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Edited Transcript of TFI.PA earnings conference call or presentation 24-Jul-19 4:30pm GMT

Half Year 2019 Television Francaise 1 SA Earnings Call

Boulogne Cedex Jul 29, 2019 (Thomson StreetEvents) -- Edited Transcript of Television Francaise 1 SA earnings conference call or presentation Wednesday, July 24, 2019 at 4:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Gilles Christian Gérard Pélisson

Télévision Française 1 SA - Chairman & CEO

* Philippe Denery

Télévision Française 1 SA - Executive VP of Finance & Procurement

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Conference Call Participants

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* Annick Tonie Maas

Exane BNP Paribas, Research Division - Analyst

* Conor O'Shea

Kepler Cheuvreux, Research Division - Head of Media Sector

* Julien Roch

Barclays Bank PLC, Research Division - MD & European Media 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

* Sophie Perrine Cecile Julienne

BofA Merrill Lynch, Research Division - Associate

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the TF1 Group 2019 First Half Results presentation. I would like now to hand over to Mr. Gilles Pélisson, Chairman and CEO; and Mr. Philippe Denery, CFO. Gentlemen, please go ahead.

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [2]

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Good afternoon, Philippe and I are very pleased to welcome you on this first semester 2019, very good results call. We want to -- so if we move to Page 3, we wanted to emphasize how much our results and this very good performance confirm that our strategy is delivering very strong results.

When I say good strong results we're talking about great contents, and we are believers in great contents, which delivers great ratings and strong profitability. You will see that particularly on the broadcasting side, but also on the way the 2 businesses, which are Newen and Unify are developing.

On the first slide, we picked up a few figures, which represents maybe the way the company is moving. First of all, with the best first half group margin for the last 7 years at 14.2%. We've talked about the yearly margin of above 10%, and it's really a pleasure to see already 14.2% on the first half.

Then there is the broadcasting margin, sharply higher on a year-to-year basis at 16%, resulting in a combination of, of course, good revenues, but also very good management on our program content -- cost.

Then, of course, there are the ratings. A very high audience share for women below 50 as a target, which not only demonstrate the very strong attractiveness of our channels, but when you think that the 32.7% is a plus versus last year where we had certainly one of the toughest comparables that you can think of, which is a soccer world's man -- World Cup for men, it's really an achievement.

Then on Newen, achieving EUR 7.5 million every day for the 2 daily soaps is also by French standards, a very strong achievement. In terms of Unify, 27.5 million unique visitors in France, which is 1 out of 2 internet users, and when you think about something which is specific to Unify, women as a target audience, 7 women out of 10 in the French market.

And then finally, the Group net cash generated by our operating activities at EUR 249 million, which is also extremely strong.

Moving now to the activity review on Page 5. It's really emphasizing the way that TF1 Group audiences are at high levels on commercial targets, but not only that it's also the widening gap with competition.

At the very top, you're seeing again, the 32.7 on women below 50, which is a plus 0, 2 versus last year when M6 is a -- is stable and France Télévisions is decreasing.

As a reminder, last year, as I was saying, the comparable was very tough. We had in first half of '18, 5 soccer games, which were between EUR 10.3 million and EUR 12.6 million, so you can imagine that by French standards it was very tough comparable.

This being also explained by the fact that not only TF1 channel performed, but also the DTT channel performed very well. The combination reached on women below 50, 10.7% of share, which was also plus 0.5 versus 2018. Quite an achievement.

On LCI, the all news channel, we reached the famous 1% that we had talked about to the market when we went on free-to-air television, which also is a plus 0.4 point versus 2018.

Major achievement in a fairly highly competitive environment with sport, all news channel in France.

And then as we will see later but this is the bottom of the chart. As you can see, MYTF1 with 7.3 unique visitors, clearly leading the way ahead of France Télévisions and M6 at 11.4.

Our performance was a plus 13% versus last year.

By taking a look on prime time, which are the advertisers' favorite slots, what is really interesting is to notice that TF1 channel is consolidating its leadership on target audience.

As you may see on Page 6, we are at high level of 28% on women below 50, which is as strong as in 2014, and we clearly moved up the difference with our closest competitor on target audience M6 from 9.5 points last year to 10.6 points this year.

And we believe that it's all because of the strength of our content, the depth of our programs, but most especially, the variety of genres that we are proposing to the consumers.

And moving on this -- on Page 7, we do believe that there is now an acknowledged know-how of what we do best in our core business.

By that I mean it's a combination of the success of flagship brands such as Koh-Lanta, The Voice or Ninja Warrior. But when you combine that with very bold choices that we are making as a leader and which have paid off.

U.S series picking the right ones and the best performing once such as Manifest, S.W.A.T. or introducing a comic series like PalmaShow, which was a French event in itself.

Of course, the way we orchestrated the Women’s Football World Cup in a way, which was -- makes that event really unique.

We knew couple of years in advance that, of course, France welcoming the event in medium-size city would be an event in France in itself.

But then the strong belief we share at TF1, which is about promoting women's sport, made it a very special event, and we brought it to a level that women's sports never had reached in the past.

And then there is, of course, very high popular French drama Les Bracelets Rouges in Season 2, Infidèle and many other fictions we have kept the tradition, but also making sure that we are recognized as the leader in French fiction.

And finally, on the news site whether it's for our 1:00 news or our 8:00 news at night, we kept our leadership very strong, and we even increased it.

Maybe one word on the women's World Soccer Cup or Football Cup on Page 8. The very high profile we gave to the competition delivered a fairly unique success.

It was really building up -- built-up across all channel and audiences for 6 months. It all started in February with the D-100 kind of celebration.

And then every month, we applied, making sure that we had an event to keep everybody more and more motivated and involved in the events.

At the very end, of course, it was a total reach of 44 million viewers, which is 2/3 of the French population, and very strong showings of 10 million viewers on average for the French national team with a record audience for the French/USA game at 10.7 million.

