Correct
18-07-2007, 08:32 AM
HEADLINES
• Sogecable achieves top high EBITDA profits in a quarter reaching 109.9 million euros, up 62.5% year-on-year.
• Sogecable’s EBIT shows top record figures in a quarter as well. It amounts to 72.1 million euros in comparison to 15.4 million euros achieved in the same quarter in 2006.
• Quarterly EBIT for pay-television activities reaches 56.7 million euros, up 54.0% year-on-year. Cuatro achieves quarterly profits for the first time reaching EBIT profits of 15.4 million euros.
• In the quarter, Sogecable’s Net Profits amount to 34.8 million euros, in comparison to profits of 4.4 million euros in the same quarter last year. The net bank debt declined by 103.5 million euros in this quarter and amounts to 916.1 million euros as of June 30th 2007.
• As of June 30th 2007, 2,056,000 clients subscribe to DIGITAL+. The average revenue for the quarter was 45.7 euros in comparison to 42.4 euros registered in the same quarter in 2006.
• Cuatro‘s audience shares showed highest levels since the beginning of operations. For the month of June 2007, the 24-hour average audience reached 8.1% and the monthly rate for the commercial target hit 10.0%.
Javier Díez de Polanco, CEO of Sogecable stated:
“In the second quarter of 2007, Sogecable achieved its best quarterly results since it went public eight years ago, this week.
Gross profits and positive cash-flow over 100 million euros were achieved by Sogecable in the last three months, thanks to significant improvements in financial and operating metrics in its both main activities.
DIGITAL+‘s EBIT is up 54% year-on-year. The control on cost of contents and the substantial increase in subscriber revenues are the main source of this positive performance. In the quarter, relevant agreements with Telefónica have been achieved for combining sale activities and content acquisitions. We expect the outcome from these deals to show in the coming quarters.
On the other hand, Cuatro met its expectations earlier than anticipated and has already reached its first quarterly profits, benefiting from excellent audience trends and advertisers’ interest in the channel. Cuatro is a grown-up operator in Spain’s free television market already."
The headlines of DIGITAL+, Sogecable's pay-TV activity, in the second quarter of 2007 were as follows:
* As of June 30th 2007, DIGITAL+'s customer base reached 2,056,000 clients, representing a net growth of 66,000 subscribers in a year.
* As of June 30th 2007, the cancellation rate stood at 11.2%, compared to 12.0% twelve months ago.
* In the quarter, the average revenue per customer reached 45.7 euros in comparison to 42.4 euros registered in the second quarter of 2006.
* In this quarter, DIGITAL+ has launched CANAL+ Latino, a new subscription offer, and has implemented a newly improved electronic programming guide (EPG).
* Next quarter, Sogecable will offer iPLUS, the most advanced PVR decoder, available for the first time in Spain, exclusively on DIGITAL+.
* In the fourth quarter of 2007, the new triple play service TRIO+, result of the agreements between Telefónica and Sogecable, will be available on the Spanish market.
Subscriber evolution
As of June 30th 2007, the subscriber base of DIGITAL+ stood at 2,056,000 clients. As of June 30th 2006, Sogecable had 1,990,000 subscribers, representing an increase of 66,000 new net subscribers in the last twelve months.
At the end of the previous quarter, as of March 31st 2007, DIGITAL+ had 2,065,000 customers. The client base of DIGITAL+ experienced a decrease of 9,000 subscribers during the second quarter of 2007. This period usually registers a seasonal decrease in commercial activity, basically due to the end of sports competitions and the beginning of the summer season.
In 2006, the exclusive broadcasting of the Germany Football World Cup matches, during the second quarter of the year, allowed a net growth in the customer base. In the same quarter of previous years -removing the effect of the accelerated migration of analogue subscribers in 2005- the client base of DIGITAL+ suffered greater drops.
Cancellation Rate
As of June 30th 2007, the cancellation rate was 11.2%, slightly higher than the existing rate at the end of the previous quarter. However, it was lower than that of former periods and the one registered in the same quarter of 2006, when the cancellation rate stood at 12%.
Selection of offers
As of June 30th 2007, most of the subscribers choose the contents of the CANAL+ family channels, available in both the “CANAL+ tier” offers as well as in the most complete “DIGITAL+ tier” offers.
As of June 30th 2007, 96% of customers subscribe to a service including CANAL+ contents and the most complete packages of the “DIGITAL+ tier” are chosen by 50% of the customer base.
In the quarter, no significant change was registered in the choice of contents made by DIGITAL+ subscribers.
Average revenue
The average revenue in the second quarter of 2007 was 45.7 euros per subscriber per month. In the same period of 2006, the average revenue of DIGITAL+ subscribers was 42.4 euros per month, representing a year-on-year increase of 7.7%.
The average subscriber revenue in the second quarter of 2007 was 38.7 euros per subscriber per month, representing a 1.1% increase over the 38.3 euros of the equivalent quarter in 2006. The average subscriber revenue in the first quarter of 2007 was 40.1 euros per subscriber per month.
The average revenue from pay-per-view services during the second quarter of 2007 amounted to an average of 7.0 euros a month. In the same quarter of 2006, the average revenue for this item had increased to 4.1 euros a month per subscriber, representing a year-on-year increase of 68.8%.
Basically, the main year-on-year differences are due to the greater number of events broadcast in pay-per-view in the second quarter of 2007 (football matches, bullfight events), and to a greater interest in the 2006/2007 Spanish League final matches, which has increased subscribers’ consumption.
Contents and services update
During the second quarter of 2007, DIGITAL+ has continued to expand its range of contents and services offered to its clients. In these months, especially significant are the improvements carried out in the Electronic Programming Guide (EPG) and the launching of “CANAL+ Latino” as a new subscription choice.
