CYFROWY POLSAT S.A.
Financial Statements
for the year ended 31 December 2020
Prepared in accordance
with International Financial Reporting Standards
as adopted by the European Union
Cyfrowy Polsat S.A.
Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 2
Table of contents
APPROVAL OF THE FINANCIAL STATEMENTS ............................................................................................................................. 4
INCOME STATEMENT ...................................................................................................................................................................... 5
STATEMENT OF COMPREHENSIVE INCOME ................................................................................................................................ 5
BALANCE SHEET .............................................................................................................................................................................. 6
CASH FLOW STATEMENT ............................................................................................................................................................... 8
STATEMENT OF CHANGES IN EQUITY .......................................................................................................................................... 9
NOTES TO THE FINANCIAL STATEMENTS .................................................................................................................................. 10
G ENERAL INFORMATION ................................................................................................................................................................. 10
1. The Company ............................................................................................................................................................. 10
2. Composition of the Management Board of the Company ........................................................................................... 10
3. Composition of the Supervisory Board of the Company ............................................................................................. 11
P RINCIPLES APPLIED IN THE PREPARATION OF FINANCIAL STATEMENTS .............................................................................................. 11
4. Basis of preparation of the financial statements ......................................................................................................... 11
5. Accounting policies ..................................................................................................................................................... 12
6. Determination of fair values ........................................................................................................................................ 27
7. Approval of the Financial Statements ......................................................................................................................... 27
E XPLANATORY NOTES .................................................................................................................................................................... 28
8. Revenue ..................................................................................................................................................................... 28
9. Operating costs ........................................................................................................................................................... 28
10. Gain on investment activities, net ............................................................................................................................... 29
11. Finance costs, net ....................................................................................................................................................... 29
12. Income tax .................................................................................................................................................................. 29
13. EBITDA (unaudited) .................................................................................................................................................... 31
14. Basic and diluted earnings per share ......................................................................................................................... 32
15. Property, plant and equipment .................................................................................................................................... 33
16. Impairment test on goodwill allocated to the “B2C and B2B” cash-generating unit .................................................... 35
17. Other intangible assets ............................................................................................................................................... 36
18. Right-of-use assets ..................................................................................................................................................... 37
19. Investment property .................................................................................................................................................... 38
20. Shares in subsidiaries and associates ........................................................................................................................ 39
21. Deferred distribution fees ............................................................................................................................................ 42
Cyfrowy Polsat S.A.
Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
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22. Other non-current assets ............................................................................................................................................ 42
23. Inventories .................................................................................................................................................................. 43
24. Trade and other receivables ....................................................................................................................................... 43
25. Other current assets ................................................................................................................................................... 44
26. Cash and cash equivalents ......................................................................................................................................... 44
27. Equity .......................................................................................................................................................................... 45
28. Hedge valuation reserve ............................................................................................................................................. 46
29. Loans and borrowings ................................................................................................................................................ 48
30. Issued bonds .............................................................................................................................................................. 49
31. Lease liabilities ........................................................................................................................................................... 50
32. Company as a lessor .................................................................................................................................................. 50
33. Other non-current liabilities and provisions ................................................................................................................. 51
34. Trade and other payables ........................................................................................................................................... 51
O THER NOTES ............................................................................................................................................................................... 53
35. Financial instruments .................................................................................................................................................. 53
36. Capital management ................................................................................................................................................... 67
37. Barter transactions ...................................................................................................................................................... 68
38. Transactions with related parties ................................................................................................................................ 69
39. Litigations .................................................................................................................................................................... 71
40. Other disclosures ........................................................................................................................................................ 72
41. Remuneration of the Management Board ................................................................................................................... 73
42. The Supervisory Board remuneration ......................................................................................................................... 74
43. Important agreements and events .............................................................................................................................. 75
44. Events subsequent to the reporting date .................................................................................................................... 77
45. Judgments, financial estimates and assumptions ...................................................................................................... 77
F INANCIAL RESULTS FOR THE 3 MONTHS ENDED 31 D ECEMBER 2020 AND 31 D ECEMBER 2019 ......................................................... 81
46. Income Statement ....................................................................................................................................................... 81
47. Statement of Comprehensive Income ........................................................................................................................ 81
48. Revenue ..................................................................................................................................................................... 82
49. Operating costs ........................................................................................................................................................... 82
50. Gain on investment activities, net ............................................................................................................................... 83
51. Finance costs, net ....................................................................................................................................................... 83
Cyfrowy Polsat S.A.
Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
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APPROVAL OF THE FINANCIAL STATEMENTS
On 24 March 2021, the Management Board of Cyfrowy Polsat S.A. approved the financial statements of the Cyfrowy Polsat S.A. prepared in accordance with International Financial Reporting Standards as adopted by the European Union, which include:
Income Statement for the period
from 1 January 2020 to 31 December 2020 showing a net profit for the period of:
PLN 405.0
Statement of Comprehensive Income for the period
from 1 January 2020 to 31 December 2020 showing a total comprehensive income for the period of:
PLN 396.7
Balance Sheet as at
31 December 2020 showing total assets and total equity and liabilities of:
PLN 15,575.9
Cash Flow Statement for the period
from 1 January 2020 to 31 December 2020 showing a net increase in cash and cash equivalents amounting to:
PLN 693.3
Statement of Changes in Equity for the period
from 1 January 2020 to 31 December 2020 showing a decrease in equity of:
PLN 242.8
Supplementary Information to the Financial Statements
The financial statements have been prepared in PLN million unless otherwise indicated.
Mirosław Błaszczyk
Maciej Stec
Jacek Felczykowski
Aneta Jaskólska
President of the Management Board
Vice-President of the Management Board
Member of the Management Board
Member of the Management Board
Agnieszka Odorowicz
Katarzyna Ostap-Tomann
Agnieszka Szatan
Member of the Management Board
Member of the
Management Board
Chief Accountant
Warsaw, 24 March 2021
Cyfrowy Polsat S.A.
Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
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Income Statement
for the year ended
Note
31 December 2020
31 December 2019
Revenue
8
2,401.0
2,378.8
Operating costs
9
(1,950.0)
(1,948.5)
Other operating income, net
7.2
2.2
Profit from operating activities
458.2
432.5
Gain on investment activities, net
10
127.7
358.8
Finance costs, net
11
(89.7)
(89.8)
Gross profit for the period
496.2
701.5
Income tax
12
(91.2)
(114.7)
Net profit for the period
405.0
586.8
Basic and diluted earnings per share (in PLN)
14
0.63
0.92
Statement of Comprehensive Income
for the year ended
Note
31 December 2020
31 December 2019
Net profit for the period
405.0
586.8
Items that may not be reclassified subsequently to profit or loss:
Actuarial gain/(loss)
(0.2)
-
Items that may be reclassified subsequently to profit or loss:
Valuation of hedging instruments
28
(8.1)
0.4
Other comprehensive income/(loss), net of tax
(8.3)
0.4
Total comprehensive income for the period
396.7
587.2
Cyfrowy Polsat S.A.
Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
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Balance Sheet - Assets
Note
31 December 2020
31 December 2019
Reception equipment
15
343.1
306.4
Other property, plant and equipment
15
112.8
113.3
Goodwill
16
197.0
197.0
Brands
7.8
7.8
Other intangible assets
17
72.1
63.4
Right-of-use assets
18
23.0
26.4
Investment property
19
36.4
38.5
Shares in subsidiaries and associates
20
13,428.8
13,404.5
includes shares in associates
1,260.2
1,248.8
Non-current deferred distribution fees
21
26.5
32.4
Other non-current assets
22
87.1
21.5
includes derivative instruments
-
0.3
Total non-current assets
14,334.6
14,211.2
Contract assets
160.2
200.8
Inventories
23
46.7
80.5
Trade and other receivables
24
118.7
137.0
Income tax receivables
-
0.3
Current deferred distribution fees
21
64.2
66.0
Other current assets
25
16.1
103.4
includes derivative instruments
-
0.1
Cash and cash equivalents
26
835.4
142.1
Total current assets
1,241.3
730.1
Total assets
15,575.9
14,941.3
Cyfrowy Polsat S.A.
Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
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Balance Sheet - Equity and Liabilities
Note
31 December 2020
31 December 2019
Share capital
27
25.6
25.6
Share premium
27
7,174.0
7,174.0
Other reserves
(8.5)
(0.2)
Retained earnings
3,719.6
3,954.1
Total equity
10,910.7
11,153.5
Loans and borrowings
29
1,387.1
1,330.4
Issued bonds
30
1,959.2
969.2
Lease liabilities
31
19.9
22.8
Deferred tax liabilities
12
84.6
81.2
Other non-current liabilities and provisions
33
6.3
1.3
includes derivative instruments
4.7
-
Total non-current liabilities
3,457.1
2,404.9
Loans and borrowings
29
140.9
662.9
Issued bonds
30
38.7
34.8
Lease liabilities
31
3.7
3.8
Contract liabilities
246.1
247.2
Trade and other payables
34
353.3
384.4
includes derivative instruments
5.5
0.2
Liabilities to shareholders related to dividend for 2019
27
415.7
-
Income tax liability
6.4
46.6
Deposits for equipment
3.3
3.2
Total current liabilities
1,208.1
1,382.9
Total liabilities
4,665.2
3,787.8
Total equity and liabilities
15,575.9
14,941.3
Cyfrowy Polsat S.A.
Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 8
Cash Flow Statement
* Includes impact of hedging instruments, amount paid for costs related to the new financing.
for the year ended
Note
31 December 2020
31 December 2019
Net profit
405.0
586.8
Adjustments for:
226.7
6.9
Depreciation, amortization, impairment and liquidation
9
173.7
176.8
Interest expense
83.6
80.3
Change in inventories
33.8
49.7
Change in receivables and other assets
134.5
27.2
Change in liabilities and provisions
(21.6)
65.5
Change in contract assets
40.6
(21.1)
Change in contract liabilities
(1.1)
10.1
Income tax
12
91.2
114.7
Net increase in reception equipment provided
(170.3)
(144.7)
Dividends income and share in the profits of partnerships
10
(121.5)
(358.8)
Other adjustments
(16.2)
7.2
Cash from operating activities
631.7
593.7
Income tax paid
(125.8)
(135.6)
Interest received from operating activities
1.9
4.2
Net cash from operating activities
507.8
462.3
Received dividends and shares in the profits of partnerships
120.2
364.4
Acquisition of shares in subsidiaries and associates
20
(25.8)
(1,233.1)
Share capital increase in subsidiary and associates
20
-
(19.6)
Acquisition of property, plant and equipment
(19.4)
(10.2)
Acquisition of intangible assets
(29.3)
(16.0)
Loans granted
(80.4)
(3.9)
Other inflows
7.5
7.7
Net cash used in investing activities
(27.2)
(910.7)
Bonds issue (Series C Bonds)
30
1,000.0
-
Bonds issue (Series B Bonds)
-
893.0
Bonds redemption (Series A Bonds)
-
(893.0)
Loans inflows
29
-
1,780.0
Net cash from the Cash Management System Agreement with interest paid
-
(0.1)
Repayment of loans and borrowings
29
(454.4)
(747.6)
Payment of interest on loans, borrowings, bonds and commissions*
(96.8)
(96.0)
Dividend paid
27
(223.8)
(594.8)
Other outflows
(12.3)
(9.2)
Net cash from financing activities
212.7
332.3
Net increase/(decrease) in cash and cash equivalents
693.3
(116.1)
Cash and cash equivalents at the beginning of the year
142.1
258.3
Effect of exchange rate fluctuations on cash and cash equivalents
-
(0.1)
Cash and cash equivalents at the end of the year
835.4
142.1
Cyfrowy Polsat S.A.
Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 9
Statement of Changes in Equity
for the year ended 31 December 2020
Note
Number of shares
Share capital
Share premium
Other
reserves
Retained earnings*
Total
Equity
Balance as at 1 January 2020
639,546,016
25.6
7,174.0
(0.2)
3,954.1
11,153.5
Dividend approved
27
-
-
-
-
(639.5)
(639.5)
Total comprehensive income
-
-
-
(8.3)
405.0
396.7
Hedge valuation reserve
28
-
-
-
(8.1)
-
(8.1)
Actuarial gain/(loss)
-
-
-
(0.2)
(0.2)
Net profit for the period
-
-
-
-
405.0
405.0
Balance as at 31 December 2020
639,546,016
25.6
7,174.0
(8.5)
3,719.6
10,910.7
Statement of Changes in Equity
for the year ended 31 December 2019
Number of shares
Share capital
Share premium
Other
reserves
Retained earnings*
Total
Equity
Balance as at 1 January 2019
639,546,016
25.6
7,174.0
(0.6)
3,962.1
11,161.1
Dividend approved and paid
-
-
-
-
(594.8)
(594.8)
Total comprehensive income
-
-
-
0.4
586.8
587.2
Hedge valuation reserve
-
-
-
0.4
-
0.4
Net profit for the period
-
-
-
-
586.8
586.8
Balance as at 31 December 2019
639,546,016
25.6
7,174.0
(0.2)
3,954.1
11,153.5
* In accordance with the provisions of the Commercial Companies Code, joint-stock companies are required to transfer at least 8% of their annual net profits to reserve capital until its amount reaches one third of the amount of their share capital. As at 31 December 2020 and 31 December 2019, the capital excluded from distribution amounted to PLN 8.5.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
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Notes to the Financial Statements
General information
1. The Company
Cyfrowy Polsat S.A. (‘the Company’, ‘Cyfrowy Polsat’) was incorporated in Poland as a joint stock company. The Company’s shares are traded on the Warsaw Stock Exchange. The Company’s registered head office is located at 4a Łubinowa Street in Warsaw.
The Company operates in Poland as a provider of a paid digital satellite platform under the name of ‘Cyfrowy Polsat’ and paid digital terrestrial television as well as telecommunication services provider.
The Company was incorporated under the Notary Deed dated 30 October 1996.
The Company is the Parent Company of Cyfrowy Polsat S.A. Capital Group (the ‘Group’). As at 31 December 2020 the Group encompasses the Company, Polkomtel Sp. z o.o. and its subsidiaries and joint ventures, Polkomtel Infrastruktura Sp. z o.o., Telewizja Polsat Sp. z o.o. and its subsidiaries and joint ventures, Netia S.A. and its subsidiaries, INFO-TV-FM Sp. z o.o., Interphone Service Sp. z o.o., Teleaudio Dwa Sp. z o.o. Sp.k., Netshare Media Group Sp. z o.o., CPSPV1 Sp. z o.o., CPSPV2 Sp. z o.o., Orsen Holding Limited and its subsidiaries , TVO Sp. z o.o. and its subsidiaries, Mese Sp. z o.o., Esoleo Sp. z o.o. and its subsidiaries and BCAST Sp. z o.o.
