Effective strategy implementation by Cyfrowy Polsat Group in Q2 2015

Cyfrowy Polsat Group published the results for Q2 and H1 2015. As a consequence of consistent implementation of its strategy, in Q2 2015 the Group recorded substantial growth of the number of users of its smartDOM program and mobile Internet access service as well as excellent results in the TV broadcasting and production segment. The accomplishment of the above operational goals translated into solid financial results.

Cyfrowy Polsat in Q2 2015: 

• The total number of active revenue generating units (RGU) was 16.3m, including:
  • 76% (12.4m) of contract services, which guarantees higher revenue stability in the future as well as greater customer loyalty.
• Stable growth of the saturation of the contract base with integrated services as part of the smartDOM program:
  • 791 thousand customers in the program,
  • 2.41m active services (RGUs) used by the above mentioned group of customers,
• 6.1m contract customers:
  • the number of contract RGUs increased by ca. 3% YoY, to 12.4m,
  • ARPU per contract customer increased by 2% YoY, to PLN 87,
  • saturation of the customer base with active RGUs increased by 7% YoY, to 2.07.
• Dynamically growing mobile Internet user base thanks to the continuous growth of the LTE network coverage footprint and the success of the integrated services offer - smartDOM translated into the growth of the number of contract-based services by 32% YoY, to nearly 1.5m, as well as the growth of the total number of mobile Internet access services to 1.7m.
• The Group’s main TV channel Polsat, its thematic channels as well as the entire Polsat Group were the viewership leaders in the commercial group both in Q2 and in H1 2015, with the following results: 13.4%, 11.3% and 24.7% in Q2 and 13.4%, 10.9% and 24.3% in H1, respectively.
• TV Polsat Group’s revenue from advertising and sponsoring in Q2 and H1 grew at a much faster rate than the market, accordingly at 5.5% and 5.9% vs. 3% and 3.3% on the market, reaching PLN 282m and PLN 503m, respectively. The Group’s market share in the TV advertising market increased to 25.4% in Q2 and to 25.3% in H1.
• The average monthly number of users of services of IPLA, the largest Polish web TV, was ca. 4.6m.
• Very good financial results:
  • revenue: PLN 2.469bn,
  • EBITDA: PLN 977m,
  • EBITDA margin: 39.6%,
  • Free Cash Flow (FCF) for the past 12 months, after payment of interest on loans and bonds: PLN 1.491bn,
  • net debt/EBITDA ratio: 3.0x.
• On July 29, 2015 the Group effected a prepayment of part of Cyfrowy Polsat’s term loan in the amount of PLN 1bn.
• On July 21, 2015 Cyfrowy Polsat issued 1 000 000 unsecured corporate bonds worth PLN 1bn, with an interest rate of WIBOR 6M + 250 bps. The bonds are traded in the Catalyst alternative trading system.
• Cyfrowy Polsat Capital Group continued negotiations with banks regarding the refinancing of the Group’s current debt with a view to simplify its structure and obtain further optimization of the terms as well as to reduce debt servicing costs.
• On April 13, 2015 the Group made an additional prepayment of Polkomtel’s  term loan in the amount of PLN 600m.
• As a result of the acquisition agreements signed on April 1, 2015 and in line with the  Group’s development strategy in the new technologies area, two companies were added to the Group: Teleaudio Dwa, the leader in Premium Rate services, and InterPhone Service, a manufacturer of state-of-the-art telecommunication and general purpose electronic appliances.

”In Q2 2015 we consistently pursued the strategy of development of integrated services thanks to which our program, smartDOM, already has nearly 800 thousand users. As assumed, the program has very positive influence on the growth of saturation of the base with services, average revenue per customer as well as subscriber loyalty and satisfaction with the services provided by us. What is also important for the Group’s performance is the rapid development of the mobile Internet segment, where we maintain the leading posiotion with around 1.7m users. We are very glad that already as many as over 2300 LTE800 base stations are on-air thanks to which our customers are able to enjoy the services of the biggest nationwide LTE network,” sums up Tomasz Gillner-Gorywoda, President of the Management Board of Cyfrowy Polsat S.A. and General Director of Polkomtel Sp. z o.o.

Services provided to individual and business customers

“Thanks to a relatively stable base of contract customers as well as the growth of its saturation with contract services, we have observed distinct growth of average revenue per customer. Growth of data consumption by smartphone users is another factor that has a positive influence on ARPU. We continue to see big potential in the area of sales of mobile Internet access services, especially as part of integrated services packages, i.e. the smartDOM program,” recapitulates Tobias Solorz, President of the Management Board of Polkomtel Sp. z o.o. and Vice President of the Management Board of Cyfrowy Polsat S.A.

