ANNUAL REPORT 2019 ENTERTAIN. INFORM. ENGAGE. KEY FIGURES SHARE PERFORMANCE 1 January 2019 to 31 December 2019 +31.15 % MDAX +16.41 % SXMP –5.82 % RTL GROUP INDEX = 100 –10.55 % PROSIEBENSAT1 RTL Group share price development for January to December 2019 based on the Frankfurt Stock Exchange (Xetra) against MDAX, Euro Stoxx 600 Media (SXMP) and ProSiebenSat1 Fremantle’s America’s Got Talent: The Champions is a prime-time hit on NBC. 2 RTL Group Annual Report 2019 Key figures REVENUE 2015 – 2019 (€ million) EBITA 2015 – 2019 (€ million) 19 6,651 19 1,139 18 6,505 18 1,171 17 6,373 17 1,248 16 6,237 16 1,205 15 6,029 15 1,167 PROFIT FOR THE YEAR 2015 – 2019 (€ million) EQUITY 2015 – 2019 (€ million) 19 864 19 3,825 18 785 18 3,553 17 837 17 3,432 16 816 16 3,552 15 863 15 3,409 MARKET CAPITALISATION* 2015 – 2019 (€ billion) TOTAL DIVIDEND / DIVIDEND YIELD PER SHARE 2015 – 2019 (€) (%) 19 6.8 19 NIL* – 18 7.2 18 4.00** 6.3 17 10.4 17 4.00*** 5.9 16 10.7 16 4.00**** 5.4 15 11.9 15 4.00*****4.9 *As of 31 December * On 2 April 2020, RTL Group’s Board of Directors decided to withdraw its earlier proposal of a € 4.00 per share dividend in respect of the fiscal year 2019, due to the coronavirus outbreak. No dividend will now be proposed to the Annual Meeting of Shareholders on 30 June 2020. ** Including an interim dividend of € 1.00 per share, paid in September 2018 *** Including an interim dividend of € 1.00 per share, paid in September 2017 **** Including an interim dividend of € 1.00 per share, paid in September 2016 ***** Including an extraordinary interim dividend of € 1.00 per share, paid in September 2015 CASH CONVERSION RATE* 2015 – 2019 (%) PLATFORM REVENUE* 2015 – 2019 (€ million) 19 105 19 368 18 90 18 343 17 104 17 319 16 97 16 281 15 87 15 248 *Calculated as operating pre-tax free cash flow as a percentage of EBITA * Revenue generated across all distribution platforms (cable, satellite, IPTV) including subscription and re-transmission fees RTL Group Annual Report 2019 3 ABOUT RTL GROUP RTL Group is a leader across broadcast, content and digital, with interests in 68 television channels, eight streaming platforms and 30 radio stations. RTL Group also produces content throughout the world and owns several rapidly growing digital video businesses. Find the detailed corporate profile of RTL Group on page 40. OUR MISSION We are innovators who shape the media world across broadcast, content and digital. We build inspiring environments where creative and pioneering spirits can thrive. We create and share stories that entertain, inform, and engage audiences around the world. We embrace independence and diversity in our people, our content and our businesses. We have a proud past, a vibrant present and an exciting future. RTL GROUP – ENTERTAIN. INFORM. ENGAGE. CONTENTS CORPORATE INFORMATION 6 Chief Executive’s report 12 Our role in society 18 Chairman’s statement 22 The Board 27 Executive Committee 28 Remuneration report FINANCIAL INFORMATION 36 Directors’ report 90 Management responsibility statement 91 Consolidated financial statements 96 Notes to the consolidated financial statements 182 Audit report 188 Glossary 194 Credits 195 Five-year summary Explore the Total Video Powerhouse. Chief Executive’s report Thomas RABE CHIEF EXECUTIVE OFFICER RTL GROUP 6 RTL Group Annual Report 2019 CHIEFCHIEF EXECUTIVE’SEXECUTIVE‘S REPORTREPORT Driven by the strong performances of our three largest business units, RTL Group achieved all financial goals in 2019: revenue grew organically by 3.2 per cent, adjusted EBITA remained broadly stable despite higher investments, and Group profit increased by 10 per cent. In this report, I will highlight RTL Group’s performance in 2019 and explain how we will boost the digital transformation of our Group across our three strategic priorities: core, growth, and alliances & partnerships. RTL Group Annual Report 2019 7 Chief Executive’s report RECORD REVENUE In 2019, RTL Group generated record revenue for the fifth consecutive year, reaching €6.7 billion. Our organic revenue growth rate rose to 3.2 per cent, driven by Fremantle and our digital businesses. Fremantle’s revenue was up 12.6 per cent, while streaming revenue grew by 46.7 per cent. Mediengruppe RTL Deutschland, our largest business unit, outperformed the German net TV advertising market, thanks to the power of the German Ad Alliance. In France, Groupe M6 completed the acquisition of the country’s leading free-to-air channel for children, Gulli, and five pay-TV channels from Lagardère. As a result, Groupe M6 gained both audience and TV advertising market share in 2019. HIGH PROFITABILITY To achieve these goals, our strategy builds upon three priorities. Firstly, strengthening our core businesses. Based on this strong operating performance, adjusted Secondly, boosting our streaming services, global content