The Company as the Parent Company prepared the consolidated financial statements (approved on 24 March 2021). These financial statements should be read in conjunction with the consolidated financial statements.
2. Composition of the Management Board of the Company
- Mirosław Błaszczyk
President of the Management Board,
- Maciej Stec
Vice-President of the Management Board,
- Jacek Felczykowski
Member of the Management Board ,
- Aneta Jaskólska
Member of the Management Board,
- Agnieszka Odorowicz
Member of the Management Board,
- Katarzyna Ostap-Tomann
Member of the Management Board.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
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3. Composition of the Supervisory Board of the Company
- Marek Kapuściński
- Józef Birka
- Marek Grzybowski
- Robert Gwiazdowski
- Aleksander Myszka
- Leszek Reksa
- Tomasz Szeląg
- Paweł Ziółkowski
- Piotr Żak
President of the Supervisory Board,
Member of the Supervisory Board,
Member of the Supervisory Board (from 23 July 2020),
Member of the Supervisory Board,
Member of the Supervisory Board,
Member of the Supervisory Board,
Member of the Supervisory Board,
Member of the Supervisory Board (from 23 July 2020),
Member of the Supervisory Board .
Principles applied in the preparation of financial statements
4. Basis of preparation of the financial statements
Statement of compliance
These financial statements for the year ended 31 December 2020 have been prepared in accordance with the International Financial Reporting Standards as adopted by the EU (IFRS EU). The Company applied the same accounting policies in the preparation of the financial data for the year ended 31 December 2020 and the financial statements for 2019, presented in the annual report, except for the EU-endorsed standards and interpretations which are effective for the reporting periods beginning on or after 1 January 2020.
During the year ended 31 December 2020 the following became effective:
a) Amendments to IFRS 3: Business Combinations – a definition of a business
b) Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform
c) Amendments to IAS 1 and IAS 8: Definition of Material
d) Amendments to References to the Conceptual Framework in IFRS Standards
e) Amendments to IFRS 16: Leases Covid 19-Related Rent Concessions .
A mendments and interpretations apply for the first time in 2020, but do not have material impact on the financial statements of the Company.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
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Standards published but not yet effective:
a) Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2
b) Amendments to IFRS 3 Business Combinations
c) Amendments to IAS 16 Property, Plant and Equipment
d) Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets
e) Annual Improvements 2018-2020 - the amendments contain explanations and clarify the guidelines for recognition and measurement: IFRS 1 Adoption of International Financial Reporting Standards for the first time, IFRS 9 Financial Instruments, IAS 41 Agriculture and examples to illustrate IFRS 16 Leases
f) Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current.
The Company has not early adopted the new or amended standards in preparing these financial statements.
5. Accounting policies
The accounting policies set out below have been applied by the Company consistently to all periods presented in the financial statements.
a) Basis of measurement
The financial statements have been prepared on a historical cost basis, except for derivative financial instruments, which are valued at fair value .
b) Going concern assumption
These financial statements have been prepared assuming that the Company will continue as a going concern in the foreseeable future, not shorter than 12 months from 31 December 2020.
c) Functional currency and presentation currency
The financial data in the financial statements is presented in Polish zloty, rounded to million. The functional currency of the Company is the Polish zloty.
d) Judgments and estimates
The preparation of financial statements in conformity with EU IFRS requires the Management Board to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and costs. Estimates and underlying assumptions are based on historical data and other factors considered as reliable under the circumstances, and their results provide grounds for an assessment of the carrying amounts of assets and liabilities which cannot be based directly on any other sources. Actual results may differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about critical estimates and judgements in applying accounting policies is included in note 45.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 13
e) Comparative financial information
Comparative data or data presented in previously published financial statements has been updated, if necessary, in order to reflect presentational changes introduced in the current period. The changes had no impact on previously reported amounts of net income or equity.
f) Foreign currency
Transactions in foreign currencies are translated to Polish zloty at exchange rates effective on a day of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with the balance sheet date into Polish zloty at the average exchange rate quoted by the National Bank of Poland (“NBP”) for that date. The foreign exchange differences arising on translation of transactions denominated in foreign currencies and from the balance sheet valuation of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. Non- monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the average NBP exchange rate in effect at the date of the valuation. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at the average NBP foreign exchange rate in effect at the date the fair value was determined.
g) Financial instruments
(i) Non-derivative financial instruments
(i) Financial assets
Financial assets are classified in the following measurement categories depending on the business model in which assets are managed and their cash flow characteristics:
• assets measured at amortised cost - if the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and the contractual terms of this financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding;
• financial asset measured at fair value through other comprehensive income – if the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of this financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding;
• assets measured at fair value through profit or loss - all other financial assets.
Financial assets at initial recognition are measured at fair value plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. Trade receivables that do not have a significant financial component are initially measured at their transaction price
Financial assets measured at amortised cost
Financial assets measured at amortised cost include trade and other receivables, loans granted and cash and cash equivalents. Interest income from these financial assets is calculated using the effective interest rate method and is presented within Gain/(loss) on investment activities, net.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 14
Financial assets measured at fair value through profit or loss
Financial assets measured at fair value through profit or loss include derivative instruments not designated as hedging instruments. Financial assets classified to this category are measured at fair value and the subsequent changes in their fair value are recognized in profit or loss. The subsequent changes in their fair value of derivative instruments not designated as hedging instruments are presented in Gain/(loss) on investment activities, net or Finance costs, net depending on the economic substance of hedged transaction.
A financial asset is derecognised when the contractual rights to receive cash flows from the asset have expired or the Company has transferred substantially all the risks and rewards of the asset.
(ii) Financial liabilities
Financial liabilities include financial liabilities measured at amortised cost and financial liabilities measured at fair value through profit or loss.
Financial liabilities are recognised initially at fair value and, in the case of financial liabilities which are not measured at fair value through profit or loss, net of directly attributable transaction costs.
Financial liabilities measured at amortised cost
Financial liabilities measured at amortised cost include loans and borrowings, issued bonds, trade and other payables and lease liabilities. Interest expense related to these financial liabilities is calculated using the effective interest rate method and is presented within Gain/(loss) on investment activities, net or Finance costs, net.
Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at fair value through profit or loss include derivative instruments not designated as hedging instruments. Financial liabilities classified to this category are measured at fair value and the subsequent changes in their fair value are recognized in profit or loss. The subsequent changes in their fair value of derivative instruments not designated as hedging instruments are presented in Gain/(loss) on investment activities, net or Finance costs, net depending on the economic substance of hedged transaction.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the profit or loss.
Accounting policies related to gains and losses on investment activities and finance costs are presented in 5u.
(ii) Derivative financial instruments
Hedge accounting
The Company may use derivative financial instruments such as forward currency contracts, foreign exchange call options, interest rate swaps and cross-currency interest rate swaps to hedge its foreign currency and interest rate risks. The Company may use forward currency contracts and foreign exchange call options as cash flow hedges of its exposure to
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 15
foreign currency risk in forecasted payments as well as interest rate swaps and cross-currency interest rate swaps for its exposure to interest rate risk.
