Letter to shareholders / Annual Report 2012

Letter to shareholders

www.apgsga.ch

2 APG|SGA SA Letter to shareholders February 28, 2013

APG|SGA SA Letter to shareholders February 28, 2013 3

Strong operating performance based on home market in Switzerland.

Continued rigorous adjustment of foreign investments.

One time effects (pension fund, impairment) affect results.

Very solid financial situation.

Dividend/special dividend of CHF 10 per share altogether.

In brief – 5.9% increase in sales revenue in Switzerland to reach a total of CHF 297.1 million – Share in sales from companies abroad drops to 6.5% of Group sales. Company in Montenegro sold.

Impairment on entire goodwill and in part on contracts in Serbia.

– Increase in the EBITDA margin from 21.4% to 23.5% after adjustment – 19.8% increase in net income to CHF 50.1 million (previous year: CHF 41.8 million).

– Free cash flow of CHF 44.2 million despite CHF 24.0 million contribution to the pension fund (previous year CHF 67.4 million).

– Net cash position of CHF 86.5 million (previous year: CHF 62.5 million) Group financial highlights in CHF 1 000

2012

2011

Change

2012 adjusted for one time effects1

2011 adjusted for one time effects2

Change adjusted for one time effects

Sales revenue

317 644

311 795

1.9%

317 644

311 795

1.9%

– Switzerland

297 111

280 581

5.9%

297 111

280 581

5.9%

– International

20 533

31 214

-34.2%

20 533

31 214

-34.2%

54.8%

74 679

66 633

12.1%

23.5%

21.4%

36.2%

60 502

48 942

19.0%

15.7%

21.1%

44 691

36 657

14.1%

11.8%

19.8%

42 713

35 463

EBITDA

113 028

73 024

– in % of sales revenue

35.6%

23.4%

Operating income (EBIT)

76 405

56 118

– in % of sales revenue

24.1%

18.0%

Consolidated net income

52 057

42 981

– in % of sales revenue

16.4%

13.8%

Net income

50 079

41 787

23.6%

21.9%

20.4%

– in % of sales revenue

15.8%

13.4%

13.4%

11.4%

Cash flow

35 645

63 948

-44.3%

54 125

61 180

-11.5%

Free cash flow

44 249

67 392

-34.3%

62 729

64 624

-2.9%

Investments in property, plant, and equipment

5 350

9 163

-41.6%

5 350

9 163

-41.6%

– advertising plant

3 033

6 380

-52.5%

3 033

6 380

-52.5%

– other investments

2 317

2 783

-16.7%

2 317

2 783

-16.7%

17.03

14.23

19.7%

14.53

12.08

20.3%

10.00

7.00

42.9%

Net income per share, in CHF Dividend per share, in CHF 1 2 3

3

One time effects 2012: change in plan and contribution to pension fund as well as impairment, including proportionate taxes One time effects 2011: net profit from sales of foreign operations, collection of bank guarantee, as well as impairment, including proportionate taxes Proposal to the General Meeting

EBITDA: Earnings before interest, taxes, depreciation of property, plant, and equipment, and amortization of intangible assets EBIT: Earnings before interest and taxes

4 APG|SGA SA Letter to shareholders February 28, 2013

Dear Shareholder: General business development Strong operating performance in Switzerland formed the basis for once again very satisfying financial results.

The ongoing strong drive behind implementation of the various measures designed to strengthen the company’s market cultivation, a compelling portfolio of products and services as well as disciplined cost management all contributed to the continued positive momentum on the domestic market that also shaped the company’s financial statements for 2012.

In the international segment we succeeded – shortly prior to publication of this letter to the shareholders – in selling our company in Montenegro and in withdrawing from this market. In Romania, the measures we took enabled a return to positive operating income. With rigorous impairment on all goodwill and a part of the agreements, the compay leading the market in Serbia was revalued.

Moreover, there was a positive impact on the annual financial statements due to the change in the pension fund from a defined benefit to a defined contribution plan along with the associated influences of IFRS / IAS 19. The company is excellently prepared for the future both with regard to its operating performance and as a result of its very solid financial situation.

APG|SGA Group Group sales revenue rose by 1.9% to reach a total of CHF 317.6 million. Organic growth in the local currency amounted to 5.2%, whereby currency influences had a -0.7% negative effect on this growth. Income from real estate in the amount of CHF 2.5 million remained at the level of the previous year. Concessions and commissions were likewise at the level of the previous year and accounted for 44.6% of sales revenue.

