SoLocal Group: Increase in Digital Sales in 2Q 2018

Finalisation of the 2018 headcount reduction plan

Confirmation of the 2018 outlook of stabilisation of recurring EBITDA¹

Regulatory News:

SoLocal Group (Paris:LOCAL)

Business activity in 2Q 2018¹

• Digital sales: €143M, +3.0%
• Digital revenues €146M, -3.5%

1H 2018 results¹

• Digital revenues: €293M, -1.2%
• Total revenues: €350M, -4.7%
• Recurring EBITDA: €70M, -11.9%
• Recurring EBITDA Capex €48M
• Net financial debt²: €342M

2018 outlook:

• Stabilisation of recurring EBITDA¹ €170M

Increase of +3.0% in Digital sales¹ in 2Q 2018 despite a tense social context.

In line with the scheduled plan, an agreement was reached with the trade unions as part of the Employment Protection Plan ("PSE") and the objective of 800 departures is reached in the summer 2018.

The SoLocal 2020 plan keeps being implemented with the rationalisation of the organisation, the reduction of the cost base, with the progressive launch of the new range of packaged and simplified products starting in the autumn 2018, and with theconclusion of partnerships generating growth and audience.

When releasing the 1H 2018 results as at June 30^th 2018, Eric Boustouller, SoLocal's Chief Executive Officer, declared: "Digital sales increased by +3% during 2Q 2018 despite a tense social context. During this period, we moved a step forward in the implementation of the "SoLocal 2020" transformation plan regarding the Company's new organisational structure, thanks to the quality of the social dialogue and the responsible mindset of all stakeholders. The signature of four agreements with the main trade unions has enabled the implementation of voluntary departures as part of a mobility leave for about 700 people, allowing the Group to reach its 800 departures target as soon as this summer. 2018 marks a turning point for SoLocal, in order to achieve growth as soon as in 2019. During the 2H 2018, we will endeavour to maintain the sales dynamics by mobilising all the Company's forces to benefit our customers. We will keep accelerating the implementation of our transformation plan, notably with the progressive launch (in a "test and learn" mode) of our new packaged and subscription-based offerings, and our new omnichannel sales organisation, which will be fully in place at the beginning of 2019."

The Board of Directors approved the consolidated financial statements of the Group as at June 30^th 2018. The limited review of the 1H 2018 accounts has been completed and the limited review report is currently being issued. The quarterly financial statements were not audited.

SoLocal focuses on continued activities vs. divested activities in the 1H 2018 results presentation, as well as in this press release. The financial performance indicators are commented within the scope of continued activities. The financial items presented in this press release for 1Q 2017, 1H 2017 and 1Q 2018 have been revised in light of the new scope of continued activities (after the disposal of certain assets, cf. Appendix I), new management rules under IFRS 15 regarding the Digital/Print sales breakdown, and the accounting restatement of a Digital/Print promotional offer. The accounting items for 2017 have been restated under IFRS 15.

I Sales¹

In millions of euros		2Q 2017		2Q 2018		Change		1H 2017		1H 2018		Change
Digital sales		139		143		+3.0%		298		293		-1.8%
Print sales		29		20		-30.6%		62		43		-30.3%
Total sales		168		163		-2.7%		360		336		-6.7%

Total sales amounted to €163 million in 2Q 2018, down -2.7% compared to 2Q 2017, with an increase in Digital sales of €4 million, up +3.0% while Print sales are down by -€9 million, i.e. by -30.6% compared with 2Q 2017.

The increase in Digital sales was driven by the success of our Presence products, Booster Contact offering and Websites, in particular the Premium websites. The decrease in Print sales is in line with the trend from previous years.

During 1H 2018, total sales amounted to €336 million, down -6.7% compared to 1H 2017, with a decrease in Digital sales of €5 million, down -1.8% (mainly due to a decrease in Digital sales in 1Q 2018), and a decrease in Print sales of -€19 million, down -30.3% over the period, in line with the global declining trend of the legacy Print business.

The operational KPIs¹ of SoLocal in 2Q 2018 are as follows

		2Q 2017		2Q 2018		Change
Evergreen sales (as a of total sales)		10%		16%		+5.6 pts
Number of visits (in millions)		601		604		+0.5%

Evergreen sales represented 16% of total sales in 2Q 2018 compared with 10% in 2Q 2017. As at June, 30^th 2018, about 40,000 customers of the Group subscribed to evergreen offerings.