The improvements implemented to the EPG in the quarter, allow subscribers to get information about the full programming grid of the channel they are watching without swapping into the information channel, and to have access to promotions and other significant aspects of the offer without missing the programme they are enjoying. These new functionalities were added to those already incorporated during the first quarter of 2007.
In this quarter, DIGITAL+ launched “CANAL+ Latino”, a new offer targeting Latin American citizens living in Spain. For this offer, DIGITAL+ has added many television channels and radio stations from various Latin American countries. The service has been launched together with the broadcast of the Venezuela 2007 America Football Cup, exclusively shown in Spain by DIGITAL+.
Furthermore, for the second half of 2007, the launch of new services has been announced, which will increase the offer provided to current and future subscribers.
New commercial projects
On May 29th 2007, Sogecable announced the launch of iPLUS, in the following quarter, the most advanced decoder available for the first time in Spain and exclusively for DIGITAL+ subscribers. iPLUS allows up to eighty hours of programming storage, is fully integrated with DIGITAL+'s EPG, provides access to Digital Terrestrial Television (DTT) and features high-definition broadcasting.
Also in May, Sogecable and Fadesa reached an agreement whereby the new owners
of properties, handed over by the latter until the end of 2009, will enjoy a yearly
subscription to CANAL+ Temáticos.
On the other hand, on June 27th 2007, Sogecable and Telefónica announced an agreement to distribute the new triple play TRIO+ as of November 30th 2007, which combines Telefónica's ADSL and Voice services with DIGITAL+'s satellite paytelevision. As stated when the agreement was announced, each company will invoice its products in TRIO+ and installation and client assistance services will continue to be operated separately. Both companies will offer TRIO+ to their current clients and will join the commercial capacity of their distribution channels to attract new clients. This agreement between Telefónica and Sogecable also includes joint activities to acquire pay-television contents for the Spanish market. The joint action will be led by Sogecable and both parties intend to benefit from the scale economies derived from their added customer bases.
The initial term of the agreement is four years and it is non-exclusive. Therefore it could be extended to additional scopes or to other operators.
CUATRO
The headlines of the free-to-air TV channel Cuatro, in the second quarter of 2007, were as follows:
* Cuatro's monthly audience ratings continued to show significant and steady increases. At the end of the second quarter of 2007 -in June 2007-, it had an average monthly audience share (24 hours) of 8.1% as compared to 7.7% registered in the last month of the previous quarter, and as compared to a 7.5% average audience in June 2006, when Cuatro showed the 2006 Germany Football World Cup.
* In this quarter, Cuatro's audience in all relevant segments, show the highest percentages since this channel was launched in November 2005.
* The average audience in June 2007 in the prime time slot (8.8%) was the same as the share reached during the broadcasting of the Germany Football World Cup twelve months earlier. In June 2007, the figures reached in the commercial target (10.0%) and the core commercial target (11.3%) also represent an increase in comparison to the audience shares achieved in these segments in the same month of 2006 (9.3% and 10.4%, respectively) and in the last month of the previous quarter (9.8% and 11.2%, respectively), which has further boosted the channel's commercial profile.
In the second quarter of 2007, Cuatro has continued to increase its audience shares in comparison to the previous quarter. As opposed to the monthly average audience of 7.7% registered in March 2007, its best figure since it began broadcasting, Cuatro ended the second quarter of 2007 with an average audience of 8.1% in June 2007, after reaching 7.8% and 8.1% in April and May 2007, respectively.
These figures again indicate that Cuatro is the fastest growing channel in terms of audience and represent a new historical record.
Official figures represent a significant increase in comparison to the audience shares obtained in comparable months of April, May and June 2006, when Cuatro reached a monthly average audience of 5.8%, 6.2% and 7.5%, respectively. In the months of June and July 2006, Cuatro had broadcast the "general interest" matches of the Germany Football World Cup, that is, those played by the Spanish football team. This audience growth trend is also evidenced in prime time (from 20.30 p.m. to 24.00 a.m.), the most attractive time slot from a commercial standpoint. In this time frame, the audience during the second quarter of 2007 was 7.9%, 8.9% and 8.8%, respectively in the months of April, May and June 2007, as compared to 6.3%, 6.7% and 8.8% in the same months of the previous year.
Cuatro continues to increase month after month its audience share in the segments of the market of most interest for advertisers. In these segments, its audience rates significantly exceed the general average audience rates. Specifically, the average audience obtained during June 2007 in the commercial target and core commercial target was 10.0% and 11.3%, respectively. Both of them show significant increases with respect to the audience shares reached in the comparable quarter of 2006.
In relation to the audience shares achieved by Cuatro in the quarter, the most significant are those achieved in June, when the channel reaffirmed its strong offer when competing with a significant number of popular sports events shown in other channels.
Despite this, Cuatro has especially increased its audience shares in the morning and the late night slot and, for the third consecutive month, it has surpassed TVE1 in the commercial target of prime time.
In relation to how the average audience was distributed throughout the week, Cuatro continues to show a balance between the various days, confirming the strength of the programming offer.
Amongst its self-produced programmes, there are two that were launched this season and which have obtained the very good audience shares. “Factor X” has obtained an average audience of 11%; and “Cuenta Atrás” has become Cuatro's most popular Spanish fiction series, reaching an average audience of 12.5%. Moreover, “Callejeros”, a do***entary and news programme, has obtained an average audience of 10.5%.