Thanks to strict cost management, the company’s operating and administrative expenses were reduced by 11.6%. EBITDA in the year under review amounted to CHF 113.0 million, which corresponds to an EBITDA margin of 35.6%. If one time effects are excluded, then there was a 12.1% increase in EBITDA compared with the previous year.

The net income in the year under review amounted to CHF 50.1 million. If one time effects are excluded, then this corresponds to an increase of 20.4%. However, currency losses totaling CHF 1.9 million had a negative impact on the results for 2012.

Cash flow In financial year 2012 a cash flow of CHF 35.6 million was achieved. It should be noted that a total of CHF 24.0 million were appropriated to the company pension fund in the reporting period. Cash flow from operations closed at CHF 45.0 million. After investments of CHF 5.4 million as well as proceeds from the sale of property, plant, and equipment, and participating interests totaling CHF 4.6 million, free cash flow before dividend payments closed at CHF 44.2 million.

APG|SGA SA Letter to shareholders February 28, 2013 5

Balance sheet Total assets fell in comparison to the end of 2011 by 7.7% to a total of CHF 287.4 million, primarily due to the complete redemption of all bank loans. Intangible assets amounted to 14.6% of total assets (year end 2011: 22.2%). Receivables from customers rose to CHF 43.9 million, while the company’s net cash position amounted to CHF 86.5 million as of the end of financial year 2012. As of the balance sheet date, the equity belonging to the shareholders of APG|SGA AG amounted to a total of CHF 103.5 million, which corresponds to an equity ratio of 36.0%. However, a negative impact on equity was attributable to actuarial losses from defined benefit pension plans in the amount of CHF 51.9 million.

Swiss market In the year under review, APG|SGA was able to look back on very positive development on its home market.

Fortunately, with increases in sales in other segments, the company was able to completely compensate for the considerable additional sales obtained in election year 2011 (National Council and Council of States) and even significantly exceed last year’s sales. Taking this into consideration, but also in light of local 1 development on the overall advertising market of -0.1%, this 5.9% increase in sales provides proof of the compelling performance of our sales organization. With respect to other media categories, Out of Home media in general and our company in particular have acquired new market shares based on a comparison between media. Another positive aspect to note is the fact that all of the APG|SGA segment companies in Switzerland exceeded their targets both with regard to sales performance and their contribution to the company’s overall results.

In the Switzerland segment, sales revenue increased by 5.9% to a total of CHF 297.0 million compared with the previous year, while EBITDA increased to CHF 115.4 million. This corresponds to an increase of 60.7% compared with the previous year. This strong increase was also positively influenced by conversion of the pension fund from a defined benefit to a defined contribution plan. Net income amounted to CHF 77.6 million in total.

In the year under review, APG|SGA was once again able to acquire or extend numerous agreements with cities, municipalities, transportation companies, corporate partners and private partners. In open, transparent and professionally conducted bids and RFQs, the company’s range of products and services convinced customers both through attractive financial terms and conditions as well as high quality, reliability and service orientation. Our corporate policy, which is aimed at long-term partnerships, and identification with our customers in our daily work, is also particularly important for public authorities and transportation companies.

At the same time, we attach great importance to all matters involving sustainability and conscientious handling of resources. In this regard, our company is considered to be a leader in the media industry. For example, APG|SGA invests substantial amounts in sustained reduction of carbon dioxide emissions, operates one of the largest environmentally friendly car fleets (natural gas/hybrid) in Switzerland and relies completely on green electricity.

1

Media Focus, gross spendings, all media, January–December 2012

6 APG|SGA SA Letter to shareholders February 28, 2013

Other special items that are particularly noteworthy in the report for 2012 include the award of a contract in a challenging public bid for management of 1,255 poster spaces on public premises in the city of Zurich for an additional five years as well as further development of the partnership between APG|SGA Traffic and PostAuto Schweiz AG – for which advertising spaces at transit stops are now marketed in addition to advertising in and on the respective vehicles. APG|SGA Mountain was able to successfully conclude various agreements with mountain regions and railways, including Zermatt Bergbahnen AG, Bettmeralp Bahnen AG, and Jungfraubahnen Management AG. With Startower, APG|SGA launched a new illuminated advertising column that revolves on its own axis and which will be used at exclusive urban locations. Our Digital Competence Center and Digital Sales divisions are in close contact with cities, transportation companies, shopping centers and other partners in order to assess the possible uses for high-quality digital products.

