APG|SGA : Letter to shareholders 2022 - Annual Report (3.4 MB)

Letter to Shareholders

www.apgsga.ch

APG|SGA at a glance

148,867

analog & digital advertising spaces

30,554

campaigns carried out

Advertising revenue

CHF m

302.1	318.5	261.9	266.1	310.6
2018	2019	2020	2021	2022

EBITDA

CHF m

72.7	61.4
			25.8	40.2
		22.5
2018	2019	2020*	2021	2022

7,071

contracts & partnerships

525

employees

EBIT

CHF m

59.5	51.3
			15.3	29.4
		12.0
2018	2019	2020*	2021	2022

Consolidated net income

CHF m

47.2	41.8
		9.5	12.7	23.4
2018	2019	2020*	2021	2022

A-

CDP score for climate change

Cash flow from operating activities

CHF m

49.4	49.8
		32.7		18.3
			10.6
2018	2019	2020	2021	2022

Earnings per share

CHF m

15.74	13.95
			4.23	7.81
		3.18
2018	2019	2020*	2021	2022

*adjustd for one-time effects

APG|SGA SA Letter to shareholders March 15, 2023 3

Significant increase in operational performance.

Portfolio successfully developed in areas of digitalization, data and programmatics. Sustainability a key element of company strategy.

Financial situation very sound. Dividend of CHF 11 per share.

In brief

• Advertising revenues in Switzerland increase by 18.1% to CHF 297.2 million
• Decrease in advertising revenues in Serbia of 8.0% to CHF 13.4 million (steady in local currency terms)
• EBITDA margin: 12.8% (previous year: 9.6%)
• EBIT margin: 9.4% (previous year: 5.7%)
• Consolidated net income of CHF 23.4 million (previous year: CHF 12.7 million)
• Free cash flow of CHF 14.0 million (previous year: CHF 5.5 million)

Financial highlights

in 1 000 CHF	2022	2021	Change
Advertising revenue	310 600	266 145	16.7%
- Switzerland	297 175	251 551	18.1%
- International	13 425	14594	−8.0%
Operating income	314 133	269485	16.6%
EBITDA	40 210	25 828	55.7%
- in % of operating income	12.8%	9.6%
EBIT	29 372	15 344	91.4%
- in % of operating income	9.4%	5.7%
Consolidated net income	23 392	12 663	84.7%
- in % of operating income	7.4%	4.7%
Cash flow from operating activities	18 255	10 589	72.4%
Free cash flow1	13 978	5 480	155.1%
Investments in property, plant, and equipment	5 380	6 610	−18.6%
- advertising panel	3 762	4422	−14.9%
- other investments	1 618	2 188	−26.1%
Earnings per share, in CHF	7.81	4.23	84.6%

EBITDA: Earnings before interest, taxes, depreciation of property, plant, and equipment, and amortization of intangible assets

EBIT: Earnings before interest and taxes

1 Cash flow from operating activities (operating cash flow) CHFt 18 255 (previous year: CHFt 10 589) less cash flow from investing activities CHFt 4 277

(previous year: CHFt 5 109), (see page 10 Consolidated statement of cash flows)

4 APG|SGA SA Letter to shareholders March 15, 2023

Dear Shareholder

General business development

The lifting of COVID-19 restrictions early on in the year led, as expected, to an ongoing revitalization of mobility behavior and consequently - in conjunction with our intensified marketing and sales activities - an increase in our advertising revenues as well. This positive development was dampened by the economic fallout from the attack on Ukraine, as well as rising inflation, recession fears and - in the fourth quarter in particular - uncertainty around potential electricity shortages and their potential impact on our business activities. Advertisers tended to take an even more short-term view in planning and booking their campaigns than in previous years.

Despite these challenging conditions, over the entire financial year we achieved a significant increase in analog and digital revenues over the previous year's values. In view of the ongoing challenging geopolitical and macroeconomic environment and the associated reduced visibility, APG|SGA continued to consistently and resolutely implement measures to optimize non-revenue-related operating costs. But this also went hand-in-hand with an successful expansion of the product and service portfolio in the areas of digitalization, data and programmatics.

APG|SGA Group

In the financial year 2022, group revenue increased by 16.7%. Real estate revenue increased by 5% to reach CHF 1.9 million. Other operating income represented the sale of property, plant and equipment, which increased by 6.7% in the reporting year. This resulted in operating income for the financial year 2022 of CHF 314.1 million, which represented an increase of 16.6% over the previous year.