For the purpose of hedge accounting, the Company’s hedges are classified as cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
For cash flow hedges the effective portion of the gain or loss on the hedging instrument is recognized directly as other comprehensive income in the hedge valuation reserve, while any ineffective portion is recognized immediately in the profit or loss.
The amounts recognized within other comprehensive income are transferred from equity to the income statement when the hedged transaction affects profit or loss, such as when the related gain or loss is recognized in finance cost or when a forecast sale occurs.
Gains and losses from the settlement of derivative instruments that are designated as, and are effective hedging instruments, are presented in the same position as the impact of the hedged item. The derivative instrument is divided into a current portion and a non-current portion only if a reliable allocation can be made.
In accordance with IFRS 9, the Company chose to apply hegde accounting requirements as in IAS 39 instead of those included in IFRS 9.
h) Equity
Ordinary shares
Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity.
Preferred shares
Preference share capital is classified as equity, if it is non-redeemable, or redeemable only at the Company’s option, and any dividends are discretionary. Dividends thereon are recognized as distributions within equity.
Costs attributable to the issue and public offer of shares
Costs attributable to a new issue of shares are recognized in equity while costs attributable to a public offering of existing shares are recognized directly in finance costs. These costs relating to both new issue and sale of existing shares are recognized on a pro-rata basis in equity and finance costs.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 16
Share premium
Share premium includes the excess of issue value over the nominal value of shares issued decreased by share issuance- related consulting costs.
Retained earnings
Retained earnings include net result, reserve capital and effect of merger with the Company. Effect of merger is calculated as the difference between assets and liabilities of the merged entity.
In accordance with the provisions of article 396 of the Commercial Companies Code, joint-stock companies are required to transfer at least 8% of their annual net profits to reserve capital until its amount reaches one third of the amount of their share capital. This capital is excluded from distribution, however, it can be utilised to cover accumulated losses.
i) Property, plant and equipment
(i) Property, plant and equipment owned by the Company
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.
Cost includes purchase price of the asset and other expenditure that is directly attributable to the acquisition and bringing the asset to a working condition for its intended use, including initial delivery as well as handling and storage costs. The cost of purchased assets is reduced by the amounts of vendor discounts, rebates and other similar reductions received.
The cost of self-constructed assets and assets under construction includes all costs incurred for their construction, installation, adoption, and improvement as well as borrowing costs incurred until the date they are accepted for use (or until the reporting date for an asset not yet accepted for use). The above cost also may include, if necessary, the estimated cost of dismantling and removing the asset and restoring the site. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
(ii) Investment property
Investment property is defined as a property (land, building, or both) held by the Company to earn rentals or for capital appreciation or both.
Investment property is measured initially at cost. Once recognized all investment property held by the Company are measured using the cost model as set out in IAS 16. This means that the assets are recognized at cost model as presented in (i) above.
Investment property is removed from the balance sheet on disposal or when it is permanently withdrawn from use and no further economic benefits are expected from its disposal.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 17
(iii) Subsequent costs
Subsequent cost of replacing a component of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Company and the amount of the cost can be measured reliably. Replaced item is derecognised. Other property, plant and equipment related costs are recognized in profit and loss as incurred.
(iv) Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment.
Land is not depreciated.
The estimated useful lives for the current and comparative period are as follows:
Buildings and structures
2-61
Years
Reception equipment
2 or 3 or 5
Years
Technical equipment and machinery
2-22
Years
Vehicles
2-10
Years
Other
2-26
Years
Depreciation methods, useful lives and residual values of material assets are reviewed at each financial year-end and adjusted if appropriate.
(v) Leased assets
Assets used by the Company under lease, tenancy, rental or similar contracts which meet lease definition, are classified separately in the balance sheet as right-of-use assets.
Equipment that is provided to customers under operating lease agreements are recognized within non-current assets (Reception equipment in the balance sheet) and depreciated as described in point (iv). The set-top boxes are depreciation over a period that exceeds the period the lease agreements are entered into.
Carrying amounts of reception equipment and other items of property, plant and equipment as well as right-of-use assets may be reduced by impairment losses whenever there is uncertainty as to those assets’ revenue generating potential or their future use in the Company’s operations. The accounting policies relating to impairment are presented in note 5n.
Detailed accounting policies related to lease contracts are described in point 5v.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 18
j) Intangible assets
(i) Goodwill
Goodwill represents the excess of the sum of consideration transferred and payable, the amount of non-controlling interest in the acquiree and the fair value as at the date of acquisition of any previously held equity interest in the acquiree over the fair value of the identifiable net assets acquired.
Goodwill is presented at purchase price less accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if possible impairment is indicated. Goodwill is allocated to acquirer’s cash-generating units for the purpose of testing for impairment. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
(ii) Other intangible assets
The Company capitalizes costs of IT software internally generated, including employee-related expenses, directly resulting from generating and preparing an asset to be capable of operating, if the Company is able to demonstrate: the technical feasibility of completing the intangible asset so that it will be available for use or sale; its intention to complete the intangible asset and use or sell it; its ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits, the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; its ability to measure reliably the expenditure attributable to the intangible asset during its development.
Other intangible assets acquired by the Company are stated at cost less accumulated amortization and impairment losses.
Subsequent expenditure on existing intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in the profit or loss as incurred.
Amortization is based on the cost of an asset less its residual value. Amortization is recognized in profit or loss on a straight- line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.
The estimated useful lives for respective intangible assets groups are as follows:
• Computer software: 2 – 15 years,
• Other: 2 – 7 years.
k) Shares in subsidiaries and associates
Shares in subsidiaries and associates are measured at cost less impairment losses. Accounting principles relating to impairment testing are presented in note 5n.
Subsidiaries are entities controlled by the Company. Associates are all entities over which the Company has significant influence but not control or joint control, over the financial and operating policies. This is generally the case where the Company holds between 20% and 50% of the voting rights.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 19
l) Inventories
Inventories are measured at the lower of cost or net realizable value. Cost of acquisition or production cost of inventories is determined by using the weighted average cost of acquisition or production cost of inventory.
The cost of inventories includes purchase price, costs relating directly to the acquisition and the costs related to preparing the inventory for use or sale.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. In the case of set-top boxes, mobile phones, modems and tablets, which under the business model applied by the Company are sold below cost, the loss on the sale is recorded when transferred to the customer.
The Company creates an allowance for slow-moving or obsolete inventories.
m) Settlements concerning data transfer purchases
Settlements concerning data transfer purchases are recognized in the nominal value upon payments made. The costs are recognized in the income statement based on actual usage of data transmission and contractual. Payments, which will be settled after 12 months from the balance sheet date are presented as other non-current assets.
n) Impairment of assets
(i) Financial assets measured at amortised cost
The Company measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables and contract assets. The trade receivables are assessed for impairment collectively in groups that share similar credit risk characteristics. The expected credit losses are estimated based on historical pattern for overdue receivables collection adjusted with currently available forward-looking information. The credit risk characteristics of contract assets correspond to the credit risk characteristics of trade receivables for a particular type of contract.
The Company considers financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full.
The Company considers a financial asset to be credit impaired when events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred, including significant financial difficulty of the debtor or a breach of contract, such as a default or past due event.
