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Edited Transcript of TFI.PA earnings conference call or presentation 27-Apr-17 4:30pm GMT

Thomson Reuters StreetEvents

Q1 2017 Television Francaise 1 SA Earnings Call

Boulogne Cedex May 2, 2017 (Thomson StreetEvents) -- Edited Transcript of Television Francaise 1 SA earnings conference call or presentation Thursday, April 27, 2017 at 4:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Philippe Denery

TF1 Group - EVP of Finance & Procurement

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Conference Call Participants

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* Adrien De La Haye Saint Hilaire

Morgan Stanley, Research Division - VP

* Charles Bedouelle

Exane BNP Paribas, Research Division - Research Analyst

* Conor O'Shea

Kepler Cheuvreux, Research Division - Head of Media Sector

* Julien Roch

Barclays PLC, Research Division - MD and European Media Analyst

* Laurie Davison

Deutsche Bank AG, Research Division - Research Analyst

* Lisa Yang

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Richard Eary

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

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the TF1 Conference Call for the First Quarter 2017 Financial Accounts. I now hand over to Mr. Philippe Denery, CFO. Sir, please go ahead.

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [2]

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Well, thank you. Good evening, ladies and gentlemen, and thank you for joining us. As usual, I will start with the main key facts and the summary of our results for the first quarter of '17, then I'll be happy to take your questions.

Well, let's start with another view of the first quarter. TF1 Group performance for the first quarter has been in line with the multichannel strategy described during its annual results presentation, delivering year-on-year increasing audiences on commercial targets, especially in March, advertising revenues have increased in line with the advertising gross revenues mark trend during this quarter. And TF1 has adjusted it's programming costs in the context and market seasonality.

Regarding audiences, the group audience share for the first quarter is in line with the multichannel strategy implemented from last year, 28% on a 4 years and plus, increasing year-on-year by 0.7 as well as on the women aged below 50 at 32.5%, increasing year-on-year plus 1.2 .

In March, the group global audiences have improved more significantly on targeted population. We have implemented our multichannel strategy and taken advantage of the new program in access slot on the TF1 core channel as well as strong recurring programs like The Voice, Koh-Lanta.

During the first 2 months, we have decided to adjust our programming costs taking to account the Italian market seasonality. Furthermore, the first quarter has been the opportunity to the test new program brands in every genre and in many dayparts like The Wall, Colony, Chicago Med and so on.

The 5 free-to-air channels are continuing to focus successfully on commercial target, as you can measure in particular in March rating. Slight decrease on a year-on-year basis for TF1 core channel audiences on women below 50 in March, 23.4% versus 23.8%, led by powerful prime time with well-known brands, successful launches of new dramas and series and renewed access program due to the launch of game like The Wall performing well on women below 50 and gathering in March, an average of 3.8 million viewers.

Increasing the rating of our DTT channels on appropriate commercial targets, women below 50 to reach 10.6% audience share during the quarter. And LCI became in March, the brands' second news channel with 0.7% audience share on the 4 years and plus. As a whole, on commercial targets, women below 50, TF1 Group audience share increased by 1.3% year-on-year from 32.6% to 33.9%.

And thanks to the rise of DTT channel, the 4 years and plus audience share improved for the group in March from 27.8% to 28.9%. The group's audience strategy remains focusing on both advertising targets and strategic time slots access time and prime time, taking some risks and renewing brands, adjusting our grid according to market seasonality and developing multichannel strategy. The good trend we mentioned on the ratings for all channel of the group is in line with our expectations.

Next focus on group revenues. Overall, group consolidated revenues for the first quarter of '17 reached EUR 499 million, up by EUR 17 million on the previous year, plus 3.5%. Advertising revenues for the group increased by 2.5% up by EUR 9 million to EUR 365 million versus EUR 356 million in Q1 '16, and that's mainly due to advertising revenues for the 5 free-to-air channels up by 2% year-on-year at EUR 348 million.

Revenues from other broadcasting activities amounted to EUR 56 million for the first quarter '17, up by EUR 8 million, plus 16.6%, explained by additional interactivity revenues during the first quarter and advertising on other non-TV platforms, especially the web. As a whole, the 5 free-to-air channels revenue represents 69.8% out of the group total revenues versus 70.8% sorry -- last year, 70.8%.

