Letter to shareholders
February 29, 2012
Turnaround achieved. Reassuring annual result. Fast and systematic strategy implementation. Resumption of dividend payments.
In brief Increase of sales revenue in Switzerland by 8.3% to CHF 280.6 million, increase of groupwide sales revenue by 2.5% to CHF 311.8 million (organic growth in local currencies +3.7%, currency translation effect –1.2%) Improvement of EBITDA by 42.3% to CHF 73.0 million Increase of EBITDA margin to 23.4% (PY 16.9%) Net income at CHF 41.8 million (PY CHF –52.3 million) Free cash flow at CHF 67.4 million (PY CHF 32.6 million) Net cash position at CHF 62.5 million (PY net debt CHF 4.1 million) Group financial highlights
1 2
in CHF 1 000
2011
2010
Change
Sales revenue
311 795
304 280
2.5%
– Switzerland
280 581
259 035
8.3%
– International 1
31 214
45 153
– 30.9%
EBITDA
73 024
51 327
42.3%
– in % of sales revenue
23.4%
16,9%
Operating income (EBIT)
56 118
– 39 098
– in % of sales revenue
18.0%
– 12,8%
Income from continuing operations
42 981
– 52 720
– in % of sales revenue
13.8%
– 17.3%
Consolidated net income
42 981
– 52 720
– in % of sales revenue
13.8%
– 17.3%
Net income
41 787
– 52 306
– in % of sales revenue
13.4%
– 17.2%
Cash flow
63 948
44 876
42.5%
Free Cash flow
67 392
32 635
106.5%
Investments in property, plant, and equipment
9 163
5 368
70.7%
– advertising plant
6 380
2 836
125.0%
– other investments
2 783
2 532
9.9%
Income from continuing operations per share, in CHF
14.23
– 17.82
Net income per share, in CHF
14.23
– 17.82
Dividend per share, in CHF 2
7.00
Greece and other foreign countries 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
Affichage Holding SA Letter to shareholders February 29, 2012
2
Dear shareholder: Business development Both in strategic and operational terms, our company made considerable progress in 2011, which gives us an optimistic perspective for the future. After a difficult phase with failed expansions to foreign markets and the associated negative financial results, the Board of Directors with its new Chairman as well as the new Management Board succeeded last year in swiftly implementing a genuine turnaround. Many legacy burdens abroad were cleared up, all companies in Switzerland generated reassuring results, and important contracts were renewed. The annual result ranks among the best in the company's history. The year under review was characterized by two priorities. On the one hand, the issue was to execute the redefined corporate strategy with its focus on the Swiss home market and with a concurrent significant reduction of the foreign portfolio exposure. The other objective was to adjust the structures and processes of the companies in Switzerland with a view of creating an integrated, contemporary Out of Home media company. In this context, numerous projects were initiated to strengthen the company's competitiveness in an ever more complex and increasingly digitized market environment. Consolidated sales revenues rose by 2.5% to CHF 311.8 million. Organic growth in local currencies amounted to 3.7%; currency effects accounted for –1.2%. Disciplined cost management, the elimination of unprofitable business activities abroad, and the positive trend in Switzerland pushed EBITDA up by 42.3% to CHF 73.0 million (PY CHF 51.3 million), which is equivalent to a groupwide EBITDA margin of 23.4% (PY 16.9%). The strict implementation of the new corporate strategy, strong growth in Switzerland, disciplined cost management, non-recurring proceeds, and the elimination of impairments on intangible assets brought about a sizeable improvement of the result. After two years of losses (2010: CHF –52.3 million, 2009: CHF –59.3 million), net income for 2011 closed at CHF 41.8 million. Swiss market The development of our activities in the Swiss market was consistently positive and further momentum was achieved with the supplementary revenues in connection with the national elections. All business activities and companies in Switzerland posted higher earnings and generated reassuring results. Sales revenue in financial 2011 advanced by 8.3% to CHF 280.6 million (PY CHF 259.0 million). EBITDA improved by 5.6% to CHF 71.8 million, which corresponds to an EBITDA margin of 25.6% (PY 26.3%). Persuasive financial bids for concession partners, dependable, high-quality services, and an exemplary commitment to environmental protection and sustainability again made it possible for the company to outplay rivals and finalize contracts within the scope of public tenders and RFQs in a fair competitive spirit. Key partners (cities, communities, mass transit operators, tourism destinations, shopping centers, among others) continue to trust our companies, which for decades have proven their capabilities and reliability in the marketplace. The list of achievements includes contract renewals with the cities of Geneva and Schaffhausen, the intensification of the marketing partnership with the public transportation authorities in Lausanne, and many others. The highly successful introduction of digital ePanels at the RailCity stations in Basel, Bern, Geneva, Lausanne, Luzern, and Zürich was another important milestone.
