The business development of ProSiebenSat.1 Media SE reflects the economic situation of the Group; this also applies to the opportunity and risk situation.

The Annual Financial Statements of ProSiebenSat.1 Media SE are prepared in accordance with the provisions of the German Commercial Code and the supplementary provisions of the German Stock Corporation Act and the Articles of Association.

BUSINESS AND ECONOMIC ENVIRONMENT

ProSiebenSat.1 Media SE is a management holding company with own operating activities. It is responsible for management functions such as corporate strategy and risk management for ProSiebenSat.1 Group, investment administration and central financing tasks, and other service functions. Furthermore, ProSiebenSat.1 Media SE is the tax group parent for the majority of the domestic subsidiaries. Its material income results from subsidiaries’ profit transfer agreements. In addition, revenues are generated in particular from internal services and the sale of ancillary programming rights.

The economic environment of ProSiebenSat.1 Media SE essentially corresponds to that of ProSiebenSat.1 Group and is described in detail in the section of the Group’s environment. Group Environment

ProSiebenSat.1 Media SE as the parent company of ProSiebenSat.1 Group is integrated into the Group-wide risk management system. Further information and the description of the internal control system for ProSiebenSat.1 Media SE, required according to section 289 (4) HGB, are presented in the Risk Report. Risk Report

The Management Declaration according to section 289a HGB is publicly available on the Company’s website and can be viewed in this Annual Report271.

SIGNIFICANT EVENTS IN 2017

At the Annual General Meeting of ProSiebenSat.1 Media SE on May 12, 2017, the shareholders resolved to allocate EUR 800 million of the distributable profit for financial year 2016 to other retained earnings. They also resolved on a payment of EUR 1.90 per eligible share, with the total payout amounting to EUR 435 million.

In financial year 2017, ProSiebenSat.1 Media SE acquired companies from within the Group in the context of bundling commerce activities. These companies were contributed to NCG – NUCOM GROUP SE.

EARNINGS OF PROSIEBENSAT.1 MEDIA SE

101 / Income statement (condensed) in accordance with the german commercial code (HGB) in EUR m

 

2017

2016

Revenues

116

99

Other operating income

82

66

Programming and material expenses

62

55

Personnel expenses

100

103

Depreciation

15

17

Other operating expenses

141

118

Operating expenses

319

293

Investment income

871

722

Financial result

–77

–78

Taxes

160

186

Income after taxes

513

330

Other taxes

0

0

Profit of the year

513

330

ProSiebenSat.1 Media SE’s revenues increased by EUR 17 million or 17% to EUR 116 million in financial year 2017. The year-on-year growth resulted primarily from higher revenues from the sale of ancillary programming rights and from revenues from barter transactions.

Other operating income rose by 24% or EUR 16 million year-on-year to EUR 82 million. This was particularly attributable to higher income from currency conversion.

Operating expenses amounted to EUR 319 million (previous year: EUR 293 million). Personnel expenses decreased slightly, as the effects of the increase in employees were more than offset by a sharp drop in expenses from share-based payment plans with a long-term incentive effect. In the previous year, the changeover to cash settlement resulted in a high non-recurring expense. The increase in other operating expenses is due in particular to higher legal and consulting costs and a rise in expenses for technical services and countertrades.

Investment income, consisting of income from profit transfer agreements and expenses from loss absorption, increased by 21% or EUR 149 million to EUR 871 million. Income from profit transfer agreements of EUR 912 million (previous year: EUR 753 million) was partly offset by expenses from loss absorption of EUR 42 million (previous year: EUR 31 million).

In financial year 2017, the financial result (interest income netted against interest expenses) improved by EUR 1 million to minus EUR 77 million.

Tax expenses amounted to EUR 160 million compared to EUR 186 million in the previous year.

For financial year 2017, ProSiebenSat.1 Media SE reported a profit for the year of EUR 513 million. This represents a year-on-year increase of 55% or EUR 183 million.

ProSiebenSat.1 Media SE had no material off-balance-sheet financing instruments during the period under review.

ProSiebenSat.1 Media SE has concluded rental contracts for property at the Unterföhring site classified as operating leases according to the German Commercial Code (HGB). These contracts will not expire before 2019.

NET ASSETS OF PROSIEBENSAT.1 MEDIA SE

102 / Balance sheet (condensed) in accordance with the german commercial code (HGB) in EUR m

 

12/31/2017

12/31/2016

ASSETS

 

 

Intangible assets

7

4

Property, plant and equipment

55

53

Financial assets

7,364

6,201

Non-current assets

7,425

6,258

Receivables and other current assets

1,328

1,092

Cash, cash at banks

1,277

1,042

Current assets

2,605

2,134

Prepaid expenses

3

4

Active difference resulting from offsetting

0

0

TOTAL ASSETS

10,034

8,396

 

 

 

LIABILITIES AND EQUITY

 

 

Equity

3,297

3,216

Provisions

218

159

Liabilities

6,489

4,998

Deferred tax liabilities

29

23

TOTAL LIABILITIES AND EQUITY

10,034

8,396

As of December 31, 2017, the total assets of ProSiebenSat.1 Media SE increased by 20% or EUR 1,638 million to EUR 10,034 million.