The Studios & Entertainment segment revenues rose by 2.5% to EUR 95 million during Q1, thanks to the great number of films released and the success of film like (inaudible) and (inaudible). A shift in production on the French market during Q1 has been compensated by the consolidation of the Netherland Production Company acquired by Newen, Tuvalu. Tuvalu as you know is a production house with a proven ability in -- of creating high-quality cross-media content. Tuvalu is active in entertainment, factual, scripted reality and scripted series. TF1 Entertainment reported also revenue growth during the quarter, compensating home shopping business, which has recorded a slight drop in sales, mainly due to supply disruption.

Now let's turn to the cost side. The programming costs for the group 5 free-to-air channels for the first quarter '17 amounted to EUR 233.5 million, including the cost of LCI programs compared to its EUR 232.4 million for the first quarter '16 for the groups 4 free-to-air channels, representing a drop on a like-for-like basis. This is a result of a combination of the broadcasting strategy during the quarter to offer less expensive content as well as a scheduling of some programs that has been shifted to a later date than in the previous year.

Other operating costs including depreciation, amortization and provisions decreased by EUR 5.6 million year-on-year. Excluding Tuvalu consolidation on the first quarter, savings would reach EUR 10 million, out of which our Recover plan correspond to EUR 7 million recurring savings for the quarter.

As a result, current operating profit for the first quarter '17 reached EUR 36.3 million, up by EUR 21.5 million. An amount of EUR 5.8 million was recognized in noncurrent operating expenses corresponding to Newen's Studio consolidation goodwill amortization, in line with accounting treatment applied in '16.

Consequently, operating profit for the first quarter is EUR 30.5 million. Income tax expense EUR 9.2 million in line with the profit of the quarter. Share of profits of joint ventures and associates raised EUR 7.1 million due to the sale of TF1's 33% equity stake in Groupe AB. So net profit attributable to the group was EUR 27.7 million for the first quarter '17.

The net cash position stands at EUR 215 million compared to EUR 187 million at the end of December '16, up by EUR 28 million. This performance takes into account the sale of TF1 equity stack in Groupe AB and the acquisition of Tuvalu by Newen Studio, Studio71 and MinuteBuzz by TF1. The second quarter is being characterized by limited visibility on the French advertising market, the high volatility in advertisers investment decision process and the presidential and general elections. I remind you that last year we had, in June, the Euro with no major equivalents post events this year.

Our midterm strategic outlook remains unchanged. For '17, TF1 confirm that it will maintain its share of the advertising market by extracting maximum value from its premium inventories, growing its DTT channels and digital content, while achieving EUR 25 million to EUR 30 million of recurring savings, excluding cost of programs under the Recover plan.

Over the next 3 years, the average annual cost of programs, excluding major sports events, for its 5 free-to-air channels will be maximum at EUR 980 million. The group will adapt investment to the competitive environment, the market seasonality and the existence or absence of a major sports event according to each year. For 2019, TF1 Group is targeting a double-digit current operating margin rate with growth in non-advertising revenues for the 5 free-to-air channels expected to account for at least 1/3 of its consolidated revenues in that year. The trend of TF1 Group's rating during the first quarter as well as the results delivered in Q1 are in line with expectation and the guidance of the group.

That concludes my review of TF1 results for the first quarter '17. Thank you again for having join us tonight. Should you have any questions, please do not hesitate to ask. And finally, I would like to remind you that a recording of this conference call will be available. You will find the connection details on our website, groupe-tf1.com.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Mr. Laurie Davison of Deutsche Bank.

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Laurie Davison, Deutsche Bank AG, Research Division - Research Analyst [2]

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It's Laurie here, I'm from Deutsche. The first question just on the second quarter advertising outlook. Can you just update us with what you're seeing in April and what your expectations are for May in terms of growth for the market and your share? Second question, on -- can you cut update us on progress with your efforts to get carriage fees retransmission from the pay-TV platforms? Thirdly, you said that your ad share did not fall on gross -- in gross value, but with M6 reporting up 5% in first quarter, your net value did fall. So were you granting larger discounts in the quarter? Has there been a change in discounts and policy?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [3]