It resulted in -- these were the best ratings for TF1 channel for the year. Without French team playing, we had on TMC, a very strong programming. For example, Sweden, USA reached 1.9 million viewers which was totally unheard of.

And as a result, TF1 had a very, very strong month of June as well as TMC.

But I think what you may want to recall is really the capacity for TF1 to create an event once we acquire such exclusive rights.

The next things we wanted to touch upon was really the way we had mentioned in the past to you, which was how do we move as a media from a mass media to a consumer-centric approach, especially using MYTF1.

On Page 9, we emphasize the way the repositioning on MYTF1 OTT platform and also our portal on IPTV has really enhanced the customer experience.

On IPTV, we are currently present with the new portal on free SFR, WIC Telecom and then Orange will soon be available.

It's about high performing player. By this, I mean, we have been able to reduce by 40%, the way we were launching the videos. We multiply by 2 the quality of the broadcasting of replay, we introduced a personal recommendation tool, we introduced also a cross device end-to-end experience, so reaching to the best-in-class standards such as Netflix. And at the end, acquiring some unique content, which means that you have on the MYTF1 portal from now on an enriched dedicated content.

And finally, to improve the customer experience, a less intrusive advertising model for better ad efficiency and for our advertisers. By that meaning, a stronger approbation of spots being -- before broadcasting on TF1 to make sure about brand safety and the quality of the instruction, and also an improved capacity to target audience in the app of MYTF1.

This results in a high-end offer on Page 10 for brands, which is strengthened by data, and -- but when you combine 2 elements, our unique environment and then this disqualified data, you kind of reach a win-win value creation scenario. Where we are, of course, improving the customer experience but we are also -- we are improving the satisfaction of advertisers.

The MYTF1 unique environment is currently delivering 93% completion, 95% visibility and 100%, of course, brand safety, which, of course, is very, very different from some other players in the digital worlds are offering.

And then when you combine that with either our own data and our own data is basically collected from the EUR 24 million logged profiles that we have on MYTF1 OTT where we call it gender and age.

You will reach some top-quality targeted data, which we can combine with some paid data, which we get from either Aufeminin or relevanC from the Casino Group, gives you a very good level of qualification. And at the end of the day, when you combine this environment and the qualified data, we do believe that it's a fairly unique combination that we have to offer to the advertising market.

Of course, this gives us some key leverage on non-linear ad, which for me is the new battle when looking at the way our consumers will end up consuming content.

On the OTT, it means that today, about 1/3 of our offers on the MYTF1 are targeted data offers. And this is a huge improvement over, from 1 year to another, it's about 17% -- 70% more. It means that we are able to charge higher prices.

You're talking about a 35% premium in term of CPM for targeted data offers versus our traditional offers.

Of course, having 24 million profiles logged gives us a unique potential reach, 2/3 of our data targeted campaign sold are now based on our own data. And then of course, we moved to 100% video inventory.

We have no more display and video, so it's really -- got rid of the display to move these -- to these video inventory only, which, of course, is the best performing segment in term of growth.

And then as I said on the IPTV, we have now a data profiling offer with -- where the statistical analysis enables data offers, thanks to the data we have been collecting.

Moving now to Newen, Newen has been able to experience audience and rating growth for its key franchises, which we wanted to remind you.

First of all, the daily show we introduced on TF1 2 years ago is performing extremely well. It's now going at on average at 24.7% rating share on women below 50, which is a 4.4-point improvement over last year, which is very significant as an access show. And of course, it's the market leader in this access, helping also our news broadcast because it's just the lead in.

But Newen is also working for France Télévisions and doing a very good job with Candice Renoir, for example, which has 5 million TV viewers in 7 seasons.

And then the daily soap of France 3 (sic) [France 2] with an average of 3.6 viewers (sic) [3.6 million viewers] is something quite significant for France 3 (sic) France 2 and it's been -- this show being in its 15th season.

Maybe one word and focus on Reel One, which is the latest acquisition that we made with the Newen's team. The whole idea is that Reel One, which is a Canadian company is a very high potential asset, which is bringing additional knowhow to Newen. By that I mean that if you see Newen traditionally as a fiction documentaries on talk show, kind of, specialist, the business model of Real One is all about production and worldwide distribution of English language TV movies. With this, we mean, a high demand genre fitting very well with, of course, the existing offer.

Very strong export potential. 90% of the revenue is generated whether it's in the U.S. but most especially in Europe.

And major clients are major European, U.S. broadcasters and SVOD platforms.

One of the particularity of this company and this market is that TV channel would buy these TV movies in bundle, so they would go for 10 to 15 movies at a time, which makes, of course, not only the sales easier and more interesting, but more significant and occurring less frequently.

And then finally, they will be producing and distributing on 2019, 75 TV movies, moving up from 50 in 2018.

So a company, which is really growing. It's also bringing 1,000 hours of programs and catalog. It expands our distribution catchment area, which will help significantly Newen with the London office, and then we already can see some synergies with our companies, which already -- there are some talks going on.

Moving now to Unify. The whole idea has been for the -- for this 2019 year is about the integration of business lines. And moving from a company, which is a mosaic of startups to a more integrating digital player.

On the social e-commerce side, the boxes, there were more than 1 million boxes sold through this first semester with the good performances of Beautiful Box, My Little Paris, Gambettes, which is tights and leggings.

And then on the digital marketing side, very strong growth in programmatic and especially Gamned!, the trading desk we acquired in 2018. And then on the digital content production, first of all, the sites like Marmiton, the cooking site in France, had of 45% progression in terms of unique visitors moving to 19 million unique visitors every month.

Doctissimo, the brands on health and well-being, reaching an all-time high of 13.8 million unique visitors in May '19, which was a 13% progression versus last year.

But I think, most importantly, it was also the start of synergy between the television side of our company and then Unify. We gave you a couple of examples.

We introduced the first new TF1 Marmiton sponsored show called De l'astuce à l'assiette, which already has generated more than 11 million TV viewers since it has been on the air mid-April. It's a short program movie -- program.

