Annual Report 2016: Strong, high-level operating performance
Positive one-time effect with disposal of Basel property / Financial situation very sound / Dividend/special dividend totaling CHF 24 per share
In brief (adjusted for one-time effects)
– Sales revenue in Switzerland up 0.4% to CHF 303.4 million.
Group sales revenue 0.7% higher at CHF 315.4 million.
– Revenues increase in Serbia by 10.7%
– Positive margin situation, in line with previous year:
EBITDA margin: 24.8% (previous year 24.8%)
EBIT margin: 20.9% (previous year 21.1%)
– Net income rises by 0.8% to CHF 52.6 million.
– Cash flow of CHF 64.0 million (previous year CHF 62.3 million)
General business development
The last financial year for APG|SGA can once again be described as highly successful. Despite loss of contracts and a highly competitive intra and intermediate environment, sales revenues still managed to exceed the previous year’s levels. At the same time, operating business margins remained at a high level thanks to a diverse range of measures. The year was also marked by further expansion of the digital product range and the successful launch of the APG|SGA Promotion business area. The group’s earnings performance remained stable, despite investment in the development of new business areas. The disposal of the Basel property caused an additional one-time effect.
In financial year 2016, group revenues grew by 0.7% to CHF 315.4 million. While sales revenues increased by 0.4% in the domestic Swiss market, the international segment recorded a strong rise of 10.7%. With the disposal of the Basel property, which is no longer required for operations, the rental return associated with the property also diminished. This property disposal represented a positive one-time effect of CHF 22.6 million on level operating income.
Fees and commissions grew by 1.0% over the previous year. Diverse process improvements brought personnel expenses down by 0.6%. Operating and administrative costs increased by 1.2% over the previous year. This increase was caused by the development costs for new business areas. Operating margins remained at more or less the same level as the previous year, reaching 24.8% of EBITDA and 20.9% of EBIT, adjusted for one-time effects.
Net income for the reporting period amounted to CHF 70.5 million. Along with a strong operating result, the one-time effect caused by the disposal of the Basel property had a positive influence on the result, totaling CHF 18.0 million. Adjusted for this one-time effect, net income was CHF 52.6 million, representing an 0.8% increase on the previous year.
AlpenPlakat AG, purchased in late February, was consolidated for the first time in financial year 2016.
Cash flow for financial year 2016 amounted to CHF 59.3 million, representing a fall of 4.2% on the previous year. Cash flow from operating activities amounted to CHF 61.7 million. After investment in fixed assets of CHF 14.0 million, purchases of intangible assets of CHF 10.9 million, acquisition of shareholdings of CHF 8.4 million and proceeds from the disposal of fixed assets of CHF 28.3 million, free cash flow stood at CHF 56.6 million. The cash flow margin during the reporting year was 17.5% (previous year 19.6%). Free cash flow per share was CHF 18.88 in financial year 2016.
The balance sheet total increased by 1.8% to CHF 273.7 million, with intangible assets representing the primary driver of the increase. The net cash position at the end of the reporting year was CHF 126.8 million, CHF 12.2 million lower than at the close of 2015. This decrease was primarily caused by the dividend payment. Intangible assets account for 8.5% of total assets. The high net cash position, the low level of intangible assets and an equity ratio of 51.8% are further indicators of a strong balance sheet.
At CHF 303.4 million, sales revenues were 0.4% higher than the strong revenue performance of the previous year, which was dominated by parliamentary elections. This is a highly gratifying development in the advertising market, but necessary to compensate for the expiring concession contracts with Geneva airport and the city of Lucerne. It was achieved through the continual expansion of digital services, active market segmentation across the market, and the consistent orientation of sales and planning and booking instruments to the specific needs of both local and national advertisers.
The fact that APG|SGA was named “Media Provider of the Year 2016” by Swiss advertisers and advertising and media agencies for the third time at the Media Trend Award is confirmation of the high degree of acceptance of our consultancy and service activities. Every segment contributed to the growth in revenues. The acquisition and integration of AlpenPlakat AG on February 2016 ran smoothly. The successful market launch of APG|SGA Promotion came on July 1, 2016. This center of competence for interactive live communication is the exclusive marketer for distribution and promotional spaces in SBB railway stations and will further expand its portfolio in this growing field of out-of-home communications.