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Thank you for your questions. First question, April, May, in terms of the -- if I understand your question, advertising market. Well, we have limited visibility even for May and June as well. April is, I would say, for the moment, in line with what was our forecast. But I would say that we can't confirm the trend we had during Q1. So we are very cautious. We can't say more, because of really the visibility is lower than what it was even during Q1. And probably due to different reasons, including the election and the global environment in terms of visibility and decision process by advertisers. In terms of carriage fees, we are in the process with negotiation or at least we're discussing with some operators. I will not comment on this negotiation process, because that will not help the negotiation process if I give any kind of comment. I would say that we are and we feel confident that there should be at the end some understanding on what we can provide, what is the value we can give to operators and how we can share this value on the long term. The process has started and we are clearly determined to go on with the process which has started. Now the third question was the market share. I have no figures on the net revenue -- net advertising market share and we will not have any clear figure before probably 6, 7 weeks. For the moment, what we can say is that -- and that has not been the case for several quarters, we have to admit it, but we have to -- we have stabilized our market share in terms of gross revenues. It's a first step. That has not been the case during the last few quarter and we'll see in terms of net. Nevertheless, even if it was M6 figures with 2% growth on the 5 free-to-air ad revenues, we think that we are in line or roughly in line with the market. We'll check as soon as we get the net figures.

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Laurie Davison, Deutsche Bank AG, Research Division - Research Analyst [4]

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Okay. M6 were just flagging on their AGM statement, yes, they were concerned about the second quarter ahead of the elections. They had noted the FMCGs that started to accelerate cuts into that period. Can you confirm that? Is that what you're seeing as well?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [5]

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Yes. We are cautious about the Q2. I'm not saying the same. I don't know what exactly what they have said, I'm saying that, yes, Q2, we are cautious. And second point is, yes, possibly but difficult to measure linked or due to the election. But as well as to a process which is different when you have in June specific events. And we are probably more familiar with this situation than M6 because some advertisers it's basically FMCG are anticipating in May last year the Football World Cup -- Euro, sorry, Euro and the sports events and so the process is a bit different. So I would say that it's a combination of the macro and the environment and the election and the combination -- as well as the situation, which is different compared last year when we have the Euro, and their positioning in terms of budget and investment in May, whether it's specific as compared to what they usually do.

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Operator [6]

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The next question is from Charles Bedouelle of Exane BNP Paribas.

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Charles Bedouelle, Exane BNP Paribas, Research Division - Research Analyst [7]

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Actually I'm going to follow up a little bit on Laurie's question. Given the very specific nature of the election, the Euro last year, can you give us an idea of what the monthly conveys were for Q2 between May -- I mean, April, May, June to see if -- whether you actually benefited from those pull forward or not? And also maybe can you tell us what your budget was for April? Because you said April was in line with your anticipation, but we don't really know what it is. And I think the second question is much more long term. I've seen that the target of double-digit margin has been reiterated for '19. Can you tell us what do you think are the minimal advertising conditions over the period for you to reach this target? What is the scenario where advertising is too weak for this target to hold?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [8]

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Well, thank you, too, Charles. As you know I don't want to give too much month per month, because in our business it's not very -- it doesn't help too much. I think that there is a combination of plenty of factors, including some time holidays, Easter holidays and so on, so I can't go on and just explain in details or whatever. But you should know that April last year was not very good, I would say. May was very positive. June was in line with the Euro -- due to the Euro was positive, but limited in terms of growth. So we have April, which is not so good. May was very good, specifically in May last year. So the basis of comparison is not very favorable. June is not a specific benchmark for the issue. Now what we can say that -- so in May, and that's -- is the case for the global market I would say. We will have definitely a high basis of comparison but it's, I would say, known -- well known from at least 11 months in advance. And so we've made and we have that in mind in our budget and in our target. April is in line with expectation. Not very good last year, in line with what we can deliver in April in the current basis. Considering your question on '19 and the target of double digit, I would say that except if we would have a break, a significant break or something which would be really disruptive on our markets, the guidance is whatever the fluctuation of the advertising market will be. We have to adapt our cost structure in order to deliver this double digit, and that we have to monitor the business, as a global business, not only the (inaudible) but the global business in the next 2.5 year in order to achieve this target. So I would say that the assumption is not something which would be specifically disruptive, positive or negative. But having said that, the targets remain the double digits.