A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
(ii) Non-financial assets
The carrying amounts of non-financial assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of intangible assets which are not yet ready for use is assessed at each financial year-end.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 20
The Company considers on annual basis whether there are indicators that investments in subsidiaries suffered any impairment (i.a. value of net assets). If so, then the impairment test is performed and the recoverable amount of the investment is estimated based on value-in-use calculations.
An impairment loss is recognized when the carrying amount of an asset or a cash-generating unit is greater than its recoverable amount. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Impairment losses are recognized in the income statement. An impairment loss for a cash-generating unit is initially recognized as a decrease of goodwill assigned to this unit (group of units), then it proportionally reduces the carrying amount of other assets from this unit (group of units).
The recoverable amount of an asset or a cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
In the case of assets that do not generate independent cash flows, the value in use is estimated for the smallest identifiable cash-generating unit to which the asset belongs.
An impairment loss for goodwill cannot be reversed. As for other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss other than that in respect of goodwill is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
o) Employee benefits
(i) Defined contribution program
The Company is obliged, under applicable regulations, to collect and remit the contribution to the state pension fund. These benefits, according to IAS 19 Employee Benefits represent state plans and are classified as defined contribution plans. Therefore, the Company’s obligations for each period are estimated as the amount of contributions to be remited for a given period.
(ii) Defined benefit program – retirement benefits
The Company is obliged to pay retirement benefits calculated in accordance with the relevant provisions of the Polish labour code. The minimum retirement benefit is as per the labour code provisions at the moment of payment.
The calculation is carried out using the Projected Unit Credit Method. Employee rotation is estimated based on historical experience and forecasts of future employment levels.
Changes in the value of the retirement benefit provision are recognized in the income statement. Actuarial gains and losses are recognized in the equity, in other comprehensive income in full in the period they originated.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 21
(iii) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are recognized as an expense as the related service is provided.
The Company recognizes a liability and charges the income statement for the amounts expected to be paid under short-term bonuses, if the Company has a legal or constructive obligation to make such payments as a result of past services provided by the employees and the obligation can be estimated reliably.
p) Provisions
A provision is recognized when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Where the effect of the time value of money is material, the Company discounts the provision, using a pre-tax discount rate that reflects current market assessments of the time value of money and those risks specific to the component of the liability.
Certain disclosures may not be included in these financial statements as they relate to sensitive information.
Warranty provision
A warranty provision is recognized when products or goods, for which the warranty was granted, are sold. The amount of the provision is based on historical warranty data and on a weighted average of all possible outflows connected with warranty claims against their associated probabilities.
q) Contingent liabilities
A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events, but its amount cannot be estimated reliably or it is not probable that there will be an outflow of resources embodying economic benefits.
A contingent liability is disclosed in the financial statements unless the possibility of an outflow of resources embodying economic benefits is remote.
Unless the possibility of any outflow in settlement is remote, the Company discloses for each class of contingent liability at the end of the reporting period a brief description of the nature of the contingent liability and, where practicable:
- an estimate of its financial effect;
- an indication of the uncertainties relating to the amount or timing of any outflow and
- the possibility of any reimbursement.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 22
r) Revenue
Revenue, which excludes value added tax, returns, trade discounts and volume rebates, represents the gross inflow of economic benefit from Company’s operating activities. Revenue is measured at the transaction prices of the consideration received or receivable. The Company’s main sources of revenue are recognized as follows:
(a) Retail revenue consists primarily of subscription fees paid by our pay digital television contract customers and our contract customers for telecommunication services. Retail revenue also includes received contractual penalties related to terminated agreements which are recognized when the contract is terminated and revenue from the rental of reception equipment. Revenue from above mentioned services is recognized as these services are provided .
Revenue from the rental of reception equipment and activation fees are recognized on a straight-line basis over the minimum base period of the subscription contract.
Revenues from prepaid mobile telephone services are recognized in profit or loss once the prepaid credit is utilised or forfeited.
(b) Wholesale revenue consists of revenue from the sale of broadcasting and signal transmission, advertising and sponsorship revenue, revenue from the sale of licenses, sublicenses and property rights and interconnect revenue.
Wholesale revenue is recognized, net of any discount given, when the services are provided.
(c) Revenue from sale of equipment is measured at the fair value of the consideration received or receivable, in case of multi-element contracts after the allocation of the transaction price based on the standalone selling price, net of discounts, rebates and returns. Revenue from the sale of goods is recognized in profit or loss when the significant risks and rewards of ownership have been transferred to the customer.
(d) Other revenue is recognized, net of any discount given, when the relevant goods or service are provided.
The Company’s process for revenue recognition from multi-element contracts consists of:
a) assessment of all goods and services provided to the client under the contract and identifying separate performance obligations in that contract
b) determining and allocating the transaction prices to separate performance obligations in the contract; the allocation is based on the reference to their relative standalone selling prices that could be obtained if the promised goods and services were sold individually in a separate transaction.
s) Distribution fees
Commissions for distributors for registering new subscribers and for retention of existing subscribers are recognized during the minimum basic period of the subscription agreement and presented in the income statement in Distribution, marketing, customer relation management and retention costs
Turnover commissions for concluding a certain number of subscription contracts are recognized in the income statement as they are due.
Commissions for distributors which will be settled within the period of 12 months after the balance sheet date are presented as current assets, however, the commissions, which will be settled after the 12-month period from the balance sheet date, are presented as non-current assets.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 23
t) Revenues and costs of barter transactions
Revenues from barter transactions for dissimilar services or goods are recognized when the services are rendered or goods are delivered. Programming licenses, products or services are expensed or capitalized when received or used. The Company recognizes barter transactions based on the estimated fair value of the programming licenses, products or services.
u) Gains and losses on investment activities and finance costs
Gains and losses on investment activities income includes interest income on funds invested, interest expenses (including interest on lease liabilities but other than interest expenses on borrowings), dividends income, share in the profits of partnerships , net foreign currency gains/losses, and results on completed forward exchange contracts and call options related to investment activities, impairment losses recognized on financial assets. Interest income and expense (other than interest expense on borrowings) is recognized as it accrues in profit or loss using the effective interest method. Dividends income is recognized in profit or loss on the date that the Company’s right to receive payment is established, with the exception of advance dividend shown as other liabilities, if there is a likelihood of the return on the basis of the final distribution of financial results of the subsidiaries. Share in the profits of partnerships are recognized once unconditional right to the division of these profits is gained. Share in the losses of partnerships are recognized in accordance with the partners’ agreements.
Finance costs comprise interest expense on borrowings (including bank loans and issued bonds), foreign exchange gains/losses on bank loans and issued bonds, realization and valuation costs of hedging instruments and instruments not under hedge accounting related to finance activities, bank and other charges on borrowings as well as guarantee fees resulting from the indebtedness. Borrowing costs are recognized in profit or loss using the effective interest method.
v) Leasing
Company as a lessor
Agreements which meet the lease definition are classified as finance lease or operating lease . The main criterion is the extent to which the risks and rewards associated with the leased asset are transferred between the Company and the lessee.
Similarly to agreements in which the Company acts as a lessee, the Company as a lessor also determines for each agreement: commencement date, lease term, lease payments and interest rate. At the commencement date lessor accounts for the finance lease by:
• excluding carrying amount of the underlying asset;
• recognizing net investment in the lease;
• recognizing selling profit or loss in profit and loss statement (if applicable).