Affichage Holding SA Letter to shareholders February 29, 2012
3
The emphasis in our conceptual work last year was on the progressive digitization of our everyday life and the opportunities it opens up for the advertising industry as well as on planning approaches for an integrated sales organization with the involvement of all segment companies. Interdisciplinary project groups laid the foundations for a forward-looking, more flexible sales organization. This also included the creation of a Digital Competence Center and of a Digital Sales Unit within the Swiss market organization. Within the scope of a brand strategy review and optimization program, it was resolved to merge and strengthen the traditional core brands APG (Eastern Switzerland) and SGA (Western Switzerland and Ticino). At the same time, all segment companies that to some extent operated under proprietary names were integrated in the new brand management concept. Since January 2012, our company has been operating under the unified APG|SGA umbrella brand, manifesting the new integrated product portfolio and sales structure. Foreign strategy Announced in the spring of 2011, the strategic realignment focused on the Swiss home market and combined with a massive reduction of foreign-market exposure was then rapidly and persistently implemented. In April, the activities in Greece had already been sold, and subsequently, our heavily loss-generating sales organization was wound down. With further steps in the months that followed, concurrent negotiations in various other countries were successfully completed despite the obstacles arising from the adverse economic baseline conditions. In the meantime, all of our interests in Hungary, Bulgaria, Bosnia, and Italy have been sold, and we are withdrawing from these markets. In Romania, a settlement ended the protracted legal dispute with the minority shareholder and general manager: all his shares were acquired, ending a stalemate situation which until then had been a significant burden for the company. A market exit at some point in time is still the objective as regards Romania. We granted the former minority shareholder a call option on all shares, scheduled to expire on March 31, 2012. Despite the challenging economic scenario and delays in conjunction with the modernization and upsizing of the advertising plant in the first quarter, the company in Serbia performed within the scope of our expectations and generated a respectable result. Its strong market leadership position, combined with an inventory of high-quality outdoor advertising products, constitutes a solid foundation for future activities in the Serbian market. Organization CFO Dr. Ulrich von Bassewitz announced his resignation from the Group effective March 31, 2012. After a onemonth familiarization period, his designated successor Beat Hermann will assume this function as of April 1, 2012. Christian Gotter joined our company on January 1, 2012. He has been appointed Head of Logistics effective February 15, 2012, replacing Walter Oeschger, who is retiring. The Board of Directors and the Executive Board wishes to thank both former members of the Management Board for their long years of service to APG and Affichage Holding.
Affichage Holding SA Letter to shareholders February 29, 2012
4
Proposals to the General Meeting The Board of Directors proposes to the General Meeting the payment of an ordinary dividend of CHF 5 per share for financial 2011. At the same time, in view of the attainment of interim strategic and operational benchmarks and the positive annual result it entailed, the Board also suggests the payment of a special dividend of CHF 2 per share. This proposal addresses both the need for a further consolidation of shareholders' equity and the resumption of dividend payments. As briefly outlined on the occasion of last year's General Meeting, the Board of Directors is of the opinion that our company, organized and operated according to modern corporate governance guidelines, should abandon the traditional transferability restrictions applied to registered shares. The registration and voting rights limitation to five percent of the share capital stipulated by this transferability provision is anachronistic. In the interest of all shareholders, the Board of Directors thus proposes to the General Meeting to delete the transferability restriction from the Articles of Incorporation. The introduction of the so-called "one share, one vote" principle reconciles par value with voting rights conferred to each share. Within the framework of the realignment of the company and the core focus shift to the home market, a complementary objective is to adjust the brand asset management approach at the holding company level as well. Associated primarily with expansions into foreign markets, the Affichage Holding SA brand has become obsolete. The General Meeting is requested to approve APG|SGA AG as the new name effective July 1, 2012. Outlook The diffuse macroeconomic baseline conditions and their likely impact on the advertising industry make it virtually impossible to forecast business developments for financial 2012 with any degree of certainty. Even though the year began with a so far positive trend in new orders, we expect booking behavior to be short-term and volatile as 2012 unfolds, with much depending on how the economic scenario develops. At the same time, we can reaffirm that the many measures put in place to strengthen our competitiveness justify an optimistic outlook for the near future. We wish to thank all of our employees for their strong commitment. They handle their daily assignments competently, enthusiastically, and in one-on-one contact with market partners. And to you, dear shareholders, we wish to express our sincere gratitude for your loyalty and support.
