarter, we had an increase of less than 6% due to interim management, but already, let's say, in the fourth quarter, the performance was better and thanks to that, we were able to close the year with a full year performance of 11%.

Regarding the other revenue, we generated lower revenue than expected for seasonality reason. And our target for the other revenue line for 2017 is EUR 200 million. As we said before, on total costs, the cost to adjusted column to understand exactly how the 2016 went, as far as operating costs, we had EUR 43 million adjustment due to, let's say, for 12.6% costs related to the, again, Vivendi agreement and EUR 30 million of extraordinary layoff costs. This EUR 30 million were clearly part of the 2020 plan that has been anticipated because we were able to reduce personnel number already in 2016. As far as, let's say, the write-down line, we had a EUR 275 million write-down and due mainly to -- related to full court and related also to the decision to be (inaudible) opportunity in the next auction. And so it's coherent with the decision you already know and the board has taken in January 2017.

As far as the EUR 4 million of other amortization and depreciation, this is part of the purchase price allocation of radio. And clearly, these are the first part of the amortization. These numbers will be almost EUR 7 million in 2017. Again, this is the base on which the strategic plan will be based. So the adjusted cost base of EUR 2,771,000,000 includes also clearly on coupon EUR 185 million additional costs compared to 2015, EUR 33 million costs of the consolidation of the radio activities in the second half 2016 and EUR 12 million of costs related to the big production, big success of Medusa that went out on the theater on January 2016 and clearly affected the first month of 2016. Deducting these known comparable costs, we reached exactly the cost base of around EUR 2,541,000,000. That is exactly the same amount of money we had the year before 2015.

Regarding 2017, the guidance for the total integrated TV costs is EUR 2,570,000,000. Clearly, this is the result of the cost base we have just commented, almost EUR 70 million of cost saving coming from the plan we've presented in January. And clearly, the remaining part of the radio cost consolidation and the EUR 7 million speak to purchase price allocation of radio. So I repeat it that the cost base guidance for 2017 is EUR 2,570,000,000.

Moving to investment. The actual number for 2016 has been a little bit less than EUR 520 million. A little bit better than expected, EUR 30 million better than expected. And our guidance for 2017 is EUR 500 million. So additional EUR 20 million investment reduction versus 2016.

Then moving to cash flow. We can confirm that the cash flow from the operation of 2015, same number. Clearly, the cash flow statement is also reflecting all the investment we carried out in terms of Radio. And also, we clearly consolidated also the M&A activity of EUR 55 million of EI Towers. And that's the main reason for the net financial position at a group level of a little bit more than EUR 1,150,000,000 again of 2016. As far as the guidance of 2000 -- at the end of 2017, we can confirm that our ratio in terms of net debt to EBITDA would be in -- below 1x. So in line with a pretty safe and balanced capital structure of the group.

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Simone Sole, Mediaset S.p.A. - Head of IR [5]

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Okay. Thank you, Marco. Now it's time for the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we will now take our first question from Ian Whittaker from Liberum.

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Ian Richard Whittaker, Liberum Capital Limited, Research Division - Analyst [2]

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I just want -- just -- actually, it's just going to be one question. I just want to sort of check in terms of what you said about the advertising performance in Q1 and what visibility you have. I think you said that you've got sort of under the new business perimeter of 2.4% growth for the businesses, but can you sort of breakdown to that of what's advertising and sort of how much visibility you have in terms of the monthly out-trends and share whatever data you have.

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Matteo Cardani, [3]

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Yes. I confirm that the performance we had in Q1 is a revenue growth of plus 2.4%, considering the new business perimeter. As I've said, we don't have the full visibility and full outlook for 2017. What I can say that the current indicators for Q1, we had the January, February actual data and we have estimates for March data. It's a slightly negative trend for the overall advertising market, but with a positive trend for TV and Radio. And so our estimate is that, comparing our positive growth versus a slightly negative trend in the overall open market. We may grow by 0.8, 0.9 points in term of market share in Q1. And I'm quite confident because based on January, February actual data, AC Nielsen reported plus 0.7 growth in market share.

