letter to shareholders / annual report 2012

www.apgsga.ch

Letter to shareholders

2 APG|SGA SA Letter to shareholders February 28, 2013

APG|SGA SA Letter to shareholders February 28, 2013 3

Strong operating performance based on home market in Switzerland.

Continued rigorous adjustment of foreign investments.

One time effects (pension fund, impairment) affect results.

Very solid financial situation.

Dividend/special dividend of CHF 10 per share altogether.

In brief

– 5.9% increase in sales revenue in Switzerland to reach a total of CHF 297.1 million

– Share in sales from companies abroad drops to 6.5% of Group sales. Company in Montenegro sold.

Impairment on entire goodwill and in part on contracts in Serbia.

– Increase in the EBITDA margin from 21.4% to 23.5% after adjustment

– 19.8% increase in net income to CHF 50.1 million (previous year: CHF 41.8 million).

– Free cash flow of CHF 44.2 million despite CHF 24.0 million contribution to the pension fund (previous

year CHF 67.4 million).

– Net cash position of CHF 86.5 million (previous year: CHF 62.5 million)

Group financial highlights

in CHF 1 000 2012 2011 Change 2012 adjusted

for one time effects

1

2011 adjusted


2

Change adjusted


Sales revenue 317 644 311 795 1.9% 317 644 311 795 1.9%

– Switzerland 297 111 280 581 5.9% 297 111 280 581 5.9%

– International 20 533 31 214 -34.2% 20 533 31 214 -34.2%

EBITDA 113 028 73 024 54.8% 74 679 66 633 12.1%

– in % of sales revenue 35.6% 23.4% 23.5% 21.4%

Operating income (EBIT) 76 405 56 118 36.2% 60 502 48 942 23.6%


Consolidated net income 52 057 42 981 21.1% 44 691 36 657 21.9%


Net income 50 079 41 787 19.8% 42 713 35 463 20.4%


Cash flow 35 645 63 948 -44.3% 54 125 61 180 -11.5%

Free cash flow 44 249 67 392 -34.3% 62 729 64 624 -2.9%

Investments in property, plant, and equipment

5 350 9 163 -41.6% 5 350 9 163 -41.6%

– advertising plant 3 033 6 380 -52.5% 3 033 6 380 -52.5%

– other investments 2 317 2 783 -16.7% 2 317 2 783 -16.7%

Net income per share, in CHF 17.03 14.23 19.7% 14.53 12.08 20.3%

Dividend per share, in CHF3 10.00 7.00 42.9%

1 One time effects 2012: change in plan and contribution to pension fund as well as impairment, including proportionate taxes

2 One time effects 2011: net profit from sales of foreign operations, collection of bank guarantee, as well as impairment, including proportionate taxes

3 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


Dear Shareholder:

General business development

Strong operating performance in Switzerland formed the basis for once again very satisfying financial results.

The ongoing strong drive behind implementation of the various measures designed to strengthen the

company’s market cultivation, a compelling portfolio of products and services as well as disciplined cost

management all contributed to the continued positive momentum on the domestic market that also shaped

the company’s financial statements for 2012.

In the international segment we succeeded – shortly prior to publication of this letter to the shareholders – in

selling our company in Montenegro and in withdrawing from this market. In Romania, the measures we took

enabled a return to positive operating income. With rigorous impairment on all goodwill and a part of the

agreements, the compay leading the market in Serbia was revalued.

Moreover, there was a positive impact on the annual financial statements due to the change in the pension

fund from a defined benefit to a defined contribution plan along with the associated influences of

IFRS / IAS 19. The company is excellently prepared for the future both with regard to its operating

performance and as a result of its very solid financial situation.

APG|SGA Group

Group sales revenue rose by 1.9% to reach a total of CHF 317.6 million. Organic growth in the local currency

amounted to 5.2%, whereby currency influences had a -0.7% negative effect on this growth. Income from

real estate in the amount of CHF 2.5 million remained at the level of the previous year. Concessions and

commissions were likewise at the level of the previous year and accounted for 44.6% of sales revenue.

Thanks to strict cost management, the company’s operating and administrative expenses were reduced by

11.6%. EBITDA in the year under review amounted to CHF 113.0 million, which corresponds to an EBITDA

margin of 35.6%. If one time effects are excluded, then there was a 12.1% increase in EBITDA compared

with the previous year.

