- Multimedia

Transcription

- Multimedia

Multimedia Polska Group
PLN '000
SELECTED FINANCIAL
INFORMATION
EUR '000
for twelve
months ended
for twelve months
ended
for twelve months
ended
for twelve
months ended
31 Dec 2015
31 Dec 2014
31 Dec 2015
31 Dec 2014
consolidated financial statements
Sales revenues
709 473
705 822
169 537
168 484
Operating profit/(loss)
135 087
143 828
32 281
34 333
Profit/(loss) before tax
73 582
80 024
17 583
19 102
Profit/(loss) for the period
86 200
50 791
20 599
12 124
Profit/(loss) attributable to equity
holders of the parent
86 196
50 787
20 598
12 123
Basic earnings per share (in PLN or
EUR)
0,94
0,55
0,22
0,13
Diluted earnings per share
(in PLN or EUR)
0,94
0,55
0,22
0,13
Number of shares (not in
thousands)
91 764 808
91 764 808
91 764 808
91 764 808
Weighted average number of
shares
(not in thousands)
91 764 808
91 764 808
91 764 808
91 764 808
Weighted average number of
shares for diluted earnings per
share
(not in thousands)
91 764 808
91 764 808
91 764 808
91 764 808
314 320
298 787
75 111
71 322
Cash flows from investing activities
(289 164)
(115 269)
(69 099)
(27 515)
Cash flows from financing activities
(108 022)
(85 660)
(25 813)
(20 448)
as at 31 Dec 2015
as at 31 Dec 2014
as at 31 Dec 2015
as at 31 Dec 2014
Cash flows from operating
activities
Current assets
395 634
392 782
92 839
92 153
Non-current assets
1 325 205
1 255 054
310 971
294 455
Total assets
1 720 839
1 647 836
403 811
386 607
198 548
243 716
46 591
57 179
1 282 355
1 199 098
300 916
281 327
239 936
205 022
56 303
48 101
91 765
91 765
21 533
21 529
31 Dec 2015
31 Dec 2014
Balance sheet
4,2615
4,2623
Income statement, cash flow statement
4,1848
4,1893
Current liabilities
Non-current liabilities
Equity
Issued capital
PLN/EUR average exchange rate (NBP)
The Polish original should be referred to in matters of interpretation.
Translation of auditors’ report originally issued in Polish.
INDEPENDENT AUDITORS’ OPINION
To the Supervisory Board and General Shareholders Meeting of Multimedia Polska S.A.
1. We have audited the attached consolidated financial statements of Multimedia Polska S.A.
Group (‘the Group’), for which the holding company is Multimedia Polska S.A.
(‘the Company‘) located in Gdynia at Tadeusza Wendy 7/9, for the year ended 31 December
2015 containing the consolidated balance sheet as at 31 December 2015, the consolidated
income statement, the consolidated statement of comprehensive income, the consolidated
statement of changes in equity, the consolidated statement of cash flow for the period
from 1 January 2015 to 31 December 2015 and the summary of significant accounting policies
and other explanatory notes (‘the attached consolidated financial statements’).
2. The truth and fairness1 of the attached consolidated financial statements, the preparation
of the attached consolidated financial statements in accordance with the required applicable
accounting policies and the proper maintenance of the consolidation documentation
are the responsibility of the Company’s Management Board. In addition, the Company’s
Management Board and Members of the Supervisory Board are required to ensure
that the attached consolidated financial statements and the Directors’ Report meet
the requirements of the Accounting Act dated 29 September 1994 (Journal of Laws 2013.330
with subsequent amendments – ‘the Accounting Act’). Our responsibility was to audit
the attached consolidated financial statements and to express an opinion on whether, based
on our audit, these financial statements comply, in all material respects, with the required
applicable accounting policies and whether they truly and fairly2 reflect, in all material
respects, the financial position and results of the operations of the Group.
3. We conducted our audit of the attached consolidated financial statements in accordance with:
•
chapter 7 of the Accounting Act,
•
National Auditing Standards issued by the National Council of Statutory Auditors,
in order to obtain reasonable assurance whether these financial statements are free of material
misstatement. In particular, the audit included examining, to a large extent on a test basis,
documentation supporting the amounts and disclosures in the attached consolidated financial
statements. The audit also included assessing the accounting principles adopted and used
and significant estimates made by the Company’s Management Board, as well as evaluating
the overall presentation of the attached consolidated financial statements. We believe our audit
has provided a reasonable basis to express our opinion on the attached consolidated financial
statements treated as a whole.
1
2
Translation of the following expression in Polish: ‘rzetelność i jasność’
Translation of the following expression in Polish: ‘rzetelne i jasne’
The Polish original should be referred to in matters of interpretation.
Translation of auditors’ report originally issued in Polish.
4. In our opinion, the attached consolidated financial statements, in all material respects:
•
present truly and fairly all information material for the assessment of the results of the
Group’s operations for the period from 1 January 2015 to 31 December 2015, as well as its
financial position3 as at 31 December 2015,
•
have been prepared in accordance with International Financial Reporting Standards as
adopted by the EU,
•
are in respect of the form and content, in accordance with the legal regulations governing
the preparation of financial statements.
5. We have read the Directors’ Report for the period from 1 January 2015 to 31 December 2015
(‘the Directors’ Report‘) and concluded that the information derived from the attached
consolidated financial statements reconciles with these financial statements. The information
included in the Directors’ Report corresponds with art. 49 para 2 of the Accounting Act.
on behalf of
Ernst & Young Audyt Polska spółka
z ograniczoną odpowiedzialnością sp. k.
Rondo ONZ 1, 00-124 Warsaw
Reg. No 130
Key Certified Auditor
Robert Klimacki
certified auditor
No. 90055
Warsaw, 29 February 2016
3
Translation of the following expression in Polish: ‘sytuacja majątkowa i finansowa’
2/2
MULTIMEDIA POLSKA GROUP
Consolidated financial statements for the year ended
31 December 2015 with the Independent Auditor's opinion
Consolidated financial statements for the year ended 31 December 2015
(PLN '000)
Contents
Consolidated Income Statement ...................................................................................................................................................................... 5
Consolidated Statement of Comprehensive Income ............................................................................................................................... 6
Consolidated Balance Sheet ............................................................................................................................................................................... 7
Consolidated Cash Flow Statement ................................................................................................................................................................. 8
Consolidated Statement of Changes in Equity ........................................................................................................................................... 9
ACCOUNTING POLICIES AND OTHER EXPLANATORY NOTES...........................................................................................................11
1
General information...............................................................................................................................................................................11
2
Identification of the consolidated financial statements .........................................................................................................11
3
Composition of the Group ..................................................................................................................................................................12
4
Composition of the Parent's Management Board ....................................................................................................................14
5
Approval of the consolidated financial statements..................................................................................................................14
6
Material accounting estimates and judgments .........................................................................................................................14
6.1
Professional judgment ..........................................................................................................................................................................14
6.2
Estimates and assumptions ................................................................................................................................................................15
7
Basis of preparation of the consolidated financial statements ...........................................................................................16
7.1
Compliance statement..........................................................................................................................................................................17
7.2
Functional currency and reporting currency of financial statements ...............................................................................18
8
Changes in adopted accounting policies .....................................................................................................................................18
9
New standards and interpretations which have been issued but are not yet effective............................................18
10
Correction of errors ...............................................................................................................................................................................19
11
Changes in estimates ............................................................................................................................................................................19
12
Key accounting policies .......................................................................................................................................................................20
12.1 Basis of consolidation ...........................................................................................................................................................................20
12.2 Foreign currency translations ............................................................................................................................................................20
12.3 Property, plant and equipment.........................................................................................................................................................21
12.4 Goodwill ......................................................................................................................................................................................................21
12.5 Intangible assets .....................................................................................................................................................................................22
12.6 Leases ..........................................................................................................................................................................................................24
12.7 Impairment losses on non-current non-financial assets ........................................................................................................24
12.8 Borrowing costs .......................................................................................................................................................................................24
12.9 Financial assets ........................................................................................................................................................................................25
12.10 Impairment of financial assets ..........................................................................................................................................................26
12.11 Derivative financial instruments and hedges ..............................................................................................................................27
12.12 Inventories .................................................................................................................................................................................................27
12.13 Trade and other receivables ...............................................................................................................................................................27
12.14 Cash and cash equivalents ..................................................................................................................................................................28
12.15 Interest-bearing loans, borrowings and debt securities ........................................................................................................28
12.16 Trade and other payables ...................................................................................................................................................................28
12.17 Provisions ...................................................................................................................................................................................................28
12.18 Employee benefits ..................................................................................................................................................................................29
12.19 Share-based payments .........................................................................................................................................................................29
12.20 Revenue ......................................................................................................................................................................................................29
12.21 Income tax .................................................................................................................................................................................................30
12.22 Earnings per share ..................................................................................................................................................................................31
13
Operating segments ..............................................................................................................................................................................31
14
Revenue and expenses .........................................................................................................................................................................33
14.1 Sales revenue ............................................................................................................................................................................................33
14.2 Other operating income ......................................................................................................................................................................33
14.3 Other operating expenses ..................................................................................................................................................................34
14.4 Finance income ........................................................................................................................................................................................34
14.5 Finance expenses ....................................................................................................................................................................................34
15
Income Tax ................................................................................................................................................................................................34
15.1 Income tax expense ...............................................................................................................................................................................34
2
(PLN '000)
15.2
15.3
16
17
18
19
20
20.1
20.2
21
22
22.1
22.2
23
24
25
26
26.1
26.2
27
28
29
30
31
31.1
31.2
31.3
31.4
32
33
34
35
35.1
35.2
36
37
37.1
37.2
37.3
37.4
38
39
Reconciliation of the effective tax rate ..........................................................................................................................................35
Deferred Tax..............................................................................................................................................................................................36
Assets and liabilities of the Company’s Social Benefit Fund ................................................................................................37
Earnings per share ..................................................................................................................................................................................37
Dividends paid and proposed ...........................................................................................................................................................37
Property, plant and equipment.........................................................................................................................................................39
Leases ..........................................................................................................................................................................................................41
Liabilities under finance leases and financing agreements...................................................................................................41
Operating lease receivables – the Group as lessor ..................................................................................................................41
Intangible assets .....................................................................................................................................................................................42
Business combinations and acquisition of non-controlling interest.................................................................................43
Goodwill ......................................................................................................................................................................................................43
Impairment test .......................................................................................................................................................................................43
Financial assets ........................................................................................................................................................................................44
Non-current receivables ......................................................................................................................................................................44
Prepayments and deferred costs .....................................................................................................................................................44
Employee benefits ..................................................................................................................................................................................44
Employee share incentive plan .........................................................................................................................................................44
Retirement and other post-employment benefit plans .........................................................................................................45
Inventories .................................................................................................................................................................................................45
Trade and other receivables ...............................................................................................................................................................46
Other financial assets ............................................................................................................................................................................46
Cash and cash equivalents ..................................................................................................................................................................46
Issued capital, statutory reserve funds and other capital reserves ....................................................................................47
Issued capital ............................................................................................................................................................................................47
Statutory reserve funds and other reserve capital ....................................................................................................................47
Retained earnings and limits to dividend distribution ...........................................................................................................48
Non-controlling interests ....................................................................................................................................................................49
Interest-bearing loans and borrowings .........................................................................................................................................49
Debt securities .........................................................................................................................................................................................50
Provisions ...................................................................................................................................................................................................53
Trade and other payables, accruals.................................................................................................................................................54
Trade and other payables (current) ................................................................................................................................................54
Accruals .......................................................................................................................................................................................................54
Liabilities under issued securities .....................................................................................................................................................55
Contingent liabilities..............................................................................................................................................................................55
Legal claims ...............................................................................................................................................................................................55
Tax settlements ........................................................................................................................................................................................56
Waste electrical and electronic equipment .................................................................................................................................56
Universal service ......................................................................................................................................................................................56
Investment commitments ...................................................................................................................................................................58
Reconciliation of differences between changes in certain items of the balance sheet and the cash flow
statement ...................................................................................................................................................................................................58
40
Related party disclosures ....................................................................................................................................................................59
40.1 Entity with significant influence over the Group .......................................................................................................................59
40.2 Company shares held by Members of the Management and Supervisory Board ......................................................59
40.3 Dividends paid and declared .............................................................................................................................................................59
40.4 Loans granted to Management and Supervisory Board Members ...................................................................................60
40.5 Other transactions with Management Board and Supervisory Board Members .........................................................60
40.6 Compensation of Management Board and Supervisory Board Members of the Group..........................................60
40.7 Participation of Management Board Members in the employee share ownership plan .........................................60
40.8 Transactions with related parties .....................................................................................................................................................60
40.8.1 Loans granted to related parties ......................................................................................................................................................61
40.8.2 Bonds issued by related parties........................................................................................................................................................62
40.8.3 Financial guarantees to secure obligations of related parties .............................................................................................62
41
Remuneration of certified auditor or entity qualified to audit financial statements .................................................63
3
(PLN '000)
42
42.1
42.2
42.3
42.4
43
44
45
46
Financial risk management objectives and policies .................................................................................................................63
Interest rate risk.......................................................................................................................................................................................63
Foreign currency risk .............................................................................................................................................................................66
Credit risk ...................................................................................................................................................................................................67
Liquidity risk ..............................................................................................................................................................................................67
Carrying value and fair value of financial instruments ............................................................................................................68
Capital management .............................................................................................................................................................................69
Employment structure ..........................................................................................................................................................................70
Events subsequent to the balance-sheet date ...........................................................................................................................70
4
(PLN '000)
Consolidated Income Statement
for the year ended 31 December 2015
Year ended
31 December 2015
Year ended
31 December 2014
(Restated)*
680,900
28,573
709,473
682,711
23,111
705,822
Depreciation and amortisation
Materials
External services
Taxes and charges
Payroll
Other employee benefits
Other expenses
Cost of goods and materials sold
Operating expenses
212,940
23,219
234,906
19,680
62,339
7,446
5,645
7,700
573,875
213,880
20,953
240,282
18,003
57,767
6,861
5,385
423
563,554
Gross profit/ (loss)
135,598
142,268
Note
Continuing operations
Subscriber-generated and inter-operator revenue
Other revenue
Sales revenue
14.1
Other operating income
Other operating expenses
Operating profit/ (loss)
14.2
14.3
8,913
9,424
135,087
14,784
13,224
143,828
Finance income
Finance expenses
Profit/ (loss)before tax
14.4
14.5
6,980
68,485
73,582
15,028
78,832
80,024
Income Tax
Profit/ (loss)for the year from continuing operations
15.1
(12,618)
86,200
29,233
50,791
86,200
50,791
86,196
4
50,787
4
0.94
0.94
0.55
0.55
Profit/ (loss)for the financial year
Attributable to:
Equity holders of the parent
Non-controlling interests
Earnings per share:
–
basic earnings for the reporting period
–
diluted earnings for the reporting period
17
* details of restatement are described in note 7
The accounting policies and other explanatory notes to the consolidated financial statements
included on pages 11 to 70 constitute an integral part hereof
5
(PLN '000)
Consolidated Statement of Comprehensive Income
Year ended
31 December 2015
Profit for the period
Other comprehensive income
Available-for-sale financial assets
Cash flow hedges
Actuarial gains (losses) on defined benefit retirement plans
Income tax relating to components of other comprehensive income
Net other comprehensive income
Total comprehensive income for the period
86,200
86,200
Year ended
31 December 2014
(Restated)*
50,791
50,791
6
(PLN '000)
Consolidated Balance Sheet
as at 31 December 2015
Note
ASSETS
Non-Current Assets
Property, plant and equipment
Goodwill
Intangible assets
Financial assets
Non-current receivables
Prepayments and deferred costs
Deferred tax assets
31 December 2014
(Restated)*
910,561
184,935
116,038
7,533
888
606
104,644
1,325,205
879,709
170,562
109,164
13,359
619
477
81,164
1,255,054
839
72,524
9,832
7,634
187,410
117,395
395,634
137
72,075
4,673
8,023
107,612
200,262
392,782
1,720,839
1,647,836
91,765
225,459
(77,320)
32
239,936
91,765
225,232
(112,003)
28
205,022
32,20
36,33
35.2
34
15.3
286,900
986,834
641
358
7,622
1,282,355
208,507
983,398
752
336
6,105
1,199,098
32,20
35.1
36,33
Total liabilities
14,440
97,892
50,901
7,575
22,575
4,923
242
198,548
1,480,903
11,334
147,573
52,132
6,511
19,767
5,368
1,031
243,716
1,442,814
TOTAL EQUITY AND LIABILITIES
1,720,839
1,647,836
Current Assets
Inventories
Trade and other receivables
Income tax receivables
Other financial assets
Cash and cash equivalents
19
22.1
21
23
24
25
15.3
31 December 2015
27
28
25
29
30
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity (attributable to equity holders of the parent)
Issued capital
Share premium
Treasury shares
Other reserve capital
Retained earnings/ Accumulated losses
Distributions from net profit during the financial year
Total equity
Non-Current Liabilities
Interest-bearing bank loans, borrowings and other
Liabilities under issued securities
Deferred income
Provisions
Deferred tax liability
Current Liabilities
Interest-bearing bank loans, borrowings and other
Trade and other payables
Income tax liability
Accruals
Deferred income
Provisions
31
31.4
35.2
35.2
34
7
(PLN '000)
Consolidated Cash Flow Statement
Note
Cash flows from operating activities
Profit before tax
Adjustments for:
Interest and dividends received
Foreign exchange (gains)/losses
Gain/(loss) from investing activities
Change in inventories
Change in receivables
Change in liabilities, net of loans and borrowings
Change in accruals and deferrals
Change in provisions
Income tax paid
Other adjustments
- liquidation of property, plant and equipment
- finance fees and commissions
- other
Net cash flows from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment and intangible assets
Purchase of property, plant and equipment and intangible assets and acquisition
of an organised part of business
Acquisition of a subsidiary undertaking, net of cash acquired
Interest received
Repayment of short-term investments (bank deposits)
Purchase of short-term investments (bank deposits)
Repayment of loans granted
Loans granted
Redemption of bonds
Net cash flows from investing activities
Cash flows from financing activities
Payment of finance lease liabilities and liabilities under financing agreements
Payment of interest on finance lease liabilities and liabilities under financing
agreements
Proceeds from loans and borrowings
Interest, fees and commissions paid
Redemption of debt securities
Dividends paid to equity holders of the parent
Other
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Net foreign exchange gains/(losses)
Cash and cash equivalents at the beginning of period
Gain/loss on measurement of foreign-currency cash
Cash and cash equivalents at the end of period, including:
- restricted cash
39
39
39
40.8.2
30
30
Year ended
Year ended
31 December 2015 31 December 2014
(Restated)*
73,582
80,024
240,738
212,940
58,386
1
(132)
(673)
(4,083)
(14,781)
1,859
(769)
(15,122)
3,112
250
3,747
(885)
314,320
218,763
213,880
58,861
(1)
(166)
217
(15,879)
(845)
(9,235)
634
(31,507)
2,804
297
4,540
(2,033)
298,787
1,357
221
(197,583)
(23,326)
2,697
170,000
(239,600)
676
(3,385)
(289,164)
(195,191)
(18,058)
1
(100,192)
8,025
(1,000)
190,925
(115,269)
(2,136)
(3,023)
(181)
82,712
(66,409)
(122,008)
(108,022)
(82,866)
200,262
(1)
117,395
-
(224)
(76,993)
(5,920)
500
(85,660)
97,858
102,403
1
200,262
-
8
(PLN '000)
Consolidated Statement of Changes in Equity
Issued capital
As at 1 January 2015
Comprehensive income for the period
Issue of shares
Transaction costs on issue of shares
Share-based payments (incentive plan)
Share buy-back
Share buy-back obligation
Redemption of shares
Acquisition of non-controlling interests
Distribution of profit brought forward
Dividends paid**
Other increases/decreases
As at 31 December 2015
91,765
91,765
Share premium
Treasury shares
-
-
Other capital
reserves
225,232
227
225,459
Retained
earnings/
accumulated
losses
(112,003)*
86,196
(227)
(51,286)
(77,320)
Total
204,994
86,196
(51,286)
239,904
Non-controlling
interests
Total equity
28
4
32
205,022
86,200
(51,286)
239,936
**note 18
The accounting policies and other explanatory notes attached to the consolidated financial statements on pages 11 to 70 constitute an integral part hereof
9
(PLN '000)
(Restated)*
Issued capital
Comprehensive income for the period
Issue of shares
Transaction costs on issue of shares
Share-based payments (incentive plan)
Share buy-back
Share buy-back obligation
Redemption of shares
Acquisition of non-controlling interests
Distribution of profit brought forward
Dividends paid**
Other increases/decreases
91,765
91,765
Share premium
Treasury shares
-
-
Other capital
reserves
46,053
179,179
225,232
Retained
earnings/
accumulated
losses
87,112
50,787
(179,179)
(70,723)
(112,003)
Total
224,930
50,787
(70,723)
204,994
Non-controlling
interests
Total equity
24
4
28
224,954
50,791
(70,723)
205,022
**note 18
The accounting policies and other explanatory notes attached to the consolidated financial statements on pages 11 to 70 constitute an integral part hereof
10
Accounting policies and other explanatory notes
(PLN '000)
ACCOUNTING POLICIES AND OTHER EXPLANATORY NOTES
1
General information
Multimedia Polska S.A. Group ("Group") consists of Multimedia Polska S.A. ("Parent", "Company") and its
subsidiaries (see note 3).
The Parent is entered in the Register of Entrepreneurs maintained by the District Court, VIII Commercial Division of
the National Court Register, under entry No. KRS 0000238931.
The Parent has been assigned industry identification No. REGON 190007345. The Company’s registered office is
located in Gdynia, at ul. Tadeusza Wendy 7/9.
The Parent and its subsidiaries have an unlimited period of operation.
The Group’s main activity is the provision of a wide range of telecommunication services, in particular radio,
television, internet and telephony over cable television systems.
On 3 November 2011, the Company received a Resolution of the Management Board of the Warsaw Stock
Exchange to delist the Company shares assigned code No. PLMLMDP00015 from the Main Market of the WSE as
of 8 November 2011. The resolution was adopted in connection with the decision of the Polish Financial
Supervision Authority to allow the Company to rematerialise shares of Multimedia Polska S.A.
2
Identification of the consolidated financial statements
These consolidated financial statements of the Group cover the year ended 31 December 2015 and contain
comparative data for the year ended 31 December 2014, which had been audited by a qualified auditor, and then
restated according to the description in note 7.
11
(PLN '000)
3
Composition of the Group
The Group consists of Multimedia Polska S.A. and the following subsidiaries:
Name
Address
Multimedia Polska
Development Sp. z o.o.
Multimedia PolskaPołudnie S.A.
Telewizja Kablowa
Brodnica Sp. z o.o.
Multimedia Polska PR Sp.
z o.o.
Multimedia Polska
Energia Sp. z o.o.
Gdynia,
ul.T.Wendy 7/9
Gdynia,
ul.T.Wendy 7/9
Gdynia,
ul. T.Wendy 7/9
Gdynia,
ul. T.Wendy 7/9
Gdynia,
ul. T.Wendy 7/9
Business activity
Stream Investment Sp. z
o.o.
Roxwell Investments Sp. z
9 o.o.
Transmitel Rzeszów Sp. z
10 o.o. w likwidacji
- film and video production
- voice, data transmission and other
telecommunication services
- cable television, construction of
other building installations
- public relations and
communication
- trading in electricity, trade of
gaseous fuels through mains
- work associated with the
construction of telecommunication
Gdynia,
lines
ul. T.Wendy 7/9
Gdynia,
ul. T.Wendy 7/9
Warsaw,
-the company is currently being
ul. Jana Pawła II
reorganized and is planned to take
19
on new functions within the Group
Gdynia,
- other business and management
ul. T.Wendy 7/9
consultancy
Rzeszów,
ul. Lenartowicza 4 telecommunication services
Multimedia Polska
11 Teletronik Sp. z o.o.
Multimedia Polska Biznes
12 S.A. (4)
Gdynia,
ul. T. Wendy 7/9
Poznań, ul.
Paderewskiego 8
1
2
3
4
5
6
7
Multimedia Polska
Infrastruktura Sp. z o.o.
Stream Communications
Sp. z o.o.
8
Ownership interest
31 December
31 December
2015
2014
99.97%
99.97%
100%
100% (7)
94.12% (1)
94.12% (1)
100%
100%
100%(1)
100%(1) (6)
100%
100%(5)
100%(3)
100%(3)
100%(2)
100%(2)
100%(3) (8)
100%(3) (8)
100%
merged with
Multimedia
Polska Biznes S.A.
100%
100%(1)
100%
-
(1)
Held indirectly through its subsidiary Multimedia Polska - Południe S.A.
(2)
Held indirectly through its subsidiary Stream Communications Sp. z o.o.
(3)
Held indirectly through its subsidiary Multimedia Polska Energia Sp. z o.o.
(4)
As of 15 October 2015, Multimedia Polska BBI S.A. changed its name to Multimedia Polska Biznes S.A.
(5)
On 26 June 2014, the General Meeting of Multimedia Polska Infrastruktura Sp. z o.o. passed a Resolution on increasing the share capital
whereby the share capital of the company was raised from PLN 55,050,000 to PLN 83,336,000. The new shares were subscribed by Multimedia
Polska S.A. On 1 October 2014, the District Court of Gdańsk-Północ, VIII Commercial Division of the National Court Register registered the increase
of the company's share capital.
(6)
On 22 September 2014, the Extraordinary General Meeting of Multimedia Polska Energia Sp. z o.o. passed a Resolution on increasing the share
capital whereby the share capital of the Company was raised from PLN 100,000 to PLN 10,100,000. The new shares were subscribed by Multimedia
Polska-Południe S.A. On 12 November 2014, the District Court of Gdańsk-Północ, VIII Commercial Division of the National Court Register
registered the increase of the company's share capital.
(7)
On 22 September 2014, the Extraordinary General Meeting of Multimedia Polska-Południe S.A. passed Resolution no.1 on increasing the share
capital whereby the share capital of the Company was raised from PLN 176,942,900 to PLN 199,820,900 through an issue of 9,151,200 registered
ordinary shares with a par value of PLN 2.5 per share. The new shares were subscribed by Multimedia Polska S.A. On 19 November 2014, the
District Court of Gdańsk-Północ, VIII Commercial Division of the National Court Register registered the increase of the company's share capital.
(8)
On 22 October 2014, the Extraordinary General Meeting of Multimedia Roxwell Investments Sp. z o.o. passed a Resolution on increasing
the share capital whereby the share capital of the company was raised from PLN 5,000 to PLN 10,000. The new shares were subscribed
by Multimedia Polska Energia Sp. z o.o. On 5 January 2015, the District Court of Gdańsk-Północ, VIII Commercial Division of the National Court
Register registered the increase of the company's share capital.
The composition of the Group changed in 2015.
On 14 January 2015, Multimedia Polska S.A. acquired 100% shares in the share capital of BB Investment S.A. (later
Multimedia Polska BBI S.A. and currently Multimedia Polska Biznes S.A.) of Poznań registered in the register of
entrepreneurs kept by the District Court for Poznań – Nowe Miasto and Wilda in Poznań, VIII Commercial Division
of the National Court Register under entry no. 0000324141. The acquired shares are equal and indivisible, and
carry 100% voting rights at the General Meeting of Multimedia Polska Biznes S.A. When its shares were acquired
12
(PLN '000)
by Multimedia Polska S.A., Multimedia Polska Biznes S.A. was the parent entity of Przedsiębiorstwo HandlowoUsługowe Vega Sp. z o.o. of Blachownia registered in the register of entrepreneurs kept by the District Court for
Częstochowa, XVII Commercial Division of the National Court Register under entry no. 0000126123. The core
activity of Przedsiębiorstwo Handlowo-Usługowe Vega Sp. z o.o. was the provision of fixed-line telephony,
Internet access and cable television services. The acquisition of the aforementioned entities fulfils an important
element of the Group’s strategy which focuses on consolidating the cable and telecommunications sector.
On 10 February 2015, the Extraordinary General Meeting of BB Investment S.A. resolved to change the business
name of BB Investment S.A. to Multimedia Polska BBI S.A. The change was registered by a competent court on
5 March 2015.
Multimedia Polska Biznes S.A. and Przedsiębiorstwo Handlowo-Usługowe Vega Sp. z o.o. had agreed on a merger
plan which provided that the merger was to be performed under Art. 492.1.1 in conjunction with Art. 515.1 of the
Commercial Companies Code by transferring all assets of Przedsiębiorstwo Handlowo-Usługowe Vega Sp. z o.o. to
Multimedia Polska Biznes S.A. The merger was registered by the register court on 27 February 2015.
On 10 February 2015, the Extraordinary Shareholders’ Meeting of Multimedia Polska Energia Sp. z o.o. resolved to
broaden the scope of its business activity to involve distribution of gaseous fuels through mains.
The development of the scope of business activities became effective on the day of registration of the resolution
by a competent court i.e. on 2 March 2015. On 15 May 2015, Multimedia Polska Energia Sp. z o.o. was granted
a license to trade in gaseous fuels.
On 31 March 2015, Multimedia Polska Biznes S.A. acquired 100% shares in the share capital of AC Systemy
Komputerowe Sp. z o.o. of Świnoujście registered in the register of entrepreneurs kept by the District Court for
Szczecin Centrum in Szczecin under entry no. 0000546674. The acquired shares are equal and indivisible, and carry
100% voting rights at the General Meeting of AC Systemy Komputerowe Sp. z o.o. The acquisition of the company
fulfilled an element of Group’s strategy.
On 31 March 2015 Multimedia Polska Biznes S.A. acquired an organised part of business Ant-Sat- Gor. The
organised part of business consists of the movable property and buildings comprising telecommunications
networks in Gliwice. The acquisition of the telecommunications networks fulfilled an element of Group’s strategy.
On 31 March 2015, Multimedia Polska Bizens S.A. acquired from Multimedia Polska – Południe S.A., 100% shares
in the share capital of Multimedia Polska Teletronik Sp. z o.o.
On 13 April 2015, Multimedia Polska Biznes S.A. (acquiring company) and AC Systemy Komputerowe Sp. z o.o. and
Multimedia Polska Teletronik Sp. z o.o., (target companies) agreed upon a merger plan. The merger will be
effected in the manner provided for in Art. 492.1.1 in conjunction with Art. 516.6 of the Polish Commercial
Companies Code, i.e. by transferring all assets and liabilities of the target companies to the acquiring company.
The merger was registered by the register court on 29 May 2015.
On 1 June 2015, Multimedia Polska Biznes S.A. acquired 100% shares in the share capital of AS-SAT Sp. z o.o. of
Gdynia, registered in the register of entrepreneurs kept by the District Court for Gdańsk-Północ in Gdańsk under
entry no. 0000488875. The acquired shares are equal and indivisible, and carry 100% voting rights at the General
Meeting of AS-SAT Sp. z o.o. The acquisition of the aforementioned entity fulfils an important element of the
Group’s strategy.
On 24 September 2015, Multimedia Polska – Południe S.A. acquired from Multimedia Polska Biznes S.A. 100%
shares in the share capital of AS – SAT Sp. z o.o.
On 30 September 2015, the Extraordinary General Meeting of Multimedia Polska BBI S.A. resolved to change the
business name of Multimedia Polska BBI S.A. to Multimedia Polska Biznes S.A. The change was registered by
a competent court on 15 October 2015.
On 1 October 2015, the Company, by resolution of the Board of Multimedia Poland SA, established its branch
located in Warsaw. The branch operates under the name of Multimedia Polska S.A. Oddział Biznes. The Oddział
13
(PLN '000)
Biznes was registered on 9 October 2015. The activity of the Oddział Biznes is to provide telecommunications
services to business customers. On 1 December 2015, the Company and Multimedia Polska Biznes S.A. entered
into an agreement whereby Multimedia Polska Biznes S.A. leased the Business Branch from the Company.
On 8 October 2015, Multimedia Polska – Południe S.A. (acquiring company) and AS - SAT Sp. z o.o. (target
company) agreed upon a merger plan. The merger will be effected in the manner provided for in Art. 492.1.1 in
conjunction with Art. 515.1 of the Polish Commercial Companies Code, i.e. by transferring all assets and liabilities
of the target company to the acquiring company. The merger was registered on 30 November 2015.
As at 31 December 2015 and as at 31 December 2014, the percentage of votes held by the Group in its
subsidiaries, co-subsidiaries and associates was equal to the Group’s stake in those entities.
4
Composition of the Parent's Management Board
As at 31 December 2015, the composition of the Parent's Management Board was as follows: Andrzej Rogowski –
President of the Management Board.
The composition of the Management Board did not change during the reporting period and up to the date of
approval of these consolidated financial statements.
5
Approval of the consolidated financial statements
These consolidated financial statements were approved for publication by the Management Board on
29 February 2016.
6
Material accounting estimates and judgments
6.1
Professional judgment
Preparation of the consolidated financial statements of the Group requires the Management Board of the parent
to make judgments, estimates and adopt assumptions, which affect the presentation of revenues, expenses, assets
and liabilities and related notes and disclosures relating to contingent liabilities. Uncertainty inherent in such
assumptions and estimations may result in significant adjustments of carrying amounts of assets and liabilities in
the future. In the process of applying accounting policies, the Management Board has made the following
judgments with the highest influence on the carrying amounts of assets and liabilities.
Classification of lease agreements:
The Group classifies lease agreements as operating or finance leases based on the assessment of the extent to
which the all the risks and rewards incidental to ownership have been allocated to the lessor and the lessee. This
assessment is based on the economic substance of each transaction.
The Group is a party to lease agreements, which, in the Management Board’s opinion, meet the criteria for being
classified as finance leases. The Management Board has determined that it retains all the significant risks and
rewards of ownership of these properties and so accounts for them as financial leases.
The Group is also a party to lease agreements, which, in the Management Board’s opinion, meet the criteria for
being classified as operating leases.
Classification of financing arrangements:
The Group classifies sale and lease back agreements as financing arrangements if the following conditions are
met:
1) the Group retains all the risks and rewards arising from ownership of the assets and the transactions do not
result in material changes concerning the right to use such assets,
2) optional contractual provisions applicable after the end of the financing period are subject to conditions under
which execution of the purchase option is almost certain.
14
(PLN '000)
Classification of purchase of an associate
Where control over a company is acquired in several transactions, how those transactions are recognized depends
on the assessment of the extent, to which they are linked.
Allocation of goodwill on acquisitions to segments
The Group allocates goodwill to segments based on the percentage of its value-in-use.
6.2
Estimates and assumptions
Presented below are key assumptions regarding the future as well as other key sources of estimation uncertainty
existing as at the balance sheet date, which entail a material risk of considerable adjustments to the carrying
amount of assets and liabilities in the subsequent financial year. In the course of drawing up the financial
statements, the Group has adopted certain forward-looking assumptions and estimates. These assumptions and
estimates may change as a result of future events brought about by market changes or changes that the Group
has no control over. Such changes will be reflected in the estimates or assumptions as they occur.
- Impairment of goodwill
The Group tested goodwill for impairment.
As at the balance sheet date, the Group performed an impairment test of goodwill arising on acquisitions and
business combinations (Note 22). All operating segments of the Group were tested and the testing did not
indicate any impairment. There were no indications of impairment of tangible or intangible assets.
If at the date of the testing, the recoverable amount of a cash-generating unit to which goodwill was allocated is
lower than its carrying amount, an impairment loss is recognised.
For the purpose of the test, goodwill was allocated to cash-generating units corresponding to the business
segments connected with television, Internet and telephony. The impairment test was performed based on fiveyear cash flow projections that may be recoverable from these assets, including a residual period with an assumed
cash flow growth rate of 2.0% for cash-generating units related to television and Internet (as for the telephony
unit the Group does not anticipate any growth).
For the purpose of impairment testing, the Group used the post-tax discount rate of 10.1%. The implied pre-tax
discount rate, calculated in accordance with IAS 36, was 12.01%.
- Impairment of property, plant and equipment and intangible assets with definite useful lives
As at 31 December 2015, there were no indicators for impairment of property, plant and equipment and
intangible assets with definite useful lives.
- Measurement of provisions for employee benefits
Provisions for employee benefits are determined using actuarial methods. The assumptions made are presented in
note 26.2.
- Other provisions and accruals and deferred income
Other provisions and accruals and deferred income are based on the best knowledge of the Company's
Management Board and available information as at the balance sheet date and on its professional judgment
regarding the required payment amount.
- Deferred tax asset
The Group recognises a deferred tax asset on the assumption that taxable profits will be available against which
the deferred tax asset can be utilized. Any deterioration of future taxable profits might render this assumption
unreasonable.
- Allowance for doubtful debts
The Group made an allowance for doubtful debts, assessed the probability of collecting overdue receivables and
estimated the value of uncollectible receivables, for which it made valuation allowances.
15
(PLN '000)
- Depreciation and amortisation rates
Depreciation and amortisation rates are determined based on the anticipated economic useful lives of property,
plant and equipment and intangible non-current assets. The economic useful lives are reviewed by the
Management annually, based on current estimates.
7
Basis of preparation of the consolidated financial statements
These consolidated financial statements have been prepared on a historical cost basis, except for derivative
financial instruments, which have been measured at fair value. The consolidated financial statements are
presented in Polish zloty (“PLN”) and all values are rounded to the nearest thousand (PLN ‘000) except when
otherwise indicated.
These consolidated financial statements have been prepared on the assumption that the Group companies will
continue as going concern in the foreseeable future. As at the date of approval of these consolidated financial
statements, the Management Board is not aware of any facts or circumstances that would indicate a threat to the
continued operation of the Group companies.
In 2015, The Management Board decided to change the accounting policies regarding recognition and accounting
for the subscriber acquisition cost (SAC) in income statement. In accordance with the amended accounting policy,
customer acquisition costs related to contracts for the provision of telecommunication services and for the energy
and gas sale agreements are capitalized as intangible assets and amortized over the average duration of the
contract, which was estimated respectively at 18 and 48 months for subscription contracts and agreements for the
sale of electricity and gas. According to the previously applied policy, they were accounted for in the income
statement when incurred.
Subscriber acquisition costs include variable employee salaries (sales commissions) and subcontractors
remuneration directly dependent on the number, type and value of their contracts and social security costs
associated with these remunerations.
Customer acquisition costs are capitalized and recognized in the balance sheet if:
− such costs are identifiable and controllable
− can be reliably measured
− the customer has signed the contract for a specified period
− it is probable that future economic benefits will flow from customer to the Group. Future economic benefits
include the proceeds from service received throughout the duration of the contract, as well as proceeds
regarding the early termination of contracts, for which the Group has the documented good recoverability, both
as a result of payments from customers and as a result of sales to debt collection companies.
In all other cases, subscriber acquisition costs are recognized in the profit / loss when incurred.
The Management Board of the Company believes that such an accounting policy allows to keep matching the
sales revenue and associated costs, and helps to obtain the information that is more useful for users of financial
statements in assessing the past, present and future events.
According to the changes of the accounting policies described above, the Group restated the comparative data as
at 31 December 2014 as opposed to the published consolidated financial statements for the year ended
31 December 2014. This resulted in a decrease in the net profit and in an increase in the total assets and total
liabilities for the year ended 31 December 2014.
16
(PLN '000)
As a result of changes the following restatements have been made to the financial data for the year ended
31 December 2014:
Year ended
31 December 2014
Restated comparative data
Approved data
External services
Payroll
Other employee benefits
Income tax
Net profit/(loss) for the period
213,880
240,282
57,767
6,861
29,233
50,791
194,092
241,599
73,612
8,871
29,350