And then local, for example, doing a split display digital dual screen campaign so from L'Oreal integrating comments and feedback from the Aufeminin-qualified community where there is an experts' club displayed next to the advertising, as you can see on the slide.

But most importantly, looking forward with Unify, it's really the scalability and organizing this collection of startups.

So on Page 15, the business transformation is in progress to offer, of course, our clients higher value added solution. It started with a reinforced leadership team, and we hired top talents from leading digital leaders. These people are in place now and working together.

There has been a very strong work done in depth about how we should be positioning Unify in the future towards not only the advertisers, but also the media agencies. And there will be launch in September of the Unify transverse ad sales-house.

And then at the end of the day what we're starting to see is that when each individual startup was going after clients. They would gain small amount budgets. But of course, having already unified France, they're starting to win larger marketing budget to package deals with major advertisers, which is, of course, our end game.

This is what I wanted to share with you at the stage. And then now, I will turn up to Philippe who will comment on our financial statements.

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [3]

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Thank you, Gilles. Good evening, everybody. I will comment on our financial statements for the first half year '19. Consolidated revenue for the first half year reached EUR 1,145 billion, up by EUR 62 million plus 5.7% year-on-year.

With an organic growth accounting for EUR 18 million and external growth for EUR 44 million.

Broadcasting revenues at EUR 891 million, up by EUR 22 million plus 2.5%, mainly driven by an increase in other revenues at EUR 99.4 million plus 28.9% year-on-year.

This will take the additional revenues on the full year basis of the contribution from the [women sign] last year with telcos and Canal+ as well as the resale of the pay-TV rights of the women football cup to Canal+.

Advertising revenues are stable year-on-year at EUR 791 million. A good performance, but a tough basis of comparison due to the broadcasting of the Men's Football World Cup last year, as Gilles mentioned.

Nonlinear advertising revenues continue to grow both in volume with video views, up by 9%, and in value with better pricing coming from data as it has been already said by Gilles.

Revenues from Studios & Entertainment segment at EUR 169 million in H1, down by EUR 17 million year-on-year.

This segment was impacted this quarter by the deconsolidation of our own shopping activity, that's around EUR 15 million. Tough basis of comparison of Newen -- for Newen in programs delivery, they have delivered a bit less, but that was on track with what they were expecting to do, and the studio suffering from decline in the video activity.

Now regarding the music business, it continues to perform well and especially with Play Two.

Finally, revenue from Unify, our Digital segment amounts to EUR 86 million with an organic growth of around 6% year-on-year, if we exclude M&A and reclassifications.

Social e-commerce continues to grow as well as digital marketing activity with a consolidation of Gamned!, which has been mentioned by Gilles already, and which is enjoying a very strong growth in the Programmatic market.

Now if we turn to cost of programs, the programming cost for the 5 free-to-air channels during the first half year amounts to EUR 446 million, EUR 53 million less than last year same period.

This reflects cost control over the programming costs, but also very favorable impact, of course, this year of the broadcasting of Men's Football World Cup last year.

Entertainment cost are up by EUR 15 million in connection with more entertainment programs on our digital channel, such as Burger Quiz or Beauty Match. And U.S. series are largely decompensating the French drama additional costs due to higher number of prime time dedicated to the genre.

What I will remind you is that part of those savings will be reinvested in promising back-to-school line-up, featuring the Rugby World Cup, the Landmark show, Mask Singer mentioned by Gilles as well as other new drama like Le Bazar de La Charité.

Now on the P&L income statement, I will not comment more on the top line and the programming costs. I've already commented.

On the other target depreciation, amortization and provision, they had -- there is an increase, which is mainly due to an impact of perimeter, including the consolidation of Aufeminin group, combined with the recent acquisition both in the production and digital activity.

While this impact, of course, is partly offset by the deconsolidation of our own shopping activity in Q2. The current operating profit reached EUR 163 million, up by EUR 61 million year-on-year.

The current operating margin rate was up by 4.8% at 14.2%, best margin rate since H1 '11 making us confident to reach our guidance for double-digit margin rate this year.

Overall, net profit attributable to the Group was EUR 107 million, up by EUR 41 million year-on-year.

Concerning the current operating profit per segment. The Broadcasting segment reported current operating profit of EUR 142.5 million plus EUR 62.6 million year-on-year, combination of additional revenue and cost control on our grid.

This represent a current operating margin of 16%, 6.8 points, a point up on the first half of '18.

And a quarter-after-quarter, the Broadcasting segment benefits from the transformation of the model launch a couple of years ago demonstrating its capacity to generate additional value, 16% margin rate as compared to 9.2% same period last year, is a significant improvement, which makes comparison with our peers more accurate.

The Studios & Entertainment segment posted a current operating profit at EUR 17.3 million, down by EUR 2.1 million year-on-year, and generated an operating margin of EUR 10.2 million, stable year-on-year. While this segment has been impacted on 1 end by the deconsolidation of the teleshopping, as already mentioned, and on other hand, by the consolidation of the new subsidiary PUPKIN and De Mensen for Newen.

While moving on to Unify, current operating profit for the first half year was EUR 3.2 million. This reflects seasonal trends and the ongoing transformation of the business.

The margin rate comparison doesn't make so much sense, given that we compare 6 months revenues to 2 months last year on Aufeminin. In absolute value, we deliver 18.5% increase with EUR 3.2 million versus EUR 2.7 million last year.

And focusing on Q2, this segment has delivered EUR 3.3 million versus EUR 2.7 million last year.

Now let's move on to net cash position. The net debt was EUR 28.7 million at the end of June '19 excluding lease obligations, versus a net debt of EUR 27.5 million at end of December '18.

Cash flow generated by operating activities, including operating cash flow, cost of net debt and change in working capital was sharply higher year-on-year at EUR 249 million, nearly twice as much as last year.