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Charles Bedouelle, Exane BNP Paribas, Research Division - Research Analyst [9]

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Okay. That's very clear. And just a very quick simple follow up. Your TV ad gross was 2%. The overall ad gross was 2.5%. So it implies that the non-TV ad gross was well into double digit. A, can you confirm? And b, how should we think about the rest of the year?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [10]

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Well, it's a mathematic and I can confirm, yes. I confirm that there is a good trend on the web, including the advertising on catch-up. And there is a positive trend as well on our part for radio and other platform apart from TV. There is also -- including of course, what has been done, which is limited, but which is part of the business in the acquisition of Bonzai

Digital and all the development limited in terms of amounts, not really significant in terms of financial investment. But as you know, we've made several move on the web, step-by-step, MinuteBuzz, Bonzai Digital, Neweb which is a component of Newen and which has a few -- some activity on the web. So yes, the global web components and the advertising on the web has increased more significantly in terms of rate, not in terms of absolute value, of course, but in terms of rate as compared to TV.

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Operator [11]

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The next question is from Lisa Yang of Goldman Sachs.

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Lisa Yang, Goldman Sachs Group Inc., Research Division - Equity Analyst [12]

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My first question is on your strategy to better monetize your prime time slots. And you talked about multiple ad breaks and so on. I was just wondering how advertisers have reacted to this so far? Are we already seeing the benefit in Q1? Or is there a little bit -- quite a benefit to come later this year? Secondly, on the ad market. I mean, Q1 ended up much better than expected for both of Newen and TF1. So just wondering how do you explain that you see the underlying market stronger? I mean, I understand there is some election impact, but -- or do you think it's mainly budgets being pulled forward from Q2? And related to that, could you confirm if April was negative? And my last question is on programming. What was the level of cost saving in Q1 that you mentioned? And should we be thinking of about EUR 980 million of programming cost for the year in line with, basically, your guidance for '17-'19 average?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [13]

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Thank you. The first question has to -- maybe it's a different question, but on the programming and the multiple break and so on, I would say that, yes, of course, Q1 has started to deliver, and yes, we are -- we have started. And the team in charge of all the program and broadcasting they have secured -- they have worked a lot in terms of how to improve the ad break position and how to monitor it better. There are still and always some ways to improve. The limit during the first half year it is close linked with the news program and the election, because as you know, we have less flexibility in news program and when we have a debate and so on. It's not as easy to optimize, but it's in line with what we want to deliver. Nevertheless, there are still probably -- there are still some optimization in terms of how to go a bit further in the inventories and advertising inventories to optimize. Now your second question was on Q1. Well, the -- yes, I would say that the advertising market is probably a bit better than our expectation -- initial expectation. We would -- we have in our assumption that there would be some possible wait-and-see position of advertisers during the first quarter. That is not been really the case as I had said during -- even in February and during the first quarter. I would say that there has not been, according to us, impact coming from the election or the situation. So yes, it's a bit better than expectation. I do not say that April was negative. It's not the case. So that's for the answer for April. And now concerning the Q1 how you should look at it, I would say that Q1 is a combination of 3 main factors. The first factor is due to the ad market, which has been globally positive and a bit better than expected. So we benefit all from the ad market as compared to what it could have been. The second factor is linked with the strategy and the optimization of both costs savings on the grid and there has been some savings which are independent from phasing. And there has been some savings on general expenses with the Recover plan, because we have delivered EUR 7 million record in savings during this Q1, which helps in terms of improving the profitability. So the second factor is due to the implementation and the delivery of the strategy, which has been put in place for the whole group. The third component of this quarter is linked with some shift on broadcasting program and which will be invested in Q2. Part of the savings are linked with this shift, but I remind you that there is a shift we won't have or which is clearly on the agenda, which is a fact that we will not have the Euro or any sports events in Q2. Meaning that we have postponed some or started later some program like The Voice or Koh Lanta later than last year, which had some positive impact in terms of finance and profitability. But this program will be -- will go on later on in the Q2 and will benefit from their rating than the audience during the Q2 as we won't have the sports event. So that's the combination of the 3 factors which explain the performance of Q1.

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Lisa Yang, Goldman Sachs Group Inc., Research Division - Equity Analyst [14]

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But what about the impact of the -- all those programs being shifted into Q2, what was the impact in Q1?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [15]

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Well, we have not given and we can't give you a clear figure. I would say that simply if you take the line in our programming costs, we have compensate on the Q1 the cost of LCI by savings on the other channel. Because, again, we are flat when we had last year 4 channels and we have, this year, 5 channels. So we have made this performance to keep the cost at the same level for additional channels during this quarter. And I would say that probably the proportion of savings are -- on the grid, savings on the grid are a combination of around 50% due to shift and 50% due to savings, record savings. That answers your question in terms of proportion of savings linked with phasing and the one linked with savings for rented for the year.