51,289
31 December 2014
Approved data
Intangible assets
Deferred tax asset
Retained earnings/ Accumulated losses
Total Assets/ Total Equity and Liabilities
109,164
81,164
(112,003)
1,647,836
95,419
83,776
(123,137)
1,636,703
Consolidated Cash-Flow Statement
Year ended
31 December 2014
Approved data
Purchase of property, plant and equipment and intangible assets
and acquisition of an organised part of business
213,880
194,092
(195,191)
(176,018)
Year ended
31 December 2014
Approved data
Retained earnings/ accumulated losses as at 1 January 2014
Retained earnings/ accumulated losses as at 31 December 2014
7.1
87,112
(112,003)
75,480
(123,137)
Compliance statement
These consolidated financial statements have been prepared in accordance with the International Financial
Reporting Standards (“IFRS”) endorsed by the European Union (“IFRS EU”). As at the date on which these
consolidated financial statements were approved for publication, considering the process underway in the
European Union of introducing IFRS standards, the IFR differ from the IFRS endorsed by the EU.
The Group has availed itself of the opportunity available to the entities applying IFRS endorsed by the EU to apply
IFRIC 21 from annual periods starting on 1 January 2015, whereas amendments to IAS 19 and amendments to
Annual Improvements to IFRSs 2010-2012 from annual periods starting on 1 January 2016.
IFRS comprise standards and interpretations accepted by the International Accounting Standards Board (“IASB”)
and the International Financial Reporting Interpretations Committee (“IFRIC”).
The financial statements of the Group's Parent have been prepared in accordance with the International Financial
Reporting Standards ("IFRS"). Other Group companies keep their accounts in accordance with the accounting
policies specified in the Accounting Act dated 29 September 1994 (“the Accounting Act”) with subsequent
amendments, and the regulations issued based on it (“Polish Accounting Standards”). These consolidated financial
statements include adjustments not included in the accounts of the Group companies, which were made to bring
the financial statements of those companies into conformity with IFRS.
17
(PLN '000)
7.2
Functional currency and reporting currency of financial statements
The functional currency of the Parent and consolidated subsidiaries and the reporting currency used in these
consolidated financial statements is the Polish zloty (PLN).
8
Changes in adopted accounting policies
The accounting policies applied to prepare these consolidated financial statements are consistent with the policies
followed in the preparation of the Group’s annual consolidated financial statements for the year ended
31 December 2014, except for the changes in the adopted accounting policies which are described in note 7 and
the effect of application of the following amendments to standards and new interpretations (presented below)
effective for annual periods beginning on or after 1 January 2015:
•
•
Annual Improvements to IFRSs 2011-2013 concerning:
•
Amendments to IFRS 3 — Business Combinations
The Amendments clarified that IFRS 3 concerned neither joint ventures nor joint arrangements. The
exception shall only be applied to the preparation of the financial statements of joint arrangements.
The Amendments shall be applied prospectively.
The Amendment had no impact on the Group’s financial position and performance.
•
Amendments to IFRS 13 Fair Value Measurement
The Amendments clarified that the exception regarding investment portfolio shall be applied not only
to financial assets and financial liabilities but also to other agreements described in IAS 39. The
Amendments shall be applied prospectively.
•
Amendments to IAS 40 Investment Property
The description of additional services (described in IAS 40) distinguished investment properties from
properties occupied by the owner (ie. from property, plant and equipment). The Amendments shall be
applied prospectively and clarified that IFRS 3 itself (not definition of additional services in IAS 40) is
used to distinguish if the transaction is the acquisition of assets or the acquisition of undertaking.
IFRIC 21 Levies
The interpretation clarified that the entity recognised liabilities under levies upon an obligating event
thus that activity causing the necessity of paying the levies, according to the terms. In the case of levies
payable after exceeding the minimum limit, the entity does not recognize the liabilities until the limit is
reached. IFRIC 21 shall be applied retrospectively.
The Group did not choose to use the option of early application of any other standard, interpretation or
amendment, which has been published but has not yet become effective, , in the light of European regulations.
9
New standards and interpretations which have been issued but are not yet
effective
The International Accounting Standards Board of the International Financial Reporting Interpretation Committee
issued the following standards and interpretations, which have not yet become effective:
• IFRS 9 Financial Instruments (issued on 24 July 2014) – not yet endorsed by EU at the date of approval of these
financial statements - effective for financial years beginning on or after 1 January 2018;
• Amendments to IAS 19 Defined Benefit Plans: Employee Contributions (issued on 21 November 2013) –
effective for financial years beginning on or after 1 July 2014, in EU effective at the latest for financial years
beginning on or after 1 February 2015;
• Annual Improvements to IFRSs 2010-2012 (issued on 12 December 2013) – some amendments effective for
financial years beginning on or after 1 July 2014 and some effective prospectively for transactions occurring on
or after 1 July 2014, in EU effective at the latest for financial years beginning on or after 1 February 2015;
18
(PLN '000)
•
•
•
•
•
•
•
•
•
•
•
•
•
IFRS 14 Regulatory Deferral Accounts (issued on 30 January 2014) – The European Commission has decided not
to launch the endorsement process of this interim standard and to wait for the final standard– not yet
endorsed by EU at the date of approval of these financial statements – effective for financial years beginning
on or after 1 January 2016;
Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations (issued on 6 May 2014) –
effective for financial years beginning on or after 1 January 2016;
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortization (issued
on 12 May 2014) – effective for financial years beginning on or after 1 January 2016;
IFRS 15 Revenue from Contracts with Customers (issued on 28 May 2014), including amendments to IFRS 15
Effective date of IFRS 15 (issued on 11 September 2015) –– not yet endorsed by EU at the date of approval of
these financial statements - effective for financial years beginning on or after 1 January 2018;
Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants (issued on 30 June 2014) - effective for financial
years beginning on or after 1 January 2016;
Amendments to IAS 27 Equity Method in Separate Financial Statements (issued on 12 August 2014) – effective
for financial years beginning on or after 1 January 2016;
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets Between an Investor and its Associate or Joint
Venture (issued on 11 September 2014) - decision about terms of performing particular steps resulting in
endorsement of the Amendments has not yet been made by EFRAG – not yet endorsed by EU at the date of
approval of these financial statements - the effective date was deferred indefinitely by IASB –;
Annual Improvements to IFRSs 2012–2014 (issued on 25 September 2014) - effective for financial years
beginning on or after 1 January 2016;
Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception (issued
on 18 December 2014) – not yet endorsed by EU at the date of approval of these financial statements effective for financial years beginning on or after 1 January 2016;
Amendments to IAS 1 Disclosure Initiative (issued on 18 December 2014) – effective for financial years
beginning on or after 1 January 2016,
IFRS 16 Leases (issued on 13 January 2016) - decision about terms of performing particular steps resulting in
endorsement of the Standard has not yet been made by EFRAG – not yet endorsed by EU at the date of
approval of these financial statements - effective for financial years beginning on or after 1 January 2019,
Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses (issued on 19 January 2016) not yet endorsed by EU at the date of approval of these financial statements – effective for financial years
beginning on or after 1 January 2017,
Amendments to IAS 7 Disclosure Initiative (issued on 29 January 2016) - not yet endorsed by EU at the date of
approval of these financial statements – effective for financial years beginning on or after 1 January 2017.
The Management Board plans to implement the new standards and interpretations as they become effective in
the EU. The effect of application of the above mentioned standards on the Group’s accounting policy is
continuously analysed.
As at the approval date of these consolidated financial statements for publication, in the Management Board’s
opinion, the implementation of the New Standards and Interpretations will have no material effect on the
accounting policies followed by the Group.
10
Correction of errors
No errors were corrected in the consolidated financial statements for 2015 and 2014.
11
Changes in estimates
In 2015 and in 2014, the Group carried out a review of expected useful lives of property, plant and equipment.
The Grupa revised and changed as from 1 January 2015 the estimated useful lives of property, plant and
equipment. This change increased net profit by PLN 315 thousand. The change of estimates introduced in 2014
increased net profit by PLN 9,825 thousand.
In 2015 and in 2014, there were no other significant changes in estimates that would affect the current or future
periods.
19
(PLN '000)
Information on changes in the value of revaluation charges and provisions are presented below in these
statements (note 19).
12
Key accounting policies
12.1 Basis of consolidation
These consolidated financial statements include the financial statements of Multimedia Polska S.A. and the
consolidation packages of entities controlled by the Company (subsidiaries), in each case prepared for the year
ended 31 December 2015.
The financial statements of subsidiaries, restated to ensure compliance with IFRS, are prepared for the same
reporting period as the financial statements of the Parent, using consistent accounting policies applicable to
business transactions and events of a similar nature. Adjustments are made to bring into line any dissimilar
accounting policies that may exist.
All significant intercompany balances and transactions, including unrealized profits on intra-group transactions,
have been eliminated in full. Unrealized losses are eliminated, unless they are an indication of impairment.
Subsidiaries are consolidated from the date on which control is obtained by the Group and cease to be
consolidated when control is lost. The Parent is deemed to exercise control when:
•
has power over the investee;
•
is exposed, or has rights, to variable returns from its involvement with the investee; and
•
has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above. When the Company has less than a majority
of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it
the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant
facts and circumstances in assessing whether or not the Group’s voting rights in an investee are sufficient to give
it power, including:
•
the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the
othervote holders;
•
potential voting rights held by the Company, other vote holders or other parties;
•
rights arising from other contractual arrangements; and
•
any additional facts and circumstances that indicate that the Company has, or does not have, the current
ability to direct the relevant activities at the time that decisions need to be made, including voting patterns
at previous shareholders’ meetings.
Changes in the parent's ownership interest, which do not lead to a loss of control over the subsidiary are
recognized as equity transactions. In such cases, in order to reflect changes in relative interests in a subsidiary, the
Group adjusts the carrying amount of controlling interests and non-controlling interests. All differences between
the amount of adjustment for non-controlling interests and the fair value of the amount paid or received are
recognized in equity and allocated to the parent's owners.
12.2 Foreign currency translations
Transactions denominated in currencies other than PLN are translated into Polish zloty at the exchange rate
prevailing on the transaction date.
As at the balance sheet date, monetary assets and liabilities expressed in currencies other than PLN are translated
into Polish zloty using the average exchange rate prevailing for a given currency by the National Bank of Poland
(NBP) at the end of the reporting period. Exchange differences resulting from the transaction are recorded under
finance income/expenses or, in cases defined in accounting policies, capitalized in the cost of the assets. Nonmonetary foreign currency assets and liabilities recognised at historical cost expressed in a foreign currency are
translated using the exchange rate effective on the transaction date. Non-monetary assets and liabilities
recognized at historical cost are translated at the exchange rate prevailing on the date of the fair value
measurement.
20
(PLN '000)
Exchange rates applied for valuation purposes:
USD
EUR
CHF
GBP
31 December 2015
3.9011
4.2615
3.9394
5.7862
31 December 2014
3.5072
4.2623
3.5447
5.4648
12.3 Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation and accumulated impairment losses. Items of
property, plant and equipment are initially recognized at purchase price plus any directly attributable costs of
bringing them to conditions necessary for their intended use. This cost also includes the cost of replacing
component parts of property, plant and equipment, if relevant recognition criteria are met. Subsequent
expenditures, such as costs of maintenance and repair, are expensed in the reporting period in which they were
incurred.
Upon purchase, property, plant and equipment are divided into components which represent items of significant
value, that can be allocated a separate useful life. Overhauls also represent asset component.
The Group generates property, plant and equipment internally. The cost of construction of property, plant and
equipment consists of direct expenditures and indirect costs, in particular personnel costs and other costs of
employees and associates participating in the process of construction and modernization of those assets.
Property, plant and equipment is depreciated on a straight-line basis over their estimated economic useful lives,
as detailed in the following table:
Type
Buildings and structures
Plant and equipment
Office equipment
Vehicles
Computers
Investments in third-party property, plant and equipment
Period
9-40 years
2-25 years
1-10 years
3.5-5 years
3-10 years
10 years
An item of property, plant and equipment may be derecognised if it is disposed or if the company does not
expect to realize any future economic benefits from its further use. Any gains or losses arising from derecognition
of an item of property, plant and equipment (calculated as the difference between net disposal and the carrying
value of the asset) are recognized in the income statement for the period in which derecognition took place.
Assets under construction include property, plant and equipment, which are under construction or assembly. They
are recognised at purchase or manufacturing cost, less any possible impairment losses. Assets under construction
are not depreciated until they are completed and brought into use.
The adopted residual values, useful economic lives and depreciation methods are reviewed annually – and
adjusted if required – with effect from the beginning of the reporting period just ended. Adjustments involve
determination of further useful economic lives and computation of the annual depreciation rate in relation to the
net value. Then the established depreciation rate is applied to the gross value of a given item of property, plant
and equipment.
12.4 Goodwill
Goodwill arising on acquisition of an business combination is initially recognised at cost, measured as the
difference between:
• the aggregate of: the consideration transferred, the amount of any non-controlling interests in the acquiree
and, in a business combination achieved in stages, the acquisition-date fair value of the acquirer's previouslyheld equity interest in the acquiree.
21
(PLN '000)
•
and the fair value of net of the acquisition-date amounts of the identifiable assets acquired and the liabilities
assumed.
Following initial recognition, goodwill is recognized at cost less accumulated impairment losses. Goodwill is
reviewed for impairment once a year, or more frequently if there is any indication of impairment. Goodwill is not
amortised.
As at the acquisition date, goodwill is allocated to each of the cash generating units, which are expected to benefit
from combining operations. Each unit or set of units to which the goodwill has been allocated:
• corresponds to the lowest level at which goodwill is monitored for internal management purposes and
• is not greater than a single operating segment as defined in IFRS 8 Operating Segments.
Impairment is determined by estimating the recoverable amount of the cash generating unit to which goodwill
has been allocated. If the recoverable amount of the cash generating unit is lower than its carrying amount, an
impairment loss is recognised. If goodwill is a part of a cash generating unit and a part of the business
corresponding to such a unit is disposed of, then the goodwill connected with the business which has been
disposed of is included in its carrying amount for the purpose of calculation of the gain or loss on the disposal. In
such circumstances, the disposed goodwill is determined based on the relative value of the business sold and the
retained part of the cash generating unit.
12.5 Intangible assets
Intangible assets acquired in a separate transaction or internally generated (if they meet the criteria for capitalized
development costs) are initially carried at cost. The initial cost of intangible assets acquired in a business
combination is equivalent to their fair value as at the date of the acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.
With the exception of capitalized expenditure on development, expenditure on intangible assets internally
generated by the Group is not capitalised and is charged against profits in the period in which it was incurred. As
part of its development activities, the Group internally generates its own intangible assets. They comprise the
design, implementation and testing of selected solutions for new or improved materials, equipment, products,
processes, services or systems.
The Group determines whether intangible assets have definite or indefinite useful lives. Intangible assets with
definite useful lives are amortised over their useful lives and assessed for impairment whenever there is an
indication of impairment. The amortisation period and the amortisation method for an intangible asset with a
definite useful life are reviewed at least each financial year-end or more frequently. Changes in the expected
useful life or pattern of consumption of the future economic benefits embodied in the asset are accounted for by
changing the amortisation period or amortisation method, as appropriate, and are treated as changes in
accounting estimates.
Intangible assets with indefinite useful lives and those which are not used are tested annually for impairment
either individually or at the cash-generating unit level.
Useful lives are reviewed each year, and, if necessary, they are adjusted with effect from the beginning of the
reporting period, which has just ended.
22
(PLN '000)
Below is a summary of the policies applied in relation to the Group’s intangible assets:
Useful lives
Internally
generated
intangible assets
5 years
Amortisation
method
applied
Straight line
method
Internally
generated or
acquired
Impairment
testing
Internally generated
Annual assessment
(when items have
not yet been
brought into use)
and when there is
any evidence
indicating
impairment loss
Patents and licences
Software
Relationships with customers
In the case of patents
and licenses used
under an agreement
concluded for a
definite term, it is
assumed that the
term together with an
additional period for
which the agreement
may be extended
represents the useful
life.
Amortised over the
term of the contract
(1–5 years) using the
straight-line method.
Acquired
2-5 years
5-21 years
In the case of agreements
concluded for a definite term,
such term is assumed to be the
useful life; any period for which
the agreement may be
extended is not taken into
account.
Straight line
method
Intangible assets are amortised
over the term of the contract.
Terms vary according to
agreements from 5 to 21 years.
Acquired
Annual assessment to
determine
whether
there is any indication
that an asset may be
impaired
Annual
assessment to
determine
whether there
is any
indication that
an asset may
be impaired
Acquired
Annual assessment to
determine whether there is any
indication that an asset may be
impaired
Relationships with customers
The following are recognised as relationships with customers:
• Relationships with customers are an intangible asset arising upon acquisition of cable television networks in
relation to which Multimedia Polska S.A. became the CATV operator for the housing areas administered by
housing communities and housing cooperatives which were parties to agreements with former operators
under which such operators were guaranteed the possibility of providing their services in the area
administered by the housing communities and cooperatives. Multimedia Polska S.A. and the housing
communities and cooperatives entered into agreements of various terms, which set forth the mutual rights
and obligations of the parties in connection with the business conducted by Multimedia Polska S.A.
• Relationships with customers identified by the Group as assets as a result of meeting recognition criteria on
accounting for acquisitions of network and business combinations. The relationships were measured as at the
date of acquisition of the relevant networks or companies and recognized in the financial statements at fair
value as at the transaction date.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net
proceeds from the sale of a given asset and its carrying value, and are recognized in the income statement upon
derecognition of the asset.
23
(PLN '000)
12.6 Leases
The Group as a lessee
Lease agreements which transfer to the Group substantially all the risks and rewards incidental to ownership of
leased asset are capitalised at the inception of the lease at the lower of the fair value of the leased asset or the
present value of minimum lease payments. Lease payments are apportioned between the finance charge and
reduction of the outstanding lease liability so as to achieve a constant rate of interest on the remaining balance of
the liability. The finance charge is recognized directly in the income statement, unless the capitalization criteria are
met.
The depreciation policy for depreciable assets held under finance lease agreements shall be consistent with that
for depreciable assets that are owned. If there is no reasonable certainty that the lessee will obtain ownership by
the end of the lease term, property, plant and equipment used under finance lease agreements are depreciated
over the shorter of their estimated useful life or the lease term.
Leases where the lessor retains substantially all the risks and rewards of ownership of the asset are classified as
operating leases. Operating lease payments under such arrangements are recognised as costs in the income
statement, on a straight-line basis, over the lease term.
The Group as a lessor
Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as
operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount
of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are
recognized as revenue in the period in which they become due.
12.7 Impairment losses on non-current non-financial assets
The Group assesses at each balance sheet date whether there is any objective evidence that a non-financial asset
or a group of non-financial assets is impaired. If the Group finds that there is such evidence, or if the Group is
required to perform an annual impairment test, the Group estimates the recoverable amount of a given asset or
cash-generating unit to which a given asset belongs.
The recoverable amount of an asset or a cash generating unit is equal to the higher of the fair value of the asset or
cash-generating unit, less costs to sell, or its value-in-use. The recoverable amount is determined for individual
assets, unless a given asset does not generate separate cash inflows largely independent from those generated by
other assets or asset groups. If the carrying value of an asset is higher than its recoverable amount, the value of
the asset is impaired and an impairment loss is recognised up to the recoverable amount. In assessing value-inuse, the projected cash flows are discounted to their present value using a pre-tax discount rate which reflects
current market assessments of the time value of money and the risks specific to the asset. Impairment losses
related to the assets used in the continued operations are recognized in other income.
At each balance sheet date, the Group assesses whether there is evidence that any impairment loss recognised in
the previous periods with respect to a given asset no longer exists or should be reduced. If there is such evidence,
the Group estimates the recoverable amount of the given asset. The recognised impairment loss is reversed only
in the situation when, following the recognition of the last impairment loss, there has been a change in the
estimates used to determine the recoverable amount of the asset. In such a case, the carrying value of the asset is
increased up to its recoverable amount. The increased value cannot exceed the carrying value of the asset that
would have been determined (net of accumulated amortisation/depreciation) if the impairment loss related to
that asset had not been recognised in previous years. Reversal of an impairment loss is immediately recognised as
income in the income statement. Following reversal of an impairment loss, the amortisation/depreciation charge
related to a given asset is adjusted in subsequent periods so that over the remaining useful life of that asset, its
revised carrying value, less its residual value, can be regularly written off.
12.8 Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset are
capitalised as part of the cost of such asset. Borrowing costs include interest expense calculated using the effective
interest method, finance charges in respect of financing agreements and finance leases, as well as exchange
24
(PLN '000)
differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to
interest expenses.
Other borrowing costs are recognised in expenses as incurred.
12.9 Financial assets
Financial assets are classified into the following categories:
– Financial assets held to maturity,
– Financial assets at fair value through profit or loss,
– Loans and receivables,
– Available-for-sale financial assets.
Held-to-maturity financial assets are non-derivative financial assets listed in an active market, with fixed or
determinable payments and fixed maturities, which the Group has the positive intention and ability to hold to
maturity, other than those:
• designated at fair value through profit or loss upon initial recognition,
• designated as available-for-sale,
• falling within the scope of loans and receivables.
Financial assets held to maturity are measured at amortised cost using the effective interest rate. Financial assets
held to maturity are classified as non-current assets if they are falling due within more than 12 months from the
balance sheet date.
A financial asset at fair value through profit or loss is a financial asset that meets either of the following conditions:
a) It is classified as held for trading. Financial assets are classified as held for trading if they are:
• acquired principally for the purpose of sale in the near term,
• part of a portfolio of identified financial instruments that are managed together and for which there is
evidence of a recent actual pattern of short-term profit-taking, or,
• a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging
instrument),
b) It has been assigned to this category in accordance with IAS 39 upon initial recognition.
Financial assets at fair value through profit or loss are measured at fair value, based on their market value on the
balance sheet date, without reflecting sales transaction costs. Any changes in the value of these instruments are
recognised directly in the income statement as finance income (positive net changes of fair value) or expenses
(negative net changes of fair value). An entire contract can be designated as financial assets at fair value through
profit or loss if it contains one or more embedded derivatives. The above does not apply when an embedded
derivative has no significant impact on cash flows generated by the original contract or the separating of
derivatives is prohibited. Financial assets can be initially classified as financial assets at fair value through profit or
loss when the following criteria are met: (i) such designation eliminates or significantly reduces a measurement or
recognition inconsistency that would otherwise arise, or (ii) assets are part of a group of financial assets that are
managed and valued based on fair value, according to a well-documented risk management strategy, or (iii)
financial assets contain embedded derivatives, which should be presented separately.
Loans and receivables are financial assets with fixed or determinable payments not classified as derivatives and
not traded in any active market. They are disclosed under current assets if they mature within 12 months from the
balance sheet date. Loans and receivables with a maturity exceeding 12 months from the balance sheet date are
classified as non-current assets. Loans and receivables are carried at amortised cost, applying the effective interest
rate method.
Available-for-sale financial assets are financial assets that are not derivative instruments, which have been
classified as being available for sale or not belonging to any of the previous three categories. Available-for-sale
financial assets are recognised at fair value increased by the transaction costs, which are directly attributable to
the purchase or issue of a financial asset. If such instruments do not have a quoted market price in an active
market and their fair value cannot be reliably measured using the alternative techniques, available-for-sale
financial assets are valued at purchase price less impairment losses. The positive or negative differences between
fair value and cost of available-for-sale financial assets (if there is a market price established in an active market or
25
(PLN '000)
when fair value can be established in some other credible manner), less deferred tax, is recognised in other
comprehensive income. Any impairment losses are recognised in the income statement as a financial cost.
Any purchase or sale of financial assets is recognised at the transaction date. Upon initial recognition of a financial
asset, it is measured at fair value plus, in the case of an asset not classified as measured at fair value through profit
or loss, transaction costs that are directly attributable to the acquisition.
A financial asset is removed from the balance sheet when the Group loses control over the contractual rights
embodied in the financial instrument. It usually takes place when the instrument is sold or when all cash flows
generated by the instrument are transferred to a non-related third party.
When the Group:
- currently has a legally enforceable right to set off the recognised amounts; and
- intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously a financial
asset and a financial liability shall be offset and the net amount presented in the statement of financial position.
A master netting arrangement (described in IAS 32,50) does not provide a basis for offsetting unless both of the
criteria described above are satisfied.
12.10 Impairment of financial assets
The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a
group of financial assets is impaired.
- Assets carried at amortised cost
If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been
incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding future expected credit losses that have not been incurred)
discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial
recognition). The carrying amount of the asset is reduced through the use of an allowance amount. The amount of
the loss is recognised in the income statement.
The Group first verifies whether there is objective evidence of any impairment of financial assets which are
considered material separately, or any impairment of assets which are not material when considered separately. If
it is determined that there is no objective evidence of impairment of a given separately tested financial asset,
whether material or not, then the Group includes such an asset in a group of financial assets of a similar credit risk
profile and tests such a group as a whole for impairment. An asset which has been tested for impairment
separately and for which an impairment loss has been recognised or with respect to which it has been determined
that the existing impairment losses will not be changed, is not taken into account when testing a group of assets.
If, in the subsequent reporting period, the impairment loss decreases and the decrease may be objectively
attributed to an event which occurred after the impairment loss was recognised, then the impairment loss
recognised earlier is reversed. Such reversal of an impairment loss is disclosed in the income statement to the
extent the carrying value of a given asset as at the reversal date is not higher than the amortised cost of that asset.
- Financial assets carried at cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is
not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to
and has to be settled by delivery of such an unquoted equity instrument, the amount of the impairment loss is
measured as the difference between the carrying amount of the financial asset and the present value of the
estimated future cash flows discounted at the current market rate of return for a similar financial asset.
- Available-for-sale financial assets
If there is objective evidence that an impairment loss has been incurred on an available-for-sale asset, then the
amount of the difference between the acquisition cost (net of any principal and interest payment) and current fair
value, less any impairment loss on that financial asset previously recognised in the profit or loss, is removed from
other comprehensive income and recognised in the income statement. Reversals of impairment losses on equity
instruments classified as available for sale cannot be recognised in the income statement. If, in a subsequent
period, the fair value of a debt securities classified as available for sale increases and the increase can be
objectively related to an event occurring after the impairment loss was recognised in the income statement, the
impairment loss is reversed, with the amount of the reversal recognised in the income statement.
26
(PLN '000)
12.11 Derivative financial instruments and hedges
The Group may use derivative financial instruments such as forward currency contracts and interest rate swaps to
hedge against the risks associated with interest rate and foreign currency fluctuations. Such derivative financial
instruments are measured at fair value. Derivatives are carried as assets when the fair value is positive and as
liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting
are taken directly to the net profit or loss for the period.
The fair value of interest rate swap is determined on the basis of the valuation model taking into account the
observable market data including, in particular, the current term interest rates.
12.12 Inventories
Inventories are recognised at the lower of their acquisition/production cost or net realisable value.
The initial cost of inventories includes all purchase costs and costs of conversion as well as other costs incurred in
the course of bringing the inventories to the their actual location and conditions – both with regard to the current
and previous year – and are determined in the following way:
Materials
Finished goods and
work-in-progress
Goods for resale
at cost of purchase calculated using the first-in, first-out (FIFO ) method.
– at cost of direct materials and labour and a proportion of production overheads
determined assuming normal production capacity utilisation, with borrowing
costs included.
– at cost of purchase calculated using the first-in, first-out (FIFO ) method.
–
The net realisable value is the estimated selling price obtained in the ordinary course of business, less the cost of
completion and the estimated costs necessary to make the sale.
No less frequently than at the end of the annual reporting period, inventories are assessed for their technical and
technological condition and capacity to use or sell them. Based on this analysis, the amount of a revaluation
allowance is determined.
12.13 Trade and other receivables
Receivables are recognised at amounts due, less allowances for bad debts.
Trade receivables expressed in currencies other than Polish zloty as at the balance sheet date are translated into
Polish zloty based on the closing rate published for the currency by the National Bank of Poland.
Receivables are measured taking into account the probability of their payment by creating appropriate bad debt
allowances. Impairment allowances for receivables are charged to other expenses or to finance expenses, as
appropriate, depending on the type of the receivable to which the impairment allowance applies. The Group
regularly remeasures trade receivables, taking into account the level of probability of their payment based on the
knowledge of the level of bad debt and estimated risk of doubtful receivables.
Receivables that have been cancelled, that have expired or have become unrecoverable reduce any previous
revaluation charges. Receivables that have been cancelled, that have expired or that have become unrecoverable,
and with respect to which no impairment losses have been previously made or the impairment loss allowances
that have been taken were lower than the full value of the receivables, are respectively charged to other expenses
or to finance costs.
If the effect of the time value of money is material, the value of receivables is determined by discounting projected
future cash flows to their present value. If the discount method is applied, an increase in receivables as a result of
passage of time is recognised as finance income.
27
(PLN '000)
12.14 Cash and cash equivalents
Cash and short-term deposits disclosed in the balance sheet comprise cash at banks and cash in hand as well as
short-term deposits with original maturities of up to three months.
Overdraft facilities are disclosed in the balance sheet as current loans and borrowings under current liabilities.
The balance of cash and cash equivalents disclosed in the consolidated cash-flow statement comprises the cash
and cash equivalents specified above.
12.15 Interest-bearing loans, borrowings and debt securities
All bank borrowings and debt securities are initially recognised at fair value, less cost of obtaining the loan or
borrowing or the issuing the debt securities. Following initial recognition, interest-bearing loans, borrowings, and
debt securities are valued at amortised cost, using the effective interest rate method.
Amortised cost includes cost of obtaining the loan or borrowing as well as discounts or premiums obtained at
settlement of the liability.
Any gains or losses are taken to the income statement when the liability is derecognised or accounted for using
the effective interest rate method.
12.16 Trade and other payables
Trade payables are carried at the amount of payment due.
Financial liabilities measured at fair value through profit or loss include financial liabilities held for trading and
financial liabilities originally classified as at fair value through profit or loss. Financial liabilities are classified as held
for trading if they were acquired for the purposes of sale in the near future. Derivative instruments, excluding
separated embedded instruments, are also classified as held for trading, unless they are deemed to be effective
hedging instruments. Financial liabilities may be classified upon initial recognition as at fair value through profit or
loss, if the following criteria are met:
(i)
(ii)
(iii)
such classification eliminates or significantly reduces inconsistencies in treatment, when both the valuation
and the rules for recognition of profits or losses are subject to other regulations, or
the liabilities are part of a group of financial liabilities that are managed and assessed on the basis of fair
value, in conformance with a documented risk management strategy, or
the financial liabilities contain embedded derivative instruments that should be separately reported
As at 31 December 2015 and as at 31 December 2014, the Group had no financial liabilities classified as at fair
value through profit or loss.
Financial liabilities at fair value through profit or loss are carried at fair value, reflecting their market value as of the
balance sheet date, excluding sale transaction costs. Changes in the fair value of such instruments are charged to
the income statement as finance income or expenses.
Other financial liabilities, not classified as at fair value through profit or loss, are carried at amortised cost, using
the effective interest rate method.
Other non-financial liabilities are reported at the amount of payment due. The Group derecognises a financial
liability if the liability is expired, i.e. when the obligation defined in the agreement has been discharged, cancelled
or expired.
12.17 Provisions
Provisions are recognized when the Group has an obligation (legal or constructive) resulting from past events, and
when it is probable that the settle of this obligation will cause an outflow of economic benefits, and the amount of
the obligation may be reliably estimated. If the Group anticipates that the costs for which provisions have been
made will be recovered, e.g. under an insurance agreement, the recovery of such funds is recognised as a separate
item of assets, but only when such recovery is practically certain to occur. The cost related to a given provision is
charged to the income statement, net of any recovered amounts.
28
(PLN '000)
If the effect of the time value of money is material, the amount of provisions is determined by discounting
projected future cash flows to their present value using pre-tax discount rates reflecting current market estimates
of the time value of money and risks, if any, specific to a given obligation. If the discount method is applied, an
increase in provisions as a result of passage of time is recognised in finance expenses.
12.18 Employee benefits
In accordance with internal remuneration regulations, employees of the Group companies are entitled to
retirement benefits.
Retirement benefits are paid out as a one-off benefit upon retirement. The amount of those benefits depends on
the number of years of employment and the average salary. The Group makes a provision for retirement benefits
in order to allocate costs of those allowances to the periods, to which they relate. In accordance with IAS 19,
retirement benefits are post-employment defined benefits plan.
The carrying amount of the Company liabilities resulting from those benefits is calculated at each balance sheet
date by an independent actuary. The balance of these liabilities equals discounted payments, which will be made
in the future and accounts for staff turnover, and relate to the period to the balance sheet date. Demographic
information and information on staff turnover are based on historical information. Actuarial gains and losses are
recognized in other comprehensive income.
12.19 Share-based payments
Employees (including Management Board Members) of the Group receive remuneration in the form of a sharebased payment transaction, whereby employees render services in exchange for shares or rights over shares
(“equity-settled transactions”).
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at
which they are granted. The fair value is determined with the use of the Black-Scholes model. Valuation of equitysettled transactions reflects the market terms of acquiring the rights (related to the price of Parent shares) as well
as other terms and conditions.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the
period in which the performance and/or service conditions are vested, ending on the date on which the relevant
employees become fully entitled to the award ('the vesting date'). The cumulative expense recognised for equitysettled transactions at each reporting date until the vesting date reflects the extent to which the vesting period
has expired and the number of awards that, in the opinion of the Management of the Group at that date, will
ultimately vest, based on the best available estimate of the number of equity instruments.
12.20 Revenue
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the
revenue can be reliably measured. Revenue is recognised net of VAT and discounts. Revenue is measured at fair
value of the consideration received or receivable, net of value added tax (VAT) and discounts. Other criteria used
for revenue recognition are discussed below.
- Sales of goods and products
Revenue is recognised when significant risks and rewards relating to the ownership of goods for resale and
products have been transferred to the buyer, provided that the revenue amount can be reliably estimated.
- Revenue on rendering of services
Revenue on rendering of services is recognised when a service is completed. If a subscriber is connected during a
given month, a fractional subscription fee amounting to one-thirtieth of the monthly fee is recognised for each
day during the period when the service was provided.
Revenues from one off connection fees are recognized for over the term of the agreement.
Revenues from promotional agreements are spread over the period of the agreement.
29
(PLN '000)
- Interest
Interest income is recognised when interests are accrued (using the effective interest rate, which is the rate
discounting future cash flows over the estimated life of the financial instrument) on the net carrying value of a
given financial asset.
- Dividends
Dividends are recognised when the shareholder's right to receive payment is established.
- Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will be
received and all attached conditions will be complied with.
When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that
the costs, which it is intended to compensate, are expensed. Where the grant relates to an asset, the fair value is
credited to deferred income and is released to the income statement over the expected useful life of the relevant
asset by equal instalments.
12.21 Income tax
- Current income tax
Liabilities and receivables under current income tax for the current period and the preceding periods are valued at
the amount of forecast payment to be made to the tax authorities (or receivables from the tax authorities, if
appropriate), based on the income tax rates and in accordance with tax regulations which are legally or actually in
force as at the balance sheet date.
- Deferred tax
For the purposes of financial reporting, deferred tax asset and liability are calculated using the balance sheet
liability method in relation to all temporary differences existing as at the balance sheet date between the tax value
of assets and liabilities and their carrying amounts disclosed in the financial statements.
Deferred tax liability is recognised for all taxable temporary differences:
• except to the extent that the deferred tax liability arises from the initial recognition of goodwill or the initial
recognition of an asset or liability in a transaction which is not a business combination, and, at the time of the
transaction, does not affect the net profit (loss) under financial accounting or tax accounting, and
• in the case of taxable temporary differences associated with investments in subsidiaries or associates, and
interests in joint ventures, unless the investor is able to control the timing of the reversal of the temporary
differences or it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised in relation to all deductible temporary differences, unused tax credit, and
unused tax losses brought forward to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, the carry forward of unused tax credits and unused tax losses can be
utilised:
•
except to the extent that the deferred tax asset relating to deductible temporary differences arises from the
initial recognition of an asset or liability in a transaction which is not a business combination, and, at the time
of the transaction, does not affect the net profit (loss) under financial accounting or tax accounting, and
• in the case of deductible temporary differences associated with investments in subsidiaries or associates and
interests in joint ventures, the related deferred tax asset is recognised in the balance sheet only to the extent
that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will
be available against which the temporary differences can be utilised.
The carrying value of a deferred tax asset is reviewed at each balance sheet date and is subject to appropriate
reduction to the extent it is no longer probable that taxable income sufficient for a partial or full realisation of this
deferred tax asset would be generated. The unrecognised portion of the deferred tax asset is subject to
reassessment at each balance sheet date and is recognised up to the amount reflecting the probability of
generating future taxable income which will allow the asset to be recovered.
Deferred tax assets and deferred tax liabilities are calculated using tax rates expected to be effective at the time of
realisation of the deferred tax asset or release of deferred tax liability, based on tax rates (and tax legislation)
30
(PLN '000)
effective as at the balance sheet date or tax rates (and tax legislation) which are certain as at the balance sheet
date to be effective in the future.
The Group has no legal basis for offsetting the deferred tax liability against the deferred tax asset; it is paid by the
particular companies to various tax offices. Offsetting is performed within each particular company, which offsets
deferred tax assets against deferred tax liabilities only if it has enforceable legal title for such offsetting of current
tax receivables and payables and the deferred tax relates to the same taxpayer and the same tax office.
Income tax relating to items which are not recognised in profit or loss is not recognised in profit or loss but under
other comprehensive income for items recognised in other comprehensive income or directly in equity for items
recognised directly in equity.
- Value Added Tax
Revenue, costs, assets and liabilities are recognised after deducting Value Added Tax (VAT), with the exception of:
• situations when it is not possible to recover Value Added Tax (VAT) paid upon the purchase of assets or
services, in which case it is charged appropriately as part of the purchase price of the asset or part of the cost
item, and
• receivables and liabilities that are reported with the inclusion of Value Added Tax (VAT).
The net amount of Value Added Tax (VAT) available for recovery or payable is disclosed in the balance sheet as an
item of receivables or liabilities.
12.22 Earnings per share
The net earnings per share for each period are calculated by dividing the net profit/ (loss) for a given period by
the weighted average number of shares in the reporting period. The weighted average number of shares during
the respective reporting period is the quantity of ordinary shares in the respective period, adjusted by the
quantity of ordinary shares repurchased during that period, multiplied by a ratio reflecting the time for which
these shares existed. The ratio reflecting the time that the shares existed is the quantity of days that the respective
shares existed to the total number of days in the period.
To calculate diluted earnings per share, the Group adjusts the number of ordinary shares bought back during the
period by such number of shares which were bought back with a view to being offered to employees as part of
the share option plan (these shares are treated as potentially dilutive).
13
Operating segments
In accordance with the requirements of IFRS 8 “Operating Segments”, the Group divides its business activities into
4 separate segments – television, Internet, telephony and other services (lease of infrastructure in particular). The
main measure of performance in the telecommunication industry is adjusted EBITDA. Analysis of adjusted EBITDA
divided into segments is one of the tools in making business decisions by Management.
The Management monitors the operating results of individual business units for the purpose of making decisions
about resource allocation and performance assessment. The Group's financing (including finance income and
expenses) and income taxes are managed on a Group basis and are not allocated to operating segments.
Segmentation is based on the individual accounting transactions. The majority of revenues and some variable cost
items are allocated directly to specific segments. Other revenues and costs are allocated to segments based
on allocation keys such as the structure of RGUs (revenue generating units), structure of fixed assets, intangible
assets, revenues from subscribers and operators, other services, or based on the structure of inventory. Revenues
generated by the Group mainly come from individual customers. Revenues from business customers - other
operators using the Group’s network or services - represent not more than 7% of sales revenue.
The television segment covers cable TV, digital TV and products such as Premium packages. The Internet segment
is primarily based on providing HFC and DSL internet services, Mobile Internet, Multisaver, MultiPower (Internet
speed boost) and BSM (wireless multimedia network). The telephony segment consists of fixed-line telephony
services, interconnect services, indirect services and pay phones. All of the segments include accordingly allocated
31
(PLN '000)
revenue from other sales, such as sales of activation services, reactivation services and package migrations. Other
services consist of revenues and costs of leasing telecommunication infrastructure, links, bandwidth, network,
offices and revenues and costs related to energy sale. “Not allocated” items include finance income and expenses,
income tax charges and the results of transactions which impact the value of non-current assets.
Sales revenues include subscriber-generated revenues and inter-operator revenues. Revenues on other sales
include revenue from leases of telecommunication infrastructure, links, bandwidth, network and offices, revenues
on the sale of advertisements and licenses. Direct variable costs of the Group concern ,in particular, programming
charges, copyright, licence fees resulting from Multisaver service, recharging of mobile modems and other
services supporting mobile internet services, interconnect and band. Operating expenses are the costs of materials
and energy, rentals, external services, salaries, taxes and charges, sales and marketing. Due to the nature of
services and transactions performed by the Group, there are no sales/purchases or other transactions between the
operating segments.
Detailed segmental information for the period of 12 months ended 31 December 2015:
Television
Sales revenue
Other sales
Direct variable costs
Operating Expenses
Other operating income/expenses
Adjustments for one-off events
Adjusted EBITDA
Other income/expenses
Net Profit/ (loss)
350,715
1,096
(124,872)
(82,108)
(1,144)
2,907
146,594
(91,511)
(2,907)
52,176
Internet
223,484
2,593
(6,006)
(62,395)
1,884
2,192
161,752
(72,582)
(2,192)
86,978
Telephony
103,429
2,716
(21,018)
(49,491)
306
1,324
37,266
(48,847)
(1,324)
(12,905)
Other
services Leases
Not
allocated
25,440
(11,372)
(3,673)
24
69
10,488
(69)
10,419
(50,468)
(50,468)
Total
677,628
31,845
(163,268)
(197,667)
1,070
6,492
356,100
(50,468)
(212,940)
(6,492)
86,200
Other income/expenses for the 12 months ended 31 December 2015, totalling PLN (50,468) thousand, comprises:
