Vocento S A : C. Call Results 2021

CONFERENCE CALL

TRANSCRIPT

1 MARCH 2022

Investor Relations

Transcript of Conference Call on 2021 Results

LUIS ENRÍQUEZ

Good morning everyone and thank you for attending this conference call on Vocento's 2021 results. This will be a slightly different call. We think that in 2021 we saw trends that confirmed the dynamics of our group in recent years. Some of our businesses recovered from the pandemic. We are now back in a relatively normal situation and we are returning to the drivers of transformation that the group had before the pandemic, in terms of digital and diversified businesses. Some non-core assets have left the group and I believe we are now in an ideal position to begin a new stage. We will explain this in today's call. So we will focus not on the small percentages of increases and decreases of various metrics, but rather on more strategic questions.

Starting with the 2021 results, the group met or exceeded all the commitments we had at the start of the year. We aimed to return to EBITDA of the pre-pandemic year of 2019. We reported 45 million euros including the assets of TV and Veralia which are considered by our auditors to be discontinued operations. In general terms, we recovered to the 45 million euros level.

We improved the margin on readers by 3.9 million euros. We have set a target of maintaining this margin at 2019 levels in 2026. This is despite the fall in circulation that will continue and despite the difficulties in passing on the increase in paper costs in the coming years. It also reflects the increase in digital subscriptions, which has been a major focus of this group since 2016. Since 2019 it has been a major driver of our digital business.

We recorded net profit of 13.6 million euros. Adjusting for all the extraordinary items in the year, we would be at around 10 million euros. We believe that we have fulfilled all our commitments for the year.

We achieved more than our target of 100,000 digital subscribers. Digital advertising was 10% higher than in 2019 and if we exclude Classifieds it was up by 18.5%. It was a difficult year for Classifieds because of the semiconductor crisis in the automotive industry which we have talked about on other calls. We think it will not be mitigated until well into the fourth quarter of this year.

Revenues from diversification increased by 6.2%. We can see in a full year the performance that we can achieve from Gastronomy and from Agencies. Some of the diversified businesses are showing the qualities that we had seen in them at the time of our investment.

As I mentioned, we have divested some non-core assets, including Veralia and our stake in Net TV. We have also extracted value from our real estate portfolio, as we have been doing since 2015. I believe that our cash generation is the highest it has

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. +34 902 404 073 - ir@vocento.com

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Investor Relations

Transcript of Conference Call on 2021 Results

been since 2011, if not before, at 32.5 million euros. We have almost zero debt, excluding the capitalisation of leases under IFRS 16. The financial debt of the group is practically zero. Our free cash flow yield is 26%. These numbers are not bad at all.

I said before that we are starting a new stage. I will sketch some details now. Then Joaquín will go into the financials, and then we will discuss the outlook for the group in the coming years.

We think that we are entering this stage with a solid structure from which to develop our company for the future. The foundations are in place. The restructuring is complete. In fact, in 2021 we have made no reference to EBITDA excluding something or to recurring EBITDA or reported EBITDA. This will be the case from now on. There will be one EBITDA number, which can be compared with all the others.

Following the divestments this year in Izen, in Veralia and in television, all of the assets of the group that are currently in our portfolio are strategic. I emphasise this point. We are not planning any asset sales in what is left of our portfolio.

And we also have a piece of good news in the shape of the Mediascope report this year. In a year of a pandemic, when some advertisers disappeared and advertising decreased, Vocento's brands have emerged stronger in all aspects. This gives you some idea of the strength of our group as we embark on the recovery.

The migration to digital is unstoppable. Digital revenues and revenues from diversification are already 37% of group revenues. Digital advertising is 50% of our advertising. These are two very important percentages for a group like ours, a regional press business. Bear in mind that the regional press still has a huge amount of revenues from circulation and from print advertising. Our numbers could look low compared to other national media groups, but they are extremely high for a regional business.

We are also accelerating the process of transformation by connecting print to digital. Starting in February and March we are offering our print customers a simple BiDi code which they can use to access all the Premium content of the day. In this way we are creating a connection to the readers of our media, in any form of access they chose, and helping them to digitalise. We are transferring readers from print to their smartphones.

There is a constant in our group: the analysis of non-organic opportunities. As I said before, we have readjusted the shape of our company. We have the financial resources needed, because we have almost no debt. We will begin to explore the market, something we still need to do. We will be judged in the coming years on our capacity to continue to digitalise and transform and to find in the market non-organic opportunities that will complete our transformation. We will actively seek them out. We will look for businesses that fit with what we already have, complementary businesses,

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. +34 902 404 073 - ir@vocento.com

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Investor Relations

Transcript of Conference Call on 2021 Results

with the levels of profitability that we are looking for and that we will uncover during the processes of negotiation that take place.