It enabled the Group to cover the dividend payout of EUR 84 million, the funding of our production activity roughly EUR 120 million, as well as our acquisition, mainly De Mensen, for amounts we've mentioned EUR 32 million on the slide.

Well, thank you very much. I'll now leave the floor to Gilles to conclude our today's presentation.

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [4]

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Thank you, Philippe. On the outlook, we wanted to come back on the H2 on the way, as Philippe started to allude to. We will continue to create value on our core business and develop our growth drivers. We do believe that we have a very, very strong back-to-school line up.

By that, I mean, not only it's, once again, a combination of various genres where we tend to try to do new things and also best-in-class. It starts with the French drama where we will have new and original content fiction like Le temps est assassin, La part du soupçon. We are recasting, you have major French actors and actresses who are playing.

But most importantly, daring move in a costume, beginning of last century -- of the 19th century, Bazar de la Charité, which should be a fairly astonishing show and which seduced Netflix, who has gone into a co-production with us.

It goes on with entertainment. As you know, we pride ourselves in having the best franchise with Danse avec les Stars, with The Voice Kids, which will be returning.

But then we will be introducing to France, what is the current best franchise in entertainment at least from what the industry is saying, which was introduced by Fox in the U.S. and then recently, by ProSieben in Germany breaking all kinds of records, which is the Mask Singer.

We're in the middle of recruiting the cast, the jury, et cetera, and making the costume because the big part of it is the costume. And it's not only fun, but I think it's going to be very, very exciting.

Then there is sports where we would have the exclusivity on the World Cup. There is no pay TV channel, which will provide games, so the entire 48 games of the World Cup in Rugby will be on TF1 and TMC, which we are very excited about.

As a reminder, these are games which will take place in the morning because the World Cup will take place in Japan and most of the time on weekends. So incremental revenues for us compared to our traditional ratings and compared to traditional shows in the morning.

There will be Handball and Formula One, of course where we have 2 more Grands Prix coming up in September, and I think, in October with the U.S. Grand Prix.

Then U.S. series coming back, with the Good Doctor, which is one of the strongest U.S. series we can think of with 7.9 million on average viewers in '18. And then New Amsterdam about-- medical series.

And then on the news side, new grids with new talents like Jean-Michel Aphatie or Elizabeth Martichoux on the all news channels LCI, making -- bringing novelty and different angle to LCI.

So to conclude, we believe that on Page 24, in H2, we will continue to create value on this co-business and develop our growth drivers through SALTO.

There has been good and strong progress in the antitrust process and we are restaging the final stages of the analysis. And of course, you will get and we will get, more visibility on that by the end of August.

On the production side, it will be the closing of Reel One, as it is, as we had mentioned in our press release submitted to the Canadian authorities.

And then on Unify, I think you will see the first positive impact of the new Unify advertising sales offer.

Of course, with Philippe, we wanted to reiterate our guidance for the year, which I hope you know, our 2019 at the Group level was the double-digit current operating margin. Then at the group level on average, annual total cost of program, which we still project at EUR 990 million for our 5 free-to-air channels.

On the Digital segment, looking forward to 2021, revenue is reaching EUR 250 million with an EBITDA at 15% or more.

And then at the Group level, ROCE in 2021 superior to the '18 ROCE.

With this, I thank you for your attention and then Philippe and I will be now ready to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Sophie Julienne from Bank of America.

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Sophie Perrine Cecile Julienne, BofA Merrill Lynch, Research Division - Associate [2]

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3 questions for me please. So you made some programming cost savings in addition to the 1 related to the World Cup costs? Should we expect this to be reinvested in H2?

Then could you give us some color on the delivery schedule for Newen in H2? And finally, how are TV trends shaping up in July and August?

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [3]

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Well, on your first question. Yes, we will reinvest part of the savings, we have already done in the first half year. Not necessarily all the savings but we will have to reinvest, first because all the cost of the Rugby rights as well as with the new -- launch of new program and French drama into the program that Gilles has mentioned. So part of the savings will be reinvested, yes.

Now in terms of your second question. The delivery of Newen, we think that second part of the year will be higher in terms of top line and what they will deliver as compared to the first half. First reason as a basis of comparison, I remind you that during the first half last year, we had delivery of Versailles, 8 episode of Versailles which was rather significant. And the second part is that if you look at the balance sheet, you will see that there have been an increase during the first half year, capital expenditure, which basically correspond to what they have invested. And that has, kind of -- KPI will generate and save -- will generate top line for the second half.

If you compare where they were and where they are today, which is on the slide I mentioned on the trend of the net cash position, we're talking about EUR 120 million net capital expenditures compared to EUR 95 million, EUR 96 million last year same period, which explain what they will deliver in the next few months, which is for the moment in terms of production cycle.

Your third question was the advertising trend. Advertising trend, there is real -- very low visibility. As you know July and August are not very important months that we have in 2 months, normal months in 2, if I may say in terms of top line.

So we have very limited visibility. And sales for the Rugby is just starting, the right direction. No negative sign on the French market, but we have to say that July and August are not very significant.

And I just remind you for July as it was the case for June, that the basis of comparison is rather high just because of the men World Cup last year with high prices, especially for the final and semifinal we had broadcasted last year. Of course, that has to take into account for July.

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [4]

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And as much as we can see on September, there is a fairly good signs on September so far.

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [5]

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But again, the figures last year just were specifically high just because of the basis on which we have some growth. And again high price with high ratings on the World Cup ad generate on a small basis the high rates.

As I remind you, which we explained last year. So just take into account the basis of comparison and the mathematics behind that.

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Operator [6]

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Our next question is from Annick Maas from Exane BNP Paribas.

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Annick Tonie Maas, Exane BNP Paribas, Research Division - Analyst [7]

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My first question is again on the ad trends. So if you take the good signs in September together with the World Cup comps in July, does that mean you expect to outperform the TV ad market in the next quarter?

And the second one is on SALTO. So just on the clearance that is expected for the end of August, is that still up to date given some telco operators now have expressed their position to the platform, firstly?