- other income/expenses related to the change in value of non-current assets – PLN (1,581) thousand,
- finance income and expenses – PLN (61,505) thousand,
- income tax – PLN 12,618 thousand.
Operating expenses recognised in the income statement comprise: direct variable costs, operating expenses and
amortisation and depreciation.
Detailed segmental information for the period of 12 months ended 31 December 2014:
(Restated)*
Sales revenue
Other sales
Direct variable costs
Operating Expenses
Other operating income/expenses
Adjusted EBITDA
Other income/expenses
Net Profit/ (loss)
Television
348,504
2,116
(115,808)
(84,252)
1,822
7,620
160,002
(82,342)
(7,620)
70,040
Internet
220,539
2,089
(7,899)
(66,091)
(964)
3,508
151,182
(75,008)
(3,508)
72,666
Telephony
109,522
2,618
(20,376)
(51,237)
(417)
6,902
47,012
(56,530)
(6,902)
(16,420)
Other
services Leases
20,434
(187)
(3,824)
187
16,610
16,610
Not
allocated
(92,105)
(92,105)
Total
678,565
27,257
(144,270)
(205,404)
628
18,030
374,806
(92,105)
(213,880)
(18,030)
50,791
* Details of restatement are described in note 7
32
(PLN '000)
Other income/expenses for the 12 months ended 31 December 2014, totalling PLN (92,105) thousand, comprises:
- other income/expenses related to the change in value of non-current assets – PLN 932 thousand,
- finance income and expenses – PLN (63,804) thousand,
- income tax – PLN (29,233) thousand.
Operating expenses recognised in the income statement comprise: direct variable costs, operating expenses and
amortisation and depreciation.
EBITDA is calculated by adding depreciation and amortisation to operating profit/ (loss), in each case determined
according to IFRS. The calculation of Adjusted EBITDA does not include any one-off events or events that are not
directly related to the Group's operating activity, for example profit/ (loss) on the sale of non-current assets or
revaluation of non-current assets. EBITDA and Adjusted EBITDA are not a performance measure of operating
activity, operating results or liquidity according to IFRS. Adjusted EBITDA is generally reported and broadly used
by investors to compare results consistently without taking depreciation into account and may differ materially
depending on the accepted rules or factors not related to the operations.
The Group incurred one-off costs associated mainly with the Group’s attempted Initial Public Offering and
expenses related to the restructuring of the Group.
The Group provides its services on the territory of the Republic of Poland, which constitutes a single consistent
geographic area. Hence, the Group does not make any allocations to geographic segments.
14
14.1
Revenue and expenses
Sales revenue
Subscriber-generated and inter-operator revenue
Television
Internet
Telephony
Subscriber-generated revenues
Inter-operator revenues
Other*
Other revenue
Total sales revenues
Year ended
31 December 2015
680,900
350,715
223,484
103,429
74,035
29,394
3,272
28,573
709,473
Year ended
31 December 2014
682,711
348,504
220,539
109,522
81,017
28,505
4,146
23,111
705,822
* in note 13 "Operating Segments", subscriber-generated and inter-operator revenues are presented jointly with other sales revenues in the Other
sales line item
14.2
Other operating income
Grants
Profit on disposal of property, plant and equipment
Compensations, fines and penalties received or receivable
Release of provisions for operating expenses
Overdue liabilities written off
Insurance premium refund
Reversal of impairment losses on property, plant and equipment
Reimbursement costs of judicial enforcement and court fees
Release of provisions for revaluation of inventories
Other
Total other operating income
Year ended
31 December 2015
111
133
6,948
173
165
635
210
214
57
267
8,913
Year ended
31 December 2014
110
166
7,035
2,114
2,066
658
1,188
515
283
649
14,784
33
(PLN '000)
14.3
Other operating expenses
Impairment losses and write-down of uncollectible receivables
Liquidation of tangible assets
Impairment write-offs on inventories
Impairment loss for other non-current assets
Costs of repairs, penalties, fines and compensations
Judicial enforcement and court fees
Donations
Tax on civil law transactions
Other
Total other operating expenses
14.4
Foreign exchange losses
Other
Total finance expenses
15.1
Year ended
31 December 2015
4,748
1,113
1,094
25
6,980
Year ended
31 December 2014
1,709
1,592
11,693
34
15,028
Finance expenses
Interest, fees and commissions on bank borrowings
Interest, fees and commissions on bonds
Interest on other liabilities
Finance charges payable under financing agreements and finance lease
15
Year ended
31 December 2014
5,462
297
155
105
5,637
832
115
93
528
13,224
Finance income
Bank interest received
Interest on receivables
Interest and commissions on loans granted and purchased bonds
Other
Total finance income
14.5
Year ended
31 December 2015
4,972
249
1,270
614
107
1,540
672
9,424
Year ended
31 December 2015
12,530
53,787
386
178
1,549
55
68,485
Year ended
31 December 2014
11,865
63,010
1,388
219
2,280
70
78,832
Income Tax
Income tax expense
The key components of the income tax expense for the year ended 31 December 2015 and 31 December 2014
were as follows:
Current income tax
Current income tax charge
Adjustments pertaining to current income tax brought forward
Deferred Tax
Relating to origination and reversal of temporary differences
Income tax expense reported in consolidated income statement
Year ended
31 December 2015
Year ended
31 December 2014
(Restated)*
12,402
12,361
41
(25,020)
(25,020)
(12,618)
25,849
24,191
1,658
3,384
3,384
29,233
34
(PLN '000)
15.2
Reconciliation of the effective tax rate
A reconciliation of income tax expense applicable to accounting profit /(loss) before income tax at the statutory
income tax rate to income tax expense at the Group's effective income tax rate for the period of 12 months
ended 31 December 2015 and 31 December 2014 is as follows:
Year ended
31 December 2015
73,582
Year ended
31 December 2014
(Restated)*
80,024
Tax at the statutory tax rate applicable in Poland, i.e. 19% (2014: 19%)
Adjustments of corporate income tax/ deferred tax
13,981
(39,271)
15,204
4,330
Non-deductible costs, including from:
- interest/ guarantees on bonds and bank borrowings
- receivables written down
- remuneration of Supervisory Board
- costs of making a public offering of Multimedia Polska S.A. shares
- contributions to the National Fund for Rehabilitation of the Disabled
- acquisition of business
- tax on civil law transactions
- depreciation of property, plant and equipment
- depreciation of goodwill
- reminders, penalties, compensations
- interest on past due tax liabilities
- sale of shares
- donations, membership fees
- representation costs
- other
Non-taxable income, including:
- subsidies
- budgetary interest
- property tax provision
- billing notes
- write-off
- other
Statistical income
Effective tax rate
Income tax expense
12,834
4,316
469
786
172
6,493
98
82
(88)
124
42
87
30
202
21
(162)
(21)
(8)
(20)
(30)
(83)
(17%)
(12,618)
9,730
5,454
747
760
2,087
163
53
142
225
31
21
47
(152)
(21)
(34)
(28)
(69)
121
36%
29,233
Profit before tax from continuing operations
35
(PLN '000)
15.3
Deferred Tax
Deferred tax arises on the following items:
Balance sheet as at
31 December 2015
Income statement
for the year ended
32,428
-
14,111
-
(18,317)
31 December 2014
(Restated)*
13,014
78,045
494
39
144
57
-
21,548
2
107
4,150
8
179
2,135
75,186
494
50
153
151
-
22,145
2
145
2,417
21
74
1,350
(3,456)
11
(29)
1,733
81
105
785
(5,774)
(44)
438
1,629
(2,537)
(238)
74
308
108
435
683
3,636
4,646
7,476
959
683
647
751
128,191
31,169
102
488
577
2,044
4,389
5,521
103,266
1,444
355
249
5
28,207
(6)
(432)
328
(106)
(1,592)
141
(1,209)
(3,057)
(25,020)
5
146
(90)
(47)
(1,431)
(4,140)
2,219
(148)
3,384
(23,547)
104,644
(23,547)
7,622
(22,102)
81,164
(22,102)
6,105
Asset
Asset on tax-deductible losses
Assets
Intangible assets and property plant and equipment
Financial assets - impairment loss
Inventories
Receivables (accrued receivables and impairment loss)
Loans granted - interest
Long-term financial instruments - bonds
Foreign exchange differences
Cash equivalents
Liabilities
Provisions
Debt securities in issue
Revaluation of bank borrowing
Lease liabilities
Liability relating to interest on borrowings
Trade payables
Accrued expenses
Deferred tax adjustment to goodwill
Gross deferred tax asset/ liability
Deferred tax charge taken to the income statement
Presentation adjustment
Net deferred tax liability/asset
Balance sheet as at
31 December 2014
(Restated)*
Provision
Asset
31 December 2015
Provision
*Details of restatement are described in note 7
The deferred tax asset and reserve are particularly affected by the temporary difference between the carrying amount and the tax value of tangible assets, liabilities under loans,
borrowings, bonds issued and a tax loss asset.
36
(PLN '000)
16
Assets and liabilities of the Company’s Social Benefit Fund
The Social Fund Act dated 4 March 1994, with subsequent amendments, stipulates that a Company Social Benefits
Fund must be established by employers who employ over 20 staff working full time. The Group creates such a
fund and makes periodic contributions to the fund. The purpose of the fund is to subsidise the Company’s social
activities, finance loans to employees and other social expenses.
The Group has offset the Fund assets against its liabilities towards the Fund, as these assets are not assets of the
Group.
The table below presents an analysis of the assets, liabilities, costs of the Fund.
31 December 2015
Cash
Social Fund liability
Net balance
Contributions to the Social Fund made during the period
17
128
(128)
358
31 December 2014
1
(1)
423
Earnings per share
Basic earnings per share amounts are computed as the quotient of the net profit/(loss) for the period attributable
to ordinary equity holders of the Parent and the weighted average number of ordinary shares outstanding during
the period.
Diluted earnings per share amounts are determined by including in the weighted average number of ordinary
shares, repurchased shares offered to employees as part of the incentive share option plan.
The data relating to earnings and shares, which served as the basis for computation of basic earnings per share
amounts, are presented below:
Year ended
31 December 2015
Net profit /(loss) for the period
Weighted average number of ordinary shares for basic earnings per share (in
thousand)
Earnings per share (in PLN)
86,196
Year ended
31 December 2014
(Restated)*
50,787
91,765
0.94
91,765
0.55
There have been no other transactions involving ordinary shares or potential ordinary shares between the balance
sheet date and the date of authorization of these consolidated financial statements.
Diluted net earnings per share
Year ended
31 December 2015
Net profit /(loss) for the period
Weighted average number of ordinary shares adjusted for the effect of
dilution (in thousand)
Earnings per share (in PLN)
86,196
Year ended
31 December 2014
(Restated)*
50,787
91,765
0.94
91,765
0.55
18
Dividends paid and proposed
The Management Board of Multimedia Polska S.A. proposes to appropriate the Company's 2015 net profit to a
dividend payment, while taking into account the restrictions, which the Company must observe under concluded
agreements (note 31.3) and by virtue of the law.
37
(PLN '000)
On 26 June 2014, the Annual General Meeting of Multimedia Polska S.A. adopted resolution no. 9 on the
allocation of profit earned by the Company in 2013. The Annual General Meeting resolved to allocate PLN 70,723
thousand of the profit to dividend payment, subject to the limitations resulting from the Company’s credit facility
agreement and the terms and conditions of bond issue. The remaining portion of the profit of PLN 179,132
thousand was allocated to the statutory reserve fund. The Annual General Meeting of Multimedia Polska S.A. set
the record date on 26 June 2014 and the dividend date on 10 October 2014.
Due to the limitations resulting from the Company’s credit facility agreement and the terms and conditions of the
bond issue, the dividend was not paid in the expected date. On 17 December 2014, the Company’s Extraordinary
General Meeting resolved to change the dividend date and set a new dividend date on 7 January 2015. The
dividend was paid in the fixed date.
On 17 March 2015, the Annual General Meeting of Multimedia Polska S.A. adopted resolution no. 8 on the
thousand of the profit to dividend payment. The remaining portion of the profit of PLN 170 thousand was
allocated to the statutory reserve fund. The Annual General Meeting of Multimedia Polska S.A. set the record date
on 17 March 2015 and the dividend date on 18 March 2015. The dividend was paid in the fixed date.
38
(PLN '000)
19
Property, plant and equipment
Year ended 31 December 2015
Net carrying amount as at 1 January 2015
Additions, including:
acquisition of a subsidiary
acquisition of an organised part of business
Disposals
Change in impairment write-down
Depreciation charge for the period
Net carrying amount as at 31 December 2015
Land and buildings
Plant and equipment
Vehicles
Assets under
construction and
prepayments
Other
Total
462,590
61,324
4,465
1,040
(701)
(47,141)
476,072
294,629
90,395
3,698
1,111
(2,635)
1,467
(119,715)
264,141
5,576
3,383
19
14
(2,249)
6,710
1,936
580
4
2
(6)
(801)
1,709
114,978
190,021
(143,140)
70
161,929
879,709
345,703
8,186
2,167
(146,482)
1,537
(169,906)
910,561
Gross carrying amount
Accumulated depreciation and impairment write-down
Net carrying amount
946,359
(483,769)
462,590
1,366,754
(1,072,125)
294,629
25,716
(20,140)
5,576
15,623
(13,687)
1,936
115,084
(106)
114,978
2,469,536
(1,589,827)
879,709
Net carrying amount
1,006,019
(529,947)
476,072
1,438,701
(1,174,560)
264,141
26,889
(20,179)
6,710
16,057
(14,348)
1,709
161,965
(36)
161,929
2,649,631
(1,739,070)
910,561
In 2015, the borrowing costs capitalised in the value of property, plant and equipment amounted to PLN 1,045 thousand. To compute the amount of borrowing costs which
qualify for capitalisation, the Group applied a capitalisation rate equal to the weighted average interest on the financial instruments classified as external financing, calculated
separately for each month.
39
(PLN '000)
acquisition of a subsidiary
Disposals
Change in impairment write-down
Depreciation charge for the period
Land and buildings
Plant and equipment
Vehicles
Assets under
construction and
prepayments
Other
Total
462,825
42,190
212
(42,637)
462,590
323,294
97,009
(635)
360
(125,399)
294,629
5,844
2,545
(52)
(2,761)
5,576
2,315
430
(10)
5
(804)
1,936
98,759
170,097
(153,772)
(106)
114,978
893,037
312,271
(154,257)
259
(171,601)
879,709
Net carrying amount
904,207
(441,382)
462,825
1,297,890
(974,596)
323,294
24,338
(18,494)
5,844
15,388
(13,073)
2,315
98,759
98,759
2,340,582
(1,447,545)
893,037
Net carrying amount
946,359
(483,769)
462,590
1,366,754
(1,072,125)
294,629
25,716
(20,140)
5,576
15,623
(13,687)
1,936
115,084
(106)
114,978
2,469,536
(1,589,827)
879,709
In 2014, the borrowing costs capitalised in the value of property, plant and equipment amounted to PLN 1,861 thousand. To compute the amount of borrowing costs which
qualify for capitalisation, the Group applied a capitalisation rate equal to the weighted average interest on the financial instruments classified as external financing, calculated
separately for each month.
40
(PLN '000)
20
20.1
Leases
Liabilities under finance leases and financing agreements
As at 31 December 2015, the subjects of lease are vehicles. Lease agreements are concluded for a period of 2 to 5
years. In conformance with the lease agreements, there was a transfer of basically the entire risk and benefits
arising in the connection with holding the assets. A part of the leases are secured with blank promissory notes.
In 2015, the Group accepted for use non-current assets subject to finance lease agreements. The total amount
of the fixed assets accepted under those agreements was PLN 2,643 thousand. The subject matter of the lease is
the means of transportation. The Group classified the lease agreements as finance leases on the basis of an
assessment of the economic substance of each transaction and the extent to which the risks and rewards
associated with holding the leased assets are allocated to the lessor and the lessee.
As at 31 December 2015 and as at 31 December 2014, the future minimum lease payments and the present value
of future minimum lease payments under non-cancellable finance leases were as follows:
31 December 2015
Minimum
Present
lease
value
payments
of payments
Within 1 year
After one year but not more than five years
Total minimum lease payments
Less finance charges
Present value of minimum lease payments
20.2
2,182
1,651
3,833
(185)
3,648
2,052
1,596
3,648
31 December 2014
Minimum
Present
lease
value
payments
of payments
1,784
1,526
3,310
(174)
3,136
1,661
1,475
3,136
Operating lease receivables – the Group as lessor
As at 31 December 2015, the future annual minimum lease receivables under
(mainly leases of technical infrastructure, sewage infrastructure and lease of
thousand.
As at 31 December 2014, the future annual minimum lease receivables under
(mainly leases of technical infrastructure, sewage infrastructure and lease of
thousand.
non-cancellable operating leases
offices) amounted to PLN 6,207
non-cancellable operating leases
offices) amounted to PLN 6,891
41
(PLN '000)
21
Intangible assets
Licences, patents
and similar assets
acquired
Relationships
with customers
Total
- acquisition of a subsidiary and an organised part of
business
Disposal
Impairment write-down
Amortisation charge for the period
56,948
41,068
52,216
8,840
109,164
49,908
6
32,830
32,830
65,186
8,840
10,204
10,204
50,852
8,846
43,034
43,034
116,038
Accumulated amortisation and impairment write-down
Net carrying amount
579,209
522,261
56,948
98,421
46,205
52,216
677,630
568,466
109,164
Net carrying amount
598,154
532,968
65,186
107,261
56,409
50,852
705,415
589,377
116,038
Licences, patents
and similar assets
acquired
Relationships
with customers
Total
57,553
32,137
-
118,528
32,917
-
(Restated)*
- acquisition of a subsidiary
Disposal
Impairment write-down
Amortisation charge for the period
32,742
56,948
60,975
780
9,539
52,216
Net carrying amount
557,188
499,635
57,553
97,641
36,666
60,975
654,829
536,301
118,528
Net carrying amount
579,209
522,261
56,948
98,421
46,205
52,216
677,630
568,466
109,164
42,281
109,164
42
(PLN '000)
22
22.1
Business combinations and acquisition of non-controlling interest
Goodwill
The table below presents goodwill as at 31 December 2015 and as at 31 December 2014:
Opening balance
Increase
Closing balance
31 December 2015
31 December 2014
170,562
14,373
184,935
169,886
676
170,562
In 2015, goodwill increased by PLN 14,373 thousand in connection with the acquisition by the Group of the
following companies Multimedia Polska Biznes S.A., AC Systemy Komputerowe Sp. z o.o., AS-SAT Sp. z o.o. and an
organized part of the Ant - SAT - Gor (note 23).
Within the above mentioned transactions, the Group acquired networks located in Świnoujście, Gliwice,
Władysławowo, Blachownia and Jastrzębia Góra, acquiring net assets in the total amount of PLN 17,122 thousand
for a total price of PLN 31,495 thousand. Acquisitions were accounted for as a business combination in accordance
with IFRS 3. The transaction generated goodwill, equal to the difference between the acquisition price and the fair
value of net assets as at the acquisition date.
In connection with the above acquisitions, the Group identified customer relations arising from these transactions
in the amount of PLN 8,840 thousand.
The recognition of the acquisition of Multimedia Polska Biznes S.A. is final. The settlements of other transactions
are temporary.
22.2
Impairment test
As at the balance sheet date the Group tested goodwill for impairment.
Goodwill is tested for impairment annually, at the end of each financial year and if there is any indication. As at the
balance sheet date of 31 December 2015 and 31 December 2014, the Group tested for impairment the goodwill
arising on business combinations.
If at the date of the testing, the recoverable amount of a cash-generating unit to which goodwill was allocated is
lower than its carrying value, an impairment loss is recognised.
For the purpose of the test, goodwill was allocated to cash-generating units corresponding to operating
segments connected with television, Internet and telephony:
Goodwill
Television
Internet
Telephony
Total carrying amount
Year ended
31 December 2015
87,082
76,793
21,060
184,935
The impairment test was conducted on the basis of the forecast of a five-year cash flow that may be recoverable
from these assets, including a residual period with an assumed cash flow growth rate of 2.0% for cash-generating
units related to television and Internet (as for the telephony unit the Group does not anticipate any growth).
For the purpose of impairment testing, the Group used the post-tax discount rate of 10.1%. The implied pre-tax
discount rate, calculated in accordance with IAS 36, was 12.01%.
The sensitivity analysis shows that the carrying amounts of the segments are equal to their value in use if the posttax discount rate is 12.32% for goodwill allocated to the cash-generating unit related to television, 13.87% for
goodwill allocated to the cash-generating unit related to the Internet, and 14.74% for goodwill allocated to the
cash-generating unit related to telephony.
No impairment of goodwill was identified as a result of the test.
43
(PLN '000)
As at 31 December 2015, recoverable amount was, respectively: PLN 574,304 for the segment related to television,
PLN 1,107,440 for the segment related to the Internet and PLN 230,503 for the segment related to telephony.
The test covered all of the segments to which the Group's goodwill was allocated and did not indicate any need
for recognising an impairment loss. Accordingly, there was no basis for recognising impairment of the property,
plant and equipment and intangible assets allocated to the cash-generating units to which goodwill was allocated.
23
Financial assets
Shares
Loans granted*
Total financial assets
31 December 2015
31 December 2014
69
7,464
7,533
70
13,289
13,359
*The Group granted loans to members of the Management Board (note 40), Group’s employees and third parties, including related parties (note
40)
24
Other receivables
31 December 2015
31 December 2014
888
619
Other receivables are the receivables related to warranty deposits paid in accordance with lease agreements
.
25
Lease
Insurance
Technical support
Permissions
Other finance expenses (commissions)
Energy
Road zone rented
WLR - commission fees
Other
Total prepayments and deferred costs
- current
- non-current
26
26.1
31 December 2015
31 December 2014
397
911
384
117
5,322
21
7
55
1,026
8,240
7,634
606
491
925
247
140
5,794
16
3
63
821
8,500
8,023
477
Employee benefits
Employee share incentive plan
Pursuant to a resolution adopted by the Extraordinary General Meeting of 31 January 2013, the Group has
introduced an incentive plan for the Management Board. In 2015 and 2014, the Group incurred no expenses
under this item. The cost of the incentive plan was recognised in 2013.
44
(PLN '000)
26.2
Retirement and other post-employment benefit plans
The Group companies provide retirement benefits to retiring employees in the amount established pursuant to
the Polish Labour Code. As a result, based on the valuation made by a professional actuarial company, the Group
recognizes a provision for the present value of this retirement benefit liability. The table below provides
information on the amount of the provision:
Current:
Retirement severance payments
Disability pensions
Death grants
Non-current:
Disability pensions
Death grants
Total provisions
31 December 2015
31 December 2014
26
4
18
48
31
3
16
50
144
15
198
357
405
130
16
190
336
386
A reconciliation which sets out movements in liabilities during the financial year has been presented in Note 34.
The principal assumptions adopted by the actuary in determining the retirement benefit obligations as at the
balance sheet date were as follows:
Discount rate (%)
- in 2015-2024 (2014-2023 respectively)
- in the other years
Weighted average employees rotation ratio (%)
Predicted remuneration growth rate (%)
- in 2016 (in 2015 respectively)
- in 2016-2024 (2015-2023 respectively)
27
31 December 2015
31 December 2014
3.00%
3.00%
13.52%
2.75%
2.75%
13.77%
1.50%
1.50%
1.50%
1.50%
31 December 2015
106
725
8
839
31 December 2014
94
33
10
137
Inventories
Raw materials (at cost)
Goods for resale
Prepaid deliveries
Total inventories
During the 12-month period ended 31 December 2015, the Group recognised impairment losses on inventories in
the amount of PLN 1 thousand, while during the 12-month period ended 31 December 2014, the Group
recognised impairment losses on inventories in the amount of PLN 99 thousand.
For information on agreements on registered pledges effective as at 31 December 2015 and 31 December 2014,
see note 32.
As at 31 December 2015 and as at 31 December 2014, there were no inventories stated at net realizable value.
45
(PLN '000)
28
31 December 2015
31 December 2014
51,895
19,569
19,363
206
1,060
72,524
10,699
83,223
51,240
15,541
15,523
18
5,294
72,075
12,527
84,602
12 months ended
31 December 2015
13,275
4,287
(6,863)
10,699
12 months ended
31 December 2014
15,100
2,751
(5,324)
12,527
Trade receivables
Receivables from the state and local budgets, including:
VAT
Other
Other receivables from third parties
Total net receivables
Doubtful debts allowance
Gross receivables
The table below presents changes in impairment losses during the periods of:
As at 1 January
Increase
Decrease
At the end of the period
Trade and other receivables do not bear interest and usually fall due after 14 days. However, some invoices are
paid after the due dates. Therefore, the collection period of outstanding trade and other receivables is in fact
longer.
The largest group of customers of the Group’s services consists of individual customers (households), and the
Group operates a policy to sell only to verified customers. In the Management Board’s opinion, this ensures that
the credit risk to which the Group is exposed does not exceed the level of the allowance for bad debts appropriate
for the Group’s trade receivables.
29
Other financial assets
Loans granted (current)*
Other short-term investments **
Total financial assets
31 December 2015
31 December 2014
17,045
170,365
187,410
7,420
100,192
107,612
*The Group granted loans to members of the Management Board and the Supervisory Board (note 40), third parties, including related parties (note
40) and its employees.
** As at 31 December 2015, the Group held the short-term investments (deposits) at maturity over 3 months which did not classify as cash and
cash equivalents in the amount of PLN 170,365 thousand (including accrued interest in the amount of PLN 765 thousand).
As at 31 December 2014, the Group held the short-term investments (deposits) at maturity over 3 months which did not classify as cash and cash
equivalents in the amount of PLN 100,192 thousand (including accrued interest in the amount of PLN 192 thousand).
30
Cash at bank earns interest at floating rates based on interest rates on overnight bank deposits. Short-term
deposits are placed for varying periods depending on the immediate cash requirements of the Group, and earn
interest at the respective short-term deposit rates. As at 31 December 2015, the fair value of cash and cash
equivalents amounted to PLN 117,395 thousand (PLN 200,262 thousand as at 31 December 2014).
All risk factors inherent in the Company's business are described in note 42.
As at 31 December 2015, the Group held the short-term deposits, classified as cash equivalents in the amount of
PLN 65,184 thousand (including accrued interest in the amount of PLN 184 thousand).
As at 31 December 2014, the Group held the short-term deposits, classified as cash equivalents in the amount of
PLN 90,200 thousand (including accrued interest in the amount of PLN 200 thousand).
46
(PLN '000)
The balance of cash and cash equivalents disclosed in the consolidated cash flow statement included:
31 December 2015
31 December 2014
52,103
65,184
108
117,395
-
109,979
90,200
83
200,262
-
Cash at bank and in hand
Short-term deposits
Other cash
Cash and cash equivalents, of which:
- restricted cash
31
31.1
Issued capital, statutory reserve funds and other capital reserves
Issued capital
As at 1 January 2015, the Company’s share capital amounted to PLN 91,764,808 and was divided into 91,764,808
ordinary bearer shares with a par value of PLN 1.00 each. The Company held no treasury shares.
All the shares have equal preference for dividend and capital value.
The Company’s share capital did not change in 2015.
- Par Value of Shares
All issued shares have a par value of PLN 1 and have been fully paid.
Majority shareholder and shareholders with significant shareholding as at 31 December 2015
Shareholder
M2 Investments Limited (1)
Tri Media Holdings Ltd (2)
Other shareholders
Total
Number of shares
held
Percentage of
votes at the
General Meeting
51.93%
46.49%
1.58%
Percentage held in
issued capital
1,449,512
Number of votes
at the General
Meeting
47,654,722
42,660,574
1,449,512
91,764,808
91,764,808
100.00%
100.00%
47,654,722
42,660,574
51.93%
46.49%
1.58%
1) M2 Investments Limited is a company in which Mr Tomek Ulatowski and Mr Ygal Ozechov, the Co-Chairmen of the Supervisory Board (with their
respective related parties) indirectly hold each 50% of shares and control the decision making process. M2 Investments Limited is a subsidiary of
YTD LLC, with registered office in Wilmington, Delaware, USA, in which the Co-Chairmen of the Supervisory Board (with their respective related
entities) hold 100% of shares and through which they control the decision making process at the purchasing entity.
2) Company controlled by Emerging Ventures (EVL) Limited of Nicosia, Cyprus.
Compared with the information presented in the annual financial statements for 2014, the data described above
did not change.
The changes in the structure of shareholders holding over 5% in the Company’s share capital in 2015 are
described in note 40.2.
In the period from 1 January 2015 to 31 December 2015, the structure of shareholders holding over 5% in the
Company’s share capital remained unchanged.
31.2
Statutory reserve funds and other reserve capital
Besides issued capital, the Group carries the following equity components:
- other reserve capital of PLN 225,459 thousand, including
special account for the purchase of treasury shares at PLN 7,993 thousand.
- retained earnings/ accumulated losses of PLN (77,320) thousand,
In 2015, the Group’s capital reserve changed.
47
(PLN '000)
allocated to the statutory reserve fund.
On 29 June 2015, the Annual General Meeting of Telewizja Kablowa Brodnica Sp. z o.o. adopted a resolution to
allocate the entire net profit for 2014, of PLN 61 thousand, to statutory reserve funds.
31.3
Retained earnings and limits to dividend distribution
The Commercial Company Code imposes an obligation on the Company to transfer at least 8% of the company’s
profit for a given financial year to reserve capital until that capital reaches at least one third of the share capital. As
at 31 December 2015, there are no restrictions for dividend distribution related to the above requirements of the
Commercial Company Code.
The possible dividend payments in the years 2016-2020 will be limited by the provisions of the Terms of the
Bonds (Series MMP004100520). The investment loan incurred by the Company also imposes certain restrictions on
dividend payments by the Company in specified circumstances.
Terms and conditions of bond issue
Permitted Distribution means a dividend or distribution of distributable profit using other available instruments
(including, among others, acquisition of own shares for redemption, granting a loan) to shareholders in a given
year, provided that:
(a) Tri Media Holdings Ltd Bonds will be repaid in the amount corresponding to 50% of the Issuer's
distributable profit designated for this purpose, starting from the 2013 profit; and
(b) in any case, starting with the profit for 2013, the amount of such distribution will not exceed the lower of:
(i) net profit for the financial year specified in the Issuer's annual separate audited financial statements;
and
(ii) net profit for the financial year specified in the Group's annual consolidated audited financial
statements
with a reservation that amounts for a given financial year not distributed under such a limit will be added
to the available distribution amount in the following and subsequent years.
In no event the action permitted shall be performed when the Issuer has breached the covenants as to Financial
Ratios or when the Leverage Ratio on the Review Date directly preceding the planned action date is greater than
3.50x.
As at 31 December 2015, the Issuer was not in breach of the Financial Covenants.
Loan agreement
Permitted Distribution means a dividend or distribution of distributable profit using other available instruments
(including, among others, acquisition of own shares for redemption, granting a loan) to shareholders in a given
year, provided that:
(a) the Bond issued by Tri Media Holdings Ltd is be repaid in the amount corresponding to 50% of the
Company's distributable profit, starting from the profit for 2013; and
(b) starting from the year ended 31 December 2013, the amount of profit designated for distribution in a
financial year cannot exceed the lower of:
(i) net profit for the financial year specified in the Company's annual separate audited financial
statements; or
(ii) net profit of the Group for the financial year specified in the Group's annual consolidated audited
financial statements,
with a reservation that amounts for a given financial year not distributed under such a limit will be added
to the available distribution amount in the following and subsequent years.
Dividends:
(a) No Obligor other than the Company will distribute, pay out or announce payment of any dividend or
other distributions for any financial year, unless to the Company or to the Obligor.
48
(PLN '000)
(b) The Company will not distribute, pay out or announce payment of any dividend or other distributions for
any financial year. The foregoing undertaking does not apply to Permitted Distributions. However, a
Permitted Distribution cannot be made in any case if:
(i) the Company has breached the covenants as to Financial Ratios or when the Leverage Ratio on the
Review Date directly preceding the planned action date was greater than 3.50x; or
(ii) other Breach has occurred and continues.
(c) Until full repayment of the liability of the shareholder Tri Media Holdings Ltd, as described in items (a)
and (b) of the Permitted Distribution definition, the Company will make a Permitted Distribution
mentioned in item (b) above in the part due to Tri Media Holdings Ltd, by making a statement on
deducting the amounts due and payable to the Company under Bonds issued by Tri Media Holdings Ltd
with the due and payable claim of Tri Media Holdings Ltd under Permitted Distribution.
As at 31 December 2015, the Company was not in breach of the Financial Covenants.
31.4
At the beginning of the period
Share in subsidiaries’ net result
At the end of the period
32
Year ended
31 December 2015
28
4
32
Year ended
31 December 2014
24
4
28
Interest-bearing loans and borrowings
On 10 June 2013, a term loan agreement was concluded between Raiffeisen Bank Polska S.A., Bank DnB NORD
Polska S.A., Credit Agricole Bank Polska S.A. and DNB Bank ASA as the initial lenders and Multimedia Polska S.A. as
the borrower for the overall amount of PLN 462,000 thousand, where the individual tranches were to be used to
finance or refinance the funds used by the Company to repay debt and to finance or refinance the Company's
capital expenditures for infrastructure development and modernization and acquisitions. A working capital loan
agreement was also concluded in the amount of PLN 50,000 thousand, to be used to finance general needs of the
Company and its current assets. Interest accruing on the facilities was based on WIBOR for applicable interest
periods plus a margin conditional upon the actual level of financial ratios. The final repayment date for those
facilities is 10 May 2020.
On 17 February 2014, Annex 1 to the above credit facilities agreement was signed, which introduced more
detailed terms, primarily in definitions, interest periods and interest calculation method.
The credit facilities were secured with a registered pledge over shares in Multimedia Polska-Południe S.A. and
Multimedia Polska Biznes S.A. held by the Company and over shares in Stream Communications Sp. z o.o. and
Multimedia Polska Infrastruktura Sp. z o.o. held by the Company and with a registered pledge on selected bank
accounts of the Company and Multimedia Polska-Południe S.A. and a pledge on a collection of Multimedia Polska
S.A.'s assets and property rights.
Multimedia Polska-Południe S.A., Stream Communications Sp. z o.o., Multimedia Polska Infrastruktura
Sp. z o.o. and Multimedia Polska Biznes S.A., subsidiaries of Multimedia Polska S.A., extended guarantees securing
the repayment of liabilities under the credit facilities.
In connection with BNP Paribas Bank Polska S.A. acceding to the credit facilities agreement, on 14 April 2014
Multimedia Polska S.A. as a borrower and all the guarantors of the credit facilities agreement submitted their
statements on establishing an enforcement title in favour of BNP Paribas Bank Polska S.A. up to the amount of
PLN 90,000 thousand.
On 9 and 23 June 2015, annexes no. 2 and 3 were signed, respectively, amending the Facilities Agreement
concluded by Multimedia Polska S.A. on 10 June 2013 with a bank syndicate. The annexes extended the availability
of the facilities, among other things, and allowed Multimedia Polska Biznes S.A. to join the Agreement as a related
party, as defined in the Agreement, and as a guarantor.
49
(PLN '000)
On 17 June 2015, Multimedia Polska S.A. together with Multimedia Polska – Południe S.A., Stream
Communications Sp. z o.o., and Multimedia Polska Infrastruktura Sp. z o.o. as guarantors-and on 26 June 2015
also Multimedia Polska Biznes S.A. as guarantor-issued a statement on submission to enforcement of the relevant
notarial deed in compliance with Art. 777.1.5 of the Civil Code in connection with the obligation to clear the
liabilities arising from the Credit Facilities Agreement dated 10 June 2013.
As at 31 December 2015, the Group has drawn down all the funds awarded in Tranche A in the amount of
PLN 62,000 thousand as well as PLN 239,285 thousand out of the funds awarded in Tranche B.
As at 31 December 2015, the amount of undrawn funds available to the Group in Tranche B was
As at 31 December 2015, the amount of undrawn funds available to the Group under the working capital loan was
Liabilities under bank loans, finance leases, financing arrangements and borrowings are as follows:
Current
Liabilities under finance leases*
Bank loans
Non-current
Liabilities under finance leases *
Bank loans
Total interest-bearing loans and borrowings and other
2,052
12,388
14,440
1,661
9,673
11,334
1,596
285,304
286,900
1,475
207,032
208,507
301,340
219,841
* note 20.1
33
Debt securities
Series MMP0416 bonds
On 29 April 2011, in accordance with Art. 9 of the Bond Act and with the purpose of refinancing part of the
Company's existing debt, the Company issued unsecured, non-subordinated PLN bonds in book-entry form, with
a total par value of PLN 107,000,000 whose holders will be entitled to receive cash benefits only.
According to the terms and conditions of issue of series MMP004100520 bonds, on 10 May 2013, 14 May 2013,
6 June 2013, 23 July 2013, 20 December 2013 and 29 April 2014, the Company organized a redemption
of 10,700 of the above series MMP0416 bonds. The par value of the redeemed bonds was PLN 107,000,000.
All of the bonds were redeemed. Upon redemption, the bonds were retired in accordance with Article 24.1 of the
Bond Act. The Bonds were withdrawn from trading on the Alternative Trading System.
On 6 June 2012, in accordance with Art. 9 of the Bond Act and with the purpose of refinancing part of the
Company's existing debt, the Company issued unsecured, non-subordinated PLN bonds in book-entry form, with
a total par value of PLN 250,000,000 whose holders will be entitled to receive cash benefits only.
According to the terms and conditions of issue of series MMP004100520 bonds, on 10 May 2013, 6 June 2013,
23 July 2013, 20 December 2013 and 6 June 2014, the Company organized redemption of 25,000 of the above
series MMP0617 bonds. The par value of the redeemed bonds was PLN 250,000,000. All of the bonds were
redeemed. Upon redemption, the bonds were retired in accordance with Article 24.1 of the Bond Act. The Bonds
were withdrawn from trading on the Alternative Trading System.
50
(PLN '000)
On 10 May 2013, in accordance with Art. 9 of the Bond Act and with the purpose of refinancing part of the
Company's existing debt and increasing the financing of the Company's operations, the Company issued
10,380 unsecured, non-subordinated PLN bonds in book-entry form, with a total par value of PLN 1,038,000,000
whose holders will be entitled to receive cash benefits only.
The Bonds are subject to the following terms:
1. Designation of Bonds: Series MMP004100520
2. Par value per Bond: PLN 100,000 subject to reduction following payments of Instalment Amounts
3. Issue Price: PLN 100,000
4. Interest: Base Rate plus Margin, i.e. 6M WIBOR (determined in accordance with the Terms of the Bonds) plus
Margin
5. Redemption Amount: The Bonds shall be redeemed on the Redemption Date at amounts equal to their Par
Value, taking into account any Instalment Amounts paid earlier.
6. Issue Date: 10 May 2013
7. Final Redemption Date: 10 May 2020
8. Redemption Dates: 10 May 2017, 10 May 2018, 10 May 2019
9. Instalment Amounts and Par Value of Bonds following the payment of Instalment Amounts: On each
Redemption Date, the Instalment Amount will amount to 25% of the initial Par Value.
Before the elapse of the final Bond maturity, the Bond redemption option may be exercised, provided that a
premium is paid to bondholders for the early redemption. The premium amount is conditional upon the date
when the call option is exercised.
On 9 May 2013, the Polish National Depository for Securities [Krajowy Depozyt Papierów Wartościowych S.A.]
adopted resolution no. 339/13 to accept a deposit of 11,000 series MMP004100520 bonds issued by the Company
with the par value of PLN 100,000 each and issue code PLMLMDP00064 for them, with a reservation that the
bonds will be registered under a settlement instruction mentioned in § 11 sec. 6 of the Detailed Rules of
Operation of the National Depository for Securities.
In accordance with the Terms of the Bonds, funds raised on the Bond issue have been designated for repayment
of bonds issued by the Company on 13 May 2010 (series MMP1115), 29 April 2011 (series MMP0416) and
6 June 2012 (series MMP0617) and repayment of the loan contracted on 15 April 2011 with Powszechna Kasa
Oszczędnościowa Bank Polski S.A.
On 19 April 2013, the Management Boards of Multimedia Polska Infrastruktura Sp. z o.o., Stream Communications
Sp. z o.o. and Multimedia Polska–Południe S.A. adopted resolutions to extend an irrevocable and unconditional,
joint and several financial guarantee securing the repayment of debt under the aforementioned bonds issued by
the Company. Moreover, those companies, in accordance with the Terms of the Bonds, extended financial
guarantees that the value of the Company's and their own assets and EBITDA is equal to at least 90% of the
Group's assets and EBITDA.
The Company received, from the Management Board of BondSpot Spółka Akcyjna on 3 June 2013 and from the
Management Board of the Warsaw Stock Exchange on 4 June 2013, resolutions in the matter of introducing into
the Catalyst alternative trading system 10,380 series MMP004100520 bearer bonds of Multimedia Polska S.A. with
a par value of PLN 100,000 each and the total par value of PLN 1,038,000,000.
The first listing of 10,380 series MMP004100520 bearer bonds of the Company, designated by the National
Depository for Securities with the code PLMLMDP00064 in the alternative trading system Catalyst and for
purposes of listing the bonds in the continuous quotation system under an abbreviated name of MMP0520, was
scheduled for 7 June 2013.
Multimedia Polska S.A. secured the series MMP004100520 bonds with the code ISIN PLMLMDP00064 in favour of
the bondholders. In connection with the security established, the amended Terms of the Bonds were delivered to
the National Depository for Securities. In connection with the security, no other changes were made relating to the
exercise of rights under the bonds.
51
(PLN '000)
The bonds issued by the Company were secured with a registered pledge over shares in Multimedia PolskaPołudnie S.A. and Multimedia Polska Biznes S.A.
held by the Company and over shares in Stream
Communications Sp. z o.o. and Multimedia Polska Infrastruktura Sp. z o.o. held by the Company and with a
registered pledge on selected bank accounts of the Company and Multimedia Polska-Południe S.A. and a pledge
on the collection of Multimedia Polska S.A.'s assets and property rights.
The registered pledges will have priority equal to Registered Pledges securing the debt under the Credit Facilities
Agreement mentioned in note 32.
On 19 June 2015, Multimedia Polska Biznes S.A. issued a statement providing a guarantee for the payment of
obligations arising from the MMP004100520 series Bonds issued by the Company.
Two circumstances occurred on 30 October 2014:
- the guarantee for the obligations of our shareholder, M2 Investments Ltd., referred to in note 40.8.3 came into
effect; as the guarantee was given when the Financial Leverage Ratio on the Testing Date immediately preceding
the date of the planned action was above 3.50x, an Event of Default occurred on the Terms and Conditions of
Issue of Series MMP004100530 Bonds issued by the Company on 10 May 2013, and at the same time
- M2 Investments Ltd. repaid the entire facility to Alior Bank S.A.; hence, the Event of Default described above was
irrevocably removed.
As a result of the circumstances described above, no future possibility remains to provide any guarantee for
shareholder liabilities pursuant to the Terms and Conditions of Bond Issue and the Issuer shall cease to apply the
Adjustment Ratio when calculating the Consolidated Net Debt ratio.
52
(PLN '000)
34
Provisions
Changes in provisions
Provisions for liabilities
Other provisions
Total
As at 1 January 2015, including
981
386
1,367
Current
Non-current
Changes in 2015
Recognized during the financial year
Unused amounts reversed
As at 31 December 2015, including
981
-
50
336
1,031
336
95
881
195
24
6
405
119
887
600
195
-
47
358
242
358
Other provisions
Total
As at 1 January 2014, including
2,985
296
3,281
Current
Non-current
Changes in 2014
Recognized during the financial year
Unused amounts reversed
As at 31 December 2014, including
2,985
-
34
262
3,019
262
638
2,642
981
90
386
728
2,642
1,367
981
-
50
336
1,031
336
Current
Non-current
Current
Non-current
Provisions
Payroll provision
Property tax provision
Provisions for future liabilities
Other provisions
Disability pensions
Death grants
Total provisions
31 December 2015
31 December 2014
163
32
195
152
829
981
170
19
216
405
161
19
206
386
600
1,367
53
(PLN '000)
35
35.1
Trade and other payables, accruals
Trade and other payables (current)
Trade payables
Liabilities related to tax, duty,
social security and other benefits:
Value added tax
Withholding tax
Personal income tax
Real estate tax
Other
Other current liabilities:
Remuneration payable to employees
Investment commitments towards related parties
Investment commitments towards other parties
Liabilities under purchase of non-current financial asset
Other liabilities
Total trade payables and other liabilities
31 December 2015
31 December 2014
28,640
38,499
4,512
594
738
46
1,515
7,405
15,255
227
661
78
1,286
17,507
134
469
61,129
115
61,847
100
245
20,408
70,814*
91,567
97,892
147,573
*As at 31 December 2014, under the item of Other liabilities, the liability is presented towards the shareholders resulting from the dividend, of
which amounted to PLN 70,723 thousand
Payment terms applicable to these financial liabilities are:
• Trade payables do not bear interest and are, as a rule, settled on a 14-day basis,
• Other liabilities do not bear interest, and their average payment period is one month.
The amount resulting from the difference between VAT receivable and VAT payable is paid to the relevant tax
authorities on a monthly or quarterly basis.
35.2
Accruals
Accrued expenses related to:
Unused annual leave and bonuses
Commissions
Copyrights and programming costs
Other expenses
Total
31 December 2015
620
1
14,978
6,976
22,575
31 December 2014
409
34
14,549
4,775
19,767
Deferred revenue:
31 December 2015
31 December 2014
641
641
752
752
Current:
Grants received
Deferred income
Other
4,923
111
4,677
135
5,368
110
5,258
-
Total
5,564
6,120
Non-current:
Grants received
54
(PLN '000)
36
Non-current
Current
Total liabilities under issued securities
31 December 2015
986,834
50,901
1,037,735
31 December 2014
983,398
52,132
1,035,530
As at 31 December 2015 and as at 31 December 2014, liabilities under the issued securities related to the bearer
bonds issued by the Company (note 33).
37
Contingent liabilities
The Group is a party to lease agreements and a part of the leases are secured with blank promissory notes.
In 2015, the leases pertain to vehicles. In conformance with the bill of exchange declarations, the value of the bills
is equal to contingent liabilities in the amount of lease amounts to be paid, increased by interest, based on any
possible delays in payments, and other costs arising from lease agreements. Detailed information about finance
leases is given in note 20.
The Group is also a party to several real estate tax collection proceedings carried out by Municipal Offices, and
pending before Local Government Boards of Appeals and Provincial Administrative Courts. After consultations
with lawyers, the Management Board believes that the risk of an additional tax assessment to the Group is not
material; however, as at the date of these financial statements the above proceedings are still pending and their
final outcome is uncertain. Currently, there can be no assurance that new real estate tax proceedings will not be
instigated against the Group companies and that the Group companies will not be required to pay additional tax
together with interest.
The Group has recognized provisions for its potential tax liabilities. As at 31 December 2015 provisions for
potential tax liabilities amounted to PLN 163 thousand and as at 31 December 2014, provisions for potential tax
liabilities amounted to PLN 152 thousand.
37.1
Legal claims
Cases in which the Company (or any other companies within the Group) is (or can be) the defendant:
As at 31 December 2015, we and our subsidiaries are involved in a number of legal proceedings (including
proceedings conducted by the President of the Office of Competition and Consumer Protection and the President
of the Office of Electronic Communications), that have arisen during the ordinary course of our business. However,
in the opinion of the Management Board shall not have any major adverse impact on the Group’s operations and
financial condition. We note that the outcome of legal proceedings can be extremely difficult to predict with any
certainty, and therefore we cannot assure you that any such proceedings will be resolved in our favour.
On 30 December 2015, the President of the Office of Competition and Consumer Protection issued a decision in
which he accused the Company of practices that infringed collective consumer interests that were evident in the
Company’s offering, according to the Office. The President imposed a fine on the Company in the total amount of
PLN 4,810,521 and other expenditures required to remove the consequences of the alleged infringement. The
Company challenged the decision in its entirety as unfair and lacking proper legal grounds because the Company
considers its actions to be completely compliant with the law.
In the opinion of the Company the decision of the President of the Office of Competition and Consumer
Protection was issued in breach of not only the law on competition and consumer protection as well as the law on
freedom of economic activity and the President of the Office of Competition and Consumer Protection issuing the
contested decision went beyond his statutory powers. Therefore the Company expects a favorable resolution of
the dispute at the stage of judicial review.
There are several court proceedings initiated by T-Mobile Polska S.A. and OPL S.A. concerning an appeal against
the decision of the President of the UKE regarding the changes in the rates under the contract between each of
the plaintiffs (T-Mobile Polska S.A and OPL S.A.) and Multimedia Polska S.A. In these proceedings, Multimedia
Polska S.A. has the status of an interested party. These matters (appeals of T-Mobile Polska S.A. and OPL S.A.
55
(PLN '000)
against the decision of the President of the UKE regarding the changes in the rates under the contracts with
Multimedia Polska S.A.) are regulatory in nature and therefore the value of the dispute is not specified. However,
there can be no assurance as to whether the final ruling setting aside or altering decisions of the President of the
UKE in each case will not result in the filing of separate financial claims.
37.2
Tax settlements
Tax settlements, together with other areas of legal compliance (such as customs or foreign exchange law) are
subject to review and investigation by a number of authorities, which are entitled to impose severe penalties. The
lack of reference to well established legal regulations in Poland results in lack of clarity and integrity in the
regulations. Frequently contradictions in legal interpretations both within government bodies and between
government authorities and companies, create uncertainties and conflicts. These facts create tax risks in Poland is
significantly higher than those typically found in countries with more developed tax systems.
The Group enters into economically justified contracts with its employees and with related parties (note 40). The
Group's tax settlements (VAT, CIT, PIT, real estate tax, social security) may be inspected within up to five years
from the end of the year in which the final tax was paid (except for VAT, in the case of which the five-year period
starts on the return submission date). As a result of such inspections, some transactions concluded by the
Company in the period, including transactions within the Multimedia Polska Group and between the Company
and its employees, may be questioned by the relevant tax authorities while the Company’s tax settlements
hitherto reported in the financial statements may be increased by additional tax liabilities. The Company believes
that as at 31 December 2015 adequate provisions have been recorded for known and quantifiable tax risks.
However, as a result of future inspections, the amounts disclosed in the financial statements may be increased in
future reporting periods following final assessment of tax liabilities by competent authorities.
37.3
Waste electrical and electronic equipment
Most of the provisions of the Act on Waste Electrical and Electronic Equipment (“WEEE”) became effective as of 21
October 2005. These provisions obligate the manufacturers and importers of electric and electronic equipment
(“EEE”) to organise and finance the collection from the collection points, processing, recovery, including recycling,
and neutralisation of WEEE. As of 1 January 2008, EEE manufacturers are required to ensure that used EEE is
collected from households.
In order to estimate its obligations arising from past events, the Group has to have the following data: quantities
in terms of kilograms of old WEEE to be collected by the Group and remaining quantities of new WEEE to be
collected by the Group. In the reports required by the Ministry of Environment, distinction between new and
historical WEEE is not made.
Therefore, given the design of the collection and collection reporting system, the Group is not able to evaluate the
quantities of electronic equipment, which are to be collected by the Group to fulfil its obligation resulting from the
act on waste electric and electronic equipment.
Given the above, the Group did not make any provision for the obligation to collect historical or new WEEE.
The Group will reassess its standpoint following new interpretation(s) of the law or actual operation of the
reporting system that would allow for a calculation of the obligation.
37.4
Universal service
Pursuant to the Telecommunication Law, the obligation to provide a universal service rests with the operator
designated by the President of UKE in a decision issued following a completed tender procedure. The President of