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Ian Richard Whittaker, Liberum Capital Limited, Research Division - Analyst [4]

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And just sort of -- I know you don't necessarily sort of want to give sort of full year indicators this time, but sort of when you're looking now in terms of future events for the rest of 2017 and so forth, would you expect to gain share in the TV advertising market?

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Matteo Cardani, [5]

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I'm sorry. I apologize. Could you repeat the question?

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Ian Richard Whittaker, Liberum Capital Limited, Research Division - Analyst [6]

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Sure. Sort of I know you haven't got much visibility in terms of the full year, but from what you can see now just in terms of the events or lack of the events which are coming up in 2017, just in terms of what's happening there, so would you expect Mediaset to gain share within the TV advertising market in 2017?

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [7]

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Yes. Yes you would, yes.

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Matteo Cardani, [8]

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Yes. Really constant because again, we had a good start. We had a good start. Let's it, but the January, February, we gained 0.7 points in market share. We expect to have a growth of 0.8 to 0.9 points in Q1 and if you remember our 2020 discussion, the expectation for this year is around an average growth of 0.4, 0.5. So we are high of our, let's say, our growth market to some extent.

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Operator [9]

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Our next question comes from Adrien De Saint Hilaire from Morgan Stanley.

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Adrien De La Haye Saint Hilaire, Morgan Stanley, Research Division - VP [10]

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So first of all, Matteo, just to come back on the 2.4%, what is it just for TV? Because I understand that this figure is TV plus Radio. Secondly, perhaps for Marco and Simone. So in the press release, I think you mentioned that the spend introduction had an impact of EUR 321 million. But then in your explanation remark, you mentioned that there were some write-down taken on favorable cost EBITDA towards resolution taken in January for the pay TV business. So can you just help us reconcile this comment because it's not quite clear to me why -- or what's the link between the 2.

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Matteo Cardani, [11]

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We -- our position is from now on, to give, let's say, consolidated data for our new perimeter. So the integrated activities, including Radio and web. So I confirm that plus 2.4%. I can simply tell you that the television alone has a positive growth in Q1, and you will see shortly when officially some new data will be released.

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [12]

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Let's move to the Vivendi. Clearly, I mean, for us it's a past story, so honestly we don't want to waste a lot of time on that because I believe it's clearly a bad story but is in any case a past story. The amount of EUR 340 million, let's say, negative effect on 2016 number. If you based on the fact that the binding contract signed should that been executed by September 2016, and if Vivendi would have executed what they have signed, clearly, the EUR 340 million would not be in our account. That's the first part of the outcome. The second part is that, clearly, the decision of Mediaset to leave, let's say, the football pay TV operation is a decision taken almost beginning of 2015. And it is -- it has been a decision on which we start the negotiation with Vivendi. And the decision to leave the sports right pay TV has been taken for, I believe, a pretty rational, let's say, appreciation of what is happening around Europe in the sense that clearly, the competition coming from telco and global pay TV operator is such for which a local pay TV operator will not be, let's say, sustainable in the current situation. And that's, again, I repeat, has been a decision taken by Mediaset generally 2016. So more than one year ago. Then clearly, we reached an agreement with Vivendi. But I mean, the -- then Vivendi decided not to execute what they signed, fine. And -- but I mean, the decision to, let's say, not go in on the football, let's say between market, has not been changed. I mean, there are no reason for which the decision on January 2016 now has to be reconsidered. And so that's the reason for which clearly, we didn't, let's say, value that the asset in our balance sheet has, let's say, an activity that we would like to pursue for the next, I don't know, 10 years. It's an activity that we have decided, let's say, to leave or to be very opportunistic of already 1 year ago. And clearly, the write-down of the asset value is coming from the decision taken more than 1 year ago. So that, I believe, is the answer. I don't know if it is what we would like to (inaudible).

