Letter from the chairman

Following a difficult few years, 2018 offered little respite. The instability of the advertising market, changing consumer preferences and relentless pressure from new competitors are just some of the many pressures and challenges now facing our business. Despite this difficult landscape, Atresmedia has yet again demonstrated its prowess at overcoming these challenges. Once ogain, we have presented a set of results that effectively confirms the value and worth of our approach to business, which is based on the ability to adapt to change, optimise resources and open up new avenues for developing the business. Working on this winning formula we have an outstanding team of employees and our management team, all of whom are ably supported by the Group’s Board of Directors and shareholders. We can therefore feel rightfully proud of the annual balance sheet presented by the Company this year. For yet another year, we have demonstrated our strength within the audiovisual market.

Our status as the leading communication group in Spain is no fluke. As we explained
in previous reports, we would never have come this far without having implemented, a long time back, a strategy that shuns tactical or defensive solutions in favour of setting medium- and long-term objectives. We do
not want to win big today only to lose big tomorrow. It’s simply not in the DNA of this Company. Our approach to business is that there are no shortcuts and this belief has made us one of the most prestigious and highly valued Groups out there. That is what makes
us so strong and is one of the fundamental principles guiding our actions every day. We rely on this approach to boost our profits and earnings while building our reputation in the process. Atresmedia has repeatedly shown that both of these benefits are mutually compatible and can be achieved by remaining firmly committed to the business model for which we are known.

The Group has yet again demonstrated its prowess at overcoming the challenges of a difficult landscape, presenting a set of results that effectively confirms the value and worth of our approach to business.

It is precisely our commitment to this model that has enabled us to consolidate our position at such a delicate time for the industry, which has seen considerable turmoil and instability. Atresmedia’s leadership and business model is widely recognised by advertisers, spectators and listeners alike, who hold the Company in high regard for refusing to rest on its laurels, for not fearing change and for maintaining the high standards of quality for which we are widely known. That is what makes our Company a benchmark in everything it does. Because we have the ability to lead while remaining true to the principles that have always guided the way we manage our business.

One example of the importance we attach to our corporate values is the corporate purpose of Atresmedia, which we have recently announced and which embodies the essence of this Group. It is what we aspire to every day as an expression of our unflinching commitment to society, and can be summed up as follows: “We believe in the power of reflection and emotion.” It is a belief and purpose that sums up our activity perfectly and defines what we have been, what we are and what we always will be. It marks out the path we have taken so far and which, I am convinced, will lead us to further success. Our goal is to stimulate thought and reflection by broadcasting quality news content while gripping viewers with the very best fiction and entertainment products. We must make sure that this reflection and emotion generate positive impacts on every one of us and on everyone and everything around us.

Each and every one of the departments that makes up the Atresmedia Group is sensitive to these intertwining priorities and in the need to pursue excellence, relevance and proximity. In 2018, the Company cemented its status as the leading news broadcaster in our country in a year that saw a good deal of political, economic and social upheaval. The spectacular growth of news programmes Antena 3 Noticias, laSexta Noticias and Servicios Informativos by Onda Cero showed once again that we care deeply about what happens in our country and that is precisely why viewers and listeners place their trust in us. Our strong desire to serve the public is plain to see and is indeed one of the hallmarks of this Company. For us, information is a strategic asset and is what sets us apart from our competitors. Because we care about people and their concerns, and that is why we listen closely to what they expect from us.

We have recently announced the corporate purpose of Atresmedia. It is what we aspire to every day as an expression of our unflinching commitment to our stakeholders and the society and can be summed up as follows: “We believe in the power of reflection and emotion”.