And finally there will be organic growth and the development of new, mainly digital projects. The first is our project for sports media, which will be launched in July. It will focus mainly on quality. Let me mention here the project The Athletic in the US. We have had conversations with them and we are finding ways to work with them on this new digital project. The Athletic was acquired by the New York Times for $550 million. We believe that in the sports area there are advertisers who are very complementary with our own advertisers. There is a clear opportunity in the market for a high-quality sports media brand which believes in journalism and in the power of well-told stories, avoiding clickbait and the banal reporting of sporting information. We see a very clear gap in the market. We are hiring very well-known names in Spanish sports media, social media and search engines. We are attracting highly skilled young people from the main digital brands.

We are also supported by Tango as we create a new agency of influencers called Yellow Brick Road. This is a pioneering initiative in the media sector. With our own brands, we will deliver a project that we are very excited about and which in a few years will make a decisive and positive contribution to our EBITDA.

And finally, we will also return to more stable shareholder returns. We have set out a payout level of 40% for shareholders. We will start by proposing a dividend of 5.4 million euros at the Shareholder Meeting on 2021 results. We are very aware of our outstanding cash position, which is reflected in the return received by shareholders who invest in our company.

Now Joaquín Valencia will share with you some more details about the performance of our businesses in 2021 and then I will come back to talk about the outlook.

JOAQUÍN VALENCIA

Thanks Luis. Let's now look at some more data from the year 2021.

Starting with EBITDA, total EBITDA went from 42.3 million in 2019 to 45 million in 2021. We can break this down into a series of parts.

First, there was a 3.6 million increase in the press business. The other businesses, audiovisual and Classifieds, dropped by 2 million. New businesses were up 1.1 million and I will talk more about those later.

In the press business we can break down the 3.6 million into various levers of profitability. The first of these levers has always been the margin on readers. We are

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. +34 902 404 073 - ir@vocento.com

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Investor Relations

Transcript of Conference Call on 2021 Results

more focused on the profitability of the business than on the numbers or the ranking. The margin on readers includes the part of the business that comes from circulation sales of print copies. Despite the fall in circulation and sales, thanks to a very strong management of costs we have been able to increase this margin from 2020, with a 0.3 million euros increase since 2019.

We also have the contribution from the digital margin from the digital subscriptions, another additional line of revenues that adds to our EBITDA.

The number of digital subscribers increased to more than 100,000, including more than 89,000 paying subscribers. This contributed a digital margin of 3.6 million. So the total margin on readers increased by 3.9 million. This is one of the growth drivers of the press business.

Moving to advertising, there was a small decrease in print advertising but at the same time significant growth in digital advertising that I will talk more about later. Cost management was excellent, especially of personnel expenses. The printing business contributed less this year; it was back to 2020 levels but still down on 2019.

What happened in advertising? In advertising we grew by 4.8 compared with 2020 but we are still down 12% on 2019. As Luis mentioned, digital advertising was very strong, growing by 16% and 18% from 2020 and 2019 respectively. The print part is falling. At Classifieds, there was the impact of the automotive sector when compared with 2019, because of the famous semiconductor crisis that Luis mentioned. On a quarterly basis, the performance has improved over the course of the year and we expect the same dynamics in the coming quarters.

In terms of market share, we are clearly increasing our share. In total the market is down 14% on 2019 and we have fallen about 12%, so by less. We are performing in line with the print market, and outperforming in digital, if we exclude Classifieds which are down 18.5%.

I think it is important to have a closer look at Classifieds, where there are two very different parts. In the real estate business there is a clear recovery in revenues and in EBITDA compared with 2019, with EBITDA up 7%. At pisos.com we are looking at possible transactions to grow the business faster. We are not satisfied with our position and we think we have to do something to grow faster. In contrast, in the automotive segment it is the semiconductor crisis that is impacting us. We are still well below where we want to be, with EBITDA of 3.8 million in 2021 in a business that should have above 5 million of EBITDA. We are looking at developing new businesses, such as renting. Premium Leads has been very important both at Pisos and at Sumauto.

In Audiovisual,. I will talk later about the accounting impact of the divestments; of the two major businesses we have sold. In April we sold our 45% stake in the Izen content production business, followed by Net TV and the film distribution business. The deal was

Gran Vía don Diego López de Haro, 45, 3ª planta. 48011 Bilbao. (Bizkaia). Tel. +34 902 404 073 - ir@vocento.com

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