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Lisa Yang, Goldman Sachs Group Inc., Research Division - Equity Analyst [16]

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And did EUR 980 million for the year, can you confirm that one?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [17]

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We have not given guidance for the year. So I can't confirm what I have not given. The only thing I can say is that we've given guidance on 3 years average. It's good to say that, yes, I give EUR 980 million for 3 years without sports events. The year where -- when you don't have sports event, it should be a bit a higher than EUR 980 million, just because you have to compensate sports events. And the year with sports events '19 and '18 will be lower than EUR 980 million. Nevertheless, we will try to achieve our best in order to go and to deliver as close to EUR 980 million. But again, the guidance, if it makes sense, mathematically, is for '17 without any events, sports events a bit higher than EUR 980 million.

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Operator [18]

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The next question is from Adrien De Saint Hilaire of Morgan Stanley.

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Adrien De La Haye Saint Hilaire, Morgan Stanley, Research Division - VP [19]

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So first of all, we've talked about carriage fees, can you give us a bit of an update around Belgium and the opportunity you see? And perhaps any offers you have received, and if you can quantify that for 2017 perhaps. Secondly, I've tried and checked here from the manifestos of both candidates of the presidential election, I couldn't find anything around media regulation. But can you tell us your feeling about what could happen in the case of an election of Mr. Macron or Mrs. Le Pen? And lastly, the other platforms had a very, very strong performance. How is this -- well, is this extrapolatable to the other quarters?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [20]

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Yes. On the Belgium, we're progressing quite well. We have just started and -- through a process in order to go on with capacity to broadcast differently the specific sports on the Belgium market. So we -- you should not take any specific impact or significant impact on '17, because the process is we have experienced that in Switzerland, it takes some time. First of all, you have to put in place the technical -- technology and that's not very difficult, it doesn't take so much. But at the same time, you have to go on the advertising market and to develop the business. So starting from scratch, it will take a bit of time. So don't expect too much for '17, but we expect to be on the market in '18. Now in terms of range, in terms of magnitude, we are in the market which is a bit higher than EUR 200 million in the francophone market, it's more than EUR 200 million. And the market share of TF1 in terms of audience rating is around 15% market share ratings. And in addition to that you have to take into account the fact that we will not make a specific advertising spot at any time on any program. So that will be probably only part of what is available. So again, we are talking about limited numbers, but that's part of the business. And that will be -- you should take into account more in the next year than this year -- for this year a very limited amount or not very significant. Concerning the media and the program of candidate, I have the same, I would say, conclusion that yours in terms of I'm not seeing so much from Emmanuel Macron, Marine Le Pen, on what they want to do in the media sector. It's not necessary on their priority. Nevertheless, I would say that from what we understand, what we read, there should not be any significant disruptive situation with some move or change in the regulation in line with the trend which has been already -- on both sides, which has been already moved, which has already been taken during the last 2, 3 years. Meaning that the traditional question of dependent, independent, the question of the specific sectors forbidden on advertising should be reviewed and normally would be reviewed. It's not clearly is a priority, but that makes sense for them in terms of next few months. I can't say more because, really, there is not so much said for the moment. Now concerning the improvement on the other platform, yes, there is an improvement on the other platform, and that is partly due to the web as well as interactivity. If you look at the details in our accounts, interactivity has been performing quite well during the first quarter, linked of course with the nature of program we have broadcasted. And that's probably part of the explanation on which you can't expect to have the same kind of growth even if we expect one with the interactivity. Growth, nevertheless, not in the same range in the next few months. On the web, on the contrary, yes, we expect to go on with the same trend, which has and makes sense to be even if it's small figures, double digit.

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Adrien De La Haye Saint Hilaire, Morgan Stanley, Research Division - VP [21]

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I'm sorry to bother you with another question. How much nonrecurring savings have you made in Q1, which will have to be possibly reinvested in the remainder of the year or next years?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [22]

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Well, probably, the question is not very different from the previous one, which is basically on the programming, I would say that it's difficult to measure. But on the programming cost we've made around 50% savings, which should be kind of recurrent. But again, difficult to say recurrent in terms of programming cost just because we adjust our investment and we are more flexible than we were previously. So we react to the competitive environment what they -- what other competitors are programming, so it's more difficult to answer very -- on specific figures. But every time we have an opportunity to invest, whether a bit less, because there is less competition on specific day or on specific month, or if we have the country some specific investment made by the others, we have to invest it before in order to keep the level of ratings we want to enjoy. So basically, this adjustment and the flexibility is greater than what it was in the past, especially from the team of Ara Aprikian. And so just as a range, I would say that 50% are -- will be reinvested as compared to what we've made in terms of savings. We expect to keep the 50% savings for the year.