This season, "House" has continued to obtain huge audience success in the prime time of Tuesdays. It has reached an average audience of 18.9% and 3.6 million viewers. Other successful series amongst the audience this season have been "Grey's Anatomy" (11.4% average audience), “Ghost Whisperer” (with a 9.4% average); or “Psych” (with a 9.3% audience). Also of interest is the increase in audience shares in two regular news slots during the season, which have reached their highest shares with an average of 8.0% and 7.4%, respectively, from Monday to Friday.
FINANCIAL EVOLUTION
As of June 30th 2007, the highlights of Sogecable's results are as follows:
* Sogecable obtains its best EBITDA in a quarter. Sogecable's EBITDA in the second quarter of 2007 amounted to 109.9 million euros, up 62.5% than the 67.6 million euros recorded in the same period of 2006.
* Sogecable's EBIT also registered the highest profits over one quarter, reaching 72.1 million euros as opposed to 15.4 million euros recorded in the same quarter of 2006. These results were obtained thanks to significant yearon- year increases in its two main activities.
* The EBIT derived from pay-television activities in the quarter amounted to 56.7 million euros, reflecting an increase of 54.0% as opposed to the profits of 36.8 million euros recorded in the same quarter of 2006.
* On the other hand, Cuatro achieved a new top high quarterly turnover, with a year-on-year increase of 55.6%. Its increased revenue was reflected in its operating results which, in the second quarter of 2007, reflected an EBIT of 15.4 million euros, as opposed to the losses of 21.4 million euros in the same quarter of 2006.
* In the quarter, Sogecable recorded net profits of 34.8 million euros, as compared to the profits of 4.4 million euros recorded in the same period of 2006.
Total Revenues
Sogecable's total revenues in the second quarter of 2007 amounted to 471.9 million euros, reflecting a 12.1% increase as opposed to the 420.8 million euros generated in the same period of 2006. During the first quarter of 2007, the year-on-year revenue growth rate was 9.4%.
This amount represents a record turnover for Sogecable in the second quarter. Of this revenue, 383.9 million euros relate to pay-television activities and 88.0 million euros were contributed by Cuatro's activities.
The revenues from pay-television activities increased by 5.4% in comparison to the same quarter of the previous year, whereas the revenues obtained by Cuatro reflected a 55.6% growth.
The main source of revenues in the second quarter of 2007 related to subscriber revenues, which amounted to 287.8 million euros. These revenues represent 61.0% of the Net Turnover for the quarter and show a year-on-year increase of 12.0% when compared to the 257.0 million euros recorded for this item in the second quarter of 2006.
The increase in advertising revenues generated by Cuatro has allowed a year-onyear increase of 48.5% in this line in the quarter, which already accounts for 19.6% of Sogecable's Net Turnover in the period, amounting to 92.5 million euros.
Subscriber Revenues
In the second quarter of 2007, Sogecable's subscriber revenues amounted to 287.8 million euros, representing a year-on-year increase of 30.9 million euros in the three months of the quarter.
The subscriber revenues recorded in the second quarter of 2007 reflect a year-onyear growth in the number of subscribers, as well as an increase in average revenue.
Subscriber revenues have experienced significant growth. Throughout the first sixn months of 2007, the ***ulative year-on-year increase in subscriber revenues amounted to 47.9 million euros, an 8.9%.
This increase in subscriber revenues in the second quarter of 2007 reflects a larger contribution to revenue from pay-per-view services than that generated in the same period of 2006, mainly due to the greater number of football matches shown as compared to those held in April-June 2006 and, also, to the interest generated by the Spanish Football League at the end of the season.
Revenue from pay-per-view this quarter was also boosted by the successful broadcasting of the April Bullfight Fair, which has became very popular amongst subscribers in its first year on DIGITAL+.
Advertising Revenues
During the second quarter of 2007, Sogecable's advertising revenues amounted to 92.5 million euros, a 48.5% increase compared to the 62.2 million euros obtained in the same period of 2006.
The upward trend in Cuatro's audience share, the increase in rates and the growth in Spain's television advertising market are the main reasons for this significant improvement.
In this quarter, Cuatro reached a record figure in advertising revenues. During this period of 2007, Cuatro generated advertising revenues of 84.4 million euros, representing a 30.3 million euros increase, some 55.9% more than the 54.1 million euros obtained in the same quarter of 2006.
Advertising revenues from pay-television activities amounted to 8.1 million euros, maintaining the figure registered in the same three months of 2006, when it benefited from the broadcasting of the Germany Football World Cup.
As of June 30th 2007, the ***ulative year-on-year growth of Sogecable's advertising revenues amounted to 60.1 million euros, 61.7% as opposed to the revenues registered in the first six months of 2006 for the same item.
Cuatro's advertising activities have generated a turnover of 142.4 million euros in the first six months of 2007, representing a ***ulative year-on-year increase of 71.6% as of June 30th 2007.
Other revenues
In the second quarter of 2007, the revenues from the rest of Sogecable's activities amounted to 91.3 million euros, as opposed to the 100.7 million euros obtained in the same quarter of the previous year, representing a 9.4 million euro decrease.
The year-on-year decrease is directly related to revenues from the sublicensing of contents to other operators which, in the first half of 2006, had generated revenues amounting to 38.6 million euros. In the second half of 2006 (and in the first half of 2007) no revenues were registered for this item. Overall, during the first six months of the year, the year-on-year difference has increased to 26.6 million euros.
The total of Sogecable's other activities generating revenues recorded under this item, increased in 2007 by 47.0% with respect to the amounts recorded in the same months of 2006.
Operating expenses
In the second quarter of 2007, operating expenses totalled 362.0 million euros, representing a year-on-year increase of 2.5%. Of this amount, 290.5 million euros correspond to expenses incurred in pay-television activities and 71.5 million euros were incurred by Cuatro.