Jean-Franรงois Decaux Chairman of the Board
Dr. Daniel Hofer Chief Executive Officer
Affichage Holding SA Letter to shareholders February 29, 2012
5
Condensed consolidated balance sheet
Assets Property, plant, and equipment Investments in associated companies
in CHF 1 000
31.12.2011
31.12.2010
78 751
87 907
345
333
5 372
2 043
Intangible assets
69 178
75 263
Deferred taxes
14 733
15 195
168 379
180 741
Other financial investments
Non-current assets Inventories
2 746
3 424
Trade accounts receivable
39 849
44 366
Other accounts receivable
15 457
11 692
6 845
8 210
Deferred expenses and accrued income Marketable securities
408
430
77 534
26 253
Current assets
142 839
94 375
Total
311 218
275 116
Cash and cash equivalents
Shareholders’ equity and liabilities Share capital Group reserves Net income Equity held by Affichage Holding SA shareholders Non-controlling interests
7 800
7 800
74 097
144 268
41 787
– 52 306
123 684
99 762
2 825
1 163
126 509
100 925
Provisions
56 425
29 628
Deferred taxes
10 160
7 588
28
15 732
Shareholders’ equity
Long-term financial liabilities Non-current liabilities
66 613
52 948
Trade accounts payable
21 589
18 336
Current accounts payable to banks
15 001
15 770
Taxes payable Other accounts payable Accrued liabilities and deferred income
1 937
3 036
23 444
28 753
56 125
55 348
Current liabilities
118 096
121 243
Liabilities
184 709
174 191
Total
311 218
275 116
Affichage Holding SA Letter to shareholders February 29, 2012
6
Consolidated income statement
in CHF 1 000
2011
2010
Change
Advertising revenue
311 795
304 280
2.5%
Real estate revenue
2 453
2 298
6.7%
Operating revenue
314 248
306 578
2.5% – 1.6%
Fees and commissions
– 139 104
– 141 406
Personnel expenses
– 65 955
– 68 337
– 4.1%
Operating and administrative costs
– 42 556
– 45 508
– 8.0%
Other income
6 391
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
73 024
51 327
42.3%
– 11 341
– 14 266
– 20.5%
– 4 780
– 5 392
– 11.4%
– 785
– 70 767
– 98.9%
56 118
– 39 098
468
1 083
– 1 431
– 3 072
62
57
55 217
– 41 030
– 12 236
– 11 690
42 981
– 52 720
42 981
– 52 720
1 194
– 414
41 787
– 52 306
14.23
– 17.82
Income from discontinued operations, net of tax Consolidated net income – of which non-controlling interests – of which Affichage Holding SA shareholders (net income) Basic and diluted earnings per share, in CHF
Segment information in CHF m Switzerland Greece Other foreign countries Holding Restatement of consolidated income Total
Affichage Holding SA Letter to shareholders February 29, 2012
Advertising revenue
EBITDA
Net income
2011
280.5
71.8
47.9
2010
259.0
68.1
42.0
2011
1.9
4.2
4.2
2010
10.7
– 16.0
– 21.9
2011
29.3
4.7
– 4.8
2010
34.4
3.4
– 79.4 – 16.7
2011
3.2
– 7.2
2010
3.2
– 4.2
0.8
2011
– 3.1
– 0.5
11.1
2010
– 3.1
2011
311.8
73.0
41.8
6.2
2010
304.3
51.3
– 52.3
7
Consolidated statement of comprehensive income
in CHF 1 000
Gross
Income tax effect
Consolidated net income Unrealized gains/losses on available-for-sale securities Currency translation differences Actuarial gains/losses from defined-benefit plans Comprehensive income – of which non-controlling interests – of which Affichage Holding SA shareholders
Affichage Holding SA Letter to shareholders February 29, 2012
2011 Net
Gross
Income tax effect
42 981 – 25
1
2 599 – 28 239
7 060
2010 Net – 52 720
– 24
– 165
41
– 124
2 599
– 5 318
– 1 239
– 6 557
– 21 179
– 8 703
2 176
– 6 527
24 377
– 65 928
833
– 370
23 544
– 65 558
8
Consolidated statement of changes in equity
in CHF 1 000
Capital Share reserves capital Premiums
as at January 1, 2010
7 800
5 632
Share of Affichage Holding SA shareholders AvailableRefor-sale valuation Retained securities reserves earnings Total
Treasury shares
Translation differences
– 6 979
– 13 327
311
– 6 600
– 124
– 6 600
– 124
Comprehensive income
46 221
– of which consolidated net income – of which other comprehensive income Reclassification of reserves
– 162
Noncontrolling interests
Total Shareholders‘ equity
125 590
165 248
1 926
167 174
– 58 834
– 65 558
– 370
– 65 928
– 52 306
– 52 306
– 414
– 52 720
– 6 528
– 13 252
44
–13 208
4
4
– 397
– 397
1 163
100 925 24 377
162
Changes in scope of consolidation Purchase of non-controlling interests Dividends Changes in treasury shares as at December 31, 2010