Atresmedia Televisión has always been a prime example of our approach to business: influential, relevant and with meaningful content that matters to our viewers. The Television Division, despite having to cope with fierce competition from new operators and changing consumer habits, consolidated its absolute leadership as a mainstay of the news market in 2018. Our coverage of the Catalan process and its impact, the vote of no confidence in Mariano Rajoy, the formation of the new government led by Pedro Sánchez
 and the elections in Andalusia proved to be hugely popular among viewers, making Antena 3 Noticias —which was the absolute leader boasting the most viewed news programmes— and laSexta Noticias —the go-to channel
 for live coverage— the fastest growing news outlets out there. Meanwhile, Antena 3 made history thanks to one of its series, namely La casa de papel (Money Heist). It was the first Spanish fiction show to win an Emmy Award,
 a testament to the quality and international renown of its fiction output. Ultimately, winning an Emmy goes to show the success of our strategy and effectively confirms that we are on the right path.

The brand name Series Atresmedia reminded everyone of its worth with productions such as Fariña (Ondas Award for Best Spanish Series), La catedral del mar and Cuerpo de élite. We also respond to emerging consumer preferences and international standards by implementing fifty-minute episodes, which have proved to be enormously popular among critics and audiences alike. In the realm of entertainment, the agreement signed with Talpa to broadcast La Voz (Spanish version of The Voice), whose viewer numbers are already proof enough of how right we were to go with the show, will now let us focus on new target audiences with the ‘senior’ and ‘kids’ editions. laSexta grew in viewership and, for the sixth straight year, outpaced its closest competitor, this time by the largest margin ever. Special interest channels Neox, Nova, Mega and Atreseries achieved their best annual figures
of the last five years and were an essential component of the Group’s wide choice of television programmes catering to specific audiences. The Group also deftly integrated the former Digital Division into its ranks, optimising its resources and improving Atresplayer to rank it among the top ten most viewed services according to the Comscore ranking.

Meanwhile, Atresmedia Radio was living proof that actions based on credibility, plurality, diversity and proximity to listeners can yield extremely positive results. The strength of its project, headed by Onda Cero, is simply undeniable. The figures do not lie: it was the only large private broadcaster to grow in audience numbers in 2018. It was also the most trusted radio broadcaster among listeners. Its radio jockeys, featuring the likes of Carlos Alsina, Julia Otero, Juan Ramón Lucas, José Ramón de la Morena, Héctor Fernández, Javier Ruiz Taboada, Jaime Cantizano and Carlos Latre —one of the most recent arrivals— attracted nearly two million listeners among them. Its success is the product of a constant drive to excel by the entire human team.

The Group continues being leader boasting the most viewed news programs. Meanwhile, Antena 3 made history thanks to one of its series, La casa de papel (Money Heist), first Spanish show to win an Emmy Award.

Atresmedia Publicidad was once again the division tasked with making all the Group’s hard work and resources pay off. It is now the leading advertising sales company in the Spanish market across all media. Atresmedia Diversificación, which brings together the Group’s businesses not tied to conventional advertising, had great success in increasing the number of subscribers to its four international channels to surpass 55 million subscriptions worldwide. It is safe to say that it is Europe’s leading private operator when it comes to the number of subscribers and channels. Our Company has also been busy in cementing its position as a benchmark for news coverage in Latin America and the United States thanks to its coverage of the crisis in Venezuela; further proof that the corporate values that guide and steer us apply equally both within and beyond our borders. Meanwhile, Atresmedia Cine productions accounted for 29.9% of box office takings in Spain, with the division producing 5.9% of all Spanish films.

Atresmedia Studios began operating in 2018 in response to the new challenges emerging in the audiovisual sector, reporting early success just months from its birth. This new division, which creates and produces fiction content for third parties, especially new platforms, has shown that content is business and that the ability to adapt, on the back of a prestigious brand name, can help us overcome the challenges that typically arise
in a rapidly changing sector. In just one year
 of life, Atresmedia Studios successfully sold
 El embarcadero to Movistar+ and produced Pequeñas coincidencias for Amazon Prime Video. These milestones, together with the deal reached with Netflix giving the streaming giant first choice over various productions from our fiction catalogue, will serve to make our series more profitable while also prolonging their life. We are confident that they will also streng then the Atresmedia brand as a benchmark in
 the international arena, ultimately giving our products greater projection and exposure while at the same time making the Company less reliant on the conventional advertising market as we pursue a global strategy of diversifying our sources of revenue.