APG|SGA offers its advertising customers an out-of-home service from a single source, thus contributing to the positive development of outdoor advertising compared with other forms of media in an advertising market that continues to stagnate overall (MediaFocus points to a growth in gross advertising investment of just 0.07% in 2016, despite the integration of search advertising into its range of measures). Also contributing to positive momentum and trust in out-of-home media was the MobNat study successfully implemented by SPR+, the research institute for outdoor advertising in Switzerland, which provided transparent and reliable proof of the media performance of poster space. The study, published in summer, and APG|SGA’s performance-based pricing system derived from it, met with consistent customer approval.
The year also saw major progress in the expansion of the digital product range, but also intense competition and a number of changes in our contract portfolio, which nonetheless remains diversified and stable. The expansion of digital ePanels in railway stations and shopping centers forged ahead. In Shopville Zürich and Zurich Oerlikon, a total of nine new City ePanels in prime locations along with two City eBoards were successfully put into operation. This brought the overall digital range of APG|SGA in the city of Zurich alone to a total of 59 large-format advertising vehicles in premium HD quality. In the last year, 44 Shopping ePanels were also put into operation. This brings the number of APG|SGA ePanels to 152, in 24 shopping centers throughout Switzerland – by far the largest digital network of large-format advertising screens in this communication space. And as communicated in early June, APG|SGA installed four Mountain ePanels in Zermatt for the first time, thus supplementing the existing range in the alpine destinations of Arosa, Lenzerheide and St. Moritz. In October 2016, a further eight digital City ePanels went into operation in prime locations in Biel/Bienne.
Through a public tender process, APG|SGA once again secured the rights for management of a total of 680 affixed and backlit spaces in Biel/Bienne for a period of eight years. The year opened with another tender process in which the city of Zurich’s real estate authority gave exclusive rights to APG|SGA for the provision of 219 commercial posters on its sites from February 1, 2017. In a tender by the Lausanne region transit authority (tl), APG|SGA secured two promising batches of commercial advertising space on and in the vehicles and attractive stations of the m1 and m2 métro lines, which will enable ongoing digitalization of these advertising spaces.
In Geneva, APG|SGA was compelled to contest the city’s award decision concerning marketing of analog poster spaces on public property. Unfortunately, Geneva city authorities awarded the concession to a competitor for a temporary period of January 1, 2017 to June 30, 2017 as part of a “public contract”. The Federal Court has still not made a decision on the poster tender for the city of Lausanne, which APG|SGA had been awarded.
Overall, the previous business year saw the renewal of numerous other contracts with both public institutions and private property owners. Our partners know they can depend on the absolute reliability and high degree of expertise of our 530 employees in Switzerland.
Moreover, the previous year saw APG|SGA focusing on active product management and the launch of numerous innovations. For example, to compensate for the expiring concession contract with Lucerne (effective July 1, 2016), APG|SGA expanded its local range in such locations as the heavily trafficked station shopping center and added a specific “Rail ePanel light Luzern”, while also creating integrated, crosssegment packages. In the city of Zurich, “Citystar F200L Zürich” represents a new network range that provides advertising customers with compelling options to sites operated by the Zurich transport authorities (VBZ), which are unavailable as of January 1, 2017. Along with the national rollout of new scrollers in the F200 format, Zurich main station also welcomed a Swiss first in 2016 – a “BrandingWall”. Bern and Zürich Stadelhofen stations were the first to receive the first “StationFullBranding”. And as part of the “Interactive Campaigning” pilot project with Poinz, Swisscom and Guess, APG|SGA posters successfully interacted with consumers for the first time with the help of beacon technology.
Internationally, APG|SGA now operates only in Serbia. Economic framework conditions improved in Serbia during the reporting period and the Alma Quattro subsidiary there showed developed positively.
In local currency terms, sales revenue improved by 11.3% in financial year 2016. Converted to Swiss francs, this represented an increase of 10.7% to CHF 11.9 million. Economies of scale and structural optimization saw a significant increase in margins.
Shortly before year-end, a very long-term concession contract was signed with the city of Belgrade. In a tender process based on a public-private partnership model, Alma Quattro was granted the right to continue as exclusive partner to the Serbian capital in the area of street furniture and advertising on public property. As well as existing advertising vehicles, this also brings with it additional, highly attractive advertising vehicles. And a rollout of digital advertising vehicles is planned for the city center.