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Adrien De La Haye Saint Hilaire, Morgan Stanley, Research Division - VP [13]

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I’m sure we’ll discuss this further tomorrow morning anyway. But perhaps, for now, I’ll ask you one last question. Does the AGCOM decision yesterday that Vivendi had breached [ up ] the Gasparri Law? Do you think that makes Mediaset’s more likely to negotiate the deal with Vivendi or less likely or it (inaudible)?

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [14]

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I don’t know because -- I don’t know. You should ask them. I mean we have still a binding contract signed. So I mean theoretically, we don’t know even why they decided not to execute. So I don’t know. And the decision of the AGCOM has not been a decision on the binding contract. It’s been a decision on the state they took -- on Mediaset. That is clearly something that has nothing to do with the contract signed in April last year.

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Operator [15]

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We will now take our next question from Laurie Davison from Deutsche Bank.

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Laurie Davison, Deutsche Bank AG, Research Division - Research Analyst [16]

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It's Laurie here from Deutsche. First question is just over these exceptionals. The fourth quarter booking seems huge compared to what you booked for the third quarter. You're saying EUR 341 million for the full year. You'd only booked EUR 50 million at third quarter stage from my memory. So why this huge expansion in the fourth quarter? And secondly, what is that going to mean for what we should be thinking for 2017 for those charges? Third question is, just to go back to the issue of TV growth in the first quarter, you said 2.4% for Radio. Could you just help us out perhaps with what we should be thinking about for Radio revenue contribution in the first quarter?

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Matteo Cardani, [17]

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I'll try to say it again, I believe that probably you had no time to read it through the press release. And I believe that thing in the press release, let's say, all the detail of the EUR 340 million is pretty please that the -- it's a little pretty, pretty careful. But I mean, I'll try to take you through it again. I mean, the EUR 50 million we have reported in the 9 months result became in the full year something around EUR 54 million, not much than that. And that were just incremental costs, not included in the 2016 Mediaset budget that has been paid by Mediaset following the contract signed with Vivendi. So these are actually incremental costs we suffered because we had signed a contract. And that is not far, as I said before, EUR 3 million, EUR 4 million more than the 9 months results that we have already disclosed. The second part of the EUR 340 million, let's say, a one-off effect is made by the write-down, and that's clearly something usually we carried out at the full year results, and not in the quarter results, where we are forced to, let's say, make an assessment of the fair value of our assets, and clearly, not only the pay TV assets, we carried out both our assessment as all the years. And clearly, the EUR 275 million write-down, clearly, it's a full year, let's say, write-down and couldn't be done within the 9 months. Lastly, in the EUR 340 million, let's say, exceptional charges, there is the fact that clearly, if Vivendi would have been executed as the contractor, Mediaset Premium would have selected the consolidated Mediaset's, let's say, area and [ places ] at the end of September. And so the remaining EUR 70 million or EUR 70-plus million it's a -- the last quarter Mediaset Premium performance that following the contract we signed years ago they would still -- wouldn't be in our consolidation area. So these 3 elements make a EUR 340 million. In any case, if we look at the future, we could have said that, in my opinion, what had happened is clearly part of the past, and it's been a pretty bad experience. But in the past, looking at the future, I confirm that the cost base for 2017 is EUR 2,570,000,000 and that will be the cost base, all included, that would be our guidance for 2017.

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Laurie Davison, Deutsche Bank AG, Research Division - Research Analyst [18]

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Okay. So just to come back on it, Marco. With the -- everything was clear there apart from the reference to EUR 54 million, the first element. I don't understand what you're saying at EUR 72 million and the EUR 269 million for the write-downs. What was the EUR 54 million? Because in the press release, it said EUR 72 million is related to pay TV and EUR 269 million that are write-down.