The ePanels that were already successfully employed in the large stations were also installed at Metro m2 in Lausanne in the spring. At the main train station in Zurich, the eBoard represents a replacement investment in the largest HD display in Switzerland (60 square meters). All in all, sales in the digital segment more than doubled since 2010.

International markets The decision to withdraw the company from operating activities in Greece, Bosnia, Hungary, Bulgaria, and Italy, as was communicated two years ago within the scope of our revised strategy, was quickly implemented despite adverse economic conditions. In Montenegro, we succeeded in selling our majority interest to the former minority shareholder shortly prior to publication of this letter to the shareholders and thus withdrawing from this market.

Our efforts to sell the companies in Romania could not be realized due to the continuing poor market conditions. However, we succeeded in putting the respective operational units on a much better footing last year. We are pleased that a positive income result at the operating level was again able to be achieved for 2012 thanks to various measures we took, such as reintegrating the logistics organization, optimization of the advertising inventory and strengthening the sales organization.

In Greece, where we no longer have any operating activities, the remaining companies will undergo structured liquidation as planned.

In Serbia, comprehensive impairment for the entire goodwill as well as a part of the value of the respective contracts was required. The company in Serbia is well-positioned in operating terms. It is the undisputed market leader and has long-term contracts for marketing a modern portfolio of products and services. In spite of these strengths – which in principle make us optimistic for the future – the company, as already mentioned in the semiannual report, was unable to escape the extraordinarily difficult macroeconomic environment. The local economic situation is very challenging, and then too there is the exceptionally weak Serbian dinar.

Despite comparatively good sales performance, which in the local currency nearly achieved the level of the previous year, intangible assets had to be adjusted down as a review of their value revealed overvaluation of the carrying amounts.

With a total of CHF 20.5 million, the entire share in Group sales from companies abroad declined even further to 6.5%. This reduction amounts to 34.2%, of which 7.0% and 25.7% were attributable to respective negative foreign exchange and acquisition effects. EBITDA amounted to a total of CHF 4.0 million. Foreign net income put a burden on the consolidated financial statement of CHF 26.2 million, with CHF 21.4 million being attributable to tax-adjusted impairment losses and CHF 3.1 million to foreign currency losses.

APG|SGA SA Letter to shareholders February 28, 2013 7

Pension fund Conversion from the previous defined benefit plan to a defined contribution plan was effected as of January 1, 2013 as planned. At the same time, all of the company’s administrative work and its asset management were completely reorganized and outsourced to external service partners. As a result, the costs required from the pension fund for beneficiaries significantly declined. At the same time, the pension fund’s risk profile was optimized. The result of switching the system had a positive effect on the company's net income for the year in the amount of CHF 38.3 million before taxes or CHF 28.8 million after taxes (in accordance with IFRS/IAS 19).

Branding After the company’s brand management in Switzerland was standardized at the beginning of the year and placed under a new umbrella brand, the previous Affichage Holding was renamed APG|SGA since the middle of the year. The new branding concept has met with very favorable reception in the market and among the company’s staff.

From IFRS to Swiss GAAP FER For the upcoming reporting year, the Board of Directors has decided to switch accounting standards from IFRS to Swiss GAAP FER. In light of the increasing complexity of IFRS and its focus on international groups of companies, Swiss GAAP FER proves to be the standard that is better suited to our medium-sized company which focuses on Switzerland.

Dividend The Board of Directors will propose to the General Meeting of Shareholders that a dividend of CHF 7 and a special dividend of CHF 3 be paid (previous year: a dividend of CHF 5 plus a special dividend of CHF 2).

This results in a payout of CHF 10 per share for financial year 2012. With renewed payment of a special dividend, the company’s shareholders will profit directly from successful resolution of the problem areas abroad and be rewarded for their support during this difficult phase.

APG|SGA also endeavors to pursue a dividend policy in the future that is both friendly to shareholders and which takes the needs of the company into equal consideration, in particular upcoming, strategically important investments in the digitization of advertising spaces. In principle, the target is a payout ratio of 60% of the net profit over a medium-term cycle.

8 APG|SGA SA Letter to shareholders February 28, 2013

Outlook APG|SGA is the undisputed market leader in Switzerland on both the analog and digital Out of Home media market. Our new portfolio strategy with its uncompromising focus on the needs of customers has provided us with above-average sales growth in the last two years – independently of the overall economic climate. The APG|SGA portfolio of products and services and the associated added value are immensely attractive for the advertising industry, advertising clients and franchisers. Thus we have created optimum conditions for the successful future of our company.