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Operator [23]

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The next question is from Conor O'Shea of Kepler Cheuvreux.

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Conor O'Shea, Kepler Cheuvreux, Research Division - Head of Media Sector [24]

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Just frankly a few on the -- just to follow up on the previous question on your comments about the opportunity in Belgium. Can you just be specific about that? Is this exclusively an advertising, a TV advertising opportunity or a carriage opportunity or a mix of both. So when you made reference to EUR 200 million and a 15% market share, are you talking specifically about TV advertising market or is it mix of carriage? With that, second question is just in terms of the increase in operating profit of broadcast -- for the Broadcasting business of about EUR 22 million. You got EUR 7 million extra TV advertising revenue and EUR 7 million cost savings, programming costs were EUR 1 million lower. Is the rest EUR 6 million to EUR 7 million, does that relate to the non-TV advertising and some of the acquisitions that you referenced such as MinuteBuzz and Bonsai? And then the third question, just on programming costs. Just to be a little bit more specific, maybe about the second quarter, how much roughly do you think of the Euro 2016 costs from last year, which I think were EUR 20 million, EUR 25 million in Q2, do you think you will reinvest in other programming in the second quarter?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [25]

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Yes. Well, on the first question, we're talking about advertising market and only advertising revenues. As such, the EUR 200 million I referred to, which is a bit more than EUR 200 million is the advertising -- TV advertising market in The francophone Belgian market. And we have 15% market share in terms of rating. It doesn't mean that we expect to have a 15% market share on the advertising market just because, again, we will not optimize or we will not use all the advertising slot for inventories to sell. So there will be something which will be kind of limitation in terms of what we will use in terms of inventories. Nevertheless, that's to give you a range. But we could expect on this market it's not a huge amount, we're talking about a market where we don't -- we're not going to change or to disrupt the market. We're just trying to adapt our position on the market through the way it's consumed and to adapt what we broadcast in terms of advertising to the consumers, which are Belgian and which are not French. Basically, that's the idea and that is what I have done -- we've done as well like in Switzerland. So that's advertising. It doesn't mean that in Belgium -- well, the intention is not to go further in other business in terms of we expect to look at what we could do in terms of production or in terms of -- but in terms of figures and in terms of P&L, I would say, we're talking about advertising revenues. Now second point on the -- I'm not sure I get exactly your question, but I hope I can answer your question. If I understand it is that we have made mainly optimization and cost savings linked with our recovery plan. And of course that part of it, the improvement of the profitabilities of the broadcasting is also coming from savings -- record savings we've made during the first quarter. And we started probably our Recover plan to deliver more on the broadcasting than in any other business in terms of capacity to deliver in the timing, savings on the Broadcasting business. So you should take into account the fact that, yes, the improvement is partially due to the fact that we focus during Q1 a bit more specifically on the Broadcasting business in order to deliver record savings linked with Recover plan. Now the third question on programming costs is the Euro and what will be invested or how we see it? I would say you that, yes, we will not have this EUR 25 million, EUR 30 million cost last year. We had in Q2 '16, EUR 30 million programming costs in Q2. We'll reinvest something which will be lower, clearly. And that means basically that you should take into account a proportion of cost, which will be clearly programming costs in Q2 will be higher than last year apart from sports events and in proportion which is -- which will be as we can see it, I would say not so much different from what we have invested net from replacement program.