During Q2 Cyfrowy Polsat Group:

• had 6m contract customers:
  • the number of contract services (RGUs) increased by 3% YoY, to 12.4m (6.5m mobile voice services, 4.4m TV services, 1.5m Internet access services),
  • ARPU per contract customer increased by 2% YoY, to PLN 87,
  • saturation with active RGUs continued to increase systematically, going up by 7% YoY, and reached 2.07 per customer,
  • churn ratio was 10.1%,
• active prepaid RGUs base was 4m, including:
  • 3.8m voice services,
  • 0.05m TV services,
  • 0.2m Internet access services,
  • ARPU per prepaid RGU increased by 2.6% YoY, to PLN 18.3.
• 4.9m SIM cards actively used data transmission services, which means growth by 23% compared to the corresponding period of 2014:
  • smartphones accounted for 90% of total sales of handsets in Q2 2015.

Financial results for the segment of services provided to individual and business customers in Q2 2015

* Operating costs do not account for depreciation, amortization, impairment and  liquidation.

 “Growth in this segment of our operations resulted from both consolidation of the results of Metelem Group, of which Polkomtel is a member, as well as organic growth – mainly thanks to higher revenue from telecommunications which we owe to very good sales of the mobile Internet access service. What is worth noting is growth of EBITDA by more than 6%, excluding the effect of consolidation of the results ofMetelem, which we recorded in spite of growing data transmission costs, and which we owe to, among others,. lower marketing costs and lower cost of customer service and retention” – comments Tomasz Szeląg, Management Board Member responsible for Finance in Cyfrowy Polsat S.A. and Polkomtel Sp. z o.o.  

TV broadcasting and production

“Thanks to the success of the spring programming as well as strong permanent items in our programming, in both Q2 and the entire first half of the year we recorded very good viewership results of 24.7% and 24.3% respectively. At the same time we were the viewership leader in the commercial group across all segments - among main channels, thematic channels and in total as Polsat Group. Such good viewership results translated into a much faster rate of growth of revenue from advertising as compared to the overall TV advertising and sponsoring market, equal to 5.5% in Q2 and 5.9% in the first half of the year,” says Maciej Stec, Management Board Member of Cyfrowy Polsat S.A. and Telewizja Polsat Sp. z o.o.

• Q2 results were substantially driven by the new items in the spring programming schedule, including the reality show "Hell’s Kitchen", which attracted 1.02m viewers on average and generated a 16.1% audience share, "Your Face Sounds Familiar" with 0.96m viewers on average and a 19.3% audience share, "Must be the Music" – 0.92m viewers on average and a 14.2% audience share, as well as the continuation of the reality show "Top Chef", which attracted 0.92m viewers per episode, translating into a 14.4% audience share.
• Regular items in the programming schedule of the main channel also enjoyed high interest among viewers: the Monday "Mega Hit" movie cycle was watched by 1.07m viewers on the average, which gave the station an audience share of 17.9%, while the series "First Love" had 0.93m viewers, which gave a 24.8% audience share.
• The event which enjoyed high viewership was the live coverage of "Polsat Superhit Festival 2015", which attracted 1.06m viewers on average and gave the station an audience share of 21%. Another important event was the live broadcast of the UEFA EURO 2016 European Football Championship qualifying match between Poland and Georgia on June13. The average audience was 1.5m and the audience share was 43.6%. The presidential debate, Bronisław Komorowski vs. Andrzej Duda, attracted 1.03m viewers on May 17, giving an audience share of 14.1%.
• The results for the first half of 2015 were under substantial influence of such items as: the spring programming schedule, the Monday’s "Mega Hit" cycle (1.13m viewers and a 18.6% audience share) as well as its Tuesday counterpart, i.e. the series "First Love" (1m viewers and a 23% audience share), the Poland – Ireland UEFA EURO 2016 qualifying match, which attracted 2.84m viewers and gave an audience share of nearly 36.9%, as well as the concert on the occasion of the 25^th anniversary of RMF FM radio, which was watched by 1.2m viewers on average and had an audience share of 19.3%.

Financial performance of the TV broadcasting and production segment in Q2 2015

* Operating costs do not include depreciation, amortization, impairment and liquidation.

 “Growth of revenue in this segment of our operations was accomplished thanks to organic growth, the success of our spring programming schedule, higher viewership shares of TV4 and TV6 channels as well as the Disco Polo Music channel, which was launched last year. A strategy of balanced management of the programming offer as well as operating costs control led to the improvement of EBITDA and EBITDA margin – comments Katarzyna Ostap-Tomann, Management Board Member and CFO of Telewizja Polsat Sp. z o.o.

Cyfrowy Polsat Group’s financial performance 

Cyfrowy Polsat Group’s financial results for Q2 2015

*Operating costs do not include depreciation, amortization, impairment and liquidation.

“It was a very good quarter in terms of financial results, which exceeded the market consensus. They reflect our consistent pursuit of the adopted strategy of development on the market of integrated services and in the area of cost control. Very high EBITDA and EBITDA margin are noteworthy. Stable and high free cash flows continue to be a strong item, which not only enables us to run our business steadily but also to make additional, unscheduled repayments of our current debt. Moreover, recently we have completed a successful issue of unsecured corporate bonds worth PLN 1bn, and we continue negotiations with banks reagrding the potential refinancing of the Group’s debt,”– comments Tomasz Szeląg.

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