Company Outlook

Our Planning Principles

Planning assumptions. The investment volume for advertising and the development of audience shares in the core market of Germany are key planning assumptions. Economic data show a solid picture overall, which is why prospects for the German advertising market are also optimistic. At the same time, TV is benefiting from structural changes in the media landscape. Due to increasing fragmentation, television is becoming even more valuable as wide-range medium. We therefore expect to strengthen our leading market position among viewers at a high level. We anticipate a stable growth rate averaging 2 % to 3 % for the net TV advertising market and expect to increase our TV advertising revenues around this level. In this context, we take economic considerations into account for moderate price increases in TV advertising. Our comparatively new stations are capitalizing their reach in an increasingly suitable way. At the same time, we are successively expanding our reach by connecting platforms and creating attractive marketing environments.

Explanatory notes on the forecast. There are framework agreements in place with a large number of our advertising customers in the Broadcasting German-speaking segment, which stipulate certain order volumes and their underlying conditions. Thus, the programming outlook is an important basis for making decisions on the investments of advertising customers in the months to come. In program screenings, ProSiebenSat.1 Group informs its customers about the direction of stations and planned formats twice a year. As it is customary in this business, the final budget volume is confirmed on a month-by-month basis — sometimes, at very short notice. Only then the total volume is transparent. Furthermore, additional advertising budgets are contracted at short notice towards the end of the year. Due to limited visibility, which is typical in the TV business, in the section below we have not used quantitative forecasts in some cases for the planning year of 2017. Instead, we have provided qualitative comparative information: the indicators “stable,” “slight increase,” “mid single-digit increase,” “mid to high single-digit increase,” “high single-digit increase,” and “significant increase” are based on expected percentage deviations from the previous year.

The information provided in this chapter refers to plans adopted by the Executive Board and Supervisory Board in December 2016. Our statements are also based on economic data at the time this report was prepared.

Expected Group and Segment Revenue and Earnings Performance

Revenues and earnings expected in 2017. ProSiebenSat.1 Group saw a positive start to the first quarter of 2017, which was driven by the ongoing positive economic situation in Germany. The Group is confident that it will also continue to see significant growth in 2017. Acquisitions accelerated revenue momentum in the past year and will further strengthen growth.

Against this backdrop, ProSiebenSat.1 will seek to increase consolidated revenues at least in the high single-digit percentage range over the year as a whole and expects new records for its earnings figures. Due to the adjustment of non-IFRS figures, recurring EBITDA will be renamed as adjusted EBITDA from financial year 2017; this will have no effects in terms of value. At Group level, we expect EBITDA and adjusted EBITDA to increase by a mid single-digit percentage in 2017. The consistent adjustment of special factors in the non-IFRS figures will lead to a change in the value of adjusted net income, but we do not expect this to affect year-on-year development. We expect adjusted net income to rise by a mid to high single-digit percentage in the projection period (Fig. 102). In addition to ongoing economic stimuli, our expectations are based on the success of our strategy in the TV and digital business.

We want to maintain our solid and highly profitable growth in the TV segment. ProSiebenSat.1 Group is benefiting from the successive expansion of its complementary station family in recent years and has established a second business model with distribution. In the Digital Entertainment and Digital Ventures & Commerce segments, we anticipate a significant rise in revenues in 2017. Revenue growth will also lead to a significant rise in adjusted EBITDA and EBITDA. In the Content Production & Global Sales segment, we focused on the most significant TV market in the world, the US, with acquisitions in 2016. We anticipate a profitable rise in revenues in the mid single-digit range in 2017 (Fig. 103). In order to make even better use of potential synergies within the Group, the share of in-house TV productions for ProSiebenSat.1 stations to come from Red Arrow production companies will further increase; in 2016, the share was 12 % (previous year: 9 %).

Growth targets until 2018. Acquisitions in the past financial year have accelerated the Group’s revenue growth. Hence, ProSiebenSat.1 increased the medium-term growth targets for revenues and recurring EBITDA at the Capital Markets Day in October 2016. At the end of 2018, consolidated revenues are expected to amount to EUR 4.5 billion; before we expected EUR 4.2 billion (Fig. 104). ProSiebenSat.1 Group has raised the recurring EBITDA growth target compared to 2012 by EUR 50 million to EUR 400 million; the Company is thus aiming for adjusted EBITDA of EUR 1.15 billion by 2018. This estimate is independent of the adjustment of non-IFRS figures made in 2017 and so applies equally and unchanged to the newly reported adjusted EBITDA in 2018. The Broadcasting German-speaking TV segment continues to grow solidly. The new business areas are developing dynamically at the same time, so the digital business as a whole is expected to contribute revenues of over EUR 1.735 billion by 2018. Both digital segments will see profitable growth: We expect the Digital Entertainment segment to achieve an adjusted EBITDA margin between 10 % and 15 % by 2018, while the target range for the Digital Ventures & Commerce segment is between 20 % and 25 %.

Revenue growth targets 2018 (Fig. 104)

Future Financial Position and Performance

At the end of 2016, net financial debt amounted to EUR 1,913 million (December 31, 2015: EUR 1,940 million), resulting in a leverage ratio of 1.9, within the target range. With an equity ratio of 22 %, ProSiebenSat.1 has an efficient balance sheet and capital structure. In November 2016, the Group increased its equity by a capital increase of EUR 515 million (gross) and increased its financial headroom for strategic acquisitions, particularly in the digital business. The Group is focusing on companies that synergistically complement the portfolio and benefit significantly from TV advertising. ProSiebenSat.1 also practices active portfolio management and regularly examines various strategic options for its investments.

ProSiebenSat.1 Group will further pursue its multi-station strategy in the TV segment and invests around EUR 1 billion every year in programming assets and the expansion of stations. We will also continue to pursue our M&A strategy. Due to free advertising time worth more than EUR 1.5 billion (gross), ProSiebenSat.1 has a second investment currency that allows us to develop new brands and expand our portfolio by using capital efficiently without high cash investments. ProSiebenSat.1 initially acquires a minority stake in many acquisitions in order to limit financial risks and gain experience on the amount of value an investment adds while complementing the existing portfolio. At the same time, the Group has also recently made larger acquisitions.

ProSiebenSat.1 is pursuing a long-term financing policy for its M&A activities with a target range for the leverage ratio of 1.5 to 2.5, which the Group will also maintain in the future. At the same time, the Group is pursuing its earnings-oriented dividend policy. The aim is to pay 80 % to 90 % of adjusted net income as a dividend each year. The Executive Board therefore advised the Supervisory Board to propose an increase in the dividend to EUR 1.90 per common share for 2016 (previous year: EUR 1.80). This corresponds to a distribution ratio of 84.7 % (previous year: 82.5 %), resulting in an attractive dividend yield of 5.2 % of the closing price of the ProSiebenSat.1 share at the end of 2016.