In pay television, a 5.2% year-on-year increase in operating expenses was recorded in the quarter (14.3 million euros), whereas the operating expenses recorded by Cuatro decreased by 5.5 million euros.
In ***ulative terms, as of June 30th 2007, exploitation expenses for pay television registered a year-on-year increase of 4.7%, whereas Cuatro's operating expenses increased by 4.0% as opposed to the amounts incurred in the same period in 2006.
Purchases
In the second quarter of 2007, purchases totalled 241.5 million euros, as compared to 244.8 million euros devoted to this line in the same period of the previous year, representing a 1.3% decrease.
The purchases incurred in the second quarter of 2007 in pay-television activities amounted to 200.9 million euros, up by 6.7 million euros, a 3.5%, increase with respect to the amounts recorded under this item in the same period of 2006. The purchases recorded by Cuatro amounted to 40.7 million euros in the three months of the period, decreasing by 10.0 million euros with respect to the 50.7 million euros incurred in the same period of 2006. In the months of June and July 2006, Sogecable broadcast the Germany Football World Cup matches through DIGITAL+ and Cuatro.
At the end of the first half of 2007, the purchases incurred in pay-television represented a year-on-year increase of 4.7%, whereas Cuatro's purchases had increased by 3.8%.
Personnel expenses
In the second quarter of 2007, personnel expenses totalled 33.4 million euros, compared to the 32.7 million euros incurred in the second quarter of 2006. Sogecable's average headcount in the first half of 2007 was 1,870, compared to an average 1.903 employees in the same period of 2006.
Other Operating Expenses
In the second quarter of 2007, Sogecable's Other Operating Expenses amounted to 87.1 million euros, as opposed to the 75.8 million euros recorded in the same period of 2006.
As of June 30th 2007, the costs incurred totalled 166.2 million euros, compared to the 157.0 million euros recorded at the end of the first half of the previous year. In comparison with the previous year, these costs increased by 5.9% in the first half of 2007.
EBITDA
In the second quarter of 2007, Sogecable's EBITDA was 109.9 million euros, representing a 62.5% increase over the 67.6 million euros obtained during the same period of 2006.
EBITDA in the second quarter of 2007 represented a new record for Sogecable, due to the positive performance of both pay-television and free-to-air television. In this period, both activities have registered operating profits and better results than those obtained in the same quarter of 2006.
Pay-television activities have generated EBITDA of 93.4 million euros in the second quarter of 2007, with a year-on-year growth of 6.1%.
Cuatro has recorded a positive quarterly EBITDA for the first time. The 16.5 million euro EBITDA generated in the second quarter represents an improvement of 37.0 million euros, compared to the results obtained in the same period of 2006, when it incurred gross operating losses of 20.5 million euros.
EBITDA for the first half of 2007 records a year-on-year growth of 50.9% and totals 172.6 million euros, compared to the 114.3 million euros reached in the first half of 2006.
EBIT
In the second quarter of 2007, Sogecable's EBIT amounted to profits of 72.1 million euros, as compared to the profit of 15.4 million euros recorded in the same quarter of 2006, with a year-on-year increase of 56.7 million euros.
In the second quarter of 2007, depreciation and amortization charges amounted to 37.8 million euros, compared to 52.3 million euros in 2006, a 14.4 million euro yearon- year drop. This decrease is mainly due to the termination of the amortisation charges recorded by Audiovisual Sport until June 2006.
The EBIT on pay-television activities in the second quarter of 2007 amounted to 56.7 million euros, an increase of 19.9 million euros or 54.0% with respect to the 36.8 million euros recorded in the same period of 2006.
Cuatro contributed a positive EBIT of 15.4 million euros, with an increase of 36.9 million euros compared to the 21.4 million euro losses recorded in the second quarter of the previous year.
As a whole, in the second quarter of 2007, Sogecable recorded net operating income of 72.1 million euros, a year-on-year growth of 56.7 million euros in the quarter. Millones de euros
As of June 30th 2007, ***ulative net operating profit totalled 95.2 million euros, as opposed to the 2.6 million euro profit recorded during the first six months of 2006.
Results
In the second quarter of 2007, Sogecable recorded net profit of 34.8 million euros, as compared to the 4.4 million euro profit recorded between April and June 2006. In the second quarter of 2007, Sogecable's profit before taxes amounted to 53.5 million euros, as compared to the losses of 2.8 million euros recorded in the same period of 2006.
During the first six months of 2007, Sogecable obtained profits before taxes of 58.1 million euros, as opposed to the 31.4 million euro losses incurred in the first half of 2006.
As of June 30th 2007, Sogecable's Net Profit totalled 36.0 million euros, compared to the ***ulative 15.7 million euro losses recorded in the first six months of 2006.
Investments
In the second quarter of 2007, Sogecable made investments amounting to 16.7 million euros. The main investments related to the acquisition of decoders and the installations of new DIGITAL+ subscribers. As of June 30th 2007, ***ulative investments totalled 34.5 million euros.
In the first half of 2006, Sogecable’s investments amounted to 169.2 million euros, out of which 111.7 million euros were devoted to the acquisition of the minority stakes in Canal Satélite Digital and Cinemanía, SL. The comparable investments in the first six months of 2006 amounted to 57.5 million euros.
As of June 30th 2007, the net bank debt drawn down by Sogecable totalled 916.1 million euros, as compared to the 1,028.1 million euros drawn down at the end of the second quarter of 2006.
As of March 31st 2007, the net bank resources used amounted to 1,019.6 million euros.