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [19]

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Yes, the EUR 54 million are made by incremental costs that we have incurred for having signed the contract, and I can lead you pretty simply, let's say, precisely. We were forced to cover Vivendi shares. We would have received that in change of Mediaset Premium and that cost was clearly, there were hedging costs of EUR 33 million as you can see in the financial charges line. Then we were forced to, let's say, reimburse a credit facilities that were not allowing us to make the agreement we signed with Vivendi for something around EUR 9 million. And in addition to that, we had almost a EUR 12 million of operating costs that we were forced to incur because we received the written information from Vivendi to sign content, let's say, agreement that were not in our budget, but clearly, we were not willing to sign without the agreement of Vivendi. So all these costs made the EUR 54 million. These are costs that clearly in 2017 will not be there anymore again.

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Laurie Davison, Deutsche Bank AG, Research Division - Research Analyst [20]

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Okay. And on the Radio number? So the first question.

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [21]

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Yes. I'll try to answer your third question. So I repeat, the plus 2.4% revenue growth is the whole new business perimeter. So integrated TV activities, including TV, Radio and digital. And these are the data I can share today with you. And it seems like you can't have it, but this is the combined result of positive growth sets in each segment of our business. So TV is growing, Radio is growing, the digital is growing. I hope to -- that gave you enough color on our Q1 performance. Thank you.

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Laurie Davison, Deutsche Bank AG, Research Division - Research Analyst [22]

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Okay. We can follow up tomorrow morning. That's great.

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Operator [23]

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The next call -- the next question comes from Julien Roch from Barclays.

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Julien Roch, Barclays PLC, Research Division - MD and European Media Analyst [24]

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My first question is on the 2020 target. Just to make sure, the base is minus EUR 167 million of operating profit in 2016 and you add the EUR 468 million till you get EUR 301 million of operating profit in 2020. Is this the correct calculation? That's my first question. The second question...

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [25]

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Hey, Julien, can you repeat the first question, sorry, and?

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Julien Roch, Barclays PLC, Research Division - MD and European Media Analyst [26]

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So to look at your 2020 targets, you said you would improve operating profit by EUR 468 million, and you confirmed that in the press release. So I just want to see whether the calculation is taking 2016 operating profit pre-exceptional of EUR 167 million and adding this EUR 468 million, so you get EUR 301 million of operating profit in 2020.

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [27]

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Yes, yes, that's the number.

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Julien Roch, Barclays PLC, Research Division - MD and European Media Analyst [28]

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Okay. The second question is, Marco, can you give us some indication of pay TV revenue in 2017, net debt for Italy and level of exceptional in 2017? Because there will be nothing linked to Vivendi. But when you unveiled the EUR 468 million, you said there would be some exceptional to achieve that. So those 3 numbers. And then the last question is, do you think Vivendi has any influence on your business?

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [29]

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Yes. So coming back to the first question, I confirm that the EUR 468 million incremental EBIT is to be based on the minus EUR 167 million numbers in the adjusted column. So that's the first part of the question. The second question, if I understood correctly, was the exceptional item that will be, let's say, present in 2017 numbers, and the only element would be the EUR 170 million positive effect that is clearly the reversal of the write-down that we carried out in 2016. And the third question on the Vivendi situation, the answer is clearly yes, because I mean, if they are 30%, let's say, shareholder, they have presence as the -- you add it from the 70% yesterday, it's (inaudible) influence on our activities, on our relation with telecom, and in many cases with everything that's a good aspect on the Italian markets. So that's for sure.

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Julien Roch, Barclays PLC, Research Division - MD and European Media Analyst [30]

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Okay. And sorry, coming back on my second question. I also asked whether we could get some indication of pay TV revenue for 2017 and net debt for Italy for 2017.

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [31]

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As far as the net debt is concerned, I can confirm you that the net debt at the group level will be below 1x. So you can recalculate the Italian, let's say, the Italian, let's say part of it. And as far as the pay TV revenue, we are targeting between EUR 630 million, EUR 640 million pay TV revenue for 2017.

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Operator [32]

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Our next question comes from Andrea Devita from Banca Akros.

