While most people still see ProSiebenSat.1 as a traditional TV broadcaster and dependent on commercials for survival, a report from investment bank Berenberg suggests that the market needs to take a fresh view of the company, and in particular its ‘NuCom’ division.
The report is headlined More than meets the eye and reminds readers that despite various disposals “the company has reduced its dependence on linear TV advertising, such that as in Q3 this represented only 44% of group revenues. The proportion of profits, of course, is higher than this, reflecting the fact that the group is investing substantial amounts in its fast-growing [alternate] businesses.”
Berenberg says: “We believe that management is following the right path in taking cash flow from the mature broadcast business and reinvesting it in higher-growth operations, such as online advertising and commerce. The consensus view is that TV is dead, but ProSiebenSat.1 is far more than just linear TV.”
Many of these subsidiary businesses are of increasing importance. The report notes:
· “Verivox, the number-two player in the utilities and financial services price comparison market in Germany. It operates a cost per lead/order business model, much like Gocompare or moneysupermarket.com.”
· “ProSiebenSat.1’s Matchmaking unit comprises Parship Elite, its German business, and eharmony, which is principally US-based, and which was acquired in Q4 2018 for €80m. This is a subscription business model: customers pay monthly fees in their bid to find love. Combined, the unit is the number-two player in terms of global online matchmaking (as opposed to dating, where Tinder leads).”
· “The Experience business is harder to value. It is described as a marketplace for gift and experience vouchers in the DACH region and combines the mydays and Jochen Schweizer brands. Strictly speaking, though, we think it should be treated as a retailer, since the vast majority of its revenues are based on selling services to consumers, and then charging a cost of goods sold against that revenue (rather than just taking a commission). Unlike most online retailers, however, its margins are attractive: the ProSiebenSat.1 entity had margins of 13% in 2018 and we expect an increase to 15% in 2019. Organic growth, meanwhile, was 28% in Q3.”
· “The Beauty and Lifestyle unit could be viewed in a similar light. It comprises Flaconi, the number-two retailer of perfume and beauty products in the DACH region (behind Parfümerie Douglas, which has a significant offline presence), Amorelie, the number-one retailer of sex toys, WindStar Medical (health products and OTC medicines), moebel.de (homewares) and Stylight (aggregation platform for fashion and lifestyle). Broadly speaking, the unit focuses on the beauty and lifestyle segment.”