EBITA was broadly stable, at €1,156 million, despite higher business and capabilities in technology and data. And investments. The adjusted EBITA margin was 17.4 per cent. thirdly, fostering alliances and partnerships in the European Reported EBITA was €1,139 million, compared to €1,171 million media industry. in 2018. CORE RTL Group’s profit for the year increased by 10.1 per cent to INVESTING IN CONTENT €864 million, mainly due to the capital gain from the disposal of Universum Film, and lower impairments. Every year, RTL Group invests €3.5 billion in content, combining the programming spend of its broadcasters and HIGHER REACH, the productions of its global content business, Fremantle. BETTER MONETISATION At RTL Group level, we launched our Format Creation Our industry is going through a massive transformation. Group (FC Group) to meet the global demand for exclusive Traditional media companies, particularly in the United content by developing both new format ideas and IP, fully States, are spending billions of dollars in the battle owned and controlled by RTL Group. FC Group focuses on with global platforms such as Netflix and Amazon. As developing factual entertainment formats and reality shows, part of these so-called ‘streaming wars’, Disney, Apple, and works closely with RTL broadcasters to reflect their AT&T/WarnerMedia and Comcast/NBC Universal have all needs in their local markets. The most important element is launched – or plan to launch – new streaming services. to be in control of the format rights. To successfully transform RTL Group’s business, two CORE factors are particularly important. One is higher reach, in CONSOLIDATION AND COST REDUCTION both linear and non-linear, which requires significant investments in content, marketing and a state-of-the-art Our primary focus is on organic growth at RTL. However, tech platform for our streaming services. The second is wherever interesting opportunities arise, we will continue to better monetisation of our reach, through targeting and consolidate across our existing broadcasting footprint. A personalisation, which requires investments in advertising recent example was our acquisition of the French children’s technology and data. channel Gulli and five pay-TV channels by Groupe M6. 8 RTL Group Annual Report 2019 Chief Executive’s report To drive the strategic agenda of RTL Group and to foster cooperation, a Group Management Committee (GMC) has been established. The GMC will shape the future of the company, bringing together massive experience and different perspectives. From left to right: Björn Bauer, CFO of RTL Group, Bernd Reichart, CEO of Mediengruppe RTL Deutschland, Elmar Heggen, Chief Operating Officer and Deputy CEO of RTL Group, Thomas Rabe, CEO of RTL Group, Jennifer Mullin, CEO of Fremantle, and Nicolas de Tavernost, Chairman of the Executive Board at Groupe M6 Given the changes in the international TV industry, we have We roll out the strategy either through stand-alone also started a wide-ranging review to reduce costs and services such as TV Now and Videoland, or through national review our portfolio. RTL Group has sold several non-core partnerships such as Salto in France. assets over the past two years – including the football club Girondins de Bordeaux, the website MonAlbumPhoto and At the end of 2019, RTL Group registered 1.44 million the home entertainment and theatrical distribution company paying subscribers for its streaming services TV Now and Universum Film. Videoland – 37 per cent more than last year. The viewing times of TV Now and Videoland also increased over GROWTH the year, by 31 per cent and 45 per cent respectively. BUILDING NATIONAL STREAMING CHAMPIONS To further boost the expansion of RTL Group’s streaming Within our three-priority strategy, we put a strong focus on services over the next five years, we plan to grow the building national streaming champions in the European number of paying subscribers for our streaming services countries where we have leading families of TV channels. TV Now and Videoland to between 5 and 7 million, to grow Making the most of our competitive advantage in local our streaming revenue to more than €500 million, and to programming, our streaming services will complement break even by 2025. global services such as Netflix, Amazon Prime and Disney+. To reach these goals, our annual content spend in TV Now and Videoland will grow from €85 million in 2019 to around €350 million in 2025. “Within our GROWTH EXPANDING OUR GLOBAL CONTENT BUSINESS three-priority strategy, we put a strong focus In 2019, Fremantle was very successful across all genres and its global footprint – in drama with the second seasons on building of American Gods and Charité, and in entertainment national streaming with American Idol on ABC and America’s Got Talent: champions.” The Champions on NBC.