– 2 560 7 800
5 632
– 9 539
Comprehensive income
– 19 927
187
2 960
– 24
46 059
– of which consolidated net income – of which other comprehensive income
2 960
– 24
2 632
72
69 550
99 762
72
20 608
23 544
833
41 787
41 787
1 194
42 981
– 21 179
– 18 243
– 361
– 18 604
1 471
1 471
Changes in scope of consolidation Purchase of non-controlling interests
21
21
Distributions Changes in treasury shares as at December 31, 2011
332 7 800
5 632
– 9 207
Affichage Holding SA Letter to shareholders February 29, 2012
– 16 967
163
46 059
25
357
90 204
123 684
– 21 – 621
– 621
2 825
126 509
357
9
Condensed consolidated statement of cash flows
in CHF 1 000
2011
2010
Income from continuing operations
42 981
– 52 720
Depreciation, amortization and impairment
16 906
90 425
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 Change in inventories Change in accounts receivable Change in marketable securities Change in accounts payable Change in other deferred expenses, accrued income, accrued liabilities, and deferred income Net cash provided by operating activities Capital expenditures in non-current assets 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
– 24
– 124
7 586
6 787
– 3 439
565
– 62
– 57
63 948
44 876
622
– 37
4 400
31 985
22
124
1 014
– 25 891
2 727
4 631
72 733
55 688
– 10 840
– 24 297
5 499
1 244
– 5 341
– 23 053
358
143
– 15 769
– 30 232
– 10
4 782
Dividends to Affichage Holding SA shareholders Distributions to non-controlling interests
– 621
– 397
Net cash used in financing activities
– 16 042
– 25 704
– 69
– 1 579
51 281
5 352
Cash flows from discontinued operations Cash and cash equivalents of the discontinued operations as at December 31 Currency translation effect on cash and cash equivalents Change in cash and cash equivalents Cash and cash equivalents as at January 1
26 253
20 901
Cash and cash equivalents as at December 31
77 534
26 253
Affichage Holding SA Letter to shareholders February 29, 2012
10
Comments on the financial situation
General While sales growth was reassuring in Switzerland, the Group remains confronted with adverse baseline conditions in its foreign markets. The reduction of foreign interests, resolved and systematically implemented as part of the strategy reorientation, as well as an upswing in the Swiss domestic market had a positive influence on income, the balance statement, and free cash flow. Affichage Group Consolidated sales revenue rose by 2.5% to CHF 311.8 million (PY CHF 304.3 million). Organic growth in local currencies amounted to 3.7%; currency effects accounted for –1.2%. Real estate revenue rose by 6.7% to CHF 2.5 million. Five effects had a positive impact on the operating result: the redimensioned and largely rehabilitated foreign activities, non-recurring proceeds amounting to CHF 6.4 million (item Other income: collection of bank guarantees, sale of activities abroad, recovered write-downs), sales growth in Switzerland achieved without infrastructure expansions, and proportionally slightly lower concession fees (44.6% of sales revenue). EBITDA advanced by 42.3% to CHF 73.0 million (PY CHF 51.3 million), which is equivalent to a groupwide EBITDA margin of 23.4% (PY 16.9%). Net income closed at CHF 41.8 million (PY CHF –52.3 million); apart from the operational recovery, this result also reflects the elimination of impairments on intangible assets. Net income for the period from January to September 2011 closed at CHF 27.7 million. Total income attributable to shareholders of Affichage Holding SA (comprehensive income) amounted to CHF 23.5 million (PY CHF –65.6 million). Switzerland In the Swiss home market, sales revenue rose by 8.3% to CHF 280.6 million (PY CHF 259.0 million). All activities contributed to this vigorous growth. The gain in the first half of the year was 7.5%, accelerating to 8.8% in the second half, buoyed by the national parliamentary elections and new electronic products (ePanels in railway stations). EBITDA increased by 5.6% to CHF 71.8 million (PY CHF 68.1 million), resulting in an EBITDA margin of 25.6% (PY 26.3%). Overall, the company generated CHF 47.9 million in net income (PY CHF 42.0 million).