For operating leases, the Company recognizes revenue in profit and loss statement on a straight line basis.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 24
Company as a lessee
(i) Assets
Assets used under agreements which meet the lease definition are recognized as right-of-use assets and lease liabilities representing the Company’s obligation to make payments for the underlying assets on the day when the leased assets are available for use by the Company.
At the commencement date, the right-of-use assets are measured at cost and consist of the following :
• the amount of the initial measurement of the lease liability;
• any lease payments made at or before the commencement date, less any lease incentives received;
• any initial direct cost incurred by the lessee;
• an estimate of costs of dismantling, removing and restoring the underlying asset and/or the site where it is located.
After the commencement date, the right-of-use assets are measured at cost less accumulated depreciation, accumulated impairment losses and adjusted for remeasurement of the lease liability resulting from reassessment or lease modification which does not require recognition of a separate lease component.
Right-of-use assets are depreciated on a straight-line basis over the shorter of: the term of the lease agreement or the useful life of the underlying asset. If the Company is reasonably certain that ownership of the underlying asset will be transferred to the lessee by the end of the lease term – then the right-of-use asset shall be depreciated from the commencement date to the end of its useful life.
The Company depreciates the right-of-use assets as follows:
• office space and other premises: 3-13 years,
• points of sale premises: 2-4 years.
• vehicles: 4-5 years.
Right-of-use assets are subject to impairment based on the accounting policies as presented in note 5n.
(ii) Liabilities
At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• the exercise price of purchase option if the lessee is reasonably certain to exercise that option;
• payments of penalties for terminating the lease (understood as any economic factors discouraging the Company from terminating the contract), if the lease term reflects that the lessee will exercise the option to terminate the lease;
• amounts expected to be payable by the lessee under residual value guarantees.
Lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. Otherwise the lessee’s incremental borrowing rate is used.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 25
After the commencement date, the Company measures the lease liability by:
• increasing the carrying amount to reflect interest on the lease liability;
• reducing the carrying amount to reflect the lease payments made;
• remeasuring the carrying amount to reflect any reassessment or lease modifications, e.g. change in the lease term or the amount of future lease payments.
Interest expenses on lease liabilities are recognized in profit or loss over the term of the lease.
w) Taxation
Income tax expense/benefit for the year comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in other comprehensive income.
Current tax is the tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
The Company does not recognize deferred tax liability for taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements when the Company is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax is recognized using the balance sheet method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred taxes are measured based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, respectively, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be partly or wholly realised. When not recognized deferred tax asset becomes recoverable, it is recognised to the extent that it has become probable that future taxable profits will allow the deferred tax assets to be recovered.
The Company recognizes a deferred tax asset used to carry over unused tax losses to the extent that it is probable that the future taxable profits will be available and unused tax losses may be utilized. While assessing whether the future taxable profits available will be sufficient, the Company takes into account inter alia forecasted future tax revenues
Deferred tax assets and liabilities are offset by the Company as criteria for offsetting from IAS 12 are fulfilled.
x) Earnings per share
The Company presents basic and diluted earnings per share for its ordinary and preference shares. Basic earnings per share are calculated by dividing the period’s profit or loss from continuing operations attributable to ordinary and preference shareholders of the Company by the weighted average number of ordinary and preference shares outstanding during the period. Diluted earnings per share are calculated by dividing the period’s profit or loss from the continued operations attributable to ordinary and preference shareholders by the weighted average number of ordinary and preference shares adjusted for all potentially dilutive ordinary and preference shares.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 26
y) Segment reporting
The Company operates in the services to individual and business customers segment which relates to the provision of services to the general public, including digital television transmission signal, mobile services, the Internet access services, the mobile TV services and the online TV services.
The Company conducts its operating activities in Poland.
Further information on segments is presented in the consolidated financial statements of the Group.
z) Cash flow statement
Cash and cash equivalents in the cash flow statement are equal to cash and cash equivalents presented in the balance sheet.
The purchase of reception equipment provided to clients under operating lease contracts is classified in the cash flow statement in operating activities. The purchase and sales of reception equipment are classified in the cash flow statement in operating activities and presented as “Net disposals/(additions) in reception equipment provided under operating lease”.
Purchases of property, plant and equipment or intangible assets are presented in their net amount (net of VAT).
aa) Business combinations among entities under common control
In principle, the issues relating to acquisitions and business combinations are regulated by IFRS 3 “Business combinations”. However, transactions under common control are excluded from the scope of this standard. The situation in which a given transaction or business phenomenon that require recognizing in financial statements prepared in accordance with IFRS are not regulated by the provisions of the individual standards is regulated by the provisions of IAS 8, points 10-12. These provisions put an entity which prepares its financial statements in accordance with IFRS under an obligation to determine an accounting policy and to use it on a consistent basis for similar transactions.
The Company decided to apply the predecessor accounting method to account for the combination of entities that are under common control. This method is based on the assumption that the entities combining were, both before and after the transaction, controlled by the same shareholder and, therefore, the financial statements reflect the continuity of joint control.
The predecessor accounting method guidelines for the merger of the parent company with its subsidiaries are as follow:
a) Assets and liabilities are not adjusted to reflect fair values as at the merger date. Instead, the acquirer recognizes in its financial statements assets and liabilities in the amount as recognized in the financial statements of the predecessor. “Predecessor values” are the carrying amounts of the merged subsidiary, which were recognized in the consolidated financial statements of the parent company. These amounts include the goodwill on acquisition of shares in a subsidiary recognized in the consolidated financial statements of the parent company.
b) Intercompany transactions and balances between the merging entities are eliminated.
c) Goodwill other than already recognized in the consolidated financial statements of the parent company is not recognized.
d) Share capital of the combined entity is the share capital of the acquiring entity. Share capital of a predecessor is eliminated.
e) Other elements of predecessor’s equity are added to the relevant items of the acquiring company’s equity. The
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 27
difference between the value of net assets and payment is recognized in the Retained earnings.
Pursuant to the predecessor accounting method, the Company recognizes in its financial statements the assets and liabilities of the acquired subsidiary at their carrying amounts as recognized in the consolidated financial statements of the Group.
The Company recognized business combinations under common control prospectively from the date of the merger, i.e. standalone financial statements of the Company will include the assets, liabilities, income, costs and cash flows of acquired entities from the date of the legal merger. Comparative data will remain unchanged.
6. Determination of fair values
A number of accounting principles and disclosures require the determination of fair value for both financial and non-financial assets and liabilities. The methods for determining fair values are described below. In justified cases, further information on methods of fair value measurement is described in the appropriate notes specific to that asset or liability.
(i) Derivatives
The fair value of derivatives is calculated based on their quoted closing bid price at the balance sheet date or, in the lack thereof, other inputs that are observable for the asset or liability, either directly (i. e. as prices) or indirectly (i. e. derived from prices). In the second case, the fair value of derivatives is estimated as the present value of future cash flows, discounted using the market interest rate at the reporting date. Information on the structure of Polish and eurozone interest rates and Polish złoty exchange rate are used in order to estimate future cash flows and market interest rate.
(ii) Non-derivative financial assets
The fair value of non-derivative financial asset for disclosure purposes is estimated as the present value of future cash flows discounted using a market interest rate as at the balance sheet date.
