Cyfrowy Polsat Group sums up 2016: dynamically growing base of services and very good financial results

Cyfrowy Polsat Group posted very good operating and financial results for 2016. Most important events and achievements of the past 12 months include: finalization of acquisition of Midas Group and its effective integration with CP Group, growth of the number of contract services and ARPU generated by contract customers, growth of viewership of Polsat TV channels and dynamic growth of TV advertising revenue, supported by the commercial success of the UEFA EURO 2016 project, retention of high margins, debt reduction, improvement of free cash flow level as well as continued development of SmartDOM Savings Program for Homes which currently offers as many as nine different products and services for households. The Group’s revenue exceeded PLN 9.6 bn, EBITDA reached PLN 3.66 bn while EBITDA margin stayed at 37.9% (on pro forma basis).

Major operating figures for Q4 2016

• The total number of active revenue generating units (RGU) increased to over 16.5 million, with over 80% (13.3 million) services provided in the contract model.
• Effective implementation of smartDOM program strategy:
  • Dynamic growth of the number of multi-play customers – up by 285 thousand during the year, with the total number exceeding 1.3 million.
  • As many as 22% of the Group’s contract customers use the integrated offer, which has positive influence on the churn ratio – 8.3% in Q4 2016.
  • The offer of SmartDOM Savings Program for Homes has been extended to include monitoring services for homes and insurance offer as well as sale of household appliances, and most recently also sale of natural gas for households. A new campaign, promoting the 9 products and services which are offered as part of the smartDOM program, has been started.

• Stable base of 5.9 million contract customers, each using 2.25 services on the average. Average revenue generated by each of these customers was PLN 88.7 for the whole of 2016 and PLN 90.7 in Q4.
• Record growth of the number of contract services – up by 640 thousand yoy, including growth of the number of RGU’s for mobile telephony by 214 thousand yoy, being the outcome of the positive influence of our multi-play strategy which in recent months was supported by intensive migration of customers from the prepaid segment.
• Contract customer base for the mobile Internet service increased by 163 thousand yoy, to nearly 1.8 million. The total number of active Internet access services was nearly 2 million.
• Thanks to both, good sale of basic service packages as well as value-added services (Multiroom and paid OTT services), the total number of contract pay TV services increased by as many as 363 thousand yoy and reached 4.8 million.
• The statistics for the prepaid segment remained under the influence of the activities associated with the anti-terrorist act which obligated users to register SIM cards:
  • In connection with the obligation to register SIM cards, mobile prepaid segment saw intensive customer migration to contract services, combined with rapid decrease of sale of new SIM’s on the entire prepaid market.
  • While promoting transparent reporting standards, Cyfrowy Polsat Group has decided to exclude unregistered SIM’s altogether from the reported statistics effective the beginning of February 2017 so as to fully reflect the effect of the obligatory prepaid card registration already in the results for Q1 2017 . At the beginning of February and at the beginning of March 2017 the Group had respectively over 2.7 million and over 2.8 million registered prepaid SIM’s as calculated according to the existing 90-day usage definition (the figure does not include the RGU’s for pay TV).
  • In Q4 ARPU for the prepaid segment increased by 3.8% yoy and reached PLN 19.2.

• Polsat Group’s TV channels unchangeably continued as the market leader in terms of viewership in the commercial viewers group, both in Q4 as well as during the entire 2016. The audience results were respectively: 25.1% (13.5% for the main channel and 11.6% for thematic channels) and 24.9% (13.2% for the main channel and 11.6% for thematic channels).
• The revenue generated by Telewizja Polsat Group from TV advertising and sponsoring increased in Q4 by 7.1% (compared to TV advertising market’s growth of 2.2% yoy) and reached PLN 366 million. Thanks to this, the Group’s share in TV advertising market increased to 27.2%. In 2016 the Group noted growth of advertising revenue by 5.6%, to the level of PLN 1,093 million PLN. At the same time the TV advertising market grew by 1.3% yoy and as a result Polsat Group’s share in the advertising market increased to 26.9%.
• Average monthly number of users of IPLA, the biggest Polish web TV, was ca. 3.8 million for the whole year, with the Q4 average of nearly 4 million.