UKE has designated Orange Polska S.A. (OPL S.A.) as the universal service provider until 8 May 2011. After that
date, no other operator has been appointed to provide the service. All telecommunication operators whose
revenues from telecommunication operations have exceeded PLN 4,000 thousand are required to participate in
financing of the universal service obligation.
In May 2011, the Regulator (the President of UKE) issued a decision on granting of a subsidy for the costs of
universal service obligation (USO) incurred by the OPL S.A. Group in 2006-2009 in the total amount
of PLN 67 million. On 10 January 2012 the President of UKE issued a decision on granting of a subsidy for the costs
of universal service obligation incurred by the OPL S.A. Group in 2010 in the amount of PLN 55,102 thousand.
56
(PLN '000)
The aggregate amount to be paid by telecommunication operators for the provision of universal service
in 2006–2010 was set at about PLN 122 million. After appealing against the decisions by OPL S.A, the President of
UKE upheld in force the decisions on granting of subsidies for 2006 -2010.
On 20 September 2013, after re-examination of the case, the President of UKE issued a decision on granting of a
subsidy for the costs of universal service obligation incurred by the OPL S.A. for the period from 1 January 2011 to
8 May 2011 in the total amount of PLN 14,903 thousand. OPL S.A. appealed against the President of UKE’s
decisions regarding the granting of subsidies for 2006 -2010 to the Provincial Administrative Court (WSA). WSA
dismissed the complaints of OPL S.A. OPL S.A brought up cassation complaints against the aforementioned
decisions to the Supreme Administrative Court of Poland (NSA). On 5 December 2013, NSA set aside the
judgments of WSA dismissing complaints of OPL S.A. concerning subsidies to the universal service for 2006 2007. NSA transferred the case for reconsideration to WSA. On 13 May 2014, NSA set aside the judgments of WSA
dismissing complaints of OPL S.A. concerning subsidies to the universal service for 2008 - 2009. NSA transferred
the case for reconsideration to WSA. On 17 July 2014, WSA overruled a contested decision of the President of UKE
for 2006 and 2007. On 7 January 2015 WSA overruled the contested decisions of the President of UKE for 2008
and 2009. OPL, KIGEiT and the President of UKE brought cassation complaints regarding all judgments for 20062009. The cases will be reconsidered by NSA. On 2 October 2014, NSA set aside the judgments of WSA dismissing
complaints of OPL S.A. concerning subsidies to the universal service for 2010. NSA transferred the case for
reconsideration to WSA. On 16 December 2015, WSA overruled the contested decision. The deadline for lodging a
cassation complaint has not yet expired. On 21 October 2013, National Chamber of Commerce for Electronics and
Telecommunications (KIGEiT) and OPL S.A. filed to WSA a complaint against decision regarding the granting of
subsidies for 2011. On 17 September 2014, WSA overruled a contested decision. OPL S.A., KIGEiT and the
President of UKE brought the cassation complaints.
As a telecommunication operators, Multimedia Polska S.A. and Multimedia Polska-Południe S.A. are required to
co-finance the subsidising of universal services for OPL S.A.
On 20 March 2014, the President of UKE issued a decision on defining the rate of participation in subsidising of
universal services in 2006. The rate amounted to 0.0018992546% of revenues for 2006. After reconsideration of
the motion, the rate was set at 0.0018499671% of revenues for 2006. The proceedings concerning defining the
rate of participation in subsidising of universal services for 2007-2011 are taking place before the President of
UKE. At the moment, it is difficult to determine the date of the decision defining the rate of participation in
subsidising of universal services for 2007-2011.
The emergence of obligation to pay by each operator (including Multimedia Polska S.A and Multimedia PolskaPołudnie S.A.) took place after the issue of individual decisions. On 27 April 2015, the President of UKE issued the
individual decisions (regarding Multimedia Polska S.A. and Multimedia Polska – Południe S.A.) determining the
amount of subsidies to the universal service for 2006 . The President of UKE determined the subsidies to the
universal service for 2006 in the amount of PLN 6 thousand regarding Multimedia Polska S.A. and determined the
subsidies to the universal service for 2006 in the amount of PLN 1.6 thousand regarding Multimedia PolskaPołudnie S.A. Multimedia Polska S.A. and Multimedia Polska – Południe S.A paid the subsidies regarding the
individual decisions of The President of UKE. The Management Board is not able to insure that, despite the
payments, the subsides will not be higher.
Next individual decisions can be expected for particular operators concerning additional payments for the years
2007-2011. At this stage, sending decisions on extension of issuing particular decisions (defining the rate for
individual years) are in progress.
The Management Board believes that, before the list of operators obliged to make payments is determined and
proceedings for payment of subsidy are initiated, all the estimates and the amount of possible provisions must be
set arbitrarily. On this basis, the Group created a provision for USO subsidies for 2007 of PLN 71 thousand.
The issue of subsidies for the subsequent years is so doubtful and spread in time that currently it does not require
any provisions.
57
(PLN '000)
38
Investment commitments
As at 31 December 2015, the Group undertook to incur expenditures for property, plant and equipment and
intangible assets in the amount of PLN 28,608 thousand (31 December 2014: PLN 29,728 thousand).
39
Reconciliation of differences between changes in certain items of the balance
sheet and the cash flow statement
Liabilities
Change in current liabilities in the balance sheet
- change in liabilities under bank borrowings, ,swap contracts, finance
leases, financing agreements, and bonds
- change in investment liabilities, acquisition of shares and other longterm financial assets
- change in non-current liabilities
- change in income tax liabilities
- change in dividend liabilities
- change in deferred income, accruals and provisions
- change in liabilities under purchase of subsidiary/shares
Change in liabilities in cash flow statement
Receivables
Change in current receivables in the balance sheet
- change in investment receivables
- change in income tax receivables
- change in non-current receivables
- change in receivables under purchase of subsidiary
- change in receivables under purchase of financial assets and sale of
shares
Change in receivables in cash flow statement
Year ended
31 December 2015
(45,168)
Year ended
31 December 2014
10,830
(1,875)
15,854
(35,021)
(1,064)
70,723
(1,574)
(802)
(14,781)
8,175
(1,415)
(70,723)
12,983
23,451
(845)
Year ended
31 December 2015
5,608
90
(5,159)
269
(935)
Year ended
31 December 2014
15,011
(72)
(4,673)
299
-
4,210
4,083
5,314
15,879
Year ended
31 December 2015
Year ended
31 December 2014
Change in short-term accruals and deferrals
(3,197)
10,560
- change in long-term accruals and deferrals
129
(76)
- change in deferred income
556
595
- change in accruals and deferrals under purchase of subsidiary
181
-
472
(1,844)
(1,859)
9,235
Accruals and deferrals
- commission paid on the loan
Change in accruals and deferrals in the cash flow statement
58
(PLN '000)
40
40.1
Related party disclosures
Entity with significant influence over the Group
M2 Investments Limited holds 51.93% of ordinary shares in the share capital of Multimedia Polska S.A. M2
Investments Limited is a company in which Messrs. Tomek Ulatowski and Ygal Ozechov, Co-Chairmen of the
Supervisory Board of the Multimedia Polska S.A., together with related parties have an indirect 50% interest each
and have influence on decision-making. M2 Investments Limited is a subsidiary of YTD LLC of Wilmington, US, in
which the Co-Chairmen of the Supervisory Board of the Multimedia Polska S.A. together with related parties have
a 100% interest and through it have an influence on decision-making in the acquiring entity.
Emerging Ventures (EVL) Limited of Nicosia, the Republic of Cyprus, holds indirectly, through its subsidiary Tri
Media Holdings Ltd, a 46.49 % interest in Multimedia’s share capital.
40.2
Company shares held by Members of the Management and Supervisory Board
On 20 March 2014, Kalberri Limited contributed to Tri Media Holdings Ltd. all of its shares in the Company's share
capital in exchange for shares in the share capital of Tri Media Holdings Ltd. On the day of these financial
statements, Mr. Andrzej Rogowski is the ultimate actual owner of Kalberri Limited.
To the best of the Company’s knowledge, the President of the Management Board does not hold shares in any of
the subsidiaries of the Group.
In the period from 1 January 2015 to 31 December 2015, the shareholding of the President of the Management
Board of Multimedia Polska S.A. remained unchanged.
As at 31 December 2014, the following members of the Parent's Supervisory Board held shares in Multimedia
Polska S.A.:
•
Tomek Ulatowski – indirectly through an American company YTD, LLC, with registered office in
Wilmington, Delaware, USA, in which Mr. Tomek Ulatowski and related entities have a 50% interest, and
which has a 100% interest in M2 Investments Limited with registered office in Nicosia, Cyprus, which
holds 47,654,722 Multimedia Polska S.A. shares.
•
Ygal Ozechov – indirectly through YTD, LLC with registered office in Wilmington, Delaware, USA, in which
Mr. Ygal Ozechow and related entities have a 50% interest, and which has a 100% interest in M2
Investments Limited with registered office in Nicosia, Cyprus, which holds 47,654,722 Multimedia Polska
S.A. shares.
To the best of the Company’s knowledge, no Supervisory Board member holds shares in any subsidiaries of
Multimedia Polska S.A.
In the period from 1 January 2015 to 31 December 2015, the number of shares held by Ygal Ozechov and Tomek
Ulatowski, Co-Chairmen of the Supervisory Board of Multimedia Polska S.A., remained unchanged.
40.3
Dividends paid and declared
On 26 June 2014, the Annual General Meeting of Multimedia Polska S.A adopted resolution no. 9 on the allocation
of profit earned by the Company in 2013. The Annual General Meeting resolved to allocate PLN 70,723 thousand
of the profit to dividend payment, subject to the limitations resulting from the Company’s credit facility agreement
and the terms and conditions of bond issue. The remaining portion of the profit of PLN 179,132 thousand was
on 26 June 2014 and the dividend date on 10 October 2014.
Due to the limitations resulting from the Company’s credit facility agreement and the terms and conditions of the
bond issue, dividend hasn’t been paid. However, on 17 December 2014, the Company’s Extraordinary General
Meeting resolved to change the dividend date and set a new dividend date on 7 January 2015. The dividend was
paid in the fixed date.
59
(PLN '000)
on 17 March 2015 and the dividend date on 18 March 2015. The dividend was paid in the fixed date.
40.4
Loans granted to Management and Supervisory Board Members
In 2011, the Group granted a loan of PLN 2,950 thousand to a Supervisory Board Member on an arm's length
basis. In 2015, the Group did not granted any loans to Supervisory Board Members.
In 2011-2015, the Group granted loans to the Management Board Member in the total amount of
PLN 9,050 thousand, on an arm's length basis. In 2015, the Management Board Member repaid the loan and the
interest in the amount of PLN 652 thousand.
The table below presents outstanding debt balances under the foregoing loan agreements (with interest) granted
by the Group to Management and Supervisory Board Members:
Borrower
Andrzej Rogowski
Tomek Ulatowski
31 December 2015
31 December 2014
9,865
3,864
9,409
3,693
The table below presents the nominal value of interest accrued on the loans granted by the Group to
Management and Supervisory Board Members pursuant to the loan agreements described above:
Borrower
Andrzej Rogowski
Tomek Ulatowski
40.5
31 December 2015
31 December 2014
1,465
914
1,009
743
Other transactions with Management Board and Supervisory Board Members
In 2015 and 2014, there were no other significant transactions with Management Board Members and Supervisory
Board Members.
40.6
Compensation of Management Board and Supervisory Board Members of the Group
Compensation paid or due to members of the Management and Supervisory Boards was as follows:
Management Board*
Supervisory Board
Total
Year ended
31 December 2015
4,408
3,945
8,353
Year ended
31 December 2014
4,010
3,400
7,410
* President’s remuneration is paid under a managerial contract executed with Aris Andrzej Rogowski.
40.7
Participation of Management Board Members in the employee share ownership plan
The Group runs an incentive plan for the management board members. Details are provided in Note 26.1.
40.8
Transactions with related parties
The table below presents:
- the statement of transactions with IT Multimedia Polska Spółka Akcyjna Sp.K. primarily which is part of
settlements under lease agreements, IT systems implementation agreements, IT hardware maintenance and sale
agreements and trademark licensing agreements,
60
(PLN '000)
- the data regarding a transaction with MediaMocni Sp. z o.o. primarily under promotion and advertising service
agreements.
- the data regarding a transaction with related party - Comfortime Invest Sp. z o.o. primarily under guarantee
agreement (note 40.8.3),
- the data regarding transactions with related parties under other agreements,
Sales to related
parties
12 months ended
31 December 2015
Purchases from
related parties
12 months ended
31 December 2015
Receivables from
related parties
Payables to related
parties
31 December 2015
31 December 2015
858
36
25
9,368
4,042
1
-
170
4
91
618
166
-
Sales to related
parties
12 months ended
31 December 2014
Purchases from
related parties
12 months ended
31 December 2014
Receivables from
related parties
Payables to related
parties
31 December 2014
31 December 2014
884
1
36
-
8,475
10,731
32
-
167
1
66
4
1
450
14
2
-
IT Multimedia Polska Spółka Akcyjna
Sp. K.
MediaMocni Sp. z o.o.
Comfortime Sp. z o.o.
Comfortime Invest Sp. z o.o.
IT Multimedia Polska Spółka Akcyjna
Sp. K.
MediaMocni Sp. z o.o.
Comfortime Invest Sp. z o.o.
Comfortime Sp. z o.o.
Dunaville Trading Limited
40.8.1 Loans granted to related parties
On 25 November 2013, the Group granted a loan of PLN 500 thousand to IT Multimedia Polska Spółka Akcyjna
Sp. K. The final repayment date for a loan principal and interest is 31 December 2015.
On 29 December 2015, under Annex 1 to the above agreement, the parties extended the repayment date of the
loan principal and interest till 31 December 2016. Other provisions of the Agreement remained unchanged.
The table below presents outstanding debt balances under the foregoing loan agreement (with interest) granted
by the Company to a related party IT Multimedia Polska Spółka Akcyjna Sp. K.:
Borrower
IT Multimedia Polska Spółka Akcyjna Sp.K.
549
528
The table below presents the nominal value of interest accrued on the loan granted by the Group to IT Multimedia
Polska Spółka Akcyjna Sp. K. pursuant to the loan agreement described above:
Borrower
IT Multimedia Polska Spółka Akcyjna Sp.K.
49
28
In 2010, the Group granted a loan of PLN 7,500 thousand on an arm's length basis to Comfortime
Polska Sp. z o.o., which is a related party. In 2011, the Group granted loans of PLN 2,500 thousand,
PLN 130 thousand, PLN 185 thousand and PLN 185 thousand on an arm's length basis to, respectively:
Comfortime Polska Sp. z o.o., Comfortime Baltica Sp. z o.o., Comfortime Łódź Sp. z o.o. and Comfortime BielskoBiała Sp. z o.o., which are its related parties. As of 31 December 2015 Comfortime Polska Sp. z o.o. repaid
PLN 8,000 thousand of loan amount.
61
(PLN '000)
The table below shows outstanding debt balances under the aforementioned loan agreements (with interest)
granted by the Group to its related parties:
Borrower
Comfortime Polska Sp. z o.o.
Comfortime Baltica Sp. z o.o.
Comfortime Łódź Sp. z o.o.
Comfortime Bielsko-Biała Sp. z o.o.
31 December 2015
31 December 2014
5,756
183
260
260
5,443
173
246
246
The table below presents the nominal value of interest accrued on the loans granted by the Group to its related
parties pursuant to the loan agreements described above:
Borrower
Comfortime Polska Sp. z o.o.
- of which capitalized
Comfortime Baltica Sp. z o.o.
Comfortime Łódź Sp. z o.o.
Comfortime Bielsko-Biała Sp. z o.o.
31 December 2015
31 December 2014
3,756
3,756
53
53
75
75
75
75
3,443
3,443
43
43
61
61
61
61
The table below shows outstanding debt balances under the loan agreements (with interest) granted by the Group
to its key management personnel:
Borrower
Key management personnel
31 December 2015
31 December 2014
3,380
795
The table below presents the nominal value of interest accrued on the loans granted by the Group to its key
management personnel:
Borrower
Key management personnel
31 December 2015
31 December 2014
239
154
40.8.2 Bonds issued by related parties
On 22 December 2009, Multimedia Polska S.A. acquired a bond with a par value of PLN 150 million, maturing
on 31 December 2015, from Tri Media Holdings Limited of Cyprus, the owner on that date of 16.85% interest
in Multimedia Polska S.A.’s share capital, representing the same voting interest at the Company’s General Meeting.
The bond acquisition price was PLN 137.2 million. The purpose of the acquisition of the bond by the Company
was to temporarily invest the funds obtained under the credit facility agreement dated 7 December 2009.
On 1 December 2014, the Company’s shareholder, Tri Media Holdings Ltd, repurchased its bond issued on
22 December 2009 for a total consideration of PLN 190,925 thousand (nominal value plus interest), which cleared
all outstanding liabilities of majority shareholders towards the Company.
40.8.3 Financial guarantees to secure obligations of related parties
On 20 April 2012, Multimedia Polska S.A. issued a financial guarantee for an amount of up to PLN 8,250 thousand
irrevocable in the period until 31 October 2014, to a holder of bonds issued by Comfortime Invest Sp. z o.o.
covering the liabilities of Comfortime Invest Sp. z o.o. under the secured bearer bonds issued by that company.
Duration period of the financial guarantee agreement was primary set on 31 October 2014 but finally was
postponed till 30 June 2015, however, the guarantee expired on 19 January 2015.
Multimedia Polska S.A. concluded a guarantee agreement with Multimedia Polska Energia Sp. z o.o. under which
the Company guaranteed to satisfy the claims of all parties who concluded electricity sale agreements,
transmission service or electricity distribution agreements or comprehensive agreements during the term of the
62
(PLN '000)
guarantee agreement. The guarantee agreement covers the liabilities of Multimedia Polska Energia Sp. z o.o. up to
On 12 March 2014, the Company, as guarantor, entered into a guarantee agreement with Alior Bank S.A. as
creditor in respect of obligations of M2 Investments under the investment credit facility agreement dated
28 September 2012, as amended, between M2 Investments as borrower and Alior Bank S.A. as lender. The date on
which the guarantee was to enter into force was originally set on 1 October 2014 but was later amended to 30
October 2014. If the guarantee entered into force, it would cover obligations of M2 Investments under the loan in
the amount of PLN 110 million. As of the date of the guarantee agreement, the outstanding amount of the loan
was PLN 103 million. The Company issued a statement on submission to enforcement of up to PLN 165 million as
security for the claims of Alior Bank S.A. under the guarantee agreement. M2 Investments Ltd repaid the entire
facility to Alior Bank S.A. on 30 October 2014.
On 30 October 2014, the guarantee for the obligations of our shareholder, M2 Investments Ltd. (described above)
came into effect. The guarantee expired on the same day regarding the fact that M2 Investments Ltd. repaid the
entire credit facility to Alior Bank S.A.
As a result of the circumstances described above, no future possibility remains to provide any guarantee for
shareholder liabilities pursuant to the terms and conditions of issue.
41
Remuneration of certified auditor or entity qualified to audit financial statements
Fees paid or payable to the audit company for the years ended 31 December 2015 and 31 December 2014, broken
down into types of services were as follows:
Type of services
Statutory audit of the Parent's standalone financial statements and
consolidated financial statements*
Other attest services
Other services*
Obligatory audit of financial statements of subsidiaries*
Total
Year ended
31 December 2015
Year ended
31 December 2014
420
190
610
320
1,280
160
1,760
* refers to Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością Sp.k.,
42
Financial risk management objectives and policies
Apart from derivative instruments, the primary financial instruments used by the Group include bank loans and
borrowings, bonds, financing agreements, finance leases, cash and bank deposits. The primary purpose of these
financial instruments is to raise finance for the operations of the Group. The Group also has various other financial
instruments, such as trade receivables and payables, which arise directly from the Group’s activities.
The Group also contracts derivative transactions, principally IRS contracts (interest rate swaps). The purpose of
these transactions is to manage interest rate risk arising from the Group's operations and its sources of finance.
It is, and has been throughout the year under review, the Group's policy that no trading in financial instruments
shall be undertaken.
The primary types of risk arising from the Group’s financial instruments include interest rate risk, liquidity risk,
foreign exchange risk and credit risk. The Management Board verifies and establishes rules for managing each of
these types of risk; the rules are briefly discussed below. The Group’s accounting policies pertaining to derivative
instruments are described in Note 12.11.
The Group does not hold significant cash amounts in foreign currencies. Cash surplus is put on bank deposits. The
conditions and interest rates are individually negotiated and they are based on fixed interest rates.
42.1
Interest rate risk
The Group's exposure to the risk related to interest rate fluctuations arises primarily in connection with noncurrent financial liabilities under the bank loan facility (for details on this liability, see Note 32) and issued bonds
63
(PLN '000)
(described in Note 33). The Group also granted loans to related parties and members of its management board
and supervisory board (note 40.4).
The Group's policy is to manage its interest expenses using a combination of fixed and variable rate debt.
The terms of the above-mentioned transactions are based on 3M, 6M and 1Y WIBOR plus margin, and as at
31 December 2015 these transactions were not hedged by any other financial instruments.
Any gains and losses on these transactions are recognised through profit or loss as the Group does not use hedge
accounting.
According to the Management Board, in the current macroeconomic situation the market expects interest rates to
decrease. The probability of an increase is much lower than the probability of an interest rates decrease. Hence,
the sensitivity analysis is prepared on asymmetrical assumptions of changes in the interest rates.
The Management Board believes that the most likely scenario is a 12bp interest rate decrease for 3M WIBOR and
6M WIBOR and a 11bp interest rate decrease for 12M WIBOR and predicts a PLN 1,607 thousand decrease in the
debt service cost and a PLN 21 thousand decrease in interest income, as presented in the tables below:
Analysis of sensitivity of the term credit facility to interest rate changes (based on 3M WIBOR) during a 12-month
period:
Hedged amount
Hedge duration
Unhedged amount
Current
+50 bp
- 100 bp
Expected
301,285
WIBOR 3M
1.72
2.22
0.72
1.60
Finance expenses during the year
5,182
6,689
2,169
4,821
Analysis of sensitivity of the issued bonds to interest rate changes (based on 6M WIBOR) during a 12-month period:
Hedged amount
Hedge duration
Unhedged amount
Current
+50 bp
- 100 bp
Expected
1,038,000
WIBOR 6M
1.77
2.27
0.77
1.65
Finance expenses during the year
18,373
23,563
7,993
17,127
Analysis of sensitivity of the granted loans to interest rate changes (based on 6M WIBOR) during a 12-month period:
Hedged amount
Hedge duration
Unhedged amount
Current
+50 bp
- 100 bp
Expected
11,959
WIBOR 6M
1.77
2.27
0.77
1.65
Finance income during the year
212
271
92
197
64
(PLN '000)
Analysis of sensitivity of the granted loans to interest rate changes (based on 3M WIBOR) during a 12-month period:
Hedged amount
Hedge duration
Unhedged amount
Current
+50 bp
- 100 bp
Expected
1,500
WIBOR 3M
1.72
2.22
0.72
1.60
26
33
11
24
Analysis of sensitivity of the granted loans to interest rate changes (based on 1Y WIBOR) during a 12-month period
Hedged amount
Hedge duration
Unhedged amount
Current
+50 bp
- 100 bp
Expected
4,850
WIBOR 1Y
1.79
2.29
0.79
1.68
87
111
38
81
The above analysis shows the value of the cost and income which would be recognised in the income statement
assuming interest at an appropriate rate of WIBOR and if the assumed changes in the interest rates occurred.
Below is presented the potential effect of the interest rate changes on net profit/loss, calculated as the difference
between the cost and income that would be recognised in the income statement if the assumed changes in the
interest rate occurred and the cost and income that would be recognised in the income statement if the interest
rate remained at the present level.
Change
+50 bp
- 100 bp
Expected
Change
+50 bp
- 100 bp
Expected
Change
+50 bp
- 100 bp
Expected
3M WIBOR
2.22
0.72
1.60
6M WIBOR
2.27
0.77
1.65
1Y WIBOR
2.29
0.79
1.68
Influence of interest rate change
on annual net profit/loss
(1,499)
2,998
360
(5,130)
10,260
1,231
24
(49)
(5)
65
(PLN '000)
The following table sets out the carrying amounts, by maturity, of the Group's financial instruments that are
exposed to interest rate risk:
Fixed rate
Other short-term investments
Floating rate
Bank overdrafts
Bank loans
Purchased non-current securities
Liabilities under securities issued
Loans granted
Fixed rate
Floating rate
Bank overdrafts
Bank loans
Liabilities under securities issued
Loans granted
within 1 year
1-5 years
above 5 years
Total
170,365
-
-
170,365
12,388
2,052
50,901
17,045
285,304
1,596
986,834
7,261
203
297,692
3,648
1,037,735
24,509
within 1 year
1-5 years
above 5 years
Total
100,192
-
-
100,192
9,673
1,661
52,132
7,420
193,249
1,475
784,072
13,289
13,783
199,326
-
216,705
3,136
1,035,530
20,709
Cash surplus is put on bank deposit. The conditions and interest rates are individually negotiated and they are
based on fixed interest rates.
The interest rates on financial instruments with variable interest are updated at intervals of less than one year.
Interest on financial instruments with a fixed interest rate is constant during their entire term, until maturity.
42.2
Foreign currency risk
The Group believes that there is certain currency exposure connected with transactions in foreign currencies.
However, it accepts the fluctuations disclosed in the sensitivity analysis provided below. The Group has no foreign
currency instruments, other than liabilities in foreign currencies. The Group does not hold significant cash amounts
on currency bank accounts. Foreign currency exposure arises when transactions are executed in currencies other
than the currency of valuation.
The balances of foreign currency liabilities are presented in the following table.
31 December 2015
31 December 2014
Average rate of exchange
USD
EUR
GBP
3.9011
4.2615
5.7862
3.5072
4.2623
5.4648
USD
EUR
GBP
616
170
(12)
(3,690)
(664)
12
USD
EUR
GBP
3,815
1,847
-
3,199
1,676
12
Year turnover of liabilities
Balance at
66
(PLN '000)
Year turnover of receivables
USD
EUR
GBP
61
101
-
(640)
176
-
USD
EUR
GBP
296
331
-
235
231
-
Balance at
The sensitivity analysis of gross profit and loss to possible, and recognised by the Management Board as
acceptable, fluctuations in USD and EUR exchange rates are presented in the following table. The Group does not
hold financial instruments with a valuation recognised in other comprehensive income.
In analysing foreign exchange risks, the Management Board used the forecasts of the Group’s bank (Raiffeisen
Polbank, Pekao S.A.) pertaining to changes in the USD, EUR and GBP exchange rates. For the purposes of the
analysis, the Management Board assumed that the zloty will weaken to PLN 4 against the USD, and the zloty will
strengthen to PLN 4.20 against the EUR and 5.80 against the GBP, i.e. respectively by -2.54%, 1.44 % and -0.24%.
On the basis of the above-mentioned forecasts and assumptions, the Management Board presents the foreign
exchange impact on annual profit or loss.
31 December 2015
Sensitivity analysis of USD
Effect on net profit or loss
-2.54%
Sensitivity analysis of EUR
Effect on net profit or loss
1.44%
42.3
(348)
94
Credit risk
It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification
procedures. In addition, receivables are monitored on an ongoing basis, and as a result the Group's exposure to
bad debts is not significant.
With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash
equivalents, bonds, and certain derivative instruments, the Group's exposure to credit risk arises from default of
the counter party, with a maximum exposure equal to the carrying amount of these instruments.
There are no significant concentrations of credit risk within the Group.
The table below presents trade receivables which were past due but not classified as uncollectible as at
31 December 2015 and 31 December 2014:
Total
31 December 2015
31 December 2014
42.4
61,753
62,993
Not past due
38,552
33,029
<30 days
5,962
12,193
30–60
days
1,887
2,393
Past due, but collectible
60–90
90–180
180–360
days
days
days
1,532
2,192
2,692
899
2,146
4,547
>360 days
8,936
7,786
Liquidity risk
Risk of losing operating cash flows is under permanent control of the Group. The Group uses periodical cash-flow
planning which takes into account maturity days of deposits and predicted future cash flows which come from
operating activity.
The Group's objective is to maintain both continuity and flexibility of funding through the use of various sources of
financing, such as bank overdrafts, bank borrowings, debt securities in issue, sale and leaseback, finance leases and
67
(PLN '000)
hire purchase contracts. The Group monitors maturity dates of its liabilities, the debt radio, as well as interest and
debt service ratios.
Below is presented the value of Group's financial liabilities by maturity, based on contractual undiscounted
payments:
Liabilities as at 31 December 2015
Within 1 year
1 – 5 years
above 5 years
Total
bank borrowings
debt securities in issue
finance leases and financing agreements
overdraft facility
Total liabilities under bank borrowings, loans, finance
leases , financing agreements and debt securities in
issue
12,749
52,563
2,182
-
329,600
1,142,658
1,651
-
-
342,349
1,195,221
3,833
-
67,494
1,473,909
-
1,541,403
Trade and other payables (excluding accounts payable
to the state and local budgets)
90,487
-
-
90,487
above 5 years
Total
Liabilities as at 31 December 2014
Within 1 year
1 – 5 years
bank borrowings
debt securities in issue
finance leases and financing agreements
overdraft facility
Total liabilities under bank borrowings, loans, finance
leases , financing agreements and debt securities in
issue
9,967
53,872
1,726
-
225,178
933,364
1,479
-
17,755
266,216
-
252,900
1,253,452
3,205
-
65,565
1,160,021
283,971
1,509,557
Trade and other payables (excluding accounts payable
to the state and local budgets)
130,066
-
-
130,066
Liabilities under guarantees are described in note 40.8.3 Financial guarantees extended to secure obligations of
related parties.
The Group analyses liquidity on an ongoing basis. In the Management Board’s view, there is no risk of the Group
losing liquidity. As at 31 December 2015 and as at 31 December 2014, the Group had no overdrafts (Note 32).
43
Carrying value and fair value of financial instruments
The table below presents a breakdown of the Group's financial instruments and a comparison of their carrying and
fair values:
Carrying amount
as at
31 December 2015
888
117,395
52,955
Fair value
as at
31 December 2015
888
117,395
52,955
Liabilities under bank loans
Overdraft
297,692
-
297,692
-
3,648
3,648
Liabilities under financing agreements
Lease liabilities
Classification
Loans and receivables
Financial liabilities carried at
amortised cost
amortised cost
-
68
(PLN '000)
Loans granted
90,487
24,509
90,487
24,509
1,037,735
170,365
1,045,733
170,365
Carrying amount
as at
31 December 2014
619
200,262
56,534
Fair value
as at
31 December 2014
619
200,262
56,534
Liabilities under bank loans
Overdraft
216,705
-
216,705
-
3,136
3,136
130,066
20,709
130,066
20,709
1,035,530
100,192
1,038,986
100,192
Liabilities under issued debt securities
Liabilities under financing agreements
Lease liabilities
Loans granted
Liabilities under issued debt securities
amortised cost
amortised cost
Classification
amortised cost
amortised cost
amortised cost
amortised cost
The fair value of liabilities on account of the issued debt securities as at the balance sheet date was set on the
basis of quotations on the Catalyst market. Those instruments are considered level 1 of the fair value hierarchy.
The carrying amount of other financial assets and liabilities is no different from their fair value as at the balance
sheet date.
44
Capital management
The main objective of the Group’s capital management is to maintain good credit ratings and safe equity ratios
that can support the Group’s operations and increase its value for shareholders.
The Group actively manages the capital structure and adjusts it according to the current macro and
microeconomic situation. In order to maintain or adjust the capital structure, the Group may decide to change the
dividend policy, retire shares and return equity or increase its capital. In the financial year ended 31 December
2015, there were no changes to the objectives, policies or processes in this respect.
The Group manages the capital structure through the leverage ratio defined as net debt divided by total net debt
and equity. The Group's policy sets debt to adjusted EBITDA ratio at the maximum level of 3.5:1. Net debt includes
interest-bearing loans and borrowings, finance lease liabilities, liabilities under financing agreements, and debt
securities in issue, less cash and cash equivalents and short-term deposits. Equity includes convertible preference
shares and equity attributable to owners of the parent less capital reserves from unrealised net gains.
69
(PLN '000)
Year ended
31 December 2015
Interest-bearing loans and borrowings
Debt securities in issue
Less cash and cash equivalents, bank deposits
Net debt
Convertible preference shares
Equity
Total equity
Total net debt and equity
Adjusted EBITDA ratio for 4 quarters (cumulative)
Debt to adjusted EBITDA ratio
Leverage ratio
297,692
1,037,735
3,648
287,760
1,051,315
Year ended
31 December 2014
(Restated)*
216,705
1,035,530
3,136
300,454
954,917
239,936
239,936
1,291,251
356,100
2.95:1
81.4%
205,022
205,022
1,159,939
374,806
2.55:1
82.3%
45
Employment structure
Average employment in the Group for the year ended 31 December 2015 and for the year ended 31 December
2014 was as follows:
Management Board
Administration
Sales
Production
Total
46
Year ended
31 December 2015
1
163
1,084
597
1,845
Year ended
31 December 2014
1
152
1,000
583
1,736
Events subsequent to the balance-sheet date
In the period from the balance sheet date to the date of these financial statements, that is 29 February 2016, no
event has occurred which should have been but was not disclosed in the accounting books as at 31 December
2015.
70
MULTIMEDIA POLSKA S.A.
CAPITAL GROUP
LONG-FORM AUDITORS’ REPORT
ON THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
CAPITAL GROUP Multimedia Polska S.A.
Long-form auditors’ report
(in thousand zlotys)
I.
GENERAL NOTES
1.
Background
The holding company of the Multimedia Polska S.A. Group (hereinafter ‘the Group’ or ‘the Capital
Group’) is Multimedia Polska S.A. (‘the holding company’, ‘the Company’).
The holding company was incorporated on the basis of a Notarial Deed dated 22 July 2005. In 2005
the Company changed its legal form from the limited liability company to a public company. The
transformation was based on the resolution of the Shareholders' Meeting of Multimedia Polska sp. z
o.o. transforming the company into Multimedia Polska S.A. Change of the legal form was registered
in the National Court Register on 1 August 2005. The Company’s registered office is located in
Gdynia at Tadeusza Wendy 7/9.
The holding company is an issuer of securities as referred to in art. 4 of the Regulation (EC) No
1606/2002 of the European Parliament and of the Council of the European Union of 19 July 2002 on
the application of international accounting standards (EC Official Journal L243 dated 11 September
2002, page 1, polish special edition chapter 13, title 29 page 609) and, based on the article 55.5 of the
Accounting Act dated 29 September 1994 (Journal of Laws 2013.330 with subsequent amendments –
‘the Accounting Act’), prepares consolidated financial statements of the Group in accordance with
International Financial Reporting Standards as adopted by the EU.
The holding company was entered in the Register of Entrepreneurs of the National Court Register
under no. KRS 0000238931 on 1 August 2005.
The Company was issued with tax identification number (NIP) 586-10-44-881 on 3 October 1995 and
statistical number (REGON) 190007345 on 26 June 1991.
The principal activities of the holding company are services in the field of telecommunication, in
particular television services, telephony and internet over cable television systems. The scope of
activities of the Group’s subsidiaries is similar to this of the holding company.
As at 31 December 2015, the Company’s issued share capital amounted to 91,765 thousand zlotys.
Equity as at that date amounted to 239,936 thousand zlotys.
In accordance with Company’s share register the ownership structure of the Company’s issued share
capital was as follows:
Number
Number
Par value
% of issued share
of shares
of votes
of shares
capital
M2 Investments Limited
47,654,722
47,654,722
51.93%
51.93%
Tri Media Holdings Ltd
42,660,574
42,660,574
46.49%
46.49%
1,449,512
1,449,512
1.58%
1.58%
91,764,808
91,764,808
100.00%
100.00%
Other shareholders
Total
There were no changes in the ownership structure of the holding company during the reporting period
as well as during the period from the balance sheet date to the date of the opinion.
This is a translation of a document originally issued in the Polish language.
2/12
There were no movements in the share capital in the reporting period.
As at 29 February 2016, the holding company’s Management Board was composed of:
Andrzej Rogowski
- President
There were no changes in the holding company’s Management Board during the reporting period as
well as from the balance sheet date to the date of the opinion.
2.
Group Structure
As at 31 December 2015, the Multimedia Polska S.A. Group consisted of the following subsidiaries
(direct or indirect):
Consolidati
on method
Type of opinion
Name of authorised entity that
audited financial statements
Multimedia Polska Południe S.A.
Full
consolidation
audit in progress
Ernst & Young Audyt Polska
spółka z ograniczoną
odpowiedzialnością sp. k.
31 December 2015
Stream
Communications Sp. z
o.o.
Full
consolidation
audit in progress
31 December 2015
Multimedia Polska
Infrastruktura
Sp. z o.o.
Full
consolidation
audit in progress
31 December 2015
Multimedia Polska
Biznes S.A.
Full
consolidation
audit in progress
31 December 2015
Telewizja Kablowa
Brodnica
Sp. z o.o.
Full
consolidation
no requirement to
audit the financial
statements
no requirement to audit the
financial statements
31 December 2015
Multimedia Polska PR
Sp. z o.o.
Full
consolidation
no requirement to
audit the financial
statements
31 December 2015
Multimedia Polska
Energia Sp. z o.o.
Full
consolidation
audit in progress
31 December 2015
Stream Investments
Sp. z o.o.
Full
consolidation
no requirement to
audit the financial
statements
31 December 2015
Roxwell Investments
Sp. z o.o.
Full
consolidation
no requirement to
audit the financial
statements
31 December 2015
Transmitel Rzeszów
Sp. z o.o. w likwidacji
Full
consolidation
no requirement to
audit the financial
statements
31 December 2015
Entity name
Balance sheet date
3/12
Entity name
Consolidati
on method
Type of opinion
Name of authorised entity that
audited financial statements
Multimedia Polska
Development
Sp. z o.o.
Full
consolidation
no requirement to
audit the financial
statements
Balance sheet date
31 December 2015
Details of the type and impact of changes in entities included in the consolidation as compared to the
prior year may be found in Note 3 of the summary of significant accounting policies and other
explanatory notes (“the additional notes and explanations”) to the consolidated financial statements of
the Group for the year ended 31 December 2015.
3.
Consolidated Financial Statements
3.1 Auditors’ opinion and audit of consolidated financial statements
Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością sp. k. with its registered office
in Warsaw, at Rondo ONZ 1, is registered on the list of entities authorised to audit financial statements
under no. 130.
Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością sp. k. was appointed
by Company’s Supervisory Board on 30 April 2014 to audit the Group’s financial statements.
Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością sp. k. and the key certified
auditor in charge of the audit meet the conditions required to express an impartial and independent
opinion on the financial statements, as defined in Art. 56.3 and 56.4 of the Act on statutory auditors
and their self-governance, audit firms authorized to audit financial statements and public oversight,
dated 7 May 2009 (Journal of Laws 2009, No. 77, item 649 with subsequent amendments).
Under the contract executed on 19 November 2013 with the holding company’s Management Board,
we have audited the consolidated financial statements for the year ended 31 December 2015.
Our responsibility was to express an opinion on the consolidated financial statements based on our
audit. The auditing procedures applied to the consolidated financial statements were designed
to enable us to express an opinion on the consolidated financial statements taken as a whole.
Our procedures did not extend to supplementary information that does not have an impact
on the consolidated financial statements taken as a whole.
Based on our audit, we issued an unqualified auditors’ opinion dated 29 February 2016, stating the
following:
„To the Supervisory Board and General Shareholders Meeting of Multimedia Polska S.A.
1. We have audited the attached consolidated financial statements of Multimedia Polska S.A. Group
(‘the Group’), for which the holding company is Multimedia Polska S.A. (‘the Company‘) located
in Gdynia at Tadeusza Wendy 7/9, for the year ended 31 December 2015 containing the
consolidated balance sheet as at 31 December 2015, the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity,
the consolidated statement of cash flow for the period from 1 January 2015 to 31 December 2015
and the summary of significant accounting policies and other explanatory notes (‘the attached
consolidated financial statements’).
4/12
2. The truth and fairness1 of the attached consolidated financial statements, the preparation
of the attached consolidated financial statements in accordance with the required applicable
accounting policies and the proper maintenance of the consolidation documentation
are the responsibility of the Company’s Management Board. In addition, the Company’s
Management Board and Members of the Supervisory Board are required to ensure
that the attached consolidated financial statements and the Directors’ Report meet
the requirements of the Accounting Act dated 29 September 1994 (Journal of Laws 2013.330 with
subsequent amendments – ‘the Accounting Act’). Our responsibility was to audit the attached
consolidated financial statements and to express an opinion on whether, based on our audit, these
financial statements comply, in all material respects, with the required applicable accounting
policies and whether they truly and fairly2 reflect, in all material respects, the financial position
and results of the operations of the Group.
3. We conducted our audit of the attached consolidated financial statements in accordance with:
•
chapter 7 of the Accounting Act,
•
National Auditing Standards issued by the National Council of Statutory Auditors,
in order to obtain reasonable assurance whether these financial statements are free of material
misstatement. In particular, the audit included examining, to a large extent on a test basis,
documentation supporting the amounts and disclosures in the attached consolidated financial
statements. The audit also included assessing the accounting principles adopted and used
and significant estimates made by the Company’s Management Board, as well as evaluating the
overall presentation of the attached consolidated financial statements. We believe our audit has
provided a reasonable basis to express our opinion on the attached consolidated financial
statements treated as a whole.
4. In our opinion, the attached consolidated financial statements, in all material respects:
•
present truly and fairly all information material for the assessment of the results of the Group’s
operations for the period from 1 January 2015 to 31 December 2015, as well as its financial
position3 as at 31 December 2015,
•
have been prepared in accordance with International Financial Reporting Standards as adopted
by the EU,
•
are in respect of the form and content, in accordance with the legal regulations governing
the preparation of financial statements.
5. We have read the Directors’ Report for the period from 1 January 2015 to 31 December 2015
(‘the Directors’ Report‘) and concluded that the information derived from the attached
consolidated financial statements reconciles with these financial statements. The information
included in the Directors’ Report corresponds with art. 49 para 2 of the Accounting Act.”
We conducted the audit of the consolidated financial statements during the period from 10 August
2015 to 29 February 2016. We were present at the holding company’s head office from 10 August
2015 to 21 August 2015, from 30 November 2015 to 11 December 2015 and from 8 February 2016
to 19 February 2016.
1
Translation of the following expression in Polish: ‘rzetelność i jasność’
Translation of the following expression in Polish: ‘rzetelne i jasne’
3
Translation of the following expression in Polish: ‘sytuacja majątkowa i finansowa’
2
5/12
3.2 Representations provided and data availability
The Management Board of the holding company confirmed its responsibility for the truth and fairness4
of the consolidated financial statements and the preparation of the financial statements in accordance
with the required applicable accounting policies, and the correctness of consolidation documentation.
The Board stated that it provided us with all financial statements of the Group companies included
in the consolidated financial statements, consolidation documentation and other required documents
as well as all necessary explanations. We also obtained a written representation dated 29 February
2016, from the Management Board of the holding company confirming that:
•
the information included in the consolidation documentation was complete,
•
all contingent liabilities had been disclosed in the consolidated financial statements, and
•
all material events from the balance sheet date to the date of the representation letter had been
disclosed in the consolidated financial statements,
and confirmed that the information provided to us was true and fair to the best of the holding company
Management Board’s knowledge and belief, and included all events that could have had an effect
on the consolidated financial statements.
At the same time declare that during the audit of the financial statements, there were no limitations of
scope.
3.3 Consolidated financial statements for prior financial year
The consolidated financial statements of the Group for the year ended 31 December 2014 were audited
by Robert Klimacki, key certified auditor no. 90055, acting on behalf of Ernst & Young Audyt Polska
spółka z ograniczoną odpowiedzialnością sp. k., the company entered on the list of entities authorized
to audit financial statements conducted by the National Council of Statutory Auditors with the number
130. The key certified auditor issued an unqualified opinion on the consolidated financial statements
for the year ended 31 December 2014. The consolidated financial statements for the year ended
31 December 2014 were approved by the General Shareholders’ Meeting on 17 March 2015.
The consolidated financial statements of the Group for the financial year ended 31 December 2014,
together with the auditors’ opinion, a copy of the resolution approving the consolidated financial
statements and the Directors’ Report, were filed on 20 March 2015 with the National Court Register.
4
Translation of the following expression in Polish: “rzetelność i jasność”
6/12
4.
Analytical Review
4.1 Basic data and financial ratios
Presented below are selected financial ratios indicating the economic or financial performance of the
Company for the years 2013 – 2015. The ratios were calculated on the basis of financial information
included in the financial statements for the years ended 31 December 2015 and 31 December 2014.
2015
Total assets
Shareholders’ equity
Net profit/ loss
Return on assets
2014
2013
1,720,839
239,936
86,200
1,647,836
205,022
50,791
1,635,518
213,323
70,723
5.0%
3.1%
4.3%
42.0%
23.8%
25.7%
12.1%
7.2%
10.1%
2.0
1.6
1.0
0.6
0.8
0.4
27 days
26 days
26 days
Net profit x 100%
Total assets
Return on equity
Net profit x 100%
Shareholders’ equity at the beginning of the period
Profit margin
Net profit x 100%
Sales of finished goods, goods for resale and raw materials
Liquidity I
Current assets
Short-term creditors
Liquidity III
Short-term creditors
Debtors days
Trade debtors x 365
Sales of finished goods, goods for resale and raw materials
7/12
Creditors days
2015
18 days
2014
25 days
2013
32 days
88.5%
85.3%
85.8%
86.1%
87.6%
87.0%
-0.9%
-0.5%
0.0%
-1.0%
0.9%
0.7%
Trade creditors x 365
Costs of finished goods, goods for resale and raw materials sold
Stability of financing
(Equity + long-term provisions and liabilities) x 100%
Total liabilities, provisions and equity
Debt ratio
(Total liabilities and provisions) x 100%
Total assets
Rate of inflation:
Yearly average
December to December
8/12
4.2 Comments
The following trends may be observed based on the above financial ratios:
•
•
•
•
•
•
•
return on assets, return on equity and profit margin decreased in 2014 in comparison
with 2013 and increased in 2015,
liquidity I ratio increased in 2015 in the analysed period,
liquidity III ratio increased in 2014 in comparison with 2013 and decreased in 2015,
debtors days increased in 2015 in comparison with previous years,
creditors days shortened in analysed period,
stability of financing decreased in 2014 and increased in 2015,
debt ratio increased in 2014 and decreased in 2015.
4.3 Going concern
Nothing came to our attention during the audit that caused us to believe that the holding company
is unable to continue as a going concern for at least twelve months subsequent to 31 December 2015
as a result of an intended or compulsory withdrawal from or a substantial limitation in its current
operations.
In Note 7 of the additional notes and explanations to the audited consolidated financial statements
for the year ended 31 December 2015, the Management Board of the holding company has stated
that the financial statements of the Group entities included in the consolidated financial statements
were prepared on the assumption that these entities will continue as a going concern for a period
of at least twelve months subsequent to 31 December 2015 and that there are no circumstances that
would indicate a threat to its continued activity.
9/12
II. DETAILED REPORT
1.
Completeness and accuracy of consolidation documentation
During the audit no material irregularities were noted in the consolidation documentation which could
have a material effect on the audited consolidated financial statements, and which were not
subsequently adjusted. These would include matters related to the requirements applicable to the
consolidation documentation (and in particular eliminations relating to consolidation adjustments).
2.
Accounting policies for the valuation of assets and liabilities
The Group’s accounting policies and rules for the presentation of data are detailed in note 12
of the additional notes and explanations to the Group’s consolidated financial statements for the year
ended 31 December 2015.
3.
Structure of assets, liabilities and equity
The structure of the Group’s assets and equity and liabilities is presented in the audited consolidated
financial statements for the year ended 31 December 2015.
The data disclosed in the consolidated financial statements reconcile with the consolidation
documentation.
3.1 Goodwill on consolidation and amortisation
The method of determining goodwill on consolidation, the method of determining impairment of
goodwill, the impairment charged in the financial year and up to the balance sheet date were presented
in note 12.4 of the additional notes and explanations to the consolidated financial statements.
3.2 Shareholders’ funds including non-controlling interest
The amount of shareholders’ funds is consistent with the amount stated in the consolidation
documentation and appropriate legal documentation. Non-controlling interest amounted to
32 thousand zlotys as at 31 December 2015. It was correctly calculated and is consistent
with the consolidation documentation.
Information on shareholders’ funds has been presented in note 31 of the additional notes
and explanations to the consolidated financial statements.
3.3 Financial year
The financial statements of all Group companies forming the basis for the preparation of the
consolidated financial statements were prepared as at 31 December 2015 and include the financial data
for the period from 1 January 2015 to 31 December 2015.
10/12
4.
Consolidation adjustments
4.1 Elimination of inter-company balances (receivables and liabilities) and inter-company
transactions (revenues and expenses) of consolidated entities.
All eliminations of inter-company balances (receivables and liabilities) and inter-company transactions
(revenues and expenses) of the consolidated companies reconcile with the consolidation
documentation.
4.2 Elimination of unrealised gains/losses of the consolidated companies, included in the value
of assets, as well as relating to dividends
All eliminations of unrealised gains/losses of the consolidated companies, included in the value of
assets, as well as relating to dividends reconcile with the consolidation documentation.
5.
Disposal of all or part of shares in a subordinated entity
During the financial year the Group did not sell any shares in subordinated entities.
6.
Items which have an impact on the Group’s result for the year
Details of the items which have an impact on the Group’s result for the year have been included
in the audited consolidated financial statements for the year ended 31 December 2015.
7.
The appropriateness of the departures from the consolidation methods and application of
the equity accounting as defined in International Financial Reporting Standards as adopted
by the EU
During the process of preparation of the consolidated financial statements there were no departures
from the consolidation methods or application of the equity accounting.
8.
Additional Notes and Explanations to the Consolidated Financial Statements
The additional notes and explanations to the consolidated financial statements for the year ended
31 December 2015 were prepared, in all material respects, in accordance with International Financial
Reporting Standards as adopted by the EU.
9.
Directors’ Report
We have read the Directors’ Report for the period from 1 January 2015 to 31 December 2015
(‘the Directors’ Report‘) and concluded that the information derived from the attached consolidated
financial statements reconciles with these financial statements. The information included
in the Directors’ Report corresponds with art. 49 para 2 of the Accounting Act.
11/12
10. Conformity with Law and Regulations
We have obtained a letter of representations from the Management Board of the holding company
confirming that no laws, regulations or provisions of the Group entities’ Articles of Association were