(iii) Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on liabilities’ quoted closing bid price at the balance sheet date or, in the lack thereof, estimated on the present value of future principal and interest cash flows, discounted using the market interest rate at the reporting date. Market interest rate is estimated as interbank interest rate for a given currency zone (WIBOR, EURIBOR) plus a margin regarding the Company’s credit risk . A market interest rate for a lease contract is estimated based on interest rates for similar lease contracts.
7. Approval of the Financial Statements
These financial statements were approved for publication by t he Management Board on 24 March 2021.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 28
Explanatory notes
8. Revenue
for the year ended
31 December 2020
31 December 2019
Retail revenue
2,194.0
2,190.4
Wholesale revenue
114.7
101.0
Sale of equipment
22.1
22.2
Other revenue
70.2
65.2
Total
2,401.0
2,378.8
Retail revenue mainly consists of pay-TV, telecommunication services , revenue from rental of reception equipment and contractual penalties related to terminated agreements .
9. Operating costs
for the year ended
Note
31 December 2020
31 December 2019
Content costs
771.5
727.1
Technical costs and costs of settlements with telecommunication operators
461.8
488.6
Distribution, marketing, customer relation management and retention costs
313.8
341.0
Depreciation, amortization, impairment and liquidation
173.7
176.8
Salaries and employee-related costs
a)
121.9
121.7
Cost of equipment sold
18.8
21.2
Cost of debt collection services and bad debt allowance and receivables written off
6.3
11.8
Other costs
82.2
60.3
Total
1,950.0
1,948.5
a) Salaries and employee-related costs
for the year ended
31 December 2020
31 December 2019
Salaries
102.7
102.5
Social security contributions
15.2
14.8
Other employee-related costs
4.0
4.4
Total
121.9
121.7
Average headcount of non-production employees*
for the year ended
31 December 2020
31 December 2019
Employment contracts (full-time equivalents)
811
789
* excluding workers who did not perform work in the reporting period due to long-term absences
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 29
10. Gain on investment activities, net
for the year ended
31 December 2020
31 December 2019
Dividends
65.7
299.5
Share in the profits of partnerships
55.8
59.3
Other
6.2
-
Total
127.7
358.8
11. Finance costs, net
for the year ended
31 December 2020
31 December 2019
Interest expense on loans and borrowings
41.7
34.2
Interest expense on issued bonds
44.0
41.0
Valuation and realization of hedging instruments
1.8
0.6
Cumulative catch-up
(7.4)
-
Guarantee fees
8.2
5.0
Bank and other charges
1.4
9.0
Total
89.7
89.8
12. Income tax
(i) Income tax in the income statement
for the year ended
31 December 2020
31 December 2019
Corporate income tax
85.9
127.2
Change in deferred income tax in the income statement
5.3
(12.5)
Income tax expense in the income statement
91.2
114.7
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 30
for the year ended
Change in deferred income tax
31 December 2020
31 December 2019
Receivables and other assets
(3.3)
4.1
Liabilities
4.8
(17.7)
Deferred distribution fees
(1.5)
(2.3)
Tangible and intangible non-current assets
5.3
3.5
Other
-
(0.1)
Change in deferred income tax – total
5.3
(12.5)
(ii) Income tax recognized in other comprehensive income
for the year ended
31 December 2020
31 December 2019
Change in deferred income tax on hedge valuation
(1.9)
0.1
Income tax expense recognized in other comprehensive income - total
(1.9)
0.1
(iii) Effective tax rate reconciliation
for the year ended
31 December 2020
31 December 2019
Profit before income tax
496.2
701.5
Profit before tax multiplied by the statutory tax rate in Poland of 19%
94.3
133.3
Dividend received from subsidiaries
(12.5)
(56.9)
Other
9.4
38.3
Tax charge for the year
91.2
114.7
Effective tax rate
18.4%
16.4%
(iv) Deferred tax assets
31 December 2020
31 December 2019
Liabilities
48.8
51.9
Tangible and intangible non-current assets
0.1
0.9
Receivables and other assets
23.7
30.6
Total deferred tax assets
72.6
83.4
Offsetting of deferred tax liabilities and deferred tax assets
(72.6)
(83.4)
Deferred tax assets in the balance sheet
-
-
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 31
(v) Deferred tax liabilities
31 December 2020
31 December 2019
Receivables and other assets
43.1
53.3
Deferred distribution fees
17.2
18.7
Tangible and intangible non-current assets
78.4
73.9
Liabilities
18.5
18.7
Total deferred tax liabilities
157.2
164.6
Offsetting of deferred tax liabilities and deferred tax assets
(72.6)
(83.4)
Deferred tax liabilities in the balance sheet
84.6
81.2
The tax authorities may at any time inspect the books and records within 5 years from the end of the year when a tax declaration was submitted, and may impose additional tax assessments with penalty interest and penalties. Furthermore, on 15 July 2016 provisions of General Anti-Avoidance Rule (GAAR) were introduced, which aim at preventing establishing and using artificial legal arrangements with tax savings as its principal purpose. Frequent amendments in the tax laws and contradicting legal interpretations among the tax authorities result in uncertainties and lack of consistency in the tax system, which in fact lead to difficulties in the judgement of the tax consequences in the foreseeable future.
13. EBITDA (unaudited)
EBITDA (earnings before interest, taxes, depreciation, amortization, impairment and liquidation) presents the Company’s key measure of earnings performance. The level of EBITDA measures the Company’s ability to generate cash from recurring operations, however it is neither a measure of liquidity nor cash level. The Company defines EBITDA as operating profit adjusted by depreciation, amortization, impairment and liquidation. EBITDA is not an IFRS EU measure, and as such can be calculated differently by other entities.
for the year ended
31 December 2020
31 December 2019
Net profit for the period
405.0
586.8
Income tax (see note 12)
91.2
114.7
Gain on investment activities, net (see note 10)
(127.7)
(358.8)
Finance costs, net (see note 11)
89.7
89.8
Depreciation, amortization, impairment and liquidation* (see note 9)
173.7
176.8
EBITDA (unaudited)
631.9
609.3
COVID costs
8.1
-
EBITDA adjusted (unaudited)
640.0
609.3
* depreciation, amortization, impairment and liquidation comprise depreciation and impairment of property, plant and equipment, amortisation and impairment of intangible assets and right-of-use assets as well as net book value of disposed property, plant, equipment and intangible assets
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 32
14. Basic and diluted earnings per share
As at the balance sheet date, the Company did not have financial instruments that could have a dilutive effect, therefore the Company’s diluted earnings per share are equal to basic earnings per share.