The global audience slightly increased by +0.5%: total visits reached 604 million in 2Q 2018 compared to 601 million in 2Q 2017, driven by the mobile audience growth (increase of +10%, representing 44% of the total audience in 2Q 2018). The audience of PagesJaunes increased by +2.6% compared with 2Q 2017, with 432 million visits.

The audience of PagesJaunes increased by +1.0% in 1H 2018 compared with 1H 2017, with 864 million visits. The global audience decreased by -0.9% in 1H 2018 compared with 1H 2017 with 1.2 billion visits.

382 million contacts³ ("leads") were generated in 1H 2018, which represents a growth of +3.2% compared with 1H 2017. The total amount of reviews increased over the period by 44%.

II Order Backlog^1,4

In millions of euros		30th June 20175		30th June 2018		Change
Digital order backlog		384		377		-1.8%
Print order backlog		68		45		-34.1%
Total order backlog1,4		452		422		-6.7%

The order backlog reached 422 million euros as at June, 30^th 2018, down -6.7%. This decrease is mainly due to the strong decline of the Print business (decrease by -34.1% as of June, 30^th 2018 vs. June, 30^th 2017).

III Revenues¹

In millions of euros		2Q 20175		2Q 2018		Change		1H 20175		1H 2018		Change
Digital revenues1		151		146		-3.5%		297		293		-1.2%
Print revenues1		41		31		-24.1%		70		57		-19.5%
Total revenues1		192		177		-8.0%		367		350		-4.7%

The Group recorded revenues¹ of €177 million in 2Q 2018, down -8.0% compared with 2Q 2017. The Group recorded revenues¹ of €350 million in 1H 2018, down -4.7% compared with 1H 2017.

Digital revenues¹ amounted to €146 million in 2Q 2018, down -3.5% compared with 2Q 2017, and amounted to €293 million in 1H 2018, slightly decreasing by -1.2% compared with 1H 2017. Revenues from Websites and Booster Contact products recorded a double-digit growth.

Print revenues¹ amounted to €31 million in 2Q 2018, down -24.1% compared with 2Q 2017, and amounted to €57 million in 1H 2018, down -19.5% compared with 1H 2017. The Print business represents 16% of total revenues¹ in 1H 2018.

Including divested activities, the Group's consolidated revenues reached €178 million in 2Q 2018, down -9.2% compared with 2Q 2017. The Group's consolidated revenues reached €351 million in 1H 2018, down -6.1% compared with 1H 2017.

IV Costs

In millions of euros		1H 20175		1H 2018		Change
Total revenues1		367		350		-4.7%
Net external expenses1		-97		-96		-0.3%
Staff expenses1		-191		-183		-4.0%
Recurring EBITDA1		79		70		-11.9%
Restructuring costs				-125
Non-recurring EBITDA1		-4		-133		NA

Recurring net external expenses¹ reached -€96 million and slightly decreased by -0.3% in 1H 2018 compared with 1H 2017.

Recurring staff expenses¹ reached -€183 million in 1H 2018 and decreased by -4.0% compared with 1H 2017.

Non-recurring items impacting the EBITDAamounted to-€133 million euros and included in particular -€125 million euros of restructuring costs related to the transformation plan. Those €125 million consist of:

• €163 million provisions related to the headcount reduction carried out as part of the transformation plan,
• €40 million of provision reversal for retirement benefits as well as long-service award related to the 2018 headcount reduction,
• €2 million of restructuring costs related to fees.

Staff expenses related to employees leaving, either as volunteers from July to September 2018, or as part of the reclassification phase in October/November 2018, will be accounted for in 2H 2018 as non-recurring costs from the date of the departure validation.

V EBITDA

In millions of euros		1H 20175		1H 2018		Change
Digital recurring EBITDA		63		59		-5.7%
EBITDA Revenues		21.1%		20.1%
Print recurring EBITDA		17		11		-35.1%
EBITDA Revenues		24.1%		19.5%
EBITDA from recurring activities		79		70		-11.9%
EBITDA Revenues		21.6%		20.0%
Contribution from non-recurring items1		-4		-133		NA
EBITDA from continued activities		76		-63		-183.5%
EBITDA Revenues		20.6%		NA
EBITDA from divested activities		-2		0		-92,8%
Consolidated EBITDA		74		-63		-186.0%
EBITDA Revenues		19.7%		NA

Recurring EBITDA¹amounted to €70 million in 1H 2018, representing a decrease of -11.9% compared with 1H 2017, as the decline in revenues¹ was partially offset by a decrease in staff expenses¹

Digital recurring EBITDA¹reached €59million in 1H 2018 vs. €63 million in 1H 2017, down -5.7%.

