Radio Luxembourg's RTL is still pop-pickers' choice
Depending on your age, the name Radio Luxembourg may carry a special magic. In my time, it represented the glorious awakening of a teenage culture which introduced us to Elvis, Buddy Holly, Bill Haley and 'The Killer' himself, Jerry Lee Lewis. Radio éireann was still in the grip of 'Ballad-makers' Saturday Night' mentality, and the 'devil's music' got no airtime at all. So 'Luxembourg' was the slot on the dial for music fans with the merest hint of revolution in their souls. A slightly later generation would remember Radio Luxembourg as a forerunner of the radio pirates, made immortal by the weekly 'Top Twenty,' unmissable for tens of millions of 'pop-pickers'.
Then, it seemed for many of us that Radio Luxembourg (founded in 1924) faded from the cultural landscape. But that's not true either. Radio Television Luxembourg (or RTL as it is now) instead became a leading European entertainment network, now filling TV and radio's remorseless appetite for fun and games. The group has 50 TV channels and 29 radio stations in eight European countries, and is in the process of developing new businesses for the digital age. Its licensing and distribution company, FremantleMedia is said to be one of the largest outside the US. It is also listed on the Frankfurt, Brussels and Luxembourg exchanges.
Last year, most of RTL markets performed well, while France and Hungary were 'challenging'. Its German operation, with pay- and free-to-air channels is the group's largest, contributing 40pc to total revenue at €2.3bn, with operating profits of €650m. Interestingly, last year its flagship Channel RTL 1's largest audience was not soaps/game shows, but the Ireland v Germany football match in the European Championship qualifiers. The French Groupe M6 is the company's second largest operation, with revenues of €1.3bn and operating profits of €330m, while its TV stations are second and third in the rankings in France. RTL Nederlands has four channels, with its main station, RTL 4, leading the market. It generates almost €0.5bn in revenues, but profits were flat at €110m. In addition to TV and radio stations, content is a strategic issue for RTL. Fremantle, which handles the worldwide content production side of the business, had revenues of €1.3bn but modest profits of €150m. The business is focused on distribution and licensing, selling to 200 channels in 40 countries.
The company's strong cashflow allows it to combine dividends with an investment programme. The investments include a number of bolt- ons, including a content producer, a YouTube network and a video advertising platform. The content producer, 495 Productions, is a US company specialising in unscripted documentaries for cable networks. If you are watching MTV with teenagers arguing, partying or trading insults, the chances are you are watching a 495 Production reality show. These productions are widely popular, they tell me. At the end of the year, RTL gained full control of the US company, StyleHaul, a leading network on YouTube for fashion beauty and lifestyle, which is streamed to more than 62 countries. Finally, it acquired SpotXchange, a video advertising platform supporting the digital transformation of the group.
In spite of the new world of media, the company still makes most of its money selling 30-second commercials, which is indispensable for advertising and branding. Last year, advertising markets in Europe (except Belgium) were positive, despite mixed economic conditions. Company revenue last year was €5.8bn, operating income €1.3bn and its market cap was €12bn. For investors, the share price is in the low €80s, short of its ten year high of €96 earlier in the year. They are, however, pleased that dividend per share last year was €5.5, representing a yield of 6pc, among the most attractive in Europe. Worth considering.
What, I wonder, would they have said about all this on 'Ballad-makers' Saturday Night'?
Nothing in this section should be taken as a recommendation, either explicit or implicit to buy any of the shares mentioned.