KirchMedia, one of Europe’s leading media groups, today announced its financial re-sults for the six months to June 30, 2001 in light of the intended merger with ProSiebenSat.1 in 2002. Highlights include:
Dr. Dieter Hahn, Chairman of the Executive Board Designate of the future merged company and Deputy Chairman of the Executive Board of KirchHolding GmbH & Co. KG, said: ‘To date, 2001 has been a very successful year for us. The results show clearly the positive development and solid financial structure of KirchMedia. Particularly, the improvement of the margin in the rights trading business, has more than offset the downturn in advertising revenues which has affected the entire media industry this year. By focusing clearly on the German-speaking market and our core areas of operation, we have created a strong basis for further growth.
KirchMedia is well placed to benefit from the consolidation in the rights trading industry. The company has contin-ued to expand its portfolio of sports rights, which represent ‘must have’ programming for broadcasters. Having built up a strong rights distribution platform, we are well positioned to maximise the value of these rights going forward.
Against this background, we are committed to completing the previously announced merger of ProSiebenSat.1 Media AG with KirchMedia. Through its vertical integration, the group aims to maximise its growth potential while bearing down on costs. Going forward, KirchMedia will exploit all parts of the audiovisual value chain, from pro-duction, through rights trading, to distribution, in order to further enhance its position as one of Europe’s leading media companies.’
Interim Financials
In the six months to June 30, 2001, revenues increased by 15% to DM 3,247 million. This increase was mainly due to the sale of the rights to the German National Football League and the consolidation of ISPR, both of which figured in the results for the first time.
The gross margin improved year-on-year from 33% to 35%. EBITDA (excluding ex-change rate results and total new media start-up losses of DM 56.3 million) grew 42% from DM 362.2 million to DM 514.4 million, representing an increase in EBITDA margin from 13% to 16%.
New Media Start-up losses of DM 56.3 million in H1 2001 (DM 19.2 million in H1 2000) were mainly the result of investments in sports portal Sport1.de, Prisma iVentures (a UK subsidiary primarily focusing on online sports rights and betting) and Kirch Intermedia (the hold-ing company for all other online activities of the KirchGruppe). Kirch Intermedia was formed in 2001 from the merger of ProSieben Digital Media and Kirch New Media. While shown H1 2000 new media start-up losses are not fully comparable to H1 2001 due to a different segment reporting, on a like-for-like basis they were at a comparable level to the first six month 2000.
Interim results are not a full indication for year-end results, given a certain unevenness that can occur in the revenues of the rights trading business.
Consolidated net debt was DM 4.4 billion (DM 3.1 billion as of December 2000). The increase was mainly due to the acquisition of a 48.4% stake in Euvia (DM 350 million) and a DM 640 million interim financing which was provided to KirchBeteiligung by KirchMedia as part of the Formula One acquisition as well as New Media investments.
Full Year Comparison
In the year to December 31, 2000, revenues were up 15% to DM 6,508.5 million (DM 5,657.2 mil-lion as of December 1999). EBITDA margin slipped to 15% (18%), reflecting increased competition in the rights trading market and higher cost of programming assets.
Consolidated net debt fell to DM 3,133 million (DM 3,708 million in 1999PF), primarily due to the repayment of a DM 1,281 million inter-company loan to KirchMedia by KirchHolding. In addition, KirchMedia has invested in programme assets, financial assets and strategic in-vestments, such as the acquisitions of sports-rights trader CWL and IMP (Innovative Medientechnik und Planung AG).
Fiction Rights Trading
The company’s entertainment library contains more than 63,000 hours of programming. KirchMedia has a leading position in national and international rights trading.
Beta Film, KirchMedia’s international license trading arm, distributes content to televi-sion companies around the world. Founded in 1959, the company is one of the largest non-American rights distribution networks on the international film and TV market, with 15,000 hours of programming currently available for international distribution. During the last financial year, Beta Film added almost 1,400 hours of new programming to its range of international rights for distribution.
Evision, a joint venture with Mediaset, produces and finances major TV projects for the international television market. Productions with a total budget of DM 250 million are planned by the end of 2005. Co-production and co-financing of feature films is under-taken through Emotion, in close co-operation with Mediaset.
Fiction rights trading, KirchMedia’s original core business, showed a strong performance in H1 2001 with reve-nues of DM 926.5 million and EBITDA of DM 217.5 million.
However, given a certain unevenness of the rights trading business during a financial year, which depends to a certain extent on package deals with broadcasters and on the specifics of these deals (e.g. number of license start dates of titles and series in each year), interim results in the rights trading segment are not necessarily fully indicative of year-end results.
This strong performance shows that the competition, which had intensified over the last two years resulting from new entrants into the rights trading business is already starting to recede. Many of these new competitors have been able to raise capital on the Neuer Markt and their bidding for programme assets resulted in higher prices, in turn affecting the profit margins in the license-trading business. KirchMedia believes that the consolidation proc-ess, which has already begun, will intensify. Thanks to its broadcasting family, film library and strong market posi-tion, KirchMedia is in an excellent position to benefit from this market consolidation.
Gross profit margin declined from 35% in 1999 to 22% in 2000 mainly due to higher programme amortization. EBITDA 2000 decreased by 42% compared to 1999 to DM 286.2 million. The main reason for this decline in mar-gins, in addition to the higher competition for fiction rights, was the sale in 1999 of substantially all of KirchMedia’s remaining children TV rights. This sale contributed DM 250 million to revenues and an above average gross profit.
Sports Rights Trading
KirchMedia holds the rights to premium events, such as the German National Football League, UEFA Cup games, boxing and the global rights to the World Cups in 2002 and 2006, during which KirchMedia, through its wholly-owned subsidiary HBS, will also act as host broadcaster.
