Ad hoc press release
Annual Result 2014:
Realigned Goldbach Group ready for profitable growth
Strategic refocusing on advertising services in German-speaking Europe (DACH region) including Poland - Realignment of business portfolio results in one-time charges - Revenue increase to CHF 464 million and net profit of CHF 2.5 million despite portfolio realignment - First-time financial reporting according to Swiss GAAP FER shortens balance sheet; segment reporting according to business areas - Successful extension of partnership with SevenOne Media (Schweiz) AG ensures continuity - Build-up of business activities in Germany opens opportunities - Unchanged dividend of CHF 0.80 per share proposed - Substantial improvement of net profit expected for FY2015
Küsnacht-Zurich/Switzerland, March 10th, 2015. The business year 2014 of SIX Swiss Exchange listed Goldbach Group AG was characterized by significant strategic decisions and operational challenges. The detailed review of all business areas as announced by the board of directors and management thus resulted in the refocusing on the group's renowned core competencies as advertising services provider with a focus on the DACH region including Poland. In parallel, the exit from Russia and Romania, the closing of the agency business in Poland and the sale of the Goldbach Group stake in the Wilmaa web-TV platform was forced. It was further decided to withdraw from the Adriatic market region. The realignment of the business portfolio as announced by management last year has thus been concluded and material balance sheet risks have been eliminated. The charges as well as write-offs for these measures led to an extraordinary result 2014 of CHF -4.4 million. Against this, the core activities of the group developed stably as net sales increased slightly to CHF 464 million. Earnings before depreciation and amortization EBITDA of CHF 27.5 million, corresponding to a margin of 5.9%, are 21% below the previous year's level due to lower profitability in the Swiss TV business as well as investments into the build-up of the German market, in the amount of CHF 1.2 million. Net profit attributable to Goldbach Group shareholders for the financial year 2014 amounts to CHF 2.5 million, against CHF 2.7 million in the prior year (-5%).
Development of revenues and earnings
Following a challenging first half-year 2014 Goldbach Group during the second half achieved respectable revenue growth of 3.8%, thus resulting in a slight increase of 1.2% in net sales to
CHF 464 million for the full year. Advertising Sales (Ad Sales) Switzerland, at CHF 394 million the largest contributor to group sales, recorded an increase of 1.5% mainly driven by the growing TV business. Radio advertising put the trough behind and recovered markedly during the second half-year with an increase of 18%. Against this, the online segment remains challenging, as sales losses in the display business could not fully be compensated by double-digit sales growth in the video business. Thanks to the successful extension of the cooperation with SevenOne Media (Schweiz) AG, Goldbach Group assumes advertising sales in Switzerland to continue the stable revenue development. Net sales of "Ad Sales Other" came in at CHF 26 million, 20% below the previous year's level mainly due to the withdrawal from unprofitable markets (Russia, Romania). In contrast, the remaining markets Austria and Poland developed stably. Marketing Services could extend its direct-to-the client activities by 7% to around CHF 49 million and thus confirmed its role as important pillar with in the Goldbach Group portfolio.
During the financial year 2014 gross profit amounted to CHF 93 million or 20% of net sales, against CHF 100 million in the prior year. The reduction by 7% was due to a different revenue mix (higher contribution of the lower margin TV business) as well as decreasing commission rates under advertising contracts. The margin reduction is structurally caused and is not a general trend since the increasing fragmentation of the TV channel landscape will support the gross margin in the medium term. EBITDA of CHF 27.5 million was 21% below the prior year due to the lower profitability of the TV business as well as investments of CHF 1.2 million in connection with the market expansion in Germany. EBITDA margin of 5.9% is thus 170 basis points below the previous year's level. The segment "Ad Sales Switzerland" remains a significant earnings pillar, generating an EBITDA of CHF 33 million or 8.4% of segment revenues. Despite declining sales of "Ad Sales Other", a break-even result could be achieved in this segment. Marketing Services' EBITDA of around CHF 0.5 million from the continuing DACH markets could not compensate for the set-back by the Adriatic business, reducing EBITDA by CHF 1 million compared to the prior year to CHF 0.2 million.