The net income in the year under review amounted to CHF 50.1 million. If one time effects are excluded,

then this corresponds to an increase of 20.4%. However, currency losses totaling CHF 1.9 million had a

negative impact on the results for 2012.

Cash flow

In financial year 2012 a cash flow of CHF 35.6 million was achieved. It should be noted that a total of

CHF 24.0 million were appropriated to the company pension fund in the reporting period. Cash flow from

operations closed at CHF 45.0 million. After investments of CHF 5.4 million as well as proceeds from

the sale of property, plant, and equipment, and participating interests totaling CHF 4.6 million, free cash flow

before dividend payments closed at CHF 44.2 million.


Balance sheet

Total assets fell in comparison to the end of 2011 by 7.7% to a total of CHF 287.4 million, primarily due to

the complete redemption of all bank loans. Intangible assets amounted to 14.6% of total assets (year end

2011: 22.2%). Receivables from customers rose to CHF 43.9 million, while the company’s net cash position

amounted to CHF 86.5 million as of the end of financial year 2012. As of the balance sheet date, the equity

belonging to the shareholders of APG|SGA AG amounted to a total of CHF 103.5 million, which corresponds

to an equity ratio of 36.0%. However, a negative impact on equity was attributable to actuarial losses from

defined benefit pension plans in the amount of CHF 51.9 million.

Swiss market

In the year under review, APG|SGA was able to look back on very positive development on its home market.

Fortunately, with increases in sales in other segments, the company was able to completely compensate for

the considerable additional sales obtained in election year 2011 (National Council and Council of States) and

even significantly exceed last year’s sales. Taking this into consideration, but also in light of local

development on the overall advertising market1 of -0.1%, this 5.9% increase in sales provides proof of the

compelling performance of our sales organization. With respect to other media categories, Out of Home

media in general and our company in particular have acquired new market shares based on a comparison

between media. Another positive aspect to note is the fact that all of the APG|SGA segment companies in

Switzerland exceeded their targets both with regard to sales performance and their contribution to the

company’s overall results.

In the Switzerland segment, sales revenue increased by 5.9% to a total of CHF 297.0 million compared with

the previous year, while EBITDA increased to CHF 115.4 million. This corresponds to an increase of 60.7%

compared with the previous year. This strong increase was also positively influenced by conversion of the

pension fund from a defined benefit to a defined contribution plan. Net income amounted to CHF 77.6 million

in total.

In the year under review, APG|SGA was once again able to acquire or extend numerous agreements with

cities, municipalities, transportation companies, corporate partners and private partners. In open, transparent

and professionally conducted bids and RFQs, the company’s range of products and services convinced

customers both through attractive financial terms and conditions as well as high quality, reliability and service

orientation. Our corporate policy, which is aimed at long-term partnerships, and identification with our

customers in our daily work, is also particularly important for public authorities and transportation companies.

At the same time, we attach great importance to all matters involving sustainability and conscientious

handling of resources. In this regard, our company is considered to be a leader in the media industry. For

example, APG|SGA invests substantial amounts in sustained reduction of carbon dioxide emissions,

operates one of the largest environmentally friendly car fleets (natural gas/hybrid) in Switzerland and relies

completely on green electricity.

1 Media Focus, gross spendings, all media, January–December 2012


Other special items that are particularly noteworthy in the report for 2012 include the award of a contract in a

challenging public bid for management of 1,255 poster spaces on public premises in the city of Zurich for an

additional five years as well as further development of the partnership between APG|SGA Traffic and

PostAuto Schweiz AG – for which advertising spaces at transit stops are now marketed in addition to

advertising in and on the respective vehicles. APG|SGA Mountain was able to successfully conclude various

agreements with mountain regions and railways, including Zermatt Bergbahnen AG, Bettmeralp Bahnen AG,

and Jungfraubahnen Management AG. With Startower, APG|SGA launched a new illuminated advertising

column that revolves on its own axis and which will be used at exclusive urban locations. Our Digital

Competence Center and Digital Sales divisions are in close contact with cities, transportation companies,

shopping centers and other partners in order to assess the possible uses for high-quality digital products.