• The Group posted very good pro forma financial results (consolidation of Midas Group results for the whole year):
  • Revenues: PLN 9.650 bn,
  • EBITDA: PLN 3.660 bn,
  • EBITDA margin: 37.9%,
  • free cash flow after repayment of interest on loans and bonds increased to PLN 1.557 bn over a 12-month period, which offers the possibility of running the company’s current business while at the same time reducing its debt,
  • net debt/EBITDA, calculated in line with the SFA definition (i.e. excluding the deb which is not serviced in cash), was 2.83x. Upon including Litenite Group’s debt – the ratio was 3.06x.

As a result of acquisition of Midas Group (Aero2 Group at present) and consolidation of its results starting from 29 February 2016, in order to give a better view of Polsat Group’s business operations the figures which in our press release are presented up to the EBIT line contain comparison of the Group’s reported results for Q4 2016 vs. the pro forma results for Q4 2015.

“ Similarly as in the previous years, in 2016 we consistently and successfully pursued our strategy and effectively responded to the challenges from customers and the market. We have accomplished the key goals for 2016, including finalization of acquisition of Midas Group, completion of the process of refinancing of the Group’s debt, substantial growth of the number of provided services (RGU’s), which we among others owe to the regular growth of our smartDOM program, as well as the commercial success of the UEFA EURO 2016 project which had positive influence on both, Polsat TV’s viewership results and revenues from advertising,” says Tobias Solorz, the CEO of Cyfrowy Polsat S.A. and Polkomtel Sp. z o.o. “Very good financial results of the whole Group and of individual segments are a confirmation of effectiveness of our efforts, which we plan to continue equally efficiently this year.

Segment of services provided to residential and business clients

“2016 was a year of consistent consolidation of our strong position on respective markets – mobile telephony, pay TV and on-line video, as well as in the multi-play area. What should be underscored is the growth of the number of provided contract services by as many as 640 thousand, 1.3 million of smartDOM program customers as well as substantial decrease of churn and consistent growth of average revenue per contract customer. These indicators demonstrate growth of our customers satisfaction with the services we provide to them, which was and is a priority for us,” sums up Tobias Solorz. “Our objective for this year is to continue the growth of such items as the number of services used by customers, the saturation of the customer base with integrated services as well as the average revenue per customer.”

While accomplishing the Group’s business goals for 2016, we also achieved very good financial results in the segment of services provided to residential and business customers. Both in Q4 as well as during the entire 2016 we maintained stable revenue and as always we kept the costs under control and generated high EBITDA margins,” comments Katarzyna Ostap-Tomann, the Management Board Member responsible for finance in Cyfrowy Polsat S.A., Polkomtel Sp. z o.o. and Telewizja Polsat Sp. z o.o.

Pro forma financial results for the segment of services provided to residential and business clients

TV broadcasting and production segment

“Both, in Q4 and during the entire 2016 our main TV channel, the theme channels as well as the entire Polsat TV Group were viewership leaders in their respective categories in the commercial viewer group,” says Maciej Stec, Management Board Member of Cyfrowy Polsat S.A. and Telewizja Polsat Sp. z o.o. “The factor which also contributed to our good results was the unique and comprehensive UEFA EURO 2016 project which was successfully carried out during the summer season. We combined broadcasting of matches in the free-to-air channel with broadcasts in the dedicated Polsat Sport 2 and Polsat Sport 3 channels where all the 51 matches could be watched live in HD quality.”

Financial results of TV broadcasting and production segment

“Balanced programming policy and consistent cost control have been reflected by substantial growth of both, the revenues and the EBITDA for the TV broadcasting and production segment in 2016. Another factor which contributed to such good results was the big sales, operational and financial success of the UEFA EURO 2016 project,” comments Katarzyna Ostap-Tomann.

Cyfrowy Polsat Group’s financial results

Financial results of Cyfrowy Polsat Group in Q4 and in the entire 2016

“It has been yet another year during which we achieved very good financial results in the whole Group. Stable revenues and operating costs control resulted in stabilization of EBITDA value and strong EBITDA margin. Last year we consistently reduced our debt, which also remains a priority for us for this year. Stable and high cash flows continue to be a strong item in our Group. They not only enable us to achieve our business goals but also to reduce our Group’s debt according to a defined plan,” sums up Katarzyna Ostap-Tomann.