And secondly, once the clearance is done, how long does it take you to have the platform live, up and running?

And then if you could just give us also an update on where we stand with the audiovisual reform.

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [8]

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On the first question, and I will leave Gilles to answer the 2 others. But on the first question, we -- because of the basis of comparison, we don't expect to outperform the market, but there is no reason for us with what we will invest not to be in line with the market. May be better, but again visibility is very low. On SALTO...

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [9]

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On SALTO. So yes, you may have seen us, we have that, of course, as it is, the rule in this kind of process there are market tests, which are being done.

And therefore, you're asking all the opponents to the project potentially their opinion, and why they would see any threats to these projects.

I think so far the process, as we have seen units, and with our partners France Télévisions and M6 as being the authority, has been trying to lead the process once we lost maybe 5 or 6 months of the very initial time between Brussels and Paris. From thereon the French authority has taken on the lead, and has made everything possible to have a good dynamic in the process. And for that, we are thankful.

At this stage, of course, there is all kind of opposition, some make sense, some don't make any sense. Of course, we are counter-arguing against those proposals and making sure that the authority understands what are the -- what is at stake.

Of course, it is a little bit surprising as it seems like France is really one of the few countries where there is such a process and so much opposition when we look at other countries proceeding in the same way. So we are very vigilant on what is acceptable and non-acceptable in the process.

At this stage, we are confident. But until it is the very end, we will see how we will be able to proceed with our partners.

Should we be able to proceed, going back to the second part of your question, I mean, the whole idea is around to be able to launch, if we were to get some authorization by August or September by the first quarter of 2020, at the earliest.

Moving to your next question on the audiovisual regulation. As you may have seen or heard, and from the discussion -- the various discussions we may have with the French authorities, there is also here a willingness to make things move and to modernize the French regulation environment when those -- some of those laws go back to 1986. So at this stage, from the various signals and discussion and declaration that the -- publicly made by the various ministers, we are confident that there is a willingness at the government level to make things happen.

And that, it is about the forbidden sectors in advertising, it's about addressable TV, and all this environment that we have described to you in the past and where we think there are really possibilities in the battle against the GAFANs, which are not submitted to any kind of constraints, to give more flexibility to free-to-air channels in the way they function. Because at the end of the day it's about the future of our Groups and their ability to grow in a market, which is evolving from linear consumption towards linear and nonlinear consumption.

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Operator [10]

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We have the next question from Lisa Yang from Goldman Sachs.

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Lisa Yang, Goldman Sachs Group Inc., Research Division - Equity Analyst [11]

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Just a few questions, please. Just to follow up on the -- your comments on the audiovisual reform. Any thoughts on -- around the timing when those changes could happen? Are we talking about later this year or more in 2020?

Second question is on the pan-European deconsolidation. Just wondering if Mediaset's move to acquire a stake in ProSieben or merge with News España changed your thoughts at all around the potential synergies or logic of pan-European consolidation. It will be interesting to hear your thoughts. Could you also give us the contribution from the resale of rights Canal+ in Q2? And how much you expect in Q3 because obviously that was a big contributor to your other broadcasting revenue growth.

And finally, on Unify, the operating margin was about 4% in H1, 7% in Q2, so just wondering, how much you expect to achieve for the full year? And how do you expect to get to 15% over time?

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [12]

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Okay. On the binding of -- for the audiovisual, I mean, it's a very tough batch to make because we have been expecting and hoping for it for quite a while.

It seems like the latest declaration from members of the government have been that there could be some trade-offs, make of the -- an arbitrage, makes at the government level this month, late July. That back in September and October, there will be discussions in the Conseil des ministres, so which is the Council of ministers. The whole idea being that, I think, the government may retain some of the proposal we have made, which is, we don't need the full load to apply changes. You can by decree decide some experimentations, some tests for 6 months, for 1 month, for 1 year, enabling the market to really see what is the effect of the impact of whatever new decisions may be made.

And so you may have some decrees by the end of this year, could be. And then most likely the [low] to take place and to be put in place and put in force, enforced by maybe the first half of 2020, but closer to the summer than to the beginning of 2020. But maybe some decrees before that. That's what we understand.

On the pan-European consolidation, as you know, we have been watching and following that. We have been partnering with Mediaset, with ProSieben on various fields. We have seen how the Mediaset Group has moved towards realigning, I guess, their Italian and their Spanish operations.

From our understanding at this stage, we haven't heard of any significant, industrial synergy to be made between their move and their move in Germany. So by that I mean, it's -- yes, there is -- there was some capital acquisition in the equity form of 10%. But beyond that, I haven't heard of any really significant strategic and synergy speak or industrial move.

So we are not fried, we're talking a lot to American groups, as we follow them in their developments on direct-to-consumer strategy because I think it's really important to understand how at Disney, how at Comcast the sky will play in the future, how Netflix will play in the future. You've seen the recent results of Netflix, which will be put under pressure in the next months because their competition is going to change significantly.

And then, of course, partnering with M6 and with France Télévisions is also opening up new ways of cooperating on a local level. We have agreed with France Télévisions to use M6, the [Autosman] technical platform for SALTO, which is, kind of, a new way of functioning between our sales.

Therefore, it's also enabling us to work better maybe with the Autosman Group. So we're looking at all that, and we are present on those areas. But for the time being, we don't see any major reason to believe in major consolidation on the European field. On Canal+ you want to comment?

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [13]

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We don't disclose the price of the selling of rights to Canal+. You can easily find it, nevertheless, in terms of range. Because if we take the first half year on the other revenue on the nonadvertising revenues on the broadcasting segment you have an increase of EUR 21.8 million, and that's correspond to a combination of the resale of the rights as well as the additional amount, which is from telecom operators, so that's a combination of both.

And if you take on the other hand, the first quarter and the same line, you will probably have an idea of what it represents proportionally between the 2. And basically, we couldn't get more in Q2 than in Q1 significantly from the operators.