The ePanels that were already successfully employed in the large stations were also installed at Metro m2 in

Lausanne in the spring. At the main train station in Zurich, the eBoard represents a replacement investment

in the largest HD display in Switzerland (60 square meters). All in all, sales in the digital segment more than

doubled since 2010.

International markets

The decision to withdraw the company from operating activities in Greece, Bosnia, Hungary, Bulgaria, and

Italy, as was communicated two years ago within the scope of our revised strategy, was quickly implemented

despite adverse economic conditions. In Montenegro, we succeeded in selling our majority interest to the

former minority shareholder shortly prior to publication of this letter to the shareholders and thus withdrawing

from this market.

Our efforts to sell the companies in Romania could not be realized due to the continuing poor market

conditions. However, we succeeded in putting the respective operational units on a much better footing last

year. We are pleased that a positive income result at the operating level was again able to be achieved for

2012 thanks to various measures we took, such as reintegrating the logistics organization, optimization of

the advertising inventory and strengthening the sales organization.

In Greece, where we no longer have any operating activities, the remaining companies will undergo

structured liquidation as planned.

In Serbia, comprehensive impairment for the entire goodwill as well as a part of the value of the respective

contracts was required. The company in Serbia is well-positioned in operating terms. It is the undisputed

market leader and has long-term contracts for marketing a modern portfolio of products and services. In spite

of these strengths – which in principle make us optimistic for the future – the company, as already mentioned

in the semiannual report, was unable to escape the extraordinarily difficult macroeconomic environment. The

local economic situation is very challenging, and then too there is the exceptionally weak Serbian dinar.

Despite comparatively good sales performance, which in the local currency nearly achieved the level of the

previous year, intangible assets had to be adjusted down as a review of their value revealed overvaluation of

the carrying amounts.

With a total of CHF 20.5 million, the entire share in Group sales from companies abroad declined even

further to 6.5%. This reduction amounts to 34.2%, of which 7.0% and 25.7% were attributable to respective

negative foreign exchange and acquisition effects. EBITDA amounted to a total of CHF 4.0 million. Foreign

net income put a burden on the consolidated financial statement of CHF 26.2 million, with CHF 21.4 million

being attributable to tax-adjusted impairment losses and CHF 3.1 million to foreign currency losses.


Pension fund

Conversion from the previous defined benefit plan to a defined contribution plan was effected as of

January 1, 2013 as planned. At the same time, all of the company’s administrative work and its asset

management were completely reorganized and outsourced to external service partners. As a result,

the costs required from the pension fund for beneficiaries significantly declined. At the same time, the

pension fund’s risk profile was optimized. The result of switching the system had a positive effect on the

company's net income for the year in the amount of CHF 38.3 million before taxes or CHF 28.8 million after

taxes (in accordance with IFRS/IAS 19).

Branding

After the company’s brand management in Switzerland was standardized at the beginning of the year and

placed under a new umbrella brand, the previous Affichage Holding was renamed APG|SGA since the

middle of the year. The new branding concept has met with very favorable reception in the market and

among the company’s staff.

From IFRS to Swiss GAAP FER

For the upcoming reporting year, the Board of Directors has decided to switch accounting standards from

IFRS to Swiss GAAP FER. In light of the increasing complexity of IFRS and its focus on international groups

of companies, Swiss GAAP FER proves to be the standard that is better suited to our medium-sized

company which focuses on Switzerland.

Dividend

The Board of Directors will propose to the General Meeting of Shareholders that a dividend of CHF 7 and

a special dividend of CHF 3 be paid (previous year: a dividend of CHF 5 plus a special dividend of CHF 2).

This results in a payout of CHF 10 per share for financial year 2012. With renewed payment of a special

dividend, the company’s shareholders will profit directly from successful resolution of the problem areas

abroad and be rewarded for their support during this difficult phase.

APG|SGA also endeavors to pursue a dividend policy in the future that is both friendly to shareholders and

which takes the needs of the company into equal consideration, in particular upcoming, strategically

important investments in the digitization of advertising spaces. In principle, the target is a payout ratio of 60%

of the net profit over a medium-term cycle.


Outlook

APG|SGA is the undisputed market leader in Switzerland on both the analog and digital Out of Home media

market. Our new portfolio strategy with its uncompromising focus on the needs of customers has provided us

with above-average sales growth in the last two years – independently of the overall economic climate. The

APG|SGA portfolio of products and services and the associated added value are immensely attractive for the

advertising industry, advertising clients and franchisers. Thus we have created optimum conditions for the

successful future of our company.