Source: Sogecable
• Sogecable achieves top high EBITDA profits in a quarter reaching 109.9 million euros, up 62.5% year-on-year.
• Sogecable’s EBIT shows top record figures in a quarter as well. It amounts to 72.1 million euros in comparison to 15.4 million euros achieved in the same quarter in 2006.
• Quarterly EBIT for pay-television activities reaches 56.7 million euros, up 54.0% year-on-year. Cuatro achieves quarterly profits for the first time reaching EBIT profits of 15.4 million euros.
• In the quarter, Sogecable’s Net Profits amount to 34.8 million euros, in comparison to profits of 4.4 million euros in the same quarter last year. The net bank debt declined by 103.5 million euros in this quarter and amounts to 916.1 million euros as of June 30th 2007.
• As of June 30th 2007, 2,056,000 clients subscribe to DIGITAL+. The average revenue for the quarter was 45.7 euros in comparison to 42.4 euros registered in the same quarter in 2006.
• Cuatro‘s audience shares showed highest levels since the beginning of operations. For the month of June 2007, the 24-hour average audience reached 8.1% and the monthly rate for the commercial target hit 10.0%.
Javier Díez de Polanco, CEO of Sogecable stated:
“In the second quarter of 2007, Sogecable achieved its best quarterly results since it went public eight years ago, this week.
Gross profits and positive cash-flow over 100 million euros were achieved by Sogecable in the last three months, thanks to significant improvements in financial and operating metrics in its both main activities.
DIGITAL+‘s EBIT is up 54% year-on-year. The control on cost of contents and the substantial increase in subscriber revenues are the main source of this positive performance. In the quarter, relevant agreements with Telefónica have been achieved for combining sale activities and content acquisitions. We expect the outcome from these deals to show in the coming quarters.
On the other hand, Cuatro met its expectations earlier than anticipated and has already reached its first quarterly profits, benefiting from excellent audience trends and advertisers’ interest in the channel. Cuatro is a grown-up operator in Spain’s free television market already."
The headlines of DIGITAL+, Sogecable's pay-TV activity, in the second quarter of 2007 were as follows:
* As of June 30th 2007, DIGITAL+'s customer base reached 2,056,000 clients, representing a net growth of 66,000 subscribers in a year.
* As of June 30th 2007, the cancellation rate stood at 11.2%, compared to 12.0% twelve months ago.
* In the quarter, the average revenue per customer reached 45.7 euros in comparison to 42.4 euros registered in the second quarter of 2006.
* In this quarter, DIGITAL+ has launched CANAL+ Latino, a new subscription offer, and has implemented a newly improved electronic programming guide (EPG).
* Next quarter, Sogecable will offer iPLUS, the most advanced PVR decoder, available for the first time in Spain, exclusively on DIGITAL+.
* In the fourth quarter of 2007, the new triple play service TRIO+, result of the agreements between Telefónica and Sogecable, will be available on the Spanish market.
Subscriber evolution
As of June 30th 2007, the subscriber base of DIGITAL+ stood at 2,056,000 clients. As of June 30th 2006, Sogecable had 1,990,000 subscribers, representing an increase of 66,000 new net subscribers in the last twelve months.
At the end of the previous quarter, as of March 31st 2007, DIGITAL+ had 2,065,000 customers. The client base of DIGITAL+ experienced a decrease of 9,000 subscribers during the second quarter of 2007. This period usually registers a seasonal decrease in commercial activity, basically due to the end of sports competitions and the beginning of the summer season.
In 2006, the exclusive broadcasting of the Germany Football World Cup matches, during the second quarter of the year, allowed a net growth in the customer base. In the same quarter of previous years -removing the effect of the accelerated migration of analogue subscribers in 2005- the client base of DIGITAL+ suffered greater drops.
Cancellation Rate
As of June 30th 2007, the cancellation rate was 11.2%, slightly higher than the existing rate at the end of the previous quarter. However, it was lower than that of former periods and the one registered in the same quarter of 2006, when the cancellation rate stood at 12%.
Selection of offers
As of June 30th 2007, most of the subscribers choose the contents of the CANAL+ family channels, available in both the “CANAL+ tier” offers as well as in the most complete “DIGITAL+ tier” offers.
As of June 30th 2007, 96% of customers subscribe to a service including CANAL+ contents and the most complete packages of the “DIGITAL+ tier” are chosen by 50% of the customer base.
In the quarter, no significant change was registered in the choice of contents made by DIGITAL+ subscribers.
Average revenue
The average revenue in the second quarter of 2007 was 45.7 euros per subscriber per month. In the same period of 2006, the average revenue of DIGITAL+ subscribers was 42.4 euros per month, representing a year-on-year increase of 7.7%.
The average subscriber revenue in the second quarter of 2007 was 38.7 euros per subscriber per month, representing a 1.1% increase over the 38.3 euros of the equivalent quarter in 2006. The average subscriber revenue in the first quarter of 2007 was 40.1 euros per subscriber per month.
The average revenue from pay-per-view services during the second quarter of 2007 amounted to an average of 7.0 euros a month. In the same quarter of 2006, the average revenue for this item had increased to 4.1 euros a month per subscriber, representing a year-on-year increase of 68.8%.
Basically, the main year-on-year differences are due to the greater number of events broadcast in pay-per-view in the second quarter of 2007 (football matches, bullfight events), and to a greater interest in the 2006/2007 Spanish League final matches, which has increased subscribers’ consumption.
Contents and services update
During the second quarter of 2007, DIGITAL+ has continued to expand its range of contents and services offered to its clients. In these months, especially significant are the improvements carried out in the Electronic Programming Guide (EPG) and the launching of “CANAL+ Latino” as a new subscription choice.
