C. Call Results 2020

TRANSCRIPT

1 MARCH 2021

Investor Relations

Transcript of Conference Call on 2020 Results

LUIS ENRÍQUEZ

Good morning and many thanks for attending our conference call on 2020 results. This set of results represents our company's response to the pandemic. The results show how we adapted and responded. I will go through the earnings and give some details about what we have achieved.

Beginning with the revenue line, we have clearly outperformed the market in general terms and also our peers. We outperformed in every area: digital, supplements and print advertising. For example, we recorded a fall of 16% while the market fell 22%. And, excluding classifieds, we increased digital advertising compared with 2019. In the last quarter, we recorded a rise in digital advertising of almost 5%, this time including classifieds. Our ability in recent years to develop new advertising areas, such as programmatic advertising, or the 25% growth in branded content, ad hoc proposals for supplements, and others, has differentiated us to a large degree compared to the market in 2020. This is the foundation for our performance and the forecasts for the future that I will discuss later.

It is important to see in our revenues the impact of new subscription revenues in the P&L. We will go into more detail about these later on and in future conference calls. We have reached 75,000 subscribers and have a target of 100,000 for the end of 2021. From a user base of almost 3,500,000 registered users, this reflects a good level of penetration. It also enhances our digital positioning and our programmatic advertising offer. Our target for the coming five years is for the margin we obtain from the growth in subscribers to offset the deterioration we will experience in the margin on physical circulation sales, which as a regional press group is very high.

We are establishing direct links with our readers, not indirect links from advertising, but direct links from circulation sales: from sales on Kiosko y Más, ON+ subscriptions, and the Premium service at ABC. This margin will be stable in the coming five years. That is one of our targets.

We have also continued to reinvent Tesa from a business which was mainly focused on producing supplements to an events company, among other areas. Successful events include WomenNow Reset, which was completely virtual at the end of last year, with the same margins as we had forecast in the in-person board meeting at the start of the year. It has become a leader in its field in a very short period, mainly in the women's area but also in luxury tourism and others. There has been a very clear recovery in margins at this business.

Leaving aside the traditional business for now, in the diversified areas Classifieds have suffered, and especially Sumauto, because of the downturn in the automotive market. We have no doubt that we will get back on the path of the strategic plan we have for this business when the market recovers. Real Estate performed somewhat

Investor Relations

Transcript of Conference Call on 2020 Results

better. The Classifieds division is a core business which will make a major contribution to EBITDA in the future.

In Gastronomy our project remains the same. As with WomenNow Reset, we organised Gastrónomika on a semi-virtual basis in San Sebastián. We retained almost 70% of the margin we had forecast without the pandemic, with an event that was connected to 55 countries and had 25,000 registered users making visits of more than half an hour. This is a very promising indicator of what we can do in the future with the events, which are a major contributor to divisions such as Gastronomy. We also launched another initiative in the gastronomical world, which is our training project for gastronomy, partnering with the Universidad Pontificia de Comillas. We expect the first students in around 2022-2023.

Moving on, the agencies performed very well in the last quarter, even with the quarantine measures that are impacting on their business. Our agencies are maintaining their contracts, increasing them, and are nearly at the same level of margins as before the pandemic.

So where does this leave us? First, EBITDA is down 30%. Our cost controls have offset about 70% of the fall in revenues that we recorded because of the pandemic. That was one of the goals we set ourselves in the conference call in March last year.

In the last quarter of the year, we recognised in our accounts 7,000,000 euros for compensation payments, mainly because of restructuring in the corporate area and at the regional newspapers, which will generate savings of around 4.8 million euros a year. These payments have been booked in 2020, so in 2021 we will be free from these charges, as has been the case in the last 10 years of the group.

As we said on the last call, our aim is to return the group to the margins of 2019 and to the goals that we set on the Investors Day in 2019, albeit with a delay of two years, as in 2021 we will return to the margin levels of 2019. This is our target, based on what we have discussed before.

I will answer your questions later, but for now I will hand over to Joaquín Valencia who will go into the financial aspects of the accounts in more detail.

JOAQUÍN VALENCIA

Many thanks Luis. I will provide some more detail about the data discussed by Luis.

In advertising, we have outperformed the market. We outperformed the total market (online and offline) by 6%, and we outperformed in each segment. We have been outperforming for many years and we did so again this year. We increased even more the contribution of digital advertising to Vocento. We are now at 45%, up from 41.4%.

Investor Relations

Transcript of Conference Call on 2020 Results

For VOCENTO this is a significant achievement, as we have a very high contribution from local advertising, where print advertising represents almost 78%. So it is a real achievement compared with other groups for us to reach this level.

Another major achievement of the year has been the migration to digital subscription models and the growth of digital subscribers. As Luis said, our target was 100,000 digital subscribers by the end of 2021 and we are maintaining that goal. Of the 100,000 total, 90,000 will be paying subscribers.

This year we recorded very significant growth, and there has also been a significant migration of subscribers onto annual subscriptions. More than 40% of our subscribers now have annual subscriptions. This is an important trend for the coming years.

Going over the business areas, Luis already mentioned the performance at Classifieds, where after a good 1Q there was a heavy impact on 2Q, followed by a recovery in 4Q.

Our strategy at Classifieds has always been to maintain the business model and the business rather than to pursue short-term profitability. In the coming year we expect to see an increase in ARPA and a clear improvement in average profitability to levels of 2019 or higher, as the market recovers.

In Gastronomy, our strategy is to complete our portfolio of offerings. This year was marked by two achievements. Our acquisition of Mateo & Co has added another element to our business. This is a strategy consultancy which focus on gastronomy, above all on building brands. We also launched a training project in partnership with the Universidad Pontificia de Comillas. So we are completing our business, which is now not just focused on events but on events, congresses, consultancy, publications and training.

We also made significant progress this year with the virtual events, as Luis mentioned, such as San Sebastián Gastronomika. We expect to maintain this model in the coming years and to increase profitability. The aim for the business in the coming years is to hold the MadridFusión and Gastronomika fairs in a hybrid format, in-person and virtual. We will develop more industry events and reach an agreement to organise an international event.

At the agencies, there has been a recovery over the course of the year. Revenues reached almost 11 million euros, with EBITDA of 1.5 million euros. Comparable EBITDA was 1.5 million euros. In the fourth quarter the contribution was 1.2 million euros, following a very strong recovery in the quarter. The agencies have been able to adapt to the challenging market this year. For example, Tango won new accounts in the pharma and agri sectors, where business increased, while there was less activity in the hospitality sector. There are also projects at the agency that are focused on strategy and on creativity, such as actions to strengthen brand communications and

This is an excerpt of the original content. To continue reading it, access the original document here.