Non-current assets increased by 19% or EUR 1,167 million year-on-year to EUR 7,425 million as of December 31, 2017. The increase primarily resulted from intragroup acquisitions of indirect subsidiaries in the context of bundling commerce activities and from capital increases at direct subsidiaries in the period under review.

Current assets amounted to EUR 2,605 million on December 31, 2017. The increase of 22% or EUR 471 million was due both to the EUR 199 million rise in receivables from affiliated companies due to increased profit transfers and to the EUR 236 million rise in cash and cash equivalents. In addition, advance payments for increased by EUR 39 million.

As of December 31, 2017, ProSiebenSat.1 Media SE’s equity increased to EUR 3,297 million. On the one hand, the increase of 3% or EUR 81 million resulted from the profit for the year of EUR 513 million in financial year 2017. However, this was partly offset by the dividend distribution of EUR 435 million in May 2017.

The equity ratio fell to 33% as of December 31, 2017 (previous year: 38%) due to the significant increase in total assets.

Provisions increased by EUR 59 million to EUR 218 million as of December 31, 2017. This was attributable to a EUR 33 million increase in tax provisions and a EUR 24 million increase in other provisions, which was caused in particular by higher provisions for interest on taxes and value-added tax.

Amounting to EUR 6,489 million as of December 31, 2017, liabilities were EUR 1,491 million higher than the previous year’s figure of EUR 4,998 million. This development chiefly resulted from the increase in intragroup liabilities from cash pooling, which was particularly attributable to the intragroup acquisition of companies in the context of bundling commerce activities.

FINANCIAL POSITION OF PROSIEBENSAT.1 MEDIA SE

Cash management is performed centrally with Group cash flows being pooled by an implemented cash pooling system at ProSiebenSat.1 Media SE as the holding company. Therefore the cash flows of the Group affect the liquidity of ProSiebenSat.1 Media SE to a large degree.

For Group companies, especially the German TV stations, ProSiebenSat.1 Media SE acts as purchasing agent for programming assets. In financial year 2017, EUR 594 million (previous year: EUR 539 million) was spent on investments in programming assets. ProSiebenSat.1 Media SE received EUR 541 million (previous year: EUR 509 million) from Group companies from the internal transfer of programming assets. As of December 31, 2017, the total future financial obligations from programming purchase agreements already concluded amounted to EUR 2,345 million (previous year: EUR 2,791 million).

In the period under review, cash outflows for purchases of tangible fixed assets at ProSiebenSat.1 Media SE amounted to EUR 26 million. This represents a year-on-year increase of EUR 9 million.

A total of EUR 270 million (previous year: EUR 564 million) was spent on contributions to the capital reserve at direct subsidiaries and on company acquisitions in financial year 2017. The transaction in the context of bundling commerce activities did not result in an outflow of cash, but instead caused an increase in intragroup cash pooling liabilities.

For further information on the balance sheet and income statement, refer to the Notes to the Annual Financial Statements of ProSiebenSat.1 Media SE.

Development of Employee Numbers

In financial year 2017, an average of 790 people were employed at ProSiebenSat.1 Media SE, comprising 696 employees and 94 apprentices, trainees and interns. In the previous year, on average 651 people were employed at ProSiebenSat.1 Media SE, 81 of whom were apprentices, trainees and interns.

Risks and Opportunities

The business performance of ProSiebenSat.1 Media SE is fundamentally subject to the same risks and opportunities as ProSiebenSat.1 Group. ProSiebenSat.1 Media SE participates in the risks of its subsidiaries and investments in line with its respective ownership interest. The risks and opportunities are described in the Risk and Opportunity Report. Risk and Opportunity Report

Outlook

Because of the interrelations between ProSiebenSat.1 Media SE and its subsidiaries, the outlook for ProSiebenSat.1 Group also largely reflects the expectations of ProSiebenSat.1 Media SE. The earnings development of ProSiebenSat.1 Media SE should remain in alignment with the development of the Group in the future, since the results of the subsidiaries will influence the investment result to a large degree. Therefore, the remarks in the Company Outlook also apply to ProSiebenSat.1 Media SE. We assume that the investment result will still have a substantial influence on the profit of ProSiebenSat.1 Media SE. Company Outlook

Dividend
The share of the profit of a stock corporation distributed to the shareholders. The amount of the dividend is proposed by the Executive Board and approved by the Annual General Meeting. The
dividend depends, among other things, on the profitability, economic situation and dividend policy of the company. The basis of assessment for the distribution is the profit calculated according to commercial law.
Glossary
Programming assets
Rights to TV program content (e.g. feature films, series, commissioned productions) capitalized as a separate item due to their particular importance for the financial position and performance at ProSiebenSat.1 Group. Feature films and series are posted on the statement of financial position as of the beginning of the license term. Commissioned productions are capitalized as broadcast-ready programming assets as of their date of formal acceptance. Until being broadcast, sport rights are included in advance payments. They are then posted to programming assets. When programs are broadcast, a program consumption item is posted in the income statement.
Glossary