breached during the financial year.
on behalf of
Ernst & Young Audyt Polska spółka
z ograniczoną odpowiedzialnością sp. k.
Rondo ONZ 1, 00-124 Warsaw
Reg. No 130
Key Certified Auditor
Robert Klimacki
certified auditor
No. 90055
12/12
MULTIMEDIA POLSKA GROUP
Directors’ Report on the Operations of the Multimedia Polska Group
for the Year Ended 31 December 2015
Contents
1
Organisation of the Multimedia Polska Group .................................................................................................................... 5
2
Related Party Transactions ........................................................................................................................................................... 7
3
Court, Arbitration or Administrative Proceedings .............................................................................................................. 7
4
Issue of Non-Equity and Equity Securities ............................................................................................................................. 8
5
Contracted and Terminated Loans, Loans Advanced, and Financial and Other Guarantees Issued ............. 8
6
Dividend Payment ............................................................................................................................................................................ 9
7
Series MMP004100520 Bondholders’ Meeting .................................................................................................................... 9
8
Company’s Governing Bodies ..................................................................................................................................................... 9
9
Number of Multimedia Polska S.A. Shares Held by the Management and Supervisory Personnel ............ 10
10
Shareholders Holding, Directly or Indirectly, Significant Blocks of Shares, Number of Shares Held
and Their Percentage Share in the Company’s Share Capital, Number of Votes Conferred by the
Shares and Their Percentage Share in the Total Vote at the General Meeting .................................................... 11
11
Other Information which in the Opinion of the Company is Material for Assessing its Staffing Levels,
Assets, Financial Standing and Results, or Changes in any of the Foregoing, and Information which
is Material for Assessing the Company’s Ability to Discharge its Obligations ..................................................... 11
12
Events Subsequent to the Balance-Sheet Date .................................................................................................................. 11
13
Material Risk Factors and Threats to the Business Conducted by the Multimedia Polska Group ................ 11
14
Discussion of the Financial Standing of the Multimedia Polska Group and Major Events which Had
a Significant Impact on its Operations .................................................................................................................................. 24
15
Differences Between the Financial Results Disclosed in the Annual Report and any Previously
Published Financial Forecasts .................................................................................................................................................... 31
16
Management of Financial Resources ..................................................................................................................................... 32
17
Capital Expenditure ........................................................................................................................................................................ 32
18
Factors and Non-Recurring Events with a Bearing on 2015 Results ......................................................................... 33
19
Development Prospects for the Multimedia Polska Group in 2016 .......................................................................... 34
20
Changes in the Key Principles of Managing the Multimedia Polska Group .......................................................... 34
Statement by the Management Board of Multimedia Polska S.A. ......................................................................................... 35
Dear Investors!
Enclosed please find the 2015 report of the Multimedia Polska Group. It was a landmark year from our perspective
for two reasons. Firstly, in line with our earlier guidance, we managed to come back to positive growth trends in the
video segment, after a longer period of adverse impact of digital terrestrial television (DTT) on our business.
Although the analog switch-off took place in 2013, its long-term effects were felt by all market players well beyond
that year. Secondly, last year we wrote about our search for new ways to expand and optimize our business model,
and today we can proudly say that our efforts are bringing the desired results.
We are seeing very good results in both areas, our core business and non-core services—outside the scope of typical
telecom operations, which has a positive impact on average revenue generated per household. We believe that
pursuing the path we have chosen will allow us to come back to linear growth trends that we enjoyed historically
and that were heavily disturbed in 2013-2014 by the introduction of DTT.
What we are particularly proud of today is that we have delivered our promises, and we are now—not just
declaratively but actually—a provider of integrated services for the home and small and medium-sized businesses.
We offer not only the highest-quality telecommunications services, home and mobile entertainment but also a full
scope of additional services, such as energy, insurance, home surveillance, and soon also gas. We continue to
enhance our service bundles by adding new functionalities, and we continue to look for more comfortable solutions
for our customers.
As announced previously, in line with our evolving business model, we have adjusted the scope of reporting of some
of our operating statistics starting from 2015. We now report our non-core services separately. However, we think
it is too soon to report them in a broader sense. We expect to be able to provide a more detailed scope of reporting
of the new services when they are fully developed.
Sales of Services
We recorded a net increase in the number of revenue generating units (RGUs) of c. 74,000 in 2015, up 5 per cent
from 2014. We consider this result to be very satisfactory; it also confirms the reversal of negative trends connected
with the introduction of DTT in Poland. Our video RGUs are on the rise, particularly digital television RGUs, and it is
not only due to migration of our analog customers to digital TV, which is very much in line with our expectations,
but also due to organic growth of our business and a few minor acquisitions. We also post satisfactory growth in
broadband RGUs. As regards the voice segment, we did manage to counteract the negative market trends and post
growth in RGUs (particularly Voice-over-IP RGUs) and revenues until 2013. In the last two years, however, we had
to give in to the global trends, although we still have growth in mobile telephony RGUs, often bundled with fixedline cable telephony (VoIP). We develop new projects, reported as other RGUs, and their results at this stage seem
promising.
Our efforts contribute to higher average revenue per user(ARPU). The strategy of maintaining high ARPU while also
preserving the quality of our services at the highest level was in place in 2012-2015 and will also apply in subsequent
periods. The telecoms market shows strong trends towards multi-play—bundling not only telecom services, but
many more. Thus, the key performance indicator we monitor is ARPU per customer, and not ARPU per RGU.
Financial Results
In 2015, we recorded a c. 0.5 per cent growth in sales revenue year on year while our adjusted EBITDA was down
c. 5 per cent and reached PLN 356 million. The lower level of EBITDA is connected with two factors: (i) the
introduction of new non-core services that entailed considerable one-off roll-out costs, particularly in the opening
stages, and (ii) a considerable negative impact of foreign currencies, especially the U.S. dollar and the euro, that
strengthened against the zloty and drove up some of our cost items denominated in foreign currencies. In
comparable conditions, our adjusted EBITDA for 2015 would have been stable from 2014. Our net profit for 2015
was PLN 86.2 million and was 70% higher than the year before.
New Products
The main focus of the Group in 2015 was on optimizing its competences and further adapting its organizational
structure and support tools to the ever changing business environment. We stimulated sales in our core business
lines and non-core projects (electricity, insurance). We also prepared for further deployments that we believe will
allow us to expand the scope of our market presence. We worked on new solutions and new products, such as gas.
Change in Accounting Policies
In 2015, we decided to change our accounting policy applicable to the recognition and accounting for subscriber
acquisition costs (SAC) in the income statement. According to the amended accounting policy, subscriber acquisition
costs are treated as intangible assets and amortised over the average duration of customer contract and not, as
before, expensed in the income statement when incurred. The change allows for a more aligned analysis of the costs
of our services in relation to revenues from those services as both revenues and costs are recognized over the period
of contract duration. Before the change, revenues were recognized when the customer made the payment, that is
over the whole period of the contract, while SAC was recognized immediately in the full amount. The change in
accounting policies was applied retrospectively in 2014 (restated data) to make our results for the years 2015 and
2014 fully comparable.
Capital Expenditure Programme and Acquisitions
We have invested heavily in our networks over the past few years. At this point, we are not planning to make large
investments in upgrading our access networks, and we expect that annual capital expenditures (except for ones
related to acquisitions) in relation to revenues will be slightly lower on average in the coming years than in previous
years, despite the growth in the scale of our operations. We expect to see a considerable drop in capital expenditures
over the next two years, when we conclude the digitalization of our subscriber base in 2017. As always, we are
interested in further consolidation of the market. We delivered four acquisitions in 2015, taking over networks in
Świnoujście, Gliwice, Władysławowo, Blachownia, and Jastrzębia Góra.
Andrzej Rogowski
President of Multimedia Polska S.A.
Directors’ Report on the Operations of the Multimedia Polska Group for the year ended 31 December 2015
1
1.1
Organisation of the Multimedia Polska Group
Group Structure in the Period Covered by this Report
The consolidated financial statements for the twelve months ending on 31 December 2015 cover Multimedia Polska
S.A. and the following companies which were members of the Multimedia Polska Group: Multimedia Polska
Development Sp. z o.o., Multimedia Polska - Południe S.A., Telewizja Kablowa Brodnica Sp. z o.o., Multimedia Polska
PR Sp. z o.o., Multimedia Polska Infrastruktura Sp. z o.o., Stream Communications Sp. z o.o., Stream Investment Sp.
z o.o., Roxwell Investments Sp. z o.o., Transmitel Rzeszów Sp. z o.o. in liquidation, Multimedia Polska Energia Sp.
z o.o., and Multimedia Polska Biznes S.A.
As at the balance-sheet date and the date of this Report, the Multimedia Polska Group (the “Group”) was comprised
of the parent undertaking Multimedia Polska S.A. (the “Company”, “Multimedia” or “MMP”) and the following direct
or indirect subsidiaries:
1
2
3*
4
5*
6
7**
8***
9**
10
11
Name
Multimedia Polska
Development Sp. z o.o.
Multimedia PolskaPołudnie S.A.
Address
Gdynia
ul. T. Wendy 7/9
Gdynia
ul. T. Wendy 7/9
Telewizja Kablowa
Brodnica Sp. z o.o.
Multimedia Polska PR
Sp. z o.o.
Multimedia Polska
Energia Sp. z o.o.
Gdynia
ul. T. Wendy 7/9
Gdynia
ul. T. Wendy 7/9
Gdynia
ul. T. Wendy 7/9
Multimedia Polska
Infrastruktura Sp. z o.o.
Gdynia
ul. T.Wendy 7/9
Stream
Communications Sp.
z o.o.
Stream Investment Sp.
z o.o.
Gdynia
ul. T.Wendy 7/9
Roxwell Investments Sp.
z o.o.
Transmitel Rzeszów Sp.
z o.o. in liquidation
Gdynia
ul. T.Wendy 7/9
Rzeszów
ul. Lenartowicza 4
Multimedia Polska
Biznes S.A.
Warsaw
Al. Jan Pawła II 19
Warsaw
Al. Jana Pawła II 19
Business activity
film and video production
Ownership interest
voice transmission, data
transmission and other
other building installation
public relations and
communication
trade of electricity,
trade of gaseous fuels
through mains
work associated with the
construction of
telecommunication lines
the company is currently
being reorganized and is
planned to take on new
functions within the Group
other business and
management consultancy
99.97%
100.00%
94.12%
100%
100%
100%
100%
100%
100%
100%
100%
* wholly-owned by Multimedia Polska-Południe S.A.
** wholly-owned by Multimedia Polska Energia Sp. z o.o.
*** wholly-owned by Stream Communications Sp. z o.o.
1.2
Changes in the Group during the Period Covered by this Report
The following material changes occurred in the Group during the period covered by this Report.
5
On 14 January 2015, Multimedia acquired 100% shares in the share capital of BB Investment S.A. (later Multimedia
Polska BBI S.A. and currently Multimedia Polska Biznes S.A.) of Poznań registered in the register of entrepreneurs
kept by the District Court for Poznań – Nowe Miasto and Wilda in Poznań, VIII Commercial Division of the National
Court Register under entry no. 0000324141. The acquired shares are equal and indivisible, and carry 100% voting
rights at the General Meeting of Multimedia Polska Biznes S.A. When its shares were acquired by Multimedia,
Multimedia Polska Biznes S.A. was the parent entity of Przedsiębiorstwo Handlowo-Usługowe Vega Sp. z o.o. of
Blachownia registered in the register of entrepreneurs kept by the District Court for Częstochowa, XVII Commercial
Division of the National Court Register under entry no. 0000126123, whose core activity was the provision of fixedline telephony, Internet access and cable television services. The latter two companies merged on 27 February 2015.
The merger was performed under Art. 492.1.1 in conjunction with Art. 515.1 of the Commercial Companies Code by
transferring all assets of Przedsiębiorstwo Handlowo-Usługowe Vega Sp. z o.o. to Multimedia Polska Biznes S.A.
On 10 February 2015, the Extraordinary Shareholders’ Meeting of Multimedia Polska Energia Sp. z o.o. resolved to
broaden the scope of its business activity to involve distribution of gaseous fuels through mains. The formal change
of business activity became effective on 2 March 2015—the day of registration of the resolution by the competent
court. On 15 May 2015, Multimedia Polska Energia Sp. z o.o. was granted a licence to trade in gaseous fuels.
On 31 March 2015, Multimedia Polska Biznes S.A. acquired 100% shares in the share capital of AC Systemy
Komputerowe Sp. z o.o. of Świnoujście, registered in the register of entrepreneurs kept by the District Court for
Szczecin Centrum in Szczecin under entry no. 0000546674. The acquired shares were equal and indivisible, and
carried 100% voting rights at the General Meeting. Also on 31 March 2015, Multimedia Polska Biznes S.A. acquired
from Multimedia Polska-Południe S.A. 100% shares in the share capital of Multimedia Polska Teletronik Sp. z o.o.
Then on 13 April 2015, Multimedia Polska Biznes S.A. (as the acquirer) and AC Systemy Komputerowe Sp. z o.o. and
Multimedia Polska Teletronik Sp. z o.o. (both as the acquirees) agreed on a merger plan. The merger was performed
on 29 May 2015 under Art. 492.1.1 in conjunction with Art. 516.6 of the Commercial Companies Code by transferring
all assets of the acquirees to the acquirer. On 1 June 2015, Multimedia Polska Biznes S.A. acquired 100% shares in
the share capital of AS-SAT Sp. z o.o. of Gdynia, registered in the register of entrepreneurs kept by the District Court
for Gdańsk-Północ in Gdańsk under entry no. 0000488875. The acquired shares were equal and indivisible, and
carried 100% voting rights at the General Meeting of AS-SAT Sp. z o.o. Then on 24 September 2015, Multimedia
Polska – Południe S.A. acquired from Multimedia Polska Biznes S.A. all the shares in the share capital of AS-SAT Sp.
z o.o. On 30 September 2015, Multimedia Polska – Południe S.A. leased the business of AS-SAT Sp. z o.o. from ASSAT Sp. z o.o. Then on 8 October 2015, Multimedia Polska – Południe S.A. (as the acquirer) and AS-SAT Sp. z o.o.
(as the acquiree) agreed on a merger plan. The merger was performed on 30 November 2015 under Art. 492.1.1 in
conjunction with Art. 515.1 of the Commercial Companies Code by transferring all assets of the acquiree to the
acquirer.
We continued the organizational restructuring of our Group commenced in 2013—separating the investment
function within the Group. Hence, in 2015 Multimedia and Multimedia Polska – Południe sold to Multimedia Polska
Infrastruktura other elements of the network that make up the so-called “fixed telecommunications infrastructure.”
The transactions were aimed at restructuring the Group and were carried out within the Group; hence, they did not
have any impact on the consolidated operating profit of the Group.
On 1 July 2015, Multimedia Polska – Południe S.A. leased from Multimedia Polska Biznes S.A. an organized business
unit (in the relevant agreement referred to as OBU Teletronik). Then on 1 September 2015 Multimedia Polska –
Południe S.A. leased from Multimedia Polska Biznes S.A. organized business units (in the relevant agreements
referred to as OBU VEGA and OBU ANT-SAT-GOR). Each organized business unit comprised only the components
clearly listed in each of the relevant agreements, including in particular movables and structures, equipment and
materials that constitute telecommunications networks, rights and obligations arising from real and movable
property lease agreements, and rights to use real or movable property resulting from other legal relations insofar
as they are used for telecommunications purposes, rights and obligations resulting from subscriber contracts, and
financial accounts and documents. On 30 September 2015, Multimedia Polska – Południe S.A. acquired from
Multimedia Polska Biznes S.A. the business that had been leased hitherto.
On 30 September 2015, Multimedia Polska Biznes S.A. leased networks from Multimedia Polska Infrastruktura Sp.
z o.o. in order to provide services to business customers. On 1 December 2015, it concluded an agreement with
Multimedia Polska – Południe S.A. whereby Multimedia Polska – Południe S.A. agreed to sell to Multimedia Polska
Biznes S.A. non-current assets listed in the agreement with the goal to have Multimedia Polska Biznes effectively
take over contracts with business customers from Multimedia Polska – Południe S.A.
6
On 1 October 2015, the Company, by resolution of the Board of Multimedia Polska S.A., established its branch
located in Warsaw. The branch operates under the name of Multimedia Polska S.A. Oddział Biznes (Business Branch).
The Business Branch was registered on 9 October 2015. The goal of the Business Branch is to provide
telecommunications services to business customers—hitherto provided by the Business Market Department, a
separate operating unit at Multimedia, and a business market-oriented group within Multimedia’s Sales and
Marketing Department. The Business Branch has been equipped with the necessary assets and assigned employees
and associates involved in the sales of telecommunications services to business customers and responsible for
business customer care and retention. On 1 December 2015, the Company and Multimedia Polska Biznes S.A.
entered into an agreement whereby Multimedia Polska Biznes S.A. leased the Business Branch from the Company.
1.3
Multimedia's Related Parties
Since 19 May 2010 the Company has been the sole general partner in the limited partnership operating under the
name IT Multimedia Polska Spółka Akcyjna Spółka Komandytowa of Warsaw, established by the Company together
with two natural persons with a view to conducting joint business activity. The core business of IT Multimedia Polska
Spółka Akcyjna Spółka Komandytowa consists in IT advisory services. IT Multimedia Polska Spółka Akcyjna Spółka
Komandytowa is registered with the District Court for the Capital City of Warsaw, XII Commercial Division of the
National Court Register, under entry No. KRS 0000360570.
1.4
The Parent Undertaking – Multimedia Polska S.A.
Below is presented basic information on Multimedia Polska S.A., the Parent Undertaking of the Group.
Registered address:
National Court Register Number (KRS):
Tax Identification Number (NIP):
Industry Identification Number (REGON):
81-341 Gdynia, ul. Tadeusza Wendy 7/9
0000238931
District Court for Gdańsk-Północ, VIII Commercial Division of the
National Court Register
586-10-44-881
190007345
The Company was incorporated by virtue of a Notarial Deed of 21 June 1991 as a limited liability company (spółka
z ograniczoną odpowiedzialnością). On 1 August 2005, based on a decision of the District Court for Gdańsk-Północ,
VIII Commercial Division, the Company changed its legal form from a limited liability company (spółka z ograniczoną
odpowiedzialnością) to a joint-stock company (spółka akcyjna).
The duration of the Company and the other Group member undertakings is unlimited.
The core activity of the Multimedia Polska Group consists in the provision of a wide range of telecommunications
services, particularly radio, television, Internet and telephony over cable television systems.
Information regarding the Company’s Business Branch is provided in Section 1.2 of this Report.
2
Related Party Transactions
Neither the Company nor any of its subsidiaries entered into any related party transactions other than on arm’slength terms that would be significant, whether individually or in aggregate, in the period covered by this Report.
Information regarding related party transactions that had an impact on the Group is provided in Section 1.2 of this
Report.
3
Court, Arbitration or Administrative Proceedings
Companies of the Multimedia Polska Group are involved in a number of legal and administrative proceedings—
including proceedings conducted by the President of the Office of Competition and Consumer Protection and the
Related Party Transactions
7
President of the Office of Electronic Communications—that have arisen during the ordinary course of our business.
However, in our opinion, they shall not have any major adverse impact on our operations and financial condition.
At the same time, we note that the outcome of legal proceedings can be extremely difficult to predict with any
certainty, and therefore we cannot assure you that any such proceedings will be resolved in our favour.
3.1
Decision of the President of the Office of Competition and Consumer Protection
On 30 December 2015, the President of the Office of Competition and Consumer Protection issued a decision in
which he accused the Company of practices that infringed collective consumer interests that were evident in the
Company’s offering, according to the Office. The President imposed a fine on the Company and other expenditures
required to remove the consequences of the alleged infringement. The Company challenged the decision in its
entirety as unfair and lacking proper legal grounds because the Company considers its actions to be compliant with
the law.
4
Issue of Non-Equity and Equity Securities
In the period covered by this Report, neither the Company nor any of its subsidiaries issued non-equity or equity
securities.
5
5.1
Contracted and Terminated Loans, Loans Advanced, and Financial and Other
Guarantees Issued
Intercompany Loans within the Multimedia Polska Group
In the period covered by this Report, loans were granted within the Multimedia Polska Group. Interest accruing on
all of those loans is based on the 3M WIBOR rate plus a margin of 2.5-3.3%.
5.2
Other Granted and Contracted Loans
In the period covered by this Report, the Company granted loans to its employees and associates, including those
considered to be related parties. However, neither the Company nor the other companies of the Group granted
loans to related parties other than those mentioned above or related parties that are part of the Multimedia Polska
Group. All of the loans bear interest based on 3M WIBOR plus a 2.5-3.3% margin.
5.3
1.
2.
3.
5.4
Financial and Other Loan or Borrowing Guarantees Issued
The guarantee provided on 26 February 2014 to the bondholder of the bonds issued by Comfortime Invest Sp.
z o.o. expired on 19 January 2015. Comfortime Invest Sp. z o.o. is the Company’s related party.
In connection with the signing of annex no. 3 to the Credit Facilities Agreement, discussed in Section 5.4 below,
Multimedia Polska Biznes S.A. became a guarantor of the payment of liabilities resulting from the agreement.
Furthermore, Multimedia Polska Biznes S.A. issued a statement providing a guarantee for the payment of
obligations arising from the MMP004100520 series Bonds issued by the Company.
MMP together with Multimedia Polska – Południe S.A., Stream Communications Sp. z o.o., and Multimedia
Polska Infrastruktura Sp. z o.o. as guarantors—and on 26 June also Multimedia Polska Biznes S.A. as a
guarantor—issued a statement on submission to enforcement of the relevant notarial deed in compliance with
Art. 777.1.5 of the Civil Code in connection with the obligation to clear the liabilities arising from the Credit
Facilities Agreement dated 10 June 2013.
Amendments to the Credit Facilities Agreement dated 10 June 2013
On 9 and 23 June 2015, annexes no. 2 and 3 were signed, respectively, amending the Credit Facilities Agreement
concluded by Multimedia Polska S.A. on 10 June 2013 (Agreement) with a bank syndicate. The annexes extended
Issue of Non-Equity and Equity Securities
8
the availability of the facilities, among other things, and allowed Multimedia Polska Biznes S.A. to join the Agreement
as a related party, as defined in the Agreement, and as a guarantor.
6
Dividend Payment
On 17 March 2015, the Annual General Meeting adopted resolution no. 8 on the distribution of profit generated by
the Company in 2014, allocating PLN 51,285,088.21 (fifty one million two hundred and eighty five thousand eighty
eight zloty 21/100) of the net profit to the payment of dividend to shareholders. The remaining portion of the profit
of PLN 169,869.47 (one hundred and sixty nine thousand eight hundred and sixty nine zloty 47/100) was allocated
to the statutory reserve fund. The Annual General Meeting of Multimedia Polska S.A. set the record date on 17 March
2015 and the dividend date on 18 March 2015.
For the reporting year ending on 31 December 2015, the Management Board shall recommend to the General
Meeting the payment of dividend equal to 100% of the Company’s 2015 net profit.
7
Series MMP004100520 Bondholders’ Meeting
On 28 May 2015, the Company convened a Bondholders’ Meeting for holders of series MMP004100520 Bonds for
23 June 2015. There were two adjournments in the meeting, first until 7 July 2015 and the second until 15 July 2015.
The Bondholders’ Meeting was closed without voting on any resolutions.
8
Company’s Governing Bodies
The Company’s governing bodies are its General Meeting, the Management Board and the Supervisory Board.
8.1
General Meeting
In accordance with the Polish corporate law, our decision making process is conducted through the General
Meeting, the Management Board and the Supervisory Board. The powers of, and relationship between, these
governing bodies are governed by the applicable provisions of the Polish Commercial Companies Code, our Statutes
and our internal by-laws.
Shareholders holding 5% or more of the Company’s share capital are listed in Section 9.
8.2
Management Board
In the period covered by this Report, the Management Board consisted of the one member. The President of the
Management Board was reappointed for another two-year term of office pursuant to resolution of the Supervisory
Board dated 17 March 2015.
Name
Andrzej Rogowski
8.3
Position
President of the Management Board
Appointed on
17 March 2015
Supervisory Board
Members of the Supervisory Board are appointed for a joint term of three years. On 28 April 2014, the Extraordinary
General Meeting re-appointed the Members of the Supervisory Board for another three-year term of office. The
same person may be appointed to the Supervisory Board for a subsequent term of office.
Name
Ygal Ozechov
Tomasz Ulatowski
Gabriel Wujek
Position
Board(1)
Co-Chairman of the
Co-Chairman of the Board(1)
Member of the Board
Appointed on
28 April 2014
28 April 2014
28 April 2014
Dividend Payment
9
(1)
9
9.1
Pursuant to paragraph 3 item 4 of the Supervisory Board by-laws, the Supervisory Board may appoint two persons as
Chairman of the Board. In such a case, each of those persons holds the position of Co-Chairman. Co-Chairmen alternate
months in fulfilling tasks and responsibilities of the Chairman as set forth in the by-laws and applicable provisions of
law. The nature of the tasks executed by the Chairman of the Board is organizational.
Number of Multimedia Polska S.A. Shares Held by the Management and Supervisory
Personnel
Management Board of Multimedia Polska S.A.
The table below presents the number of shares held by the President of the Management Board in the period
covered by this Report.
Name
of Managing Person
Andrzej Rogowski –
President
(1)
As at
31 December 2015
0(1)
As at
29 February 2016
0(1)
0(1)
On 20 March 2014 Kalberri Limited, whose ultimate actual owner as at the date of this Report is Mr. Andrzej Rogowski,
contributed all shares held in the Company’s share capital to Tri Media Holdings Ltd. in exchange for shares in the share
capital of Tri Media Holdings Ltd.
To the best of the Company’s knowledge, the President of the Management Board does not hold shares in any of
the subsidiaries of the Multimedia Polska Group.
The number of shares held by the President of the Management Board of Multimedia Polska S.A. did not change in
the period from the publication of the report for the twelve months of 2014 to the date of this Report.
9.2
Supervisory Board of Multimedia Polska S.A.
The number of shares held by members of the Supervisory Board in the period covered by this Report is presented
below.
Name of Supervisory
Board Member
As at
31 December 2015
As at
29 February 2016
Tomek Ulatowski
47.654.722(1)
47.654.722(1)
47.654.722(1)
Ygal Ozechov
47.654.722(2)
47.654.722(2)
47.654.722(2)
Gabriel Wujek
0
0
0
(1)
(2)
Indirectly through an American company YTD, LLC of Wilmington, Delaware, USA, in which Mr Tomek Ulatowski jointly
with related entities holds a 50% interest, and which is the sole owner of M2 Investments Limited of Nicosia, Cyprus,
which in turn holds 47.654.722 shares in Multimedia.
Indirectly through an American company YTD, LLC of Wilmington, Delaware, USA, in which Mr Ygal Ozechov jointly with
related entities holds a 50% interest, and which is the sole owner of M2 Investments Limited of Nicosia, Cyprus, which
in turn holds 47.654.722 shares in Multimedia.
To the best of the Company’s knowledge, no Supervisory Board member holds shares in any subsidiaries of
Multimedia.
The number of shares held by the Members of the Supervisory Board did not change in the period covered by this
Report.
Number of Multimedia Polska S.A. Shares Held by the Management and Supervisory Personnel
10
10 Shareholders Holding, Directly or Indirectly, Significant Blocks of Shares, Number of
Shares Held and Their Percentage Share in the Company’s Share Capital, Number of
Votes Conferred by the Shares and Their Percentage Share in the Total Vote at the
General Meeting
In the period covered by this Report and as at the date of this Report, the Company’s share capital amounted to
PLN 91,764,808 and was divided into 91,764,808 shares, conferring the right to the same number of votes at the
Company’s General Meeting.
Shareholders holding 5% or more of the Company’s share capital as at the date of this Report:
Shareholder
Number of
shares held
Number of votes
at the General
Meeting
Percentage of
votes at the
General Meeting
Percentage held
in share capital
M2 Investments Limited (1)
47,654,722
47,654,722
51.93%
51.93%
Tri Media Holdings Ltd
42,660,574
42,660,574
46.49%
46.49%
1,449,512
1,449,512
1.58%
1.58%
91,764,808
91,764,808
100.00%
100.00%
Other shareholders
Total
(1)
(2)
M2 Investments Limited is a company in which Mr Tomek Ulatowski and Mr Ygal Ozechov, the Co-Chairmen of the
Supervisory Board (with their respective related entities) indirectly hold each 50% of shares and control the decision
making process. M2 Investments Limited is a subsidiary of YTD LLC, with registered office in Wilmington, Delaware, USA,
in which the Co-Chairmen of the Supervisory Board (with their respective related entities) hold 100% of shares and
through which they control the decision making process at the purchasing entity.
Company controlled by Emerging Ventures (EVL) Limited of Nicosia, Cyprus.
(2)
There were no changes in the Group’s structure during the period covered by this Report.
11 Other Information which in the Opinion of the Company is Material for Assessing its
Staffing Levels, Assets, Financial Standing and Results, or Changes in any of the
Foregoing, and Information which is Material for Assessing the Company’s Ability to
Discharge its Obligations
No events occurred in the period from the balance sheet date to the date of this Report that have not been discussed
in this Report and that would be material for assessing the staffing levels, assets, financial standing, or the Company’s
ability to discharge its obligations.
12 Events Subsequent to the Balance-Sheet Date
12.1
Events Which Have Not Been Disclosed in the Financial Statements and Which May Have
a Material Bearing on the Future Financial Results of the Multimedia Group
No events occurred in the period from the balance sheet date to the date of this Report that have not been discussed
in this Report and that may have a material bearing on the future financial results of the Multimedia Group.
13 Material Risk Factors and Threats to the Business Conducted by the Multimedia
Polska Group
13.1
Risks related to the market in which we operate
Shareholders Holding, Directly or Indirectly, Significant Blocks of Shares, Number of Shares Held and Their Percentage Share in the Company’s
Share Capital, Number of Votes Conferred by the Shares and Their Percentage Share in the Total Vote at the General
11
13.1.1
The Polish pay television, broadband Internet and telephony industries are highly competitive.
We face competition from established and new competitors who provide one or more of television, broadband
Internet and telephony services. In some instances, we compete against companies with easier access to financing,
more comprehensive services and service ranges, greater personnel resources, wider geographical coverage, greater
brand name recognition and experience or longer-established relationships with regulatory authorities and
subscribers. Some of our competitors have made significant capital expenditures in their networks to improve their
ability to provide new services and products and extend their area of operation. In addition, because we have our
own PSTN access networks, which competing cable operators do not have, these cable operators may have fewer
regulatory burdens with which they are required to comply. Such competition can make it difficult to attract new
customers and retain existing subscribers, thereby increasing churn levels. Increased competition and special
promotions and discounts we grant to customers who subscribe for multiple services are likely to reduce our ARPU
on a per-service basis.
Pay Television
We expect competition in the provision of television services to increase over the coming years. Historically, we had
limited competition from the other large cable operators, such as UPC Polska and Vectra, because our access
networks overlap with competitors only to a limited extent. However, such overlap may increase in the future,
negatively affecting our business, results of operations, financial condition and/or prospects.
Our television services business also faces competition from direct-to-home satellite television broadcasters (“DTH”).
Competition between DTH and cable television depends on the population density of a given geographical area
and the penetration of DTH television is higher than the penetration of cable television in rural areas, towns and
villages with no or little cable television infrastructure.
There are a number of channels freely available in the market through DTT. Increased competition from such “free
to air” operators as a result of the nationwide analogue switch-off has already contributed to higher churn for our
analogue cable television and digital television subscribers in 2013 and 2014. Any further increase of such
competition in the future may also raise churn, in particular in our low-tier TV packages.
As digital television develops, the difference between content distributors and content providers may also become
blurred. Current providers of content may decide to market packages directly to the end user and seek only to
acquire network access from current television services providers, instead of being part of the provider’s channel
offering.
Broadband Internet
With respect to fixed broadband Internet services, we primarily compete with (i) Orange Polska Group, the largest
fixed broadband Internet services provider in Poland in terms of the number of users, (ii) UPC Polska and Vectra,
providers of broadband Internet services over cable TV networks, (iii) telecommunications operator Netia. Poland is
currently seeing a strong growth trend of dedicated services and data transfer packages as consumers expect
broadband operators to increase connection speeds and offer more competitive prices. The continued growth of
bandwidth – in particular in the upper range – is a discernible trend in the Polish fixed broadband Internet market.
In addition, some of the above-listed competitors are also providing mobile broadband Internet services in Poland,
which are accounting for the growing proportion of total broadband Internet services. Mobile operators, such as
Orange Polska, Polkomtel, P4 (Play) and T-Mobile Polska, are the key players on the mobile broadband market.
Connection speeds for such services are expected to further increase in the future, particularly with the increased
penetration of the LTE technology.
As a result of the technological developments, we expect competition in the broadband Internet market to further
increase in the future. We cannot provide any assurance that the measures we introduce in response to these
developments, such as entering into agreements with Polkomtel Sp. z o.o. and P4 (Play) allowing us to use those
operators’ networks for providing our mobile broadband Internet services, will be successful in attracting and
retaining customers.
Material Risk Factors and Threats to the Business Conducted by the Multimedia Polska Group
12
Telephony
The Polish fixed-line telephony market is dominated by the incumbent, Orange Polska (formerly Telekomunikacja
Polska). Orange Polska’s extensive local loop infrastructure overlaps with the networks of other telecommunications
carriers and cable operators, including ours, making Orange Polska the main competitor to our broadband Internet
and fixed-line telephony services. Orange Polska, as part of the France Telecom group, has easier access to financial
resources, operational and marketing expertise, greater purchasing power with suppliers and subcontractors and a
greater ability to leverage costly customer care operations.
Increasing competition among fixed-line telephony operators and cable television operators that provide telephony
services over cable using VoIP technology is putting significant downward pressure on prices. In addition, increasing
numbers of users are substituting fixed-line telephone lines with mobile telephony services and many households
in Poland use only mobile telephones and do not pay for a fixed-line service. This substitution, in addition to the
increasing use of e-mail, may continue to negatively affect our call volumes and subscriber retention. Moreover,
Skype, FaceTime, Viber and similar VoIP applications and operators that do not own their own networks continue
to be popular in Poland, particularly among young and savvy Internet users. Skype’s offering is particularly attractive
to international long-distance callers. Competition from such new telephony technologies may have an adverse
impact on usage of our fixed-line telephony networks, primarily in the international and long-distance call segment.
As new competitors and new technologies enter in, or expand their share of, the overall voice market and prices
decrease in line with the downward pressure on telephony prices experienced elsewhere in Europe, our fixed-line
telephony business may become less profitable and experience a further decline in revenue and market share. In
addition, we may be forced to respond to such developments by investing resources into our own services and
products development initiatives, which may not bring the expected results.
According to the UKE Report, mobile telephony is the largest segment of the Polish telecommunications market.
There are four large mobile operators in Poland with their own networks, T-Mobile Polska, Orange Polska, Polkomtel
and P4. As we launched our mobile virtual network operator (MVNO) project in January 2014 based on an agreement
with Polkomtel with the aim of adding mobile voice services to our existing offering, we are affected by intense
competition in the Polish mobile telephony sector.
There can be no assurance that we will be able to compete successfully against Orange Polska or our other current
or future competitors operating in the voice sector. Our failure to do so could have a material adverse effect on our
business, results of operations, financial condition and/or prospects. Such competition could make it difficult to
attract new customers and retain existing subscribers effectively and could result in higher marketing expenses with
lower telephone subscription proceeds.
13.1.2
Our television services business has already been and could continue to be adversely affected by
the impact of the analogue terrestrial television switch-off and the growth of digital terrestrial
television services
In the first seven months of 2013, Poland went through the nationwide digital television transition, also called the
digital switchover or analogue switch-off, the process in which analogue television broadcasting was converted to,
and replaced by digital terrestrial television (DTT).
The nationwide analogue switch-off, most intense between February and June 2013, was supported by a large-scale
government-run marketing and information campaign. At the time Poland completed the process of analogue
switch-off in July 2013, three multiplexes operated by Poland’s transmission company Emitel covered nearly 100%
of Polish households. Currently, 24 free to air channels are broadcasted in total, including public TV channels, TVP
1 and TVP 2. In the course of the analogue switch-off, many Polish pay television operators, including us, initially
experienced increased churn and weaker sales of video services, to a large extent due to the availability of a free
DTT offer. Competition from free DTT in 2013 and 2014 also resulted in a stronger price slump than in previous
years for pay television services. In response to this negative effect, we have prepared a special offer that is
competitive to DTT with respect to both content and average weighted rates (including the costs of set-top boxes).
We expect some of our former clients, after they familiarize themselves with our new offer and the currently available
DTT offer, will come back to us for more attractive and more diverse content. Nevertheless, there is no certainty that
our efforts to reduce churn among our analogue and digital cable television subscribers and to mitigate the effects
of churn in TV services recorded in 2013 and 2014, will be successful. Moreover, we cannot guarantee that the slower
pace of sales in video services and the falling rates for television services, driven down mainly by the competition of
13
free DTT introduced in 2013, will not continue in the near- and medium-term, especially if the programming offered
by DTT continues to improve.
13.1.3
We do not have guaranteed access to television content and are dependent on our agreements,
relationships and cooperation with content providers, including broadcasters and collective rights
associations
The success of our television services business depends on, among other things, the quality and variety of the
television content delivered to our subscribers. We do not produce our own content and depend on our agreements,
relationships and cooperation with content providers, including broadcasters and collective rights associations
(principally the Polish Filmmakers Association (the PFA)). For the provision of content distributed via our network,
we have entered into license agreements with public and commercial broadcasters, other content providers and the
PFA. As we depend upon broadcasters and other content providers for the provision of content to retain our existing
subscribers and attract new customers, content providers may have considerable bargaining power to increase the
license fees we pay them when the term of the existing license expires. In recent years, fees paid to many content
providers have been rising at a pace much higher than the inflation rate in Poland. This trend has already adversely
affected us as our programming and copyright expenses. Since most of the contracts with content providers need
to be periodically renewed, we may be unable to renegotiate them on terms that are similar to those of the current
contracts, which could result in a further increase in our programming and copyright expenses. In addition,
broadcasters and other content providers may elect to distribute their content exclusively through other distribution
platforms, such as satellite, DTT or Internet-based platforms. If we are unable to obtain or retain attractively priced
competitive content, demand for our existing and future television services could decrease, thereby limiting our
ability to maintain or increase revenue from these services.
13.1.4
Changing pattern of video content distribution (from pay television to Internet, where such
services are delivered by OTT services providers) could slow down the growth, or even result in a
decrease, in the number of our television services RGUs and, hence, adversely affect our revenue
and profitability
New market players from sectors that are either unregulated or subject to different regulations from us have
emerged as competitors to us in the provision of video services. For example, Google, Yahoo, Netflix and other OTT
services providers already offer audiovisual content that can be accessed by our subscribers. The OTT television
market in Poland is developing dynamically, with channel offerings available only over the Internet already
beginning to emerge. While we make efforts to address this challenge by: (i) expanding our own OTT video services,
with our mmTV.pl service currently available on PCs, smartphones, tablets and other Internet-connected devices
and (ii) cooperating with other OTT services providers to offer their services to our subscribers through set-top
boxes, there can be no assurance that we will be successful in implementing these initiatives and that continuing
development of the OTT market in Poland will not slow down the growth, or even result in a decrease, in the number
of our television services RGUs and, hence, adversely affect our revenue and profitability.
13.1.5
The consolidation of the Polish pay television and telecommunications markets may adversely
affect our business
The pay television and telecommunications markets in Poland remain relatively fragmented, but they have recently
experienced a significant trend towards higher level of consolidation. The emergence of larger pay television and
telecommunications services companies as a result of this consolidation process may make it even more difficult for
us to successfully compete in some or all of our principal markets. For example, the emergence of a dominant
market player in pay television, fixed or mobile broadband Internet or fixed-line or mobile telephony segments of
the market may adversely affect our business as a result of such player using its market power to increase the cost
of content or infrastructure lease fees.
Moreover, we expect that at least some of the operators active in the Polish pay television market may seek to
acquire independent cable television operators to further expand their areas of operation, which may be detrimental
to our business as we may not be able to deliver on our acquisition plans as expected because of higher expected
bids for small cable operators.
14
13.1.6
Our operations could be adversely affected by any deterioration in the television, broadband
Internet or telephony markets in Poland as a result of an economic downturn and/or a
deterioration of living standards or other reasons
We operate exclusively in the Polish market and our success is, therefore, closely linked to the general economic
climate in Poland and cannot be offset by developments in other markets. Our business is focused on providing
television, fixed and mobile broadband Internet and telephony services to residential customers in Poland and
broadband Internet and telephony services to small and medium-sized business customers in Poland. As a result,
substantially all of our operating revenue is derived from Poland. Any downturn in the television, broadband Internet
or telephony markets in Poland, as a result of an economic downturn and/or a deterioration of living standards or
other reasons, could have an adverse impact on our business, results of operations, financial condition and/or
prospects. Negative developments in, or general weaknesses of, the Polish economy and, in particular, high levels
of unemployment, or decreases in disposable income of the population could have an adverse impact on spending
by consumers in terms of both usage levels and spending on additional services. Such developments could make it
more difficult for us to attract new customers, make it more likely that our existing subscribers will downgrade or
disconnect their services, and make it more difficult for us to maintain or increase ARPU.
13.1.7
We could be adversely affected by the continuing decrease in the overall number of fixed-line
telephony subscribers in Poland and by the decrease in non-subscription revenue from telephony
services
The overall number of fixed-line telephony subscribers in Poland has been decreasing in recent years, primarily
because of the substitution effect from mobile telephony. While we were able thus far to successfully withstand the
impact of this trend, there is no assurance that we will be able to continue to grow the number of our fixed-line
telephony RGUs in the future.
In addition, in recent years, the increasing proportion of revenue for fixed-line telephony services have come from
plan subscription fees that include a certain number of free minutes and certain free additional services, while the
proportion of revenue from the use by subscribers of additional minutes or additional services not included in the
subscription plan has continued to decrease. We expect that this trend will continue in the near- and medium-term
future and that it will continue to have an adverse effect on our revenue and profitability.
13.1.8
We could suffer adverse consequences from the failure to deploy successfully new technologies or
services
Our industry is characterized by rapid technological change and the introduction of new services and products. If
any new or enhanced technologies, services or products introduced by us fail to achieve sufficient market
acceptance or experience technical difficulties, our revenue growth, margins and cash flows may be adversely
affected. As a result, we may not recover the initial investment made to deploy these technologies, services or
products.
We may not be able to fund the capital expenditures necessary to keep pace with technological developments. Our
inability to obtain the funding or other resources necessary to expand or further upgrade our networks and provide
advanced services in a timely manner, or successfully anticipate the demands of the marketplace, could have a
material adverse effect upon our ability to attract and retain customers and generate revenue.
As we work to introduce new technologies, services and products, and as the number of our customers and the
number of services that we offer our customers increases, the complexity of our services offerings will also increase
and may require our networks to be extended. A failure to manage the growth and complexity of our network could
lead to a degradation of service quality and network disruptions that could harm our reputation and result in a loss
of subscribers.
15
13.2
Risks related to our business
13.2.1
There is no certainty that we will be able to successfully expand our MVNO services after their
launch in January 2014 or successfully expand any other recently launched services or develop or
introduce new services in the future
In 2013, we entered into an agreement with Polkomtel and in 2014 with P4 Sp. z o.o. under which we have access
to their networks on a wholesale basis and are able to resell the mobile telephony and mobile broadband services
under the Multimedia brand name as part of our expanded integrated services package. We launched the MVNO
services in January 2014. This allows us to expand our triple play offer by adding mobile telephony as a fourth
component, which enables us to provide a “quadruple play” offer to our subscribers. In providing the mobile
telephony and mobile broadband services to our subscribers, we are dependent on the mobile network and other
related services provided by Polkomtel and P4, and any network quality or other problems that might arise in the
future could have a material adverse effect on our operations and our reputation. Our ability to comply with
applicable regulatory requirements for electronic communications providers may also in some cases depend on
mobile network operators.
A failure to successfully enter the mobile telephony market could have substantial negative consequences for us
because we would not then be able to offer customers a full suite of television, broadband Internet and fixed-line
and mobile telephony services that other competitors are developing.
We have recently introduced a number of new services and are currently working on developing and launching
other new innovative services. If new services introduced by us fail to achieve sufficient market acceptance or
experience technical difficulties, our revenue growth, margins and cash flows could be adversely affected. As a result,
we may not recover the initial investment that we have made or may make to deploy these services. In addition, if
competitors offer the same or similar new services in the market more quickly or more effectively than we do, we
may lose existing and potential customers to our competitors.
13.2.2
The operation of our network and related systems depends on technology, equipment and service
suppliers that may discontinue their products or seek to charge us prices that are not competitive
We have important relationships with several suppliers of hardware and services that we use to operate the network
that we own or lease and related systems. In many cases, we have made substantial investments in the equipment
or software of a particular supplier. Therefore, changing supply and maintenance relationships in the event that an
initial supplier, refuses to offer us favourable prices or ceases to produce equipment or provide the support that the
network requires, will potentially increase our costs.
We rely on sales forecasts, supply chain management processes, our stocks in the warehouse and expected delivery
terms to ensure that we have necessary levels of equipment and staffing to meet customer demands. If our
forecasting and other logistics systems prove erroneous, we may have difficulty obtaining needed equipment within
required periods, which could have a material adverse effect on our ability to attract and retain customers and
generate revenue.
13.2.3
We may be unable to maintain adequately or upgrade our network and related systems or make
other network improvements essential for our operations
Our assumptions regarding the expenditures associated with maintenance and upgrades of the network may prove
to be inaccurate for a number of reasons, including if:

we are unable to obtain compatible equipment from our existing suppliers required to maintain or upgrade
the network; or

network usage requirements in the network exceed our projections and our planned investments are
insufficient to maintain throughput and functionality at the level required to provide services of adequate
quality.
We may be required to seek additional financing if our expenditures on network maintenance, upgrades and
expansion exceed our projections or our operating cash flows are lower than expected. Any inability to secure
additional financing could adversely affect our operational plans.
16
13.2.4
A system failure or security breach on the network or the malfunctioning of technical equipment
could have a material adverse effect on our business, results of operations, financial condition,
prospects and/or reputation
If any part of our network, including our information technology systems, is subject to a flood, fire or other natural
disaster, acts of terrorism, a computer virus, other catastrophe or unauthorized access, our operations and customer
relations could be adversely affected. Although our national backbone is, in significant part, built in resilient rings
to ensure the continuity of network availability in the event of any damage to our underground fibres and hightension wires, if any ring is cut twice in different locations transmission signals will not be able to pass through part
of our network, which could cause significant damage to our business. In addition, disaster recovery, security and
service continuity protection measures that we have or may in the future undertake, and our monitoring of network
performance from our two network operations centres, may be insufficient to prevent losses. We maintain standard
insurance policies which cover our fixed assets for property damage. In particular, our telecommunications
infrastructure, as well as our cable television access networks, are insured against damage from fire, theft and other
types of risk. However, any catastrophe or other damage that affects our network could result in substantial
uninsured losses and, in some cases, an interruption of our services, which, in turn, could have an adverse effect on
our reputation, operational continuity, business in general, result of operations, financial condition and/or prospects.
In the event of a power outage or other shortage, we have back-up or alternative supply sources for only a part of
our network components. Our business is also dependent on certain sophisticated critical systems, including our
billing and management information systems. The complexity of these systems is increasing as we increase the
number and variety of the products and services that we offer. As a result, if there is a problem with the operation
of our billing or management system, it may be difficult to resolve the issue in a timely and cost effective manner.
Moreover, we may incur liabilities and adverse publicity or reputational damage to the extent that any accident or
breach of our security systems results in a loss of or damage to customers’ data or applications, or inappropriate
disclosure of confidential information. We could also be adversely affected by the malfunctioning of set-top boxes
and other end-user equipment, all of which is produced by third-party providers. In the event that such equipment
is defective, it may be difficult or impossible to enforce claims against providers. Our ability to recover funds from
providers in such cases or in other situations may also be limited if the providers become insolvent. Malfunctions of
set-top boxes and other end-user equipment may create technical problems, damage our reputation and result in
the loss of subscribers, which could have a material adverse effect on our business, results of operations, financial
conditions and/or prospects.
13.2.5
We may pursue acquisitions that, if consummated, may adversely affect our business
Our primary focus is on active participation in the consolidation of the Polish cable television and
telecommunications markets. Future acquisitions may have a major impact on our business and results of
operations. The process of acquiring and integrating a new business with our operations may also carry some risks,
such as, for example, discontinuation of our services by some subscribers of the acquired operator, the need for
additional investments into the acquired network or delays connected with legal consolidation of the businesses.
We may also become liable for any debts or obligations of acquired operators, including possible undisclosed
liabilities, and our debt burden may increase if we borrow funds to finance any future acquisition, which could have
a negative impact on our cash flows and our ability to finance our overall operations. Although the cable television
market in Poland is still highly fragmented, we cannot guarantee that any of the acquisitions that we intend to make
or decide to make in the future will be finalized or that we will succeed in increasing our revenue, subscriber or RGU
levels. In addition, our management may be distracted by such acquisitions and the integration of the acquired
businesses.
13.2.6
The proper functioning of the infrastructure and equipment owned and operated by third parties
depends on cooperation with telecommunications operators, including Orange Polska
Our success depends on, among other things, our ability to provide high quality and reliable services, which is in
part dependent upon the proper functioning of the infrastructure and equipment owned and operated by third
parties and is, therefore, beyond our control.
Historically, our key business partner as far as the scale of our cooperation is concerned is Orange Polska. A large
portion of the traffic generated on our networks is transmitted using interconnection points with Orange Polska. In
addition, to expand our network organically, we rely upon Orange Polska to lease network infrastructure to us in
17
various locations in which it has already constructed such infrastructure. We lease space in underground ducts,
tunnels or piping controlled by Orange Polska, particularly in urban areas. If Orange Polska refuses to cooperate
with us on these matters or makes such cooperation difficult, this may affect our ability to expand our network or
achieve efficiencies in our telephony services.
Additionally, we lease a portion of our transmission backbone and related transmission infrastructure and
equipment from third-party service providers. If such service providers fail to maintain their networks properly, or
fail to respond quickly to network failures, our customers may experience service interruptions. If interruptions
adversely affect the perceived reliability of our service, we may have difficulty attracting new customers and our
brand, reputation and growth will be negatively impacted.
13.2.7
Our success depends on attracting and retaining key personnel
We believe that our commercial success depends on our ability to attract and retain highly qualified management
and key personnel. At present, competition for highly skilled individuals in Poland is intense. There can be no
assurance that we will continue to be successful in attracting and retaining such individuals in the future. Loss and
failure to attract or retain such individuals could have a material adverse effect on our business, result of operations,
financial condition and/or prospects.
13.2.8
Our business may be adversely affected by failure to maintain our reputation and the value
associated with the Multimedia brand
The Multimedia brand is an important asset to our business. Maintaining the reputation of, and value associated
with, the Multimedia brand is vital to the success of our business, but there can be no assurance that our business
strategy and its execution will accomplish this objective. Our reputation may be harmed if we encounter difficulties
in the provision of new or existing services, whether from technical faults, lack of necessary equipment or other
factors. If third parties on whom we rely do not meet our performance standards or provide technically flawed or
imperfect products, the quality of our services and our reputation may be harmed. Substantial erosion in the
reputation of, or value associated with, the Multimedia brand could have a material adverse effect on our business,
results of operations, financial condition and/or prospects.
13.2.9
Our subscriber churn may increase in the future
Churn among our subscribers could increase for many reasons, including the effects of competition or new
technologies and problems with the quality of services we offer. From time to time, we change the programming
we offer to our television subscribers and introduce price changes. Such changes may also affect our churn levels.
Any increase in customer churn or any amounts expended to control customer churn or to replace lost subscribers
could negatively affect our profitability. In order to counter a potential or actual increase in customer churn, higher
marketing, call centres-related or other additional expenses might be required.
In 2013, we introduced a key change in our customer retention strategy that we call our interim rates policy. The
interim rates mechanisms have allowed us to propose new pricing parameters on a flexible footing to customers
before the expiry of their promotional rates. As a result, we are able to optimize the overall effect of several key
measures, such as revenues, gross margin and customer churn levels. We believe that the introduction of the interim
rates policy helps us to reduce churn among our subscribers. However, if this policy stops working and churn levels
increase again, such developments could have a material adverse effect on our revenue and profitability.
13.2.10 Our operations and future investments could require significant capital investment
In order to continue to provide competitive services and products to our subscribers, we must continue to expand
and improve our service offerings and technology, which involves significant on-going capital investment. We may
need to raise capital in the future if our cash flow from operations is not adequate to fund our network investment
programs or if we pursue new projects. Depending on capital requirements, market conditions and other factors,
we may need to raise additional funds through debt or equity offerings. In the event that such financing cannot be
obtained on reasonable terms, or at all, we may not be able to upgrade our services as necessary and may be
compelled to scale back our plans for future business expansion.
18
13.3
Risks related to our financial position
13.3.1
Breach of covenants included in our financing documentation may obligate us to repay financing
facilities before maturity
The documentation of our financing facilities contain a number of significant covenants or other provisions that
could adversely affect the way we operate our business. Such covenants apply to Multimedia Polska and to its
subsidiaries and concern, among others:

payment of dividends or making of other distributions to the shareholders in certain circumstances;

making certain investments or acquisitions;

disposal of assets other than in the ordinary course of business or to other members of our group, or of a
total value not exceeding (in any financial year) PLN 50m;

mergers with other companies that are not in our group;

incurring additional debt and extending guarantees;

granting loans or other forms of financing, except for loans of a total value not exceeding PLN 30m;

granting liens and pledging assets; and

materially changing the general nature of our business.
Our ability to comply with these provisions may be affected by events beyond our control. In addition to limiting
our flexibility in operating our business, the breach of any covenants or obligations under the agreements and
instruments governing our debt will result in a default under the applicable debt agreement or instrument and could
trigger acceleration of the related debt, which in turn could trigger defaults under other agreements governing our
debt.
13.3.2
We could be adversely affected by increases in the interest rates on our outstanding debt
Almost all of our debt bears interest at variable rates based on the official WIBOR rates for three-month deposits in
Polish zloty or six-month deposits in Polish zloty, plus margin. An increase in the interest rates on our debt may lead
to higher debt service costs and, consequently, adversely affect our business, results of operations, financial
condition and/or prospects.
13.3.3
Currency fluctuations could adversely affect our earnings and cash flow
Our business is exposed to fluctuations in currency exchange rates. Although a substantial majority of our revenue
is denominated in Polish zloty, we have significant capital expenditures and operating costs (including costs of
network hardware equipment, software and programming content) that are incurred in euro and U.S. dollars. The
exchange rates between Polish zloty and euro or U.S. dollar have fluctuated significantly in recent years and may
continue to fluctuate significantly in the future. We do not engage in foreign exchange hedging transactions and,
therefore, we could be adversely affected by any future fluctuations in exchange rates unfavourable from our
perspective.
13.3.4
We have significant debt service obligations
We have significant debt service obligations and may incur additional debt in the future. As of 31 December 2015,
we had total consolidated debt of PLN 1,339.1m (consisting of all non-current and current “interest-bearing bank
borrowings, debt instruments and other” and “liabilities under issued securities”) as compared to consolidated
shareholders’ equity of approximately PLN 239.9m. The ratio of our interest-bearing debt minus cash and other
liquid financial assets (i.e. bank deposits), as of 31 December 2015, to our 2015 Adjusted EBITDA was 2.95.
Our debt service obligations could have important consequences, including, but not limited to, the following:

requiring that a substantial portion of our cash flows from operations be dedicated to servicing debt,
thereby reducing the funds available to us to finance our operations, capital expenditures, research and
development and other business activities, including maintaining the quality of the network, as well as the
ability to distribute dividends;

impeding our ability to obtain additional debt or equity financing, including financing for capital
expenditures, and increasing the cost of any such borrowing;

impeding our ability to effectively compete with other providers of television, Internet and telephony
services in Poland; and
19

13.3.5
adversely affecting public perception of us and our brand and making us more vulnerable to economic
downturns and adverse developments and giving us less flexibility to react to changes in our business.
We may not generate sufficient cash flows to fund our capital expenditures, ongoing operations
and debt obligations
Our ability to service our debt and to fund our on-going operations will depend on our ability to generate cash
flows. We cannot give assurance that our businesses will generate sufficient cash flows from operations or that
future debt or equity financing will be available to us in an amount sufficient to enable us to pay our debt obligations
when due. Our ability to generate cash flows is dependent on many factors, including:

our future operating performance;

the demand and price levels for our current and planned services and products;

our ability to maintain the required level of technical capability in our network and in the subscriber
equipment and other relevant equipment connected to our network;

general economic conditions in Poland and conditions affecting the purchasing capacity of our customers;

competition;

the outcome of certain litigation in which we are involved and legal, tax and regulatory factors affecting
our business.
Some of these factors are beyond our control. If we are unable to generate sufficient cash flows, we may not be able
to grow our business, respond to competitive challenges or fund our other liquidity and capital needs, including
capital expenditures and debt service obligations. If we are unable to meet our debt service obligations, we may
have to sell assets, attempt to restructure or refinance our existing indebtedness or seek additional funding in the
form of debt or equity capital. We may not be able to do so on satisfactory terms, if at all.
13.4
Risks related to Regulatory and Legal Proceedings
13.4.1
We are governed by the prevailing legal regulations, which may obligate us to incur additional
expenditures or curtail our revenues.
Our operations are broadly subject to legal regulations and oversight by various national government authorities,
including in particular oversight by the President of the Office of Electronic Communications (“UKE”). These
regulations may elevate our administrative and operating expenditures or curtail our revenues.
Among other regulations, we are governed by:

regulations pertaining to the provision of the last mile service in our network according to which the
President of UKE may set the maximum prices to render this service on a given market;

regulations pertaining to telecommunications access, including the connection of various telecom
operators’ networks and interconnect fees which we charge and pay;

regulations pertaining to the provision of access to properties, buildings and telecommunication
infrastructure for other operators and local government entities conducting telecommunication activity;

requirements of incorporating specific national and regional television programmes in our offering;

regulations pertaining to protecting subscriber privacy;

other regulations concerning the usage of land, environmental protection, equal employment
opportunities, technical standards, the required standards for subscriber services and competition and
consumer protection.
Amendments to prevailing regulations and government policy (or to the interpretation of prevailing law) may
materially affect our profitability, how we conduct our operations and the rollout of new products and services. In
particular, amendments to prevailing regulations (or their interpretation) pertaining for instance to obtaining
permits to conduct a specific type of activity, price regulations, network connection agreements and imposing
general obligations on the provision of services as well as amendments implementing more favourable terms and
conditions for other operators to provide services may exert a material adverse impact on our operations. The
inability to anticipate how prevailing and future regulations will affect products and services may exert an impact
on our capacity to launch new products and services.
20
13.4.2
The imposition of new obligations on the Company stemming from the Telecommunications Law
may exert an adverse impact on our operations.
The main act that presently regulates telecommunications activities in Poland is the Telecommunications Law of 16
July 2004 (Journal of Laws of 2004, No. 171, item 1800, as amended) (“Telecommunications Law”). Under the
Telecommunications Law, the President of UKE may impose duties on operators controlling access to end users so
as to ensure that such end users are able to communicate with end-users of another telecommunications provider,
including the obligation to interconnect networks. The following duties, among others, may be imposed on an
operator holding a significant market power on one of its appropriate markets: (i) the duty to make the network
available to other operators, in particular to connect it to the local subscriber loop or to co-utilize the local subscriber
loop, (ii) to calculate costs and base the fees charged for network access on these calculations and (iii) to keep
regulatory accounting in reference to the provision of telecommunications access or to render services on the retail
market. The Telecommunications Law does not define the size of the market in which the market position of a
telecommunications provider is evaluated. Even a small telecommunications provider can have a large market share
in a small area. As a result, the President of UKE may name telecommunications providers as having significant
market power in a small area This will serve as a basis for imposing any other regulatory obligations upon such a
company, which will have to be proportional to the superior market position of the company, i.e. to the extent that
it prevents effective competition on the given telecommunication services market.
Pursuant to the Telecommunications Law, a public telecommunications network operator is obliged to conduct
negotiations concerning telecommunication access agreements, including interconnection agreements, upon
request from another telecommunications operator and other authorized entities. When providing
telecommunication access a telecommunication entrepreneur should take into consideration the regulatory duties
imposed on it for the purposes of rendering public access services and procuring network interoperability. The
President of UKE may, in response to an application from any party to negotiations to enter into a
telecommunication access contract adjudicate the contested issues and prescribe the terms and conditions of
cooperation by issuing an administrative decision, which supersedes the contract in this scope.
Since January 2013, even a small telecommunication entrepreneur may be obligated by the President of UKE to
render a universal service. The President of UKE may assess availability, the quality of service and the price
affordability of services falling within the scope of a universal service. The President of UKE consults the results of
this assessment with end users, consumers and telecommunication entrepreneurs. If the results of this assessment
and consultations demonstrate that any of the services falling within the scope of a universal service is not available
or is not rendered while observing good quality and at an affordable price, the President of UKE announces a
competition without delay to select an entrepreneur designated to discharge the duty of rendering this service in
the area designated by the President of UKE. In the event of a dearth of offers fulfilling the terms and conditions of
the competition, the President of UKE designates, by a decision, the telecommunication entrepreneur to render such
service while simultaneously obligating it to render the universal service on the stated area while giving
consideration to the economic and technical capacity of this entrepreneur to render this service in a given area, the
need to support equal opportunity and effective competition in rendering telecommunication services and to
procure the availability of these services.
The Telecommunication Law imposes a duty on us to procure that our subscribers have portability to reassign the
number assigned to them to the existing network of some other operator if they cease to utilise our services. If we
are unable to provide a subscriber with such portability or if we do it with delay, this may affect our reputation and
impede us from acquiring new subscribers, while penalties may also be imposed on us by the President of UKE.
Furthermore, number portability may enable customers to churn away from our services, thereby elevating the
number of such persons. If we are unable to attract a sufficient number of new customers by taking advantage of
number portability, the cost of implementing this solution may outweigh the potential benefits that we receive.
13.4.3
The President of KRRiT may impose a fine on us in the event of recognising that we have failed to
discharge the duty of disseminating selected channels in every bundle made available by the
Company.
The Act of 29 December 1992 on Radio and Television (Journal of Laws of 1993, Number 7, item 34 as amended,
“Act on Radio and Television”) imposes on us the duty of disseminating the following programmes in our cable
network: TVP 1, TVP 2 and the TVP regional programme, TVN, Polsat, TV Puls and TV4. According to the official
interpretation of art. 43.1 of the Act on Radio and Television presented by the Chairman of KRRiT on 17 November
21
2011, cable operators should offer the programmes above in each one of the bundles available from these
operators. In our opinion, art. 43.1 of the Act on Radio and Television does in truth impose the duty of disseminating
the above programmes on operators but it does not impose the obligation of offering them in all of an operator’s
bundles. Our opinion is based on PIKE’s opinion expressed on 9 December 2011 according to which the foregoing
stance of the Chairman of KRRiT constitutes an overinterpretation of the regulations and imposes more extensive
obligations on operators than the Act on Radio and Television, which does not state in which bundles these
television programmes should be made available.
Being guided by the desire to cooperate as best as possible with KRRiT and recognising the socially important
gravity of the arguments underpinning KRRiT’s position, we continue to undertake investment and operating efforts
aiming at complying with KRRiT’s guidelines.
According to the Act on Radio and Television, if a cable operator is not going to offer the programmes covered by
the duty of dissemination to its subscribers, the Chairman of KRRiT may impose on such an operator a cash fine of
up to 10% of that operator’s revenues generated in the previous fiscal year. Therefore, one cannot rule out that the
President of KRRiT will impose on us a cash fine if we fail to offer these programmes in each one of the bundles we
have, which could exert a material adverse impact on the Group’s operations, financial position, operating results
and growth forecasts.
13.4.4
Collective management organisations may launch claims against us
According to the Act of 4 February 1994 on Copyrights and Neighbouring Rights (i.e. Journal of Laws of 2006, No.
90, item 631 as amended) (“Copyright Law”), cable television operators may retransmit works broadcast in radio and
television programmes in their cable networks only on the basis of an agreement executed with the competent
collective management organisation. We entered into an agreement with the Association of Polish Filmmakers
(“SFP”) and the Authors' Association ZAiKS, the largest collective management organisations in Poland, that hold
copyrights to numerous audiovisual works in their repertoire.
On account of the considerable variety of works in the television and radio programmes disseminated in our cable
networks, one cannot rule out that other collective management organisations representing authors not belonging
to SFP or ZAiKS will file claims against the Company by virtue of the breach of the copyrights they manage.
13.4.5
Amendments to regulations of tax law, its interpretation and amendments to individual tax
rulings on the regulations of tax law may lead to the emergence of considerable expenses in
adapting to them or the risk of tax authorities challenging the correctness of our tax settlements.
The regulations of tax law are complicated and unclear and they change frequently. There is a risk that in conjunction
with the implementation of new regulations the Group Companies will have to undertake adaptive efforts, which
may lead to the emergence of considerable expenses caused by the circumstances of adapting to the new
regulations and the costs of failing to submit to them. Controversies and disputes frequently accompany the
application of the regulations of tax law and they are usually adjudicated until the administrative courts review them.
In addition, the practice of applying tax law by tax authorities is not homogenous, while the jurisprudence of
administrative courts pertaining to tax law exhibits material differences. The Company cannot guarantee that the
tax authorities will not make a different interpretation, unfavourable to the Group’s Companies, of the tax
regulations applied by the Group’s Companies. One cannot preclude the risk that individual tax rulings obtained
and already applied by the Group’s Companies will be challenged.
On account of the above, one cannot preclude prospective disputes with tax authorities, and as a result, that the tax
authorities will challenge the correctness of tax settlements made by the entities in the Group in respect of tax
liabilities for which the period of limitation has not expired and that tax arrears will be defined for these entities.
13.4.6
Challenging the terms and conditions of agreements with related entities may have an adverse
impact on our operations
The Group’s Companies enter into many transactions with Group entities and with other related parties within the
meaning of tax regulations. When entering into and executing transactions with related entities Group Companies
take care in particular to procure that these transactions comply with the prevailing regulations pertaining to transfer
pricing and to observe all documentary requirements applicable to such transactions. Nevertheless, on account of
22
the special nature of transactions with related entities, the complexity and ambiguity of the legal regulations
governing the methods of investigating the prices used, as well as the difficulties in identifying comparable
transactions for benchmarking purposes, one cannot procure that various group companies will not undergo
inspections or other investigation-related actions undertaken by tax authorities, including revenue audit authorities.
In the event of challenging the methods of specifying the market conditions for the purposes of these transactions,
this may exert a material adverse impact on the Group’s operations, financial position, growth outlook and results.
13.4.7
Our activity as an Internet service provider puts us at risk of court proceedings being launched
against us concerning the transmission of information owned by third parties or the usage of our
service to transmit content forbidden by law.
In connection with the growing popularity of Internet and the transmission of an increasingly greater quantity of
information via the Internet by using the services of providers like ourselves, one cannot preclude that we may be
sued for breach of intellectual property. Potential liability may grow at the time of adopting a regulation which
would impose on Internet service providers the duty of preventing clients from the unauthorised downloading of
music, movies and other content from the Internet, for downloading this content from the Internet may violate
intellectual property rights.
All disputes and court proceedings, regardless of whether they are justified or not, may be time-consuming. At the
same time, such a circumstance may lead to the necessity of signing licensing agreements whose execution on
market conditions may not be plausible. If such claims or lawsuits prove to be justified, this may have an adverse
impact on our financial position and the results of our operating activity.
Moreover, if our subscribers will have the ability to transmit illegal content via the web, this may damage our
reputation, our clients or third parties.
13.4.8
Polish regulations concerning competition protection may hamper our development or action
strategy
According to the Act of 16 February 2007 on Competition and Consumer Protection (Journal of Laws of 2007, No.
50, item 331 as amended) (“Act on Competition and Consumer Protection”), specific transactions executed in Poland
entailing the acquisition or purchase of another entity require prior notification to the President of UOKiK. The
President of UOKiK may impose a cash fine on an entity effecting such a transaction if it fails to make such a
notification or obligate it to sell all or some of the assets or shares acquired as a result of such a transaction.
According to the Act on Competition and Consumer Protection the President of UOKiK may forbid the execution of
a transaction or specify the conditions for its execution if it deems that the acquisition or purchase may exert an
adverse impact on competition on the Polish market. One cannot anticipate the President of UOKiK’s decisions
concerning a given notification. Generally, a purchase leading to concentration as a result of which the buyer’s share
in a given appropriate market surpasses 40% entails considerable risk of the President of UOKiK blocking such a
transaction. Even though it is permissible to grow market share above 40% as a result of organic growth, the
President of UOKiK may refuse to approve one or all of our future acquisitions or purchases, which may adversely
affect the development of our operations through acquisitions and purchasing other entities.
13.4.9
The President of UOKiK may impose on us cash fines in the event of asserting that we have
breached the collective interests of consumers
Since we render services primarily to natural persons for purposes not associated with their business or work-related
activity, there is a risk that the President of UOKiK will issue a decision stating that we have breached the collective
interests of consumers. According to the Act on Competition and Consumer Protection, a practice breaching the
collective interests of consumers is understood to mean in particular the application of clauses in model contracts
that have been entered in the register of clauses of model contracts after being recognised as being impermissible,
breaching the duty of providing consumers with accurate, true and complete information as well as unfair market
practices or acts of unfair competition.
The President of UOKiK may impose on us a cash fine in an amount up to 10% of the revenues generated in the
settlement year preceding the year of imposing the fine as a sanction for using practices that breach the collective
interests of consumers, which could affect in a material and adverse manner our operations, operating results,
financial position and growth outlook.
23
Having in mind a number of decisions issued by the Office of Competition and Consumer Protection asserting the
breach of the collective interests of consumers by our competitors and the status and scope of these breaches, we
under all measures to curtail the risk of the Office of Competition and Consumer Protection issuing similar decisions
against us.
14 Discussion of the Financial Standing of the Multimedia Polska Group and Major
Events which Had a Significant Impact on its Operations1
The following discussion and analysis of the Group’s results for 2015 has been prepared on the basis of the
consolidated financial statements for the year ended 31 December 2015 prepared in accordance with IFRS. Please
note that the Group has restated comparative data for 31 December 2014 compared to the 2014 annual report
(restated data). The data was restated due to a change in accounting policies applicable to the recognition and
accounting for subscriber acquisition costs (SAC) in the income statement. According to the amended accounting
policy, the subscriber acquisition costs resulting from telecom service delivery contracts and energy and gas delivery
contracts are treated as intangible assets and amortised over the average duration of the contract and not, as before,
expensed in the income statement when incurred. In order to provide full comparability of data year on year, the
change was also made retrospectively in 2014, which resulted in different presentation of results: a decrease in the
net profit and an increase in the balance-sheet total for the year ended 31 December 2014 compared to the data
published in the 2014 annual report (see note 7 to the consolidated financial statements).
The Multimedia Polska Group operates only in Poland and 100% of its revenues are generated in the domestic
market. The Group does not have any export sales. Due to the nature of the Group’s operations, there are no
significant concentration risks with respect to both subscribers and suppliers.
The operating and financial results of Multimedia Polska Biznes S.A. (previously Multimedia Polska BBI S.A.) and its
subsidiaries have been consolidated with the result of the entire Multimedia Polska Group from January 2015.
As announced previously, as from 2015 the Group has ceased to report detailed segment-specific operating
statistics, pertaining primarily to RGUs and ARPU.
With respect to RGUs, as of 2015 our basic split is into telecom RGUs and other RGUs, where other RGUs comprise
new services outside the scope of the typical telecom bundle reported to date (such as energy, home monitoring
and insurance etc.). As a result, the group of customers referred to as ‘multiplay’ comprises clients who take up
three or more services, not just the triple play subscribers.
With respect to ARPU, as the telecoms market shows strong trends towards multiplay—bundling not only telecom
services, but many more—we want to focus on ARPU per customer instead of ARPU per each type of RGU. As we
start to create bundles of services outside the scope of the typical triple play, we may be allocating discounts to
particular services at our discretion. This could lead to gross misinterpretation of our ARPU statistics if each segment
was to be analysed separately, particularly during a stronger push to sell a certain product or service or if the entire
discount on the bundle was allocated to just one product in that bundle. Furthermore, in order to provide the most
accurate data, as from 2015 we disregard other revenues that are not strictly customer-related when calculating
ARPU per customer; hence, some minor differences may occur between ARPU per subscriber reported previously
and ARPU per customer reported as from 2015. To ensure comparability of data we have adjusted this statistic
retrospectively in prior periods (comparable data) in this Report.
14.1
Key Operating Figures
As at 31 December 2015, the Group had in total 1,674,6472 revenue generating units (RGUs), including:
Please be aware of the fact that the analysis provided below was based on PLN millions rounded to one decimal place. Thus,
some arithmetic inaccuracies may result from the approximation.
2
Please note that this number is not comparable to the numbers stated in prior reports, until and including Q3 2013, due to the
change in the methodology used to calculate RGUs. A detailed explanation is provided in the 2013 annual report and
comparable data for prior periods is provided in Schedule no. 1 to the 2013 annual report.
1
Discussion of the Financial Standing of the Multimedia Polska Group and Major Events which Had a Significant Impact on its Operations
24