So basically, you have the range. But we can't disclose and there are confidentiality, and so you get it.

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [14]

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There will be a quiz at the end of this question session.

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [15]

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Hopefully, yes.

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [16]

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(inaudible)

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [17]

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Sorry about that.

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [18]

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On Unify, your question was -- once again, Unify, as I said, is really a business where we see, hear from every day. We have the management team in place, we have now the ad sales proposition in place. We said we will be there 15% by 2021. It's really achievable. And at this stage, see the -- as I told you before, look at '19 and the 12, 18 months post acquisition of Aufeminin as a period of transformation, revamping, structuring the company and trying to make it more scalable than it was. And this is exactly where we are at this stage. So I'm very confident in our capability of doing it but it takes a little time.

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Operator [19]

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Our next question is from Julien Roch from Barclays.

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Julien Roch, Barclays Bank PLC, Research Division - MD & European Media Analyst [20]

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(foreign language) Philippe. My first question is on the video boost views on advertising. So video views were up 17% in Q2 to EUR 393 million, up from EUR 336 million. You said price were up and they were flat in Q1 because at the time of the Q1 results, you said they were flat. So roughly how much were they up in Q2, are we talking up 5%, 10%? And can you explain again why price is up in Q2, and they weren't up in Q1 for online videos? That's my first question.

My second question, coming back on the change. So you said that you're hearing from the government that some decree could be taken and you also said that it will be like a market test.

So is that the right understanding that you think the government will allow targeted advertising for, say, a 12 months or 24 months period with a revisiting that at the end of the period to see whether there was really a big impact on the market? So where do you think those decree will happen? Second question.

And then the third question, coming back again on consolidation. So you don't see -- you're saying there's no reason to believe in major consolidation. But basically Mediaset, what they're telling the market is they feel the core business is under so much pressure that one way to address those issues is to merge, and they're saying that if another major broadcast has joined the 2 companies, they could serve as much as 10% of the fixed cost, which for TF1 would be a 15% to 20% of great [VVS]. So why do you agree with Mediaset on that?

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [21]

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On your first question. Yes, it's progressing during the first half, sure, and probably the second quarter is more than -- increased as compared to the first. So yes, it's progressing during the semester. And as to the trend is -- remained positive from the beginning of April to June. That is also linked with what we have done in terms of offer and the change in the platform, which has been very successful with growth in [development].

Second question was the decrees, the regulations.

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [22]

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So in terms of decrees, I mean, there's one thing, which cannot be tested with an experimentation is addressable TV. You -- it's like being half [premiums]. There's no such way. You either go for it or not. You need the telcos to go with you because the telcos need to change their systems and then share the information with their boss.

So I mean it's more to change the law because the French law says that you should be delivering a continuity in your signal and the way this is to be interpreted is that you should treat all French people equally, which is, of course, the total opposite of the Internet modern way of thinking where each individual can be addressed individually.

So this is more the change in the law that we would expect to give us the flexibility. And then, what can happen is that whether we go with [sports] and testing with some groups of partners to start moving into the right direction on addressable TV.

On the others, as I mentioned to you, the decrees could take place as early as the end of '19, but this is really to be decided by the government at some point. But for that, they don't need the law, on especially -- on the forbidden sectors, movies, forbidden days, et cetera, et cetera.

And on the last question, we don't believe that there is at all the savings that you talking about. Our understanding of the TV, this message remains especially in Europe with the difference in languages, [capturing], et cetera, a very big importance as long as linear television exists, that you're going to have very much peculiar interest to do programming, which cannot necessarily be ritualized and shared.

For example, the Rugby Cup, we may buy the Rugby Cup in France. Or France and England may buy it. There's not 1 point of interest in Germany. Nobody is going to watch this. Same in Belgium, same in Holland. So the news is exactly the same story. So I don't think -- where did you get the fact that suddenly the EPS will be rising by 10% or 15%, we don't see that.

So the question is more, as we said, picking the right alliance for the future, which will give us the possibility of leveraging the unique position of TF1. And once again I will remind you that when you look at Europe, they're not starting all on the same starting point and starting line. We believe as TF1 we are in the country, which has a lot of leverage, and we are because of our ratings, our unique position, and a position, which enables us to make strong alliances with international partners where some maybe weaker players are not in that position.

So I will argue that you should also take that in your analysis. And that -- the same solution is not necessarily the best one for everybody.

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Operator [23]

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We have Conor O'Shea from Kepler Cheuvreux.

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

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Just a couple of outstanding questions. first question, maybe Philippe, you mentioned the third quarter last year, advertising, I think, was up all of 7%. Could you just remind us in general terms whether September 2018 was -- showed strong growth or most of that growth was generated by the final stages of the World Cup in July?

Second question, if you could just have an idea of the M&A impact from the Reel One acquisition on the Studios business in the second half of the year or a full year number for 2020.

And last question. Just on the addressable advertising inventory, I think, you said in the slide, 35% of MYTF1 inventory was addressable. I think this morning, ITV was saying 75% on their hub was addressable, but they had -- only now transitioning from, sort of, a manual model to an automated model.

Can you just confirm that your model is automated or where you are in the automation process, to what degree is that inventory programmatic? And viable in real-time linked to the agency trading desks?

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [25]

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Well, yes. On your first question, the third quarter last year was significantly impacted by the Football World Cup. And again just because of the nature of the quarter, where we have significant price impacts coming from this event. And on drive with a very small amount in terms of advertising revenues in July and August. So don't expect 7% trend this year, as I alluded to. And again that is really -- that was well impacted. September was fairly okay last year. No significant growth but fairly stable as compared to the previous year.

Your second question was on the M&A impact of Reel One. I would say that it will be rather limited because we don't expect Reel One to have a very limited or no impact. We don't have yet the closing dates. But very limited or no impact on Q3. And hopefully, if we have the clearance of the authority before October then we'll have a global impact in Q4. But again, we are talking about on a quarterly basis EUR 2 million in terms of top line.

