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.