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Conor O'Shea, Kepler Cheuvreux, Research Division - Head of Media Sector [26]

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Okay. I'm sorry, just a follow-up on the second question on the bridge year-on-year in broadcasting operating profit growth. Obviously, you mentioned the EUR 7 million recovery cost savings. And on top of that there's revenue growth of about EUR 7 million in TV advertising. Even if we add the growth in non-TV advertising, the increases is still higher than if you had a 100% drop-through of those elements. So I think programming cost fell by EUR 1 million year-on-year in Q1 '17. So I'm just wondering were there any other elements apart from the ones that you've called out, boosting broadcasting EBITDA in Q1?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [27]

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No, I'll say that it results from programming cost savings, savings on [draw] expenses apart from programming costs and additional revenues. The 3 main components. There's not been any kind of more significant change. And again, on Q2 programming costs, we should be, of course, on a, I would say, on a double-digit increase and we will try to double-digit increase in terms again of absolute amounts. We're talking about more than EUR 10 million, clearly. And we will try to monitor in order to get the best delivery we can. And again, that will be adjusted especially in June when we have to replace Euro.

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Operator [28]

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The next question is from Richard Eary of UBS.

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Richard Eary, UBS Investment Bank, Research Division - Executive Director and Head of European Media Team [29]

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I just have several questions, actually. Just the first one is just the phasing of the cost out that was actually announced in the first quarter. So you talked about reiterating EUR 25 million to EUR 30 million of cost savings this year, but you delivered EUR 7 million in the first quarter. It is my understanding that it was going to be much more back-end loaded. So does that mean the EUR 25 million to EUR 30 million could look light for the full year? That's the first question. The second question just going back to the Q2 as we look at DTT comparisons and just so we're aware of that. Can you just outline what was the revenues attached to the Euros last year? So we're obviously aware that there will be lost revenues coming through which will obviously made up by some additional revenues coming through from programming such as The Voice, but -- so we can just kind of gauge of that affect that will come through effectively in June? Third question with regard to just the PPA, that's obviously come through below line just if you can just remind us the full year guidance for the PPA? And for the last question just on tax, just in terms of housekeeping question. Just so we get an understanding, was there anything going on in the first quarter, the tax rate look quite light and with the taxation guidance for the full year?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [30]

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Thank you for your question. First question in terms of cost savings Recover plan, yes, we delivered around EUR 7 million for the Q1. It will be a record savings. And we expect to deliver same amount, a bit more every quarter. B, I would say that the transformation plan and the impact of the transformation plan will be more significant in Q2 and the rest of the year than in Q1. But on the other side, there has been some specific [record] costs on the broadcasting, which have impacted Q1 which will be -- which was more in line with what we could deliver and with what delivered in Q1. In other terms, I would say that this Recover plan is impacting several part of the company and we are monitoring it in a way which could be a bit different quarter per quarter in order to remain with the targeted EUR 25 million to EUR 30 million. And there is no reason today to think that we can't deliver or that could be light as you said, lighter than expected. There is no reason. There has been some process where we have started to deliver. And we know that decision, which have been taken to this point of time will deliver a bit later than others. So we are monitoring it in a way which should be in line and with the guidance. Now then your second question, which was what was the revenues (inaudible) zero and if we have and could do some impact of what -- how you should account for quite of absence of revenues in Q2 because of the absence of the Euro. I would say that we have not given specific figures and we have to admit, last year, that TF1 is confirmed we have said that the Euro has not bring significant additional revenues because for this specific events, and we have some time during the last 2 or 3 years, the same situation where the advertising -- advertisers have kept their budgets and shift some budget to the Euro instead of spending on the natural or other program. So we don't think that there will be -- and as such everything to do the same and a significant change due to the Euro directly. The only thing we can say is that last year, indirectly in May, we had some significant growth because advertisers have anticipated, and especially FMCG, the Euro and invested earlier. And so there is some impact, but probably in terms of revenues for the Q2 more impact of single -- high single digit, but not more.

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Richard Eary, UBS Investment Bank, Research Division - Executive Director and Head of European Media Team [31]

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Now Philippe, just before you go into the second question. Just to be clear there, so as we step in you've mentioned April was basically flat to positive, because you said it wasn't down. You've obviously got a harder comp in May, because the portfolio of FMCG. And then you got a harder comp in June, but the Euro didn't bring in significant net revenues. Does that mean that when we blend the 3 months together, are you expecting a positive second quarter outcome for advertising revenues? Or would you think, well, that should be negative?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [32]

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If -- I would have think we did give a guidance. And if I didn't give a guidance, I can't answer your question. So I'm sorry, but I have given all the information I could, I can't give you more than what I said, sorry. But I don't think -- I don't have enough visibility for May and June. I give what I know. Now the third question is the PPA is linked with the goodwill of -- we had on Newen acquisition and we recognized a depreciation of the goodwill ads last year every quarter for an amount -- a global amount last year, which was EUR 24.5 million for the full year. And now we accounted on a regular basis, which correspond to the line we have on the specific operating costs, which is the amortization of the goodwill of -- and that is during the 3 years. So the timing or what we had is for '16, '17 and '18 based on the accounting rule, which is the amortization based on some specific assets we accounted regularly. So you will get the same amount as last year for the whole year and that will be the same next year. It's an accounting treatment. There is no cash impact.