Now your third question on the -- in terms of how we use data and we forget on MYTF1 of course, we use data as -- which are coming from global on MYTF1 site. It is progressing on a regular basis. In terms of the way we use it, we have information on the age and the gender and the information on TV viewers. We can cross those data as -- with other data as we collect by different ways.

A good part of the value is coming from the login from TV viewers, and we do think that we have potential additional value with cross-categorization with data, and especially limited for the moment with data coming from Unify, which we should in the next few months, get more value and optimize the selling of those data.

I remind you that in terms of value we have the value, which is around 3x what we got on TV on the nonlinear, and with data it's probably 4x. So of course, the more we sell digital, including data value, the more value we capture from the market.

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

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And that's for advertising spot?

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [27]

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Yes, that's advertising spot. Yes.

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Conor O'Shea, Kepler Cheuvreux, Research Division - Head of Media Sector [28]

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And sorry, just one follow-up question on the addressable advertising. If the new audiovisual law removes the advertising ban on national TV channels doing addressable advertising, do you think at that stage you will have to partner with a external technology partner in order to fully seize the opportunity? Or as ITV is doing with [mobi]? Or with what you've got internally at Unify and the deals that you have with the telco operators maybe to share data, that, that will be sufficient or will you have to really go in a different direction?

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [29]

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I think it's too early to say at this stage. We're doing already a lot of work on our data, as Philippe mentioned on the logged in data. Then working results like the others, like relevanC from Casino Group, which is all of the shoppers.

It's already giving us the possibility of seeing how we can incorporate data from the outside into our own data and providing it to advertisers. Once we can get into addressable TV, it will be even more fine tune. And I think we should give ourselves some time to see how we structure that.

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Operator [30]

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We have a following question from (inaudible)

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Unidentified Analyst, [31]

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I have 2 questions, actually 2 follow up. One on SALTO and the other one on production.

Regarding SALTO and the antitrust competitive analysis that is being done by the competition authority in France. It seems from the press that you're -- you have been -- you might have to take on some strong remedies in order for the deal to go through. And actually, my question is, can you be a little bit more specific on what type of reference market the competitive authority is using in its analysis?

Is it taking the free-to-air TV market? Or is it including in its analysis the whole TV market, including Pay TV and the new competitors such as Mexican SVOD players? That's my first question.

My second question is on the production. Production is a very important pillar of your strategy. However, in the past few quarters, this line has been rather disappointing, sometimes for comparable basis reasons and also for -- on the cinema side.

Can you please guide us on where your objective in terms of normative, organic growth of the TV production activities should be? And are you seeing any specific traction there, and in particular, for the new players that are to come on the SVOD market in the coming months?

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [32]

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So on the SALTO relevant market. Yes, the authority ultimately is still looking with both entities, the market structuring. By that I mean that they're looking still at the linear television as 1 market. And then, SVOD as a different market. So there is no capability at this stage because this is the way it's -- it has been in the past. To really look at the total what from now on we call the attention market, capturing what is the total attention captured by the combination of watching linear television and then nonlinear SVOD programs, which is the reality for most of people living in Europe and especially living in France those days.

So for the sake of moving faster ahead, we have to go with this approach for the time being, and I think, should SALTO be allowed, I think we will address that in the future. And of course, the authority will certainly mandate and look at the -- what are the relevant markets but at a later stage.

But for the time being, we are -- they're definitely looking at it with 2 markets very differently. On the production side.

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [33]

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On the production side, just would like to say that the production is delivering in line with our expectation. It's probably not so clear or I don't know what is your reference. But I would say that if you -- of course you'd look at Studio & Entertainment. And of course there is a part of this activity in this business, which is a bit different. We include music, we used to include as well, teleshopping. So -- but the Production segment, as such, I mean, Newen is delivering in line.

And yes, it makes sense to them to -- and there is no reason for them not to work again with another clients with platform. They already have done it, as you know, with Amazon and Netflix. And they will do it with others probably in the future. So including maybe a new development with the 2 platform, they've already worked with. And as an example they're working very successfully in Denmark subsidiary with Netflix with great success recently. One of the best successes of Netflix up to now from what has been produced.

So we are in line with the expectation. Though there should be some growth, organic growth coming from those new clients, as it has been already the case in the past.

And it's a cycle in this business. You need to have 1.5, 2 years of development in order to launch a new series or program. But it's progressing and apart from that, they're working a lot on best practice sharing between the different components now of Newen, including Tuvalu, including De Mensen and together with Reel One in order to create more synergies. And in this case to optimize their resources because they are all working a bit differently but if you put together all their best practice we can expect to have a better optimization and productivity on this segment. But again, the segment is delivering in line with the market and in line with the expectation as the Production sector is concerned. And we admit that on the Studio side, yes, there is a problem, I may say, or an issue with digital, but we're dealing with it. But it's a market, which is going down. At the same time, yes, it's true to say that we've not been very successful on this part of the cinema business recently. You know that cinema you can't be successful every time, and we have to admit that during the last year, 1.5 years, while we've not been very successful on this part of the cinema business, it has been very successful in the choice, which has been made by the Broadcasting team in terms of choice for rights on TF1 with big film and big success. On what we've invested in the Studio business on its own, we've not been very successful but that's always the case. You can't have a full picture in 12 or 18 months. So that's what I have to say on Production side.

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [34]

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The whole idea is to -- that we will be streamlining this business, focusing on the development of Newen in a diversified production house with different genres, as I mentioned, fiction, talkshow, documentaries, TV movies now with Reel One and animation with Blue Spirit.

And then as Philippe just mentioned the focus on the production for -- thanks to our obligation in France, due to our obligations in France for our own channels. And then some distribution add up, which we can combine between TF1 and Newen.

So this is where we see ourselves going. And of course, VOD and everything else it's not necessarily out of our future.

