KINO POLSKA TV S.A. Annual report of Kino Polska TV SA for 2019 KINO POLSKATV S.A.
KINO POLSKA TV S.A. SEPARATE ANNUAL REPORT FOR THE YEAR 2019 KINO
Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 TV S.A.
CONTENTS...... 2 I. SELECTED FINANCIAL DATA...... 9 II. DIRECTORS' REPORT OF KINO POLSKA TV S.A. FOR 2019...... 10
1. Descriptio n of Kino Po lska S.A ...... 11 2. T he C o m pa n y's extern a l bu sin ess environment ...... 12 3. INFORMATION ON THE ENTITY'S EXPECTED DEVELOPMENT...... 15 4. INFORMATION ON SIGNIFICANT RESEARCH AND DEVELOPMENT ACHIEVEMENTS ...... 16 5. EVENTS HAVING A SIGNIFICANT EFFECT ON THE KINO POLSKA TV S.A.'S OPERATIONS, WHICH TOOK PLACE IN THE FINANCIAL YEAR AND AFTER THE BALANCE SHEET DATE, UP TO THE DATE OF APPROVAL OF THE FINANCIAL STATEMENTS...... 16 6. INFORMATION ON THE CURRENT AND ANTICIPATED FINANCIAL STANDING...... 20 7. INFORMATION ON THE PURCHASE OF TREASURY SHARES, AND IN PARTICULAR, THE PURPOSE OF THEIR PURCHASE, THEIR NUMBER AND NOMINAŁ VALUE, INDICATING THE PORTION OF SHARE CAPITAL THEY REPRESENT, THEIR PURCHASE PRICE AND SALES PRICE IN THE EVENT OF THEIR SALE...... 21 8. INFORMATION ON THE BRANCHES OR PERMANENT ESTABLISHMENTS OWNED BY THE ENTITY...... 21 9. INFORMATION ON FINANCIAL INSTRUMENTS...... 21 10. Fin a n cia l a n d n o n - fin a n c ia l ra tio s, in clu d in g In fo rm atio n on environmental a n d em plo ym en t issu es, as WELL AS ADDITIONAL EXPLANATIONS OF AMOUNTS DISCLOSED IN THE FINANCIAL STATEMENTS...... 22 11. DISCUSSION OF THE BASIC ECONOMIC AND FINANCIAL VALUES AND, IN PARTICULAR, DESCRIPTION OF THE FACTORS, INCLUDING NON-TYPICAL ONES, WHICH HAVE A SIGNIFICANT IMPACT ON THE ISSUER'S OPERATIONS AND ITS FINANCIAL STATEMENTS, INCLUDING THE PROFIT OR LOSS FOR THE FINANCIAL YEAR...... 23 12. INFORMATION ABOUT THE DEVELOPMENT STRATEGY ADOPTED BY THE ISSUER AND ITS GROUP AND ACTIONS TAKEN TO IMPLEMENT THIS STRATEGY, AND A DESCRIPTION OF THE ISSUER'S DEVELOPMENT PROSPECTS IN THE NEXT FINANCIAL YEAR...... 26 13. T he pan d em ic w ill potentially h ave an a d verse effect on th e eco n o m ic situ a tio n of Po la n d a n d THE OTHER
c o u n tries in w h ich th e Issu er 's G roup o p er a t e s...... 27 14. Descriptio n of m a ter ia ł risk factors a n d th r ea ts related t o th e Issu er 's o p e r a t io n s ...... 31 15. In dicatio n of litig a tio n pendin g befo re co u r ts, arbitration bodies OR PUBLIC administration authorities, INCLUDING INFORMATION ON LITIGATION RELATING TO THE ISSUER'S OR ITS SUBSIDIARIES' LIABILITIES OR RECEIVABLES AMOUNTING TO AT LEAST 10% OF THE ISSUER'S EQUITY...... 36 16. INFORMATION ON KEY PRODUCTS, GOODS FOR RESALE AND SERVICES...... 37 17. INFORMATION ON SALES MARKETS, TAKING INTO ACCOUNT THE BREAK-DOWN INTO DOMESTIC AND FOREIGN MARKETS, AND INFORMATION ON THE SOURCES OF SUPPLY OF PRODUCTION MATERIALS AND GOODS AND SERVICES, SPECIFYING RELIANCE ON ONE OR MORE CUSTOMERS AND SUPPLIERS, AND IN THE EVENT OF ONE CUSTOMER OR SUPPLIER HAVING A SHARE OF AT LEAST 10% OF TOTAL SALES REVENUES - THE NAME OF THAT SUPPLIER OR CUSTOMER, ITS SHARE IN THE SALES OR PURCHASES AND ITS FORMAL RELATIONSHIP WITH THE ISSUER...... 39 18. INFORMATION ON CONTRACTS SIGNIFICANT TO THE ISSUER'S OPERATIONS, INCLUDING CONTRACTS CONCLUDED BY AND BETWEEN THE SHAREHOLDERS OF WHICH THE ISSUER IS AWARE, INSURANCE CONTRACTS, AND COOPERATION CONTRACTS39 19. INFORMATION ON THE ISSUER'S ORGANIZATIONAL OR EQUITY RELATIONSHIPS WITH OTHER ENTITIES AND DETERMINING ITS MAIN INVESTMENTS IN POLAND AND ABROAD, IN PARTICULAR SECURITIES, FINANCIAL INSTRUMENTS, INTANGIBLE ASSETS AND REAL ESTATE, INCLUDING EQUITY INVESTMENTS MADE OUTSIDE THE GROUP OF RELATED ENTITIES AND A DESCRIPTION OF THE METHODS OF FINANCING THEM...... 40 20. INFORMATION ON TRANSACTIONS CONCLUDED BY THE ISSUER OR ITS SUBSIDIARIES WITH RELATED ENTITIES ON CONDITIONS OTHER THAN ARM'S LENGTH...... 41 21. INFORMATION ON LOAN AGREEMENTS CONCLUDED AND TERMINATED IN A GIVEN FINANCIAL YEAR, INCLUDING AT LEAST THE AMOUNTS OF SUCH LOANS, TYPE AND AMOUNT OF INTEREST RATE, CURRENCY AND REPAYMENT DEADLINES...... 41
22. INFORMATION ON LOANS GRANTED IN THE GIVEN FINANCIAL YEAR (INCLUDING THOSE GRANTED TO THE ISSUER'S RELATED ENTITIES), GIVING AT LEAST THEIR AMOUNTS, TYPE AND INTEREST RATE, CURRENCY AND REPAYMENT DEADLINE...... 41
3 KINO
Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 TV S.A.
23. In fo rm atio n on w a rr a n ties a n d g u a ra n tees g ra n ted a n d r eceived in a given Fin a n cia l yea r , in pa rtic u la r WARRANTIES AND GUARANTEES GRANTED TO THE |SSUER'S RELATED ENTITIES...... 42 24. Descriptio n of THE Issu er 's USE of pro ceeds from sec u rities ISSUED in THE PERIOD COVERED BY THE REPORT UP TO THE DlRECTORS' REPORT DATE - IF ANY SECURITIES WERE ISSUED in THE PERIOD COVERED BY THE REPORT...... 42 25. Expla n a tio n of differences betw een th e Fin a n cia l resu lts sh o w n in th e An n u al Repo r t a n d th e fo recasts of THE RESULTS FOR THE YEAR PUBLISHED PREVlOUSLY...... 42 26. ASSESSMENT, WlTH JUSTIFICATlON, of THE MANAGEMENT OF FINANCIAL RESOURCES, IN PARTICULAR, THE ABILITY TO MEET liabilities, a n d determination of po ten tia l th r ea t s a n d a ctio n s ta k en or in ten d ed TO BE TAKEN BY THE Issu er TO COUNTERACT THOSE THREATS...... 42 27. ASSESSMENT of THE FEASIBILITY of lNVESTMENT PLANS, INCLUDING CAPITAL EXPENDlTURE, RELATlVE TO THE FINANCIAL RESOURCES HELD, TAKING INTO ACCOUNT POSSIBLE CHANGES IN THE STRUCTURE OF FINANCING OF lNVESTlNG ACTlVlTlES42 28. ASSESSMENT OF FACTORS AND UNUSUAL EVENTS AFFECTING THE RESULTS FOR THE FINANCIAL YEAR AND DETERMINATION OF THE DEGREE OF IMPACT OF THOSE FACTORS OR UNUSUAL EVENTS ON THE RESULTS ACHlEVED...... 43 29. Descriptio n of extern a l a n d in tern a l facto rs t h a t a re significant for th e development of th e Issu er 's ENTERPRISE...... 43 30. CHANGES in BASIC PRINCIPLES FOR MANAGING THE |SSUER'S BUSINESS AND ITS GROUP...... 43 31. In fo rm atio n on a g reem en ts, if a n y , c o n c lu d ed by th e Issu er w ith its m a n a g ers, stipulating compensation in THE EVENT OF THElR RESIGNATlON OR DISMISSAL FROM THE POSITlON HELD WITHOUT AN IMPORTANT REASON OR DUE TO THE Issu er 's bu sin ess combination BY acquisition ...... 43 32. In fo rm atio n on remuneration , bo n u ses or ben efits, in clu d in g th o se resu ltin g from in cen tive or bonus SCHEMES BASED ON THE |SSUER'S CAPITAL, INCLUDING PLANS OF PRE-EMPTlVE RIGHTS TO BONDS, CONVERTlBLE BONDS, SUBSCRIPTION WARRANTS (iN CASH, IN KIND OR IN ANY OTHER FORM), PAlD, PAYABLE OR CONDITlONALLY PAYABLE TO EACH OF THE lSSUER'S MANAGERS OR SUPERVlSORS, OR MEMBERS OF THE |SSUER'S ADMlNlSTRATlVE BODlES IN THE |SSUER'S bu sin ess, s e p a r a t e l y ...... 44 33. In fo rm atio n on pen sio n s a n d sim ila r ben efits, if a n y, payable to th e Issu er 's fo rm er m a n a g ers or SUPERVlSORS, OR FORMER MEMBERS OF THE |SSUER'S ADMlNlSTRATlVE BODlES, AND ON LIABILITIES ASSUMED IN RELATlON TO THOSE PENSIONS, INDlCATING THE TOTAL AMOUNT FOR EACH CATEGORY...... 45 34. To ta l NUMBER a n d PAR VALUE of ALL THE Issu er 's SHARES a n d SHARES in THE Issu er 's RELATED entities HELD BY THE Issu er 's Ma n a g em en t or Su perv iso ry Bo a rd m e m b e r s ...... 45 35. In fo rm atio n on a g reem en ts of w h ich th e Issu er is aw a re (in clu d in g a lso th o se co n clu d ed a fter th e balance SHEET DATE) AS A RESULT OF WHICH FUTURE CHANGES MAY OCCUR IN THE PROPORTlONS OF THE SHARES HELD BY THE CURRENT shareholders a n d bondholders...... 46 36. In fo rm atio n on th e c o n tr o l system for em plo yee sh a re s c h e m e s ...... 47 37. In fo rm atio n on th e d ate of co n clu sio n of th e co n tr a ct for th e a u d it or review of th e Fin a n cia l sta tem en ts or th e Consolidated Fin a n cia l sta tem en ts by a n d betw een th e Issu er a n d th e reg istered a u d it firm , a n d on THE perio d for WHICH THE CONTRACT WAS CONCLUDED. INFORMATION ON WHETHER AND IN WHAT PERIOD THE ISSUER USED THE SERVlCES OF THE SELECTED AUDIT FIRM AND SPECIFICATlON OF THE SCOPE OF SUCH SERVlCES. iNDlCATlON OF THE AUTHORITY WHICH SELECTED THE REGISTERED AUDIT FIRM. INDlCATlON OF THE FEE OF THE REGISTERED AUDIT FIRM PAlD OR PAYABLE FOR THE CURRENT AND THE PREVlOUS FINANCIAL YEAR, SEPARATELY FOR: THE AUDIT OF THE ANNUAL FINANCIAL STATEMENTS, OTHER ASSURANCE SERVlCES, INCLUDING A REVlEW OF THE FINANCIAL STATEMENTS, TAX ADVlSORY SERVlCES, OTHER SERVlCES...... 47 38. In vesto r r e la t io n s ...... 47 III. INFORMATION ON CORPORATE GOVERNANCE...... 49
1. T he Issu er 's CORPORATE g o v ern a n c e prin ciples a n d THE place w h ere THE t e x t of THE se t of THE PRINCIPLES is PUBLICLY AVAlLABLE...... 49 2. T he exten t t o w h ich th e Issu er d epa rted from th e c o rpo ra te g o vern a n c e prin ciples r eferred to a b o v e, INDlCATlON of THE PRINCIPLES AND EXPLANATlON OF THE REASONS FOR DEPARTURE, AS WELL AS EXPLANATlON OF HOW THE COMPANY INTENDS TO REMEDY THE CONSEQUENCES, IF ANY, OF ITS FAlLURE TO APPLY A PARTICULAR PRINCIPLE, OR WHAT STEPS IT INTENDS TO TAKE TO MITIGATE THE RlSK OF ITS FUTURE FAlLURE TO APPLY THE PRINCIPLE...... 49
4 KINO
Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 TV S.A.
3. DESCRIPTION OF THE MAIN FEATURES OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS APPLIED BY THE ISSUER IN RESPECT OF THE PROCESS OF PREPARING THE FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENTS .. 60 4. SHAREHOLDERS HOLDING, DIRECTLY OR INDIRECTLY, SIGNIFICANT BLOCKS OF SHARES, INCLUDING THE NUMBER OF SHARES HELD BY THOSE ENTITIES, THEIR PERCENTAGE INTEREST IN THE SHARE CAPITAL, NUMBER OF VOTES RESULTING THEREOF AND PERCENTAGE OF THE TOTAL NUMBER OF VOTES AT THE GENERAL MEETING ...... 62 5. HOLDERS OF ANY SECURITIES CARRYING SPECIAL CONTROLLING RIGHTS, INCLUDING A DESCRIPTION OF THOSE RIGHTS ... 64 6. ALL VOTING RESTRICTIONS, SUCH AS VOTING RESTRICTIONS APPLICABLE TO HOLDERS OF A SPECIFIED PERCENTAGE OR NUMBER OF VOTES, TIME RESTRICTIONS ON VOTING OR PROVISIONS SEPARATING THE EQUITY RIGHTS ATTACHED TO SECURITIES FROM HOLDING SUCH SECURITIES...... 64 7. ANY RESTRICTIONS ON THE TRANSFERABILITY OF TITLE TO THE ISSUER'S SECURITIES...... 64 8. DESCRIPTION OF THE RULES FOR APPOINTMENT AND DISMISSAL OF MANAGEMENT BOARD MEMBERS AND THEIR POWERS, IN PARTICULAR THE RIGHTTO MAKE DECISIONS ABOUT AN ISSUE OR REDEMPTION OF SHARES...... 65 9. DESCRIPTION OF THE RULES FOR AMENDING THE ISSUER'S ARTICLES OF ASSOCIATION...... 65 10. T he w a y th e Gen eral Meeting a cts a n d its key rig hts, as w ell as th e rights of shareholders a n d th e m a nn er OF EXERCISING THEM ...... 65 11. T he composition (a n d ch a n g es th erein w h ich o ccu r red in th e last Fin a n cia l y e a r ) a n d description of ACTIVITIES OF THE ISSUER'S MANAGEMENT BOARD, SUPERVISORY BOARD AND ADMINISTRATIVE BODIES...... 67 REPRESENTATION OF THE MANAGEMENT BOARD OF KINO POLSKA TV S.A. ON THE APPOINTMENT OF AN AUDIT FIRM TO PERFORM AN AUDIT OF THE ANNUAL SEPARATE FINANCIAL STATEMENTS 82 REPRESENTATION OF THE SUPERVISORY BOARD OF KINO POLSKA TV S.A. CONCERNING THE AUDIT COMMITTEE...... 83 ASSESSMENT BY THE SUPERVISORY BOARD OF KINO POLSKA TV S.A. CONCERNING THE DIRECTORS' REPORT OF KINO POLSKA TV S.A. AND THE ANNUAL SEPARATE FINANCIAL STATEMENTS OF KINO POLSKA TV S.A...... 84 REPRESENTATION OF THE MANAGEMENT BOARD OF KINO POLSKA TV S.A. ON THE PREPARATION OF THE FINANCIAL STATEMENTS AND THE DIRECTORS' REPORT...... 85 IV. SEPARATE FINANCIAL STATEMENT OF KINO POLSKA TV S.A. FOR THE YEAR ENDED 31 DECEMBER 2019...... 86
5.1. Gen era l In fo rm atio n a b o u t th e Co m pa n y a n d its Gr o u p ...... 92 5.2 Ma jo r a c c o u n tin g po lic ies...... 93 5.3 Seg m en ts...... 97 5.4 Rev en u e...... 98 5.5 Operatin g e x p e n se s...... 102 5.6 Ca p it a l a n d liq u idity Ma n a g em en t, d e b t ...... 103 5.7 T he Gr o u p ...... 111 5.7.1 SHARES IN SUBSIDIARIES AND JOINT VENTURES...... 111 5.8. Pro g ra m m in g in v en to r y...... 119 5.9 EXPLANATORY NOTES TO THE OTHER ITEMS OF THE STATEMENT OF COMPREHENSIVE INCOME...... 121 5.10 Oth er a ssets a n d liabilities ...... 127 5.11 Unrecognized it e m s ...... 149 5.12 Error c o r r e c t io n ...... 153 REPORT ON THE AUDIT OF THE ANNUAL SEPARATE FINANCIAL STATEMENTS OF KINO POLSKA TV S.A. AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2018...... 154
5 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Letter of the President of the Management Board of Kino Polska TV S.A. TV S.A.
Dear Sir / Madam,
On behalf of the Management Board of Kino Polska TV S.A. ("the Company"), I hereby present the Company's Annual Report for the year 2019.
For Kino Polska TV S.A. and our entire Group, 2018 was a time when we could observe the positive effect of the synergies of operations within the Group in the areas of purchases of programming as well as marketing and sales. It is the result of assuming control over the Zoom TV channel and the transaction involving the purchase of shares in Stopklatka S.A. in 2018 which resulted in taking over control of this Company. The past 12 months ended 31 December 2019 strengthened our belief that adopting these steps was a good decision.
In 2019, we continued expanding the programme library of our channels which recorded good audience ratings in the period under discussion. It should also be noted, above all, that 2019 was a record year for the Zoom TV channel - its share in the commercial audience was 0.53%, which is almost 33% higher than in 2018 (SHR%, All 16-49). Even better results were recorded by Zoom TV among terrestrial digital television viewers, where the channel's share was 0.72%, which is more than a 16% increase year-on-year (SHR%, All TV Terrestrial 16-49, live). The dynamic development of the ZOOM TV channel made it the fastest growing segment of the Company in 2019, with the Zoom TV segment's revenue increasing by more than 42% year- on-year.
The year 2019 was the best year ever for the entire Group in terms of audience ratings. In the past twelve months, our channels reached a 1.97% share in the commercial audience (SHR%, All 16-49) which means an increase of 5.9% compared with 2018.
In the twelve months ended 31 December 2019, the Company recorded an 11% increase in sales revenue y/y. On the other hand, the net profit decreased by 32% compared with 2018, mainly due to the termination of a contract with a related entity for making licence rights available.
We believe that in 2020, we will be able to continue the Kino Polska TV S.A. s development just as effectively. In the upcoming periods, we aim at making the Group the fifth largest media group in Poland, with an average annual share in the commercial audience (SHR, All 16-49, live) of 2.5-3%.
When making plans for the coming months, we cannot forget about the global coronavirus (SARS-CoV-2) pandemic which both the Polish and global economies are currently facing and which is also likely to negatively affect the media market. As at the date of publication of the Report, we do not expect a direct, materially negative impact of the coronavirus (SARS-CoV-2) pandemic on the Company's operations, financial position and results of operations in the medium to long term. However, it cannot be precluded that a prolonged period of restrictions in business activities will negatively affect the financial our position and results of operations. We are monitoring the situation on an on-going basis and will take the appropriate steps, if necessary, to mitigate the effect of the pandemic on our operations. Since mid-March, to protect our
6 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Letter of the President of the Management Board of Kino Polska TV S.A. TV S.A. employees' health, we implemented the procedure for working remotely, while maintaining full business continuity. We believe that due to our determination and joint commitment, the market and financial position of Kino Polska TV S.A. will not be materially disrupted.
You are cordially invited to read the Report.
Bogusław Kisielewski President of the Management Board of Kino Polska TV S.A.
7 KINO POLSKA Kino Polska TV S.A. Separate annual report for the year 2019 TV S.A.
This report (the "Report") of Kino Polska TV S.A. (the "Company" or the "Issuer") for the year 2019 has been prepared in accordance with §70, clause 1 of the Regulation of the Minister of Finance of 29 March 2018 on current and periodic information submitted by issuers of securities and conditions for considering as equivalent the information required under the legislation of a non-Member State (the "Regulation").
Based on §79, clause 2 of the Regulation, Kino Polska TV S.A. has not submitted a separate q uarterly report for the 4th quarter of 2019.
8 KINO Kino Polska TV S.A. Separate annual report for the year 2019 POLSKA Selected financial data TV S.A. I. SELECTED FINANCIAL DATA
12 months ended 12 months ended 12 months ended 31 December 2018 12 months ended 31 December 2019 31 December 2018 (restated*, 31 December 2019 Selected financial data (in PLN '000) (restated*) in PLN '000)
in PLN '000 in EUR '000 I Sales revenue 161,807 146,225 37,614 34,270 II Operating profit 13,456 18,755 3,128 4,395 III Profit before tax 11,859 16,591 2,757 3,888 IV Total comprehensive income 9,249 13,617 2,150 3,191 Weighted average number of treasury V shares (not in thousands) 19,821,404 19,821,404 19,821,404 19,821,404 Number of treasury shares VI (not in thousands) Net earnings/(loss) per share from VII continuing operations (not in thousands) 0.47 0.69 0.11 0.16 Net cash VIII from operating activities 15,663 16,095 3,641 3,772 Net cash IX from investing activities (2,081) (3,587) (484) (841) Net cash X from financing activities (13,346) (14,238) (3,102) (3,337) Cash and cash equivalents as at the end XI of the period 522 286 122 67 A s a t A s at A s a t 31 December 2018 A s at 31 December 2019 31 December 2018 (restated*, 31 December 2019 (in PLN '000) (restated*) in PLN '000)
in PLN '000 in EUR '000 XII Non-current assets 246,135 242,642 57,799 56,428 XIII Current assets 39,816 33,766 9,350 7,853 XIV Assets held for sale - - - - XV Total assets 285,951 276,408 67,148 64,281 XVI Non-current liabilities 40,419 68,022 9,491 15,819 XVII Current liabilities 71,552 37,678 16,802 8,762 XVIII Equity 173,980 170,708 40,855 39,700 XIX Share capital 1,982 1,982 465 461 * Information on the transformation is presented in Note 5.12 to the Separate Financial Statements for the year ended 31 December 2019.
The above financial data for the years 2019 and 2018 was translated into EUR in accordance with the following rules: • assets and equity & liabilities - at the mid exchange rate determined by the National Bank of Poland as at 31 December 2019 - PLN 4.2585/EUR; For comparative figures, the mid exchange rate as at 31 December 2018 - PLN 4.3000/EUR; • individual items of the statement of comprehensive income and the statement of cash flows - at the mid exchange rate calculated as the arithmetic mean of the exchange rates in force as at the last day of each month in the period from 1 January 2019 to 31 December 2019, determined by the National Bank of Poland PLN 4.3018/EUR. For comparative figures in in the period from 1 January 2018 to 31 December 2018 PLN 4.2669/EUR.
9 KINO POLSKA TV S.A. KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
1. Description of Kino Polska S.A.
Kino Polska TV S.A. is the parent of the Kino Polska TV S.A. Group ("the Group"), a modern, dynamically developing media group which aspires to be the key player on the Central and Eastern European market.
Kino Polska TV Sp. z o.o. was established in June 2003 and it started broadcasting its first TV channel, Telewizja Kino Polska, in December of the same year. In 2010, Kino Polska TV Sp. z o.o. was transformed into a joint stock company. On 12 April 2011, Kino Polska TV S.A. made its debut on the Warsaw Stock Exchange. SPI International B.V. ("SPI") is the Company's majority shareholder.
The key areas of operation of the Issuer are broadcasting and producing television channels: Kino Polska, Kino Polska Muzyka, Zoom TV, Kino TV, FilmBox channels and theme channels, sales of advertising time and trading in licensing rights. The channels produced and broadcast by the Company are in the offer of all significant Polish operators. Kino Polska TV S.A. also produces channels for foreign markets.
Kino Polska TV S.A. diversifies the sources of its revenues by developing channels distributed terrestrially. The Company owns 99.62% of the shares Stopklatka S.A. ("Stopklatka") - the broadcaster of the first in Poland terrestrial film channel Stopklatka (formerly: Stopklatka TV); the channel is also available in the offer of most paid TV providers in Poland.
By virtue of a Notarial Deed of 12 March 2019, Filmbox Iberia S.L.U. was established.
On 5 August 2019, the Issuer purchased 2,500 shares in Filmbox Estonia OU for EUR 2,500 and became its sole owner.
On 5 December 2019, the Company purchased 208,361 ordinary bearer shares of Stopklatka (the "Transaction") as a result of settlement of cash and cash equivalents as part of a transaction which took place on 3 December 2019 in connection with the end of a tender offer for shares in Stopklatka S.A. As a result, the Company increased its share in the total number of votes at Stopklatka's General Shareholders' Meeting by 1.9%. Before the Transaction, the Issuer directly held 10,920,784 shares representing 97.76% of Stopklatka's share capital and carrying 10,920,784 votes at Stopklatka's General Meeting, representing 97.76% of total voting rights. As at the date of publication of the Report, the Company holds 11,129,145 shares representing 99.62% of the share capital of Stopklatka and carrying 11,129,145 votes at Stopklatka's General Meeting (i.e. 99.62% of the total number of the votes). The tender offer was a part of the procedure of withdrawing Stopklatka S.A.'s s shares from trading on the NewConnect market which finally took place on 29 February 2020, in the 29 February 2020. On 6 March 2020, Stopklatka's shares were deleted from the register kept by the Central Securities Depository of Poland (KDPW).
11 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
As at 31 December 2019, Kino Polska TV S.A. had the following subsidiaries: • Stopklatka S.A. (Poland) - subsidiary; • Filmbox Iberia S.L.U. (Spain) - a subsidiary; • Filmbox Estonia OU (Estonia) - a subsidiary; • Filmbox International Ltd. (United Kingdom) - a subsidiary;
o Help Film s.r.o. (the Czech Republic) - indirect subsidiary;
o Help Film Slovakia s.r.o. (Slovakia) - indirect subsidiary;
o SPI International Magyarorszag, Kft. (Hungary) - indirect subsidiary.
2. The Company's external business environment
2.1 Macroeconomic enyironment1 The operations and financial results of Kino Polska TV S.A. are influenced by the economic situation both in Poland and on the international markets. The factors that have a particular impact on the Company's operations include GDP growth, the level of consumer spending of households, capital expenditure of enterprises (including in particular demand for TV advertising), the level of expenditure on the services provided by the Issuer, the unemployment rate, the rate of growth of real wages and salaries.
According to the World Bank's estimates, the Polish GDP growth rate exceeded 4% (the fourth strongest GDP growth in the European Union) in 2019. However, in 2020, in connection with the coronavirus (SARS-CoV-2) pandemic, GDP growth of the Polish economy will decelerate by 3.5%, according to Goldman Sachs estimates. At the same time, the Bank forecasts a rapid recovery of the Polish economy already at the end of the current year. The recovery is expected to continue in 2021.
The coronavirus also negatively affects the global economy, including the European Union. This is due to, among other things, economic restrictions introduced in China and the whole of Asia, which destabilize global value chains consisting of both EU and US firms. Goldman Sachs is forecasting that the euro area will record a 9% decrease in GDP in 2020, but the economic recovery should return towards the end of the year. At the same time, the Director-General for Economic and Financial Affairs of the European Union informed that in 2020, the euro area and the European Union as a whole is likely to face recession.
2.2 The television market in Poland
On the Polish market, more than 200 television channels belonging to over a dozen media groups are available. Channels belonging to the portfolio of three entities, namely Polsat Group, TVN Group and the Public Television (TVP) hold almost 70% of the market.
The Kino Polska TV S.A. Group - the owner of, among other things, terrestrial channels Stopklatka and Zoom TV and theme channels Kino Polska, Kino Polska Muzyka and Kino TV - occupies a high sixth position in the market.
1 Source: The World Bank, https://businessinsider.com.pl 12 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
The year 2019 was the best year ever for the Group in terms of audience ratings. In the past twelve months, the broadcaster reached a 1.97% share in the commercial audience (SHR%, All 16-49) which means an increase of 5.9% compared with 2018.
According to the data of Nielsen Media Research ("NAM"), the number of households with access to television is not decreasing. In 2019, it amounted to nearly 14 million, the same as in the previous year. More than 5 million households only had access to digital terrestrial TVs.
Paid TV is used by almost 63% of households, with Cyfrowy Polsat, NC+ and UPC Polska being the largest operators in this segment. The cable market consolidation whose progress has been observed for several years limits the number of paid television providers. However, the number of such providers is still high, which distinguishes Poland against the background of other countries in Europe and around the world.
Operators of satellite platforms and cable networks focus mainly on reaching viewers who are looking for top quality programming offer. This forces TV providers to produce and acquire unique content for their channels.
Dynamic technological progress, digitization and development of the Internet enable the implementation of new solutions, which often are innovative on a national scale. On the Polish market, we observe an increase in the number of entities that provide IPTV services. According to the GUS report "The Information Society in Poland in 2019", as many as 86.7% of Polish households have access to the Internet. A study by Nielsen Audience Measurement shows that approximately 7% of households watch online TV using the Internet, and over 37% of households have a Smart TV set.
2.3 The television advertising segment of the Polish media market Advertising revenue is a significant source of the Issuer's revenue. According to Nielsen Audience Measurement, the average time of watching (ATV) in the commercial group All 16-49 fell by 3% in 2019. Against this background, the Kino Polska TV S.A. channels positively differ, with ATV in the commercial group All 16-49 having increased by 2.7% (data: NAM, All 16-49, Live +2d).
The annual growth rate of the advertising market in Poland decelerated compared with the prior year. However, it should be remembered that 2018, when the TV advertising market in our country recorded a growth rate of as much as 5.9% and its value amounted to PLN 4,398.2 billion, was the best in several years.2 According to Starcom media house, in 2019 TV advertising expenditure decreased slightly, to PLN 4,371.4 billion, which is a decrease of 0.6% year-on-year.
Regardless of this drop, television still is, and is expected to remain until 2021, according to forecasts, the largest advertising medium in Poland. It cannot be precluded that the ongoing coronavirus (SARS-CoV-2) pandemic will bring some changes to the media market. However, as at the date of publication of the Report, the Management Board does not expect a
2Source: Starcom
13 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A. direct, materially negative impact of the pandemic on the Company's operations, financial position and results of operations. Nevertheless, it cannot be precluded that a prolonged period of restrictions in business activities will in the medium and long term negatively affect the Issuer's financial position and results of operations. The Management Board is monitoring the situation on an ongoing basis and will respond appropriately to mitigate the impact of such measures, if any.
2.4 The capital market and quotations of the Issuer's shares
The capital market in 2019 As at the end of 2019, 401 Polish and 48 foreign companies were listed on the Warsaw Stock Exchange main market. Seven companies made their debut on the WSE main market, including five companies which were transferred from an alternative trading system - the NewConnect market, and one was established through a split-up of a company already floated on the WSE). In the period under discussion, the WIG20 index decreased by approx. 6%, sWIG80 increased by 13%, while WIG and mWIG40 indices remained at the same level as in 2018. Such results are due to, among other things, the political situation in Poland, the US-China trade war and Brexit.
2.4.2 Quotations of the Issuer's shares The table below shows data relating to the Issuer's shares compared on a year by year basis.
In 2019, the highest price of the Company's shares at the closing of a session was PLN 13.00 (on 22 March 2019), and the lowest price was PLN 9.60 (on 23 December 2019).
Data on the quotation of Kino Polska TV S.A. shares
12 m onths 12 m onths 12 m onths 12 m onths 12 m onths
ended ended ended ended ended
31/12/2019 31/12/2018 31/1 2 /2 0 1 7 31/12/2016 31/12/2015
Price as at the end of the period 9.7 10.5 11.5 11.7 11.5
Change year on year (in terms of (0.8) (1.0) -0.2 0.2 (1) value)
Change year on year (in %) (7.6) (9.5%) (2%) 2% (8%)
Minimum closing price 9.60 9.72 9.89 10.94 11.29
Maximum closing price 13.0 13.80 13.85 14.15 17.0
Average closing price 10.8 11.83 11.67 12.5 13.7 in all sessions during the year
Trading volume (pieces) - daily 5,558 5,058 3,498 2,920 4,462 average
Trades (in PLN'000) - daily average 60 61 41 36 61
Number of shares at the end of the 19,821,404 19,821,404 19,821,404 19,821,404 19,821,404 year
Capitalization 192,267,619 208,124,742 227,946,146 231,910,427 227,946,146 The Issuer shares the profit earned with its shareholders by paying out dividend. The details are shown in the table below.
14 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
Period for which dividend Number of shares D ividend reco rd D ividend Amount of dividend per share w as p a id covered b y dividend Date p a y m e n t date
2018 PLN 0.30 19,821,404 01/07/2019 12/07/2019 2017 PLN 0.55 19,821,404 29/06/2018 16/07/2018
18/07/2017 2016 PLN 1.13 19,821,404 04/07/2017 03/08/2017
2015 PLN 1 19,821,404 06/06/2016 20/06/2016
ca. 2014 PLN 1 19,821,404 30/06/2015 14/07/2015
2013 PLN 0.45 13,821,404 14/07/2014 14/08/2014
2012 PLN 1 13,821,404 10/09/2013 25/09/2013
2011 PLN 1 13,859,000 29/05/2012 13/06/2012
The total value of dividends paid by the Company was PLN 112,789,223.72.
Price of Kino Polska TV S.A. shares versus WIG-Media and WIG indices in 2019
Change in the closing rate (%) 15%
-10% ------I 2019 II 2019 III 2019 IV 2019 V 2019 VI 2019 VII 2019 VIII 2019 IX 2019 X 2019 XI 2019 XII 2019
Kino Polska TV WIG MEDIA WIG
3. Information on the Entity's expected development
Kino Polska TV S.A. is continuing work aimed at strengthening its position on the Polish television market and developing on international markets. In the upcoming periods, the Issuer's Group plans to start selling adverting time on the FilmBox basic channel in selected countries of Central and Eastern Europe. Currently, advertisements are broadcast on the Kino TV channel in Poland and on FilmBox in the Czech market. Therefore, the Group expects higher advertising revenue, which will translate into a further improvement in its financial result. The Issuer continuously invests in purchases of programming, is consistently expanding its program library in order to make its offer even more attractive. In the Company's opinion, this will translate into an increase in the number of viewers of the channels broadcast by the Company.
15 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
In addition, the Company plans to further expand Zoom TV's programme offer. These actions are aimed at increasing the channel's audience ratings share among viewers and improving its attractiveness among advertisers. Moreover, the Company revamped the graphic design of Zoom TV. "HUMOUR SCANDAL MYSTERY" became the channel's new slogan which adequately reflects its nature. These activities are aimed at increasing the distinctiveness and recognizability of Zoom TV which should have a positive effect on the channel's audience rating in the immediate future. In addition, the Issuer intends to continue increasing the technical reach of Zoom TV. At present, more than 12 million subscribers have access to the channel (without taking into account terrestrial digital television).
When analysing the information on the entity's expected development provided above, it should be borne in mind that the actual implementation of the plans described herein will depend on the economic situation. As at the date of publication of the Report, the Management Board is not expecting any direct, materially negative impact due to the coronavirus (SARS-CoV-2) pandemic on the Company's operations, financial position and results of operations. Nevertheless, it cannot be precluded that a prolonged period of restrictions in business activities will in the medium and long term negatively affect the Issuer's financial position and results of operations. The Management Board is monitoring the situation on an ongoing basis and will respond appropriately to mitigate the impact of such measures, if any.
4. Information on significant research and development achievements
In 2019, the Company did not engage in any research and development work.
5. Events having a significant effect on the Kino Polska TV S.A.'s operations, which took place in the financial year and after the balance sheet date, up to the date of approval of the financial statements
2019
16 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
Withdrawal of Stopklatka S.A.'s shares from trading
On 10 October 2019, the Management Board of the Company decided to purchase 100% of shares of a subsidiary, Stopklatka, S.A., with a view to submitting an application to the Polish Financial Supervision Authority (PFSA) for consent to dematerialize and withdraw Stopklatka S.A.'s shares from trading on the NewConnect market. Acting in accordance with §17 clause 1 item 4 of the Company's Articles of Association, by resolution of 10 October 2019, the Issuer's Supervisory Board gave its consent to the Issuer's buying Stopklatka S.A.'s shares.
The respective application was submitted to the PFSA on 18 December 2019.
On 11 October 2019, the Issuer's Management Board, via Dom Maklerski BOŚ S.A., announced a tender offer for the sale of 250,476 ordinary bearer shares with a par value of PLN 1.00 each issued by Stopklatka S.A. (the "Shares"). The Shares were admitted and introduced to trading in the alternative trading system and were traded on the NewConnect market operated by the Warsaw Stock Exchange and were registered with the Central Securities Depository of Poland (KDPW) under the ISIN code PLSTPKL00012. All Shares are of the same type and carry the same rights, and each Share carries one vote at Stopklatka S.A.'s General Meeting. The Shares represent 2.24% of the total number of Stopklatka S.A.'s shares and carry 2.24% of the total number of votes at the General Meeting. The Company committed to purchase Shares at PLN 6.20 per Share.
On 20 November 2019, the Company's Management Board, through Dom Maklerski BOS S.A., changed the price at which the Shares were purchased as part of the said tender offer for Shares in Stopklatka S.A. from PLN 6.20 per Share to PLN 7.00 per Share.
On 5 December 2019, the Company purchased 208,361 ordinary bearer shares of Stopklatka (the "Transaction") as a result of the settlement of cash and cash equivalents as part of a transaction which took place on 3 December 2019 in connection with the end of a tender offer for shares in Stopklatka S.A. As a result, the Issuer increased its share in the total number of votes at Stopklatka's General Meeting by more than 1%. The Company holds 11,129,145 shares representing 99.62% of the share capital of Stopklatka and carrying 11,129,145 votes at Stopklatka's General Meeting, representing 99.62% of the total number of the votes.
On 29 February 2020, the shares of Stopklatka S.A. were withdrawn from the alternative trading system on the NewConnect market.
On 6 March 2020, Stopklatka's shares were deleted from the register kept by the Central Securities Depository of Poland (KDPW) and the Company lost its status of a public company.
General Meetings
17 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
On 24 June 2019, the Ordinary General Shareholders' Meeting of Kino Polska TV S.A. took place and adopted the following resolutions: • on the approval of the Directors' Report and the financial statements of Kino Polska TV S.A. prepared in accordance with the International Financial Reporting Standards for the financial year ended 31 December 2018; • on the approval of the Directors' Report for the Group and the consolidated financial statements of the Kino Polska TV S.A. Group prepared in accordance with the International Financial Reporting Standards for the financial year ended 31 December 2018; • on the appropriation of profit for 2018; • on granting a vote of approval to the Management Board and Supervisory Board members for the financial year 2018;
On 28 October 2019, an Extraordinary Shareholders Meeting of Kino Polska TV S.A, took place and adopted resolutions concerning changes to the composition of the Supervisory Board.
On 2 December 2019, an Extraordinary Shareholders Meeting of Kino Polska TV S.A, took place and adopted a resolution determining the remuneration of members of the Supervisory Board delegated to independently perform certain supervisory roles.
The full content of the resolutions adopted at the Issuer's General Meetings is available on the Company's website.
Dividend for the year 2018 On 11 April 2019, the Issuer's Supervisory Board passed a resolution on expressing a positive opinion on the proposal of the Management Board of Kino Polska TV S.A. concerning the appropriation of a part of the Issuer's profit for the year 2018 for payment of dividend to the Company's shareholders.
Amount of dividend per share: PLN 0.30 (gross).
Total amount of dividend: PLN 5,946,421.20 (gross).
The Company's profit for the year 2018: PLN 13,415,369.05 (before restatement; information on the restatement is presented in Note 5.12 to the Separate Financial Statements for the year ended 31 December 2019.).
The Issuer's Supervisory Board recommended to the Ordinary General Meeting of Kino Polska TV S.A. passing a resolution on the appropriation of profit for the year 2018 in accordance with the proposal of the Company's Management Board).
18 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
On 24 June 2019, the Issuer's Ordinary General Meeting adopted a resolution concerning the appropriation of the Company's net profit for 2018 of PLN 13,415,369.05 (before restatement; information on the restatement is presented in Note 5.12 to the Separate Financial Statements for the year ended 31 December 2019.), as follows: • PLN 5,946,421.20 was earmarked for the payment of dividend to shareholders; • PLN 7,468,947.85 was earmarked for transfer to the Company's supplementary capital.
The dividend for the Issuer's shareholders for the year 2018 amounted to PLN 0.30 gross per one share of the Company.
The dividend was payable to the shareholders who held the Company's shares on 1 July 2019 ("Dividend Record Date").
Pursuant to the resolution of the OGM, the dividend was to be paid on 12 July 2019 (and the dividend was paid on that date).
The number of shares covered by the dividend: 19,821,404.
Changes in the composition of the Supervisory Board On 28 October 2019, the Extraordinary General Meeting dismissed Mr Levent Gultan from the Supervisory Board and appointed Mr Jacek Koskowski and Jesus Perezagua Sanchez to the Supervisory for a joint term of office.
On 31 January 2020, Jacek Koskowski submitted his resignation from the Supervisory Board with immediate effect.
On 27 February 2020, the Extraordinary General Meeting appointed Mr Marcin Boroszko to the Supervisory Board.
In connection with the above, as at the date of publication of the Report, the composition of the Supervisory Board of Kino Polska TV S.A. is as follows: • Loni Farhi - Chairman of the Supervisory Board; • Stacey Sobel - Deputy Chair of the Supervisory Board; • Marcin Boroszko - Member of the Supervisory Board; • Piotr Orłowski - Member of the Supervisory Board; • Jesus Perezagua Sanchez - Member of the Supervisory Board; • Krzysztof Rudnik - Member of the Supervisory Board; • Katarzyna Woźnicka - Member of the Supervisory Board;
Changes in the Management Board
19 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
On 8 November 2019, the Issuer's Supervisory Board adopted a resolution appointing Mr Levent Gultan for the Company's Management Board for a three-year term of office for the position of a Management Board of Kino Polska TV S.A. At the same time, in connection with the above, in order to harmonize the terms of office of all members of the Management Board of Kino Polska TV S.A., acting pursuant to § 12 clause 2 of the Company's Articles of Association, the Supervisory Board decided to dismiss Mr Bogusław Kisielewski, Mr Marcin Kowalski, Mr Alber Uziyel and Mr Berk Uziyel from the Issuer's Management Board with immediate effect. The Company's Supervisory Board appointed Mr Bogusław Kisielewski, Mr Marcin Kowalski, Mr Alber Uziyel and Mr Berk Uziyel to the Issuer's Management Board for a new three-year term of office. At the same time, the Supervisory Board entrusted the function of President of the Management Board of Kino Polska TV S.A. to Mr Bogusław Kisielewski.
In connection with the above, as at the date of publication of the Report, the composition of the Management Board of Kino Polska TV S.A. is as follows: • Bogusław Kisielewski - President of the Management Board; • Berk Uziyel - Member of the Management Board; • Marcin Kowalski - Member of the Management Board; • Alber Uziyel - Member of the Management Board. • Levent Gultan - Member of the Management Board.
Additional information Additional information on material factors, having an impact on the Issuer's financial results in the period under discussion is provided in Note 11 to the Directors' Report for 2019.
6. Information on the current and anticipated financial standing
In the opinion of the Management Board of Kino Polska TV S.A., the Company's financial position is stable and it is not exposed to liquidity risk.
The Issuer's Management Board expects the revenues of Kino Polska TV S.A. to increase regularly in the consecutive years. Information on the anticipated development of the Company is presented in Note 3 to the Directors' Report for 2019.
The risks which may result in deterioration of the Issuer's financial position are discussed in Note 13 to the Directors' Report for 2019.
A detailed description of Kino Polska TV S.A.'s financial results is presented in Note 11 to the Directors' Report for 2019.
20 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
7. Information on the purchase of treasury shares, and in particular, the purpose of their purchase, their number and nominal value, indicating the portion of share capital they represent, their purchase price and sales price in the event of their sale
The Issuer did not purchase any treasury shares in 2019.
8. Information on the branches or permanent establishments owned by the entity
The Company did not own any branches or permanent establishments in 2019.
9. Information on financial instruments
Risks: price risk, credit risk, a risk of significant disturbances in cash flows and loss of financial liquidity, to which the Entity is exposed In the reporting period, Kino Polska TV S.A. was not exposed to a risk related to changes in the prices of the services offered or a drop in demand for its services. On the other hand, when purchasing services or assets, the Company tried to negotiate their prices and payment terms. Liquidity risk is minimized through on-going monitoring and managing the maturities of licence and distribution liabilities and repayment deadlines of receivables in respect of sales made in foreign currencies, mainly in respect of production services and programming library management.
The Company is exposed to credit risk mainly in relation to trade receivables. The Company is monitoring receivables from subscribers and undertakes debt collection measures which include blocking signal transmission to subscribers.
To ensure smooth financing of the current operations, on 8 June 2016 the Issuer signed a MultiLinia agreement with Bank Zachodni WBK S.A. Based on the Agreement, the Bank agreed to provide services to the Company in the form of a bank overdraft designated for financing the ongoing business operations of the Issuer and a guarantee line up to a total of PLN 30,000 thousand. Within the above-mentioned amount, the guarantee limit was set at PLN 1,000 thousand. In accordance with an annex to the Agreement signed on 5 June 2018, the overdraft is due to be repaid by 9 June 2020. The interest rate on the bank overdraft is variable and amounts to 1M WIBOR for each day, plus the Bank's margin.
The repayment of the overdraft facility is legally secured by: • a blank promissory note issued by the Company for the Bank; • the Issuer's statement on submission to enforcement proceedings pursuant to Article 777 of the Code of Civil Procedure;
• granting the Bank authorization to use the cash in the current accounts with the Bank; • assignment of receivables from trade contracts.
21 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
Further details on the Company's financial risks and the way of managing them are presented in Note 5.10.4 to the Company's Separate Financial Statements as at and for the year ended 31 December 2019.
Financial risk management objectives and methods used by the Entity to manage financial risk, including methods used for hedging significant types of planned transactions for which hedge accounting is used.
Further details on the Company's financial risks and the way of managing them are presented in Note 5.10.4 to the Separate Financial Statements of Kino Polska TV S.A. as at and for the year ended 31 December 2019.
The Company does not use hedge accounting.
10. Financial and non-financial ratios, including information on environmental and employment issues, as well as additional explanations of amounts disclosed in the financial statements
The Company's key financial ratios in the years 2019 and 2018 were as follows:
12 months ended 12 months ended Ratio Form ula 31 December 2018 31 December 2019 (restated*)
Return on assets (ROA) net profit** / average annual assets balance 3% 5%
Return on equity (ROE) net profit**/ average annual equity balance 5% 8%
Net profitability of sales net profit/sales revenue 6% 9%
EBITDA profitability EBITDA / sales revenue 29% 32%
Cash ratio Total current assets / current liabilities 0.6 0.9
G earing Total liabilities / total assets 0.4 0.4 * Information on the transformation is presented in Note 5.12 to the Separate Financial Statements for the year ended 31 December 2019. ** Net profit from continued operations.
A detailed description of Kino Polska TV S.A.'s financial results is presented in Note 11 to the Directors' Report for 2019.
The Kino Polska TV S.A.'s employment structure by key departments (in number of persons) is presented in Note 3 to the Company's Separate Financial Statements as at and for the year ended 31 December 2019.
Environmental issues do not apply to the Company.
22 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
11. Discussion of the basic economic and financial values and, in particular, description of the factors, including non-typical ones, which have a significant impact on the Issuer's operations and its financial statements, including the profit or loss for the financial year
11.1 Financial results
12 months ended 12 months ended Selected economic and financial data 31 December 2019 31 December 2018 Change (%) (in PLN '000) (restated*, in PLN '000)
Revenue from contracts with customers 161,807 146,225 +11% Operating profit/(loss) 13,456 18,755 -28% Net profit/(loss) 9,249 13,617 -32% EBITDA 46,734 46,458 +1% EBITDA profitability 29 32 -9% * Information on the transformation is presented in Note 5.12 to the Separate Financial Statements for the year ended 31 December 2019.
In 2019, the Issuer generated sales of PLN 161,807 thousand, which represent an increase of 11% in relation to the previous year.
The Issuer's revenues in 2019 comprise broadcasting revenues (a 33% share), revenues from the sale of advertising (23%), revenues from production, sales of licences and other revenues (44%).
The increase in the Company's revenues is mainly due to higher sales of advertising on the Zoom TV channel (an increase of PLN 5,200 thousand), higher revenues from the production of FilmBox film channels and theme channels (an increase of PLN 4,337 thousand) and higher revenues from broadcasting of FilmBox film channels and theme channels (PLN 3,751 thousand). The proceeds from the sale of licences increased by PLN 11,357 thousand, which was mainly due to a significant increase in the Issuer's selling activity in the reported year. It also worth mentioning that a part of the increase in the revenues from the Sale of licences segment was a result of the separate presentation of VOD revenues - due to a change in the distribution model, in 2019 the Company adopted new principles of presentation of the revenues and costs of sales of television and VOD rights (for details, see Note 5.4 to the Separate Financial Statements of Kino Polska TV S.A. for the year ended 31 December 2019).
The Issuer's advertising revenues were 17% higher in the analysed period than in 2018 and amounted to PLN 37,401 thousand. Such a significant increase in advertising revenues was partly the result of the dynamic development of the Zoom TV channel, whose sales increased by as much as 42%, and partly a result of a 25% growth in revenues from advertising on FilmBox film channels and theme channels. Unfortunately, the revenues from the Kino Polska channels decreased in the reported period due to limited access to films and TV shows in Polish.
In the 12 months ended 31 December 2019, the Company's revenues from broadcasting were 7% higher than in the previous year and amounted to PLN 53,421 thousand. The revenues from the FilmBox film channels and theme channels increased by 11% y/y (as a result of intensified sales campaigns and an increase in the number
23 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A. of subscribers). At the same time, the results on broadcasting the Kino Polska channels were almost identical to those in 2018.
The operating profit generated in the reported period was 28% lower, and the net profit was 32% lower than in the previous year. The profit was lower mainly due to the termination of a licensing agreement with a related entity. It should be noted that under the present model the revenues from licensing rights are still generated indirectly.
11.2 Audience ratings of the Kino Polska TV S.A. Group channels3
Stopklatka
In 2019, Stopklatka recorded a share of 0.96% in the commercial audience (a more than 4% increase compared with 2018) (SHR%, All 16-49, live).
The channel's result was more than twice as good among the viewers of terrestrial digital television - the share of Stopklatka in this group of viewers was 1.88% (0.5% more than in 2018) (SHR%, All TV Terrestrial 16-49, live).
In the reported period, the average time of watching Stopklatka was 31 minutes and 21 seconds (ATS, All 16-49, live), i.e. 5% longer year-on-year. The increase in ATS reflects the growing attractiveness of the channel's programme offer.
The most important premiere on Stopklatka in 2019 was the Polish TV premiere of the popular TV series Narcos. Moreover, Stopklatka modified its name by deleting the "TV" part.
Zoom TV The year 2019 was the best year ever for Zoom TV in terms of audience ratings. The share of this channel in the commercial audience was 0.53%, which represents an increase of almost 33% compared with the previous year. The last month of 2019 was the also best month ever for Zoom TV - its share in the commercial audience in December was 0.64%, which represents a more than 10% growth in relation to December 2018 (SHR%, All 16 49, live).
The channel had even better results among terrestrial digital TV viewers in the reported period. The share of Zoom TV in this audience group was 0.72%, i.e. over 16% more than in 2018 (SHR%, All TV Terrestrial 16-49, live).
The average time of watching Zoom TV in 2019 was 32 minutes and 19 seconds, i.e. it was more than 26% longer than in 2018 (ATS, All 16-49, live). Zoom TV reported the biggest ATS growth (y/y) of all the Issuer's channels. The ATS growth reflects the growing attractiveness of Zoom TV's programme offer.
3 Source: NAM, live data
24 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
Zoom TV currently is the fastest-growing segment of the Company in terms of the amount of revenues. In 2019, Zoom TV was the first TV channel in Poland to show the Turkish series Bride of Istanbul, which gained enormous popularity (it contributed to the daypart's 20% growth). Zoom TV refreshed its graphic design and has a new slogan, which adequately describes its nature: "HUMOUR SCANDAL MYSTERY". Moreover, the channel's concession changed - there are more documentaries and entertainment shows, which are popular among viewers.
Kino Polska
In 2019, the Kino Polska channel recorded a share of 0.25% in the commercial audience (a more than 26% drop compared with 2018) (SHR%, All 16-49, live).
The average time of watching Kino Polska in 2019 was 21 minutes and 10 seconds, which means that its viewers spent 16% less time in front of TV sets than a year before (ATS, All 16-49, live).
In the reported period, Kino Polska showed a number of hit Polish films, such as "Obława", "Lincz", "Wymyk", "Yuma", "Układ zamknięty", the "Misja Afganistan" TV series and the original comedy show "Nowy kabaretowy rejs".
Kino TV
In 2019, Kino TV recorded a share of 0.15% in the commercial audience (an increase of more than 15% compared with 2018) (SHR%, All 16-49, live).
The channel achieved better results among the cable and satellite TV viewers. The share of Kino TV in the former group of viewers was 0.23% (SHR%, All TV Cable 16-49, live), and in the latter it was 0.20% (an increase of 25% y/y).
The average time of watching Kino TV in 2019 was 24 minutes and 6 seconds, i.e. it was almost 8% longer than in 2018 (ATS, All 16-49, live). The ATS growth Indicator reflects the growing attractiveness of the channel's programme offer.
Kino TV broadcasts in HD from February 2019.
Kino Polska Muzyka
In 2019, the Kino Polska Muzyka channel recorded a share of 0.08% in the commercial audience (an increase of more than 14% compared with the year before) (SHR%, All 16-49, live).
Its result almost doubled among the cable TV viewers - the share of Kino Polska Muzyka in the audience ratings in this group increased by as much as 50% compared with the previous year and it amounted to 0.15% (SHR%, All TV Cable 16-49, live).
25 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
The average time of watching Kino Polska Muzyka in the analysed period 25 minutes and 53 seconds, i.e. it was more than 17% longer than in 2018 (ATS, All 16-49, live). The increase in A TS reflects a growing attractiveness of Kino Polska Muzyka’s programme offer.
12. Information about the development strategy adopted by the Issuer and its Group and actions taken to implement this strategy, and a description of the Issuer's development prospects in the next financial year
The Issuer's strategy is aimed at improving the Issuer's and its Group's position on the Polish television market and its further development on international markets. The actions taken are aimed at making the Group the fifth largest media group in Poland, with an average annual share in the commercial audience (SHR, All 16-49, live) of 2.5-3%.
As part of the execution of this strategy, the Group invests in the programme offer of its channels, so that they could attract new viewers to make their audience ratings further improve. Intensive marketing activities associated with the products offered by the Group will also be continued (including popularization of products in the online environment). The Group expects that these actions will bring an increase in the revenues from broadcasting of pay TV channels and generate higher advertising revenues.
Achieving synergies within the Group is also one of its strategic goals. To achieve this goal, in 2018 the Issuer purchased shares of Stopklatka S.A. As a result of this transaction, the Issuer acquired control over that entity (previously, Stopklatka was under the Company's joint control).
In the coming periods, the Group will also develop the digital segment of its operations in order to gradually increase the share of the sales of non-linear products (FilmBox Live and FilmBox On Demand) in its revenues. The Group' strategic goals will include the launch of its own Kino Polska TV platform, It will present popular Polish films and TV shows, already known from the iconic Kino Polska channel, as well as unique productions of the Group and interviews with the best-known Polish film makers, which have never before been published. In the light of the present changes, it may be expected that the non-linear products segment will be the main source of the Group's revenues in the future.
The Group is working on increasing sales of FilmBox Premium packages on foreign markets and expanding the distribution of those channels to new territories. It also plans to gradually introduce advertising blocks to FilmBox basic channels in selected countries.
When analysing the information on the Company's and Group's strategy provided above, it should be borne in mind that the actual implementation of the plans described here will depend on the economic situation. As at the date of publication of the Report the Management Board is not expecting a direct, materially negative impact of the coronavirus (SARS-CoV-2) pandemic on the Company and Group's operations, financial position and results of operations. Nevertheless, it cannot be precluded that a prolonged period of restrictions in business activities 26 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A. will in the medium and long term negatively affect the Issuer and its Group's financial position and results of operations. The Management Board is monitoring the situation on an ongoing basis and will respond appropriately to mitigate the impact of such measures, if any.
13. The pandemie will potentially have an adverse effect on the economic situation of Poland and the other countries in which the Issuer's Group operates.
Macroeconomic risk and risk relating to the financial position of households Macroeconomic risk and risk relating to the financial position of households The level of the Issuer 's revenues mainly depends on the wealth of those who live in Poland and other countries in which the Group operates (especially big-city dwellers), which changes depending on the economic conditions, including: the pace of economic growth, level of unemployment, individual consumption, consumer sentiment indices, EUR/PLN exchange rate, and the government's fiscal policy. There is a risk that in the case of a protracted economic slowdown or recession, the demand for the services offered by the Issuer and its Group will decrease, which may adversely impact their growth and results of operations.
The sources of the Issuer's revenues include the sales of advertising through the channels it distributes (in Poland). An economic crisis or, in particular, a recession in Poland could lead to a situation where the existing advertisers would reduce their expenditure on advertising time on the Company's channels.
The experts expect that Poland may experience a decrease in the rate of GDP growth in 2020 due to the SARS- CoV-2 pandemic. An economic slowdown could have an adverse effect on the advertisers' activity (among other things). Lower expenditure on advertising would likely also be reflected in the Group's financial results. However, the Management Board believes that, at the current stage of development of the pandemic, and its present, still difficult to estimate, long-term impact on individual branches of the economy, it is impossible to determine with any precision how long the period of lower advertising revenue would last.
A long-term regional or global economic slowdown would have an adverse effect on the amount of consumer spending in Poland. Some of the channels from the Issuer's portfolio are offered by cable and satellite operators as part of paid TV packages. The resignation of some subscribers from paid TV cannot be excluded. As a result, the Company's revenues from broadcasting of its channels would decrease. It should be noted, though, that since the Polish government introduced certain solutions to encourage people to stay at home, a greater interest in both television and VOD platforms can be expected in these special circumstances.
There is also a risk of a deterioration in the financial standing of the Company's business partners who may have problems with the timely repayment of their liabilities to the Issuer.
It is also possible that the value of the Polish currency in relation to other currencies will decrease due to the SARS-CoV-2 pandemic, which also could have an adverse effect on the Issuer's financial standing.
27 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
As at the date of publication of the Report, the Management Board does not expect a direct, materially negative impact of the SARS-CoV-2 pandemic on the Company's operations, financial position and results of operations. However, it cannot be precluded that a prolonged period of restrictions in business activities will in the medium and long term negatively affect the Issuer's financial position and results of operations. The Management Board is monitoring the situation on an ongoing basis and will respond appropriately to mitigate the impact of such measures, if any. If the Company's Management Board obtains data suggesting a significant adverse effect of the pandemic on the Issuer's finances, it will publish such information immediately (in accordance with Articles 1 and 4 of the Regulation (EU) no. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC.
Competition risk The Issuer operates on a highly competitive market with many film television stations competing for end customers, which broadcast in Polish or foreign languages, in standard or high-definition format, and offer a variety of films and television programmes produced in Poland, the U.S., Europe or elsewhere.
Moreover, the Company's offer competes with that of a number of broadcasters of general, non-film television channels. This is especially noticeable in the programming provided by cable television operators, where the finite capacity of a cable connection limits the programming on offer to several dozen channels, which entails a regular replacement of the least interesting channels provided. The end customers' interest can also be influenced by the conditions created by the operator that can be influenced by the Issuer only to a very limited extent, among other things, the structure of basic and additional television channel packages provided, contents of the packages relative to their prices and relative to contents of competitors' packages, signal availability, set- top boxes provided, etc. The channels distributed via free terrestrial television also constitute significant competition for the programming offered by the Company. As a result of finalizing the process of the digitization of terrestrial television in Poland in July 2013, twenty-four television channels are distributed terrestrially. Multiplex eight is another DVB-T terrestrial digital television channel network which was launched in Poland. Ultimately, the new multiplex was to comprise either seven standard-definition channels (three Telewizja Polska channels and four commercial TV channels) or six channels, including one high-definition one (two SD and one HD channel of Telewizja Polska and four commercial SD channels). In November 2015, the National Broadcasting Council (KRRiTV) granted four concessions for terrestrial distribution of channels on Multiplex Eight. Towards the end of 2016, four commercial broadcasters started broadcasting through MUX8. Two Telewizja Polska channels (TVP Rozrywka and TVP Sport HD) started broadcasting through Multiplex Eight in December 2018. As a result of changes introduced by TVP in 2019, ultimately TVP Kultura HD and TVP HD channels (the latter in SD resolution) have been provided through MUX8 multiplex since April 2020. In the Company's opinion, given the high volatility of TVP's offer in MUX8 and seasonality of the audience ratings, at present it is difficult to clearly assess the impact of the functioning of the said TVP channels set on the audience rating of the entire MUX8. According to a NAM survey, the percentage of households which can receive channels broadcast through MUX-8 was 63.9% at the end of March.
28 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
The Issuer seeks to maintain attractive programming of its channels; however, the risk that, in spite of this, the competition in the segment of film programmes or in the entire media industry will intensify cannot be ruled out, which could cause a drop in the viewership (audience) of the Group's channels and, consequently, adversely affect its results of operations. Plans for setting up another multiplex cannot be ruled out, either. This will result in a further increase in the number of competitors.
Risk of claims of infringement of intellectual property rights The Company's business is based, to a significant extent, on using intellectual property rights and licence agreements. The Issuer believes that it does not infringe any intellectual property rights of third parties in its business. However, the Company cannot rule out the possibility that it might involuntarily infringe such rights. Consequently, claims could be lodged against it in that respect, as a result of which the Company would have to pay appropriate compensation. This could adversely affect the Company's results of operations and its growth prospects.
Risk of volatility of legal regulations, in particular those governing the Company's business Due to the fact that the Polish legal system is subject to frequent changes, they may have an adverse impact on the business of Kino Polska TV S.A. and entail serious business risks. In particular, the Company's activities may be affected by changes in the legislation governing its business, including the Radio and Television Act and the respective secondary legislation, the Copyright Act, the EU regulations concerning the operations of reproduction rights organizations, as well as changes in the capital market legislation in Poland.
Such new legislation may potentially pose some risks related to interpretation issues, lack of history of relevant court decisions, unfavourable interpretations adopted by courts or public administration bodies, etc. Additionally, the tax system in Poland is highly volatile. Any changes to business taxation, in terms of income tax, VAT and other taxes, may have an adverse effect on the operations and the level of income of the Issuer.
The Company is also exposed to the risk of possible changes in the interpretations of the tax law published by the tax authorities, which may influence the operating activities and financial results of the Issuer.
To minimize this risk factor, the Company is working together with a consulting company and has the necessary insurance. In addition, the employees and associates of Kino Polska TV S.A. participate in training/workshops on current changes in the legislation governing the Issuer's business.
Foreign exchange risk Kino Polska TV S.A. incurs the costs of broadcasting services and other ancillary services for each television channel in the currency generally accepted for this type of agreement, including the euro. Additionally, the Company incurs a part of the costs involved in purchasing programming licences in US dollars. Therefore, certain costs incurred by the Issuer are exposed to foreign exchange risk. Any significant weakening of the Polish zloty against the euro or the US dollar could reduce the Company's profitability. To minimize this risk factor, the Group
29 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A. companies have foreign currency current accounts, used for the settlement of foreign exchange transactions, and monitor foreign currency cash inflows and outflows on an on-going basis.
This factor may have a significant adverse impact on the development prospects, the results and the financial standing of the Issuer.
Further details on the Company's financial risks and the way of managing them are presented in Note 5.10.4 to the Separate Financial Statements as at and for the year ended 31 December 2019.
Risk of administrative penalties being imposed on the Issuer by the Polish Financial Supervision Authority for the incorrect performance of disclosure obligations The Polish Financial Supervision Authority (PFSA), as the regulator of public companies, may impose administrative penalties (including financial penalties) for incorrect fulfilment of disclosure obligations envisaged in the Act on Public Offering and in the Act on Trading in Financial Instruments. Such penalties may have a significant impact on the Company's financial position.
Moreover, as of 3 July 2016 companies quoted on a regulated market and in alternative trading systems are obliged to directly apply the Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse, and the scope of their responsibilities is specified in the Directive 2014/57/EU of the European Parliament and of the Council of 16 April 2014 on criminal sanctions for market abuse. The entry into force of the legislation referred to above involves not only an extension of the catalogue of events constituting a violation of disclosure obligations, but also leads to increased penalties which may be imposed on public companies for such a violation.
The Issuer seeks to diligently discharge the disclosure obligations imposed on it. To that end, it participates in conferences (held - among others - by the Warsaw Stock Exchange and the PFSA) and in training aimed at keeping abreast of the applicable legislation. The Company also cooperates in this regard with a law firm.
Risk of non-compliance with personal data protection legislation resulting in the possibility of penalties being imposed for non-compliance with GDPR As part of its operations, the Company processes the personal data of its customers, suppliers, employees and collaborators, and therefore is a personal data controller. As such, the Company is subject to the provisions of Regulation (EU) 2016/679 of the European Parliament and the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC ("GDPR").
With the implementation of GDPR, personal data protection standards became stricter. It should also be remembered that penalties which may be imposed on controllers in the case of infringements were also significantly increased. Currently, they may reach up to EUR 20 million or 4% of the total annual turnover for the preceding year. The regulator may also impose a temporary or permanent ban on personal data processing.
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The Issuer developed and implemented the procedures set out in the GDPR. Training for the Company's employees was conducted by employees of law firms which specialize in GDPR issues. In addition, the Management Board of the Issuer appointed a Personal Data Coordinator. The Company also cooperates in this regard with a law firm.
Risk of the United Kingdom leaving the European Union (Brexit) Filmbox International Ltd. - a subsidiary of the Issuer, holds a concession for FilmBox film channels granted by the Office of Communications ("Ofcom") in London for an unlimited period.
In order to mitigate the risk associated with the United Kingdom leaving the European Union (Brexit), which may relate to, among other things, legal issues arising, the Issuer's Management Board decided to move the concession for the FilmBox film channels to Spain. On 1 February 2020, the Company already moved two concession (for the Kino TV and Gametoon HD channels) to that country, and by the end of 2020 (i.e. by the end of the transition period), concessions for other FilmBox film channels are planned to be moved to Spain. The concessions are owned by a subsidiary of the Issuer, Filmbox Iberia S.L.U. The Issuer has already established a broadcasting structure within that entity, i.e. a team responsible for programming, purchasing and marketing decisions.
14. Description of material risk factors and threats related to the Issuer's operations
Risk of loss of concession/not obtaining an extension of concession after the end of its term The operations of the Kino Polska TV S.A. in the area of Telewizja Kino Polska production and distribution are based on the concession no. 238/K/2013-T for the satellite broadcast of coded "Telewizja Kino Polska" channel. The concession is valid until 17 December 2023.
Kino Polska TV S.A. also holds the following concessions: No. 489/2011-T for the "Kino Polska Muzyka" channel, which expires on 6 December 2021; No. 540/2013-T for the "Kino Polska International" channel, which expires on 15 October 2023; No. 541/2013-T for the "Kino Polska Muzyka International" channel, which expires on 15 October 2023.
The Company's subsidiary, Stopklatka S.A., holds a concession no. 544/2013-T for the digital terrestrial distribution of the Stopklatka (formerly: Stopklatka TV) channel on the first multiplex and for its satellite distribution, amended on 27 February 2014, which has been valid from 30 October 2013 and expires on 29 October 2023. The channel started broadcasting on 15 March 2014. Moreover, Cable Television Networks & Partners sp. z o.o. ("CTN&P") obtained concession no. 629/2015-T for the distribution of the Zoom TV channel on the eighth multiplex and concession no. 654/2016-T, on the basis of which the channel is distributed via satellite.
The company merged with the Issuer on 26 June 2018.
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There is a risk that potential non-compliance with the terms of the concession, in particular in respect of the programming content or the maximum advertising broadcast time, or permanent discontinuation of broadcasting the channel, may lead to KRRiT imposing sanctions (call to repair the violations, monetary penalties of up to 50% of the annual fee for the use of the frequency or up to 10% of the broadcaster 's revenue for the previous fiscal year, or losing the concession). Theoretically, there is a risk that KRRiT could refuse to re-grant the concessions to Kino Polska TV S.A. or Stopklatka after the period for which they have been initially granted or that the terms of the re-granted concessions (or concession-related contracts, such as the lease of a transponder or broadcasting services) would be less favourable from the Issuer's perspective than the current ones. However, the Company's Management Board believes that this risk is minimal. The observed market conditions confirm this.
Filmbox International Ltd. - a subsidiary of the Issuer, holds a concession for FilmBox film channels granted by the Office of Communications ("Ofcom") in London for an unlimited period.
Risk of not extending cooperation contracts with cable and digital operators The Issuer's revenue consists mainly of the fees paid by operators of cable TV and digital satellite platforms for re-broadcasting TV programs produced/distributed by Kino Polska TV S.A. and Filmbox International Ltd.
The Company signed agreements for re-broadcasting the Telewizja Kino Polska channel with all operators of digital satellite platforms and with most cable TV operators, including all the largest ones (UPC, Multimedia Polska, Vectra, Toya, Inea); the largest operators cover approx. 75% of all cable TV subscribers in Poland. Additionally, Telewizja Kino Polska is available in the international version (Kino Polska International) in the USA via the Dish Network platform.
The Issuer also signed agreements for distribution of the Kino TV (formerly FilmBox) channel with all operators of satellite platforms and most cable TV operators. The Issuer also signed agreements for the distribution of the FilmBox Premium channels with all operators of satellite platforms and more than 150 cable TV operators, including all the largest ones (UPC, Multimedia Polska, Vectra, Toya, Inea). Kino Polska Muzyka is available in offers of selected cable operators (such as UPC Polska, Multimedia Polska, Vectra, Toya, Inea) and on all satellite platforms. Additionally, this channel is also available in the international version (Kino Polska Muzyka International) in the USA via the Dish Network platform and the Ipla Polonia platform, which is addressed to the Polish community.
Some of the agreements with operators provide for flat-rate revenues, and some determine revenues based on the actual number of subscribers in a given month.
The agreements with the key operators are concluded for one to three years, with the option of termination not earlier than three months before the end of the first term of the agreement, and if the agreement is not terminated, it is automatically extended for a consecutive specified period.
32 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
The risk of terminating one or more agreements or not extending them by the operators cannot be ruled out. Termination or non-extension of an agreement, in particular by an operator who has many subscribers, would have a significant negative impact on the revenue and results of the Company and its Group. The Issuer tries to mitigate the above risk by creating an attractive programme offer for the individual channels and negotiating appropriate provisions in the agreements, including the termination and extension conditions.
Business model risk The Company's business activities are focused on the distribution of the following channels: Kino Polska, Kino Polska Muzyka, Zoom TV; as well as on distribution and production of TV programmes with a film profile intended for other market niches (Kino TV and FilmBox Premium package) and the Kino Polska International and Kino Polska Muzyka International channels.
There is a risk of ill adjustment of the Company's programme offer to the changing viewers' expectations, outflow of viewers to the Internet or the Company's inability to introduce new attractive products to the offer as the current markets become saturated.
The Issuer engages in operations on markets where commercial success depends on factors that are difficult to predict, such as customer satisfaction and acceptance of the programming content. Viewer satisfaction with the programme offer is of key importance for the possibility of acquiring and retaining customers, as well as achieving and increasing subscription revenues. The ability to generate advertising revenues depends on the viewers' demand for TV programmes broadcast by the Issuer. Therefore, the audience ratings of the programmes broadcast by the Company have a direct impact both on the attractiveness of the television channels for the current and potential advertisers and on the fees the Issuer may earn for advertising time.
Demand for television channels and viewers' preferences are subject to frequent changes. The Company may be unable to acquire and retain customers if it does not effectively forecast the demand for programmes or changes in tastes with respect to programming content or if the Issuer's competitors manage to forecast such demand or changes in tastes more effectively. As a result, it may lead to an increase in the customer churn rate and a drop in viewership, and - as a result - difficulties with acquiring advertisers. In consequence, a lack of acceptance for the programme offer of Kino Polska TV S.A. or its inability to acquire rights to broadcast programmes/films may have a significant adverse effect on the Company's results, financial position and development prospects. The Issuer attempts to mitigate such risk by preparing an attractive programme offer for its viewers.
Also worth mentioning are the limitations in the availability of the programming content in Polish which is due, among other things, to the liquidation of film studios. This is a challenge for the Company, because not only is the Polish content the foundation of the Kino Polska programming (mainly older, iconic productions), but is also very valuable to other channels in the Issuer's portfolio. The Company is therefore working on neutralizing the impact of this limitation on its business. It was decided to rejuvenate the audience of the Kino Polska channel
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(while maintaining the nostalgic character of the channel which is so important for its viewers), which has started showing more content which will be attractive to the younger audience, too.
To minimize this risk, as of 2012 the Company has systematically increased its presence in the new media, among other things using the mobile application FilmBox Live, the presence of Telewizja Kino Polska in Cyfrowy Polsat's Mobile TV, and the availability of the following channels: Telewizja Kino Polska, Kino TV and FightBox in live Internet television Orange Tu i Tam, Play Now and WPPilot.
The Issuer holds 100% of the shares in Filmbox International Ltd., which allows the Company to control activities related to the production and distribution of FilmBox film channels on a global scale. Expansion to other foreign markets is another factor that minimizes the risk of market saturation. Thanks to its strategy, Kino Polska TV S.A. is present in more than 40 countries.
The Group is constantly expanding its programme offer. The Company is the majority shareholder of Stopklatka S.A., the broadcaster of the first terrestrial film channel in Poland - Stopklatka (formerly: Stopklatka TV), which has been broadcast since 2014. In 2016, another terrestrial television channel was added to the Company 's portfolio - Zoom TV, which was then broadcast by the Issuer's subsidiary - Cable Television Networks & Partners sp. z o.o. In 2018, CTN&P was merged with the Company.
Risk of interruptions in the transmission of television signal The risk of interruptions in the transmission of the television signal is a typical and characteristic element of the operations of all television broadcasters. The Company provides its customers, cable television operators and the operators of digital satellite platforms mainly with a signal which transmits the Issuer's television programmes via a satellite. The satellite signal for each of the channels is encoded. The technical services related to the transmission of the signal of the Company's channels have been outsourced to specialized entities.
There is a risk, however, that despite the signed agreements and the application of technological solutions, an interruption may occur in the receipt of the Issuer's one or many channels by the operators or by end viewers, especially in the event of defective functioning of or damage to fibre optic devices or networks, or in the event of force majeure (e.g. natural disasters). These factors may have a significant adverse impact on the development prospects, the results and the financial standing of Kino Polska TV S.A.
The Company tries to minimize the risk of interruptions in the transmission of the television signal. The devices used to produce and broadcast the Issuer's television channels are equipped with a number of safety features to lower the probability of the occurrence and the consequences of potential malfunction.
Risk of loss of managers and key personnel The operations and development of the Issuer depend on the knowledge and experience of its managers and employees. Conducting this type of activity requires well-qualified senior managers. The loss or lack of possibility
34 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A. to find qualified staff for the key positions may have a significant adverse impact on the operating activities or further development prospects of the Company.
The Issuer's operations in the media industry requires acquiring and retaining employees with a specific educational background and experience, whose supply on the market is relatively limited. Additionally, there are media industry enterprises and holdings on the market which, due to the scale of their operations, generate demand for such employees (in particular, for specialists dealing with technical services and the preparation of programmes) and are in a position to offer better conditions of employment.
Consequently, the risk of difficulties arising in attracting or retaining the employees necessary to conduct the operations cannot be ruled out. The Company seeks to prevent the loss of managers and key employees by offering them remuneration which is attractive compared to that offered on the market.
Risk of external services The specific nature of the Issuer's operations leads to a substantial share of third party services in operating expenses. External services comprise licence and distribution fees, fees for specialist services regarding the production and distribution of television programmes, and fees for various kinds of typical services provided to a given business. The risk that the trade conditions for the purchase of one or many external services by the Company will deteriorate, especially that the costs of licences or the cost of broadcasting programmes via a satellite will increase, cannot be ruled out.
To mitigate this risk the Issuer monitors the terms and conditions arising from the contracts it concludes on a current basis, analyses the available market options and negotiates the terms and conditions of contracts.
Risk of the key shareholder dominating the Company's operations SPI International B.V. holds shares which represent 65.15% of all shares and votes at the General Meeting of the Issuer. The risk that the interests and operations of the key shareholder will not be in line with those of minority shareholders cannot be ruled out. In particular, it is not possible to rule out the risk that the key shareholder will decide to change the sequence of pursuit of the Group's individual strategic goals, or to change the strategy itself, or to change the scope of the Company's operations. The risk that the key shareholder will exert decisive influence on the Issuer's decisions, including decisions about the content of the resolutions passed by the General Meeting, cannot be ruled out, either.
Risk related to distribution and production agreements for the FilmBox programmes The Company has been offering production and distribution of FilmBox programmes since 2009. On 18 February 2014, a distribution agreement was concluded by and between the Issuer and Filmbox International Ltd. (the "FB Agreement"). Under the FB Agreement, Filmbox International Ltd. (a subsidiary of the Issuer) grants the Issuer a licence (exclusively in the territory of Poland and non-exclusively in other countries throughout the world) for the rights to rebroadcast the film channels of the FilmBox brand (for which Filmbox International Ltd. holds
35 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A. concessions), along with the possibility of sublicensing them to cable and satellite operators, and to operators using other techniques of transmission and rebroadcast. In 2018, the scope of the FB Agreement was extended to include the television programmes covered by a concession held by Mediabox Broadcasting International Ltd., which Filmbox International Ltd. has the right to distribute. In this respect, the FB Agreement replaced the distribution agreement concluded on 30 September 2011 by and between the Issuer and Cinephil France S.A.S., whose scope was limited by an annex signed on 18 February 2014, on the basis of which Kino Polska TV S.A. distributes theme channels such as: FASHIONBOX, FIGHTBOX, DOCUBOX, FASTNFUNBOX, 360TUNEBOX, EROX, EROXXX, Gametoon, Funbox UHD, the application FILMBOX LIVE and VOD content under the FilmboxonDemand brand.
Additionally, on 13 March 2013 KPTV Media Sp. z o.o. ("KPTV Media") signed two significant agreements with Filmbox International Ltd.: a production agreement and a telecommunications agreement under which it provides services which consist of preparing the FilmBox channels, and therefore the scope of the work of Kino Polska TV S.A. was limited to operations complementary to KPTV Media Sp. z o.o.'s activities in this area. Both the Issuer and KPTV Media Sp. z o.o. have also signed agreements on the preparation of theme channels with Mediabox Broadcasting International Ltd. and Rox Entertainment B.V. KPTV Media merged with the Company on 26 June 2018, and the Issuer took over all KPTV Media's obligations under the above-mentioned agreements.
It cannot be ruled out that the above agreements will not be extended for consecutive periods or that new, less favourable trade conditions will be negotiated. Nor can it be ruled out that for reasons beyond the Company's control the concessionaire will lose one or more concessions, which would have a significant adverse effect on the results and the financial position of the Issuer.
To minimize these risk factors, on 27 November 2013 Kino Polska TV S.A. became the owner of 100% of the shares in Filmbox International Ltd., a company which owns the Filmbox film channels.
In 2018, the Company signed a trilateral agreement with Filmbox International Ltd. and Mediabox Broadcasting International Ltd. for distribution of Filmbox and Mediabox channels on the CEE markets. Under this agreement, Filmbox International Ltd. took over the revenues from Mediabox channels on the CEE markets and the costs of the Mediabox channels production services.
15. Indication of litigation pending before courts, arbitration bodies or public administration authorities, including information on litigation relating to the Issuer's or its subsidiaries' liabilities or receivables amounting to at least 10% of the Issuer's equity
In the reporting period and after its end, no proceedings were pending in respect of the Issuer before a court, an arbitration body or a public administration authority, which would meet the above criteria, either individually and in respect of two or more proceedings.
36 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
16. Information on key products, goods for resale and services
The Company's core products and services comprise: • The Zoom TV channel, which has been broadcast since 25 October 2016 (until 26 June 2018 through CTN&P); a universal TV channel presenting current events from various parts of Poland and programmes promoting the idea of self-government and informing about the functioning of local communities, civil education and various actions taken to promote public interest, in which a wide range of political views are represented. The channel is available via free terrestrial television free of charge on MUX8. The Issuer also signed distribution agreements with all operators of digital satellite platforms and most cable TV operators, including all the largest ones (UPC Polska, Vectra, Multimedia Polska, Inea, Toya); the largest operators cover approx. 90% of all cable TV subscribers in Poland. The channel is also available in the Play Now offer.
• Telewizja Kino Polska which draws upon the long-standing heritage of Polish film, valuable for all age groups, and which is the Issuer's core product. The channel's unique formula places it high in the audience rankings of theme channels in Poland. This channel presents the classic films and invites the audience to rediscover them. Telewizja Kino Polska sells advertising time. The channel operates based on concession no. 238/K/2013-T. The Company signed agreements for re-broadcasting the Telewizja Kino Polska channel with all operators of digital satellite platforms and with most cable TV operators, including all the largest ones (UPC Polska, Vectra, Multimedia Polska, Vectra, Inea, Toya); the largest operators cover approx. 75% of all cable TV subscribers in Poland. Telewizja Kino Polska is also available on Cyfrowy Polsat's TV Mobilna, live Internet television Play Now, WPPilot and in the FilmBox Live package. • The television channel Kino TV (formerly: FilmBox) and the FilmBox Premium package - film television channels, presenting feature films and documentaries from all over the world divided into categories by type, band and thematic cycles. The Issuer also signed agreements for the distribution of the Kino TV channel with all operators of satellite platforms and most cable TV operators, including all the largest ones (UPC Polska, Multimedia Polska, Vectra, Toya, Inea). The Issuer also signed agreements for the distribution of the FilmBox Premium channels with all operators of satellite platforms and more than 150 cable TV operators, including all the largest ones. The channels are also available in other countries, including the Czech Republic, Romania, Slovakia and Hungary. • The television channel Kino Polska Muzyka - the only station in the world which broadcasts exclusively Polish music. Apart from cult music videos, unforgettable concerts and golden hits of the greatest Polish stars it also broadcasts show hits and interesting archival programmes. Since January 2012, Kino Polska Muzyka has sold advertising time. The channel operates based on concession no. 489/2011-T. Kino Polska Muzyka is available in offers of cable operators (such as UPC Polska, Multimedia Polska, Vectra, Toya, Inea) and on all satellite platforms. Kino Polska Muzyka is also offered on FilmBox Live Play Now and WPPilot. Additionally, the channel is available in the international version in the USA via the Dish Network platform and the Ipla Polonia platform addressed to the Polish community.
37 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
• The Kino Polska International television channel - a channel whose mission is to continue the programme mission of Telewizja Kino Polska. The channel is broadcast in Polish. It is addressed primarily to the Polish community in the U.S. The channel is available in the USA via the Dish Network platform. • archiving services - creating archival copies and providing archiving services in the areas of deep and ongoing archiving for the purposes of storing and exchanging digital material. • reconstruction services - coordination of reconstruction processes in terms of quality and technologies used based on the unique know-how. • services relating to the preparation of master copies - providing the services relating to the production and distribution of digital copies of films and other materials in DCP, TV, VoD, DVD and Blu-ray technologies, UHD copies and preparation of fragments of materials. • services relating to promotions - development of promotional packages for digitally reconstructed materials. • services in respect of the preparation of language versions and adaptations: - preparing language versions of films and their adaptations to various fields of use; - inserting language versions of films in master copies; - preparing edit decision lists for digitally reconstructed materials, on the basis of which comprehensive solutions could be created for context search of digitally reconstructed materials. • distribution of licences for digitally reconstructed materials - on behalf of copyright holders, based on licence agreements.
Kino Polska TV S.A. produces and distributes the FilmBox channels on the basis of agreements with Filmbox International Ltd. (owner of the concession for and distributor of film channels), and thematic channels - on the basis of agreements with Mediabox Broadcasting International Ltd. (owner of the concession for thematic channels) and Cinephil France S.A.S. (distributor of thematic channels).
Moreover, the Company's other activities comprise: • broadcasting TV channels Kino Polska, Kino Polska Muzyka, Kino TV, Zoom TV, FilmBox film channels and topical channels (including sales of advertising spots); • production of television channels; • sales of licence rights.
In addition, in Note 5.3. to the Issuer's Separate Financial Statements as at and for the year ended 31 December 2019, the structure of the Company's sales by core operating segment is presented.
38 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
17. Information on sales markets, taking into account the break-down into domestic and foreign markets, and information on the sources of supply of production materials and goods and services, specifying reliance on one or more customers and suppliers, and in the event of one customer or supplier having a share of at least 10% of total sales revenues - the name of that supplier or customer, its share in the sales or purchases and its formal relationship with the Issuer
Key customers The main recipients of the Issuer's products are cable television and digital satellite platform operators who provide the signal of the channels produced by the Company to their subscribers (households).
Other users of the services provided by the Issuer in 2019 include: • Polsat Media Biuro Reklamy Spółka z ograniczoną odpowiedzialnością Sp. k., • other television broadcasters who acquire rights to broadcast films owned by Kino Polska TV S.A.; • video on demand operators; • individuals (purchasers of DVDs) via a distribution company.
The Company's key market in 2019 was the domestic market, which was responsible for approx. 65% of the Company's revenues. The remaining revenue of the Issuer was generated based on foreign markets.
2019 Poland European Union Other Total
Total revenues (in PLN '000) 105,161 5,362 51,284 161,807
The main customers whose share in the Issuer's sales revenue for 2019 represented at least 10% of total sales revenue in 2015: • Polsat Media Biuro Reklamy Spółka z ograniczoną odpowiedzialnością Sp. k. - 22% of the total sales revenue; • ITI Neovision S.A. - 10% of the total sales revenue.
The Issuer has commercial relations with the other entities.
Key suppliers No single supplier had a share of 10% or more in the total sales revenue of the Company in 2019.
18. Information on contracts significant to the Issuer's operations, including contracts concluded by and between the shareholders of which the Issuer is aware, insurance contracts, and cooperation contracts
In the period of 12 months ended 31 December 2019, the Issuer (and its subsidiaries) did not enter into any agreements significant to the Issuer's operations. Neither is the Issuer aware of any agreements concluded by and between its shareholders which would have a material impact on its operations.
39 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
19. Information on the Issuer's organizational or equity relationships with other entities and determining its main investments in Poland and abroad, in particular securities, financial instruments, intangible assets and real estate, including equity investments made outside the group of related entities and a description of the methods of financing them
Kino Polska TV S.A. is related in terms of equity to its subsidiaries and jointly controlled entities.
| Direct subsidiaries
| Indirect subsidiaries
A detailed list of the shares/interest held by the Company (directly and indirectly) is presented in Note 5.1. to the Separate Financial Statements of the Issuer as at and for the year ended 31 December 2019.
Information on the composition of the management bodies of the Issuer's subsidiaries and companies under its joint control as at 31 December 2019:
Company name Composition of the Management Board
Bogusław Kisielewski - President of the Management Board Stopklatka S.A. Małgorzata Parczewska-Pałka - Management Board Member Berk Uziyel - Member of the Management Board Berk Uziyel - Director Filmbox International Ltd. John Logan - Director
Information on the composition of the management bodies of the Issuer's subsidiaries and companies under its joint control as at the date of publication of this Report:
40 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
Company name Composition of the Management Board
Bogusław Kisielewski - President of the Management Board Stopklatka S.A. Małgorzata Parczewska-Pałka - Management Board Member Berk Uziyel - Member of the Management Board Berk Uziyel - Director Filmbox International Ltd. John Logan - Director
Filmbox Estonia OU in liquidation Jaanus Magi - Member of the Management Board
Filmbox Iberia S.L.U. Maria Almudena Campo Marquina - Member of the Management Board
20. Information on transactions concluded by the Issuer or its subsidiaries with related entities on conditions other than arm's length
In 2019, Kino Polska TV S.A. and its related entities did not conclude any significant transactions with related entities on conditions other than arm's length.
21. Information on loan agreements concluded and terminated in a given financial year, including at least the amounts of such loans, type and amount of interest rate, currency and repayment deadlines
In 2019, the Company signed a loan agreement with Santander Bank Polska S.A. relating to a loan of PLN 596 thousand. The interest rate on the loan is fixed at 4.21% and the repayment date is 25 January 2021.
In addition, in the period covered in the Report, the Issuer concluded a loan agreement with a related entity, Filmbox International Ltd., amounting to EUR 800 thousand. The interest rate on the loan is EURIBOR 3M + margin, and its repayment date falls no later than one year after the disbursement of a given tranche.
Details of the loans and borrowings received are presented in Note 5.6.3 to the Separate Financial Statements for the year ended 31 December 2019.
22. Information on loans granted in the given financial year (including those granted to the Issuer's related entities), giving at least their amounts, type and interest rate, currency and repayment deadline
In 2019, the Company granted a loan of EUR 20 thousand to its subsidiary, Filmbox Iberia S.L.U.. Interest rate on the loan is EURIBOR 3M + margin, and its repayment date falls no later than one year after the disbursement of a given tranche. On 18 March 2020, the General Meeting of Filmbox Iberia S.L.U. adopted a resolution on converting the said loan to equity.
Details of the loans granted are presented in Note 5.10.7 to the Separate Financial Statements for the year ended 31 December 2019.
41 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
23. Information on warranties and guarantees granted and received in a given financial year, in particular warranties and guarantees granted to the Issuer's related entities
In 2019, the Company did not receive any warranties and guarantees, but only continued the guarantees granted/received in prior years.
24. Description of the Issuer's use of proceeds from securities issued in the period covered by the report up to the Directors' Report date - if any securities were issued in the period covered by the report
The Company did not issue any securities in the period covered by the report.
25. Explanation of differences between the financial results shown in the Annual Report and the forecasts of the results for the year published previously
The Company did not publish any forecasts of separate financial results for 2019.
26. Assessment, with justification, of the management of financial resources, in particular, the ability to meet liabilities, and determination of potential threats and actions taken or intended to be taken by the Issuer to counteract those threats
The management of the financial resources is a competence of the Management Board of Kino Polska TV S.A. and in the Issuer's opinion, is performed in a reasonable and efficient manner. The decisions taken by the Management Boards, both relating to the Company's operations and to their finances, are preceded by an analysis of all potential benefits and threats.
Kino Polska TV S.A. meet its financial liabilities as they become due and is not at risk of losing financial liquidity. As at 31 December 2019, the Company's cash and cash equivalents amounted to PLN 522 thousand.
27. Assessment of the feasibility of investment plans, including capital expenditure, relative to the financial resources held, taking into account possible changes in the structure of financing of investing activities
In accordance with its operating plans, Kino Polska TV S.A. intends to invest in programming inventory on an on- going basis. If necessary, the Issuer will use a bank overdraft facility. The cash held, funds generated on current operations and available under the overdraft facility should suffice to finance future needs, both those related to on-going operations and those related to the Company's planned investment projects.
42 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
Kino Polska TV S.A. does not rule out the possibility of other investments if an attractive offer arises. In such an instance, depending on the scale of the projects, the Issuer will consider the possibility of using alternative sources of financing.
28. Assessment of factors and unusual events affecting the results for the financial year and determination of the degree of impact of those factors or unusual events on the results achieved
Factors having an impact on the Issuer's financial results are described in Notes 5 and 11 of the Directors' Report for 2019.
29. Description of external and internal factors that are significant for the development of the Issuer's enterprise
The Issuer's enterprise is affected by many factors, both external and internal.
External factors include the macroeconomic conditions in Poland and abroad, development of competition on the market, change in the level of advertising expenditure, change in television viewers' preferences and change in the legal regulations applicable to the Issuer.
Internal factors include, among other things, the risk of not being granted concessions for broadcasting a channel after the previous one expires, cooperation with cable and satellite television operators and other material counterparties, access to attractive content and controlling whether the broadcast content complies with concession requirements.
The Issuer's development prospects are described in Note 3 to the Directors' Report for 2019.
30. Changes in basic principles for managing the Issuer's business and its Group
In 2019 there were no significant changes in the basic principles of managing the Company and its Group.
31. Information on agreements, if any, concluded by the Issuer with its managers, stipulating compensation in the event of their resignation or dismissal from the position held without an important reason or due to the Issuer's business combination by acquisition
The Issuer did not conclude any agreements with its managers, stipulating compensation in the event of their resignation or dismissal from the position held without an important reason or due to the Issuer's business combination by acquisition.
43 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
However, on the basis of resolutions of the Issuer's Supervisory Board, each member of the Management Board is entitled to twelve times the monthly net remuneration in the event of being dismissed from the function performed.
32. Information on remuneration, bonuses or benefits, including those resulting from incentive or bonus schemes based on the Issuer's capital, including plans of pre-emptive rights to bonds, convertible bonds, subscription warrants (in cash, in kind or in any other form), paid, payable or conditionally payable to each of the Issuer's managers or supervisors, or members of the Issuer's administrative bodies in the Issuer's business, separately
Remuneration of the Members of the Management Board of Kino Polska TV S.A. received from the Issuer in 2019 was as follows:
D ue to D ue to Due to bonuses, Business em ploym ent Total appointment aw ards activities contract Bogusław Kisielewski 555,871.00 35,370.58 356,559.00 - 947,800.58
Berk Uziyel 135,000.00 - - - 135,000.00 Marcin Kowalski 376,180.00 35,102.18 237,653.00 - 648,935.18
Levent Gultan 85,039.00 - - - 85,039.00
Alber Uziyel 150,000.00 - - 150,000.00
Gross remuneration of the Members of the Management Board of Kino Polska TV S.A. received from the Issuer's subsidiaries or jointly controlled entities in 2019 was as follows:
Stopklatka S.A. D ue to D ue to em ploym ent D ue to Business appointment contract bonuses, awards activities
Bogusław Kisielewski 252,663.00 - - - Berk Uziyel 15,000.00 - - -
Filmbox International Ltd.
D ue to D ue to D ue to em ploym ent Business bonuses, appointment contract activities aw ards
Berk Uziyel - - - 289,080.96
44 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
(Gross) remuneration of the Members of the Supervisory Board received from the Issuer in 2019 was as follows:
D ue to Remuneration D ue to D ue to e m ploym ent Business of the Supervisory bonuses, appointment contract activities Bo a rd aw ards
Loni Farhi 1,000.00 - - - Stacey Sobel 1,000.00 - - - Piotr Orłowski 29,221.38 - - - Jacek Koskowski 9,116.92 - - - Krzysztof Rudnik 62,165.43 - - - Jesus Perezagua Sanchez 11,234.35 - - - Katarzyna Woźnicka 59,551.38 - - - Levent Gultan 51,848.16 - - -
In 2019 Members of the Supervisory Board of Kino Polska TV S.A. did not receive any benefits in kind from the Issuer.
In the analysed period, Members of the Supervisory Board of Kino Polska TV S.A. did not receive remuneration or benefits in kind from the Issuer's subsidiaries or entities under the joint control of the Issuer.
33. Information on pensions and similar benefits, if any, payable to the Issuer's former managers or supervisors, or former members of the Issuer's administrative bodies, and on liabilities assumed in relation to those pensions, indicating the total amount for each category
Kino Polska TV S.A. does not have any liabilities resulting from pensions or similar benefits payable to former managers, supervisors or former members of its administrative bodies.
34. Total number and par value of all the Issuer's shares and shares in the Issuer's related entities held by the Issuer's Management or Supervisory Board members
Kino Polska TV S.A. The number of Kino Polska TV S.A. shares held by the Issuer's Management and Supervisory Board members is as follows:
N am e Number of shares Number of % of the fot* % of share capital and surname / par value in PLN votes number of votes
As at 16 April 2020
Bogusław Kisielewski PLN 136,124/ 13,612.40 136,124 0.69% 0.69%
In accordance with the Issuer's best knowledge, no other members of the supervisory or management bodies of Kino Polska TV S.A. hold shares in the Company as at the date of this Report's approval.
45 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
Stopklatka S.A. In accordance with the best knowledge of the Management Board of Kino Polska TV S.A., no members of the Issuer's supervisory or management bodies hold shares in Stopklatka S.A. as at the date of this Report's approval.
Filmbox Iberia S.L.U. In accordance with the best knowledge of the Management Board of Kino Polska TV S.A., no members of the Issuer's supervisory or management bodies hold shares in Filmbox Iberia S.L.U. as at the date of this Report 's approval.
Filmbox Estonia OU in liquidation In accordance with the best knowledge of the Management Board of Kino Polska TV S.A., no members of the Issuer's supervisory or management bodies hold shares in Filmbox Estonia OU in liquidation as at the date of this Report's approval.
Filmbox International Ltd. In accordance with the best knowledge of the Management Board of Kino Polska TV S.A., no members of the Issuer's supervisory or management bodies hold shares in Filmbox International Ltd. as at the date of this Report's approval.
Help Film s.r.o. In accordance with the best knowledge of the Management Board of Kino Polska TV S.A., no members of the Issuer's supervisory or management bodies hold shares in Help Film s.r.o. as at the date of this Report's approval.
Help Film Slovakia s.r.o. In accordance with the best knowledge of the Management Board of Kino Polska TV S.A., no members of the Issuer's supervisory or management bodies hold shares in Help Film Slovakia s.r.o. as at the date of this Report's approval.
SPI International Magyarorszag, Kft. In accordance with the best knowledge of the Management Board of Kino Polska TV S.A., no members of the Issuer's supervisory or management bodies hold shares in SPI International Magyarorszag, Kft as at the date of this Report's approval.
35. Information on agreements of which the Issuer is aware (including also those concluded after the balance sheet date) as a result of which future changes may occur in the proportions of the shares held by the current shareholders and bondholders
The Issuer is not aware of any agreements which could result in future changes in the proportion of shares held by the current shareholders or bondholders. 46 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
36. Information on the control system for employee share schemes
There are no employee share schemes in the Company.
37. Information on the date of conclusion of the contract for the audit or review of the financial statements or the consolidated financial statements by and between the Issuer and the registered audit firm, and on the period for which the contract was concluded. Information on whether and in what period the Issuer used the services of the selected audit firm and specification of the scope of such services. Indication of the authority which selected the registered audit firm. Indication of the fee of the registered audit firm paid or payable for the current and the previous financial year, separately for: the audit of the annual financial statements, other assurance services, including a review of the financial statements, tax advisory services, other services
On 18 July 2019, the Company concluded a contract with KPMG Audyt Sp. z o.o. Sp. k. ("KPMG"), for the audit of the separate and consolidated financial statements as at and for the year ended, respectively, 31 December 2019 and 31 December 2020, as well as for the review of the Issuer's separate and consolidated financial statements for the periods from 1 January 2019 to 30 June 2020 and from 1 January 2020 to 30 June 2020.
Before signing the said agreement, the Issuer did not use the services of the selected audit firm.
KPMG was selected by the Issuer's Supervisory Board, which acted pursuant to § 17, clause 1 sections 2 and 3 of the Company's Articles of Association.
Fees of the registered audit firm:
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Statutory audit or review of financial statements 329 381
Total 329 381
38. Investor relations
Kino Polska TV S.A., appreciates the importance of conducting efficient and transparent communication with the investors.
The Company publishes the current and periodic reports required by law. Additionally, in each quarter, meetings are organized with investors and analysts during which the Management Board presents results for the period and the most important achievements and plans of the Company and the Group. The Issuer publishes all the presentations from the said meetings on its website.
47 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Directors Report of Kino Polska TV S.A. TV S.A.
Apart from the said meetings presenting results, the Company's representatives regularly participate in chats and meetings with investors and analysts organized, among others, by brokerage houses. The Issuer's Management Board also continues the good practice of organizing individual meetings with analysts.
In addition, the Company cooperates with two market makers in order to increase the liquidity of its quotations. The Issuer also uses the services of a professional PR/IR advisor.
The Issuer is aware that its corporate website is an important source of information on its business. Therefore, it makes every effort to ensure that the information presented there is up-to-date and complete. All the published reports, annual financial results, information on General Meetings, monthly audience ratings of the Issuer's key channels and the presentations for investors and analysts referred to above can be found In the INVESTOR RELATIONS tab. The Company also publishes an English language version of its website.
48 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
III. INFORMATION ON CORPORATE GOVERNANCE
1. The Issuer's corporate governance principles and the place where the text of the set of the principles is publicly available
The Issuer's Management Board makes every effort to ensure that all shareholders have equal access to information on the Company. To ensure full transparency, since the moment of achieving the status of a listed company Kino Polska TV S.A. has applied a significant part of the best practices of listed companies.
Since 22 March 2011, the Issuer has published current and periodic reports and placed them on its corporate website. In 2019, the Company followed certain principles and recommendations applicable to public companies, specified in the "Good Practices of Companies Listed on the WSE 2016". The principles and recommendations are published on the website of the Warsaw Stock Exchange at: https://www.gpw.pl/pub/GPW/files/PDF/GPW 1015 17 DOBRE PRAKTYKI v2.pdf
Details of the "Good Practices of Companies Listed on the WSE 2016" applied by the Issuer are presented on the Issuer's website at: https://relacieinwestorskie.kinopolska.pl/relacieinwestorskie/lad korporacyjny
Editors of the channels produced by the Company comply with the professional standards generally accepted in the profession. The Media Ethics Charter is the foundation of their professional standards. In addition to that, the editors are also familiar with the Journalists' Code of Conduct, as published by the Association of Journalists of the Republic of Poland, and the Journalists' Code of Ethics of the Association of Polish Journalists, which specify desirable rules of conduct.
2. The extent to which the Issuer departed from the corporate governance principles referred to above, indication of the principles and explanation of the reasons for departure, as well as explanation of how the company intends to remedy the consequences, if any, of its failure to apply a particular principle, or what steps it intends to take to mitigate the risk of its future failure to apply the principle
The extent to which the Issuer departed from the recommendations and corporate governance principles specified in the "Good Practices of Companies Listed on the WSE 2019", indication of the principles and explanation of the reasons for departure, as well as explanation how the Company intends to remedy the consequences, if any, of its failure to apply a particular principle, or what steps it intends to take to mitigate the risk of its future failure to apply the principle, are presented below.
49 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
I. Information policy and communication with investors
PRINCIPLE I.Z.1 The Company maintains its corporate website on which it publishes (in addition to the information required by law) the following information, in a legible form and a designated location:
COMMENTS
I.Z.1.10 financial projections - if the company has The forecast of the financial results of the Kino Polska
decided to publish them - published at least in the TV S.A. Group for 2016 and the information about the
last 5 years, including information about the degree degree of its implementation, prepared by the Issuer,
of their implementation; were presented to the general public in the form of
reports published in the ESPI system, in compliance
with the Regulation of the Minister of Finance on
current and periodic reporting (...) of 29 March 2018.
All current and period reports are available on the
Company's website. The Company did not publish a
forecast of its financial results for 2019.
I.Z.1.11. information about the content of the The Company does not publish information on its
company's internal principle in respect of changing principle on changing the registered audit firm or
the registered audit firm or information about the information on the absence of such a principle on its
absence of such a principle; website. The appointment of a registered audit firm
(...) and the change thereof is at the discretion of the
Supervisory Board and it is not subject to any internal
rules, only the statutory regulations, i.e. the Act on
Registered Auditors. Nevertheless, the Company
advised the Supervisory Board of the said principle.
I.Z.1.15. information about the company's diversity The Company has not drafted and implemented a
policy applicable to the company's governing bodies form alized diversity policy. Nevertheless, in taking HR
and key managers; the description should cover the decisions as part of its current operations, it takes
following elements of the diversity policy: gender, account of various diversity aspects, e.g. gender,
education, age, professional experience, and specify education, age, professional experience. At the same
the goals of the diversity policy and its time, the Company believes that it should have certain
implementation in the reporting period; if the discretion in selecting its governing bodies and key
company has not drafted and implemented a m a n a g e rs. diversity policy, it should publish an explanation of its decision on its website;
50 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
I.Z.1.16. information about the planned transmission In the near future, this principle will not be applied by of a General Meeting, not later than 7 days before the Kino Polska TV S.A. because the Company does not date of the General Meeting; apply Principle I.Z.1.20. The Issuer will consider
(...) applying this Good Practice in the event of significant
interest in the forms of remote communication
indicated in Principle I.Z.1.20 on the part of the
Company's shareholders.
I.Z.1.19 the shareholders' questions addressed to the The Company will comply with this Principle to the
Management Board pursuant to Article 428 §1 or §6 extent required by the generally applicable of the Commercial Companies Code together with legislation, i.e. the Commercial Companies Code and answers of the Management Board to those the Regulation of the Minister of Finance on current questions, or a detailed explanation of the reasons for and periodic reporting (....) of 29 March 2018. The not giving an answer, pursuant to principle IV.Z.13; Company will not publish questions asked during a
General Meeting and respective answers on its
website because of the large number of questions
asked, which are often unimportant. The Company
does not keep detailed records (either written or
electronic) of general meetings - notarized General
Meeting minutes may be the source of such
information, which, however, do not include all the
statements, questions and answers. Under the
Commercial Companies Code and the General
Meeting Regulations, general meeting participants
are allowed to make statements in writing which are
appended to the minutes. In the Company's opinion,
these principles both ensure the transparency of
General Meetings and defend the Company against
potential claims of those shareholders who do not
wish for their image or statements to be published. As
far as questions asked outside a General Meeting are
concerned, this Principle is a duplication of the duty
stipulated in §38, clause 1 section 12 of the Regulation
of the Minister of Finance on current and periodic
reporting (....). A report on the matter in question will
be published on the website, under the Current
Reports tab.
51 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
I.Z.1.20 an audio or video recording of a general Currently, due to the existing legal limitations and
meeting; reservations, the Company will not record General
(...) Meetings in audio or video form. Nevertheless, if
appropriate legal regulations are introduced which
allow the Company to record General Meetings
without the consent of their participants, the
Company will apply the said principle.
II. Management Board and Supervisory Board
RECOMMENDATION II.R.2.
Persons making decisions about the election of It is not up to the Company's Management Board to
members of the Company's Management Board or apply this recommendation. Nevertheless, the
Supervisory Board should aim at ensuring diversity in Management Board informed the competent terms of their gender, education, age and authorities about this recommendation. professional experience. RECOMMENDATION II.R.3.
Performing a function in the Company's Management The Company applies this recommendation with the
Board constitutes the main area of a Management reservation that the Management Board members
Board member's professional activity. Any additional also perform functions in the authorities of other
professional activity of a Management Board Group companies. member must not have an adverse effect on the proper performance of his/her function in the Company in terms of time and workload. In particular, a Management Board member should not be a member of the authorities of any other entities if the time spent on performing their functions in such entities make it impossible to properly perform his/her obligations at the Company.
(...) PRINCIPLE II.Z.5.
A Supervisory Board member makes a statement on The Management Board will notify the Supervisory
satisfying the independence criteria specified in Board of the said principle. Nevertheless, its
Principle II.Z.4 addressed to the other Supervisory application is up to a given Supervisory Board
Board members and the Management Board m e m b e r. members.
52 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
PRINCIPLE II.Z.6.
The Supervisory Board shall identify any relationships The Management Board will notify the Supervisory
or circumstances which may affect the fulfilment of Board of the said principle. Nevertheless, its
the independence criteria by a Supervisory Board application is up to the Supervisory Board. member. An assessment of Supervisory Board members' fulfilment of the independence criteria shall be presented by the Supervisory Board in accordance with the principle II.Z.10.2.
PRINCIPLE II.Z.7.
Annex I to the Commission Recommendation The committees operating within the Company's
referred to in Principle II.Z.4 applies to the tasks and Supervisory Board will act in accordance with the
the operation of the Supervisory Board committees. applicable legislation and internal regulations. Where the functions of the audit committee are performed by the Supervisory Board, the foregoing shall apply accordingly.
(...)
PRINCIPLE II.Z.10. In addition to its responsibilities laid down in the legislation, the Supervisory Board shall prepare and present to the Ordinary General Meeting once a year the following:
II.Z.10.1. an assessment of the company's standing, The principle is applied, except that the Company's
including an assessment of the internal control, risk organizational structure does not include separate
management and compliance systems and the units responsible for the performance of tasks in
internal audit function; such an assessment should individual systems. cover all significant controls, including in particular financial reporting and operational controls;
(■■■)
II.Z.10.3 an assessment of the company's compliance In the opinion of the Management Board, assessment
with the disclosure obligations concerning of compliance with the corporate governance
compliance with the corporate governance principles principles by the body which itself is obliged to comply
defined in the Stock Exchange Rules and the with them is not appropriate.
regulations on current and periodic reports published As far as foreign members of the Supervisory Board
by issuers of securities; are concerned, the provisions governing the
correctness of the Company's compliance with the
disclosure obligations concerning compliance with the
53 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
corporate governance principles are not generally
available in English.
II.Z.10.4 an assessment of the reasonableness of the Once the Company undertakes any sponsoring,
Company's policy referred to in recommendation charity or sim ilar activities, it will apply this principle. I.R.2 or information about the absence of such a policy.
PRINCIPLE II.Z.11.
The Supervisory Board considers issues which are to The Company will not apply this principle. In this be the subject matter of the resolutions of the GM respect, the Company believes that the competencies and expresses its opinion on such issues. granted to the Supervisory Board in the Commercial
Companies Code and in the Issuer's Articles of
Association are sufficient to correctly supervise the
Company's operations.
III. Internal systems and functions
RECOMMENDATION III.R.1
The company has separate units in its structure that The Company does not have separate units in its are responsible for performing the tasks within structure that are responsible for performing the tasks different systems or functions, unless the existence of within different system s due to the size of its activities. such separate units is not justified in view of the size Internal control, risk management and supervision of or type of company's activities. compliance are executed in a dispersed structure. PRINCIPLE III.Z.1.
The company's Management Board is responsible for The principle is applied, except that the Company's the implementation and maintenance of efficient organizational structure does not include separate internal control, risk management and compliance units responsible for the performance of tasks in systems and an internal audit function. individual systems.
PRINCIPLE III.Z.2.
Subject to principle III.Z.3, persons responsible for risk The Company does not have separate units in its management, internal audit and compliance should structure that are responsible for performing the tasks report directly to the president or another member of within different system s due to the size of its activities. the Management Board and should be allowed to Internal control, risk management and supervision of report directly to the Supervisory Board or the audit compliance are executed in a dispersed structure, and committee. the persons performing such tasks report directly to
the Management Board.
54 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
PRINCIPLE III.Z.3. The Company does not have separate units in its
The independence rules defined in generally structure that are responsible for performing the tasks accepted international professional standards for the within different systems due to the size of its activities, internal audit practice apply to the person heading and the persons performing the individual functions the internal audit function and other persons are subject to the Company's internal regulations responsible for such tasks. o n ly .
PRINCIPLE III.Z.4.
At least once a year, the person responsible for The Company believes that, due to the size of the
internal audit (if there is a separate internal audit Company's operations, there is no need to prepare an function within the company) and the Management additional report. Board shall present to the Supervisory Board their assessment of the effectiveness of the systems and functions referred to in Principle III.Z.1 and a relevant report.
PRINCIPLE III.Z.5.
The Supervisory Board shall monitor the effectiveness The Supervisory Board and the Audit Committee of the systems and functions referred to in Principle monitor the systems and functions operating in the
III.Z.1, among other things based on the reports Company by reference to the generally applicable
provided periodically by the persons responsible for legislation and the internal regulations implemented such functions and the company's Management at the Company. Board, and make an annual assessment of the effectiveness of such systems and functions according to Principle II.Z.10.1. If the company has an audit committee, it shall monitor the effectiveness of the systems and functions referred to in Principle III.Z.1, which, however, does not release the Supervisory Board from the obligation to make an annual assessment of the effectiveness of such systems and functions.
PRINCIPLE III.Z.6.
If the company has no separate internal audit In the Company's opinion, decisions concerning the function in its organization, the audit committee (or organizational structure and the need to form the Supervisory Board if it performs the functions of separate units should be taken by the Management the audit committee) shall review on an annual basis B o ard . whether such a function needs to be separated.
55 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
IV. General Meeting and shareholder relations
RECOMMENDATION IV.R.2
If the shareholding structure or the shareholders' Points 1) and 2) of this Recommendation will not be expectations reported to the Company so require and applied in the near future due to the absence of the company is able to provide the technical appropriate regulations in the Company's Articles of infrastructure necessary for holding a General Association and the General Meeting Rules and
Meeting effectively with the use of the means of Regulations, as well as due to the high cost of electronic communication, the Company should give implementing a data transmission system. The Issuer the shareholders an opportunity to participate in the will consider the implementation of this Good Practice
General Meeting with the use of such means, in in the event of significant interest in this form of particular by: communication on the part of the Company's
1) broadcasting the General Meeting in real time; shareholders. 2) real-time bilateral communication, so that the shareholders can speak during the General Meeting from a remote location; 3) voting during the General Meeting (personally or by proxy).
(...)
PRINCIPLE IV.Z.2. This Principle will not be applied in the near future If justified by the shareholding structure, companies due to the absence of appropriate regulations in should ensure generally available real-time broadcasts the Company's Articles of Association and the of General Meetings. General Meeting Rules and Regulations, as well as
due to the high cost of implementing a data
transmission system. The Issuer will consider the
implementation of this Good Practice in the event
of significant interest in this form of
communication on the part of the Company's
shareholders.
PRINCIPLE IV.Z.3.
The media should be allowed to be present at the Authorized persons and persons servicing General
General Meetings. Meetings shall take part in General Meetings. The
(■■■) applicable legal regulations, including the
Regulation of the Minister of Finance on current
and periodic reporting of 29 March 2018 (...)
sufficiently govern the discharge of the disclosure
56 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
obligations imposed on public companies in terms
of the transparency of matters discussed at
General Meetings. The Company will be responding
to any media queries relating to General Meetings
on a current basis.
PRINCIPLE IV.Z.11.
Members of the Management Board and the The Company will use its best efforts to apply this
Supervisory Board should participate in a General principle, however, it cannot guarantee the
Meeting as necessary to answer questions asked at the participation of members of the Supervisory Board
General Meeting. on each occasion.
(...)
PRINCIPLE IV.Z.13.
If a shareholder requests information about the The Company will comply with this Principle to the
company, the Management Board of the company extent required by the generally applicable
should provide an answer to the shareholder's request legislation, i.e. the Commercial Companies Code
within 30 days or inform the shareholder of its refusal to and the Regulation of the Minister of Finance on
provide such information, if the Management Board has current and periodic reporting (....) of 29 March
made such a decision under Article 428 §2 or §3 of the 2018 .
Commercial Companies Code. As far as questions asked outside a General
(■■■) V. Meeting are concerned, this Principle is a
duplication of the duty stipulated in §38, clause 1
section 12 of the Regulation of the Minister of
Finance on current and periodic reporting (....). A
report on the matter in question will be published
on the website, under the Current Reports tab.
V. Conflict of interests and transactions with related entities
PRINCIPLE V.Z.2.
A member of the Management Board or Supervisory This principle will not be applied, unless generally
Board shall inform the Management Board or the applicable regulations prevent a given person from
Supervisory Board (as appropriate) of an existing or voting . potential conflict of interests and shall not vote on resolutions on matters which may be associated with a conflict of interest.
(...)
57 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
PRINCIPLE V.Z.5.
Before the company concludes a significant The Company's Articles of Association contain
agreement with a shareholder who holds at least 5% regulations for verifying transactions by the
of the total number of votes in the company or with Supervisory Board, which, in the Company's opinion,
a related party, the Management Board shall request guarantee transparency with respect to concluding the Supervisory Board's approval for the transaction. agreements. Before giving its approval, the Supervisory Board shall evaluate the impact of the transaction on the company's interest. The foregoing does not apply to typical transactions or transactions concluded on an arm's-length basis as part of the company's operations with members of the company's group. If a decision about signing a significant agreement between the Company and a related party is made by the General Meeting, the company should give all shareholders access to the information necessary for assessing the impact of the transaction on the company's interest before the decision is made.
PRINCIPLE V .Z .6 . In its internal regulations, the company shall define The Company will analyse the need to implement the the criteria and circumstances under which a conflict appropriate internal regulations and, if such a need is of interests may arise in the company, as well as the identified, publish a relevant report. rules of conduct in the situation or an actual or potential conflict of interest. The company's internal regulations shall, among other things, provide ways to prevent, identify and resolve conflicts of interest, as well as rules for excluding Management Board or Supervisory Board members from participating in reviewing matters that are subject to an actual or potential conflict of interest.VI.
VI. Remuneration
RECOMMENDATION VI.R.1
Remuneration of members of the company's The Company does not apply recommendations
authorities and key managers should result from the concerning determination of the policies with respect
remuneration policy adopted. to the remuneration of members of the company's
58 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
authorities and key managers. The recommendations
of the European Commission were not used as a
model for preparing the system for remunerating
members of the Company's authorities and key
managers and not all the recommendations are
applied. The remuneration of the Management Board
members is determined by a decision of the
Supervisory Board based on the scope of duties and
responsibilities of the Management Board members.
Pursuant to Article 392 § 1 of the Commercial
Companies Code, remuneration of Supervisory Board
members and remuneration of the Supervisory Board
members seconded to temporarily perform the
functions of Management Board members based on
Article 390 § 1 of the Commercial Companies Code is
determined by the General Meeting. The amount of
remuneration depends on the scope of tasks and
responsibilities associated with the function
performed. It also corresponds to the size of the
Company and is reasonably related to its financial
performance. The remuneration of the key managers
is determined based on the scope of their duties and
responsibilities.
RECOMMENDATION VI.R.2.
The remuneration policy should be closely The Company does not have a remuneration policy. associated with the company's strategy, its short- term and long-term goals and long-term interests and results. It should also include solutions aimed at preventing any discrimination.
PRINCIPLE VI.Z.3.
The remuneration of Supervisory Board members Decisions as to the type of remuneration payable to should not be linked to options or other derivatives the Supervisory Board members are taken by the or any other variable components, and should not General Meeting and the Company's Management be linked to the company's results of operations. Board has no influence over them. Nevertheless, the
Company will inform the General Meeting about the
existence of this principle.
59 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
PRINCIPLE VI.Z.4.
In the Directors' Report, the company presents a The Company does not have a remuneration policy. report on the remuneration policy, including at least the following: 1) general information about the company's remuneration system; 2) information about the conditions and amounts of remuneration of each Management Board member, divided into fixed and variable remuneration components, including the key parameters of setting the variable remuneration components and the terms of payment of severance pay and other amounts due on termination of employment, contract or a similar legal relationship, separately for the company and each group entity; 3) information about non-financial remuneration components due to the individual Management Board members and key managers; 4) significant amendments made to the remuneration policy in the last financial year or information about the absence thereof; 5) assessment of the implementation of the remuneration policy in terms of achievement of its goals, in particular long-term shareholder value creation and the company's stability.
3. Description of the main features of the internal control and risk management systems applied by the Issuer in respect of the process of preparing the financial statements and consolidated financial statements
The Management Board of Kino Polska TV S.A. is responsible for the internal control system in the Company and for its effectiveness in the process of preparing the financial statements.
The internal control system in the Company operates on many levels, as described below.
60 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
3.1 Specialized Finance Department supported by the accounting and financial systems Business transactions and events are recorded in an integrated financial and accounting system. Access to the system is limited to the persons employed in the Finance Department. The configuration of the system allows the restriction of systemic rights so as to ensure the appropriate segregation of duties among the employees.
The Company has an effective document flow process, which ensures the completeness of the information recorded in the financial and accounting system, and, subsequently, in a periodic report prepared based on the data obtained from the system.
The financial statements are prepared by a specialized Finance Department in accordance with the adopted accounting policy. The policy is standardized for all Kino Polska TV S.A. Group companies. It is periodically updated mainly to ensure consistency with the currently binding regulations, in particular with IFRS, the Accounting Act of 29 September 1994 and the Regulation of the Minister of Finance dated 29 March 2018 on current and periodic information submitted by issuers of securities.
The Company applies authorization procedures, in accordance with which periodic financial data prepared by the Finance Department is submitted to the Management Board, and, subsequently, to the Audit Committee of the Supervisory Board for expressing an opinion. After an opinion of the Audit Committee is obtained and an audit of the financial statements by an external independent registered auditor is completed, the report is approved by the Management Board for publication (the Investor Relations Department is in charge of the publication). To protect the data presented in periodic reports, any information to be included therein is made available exclusively to those involved in the preparation of these reports.
3.2 Corporate risk management The Company consistently carries out the process of identification, assessment and management of corporate risk in various areas of the Issuer's business.
Both risk identification and risk assessment are managed by the Controlling Department in cooperation with the Audit Committee. Risk is managed and mitigated on many levels through the introduction of appropriate controls.
3.3. External audit In accordance with the applicable legislation, semi-annual separate and consolidated financial statements of Kino Polska TV S.A. are reviewed by an independent registered auditor, and annual separate and consolidated financial statements of Kino Polska TV S.A. are audited by an independent registered auditor.
A registered auditor is appointed by the Supervisory Board based on recommendations of the Audit Committee,
The audit of the financial statements for the years 2019 - 2020 is performed by KPMG Audyt Sp. z o.o. Sp. k.
61 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
As part of its audit procedures, a registered auditor conducts an independent assessment of the accounting policies applied by the parent company in preparing financial statements and of the fairness and correctness of the separate and consolidated financial statements. Opinions on the audit of the separate and consolidated financial statements of Kino Polska TV S.A. and its Group issued by a registered auditor are one of the components of the internal control and risk management systems in the process of preparing the financial statements.
3.4 Supervisory Board, Audit Committee and internal audit Actions taken by the Controlling Department are a significant element of internal control. This department indirectly strengthens the process of preparing financial statements.
The objective of the Controlling Department is to monitor and report to the Management Board and the Audit Committee on an on-going basis.
The body which supervises the financial reporting process to ensure the fairness of the presented financial information at the Company is the Audit Committee appointed within the Issuer's Supervisory Board.
Moreover, under Article 4a of the Accounting Act of 29 September 1994, the duties of the Supervisory Board include ensuring that the financial statements and Directors' Report meet the legal requirements, and the Supervisory Board performs this duty using its powers laid down in the legislation and the Company's Articles of Association. This is another level of control exercised by an independent body, which ensures the correctness and fairness of information presented in the separate and consolidated financial statements.
4. Shareholders holding, directly or indirectly, significant blocks of shares, including the number of shares held by those entities, their percentage interest in the share capital, number of votes resulting thereof and percentage of the total number of votes at the General Meeting
The table below presents the shareholders of Kino Polska TV S.A. holding, to the best of the Company's knowledge, at least 5% of the votes at the Company's General Meeting as at the date of issue of this Report.
62 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
N u m b er o f Type o f N u m b er o f In terest in the Share of total votes Shareholder votes a t shares sh a res1 share capital (in %) a t the G M the G M Ordinary SPI International B.V. 12,913,285 65.15% 12,913,285 65.15% bearershares
Investment funds managed by Ordinary Ipopema TFI S.A. (including Total FIZ 1,702,462 8.59% 1,702,462 8.59% bearershares and TTL 1 Sp. z o.o)
Nationale-Nederlanden Powszechne Towarzystwo Emerytalne S.A. Ordinary (including Nationale-Nederlanden 1,038,944 5.24% 1,038,944 5.24% bearershares OFE and Nationale-Nederlanden DFE)2 Ordinary Other 4,166,713 21.02% 4,166,713 21.02% bearershares
O rd inary TOTAL 19,821,404 100.00% 19,821,404 100.00% bearer shares
1 information in the table is based on the notifications received from the shareholders pursuant to Article 69 of the Act of 29 July 2005 on public offerings and conditions governing the introduction of financial instruments to organized trading and on public companies, and on the notification submitted by SPI International B.V. about the actual number of the Issuer's shares held. 2 formerly ING Powszechne Towarzystwo Emerytalne S.A. (including ING OFE and ING DFE).
The parent company of SPI International B.V., which holds 100% of the shares in that company, is Cooperatieve SPI International U.A. To the best knowledge of the Company's Management Board, since the date of submitting the quarterly report for the third quarter of 2019, i.e. since 21 November 2019, there have been no changes in the shareholding structure of Kino Polska TV S.A. with regard to shareholders holding at least 5% of the votes at the Company's General Meeting.
The following table shows the shareholders holding at least 5% of the total number of votes who were present at the last General Meeting of Kino Polska TV S.A., i.e. on 27 February 2020.
N um ber o f Interest in the share N u m b er o f votes Share of total votes at Shareholder Type of shares shares capital (in %) at the last GM the last GM
Ordinary SPI INTERNATIONAL B.V. 12,913,285 65.15% 12,913,285 87.74% bearershares NATIONALE Ordinary NEDERLANDEN OTWARTY 1,044,054 5.27% 1,044,054 7.09% bearershares FUNDUSZ EMERYTALNY GOVERNMENT OF Ordinary 760,637 3.84% 760,637 5.17% NORWAY bearershares
Information on the Company's main shareholder4 SPI International B.V. is a global media group, which has been a leading global distributor of cinema and television films for over 25 years. The map below shows the territories on which SPI conducts its operations.
4Source: SPI own materials
63 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
SPI International B.V. is a global media group, which has been a leading global distributor of cinema and television films for over 25 years. SPI offers more than 38 television channels on six continents. The SPI channels are available in 16 language versions and are offered by more than 600 pay TV operators.
SPI uses state of the art technologies to provide its customers with both linear channels (such as the FilmBox brand) and video on demand content, including UHD programmes. The SPI programme offer is available on almost all devices with Internet access via global streaming services and local OTT television operators.
5. Holders of any securities carrying special controlling rights, including a description of those rights
There are no securities which give special controlling rights over the Company.
6. All voting restrictions, such as voting restrictions applicable to holders of a specified percentage or number of votes, time restrictions on voting or provisions separating the equity rights attached to securities from holding such securities
In the reporting period, there were no securities that would be associated with any voting restrictions.
7. Any restrictions on the transferability of title to the Issuer's securities
In the reporting period, there were no restrictions on the transfer of ownership of the Issuer's shares.
64 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
8. Description of the rules for appointment and dismissal of Management Board members and their powers, in particular the right to make decisions about an issue or redemption of shares
In accordance with § 11 clause 1 of the Issuer's Articles of Association, the Management Board consists of not less than two and not more than five persons, including the President and other members of the Management Board. The Management Board manages the Company's affairs and represents it before third parties. The following persons are authorized to make representations and sign on behalf of the Company: the President of the Management Board acting jointly with another Board member or a proxy holder.
Management Board members, including the President, are appointed and dismissed by the Supervisory Board for a three-year term. They have no special powers relating to the issue or redemption of shares.
9. Description of the rules for amending the Issuer's Articles of Association
The Issuer's Articles of Association are amended in accordance with the provisions of the Commercial Companies Code, i.e. by resolution of the General Meeting.
10. The way the General Meeting acts and its key rights, as well as the rights of shareholders and the manner of exercising them
Pursuant to Article 4021 of the Commercial Companies Code, the General Meeting of a public company is convened by an announcement published on the Company's website and in the form of a current report - in accordance with the provisions of the Act on Public Offering. The announcement should be made no later than 26 days before the date of the General Meeting. Article 4022 of the Commercial Companies Code defines the content of the announcement on the General Meeting of a public company. It should include at least the date, time and place of the General Meeting and a detailed agenda, as well as a precise description of the procedures for participating in the General Meetings and voting. In particular, the announcement should include information on the following issues: • The right of a shareholder to request placing certain issues on the agenda of the General Meeting - according to Article 401 § 1 of the Commercial Companies Code, a shareholder or shareholders representing at least one twentieth of the share capital may demand placing certain issues on the agenda of the next General Meeting. Such a request should be submitted to the Management Board no later than 21 days before the scheduled date of the GM. It should contain a justification for or a draft resolution on the issue that is proposed to be placed on the agenda. A request may be submitted in an electronic form. The Management Board shall be obliged to announce the changes made to the agenda at the shareholders' request immediately, no later than 18 days before the scheduled date of the GM. Such an announcement should be consistent with the procedure for convening the GM (Article 401 § 2 of the Commercial Companies Code).
• The right of a shareholder to submit drafts of resolutions on issues placed on the agenda of the General Meeting or issues which are to be placed on the agenda before the date of the GM - in accordance with
65 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
Article 401 § 4 of the Commercial Companies Code, before the date of the General Meeting a shareholder or shareholders of a public company representing at least one-twentieth of the share capital may submit to the Company, in writing or using electronic means of communication, draft resolutions relating to the issues that have been or are to be placed on the agenda of the General Meeting. The Company publishes draft resolutions on its webpage immediately. • According to Article 401 § 6 of the Commercial Companies Code, the Articles of Association may contain a provision that a shareholder or shareholders representing less than one-twentieth of the share capital may request that certain issues be placed on the agenda of the next GM or to submit to the Company, in writing or using electronic communication, draft resolutions relating to the issues that have been or are to be placed on the agenda of the General Meeting. The Articles of Association of the Issuer do not include such provisions. • The right of a shareholder to submit draft resolutions relating to issues placed on the agenda during the General Meeting - in accordance with Article 401 § 5 of the Commercial Companies Code, every shareholder has the right to submit draft resolutions relating to issues placed on the agenda during the General Meeting. • The manner of voting by proxy, in particular the forms used to vote by proxy, and the manner of notifying the Company of appointing a proxy by means of electronic communication. • The possibility and manner of participating in the General Meeting by means of electronic communication. • The manner of speaking during the General Meeting by means of electronic communication. • The manner of voting by correspondence or by means of electronic communication. • Registration date for participating in the General Meeting which, according to Article 4061 of the Commercial Companies Code, falls 16 days before the date of the General Meeting and is the same for holders of bearer shares and registered shares. • Information that only the persons who are shareholders of the Company on the day of registration for participating in the General Meeting have the right to participate in the General Meeting.
• An indication of where and how a person entitled to participate in the General Meeting may receive a full text of the documentation which is to be presented at the Meeting and drafts of the resolutions or, if no resolutions are expected to be passed, comments of the Management Board or Supervisory Board of the Company on the matters placed on the agenda of the General Meeting or issues which are to be added to the agenda before the date of the General Meeting. • Address of the website on which the information on the General Meeting will be published.
Pursuant to Article 4023 § 1, each public company is obliged to maintain its own website and, as of the date of convening the General Meeting, publish the following information there: • announcement on convening the General Meeting; • information about the total number of shares in the Company and the number of votes carried by such shares as at the date of the announcement and, if the shares are of different types, also about the division of the shares into individual types and the number of votes carried by each type of share; • the documentation to be presented to the General Meeting;
66 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A.
• drafts of the resolutions or, if no resolutions are expected to be passed, comments of the Management Board or the Supervisory Board of the Company on the matters placed on the agenda of the General Meeting or issues which are to be added to the agenda before the date of the General Meeting; • forms for voting by proxy or by correspondence, unless sent directly to all shareholders. If forms for voting by proxy or by correspondence cannot be made available on the website for technical reasons, a public company should inform on its website where and how such forms may be obtained. In such cases, the public company shall send the forms by post, free of charge, to every shareholder who has requested them.
The forms for voting by proxy or by correspondence should contain the suggested wording of the resolutions of the General Meeting and should make it possible to: • identify the shareholder casting the vote and his proxy, if the shareholder is voting by proxy; • cast a vote within the meaning of Article 4 § clause 1 section 9 of the Commercial Companies Code; • for shareholders voting against the resolution, to submit an objection; • place a voting instruction with regard to each resolution on which the proxy is to vote.
In accordance with §21 of the Issuer's Articles of Association, resolutions of the General Meeting are passed by an absolute majority of votes validly cast, unless the provisions of the Articles of Association or the law provide more stringent conditions. Resolutions of the General Meeting on the following matters require a qualified majority of three quarters of the votes cast: • redemption of shares in the case referred to in Article 415 § 4 of the Commercial Companies Code; • acquisition of treasury shares in the case referred to in Article 362 § 1 clause 2 of the Commercial Companies Code; • a business combination of the Company with another company in the case referred to in Article 506 § 2 of the Commercial Companies Code.
A resolution of the General Meeting on the dismissal or suspension by the General Meeting of one or all members of the Management Board in accordance with Article 368 § 4 of the Commercial Companies Code, requires four- fifths of the votes cast. The acquisition or disposal of property, perpetual usufruct right or interest in real property do not require a resolution of the General Meeting.
11. The composition (and changes therein which occurred in the last financial year) and description of activities of the Issuer's Management Board, Supervisory Board and administrative bodies
Management Board of Kino Polska TV S.A. The Management Board operates in compliance with the provisions of the Commercial Companies Code and the Company's Articles of Association. The Management Board consists of not less than two and not more than five persons, including the President and other members of the Management Board. The President of the Management Board manages the work of the Management Board, defines the internal division of duties and powers between the Management Board members, convenes and presides over the Management Board
67 KINO Kino Polska TV S.A. POLSKA Separate annual report for the year 2019 Information on corporate governance TV S.A. meetings, and issues the Company's internal regulations. The President of the Management Board may authorize other persons to convene and preside over Management Board meetings and issue internal regulations. Resolutions of the Management Board are passed unanimously. The Management Board is obliged to report significant events associated with the Company's operations to the Supervisory Board at least once a year. Such reports shall also contain statements of the Company's income, costs and financial results.
The following persons are authorized to make representations and sign on behalf of the Company: the President of the Management Board acting jointly with another Board member or a proxy holder. For the purposes of taking specific actions or actions of a specific type, proxies may be appointed to act independently or jointly, within the scope of their authorization.
Supervisory Board of Kino Polska TV S.A. The Supervisory Board supervises all areas of the Company's activities on an ongoing basis. In addition to the matters specified in the provisions of the Commercial Companies Code and other provisions of the Company's Articles of Association, the competencies of the Supervisory Board include: • acceptance of the proposed changes to the Company's Articles of Association drawn up by the Management Board; • appointment of a registered audit firm to carry out an audit or review of the consolidated and separate financial statements of the Company; • granting consent to entering into agreements with such company or its subsidiaries, subordinated entities, parent companies or subsidiaries or subordinate entities of its parent companies and for performing any other activities that may adversely affect the independence of such entity in performing the audit or review of the Company's financial statements;
• granting consent to joining or creating any business organization, acquiring or selling shares or interests in companies, as well as approving changes in the equity interest in any business organization in which the Company participates; • granting consent to entering into or terminating long-term cooperation agreements whose value (over the whole term of a given agreement) may exceed the amount of EUR 500,000 or its equivalent as calculated on the date of transaction at the exchange rate of the National Bank of Poland (NBP); • granting consent to the sale, purchase, encumbrance, rental, lease of the Company's assets outside the ordinary course of the Company's business activities in excess of EUR 500,000 or its equivalent calculated as at the date of sale, purchase, encumbrance, rental or lease of a given asset at the exchange rate of the NBP; • granting consent to the acquisition of fixed assets outside the ordinary course of the Company's business activities in excess of EUR 500,000 or its equivalent calculated as at the date of acquisition at the exchange rate of the NBP; • granting consent to the creation of employee pension schemes at the Company and granting additional pension rights in addition to the existing ones;
• approving the Company's annual budget by 31 December of a given financial year.
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Audit Committee of Kino Polska TV S.A. The Audit Committee consists of at least three members. At least one member of the Audit Committee must have knowledge and skills in the area of accounting or auditing financial statements. Most members of the Audit Committee, including the chairman, are independent of the Company within the meaning of Article 130 of the Act on registered auditors. The Audit Committee members must have knowledge and skills in the industry in which the Company operates. This condition is satisfied when at least one member of the Audit Committee has knowledge and skills in the industry or when different members have knowledge and skills in its different areas. Members of the Audit Committee are appointed and dismissed by the Supervisory Board from among its members by secret ballot.
The main tasks of the Audit Committee include: 1) the monitoring of: a) the financial reporting process; b) the effectiveness of the internal control and risk management systems and internal audit, also in the area of financial reporting; c) audit performance, in particular the audit work carried out by the audit firm, taking into account all findings and observations of the Audit Supervision Committee resulting from the inspection performed in the audit firm; 2) controlling and monitoring the independence of the registered auditor and the audit firm, in particular if it also provides non-audit services to the Company; 3) informing the Company's Supervisory Board about the results of the audit and explaining the effect of the audit on the fairness of financial reporting at the Company and the role of the audit committee in the audit process; 4) assessing the registered auditor's independence and granting consent for the provision of permitted non- audit services by the auditor to the Company; 5) preparing a policy for selection of the audit firm; 6) preparing a policy for the provision of permitted non-audit services by the registered audit firm, its related entities and members of its network; 7) setting up the procedure for selection of an audit firm by the Company; 8) making a recommendation referred to in Article 16 clause 2 of the Regulation in accordance with the policies referred to in sections 5 and 6 to the Supervisory Board or the authority mentioned in Article 66 clause 4 of the Accounting Act of 29 September 1994; 9) making recommendations aimed at ensuring the fairness of the financial reporting process at the Company.
Management Board of Kino Polska TV S.A. In the period from 1 January 2019 to 8 November 2019, the composition of the Management Board of Kino Polska TV S.A. was as follows:
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Bogusław Kisielewski President of the Management Board Marcin Kowalski Management Board Member Alber Uziyel Management Board Member Berk Uziyel Management Board Member
In the period from 8 November 2019 to 31 December 2019, the composition of the Management Board of Kino Polska TV S.A. was as follows:
Bogusław Kisielewski President of the Management Board Levent GUltan Management Board Member Marcin Kowalski Management Board Member Alber Uziyel Management Board Member Berk Uziyel Management Board Member
Bogusław Kisielewski - President of the Management Board Bogusław Kisielewski graduated from the Kraków University of Economics in Kraków, the Economics Department. He completed many training courses in management, finance, management and financial accounting, bookkeeping, capital markets, ERP and MRP IT systems.
He began his career as a broker with Regionalny Dom Maklerski Polonia S.A. After that, he was a Member of the Management Board/Finance Director of, among others, BMJ Management Sp. z o.o. and ZPO Modena S.A.
Since 2007 he has been with Kino Polska TV S.A. (previously Kino Polska TV Sp. z o.o.) - currently as President of the Management Board, previously a Member of the Management Board/ Director General.
Since 2013 he has been the President of the Management Board of Stopklatka S.A.
From the year 2017 to 26 June 2018, Bogusław Kisielewski was also 1st Vice President of the Management Board of Cable Television Networks & Partners sp. z o.o. (previously he was a member of the Supervisory Board of that company). CTN&P merged with the Company on 26 June 2018.
Levent Gultan - Member of the Management Board Mr Levent Gultan is an experienced business manager with more than 20 years of international experience in digital media and Internet technologies. He supported firms in building telecommunication, financial services and advanced technology functions. He was the Managing Director of Mediakraft Networks GmbH and Mediakraft Networks Polska Sp. z o.o.
In 2018-2019, he was a member of the Supervisory Board of Kino Polska TV S.A.
Levent Gultan has an MBA from the Duke University Fuqua School of Business and BBA from the Emory University Goizueta Business School.
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Levent Gultan's activities outside the Issuer's enterprise relate to his involvement in Mediakraft Turkey Yayin Hizmetleri A.S. He is a founder of the said company and also sits on its Management Board.
Marcin Kowalski - Member of the Management Board; Marcin Kowalski studied at the University of Silesia, the Radio and Television Department. In 2003 he received a Master's degree in Organization of Television and Film Production.
He began his career in 2005 at Kino Polska TV S.A. (then: Kino Polska TV Sp. z o.o.) as Postproduction Department Manager; after that, he became Managing Director of the FilmBox and Kino Polska channels. Since 2015 he has been a member of the Management Board (before that, a proxy) of the company.
He also held the position of Operations & OnAir Manager at Fox International Channels Polska.
From 2012 to 26 June 2018, he was President of the Management Board of KPTV Media Sp. z o.o. and from January 2017 to 26 June 2018 he was 2nd Vice President of the Management Board of Cable Television Networks & Partners sp. z o.o. (previously he was a member of the Supervisory Board of that company). KPTV Media and CTN&P merged with the Issuer on 26 June 2018.
Since 2013 he has been a Member of the Supervisory Board of Stopklatka S.A.
Alber Uziyel - Member of the Management Board. Alber Uziyel graduated from Istanbul Technical University with a Master's degree in Electrical Engineering.
In the years 1979-1996 he was Member of the Management Board of Eskimo Textile and Production.
Since 2008, he has been President of Eftas A.S., where he is responsible, among other things, for developing the Company's strategy and supervising its distribution.
Since 2012 he has been working with Mediabox International Ltd. as Filmbox Live Project Adviser.
Since 2015, he has been President of the Management Board of Kino Polska TV S.A. Since 14 June 2018, he has been a Member of the Supervisory Board of Stopklatka S.A.
Berk Uziyel - Member of the Management Board Berk Uziyel graduated from the Koc School in Istanbul and from Babson College in Boston, Department of Administration and Entrepreneurship in Business.
He began his career in 2001 at Merrill Lynch in Boston. After one year he joined the Eftas team where he was responsible for the distribution of the Konica Minolta, Kodak, Olympus and Oblio brands. At Eftas he was: Sales and Marketing Manager, Sales Director and Operations Director.
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Since 2010 he has combined those duties with the position of New Media Director at SPI International B.V., Managing Director of Filmbox International Ltd. and Mediabox Broadcasting International Ltd., responsible, among other things, for the distribution of FilmBox channels on the international market.
From 21 January 2016 to 14 June 2018, he was a member of the Supervisory Board of Stopklatka S.A. (from 3 February 2016, he was the Chairman of the Supervisory Board). Since 7 September 2018, he has been the Management Board member at Stopklatka.
Supervisory Board of Kino Polska TV S.A. In the period from 1 January 2019 to 28 October 2019, the composition of the Supervisory Board of the Issuer was as follows:
Loni Farhi Chair of the Supervisory Board Stacey Sobel Deputy Chair of the Supervisory Board Supervisory Board Member Piotr Orłowski (independent member) Krzysztof Rudnik Supervisory Board Member Supervisory Board Member Levent Gultan (independent member) Katarzyna Woźnicka Supervisory Board Member
In the period from 28 October 2019 to 31 December 2019, the composition of the Supervisory Board of the Issuer was as follows:
Loni Farhi Chair of the Supervisory Board Stacey Sobel Deputy Chair of the Supervisory Board Supervisory Board Member Jacek Koskowski (independent member) Supervisory Board Member Piotr Orłowski (independent member) Supervisory Board Member Jesus Perezagua Sanchez (independent member) Krzysztof Rudnik Supervisory Board Member Katarzyna Woźnicka Supervisory Board Member
Loni Farhi - Chair of the Supervisory Board Loni Farhi is member of the British Academy of Film and Television Arts-East Coast. He has worked in the film industry for many years.
In the years 1978-1985, he worked for Eskimo Yunleri A.S.- first as Sales Manager, then as Production Manager, and since 1983 as General Manager.
In the years 1987 to 1989 he was employed by Ans International as the Managing Partner.
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In 1989 he established SPI INC., where he was CEO until 1991.
Since 1990 he has been the President of the Management Board of SPI International INC., New York.
He is the Chair of the Supervisory Board of Kino Polska TV S.A. and Stopklatka S.A.
Stacey Sobel - Deputy Chair of the Supervisory Board In 1980 Stacey Sobel earned the title of Master of Arts at the Boston University, in the Art Department. She has worked in the film industry for 28 years.
In the years 1982-1988 she was employed by AVP International Sales. In the years 1980-1981 she worked as the Account Executive Domestic Sales, and then for Cannon Films INC., Los Angeles (1980 to 1988).
Since 1989 she has been with SPI International INC., New York, where she is Vice President of the Management Board.
She is Deputy Chair of the Supervisory Board of Kino Polska TV S.A.
Jacek Koskowski - Supervisory Board Member Jacek Kostkowski studied at the Jagiellonian University (Faculty of History and Philosophy) and the Warsaw University (Faculty of History, Faculty of Modern Languages).
He has many years of experience in the television industry. In 2011-2019, he was General Director and Vice- President for Poland at BBC Worldwide / BBC Studios, where he was responsible, among other things, for developing strategic and development plans and concluding distribution agreement with all the major local platforms and business partners. In 2007-2001, he was Director of Theme Channels at TV Polska S.A., where he developed a new structure within the Polsat Group, namely the Theme Channels Division (prepared a business plan and a budget for this project). In 2000-2007, he participated in creating and then was Director General of PrOgram Sp. z o.o., an agency for international TV broadcasters in Poland, where he managed growth of the company's portfolio (its customers included, among other things, National Geographic Channel, BBC Prime, 4funTV, Polsat Sport).
From 28 October 2019 to 31 January 2020, he was a member of the Supervisory Board of Kino Polska TV S.A.
Jesus Perezagua Sanchez - Member of the Supervisory Board Jesus Perezagua Sanchez graduated from Escuela de Organizacion Industrial in Madrid with an MBA diploma.
He is a media expert and director general with broad experience in establishing and developing firms in Europe, Africa and Japan. He has worked for many key players in the television, multimedia and digital services sectors, searching for the possibilities of market expansion and new streams of revenue.
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He created and was Director General of Aqui Media Co., Ltd., a Japanese media company (online OTT television, a traditional line channel and branded blocks) engaged in production and live broadcasting using artificial intelligence in the cloud. Since 2014, he has worked as a Media Consultant, a member of the management boards of companies in the sector of media technologies and multi-channel networks; advising media groups on strategy and management. In 2014-2015, he was a Media Advisor to a temporary Director General at Fix International Channels where he was responsible for, among other things, strategic advisory for a portfolio of channels and restructuring the operations of Fox Sports Japan. In 2011-2014, as President for Europe and Africa, he was responsible for regional management and development in that entity. From 1998 to 2004, he worked for Fox Kinds Entertainment Spain as General Director.
Since 2019, he has been a Member of the Supervisory Board of Kino Polska S.A.
Piotr Orłowski - Supervisory Board Member Piotr Orłowski graduated from the Faculty of Law and Administration at the Adam Mickiewicz University in Poznań. In 2001 he obtained an L.L.M. He earned a scholarship from the Stefan Batory Foundation at Oxford University.
He sits on the Supervisory Boards of Kino Polska TV S.A. and Carpathia Capital S.A.
Since 2006 he has practised law at Orłowski Kancelaria Prawna Sp. k. and Orłowski Tomaszewski Kancelaria Prawna Sp.j.
Since 2011 he has been a Member of the Supervisory Board of Stopklatka S.A.
Krzysztof Rudnik - Supervisory Board Member Krzysztof Rudnik graduated from the Warsaw School of Economics in 2000. He also studied at NHH in Bergen, Norway, under the CEMS programme. He is an American certified financial advisor (CFA).
He has many years of experience in mergers and acquisitions and business valuations. In the years 2000-2013 he worked with such companies as Deloitte, Ernst & Young and BRE Corporate Finance. Since 2013 he has been a Member of the Supervisory Board of Kino Polska TV S.A.
Additionally, he is Member of the Board of Directors of Orphee S.A. and supervises the commercialization of medical devices developed by PZ Cormay S.A.
Katarzyna Woźnicka - Supervisory Board Member Katarzyna Woźnicka studied Finance and Accounting at the Kozminski University in Warsaw. In 2001 she received a Master's degree in Finance and Accounting. Since 2009 she has been member of ACCA, and since 2014 of FCCA.
In the years 2001 - 2003 she was the Manager of the Purchases Administration Office at Prószyński S.A./Agora S.A. Subsequently, (in the years 2003 - 2006) she was employed as an Analyst and then (2006-2007) as Financial
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Controller at Agora S.A. In the years 2007 - 2014 she was with LexisNexis Polska Sp. z o.o., first as a Finance Manager, then as Finance Director/ Member of the Management Board.
In the years 2014-2015, Katarzyna Woźnicka worked at Kino Polska TV S.A. as Finance Director. Since 2016 she has been Member of the Issuer's Supervisory Board.
From 2014 to 13 June 2018, she was employed at Stopklatka S.A. as Finance Director. Since 14 June 2018, she has been a Member of the Supervisory Board of Stopklatka.
Since 2016 she has been CFO at SPI International Group.
Audit Committee In the reporting period, there was also an Audit Committee within the structure of the Supervisory Board of Kino Polska TV S.A.
In the period from 1 January 2019 to 28 October 2019, the composition of the Committee was as follows: Chair of the Audit Committee Piotr Orłowski (independent member) Krzysztof Rudnik Member of the Audit Committee Member of the Audit Committee Levent GUltan (independent member)
In the period from 28 October 2019 to 31 December 2019, the composition of the Audit Committee was as follows: Chair of the Audit Committee Piotr Orłowski (independent member) Member of the Audit Committee Jacek Koskowski (independent member) Krzysztof Rudnik Member of the Audit Committee
Mr Krzysztof Rudnik has knowledge and skills in the area of accounting or auditing financial statements. Krzysztof Rudnik and Piotr Orłowski have extensive knowledge of the market on which the Issuer operates due to the fact that they have been members of the Kino Polska TV S.A. Supervisory Board for many years. Jacek Koskowski has many years of experience in the sector in which the Company operates. Levent Gultan has more than 15 years of experience in digital media, Internet technologies, telecommunications, financial services and advanced technology.
Krzysztof Rudnik graduated from the Warsaw School of Economics in 2000. He also studied at NHH in Bergen, Norway, under the CEMS programme. He is an American certified financial advisor (CFA). Krzysztof Rudnik has many years of experience in mergers and acquisitions, business valuations and creating goodwill. In the years 2000-2013 he worked with such companies as Deloitte, Ernst & Young and BRE Corporate Finance. He is member of the Board of Directors of Orphee S.A. and cooperates with PZ Cormay S.A. in the area of commercialization of new products developed by that company. Moreover, he was a member of the Supervisory Boards and chairman
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of the Audit Committees of the following companies listed on the WSE: PZ Cormay S.A. (in the years 2013-2014) and Biomed Lublin WSiS S.A. (in the years 2013-2015).
Piotr Orłowski graduated from the Faculty of Law and Administration at the Adam Mickiewicz University in Poznań. In 2001 he obtained an L.L.M. He earned a scholarship from the Stefan Batory Foundation at the Oxford University. He is a member of the Supervisory Boards of Stopklatka S.A. (since 2011) and Remedis S.A. Since 2006 he has been Partner in the partnership Orłowski Matwijcio Kancelaria Radców Prawnych Sp. p.
Jacek Koskowski has many years of experience in the sector in which the Issuer operates. In 2011-2019, he was General Director and Vice-president for Poland at BBC Worldwide / BBC Studios, where he was responsible, among other things, for developing strategic and development plans and concluding distribution agreement with all the major local platforms and business partners. In 2007-2001, he was the Director of Theme Channels at TV Polska S.A., where he developed a new structure within the Polsat Group, namely the Theme Channels Division (prepared a business plan and a budget for this project). In 2000-2007, he participated in creating and then was Director General of PrOgram Sp. z o.o., an agency for international TV broadcasters in Poland, where he managed growth of the company's portfolio
Levent Gultan is the founder of Mediakraft Turkey. Currently, he is the Managing Director of Mediakraft Networks GmbH and Mediakraft Networks Polska Sp. z o.o. responsible for international branches and Business Development teams.
Policy for selecting an audit firm to perform an audit of the financial statements of Kino Polska TV S.A.
In accordance with the Company's Articles of Association, selecting an audit firm to perform the statutory audit of the Company's financial statements and the statutory audit of the consolidated financial statements of the Group is the responsibility of the Supervisory Board. The recommendations of the Company's Audit Committee are taken into account.
The Supervisory Board is independent in making the selection, such a decision must not be forced on the Supervisory Board in any way, and the choice must not be narrowed down to a specific category or list of entities.
All the Company's authorities and other units/persons involved in the process of selecting an audit firm take into consideration the following elements: • the ability to provide the full scope of required services; • the audit firm's previous experience in auditing financial statements of companies and groups with a similar business profile to that of the Company; • the audit firm's previous experience in auditing financial statements of public companies; • professional qualifications and experience of persons directly involved in the audit process; • the number of persons available to conduct the audit and availability of qualified experts in the fields specific to the Company and the Group;
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• the certainty that the audit will be conducted in accordance with the International Standards on Auditing and Assurance and in compliance with the International Quality Control Standard 1; • the ability to conduct the audit within the timeframe specified by the Company; • the audit firm's reputation, taking into account the report referred to in Article 90, clause 5 of the Act; • the price offered by the audit firm.
The Company applies this Policy also when selecting an audit firm for a review of the financial statements and consolidated financial statements.
The Policy is based on the Act on registered auditors, audit firms and public oversight of 11 May 2017 and it only contains the basic criteria applied in the selection of an audit firm. A detailed procedure for selecting an audit firm is set out in a separate document. The Policy is approved and amended by resolution of the Audit Committee.
The policy for the provision of permitted non-audit services by the registered audit firm performing the audit, its related entities and members of its network
I. GENERAL PRINCIPLES
The audit firm conducting the audit, its related entities or members of its network (hereinafter: "the Auditor") may provide to the company Kino Polska TV S.A. and the Kino Polska TV S.A. Group the services permitted by law, including in particular the Act on registered auditors, audit firms and public oversight of 11 May 2017 (Journal of Laws of 2017, item 1089) ("the Act on Registered Auditors") and the Regulation (EU) No 537/2014 of the European Parliament and of the Council on specific requirements regarding a statutory audit of public- interest entities and repealing Commission Decision 2005/909/EC (hereinafter: "the Regulation").
The auditor provides the services in a professional manner (in particular, with due care and diligence), using professional knowledge and taking into account the nature of the activities of the company Kino Polska TV S.A. and the Kino Polska TV S.A. Group.
The Auditor may provide the permitted services after making an assessment as to whether the provision of such services would affect the Auditor's independence. In particular, the Auditor shall make every effort to avoid a conflict of interests.
II. THE REGULATION
Pursuant to Article 5 of the Regulation, a statutory auditor or an audit firm carrying out the statutory audit, or any member of the network to which the statutory auditor or the audit firm belongs, shall not directly provide to the Company or the Group any prohibited non-audit services in: a) the period between the beginning of the period audited and the issuing of the audit report; and
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Prohibited non-audit services shall mean: a) tax services relating to: (i) preparation of tax forms; (ii) payroll tax; (iii) customs duties; (iv) identification of public subsidies and tax incentives unless support from the statutory auditor or the audit firm in respect of such services is required by law; (v) support regarding tax inspections by tax authorities unless support from the statutory auditor or the audit firm in respect of such inspections is required by law; (vi) calculation of direct and indirect tax and deferred tax; (vii) provision of tax advice; b) services that involve playing any part in the management or decision-making of the audited entity; c) bookkeeping and preparing accounting records and financial statements; d) payroll services; e) designing and implementing internal control or risk management procedures related to the preparation and/or control of financial information or designing and implementing financial information technology systems; f) valuation services, including valuations performed in connection with actuarial services or litigation support services; g) legal services, with respect to: (i) the provision of general counsel; (ii) negotiating on behalf of the audited entity; and (iii) acting in an advocacy role in the resolution of litigation; h) services related to the audited entity's internal audit function; i) services linked to the financing, capital structure and allocation, and investment strategy of the audited entity, except providing assurance services in relation to the financial statements, such as the issuing of comfort letters in connection with prospectuses issued by the audited entity; j) promoting, dealing in, or underwriting shares in the audited entity; k) human resources services, with respect to:
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(i) management in a position to exert significant influence over the preparation of the accounting records or financial statements which are the subject of the statutory audit, where such services involve: — searching for or seeking out candidates for such position; or — undertaking reference checks of candidates for such positions; (ii) structuring the organization design; and (iii) cost control.
A statutory auditor may provide to the Company and the Group non-audit services other than the prohibited non-audit services subject to the approval of the audit committee after it has properly assessed threats to independence and the safeguards applied in accordance with Article 22b of Directive 2006/43/EC .
III. THE ACT ON REGISTERED AUDITORS
Pursuant to Article 136 of the Act on Registered Auditors, the prohibited services mentioned in Article 5(1) paragraph 2 of the Regulation also include other non-audit services.
On the other hand, the prohibited services referred to in Article 5(1) paragraph 2 of the Regulation of the European Parliament and of the Council No 537/2014 do not include:
1) the services mentioned in Article 15 clause 3 of the Act on the operation of cooperative banks, their association and associating banks of 7 December 2000;
2) the following services: a) economic and financial due diligence; b) issuing of comfort letters
- in connection with the audited entity's prospectus, in accordance with the national standard on related services, involving the performance of agreed procedures;
3) assurance services relating to pro forma financial information, forecasts of results or estimations of results presented in the audited entity's prospectus;
4) audit of historical financial information for the prospectus referred to in the Commission Regulation (EC) No 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council as regards information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements;
5) verification of consolidation packages;
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7) assurance services relating to corporate governance, risk management and corporate social responsibility reporting;
8) the services of assessment of the compliance of the information disclosed by financial institutions and investment firms with the requirements in respect of disclosing information on capital adequacy and variable remuneration components;
9) assurance relating to financial statements or other financial information for the regulators, the Supervisory Board or another supervisory body of the company or its owners, exceeding the scope of the statutory audit and aimed at assisting such authorities in the performance of their statutory obligations.
The above-mentioned permitted services may only be provided to the extent that they do not relate to the audited entity's tax policy, after the audit committee has assessed the threats and safeguards to the auditor's independence.
If the Auditor provides the non-audit services referred to in Article 5(1) of the Regulation to the company Kino Polska TV S.A. and the Kino Polska TV S.A. Group for a period of at least three consecutive financial years, the total fee for such services shall be limited to not more than 70% of the average fee paid in the last three consecutive financial years for the statutory audit (statutory audits) of the Company and the Group.
Non-audit services other than mentioned in Article 5(1) of the Regulation (EU) of the European Parliament and of the Council No 537/2014, which are required to be provided in accordance with the European or national law, shall be excluded from the limitations defined in the preceding paragraph.
If the total fee received from the company Kino Polska TV S.A. and the Kino Polska TV S.A. Group for each of the last three consecutive financial years amounts to more than 15% of the total fees received by the Auditor performing the statutory audit in each of those financial years, the Auditor shall notify the Audit Committee thereof and discuss the threats to its independence and the safeguards applied to mitigate such threats. The Audit Committee shall consider whether the audit engagement should undergo quality assurance control performed by another registered auditor or audit firm before the audit report is issued.
If the fee received from the company Kino Polska TV S.A. and the Kino Polska TV S.A. Group still exceeds 15% of the total fees received by the Auditor, the Audit Committee shall decide, based on objective factors, whether the Auditor may continue the statutory audit performance for an additional period not exceeding two years.
The Policy is based on the Act on Registered Auditors.
The Policy is approved and amended by resolution of the Audit Committee.
On 21 February 2019, the Audit Committee of Kino Polska TV S.A. recommended selecting KPMG Audyt Sp. z o.o. Sp. k. to conduct audits of the financial statements of the Company and the Group for the financial years ended
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31 December 2019 and 31 December 2020, respectively, and reviews of the Issuer's separate and consolidated financial statements for the periods from 1 January 2019 to 30 June 2019 and from 1 January 2020 to 30 June 2020. The Audit Committee's decision was adopted on the basis of the legal regulations then in force, after analysing the offers of audit firms.
Four Audit Committee meetings were held in 2019.
Planning and Budgeting Committee In the reporting period, there was also a Planning and Budgeting Committee within the structure of the Supervisory Board of Kino Polska TV S.A.
In the period from 1 January 2019 to 28 October 2019, the composition of the Planning and Budgeting Committee was as follows:
Krzysztof Rudnik Member of the Planning and Budgeting Committee Katarzyna Woźnicka Member of the Planning and Budgeting Committee Levent GUltan Member of the Planning and Budgeting Committee
In the period from 28 October 2019 to 31 December 2019, the composition of the Planning and Budgeting Committee was as follows:
Krzysztof Rudnik Member of the Planning and Budgeting Committee Katarzyna Woźnicka Member of the Planning and Budgeting Committee Jacek Koskowski Member of the Planning and Budgeting Committee Jesus Perezagua Sanchez Member of the Planning and Budgeting Committee
Warsaw, 16 April 2020 Management Board of Kino Polska TV S.A.
Bogusław Kisielewski Levent Gultan
President of the Management Management Board Member Board
Marcin Kowalski Alber Uziyel
Management Board Member Management Board Member
Berk Uziyel
Management Board Member
81 KINO Kino Polska TV S.A. Separate annual report for the year 2019 POLSKA Representation of the Management Board TV S.A. Warsaw, 16 April 2020
REPRESENTATION OF THE MANAGEMENT BOARD OF KINO POLSKA TV S.A. ON THE APPOINTMENT OF AN AUDIT FIRM TO PERFORM AN AUDIT OF THE ANNUAL SEPARATE FINANCIAL STATEMENTS
The Management Board of Kino Polska TV S.A., acting on the basis of the representation of the Supervisory Board of Kino Polska TV S.A., confirms that the audit firm which has audited the annual separate financial statements has been appointed in accordance with the law, including the regulations concerning the appointment and the procedure for the appointment of an audit firm. The audit firm and the members of the audit team met the conditions for preparing an unbiased and independent report on the audit of the annual separate financial statements of Kino Polska TV S.A., in accordance with the applicable laws, auditing standards and principles of professional ethics.
The Management Board of Kino Polska TV S.A. declares that the Company complies with the applicable laws relating to audit firm and key registered auditor rotation as well as the mandatory grace periods.
The Management Board of Kino Polska TV S.A. declares that the Issuer has a policy for appointing an audit firm and a policy for the provision to the Issuer by the audit firm, an entity related to the audit firm or a member of its network of additional non-audit services.
Management Board of Kino Polska TV S.A.
Bogusław Kisielewski Levent Gultan
President of the Management Management Board Member Board
Marcin Kowalski Alber Uziyel
Management Board Member Management Board Member
Berk Uziyel
Management Board Member
82 KINO Kino Polska TV S.A. Separate annual report for the year 2019 POLSKA Supervisory Board's Assessment TV S.A. Warsaw, 16 April 2020
REPRESENTATION OF THE SUPERVISORY BOARD OF KINO POLSKA TV S.A. CONCERNING THE AUDIT COMMITTEE
The Supervisory Board of Kino Polska TV S.A. states that the regulations concerning the appointment, composition and operations of the Audit Committee, including those concerning the fulfilment of the independence criteria and requirements regarding the possession of knowledge and skills relevant to the industry in which the Issuer operates, and with regard to accounting or the audit of financial statements, by its members, are complied with.
The Supervisory Board states that the Audit Committee performed the audit committee tasks provided for in the applicable laws.
Supervisory Board of Kino Polska TV S.A.:
Loni Farhi Stacey Sobel
Chair of the Supervisory Board Deputy Chair of the Supervisory Board
Marcin Boroszko Piotr Orłowski
Supervisory Board Member Supervisory Board Member
Jesus Perezagua Sanchez Krzysztof Rudnik
Supervisory Board Member Supervisory Board Member
Katarzyna Woźnicka Supervisory Board Member
83 KINO Kino Polska TV S.A. Separate annual report for the year 2019 POLSKA Supervisory Board's Assessment TV S.A. Warsaw, 16 April 2020 ASSESSMENT BY THE SUPERVISORY BOARD OF KINO POLSKA TV S.A. CONCERNING THE DIRECTORS' REPORT OF KINO POLSKA TV S.A. AND THE ANNUAL SEPARATE FINANCIAL STATEMENTS OF KINO POLSKA TV S.A.
The Supervisory Board of Kino Polska TV S.A. has assessed that the Directors' Report of Kino Polska TV S.A. and the Annual Separate Financial Statements of Kino Polska TV S.A. as at and for the year ended 31 December 2019 have been prepared in accordance with the books, documents and the facts.
The Supervisory Board, guided by its own determinations as well as the registered auditor's opinion and report on the audit of the financial statements, states that the submitted financial statements have been prepared in accordance with the books and documents as well as the facts and the applicable laws, and that they give a true and fair view of the Company's financial position.
The Supervisory Board states, based on its own determinations, that the information in the Directors' Report is complete and consistent with the information in the financial statements, and consistent with the facts. The Report gives a full and fair view of the Company's position, presenting trends in the Company's business activities, assessing its revenue sources, presenting its cost structure and the basic risks to which the Company is exposed.
Supervisory Board of Kino Polska TV S.A.:
Loni Farhi Stacey Sobel
Chair of the Supervisory Board Deputy Chair of the Supervisory Board
Marcin Boroszko Piotr Orłowski
Supervisory Board Member Supervisory Board Member
Jesus Perezagua Sanchez Krzysztof Rudnik
Supervisory Board Member Supervisory Board Member
Katarzyna Woźnicka
Supervisory Board Member
84 KINO Kino Polska TV S.A. Separate annual report for the year 2019 POLSKA Representation of the Management Board TV S.A. Warsaw, 16 April 2020
REPRESENTATION OF THE MANAGEMENT BOARD OF KINO POLSKA TV S.A. ON THE PREPARATION OF THE FINANCIAL STATEMENTS AND THE DIRECTORS' REPORT
The Management Board of Kino Polska TV. S.A. confirms that, to the best of its knowledge, the annual separate financial statements of Kino Polska TV S.A. and comparative information have been prepared in accordance with applicable accounting policies and that they give a true and fair view of the financial position of Kino Polska TV S.A. and the results of its operations. The annual report on the operations of Kino Polska TV S.A. (the Directors' Report) presents a true picture of the development, achievements and position of Kino Polska S.A., including a description of the key risks and threats.
Management Board of Kino Polska TV S.A.
Bogusław Kisielewski Levent Gultan
President of the Management Management Board Member Board
Marcin Kowalski Alber Uziyel
Management Board Member Management Board Member
Berk Uziyel
Management Board Member
Person responsible for maintaining the books of account
Dominika Talaga-Spławska Chief Accountant
85 KINO POLSKA TV S.A.
IV. SEPARATE FINANCIAL STATEMENT OF KINO POLSKA TV S.A. FOR THE YEAR ENDED
31 Decem ber 2019 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. APPROVAL OF THE SEPARATE FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION ("IFRS")
On 16 April 2020, the Management Board of Kino Polska TV S.A. approved the Company's separate financial statements for the period from 1 January 2019 to 31 December 2019 prepared in accordance with IFRS as adopted by the European Union which include standards and interpretations approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC), comprising:
Separate statement of comprehensive income for the period from 1 January 2019 to 31 December 2019, showing total comprehensive income of: PLN 9,249 thousand.
Separate statement of financial position as at 31 December 2019, showing total assets and total equity & liabilities of: PLN 285,951 thousand.
Separate statement of cash flows for the period from 1 January 2019 to 31 December 2019, showing a net increase in cash and cash equivalents of: PLN 236 thousand.
Separate statement of changes in equity for the period from 1 January 2019 to 31 December 2019, showing an increase in equity of: PLN 3,912 thousand.
Notes to the separate financial statements
Management Board of Kino Polska TV S.A.
Bogusław Kisielewski Levent Gultan
President of the Management Management Board Member Board
Marcin Kowalski Alber Uziyel
Management Board Member Management Board Member
Berk Uziyel
Management Board Member
Person responsible for maintaining the books of account
Dominika Talaga-Spławska Chief Accountant
Warsaw, 16 April 2020
87 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. 1. Separate statement of comprehensive income
12 months ended 12 months ended Note 31 December 2019 31 December 2018 (in PLN '000) (restated*, in PLN '000)
Revenue from contracts with customers 5.3, 5.4 161,807 146,225
Operating expenses 5.3, 5.5 (147,835) (128,016) Other operating income 5.9.5 526 1,007 Other operating expenses 5.9.5 (1,042) (461) Operating profit 13,456 18,755
Finance income 5.9.6 955 36 Finance costs 5.9.6 (2,552) (2,200)
Profit before tax 11,859 16,591 Income tax expense 5.9.7 (2,610) (2,974)
Net profit from continued operations 9,249 13,617
Net profit for the period 9,249 13,617
Total comprehensive income 9,249 13,617
Earnings/(Loss) per share from continued and discontinued 5.6.2 operations, basic and diluted: - from continued operations 0.47 0.69 - from profit for the year 0.47 0.69
weighted average number of shares in the period 19,821,404 19,821,404 diluted number of shares in the period 19,821,404 19,821,404
* Information on the transformation is presented in Note 5.12.
88 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. 2. Separate statement of financial position
A s at As at 31 December A s a t 1 January Note 31 December 2019 2018 (restated*, in 2018 (restated*, (in PLN '000) P LN '000) in PLN '000)
ASSETS Non-current assets Property, plant and equipment 5.10.1 2,637 4,969 4,302 Right-of-use assets 5.10.3 6,331 - - Goodwill 5.12 20,466 20,466 20,466 Non-current programming inventory 5.8 33,266 33,678 36,136 Other intangible assets 5.10.2 8,941 10,016 11,536 Investments in subsidiaries and jointly controlled entities 5.7.1 172,179 170,563 126,135 Trade and other receivables 5.10.5 179 181 175 Long-term prepayments and deferred costs 5.10.6 1,003 2,006 - Deferred income tax assets 5.9.7 1,133 763 525 Total non-current assets 246,135 242,642 199,275
Current assets Inventory 5.10.8 78 1,149 885 Current programming inventory 5.8 7,008 3,692 4,343 Loans granted 5.10.7 2,883 2,758 1,022 Trade and other receivables 5.10.5 27,688 24,550 23,687 Short-term-term prepayments and deferred costs 5.10.6 1,003 1,002 - Income tax receivable 634 329 - Cash and cash equivalents 5.10.9 522 286 2,016 Total current assets 39,816 33,766 31,953
TOTAL ASSETS 285,951 276,408 231,228
EQUITY AND LIABILITIES Equity Share capital 1,982 1,982 1,982 Share premium 148,940 148,940 148,940 Retained earnings 23,058 19,786 17,315 Total equity 5.6.1 173,980 170,708 168,237
Non-current liabilities Loans and borrowings received 5.6.3 23,895 55,562 - Derivative financial instruments 5.10.13 305 563 559 Concession liabilities 5.10.10 8,040 9,330 10,523 Trade and other payables 5.10.11 1,095 1,193 1,885 Provisions 5.10.14 284 116 72 Liabilities in respect of contracts with customers 5.10.12 2,578 480 - Lease liabilities 5.6.4 4,222 778 491 Deferred income tax provision 5.9.7 - - 338 Total non-current liabilities 40,419 68,022 13,868
Current liabilities Loans and borrowings received 5.6.3 37,307 7,630 13,658 Derivative financial instruments 5.10.13 197 55 210 Concession liabilities 5.10.10 1,290 1,193 1,098 Liabilities measured at present amount due- current part - - 9,983 Trade and other payables 5.10.11 27,980 24,622 18,750 Provisions 5.10.14 626 564 454 Liabilities in respect of contracts with customers 5.10.12 2,295 3,071 4,624 Lease liabilities 5.6.4 1,857 543 271 Income tax liabilities 5.9.7 - - 75 Total current liabilities 71,552 37,678 49,123
TOTAL EQUITY AND LIABILITIES 285,951 276,408 231,228
* Information on the transformation is presented in Note 5.12.
89 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. 3. Separate statement of cash flows
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (restated*, in PLN '000)
Cash flows from operating activities
Net profit 9,249 13,617 Adjusted for: Amortization and depreciation 32,722 27,393 Scrapping of property, plant and equipment and intangible assets - 166 Asset impairment allowances 88 (68) Foreign exchange differences (34) - Interest and dividends, net 1,577 1,727 Profit/loss on investing activity (8) 18 (Gains)/Losses on changes in the fair value of derivative financial (116) (64) instruments Purchase of programming inventory (31,803) (21,856) Change in receivables (3,136) (4,653) Change in prepayments and accruals 1,003 (3,009) (Increase)/Decrease in inventory 1,071 (264) Increase/(Decrease) in liabilities 4,106 4,945 Increase/(Decrease) in deferred income - (4,624) Change in liabilities in respect of contracts with customers 1,323 3,551 Increase/(Decrease) in provisions 230 154 Corporate income tax paid / refunded (3,219) (3,912) Corporate income tax liability 2,610 2,974 Net cash from operating activities 15,663 16,095
Cash flows from investing activities
Sale of property, plant and equipment and intangible assets 8 - Purchase of property, plant & equipment and intangible assets (2,739) (1,887) Acquisition of a subsidiary (160) - Dividends received 842 - Interest received 54 - Loans granted (86) (1,700) Net cash from investing activities (2,081) (3,587)
Cash flows from financing activities
Payment of lease liabilities (1,721) (454) Proceeds from loans/borrowings raised 5,959 55,985 Repayment of loans/borrowings (7,910) (2,943) Dividends paid (5,946) (10,902) Acquisition of shares in subsidiaries (1,500) (54,428) Dividend payment costs (31) (21) Interests paid (2,197) (1,475) Net cash from financing activities (13,346) (14,238)
Net increase/(decrease) in cash and cash equivalents 236 (1,730)
Cash and cash equivalents as at the beginning of the period 286 2,016
Cash and cash equivalents as at the end of the period 522 286
* Information on the transformation is presented in Note 5.12.
90 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019. TV S.A.
4. Separate statement of changes in equity
N um ber o f Share capital Sh a re prem ium Retained earnings Total eq uity shares (in PLN '000) (in PLN '000) (in PLN '000) (in PLN '000)
As at 1 Jan uary 2019 19,821,404 1,982 148,940 19,035 169,957
Error correction - - - 751 751
As at 1 January 2019 (restated*) 19,821,404 1,982 148,940 19,786 170,708
Dividends paid - - - (5,946) (5,946) Dividend payment costs - - - (31) (31) Total comprehensive income for the period - - - 9,249 9,249
As at 31 December 2019 19,821,404 1,982 148,940 23,058 173,980
* Information on the transformation is presented in Note 5.12.
N um ber o f Share capital Share premium Retained earnings Total eq uity shares (in PLN '000) (in PLN '000) (in PLN '000) (in PLN '000)
As at 1 January 2018 (reported data) 19,821,404 1,982 148,940 28,984 179,906
Error correction - - - 549 549
Business combination - - - (12,218) (12,218)
As at 1 January 2018 (reported data) 19,821,404 1,982 148,940 17,315 168,237
Adjustment due to the application of IFRS 9 - - - (223) (223) Dividend payment costs - - - (21) (21) Dividends paid - - - (10,902) (10,902) Total comprehensive income for the period - - - 13,617 13,617
As at 31 December 2018 (restated*) 19,821,404 1,982 148,940 19,786 170,708
* Information on the transformation is presented in Note 5.12.
91 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
5. Notes to the separate financial statements
5.1. General information about the Company and its Group
Company name: Kino Polska TV S.A. ("the Company", "the Issuer") Registered office of Kino Polska TV S.A.: ul. Puławska 435a, 02-801 Warsaw Telephone: 22 356 74 00, Fax: 22 356 74 01 Website: www.relacjeinwestorskie.kinopolska.pl Statistical number (REGON): 015514227 Tax identification number (NIP): 5213248560 Registration: The National Court Register (KRS) maintained by the District Court for the capital city of Warsaw, 13th Business Department KRS: 0000363674
As at 31 December 2019, Kino Polska TV S.A. had the following subsidiaries:
Number of shares Interest in the share Entity Registered office Type of preference held capital
Direct subsidiaries ul. Puławska 61, 02-801 Stopklatka S.A. 11,129,145 99.62% no preference Warsaw General Pardinas 114, 1A, Filmbox Iberia S.L.U. 3,500 100.00% no preference 28006 Madrid, Spain Maakri tn 19/1, 10145 Filmbox Estonia OU 2,500 100.00% no preference Tallinn, Estonia Chiswick Park 566 Chiswick Filmbox International Ltd. High Road, London W4 3,350,000 100.00% no preference 5YA, United Kingdom
Indirect subsidiaries SPI International Magyarorszag, Zaborhegy utca 19 1 100% no preference Kft. 1141 Budapest, Hungary Na Bojisti 1473/18 Help Film s.r.o. 120 00 Praga 2 - Nove 200,000 100% no preference Mesto, Czech Republic Zamocka 3 Help Film Slovakia s.r.o. 5,000 100% no preference 811 01 Bratislava, Slovakia
During the period covered by these Financial Statements, the main areas of the Company's operations included: • broadcasting TV channels Kino Polska, Kino Polska Muzyka, Kino TV, Zoom TV and topical channels, including sales of advertising spots on these channels;
• production of TV channels; and • sales of licence rights.
92 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. Composition of the Management Board of Kino Polska TV S.A. in the 12-month period ended 31 December 2019 and up until the date of preparation of these financial statements:
• Bogusław Kisielewski - President of the Management Board; • Levent Gultan - Member of the Management Board (since 8 November 2019); • Marcin Kowalski - Member of the Management Board; • Alber Uziyel - Member of the Management Board • Berk Uziyel - Member of the Management Board.
Composition of the Supervisory Board of Kino Polska TV S.A. in the 12-month period ended 31 December 2019 and up until the date of preparation of these financial statements: • Loni Farhi - Chairman of the Supervisory Board; • Stacey Sobel - Deputy Chair of the Supervisory Board; • Marcin Boroszko - Member of the Supervisory Board;- Member of the Supervisory Board (since 27 February 2020). • Levent Gultan - Member of the Supervisory Board (until 28 October 2019). • Jacek Koskowski - Member of the Supervisory Board (since 28 October 2019). • Piotr Orłowski - Member of the Supervisory Board; • Jesus Perezagua Sanchez - Member of the Supervisory Board (since 28 October 2019); • Krzysztof Rudnik - Member of the Supervisory Board; • Katarzyna Woźnicka - Member of the Supervisory Board;
Explanation of the seasonality in the Company's operations In Kino Polska TV S.A., as regards the majority of the types of services and goods for resale sold, the operations are not cyclical or seasonal in nature, which would result in significant volatility of the results of operations during a financial year. Advertising revenue in Poland is usually the lowest in the third quarter of the calendar year (which includes the summer holiday period) and the highest in the fourth quarter.
5.2 Major accounting policies
The main accounting policies used in preparing these financial statements are presented below. These policies were applied in all the presented years on a consistent basis except for the adoption of new and amended standards which are described below.
Basis of preparation The Company's separate financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRS).
The separate financial statements have been prepared on a historical cost basis and the going concern assumption.
93 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. As at 31 December 2019, the Company's current liabilities exceeded the sum of current assets by PLN 31,736 thousand, which is mainly due to the maturity of an overdraft facility granted for several years which expires in June 2020. The Company fulfils its obligations resulting from banking covenants, generates positive cash flows from operating activities (PLN 15,663 thousand in 2019 and PLN 16,095 thousand in 2018) and settles its liabilities as they become due. Historically, the Company has been generating profits (including the profit of PLN 9,249 thousand for 2019) and has positive equity. In addition, in mid-June 2020, the Company plans to extend the financing agreement relating to the overdraft facility with a limit of up to PLN 30 million - currently, the Group is in constant contact with the financing bank and expects to sign the relevant annexes before the end of June 2020.
Note 5.11.3 also presents circumstances resulting from the epidemiological situation relating to COVID-19 coronavirus which arose after the balance sheet date.
In the opinion of the Management Board, the Company will have the necessary funds to continue as a going concern for at least 12 months of the balance sheet date.
Accounting estimates and judgements The preparation of separate financial statements in accordance with IFRS requires using certain significant accounting estimates. It also requires the Management Board to make its own assessments as part of the Company's accounting policies. The issues which require making significant assessments, are particularly complex, and the areas in the case of which the assumptions and estimates made have a material impact on the financial statements are presented in the following notes:
Note No. Major accounting estimates and judgements
• Recognition of revenue from broadcasting television channels - assessment of the Company's role as the principal 5.4 • Recognition of revenue from selling licences and VOD - assessment of the Company's role as the principal 5.7.2 Indications of impairment of an investment in Filmbox International Ltd. 5.7.3 Impairment test of goodwill and the Zoom TV segment 5.7.4 5.7.4 Impairment test of investment in Stopklatka S.A. Impact of G A A R - inherent uncertainty concerning the interpretation of the tax law 5.9.7 by the Company 5.10.4 Write-downs of receivables Amortization rates of programming inventory - adjustments of amortization periods 5.8 due to the fact that the allowed number of rebroadcasts has been used First-time adoption of IFRS 16 - determination of the lessee's marginal interest rate 5.2 and recognition of different type of payments for the purposes of measuring the lease liability 5.12 Correction of an error - assumptions relating to the purchase of an enterprise
94 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. New standards, amendments and interpretations adopted by the Company
In the financial year beginning on 1 January 2019, the Company applied the new and amended standards listed below.
IFRS 16 "Leases" IFRS 16 "Leases" was published by the International Accounting Standards Board on 13 January 2016 and is effective for annual periods beginning on or after 1 January 2019. The new standard sets out the principles for recognition, measurement, presentation and disclosure of leases from the point of view of the lessor. All lease transactions result in a lessee obtaining a right to use an asset and an obligation to make payments. Therefore, IFRS 16 abolishes the classification of leases into operating leases and finance leases required under IAS 17 and introduces a single model for the accounting treatment of leases by lessees. A lessee will be obliged to recognize: (a) assets and liabilities for all lease transactions concluded for more than 12 months, except when a given asset is of low value; and (b) depreciation of a leased asset separately from interest on the lease liability in the statement of profit and loss.
In accordance with the transitional provisions, the Company took advantage of the possibility to apply the new standard retroactively, with the combined effect of the first-time adoption recognized as at 1 January 2019 without restating comparative data.
In accordance with the rules introduced by IFRS 16, as at 1 January 2019 the Company recognized assets and liabilities in respect of the office lease contract of PLN 5.5 million and other assets, such as broadcasting equipment and furniture of PLN 1.4 million, presented in the prior year in accordance with IAS 17.. Right-of-use assets are recognized on a straight line basis over a period equal to the term of the lease or similar contract concluded by the Company (typically from 36 to 48 months or until 31 December 2023, as is the case of the lease of office space). The lease liabilities are accounted for using the effective interest rate. The lessee's marginal interest rate applied by the Company to an office lease agreement amounted to 2.44%. For other lease/rent contracts, the lessee's marginal interest rate ranges from 2.43% to 3.23%, depending on when the contract has been concluded and the contractual currency.
In calculating the lease liability concerning the office lease contract, the Company took into account exclusively fixed payments (including payments whose changes, if any, are dependent on index changes), i.e. without taking into account service charges disclosed in Note 5.11.1.
If IFRS 16 was not applied, the Company's consolidated balance sheet at 31 December 2019 would differ from the present one as follows:
• The Company would not have recognized right-of-use assets of PLN 6,331 thousand, including, in particular, the right-of-use asset relating to the lease of office space of PLN 4,497 thousand would not have been recognized. •
• The value of property, plant and equipment would have been PLN 1,834 thousand higher.
95 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. • Lease liabilities in respect of office space lease would have been PLN 4,551 thousand lower.
The amendments to the standards listed below, effective as from 1 January 2019, did not affect the Company 's financial statements: - Amendment to IAS 9, 'Financial instruments"; - Amendments to IAS 28 "Investments in Associates"; - Annual Improvements 2015-2017; - Amendments to IAS 19, "Employee Benefits"; - IFRIC 23, "Uncertainty over Income Tax Treatments"
New standards, amendments and interpretations not yet applied The Company did not decide to apply any of the published standards or interpretations early in these financial statements before their effective dates.
The Company has analysed the impact of the published standards and their interpretations. The results of the analysis are presented in the table below:
Standard Impact on the Company's financial statements
The Company shall apply these amendments as from 1 January 2020. Amendments to references to Conceptual Framework of IFRS At present, the potential impact of these amendments on the Company's financial statements is not yet known.
The Company shall apply these amendments as from 1 January 2020. Amendments to IFRS 3, "Business combinations" - definition of a business At present, the potential impact of these amendments on the Company's financial statements is not yet known.
The Company shall apply these amendments as from 1 January 2020. Amendment to IAS 1 and IAS 8 - definition of "material" At present, the potential impact of these amendments on the Company's financial statements is not yet known.
Amendments to IFRS 9, IAS 39 and IFRS 7 - The standard will have no effect the Company's IBOR reform operations.
Translation of items denominated in foreign currencies Functional currency and presentation currency The functional and presentation currency of the Company is the Polish zloty (PLN).
96 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Transactions and balances Transactions expressed in foreign currencies are translated into functional currency based on the exchange rate as at the date of transaction.
As at the balance sheet date, monetary items are translated at the NBP mid exchange rate in force on that date.
Foreign exchange gains or losses are presented in the separate statement of comprehensive income, in Other operating income or Other operating expenses.
5.3 Segments
Operating segments are presented in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Management Board of Kino Polska TV S.A. has been identified as the chief operating decision-maker responsible for the allocation of resources and evaluation of the results of the operating segments.
The Company's operating segments are its strategic segments which offer different products and services. They are managed in a different way and pursue different marketing strategies. Each segment earns revenue and incurs costs associated with its operations.
The Management Board of Kino Polska TV S.A. evaluates segment operations by analysing segments' results, defined as sales revenue less direct operating expenses and allocated indirect operating expenses. There are no inconsistencies between operating segment reporting and the treatment of the segments in the accounting records, and between their treatment for management reporting purposes.
The Management Board of Kino Polska TV S.A. does not analyse the assets or liabilities of each reporting segment. Operating segments which do not reach quantitative thresholds are aggregated in the "Other segments" item. These segments have different characteristics than the separately reported segments.
In 2019, the Company changed the method of presentation of the profit/loss on trading in VOD rights. In 2018, such activities were presented in Other segments, but from 2019 they are presented in the "Sales of licences" segment. The revenues from sales of VOD rights amounted to PLN 630 thousand in 2018 (net presentation - agency revenues in previous years). The Company decided to change the classification of trading in VOD rights at the segment level due to the changes in the business model - see Note 5.4.
97 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
12 months ended 31 December 2019 (in PLN '000)
FilmBox film Productio channels and Kino Polska Sales of O ther n o f TV Zoom TV TOTAL topical channels licensing rights segm ents channels channels Sales - broadcasting 37,982 15,435 - 4 - - 53,421 Sales - advertising 6,564 13,408 - 17,429 - - 37,401 Sales - other - - 52,809 - 16,138 2,038 70,985 Total revenues from contracts 44,546 28,843 52,809 17,433 16,138 2,038 161,807 with customers
Operating expenses (42,898) (18,130) (49,169) (22,872) (12,242) (2,524) (147,835)
Segment profit/(loss) 1,648 10,713 3,640 (5,439) 3,896 (486) 13,972 Other operating income ------526 Other operating expenses ------(1,042) Operating profit ------13,456 Finance income ------955 Finance costs ------(2,552) Profit before tax ------11,859 Income tax expense ------(2,610) Net profit from continued ------9,249 operations * The amount includes a provision for programming inventory of PLN 44 thousand.
12 months ended 31 December 2018 (restated*, in PLN '000) FilmBox film Productio Kino Polska Sales of O ther channels and n o f TV Zoom TV TOTAL channels licensing rights segm ents topical channels channels Sales - broadcasting 34,231 15,465 - 2 - - 49,698 Sales - advertising 5,246 14,612 - 12,229 - - 32,087 Sales - other - - 48,472 - 4,781 3,182 56,435 Sales - fees for film licences 8,005 - - - - - 8,005 Total revenues from contracts 47,482 30,077 48,472 12,231 4,781 3,182 146,225 with customers
Operating expenses after (40,952) (17,247) (44,773) (20,900) (2,097) (2,047) (128,016) allocation
Segment profit/(loss) 6,530 12,829 3,700 (8,669) 2,684 1,135 18,209 Other operating income ------1,007 Other operating expenses ------(461) Operating profit ------18,755 Finance income ------36 Finance costs ------(2,200) Profit before tax ------16,591 Income tax expense ------(2,974) Net profit from continued ------13,617 operations * Information on the transformation is presented in Note 5.12.
5.4 Revenue
The Company recognizes revenue at the time a customer obtains control over a service or a good for resale/finished good. If different services are sold under a single contract, consideration is allocated to each of the performance obligations on the basis of relative unit prices. The consideration comprises an estimated
98 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. amount of variable consideration if it is highly probable that its amount will not be reversed significantly should the estimates change.
A detailed description of the Company's performance obligations arising from the individual types of contracts with customers is presented below.
• Revenue from broadcasting channels is recognized in the month to which it relates, based on the number of subscribers in a given period and rates per subscriber or lump-sum rates resulting from agreements with cable and digital television operators. In principle, the Company's customers receive invoices for broadcasting either in the month in which a service is provided or in the following month. Consequently, assuming payments terms of 14 days, consideration is payable within 30 days from the delivery date. A performance uninvoiced but satisfied is recognized as accrued income and recorded in Trade and other receivables. The Company assesses that, in the case of the television channels it does not own, it acts as a principal (i.e. it exercises control over a promised service before it is provided to a customer), therefore, it presents the revenue from the provision of such services on a gross basis (i.e. separately from costs incurred to the owners of rights to television channels). This judgement is based on the following assumptions:
- the Company bears the primary responsibility for performing a contract; - the Company has the right to set the selling prices of channel rebroadcasting services; - the Company has the right to choose and accept the operators with which it cooperates; - The Company bears the full credit risk. • Revenue from broadcasting advertisements is recognized no later than on the last day of broadcasting a given advertisement. Revenue is recognized at the amounts payable by the buyers of advertising time, net of value-added tax, any rebates allowed and the commission deducted by the Company's advertising broker. The Company issues invoices for broadcasting advertisements in the month following the month in which the broadcasting took place. Consequently, assuming payments terms of 14 days, consideration is payable within 30 days from the delivery date. A performance uninvoiced but satisfied is recognized as accrued income and recorded in Trade and other receivables.
• Revenue from production of channels is recognized in the period to which it relates, based on the costs incurred plus a margin specified in the agreement with the buyer of such services. The Company issues invoices for the production of channels in the month following the month in which a service was provided. Consequently, assuming payments terms of 14 days, consideration is payable within 30 days from the delivery date. A performance uninvoiced but satisfied is recognized as accrued income and recorded in Trade and other receivables. • Revenue from sale of goods for resale and finished goods is recognized if a customer obtains control over the goods for resale and finished goods transferred. As regards the sales of goods for resale and finished goods, the Company acts first of all based on consignment contracts. The Company issues related invoices in the month following the month in which a sale was made. Consequently, assuming payments terms of 14 days, consideration is payable within 30 days from the delivery date. A performance uninvoiced but satisfied is recognized as accrued income and recorded in Trade and other receivables.
99 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
• Revenue from non-cash transactions (broadcasting advertisements in exchange for goods for resale and services) is recognized at the time advertisements are broadcast, provided that the services being exchanged are not homogeneous. Goods or services obtained in such transactions are recognized as assets or charged to costs when received or used. The Company recognizes non-cash transactions based on the estimated fair value of the goods or services received in exchange. If goods or services are received before an advertisement is broadcast, a liability is recorded. Likewise, if an advertisement is broadcast before the receipt of goods for resale or services, a related receivable is recorded. Revenue from and costs of non-cash transactions are not offset in the statement of comprehensive income, except for transactions in which the services being exchanged are homogeneous. Revenue from non-cash transactions is accounted for similarly to revenue from broadcasting advertisements. • Trading in licensing rights (VOD and television rights) Recognition of VoD revenue in 2018: In 2018, as regards the revenue earned from offering access to films not owned by the Company in VoD services, it was assessed that the Company's performance obligation consists of ensuring the provision of services by another entity, i.e. the Company acted as an agent. In consequence, the Company presented related revenue and expenses on a net basis, i.e. it presented as revenue only the commission it receives from such operations. This judgement was based on the following assumptions: - the Company was not involved in the further development and distribution of the licences which are the subject of transactions; - the Company's consideration had the form of a commission; - the Company bore a limited credit risk.
In 2019, the Company changed the model for cooperation with the provider of the licences (i.e. SPI International BV, the Company's parent company) as regards both television and VOD rights. The purpose of the change was to more effectively use the Company's resources and the role it plays in trading in licences. In connection with the above, the Company changed: - the presentation of revenue from and costs of sales of VOD rights to separate presentation of revenue and costs; - the presentation of costs of sales of television rights.
The changes are described in more detail below. The changed model of cooperation had no impact on the timing of revenue recognition on sales of VOD and television rights.
The Company does not treat the changes described above as changes to accounting policies, but as the adoption of new assumptions for the presentation of revenue and costs relating to sales of television and VOD rights as a result of a change in the distribution model. In the opinion of the Management Board, these assumptions reflect in the most accurate way the nature of rights purchased and sold.
100 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
In 2019, revenue from and costs of trading in licensing rights comprise the Company's activities which consist of reselling its film licences (television and VOD rights). In 2018, this segment comprised solely reselling television rights, while the Company's operations relating to VOD rights was presented in Other segments.
The Company's promise to grant a licence to a customer does not involve an obligation to transfer any additional goods and services to that customer. The Company recognizes that the rights to use a specific licence are transferred to a customer at a specific time, because promising to grant a licence is aimed at ensuring the customer the right to use the licence in the form in which it exists at the time the licence is granted (a film licence does not change in the period for which the licence is granted). The Company recognizes licensing revenue on the start date of the licence period.
In principle, the Company's customers receive invoices for VoD services either in the month in which a service is provided or in the following month. Consequently, assuming payments terms of 14 days, consideration is payable within 30 days from the delivery date. A performance uninvoiced but satisfied is recognized as accrued income and recorded in Trade and other receivables.
In the case of sale of licences, invoicing and payment terms are not directly correlated with the recognition of related revenue. Consequently, the Company recognizes both accrued income and liabilities in respect of contracts with customers (in the case of invoicing unearned revenue).
Based on the provisions of the new distribution agreement relating to trading in licensing rights, the Company recognizes remuneration due to the original owner of these rights, defined as a fixed percentage of sales, in operating expenses in the line of Content costs (the fees for both VOD and television rights). Therefore, the Company presents revenue and costs relating to trading in television and VOD rights separately. This judgement is based on the following assumptions: - the Company is responsible for searching for customers, analysing their needs and for the proposal and negotiation processes; - the Company independently conducts the negotiation process leading to signing a contract; - the Company independently determines terms and conditions of the contracts for the rights available for sale. In the opinion of the Company's Management Board, the scope of the Company's responsibilities, the risks and benefits point to there being no indications of an agency relationship.
With regard to contracts for the sale of television rights which were concluded in prior years and which relate to television rights acquired by the Company in prior years, the Company continues to apply the approach to the recognition of the costs of such operations followed in preceding years. This means that until these contracts have been fully accounted for, the Company will recognized the costs relating to such contracts in the line Cost of sales of goods for resale.
101 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
12 months ended 12 months ended Sales revenue Reconciliation to operating segments 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Broadcasting 53,421 49,698 Sales - broadcasting in the FilmBox film - Poland 49,340 46,417 channels and theme channels, Kino Polska - EU channels and Zoom TV segment 3,790 2,493 - United Kingdom 200 274 - other countries 91 514
Paid advertising 35,347 31,201 Sales - advertising in the FilmBox film - Poland channels and theme channels, Kino Polska 35,347 31,201 channels and Zoom TV segment Barter advertising 2,054 886 - Poland 2,054 886
Sale and provision of licences 16,138 12,786 - Poland 15,965 4,967 - EU Sales of licensing rights 38 - - United Kingdom 129 7,807 - other countries 6 12
Revenue from the production of 52,809 48,472 channels - Poland Production of TV channels 1,598 438 - EU 541 368 - United Kingdom 50,670 47,666
Other 2,038 3,182 - Poland 857 1,543 - EU Other segments 993 1,200 - United Kingdom 179 439 - other countries 9 -
Total 161,807 146,225
5.5 Operating expenses
The operating expenses in 2019 are 15% higher than in the previous year. The biggest changes compared with the previous year can be seen in non-current and current programming inventory amortization. This results from the regular amortization of new programming inventory purchased in previous periods (amortization charges in respect of the Filmbox channel increased the most). The increase in other content costs is associated with the signing of a new distribution agreement (see Note 5.4) and relates to the resale of television and VOD rights. The increase in broadcasting expenses is a result of the indexation of the agreements with the suppliers of broadcasting services for both terrestrial and satellite television. The costs of other services are 14% higher than in the previous year, which is mainly due to higher distribution fees payable to the owners of the Filmbox channels and the theme channels. This increase is correlated with the increase in sales on these channels. The increase in the cost of goods for resale sold is directly associated with the increase in revenues from licences.
102 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (restated*, in PLN '000) Depreciation and amortization (26,487) (22,152)
- including the amortization of non-current programming inventory (21,644) (18,968) Impairment of programming inventory (44) (25) Employee benefit expenses, including: (17,881) (17,200) - cost of wages and salaries (15,248) (14,571) - costs of social insurance and other benefits (2,403) (2,475) - costs of future benefits (provisions) with respect to one-off retirer (230) (154) bonuses, long service bonuses and similar employee benefits Materials and energy used (749) (695) Broadcasting services (20,103) (18,905) Content costs (14,943) (13,290)
- including amortization of current programming inventory (6,235) (5,240) Other services (55,000) (48,060) Taxes and fees (3,348) (3,338) Other costs (1,324) (1,736) Cost of goods for resale and materials sold (7,956) (2,615)
Total operating expenses (147,835) (128,016) * Information on the transformation is presented in Note 5.12.
5.6 Capital and liquidity management, debt
5.6.1 Capital management, EBITDA
Share capital is stated at the nominal value, i.e. amount stipulated in the Company's Articles of Association and entered in the court register.
Due to the issue and purchase of own equity instruments and dividend payment, the Company usually incurs various types of costs (e.g. registration fees, legal and accounting advisors' fees, the costs of preparing a prospectus and printing it, and stamp duty). Such transaction costs (less any income tax benefits), relating to equity transactions, reduce the share premium by an amount equal to the marginal costs relating directly to that transaction. Other costs (i.e. costs which could have been avoided) are recognized as period costs. Transaction costs are recognized in equity when incurred.
103 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. Share capital
SHARE CAPITAL OF KINO POLSKA TV S.A. AS AT 31 December 2019 Typ e of V alu e o f the Type of share restriction on N um ber of Par value of series/issue Series Type of shares preference rights to shares one share at par value shares (in PLN'000) A ordinary bearer shares none none 13,821,404 0.10 1,382 C ordinary bearer shares none none 6,000,000 0.10 600 Total 19,821,404 1,982 SHARE CAPITAL OF KINO POLSKA TV S.A. AS AT 31 December 2018 Typ e of Value of the series/issue Type of share restriction on N um ber of Par value of Series Type of shares at par value preference rights to shares one share (PLN '000) shares A ordinary bearer shares none none 13,821,404 0.10 1,382 C ordinary bearer shares none none 6,000,000 0.10 600 Total 19,821,404 1,982
All issued shares are fully paid up.
The table below presents the shareholders of Kino Polska TV S.A. holding, to the best of the Company's knowledge, at least 5% of the votes at the Company's General Meeting as at the date of submission of these Separate Financial Statements.
N um ber of N um ber of Interest in the Share o f total votes Shareholder Type of shares votes at sh ares1 share capital (in %) at the GM the GM
Ordinary bearer SPI International B.V. 12,913,285 65.15% 12,913,285 65.15% shares
Investment funds managed by Ordinary bearer Ipopema TFI S.A. (including Total 1,702,462 8.59% 1,702,462 8.59% shares FIZ and TTL 1 Sp. z o.o)
Nationale-Nederlanden Powszechne Towarzystwo Ordinary bearer Emerytalne S.A. (including 1,038,944 5.24% 1,038,944 5.24% shares Nationale-Nederlanden OFE and Nationale-Nederlanden DFE)2
Ordinary bearer Other 4,166,713 21.02% 4,166,713 21.02% shares
Ordinary bearer TOTAL 19,821,404 100.00% 19,821,404 100.00% shares
1 Information in the table is based on the notifications received from the shareholders pursuant to Article 69 of the Act of 29 July 2005 on public offerings and conditions governing the introduction of financial instruments to organized trading and on public companies, and on the notification submitted by SPI International B.V. about the actual number of the Issuer's shares held. 2 Formerly ING Powszechne Towarzystwo Emerytalne S.A. (including ING OFE and ING DFE).
The parent of SPI International B.V., which holds 100% of the shares in that company, is Cooperatieve SPI International U.A. which is, furthermore, the entity that prepares consolidated financial statements at the ultimate level. The ultimate parent is Ms. Hilda Uziyel.
The consolidated financial statements of Cooperatieve SPI International U.A. are not publicly available.
104 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. Information about the dividend
A dividend (if any) for the Company's shareholders (including the transaction costs relating to the payment of such a dividend) is deducted directly from equity.
Dividend distribution to the Company's shareholders is recognized as a liability in the Company's financial statements in the period in which the dividends are approved by the Company's shareholders.
On 24 June 2019, the Ordinary General Shareholders' Meeting of Kino Polska TV S.A. adopted a resolution on the appropriation of the Company's net profit for the financial year ended 31 December 2018 of PLN 13,415,369.05 (before restatement), as follows: • PLN 5,946,421.20 was earmarked for the payment of dividend to shareholders; • PLN 7,468,947.85 was earmarked for transfer to the Company's supplementary capital (presented together with retained earnings).
The dividend for the Issuer's shareholders for the year 2018 amounted to PLN 0.30 gross per one share of the Company.
The dividend was payable to the shareholders who held the Company's shares on 01 July 2019 ("Dividend Record Date").
The dividend was paid on 12 July 2019.
The dividend payment costs amounted to PLN 31 thousand.
Number of shares covered by the dividend: 19,821,404.
The Company's Management Board is currently analysing the amount of a potential dividend for 2019. As soon as the decision is made, the Issuer will immediately provide this information to the general public in the form of a current report.
The objective of the Issuer's capital risk management is to maintain an optimal capital structure, ensure the ability to continue in operation, as well as generate return for the shareholders and benefits for other stakeholders. In connection with the above, the Company monitors debt ratios, maintain a proactive policy with regard to dividend, issuing new shares or repurchasing and redeeming or reselling previously issued shares and selling assets in order to reduce debt.
105 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. As at 31 December 2019 and as at 31 December 2018, the liability ratios analysed by the Issuer were as follows:
A s a t A s a t 31 December 2019 31 December 2018 (restated*, (in PLN '000) in PLN '000)
Equity 173,980 170,708 Net non-current assets, including: 246,135 242,642 - intangible assets, goodwill and programming inventory 62,673 64,160
Equity to assets ratio 0.71 0.70 * Information on the transformation is presented in Note 5.12.
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (restated*, in PLN '000)
Operating profit/(loss) 13,456 18,755 Adjustments: 33,278 27,703 - depreciation and amortization 26,487 22,152 - amortization of current programming inventory 6,235 5,240 - impairment of non-current assets 44 25 - foreign exchange gains/(losses) 493 219 - interest income 3 - - interest expense to the State Budget 16 67 EBITDA 46,734 46,458 Loans, borrowings and other sources of financing (including 67,281 64,513 leases)
Ratio: Loans, borrowings and other sources of financing/EBITDA 144% 139% * Information on the transformation is presented in Note 5.12.
The Issuer defines EBITDA as an operating profit/loss adjusted for amortization and depreciation and the impairment of fixed assets, intangible assets and programming inventory. Moreover, in the calculation of EBITDA the Company eliminates foreign exchange differences and interest expense on liabilities to the State budget, and recognizes interest income. EBITDA is not defined in EU IFRS and may be calculated in a different way by other entities.
EBITDA cannot be considered as a measure equivalent to profit before tax or to cash flows from operating activities (or to any other measures defined by the IFRS). Nor can EBITDA be treated as the sole measure of operating effectiveness or a liquidity ratio. In particular, EBITDA cannot be treated, either, as a measure of cash and cash equivalents remaining at the Company's disposal, which can be invested in business development.
As an analytical tool, EBITDA has certain limitations and therefore, cannot be considered in isolation from other ratios or as a substitute of the financial data consistent with IFRS EU. Therefore, investors should not rely on this ratio uncritically.
106 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
5.6.2 Earnings per share
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (restated*, in PLN '000)
Net profit from continued operations 9,249 13,617 Net profit from continued operations - - Total 9,249 13,617 Adjustments - - Net profit attributable to ordinary shareholders, used to calculate 9,249 13,617 diluted earnings per share * Information on the transformation is presented in Note 5.12.
12 months ended 12 months ended 31 December 2019 31 December 2018
Weighted average number of ordinary shares issued, used to 19,821,404 19,821,404 calculate basic earnings per share
Adjusted weighted average number of ordinary shares, used to 19,821,404 19,821,404 calculate diluted earnings per share
12 months ended 12 months ended Basic earnings per share 31 December 2018 31 December 2019 (restated*)
Net profit (in PLN'000) 9,249 13,617 Weighted average number of ordinary shares 19,821,404 19,821,404
Basic earnings per share 0.47 0.69 * Information on the transformation is presented in Note 5.12.
12 months ended 12 months ended Diluted earnings per share 31 December 2018 31 December 2019 (restated*)
Net profit attributable to ordinary shareholders, used to 9,249 13,617 calculate diluted earnings per share (in PLN'000) Adjusted weighted average number of ordinary shares, used to 19,821,404 19,821,404 calculate diluted earnings per share
Diluted earnings per share (PLN/share) 5.6.3. 0.47 0.69 * Information on the transformation is presented in Note 5.12.
107 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
5.6.3 Debt
As at 31 December 2019, the Company had the following loans and open credit lines:
Loan value as at the balance sheet date Financing Loan/lim it in Repaym ent Currency Interest rate Collateral entity am ount foreign in PLN deadline currency '000 '000 a blank promissory note, a declaration of submission to Santander WIBOR 1M + up to PLN enforcement proceedings, Bank Polska PLN n/a 25,938 the Bank's 09/06/2020 30 million powers of attorney for bank S.A. margin accounts, and an agreement on the assignment of receivables Santander WIBOR 1M + an agreement on the Bank Polska PLN PLN 10 million n/a 5,410 the Bank's 28/02/2022 assignment of receivables and a S.A. margin registered pledge on shares Santander WIBOR 1M + an agreement on the PLN 32.2 Bank Polska PLN n/a 26,106 the Bank's 30/04/2023 assignment of receivables and a million S.A. margin registered pledge on shares Santander PLN 596 Bank Polska PLN n/a 341 4.21% 25/01/2021 blank bill of exchange thousand S.A. one year from the Filmbox 800 800thousand EURIBOR 3M+a date of International EUR thousand N/A EUR , margin payment of Ltd. EUR a given tranche Total loans and 61,202 borrow ings
As at 31 December 2018, the Company had the following loans and open credit lines:
Loan value as at the balance sheet date Financing Loan/lim it in Currency Interest rate R epaym ent Collateral entity am ount foreign in PLN deadline currency '000 '000 a blank promissory note, a declaration of submission to Santander WIBOR 1M + up to PLN enforcement proceedings, powers Bank Polska PLN n/a 24,009 the Bank's 09/06/2020 30 million of attorney for bank accounts, and S.A. margin an agreement on the assignment of receivables Santander WIBOR 1M + an agreement on the assignment Bank Polska PLN PLN 10 million n/a 7,909 the Bank's 28/02/2022 of receivables and a registered S.A. margin pledge on shares Santander WIBOR 1M + an agreement on the assignment PLN 32.2 Bank Polska PLN n/a 31,274 the Bank's 30/04/2023 of receivables and a registered million S.A. margin pledge on shares Total loans and 63,192 borrow ings
In 2019, the Company obtained loans and borrowings of PLN 5,959 thousand, accrued interest of PLN 2,000 thousand and repaid principal and interest totalling PLN 9,923 thousand.
108 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. 5.6.4 Leases
The finance lease contracts concluded by the Issuer concern mainly office space and IT equipment.
The reconciliation of minimum lease payments to carrying amounts is presented below:
A s at A s a t A s at 31 December 2019 1 Ja n u a ry 20 1 9 31 December 2018 (in PLN '000) - after IFRS 16 application (in PLN '000)
Lease liabilities, gross - minimum lease payments: Up to 1 year 2,006 1,789 611 From 1 to 5 years 4,380 5,655 835
6,386 7,444 1,446 Future financial payments in respect of leases (307) (582) (125)
Present value of lease liabilities 6,079 6,862 1,321
In 2019, in accordance with IFRS 16, the Company recognized a liability of PLN 5,542 thousand, signed a new lease contract totalling PLN 937 thousand, accrued lease interest of PLN 183 thousand and repaid lease liabilities of PLN 1,904 thousand (principal instalments with interest).
The present value of lease liabilities is as follows:
A s at A s at A s at 1 Ja n u a ry 20 1 9 31 December 2019 31 December 2018 - after IFRS 16 application (in PLN '000) (in PLN '000) (in PLN '000) The present value of lease liabilities is as follows: Up to 1 year 1,857 1,598 543 From 1 to 5 years 4,222______5,264______778 6,079 6,862 1,321
5.6.5 Liquidity management
The Issuer monitors the risk of the lack of funds using a periodical liquidity planning tool. This tool takes into account the maturity dates of both liabilities in respect of loans, borrowings and leases and in respect of purchase of property, plant & equipment, intangible assets and programming inventory, as well as forecasted cash flows from operating activities.
The Company's objective is to maintain a balance between the continuity and flexibility of financing by using various sources of funding, such as overdraft facilities, borrowings and leases.
109 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
The table below contains an analysis of the Company's financial liabilities which will be settled (or extended, as in the case of overdrafts) in the respective age brackets, based on contractual maturities as at the balance sheet date.
A s at 31 December 2019 (in PLN '000)
B o o k Contractual Less than 6-12 1-2 2-5 Over 5 value cash flo w s 6 months months years years years
Loans and borrowings received 61,202 63,495 33,853* 4,427 8,364 16,851 - Lease liabilities 6,079 6,386 1,012 994 1,686 2,694 - Concession liabilities 9,330 10,240 1,571 - 1,625 5,202 1,842 Payables related to purchase of programming inventory 14,239 14,239 11,053 2,091 1,074 9 12 Trade payables 14,041 14,041 14,041 - - - - Derivative financial instruments 502 502 99 98 - 305 - Total 105,393 108,903 61,630 7,611 12,749 25,061 1,854
* The Company plans to have the repayment dates of the overdraft amounting to PLN 25,938 as at 31 December 2019 extended as part of the activities planned in connection with signing an annex to the existing loan agreement.
As at 31 December 2018 (in PLN '000)
Book Contractual Less than 6-12 1-2 2-5 Over value cash flows 6 months months years years 5 years
Loans and borrowings received 63,192 66,627 4,444 4,392 32,600 25,191 - Lease liabilities 1,321 1,446 315 296 549 286 - Concession liabilities 10,523 11,757 1,517 - 1,571 5,039 3,630 Payables related to purchase of programming inventory 7,751 7,751 5,826 732 1,143 50 - Trade payables 17,338 17,338 17,338 - - - - Derivative financial instruments 618 618 109 (54) 233 330 - Total 100,743 105,537 29,549 5,366 36,096 30,896 3,630
110 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
5.7 The Group
5.7.1 Shares in subsidiaries and joint ventures
The Company measures shares in subsidiaries at cost of purchase net of impairment write-downs.
Interests in subsidiaries and joint ventures as at 31 December 2019 and 31 December 2018.
Carrying value Carrying value Net assets as at D ate of % of share capital Registered N ature of of shares as at of shares as at 31/12/2019 (in % of share capital held Entity's name and legal form Business activities assum ing held as at office relationship 31/12/2019 31/12/2018 PLN '000) as at 31/12/2018 control 31/12/2019 (in PLN'000) (in PLN'000)
Warsaw, web portal and TV 496 Stopklatka S.A. ("Stopklatka") direct subsidiary 14/06/2018 57,618 56,118 99.62% 97.76% Poland activities
London, distribution of film Filmbox International Ltd. United channels from the direct subsidiary 01/12/2013 114,445 114,445 27,121 100% 100% Kingdom Filmbox family distribution of film Filmbox Iberia S.L.U. Madrid, Spain channels from the direct subsidiary 27/02/2019 116 - (37) 100% - Filmbox family distribution of film - (29 fully Filmbox Estonia OU Tallin, Estonia channels from the direct subsidiary 05/08/2019 no data 100% written down) - - Filmbox family distribution of film SPI International Magyarorszag, Budapest, channels from the direct subsidiary 01/12/2013 n/a n/a 1,895 100%* 100%* Kft. Hungary Filmbox family distribution of film Prague, the Help Film s.r.o. channels from the direct subsidiary 01/12/2013 n/a n/a 1,879 100%* 100%* Czech Republic Filmbox family distribution of film Bratislava, Help Film Slovakia s.r.o. channels from the direct subsidiary 01/12/2013 n/a n/a 722 100%* 100%* Slovakia Filmbox family * by Filmbox International Ltd.
111 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Filmbox Iberia S.L.U. was formed on the basis of a notarial deed of 12 March 2019. The Company took up the capital of EUR 3.5 thousand. Direct costs associated with this transaction amounted to PLN 101 thousand.
On 5 August 2019, the Issuer purchased 2,500 shares in Filmbox Estonia OU for EUR 2,500 from Advokaadiburoo Magnusson OU and became its sole owner. Direct costs associated with the acquisition of shares in this company amounted to PLN 29 thousand. At the same time, given the uncertainty as regards the further development of this company, the Issuer recognized a write-down covering the full value of the shares held.
On 5 December 2019, the Company purchased 208,361 ordinary bearer shares of Stopklatka for PLN 208,361 (the "Transaction") as a result of settlement of cash and cash equivalents as part of a transaction which took place on 3 December 2019 in connection with the end of a tender offer for shares in Stopklatka S.A. As a result, the Company increased its share in the total number of votes at Stopklatka's General Shareholders' Meeting by I. 9%. Before the Transaction, the Company directly held 10,920,784 shares representing 97.76% of Stopklatka's share capital and carrying 10,920,784 votes at Stopklatka's General Meeting, representing 97.76% of the total voting rights. As at the date of publication of the Report and as at the balance sheet date, the Company held I I , 129,145 shares representing 99.62% of the share capital of Stopklatka and carrying 11,129,145 votes at Stopklatka's General Meeting, representing 99.62% of the total number of votes at Stopklatka's General Meeting. Direct costs associated with the settlement of the purchase of 1.9% shares in Stopklatka amounted to PLN 41 thousand. The tender offer was part of the procedure of withdrawing Stopklatka S.A.'s s shares from trading on the NewConnect market which finally took place on 29 February 2020. On 6 March 2020, Stopklatka 's shares were deleted from the register kept by the Central Securities Depository of Poland (KDPW).
Investments in subsidiaries are reviewed for impairment whenever the Management Board identified events or changes in circumstances which indicate that the carrying amount may not be recoverable. The Company is monitoring indications of impairment of investments in subsidiaries by analysing the operating and financial results of the subsidiaries.
5.7.2 Analysis of indications of impairment of an investment in a subsidiary Filmbox International Ltd.
As at 31 December 2019 and 31 December 2018, the Company assessed that there were no indications of impairment of its investment in Filmbox International Ltd. This entity has shown positive financial results since 2018. Therefore, no impairment tests in respect of this asset were performed.
5.7.3 Impairment test with respect to Zoom TV segment
Goodwill is related to the segment of Zoom TV and it was recognized by the Company in 2016 as a result of the acquisition of CTN&P by the capital group to which the Company belongs, and then a merger between the Company and CTN&P, among others, in 2018 using the so-called book value method - Note 5.12.
112 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
The Zoom TV segment which includes, among other things, goodwill and a concession for broadcasting the Zoom TV channel valid until 2025, is a separate cash generating unit. The Company conducted impairment tests with respect to the Zoom TV segment assets both as at 31 December 2018 (due to restatement of comparatives) and as at 31 December 2019.
5.7.3.I. Test as at 31 December 2018
As at 31 December 2018, the Company conducted an impairment test of the Zoom TV segment assets. As at 31 December 2018, goodwill related to the Zoom TV segment amounted to PLN 20 466 thousand and other related assets and liabilities amounted to PLN 8 861 thousand.
During the impairment test, the recoverable amount of the Zoom TV segment was calculated based on value in use. These calculations were based on discounted cash flows derived from the current financial plan adopted by the Management Board for the year 2019, assumptions concerning revenue and expenses in the years 2020 2023 and the growth rate after 2023. The operations of the Zoom TV segment consist of running the Zoom TV television channel. Broadcasting of Zoom TV commenced in October 2016. This television channel is available on the eighth multiplex of digital terrestrial television.
The revenue forecasts for the years 2019-2023 were based on expectations mainly concerning an increase in the share of the Zoom television channel in the total audience (SHR) from 0.40% recorded in 2018 to the targeted 1.00% in 2023. The average SHR in the forecast horizon was adopted at 0.82%; The assumptions concerning the increase in SHR are to be achieved mainly by increasing recognizability of the Zoom TV brand among the audience (thanks to increased expenditure on sales activities and steadily growing related marketing expenses) and by an over 11% increase in expenditure on content purchases over the next five years. The planned average annual increase in revenue in the years 2019-2023 of approximately 13% is a result of both higher SHR and a favourable tendency in the cost per point (CPP) for the channel. In the Company's opinion, the increase in SHR will be achieved by: • investing in content (for example, unique productions dedicated solely to the Zoom TV channel have been planned); • flexible response to the needs of the audience and to market changes; • selecting content resulting in better audience structure from the advertisers' perspective; and • conducting marketing activities.
Other key financial assumptions adopted to discounting cash flows as at 31 December 2018: • incremental growth rate 2.5%; • discount rate before tax 7.4%. The discount rate reflected management's estimate of the risk typical of a given activity, taking into account the time value of money and the risk typical of a given asset. The discount rate was calculated taking into account the specific conditions in which the segment operates, based on the weighted average cost of capital (WACC). The discount rate has been calculated taking into account the specific conditions of the Company's operations
113 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A. based on the weighted average cost of capital (WACC). The WACC rate took into account both debt and equity. The incremental growth rate was based on market data concerning the long-term inflation rate in Poland and Management Board forecasts.
The Company's Management Board believes that the key assumptions adopted for the impairment test of the Zoom TV segment as at 31 December 2018 were reasonable and based on the Company's experience and forecasts of market growth. Value in use (PLN 44 448 thousand) of the Zoom TV segment estimated by the Company as at 31 December 2018 was higher than the book value (PLN 29 327 thousand). In consequence, the Company did not recognize any impairment. Movements in the marginal growth rate or discount rate of 1 p.p. would not have caused any impairment. The Company would have recognized impairment if, with other conditions remaining unchanged: • the assumed SHR in the forecast period did not exceed 0.88%; • the discount rate amounted to 9.2%; • the incremental growth rate equalled zero.
5.7.3.2. Test as at 31 December 2019
As at 31 December 2019, the Company conducted an impairment test of the Zoom TV segment assets. As at 31 December 2019, goodwill related to the Zoom TV segment amounted to PLN 20 466 thousand and other related assets and liabilities amounted to PLN 9,500 thousand.
During the impairment test, the recoverable amount of the Zoom TV segment was calculated based on value in use. These calculations were based on discounted cash flows derived from the current financial plan adopted by the Management Board for the year 2020, assumptions concerning revenue and expenses in the years 2021 2024 and the growth rate after 2024. The operations of the Zoom TV segment consist of running the Zoom TV television channel. Broadcasting of Zoom TV commenced in October 2016. This television channel is available on the eighth multiplex of digital terrestrial television.
The revenue forecasts for the years 2020-2024 were based on expectations mainly concerning an increase in the share of the Zoom television channel in the total audience (SHR) from 0.52% recorded in 2019 to the targeted 1.05% in 2024. The average SHR in the forecast horizon was adopted at 0.91%; The assumptions concerning the increase in SHR are to be achieved mainly by increasing the recognizability of the Zoom TV brand among the audience (thanks to increased expenditure on sales activities and steadily growing related marketing expenses) and by an over 6% increase in expenditure on content purchases over the next five years. The planned average annual increase in revenue in the years 2020-2024 of approximately 11.2% is a result of both higher SHR and a favourable tendency in the cost per point (CPP) for the channel. In the Company's opinion, the increase in SHR will be achieved by:
• investing in content (for example, unique productions dedicated solely to the Zoom TV channel have been planned);
114 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
• flexible response to the needs of the audience and to market changes; • selecting content resulting in better audience structure from the advertisers' perspective; and • conducting marketing activities.
Other key financial assumptions adopted to discounting cash flows as at 31 December 2019: • incremental growth rate 2.5%; • discount rate before tax 10.20%. The discount rate reflected management's estimate of the risk typical of a given activity, taking into account the time value of money and the risk typical of a given asset. The discount rate was calculated taking into account the specific conditions in which the segment operates, based on the weighted average cost of capital (WACC). The discount rate has been calculated taking into account the specific conditions of the Company's operations based on the weighted average cost of capital (WACC). The WACC rate took into account both debt and equity. The incremental growth rate was based on market data concerning the long-term inflation rate in Poland and Management Board forecasts.
The Company's Management Board believes that the key assumptions adopted for the impairment test of the Zoom TV segment as at 31 December 2019 were reasonable and based on the Company's experience and forecasts of market growth. Value in use of the Zoom TV segment (PLN 40 891 thousand) estimated by the Company as at 31 December 2019 was higher than the book value (PLN 29 966 thousand). In consequence, the Company did not recognize any impairment. Movements in the marginal growth rate or discount rate of 1 p.p. would not have caused any impairment. The Company would have recognized impairment if, with other conditions remaining unchanged: • the assumed SHR in the forecast period did not exceed 0.88%; • the discount rate amounted to 12.3%; • the incremental growth rate amounted to -0.3%;
5.7.4 Impairment test of investment in Stopklatka S.A.
5.7.4.1 Test as at 31 December 2018
As at 31 December 2018, the Company conducted an impairment test of the investment in a subsidiary Stopklatka S.A. The Company's investment in Stopklatka S.A. as at 31 December 2018 was PLN 58 877 thousand and it comprised shares of PLN 56 119 thousand and loans including interest and receivables of PLN 3 680 thousand. In the impairment test, the calculation of the recoverable amount of the investment in Stopklatka S.A. was performed based on the calculation of fair value less costs to sell. These calculations were based on discounted cash flows. Future cash flows were estimated on the basis of free cash flows available to all funding providers (FCFF). The FCFF were discounted using weighted average cost of capital (WACC) based on the estimated cost of capital and cost of debt. The operations of Stopklatka S.A. consist of running the Stopklatka television channel.
115 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Stopklatka S.A. began broadcasting that channel on 15 March 2014. The television channel is available in the first multiplex of terrestrial digital television. The revenue forecasted for the years 2019-2023 was based on predictions concerning, above all, an increase in the share of the Stopklatka TV television channel in the total audience (SHR) from the 0.92% recorded in 2018 to the target figure of approximately 1.25% in 2023. The assumptions concerning the increase in SHR are to be implemented by tailoring the programme mix to the target viewer in a better way and by using the available programme catalogue in a more effective manner. In the long term, the assumptions concerning the increase in SHR are also affected by the Management Board's expectations relating to the development of the method of conducting TV-audience research. The budgeted annual average increase in revenue in the years 2019-2023 of approximately 9.75% is the result of both an increase in SHR, favourable movements in the so-called cost per point (CPP) and additional revenue streams which could be taken into account by an independent industry investor. The budgeted operating expenses and capital expenditure (mainly on purchases of programming inventory) assume purchasing optimizations and synergies available to an average industry investor. The SHR budgeted for 2019 is 1.05%. Other key financial assumptions adopted to discounting cash flows as at 31 December 2018: • incremental growth rate 2.5%; • discount rate after tax 7.37%. The discount rate reflected the management's estimate of the risk typical of a given activity, taking into account the time value of money and the risk typical of a given asset. The discount rate was calculated taking into account the specific conditions in which the segment operates, based on the weighted average cost of capital (WACC). The discount rate has been calculated taking into account the specific conditions of the Company's operations based on the weighted average cost of capital (WACC). The WACC rate took into account both debt and equity. The incremental growth rate was based on market data concerning the long-term inflation rate in Poland and Management Board forecasts. The Company believed that the key assumptions adopted for the impairment test of the investment in the subsidiary Stopklatka S.A. as at 31 December 2018 were reasonable and based on the Company's experience and forecasts of the market growth. Fair value less costs to sell estimated by the Company as at 31 December 2018 was higher than the book value of the investment in Stopklatka S.A. In consequence, the Company did not recognize any impairment. Movements in the marginal growth rate or discount rate of 1 p.p. would not have caused any impairment. The Company would have recognized impairment if the assumed average SHR in the forecast period did not exceed 1.01%.
5.7.4.2 Test as at 31 December 2019
As at 31 December 2019, the Company conducted an impairment test of the investment in a subsidiary Stopklatka S.A. The Company's investment in Stopklatka S.A. as at 31 December 2019 was PLN 64,289 thousand and it comprised shares of PLN 57 618 thousand and a loan including interest and receivables of PLN 6,671 thousand. During the impairment test, the recoverable amount of the investment in Stopklatka S.A. was calculated based on value in use. These calculations were based on discounted cash flows. Future cash flows were estimated on the basis of free cash flows available to all funding providers (FCFF). The FCFF were discounted using the weighted
116 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A. average cost of capital (WACC) based on the estimated cost of capital and cost of debt. The operations of Stopklatka S.A. consist of running the Stopklatka television channel (previously Stopklatka TV). Stopklatka S.A. began broadcasting that channel on 15 March 2014. The television channel is available in the first multiplex of terrestrial digital television. The revenue forecasts for the years 2020-2024 were based on the expectations mainly concerning an increase in the share of the Stopklatka television channel in the total audience (SHR) from 0.95% recorded in 2019 to the targeted approximately 1.32% in 2024. The average SHR in the forecast horizon was adopted at 1.22%. The assumptions concerning the increase in SHR are to be implemented by tailoring the programme mix to the target viewer in a better way and by using the available programme catalogue in a more effective manner. The planned average annual increase in revenue in the years 2020-2024 of approximately 5% is a result of both higher SHR and a favourable tendency in the cost per point (CPP) for the channel. The operating expenses and capital expenditure adopted in the financial plan assume average annual growths of approximately 2%. The SHR budgeted for 2020 is 1.10%. The other key financial assumptions made in discounting cash flows as at 31 December 2019: • incremental growth rate 2.5%; • discount rate after tax 10.20%.
The discount rate reflected management's estimate of the risk typical of a given activity, taking into account the time value of money and the risk typical of a given asset. The discount rate was calculated taking into account the specific conditions in which the segment operates, based on the weighted average cost of capital (WACC). The discount rate has been calculated taking into account the specific conditions of the Company's operations based on the weighted average cost of capital (WACC). The WACC rate took into account both debt and equity. The incremental growth rate was based on market data concerning the long-term inflation rate in Poland and Management Board forecasts. The Company believed that the key assumptions adopted for the impairment test of the investment in the subsidiary Stopklatka S.A. as at 31 December 2019 were reasonable and based on the Company's experience and forecasts of the market growth.
Value in use (PLN 91 767 thousand) of the Zoom estimated by the Company as at 31 December 2019 was higher than the book value of the investment in Stopklatka S.A. (PLN 64 289 thousand). As a consequence, the Company did not recognize any impairment. Movements in the marginal growth rate or discount rate of 1 p.p. would not have caused any impairment. The Company would have recognized impairment if, with other conditions remaining unchanged: • the assumed SHR in the forecast period did not exceed 1.13%; • the discount rate amounted to 14%; • the incremental growth rate amounted to -2%;
5.7.5 Related party transactions
Revenue from related parties relates mainly to the provision of production and telecommunications services and sale of licences, while purchases from related entities comprise fees for broadcasting rights, purchases of licences
117 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A. and fees for access to the content, and marketing services. In the period covered by these financial statements, there were no material transactions with members of the Company's management or supervisory bodies.
Related party transactions are conducted on terms and conditions close to the arm's length basis.
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
sales of finished interest sales of finished interest Revenue from sales to related entities goods and services income goods and services income
Filmbox International Ltd.; 50,676 - 52,679 - Help Film s.r.o. 57 - 62 - Help Film Slovakia s.r.o. 44 - 54 - SPI International Magyaroszag kft 83 - 133 - Stopklatka S.A. 8,007 94 2,511 36 Mediabox Broadcasting International Ltd (UK) 501 - 3,507 - SPI Int'l BV (NL) 997 - 922 - ROX Entertainment BV 325 - 510 - Cooperatieve SPI International U.A. (NL) 21 - 18 - Bogusław Kisielewski - - 1 - Total revenue from sales to related entities 60,711 94 60,397 36
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
purchase purchase interest purchase purchase interest Purchases from related entities of services of assets expense of services of assets expense
Filmbox International Ltd.; 39,477 - 33 33,803 - 9 Stopklatka S.A. 18 - - 6 - - Mediabox Broadcasting International Ltd (UK) 129 - - 129 - - SPI Int'l BV (NL) 4,167 2,853 - 3,899 1,033 - SPI Intl' Inc. (USA) 98 - - 102 - - Eggplant Production Martyna Koreblewska-Szpetmańska - - - 30 - - EFTAS Eklektronik Fotograf Ticaret Sanayi A.S. 322 - - 422 - - Total purchases from related entities 44,211 2,853 33 38,391 1,033 9
As at A s at 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Trade and similar Loans Trade and similar Loans Receivables receivables granted receivables granted Filmbox International Ltd.; 5,441 - 4,465 - Help Film s.r.o. 5 - 14 - Help Film Slovakia s.r.o. 4 - 12 - SPI International Magyaroszag kft 27 - 22 - Stopklatka S.A. 3,795 2,798 1,383 2,758 Filmbox Iberia S.L.U. - 85 - - Mediabox Broadcasting International Ltd (UK) 995 - 601 - SPI Int'l BV (NL) 1,810 - 386 - ROX Entertainment BV 156 - 243 - Cooperatieve SPI International U.A. (NL) 48 - 23 - Bogusław Kisielewski - - 7 - Total receivables 12,281 2,883 7,156 2,758
118 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
A s at A s at 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Trade and similar Loans Liabilities Trade and similar payables payables received Filmbox International Ltd.; 3,582 3,407 4,100 Stopklatka S.A. 16 - 78 Mediabox Broadcasting International Ltd (UK) 62 - 28 SPI Int'l BV (NL) 2,502 - 1,657 SPI Intl' Inc. (USA) - - 9 Bogusław Kisielewski - - 1 Marcin Kowalski - - 1 EFTAS Eklektronik Fotograf Ticaret Sanayi A.S. 52 - 56 6,214 3,407 5,930
Description of the nature of the relationships between the related parties as at the balance sheet date and for the period from 1 January 2019 to 31 December 2019:
NAME/NAME AND SURNAME OF A RELATED PARTY REASON FOR BEING CONSIDERED A RELATED PARTY
COOPERATIEVE SPI INTERNATIONAL U.A. other related party
EFTAS ELEKTRONIK FOTOGRAF TICARET SANAYI A.S. other related party
EROX INTERNATIONAL B.V. other related party
Filmbox Estonia OU subsidiary
Filmbox Iberia S.L.U. subsidiary
Filmbox International Ltd. subsidiary
Help Film s.r.o. subsidiary
Help Film Slovakia s.r.o. subsidiary
MEDIABOX BROADCASTING INTERNATIONAL LTD other related party
SPI INTERNATIONAL B.V. higher tier parent
SPI INTERNATIONAL INC other related party
SPI INTERNATIONAL N.V. other related party
SPI International Magyarorszag, Kft. subsidiary
STOPKLATKA S.A. subsidiary
Bogusław Kisielewski Management Board Member
MARCIN KOWALSKI Management Board Member
5.8. Programming inventory
5.8.1 Programming inventory
Programming inventory includes film licences acquired and used by the Company in the course of its operations, and those acquired with a view to their reselling.
Programming inventory is recognized at purchase price at the moment of starting its use or when the payment for film licences occurs before the starting date of the licence period.
Expenditure such as translation costs and technical costs, relating to materials supplied by a licensor, is included in the cost of purchase of a given programming inventory item.
119 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Contracts concluded and valid, concerning the purchase of programming inventory for which the criteria for recognition as programming inventory are not met, are not recognized in the balance sheet but are disclosed as future commitments at the amount of liabilities resulting from such contracts and outstanding as at the balance sheet date (Note 5.11.1).
Programming inventory is classified as current or non-current, depending on the licence period. Programming inventory with an original licence period shorter than 1 year are classified as current.
Amortization of films licences begins in the month when the right to use it was obtained (start of the licence period) and is charged on a straight-line basis over the period of validity of a given licence (typically up to 3 years). Amortization of own and co-produced films is charged on a straight line basis over the period of 10 years or using a different method reflecting their use over time.
Some agreements based on which the Company recognizes and uses film licences contain additional restrictions (in addition to the licence period) relating to the maximum number of rebroadcasts allowed. The Company is analysing the licences in terms of the number of rebroadcasts and the related restrictions resulting from agreements with licensors, and adjusts the amortization periods and charges as needed. Such adjustments are treated as changes in accounting estimates and recognized in profit or loss for the period, in Operating expenses/ Amortization of non-current/current programming inventory.
During the financial year ended 31 December 2019, the Management Board analysed the programming inventory held in terms of both the utilization of the allowed number of rebroadcasts and in terms of other indications of impairment. As a result of the analysis, additional charges which accelerated the amortization of programming inventory of PLN 560 thousand were recognized due to the fact that the allowed number of rebroadcasts had been used.
Programming assets are derecognized on disposal or termination of the licence period. Gains or losses on derecognition of an intangible asset are determined at the amount of the difference between net proceeds from sale, if any, and the carrying amount of the asset. They are shown in the profit or loss of the period under Other operating income or expenses on derecognition of the asset.
Impairment of programming inventory The Company makes significant investments in film licences presented as Programming inventory. The scope of use of such licences depends on their contractual terms. In the majority, licences are granted for a specific period, and some of them only allow a specific number of rebroadcasts.
What is characteristic of the television industry is that the attractiveness of the programming inventory held may decrease with the passage of time and/or the number of rebroadcasts.
Purchases of programming inventory are presented as operating activities in the cash flow statement.
120 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
As at As at 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Purchased film licences 34,907 33,471 Down payments 5,367 3,899
Total 40,274 37,370 including: non-current programming inventory 33,266 33,678 current programming inventory 7,008 3,692
12 months ended 12 months ended Changes in programming inventory 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Net book value as at 1 January 37,370 40,479 Increase: - purchase of film licences (including down payments) 38,338 23,282 Changes in impairment write-downs (44) (25) Amortization of film licences (27,879) (24,208) Scrapping - (61) Sale (7,484) (2,097) Reclassification to other intangible assets (27) -
Net book value as at 31 December 40,274 37,370
5.9 Explanatory notes to the other items of the statement of comprehensive income
5.9.1 Employee benefit expense
Defined contribution plan Based on the applicable legislation, the Company is obliged to collect and remit contributions to the employee retirement plan. These benefits, according to IAS 19 "Employee benefits", constitute a state plan and have the nature of a defined contribution plan. Consequently, the Issuer's liability for each period is estimated based on the amounts of contributions to be made for a given period.
Defined benefit plan - one-off retirement bonuses (Note 5.10.14) Based on the applicable legislation, the Company is obliged to pay retirement benefits at amounts resulting from the provisions of the Polish Labour Code. The minimum level of the retirement bonuses is based on the provisions of the Polish Labour Code in force as at the date of their payment.
The calculation is performed using the projected unit credit method. Employee turnover is estimated on the basis of historical data and the expected future level of employment.
Changes in the amount of the liability relating to one-off retirement bonuses are charged to the statement of profit and loss on a net basis.
121 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Short-term employee benefits Short-term employee benefit obligations are measured without a discount and charged to costs when the benefit has been provided.
The Issuer recognizes a provision, charged to costs, at the amount of anticipated payments to employees in respect of short-term monetary bonuses provided that the Company has a legal or constructive obligation to make such payments based on the services provided by employees in the past, and the liability may be reliably estimated.
5.9.2 Remuneration of the senior management
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Short-term employee benefits (wages & salaries and related charges) 2,192 2,052 Total 2,192 2,052
12 months ended 12 months ended Management Board 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Bogusław Kisielewski 948 850 Berk Uziyel 135 247 Marcin Kowalski 649 589 Alber Uziyel 150 150 Levent Gultan 85 - Total 1,967 1,836
12 months ended 12 months ended Supervisory Board 31 December 2019 31 December 2018 (in PLN'000) (in PLN '000) Loni Farhi 1 2 Stacey Sobel 1 2 Piotr Orłowski 29 32 Jacek Koskowski 9 - Krzysztof Rudnik 62 62 Jesus Perezagua Sanchez 11 - Leszek Stypułkowski - 30 Piotr Reisch - 1 Katarzyna Woźnicka 60 60 Levent Gultan 52 27 Total 225 216
5.9.3 Employment structure
12 months ended 12 months ended 31 December 2019 31 December 2018 Management Board 5 4 Management and administration 24 28 Production and programming employees 73 73 Marketing and sales 18 13 Technical department 8 7 Total 128 125
122 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
5.9.4 Remuneration of the registered auditor or a registered audit company
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Statutory audit or review of financial statements 329 381 Total 329 381
5.9.5 Other operating income and expenses
12 months ended 12 months ended Other operating income 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Net gains on disposal of non-financial non-current assets 8 - Write-downs of intangible assets and fixed assets - 14 Liabilities written off 45 - Release of receivables write-downs - 179 Subsidy* 333 248 Measurement of derivative instruments (forward contracts) 91 481 Stock count surpluses 1 - Compensation received 2 12 Other 46 73 Total 526 1,007 *The Company recognizes subsidies received only when there is a reasonable certainty that the conditions for receiving the funds will be met and the funds will be received. The Company recognizes subsidies systematically and other operating income in successive periods, to ensure that they match the related costs which the subsidies are intended to compensate. In the case of the Company, subsidies were granted for preparing omnibus editions of films and are recognized in line with their distribution. The deferred part of the subsidies in presented in the line "Liabilities in respect of contracts with customers" (Note 5.10.12).
12 months ended 12 months ended Other operating expenses 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Net loss on disposal of non-financial non-current assets - (19) Receivables written off (1) (20) Recognition of write-downs of receivables (455) - Contractual penalties - (20) Interest on trade payables (22) (24) State Budget interest (16) (67) Foreign exchange differences (493) (219) Stock count settlements (48) (16) Other (7) (76) Total (1,042) (461)
5.9.6 Finance income and costs
12 months ended 12 months ended Finance income 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Interest income, including: 97 36 - on bank deposits 3 - - on loans 94 36 Dividend income from subsidiaries 833 - Measurement of derivative instruments (IRS) 25 - Total 955 36
123 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
12 months ended 12 months ended Finance costs 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Interest expense, including: (2,183) (1,399) - on loans and borrowings (2,000) (1,349) - on finance leases (183) (50) Bank commissions - (2) Remeasurement of investments (shares in a subsidiary) (45) - Discount on concessions (324) (364) Measurement of financial liabilities measured at fair value - (18) Measurement of derivative instruments (IRS) - (417) Total (2,552) (2,200)
5.9.7 Income tax expense
Reconciliation of the effective tax rate
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Current income tax (2,980) (3,486) Current tax on income for the financial year (2,980) (3,486)
Deferred tax 370 512 Temporary differences arising / reversed 370 512
Income tax expense (2,610) (2,974)
Reconciliation of corporate income tax on profit before tax in accordance with the statutory tax rate with corporate income tax calculated using the effective tax rate of the Company for the 12 months ended 31 December 2019 and 31 December 2018 is as follows:
12 months ended 12 months ended Differences between the income tax expense and the amount of tax 31 December 2019 31 December 2018 calculated by applying the tax rate to profit before tax (in PLN '000) (restated*, in PLN '000)
Profit before tax 11,859 16,591 Income tax charge at the statutory rates applicable in the period (19% in (2,253) (3,152) Poland) Non-taxable income 202 - Non-deductible costs (101) (356) Income recognized for tax purposes, not recognized for accounting - (8) purposes Deductible temporary differences on which no deferred tax asset has 167 previously been recognized - Reversal of a deferred tax provision due to there being no need to recognize - 375 such a provision Taxable temporary differences for which a provision has not been (631) recognized previously - Change in the method for determining foreign exchange gains and losses 173 from tax method to accounting method - Income tax expense (2,610) (2,974) * Information on the transformation is presented in Note 5.12.
In the light of the General Anti-Avoidance Rule ("GAAR") effective since 15 July 2016, which is intended to prevent the creation and utilization of artificial legal structures established in order to avoid paying taxes in Poland, the
124 KINO POLSKA Kino Polska TV S.A. Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Management Board made a comprehensive analysis of the tax circumstances of the Company companies as regards the identification and assessment of transactions and operations which could potentially be subject to the GAAR legislation, considered the effect on deferred tax, the tax bases of assets and provisions for tax risk. In the opinion of the Management Board, the analysis did not indicate any need to adjust the reported current and deferred income tax. Nevertheless, in the opinion of the Management Board, in the case of the GAAR legislation there is an inherent uncertainty concerning the interpretation of the tax law by the Entity which may result in the need to pay additional tax for past periods. The tax authorities in Poland may inspect accounting and tax records at any time within five years of the end of the year in which the related tax returns were filed, and they could charge the Company with additional tax, together with penalties and default interest. The Management Board believes that there are no circumstances that would indicate any possible material liability arising in this respect.
A s at As at 31 December 2018 31 December 2019 (restated*, in PLN '000) (in PLN '000) Deferred income tax assets: - to be realized within 12 months 1,616 1,434 1,616 1,434 Deferred income tax provision: - to be settled after 12 months (239) (343) - to be settled within 12 months (244) (328) (483) (671) Deferred income tax asset/ provision (net) 1,133 763 * Information on the transformation is presented in Note 5.12.
125 KINO KINO
Kino Polska TV S POLSKA POLSKA Separatefinancial statements as at and forthi TV S.A. ber 2019 TV S.A.
12 months ended 12 months ended Changes in gross deferred income tax 31 December 2019 31 December 2018 (in PLN '000) (restated*, in PLN '000) As at 1 January 763 187 Credited to the income statement 370 512 Tax charge relating to transactions recognized directly in equity - 64 As at 31 December 1,133 763 * Information on the transformation is presented in Note 5.12.
(in PLN'000) Liabilities in Assets in Tax amortization of Interest Im pairm ent Measurement of respect of respect of Provisions Liabilities O ther Total intangible assets accrued lo sses derivative instruments contracts with contracts with custom ers custom ers
Deferred income tax assets As at 1 January 2018 5 121 182 146 364 204 1,022 Charged/ (credited) to the income statement - (5) 8 27 (29) 300 117 134 (204) 348 Tax charge relating to transactions recognized 64 64 directly in equity As at 31 December 2018 - - 129 272 117 300 481 134 - 1,434 As at 1 January 2019 - - 129 272 117 300 481 134 - 1,434 Charged/ (credited) to the income statement 122 - 44 42 (22) (4) 134 (134) - 182 As at 31 December 2019 122 - 173 314 95 296 615 - - 1,616
(in PLN'000) Foreign Difference in the tax and Liabilities in respect Assets in respect M easurem en Tax amortization of Interest exchange accounting treatment of of contracts with of contracts with O ther t o f Total intangible assets accrued difference leases custom ers custom ers concessions s Deferred tax liabilities As at 1 January 2018 302 51 88 391 4 - - - 836 Charged/ (credited) to the income (115) (35) 125 (391) (4) 30 - 225 (165) statement As at 31 December 2018 187 16 213 - - 30 - 225 671 As at 1 January 2019 187 16 213 - - 30 - 225 671 Charged/ (credited) to the income (187) 19 (213) (30) 321 (98) (188) statement - - As at 31 December 2019 - 35 - - - - 321 127 483
126 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
As at 31 December 2019, the Company offset the deferred tax assets and provisions due to the fact that the tax settlements as at that date related to the same entity and the same tax office and could be netted off.
The Company did not recognize deductible temporary differences relating to shares in subsidiaries of PLN 149.9 million as at 31 December 2019 (PLN 139.6 million as at 31 December 2018).
5.10 Other assets and liabilities
5.10.1 Property, plant and equipment
Fixed assets are stated at cost, i.e. at cost of purchase or manufacture, less accumulated depreciation and impairment write-downs.
Depreciation is charged on a straight line basis. The residual values, useful lives and depreciation methods of assets are verified each year and adjusted, if necessary, and the effects of the changes are recognized prospectively. The average depreciation rates for the individual categories of fixed assets are as follows: • plant and machinery - 10%-30%; • other fixed assets - 10% - 20%
A given item of property, plant and equipment may be derecognized after it is sold or when no economic benefits are expected from the further use of such an asset. Any gains or losses on derecognition of a given asset (calculated as the difference between any net proceeds from sale and the carrying amount of the asset) are recorded in the profit or loss for the period in which an item was derecognized, in Other operating income or Other operating expenses, as appropriate.
Impairment write-downs are immediately charged to costs in the profit or loss for the period under Other operating expenses.
An impairment write-down of a given asset, recognized in the previous years, may be reversed when, and only when, since the recognition of the last impairment write-down there has been a change in accounting estimates used to determine the recoverable amount of a given asset.
The reversal of an impairment write-down of an asset is recognized as income in the profit or loss for the period, in Other operating income.
In 2018, the Company reversed/utilized impairment write-downs of PLN 93 thousand (and scrapped the related assets) in relation to:
- investments in unused office space; - electronic equipment which ultimately had not been transferred to the Company.
127 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
A ssets P lant and V ehicles Other fixed Leasehold Total under m achinery (in assets improvements (in PLN construction (in PLN '000) PLN '000) (in PLN'000) (in PLN '000) '000) (in PLN '000) Financial year ended 31 December 2019
A s at 1 January Gross value 15,256 557 1,451 998 233 18,495 Accumulated depreciation (12,332) (403) (701) (90) (13,526)
Net book value 2,924 154 750 908 233 4,969
Net book value as at the beginning of the 2,924 154 750 908 233 4,969 year Reclassification of the right-of-use assets in accordance with IFRS 16 as at 1 January (569) (133) (542) (225) (1,469) 2019
Increases 371 44 15 4 44 478 Transfers 10 4 - (14) - Depreciation charge (1,035) (30) (90) (186) (1,341)
Net book value as at the end of the year 1,701 35 137 726 38 2,637
As at 31 December Gross value 14,564 242 866 1,002 38 16,712 Accumulated depreciation (12,863) (207) (729) (276) (14,075)
Net book value 1,701 35 137 726 38 2,637
Financial year ended 31 December 2018
Net book value as at the beginning of the 3,759 259 284 4,302 year Increases 407 - 647 42 1,203 2,299 Decreases - - (30) (49) (26) (105) Transfers (2) - 2 957 (970) (13) Depreciation charge (1,240) (105) (153) (109) - (1,607) Write-downs - - - 67 26 93 Net book value as at the end of the year 2,924 154 750 908 233 4,969
As at 31 December Gross value 15,256 557 1,451 998 233 18,495 Accumulated depreciation (12,332) (403) (701) (90) (13,526)
Net book value 2,924 154 750 908 233 4,969
5.10.2 Other intangible assets
Intangible assets are stated at cost, i.e. at cost of purchase or manufacture, less accumulated amortization and impairment write-downs.
Intangible assets are amortized over their expected useful lives (typically specified in an agreement) and tested for impairment each time there are indications of their impairment. The average amortization periods for the individual categories of intangible assets are as follows: • concession acquired - over the term of a concession; • other intangible assets - 2 years; • trademarks - 10 years.
128 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Intangible assets are derecognized on disposal or when further future economic benefits are expected from their use (scrapping).
Gains or losses on derecognition of an intangible assets are determined at the amount of the difference between net proceeds from the sale of the asset, if any, and the carrying amount of the asset. They are shown in the profit or loss of the period under Other operating income or expenses on derecognition of the asset.
Intangible assets Concessions Other fixed assets Total under construction (in PLN '000) (in PLN'000) (in PLN '000) (in PLN '000) Financial year ended 31 December 2019
A s at 1 January Gross value 13,291 3,545 - 16,836 Accumulated amortization (3,527) (3,293) - (6,820)
Net book value 9,764 252 - 10,016
Net book value as at the beginning of the year 9,764 252 10,016
Increases - 697 8 6 783 Transfers - 27 - 27 Amortization charge (1,399) (486) - (1,885) Net book value as at the end of the year 8,365 490 86 8,941
As at 31 December
Gross value 13,291 4,269 8 6 17,646 Accumulated amortization (4,926) (3,779) - (8,705) Net book value 8,365 490 86 8,941
Financial year ended 31 December 2018 (restated*)
Net book value as at the beginning of the year 11,161 375 - 11,536 Increases - 57 - 57
Amortization charge (1,397) (1 8 0 ) - (1,577)
Net book value as at the end of the year 9,764 252 - 10,016
As at 31 December Gross value 13,291 3,545 - 16,836 Accumulated amortization (3,527) (3,293) - (6,820)
Net book value 9,764 252 - 10,016 * Information on the transformation is presented in Note 5.12.
The main component of intangible assets is a concession to broadcast the Zoom TV channel. On 5 November 2015, the National Broadcasting Council ("KRRiT") passed a resolution to grant a concession to Cable Television Networks & Partners Sp. z o.o. ("CTN&P") (merged with the Company on 26 June 2018 - Note 5.11.4) to broadcast a universal television channel within the eighth multiplex signal. The decision to grant the concession became final on 16 March 2016.
In 2016, the Company acquired shares in CTN&P. From the perspective of the Group in which the Company is the Parent, the acquisition of shares in CTN&P was recognized as the acquisition of an enterprise comprising, among other things, a concession to broadcast the Zoom TV channel (Note 5.12). In 2018, the Company merged with CTN7P, and therefore the fair value of the concession from the consolidated financial statements was
129 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
applied in the separate financial statements of the Company. The concession amortization period was determined to last until 28 December 2025.
As at the balance sheet date, the value of the concession amounted to PLN 8,335 thousand.
Information on concession payments is included in Note 5.10.10.
Other intangible assets comprise purchased software and costs incurred on trademark registration.
Right-of-use assets
Other fixed Plant and V ehicles Assets under Total Office space assets m achinery (in construction (in PLN (in PLN'000) (in (in PLN '000) PLN '000) (in PLN '000) '000) P LN '000) Financial year ended 31 December 2019
Net book value recognized in accordance with IFRS 16 as at 1 5,542 542 569 133 225 7,011 January 2019 Increases 65 - 576 - 296 937
Transfers - - 294 - (294) -
Amortization charge (1 ,1 1 0 ) (109) (339) (59) - (1,617) Net book value as at the end of 4,497 433 1,100 74 227 6,331 th e year As at 31 December Gross value 5,607 606 1,915 296 227 8,651
Accumulated amortization (1 ,1 1 0 ) (173) (815) (2 2 2 ) - (2,320)
Net book value 4,497 433 1,100 74 227 6,331
5.10.4 Financial instruments and financial risk management
5.10.4.1 Financial instruments Financial instruments comprise trade receivables, cash and cash equivalents, loans and borrowings, trade payables and liabilities in respect of programming inventory).
Classification of financial assets
The Company classifies financial assets into the following measurement categories: • measured at amortized cost; • measured at fair value through profit or loss; • measured at fair value through other comprehensive income. The classification is dependent on the financial asset management model adopted by the Company and the terms of contractual cash flows. The Company reclassifies investments in debt instruments when, and only when, the
130 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. model used to manage these assets changes. As at the balance sheet date, the Company did not have any assets other than assets measured at amortized cost.
Recognition and derecognition Financial assets are recognized, when the Company becomes a party to the contractual terms of an instrument. Financial assets are derecognized, when the rights to receive cash flows from the financial assets have expired or have been transferred, and the Company has transferred substantially all risks and rewards of ownership.
Measurement at initial recognition At initial recognition, the Company measures a financial asset at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs relating to financial assets at fair value through profit or loss are recognized in profit or loss.
The Company recognizes the following categories of financial assets: • Trade receivables Trade receivables are classified as financial assets measured at amortized cost. Trade receivables are exposed to credit risk. Impairment write-downs are recognized in accordance with the accounting policies set out in Note 5.10.4.2.1 Credit risk.
• Cash and cash equivalents Cash at bank and in hand passes the SPPI test and the test of the "hold to collect" business model, therefore, it is measured at amortized cost net of impairment losses determined in accordance with the expected loss model (5.10.4.2.1 Credit risk). Cash and cash equivalents are exposed to credit risk.
• Loans granted Loans granted pass the SPPI test and the test of the "hold to collect" business model, therefore, they are measured at amortized cost net of impairment losses determined in accordance with the expected loss model (5.10.4.2.1 Credit risk).
Financial liabilities Financial liabilities held for trading are be measured at fair value through profit or loss.
All other financial liabilities are measured at amortized cost.
The Company classifies derivative instruments such as forwards and IRS as financial liabilities measured at fair value through profit or loss.
Other financial liabilities include loans and borrowings received, trade payables and payables related to the purchase of programming inventory, concession liabilities and lease liabilities.
131 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Carrying amount A s a t A s a t 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Financial assets measured at amortized cost 28,763 25,475
Trade receivables 25,358 22,431 Loans granted 2,883 2,758 Cash and cash equivalents 522 286
Carrying amount
A s a t A s a t Financial liabilities 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Other financial liabilities measured at amortized cost: 104,891 100,125
Loans and borrowings received 6 1 , 2 0 2 63,192 Lease liabilities 6,079 1,321 Concession liabilities 9,330 10,523 Payables related to the purchase of programming inventory 14,239 7,751 Trade payables 14,041 17,338 Financial liabilities measured at fair value through profit or 502 618 Derivative financial instruments (forward contracts and IRS) 502 618
5.10.4.2 Financial risk
The Company's activities expose it to a variety of financial risks: • liquidity risk (5.6.5); • credit risk; • market risk; - foreign exchange risk; - interest rate risk.
The Company's general risk management programme is focused on the unpredictability of the financial markets and attempts to minimize the potential adverse effect on the Company's financial results.
The risk is managed by the Issuer's Management Board which identifies and evaluates financial risks and protects the Company from them in close cooperation with the operating units. The Management Board sets out general risk management principles and the policies relating to specific areas, such as foreign exchange risk, interest rate risk, credit risk, and investing surplus liquidity.
5.10.4.2.1 Credit risk The Company enters into sales transactions only with customers with good creditworthiness. All customers wishing to take advantage of the trade credit are subject to initial verification procedures. Moreover, due to on- going monitoring of the balances of receivables, the Company's exposure to bad debt risk is not significant.
The maximum exposure to credit risk is equal to the book value of financial assets and was as follows as at the balance sheet date:
132 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Carrying amount
A s a t A s a t 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Trade receivables 25,358 22,431 Loans granted 2,883 2,758 Cash and cash equivalents 522 286
28,763 25,475
Concentration of credit risk is presented in the table below:
Carrying amount
As at As at 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Loans granted: 2,883 2,758 Stopklatka S.A. 2,798 2,758 Filmbox Iberia S.L.U. 85 -
Trade receivables 25,358 22,431 Receivables from media houses 2,493 3,556 Receivables from cable operators 9,721 10,287 Other receivables from unrelated entities 2,818 1,713 Receivables from related entities 10,326 6,875
Cash and cash equivalents 522 286 Bank Pekao S.A. (Poland) 117 - Santander S.A. (Polska) - formerly BZ WBK S.A. 376 285 Cash in hand 29 1
In the case of trade receivables, the Company uses the simplified approach required under IFRS 9 and measures impairment losses at the amount of the credit losses expected over the entire lifetime of a receivable since its initial recognition. The Company applies a provision matrix in which impairment losses are calculated for trade receivables classified into different age brackets or periods overdue. In order to determine the expected credit losses, the Company has grouped its trade receivables on the basis of the description of the credit risk of the individual customer groups. To determine the overall default ratio, an analysis of irrecoverability is performed for the financial year preceding the year to which the analysis relates and for which expected credit losses are calculated. Default ratios are calculated for the following brackets: (1) current; (2) up to 30 days; (3) from 30 to 60 days; (4) from 60 to 90 days; and (5) over 90 days. In order to determine a default ratio for a given age bracket, the balance of uncollected receivables is compared with the balance of all receivables in a given bracket. The Company classifies trade receivables to two categories: • trade receivables for which a simplified approach was used to measure the credit losses expected over the entire lifetime of a receivable; • impaired trade receivables - identified individually as uncollectible; the indications comprise the long-term (i.e. more than 1 year) lack of payment or / and the lack of possibility to contact the counterparty.
In the case of cash & cash equivalents and loans granted, the Company uses a three-stage impairment model:
133 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
• Stage 1 - balances for which credit risk has not increased significantly since initial recognition; expected credit losses are determined on the basis of the probability of default within 12 months (i.e. the total expected credit loss is multiplied by the probability that a loss will occur within the next 12 months); • Stage 2 - covers balances for which credit risk has increased significantly since initial recognition, but there is no objective evidence of impairment; expected credit losses are determined on the basis of the probability of default throughout the contractual lifetime of a given asset; • Stage 3 - covers balances with objective evidence of impairment; the evidence comprises the long-term (i.e. more than 1 year) lack of payment or / and the lack of possibility to contact the counterparty.
All cash and cash equivalents were classified as stage 1; the estimated amount of expected credit losses in immaterial, so the Company did not recognize any expected credit losses.
134 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Credit risk A s at A s at 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Stage 1 Stage 3 Total Stage 1 Stage 3 Total Gross carrying amount 3,405 306 3,711 3,044 291 3,335 Loans granted 2,883 306 3,189 2,758 291 3,049 Cash and cash 522 - 522 286 - 286 equivalents Impairment losses (IFRS 9) - (306) (306) - (291) (291) Loans granted - (306) (306) - (291) (291)
Carrying amount 3,405 - 3,405 3,044 - 3,044
135 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Calculation of impairment losses as at 31 December 2019 (in PLN '000)
Up to 30 Receivables from related entities Total Current 30-60 days 60-90 days Over 90 days days
Balance of receivables 11,027 9,236 452 50 2 0 1 1,088
Default ratio - 2 % 2 % 8 % 23% 42% Expected credit losses* (701) (185) (9) (4) (46) (457)
Customers with a good financial standing* Balance of receivables 12,611 10,414 1,632 556 - 9
Default ratio - 1 % 1 % 1 % 1 % 1 %
Expected credit losses (135) (113) (16) (6 ) - - Other groups
Balance of receivables 2,654 1,512 595 1 1 0 164 273
Default ratio - approx. 1 % approx. 3% approx. 8 % approx. 1 2 % approx. 16%
Expected credit losses (98) (17) (15) (6 ) (17) (43)
Impaired receivables Balance of receivables 429 - - - - 429
Default ratio - 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % Expected credit losses (429) - - - - (429)
Total receivables, gross 26,721 21,161 2,679 716 365 1,799
Write-down of receivables (1,363) (315) (40) (16) (63) (929)
Total receivables, net 25,358 20,847 2,639 700 302 870
* Including: the Parent -PLN 125 thousand, subsidiaries - PLN 189 thousand, other related entities - PLN 387 thousand
* Large entities (e.g. listed on a stock exchange) with a stable financial position for which the risk of default was assessed as low, based on historical data relating to payments to the Company.
136 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Calculation of impairment losses as at 31 December 2018 *
Up to 30 Receivables from related entities Total Current 30-60 days 60-90 days Over 90 days days Balance of receivables 7,153 5,992 364 450 103 244
Default ratio - 3% 3% 5% 1 0 % 30%
Expected credit losses (282) (167) (1 2 ) (2 1 ) (1 0 ) (72)
Customers with a good financial standing Balance of receivables 11,545 10,950 260 296 - 39
Default ratio - 1 % 1 % 1 % 1 % 1 %
Expected credit losses (1 2 0 ) (115) (3) (2 ) - -
Other groups Balance of receivables 4,304 2,086 517 269 198 1,234
Default ratio - approx. 2 % approx. 2 % approx. 7% approx. 1 2 % approx. 2 1 %
Expected credit losses (169) - (1 0 ) (18) (2 2 ) (119)
Impaired receivables Balance of receivables 363 - - - - 363
Default ratio - 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % Expected credit losses (363) - - - - (363)
Total receivables, gross 23,365 19,028 1141 1,015 301 1,880
Write-down of receivables (934) (282) (25) (41) (32) (554)
Total receivables, net 22,431 18,746 1,116 974 269 1,326
* Including: the Parent -PLN 42 thousand, subsidiaries - PLN 170 thousand, other related entities - PLN 70 thousand
* Large entities (e.g. listed on a stock exchange) with a stable financial position for which the risk of default was assessed as low, based on historical data relating to payments to the Company.
137 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Changes in total impairment write-downs of trade and other receivables were as follows:
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
As at 1 January - calculated according to IAS 39 (934) (875)
Amounts recognized in retained earnings upon first-time (287) adoption of IFRS 9 -
Opening balance of write-downs as at 1 January (934) (1,162)
Impairment losses recognized in profit or loss (538) (847) - including any write-downs of receivables from related (419) 189 entities Receivables written off as uncollectible 26 49 Reversal of unused impairment losses 83 1,026
Closing balance of write-downs as at 31 December (1,363) (934)
Other categories of receivables do not contain any impaired items. Impaired loans are disclosed in Note 5.10.7.
5.10.4.2.2 Foreign exchange risk
The Company is exposed to foreign currency risk associated with purchase and sale transactions concluded and from maintaining cash and cash equivalents in foreign currencies. Revenue generated by the Company is expressed mainly in PLN, and the main items of costs and capital expenditure incurred in foreign currencies, namely EUR and USD.
The Company does not use hedge accounting. The Company partly hedges cash flows in foreign currencies resulting from real exchange rates using derivative instruments, namely forward contracts.
The table below presents the Company's exposure to foreign exchange risk in individual currencies, after translation into PLN:
A s at A s at 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
EUR USD GBP HUF CZK EUR USD GBP HUF TRY CZK
Trade receivables 7,428 3,265 - 737 217 5,836 988 7 482 - 145
Cash and cash equivalents 6 8 163 5 - - 148 132 - - - - Derivative financial (197) (618) instruments ------Finance leases (360) (134) - - - (136) - - - - - Trade payables and payables related to purchase of (8,157) (16,791) (13) - (51) (5,041) (6,177) (28) (6 ) (150) (149) programming inventory
Balance sheet exposure (1,021) (13,694) (8) 737 166 807 (5,675) (21) 476 (150) (4)
138 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
12 months ended 12 months ended 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Estimated change Estimated change in net profit or loss, in PLN in net profit or loss, in PLN Estimated change in exchange rate of +10%
EUR (1 0 2 ) 81 USD (1,369) (568) GBP (1 ) (2 ) HUF 74 48 CZK 17 - Estimated change in exchange rate o f -10%
EUR 1 0 2 (81) USD 1,369 568
GBP 1 2 HUF (74) (48) CZK (17) -
5.10.4.2.3 Interest rate risk Changes in market interest rates do not affect the Company's revenue directly, but they affect both its cash flows from operating activities (via the level of interest on current accounts and deposits) and its cash flows from financing activities (via the cost of servicing the Company's loans).
The table below presents the interest rate risk profile as at the balance sheet date for interest-bearing financial instruments.
A s a t A s a t 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Instruments with fixed interest rates: Concession liabilities* (10,240) (11,757) Lease liabilities* (6,386) (1,446) Loans and advances received* (352) -
Instruments with variable interest rates: Cash and cash equivalents 522 286 Loans granted* 2,883 2,758 Loans and advances received* (63,143) (66,627) Derivative financial instruments (502) (618)
Net exposure (60,240) (64,201) * nominal amounts
139 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Sensitivity analysis of cash flows from variable rate instruments (before taxation):
Net profit/(loss) Equity Increase of 100 Decrease of 100 Increase of 100 Decrease of 100 b.p. b.p. b.p. b.p. As at 31 December 2019 (in PLN'000) Financial instruments bearing variable interest rates (602) 602 (602) 602 Cash flow sensitivity (602) 602 (602) 602 As at 31 December 2018 (restated* **, in PLN '000) Financial instruments bearing variable interest rates (642) 642 (642) 642 Cash flow sensitivity (642) 642 (642) 642 * Information on the transformation is presented in Note 5.12.
5.10.4.3 Comparison of fair value and book value The Company applies the following fair value hierarchy for financial instruments, depending on the selected measurement method: • level 1: quoted prices (unadjusted) on active markets for the same assets and liabilities;
• level 2: input data which is observable for a given asset or liability, either directly (e.g. as prices) or indirectly; • level 3: input data which is not based on observable market prices (unobservable input data).
The table below presents the fair values of financial assets and liabilities not measured at fair value, and their book values.
As at A s at 31 December 2018 31 December 2019 (restated*, (in PLN '000) in PLN'000) Category Fair value Book Fair Book Fair under hierarchy level value value value value IFRS 9
Trade and other receivables A 2 25,358 25,358 22,430 22,430
Loans granted A 2 2,883 2,883 2,758 2,758 Cash and cash equivalents A * 522 522 286 286
Loans and borrowings received B 2 (61,202) (61,459) (63,192) (63,523)
Concession liabilities B 2 (9,330) (9,491) (10,523) (10,739)
Lease liabilities B 2 (6,079) (6,106) (1,321) (1,401) Trade payables and payables related to purchase of B 2 (28,280) (28,280) (25,089) (25,089) programming inventory
Total (76,128) (76,574) (74,651) (75,278)
Unrecognized profit/(loss) (446) (627) A - Financial assets measured at amortized cost B - Financial liabilities measured at amortized cost *It is assumed that the fair value is equal to nominal value. Therefore, no techniques were used to measure these balance sheet items. ** Information on the restatement is presented in Note 5.12.
Trade receivables, other receivables, trade and other payables comprise mainly receivables and payables which will be settled no later than by the end of the month following the balance sheet date. Consequently, it was assumed that their measurement taking into account the time value of money would be approximate to their nominal value. Similar assumptions were adopted for the measurement of the loans granted and repayable within one year after the balance sheet date.
140 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
The Company used similar simplifications in the case of capital commitments whose measurement as at the balance sheet date does not include the effect of discounting.
The fair value of the concession liabilities was determined using the expected cash flows from the balance sheet date to 27 February 2025, discounted with a WIBOR market rate and a margin relating to the Company's credit risk.
In the case of the overdraft facility received by the Company, the final repayment deadline was set at 9 June 2020. However, due to the nature of the loan granted (an overdraft facility), the deadline for repayment of the present balance, expected by the Company, is impossible to determine. For this reason, it was assumed that the fair value of the overdraft facility is approximate to its carrying amount. The same simplification was applied to loans from a related company.
The fair value of the other three loans was determined using the expected cash flows from the balance sheet date to 28 February 2022, 30 April 2023 and 29 January 2021, respectively, and discounted with a WIBOR market rate and a margin relating to the Group's credit risk.
5.10.5 Trade and other receivables
A s a t As at 31 December 2018 31 December 2019 (restated*, in PLN '000) (in PLN '000)
Receivables from other entities 179 181 - other receivables 179 181 Total non-current receivables, gross 179 181 Current receivables Receivables from related entities 12,281 7,156 - trade receivables 4,490 2,540 - accrued income 6,537 4,616 - prepayments 1,254 - - other receivables -
Receivables from other entities 16,771 18,328 - trade receivables 7,726 8,298 - accrued income 7,968 7,911 - prepayments 409 841 - State budget receivables other than income tax receivable 622 1,241 - other receivables 46 37 Total current receivables, gross 29,052 25,484 Write-downs of receivables (1,363) (934) Total trade and other receivables 27,868 24,731 * Information on the transformation is presented in Note 5.12.
Trade receivables and accrued income are measured at fair value plus transaction costs. After initial recognition, they are carried at amortized cost using the effective interest rate, in accordance with the requirement of IFRS 9 for this category of financial assets. However, in the case of such receivables, the Company uses a simplified approach which consist of recognizing and disclosing such receivables at nominal amounts (amounts originally invoiced or to be invoiced). In the opinion of the Management Board, such simplification does not materially distort the Company's financial and economic position or its net profit or loss.
141 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
The policies for the measurement and recognition of impairment of trade receivables are described in Note 5.10.4.
Impairment is recognized in the profit or loss for the period, in Other operating expenses.
Other receivables (receivables from the State Budget, prepayments, receivables resulting from settlements with employees) are measured at nominal values.
5.10.6 Accruals
As at the balance sheet date, accruals comprised the value of future rebates relating to contracts with customers which, in the following two years (in equal instalments), will reduce the Company's revenue from these contracts - in the amount of PLN 2,006 thousand.
142 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
5.10.7 Loans granted
Loans granted are initially recognized at fair value plus transaction costs. After initial recognition, they are carried at amortized cost using the effective interest rate, in accordance with the requirement of IFRS 9 for this category of financial assets.
At each balance sheet date, the Company performs an assessment of any objective evidence that loans granted may be impaired, i.e. collecting the full amount of a loan is no longer probable. The Company makes the assessment individually, separately for each loan. Impairment is calculated as the difference between the book value and the amount of future cash flows which are likely to be received.
Loans are derecognized if the Company's contractual rights to cash flows from these financial assets expire or if the Company transfers these financial assets without retaining control over them (or related risks and rewards).
A s at 31 December 2019 (in PLN '000) Loan value as at the balance sheet Loan/limit ______date______Financing entity Interest rate Repayment deadline Collateral Currency am oun t in foreign in PLN currency a surety provided by a private individual and a declaration of submission to enforcement proceedings in accordance with Tramway Sp. z o.o. PLN 240 n/a 306 fixed interest rate - 1 0 % p.a. 30/06/2014 Article 777, para. § 1 item 4 of the Code of Civil Proceedings by the borrower and the provider of surety
Stopklatka S.A. PLN 2 , 0 0 0 n/a 1,093 WIBOR 3M+a margin 30/06/2020 none
2 years from the date of Stopklatka S.A. PLN 1,700 n/a 1,705 WIBOR 3M+a margin payment of a given none tranche one year from the date of Filmbox Iberia S.L.U. EUR 2 0 2 0 85 EURIBOR 3M+a margin payment of a given none tranche Total loans 3,189
Write-downs (306)
Total loans 2,883
143 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
A s at 31 December 2018 (in PLN '000)
Loan value as at the balance sheet Loan/lim it date Financing entity Interest rate Repayment deadline Collateral Currency am ount in foreign in PLN currency a surety provided by a private individual and a declaration of submission to Tramway Sp. z o.o. PLN 240 n/a 291 fixed interest rate - 1 0 % p.a. 30/06/2014 enforcement proceedings in accordance with Article 777, para. § 1 item 4 of the Code of Civil Proceedings by the borrower and the provider of surety
Stopklatka S.A. PLN 2 , 0 0 0 n/a 1,056 WIBOR 3M+a margin 30/06/2019 none one year from the Stopklatka S.A. PLN 1,800 n/a 1,702 WIBOR 3M+a margin date of payment of a none given tranche Total loans 3,049
Write-downs (291)
Total loans 2,758
144 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
5.10.8 Inventory
Inventory is stated at the lower of purchase price /manufacturing cost and the net realizable value. The net realizable value is the estimated selling price in the ordinary course of business, less finishing costs and estimated costs to sell.
In "Materials", the Company recognizes materials used for the Company's own needs and charged to the income statement upon being issued, as well as data carriers charged to the income statement upon being released to a counterparty.
Goods for resale comprise DVDs. Finished goods comprise film publications produced by the Company, stored in the Company's warehouses and in the consignment warehouse.
Inventory issues are recorded using the "first in, first out" (FIFO) cost formula.
A s at A s a t 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Materials 58 51 Goods for resale 19 27
Finished goods 1 1,071
Total 78 1,149
5.10.9 Cash and cash equivalents
Cash comprises cash in hand and short-term deposits with banks (up to 3 months). The balance of cash and cash equivalents shown in the statement of cash flows comprises the cash and cash equivalents specified above.
A s a t A s at 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Cash in hand and at bank 522 286
Total 522 286
5.10.10 Concession liabilities
Concession liabilities concern the Zoom TV concession (Note 5.10.2). The total fee for the concession is PLN 13,545 thousand and will be paid in annual instalments by 27 February 2025. The present value of the respective liability is reduced annually based on the schedule of payment of the consecutive instalments agreed with the regulator and amounted to PLN 9,330 thousand as at 31 December 2019. After initial recognition, concession liabilities are measured at amortized cost, using the effective interest rate method. In determining the amortized cost, the costs of obtaining a loan or borrowing as well as discounts or premiums obtained in connection with the liability are taken into account. The effective interest rate is the rate which discounts the estimated future
145 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. payments made in the expected period from the value of a financial instrument at expiry to the net carrying amount of a financial liability.
A s a t A s a t 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Future payments
27 February 2019 - 1,517 27 February 2020 1,571 1,571
27 February 2021 1,625 1,625
27 February 2022 1,680 1,680
27 February 2023 1,734 1,734
27 February 2024 1,788 1,788
27 February 2025 1,842 1,842
Total payments 10,240 11,757
Discount (910) (1,234) Present value of future payments - carrying amount of the concession liability 9,330 10,523
Current 1,290 1,193 Non-current 8,040 9,330
5.10.11 Trade and other payables
A s a t A s a t 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Non-current liabilities
Liabilities to related entities - 669 - payables related to purchase of programming inventory - 669
Liabilities to other entities 1,095 524 - payables related to purchase of programming inventory 1,095 524
Total non-current liabilities 1,095 1,193
Current liabilities
Current liabilities to related entities 6,214 5,262 - trade payables 4,809 4,954 - payables related to purchase of programming inventory 1,405 308
Liabilities to other entities 21,766 19,360 - trade payables 9,232 12,384 - payables related to purchase of programming inventory 11,739 6,250 - wages and salaries payable 1 15 - State budget payables other than the current income tax payable 792 711
- other non-financial liabilities 2 -
Total current liabilities 27,980 24,622
Trade payables and payables related to purchase of programming inventory are classified as financial liabilities and, in principle, measured at amortized cost in accordance with the requirements of IFRS 9 for financial liabilities
146 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A. other than those measured at fair value through profit or loss. However, for current trade payables the Company uses a simplified approach whereby such payables are shown at amounts due. In the opinion of the Management Board, such simplification does not materially distort the Company's financial and economic position or its net profit or loss.
Financial liabilities are derecognized when they expire (i.e. when a contractual obligation has been fulfilled, cancelled or has expired).
Other non-financial liabilities (State budget payables and liabilities resulting from settlements with employees, and other types of payables) are stated at amounts due.
5.10.12 Liabilities in respect of contracts with customers (previously: Deferred income)
A s a t 31 December 2019 To be recognized within: (in PLN '000) up to 12 2 to 5 years m onths
Sales of licences invoiced but not made 4,789 2 , 2 1 1 2,578 Consignment sales invoiced but not made 84 84 -
4,873 2,295 2,578
A s a t 31 December 2018 To be recognized within: (in PLN '000)
up to 12 2 to 5 years m onths Sales of licences invoiced but not made 2,521 2,041 480 Consignment sales invoiced but not made 47 47 - Subsidies received - to be settled in the future* 983 983 -
3,551 3,071 480 * Note 5.9.5; as at 31 December 2018, the unrecognized portion of subsidies was reported as a decrease in inventories
Revenue recognized in the reporting p e rio d resulting from liabilities as at 31 December 2018 11 12 months ended 31 December 2019 (in PLN'000)______Sales of licences invoiced but not made 2,115
Consignment sales invoiced but not made 4 2
Subsidies received - to be settled in the future* 3 3 3
2,490 * Note 5.9.5; as at 31 December 2018, the unrecognized portion of subsidies was reported as a decrease in inventories
147 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
5.10.13 derivative financial instruments
Forward contracts
In 2017, the Company concluded agreements on the purchase of forward contracts in USD, totalling USD 1,476 thousand, with maturities in the period from 31/01/2018 to 31/07/2020 with Santander S.A.
The fair value of the forward instruments is determined by Santander S.A. on the basis of future cash flows discounted up until the measurement date with market curves which take into account swap points. The discounted cash flows are translated into PLN at the NBP fixing rate as at the measurement date.
The effects of measurement are recognized as at the end of each month and presented in "Other operating income/expenses". In 2019, the Company recognized a total of PLN 91 thousand worth of gains on the measurement of its forward instruments (PLN 481 thousand in 2018).
In accordance with IFRS 13, the Group classifies the fair value of forward contracts as level 3 of the fair value hierarchy.
The key parameters of the forward contracts are presented in the table below.
31 December 2019 31 December 2018 Type of instrument Forward Forward
Risk hedged Payments for programming Payments for programming inventory in USD inventory in USD Nominal value of the hedging instrument 492 thousand USD 984 thousand USD Fair value of the hedging instrument PLN 197 thousand PLN 288 thousand
Financial instruments Financial instruments Accounting classification measured at fair value measured at fair value through profit or loss through profit or loss
Period of the hedging instrument's effect on the income statement Up until 31 July 2020 Up until 31 July 2020
IRS
In 2018, the Company concluded an IRS (Interest Rate Swap) transaction which consists of swapping interest payments based on a variable interest rate WIBOR 1M for interest payments based on a fixed interest rate with Santander S.A.
The above transaction secures the Company's liabilities in respect of interest on an investment loan.
The transaction was concluded for the period from 15 June 2018 to 28 April 2023 and secures, in total, the nominal amount of the loan of PLN 16,100 thousand.
148 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
The I RS transaction was concluded to mitigate the risk of an adverse change in the interest rate and, thereby, to achieve the stabilization of the cost of financing the loan.
The key parameters of the IRS are presented in the table below.
31 December 2019 31 December 2018 Type of instrument IRS IRS
Risk hedged Payments in respect of an Payments in respect of an investment loan investment loan Fair value of the hedging instrument PLN 305 thousand PLN 330 thousand Financial instruments Financial instruments Accounting classification measured at fair value measured at fair value through profit or loss through profit or loss
Period of the hedging instrument's effect on the income statement Up until 28 April 2023 Up until 28 April 2023
5.10.14 Provisions
Provision for one-off Provision for holiday pay Total retirement bonuses (in PLN '000) (in PLN '000) (in PLN '000) A s at 1 Jan uary 2019 564 116 680 Recorded during the financial year 62 168 230
As at 31 December 2019 626 284 910
Provision for one-off Provision for holiday pay Total retirement bonuses (in PLN '000) (in PLN '000) (in PLN '000) A s at 1 Jan uary 2018 454 72 526
Recorded during the financial year 1 1 0 44 154
As at 31 December 2018 564 116 680
5.11 Unrecognized items
5.11.1 Commitments in respect of contracts concluded
Future commitments in respect of lease agreements for warehouse space and a service fee for office space:
A s a t A s a t 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Within 1 year 556 1,709 Within 1 to 5 years 1,622 6,775
Total 2,178 8,484
Future commitments in respect of the provision of broadcasting and similar services:
A s a t A s a t 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000) Within 1 year 21,197 19,414 Within 1 to 5 years 41,636 49,990 Over 5 years 8,173 16,337
Total 71,006 85,741
149 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Future commitments in respect of contracts on the purchase of programming inventory:
A s a t A s a t 31 December 2019 31 December 2018 (in PLN '000) (in PLN '000)
Within 1 year 4,094 8,395 Within 1 to 5 years 9,878 11,736
Total 13,972 20,131
5.11.2 Contingent liabilities
On 26 June 2018, the Company presented its subsidiary, Stopklatka S.A., with a promissory note as a guarantee for the overdraft facility incurred by Stopklatka S.A. with Santander S.A. for a maximum amount of PLN 4,000 thousand. The renewable loan agreement is valid up until 31 August 2019.
In the opinion of the Management Board, the discharge of the conditional liability is not probable as at the balance sheet date, given the positive results recorded by Stopklatka S.A., the absence of risks to the going concern assumption and the satisfactory financial standing of that company.
5.11.3 Post-balance sheet events
On 29 February 2020, the shares of Stopklatka S.A. were withdrawn from the alternative trading system on NewConnect, and on 6 March 2020 they were deleted from the register kept by the Central Securities Depository of Poland (KDPW).
On 18 March 2020, the General Meeting of Filmbox Iberia S.L.U. adopted a resolution on the debt-to-equity conversion of a loan of PLN 20 thousand received by it from the Company.
At the end of 2019, public opinion first learned about the COVID-19 infections spreading in China. With the growth of the epidemic, the number of people infected in China and (in the first months of 2020) in other countries started to grow until they reached the present level. Today the situation is still volatile in many countries, although there are many indications of the crisis stabilizing in China, where the pandemic originated. Many commentators and experts indicate the potentially strong impact of the pandemic on both the global and the Polish economy.
The above-mentioned factors will likely lead to an economic slowdown, with recession expected in the short- term perspective, which may result in a reduction of consumer purchasing power and advertising budgets. At present it is not possible to accurately estimate the potential adverse effect of the epidemic on such budgets, since it is also possible that the budgets for outdoor and similar types of advertising will be moved to television and online advertising. Therefore, at present the Company does not have any reasonable data from the sector on the basis of which it could estimate the effect of COVID-19 on the amount of such budgets.
150 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
On the basis of the Nielsen Media Measurement data as at the end of March, both the average time of TV consumption and its consumption in the most attractive 16-49 age group increased significantly in annual terms.
It should also be noted that the lower supply of advertising campaigns in April and subsequent months should be considered temporary due to the fact that the market was surprised with the situation and spending was frozen in the sectors which are bound to experience problems in the coming period (e.g. the tourist industry), and, at the same time, other sectors (such as FMCG or pharma) were unable to shift funds to other media in the short term.
In the opinion of the Management Board, the arguments raised above indicate the TV audience trends for the entire lockdown period, which allow us to believe that the assumed revenues will be maintained in the long run and the budget targets will be achieved.
It should also be noted that the Company's activities are diversified and its advertising revenues are only one of the revenue segments (34% of total revenues). According to preliminary data, the television sector in general, and the paid TV sector in particular, is one of the very few sectors that are particularly immune to the long-term effects of the SARS-CoV-2 epidemic. Even though both areas of the television business may be exposed to long- or medium-term decreases in advertising revenues resulting from advertising budget shifts and the overall shock associated with the first contact of the economy with the new circumstances, the paid TV sector in particular will achieve a better than average position in terms of mid- and long-term protection of revenues due to:
• diversification - a large part of paid channels, which broadcast advertisements, generate revenues both from advertising and from subscription fees (broadcasting);
• limited possibilities of mass churn (migration) of subscribers due to the long-term nature of subscription agreements signed. At this point, it should be noted that paid TV distributed by operators has a business advantage over 'over-the-top' streaming platforms where the service can be terminated at any time;
• a shift in priorities: due to the restriction of freedom under lockdown, as well as the need to have access to entertainment and news, TV becomes one of the necessities. It should be noted here that the current situation causes a disproportionally high increase in the traditional television audience in the commercial group.
At the same time, on the foreign markets the revenues from broadcasting (and advertising) did not decrease in the first quarter of 2020. Furthermore, none of the significant operator contracts ends in 2020; most of such contracts were renegotiated in the years 2018-2019 and their terms are from two to four years.
At present, actions are being taken to support additional sales in the VOD segment and, in cooperation with cable operators, planned marketing activities, known as "open Windows", which should help increase broadcasting revenues in the short term.
151 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
The Company does not expect any significant problems caused by payment backlogs. The biggest customers of the Issuer are large entities with good financial standing. At the same time, the Company has funds available in the form of an overdraft until June 2020.
The Management Board constantly monitors the cost structure to adapt the structure of the budgets to the current needs in a flexible manner; e.g. shifts of marketing expenses from outdoor to online advertising are being considered. No changes in the expenditure on programming inventory are currently anticipated, other than certain cuts in the area of co-production. This year, the Company gave up all its production plans (both own production and co-production) concerning programmes for the Zoom TV and Stopklatka channels. The making of the film "Po moim trupie" was postponed.
It should also be noted that the Company maintained its going concern status and no problems are anticipated with its continuation. Most operating systems of the Issuer, including the office IT systems, the separate broadcasting systems and the accounting system, are adapted for the purposes of remote work and allow remote control. In the case of the systems that require on-site operators, including in particular the video post-production systems, a rotational system of work with minimum staff numbers was introduced which, combined with a change in the system of planning and organization of work, ensures continuous production of broadcasting materials. In the case of typical back office departments, remote communication solutions based on Google tools were implemented, including in particular the Google Hangouts conference call system. Access to specialized systems, such as the programming system, the content database, the accounting and HR systems, is executed through VPN. All the above-mentioned solutions were supported with the Management Board's decisions introducing obligatory daily status conference calls between the management and employees.
As at the date of the publication of these separate financial statements, the management of the Company considers the current situation to be a post-balance sheet event which requires additional disclosures rather than as an event affecting the conditions as at 31 December 2019. The Management Board is closely monitoring the situation and actively analysing the potential impact of market developments on the Company. Based on analyses performed by the Management Board which assume a 25% decrease in advertising revenue in April and May and then a gradual return to the budgeted levels in the fourth quarter of 2020 (which is the maximum expected negative impact according to the Management Board), no material problems with ensuring financial liquidity were identified.
The Management Board does not expect a direct materially negative impact due to the COVID-19 pandemic on the Company's operations, financial position and results of operations. Nevertheless, it cannot be precluded that a prolonged period of restrictions in business activities, extension and prolongation of measures to limit the spread of the virus which are painful for Polish economy will negatively affect the Issuer's financial position and results of operations in the medium and long term. The Management Board is monitoring the situation on an ongoing basis and will respond appropriately to mitigate the impact of such measures, if any.
152 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
5.12 Error correction
Error correction - recognition of the purchase of Cable Television Networks & Partners sp. z o.o. ("CTN&P") in 2016 and the related adjustment to the allocation of the acquisition costs in 2018
On 26 June 2018, a business combination of Kino Polska TV S.A. ("the Acquiring Company") and its subsidiaries CTN&P, KPTV Media Sp. z o.o. and Cyfrowe Repozytorium Sp. z o.o. ("Acquired Companies") was entered in the Register of Businesses. The business combination was executed on the basis of Article 492 §1.1 of the Code of Commercial Companies by transferring all assets of the Acquired Companies to the Acquiring Company. According to Article 494 § 1 of the Commercial Companies Code, as from the combination date, i.e. 26 June 2018, the Acquiring Company assumed all of the rights and obligations of the Acquired Companies.
Given the fact that Kino Polska TV S.A. was the sole shareholder of the Acquired Companies, the business combination was of the nature of joint control transaction/capital restructuring. With regard to such transactions, the Company applies the book value method, i.e. as at the business combination date, assets and liabilities of the acquired companies (businesses) are reported at amounts derived from the consolidated financial statements prepared by the Company.
With regard to comparative data, the Company applies a retrospective approach, i.e. the income statement and the balance sheet of the combined entities are shown as if these entities were combined as of the date of the Kino Polska TV S.A. Group's assuming control over them.
Consequently, additional assets and liabilities recognized as at the moment of acquisition of CTN&P in 2016 by the Group to which the Company belongs were included in the Company's separate financial statements. The said acquisition of CTN&P was accounted for again due to the identification of an error at the level of the consolidated financial statements of the Group to which the Company belongs. As a result of the said business combination of 2018, the effect of the recognition of the transaction (correction of the error) at the level of the consolidated financial statements was also applied to the separate financial statements of the Company.
The effect of the error on the consolidated financial statements of the Group to which the Company belongs, and consequently, on the Company's separate financial statements, is described below.
On 23 May 2016, the Company accepted an offer to take up 385 new shares in CTN&P representing 49% of its share capital, for PLN 10,000 thousand. The said amount was paid on 24 May 2016. In accordance with the agreement, the Company acquired control over CTN&P on the date of registration of its share capital increase, i.e. on 17 June 2016.
In the context of the definition of a business provided in Appendix A to IFRS 3, Business Combinations, the Management Board of the Company assessed the scope of the operations of CTN&P as at the date of assuming control by Kino Polska TV S.A. In the consolidated financial statements for 2016, this transaction was recognized as the acquisition of an asset in the form of a concession.
153 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
In the opinion of the Management Board, in 2016 the operations of CTN&P as at the date of its acquisition by the Group were wrongly concluded as not meeting the definition of a business. The following circumstances existing at the date of the acquisition of CTN&P indicated the existence of a business and should have been considered in the analysis of the method of accounting for the transaction: • the number of employees and associates and the scope of their duties; • the number of agreements signed and the stage of completion of the negotiations of significant business terms and conditions of the agreements that were signed shortly after the date of the acquisition; • the existence of approved plans for the company's operations and development; • the existence of the Programme Board; • the existing relations of employees and associates, in particular in the area of local content purchases and cooperation with cable and satellite operators.
In view of the circumstances described above, the acquisition of CTN&P should have been recognized as the acquisition of a business.
In the consolidated financial statements, the Group to which the Company belongs accounted for the allocation of the cost as at 17 June 2016. The result of the new calculation, including the correction of the previously adopted approach is presented in the table below.
Reported data E rro r co rrection Restated data Consideration as at the date of assuming control (in PLN'000) (in PLN'000) (in PLN'000)
Cash and cash equivalents 10 000 - 10 000
Fair value of additional financial liabilities 19 395 - 19 395
Total consideration 29 395 - 29 395
Non-controlling interest - - -
Cash and cash equivalents 8 108 - 8 108 Property, plant and equipment 9 - 9 Concession - an asset representing a formal right - 13 197 13 197 Concession - an asset to which a value from the acquisition of a group of assets was allocated 33 663 (33 663) - Trade and other receivables 79 - 79 Concession liabilities (12 409) - (12 409) Trade and other payables (55) (55) Provisions Deferred income tax on a surplus
Total net assets 29 395 (2 0 4 6 6) 8 929
Goodwill - 2 0 4 6 6 2 0 4 6 6
CTN&P was the broadcaster of the Zoom TV channel, which was available e.g. on terrestrial digital TV platforms. As a result of the acquisition, the Company's Group was able to diversify its operations, i.e. extend its offer of channels available on terrestrial digital platforms and integrate the selected areas of operations of its existing channels to achieve synergies mainly in the areas of management, marketing, channel production and content purchases. The synergy effect was enhanced in June 2018 when the legal business combination of Kino Polska TV S.A. with CTN&P took place.
154 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
The identifiable assets recognized and measured as at the date of the acquisition included a concession representing a formal right to broadcast valid until 28 December 2025 (the concession's amortization was set for that period).
The goodwill of PLN 20,466 thousand comprised the above-mentioned economies of scale and synergies and reflected the value of informal relations of CTN&P employees and associates mainly with the providers of local content.
No part of the goodwill will be deductible for corporate income tax purposes.
The fair value of additional financial liabilities as at the date of assuming control comprised: • the obligation of the Group to which the Company belongs to acquire 21% of the shares within a specified period for PLN 10,000 thousand - the acquisition took place on 5 September 2016; • the obligation to acquire the remaining 30% of the shares on the minority shareholder's request within a specified time for PLN 10,000 thousand (the put option) - the acquisition took place on 23 January 2018.
Non-controlling interests were not recognized, since in the Management Board's opinion all significant benefits associated with those shares had been transferred to the acquirer, i.e. the Group to which the Company belongs, at the date of the acquisition. In the opinion of the Management Board, this was due to the fact that it was reasonably certain that the non-controlling shareholder would execute the put option. Due to the correction discussed above, the following adjustments were made to the separate financial statements: • the opening balance as at 01/01/2018 was restated, i.e. goodwill of PLN 20,466 thousand was recognized and, consequently, the value of the recognized concession was adjusted and amortization of assets recognized upon acquisition (concession) accumulated up to 1 January 2018 was adjusted by PLN 751 thousand; • the statement of comprehensive income for 2018 was restated by adjusting the concession amortization by PLN 202 thousand.
Corrections of errors in presentation The Company made the following presentation changes in 2019, which were not associated with the error corrections described above, but were intended to better reflect the nature of recognized transactions: • In the statement of financial position, future discounts relating to contracts with customers were presented in Prepayments and deferred costs (previously they were presented in Assets in respect of contracts with customers).
• In the statement of cash flow statement, payments in respect of purchase of non-controlling interests were presented under cash flows from financing activities (previously such transactions were presented in cash flows from investing activities).
155 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
The effect of presentation changes described above and correction of the error on the statement of financial position as at 31 December 2018 and on the statement of comprehensive income and statement of cash flows for 12 months ended 31 December 2018 is presented below.
156 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Restatement of the separate statement of comprehensive income for the twelve months ended 31 December 2018
12 months ended Erro r 12 months ended 31 December 2018 correction 31 December 2018 (reported data, in PLN '000) (in PLN'000) (restated, in PLN '000)
Revenue from contracts with customers 146,225 - 146,225
Operating expenses (128,218) 2 0 2 (128,016) Other operating income 1,007 - 1,007 Other operating expenses (461) - (461) Operating profit 18,553 202 18,755
Finance income 36 - 36 Finance costs (2 ,2 0 0 ) - (2 ,2 0 0 )
Profit before tax 16,389 202 16,591 Income tax expense (2,974) - (2,974)
Net profit from continued operations 13,415 202 13,617
Net profit for the period 13,415 202 13,617
Total comprehensive income 13,415 202 13,617
Earnings per share from continued and discontinued operations, basic and diluted - from continued operations 0 .68 0 . 0 1 0.69 - from profit for the year 0.68 0.01 0.69
weighted average number of shares in the period 19.821.404 19.821.404 diluted number of shares in the period 19.821.404 19.821.404
157 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Restatement of the separate statement of financial position as at 31 December 2018
A s a t E rro r A s a t Presentation 31 December 2018 correction 31 December 2018 change (reported data, in PLN (in (restated, (in PLN'000) '000) PLN '0 0 0 ) in PLN '000)
ASSETS Non-current assets Property, plant and equipment 4,969 4,969 Goodwill - 20,466 - 20,466 Non-current programming inventory 33,678 - - 33,678 Other intangible assets 29,731 (19,715) - 10,016 Investments in subsidiaries and jointly controlled entities 170,563 - - 170,563 Trade and other receivables 181 - - 181 Long-term prepayments and deferred costs - - 2,006 2,006 Deferred income tax assets 763 - - 763 Total non-current assets 239,885 751 2,006 242,642
Current assets Inventory 1,149 - - 1,149 Current programming inventory 3,692 - - 3,692 Loans granted 2,758 - - 2,758 Trade and other receivables 24,550 - - 24,550 Assets in respect of contracts with customers 3,008 - (3,008) - Short-term-term prepayments and deferred costs - - 1 , 0 0 2 1 , 0 0 2 Income tax receivable 329 - - 329 Cash and cash equivalents 286 - - 286 Total current assets 35,772 - (2,006) 33,766
TOTAL ASSETS 275,657 751 - 276,408
EQUITY AND LIABILITIES Equity Share capital 1,982 1,982 Share premium 148,940 - 148,940 Retained earnings 19,035 751 - 19,786 Total equity 169,957 751 - 170,708
Loans and borrowings received 55,562 - - 55,562 Derivative financial instruments 563 - - 563 Concession liabilities 9,330 - - 9,330 Trade and other payables 1,193 - - 1,193 Provisions 116 - - 116 Liabilities in respect of contracts with customers 480 - - 480 Finance lease liabilities 778 - - 778 Total non-current liabilities 68,022 - - 68,022
Current liabilities Loans and borrowings received 7,630 - - 7,630 Derivative financial instruments 55 - - 55 Concession liabilities 1,193 - - 1,193 Trade and other payables 24,622 - - 24,622 Provisions 564 - - 564 Liabilities in respect of contracts with customers 3,071 - - 3,071 Finance lease liabilities 543 - - 543 Total current liabilities 37,678 - - 37,678 TOTAL EQUITY AND LIABILITIES 275,657 751 - 276,408
158 KINO
Kino Polska TV S.A. POLSKA Separate financial statements as at and for the year ended 31 December 2019 TV S.A.
Restatement of the separate statement of cash flows for the twelve months ended 31 December 2018
12 months ended Presentation 12 months ended 31 December 2018 change 31 December 2018 (re p o rte d data, (in PLN'000) (restated, in PLN '000) in PLN '000)
Cash flows from operating activities
Net profit 13,415 202 13,617 Adjusted for: Amortization and depreciation 27,595 (202) 27,393 Scrapping of property, plant and equipment and intangible 166 166 assets - Asset impairment allowances (68) - (68) Interest and dividends, net 1,727 - 1,727 Profit/loss on investing activity 18 - 18 (Gains)/Losses on changes in the fair value of derivative (64) (64) financial instruments - Purchase of programming inventory (21,856) - (21,856) Change in receivables (4,653) - (4,653) (Increase)/Decrease in assets in respect of contracts with (3,009) 3,009 customers - Change in prepayments and accruals - (3,009) (3,009) (Increase)/Decrease in inventory (264) - (264) Increase/(Decrease) in liabilities 4,945 - 4,945 Increase/(Decrease) in deferred income (4,624) - (4,624) Change in liabilities in respect of contracts with customers 3,551 - 3,551 Increase/(Decrease) in provisions 154 - 154 Corporate income tax paid / refunded (3,912) - (3,912) Corporate income tax liability 2,974 - 2,974 Net cash from operating activities 16,095 - 16,095
Cash flows from investing activities
Purchase of property, plant & equipment and intangible assets (1,887) - (1,887) Acquisition of shares in subsidiaries (54,428) 54,428 - Loans granted (1,700) - (1,700)
Net cash from investing activities (58,015) 54,428 (3,587)
Cash flows from financing activities Payment of lease liabilities (454) - (454) Proceeds from loans/borrowings raised 55,985 - 55,985 Repayment of loans/borrowings (2,943) - (2,943) Dividends paid to shareholders of the parent (10,902) - (10,902) Acquisition of shares in subsidiaries - (54,428) (54,428) Dividend payment costs (21) - (21) Interests paid (1,475) - (1,475) Net cash from financing activities 40,190 (54,428) (14,238)
Net increase/(decrease) in cash and cash equivalents (1,730) - (1,730)
Cash and cash equivalents as at the beginning of the period 2,016 - 2,016
Cash and cash equivalents as at the end of the period 286 - 286
159 KINO POLSKA TV S.A.
REPORT ON THE AUDIT OF THE ANNUAL SEPARATE FINANCIAL STATEMENTS OF KINO POLSKA TV S.A. AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2019 This document is a free translation of the Polish original. Terminology current in Anglo-Saxon countries has been used where practicable for the purposes of this translation in order to aid understanding. The binding Polish original should be referred to in matters of interpretation.
p p p - - f ~ \ y p U U U U
To the General Shareholders’ Meeting and Supervisory Board of Kino Polska TV S.A.
Report on the Audit of the Annual Separate Financial Statements
Opinion We have audited the accompanying annual In our opinion, the accompanying separate separate financial statements of Kino financial statements of the Entity: Polska TV S.A. (the “Entity”), which comprise: — give a true and fair view of the unconsolidated financial position of the — the separate statement of financial Entity as at 31 December 2019 and of position as at 31 December 2019, its unconsolidated financial performance and its unconsolidated and, for the period from 1 January to 31 cash flows for the financial year then December 2019: ended in accordance with International — the separate statement of profit or loss Financial Reporting Standards, as and other comprehensive income; adopted by the European Union (“IFRS — the separate statement of changes in EU”) and the adopted accounting equity; policy; — the separate statement of cash flows; — comply, in all material respects, with regard to form and content, with and applicable laws and the provisions of the Entity's articles of association; — notes to the separate financial statements comprising a summary of — have been prepared, in all material significant accounting policies and other respects, on the basis of properly explanatory information maintained accounting records in accordance with chapter 2 of the (the “separate financial statements”). accounting act dated 29 September 1994 (the “Accounting Act”).
Our audit opinion on the separate financial statements is consistent with our report to the Audit Committee dated 16 April 2020.
1 KPMG Audyt spółka z ograniczoną odpowiedzialnością sp.k. ul. Inflancka 4A, 00-189 Warszawa, tel. +48 (22) 528 11 11, fax +48 (22) 528 10 09, Email [email protected], Internet www.kpmg.pl
© 2020 KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k., a Polish limited partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative („KPMG International”), a Swiss entity. All rights rese^ed. Basis for Opinion We conducted our audit in accordance with: entities and repealing Commission Decision 2005/909/EC (the “EU — International Standards on Auditing as Regulation”); and adopted by the National Council of — other applicable laws. Certified Auditors as National Standards on Auditing (the “NSA”); and Our responsibilities under those regulations — the act on certified auditors, audit firms are further described in the Auditor’s and public oversight dated 11 May 2017 Responsibility for the audit of the separate (the “Act on certified auditors”); and financial statements section of our report. — regulation (EU) No 537/2014 of the We believe that the audit evidence we have European Parliament and of the Council of obtained is sufficient and appropriate to 16 April 2014 on specific requirements provide a basis for our opinion. regarding statutory audit of public-interest Independence and Ethics We are independent of the Entity in engagement in Poland. We have fulfilled all accordance with the Code of Ethics for ethical responsibilities resulting from those Professional Accountants (“IFAC Code”) requirements and IFAC Code. During our audit issued by the International Ethics Standards the key certified auditor and the audit firm Board for Accountants as adopted by the remained independent of the Entity in resolutions of the National Council of Certified accordance with requirements of the Act on Auditors, as well as other independence and certified auditors and the EU Regulation. ethical requirements, applicable to audit Key Audit Matters Key audit matters are those matters that, in our matters. Key audit matters were addressed in professional judgment, were of most the context of our audit of the separate significance in our audit of the separate financial statements as a whole, and in forming financial statements of the current period. They our opinion thereon we have summarised our are the most significant assessed risks of response to those risks. We do not provide material misstatements, including those due to a separate opinion on these matters. We have fraud, described below and we performed determined the following key audit matters: appropriate audit procedures to address these
Revenue recognition
Revenue for the year ended 31 December 2019: PLN 161,807 thousand; contract liabilities as at 31 December 2019: PLN 4,873 thousand. Reference to the separate financial statements: Note 5.3 „Segments”, Note 5.4 „Revenue”, Note 5.10.12 „Liabilities in respect of contracts with customers”.
Key audit matter Our response
The Entity generates revenue from the Our audit procedures included, among other following streams: broadcasting channels, things: broadcasting advertisements, production of channels and sale of licensing rights (VOD — obtaining understanding of and and TV rights) within the Kino Polska TV evaluating the revenue recognition S.A. Group. process, including related key internal controls, Revenues are one of the key performance — assessing the revenue recognition policy indicators for assessing the Entity’s results for compliance with relevant provisions and also are subject of a particular interest of the financial reporting standards, of analysts and investors. Additionally, — evaluation of the appropriateness of revenues constitute one of the elements of determination of the Entity’s role as a the bonus scheme for the Management
2 Board, which increases the risk of principal or agent in concluded manipulation of the financial statements. transactions - by analysis of contractual provisions for selected contracts with Application of revenue recognition principles clients and obtaining understanding of of the relevant financial reporting standards the nature and scope of the Entity's is complex and requires making significant performance obligations specified in the assumptions and judgments. Particular contracts, complexity is associated with the following factors: — assessment of the appropriateness of recognition of broker’s commission as a — recognition of revenue from licensing reduction of transaction price in relation rights (VOD and television rights) to revenue from broadcasting requires from the Management Board a advertisements by analysis of selected subjective assessment of the Entity’s contracts, role as a principal or agent in concluded — reconciliation of a sample of sales transactions. This assessment requires invoices included in revenues to analysis of contracts with clients to contracts with customers and collected determine the nature of the Entity's payments, performance obligations. In addition, — analysis of selected sales transactions different timing of invoicing and recognized at the turn of the financial recognition of licensing revenue year with respect to the allocation of increases the risk of recognizing revenue to the appropriate period, by revenue in the incorrect period, analysis of underlying source — in relation to revenue from broadcasting documents, including contracts with advertisements, recognition of broker’s customers and license terms, commission as a reduction of — analysis of credit notes issued during transaction price requires from the and after the end of the audited year to Management Board the assessment of evaluate the appropriateness of the whether the consideration payable to a revenue recognition in the audited year, broker constitute a payment for distinct — for a sample of the Entity’s customers services transferred to the Entity. obtaining confirmations of the selected invoices included within the amounts Due to the above, we considered revenues due therefrom as at 31 December 2019 to be a key audit matter. and turnover for the year then ended, — analysis of journal entries posted to revenue accounts, including, in particular, journal entries with an unusual combination of accounts, i.e. posted in correspondence with accounts not typically used by the Entity to record sales transactions, — evaluation of appropriateness and completeness of disclosures in the financial statements related to revenue recognition.
Impairment of investment in Stopklatka S.A. subsidiary and Zoom TV goodwill
The carrying amount of the investment in Stopklatka S.A. as at 31 December 2019: PLN 57,618 thousand; Zoom TVgoodwill: PLN 20,466 thousand. Reference to the separate financial statements: investments in subsidiaries - Note 5.7.1 „Shares in subsidiaries and joint ventures”, Note 5.7.4 „Impairment test of investment in Stopklatka S.A. ”;
3 goodwill - Note 5.7.3 „Impairment test with respect to ZOOM TV segment” and Note 5.12 „Error correction”.
Key audit matter Our response
As described in Note 5.7.4 of the separate Our audit procedures in the area included, financial statements, in the audited year, the among other things: Entity identified impairment indicators in respect of its investment in Stopklatka S.A. — evaluating against the requirements subsidiary ("Stopklatka"), including, of the relevant financial reporting primarily, failure to meet forecasted results standards the Entity’s accounting for 2019 and losses incurred by the policy for identification of impairment, subsidiary in previous years. and measurement and recognition of any impairment losses in respect of In addition, as described in Note 5.7.3 of the investments in subsidiaries and separate financial statements, the Entity goodwill; recognized goodwill on the acquisition and subsequent merger with Cable Television — assessing internal controls relating Networks & Partners Sp. z o.o., which was to identification of impairment allocated to the cash generating unit indicators and to the process of ("CGU") of the Zoom TV segment ("Zoom impairment testing for investments TV goodwill"). in subsidiaries and goodwill, — evaluating the quality of the Entity's In accordance with the relevant financial forecasting by comparing historical reporting standards, the Entity is required to projections with actual outcomes, perform an impairment test for assets for which impairment indicators were identified — assessing the appropriateness of and an annual impairment test for goodwill assets grouping into CGUs, by comparing the carrying amount of these — assisted by our own valuation assets/CGU to which the goodwill was specialists, challenging the allocated to their recoverable amount. reasonableness of the Entity’s key assumptions and judgments used in In the wake of the above factors, as at 31 estimating the recoverable amount, December 2019, the Entity performed an including: impairment test for the investment in • assessing the Entity’s discounted Stopklatka subsidiary and Zoom TV cash flow model against the goodwill. The Entity determined the relevant financial reporting recoverable amounts of the aforementioned standards, market practice and for assets/CGU based on their value in use internal consistency, estimated under the discounted cash flow method. • challenging reasonableness of the key macroeconomic assumptions Determination of the recoverable amount used such as those in respect of requires making a number of assumptions discount rates and cash flows and judgements, in particular those relating growth rates in the residual period, to the future cash flow projections which by reference to publicly available depend on the audience ratings of the external sources, and Stopklatka and Zoom TV channels in Poland • assessing reasonableness of the and the sale of advertising time in these assumptions relating to the future channels dependent not only on the cash flow projections, including attractiveness of the content but also the SHR, by reference to the actual demand on the television advertising data derived from the Entity's market. Future cash flow projections are historical financial information and subject to significant variability due to by analysis of the activities changing market conditions and undertaken by the Entity's environment. Key assumptions relate to Management Board till the audit discount rate used, cash flows growth rate in date; the residual period and the audience ratings of the Stopklatka and Zoom TV channels
4 ("SHR"). A minor change in these — assessing the Entity’s analysis of assumptions may have a significant impact the model’s sensitivity to changes in on the recoverable amount. key underlying assumptions, Due to the above, the assessment of the — assessing the appropriateness and investment in Stopklatka subsidiary and the completeness of impairment-related Zoom TV goodwill for impairment required disclosures in the separate financial our significant judgment and increased statements. attention in the course of our audit. As a consequence, we considered this area to be a key audit matter.
Audit of financial statements for the first time
Reference to the separate financial statements: Note 5.12 „Error correction”.
Key audit matter Our response
The financial statements of the Entity for the Our audit procedures in the area included, year ended 31 December 2019 were the first among other things: financial statements of the Entity audited by us. — assessing the compliance of the accounting policies applied by the Entity During the audit, we performed a number of with relevant financial reporting procedures to gain an understanding of the standards, in particular with regard to nature of the Entity’s operations, including acquisitions and business combinations the associated processes and risks, and of accounting, its internal control system and the adopted — assisted by our own valuation accounting policies. specialists, challenging the reasonableness of the assumptions and Furthermore, procedures performed by us judgments adopted by the Entity's were aimed at determining whether or not Management with regard to the the opening balances of the financial accounting for the CTN&P acquisition statements contain misstatements which transaction, including: materially affect the financial statements for • assessing the valuation method and the year ended 31 December 2019. model used by the Entity for compliance with the relevant As described in note 5.12 of the separate financial reporting standards, market financial statements, during the audited year practice, and internal consistency, there were errors identified regarding, • challenging the reasonableness of among others, the accounting for the the assumptions adopted related to acquisition of shares in Cable Television the assessment of the nature of the Networks & Partners Sp. z o.o. ("CTN&P") business acquisition transaction and which took place in 2016. the valuation and economic useful life of the acquired concession, The accounting for this transaction required — communicating with the Key Certified the adoption of significant judgments and Auditor acting on behalf of the previous assumptions, in particular with regard to the audit firm with respect to key audit assessment of the nature of the transaction matters, including a review of audit as an asset purchase or a business documentation for the year ended 31 acquisition, assumptions regarding the December 2018, extension of a broadcasting concession — assessing the key audit matters from the prior year audit and their impact on the
5 acquired in the transaction and estimates financial statements for the year ended related to its economic useful life. 31 December 2019, analysing the appropriateness of Due to the above, the procedures performed adjustments to the opening balances regarding the opening balances required recognized by the Entity, significant attention and time involvement evaluating the correctness and from us, including the assistance of our own completeness of disclosures in the valuation specialists, thus we considered financial statements with respect to this area to be a key audit matter. adjustments of the opening balances.
Other matter The separate financial statements of the Entity expressed an unqualified opinion on those as at and for the year ended 31 December financial statements on 21 March 2019. 2018 were audited by another auditor who Responsibility of the Management Board and Supervisory Board of the Entity for the separate financial statements The Management Board of the Entity is continue as a going concern, disclosing, as responsible for the preparation, on the basis of applicable, matters related to going concern properly maintained accounting records, of and using the going concern basis of separate financial statements that give a true accounting unless the Management Board of and fair view in accordance with International the Entity either intends to liquidate the Entity Financial Reporting Standards, as adopted by or to cease operations, or has no realistic the European Union, the adopted accounting alternative but to do so. policy, the applicable laws and the provisions According to the Accounting Act, the of the Entity's articles of association and for Management Board and members of the such internal control as the Management Supervisory Board of the Entity are required to Board of the Entity determines is necessary to ensure that the separate financial statements enable the preparation of separate financial are in compliance with the requirements set statements that are free from material forth in the Accounting Act. Members of the misstatement, whether due to fraud or error. Supervisory Board of the Entity are responsible In preparing the separate financial statements, for overseeing the Entity’s financial reporting the Management Board of the Entity is process. responsible for assessing the Entity's ability to Auditor’s Responsibility for the audit of the :e financial statements Our objectives are to obtain reasonable Management Board of the Entity has assurance about whether the separate conducted or will conduct the affairs of the financial statements as a whole are free from Entity. material misstatement, whether due to fraud or As part of an audit in accordance with NSAs, error, and to issue an auditors’ report that we exercise professional judgment and includes our opinion. Reasonable assurance is maintain professional scepticism throughout a high level of assurance, but is not the audit. We also: a guarantee that an audit conducted in accordance with NSAs will always detect — identify and assess the risks of material a material misstatement when it exists. misstatement of the separate financial Misstatements can arise from fraud or error statements, whether due to fraud or error, and are considered material if, individually or in design and perform audit procedures the aggregate, they could reasonably be responsive to those risks, and obtain audit expected to influence the economic decisions evidence that is sufficient and appropriate of users taken on the basis of these separate to provide a basis for our opinion. The risk financial statements. of not detecting a material misstatement The scope of audit does not include assurance resulting from fraud is higher than for one on the future viability of the Entity or on the resulting from error, as fraud may involve efficiency or effectiveness with which the collusion, forgery, intentional omissions,
6 misrepresentations, or the override of statements, including the disclosures, and internal control; whether the separate financial statements — obtain an understanding of internal control represent the underlying transactions and relevant to the audit in order to design events in a manner that achieves fair audit procedures that are appropriate in presentation. the circumstances, but not for the purpose We communicate with the Supervisory Board of expressing an opinion on the of the Entity regarding, among other matters, effectiveness of the Entity's internal the planned scope and timing of the audit and control; significant audit findings, including any — evaluate the appropriateness of significant deficiencies in internal control that accounting policies used and the we identify during our audit. reasonableness of accounting estimates and related disclosures made by the We provide the Supervisory Board of the Entity Management Board of the Entity; with a statement that we have complied with relevant ethical requirements regarding — conclude on the appropriateness of the independence, and communicate with them all Management Board of the Entity’s use of relationships and other matters that may the going concern basis of accounting and, reasonably be thought to bear on our based on the audit evidence obtained, independence, and where applicable, related whether a material uncertainty exists safeguards. related to events or conditions that may cast significant doubt on the Entity’s ability From the matters communicated with the to continue as a going concern. If we Supervisory Board of the Entity, we determine conclude that a material uncertainty exists, those matters that were of most significance in we are required to draw attention in our the audit of the separate financial statements auditors’ report on the audit of the of the current reporting period and are separate financial statements to the therefore the key audit matters. We describe related disclosures in the separate these matters in our auditors’ report on the financial statements or, if such disclosures audit of the separate financial statements are inadequate, to modify our opinion. Our unless law or regulation precludes public conclusions are based on the audit disclosure about the matter or when, in evidence obtained up to the date of our extremely rare circumstances, we determine auditors’ report on the audit of the that a matter should not be communicated in separate financial statements. However, our report because the adverse consequences future events or conditions may cause the of doing so would reasonably be expected to Entity to cease to continue as a going outweigh the public interest benefits of such concern; communication. — evaluate the overall presentation, structure and content of the separate financial
Other information
The other information comprises: — Representation of the Supervisory Board of Kino Polska TV S.A. concerning the — Letter of the President of the Management Audit Committee Board — Assessment by the Supervisory Board of — Selected financial data Kino Polska TV S.A. concerning the — Directors’ Report of Kino Polska TV S.A. Directors’ Report of Kino Polska TV S.A. for 2019 and the annual separate financial — Information on Corporate Governance statements of Kino Polska TV S.A. — Representation of the Management Board — Representation of the Management Board of Kino Polska TV S.A. on the appointment of Kino Polska TV S.A. on the preparation of an audit firm to perform an audit of the of the financial statements and the annual separate financial statement Directors’ Report. (the “Other information”).
7 Responsibility of the Management Board and Supervisory Board The Management Board of the Entity is for the year ended 31 December 2019 (the responsible for the Other information in “Report on activities”), including the corporate accordance with applicable laws. governance statement which is a separate part of the Report on activities, are in compliance The Management Board and members of the with the requirements set forth in the Supervisory Board of the Entity are required to Accounting Act. ensure that the report on activities of the Entity Auditor’s Responsibility Our opinion on the separate financial activities was prepared in accordance with statements does not cover the Other applicable laws and the information given in information. the Report on activities is consistent with the separate financial statements. In connection with our audit of the separate financial statements, our responsibility was to Moreover, in accordance with the requirements read the Other information and, in doing so, of the Act on certified auditors our consider whether the Other information is responsibility was to report whether the Entity materially inconsistent with the separate included in the statement on corporate financial statements or our knowledge obtained governance information required by the in the audit, or otherwise appears to be applicable laws and regulations, and in relation materially misstated. If, based on the work we to specific information indicated in these laws performed, we conclude that there is a material or regulations, to determine whether it misstatement in the Other information, we are complies with the applicable laws and whether required to report that fact. it is consistent with the separate financial statements. In accordance with the Act on certified auditors our responsibility was to report if the Report on Opinion on the Report on activities Based on the work undertaken in the course of — has been prepared in accordance with our audit of the separate financial statements, applicable laws, and in our opinion, the accompanying Report on — is consistent with the separate financial activities, in all material respects: statements. Opinion on the statement on corporate governance In our opinion, the corporate governance Furthermore, in our opinion, the information statement, which is a separate part of the identified in paragraph 70 subparagraph 6 Report on activities, includes the information point 5 letter c-f, h and letter i of the decree, required by paragraph 70 subparagraph 6 included in the corporate governance point 5 of the Decree of the Ministry of Finance statement, in all material respects: dated 29 March 2018 on current and periodic information provided by issuers of securities — has been prepared in accordance with and the conditions for recognition as equivalent applicable laws; and of information required by the laws of a non- — is consistent with the separate financial member state (the “decree”). statements. Statement on Other information Furthermore, based on our knowledge about have not identified material misstatements in the Entity and its environment obtained in the the Report on activities and the Other audit of the separate financial statements, we information.
8 Report on other legal and regulatory requirements
Statement on services other than audit of the financial statements
To the best of our knowledge and belief, we subparagraph of the EU Regulation and art. did not provide prohibited non-audit services 136 of the act on certified auditors. referred to in art. 5 paragraph 1 second Appointment of the audit firm
We have been appointed for the first time to dated 4 March 2019. Our period of total audit the annual separate financial statements uninterrupted engagement is 1 year. of the Entity by resolution of Supervisory Board
On behalf of audit firm KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. Registration No. 3546
Signed on the Polish original
Zbigniew Libera
Key Certified Auditor Registration No. 90047 Limited Partner, Proxy
Warsaw, 16 April 2020
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