Analysts at investment bank BNP-Paribas suggest that 2024 remains another transitional year for German broadcaster ProSiebenSat.1 (PSM). It says that PSM’s increased investment in local content is the right strategic move “but is painful for shareholders”.

The bank says that management will increase that local content to support its digital offering. That extra investment on programming will cost about €80 million, but PSM has also “impaired” about €250 million-worth of existing programming assets – and mainly US content – which it cannot use in its digital channels. Moreover, PSM will book a provision in Q4/2023 for onerous contracts for the acquisition of future programming assets of up to €90 million resulting in a cash outflow of c. €50 million in 2024/2025 in total.

The bank says that PSM’s dividend could be at risk. “On the back of additional program spending, management expects:
a) 2024 revenues to increase driven by a slight increase in TV advertising revenues and
b) 2023 adj. EBITDA to remain stable y-o-y, falling short 8-9 per cent y-o-y of consensus estimates.

“Moreover, given additional investments in 2024, low Free Cashflow generation in 2023 and management focus on deleveraging, we see risk to consensus DPS estimates of €0.28 (BNPPE: €0.10),” adds the bank.

The bank says that PSM’s 2024 revenue guidance includes a slight increase in TV advertising revenues. However, if consumer sentiment and IPO expectations would recover next year, operational leverage is significant: BNP-Paribas estimates 5-10 per cent higher [German-speaking] TV advertising revenues, equivalent to c. 10/20-point change in IFO business expectations, to result in c. 28-55 per cent higher 2024 group pre-tax profit.

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Tags: bank, BNP Paribas, ProSiebenSat.1