Major business events in 2016

• In December Cyfrowy Polsat released updates for its EVOBOX PVR set-top box thanks to which users gained access to two new functions – Internet radio with an offer of several hundred stations as well as the possibility of turning on the view of the currently watched program while at the same time switching to any other channel from the list.
• In November Plus launched a new service called Bezpieczny Dom (Safe Home) and Bezpieczna Firma (Safe Company) which offers remote monitoring of homes and companies while away. Monitoring is available via a mobile application installed on smartphones and tablets as well as via web service on computers.
• Last October, during a SAT Kurier Awards 2016 gala, Cyfrowy Polsat received two trophies in the category: ”Best Dedicated Set-top Box” – for its EVOBOX PVR, and ”Best Service” for IPLA web TV. During the CSI Awards event the state-of-the-art, multimedia software of the EVOBOX PVR set-top box also received an award in the category “Best Interactive Application or Technology” and was recognized an innovative product at the IBC Best of Show Awards.
• 1 September – a new category – household appliances – was added to the offer of comprehensive services making up smartDOM.
• 23 August – Cyfrowy Polsat Group implemented the latest standard of mobile Internet – Internet LTE Plus Advanced which offers data download rates of even up to 300 Mbps.
• 17 August – Cyfrowy Polsat Group, while cooperating with ERGO Hestia Insurance Company from Sopot, introduced a new offer for its customers called “JA+ Ubezpieczenia” (“I + Insurance”).
• In August IPLA web TV extended its offer by adding 31 new TV online channels.
• In July Cyfrowy Polsat Group, while cooperating with Huawei, launched a project involving implementation of a new common IT environment for Cyfrowy Polsat and Polkomtel.
• From 10 June to 10 July Cyfrowy Polsat offered the possibility to watch the UEFA EURO 2016 European Championship – all 51 matches were shown live in HD quality. The matches could be watched on two channels that were fully dedicated to EURO 2016 – Polsat Sport 2 and Polsat Sport 3. Live coverage was also available in IPLA web TV.
• 11 May - Cyfrowy Polsat launched Cyfrowa Strefa Twórców (the Digital Artists Zone) – a venue where artists could in a simple way submit their concepts, ideas or interesting scripts of film productions.
• On 26 April EVOBOX PVR set-top box received a Gold Medal of Poznań International Trade Fair (MTP), while on 28 April Cyfrowy Polsat Capital Group received the Eagle Award, presented by “Rzeczypospolita” daily, in the category Best Infrastructural, Trading and Non-Financial Services Company.
• 15 March – Cyfrowy Polsat launched the Cyfrowy Polsat GO offer, which extended the company’s satellite TV package by offering on-line access to selected on-demand content as well as to linear channels available in the TV package selected by a client and also to additional free and paid VOD content.
• 14 March – Cyfrowy Polsat’s Mobile TV offer, available as DVB-T, was extended by adding 4 new thematic channels, i.e. Polsat Café, Polsat Play, Comedy Central Family and TVN Style.
• 12 March – IPLA web TV, while being recognized a top quality product and service addressed to the family segment, to children in particular, received the KidZone Quality Mark.
• 26 February - Polkomtel announced roll out of the first in Poland commercial LTE-Advanced network offering transfer rates of up to 300 Mbps.
• In February Litenite company, controlling 66% of shares of Midas Group, was acquired by Cyfrowy Polsat via Polkomtel.
• The process of refinancing of the Group’s existing debt was completed at the end of January. As a result, the Group obtained more favorable financial terms and bigger flexibility from the point of view of its current operational and investment activities.
• According to a report developed following the mobile data transmission quality survey, requested by the Office of Electronic Communications (UKE), Internet access service offered by Plus was determined to be the fastest. The average data download rate offered by Plus network was 25.19 Mbps, i.e. twice the rate offered by Play and 25% better than T-Mobile and Orange.
• In the second half of January, IPLA web TV provided access to live coverage of the 12^th edition EHF European Men's Handball Championship 2016 which took place in Poland. Cyfrowy Polsat subscribers and Plus customers could watch the matches for free.
• 15 January 2016 –EVOBOX PVR set-top box was added to Cyfrowy Polsat’s offer – it is the latest and the most advanced satellite STB available in the operators’ offers. The set-top box was developed in Mielec plant which is owned by Polsat Group.