The improvements implemented to the EPG in the quarter, allow subscribers to get information about the full programming grid of the channel they are watching without swapping into the information channel, and to have access to promotions and other significant aspects of the offer without missing the programme they are enjoying. These new functionalities were added to those already incorporated during the first quarter of 2007.
In this quarter, DIGITAL+ launched “CANAL+ Latino”, a new offer targeting Latin American citizens living in Spain. For this offer, DIGITAL+ has added many television channels and radio stations from various Latin American countries. The service has been launched together with the broadcast of the Venezuela 2007 America Football Cup, exclusively shown in Spain by DIGITAL+.
Furthermore, for the second half of 2007, the launch of new services has been announced, which will increase the offer provided to current and future subscribers.
New commercial projects
On May 29th 2007, Sogecable announced the launch of iPLUS, in the following quarter, the most advanced decoder available for the first time in Spain and exclusively for DIGITAL+ subscribers. iPLUS allows up to eighty hours of programming storage, is fully integrated with DIGITAL+'s EPG, provides access to Digital Terrestrial Television (DTT) and features high-definition broadcasting.
Also in May, Sogecable and Fadesa reached an agreement whereby the new owners
of properties, handed over by the latter until the end of 2009, will enjoy a yearly
subscription to CANAL+ Temáticos.
On the other hand, on June 27th 2007, Sogecable and Telefónica announced an agreement to distribute the new triple play TRIO+ as of November 30th 2007, which combines Telefónica's ADSL and Voice services with DIGITAL+'s satellite paytelevision. As stated when the agreement was announced, each company will invoice its products in TRIO+ and installation and client assistance services will continue to be operated separately. Both companies will offer TRIO+ to their current clients and will join the commercial capacity of their distribution channels to attract new clients. This agreement between Telefónica and Sogecable also includes joint activities to acquire pay-television contents for the Spanish market. The joint action will be led by Sogecable and both parties intend to benefit from the scale economies derived from their added customer bases.
The initial term of the agreement is four years and it is non-exclusive. Therefore it could be extended to additional scopes or to other operators.
CUATRO
The headlines of the free-to-air TV channel Cuatro, in the second quarter of 2007, were as follows:
* Cuatro's monthly audience ratings continued to show significant and steady increases. At the end of the second quarter of 2007 -in June 2007-, it had an average monthly audience share (24 hours) of 8.1% as compared to 7.7% registered in the last month of the previous quarter, and as compared to a 7.5% average audience in June 2006, when Cuatro showed the 2006 Germany Football World Cup.
* In this quarter, Cuatro's audience in all relevant segments, show the highest percentages since this channel was launched in November 2005.
* The average audience in June 2007 in the prime time slot (8.8%) was the same as the share reached during the broadcasting of the Germany Football World Cup twelve months earlier. In June 2007, the figures reached in the commercial target (10.0%) and the core commercial target (11.3%) also represent an increase in comparison to the audience shares achieved in these segments in the same month of 2006 (9.3% and 10.4%, respectively) and in the last month of the previous quarter (9.8% and 11.2%, respectively), which has further boosted the channel's commercial profile.
In the second quarter of 2007, Cuatro has continued to increase its audience shares in comparison to the previous quarter. As opposed to the monthly average audience of 7.7% registered in March 2007, its best figure since it began broadcasting, Cuatro ended the second quarter of 2007 with an average audience of 8.1% in June 2007, after reaching 7.8% and 8.1% in April and May 2007, respectively.
These figures again indicate that Cuatro is the fastest growing channel in terms of audience and represent a new historical record.
Official figures represent a significant increase in comparison to the audience shares obtained in comparable months of April, May and June 2006, when Cuatro reached a monthly average audience of 5.8%, 6.2% and 7.5%, respectively. In the months of June and July 2006, Cuatro had broadcast the "general interest" matches of the Germany Football World Cup, that is, those played by the Spanish football team. This audience growth trend is also evidenced in prime time (from 20.30 p.m. to 24.00 a.m.), the most attractive time slot from a commercial standpoint. In this time frame, the audience during the second quarter of 2007 was 7.9%, 8.9% and 8.8%, respectively in the months of April, May and June 2007, as compared to 6.3%, 6.7% and 8.8% in the same months of the previous year.
Cuatro continues to increase month after month its audience share in the segments of the market of most interest for advertisers. In these segments, its audience rates significantly exceed the general average audience rates. Specifically, the average audience obtained during June 2007 in the commercial target and core commercial target was 10.0% and 11.3%, respectively. Both of them show significant increases with respect to the audience shares reached in the comparable quarter of 2006.
In relation to the audience shares achieved by Cuatro in the quarter, the most significant are those achieved in June, when the channel reaffirmed its strong offer when competing with a significant number of popular sports events shown in other channels.
Despite this, Cuatro has especially increased its audience shares in the morning and the late night slot and, for the third consecutive month, it has surpassed TVE1 in the commercial target of prime time.
In relation to how the average audience was distributed throughout the week, Cuatro continues to show a balance between the various days, confirming the strength of the programming offer.
Amongst its self-produced programmes, there are two that were launched this season and which have obtained the very good audience shares. “Factor X” has obtained an average audience of 11%; and “Cuenta Atrás” has become Cuatro's most popular Spanish fiction series, reaching an average audience of 12.5%. Moreover, “Callejeros”, a do***entary and news programme, has obtained an average audience of 10.5%.