Print recurring EBITDA¹ reached €11million in 1H 2018 vs. €17 million in 1H 2017, down -35.1%.

Recurring EBITDA¹ Revenues¹ margin amounted to 20.0 in 1H 2018, down -1.6 pts compared with 1H 2017.

Non-recurring EBITDA¹reached -€133 million in 1H 2018, down -€129 million compared with 1H 2017, mainly due to the €125 million restructuring costs related to the transformation plan.

Including non-recurring items and divested activities, the consolidated EBITDA reached -€63 million.

VI Net result

In millions of euros		1H 20175		1H 2018		Change
Recurring EBITDA from continued activities		79		70		-11.9%
Depreciation and amortisation,6		-28		-33		+15.4%
Financial result exc. debt restructuring1		-11		-19		+74.2%
Corporate income tax1,6		-17		-11		-34.9%
Recurring net income from continued activities		23		7		-69.4%
Contribution of non-recurring items1 to net income		10		38		NA
Restructuring costs		NA		-125		NA
Net gain from debt restructuring1		266		NA		NA
Net income from continued activities		299		-80		-126.8%
Contribution of divested activities to net income		-3		0		-93.4%
Consolidated net income		296		-80		-127.2%

Depreciation and amortisation expenses¹amounted to -€33 millionin 1H 2018, an increase of +15.4% compared with 1H 2017, primarily due to the full depreciation of losses from previous years from divested activities of -€3.7 million.

Financial result¹amounted to -€19 millionin 1H 2018 vs. -€11 million in 1H 2017 (exc. debt restructuring). The change is due to financial expenses: as part of the debt financial restructuring in 1Q 2017. 2017 interest expenses were only payable for the period between March, 15^th to December, 31^st 2017, in accordance with the terms negotiated in the financial restructuring. There are no non-recurring financial items in 1H 2018, whereas in 1H 2017 the net gain from debt restructuring reached €266 million.

The corporate income tax expenses¹amounted to -€11 millionin 1H 2018, down -34.9% compared with 1H 2017, due to a decrease in pre-tax income¹

Recurring net income from continued activities amounted to €7 millionin 1H 2018,down -69.4% compared with 1H 2017.

Net income from continued activities amounted to -€80 million in 1H 2018, a decrease of €379 million compared with 1H 2017, primarily due to the restructuring costs related to the transformation plan.

Given the net income from divested activities is virtually equal to zero, the Group's consolidated net income was -€80 million in 1H 2018.

VII Cash-flows and financial debt

In millions of euros		1H 20175		1H 2018		Change
Recurring EBITDA from continued activities		79		70		-9.5
Non monetary items included in EBITDA1		-1		5		+5.9
Net change in working capital1		-17		-25		-7.6
Acquisitions of tangible and intangible fixed assets1		-25		-22		+3.7
Cash financial income/Expense1		-41		-17		+23.9
Non-recurring items1		-12		-12		+0.1
Corporate tax paid		-27		-12		+15.2
Free cash flow from continued activities		-44		-12		+31.7
Free cash flow from divested activities		-2		0		+1.7
Consolidated free cash flow		-46		-12		+33.4

The net change in working capital¹ reached -€25 million as at June, 30^th 2018 compared with -€17 million in 1H 2017. As announced, the management team is currently working on the implementation of a plan to improve the Group's working capital, which is expected in 2019.

Including divested activities' contribution, the consolidated free cash flow reached €-12 million in 1H 2018.

The Group had a net cash position of €73 million as at June, 30^th 2018⁷

Net financial debt²amounted to €342 million as at June, 30^th 2018, compared with €357 million as at June, 30^th 2017.

Furthermore, the Group continues to analyse its options for the refinancing of its indebtedness with the primary aim of reducing its cost. All financing instruments are being considered, including instruments potentially giving access to the equity of SoLocal, within the framework of the authorisations voted at the Shareholders Meeting of March, 9^th 2018.