Yet our Group must not only face the challenges posed by the advertising market, the emergence of new players in the sector and social changes. We must also contend with the administrative and legal challenges inherent in our industry. On this front, we at Atresmedia have been lobbying for three regulatory changes for several years now. We are calling for the same rules to be applied across the board, so that all companies that operate in the audiovisual market can compete freely on a level playing field. This will require the authorities to eliminate the prevailing imbalances, which place an excessive burden on traditional operators while failing to provide adequate protection to the public, especially children, against new risks. While the new Audiovisual Media Services Directive 2018/1808 passed in November 2018 is a step in the right direction, it falls short of the mark. We are therefore calling on the lawmakers to honour this objective of applying the same rules to everyone when the time comes to transpose this Directive into Spanish law (at some point between 2019 and 2020).

Our Group must not only face the challenges posed by the advertising market, the emergence of new players in the sector and social changes. We must also contend with the administrative and legal challenges inherent in our industry.

Creation and intellectual property are fundamental to a Group such as ours. That is why we also hope that the incorporation into domestic law of the regulatory changes being promulgated by the European institutions — now on the verge of being approved— will help better protect our rights as creators, which are the main driving force behind the development of the creative and cultural industries.

Last but not least, we must all work together to complete the clearance of the 700 MHz band before 30 June 2020, which contains the current panorama of national channels
on free-to-air digital terrestrial television. We must ensure that this migration causes as little disturbance as possible to the public without generating additional costs for operators. I am convinced that this process will help bring about a technological shift towards new services for citizens, as indeed has happened with the launch of LovesTV, a joint free-to-air television platform promoted by Atresmedia alongside Mediaset and RTVE, and which represents a milestone in the sector for the benefit of users.

We know that we have a huge role to play in bringing about positive change and that we are capable of raising awareness through our many resources and actions. The involvement and response of our Group, through its Corporate Responsibility Policy, has been nothing short of absolute. Aside from our ongoing commitment to the ten principles enshrined in the United Nations Global Compact and to the Sustainable Development Goals, in 2018 we began the process of implementing our second Corporate Responsibility Master Plan, which will guide our actions in this area through to 2020. Of the many actions we have undertaken, in 2018 we agreed to extend the Compromiso Atresmedia brand name, which embraces all the Group’s internal and external actions in the realm of corporate responsibility, with the launch of Levanta la cabeza (Hold your head high). Under the Compromiso Atresmedia badge, we have been championing campaigns against road accidents (Ponle Freno) and in support of scientific research and medical prevention (Constantes and Vitales). We are also seeking to increase protection for intellectual property (Crea Cultura), while bringing the fight to gender violence and discrimination against women (Zero Tolerance), protecting the environment (Hazte Eco), promoting healthy living habits (Objetivo Bienestar) and encouraging the responsible use of technology (Levanta la cabeza).

Our implication in the positive change of the society through our Corporate Responsibility Policy has been nothing short of absolute. We have extended the Compromiso Atresmedia brand name which embraces all the Group’s internal and external actions.

Ponle Freno, the longest-running campaign
 of Atresmedia and the most widely broadcast initiative on television according to the Institute for Social and Market Research (CIMOP), celebrated its tenth anniversary in 2018. The Ponle Freno race track has been gradually expanding over the last ten years, with Malaga, Murcia and Badalona now featuring on the
 list of cities taking part in the initiative. During these ten years, the programme has raised over one and a half million euros for victims of road accidents.