Based on this, we are confident that the company will achieve strong performance in comparison to the

market in 2013. However, we will refrain from concrete guidance for 2013, because the current structural and

macroeconomic challenges do not allow for a forecast for the year with any degree of certainty.

We would like to take this opportunity to thank our staff for their impressive commitment to the various

divisions of APG|SGA.

We would also like to thank you as shareholders for your loyalty and support.

Jean-François Decaux Dr. Daniel Hofer

Chairman of the Board Chief Executive Officer


Assets

in CHF 1 000 31.12.2012 31.12.2011

Property, plant, and equipment 72 026 78 751

Investments in associated companies 311 345

Other financial investments 3 165 5 372

Intangible assets 41 868 69 178

Deferred taxes 16 030 14 733

Non-current assets 133 400 168 379

Inventories 2 362 2 746

Trade accounts receivable 43 913 39 849

Other accounts receivable 13 132 15 457

Deferred expenses and accrued income 8 109 6 845

Marketable securities 501 408

Cash and cash equivalents 85 976 77 534

Current assets 153 993 142 839

Total 287 393 311 218

Shareholders’ equity and liabilities in CHF 1 000 31.12.2012 31.12.2011

Share capital 7 800 7 800

Group reserves 45 631 74 097

Net income 50 079 41 787

Equity held by APG|SGA SA shareholders 103 510 123 684

Non-controlling interests 3 543 2 825

Shareholders’ equity 107 053 126 509

Provisions 61 335 56 425

Deferred taxes 12 255 10 160

Long-term financial liabilities 26 28

Non-current liabilities 73 616 66 613

Trade accounts payable 20 465 21 589

Current accounts payable to banks 15 001

Taxes payable 1 138 1 937

Other accounts payable 30 102 23 444

Accrued liabilities and deferred income 55 019 56 125

Current liabilities 106 724 118 096

Liabilities 180 340 184 709

Total 287 393 311 218

Condensed consolidated balance sheet


in CHF 1 000 2012 2011 Change

Advertising revenue 317 644 311 795 1.9%

Real estate revenue 2 456 2 453 0.1%

Operating revenue 320 100 314 248 1.9%

Fees and commissions -141 535 -139 104 1.7%

Personnel expenses -29 856 -65 955 -54.7%

– of which ordinary personnel expenses -68 205 -65 955 3.4%

– of which prior service income due to plan change 38 349

Operating and administrative costs -37 630 -42 556 -11.6%

Other income 1 949 6 391

EBITDA 113 028 73 024 54.8%

Depreciation -9 729 -11 341 -14.2%

Amortization of intangible assets -4 447 -4 780 -7.0%

Impairment -22 447 -785

Operating income (EBIT) 76 405 56 118 36.2%

Financial income 1 722 468

Financial expenses -2 192 -1 431

Income from associates 26 62

Income before income tax 75 961 55 217 37.6%

Income tax -23 904 -12 236

Income from continuing operations 52 057 42 981 21.1%

Income from discontinued operations, net of tax

Consolidated net income 52 057 42 981 21.1%

– of which non-controlling interests 1 978 1 194 65.6%

– of which APG|SGA SA shareholders (net income) 50 079 41 787 19.8%

Basic and diluted earnings per share, in CHF 17.03 14.23 19.7%

Segment information

in CHF m Advertising revenue EBITDA Net income

Switzerland 2012 297.0 115.4 77.6

2011 280.5 71.8 47.9

International 2012 20.5 4.0 -26.2

2011 31.2 8.9 -0.6

Holding 2012 2.9 -6.4 -3.2

2011 3.2 -7.2 -16.7

Eliminations and non-allocated items of consolidated income 2012 -2.8 0 1.8

2011 -3.1 -0.5 11.1

Total 2012 317.6 113.0 50.1

2011 311.8 73.0 41.8

Consolidated income statement


Income 2012 Income 2011 in CHF 1 000 Gross tax effect net Gross tax effect net

Consolidated net income 52 057 42 981

Unrealized gains/losses on available-for-sale securities 111 -25 86 -25 1 -24

Currency translation differences 995 0 995 2 599 2 599

Actuarial gains/losses from defined benefit plans -68 023 16 171 -51 852 -28 239 7 060 -21 179