Based on this, we are confident that the company will achieve strong performance in comparison to the market in 2013. However, we will refrain from concrete guidance for 2013, because the current structural and macroeconomic challenges do not allow for a forecast for the year with any degree of certainty.

We would like to take this opportunity to thank our staff for their impressive commitment to the various divisions of APG|SGA. We would also like to thank you as shareholders for your loyalty and support.

Jean-François Decaux Chairman of the Board

Dr. Daniel Hofer Chief Executive Officer

APG|SGA SA Letter to shareholders February 28, 2013 9

Condensed consolidated balance sheet

Assets in CHF 1 000

Property, plant, and equipment

31.12.2012

31.12.2011

72 026

78 751

311

345

3 165

5 372

Intangible assets

41 868

69 178

Deferred taxes

16 030

14 733

133 400

168 379

Investments in associated companies Other financial investments

Non-current assets

2 362

2 746

Trade accounts receivable

43 913

39 849

Other accounts receivable

13 132

15 457

8 109

6 845

Inventories

Deferred expenses and accrued income

501

408

85 976

77 534

Current assets

153 993

142 839

Total

287 393

311 218

31.12.2012

31.12.2011

Marketable securities Cash and cash equivalents

Shareholders’ equity and liabilities in CHF 1 000

Share capital Group reserves Net income Equity held by APG|SGA SA shareholders

7 800

7 800

45 631

74 097

50 079

41 787

103 510

123 684

3 543

2 825

107 053

126 509

Provisions

61 335

56 425

Deferred taxes

12 255

10 160

Non-controlling interests Shareholders’ equity

26

28

Non-current liabilities

73 616

66 613

Trade accounts payable

20 465

21 589

Long-term financial liabilities

Current accounts payable to banks Taxes payable Other accounts payable

15 001 1 138

1 937

30 102

23 444

55 019

56 125

Current liabilities

106 724

118 096

Liabilities

180 340

184 709

Total

287 393

311 218

Accrued liabilities and deferred income

10 APG|SGA SA Letter to shareholders February 28, 2013

Consolidated income statement

in CHF 1 000

2012

2011

Change

Advertising revenue

317 644

311 795

1.9%

Real estate revenue

2 456

2 453

0.1%

Operating revenue

320 100

314 248

1.9%

-141 535

-139 104

1.7%

Personnel expenses

-29 856

-65 955

-54.7%

– of which ordinary personnel expenses

-68 205

-65 955

3.4%

-37 630

-42 556

-11.6%

1 949

6 391

Fees and commissions

– of which prior service income due to plan change

38 349

Operating and administrative costs Other income EBITDA Depreciation Amortization of intangible assets Impairment Operating income (EBIT) Financial income Financial expenses Income from associates Income before income tax Income tax Income from continuing operations

113 028

73 024

54.8%

-9 729

-11 341

-14.2% -7.0%

-4 447

-4 780

-22 447

-785

76 405

56 118

1 722

468

-2 192

-1 431

36.2%

26

62

75 961

55 217

-23 904

-12 236

52 057

42 981

21.1%

52 057

42 981

21.1%

37.6%

Income from discontinued operations, net of tax Consolidated net income – of which non-controlling interests – of which APG|SGA SA shareholders (net income) Basic and diluted earnings per share, in CHF

1 978

1 194

65.6%

50 079

41 787

19.8%

17.03

14.23

19.7%

Segment information in CHF m

Switzerland International Holding Eliminations and non-allocated items of consolidated income Total