This season, "House" has continued to obtain huge audience success in the prime time of Tuesdays. It has reached an average audience of 18.9% and 3.6 million viewers. Other successful series amongst the audience this season have been "Grey's Anatomy" (11.4% average audience), “Ghost Whisperer” (with a 9.4% average); or “Psych” (with a 9.3% audience). Also of interest is the increase in audience shares in two regular news slots during the season, which have reached their highest shares with an average of 8.0% and 7.4%, respectively, from Monday to Friday.
FINANCIAL EVOLUTION
As of June 30th 2007, the highlights of Sogecable's results are as follows:
* Sogecable obtains its best EBITDA in a quarter. Sogecable's EBITDA in the second quarter of 2007 amounted to 109.9 million euros, up 62.5% than the 67.6 million euros recorded in the same period of 2006.
* Sogecable's EBIT also registered the highest profits over one quarter, reaching 72.1 million euros as opposed to 15.4 million euros recorded in the same quarter of 2006. These results were obtained thanks to significant yearon- year increases in its two main activities.
* The EBIT derived from pay-television activities in the quarter amounted to 56.7 million euros, reflecting an increase of 54.0% as opposed to the profits of 36.8 million euros recorded in the same quarter of 2006.
* On the other hand, Cuatro achieved a new top high quarterly turnover, with a year-on-year increase of 55.6%. Its increased revenue was reflected in its operating results which, in the second quarter of 2007, reflected an EBIT of 15.4 million euros, as opposed to the losses of 21.4 million euros in the same quarter of 2006.
* In the quarter, Sogecable recorded net profits of 34.8 million euros, as compared to the profits of 4.4 million euros recorded in the same period of 2006.
Total Revenues
Sogecable's total revenues in the second quarter of 2007 amounted to 471.9 million euros, reflecting a 12.1% increase as opposed to the 420.8 million euros generated in the same period of 2006. During the first quarter of 2007, the year-on-year revenue growth rate was 9.4%.
This amount represents a record turnover for Sogecable in the second quarter. Of this revenue, 383.9 million euros relate to pay-television activities and 88.0 million euros were contributed by Cuatro's activities.
The revenues from pay-television activities increased by 5.4% in comparison to the same quarter of the previous year, whereas the revenues obtained by Cuatro reflected a 55.6% growth.
The main source of revenues in the second quarter of 2007 related to subscriber revenues, which amounted to 287.8 million euros. These revenues represent 61.0% of the Net Turnover for the quarter and show a year-on-year increase of 12.0% when compared to the 257.0 million euros recorded for this item in the second quarter of 2006.
The increase in advertising revenues generated by Cuatro has allowed a year-onyear increase of 48.5% in this line in the quarter, which already accounts for 19.6% of Sogecable's Net Turnover in the period, amounting to 92.5 million euros.
Subscriber Revenues
In the second quarter of 2007, Sogecable's subscriber revenues amounted to 287.8 million euros, representing a year-on-year increase of 30.9 million euros in the three months of the quarter.
The subscriber revenues recorded in the second quarter of 2007 reflect a year-onyear growth in the number of subscribers, as well as an increase in average revenue.
Subscriber revenues have experienced significant growth. Throughout the first sixn months of 2007, the ***ulative year-on-year increase in subscriber revenues amounted to 47.9 million euros, an 8.9%.
This increase in subscriber revenues in the second quarter of 2007 reflects a larger contribution to revenue from pay-per-view services than that generated in the same period of 2006, mainly due to the greater number of football matches shown as compared to those held in April-June 2006 and, also, to the interest generated by the Spanish Football League at the end of the season.
Revenue from pay-per-view this quarter was also boosted by the successful broadcasting of the April Bullfight Fair, which has became very popular amongst subscribers in its first year on DIGITAL+.
Advertising Revenues
During the second quarter of 2007, Sogecable's advertising revenues amounted to 92.5 million euros, a 48.5% increase compared to the 62.2 million euros obtained in the same period of 2006.
The upward trend in Cuatro's audience share, the increase in rates and the growth in Spain's television advertising market are the main reasons for this significant improvement.
In this quarter, Cuatro reached a record figure in advertising revenues. During this period of 2007, Cuatro generated advertising revenues of 84.4 million euros, representing a 30.3 million euros increase, some 55.9% more than the 54.1 million euros obtained in the same quarter of 2006.
Advertising revenues from pay-television activities amounted to 8.1 million euros, maintaining the figure registered in the same three months of 2006, when it benefited from the broadcasting of the Germany Football World Cup.
As of June 30th 2007, the ***ulative year-on-year growth of Sogecable's advertising revenues amounted to 60.1 million euros, 61.7% as opposed to the revenues registered in the first six months of 2006 for the same item.
Cuatro's advertising activities have generated a turnover of 142.4 million euros in the first six months of 2007, representing a ***ulative year-on-year increase of 71.6% as of June 30th 2007.
Other revenues
In the second quarter of 2007, the revenues from the rest of Sogecable's activities amounted to 91.3 million euros, as opposed to the 100.7 million euros obtained in the same quarter of the previous year, representing a 9.4 million euro decrease.
The year-on-year decrease is directly related to revenues from the sublicensing of contents to other operators which, in the first half of 2006, had generated revenues amounting to 38.6 million euros. In the second half of 2006 (and in the first half of 2007) no revenues were registered for this item. Overall, during the first six months of the year, the year-on-year difference has increased to 26.6 million euros.
The total of Sogecable's other activities generating revenues recorded under this item, increased in 2007 by 47.0% with respect to the amounts recorded in the same months of 2006.
Operating expenses
In the second quarter of 2007, operating expenses totalled 362.0 million euros, representing a year-on-year increase of 2.5%. Of this amount, 290.5 million euros correspond to expenses incurred in pay-television activities and 71.5 million euros were incurred by Cuatro.