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Operator [35]

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We have 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 [36]

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Just to sort of maybe elaborate on from the last question on the Studios & Entertainment side. I mean, one of the things, one of the frustrations has been a lack of disclosure in that segment, particularly given, obviously, the sale of the Home Shopping channel, which has obviously, had an impact through this year. I mean -- and in addition to that, you talked about Newen Studios growing along with expectations. Is there any way you can provide a little bit more disclosure in terms of the magnitude of the revenues out of the individual -- of revenue items in the Studios -- take one studio in terms of film production and the entertainment and the Home Shopping side so we can get a feeling for the moving parts within that, and the underlying growth rates?

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [37]

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Well, just to clarify, the figure for teleshopping activity on a full year basis is around EUR 60 million top line. So you have EUR 15 million per quarter and that has explained the drop in the top line of this specific segment. In addition to that, you have a slight drop in the Studio business due to the video mainly, which is going down. We actually were a few million down, but that's explain also the drop. Now on the contrary, in terms, again, of top line, to clarify this question on Studio & Entertainment on which there is no reason to be disappointed at all because we're progressing. The question is a basis of confirmation, again, on the first half year for the Production segment, on which, of course -- but that's cyclical. They are -- they will give more as we can see in the KPI on the balance sheet side in order to secure what will be done on the second half of the year and that cyclicity and seasonality of the business, but nothing different from the good trend they had in the past. We are restructuring the whole Studios & Entertainment segment as you know,. We are developing the more profitable business, like music, and we are deinvesting in less profitable, like teleshopping, which should deliver on a full year basis from now. Of course, the first half is not very clear to understand, but with the figures I gave you, you should take into account those magnitudes.

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Richard Eary, UBS Investment Bank, Research Division - Executive Director and Head of European Media Team [38]

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So just sort of a clarity question as a follow-up. So if we just look at the Studios business with inside that subsegment. I'm just looking at Newen specifically. I think historically you've talked about organic growth rates of Sector 10. I mean are we on line to basically deliver decent growth out of Newen this year? And if so, sort of, by what magnitude? Obviously, there's some timing negotiations concerning certain delivery.

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [39]

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Yes, we have given, I think, figures of 5% on a yearly basis for Production and additional growth will come from [ex-sale] growth.

We confirm on a global trend, the 5% organic growth for Newen, which is in our target for this year. It doesn't mean that it is 5% per quarter, it's not 5% because of the nature of the business. But yes, we can confirm that it could be around 5%.

We said that 5% in this business and due to the nature of the market, but mainly French, and the position in the market, is a good performance. And that on the short term, meaning couple of years, the growth -- significant growth will come from external acquisition. And that is the case with Reel One, and they will improve, of course, the trend, accelerate the development of Newen, which is in the path.

So yes, we confirm the growth rates for Newen on a yearly basis.

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Operator [40]

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We have no other questions for the moment. (Operator Instructions) We have no other questions. Have a good one.

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [41]

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Well, just to conclude this call, I just would like to insist on the trend in terms of profitability of the business, and especially, on the Broadcasting segment. You have raised different questions, including questions on the consolidation on the European level. I just would like to mention that our trend in terms of profitability is progressing. That doesn't -- I'm not saying that we will keep this 14% or 16% on the Broadcasting side for the full year. But the trend is very positive, it's different from other TV in Europe. And I think that what has been put in place here now in terms of financial delivery for the last 2 or 3 years is delivering now in terms of financials with a strong balance sheet with a capacity to use our resources in order to develop the business with new acquisition, and in the same time, to keep the level of pay back to our shareholders, which is even higher than previously in terms of payback.

Second point is to say that in terms of the nature of the Broadcasting, I remind you that when you get 16% profitability on the Broadcasting segment, if you take 4, 5 proved points of profitability due to the regulation, then you reach a level of profitability, which is very comparable to other TV in Europe, which has always been the challenge of TF1.

You -- we are right on track on this. And I remind you that if you look at our P&L, on the P&L, you will find around EUR 66 million as tax, which on our EBIT, before EBIT, which are basically CNC and all the -- and probably 2/3 of it are directly linked with the regulation.

So may have a capitalization, and we are very close to -- there probably are other broadcaster -- and I'm talking about the broadcasting activity. Difficult to compare the other activities, which are different depending on the different media group. But we're in line with what we want to deliver.

So I just want to insist on this because I think that we have to be clear on the figures.

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Philippe Denery, Télévision Française 1 SA - Executive VP of Finance & Procurement [42]

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Thank you, Gilles. Complementary, well just to say, think of us as with Newen and Unify as a more balanced model, business model as a group, than we were 2 years ago, 3 years ago.

On the Broadcasting side, should the regulation move to the level of European countries -- other European countries, we see some really interesting upside in our maneuverability.

Think also the fact that by 2020, in the French market you will have with Médiamétrie a new way of measuring on the move ratings from mobile and tablet. Meaning of that, that we can get an additional 10 to 15 minutes at least additional ratings and audiences. Meaning by that, that the current thermometer is not necessarily the right tool anymore compared to the usage, which our federal citizens are doing. So I'm looking forward to seeing this as putting back television as -- in a more significant manner and matter in the advertising market.

And finally, when you think of us as looking to alliances. Once again, we are very actively looking at all type of alliances whether it is on the technology side, whether it is on partnering with American platforms, which we believe are great opportunities for us, whether it's on TF1, whether it's on Newen.

And so there could be some consolidation in Europe, but we don't see that currently as the most significant one because whatever synergy is maybe generated, we don't see them as, as significant as the fact that in Europe basically the way to compete is on the fairly local level where we think we are in a unique position, and therefore, capable of attracting all kinds of alliances but not necessarily from European partners. Can be, but also there are some others. Thank you very much for your attention and have a great summer.

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Gilles Christian Gérard Pélisson, Télévision Française 1 SA - Chairman & CEO [43]

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Thank you very much.

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Operator [44]

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Ladies and gentlemen, this concludes today's teleconference. Thank you all for your participation. You may now disconnect.