PRISA ANNUAL RESULTS 2014

• Digital transformation revenues increase by 20% and reach 164 million euros.
• Digital  education  systems  (UNO  and  Compartir)  continue  their  development  in  Latin

America improving margins significantly, reaching 21.3 Million Euro in EBITDA 2014 vs. 2.9

Million Euro in 2013.

OPEX and CAPEX control continues 

• Operating expenses have fallen by 21.3 million Euro (-1.6%)
• Adjusted personnel expenses fall by 33.5 million Euro (-7.9%): Spain (-12.4%); Portugal (-

4.8%) and Latam (-1.7%).

• The  entire  collective  agreements  have  been  renewed,  new  agreements  of  personnel reduction have been done, and voluntary severance and de-indexation agreements have been reached in several areas.
• Capex has been reviewed to channel resources to growth areas, mainly Santillana.

The Group continues with its focus on the execution of the refinancing plan

• The Group continues focusing on the execution of the refinancing plan: 780 million euros debt cancellation with a 25% discount debt buyback with funds coming from:
  • 100 million euros capital increase at 0.53 Euro per share.
  • sale of 13.68% stake in Mediaset Spain
  • Agreement for the sale of 56% stake of Canal + to Telefónica for an initial price of 750 million.
• Capital increase of 75 million euros at 0.53 euros per share
  • The total net debt of the Group as of December 31st 2014 amounts to 2,580 million comparing to 3,306 million Euro on December 2013.

RESULTS BY BUSINESS DIVISION

Education 

• North area campaigns of Spain, Mexico and Brazil, have been a better behaviour than expected, taking into account the education cycles, mainly in Spain and Brazil.
• Spain: the campaign of 2014 has ended with a growth compared to 2013, despite the difficulties of the new law implementation, and as a result of commercial effort and cost

control. Revenues grow by 2.2% and EBITDA by 6%.

• Mexico: The campaign had performance. Revenues grew by +7.4% and EBITDA grows by

+17.7% in local currency.

• In 2014 all the campaigns from south Area have been closed showing mainly a good performance in local currency.
• Brazil: the good behaviour in the regular campaign has almost fully offset the decrease of

the institutional sale, due to the volume of government purchases has been lower than expected and that prices have not fully been impacted by inflation.

• Digital education systems (UNO and Compartir) continue their development in Latin

America,  significantly improving their  profitability and  growing  in  students  (more  than

630,000).

• Sale of  General Editions, which occurred in  June 2014, has generated a gain on disposal of 21.6 million euro.
• The adjusted revenue in local currency increased by +10% (Spain 2.2%, Brazil 11.3%, Mexico 6.5%, Chile 14.5%, Argentina 49.6%).
• Exchange rate has a negative impact on revenues in Santillana in 2014 of 66.7 million.
  • Adjusted EBITDA grows by 17.6% in local currency (+4.3% in Euro), within FX impact of 20.2 million Euro.

• Adjusted advertising in Spain grows by +0.6% (+2.5 in 4Q).
  • Advertising in Latam grows in local currency in all countries but Chile, due to a downturn of the economic cycle and the election period of the country.
  • Reported results are impacted by FX which has a negative impact in radio revenues of 12.6 million Euro and 2.5 million in EBITDA.
  • Additionally, in 2014 consolidation criteria for Mexico and Costa Rica was modified to change from proportional integration to equity consolidation (due to an international

accounting rules change, adopted by the EU and which impacts since January 2014). Information for 2013 is provided with same criteria for comparative purposes. Mexico and Costa Rica operations are included in adjusted figures for both revenue and EBITDA.

• Adjusted for these items, Radio Latam revenue would have grown by 5.4%.
• Effort in cost control, result of a cost control process implemented in last years, continues

(-3.8% in adjusted terms), mainly in personal cost in Spain and Latam.

• Remarkable operational improvement in Spain, where EBITDA increased by +45% to

18.1 million euro in a flat revenue growth scenario, being worth mentioning the high operating leverage of the business.

• Adjusted EBITDA in Radio in 2014 reached 65.6 million Euro (+3.4% compared to 2013), and 68.1 million Euro adjusted by FX (+7.3%).