Alma Quattro is in an excellent position and is the clear market leader in Serbia. A robust service portfolio and long-term agreements provide the foundation for a successful future.
At the General Meeting on May 24, 2016, all members of the Board of Directors were re-elected. This means the body continues to comprise Dr. Daniel Hofer (President), Robert Schmidli (Vice President), Xavier Le Clef, Stéphane Prigent and Markus Scheidegger. In operational management, too, the composition remains unchanged. This continuity ensures that specialist skills are retained and the company’s proven, successful business strategy will be taken forward.
The Board of Directors is convinced that this highly shareholder-friendly dividend policy should be maintained. The strong balance sheet and the net cash position, along with successful business activities, provide the necessary conditions.
The Board of Directors therefore intends to propose payment of a special dividend by doubling the ordinary dividend for both 2016 and the next two financial years as well.
In view of the company's pleasing business performance, the Board of Directors proposes to the General Meeting that a dividend of CHF 12 and special dividend of CHF 12 be paid for financial year 2016. (Previous year: dividend of CHF 11.50 and special dividend of CHF 11.50). This results in a total payment of CHF 24 per share.
The impact of outdoor advertising begins when consumers leave their homes. No other medium offers such precise control, achieves so much repeat contact and ensures such impressive visibility as outdoor advertising. This is something that advertisers appreciate, and they have come to rely on out-of-home media in their ad planning. To ensure this remains the case in the future, APG|SGA is consistently expanding its unique integrated portfolio, which encompasses advertising space in analog and digital form, as well as promotional space for sampling and live communications.
In addition, as communicated in early February, APG|SGA is pressing forward in the business field of mobile media, with the launch of a dedicated new segment brand in the form of APG|SGA Interaction. With this, APG|SGA is expanding its activities in the areas of mobile media, interactive and data collection. This is driven by the conviction that mobile media will become an increasingly integrated component of the out-ofhome media market. The growing use of mobile internet in the context of digital and analog outdoor advertising allows effective targeted marketing and new interactive advertising forms along the customer journey.
APG|SGA is consistently investing in promising formats in the growing area of digital outdoor advertising. In January came a Swiss first with the launch of 64 Escalator ePanels in Zurich main station. Métro stations in Lausanne will also be digitalized in the near future. And as communicated in February, the award of the “Parking Place de Cornavin SA” tender to APG|SGA means this heavily trafficked shopping arcade (MetroShopping) at Geneva’s main station will be fitted with attractive digital advertising vehicles. Also part of this expansion is the rollout of 22 City ePanels in prime positions in Basel. As previously announced, APG|SGA secured not just this batch in the tender, but also the award for management of all spaces in F200, F12 and F4 format from January 1, 2018. This also applies to 253 F200 backlit posters. This ensures that APG|SGA will remain the clear market leader in Basel for at least the next 10 years.
With these tender awards and initiatives, we are laying the foundation for the continued positive development of our company. In view of the current, highly dynamic market climate, we are standing by our values, which have made us the go-to service provider for city administrations, mass transit authorities and private property owners for the past 116 years. These values include 100% reliability, outstanding professional expertise, a strong commitment to the interests of our partners and, along with rates that will remain attractive in the long term, the certainty that we offer the best marketing organization and the leading product portfolio in the Swiss out-of-home advertising market.
In light of high volatility and the trend toward shorter-term bookings in the advertising market, as well as pending appeals of partner contracts, APG|SGA will continue to forgo a concrete forecast for revenue development in the coming months.
The more than 580 employees at APG|SGA in Switzerland and Serbia will do everything they can to further the dynamic and success development of the company and its ranges of outdoor advertising services.
The Board of Directors and the management would like to take this opportunity to thank all its employees for their impressive work and for this particularly gratifying result. We would also like to extend our heartfelt thanks to you, our esteemed shareholders, for your trust and interest in APG|SGA, now and in the future.
APG|SGA, Allgemeine Plakatgesellschaft AG
APG|SGA AG 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 centers and railway stations, in mountain regions and on public transport - from poster campaigns with the widest coverage, large poster spaces, special advertising formats and promotions to state of the art digital advertising media and mobile advertising. When communicating with customers, authorities and the advertising industry, APG|SGA represents sustainability, innovation and expertise.