Solocal Group: Internet Revenues up +4.1%, Group Revenues in Slight Decrease and Partnerships Strengthened with Major Web Players in Q1 2015

Regulatory News:

Solocal Group  (Paris:LOCAL):

At its Investor Day to be held today in Paris, Solocal Group, #1 in Europe for local digital communication, will present its strategic development and growth objectives for the period up to 2018.

Jean-Pierre Remy, Chief Executive Officer, stated: "Internet revenues continued to grow by +4% in the first quarter thanks to the sharp increase in the audiences we generated for our advertisers. The quality of our audiences has considerably improved, which is reflected in the significant growth of our average revenue per advertiser. In addition, we have pursued the implementation of our Digital 2015 transformation program, which implies the adaptation of our sales structures longer than expected. Our sales results remain below our expectations. We still have a strong focus on the growth of our Internet business, while managing with discipline our investments and expenses.”

The full Investor Day presentation will be available on www.solocalgroup.com on 28 April at 2 pm.

I. Revenues and EBITDA in the 1^st quarter of 2015

The Board of Directors approved the Group's consolidated accounts as of 31 March 2015.

The Group posted consolidated revenues of €209.2 million in Q1 2015, down -3.0% compared to Q1 2014:

• The Internet business is up by +4.1%, driven by the Search & Display business, which grew by +5.5% mainly driven by the increase of +10% in ARPA⁴, which is the result of improved monetisation of Internet audiences, up by +14%. The strong increase in ARPA⁴ more than offsets the decrease in the number of clients -4%, which, amongst others, has been impacted by the priority given to the commercial development of high-value clients in early 2015.
• The Digital marketing⁶ penetration rate⁵ rose from 21% to 22%, which is in line with our strategy of reaching a penetration rate of 30% within 3 years.
• The Print & Voice business fell by -20.6% in the period, which is a sharper decrease than last year (-19% in Q4 2014 and -17% in full year 2014), and which leads us to revise slightly our Group revenue growth forecast 2015.

EBITDA of €54.2 million in Q1 2015 dropped by 33.7% compared to Q1 2014. The EBITDA/revenues margin was 26% in Q1 2015, compared to 38% in Q1 2014. This 12-point fall in the EBITDA/revenue margin is due primarily to:

• a 7-point increase due to sales cost increase as a result of investments made to the reinforcement of the sales and marketing organisation around around our 5 verticals;
• a 5-point drop due do the Print & Voice business as a result of the accelerated decrease in that business.

Under these circumstances, the Group is setting up an operational contingency plan that will reduce costs by nearly €30 million on a yearly basis. Thanks to this plan, we remain confident in our ability to achieve an EBITDA/revenue margin⁸ of between 29% and 30% in 2015.

II. Net income and financial structure in the 1^st quarter of 2015

The Group’s EBITDA of €53.7 million in Q1 2015 is down -26% and is impacted by the drop in recurring EBITDA, which is partially offset by non-recurring exceptional items in the Q1 2015.

Net financial income was negative by -€22.0 million in the Q1 2015, down -20.9% compared to Q1 2014, thanks primarily to the impact of debt repayments made between the two periods.

In Q1 2015, the Group recognised corporate income tax expense of €7.5 million, a decrease of -49.7% compared to Q1 2014. The effective tax rate of 38% in the Q1 2015 is exceptionally lower by 5 points compared to Q1 2014 due to the one-off deduction of share-based compensation expenses.

The Group net income amounted to €12.4 million in Q1 2015, down

-36.4% compared to Q1 2014.

After the refinancing carried out in 2014, net debt¹¹ totalled €1,125.8 million as of 31 March 2015, in decrease by €416.1 million compared to 31 March 2014.

The Group’s net cash flow was €20.7 million as of 31 March 2015, down by -59.5% compared to Q1 2014. This drop is primarily driven by the EBITDA decrease and the increase in working capital requirements temporarily implied by the new sales compensation structure. These two items are partially offset by the fact that no tax payments were made during the period.

As of 31 March 2015, Solocal Group held €42.0 million in net cash.

III. Outlook for 2015-2018

The expected outlook for 2015 is:

• Internet revenues growth between +5% and +10%
• A slight decrease in Group revenues - less than in 2014 - due to the accelerating decrease in the Print & Voice business
• EBITDA/revenues margin¹² between 29% and 30%
• In order to maintain this margin rate, the Group is setting up an operational contingency plan that will reduce costs by nearly €30 million on a yearly basis. As a result of this plan, net income is expected to remain stable compared to 2014.

Furthermore, in 2015 the Group would like to:

• proceed with partial purchases of its high yield debt;
• proceed with partial purchases of its bank debt by at least €15 million;
• achieve a reverse split, subject to the shareholders vote at the next combined shareholders’ meeting scheduled on 11 June 2015.

At the Investor Day to be held today in Paris, the Group will present its priorities for the period up to 2018: sustainable and profitable growth and continuing deleverage.

The Group is aiming to achieve in 2018:

• an Internet revenue growth of ~+10%
• an EBITDA/revenue margin of ~30%
• a Net debt reduction > €300 million compared to the current amount

About Solocal Group

Solocal Group, the European market leader in local online communication, provides digital content, advertising solutions and transactional services that simply connect people with local businesses. The Group employs some 4,800 people (including nearly 2,300 local communication advisors) in France, Spain, Austria and the United Kingdom and supports the online development of SMB and major client accounts, mainly through its four flagship brands: PagesJaunes, Mappy, ComprendreChoisir and A Vendre A Louer. Over the years, Solocal Group has earned the trust of some 550,000 Internet clients. In 2014, Solocal Group generated revenues of 936 million euros, of which Internet business accounted for 68%, making it a European market leader in terms of online advertising revenues. Solocal Group is listed on Euronext Paris (LOCAL). More information may be obtained at www.solocalgroup.com.

This press release contains forward-looking statements. Although Solocal Group feels that its estimates are based upon assumptions which we believe to be reasonable, these forward-looking statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those anticipated in said forward-looking statements. For a discussion of risks and uncertainties which could cause actual results, financial condition, performance or achievements of Solocal Group to differ from those contained in the forward-looking, please refer to the "Risk factors" section of the "Document de Référence" filed with the French financial markets authority (AMF) and available on the Internet sites of the AMF (www.amf-france.org) and of Solocal Group (www.solocalgroup.com). Accounting data arepresented on an annual basis in audited consolidated form and on an quarterly basis in unaudited consolidated form.

¹ Average Revenue Per Advertiser 

² Recurring EBITDA / Group revenue margin, excluding exceptional items

³ cf. Press release Solocal Group / Google published today

⁴ Average Revenue Per Advertiser

⁵ % of Internet clients "Search & Display” benefiting from a Digital marketing product

⁶ Creation and referencing of web/marketing content and transactional services

⁷ Excluding exceptional items

⁸ Recurring EBITDA / Group revenue margin, excluding exceptional items

⁹ Excluding exceptional items

¹⁰ Including share of profit or loss of an associate

¹¹ Net debt is the gross financial debt plus or minus the fair net asset value of asset and/or liability derivative instruments used for cash flow hedging purposes, minus cash and cash equivalents.

¹² Recurring EBITDA margin/Group revenues, excluding exceptional items

Appendix 1: Audiences for 1^st quarter

Appendix 2: Income statement for 1^st quarter

¹ Excluding exceptional items

Appendix 3: Consolidated cash flow statement for 1^st quarter

Appendix 4: Consolidated balance sheet

Appendix 5: Consolidated net debt