In pay television, a 5.2% year-on-year increase in operating expenses was recorded in the quarter (14.3 million euros), whereas the operating expenses recorded by Cuatro decreased by 5.5 million euros.
In ***ulative terms, as of June 30th 2007, exploitation expenses for pay television registered a year-on-year increase of 4.7%, whereas Cuatro's operating expenses increased by 4.0% as opposed to the amounts incurred in the same period in 2006.
Purchases
In the second quarter of 2007, purchases totalled 241.5 million euros, as compared to 244.8 million euros devoted to this line in the same period of the previous year, representing a 1.3% decrease.
The purchases incurred in the second quarter of 2007 in pay-television activities amounted to 200.9 million euros, up by 6.7 million euros, a 3.5%, increase with respect to the amounts recorded under this item in the same period of 2006. The purchases recorded by Cuatro amounted to 40.7 million euros in the three months of the period, decreasing by 10.0 million euros with respect to the 50.7 million euros incurred in the same period of 2006. In the months of June and July 2006, Sogecable broadcast the Germany Football World Cup matches through DIGITAL+ and Cuatro.
At the end of the first half of 2007, the purchases incurred in pay-television represented a year-on-year increase of 4.7%, whereas Cuatro's purchases had increased by 3.8%.
Personnel expenses
In the second quarter of 2007, personnel expenses totalled 33.4 million euros, compared to the 32.7 million euros incurred in the second quarter of 2006. Sogecable's average headcount in the first half of 2007 was 1,870, compared to an average 1.903 employees in the same period of 2006.
Other Operating Expenses
In the second quarter of 2007, Sogecable's Other Operating Expenses amounted to 87.1 million euros, as opposed to the 75.8 million euros recorded in the same period of 2006.
As of June 30th 2007, the costs incurred totalled 166.2 million euros, compared to the 157.0 million euros recorded at the end of the first half of the previous year. In comparison with the previous year, these costs increased by 5.9% in the first half of 2007.
EBITDA
In the second quarter of 2007, Sogecable's EBITDA was 109.9 million euros, representing a 62.5% increase over the 67.6 million euros obtained during the same period of 2006.
EBITDA in the second quarter of 2007 represented a new record for Sogecable, due to the positive performance of both pay-television and free-to-air television. In this period, both activities have registered operating profits and better results than those obtained in the same quarter of 2006.
Pay-television activities have generated EBITDA of 93.4 million euros in the second quarter of 2007, with a year-on-year growth of 6.1%.
Cuatro has recorded a positive quarterly EBITDA for the first time. The 16.5 million euro EBITDA generated in the second quarter represents an improvement of 37.0 million euros, compared to the results obtained in the same period of 2006, when it incurred gross operating losses of 20.5 million euros.
EBITDA for the first half of 2007 records a year-on-year growth of 50.9% and totals 172.6 million euros, compared to the 114.3 million euros reached in the first half of 2006.
EBIT
In the second quarter of 2007, Sogecable's EBIT amounted to profits of 72.1 million euros, as compared to the profit of 15.4 million euros recorded in the same quarter of 2006, with a year-on-year increase of 56.7 million euros.
In the second quarter of 2007, depreciation and amortization charges amounted to 37.8 million euros, compared to 52.3 million euros in 2006, a 14.4 million euro yearon- year drop. This decrease is mainly due to the termination of the amortisation charges recorded by Audiovisual Sport until June 2006.
The EBIT on pay-television activities in the second quarter of 2007 amounted to 56.7 million euros, an increase of 19.9 million euros or 54.0% with respect to the 36.8 million euros recorded in the same period of 2006.
Cuatro contributed a positive EBIT of 15.4 million euros, with an increase of 36.9 million euros compared to the 21.4 million euro losses recorded in the second quarter of the previous year.
As a whole, in the second quarter of 2007, Sogecable recorded net operating income of 72.1 million euros, a year-on-year growth of 56.7 million euros in the quarter. Millones de euros
As of June 30th 2007, ***ulative net operating profit totalled 95.2 million euros, as opposed to the 2.6 million euro profit recorded during the first six months of 2006.
Results
In the second quarter of 2007, Sogecable recorded net profit of 34.8 million euros, as compared to the 4.4 million euro profit recorded between April and June 2006. In the second quarter of 2007, Sogecable's profit before taxes amounted to 53.5 million euros, as compared to the losses of 2.8 million euros recorded in the same period of 2006.
During the first six months of 2007, Sogecable obtained profits before taxes of 58.1 million euros, as opposed to the 31.4 million euro losses incurred in the first half of 2006.
As of June 30th 2007, Sogecable's Net Profit totalled 36.0 million euros, compared to the ***ulative 15.7 million euro losses recorded in the first six months of 2006.
Investments
In the second quarter of 2007, Sogecable made investments amounting to 16.7 million euros. The main investments related to the acquisition of decoders and the installations of new DIGITAL+ subscribers. As of June 30th 2007, ***ulative investments totalled 34.5 million euros.
In the first half of 2006, Sogecable’s investments amounted to 169.2 million euros, out of which 111.7 million euros were devoted to the acquisition of the minority stakes in Canal Satélite Digital and Cinemanía, SL. The comparable investments in the first six months of 2006 amounted to 57.5 million euros.
As of June 30th 2007, the net bank debt drawn down by Sogecable totalled 916.1 million euros, as compared to the 1,028.1 million euros drawn down at the end of the second quarter of 2006.
As of March 31st 2007, the net bank resources used amounted to 1,019.6 million euros.
Source: Sogecable