Advertising revenue

EBITDA

Net income

2012

297.0

115.4

77.6

2011

280.5

71.8

47.9

2012

20.5

4.0

-26.2

2011

31.2

8.9

-0.6

2012

2.9

-6.4

-3.2

2011

3.2

-7.2

-16.7

2012

-2.8

0

1.8

2011

-3.1

-0.5

11.1

2012

317.6

113.0

50.1

2011

311.8

73.0

41.8

APG|SGA SA Letter to shareholders February 28, 2013 11

Consolidated comprehensive income

Gross

Income tax effect

Unrealized gains/losses on available-for-sale securities

111

-25

Currency translation differences

995 -68 023

in CHF 1 000

Gross

Income tax effect

86

-25

1

0

995

2 599

16 171

-51 852

-28 239

Consolidated net income

Actuarial gains/losses from defined benefit plans

2012 net

52 057

2011 net

42 981 -24 2 599 7 060

-21 179

Comprehensive income

1 286

– of which non-controlling interests

1 969

833

-683

23 544

– of which APG|SGA SA shareholders

24 377

12 APG|SGA SA Letter to shareholders February 28, 2013

Consolidated statement of changes in equity

in CHF 1 000

as at January 1, 2011

Capital Share reserves capital premiums

7 800

5 632

Treasury shares

-9 539

Comprehensive income

Share of APG|SGA SA shareholders Translation AvailableReNondifferfor-sale valuation Retained controlling ences securities reserves earnings Total interests

-19 927

187

2 960

-24

46 059

– of which consolidated net income – of which other comprehensive income

2 960

-24

99 762

1 163

100 925

20 608

23 544

833

24 377

41 787

41 787

1 194

42 981

-21 179

-18 243

-361

-18 604

1 471

1 471

21

21

25

357

as at December 31, 2011

332 7 800

5 632

-9 207

Comprehensive income

-16 967

163

1 004

86

46 059

90 204

– of which consolidated net income – of which other comprehensive income

1 004

-21 -621

-621

123 684

2 825

126 509

-1 773

-683

1 969

1 286

50 079

50 079

1 978

52 057

-51 852

-50 762

-9

-50 771

-20 589

-20 589

-1 251

-21 840

95

1 098

67 937

103 510

3 543

107 053

Distributions Changes in treasury shares

Shareholders' equity

69 550

Changes in scope of consolidation Purchase of non-controlling interests

Total

357

Purchase of non-controlling interests Distributions Changes in treasury shares as at December 31, 2012

1 003 7 800

5 632

-8 204

-15 963

249

46 059

1 098

APG|SGA SA Letter to shareholders February 28, 2013 13

Consolidated statement of cash flows

in CHF 1 000

2012

2011

Consolidated net income

52 057

42 981

Depreciation and amortization, and impairment

37 281

16 906

Unrealized gains/losses on securities Change in provisions, taxes, and interest Gain/loss from the sale of non-current assets Income from associates Cash flow

86

-24

-51 823

7 586

-1 930

-3 439

-26

-62

35 645

63 948

Change in inventories

345

622

Change in accounts receivable

601

4 400

-93

22

8 900

1 014

-394

2 727

Net cash provided by operating activities

45 004

72 733

Capital expenditures in non-current assets

-5 366

-10 840

Change in marketable securities Change in accounts payable Change in other deferred expenses, accrued income, accrued liabilities, and deferred income

Sale of non-current assets Net cash used in investing activities Purchase and sale of treasury shares Change in current accounts payable to banks Change in long-term financial liabilities Dividends to APG|SGA SA shareholders

4 611

5 499

-755

-5 341

1 098

358

-15 001

-15 769

-2

-10

-20 589

Distributions to non-controlling interests

-1 251

-621

Net cash used in financing activities

-35 745

-16 042

-62

-69

8 442

51 281

Cash and cash equivalents as at January 1

77 534

26 253

Cash and cash equivalents as at December 31

85 976

77 534

Currency translation effect on cash and cash equivalents Change in cash and cash equivalents

14 APG|SGA SA Letter to shareholders February 28, 2013

Agenda

Financial media and analysts conference February 28, 2013, Z端rich Publication of the annual report April 23, 2013 General Meeting May 22, 2013, Geneva Announcement of semi-annual results July 31, 2013

Contacts Dr. Daniel Hofer, Chief Executive Officer T +41 58 220 71 66 Beat Hermann, Chief Financial Officer T +41 58 220 77 47

This letter to shareholders is available in German, French and English.

The German version is legally binding.

www.apgsga.ch APG|SGA SA 23, rue des Vollandes CH-1211 Genève 6 investors@apgsga.ch

Printed in Switzerland February 2013 All rights reserved

APG|SGA SA is Switzerland’s leading Out of Home media company. Listed on the SIX Swiss Exchange in Zurich, APG|SGA covers all aspects of Out of Home advertising: on the street, at the airport, in shopping centres and train stations, in mountain regions and on public transport – from poster campaigns with the widest coverage and large poster spaces to state-of-theart digital advertising media. When communicating with customers, the authorities and the advertising industry, APG|SGA represents sustainability, innovation and competency.