VIII 2018 Outlook

The Group confirms for 2018 its outlook of stabilisation of recurring EBITDA¹: €170M.

IX Next dates of the financial timetable

The next dates for the financial timetable are as follows:

• 3Q 2018 revenue release: October, 24^th 2018 after market close

Notes :

¹ Scope of continued activities.
² Net financial debt equals to total gross financial debt minus net cash and cash equivalents.
³ Potential contacts generated for professionals (customers and non-customers) ie. clicks showing the user's intention to contact the professional or to visit its shop.
⁴ Order backlog equals to the outstanding portion of revenues still to be recognised as at June30^th 2018 from sales orders validated and engaged by our clients as at June, 30^th 2018. Regarding evergreen contracts, only the current commitment period is taken into account.
⁵ Restated under IFRS 15.
⁶ Restated for the retrospective application of IAS 20 concerning the Crédit impôt recherche.
7 Net of bank overdrafts.

About SoLocal Group

SoLocal Group aims to become the trusted and local digital partner supporting business companies to accelerate their growth. To succeed in this transformation, it relies on its six key assets some of them being unique in France: media with very high audiences, powerful geolocated data, scalable technological platforms, commercial coverage throughout France, privileged partnerships with GAFAM and numerous talents (experts in data, IT development, digital marketing, etc.). SoLocal Group's activities are structured around two axes. First, a range of "full web apps" digital services on all devices (PCs, mobiles, tablets and personal assistants), offered in the form of packs and subscriptions, ("Digital Presence", "Digital Advertising", "Digital Website"," Digital Solutions" and "Print to Digital"), and integrating a digital coaching service, to support clients success. Second, flagship owned media (PagesJaunes and Mappy) used daily by Frenchs and offering an enriching and differentiating user experience. With more than 460,000 customers across France and 2.4 billion visits on its media, the Group generated revenues of €756 million (IAS 18) in 2017, 84% coming from Internet making it one of the leading European players in terms of online advertising revenue. SoLocal Group is listed on Euronext Paris (LOCAL). More information is available at www.solocalgroup.com.

I. Appendix I: Divested activities

During the 1H 2018, the Group divested four non-core activities ("divested activities"):

• Netvendeur on March, 9^th 2018,
• Retail Explorer on May, 31^st 2018,
• Effilab Dubai on June, 19^th 2018,
• Effilab Australia on June, 28^th 2018

II. Appendix II: Review of 1Q 2017, 1Q 2018 and 1H 2017

Sales

1Q 2017						1Q 2018				Change
In millions of euros		Published on April, 24th 2018		Revised		Published on April, 24th 2018		Revised		Published on April, 24th 2018		Revised
Digital sales		166		159		153		150		-7.7%		-6.0%
Print sales		29		33		21		23		-28.8%		-30.0%
Total sales		195		192		174		173		-10.8%		-10.2%

1Q 2018 and 1Q 2017 sales, published on April, 24^th 2018, were revised in light of the new scope of continued activities (following the disposal of some assets, notably Retail Explorer in 2Q 2018, cf. Appendix I) and new management rules under IFRS 15 regarding the sales breakdown between Digital and Print (as published on June 28^th, 2018 in the press release "IFRS 15: a new revenue recognition accounting standard").

Revenues

1Q 2017						1Q 2018				Change
In millions of euros		Published on April, 24th 20185		Revised5		Published on April, 24th 2018		Revised		Published on April, 24th 2018		Revised
Digital revenues1		150		146		152		148		+1.3%		+1.2%
Print revenues1		26		29		16		25		-36.9%		-12.8%
Total revenues1		176		175		168		173		-4.3%		-1.2%

The 1Q 2018 and 1Q 2017 revenues published on April, 24^th 2018, were revised in light of the new scope of continued activities (following the disposal of some assets, notably Retail Explorer in 2Q 2018, cf. Appendix I), new management rules concerning the breakdown between Digital and Print under IFRS 15 (as published on June 28^th, 2018 in the press release "IFRS 15: a new revenue recognition accounting standard") and the accounting restatement concerning a Print/Digital promotional offer.

		1H 2017
In millions of euros		Published on July, 27th 2017		Restated
Digital revenues		323		297
Print revenues		62		70
Total revenues		386		367

1H 2017 revenues were therefore impacted by the revision.

