ANNUAL REPORT 2016 THE POWER OF TOTAL VIDEO RTL Group Corporate Communications CORPORATE RESPONSIBILITY REPORT 2016 43, boulevard Pierre Frieden L-1543 Luxembourg T: +352 2486 5201 [email protected] For more information, visit RTLGroup.com and follow us on Twitter, Facebook, Instagram and LinkedIn 2016 Report Annual Group RTL ENTERTAIN. INFORM. ENGAGE. WorldReginfo - 42920f52-04d3-4c76-9793-92a33213265a ANNUAL REPORT 2016 “EXCLUSIVE CONTENT IS THE POWER ENGINE FOR EVERYTHING WE DO IN THE TOTAL VIDEO UNIVERSE” ANKE SCHÄFERKORDT & GUILLAUME DE POSCH Co-CEOs of RTL Group ENTERTAIN. INFORM. ENGAGE. WorldReginfo - 42920f52-04d3-4c76-9793-92a33213265a KEY FIGURES FIVE-YEAR SUMMARY Year to Year to Year to Year to Year to December December December December December SHARE PRICE PERFORMANCE 01/01/2016 – 31/12/2016 2016 2015 2014 1 2013 2 2012 € m € m € m € m € m + 6.8 % MDAX Revenue 6,237 6,029 5,808 5,824 5,998 INDEX = 100 – of which net advertising sales 3,772 3,602 3,432 3,362 3,397 – 7.6 % Other operating income 111 55 83 51 45 EURO STOXX Consumption of current programme rights (2,070) (2,015)(1,903)(1,924)(2,015) 600 MEDIA Depreciation, amortisation, impairment and valuation allowance (215) (199)(203)(198)(187) – 9.5 % Other operating expenses (2,924) (2,750)(2,682)(2,663)(2,790) RTL GROUP Impairment of goodwill and amortisation and impairment of fair value adjustments on acquisitions of subsidiaries (15) (6)(104)(10)(10) Gain / (loss) from sale of subsidiaries, other investments – 21.7 % and re-measurement to fair value of pre-existing interest in acquiree 6 4 1 5 (9) PROSIEBENSAT1 Profit from operating activities 1,130 1,118 1,000 1,085 1,032 RTL Group share price development for January to December 2016 Share of results of investments accounted for using the equity method 67 57 47 117 (53) based on the Frankfurt Stock Exchange (Xetra) against MDAX, Earnings before interest and taxes (“EBIT”) 1,197 1,175 1,047 1,202 979 Euro Stoxx 600 Media and ProSiebenSat1 Net interest expense (21) (25)(23)(22)(10) Financial results other than interest 3 13 (4) 70 (1) Profit before taxes 1,179 1,163 1,020 1,250 968 Income tax expense (363) (300)(287)(302)(277) Profit for the year 816 863 733 948 691 Loss from discontinued operations – ––– (1) Profit for the year 816 863 733 948 690 11.5 % Attributable to: OTHER RTL Group shareholders 720 789 652 870 597 Non-controlling interests 96 74 81 78 93 10.7 % DIGITAL EBITA 1,205 1,167 1,144 1,148 1,078 48.0 % Impairment of goodwill of subsidiaries – – (88) –– TV ADVERTISING Amortisation and impairment of fair value adjustments 21.2 % on acquisitions of subsidiaries (15) (6)(16)(10)(10) CONTENT Impairment of disposal group – –– (10) – Impairment of investments accounted for using the equity method – – 4 68 (82) Re-measurement of earn-out arrangements 1 10 2 1 2 Gain / (loss) from sale of subsidiaries, other investments and re-measurement to fair value of pre-existing interest in acquiree 6 4 1 5 (9) 4.5 % Earnings before interest and taxes (“EBIT”) 1,197 1,175 1,047 1,202 979 PLATFORM REVENUE 4.1 % RADIO ADVERTISING EBITDA 1,411 1,360 1,347 1,328 1,257 Basic earnings per share (in €) 4.69 5.14 4.25 5.67 3.88 Ordinary dividend per share (in €) 3.00 3.00 2.50 2.50 5.10 Extraordinary dividend per share (in €) 1.003 1.004 3.005 4.506 5.40 Dividends paid (€ million) 614 691 999 1,998 783 RTL Group Revenue Split Average number of full-time equivalent employees 10,699 10,325 9,804 9,807 9,590 In 2016, TV advertising accounted for 48.0 per cent of RTL Group’s total Net assets (€ million) 3,552 3,409 3,275 3,593 4,858 revenue, making the Group one of the most diversified groups when it comes to revenue. Content represented 21.2 per cent of the total, while Net (debt) / cash (€ million) (576) (671) (599) 6 1,051 1 Re-presented for changes in purchase price allocation greater exposure to fast-growing digital revenue streams and higher 2 Re-presented following the application of IFRS 5 to Alpha Media Group (discontinued operations) margin platform revenue will further improve the mix. 3 Including an interim dividend, paid in September 2016 4 Including an extraordinary interim dividend, paid in September 2015 5 Including an extraordinary interim dividend, paid in September 2014 6 2013 Including an extraordinary interim dividend, paid in September WorldReginfo - 42920f52-04d3-4c76-9793-92a33213265a Key figures REVENUE 2012 – 2016 (€ million) EBITA 2012 – 2016 (€ million) 16 6,237 16 1,205 15 6,029 15 1,167 14 5,808 14 1,144* 13 5,824* 13 1,148** 12 5,998 12 1,078 * Restated for IFRS 11 * Restated for changes in purchase price allocation ** Restated for IFRS 11 NET PROFIT ATTRIBUTABLE