Press 

• Adjusted advertising revenues in 2014 fall by -1.4% (El País -3.8% y AS +9.9%), growing by +5% in 4Q.
• Traditional  advertising  revenues  fall  by  -9.6%  which  are  compensated  by  the excellent performance of the Digital advertising revenues which grow by 18.4% and already represent 30% of the division’s advertising revenues and by revenues from new business (event management) which grow by 22.2%. It has to be highlighted that during 4Q, digital advertising revenues more than offset the fall in traditional advertising.
• We highlight the strength of AS where digital advertising revenues grow by 19.1% and already 55% of the total advertising revenue.
• Circulation revenues fall by -13.4%.
  • Decrease  in  Other  Revenues  (-4.8%),  despite  the  growth  of  the  revenues  from promotions (+31.2%). In 2014 revenues have been generated by tax deductions, which have not been registered as revenues versus 7.4 million Euro registered in 2013.
• Strong cost control in every item (-4.0% in adjusted terms and -8.6% in staff costs).
• Adjusted EBITDA in Press reaches 14.6 million Euro (-41.8% compared to 2013 or -

17.1% adjusting for deductions recorded in 2013 and not registered in 2014).

Media Capital

• Advertising revenues  increase  by  +11.1%  in  adjusted  terms  2014  (1Q,  +5.3%;  2Q,

+26.4%; 3Q, 8.7%; 4Q, +4.3%). Very good performance both on TV (+11.4% in 2014) as well as on radio (+9.2%). It is worth noticing that advertising recovery in Portugal started in second half of 2013).

• Decline in other revenues in 2014 (-16.9%), mainly due to the drop in value added call services.
• Adjusted EBITDA reaches 43.8 million Euro and grows by 6.9 % on the back of the stability of revenues and a strong effort to control the costs.

On June 2014 the contract to sell 56% stake of Canal+ with Telefónica was formalized at initial amount of 750 million Euro: 

• The price is subject to customary adjustments in such operations until the closing of the transaction plus a specific adjustment depending on the resolution of the arbitrage with MediaPro concerning the costs of the 2012-2015 football seasons.
• The operation is already approved by the representative panel of the financing banks and is only subjected to the authorization of the competition authorities.
• The administrative inquiry of the operation has been transferred by the EU authorities to

Spanish supervisor body, the CNMC (National Commission for Market and Competition).

This case is currently being processed by the commission, who could impose conditions or require commitments for the approval of this operation.

• The signing of the agreement generates an accounting loss in the consolidated accounts of Prisa of 2,064 million Euro and 750 million in the individual accounts, This loss in the

individual  accounts  generates  an  asset  imbalance,  that  was  offset  by  an  automatic

conversion of a portion of tranche 3 of the corporate level debt, into equity loans for a sufficient amount to compensate for this asset imbalance.

• This  conversion  mechanism  was  set  up  in  the  refinancing  agreement  signed  by  the company in December 2013.
• The amount of debt from Tranche 3 that was converted into equity loans (PPL's according to the contractual definitions), was 507 million Euro and took place on September 15th 2014.
• As of December 31st 2014, Prisa Group has reviewed DTS sale price and an additional impairment of 23.7 million euros has been recorded, for the estimated impact that the future evolution of the business will have on the price of the operation, until the sale materializes.
• With the purpose of  restoring capital balance, as a consequence of  the price review, the automatic mechanism for Tranche 3 debt conversion into participating loans in sufficient amount to offset said unbalance at conversion date, has been initiated.
• The results of this transaction are presented in the consolidated income statement under Result  from  discontinued operations  and  the  assets  and  liabilities  as  Non-current assets held for sale and Liabilities associated with non-current assets held for sale".

Consolidated P&L

The comparison of the results of the first half of 2014 and 2013 is affected by extraordinary   items   recorded   under   both   revenues,   expenses,   amortizations  & provisions. To conduct a homogeneous comparison, we are presenting a profit and loss account adjusting these extraordinary items:

ENERO - DICIEMBRE                       OCTUBRE - DICIEMBRE

During 2014, excluding extraordinary items and exchange rate impact:

• Operating revenue grow by 1.4%
• Adjusted EBITDA grow by 6.9%
• The improvement in margins continues