1,632,339

42,308
telecom RGUs (including 816,455 video RGUs, 535,766 broadband Internet RGUs, and 280,118
voice RGUs), and
other RGUs.
As of 31 December 2015, we provided services to approximately 824,100 customers, of which approximately 310,500
signed up for two services (out of television, Internet, telephony, and other services) and approximately 130,300
signed up for a multiplay service bundle (three or more services). As of 31 December 2015, all of our customers
collectively took up approximately 1,674,600 services (television, including premium channels; fixed and mobile
broadband Internet; fixed and mobile telephony, including indirect voice and payphones; and other services,
including energy, home monitoring and insurance etc.).
In 2015, we recorded a net increase in RGUs of 73,733 (net of churn) compared to 2014, including:

34,243 telecom RGUs (including addition of 36,506 video RGUs, 8,926 broadband RGUs, and
disconnection of 11,189 voice RGUs), and
39,490

other RGUs.
The rise in RGUs was related mainly to the acquisition of smaller telecom operators, the introduction of new services
in 2014, outside the usual scope of our core telecom operations, and organic growth of our business.
Going forward, we expect that more of our customers will use our bundled offerings, which may help to reduce our
churn rate and provide an important source of future sales revenue growth. The average monthly revenue per
customer (ARPU/HC) in 2015 was PLN 67.12 against PLN 66.26 in 2014 (comparable data, see introduction to Section
14 above), which may be treated as evidence of the reversal of the negative trends that have been in place since the
introduction of DTT in Poland. We believe it is owing to our launch of new services and making our offer more
attractive to our customers, which helps us boost the service multiplication ratio among our clients.
The disconnection rate (churn), calculated as the ratio of disconnections from a given service to the number of
revenue generation units (RGU) at the beginning of the period, was 11.7% (monthly average of 0.97%) in both 2014
and 2015. The level of this ratio has stabilized after the adverse impact it suffered in 2013 following the introduction
of free digital terrestrial television in Poland (for more information see our 2013 annual report).
The ratio of RGUs per customer was up from 1.95 in 2014 to 2.03 in 2015. The upward drivers of this ratio in 2015
were the introduction of new services, outside the scope of our core telecom operations, and upsell and cross-sell
to our existing customer base.
14.2
14.2.1
Sales Revenue
Our sales revenue consists of revenue from television, Internet and telephony services as well as other revenue. The
shares of revenue from individual services as a percentage of total revenue are presented in the table below.
2014
2015
Television
49.4%
49.4%
Internet
31.2%
31.5%
Telephony
15.5%
14.6%
3.9%
4.5%
Other
Our sales revenue increased by PLN 3.7m, or 0.5%, from PLN 705.8m in 2014 to PLN 709.5m in 2015. This increase
was principally due to growth in television revenue by PLN 2.2m, or 0.6%, and in broadband Internet revenue of
PLN 2.9m, or 1.3%, which was partially offset by a decline in telephony revenue of PLN 6.1m, or 5.6%, between the
two periods. Other revenues increased by PLN 4.6m, or 16.8%, which had the decisive impact on the level of sales
revenue in 2015. It is worth noting that in line with our earlier guidance, the impact of the recent adverse changes
in our market environment—the 2013 nationwide analogue switch-off—on our business is beginning to subside
compared to previous reporting periods. At the same time, having introduced new services in 2014, such as energy,
home monitoring or insurance, we are keeping pace with changes in our immediate market environment.
25
14.2.2
Television
The table below sets forth selected consolidated operational and financial data for our television business.
2014
Total television revenue (PLN ‘000)
2015
348,504
350,715
1,405
1,474
1,293
1,314
58
79
Homes passed (‘000)(1)
Cable network
PSTN network(2)
PON network
Television RGUs (‘000)
(1)
(2)
55
81
780
816
Homes passed represent the sum of existing subscribers and potential subscribers to whom we can offer our television
services.
Until the Q3 2013 report, this number included homes passed by PON networks. As of the end of 2013, we have switched
to separate reporting of both technologies in terms of homes passed, as PSTN networks are being replaced by new
generation PON networks. Television services provided over PON networks are classified as IPTV.
Our television sales revenue increased by PLN 2.2m, or 0.6%, from PLN 348.5m in 2014 to PLN 350.7m in 2015. One
major and positive trend that is currently affecting our television segment is migration of our subscribers to digital
services, which has continued for several years. The price for digital television services is significantly higher than
the price for analogue television services; however, after our Group responded to the introduction of free DTT in
Poland with a targeted offering, our television ARPU dropped considerably over 2014 and the following quarters. If
pricing of television services had not been affected by the introduction of DTT in Poland, the migration of customers
from analogue to digital services would have translated into much higher revenue growth in this segment. The
notable changes in our market environment that have been in place since 2013, connected primarily with Poland’s
analogue switch-off and the ensuing increase in competition among market players, make it much more challenging
to continue with our historical upward trends typically seen in this segment before.
As a result of continued development of services, such as VoD, interactive television, TV Everywhere (television
accessible via mobile devices) etc., as well as the migration of our subscribers to digital services, we expect to see
growth in the number of digital television users and revenue generated from these services in the forthcoming
quarters.
In the television segment (excluding premium channels), the churn rate was 8.45% (monthly average of 0.70%) in
2015 and dropped from 9.1% (monthly average of 0.75%) in 2014. Our Management Board believes that the churn
rate is kept under control in large part due to increased service bundling, which has a positive impact on churn due
to higher loyalty among double and multiplay customers as compared to single play customers.
14.2.3
Internet
The following table sets forth selected consolidated operational and financial data for our broadband Internet
business.
2014
Total Internet revenue (PLN ‘000)
Cable network
PSTN network (DSL)(2)
2015
220,539
223,484
1,479
1,545
1,279
1,319
145
146
PON network
55
81
Internet RGUs (‘000)
527
536
(1)
Homes passed represent the sum of existing subscribers and potential subscribers to whom we can offer fixed Internet
services.
26
(2)
to a separate reporting of both technologies in terms of homes passed, as PSTN networks are being replaced by new
generation PON networks.
Our Internet sales revenue increased by PLN 3.0m, or 1.3%, from PLN 220.5m in 2014 to PLN 223.5m in 2015. This
growth was principally due to an increase in the number of broadband Internet RGUs, both fixed and mobile, of
c. 11,600, or 2.7%, in aggregate between the two periods. At the same time, as a result of increasing competition in
the market, particularly coming from providers of LTE-based Internet services, the pricing of Internet services
decreased slightly.
Comparing our results year-on-year, churn rates on our fixed Internet services increased slightly. The churn rate was
9.8% (monthly average of 0.82%) in 2015 against 9.4% (monthly average of 0.78%) in 2014.
14.2.4
Telephony
The following table sets forth selected consolidated operational and financial data for our telephony business.
2014
Total telephony revenue (PLN ‘000)
Cable (VoIP)
PSTN network(2)
PON network
Telephony RGUs (‘000)
(1)
(2)
2015
109,522
103 429
1,473
1,539
1,259
1,303
159
155
55
81
291
280
Homes passed represents the sum of existing subscribers and potential subscribers to whom we can offer our telephony
services using our access networks: cable, PSTN and PON.
to a separate reporting of both technologies in terms of homes passed, as PSTN networks are being replaced by new
generation PON networks.
Our telephony revenue decreased by PLN 6.1m, or 5.6%, from PLN 109.5m in 2014 to PLN 103.4m in 2015. As a
result of strong competition and price pressure that affect the entire Polish telecommunications market, we
experienced a decrease in fees for telephony services, and in particular usage fees. Although the usage of our
networks continued to increase, it is only partially recognized as revenue, as the traffic is generated by subscribers
who are entitled to free minutes under their monthly line rental fee arrangements.
In the fixed-line subscriber-generated telephony segment (excluding indirect WLR services, payphones, and mobile
telephony), the churn rate increased from 9.2% (monthly average of 0.76%) in 2014 to 10.3% (monthly average of
0.86%) in 2015.
14.2.5
Other revenues3
Other revenues include lease income, licence fees, revenue from production of programming and other subscribergenerated and interoperator revenues (migrations between packages, maintenance, re-connection fees etc.), as well
as new services outside the scope of our core telecom operations, introduced in 2014, such as energy, home
monitoring and insurance etc.
Other revenues increased by PLN 4.6m, or 16.8%, from PLN 27.3m in 2014 to PLN 31.8m in 2015. Revenues from
new projects and fees for lease of links and telecommunications infrastructure were the most significant items of
other revenues.
Please note that “other revenues” discussed in this subsection are different from “other revenue” presented in the financial
statements. In this discussion, “other revenues” are a sum of two items of the financial statements: (1) “other” under “subscribergenerated and interoperator revenues,” and (2) “other revenue” (see note 14.1 to the consolidated financial statements). "Other
revenues" presented in this section correspond to "other sales" discussed in note 13 to the consolidated financial statements.
3
27
14.2.6
Operating Expenses
Our operating expenses (excluding D&A) increased by PLN 11.3m, or 3.2%, from PLN 349.7m in 2014 (restated data,
see introduction to Section 14 above) to PLN 360.9m in 2015. The table below presents the structure of operating
expenses:
(PLN ‘000)
Cost of services sold
Network maintenance
Subscriber costs
Sales and marketing
Personnel costs
General management
Total
2014
2015
144,269.0
60,824.6
8,069.6
17,963.0
65,947.9
52,599.3
163,267.7
58,112.0
7,074.6
12,095.9
69,624.2
50,760.1
349,673.4
360,934.5
The largest increases were recorded in the cost of services sold (PLN 19.0m) and personnel costs (PLN 3.7m).
The cost of services sold increased primarily on the back of programming and copyright expenses incurred as a
result of acquisitions and changes to programming content, and also costs associated with new services, outside
the scope of our core telecom activity. Another major factor negatively affecting our cost of services sold was the
appreciation of foreign currencies in 2015 compared to the rates recorded in 2014.
Personnel costs increased due to expansion of our sales and marketing structures in connection with the
development of our product portfolio.
We estimate that the total negative impact of foreign exchange rates on the level of our operating expenses in 2015
reached c. PLN 9m.
The largest decreases were recorded in sales and marketing costs (PLN 5.9m), network maintenance costs (PLN
2.7m), and general management (PLN 1.8m).
The decline in sales and marketing costs was related to the high level of those costs in 2014 when we ran large
advertising campaigns and incurred IPO-related expenses. Such expenses were not borne in 2015.
The decrease in network maintenance costs is primarily attributable to link lease cost optimizations.
The fall in general management expenses was also connected with a high level of those costs in 2014 when we were
involved in the IPO process.
14.2.7
Other Operating Income and Expenses
Other operating income decreased by PLN 5.9m, or 39.7%, from PLN 14.8m in 2014 to PLN 8.9m in 2015. This
decrease was principally a result of a PLN 2.0m decrease in income from the release of provisions for operating
expenses, a PLN 2.0m decline in income recognized on overdue liabilities written off, and a PLN 1.0m decrease in
income from reversal of impairment losses on property, plant and equipment.
Other operating expenses decreased by PLN 3.8m, or 28.7%, from PLN 13.2m in 2014 to PLN 9.4m in 2015. This
decrease was principally a result of PLN 4.3m lower costs of repairs, penalties, fines and compensations and PLN
0.5m lower impairment losses and write-down of uncollectible receivables. At the same time, there was a PLN 1.4m
increase in tax paid on civil law transactions.
14.2.8
Operating Profit
For the reasons set forth above relating to the structure of both our revenue and expenses, operating profit declined
by PLN 8.1m, or 5.7% from PLN 143.8m in 2014 (restated data) to PLN 135.7m in 2015. Operating profit margin also
decreased from 20.4% in 2014 to 19.1% in 2015.
28
The detailed factors contributing to the level of our operating profit for 2015 relative to 2014 included:
+ PLN 2.2m increase in video revenue, driven mainly by the digitalization of our subscriber base,
+ PLN 2.9m increase in Internet revenue, driven by new additions of subscribers in the broadband segment,
PLN 6.1m decrease in telephony revenue,
+ PLN 4.6m increase in other revenues (e.g. from new services, leases etc.),
PLN 19.0m increase in cost of services sold (partly connected with adverse impact from USD/PLN and EUR/PLN
exchange rate fluctuations),
+ PLN 9.6m decrease in direct costs,
PLN 3.7m increase in personnel costs,
+ PLN 1.8m decrease in general management costs,
PLN 2.1m decrease of the balance of other operating income and expenses, and
+ PLN 1.5m decrease in depreciation and amortisation.
14.2.9
EBITDA and Adjusted EBITDA
Comparing our results year on year, our EBITDA decreased by PLN 9.7m, or 2.7%, from PLN 357.7m in 2014 (restated
data) to PLN 348.0m in 2015. The level of our EBITDA was attributable to the same factors that had an impact on
operating profit as described above, except depreciation and amortization.
In the same period, Adjusted EBITDA decreased by PLN 18.7m, or 5.0%, from PLN 374.8m in 2014 (restated data) to
356.1m in 2015. Our Adjusted EBITDA margin was 53.1% in 2014 and 50.2% in 2015. The calculation of Adjusted
EBITDA does not include any one-off events or events that are not directly related to the Group's operating activity,
for example profit (loss) on the sale of non-current assets or revaluation of non-current assets. Adjustments to
EBITDA amounted to PLN 8.1m in 2015 as compared to PLN 17.1m in 2014. A detailed description of Adjusted
EBITDA and details on the method of measuring it are provided in note 13 to the consolidated financial statements.
14.2.10 Finance Income
Our finance income decreased by PLN 8.0m, or 53.6%, from PLN 15.0m in 2014 to PLN 7.0m in 2015. Finance income
decreased principally due to lower fees and interest on loans granted and purchased bonds (down by PLN 10.5m)
and lower interest on receivables (down by PLN 0.5m), partially offset by a PLN 3.0m increase in bank interest
received.
14.2.11 Finance Expenses
Finance expenses decreased by PLN 10.3m, or 13.1%, from PLN 78.8m in 2014 to PLN 68.5m in 2015. Finance
expenses decreased principally due to a PLN 9.3m decrease in interest, fees and commissions on bonds, and a PLN
1.0m decline in interest on other liabilities.
14.2.12 Income Tax
In 2015, the Group’s corporate income tax amounted to negative PLN 12.6m, thus the effective tax rate on pre-tax
profit was below zero. In 2014, income tax for the Group was PLN 29.2m (restated data), which means that effective
tax rate on pre-tax profit was c. 36%. This was principally due to a change in management estimates regarding the
expected tax results of some of the companies of the Group, which resulted in a higher deferred income asset
recognized in 2015 on carry-forward tax losses. In 2014, the effective tax rate was higher than the statutory rate as
a result of (i) recognition of costs that are not deductible for tax purposes on a permanent basis, i.e. primarily fees
and interest on debt incurred to carry out our share buy-back programme, and also IPO-related costs; and (ii)
application of 19% tax rate to bond-related interest received in connection with the repurchase of the Tri Media
Holdings Ltd bond by our shareholders (the income tax rate applied to income recognized on the bond under
deferred tax in previous years was 10%, in compliance with international double taxation agreements).
14.2.13 Net Profit
In 2015, we recorded net profit of PLN 86.2m, up by PLN 35.9m, or 70.7%, from 2014 when we recorded a net profit
of PLN 50.8m (restated data). Apart from the operating events described in Section 14.2.8, the tax issues described
above had the most significant impact on our 2015 net profit. However, there was also an additional impact within
29
the operating factors, that were adverse foreign exchange rate fluctuations (responsible for a c. PLN 9m increase in
our total operating expenses).
The Management Board intends to recommend to the Supervisory Board and the General Meeting of the parent
company that the 2015 net profit be allocated to dividend payment.
14.3
14.3.1
Non-Current Assets
As at the balance-sheet date, 31 December 2015, non-current assets amounted to PLN 1,325.2m and accounted for
77.0% of total assets. Non-current assets increased by PLN 70.2m from 31 December 2014 (restated data). On the
one hand, there were large increases in property, plant and equipment (of PLN 30.9m), deferred income tax assets
(of PLN 23.5m), goodwill (of PLN 14.4m), and intangible assets (of PLN 6.9m), but on the other hand financial assets
decreased by PLN 5.8m.
Property, plant and equipment increased by PLN 30.9m due to an increase of PLN 133.2m in the gross carrying
amount of property, plant and equipment and an increase of PLN 47.0m in assets under construction, partially offset
by PLN 149.3m higher impairment charges. Goodwill increased by PLN 14.4m due to acquisitions. Intangible assets
increased by PLN 6.9m as a result of a PLN 27.8m increase in gross carrying amount, offset by a PLN 20.9m increase
in accumulated amortisation and impairment charges. Financial assets dropped by PLN 5.8m due to a lower level of
loans granted by the Group.
14.3.2
Current Assets
As at 31 December 2015, current assets amounted to PLN 395.6m and represented 23.0% of total assets. Current
assets increased by PLN 2.9m, principally due to a PLN 82.9m decrease in cash and cash equivalents, partially offset
by a PLN 79.8m increase in other financial assets and a PLN 5.2m increase in income tax receivable. The decrease in
cash and cash equivalents was connected with the recognition of cash held in bank deposits with maturities of over
3 months as other financial assets (increase in bank deposits of c. PLN 70m from 2014) and also with dividend
payout and clearing payments for acquisitions. The increase in other financial assets was attributable to the
classification of bank deposits discussed above and a PLN 9.6m increase in loans granted by the Group (with accrued
interest). Income tax receivable increased as a result of the tax being overpaid during 2015.
Receivables
Current receivables as at the balance sheet date 31 December 2015 were PLN 82.4m, relative to PLN 76.7m as at
31 December 2014. They increased by PLN 5.6m over 31 December 2014, which was attributable to an increase in
income tax receivable (of PLN 5.2m) and trade and other receivables (of PLN 0.4m).
As at 31 December 2015, cash amounted to PLN 117.4m, down by PLN 82.9m relative to 31 December 2014 (PLN
200.3m). Cash and cash equivalents represented 29.7% of current assets. This level of cash and cash equivalents was
connected with our 2013 and 2014 dividend payment totalling PLN 122.0m and the interest and fees we paid
totalling PLN 66.4m. We also drew down PLN 82.7m in credit facilities. In addition, PLN 220.9m in cash was spent
on investments (including PLN 23.3m on acquisitions) and cash was placed in bank deposits longer than 3 months
(increase in bank deposits of c. PLN 70m from 2014). We also granted loans totalling PLN 3.4m. The level of operating
profit generated by us plus depreciation and amortisation, taxes paid by us, and our engagement in working capital
totalling c. PLN 314.3m were the other factors impacting the level of cash at the end of December 2015.
14.3.3
Equity
As at the balance-sheet date, 31 December 2015, equity stood at PLN 239.9m, having increased by PLN 34.9m
relative to 31 December 2014 (PLN 205.0m, restated data). This increase in equity resulted from our dividend
payment of PLN 51.3m from 2014 profits, and was partially offset by the net profit generated by the Group in 2015
totalling PLN 86.2m. For a detailed statement of changes in equity, please refer to the financial statements.
30
14.3.4
Non-Current Liabilities
Our non-current liabilities as at the balance sheet date, 31 December 2015, amounted to PLN 1,282.4m and
increased by PLN 83.3m compared to 31 December 2014 (PLN 1,199.1m). The increase in non-current liabilities was
primarily the result of a PLN 78.4m increase in interest-bearing loans and borrowings against 2014 following a drawdown from credit facilities. At the same time, there was a PLN 3.4m increase in liabilities under issued securities
reported as non-current (c. PLN 986.8m was disclosed under non-current liabilities in 2015 compared to PLN 983.4m
at 2014 year-end, in accordance with IFRS). There was also a PLN 1.5m increase in deferred tax liability primarily due
to a provision for interest accrued on loans granted by the Group.
14.3.5
Current Liabilities
Our current liabilities as at the balance sheet date, 31 December 2015, amounted to PLN 198.5m, down by PLN
45.2m from 31 December 2014 (PLN 243.7m). The decline in those liabilities was primarily connected with the high
level of trade and other payables in 2014 (mainly due to a dividend from 2013 profits that had already been declared
but was recognized as a current liability at 2014 year-end); hence, there was a PLN 49.7m decline in trade and other
payables in 2015 compared to 2014 and a PLN 3.1m increase in interest-bearing bank loans, borrowings and other
recognized as current, due to a draw-down from our credit facility.
14.4
Consolidated Cash Flow Statement
In 2015, net cash flows from operating activities totalled PLN 314.3m relative to PLN 298.8m recorded in 2014. The
structure of our operating cash flows is similar to EBITDA, with the difference between the two values being the gain
from other operating activities, changes in working capital (PLN 18.4m in total), and income tax paid by us (PLN
15.1m).
In 2015, net cash flows from investing activities amounted to PLN -289.2m, compared to PLN -115.3m in 2014. We
cashed in bank deposits totalling PLN 170.0m and opened bank deposits for a total of PLN 239.6m. We spent PLN
220.9m in total on typical investing activities (purchase of property, plant and equipment and intangible assets and
acquisition of an organised part of business, and acquisition of a subsidiary undertaking, net of cash acquired)
compared to PLN 213.2m in 2014. Moreover, we granted loans of PLN 3.4m and received PLN 2.7m in interest and
PLN 1.4m as proceeds from the sale of property, plant and equipment, and intangible assets.
In 2015, net cash flows from financing activities amounted to PLN -108.0m, compared to PLN -85.7m in 2014. In
2015, we paid interest and fees totalling PLN 66.4m, paid out dividends totalling PLN 122.0m, and paid finance lease
liabilities with interest totalling PLN 2.3m. We also drew down PLN 82.7m in credit facilities.
14.5
Employment
As at 31 December 2015, the Multimedia Polska Group employed 2,083 staff, including persons cooperating with
the Group (associates) and sales representatives. 585 persons were employed at the regional structures (including
customer service assistants, sales representatives, and sale coordinators) and 1,498 persons at the head office. The
increase in employment levels in the regional structures and the head office was connected with the expansion of
our offering and introduction of new services as well as organizational changes in selected departments. The
increase was recorded primarily in the sales and marketing department. The headcount increased by 91 employees,
or 4.6%, on 31 December 2014.
15 Differences Between the Financial Results Disclosed in the Annual Report and any
Previously Published Financial Forecasts
The Group has not published any financial forecasts.
Differences Between the Financial Results Disclosed in the Annual Report and any Previously Published Financial Forecasts
31
16 Management of Financial Resources
As at the balance sheet date, 31 December 2015, the Group had cash and cash equivalents in the amount of
PLN 117.4m, and liquid other financial assets, i.e. bank deposits, totalling c. PLN 170.4m. Our current receivables
amounted to PLN 82.4m while our total liabilities amounted to PLN 1,480.9m, including PLN 198.5m in current
liabilities.
The current liquidity ratio, calculated as current assets divided by current liabilities, was 2.0. The quick liquidity ratio,
calculated as current assets less inventories divided by current liabilities, was the same as the current liquidity ratio
because the value of inventories was insignificant. Management believes that the levels of those ratios are safe and
the Group’s liquidity is not materially threatened.
As at 31 December 2015, the Group had liabilities relating to interest-bearing loans and borrowings, securities
issued, and finance lease liabilities totalling PLN 1,339.1m, including PLN 986.8m under non-current debt securities
issued and PLN 286.9m under non-current bank loans and finance leases. The ratio of our net debt (debt minus cash
and other liquid financial assets—bank deposits) to adjusted EBITDA was 2.95. Taking into account the profitability
of our business and results of operations, for example at the level of EBITDA, we consider these ratios to be relatively
low and safe and around the market average.
The interest cover ratio, calculated as Adjusted EBITDA divided by interest and fees on bank loans and overdrafts,
was 5.4. Management believes that this level of the ratio confirms that the Group is able to make timely payments
of interest accrued on bank loans and borrowings utilising only cash from operating activities.
Management believes that the Group’s ability to maintain payment of current liabilities is not in any way threatened.
The situation may change in the future if we commit our funds to capital expenditure in a short space of time. The
Group’s exposure to such risk is, however, limited thanks to its ability to generate positive cash flows from operating
activities.
17 Capital Expenditure
We spent approximately PLN 220.9m on capital expenditure in 2015. This amount comprises PLN 211.6m of
expenditures on expansion, upgrades and maintenance of our own networks, PLN -14.0m resulting from a change
in investment liabilities and reconciliation of investment expenditures and fixed assets, and PLN 23.3m of acquisition
expenditures.
Expenditures connected with the expansion, upgrades and maintenance of our own networks included c.
PLN 141.7m growth CAPEX directly related to expanding the range of services provided by us and subscriber
activations, and c. PLN 69.9m CAPEX incurred to ensure continuity of services, replace network equipment and
streamline internal processes (Maintenance Capital Expenditure). Please note that our maintenance capital
expenditure was impacted by the restatement resulting from the change in accounting policies applicable to the
recognition and accounting for subscriber acquisition costs (SAC) in the income statement (see introduction to
Section 14 and note 7 to the consolidated financial statements). The restatements translated into increases in our
maintenance CAPEX of PLN 19.2m in 2014 (compared to data provided in the 2014 annual report) and PLN 23.2m
in 2015.
17.1
Growth Capital Expenditure
The main growth capital expenditures in 2015 comprise:
expenses related to new subscriber activations, such as installation costs and CPE (customer premises
equipment) costs, in particular purchases of set-top boxes, which receive and decrypt digital television signals
at customer premises, and purchases of cable modems for broadband Internet and VoIP activations,
development of our central infrastructure to service a higher number of customers and steadily increase
broadband connection speeds for all customers, and in particular purchase of cable and IP routers for the needs
of increasing data traffic,
R&D work connected with the introduction of new services and technologies, such as MVNO, energy, TV
Everywhere (television accessible via mobile devices),
Management of Financial Resources
32
-
construction of new HPs to expand the reach of our networks by cabling newly constructed housing estates,
and also as part of our active acquisitions project,
network upgrades to deliver the full bundle of services across our entire footprint and to increase network
capacity to sell more bandwidth consuming services. A significant portion of network upgrade expenditures
was dedicated to improving the quality of the networks acquired by us and to rebuild networks according to
FTTB and FTTH standards.
17.2
Maintenance Capital Expenditure
Other capital expenditure of PLN 69.9m, not directly related to network expansion or subscriber activations, included
primarily expenditures on:
development of our billing system,
implementing the new ERP system,
upgrades of power and air-conditioning systems,
purchases and overhauls of own and leased premises, and
subscriber acquisition costs.
17.3
Acquisition Capital Expenditure
In 2015, the Group took over networks acquired in four transactions. The networks pass by 30,000 homes in
aggregate in Świnoujście, Gliwice, Władysławowo, Blachownia, and Jastrzębia Góra. As at the end of 2015, the
networks had 16,000 active RGUs.
Acquisitions are an important element of our consolidation strategy for the cable and telecoms market, allowing us
to benefit from synergies by integrating the acquired areas in terms of technology and services provided.
17.4
Assessment of the Feasibility of Planned Investments
As at the balance sheet date, 31 December 2015, the Group had cash and cash equivalents of PLN 117.4m and other
liquid financial assets (i.e. bank deposits) of c. PLN 170.4m. The Group expects that in 2016 it will be able to finance
its investment programme related to network expansion, deployment of new technologies and services and new
subscriber activations, with cash generated from operating activities. The Group also has available credit facilities,
with about PLN 211m available funds remaining as at 31 December 2015. Therefore, we can quickly and significantly
increase our capital expenditures if necessary.
18 Factors and Non-Recurring Events with a Bearing on 2015 Results
In the Management Board’s opinion, there were two factors in 2015 that had a significant bearing on the Group’s
operating profit and net profit:
1. The change in accounting policies applicable to the recognition and accounting for subscriber acquisition costs
(SAC) in the income statement. According to the amended accounting policy, as of 2015 the subscriber
acquisition costs resulting from telecom service delivery contracts and energy and gas delivery contracts are
treated as intangible assets and amortised over the average duration of the contract and not, as before,
expensed in the income statement when incurred (see note 7 to the consolidated financial statements). To
ensure comparability of data, the change was made retrospectively in 2014 (restated data) so that the data
presented in this annual report and the consolidated financial statements is fully comparable. The restatement
had an impact on the following items of the income statement: depreciation and amortisation, operating
expenses (external services, payroll, other employee benefits) and income tax, and, consequently, also profit for
the year.
2. Adverse impact of foreign exchange rates fluctuations, from the Group’s perspective, (particularly USD/PLN and
EUR/PLN) that translated into a c. PLN 9m increase in our operating expenses in 2015.
Another factor that had an impact on our 2015 net profit was income tax totalling negative PLN 12.6m. The reason
for the negative amount of income tax in 2015 was a change in management estimates regarding the expected tax
results of some of the companies of the Group, which resulted in a higher deferred income asset recognized in 2015
on carry-forward tax losses.
Factors and Non-Recurring Events with a Bearing on 2015 Results
33
19 Development Prospects for the Multimedia Polska Group in 2016
19.1
Operating Factors
As at 31 December 2015, the Group had c. 440,800 customers who have taken up more than one service, including
approx. 130,350 multi play customers. Going forward, we expect that more of our customers will use our bundled
offerings, which may help to reduce our churn rate and provide an important source of future sales revenue growth.
We expect continued migration of analogue television clients to digital television, which in our opinion should drive
revenue growth from the entire TV segment since subscription fees for digital TV are higher than for analogue
television. As a result of the launch of services, such as VoD, interactive television, TV Everywhere (television
accessible via mobile devices) etc., as well as the migration of our subscribers to digital services we expect to see
growth in the number of digital television users and revenues generated on those services in the forthcoming
quarters.
In line with our earlier guidance, the impact of the recent adverse changes in our market environment—the 2013
nationwide analogue switch-off—on our business is beginning to subside compared to previous reporting periods,
although its one-off negative impact remains. At the same time, following the introduction of new services initiated
in 2014, such as energy, home monitoring, insurance etc., we expect revenues generated on those services to
increase going forward.
19.2
New technologies and new products
The main focus of the Group in 2015 was on optimizing its competences and further adapting its organizational
structure and support tools to the ever changing business conditions.
We stimulated sales in our core business lines as well as new projects (electricity, insurance), and we also prepared
for further deployments that will allow us to expand the scope of our market presence.
In the second half of 2015, we restructured our B2B segment, hired new employees and changed the manner in
which we manage those activities. Simultaneously, we prepared new products for the business segment based on
Unified Communication tools.
With respect to the B2C segment, we focused on improving the services we offer, particularly video services, and
continued working on a more advanced video delivery platform. We also carried on with the digitalization of our
analog TV subscribers, which had a positive impact on ARPU and freed up bandwidth for our broadband services.
20 Changes in the Key Principles of Managing the Multimedia Polska Group
We continue our restructuring changes implemented in previous years heading in two directions: restructuring and
centralising our sales channels, as well as centralising and restructuring our network maintenance systems. With
respect to centralising our maintenance efforts and systems, we have continued to increase the number of
telecommunications and data transfer systems, which can be monitored and reconfigured remotely (centralised
network management). Furthermore, we are in the process of aligning our assets with current customer
segmentation. We want to have a target structure where there the B2C (Business to Consumer), B2B (Business to
Business) and infrastructure management functions are clearly separated.
Development Prospects for the Multimedia Polska Group in 2016
34
Statement by the Management Board of Multimedia Polska S.A.
In accordance with the provisions of the Regulation of the Minister of Finance dated 19 February 2009 on current
and periodic information published by issuers of securities and conditions for recognising as equivalent information
required by the laws of a non-member state, the Management Board of Multimedia Polska S.A. represents as follows:
- to the best of our knowledge the annual consolidated financial statements and the comparative information have
been prepared in compliance with International Financial Reporting Standards and give a true, fair and clear view
of the assets, financial standing and net result of the Multimedia Polska Group, and the Directors’ Report on the
operations of the Multimedia Polska Group truly reflects the development, achievements and situation of the
Multimedia Polska Group, including the description of the key risk factors and threats;
- Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością sp. k., the qualified auditor of financial
statements who audited the annual financial statements, had been selected in compliance with the provisions of
the law. The auditing firm and the qualified auditors who performed the audit met the conditions to issue an
impartial and independent auditor’s opinion in accordance with the applicable provisions of the national law.
Andrzej Rogowski
President