III. Appendix III Consolidated income statement, consolidated cash flow statement and consolidated balance sheet

Consolidated income statement

In millions of euros		30th June 20175,6								30th June 2018
		Consolidated		Divested activities		Continued activities				Consolidated		Divested activities		Activités poursuivies
						Recurring		Non recur.						Recurring		Non récur.		Change in Recurring
Revenues		373		6		367				351		1		350				-4.7%
Net external expenses		(101)		(5)		(97)		0		(99)		(0)		(96)		(2)		-0.3%
Staff expenses		(199)		(4)		(191)		(4)		(190)		(1)		(183)		(7)		-4.0%
Restructuring costs										(125)						(125)
EBITDA		74		(2)		79		(4)		(63)		(0)		70		(133)		-11.9%
Depreciation and amortisation		(30)		(1)		(28)				(33)		(0)		(33)				+15.4%
Operating income		44		(3)		51		(4)		(96)		(0)		37		(133)		-27.1%
Net gain from debt restructuring as at March, 13th 2017		266						266
Other financial income										0				0
Financial expenses		(11)		(0)		(11)				(19)		(0)		(19)				+75.1%
Financial income		255		(0)		(11)		266		(19)		(0)		(19)				-74.2%
Income before tax		299		(3)		40		262		(115)		(0)		18		(133)		-54 .7%
Corporate income tax*		(3)		1		(17)		14		(35)		0		(11)		46		-34.9%
Income for the period		296		(3)		23		276		(80)		(0)		7		(87)		-69.4%

Consolidated Cash Flow Statement

In millions of euros		30th June 20175		30th June 2018		Change
Recurring EBITDA from continued activities		79		70		-9.5
Non monetary items included in EBITDA and other		(1)		5		+5.9
Net change in working capital		(17)		(25)		-7.6
Acquisition of tangible and intangible fixed assets		(25)		(22)		+3.7
Cash financial income/Expense		(41)		(17)		+23.9
Non-recurring items		(12)		(12)		+0.1
Corporate income tax paid		(27)		(12)		+15.2
Free cash flow from continued activities		(44)		(12)		+31.7
Free cash flow from divested activities		(2)		(0)		+1.7
Free cash flow		(46)		(12)		+33.4
Increase (decrease) in borrowings		(270)		(1)		+269.3
Capital increase		273				-272.7
Other of which asset disposal		1		(0)		-1.1
Change in net cash cash equivalents		(43)		(14)		+29.0
Net cash cash equivalents at beginning of period		91		86		-4.9
Net cash cash equivalents at end of period		48		73		+24.1

Consolidated balance sheet

In millions of euros
ASSETS		30th June 20175		30th June 2018		Change
Total non-current assets		308		325		+5.6%
Net goodwill		96		89		-6.9%
Net intangible fixed assets		127		112		-11.7%
Net tangible fixed assets		28		23		-18.4%
Other non-current assets of which deferred tax assets*		58		102		+76.0%
Total current assets		359		394		+9.8%
Net trade accounts receivable		270		255		-5.3%
Prepaid expenses		9		9		+8.8%
Cash and cash equivalents		49		73		+50.3%
Other current assets		32		57		+75.1%
Total assets		667		719		+7.9%
Liabilities
Total equity		(619)		(674)		-8.9%
Total non-current liabilities		550		524		-4.9%
Non-current financial liabilities and derivatives		399		409		+2.7%
Employee benefits (non-current)		137		97		-29.2%
Other non-current liabilities		15		18		+15.9%
Total current liabilities		735		870		+18.3%
Bank overdrafts and other short-term borrowings		6		5		-22.5%
Deferred income		448		394		-11.9%
Employee benefits (current)		103		113		+9.0%
Trade accounts payable		84		107		+27.0%
Current provisions		20		179**		+804.1%
Other current liabilities including taxes		75		73		-1.9%
Total liabilities		667		719		+7.9%

*The change in deferred tax assets as of June, 30^th 2018 vs. June, 30^th 2017 is mainly due to a provision related to the restructuring plan.
** Including €163 million of provisions for restructuring.

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Contacts:

SoLocal
Press
Delphine Penalva, [phone]
[e-mail]
or
Edwige Druon, [phone]
[e-mail]
or
Alexandra Kunysz, [phone]
[e-mail]
or
Investors
Nathalie Etzenbach-Huguenin, [phone]
[e-mail]
or
Alima Lelarge Levy, [phone]
[e-mail]