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Richard Eary, UBS Investment Bank, Research Division - Executive Director and Head of European Media Team [33]

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No, no. I appreciate that. I just wanted to double check that that's what we're looking for again just some reiteration about for the next 3 years.

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [34]

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Concerning your -- the tax question, we have a rate of 30% to be -- the lower than what I expect for the full year. We are trying to optimize and see what has been your -- depending on the different business we have vesting from the previous losses we benefit on the tax issues. But you should take as an assumption the normal rate a bit lower than the official one -- or there is no official one but a bit more than 30% rate for the company.

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Operator [35]

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The next question is from Julien Roch of Barclays.

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Julien Roch, Barclays PLC, Research Division - MD and European Media Analyst [36]

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My first question is on cost savings in Q1, you said EUR 7 million underlying the EUR 10 million quarter-on-quarter profit. Can you explain the difference between the EUR 10 million and the EUR 7 million, because I find the recurring and nonrecurring confusing? That is my first question. The second one is on the acquisition of Tuvalu. Could we get an idea of the revenues and operating profit in Q1 and the full year? And three, I know you said you wouldn't be commenting on negotiation with broadband providers. But you said you pulled out a document and when you're going black in terms of signal in -- on the 30th of April which is the only in 3 days. Can you confirm that it is the case?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [37]

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On cost savings, yes, what is non-recurrent -- well, I mean, what is recurrent EUR 7 million out of EUR 10 million as I mentioned. And the EUR 3 additional million mean that they are non-recurrent, and that could be invested during the rest of the year. But on the contrary, we will have some additional savings in Q2, Q3 and Q4. So if I understand your question, you'll get the line amortization, provision and no other cost apart from programming costs. Yes, EUR 7 million out of EUR 10 million everything being the same apart from Tuvalu. Though EUR 3 million could be reinvested, I think, could be reinvested during the rest of the year. Out of those EUR 10 million, EUR 7 million are linked with the Recover plan we monitor all along the year. Now concerning Tuvalu, we have not given too much information. And it's part now of the Newen business. And we can only say that the -- and that has been said, I think, previously, that range of their activity is around EUR 25 million per year. So that's roughly the range in terms of -- we don't disclose the profitability of those specific companies. The only thing we can say is that we expect additional synergies through the acquisition and the capacity with Newen to develop additional synergies compared to what they deliver on the stand-alone basis. Concerning the carriage fees, no, I can't confirm that we will -- as I would say, as (inaudible) cut the signal on the 30th of April. That's not what we had in the process. What we have in the process is that we ask some operators not to use the signal on the over-the-top platform from the 30th of April. That's the requirement we've made. And we will wait for the 30th of April to see what they do and what is the result of what we were -- what we had asked them to do. We have gone with discussing and ready to go on with discussing with all the operators in order to again see how we can in the mid-, long-term share the value of the content we provide. That's what I can say at this stage.

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Julien Roch, Barclays PLC, Research Division - MD and European Media Analyst [38]

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Okay. And coming back on Tuvalu. If it's about EUR 25 million a year and you assumed Q1 is a bit less than the 1/4, say, 25% -- say, 20% so that's EUR 5 million, does that mean that Newen on an organic basis declined in Q1?

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [39]

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Yes, you're right. As a consequence, yes, that Newen during the first quarter had a bit declined because they have delivered a bit less, but that's seasonality effect. We had, last year, and especially on (inaudible), I think they have delivered more to their clients. So that is, I would say, at this point is positive for Q2 in terms of shift because there should be more business for Newen on the French market and the (inaudible) market in Q2 than in Q1, so yes.

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Operator [40]

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This concludes the question-and-answer session.

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Philippe Denery, TF1 Group - EVP of Finance & Procurement [41]

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Well, thank you. Thank you to all of us for attending this conference call, and have a good evening. Thank you.

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Operator [42]

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Ladies and gentlemen, thank you for attending. This conference is now concluded. You may now disconnect.