Letter of the CEO – 2022


Dear Shareholders,

The last three years have been a rollercoaster ride for all the businesses in the internet industry. After the unexpected pandemic acceleration, came just as sudden post-covid stagnation.

 Users turning from online to offline triggered a series of upheavals in the digital world in 2022, which indirectly affected us too. Among the greatest losers of the year were those who had recently bought online companies at a high price, those who operated on corroded business models, those who over-invested, counting on a quick breakthrough to the next levels of digitalization, and those who were imprudent in making promises to investors. Those who made more than one of those mistakes had to painfully retreat their troops like Napoleon from Moscow.

What did this mean for us? The advertising and subscription business grew by 14% at WP Holding in 2022. Our managers set their internal goals even higher, but the problems of the e-commerce world are not indifferent to the advertising market. We made up for it with the travel segment, which grew by as much as 90%, beating all forecasts. EBITDA across the group grew, in line with our expectations, by 21%. It is worth stressing that our full-year revenue exceeded one billion zloty for the first time.

In 2022, we received the "ESG Leaders" award of the of the Warsaw Stock Exchange. Have we deserved it? At all levels:

Environmentally - our server rooms are zero-carbon (which also proved to be our shield against drastically rising energy costs).

Socially - we were particularly pleased with the three Grand Press 2022 awards for the best journalists in Poland, which went to the editors of WP Media. Providing reliable information is an important social function that we consistently fulfill.

In the area of corporate governance, we kept up our efforts to level the playing field for women in business, who make up the majority of our employees and are strongly represented among the holding company's management team.

Since the outbreak of the pandemic, we froze all new significant financial commitments at WP Holding. We tried to use the time of covid-induced acceleration and post-covid deceleration to observe and learn lessons. We updated our vision for the future, distilling it down to the four pillars already familiar to all of us - advertising, subscription, tourism, and consumer finance.

We saw the final months of 2022 as an excellent opportunity to take advantage of revisions to the companies' valuation expectations and make investments of almost PLN 600 million. Including, the first significant acquisitions outside Poland. We truly hope to build the champion of Central and Eastern Europe in the area of domestic tourism. And those hopes stand on a firm footing. Even in the first quarter of 2023, despite the difficult macroeconomic situation, the Szallas team achieved as much as 23% growth in the value of bookings. At the same time, we recognize the limitations of expansion opportunities in the media market in Poland.

The first year of the war in Ukraine is behind us. Since the intervention in the Gulf, we have had time to get used to watching live coverage from the front on TV. However, showing a mother the death of her own son on screen seemed an insurmountable boundary. Nowadays, almost every soldier carries a camera, and swarms of hungry crows hovering over the battlefields were replaced by swarms of camera-equipped drones.

The role and responsibility of the media have become incomparable to anything we have faced before. The war is no longer just fought on the frontline. We acknowledge our great responsibility in building the public sentiment for much-needed support for the defenders of Ukraine's freedom. It was the media's almost live coverage of the atrocities of the armed conflict, that made public opinion press Western European leaders to increase aid. Recognizing the power and responsibility of media, we were the first to take radical action to reduce the possibility of manipulation of public opinion in comments under articles. We constantly monitor emerging attempts and respond accordingly. We want editorial content to be a safe place with reliable information, even if we have to resign from part of the advertising revenue - this is an important part of our ESG strategy. For all ouf us, this war is also a glaring example of what depriving a peaceful society of a free media leads to and the important role it plays in the fight against the degeneration of power.

What lies ahead? Just as in March 2020, 2021, 2022, this March 2023, we find ourselves in a situation where, knowing the results of the first quarter already, it is not easy to describe the coming year. However, we are not overly concerned. The strength of our group is our business diversification and management flexibility, which has allowed us, since the IPO, to maintain average annual EBITDA growth of 20%. The first quarter of 2023 shows that we can make up for the shortfall in advertising revenue targets with the travel segment. Will this be the case for the whole of 2023?

In the baseline scenario, we assume that the economic downturn, which is already visible to the naked eye, will last no longer than the end of the first half of the year. Every sailor knows that the best way to hoist the sails is to stand under the wind.

Best regards,

Jacek Świderski

CEO Wirtualna Polska Holding SA