Adoption of a new dividend policy of Cyfrowy Polsat S.A.

The Management Board of Cyfrowy Polsat S.A. (the “Company” or “Cyfrowy Polsat”) informs that meeting the requirements of the majority shareholder of the Company, expressed in a letter received from Mr. Zygmunt Solorz on February 7, 2019 (see the Company’s current report No. 4/2019 dated February 7, 2019), it reviewed the Company’s dividend policy.

Hereby the Company announces the wording of the new dividend policy, as adopted by the resolution of the Management Board of the Company dated March 15, 2019:

“The main goal of the strategy of Cyfrowy Polsat S.A. Capital Group (the “Group,” “Polsat Group”) is the permanent growth of the value of Cyfrowy Polsat S.A. (the “Company”) for its shareholders. We intend to achieve this goal by implementing the major elements of our operational strategy which include:

1. growth of revenue from services provided to residential and business customers through consistent building of the value of our customer base by maximizing the number of users of our services as well as the number of services offered to each customer while simultaneously increasing average revenue per user (ARPU) and maintaining high levels of customer satisfaction,
2. growth of revenue from produced and purchased content by expanding its distribution, maintaining the audience shares of our channels and improving our viewer profile,
3. effective management of the cost base of our integrated media and telecom group by exploiting its inherent synergies and economies of scale, and
4. effective management of the Group’s finances, including its capital resources.

Predictable dividend payout to shareholders is one of the main goals underlying the capital resources management policy of Cyfrowy Polsat S.A. At the same time, bearing in mind the strategy of deleveraging the Group, the Management Board has set the desirable consolidated debt level, as measured by the net debt/EBITDA ratio, which should be reduced to below the threshold of 1.75x.

In view of the above, the Management Board of Cyfrowy Polsat S.A. has adopted a resolution regarding the dividend policy which assumes that dividend payout proposals, along with the Management Board’s recommendations, will be presented every year to the General Meeting, subject to the observance of the following general principles:

1. the amount of a dividend paid out every year shall guarantee the Company’s shareholders an attractive return from invested capital;
2. the level of the obtained return shall be shaped in relation to the commonly available on the Polish market forms of safe investing of funds, in particular in relation to the level of bank deposits rates, while taking into account a risk premium associated with floating of Cyfrowy Polsat’s share prices on the Warsaw Stock Exchange;
3. in parallel, a yearly submitted proposal for distribution of the Group’s net profit for the previous financial year should allow for the continuation of gradual reduction of Cyfrowy Polsat Group’s net debt in order to achieve the desired ratio of net debt to EBITDA at the level below 1.75x.

Simultaneously, the Management Board of Cyfrowy Polsat S.A. reviewed the plans of Cyfrowy Polsat Capital Group and evaluated possibilities of allocating the expected cash resources of the Group with an aim to pay out a stable and predictable dividend stream to its shareholders in medium term. Based on the conducted analysis, the Management Board intends to recommend for 2019-2021 the dividend payout in the total amount of not less than PLN 2.79 per share in three equal installments as follows:

1. at least PLN 0.93 per share to be paid out in 2019;
2. at least PLN 0.93 per share to be paid out in 2020;
3. at least PLN 0.93 per share to be paid out in 2021.

In parallel, the Management Board notes that every time when presenting a proposal for distribution of the profit for the previous year it will take into account the Group’s net profit, financial standing and liquidity, existing and future liabilities (including potential restrictions related to facility agreements and other financial documents), the assessment of the Group’s prospects in specific market and macroeconomic conditions, potential necessity of spending funds for the Group’s development, in particular through acquisitions and embarking on new projects, one-off items, as well as valid legal regulations.

The dividend policy will be subject to regular verification by the Company’s Management Board. In particular, the Management Board expects modification to the aforementioned dividend policy following the refinancing of Polsat Group’s debt which is expected in 2022.

The new dividend policy will take effect from April 1, 2019.”

The Management Board notes that the payout at the level of PLN 0.93 per share generates an annual return rate of approximately 4% as compared to the average capitalization of the Company in December 2018. Thus, in the Management Board’s opinion, it meets the general principles of the dividend policy presented above and the expectations of the majority shareholder of Cyfrowy Polsat, expressed in the letter received from Mr. Zygmunt Solorz on February 7, 2019. Simultaneously, in the Management Board’s opinion the above mentioned schedule and amounts of dividend payouts shall not interrupt the development concept of Cyfrowy Polsat Capital Group, enabling at the same time its further deleveraging.

Legal basis: Article 17 Section 1 of the Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC.