Letter from the chairman

In 2017 Atresmedia navigated a highly complex environment. Once again, our ability to adapt to constantly shifting scenarios has been put to the test. Given the difficulties that we have faced, we come before you with a sense of pride in our achievement: a set of figures for the year that can only be described as excellent. The Group’s performance reflects the efforts of our strong team of professionals, the unflagging and valuable support of the Board and, of course, our shareholders’ confidence in the management team. For yet another year, Atresmedia has proved that it is a strong and successful company.

The fact that we are Spain’s largest Communication Group is no mere accident. It is the outcome of the way we do business. For a number of years, we have pursued, vigorously and with conviction, a strategy predicated on quality content, professionalism, a diversity of viewpoints and support for the industry. Our focus on these vectors of action, which cut across all our areas of activity, is the key to our success. What defines us and places us in a leading position in the eyes of the general public, which values and rewards our efforts to avoid the easy way out and, instead, achieve excellence.

The Group’s strong performance is a reflection of our superb team of professionals, the unflagging and valuable support of the Board and, of course, the confidence placed in the management team by our shareholders

We have undeniably proved that our model brings together sustainable leadership with an attractive return on investment; our strong business performance is wedded to the recognition and confidence of our viewers, listeners and advertisers. The worth of our business philosophy is borne out by the facts and by our performance.

The figures achieved in 2017 reflect these values, which are common to the entire Company, and are also the outcome of our willingness to understand and rise to challenges as they emerge in our surroundings. We are not scared of change. Rather, change is what drives us forward and enables us to become our best selves. And 2017 was certainly a year of change. The internationalisation of our content, the founding of Atresmedia Studios, the acquisition of SmartClip and the enhancement of our diversification policy all clearly exemplify our refusal to conform or rest on our laurels, and our ability to adapt and consistently improve.

2017 also saw our Group become finally and firmly established as Spain’s leading news organisation. And this, again, is no mere coincidence or short-term trick. It is the outcome of a long-term commitment to a diversity of viewpoints, and quality news and reporting. Our coverage of the Catalan independence process via Antena 3 Noticias, laSexta Noticias and the Onda Cero news unit was the go-to option for millions of people, and strengthened our bond to the real concerns of the wider community. This success shows that our strategy was the right one, even though the fruits were not borne immediately.

As a result, Atresmedia has moved to the forefront, and we can now say that we are the most influential Group. And not just through our news and current affairs programming. We also lead the pack with our entertainment and fiction content. Because influence also consists of people talking about your series or game shows in their day-to-day lives. To be influential and address the concerns closest to wider society is all part of what we want to be. This is an attribute that becomes especially significant in a changing and highly competitive environment. Our influence places us in a stronger position facing new entrants and sets us apart from more conventionally-minded operators; it will bring us quantifiable benefits in many respects. Our willingness to provide service and our commitment to the public make us part of the backbone of wider society.

Our coverage of the Catalan independence process via Antena 3 Noticias, laSexta Noticias and the Onda Cero news unit was the go-to option for millions of people, and strengthened our bond to the real concerns of the wider community

The television division has again proved its robustness through a model that is recognised for its news programming, its entertainment and its fiction, which is endorsed by audience ratings and best able to withstand a scenario of increasing fragmentation. Among other achievements, Antena 3 ended 2017 as the unrivalled leader in the morning and weekend timeslots, while laSexta again outstripped its main competitor for the fifth year running. Our special-interest channels, Neox, Nova, Mega and Atreseries, rounded out Atresmedia Televisión’s successful offering. The television division is capable of generating prestigious and widely recognised brands; it is a veritable factory of quality content that is distributed around the world and of which we are very proud. This high quality is enabling us to prove that our strategy as a content factory is effective. In this sense, the last step in this direction has been Atresmedia Studios, a pioneer production venture for the creation, design and production of content to third parties, which already has a wide range of both Spanish and international customers.

Atresmedia Radio is still going strong, based as it is on credibility, diversity of viewpoints, entertainment and closeness to people’s real concerns. The past few years have been complex for our radio division, but we are beginning to see positive results. We have the best offer on the market, even though our smaller number of broadcasting bases means that we are not competing on an equal footing. Onda Cero proved its immense strength: it was the only general￾interest radio station to grow in the last two consecutive waves of the EGM audience survey, and ended 2017 with 3% growth, doubling the market average. Our superb team of professionals are determined to remain at the forefront and even surpass their own achievements: this has lent still greater strength to our radio presence. We have now been joined by Jaime Cantizano, who will work alongside leading journalists like Carlos Alsina, Juan Ramón Lucas, Julia Otero, Héctor Fernández and Javier Ruiz Taboada or Jose Ramón de la Morena among other superb journalists.

Atresmedia Publicidad effectively leveraged all the Group’s resources, and again in 2017 led the advertising market, being the advertising exclusivist with the highest share in the market, of around 20% and the highest power ratios in its chosen areas. In addition, in line with the Group’s overarching search for innovation, the Advertising division opened up new market niches. In this sense I would like to highlight the acquisition of Smartclip Latam, which makes Atresmedia the leading Spanish operator in the online advertising market and bolsters its strategy in that field.

Atresmedia Digital retained our position as the leading audiovisual group on the Internet and placed among the top ten most visited websites in Spain, according to Comscore; it raised its monthly average unique visitors to 27 million, and moved forward towards tighter integration at a time when the online world is becoming increasingly important.

We are the most influential Group with our news and current affairs programming, and with our entertainment and fiction content. To be influential is part of what we want to be. This is an attribute that becomes especially significant in a changing and highly competitive environment

Atresmedia Diversificación, which brings together the Group’s businesses not tied to conventional advertising, had great success in increasing the number of homes that subscribe to its three international channels, comfortably topping 50 million worldwide: this places us as the European private operator with the largest number of channels and subscribers overseas.

Atresmedia Cine produced nine feature films in 2017, which accounted for 29.3% of box office takings by Spanish productions. Five of those films were produced by our Film Division – a mandatory investment which we have been able to leverage – and made it into the box office top ten.

In addition to the annual challenges we face as a Company and the circumstances of the given time in the economy, Atresmedia must address key issues in the regulatory domain. For many years, we have called upon lawmakers to support stronger stability and security in the industry. We asked for a friendlier regulatory stance towards the second digital dividend, and a specific timetable for the switchover to digital that will benefit users and industry alike. This issue will, after all, shape the future development of television in Spain. We have of course urged government bodies to deal with the regulatory challenges posed by the development of the audiovisual sector. Against a background of rapid change in the media, our Group wants to see open competition on an equal footing; the legal rules should apply to all operators equally. It is our hope that the regulatory symmetry that we are asking for – and which is surely reasonable – will enable us to serve the wider community to the best of our ability. We also ask that regulators not resign themselves to defeat in the face of difficulty. The audiovisual world evolves at breakneck speed every day, and calls into being new realities that must be regulated. An example here is child protection: we are required - and rightly so - to stay alert so as not to harm a highly vulnerable sector of the population, and yet in other media there is no oversight at all.

The key milestone in corporate responsibility this year was the design and adoption of Atresmedia’s second corporate responsibility Master Plan, which will bring together all sustainability actions for the next three years. This new strategy is the outcome of a process of introspection through which Atresmedia’s management team identified all the non-financial aspects that create value for our business and our main stakeholders. The mainstreaming of corporate responsibility is a path we took some time ago, but this new plan is a key turning point for the Group, because it establishes strong underpinnings for integrating responsible management with our business in a more consistent and universal way, with a focus on creating value internally and externally. In addition, the plan will enable us to respond more effectively to the new requirements and demands of the society in which we live.

Against a background of rapid change in the media, our Group wants to see open competition on an equal footing; the legal rules should apply to all operators equally. It is our hope that the regulatory symmetry that we are asking for – and which is surely reasonable – will enable us to serve the wider community to the best of our ability

One of the first results of that process of introspection is the shift in focus for the Annual and Corporate Responsibility Report which we publish today. Atresmedia has reported on its sustainability performance for more than a decade, but this is the first time that our Group publishes an integrated report setting out the relationships between strategy, governance and financial performance and the social, economic and environmental setting in which the Organisation operates. The Report addresses all the issues that bear upon our strategy and are relevant to our shareholders, customers, suppliers and other stakeholders, thus providing a comprehensive vision of everything we do. In addition to the Group’s traditional community role, this new report enhances the information about key strategic issues, such as risk management and the strengthening of our Corporate Governance, which is now compliant with almost every recommendation in this field, thus making us a stronger and more reliable organisation.

This is the first time that our Group publishes an integrated report setting out the relationships between strategy, governance and financial performance and the social, economic and environmental setting in which the organisation operates

As to our community role, given that we are a medium of communication, a highlight is Atresmedia’s determination to place the Group’s whole communicative potential at the service of wider society and its vital concerns. Compromiso Atresmedia is the conceptual umbrella that embraces all our corporate responsibility initiatives, as reflected in our media and also internally within the Company. Supporting road safety, raising awareness of healthy lifestyle choices, protecting the environment, supporting scientific research, fighting against gender violence and advocating the creation and protection of intellectual property continue to be issues to which we are firmly committed.

In 2017 we expanded the Ponle Freno races to Pontevedra, Palma de Mallorca and Las Palmas de Gran Canaria, while raising awareness of the dangers of mobile phone use while driving. In 2017, the Ponle Freno race circuit brought in more than 178,000 euros, which were allocated in full to projects in support of traffic accident victims. Asturias, Madrid and Valencia are now “heart-protected” territories thanks to the campaign on the installation and use of defibrillators carried out by Constantes y Vitales. This project also had a research aspect: Harald zur Hausen, who was awarded the Nobel Prize for his research on the influence of the papilloma virus on the onset of cancer, was a guest speaker in Madrid. The Group kept up its support for the fight against gender violence by means of its Tolerancia Cero (zero tolerance) project, encompassing campaigns on how to isolate domestic violence perpetrators and combat sexist micro-aggressions. Hazte Eco took part in a “Save the Climate” campaign by broadcasting ads calling for action against climate change. In 2017, our commitment to raising awareness in the community involved us with a range of NGOs, to which we donated free advertising campaigns to a value of more than 12 million euros. Crea Cultura continues to move forward as a leading advocate of the creation and protection of intellectual property. One of its recent projects is Crea Lectura, a new TV show on literature broadcast by laSexta.

As you can see, our contribution to society is not limited to broadcasting awareness-raising campaigns externally. We also aim to bring about real change internally within our Group. Consistency is another of the values that inspire us. Hence, in 2017 we hosted cardiopulmonary resuscitation and defibrillator courses involving more than 200 Group employees, and also held our second “Road Safety Week” to train our people in this field. We are also aware that our professionals are one of our best assets, so another of our commitments is to offer them a rewarding and highly motivating workplace. We have accordingly made progress with enhancing our people’s work-life balance by introducing improvements in the collective bargaining agreement signed in 2017. We also support equality: 50.4% of our employees are now women. Moreover, we made further efforts to provide employees with quality training to enable them to rise to the new challenges we now face.

But that’s not all: we want to build an active dialogue and engagement with our professionals and offer them forums for sharing ideas in aid of internal innovation. This is the intention behind Project Th’nk, which became firmly established in 2017. The initiative is designed to encourage Atresmedia employees to come together in a space of inspiration, communication and teamwork and bring out their intrapreneurial spirit.

We have supported road safety, raised awareness of healthy lifestyle choices, protected the environment, supported scientific research, fought against gender violence and advocated the creation and protection of intellectual property: these continue to be issues to which we are firmly committed

Of course, I cannot fail to mention the dedicated engagement of Group employees who took part in the Corporate Volunteering Programme, which has now been in place for a decade. The programme has involved the donation of more than 2,300 hours of employees’ time to charity work, including helping out at food kitchens for the homeless, providing support to the elderly and the disabled, and helping to train unemployed young people.

That same spirit of improvement and active engagement in these fields of sustainability drove Atresmedia to join the Fundación SERES, which supports companies’ commitment to playing a role in the community, and the Forética Environment Cluster, a leading corporate responsibility forum, which Atresmedia joined last year as the first media member. This is the second focus group we join after the transparency, good governance and integrity cluster. These moves exemplify the significance we attach to the values of community commitment, sustainability and integrity.

Through the Fundación Atresmedia we continued to channel charitable aid from the Group for child protection, better education, and integration of people with disabilities. Milestones included the “Great Teachers” event, which drew record attendance this year, or the celebration of the Hospitalized Child Day; the campaign undertaken in partnership with the Fundación Randstad to raise awareness of the need to integrate people with disabilities, and support for occupational training.

I should like to mention some of the accolades that the company achieved in 2017. For the second year running, the Rep Trak España 2017 research survey rated us as the audiovisual group with the strongest reputation. The rating is based on consumer opinions on our financial strength, capability for innovation, leadership and offered range of entertainment and news. I should also mention that the 2017 Randstad Employer Branding report placed us as the best place to work in the communication sector.

In addition, one of our latest successes is Atresmedia Formación, where we provide quality training to enable the future professionals of the audiovisual and communications sector to rise to the new challenges we now face. One year after the launch of this new division, which provides training courses on topics relating to television, radio, film, communications and IT, we can confidently say that we are on track to become the leading benchmark in Spain. We have a catalogue of 400 courses and have entered into partnerships with a range of prestigious Spanish and international institutions.

The Fundación Atresmedia continues to channel the Group’s community support for child protection, better education and the integration of people with disabilities, with milestones such as the “Great Teachers” award ceremony, which drew record beating attendance

I would like to conclude this message with a reminder that 2017 was by no means an easy year. In fact, it was a tough time, and we have had to bring out the best in us to deliver a strong performance. We are confident that we can perform just as strongly in 2018. At the Group, we have a leading model that adapts swiftly to change, and our commitment to quality has proved to be the right call. We face new challenges every day. But I am fully confident that, whatever the challenge may be, we shall rise to it, because it’s in our DNA.