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Andrea Devita, Banca Akros S.p.A., Research Division - Sector Coordinator and Analyst [33]

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Yes. Two questions, please. The first on the rights amortization expected for the current year. So whether the EUR 70 million savings come -- comes from mainly from lower rights amortization or what is the level of rights amortization that you foresee after the write-down that you made in Q4? The second is the level of cash exceptional costs that you see in 2017 based on the item that you booked last year and the ones that you expect to book this year.

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Matteo Cardani, [34]

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So the expected level of amortization in the next 2 year would be EUR 790 million in '17 and EUR 530 million in 2018. This is based on the indication that we provided with the guideline to the plan to 2020.

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [35]

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In terms of cash exceptional for 2017, would be in the region of EUR 10 million made of additional legal costs for EUR 5 million, EUR 6 million and the sale of the decision regarding content we were commenting before that will affect the 2016 too in the region of EUR 4 million, EUR 5 million.

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Andrea Devita, Banca Akros S.p.A., Research Division - Sector Coordinator and Analyst [36]

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Okay. Just a follow-up, the rest of premium costs in that, as this is a situation included in the perimeter is considered to be ordinary or on their underlying cost, nothing exceptional anymore, right?

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Matteo Cardani, [37]

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Okay. We'll follow the 2020 plan, so there will be a reduction in their cost because clearly, we have to achieve the famous EUR 200 million incremental EBIT also in premium, and so clearly, (inaudible) also cost inflation will follow the rest of the group. But I believe there'd be no other exceptional costs.

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Operator [38]

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We will now take our next question from Richard Eary from UBS.

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Richard Eary, UBS Investment Bank, Research Division - Executive Director and Head of European Media Team [39]

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Just trying to seek a couple of clarity questions. Just on the cost guidance for '17 of EUR 2,570,000,000. Can you just walk me through the waterfall from EUR 2,771,000,000, which is obviously the adjusted cost base in '16. Given the fact that you obviously -- targeting out the statutory there are EUR 68 million of cost savings this year. So I'm just trying to understand like EUR 200 million is full against the EUR 70 million in cost savings, then what's the differential? That's the first question.

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [40]

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So I'll try to give you all the details. So we are tracking from EUR 2,771,000,000 of 2016. We are going to have a EUR 68 million savings coming from the 2020 plan. We will have EUR 170 million positive effects of the write-down on 2016. We will have EUR 30 million incremental cost of Radio because of the consolidation, clearly is not like-for-like. And we have additional EUR 6 million of purchase price allocation of the Radio price. And all that made -- makes the EUR 2,570,000,000 cost base.

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Richard Eary, UBS Investment Bank, Research Division - Executive Director and Head of European Media Team [41]

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Okay. So the major big difference is just the write-down that you took of that EUR 170 million, that's kind of [ monetary ]?

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Matteo Cardani, [42]

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Correct. I will consider the EUR 70 million cost savings coming from the plan not being relevant, to be honest. Because all the rest is clearly accounting. But I mean, saving EUR 70 million is not really a downwind.

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Richard Eary, UBS Investment Bank, Research Division - Executive Director and Head of European Media Team [43]

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No, no, it's just to try and walk us through what was previously announced relative to what you've announced today. The second question just for some clarity in terms of the numbers for '16. In terms of the actual net advertising revenues, how much of that was actually from Radio? I know we're still on to basically -- the forecast that you gave out for basically '17, which was close to EUR 70 million, I think on consolidation.

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Matteo Cardani, [44]

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Yes. But I'm sorry to repeat but the position we have is from now on, to give our consolidated performance with no split for each single business. So I apologize, but I must confirm again, so the plus 2.4% new perimeter consolidated performance, and I can, let's say, give you more color concern that all the 3 segments of our business are in the positive growth trend compared to past year.