Affichage Holding SA Letter to shareholders February 29, 2012
11
International: Greece and other foreign countries In compliance with reporting standard IFRS 8 (segment reporting), the International Division is subdivided into two segments: Greece and Other foreign countries. The total foreign contribution to consolidated sales revenue declined from 14.8% to 10%, closing at CHF 31.2 million (PY CHF 45.2 million). This represents a decrease of 30.9%, of which 8.4% is attributable to negative foreign-exchange effects. Overall, the International Division generated EBITDA of CHF 8.8 million (PY CHF –12.5 million). Sales revenue in Greece fell by 81.8% to CHF 1.9 million (PY CHF 10.7 million), of which –2.2% was due to currency translation. To a large extent, EBITDA of CHF 4.2 million (PY CHF –16 million) reflects costs for the controlled exit, income from the sale of individual activities to a local partner, and an amount collected from a bank guarantee representing a receivable from the seller of the operations in Greece. Net income closed at CHF 4.2 million (PY CHF –21.9 million). Sales revenue in Other foreign countries declined by 15.0% to CHF 29.3 million (PY CHF 34.4 million); currency effects account for –10.3%. Expressed in local currencies, sales revenue in the Serbian market stagnated, and a further decline of 13.5% was posted in the Romanian market. EBITDA closed at CHF 4.7 million (PY CHF 3.4 million), resulting in an EBITDA margin of 15.9% (PY 10.0%). Net income improved to CHF –4.8 million (PY CHF –79.4 million), which is attributable to the elimination of prior-year impairments. In compliance with IFRS 5, no separate report was compiled for the sale of activities in Bosnia, Bulgaria, South Tyrol, and Hungary: they were classified as non-essential. The segment report for Other foreign countries lists the sold activities with a revenue contribution of CHF 7.5 million, an EBITDA contribution of CHF 1.3 million, and net income amounting to CHF 0.6 million. In late 2011, the Affichage Group acquired the 30% share minority in Affichage Romania Srl and granted the former minority shareholder a call option for the 100% acquisition of the Romanian group; the option expires at the end of March 2012. Cash flow Cash flow closed at CHF 63.9 million (PY CHF 44.9 million). Cash flow from operations, i.e. cash-relevant income under consideration of changes in net current assets, closed at CHF 72.7 million (PY CHF 55.7 million). After investments in property, plant, and equipment, financial assets, and intangible assets amounting to CHF 10.8 million (PY CHF 23.1 million) as well as proceeds from the sale of property, plant, and equipment, and participating interests totaling CHF 5.5 million, free cash flow closed at CHF 67.4 million (PY CHF 32.6 million).
Affichage Holding SA Letter to shareholders February 29, 2012
12
Balance sheet Total assets increased by 31.1% to CHF 311.2 million, mainly because of increased liquidity. Intangible assets amount to 22.2% of total assets (PY 27.4%) or 55.9% of shareholders' equity (PY 75.4%). Net current assets amount to 6.7% of sales revenue (PY 9.7%). The receivables portfolio decreased to CHF 39.8 million (PY CHF 44.4 million). The CHF 4.1 million net debt position from the prior year was transformed into a net cash position of CHF 62.5 million. Shareholders' equity amounts to CHF 123.7 million (PY CHF 99.8 million), which is equivalent to an equity ratio of 39.7% (PY 36.3%). Shareholders' equity was burdened by an IFRS-related actuarial loss from defined-benefit plans in the amount of CHF 21.2 million (PY CHF 6.6 million). This reflects slight losses on pension fund assets as well as historically low interest rates that resulted in a further reduction of the discount rate, which in turn increases expected future benefit obligations.
Affichage Holding SA Letter to shareholders February 29, 2012
13
Agenda
Financial media and analysts conference February 29, 2012, ZĂźrich Publication of the annual report April 24, 2012 General Meeting May 23, 2012, Geneva Announcement of semi-annual results July 31, 2012
Contacts Dr. Daniel Hofer, Chief Executive Officer T +41 58 220 7166 Dr. Ulrich von Bassewitz, Chief Financial Officer T +41 58 220 7747 Affichage Holding SA 23, rue des Vollandes Case postale 6195 CH-1211 Genève 6 investors@affichage.com www.affichage.com
Affichage Holding SA Letter to shareholders February 29, 2012
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Credits The German version is legally binding. Cover Z端rich HB: APG|SGA continues to drive digitization in Out of Home advertising in the Swiss market. ePanels with the standard 9:16 portrait format deliver brilliant images in full-HD resolution, empowering Out of Home advertising of unprecedented quality. Concept and editorial office J端rg Sager, Luzern Photography Bruno Eberli, Horw Printing UD Print AG, Luzern