Fees and commissions increased by 12.2% in the reporting year. This increase was disproportionate to sales revenue, and was due to non-sales-volume-related fees associated with the higher sales volumes. Personnel expenses grew by 9.7% in the financial year 2022. This is primarily attributable to the slight increase in variable compensation as well as lower compensation for short-time work than in the previous year. Operating and administrative costs increased by 19.2% in the reporting year. While direct operating and administrative costs remained at the previous year's levels, expenses associated with sponsorship of poster campaigns in the cultural and sport space rose sharply.

There was a significant increase in margins through economies of scale, process optimization and cost discipline. The financial year 2022 saw an EBITDA margin of 12.8% (previous year: 9.6%) and an EBIT margin of 9.4% (previous year: 5.7%). Net income for 2022 amounted to CHF 23.4 million (previous year: CHF 12.7 million), representing an increase of 84.7%.

Cash flow

Operating cash flow for the financial year 2022 amounted to CHF 18.3 million (previous year: CHF 10.6 million). This represents an increase of 72.4%. In the reporting year 2022, a delayed fee payment for the previous year in connection with COVID-19 renegotiations had a significantly negative impact on operating cash flow. After deducting the cash flow from investing activities of CHF 4.3 million (previous year: CHF 5.1 million), this resulted in a free cash flow of CHF 14.0 million (previous year: CHF 5.5 million).

APG|SGA SA Letter to shareholders March 15, 2023 5

Balance sheet

The balance sheet total reduced by CHF 26.1 million in the financial year 2022 to CHF 189.4 million. This decrease was primarily driven by lower cash and cash equivalents along with a significant reduction in accrued liabilities and deferred income. The net cash position at the end of 2022 was CHF 53.3 million, CHF 19.1 million lower than at the close of 2021. This decrease was primarily caused by the dividend payment and the delayed fee payment as described above. Equity totaled CHF 91.2 million, representing an equity ratio of 48.2%.

Swiss market

Advertising revenues for 2022 amounted to CHF 297.2 million, up 18.1% on the previous year. Following a very strong start to the year - which saw the complete lifting of COVID-19 restrictions - challenging economic conditions flattened growth in the second half of the year.

While APG|SGA saw positive developments in advertising investment throughout 2022 in sectors such as wholesale, banks, health insurance and art and cultural events, persistent supply chain issues meant advertising spend remained below average in some areas, particularly the automotive sector.

Recovery of revenues for promotional space, public transport and airport advertising was more subdued, with a slower rise in footfall and a larger proportion of annual space bookings. By contrast, there was a rapid increase in demand for high-impact,large-scale products in prime locations in airport, mountain and city settings over the course of the year. The development in revenues for analog products in 2022 was similarly positive overall. Our internal APG|SGA logistics organization processed and installed more than 716,500 high-quality posters in the standard formats "F4", "F200", "F12" and "F24".

There was also positive development in the revenues generated by our digital advertising media. This is due, on the one hand, to the fact that APG|SGA is providing advertisers with a growing digital portfolio and, on the other hand, to the fact that clients and their agencies appreciate the ability to flexibly book and broadcast "Digital Out of Home" at short notice.

In 2022, APG|SGA invested in the digital expansion and increased flexibility of its products. Throughout the year, new "ePanels" were installed in Aarau, Bern, Thun, Zurich and Geneva Cornavin railway station. Ten new "XXL eBoards" were also put into operation in cooperation with Zurich Airport. And, in early 2023, they were joined by 44 new "Airport ePanels", largely in airside positions, marketed in a new digital network that boasts a total of 12 networks and 234 screens.

In 2022, numerous new, high-quality spaces on private property, both analog and digital, were added to the portfolio once again, with many contracts extended. Overall, we have a stable portfolio of over 7,000 contracts secured for the long term with both public authorities and private property owners throughout Switzerland.

Serbian market

In the financial year 2022, subsidiary Alma Quattro d.o.o. contributed 4.3% to group revenues. This was also a year in which Serbia was greatly impacted by the war in Ukraine. A very high rate of inflation and the huge increase in energy prices created difficult conditions for the economy. There were also tensions on the border with Kosovo. Despite these circumstances, advertising revenues were almost steady with a minimal reduction of 1.2% in local currency terms. With the weakening of the Serbian dinar, this translated into a reduction of 8.0% in Swiss francs.

Alma Quattro boasts an advertising inventory of over 4,600 sites in highly attractive locations, primarily in cities such as Belgrade, Novi Sad, Niš, Valjevo, Čačak, Užice and Kragujevac.