Comprehensive income 1 286 24 377

– of which non-controlling interests 1 969 833

– of which APG|SGA SA shareholders -683 23 544

Consolidated comprehensive income


Share of APG|SGA SA shareholders Total Trans- Capital lation Available- Re- Non- Share- Share reserves Treasury differ- for-sale valuation Retained controlling holders' in CHF 1 000 capital premiums shares ences securities reserves earnings Total interests equity

as at January 1, 2011 7 800 5 632 -9 539 -19 927 187 46 059 69 550 99 762 1 163 100 925

Comprehensive income 2 960 -24 20 608 23 544 833 24 377

– of which consolidated net income

41 787 41 787 1 194 42 981

– of which other comprehensive income

2 960 -24 -21 179 -18 243 -361 -18 604

Changes in scope of consolidation

1 471 1 471

Purchase of non-controlling interests

21 21 -21

Distributions -621 -621

Changes in treasury shares 332 25 357 357

as at December 31, 2011 7 800 5 632 -9 207 -16 967 163 46 059 90 204 123 684 2 825 126 509

Comprehensive income 1 004 86 -1 773 -683 1 969 1 286

– of which consolidated net income

50 079 50 079 1 978 52 057

– of which other comprehensive income

1 004 -51 852 -50 762 -9 -50 771

Purchase of non-controlling interests

Distributions -20 589 -20 589 -1 251 -21 840

Changes in treasury shares 1 003 95 1 098 1 098

as at December 31, 2012 7 800 5 632 -8 204 -15 963 249 46 059 67 937 103 510 3 543 107 053

Consolidated statement of changes in equity


in CHF 1 000 2012 2011

Consolidated net income 52 057 42 981

Depreciation and amortization, and impairment 37 281 16 906

Unrealized gains/losses on securities 86 -24

Change in provisions, taxes, and interest -51 823 7 586

Gain/loss from the sale of non-current assets -1 930 -3 439

Income from associates -26 -62

Cash flow 35 645 63 948

Change in inventories 345 622

Change in accounts receivable 601 4 400

Change in marketable securities -93 22

Change in accounts payable 8 900 1 014

Change in other deferred expenses, accrued income, accrued liabilities, and deferred income

-394 2 727

Net cash provided by operating activities 45 004 72 733

Capital expenditures in non-current assets -5 366 -10 840

Sale of non-current assets 4 611 5 499

Net cash used in investing activities -755 -5 341

Purchase and sale of treasury shares 1 098 358

Change in current accounts payable to banks -15 001 -15 769

Change in long-term financial liabilities -2 -10

Dividends to APG|SGA SA shareholders -20 589

Distributions to non-controlling interests -1 251 -621

Net cash used in financing activities -35 745 -16 042

Currency translation effect on cash and cash equivalents -62 -69

Change in cash and cash equivalents 8 442 51 281

Cash and cash equivalents as at January 1 77 534 26 253

Cash and cash equivalents as at December 31 85 976 77 534

Consolidated statement of cash flows


Financial media and analysts conference

February 28, 2013, Zürich

Publication of the annual report

April 23, 2013

General Meeting

May 22, 2013, Geneva

Announcement of semi-annual results

July 31, 2013

Contacts

Dr. Daniel Hofer, Chief Executive Officer

T +41 58 220 71 66

Beat Hermann, Chief Financial Officer

T +41 58 220 77 47

This letter to shareholders is available in German,

French and English.

The German version is legally binding.

Agenda

www.apgsga.ch

APG|SGA SA

23, rue des Vollandes

CH-1211 Genève 6

[email protected]

Printed in Switzerland

February 2013

All rights reserved

APG|SGA SA 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 centres and train

stations, in mountain regions and on

public transport – from poster

campaigns with the widest coverage

and large poster spaces to state-of-the-

art digital advertising media. When

communicating with customers, the

authorities and the advertising industry,

APG|SGA represents sustainability,

innovation and competency.

letter to shareholders / annual report 2012

Documents

time effects sales revenue

total of chf

net cash position of

net income

group sales

free cash flow of chf

pension fund previous

time effects pension