Change of accounting standards to Swiss GAAP FER
The board of directors of Goldbach Group AG decided in October 2014 to switch its financial
accounting from IFRS to Swiss GAAP FER with retroactive effect for the financial year 2013. In connection with this conversion, the change in market segment at the SIX Swiss Exchange from the Main Standard to the Domestic Standard took place as of December 8, 2014.
Switching accounting standards from IFRS to Swiss GAAP FER mainly leads to adjustments where company mergers are involved (treatment of goodwill and immaterial assets from acquisitions), the treatment of cumulative foreign currency differences in equity, and the calculation of benefit liabilities. The balance has been reduced by CHF 34 million due to the new treatment of goodwill as well as the lower benefit liabilities. Uncommitted funds have been partially used to pay media partners early, thus reducing free cash flow by around CHF 10 million. Equity capital as of end of 2014 amounts to CHF 32 million, corresponding to an equity ratio of 21.2%. A detailed re-conciliation to account for the change from IFRS to Swiss GAAP FER is included in the 2014 Annual Report on pages 7 f.
Focusing of strategic alignment
Within the framework of an intense strategy process during the past year, the board of directors and management have paved the way for the focusing of Goldbach Group on its accredited core competencies as advertising services provider with a concentration on the DACH region including Poland as well as full service agency in the area of Marketing Services. Accordingly, during the transition year 2014 unprofitable business units have thus been closed, restructured or sold. Based on the excellent position in the home market of Switzerland the advertising of moving images on all channels is to now be expanded concertedly. At the forefront are the markets Austria and Germany, the latter the largest advertising market in Europe with a volume of EUR 4.3 billion TV spendings annually. For this purpose, the foundation of Goldbach Germany has created a strong starting point. "With the build-up of the business in the very promising German market we use our long-standing know how as advertising services provider in a concerted manner to organically develop the potential of the many digital channels with local managers as partners, thus laying the foundation for sustainable, profitable growth" states Michi Frank, CEO Goldbach Group, with conviction.
Outlook and dividend
For the current financial year Goldbach Group from today's perspective expects a positive sales development of the continued operations in the lower single-digits, driven by continuous growth in the TV business as well as a sustained recovery in the radio business. Thanks to the improved profitability of the core operations and the non-recurring nature of special items, the group anti-cipates net profit to improve substantially, despite build-up costs for the German market.
The board of directors of Goldbach Group proposes to the General Meeting of April 14, 2015 to pay an unchanged dividend of CHF 0.80 per share. Furthermore, the board will nominate Mirjana Blume and Dr Erica Dubach Spiegler as new members of the board of directors to replace Ronald Sauser and Peter A. C. Blum, who have decided to step down.
The Annual Report 2014 of Goldbach Group AG is available for download via our website:
http://www.goldbachgroup.com/Investor-Relations-en/Annual-Reports/Annual-Report-2014
Further information:
Goldbach Group Company Profile
The Goldbach Group is the leading network for electronic communication solutions and a logistics centre for the marketing and representation of advertising in private electronic media in the areas of television, internet television, radio, digital out of home, online display, in-game, search advertising and mobile advertising. The company is based in Switzerland (Kusnacht-Zurich) and is active in the whole DACH region (Switzerland, Germany, Austria), in Poland and in the Adriatic region (Slovenia, Croatia, Serbia). The Group's core business comprises planning, consulting, creation, concept development, purchasing and implementation through to assessment of the deployment of electronic offline and online media and cross-media campaigns.
Goldbach Group has been quoted in the main standard of the SIX Swiss Exchange since June 15th, 2007 resp. in the domestic standard since December 8th, 2014 (Valor 487094, ISIN CH0004870942, Ticker-Symbol: GBMN).
Further information: www.goldbachgroup.com or www.goldbach.com
Contact:
Goldbach Group AG
Germaine Müller, Investor Relations Manager
Jürg Bachmann, Corporate Communication / Public Affairs
Seestrasse 39
8700 Küsnacht-Zurich
Phone
+41 (44) 914 91 00
Fax
+41 (44) 914 93 60
www.goldbachgroup.com