With Constantes y Vitales, we were successful in making Asturias and Cantabria heart- protected territories by installing defibrillators in public spaces, following the example set in Madrid, Valencia, Andalusia, Catalonia, the Canary Islands and the Basque Country. Crea Cultura raised awareness in a different way
 and with a language everyone can appreciate, namely comedy, with its spot titled Is that really how you pay creators? Don’t be a troglodyte, starring theatrical group Yllana. It also launched the programme Crea Lectura on laSexta. Meanwhile, Zero Tolerance was recognised by Compromiso Clece, the Community of Madrid and UN Women for its tireless work against gender violence.

Yet our gaze it not just outward-looking.
We look in all directions and want all this satisfaction and well-being to feed through to the employees who make up Atresmedia. We continue to implement measures to improve their work-life balance. We arrange training courses in health and road safety and we foster the labour market integration of people such
as female victims of gender violence and those with disabilities. As part of our commitment
to internal entrepreneurship, we continued
 to promote the Th’nk Project, which in 2018 was named ‘Best Campaign for Organisational Change’ at the Fundacom Awards. And let
us not forget the success, year in year out, of our Corporate Volunteering Program, which
 in 2018 carried out 30% more activities than the previous year. Upwards of one hundred workers, family members and friends dedicated over two thousand hours of their time to caring for vulnerable groups, especially children, by collaborating on initiatives such as ‘Business Solidarity Day’ or ‘Give & Gain’ by Forética, in which we have been a media partner for four years. Our Corporate Volunteering Programme has been awarded the Certificate of Excellence
 in Corporate Volunteering Management and this would not have been possible without the hard work and dedication of the Company’s employees. I cannot thank them enough for their invaluable help at food kitchens and in accompanying the elderly and disabled people, while also getting involved in environmental actions.

Fundación Atresmedia remains an essential project for the Group and all of us who belong to it feel rightfully proud of what it has achieved. With every initiative aimed at humanising children’s hospitals, normalising disability and improving education, the Foundation helps strengthen the Group’s commitment to building a better future for children and young people.

I would like to highlight some of its achievements in 2018, such as the launch of an innovative tool to measure the level of humanisation at children’s hospitals; its efforts to give greater visibility to people with disabilities in the audiovisual content of our programming schedules; or getting the chairmen of large companies involved in the campaign to promote vocational training (DescubrelaFP).

Atresmedia continues being recognised for supporting the visibility of women, gender equality and those with disabilities. Moreover, Atresmedia is the most atractive company to work at in the media sector, according to different researches.

I would also be remiss not to mention some of the accolades awarded to Atresmedia in 2018. The ‘Personality Media’ study confirmed our status as the group with the best image among consumers. Meanwhile, shows such as El intermedio or El hormiguero were praised for promoting and giving a voice to women and for championing equality and also for disseminating and increasing the visibility of disabled people. For the sixth straight year, Atresmedia was singled out as the most attractive company to work at in
the communication sector, according to the Randstad Employer Brand Research 2018 report, which ranked us in the top ten when it comes to interesting job content and pleasant work atmosphere. We also received the Stela Award from Fundación Síndrome de Down for integrating people with Down Syndrome into our workforce.

And let’s not forget another hugely successful initiative, namely Atresmedia Formación, a benchmark in audiovisual, radio and multimedia training that has given the Atresmedia brand yet another attribute by expanding its horizons to training in communication. It is a further example of how to adapt to circumstances and open up new business avenues based
 on our principles, by turning two decades of experience in internal training into something that now looks outwards. In 2018 alone, Atresmedia Formación provided quality training in specific subjects to some 900 learners.

Let me conclude by stressing once again that 2018 was not an easy year. Quite the opposite in fact, because it tested our resolve and forced us to dig deep. This difficult landscape allowed us to gauge how our business model and corporate values hold up. We know full well that the future holds many challenges but we are sure that our exceptional human team will embrace them and prove more than capable
of responding to the new paradigms within the sector and accomplishing the objectives we have set ourselves.