In 2000, KirchMedia bundled its growing activities in the sports-rights sector into the newly-formed company KirchSport GmbH. The division’s financials are not fully comparable due to changes in the scope of consolidation: CWL, Prisma iVentures and WorldZap were consolidated for the first time in 2000 and ISPR for the first time in H1 2001, after KirchMedia increased its stake from 50% to 51% (previously accounted for as an equity investment).
In addition, the rights to the German National Football League had been with ISPR and as such were not consolidated. However, in 2000 the rights were acquired by KirchMedia and the resulting rights sales were reflected in KirchMedia’s results start-ing from H2 2000.
The main driver for revenues was the National Football League. The increase in EBITDA to DM 30.8 million translates into an increase in EBITDA margin from 2% to 5% in H1 2001 (adjusted for new media start-up losses).
The sale of broadcasting rights to the World Cups 2002 and 2006 is not included in these figures.
Until these events take place in 2002 and 2006, all proceeds from the sales of World Cup rights are booked as prepayments received, license payments to FIFA as prepayments paid and as such are only reflected in the balance sheet. Cost and revenue recognition for the sale of broadcasting rights to the World Cups occurs only at the time of the event in 2002 and 2006, respectively.
On March 7, 2001 KirchMedia announced the signing of an agreement with Germany’s two public broadcasters ARD and ZDF with regard to certain German (free-TV) rights to the World Cup 2002 for DM 225 million. To date, KirchMedia has already successfully sold the European World Cup rights for 2002 in 18 territories.
In addition, KirchMedia recently acquired the non-European broadcasting rights to the World Cups 2002 and 2006 from FIFA. KirchMedia has mean-while been able to conclude agreements in Korea, Japan and in most Asian countries for these rights, as well as in South America and Africa, including South Africa.
Commercial Television
The group’s German television brands include ProSieben, Sat.1, Kabel 1, N24 and DSF. These TV stations are premium brands with clear market positioning. ProSieben pro-vides movies and young entertainment; Sat.1 offers family entertainment; Kabel 1 presents classic movies and series; N24 is responsible for the broadcasting family’s news programme and DSF has the most comprehensive range of sports programming on Ger-man free-TV. Together, the company’s stations hold the number one position among both audiences and advertisers in Germany, the world’s third largest advertising market.
In addition, KirchMedia’s international TV interests include a 25% stake in Telecinco, Europe’s most profitable tele-vision company, and a 1.3% stake in Mediaset, Italy’s largest broadcaster. (Note: Telecinco is accounted for at equity and Mediaset at cost)
Declining advertising revenues affected the division’s revenue growth, with divisional EBITDA in H1 2001 of DM 268.6 million.
Start-up losses at Kirch Intermedia contributed to adjustments of DM 45.8 million.
During the first half of the year ProSiebenSat.1 generated less revenues, which resulted in a decrease of the consolidated free television segment’s EBITDA margin from 16% in 2000 to 12% in H1 2001.
H1 2001 channel-revenues of DSF amounted to DM 183.4 million, which is an increase of 21%. DSF’s Group-EBITDA (incl. PlazaMedia) amounted to DM (12.1) million. The turn-around has been slowed by the adverse ad-vertising market conditions.
According to AC Nielsen, KirchMedia’s share of the German advertising market increased in H1 01 from 46.9% to 47.9%. This compares to RTL Group’s 41.9%.
Production
The Group’s production companies such as neue deutsche Filmgesellschaft mbH (ndF), Janus, Glücksrad, Janus Pearson and KirchMedia Entertainment produce and co-produce a range of television programming.
Successful recent productions include ‘Mittermeier & Friends’ and ‘Sag ja! – Willkom-men zu Deiner Hochzeit’ produced by the KirchMedia Entertainment or the TV series ‘Samt und Seide’, ‘Jenny & Co.’ and the TV movie ‘Southwest’ produced by the KirchMedia subsidiary ndF.
H1 2001 saw various projects in the ‘post-production’ phase, ahead of delivery to broadcasters in H2. Profits are only recognised upon delivery of product.
H1 2001 revenues amounted to DM 84 million showing a continuous level of production activities on previous-years basis.
2000 revenues also remained stable. EBITDA reached DM 5.9 million (DM 0.6 million in 1999), as a result of 1999 fiction programming delivered in this period.
Technical Services
KirchMedia owns state-of-the-art film technical facilities. It operates one of Europe’s most modern service centres specialising in film processing, post-production, restora-tion, dubbing and film archiving.
Revenues in H1 2001 were DM 35.5 million and EBITDA DM 9.2 million. The division’s revenues are mainly gen-erated from inter-company transactions, with all such transactions conducted on an ‘at-arms-length’-basis.
Segmental revenues were stable in 2000. Gross profit decreased by 14% to DM 69.0 million mainly due to an in-crease in costs of goods sold. This cost increase resulted in EBITDA falling to DM 21.2 million in 2000 (DM 43.5 million in 1999).
For further information please contact:
KirchMedia GmbH & Co. KGaA
Hartmut Schultz
Corporate Spokesman
Tel: +49 (0)89 9956-2325
hartmut.schultz@kirchgruppe.de
Riccarda Kolb
Spokesperson
Tel: +49 (0)89 9956-2324
riccarda.kolb@kirchgruppe.de
Investor Relations Contact:
Brunswick Germany
Simon Holberton
Christine Graeff
Tel: +49 69 2400 5510
sholberton@brunswickgroup.com
cgraeff@brunswickgroup.com
Brunswick Europe
Rurik Ingram
James Hogan
Tel: 00 44 20 7404 5959
ringram@brunswickgroup.com
jhogan@brunswickgroup.com