Discovery sets long-term guidance, international plans


Michelle Clancy

| 30 September 2015

Discovery Communications has set its long-term financial guidance, led by international expansion.

The company expects a low double-digit, constant currency-adjusted EPS CAGR from 2015 to 2018, and low double-digit free cash flow CAGR from 2015 to 2018.

"Third quarter results are on track, highlighted by strong US advertising growth," CFO Andrew Warren said. "We are pleased that we are delivering on our 2015 commitments and are confident that we are well positioned to continue to grow adjusted EPS in the long-term. In addition, our model generates significant free cash flow, and we expect to have approximately $10 billion in available capital over the next five years."

Discovery Networks International has been the growth engine for the company of late, and the division has a three-part strategy: grow audience and share; own and control must-have IP; and create and expand powerful and loved brands.

Speaking at Discovery's first investor day in New York City, Jean-Briac Perrette, president, Discovery Networks International, described how Discovery's strategy will hinge on leveraging exclusive content around the world will support the division's continued strong growth.

Part of the company's strategy is to grow the Eurosport brand; unlike sports TV in the US, Eurosport is not dependent on any single franchise and has locked in long-term rights at low inflation levels.

Also, Eurosport's programming schedule is nearly 50% Olympic sports. The Olympic Games' sublicensing fees will cover 70% economics. Also, talks have already begun with both traditional and new distribution partners, such as mobile and digital.

Across Europe, Discovery has used local teams and tailored strategies to propel growth and out-perform competitors, even in challenging economic environments. In markets where a large number of households have never seen pay-TV, the company said that it sees an opportunity to launch thematic free-to-air channels programmed with its global content engine.

"Discovery Communications is like no other media company in the world, with an average of ten channels across more than 220 markets, and we are well positioned for near- and long-term growth," said David Zaslav, president and CEO, Discovery. "The company stands out in the marketplace due to our efficient global content model; unrivalled international infrastructure run by local teams; and a strong growth position in the US. We are confident in the long-term outlook for our business and foresee continued growth in the years ahead, which we expect will produce significant free cash flow and value for shareholders."