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Richard Eary, UBS Investment Bank, Research Division - Executive Director and Head of European Media Team [45]

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No, no, maybe what I was trying to get at is that given the fact that the cost base, you've got EUR 30 million additional costs in there from the Radio consolidation, I was just trying to get the expectation of what the revenue contribution was to match those additional costs that you explained.

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [46]

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What I can tell you is that the Radio is -- in any case, profit may seem already in 2017, clearly, not a big number, that honestly, is not material on the total number of Mediaset's, but as we said already, fact is, when we acquired, we have a -- we had a plan, the Radio assets we acquired were loss-making. We clearly had made a plan for which, clearly revenue went -- should have grown and costs should have decreased, and that is on plan, and so can we -- it's already in the first year that we have generating profits coming from Radio assets, (inaudible) before our acquisition, the assets were loss-making.

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Simone Sole, Mediaset S.p.A. - Head of IR [47]

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Okay. I think we have just room for the last question. Thank you.

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Operator [48]

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We will now take our last question from Sarah Simon from Berenberg.

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Sarah Simon, Berenberg, Research Division - Analyst [49]

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Sorry, just back on the 2.4% growth, I'm assuming that is on a pro forma basis because you're going to have a consolidation benefit in Q1 just from having Radio with the Finelco assets that you didn't have in. So if you can confirm the 2.4% is pro forma. And can you give us or send us the pro forma quarterlies as if Radio had been fully in last year, so we can understand the phasing. And then the second one was just on the write-down, the EUR 170 million. Am I right in thinking though that, that's -- there's going to be a cash cost associated with that to the cash flow statement even if it's not in the P&L anymore because you still would have paid for those rights. And if so, how much is that?

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [50]

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The EUR 275 million are all noncash.

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Sarah Simon, Berenberg, Research Division - Analyst [51]

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EUR 75 million?

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Marco Giordani, Mediaset S.p.A. - CFO, General Manager of Administration, Finance, Control & Business Development and Executive Director [52]

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EUR 275 million. So the write-down in [ base ] is EUR 12 million is whole noncash clearly. It's an accounting, let's say.

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Sarah Simon, Berenberg, Research Division - Analyst [53]

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Right. Let's say, you've got EUR 170 million of savings, which is a noncash saving, but what is -- are you going to be paying -- the EUR 170 million, you'll still be paying out in cash through the cash flow savings, is that, right?

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Matteo Cardani, [54]

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The -- clearly, the football contract cannot be changed so...

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Sarah Simon, Berenberg, Research Division - Analyst [55]

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Right.

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Matteo Cardani, [56]

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Let's say, the seasonal cost of football will be paid on a quarterly basis as has been foreseen in the contract.

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Sarah Simon, Berenberg, Research Division - Analyst [57]

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Yes.

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Matteo Cardani, [58]

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The accounting point of view, we have -- if you want anticipated, let's say it this way, we have anticipated EUR 275 million cost in 2016, and we will have a lower accounting costs in 2017 and '18 because of debt. But in terms of cash, we are going on in paying what we have, let's say, what we're giving in the contract.

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Sarah Simon, Berenberg, Research Division - Analyst [59]

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Yes. Okay.

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Matteo Cardani, [60]

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So what -- I mean, the EUR 170 million benefits coming from the write-down in 2017, will be noncash because clearly the write-down was not cash service as well.

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Sarah Simon, Berenberg, Research Division - Analyst [61]

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Yes.

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Matteo Cardani, [62]

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Okay. I tried to answer your questions. So with the absolute values on the basis of which the 2.4% growth has been calculated. So Q1 advertising and for revenue data in 2016 were EUR 500.3 million, and the new number for Q1 2017 is EUR 512.2 million. These are the 2 perimeters we are comparing on which plus 2.4% has been calculated.

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Simone Sole, Mediaset S.p.A. - Head of IR [63]

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Okay. Thank you, everybody, for listening in the conference call. As always, we are available for any further questions you may have. Thank you. Bye-bye.

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Operator [64]

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This will conclude today's conference call. Thank you all for your participation. You may now disconnect.