TO RTL GROUP SHAREHOLDERS 2012 – 2016 (€ million) EQUITY 2012 – 2016 (€ million) 16 720 16 3,552 15 789 15 3,409 14 652* 14 3,275* 13 870 13 3,593 12 597 12 4,858 * Restated for changes in purchase price allocation * Restated for changes in purchase price allocation TOTAL DIVIDEND/ MARKET CAPITALISATION* 2012 – 2016 (€ billion) DIVIDEND YIELD PER SHARE 2012 – 2016 (€ )(%) 16 10.7 16 4.00* 5.4 15 11.9 15 4.00** 4.9 14 12.2 14 5.50*** 6.8 13 14.4 13 7.00**** 10.0 12 11.7 12 10.50 13.9 * As of 31 December * 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 *** Including an extraordinary interim dividend of € 2.00 per share, paid in September 2014 **** Including an extraordinary interim dividend of € 2.50 per share, paid in September 2013 CASH CONVERSION RATE* 2012 – 2016 (%) PLATFORM REVENUE* 2012 – 2016 (€ million) 16 97 16 281 15 87 15 248 14 95 14 225** 13 106 13 185 12 101 12 175 * 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 ** Restated DIGITAL REVENUE* 2012 – 2016 (€ million) ONLINE VIDEO VIEWS 2012 – 2016 (billion) 16 670 16 274.0 15 508 15 105.0 14 295 14 36.4 13 233 13 16.8 12 188 12 6.9 * Excluding e-commerce, home shopping and platform revenue for digital TV 273 MILLION VIEWERS WATCH TV 3h55 3 out of 4 AVERAGE VIEWING TIME DURING PRIME TIME EUROPEAN IN EUROPE (2015) IN EUROPE TV HOUSEHOLDS OWN A HDTV RTL Group Annual Report 2016 3 WorldReginfo - 42920f52-04d3-4c76-9793-92a33213265a ABOUT RTL GROUP RTL Group is a leader across broadcast, content and digital, with interests in 60 television channels and 31 radio stations, content production throughout the world, and rapidly growing digital video businesses. The television portfolio of Europe’s largest broadcaster includes RTL Television in Germany, M6 in France, the RTL channels in RTL Group’s content production arm, the Netherlands, Belgium, Luxembourg, FremantleMedia, is one of the largest Croatia and Hungary, and Antena 3 in Spain. international creators, producers and distributors of multi-genre content outside The Group also operates the channels the US. With operations in 31 countries, RTL CBS Entertainment and RTL CBS Extreme FremantleMedia’s comprehensive in Southeast Asia. RTL Group’s families global network is responsible for around of TV channels are either the number one or 12,000 hours of programming broadcast number two in eight European countries. a year and distributes over 20,000 hours of content worldwide. The Group’s flagship radio station is RTL in France, and it also owns or has Combining the catch-up TV services of interests in other stations in France, its broadcasters, the multi-channel networks Germany, Belgium, the Netherlands, Spain BroadbandTV, StyleHaul and Divimove as and Luxembourg. well as FremantleMedia’s 260 YouTube channels, RTL Group has become the leading European media company in online video. RTL Group also owns majority stakes in the programmatic video advertising platforms, SpotX and Smartclip. 4 RTL Group – Entertain. Inform. Engage. WorldReginfo - 42920f52-04d3-4c76-9793-92a33213265a Scan and watch the ‘power of total video’ trailer with highlights across broadcast, CONTENTS content, digital CORPORATE INFORMATION 6 Chief Executives’ report 12 Our mission statement 14 Our business model 18 Our strategy 22 The ad tech business 24 Our role in society 28 Chairman’s statement 30 The Board / Executive Committee FINANCIAL INFORMATION 38 Directors’ report 106 Management responsibility statement 107 Consolidated financial statements 112 Notes 204 Auditors’ report 206 Glossary 210 Credits 211 Five-year summary RTL Group Annual Report 2016 5 WorldReginfo - 42920f52-04d3-4c76-9793-92a33213265a Chief Executives’ report EXCLUSIVE CONTENT – THE POWER ENGINE IN THE TOTAL VIDEO UNIVERSE GUILLAUME DE POSCH “WE’RE TRANSFORMING RTL GROUP INTO A GLOBAL LEADER IN VIDEO PRODUCTION, AGGREGATION AND MONETISATION” 6 RTL Group Annual Report 2016 WorldReginfo - 42920f52-04d3-4c76-9793-92a33213265a Chief Executives’ report Following a series of investments into online video and digital advertising, digital has become a rapidly growing third pillar of RTL Group’s business. We talked to Anke Schäferkordt and Guillaume de Posch about RTL Group’s financial performance in 2016, its growth strategy, the importance of editorial independence, and how RTL Group is shaping the ‘total video’ environment globally. ANKE SCHÄFERKORDT “WE HAVE THE FINANCIAL MEANS FOR FURTHER INVESTMENTS, FUELLING OUR GROWTH STRATEGY” RTL Group Annual Report 2016 7 WorldReginfo - 42920f52-04d3-4c76-9793-92a33213265a Chief Executives’ report How did RTL Group perform in 2016? GUILLAUME DE POSCH: 2016 was another record year for RTL Group.