for the year ended
31 December 2020
31 December 2019
Net profit for the period
405.0
586.8
Weighted average number of ordinary and preference shares in the year
639,546,016
639,546,016
Earnings per share in PLN (not in million)
0.63
0.92
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 33
15. Property, plant and equipment
Reception equipment
Land
Buildings and structures
Technical equipment and machinery
Vehicles
Other
Tangible assets under construction
Advances for tangible assets under construction
Other property, plant and equipment
Cost
Cost as at 1 January 2020
1,302.5
15.5
106.4
181.3
1.2
20.1
7.5
-
332.0
Additions
170.8
-
1.6
9.4
-
2.5
0.8
0.2
14.5
Transfer from assets under construction
-
-
-
2.6
-
0.1
(2.7)
-
-
Disposals
(75.9)
-
-
(12.6)
(0.4)
(0.3)
-
-
(13.3)
Cost as at 31 December 2020
1,397.4
15.5
108.0
180.7
0.8
22.4
5.6
0.2
333.2
Accumulated impairment losses as at 1 January 2020
4.3
-
-
0.3
-
-
-
-
0.3
Decrease
(0.5)
-
-
-
-
-
-
-
-
Accumulated impairment losses as at 31 December 2020
3.8
-
-
0.3
-
-
-
-
0.3
Accumulated depreciation
Accumulated depreciation as at 1 January 2020
991.8
-
49.2
151.0
1.1
17.1
-
-
218.4
Additions
133.6
-
4.4
9.2
0.1
1.3
-
-
15.0
Disposals
(74.9)
-
-
(12.6)
(0.4)
(0.3)
-
-
(13.3)
Accumulated depreciation as at 31 December 2020
1,050.5
-
53.6
147.6
0.8
18.1
-
-
220.1
Carrying amount
As at 1 January 2020
306.4
15.5
57.2
30.0
0.1
3.0
7.5
-
113.3
As at 31 December 2020
343.1
15.5
54.4
32.8
-
4.3
5.6
0.2
112.8
The Company recognized utilisation of an impairment loss on items of property, plant and equipment. The impairment allowance is recognized in ‘depreciation, amortization, impairment and liquidation’.
Property, plant and equipment are subject of collateral described in detail in the Report of the Management Board on the activities of the Company in note 4.4.5
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 34
Reception equipment
Land
Buildings and structures
Technical equipment and machinery
Vehicles
Other
Tangible assets under construction
Other property, plant and equipment
Cost
Cost as at 1 January 2019 (IAS 17 basis)
1,228.4
15.5
103.9
186.3
2.7
20.1
4.3
332.8
Right-of-use reclassification
-
-
-
-
(1.4)
-
-
(1.4)
Cost as at 1 January 2019 (IFRS 16 basis)
1,228.4
15.5
103.9
186.3
1.3
20.1
4.3
331.4
Additions
145.2
-
1.7
5.6
0.1
0.1
5.9
13.4
Transfer from assets under construction
-
-
0.8
1.9
-
-
(2.7)
-
Disposals
(71.1)
-
-
(12.5)
(0.2)
(0.1)
-
(12.8)
Cost as at 31 December 2019 (IFRS 16 basis)
1,302.5
15.5
106.4
181.3
1.2
20.1
7.5
332.0
Accumulated impairment losses as at 1 January 2019
4.3
-
-
0.3
-
-
-
0.3
Recognition
1.0
-
-
-
-
-
-
-
Utilisation
(1.0)
-
-
-
-
-
-
-
Accumulated impairment losses as at 31 December 2019
4.3
-
-
0.3
-
-
-
0.3
Accumulated depreciation
Accumulated depreciation as at 1 January 2019 (IAS 17 basis)
925.0
-
45.0
153.9
1.4
15.8
-
216.1
Right-of-use reclassification
-
-
-
-
(0.2)
-
-
(0.2)
Accumulated depreciation as at 1 January 2019 (IFRS 16 basis)
925.0
-
45.0
153.9
1.2
15.8
-
215.9
Additions
136.1
-
4.2
9.6
0.1
1.4
-
15.3
Disposals
(69.3)
-
-
(12.5)
(0.2)
(0.1)
-
(12.8)
Accumulated depreciation as at 31 December 2019 (IFRS 16 basis)
991.8
-
49.2
151.0
1.1
17.1
-
218.4
Carrying amount
As at 1 January 2019 (IAS 17 basis)
299.1
15.5
58.9
32.1
1.3
4.3
4.3
116.4
As at 1 January 2019 (IFRS 16 basis)
299.1
15.5
58.9
32.1
0.1
4.3
4.3
115.2
As at 31 December 2019 (IFRS 16 basis)
306.4
15.5
57.2
30.0
0.1
3.0
7.5
113.3
The Company recognized utilisation of an impairment loss on items of property, plant and equipment. The impairment allowance is recognized in ‘depreciation, amortization, impairment and liquidation’.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 35
16. Impairment test on goodwill allocated to the “B2C and B2B” cash-generating unit
The Company recognized goodwill in the amount of PLN 197.0 on the acquisition of M.Punkt Holdings Ltd. and Redefine Sp. z o.o. in the financial statements and allocated them to the “B2C and B2B services” cash-generating unit. “B2C and B2B services” cash-generating unit is equivalent to the Company. Upon merger of M.Punkt Holdings and Redefine with the Company the amount of goodwill recognized in consolidated financial statements was transferred to these financial statements (see accounting policy in note 5aa).
Goodwill was tested for impairment as at 31 December 2020. The impairment test did not indicate impairment.
The impairment test was based on the recoverable amounts of the cash generating unit to which the goodwill has been allocated. The recoverable amount of the cash-generating unit is determined based on the value-in-use calculations. The Company tests the total carrying amount of the cash-generating unit and any impairment identified is recognized in the profit or loss immediately with respect to goodwill first and is not subsequently reversed. If goodwill is fully impaired the remaining amount of the impairment loss is allocated to other assets of the cash-generating unit on a pro rata basis.
In the annual impairment test performed by the Company as at 31 December 2020 the calculation of value-in-use was based on discounted free cash flows and involved the use of estimates related to cash flow before tax projections based on actual financial business plans covering the 5-year period until 2025. Cash flow projections after 5-year forecast period are estimated using the terminal growth. Terminal growth rate does not exceed the long-term average growth rate for the country in which the Company operates.
The key financial assumptions
The most sensitive key financial assumptions used in the value-in-use calculations of the “B2C and B2B services” cash- generating unit were as follows:
- discount rate
- terminal growth rate used for estimating fee cash flows beyond the period of financial plans
B2C and B2B services
2020
2019
Terminal growth
2%
2%
Discount rate before tax
7.5%
8.2%
Discount rate – the discount rate reflects the estimate made by the management of the risks specific to cash-generating unit, taking into account the time value of money and risks specific to the asset. The discount rate was estimated on the basis of weighted average cost of capital method (WACC) and considered Company’s business environment. WACC considers both debt and equity. Cost of equity is based on the return on investment expected by the Company’s investors while cost of debt is based on the interest bearing debt instruments. Operating segment - specific risk is considered by the estimation of beta. Beta is estimated annually and is based on the market data.
Terminal growth rate – growth rates are based on widely available published market data.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 36
Sensitivity analysis of key financial assumptions
The Company believes that the key assumptions made in testing for impairment of the cash-generating unit as at 31 December 2020 are reasonable and are based on our experience and market forecasts that are published by the industry experts. Management believes that any reasonably possible change in the key assumptions on which the cash-generating unit’s recoverable amount is based would not cause the impairment charge to be recognized.
17. Other intangible assets
Software and licenses
Other
Under development
Total
Cost
Cost as at 1 January 2020
221.2
1.5
23.7
246.4
Additions
5.2
-
22.8
28.0
Transfer from intangible assets under development
11.4
-
(11.4)
-
Disposals
(6.2)
(0.4)
-
(6.6)
Cost as at 31 December 2020
231.6
1.1
35.1
267.8
Accumulated amortization
Accumulated amortization as at 1 January 2020
181.9
1.1
-
183.0
Additions
19.2
0.1
-
19.3
Disposals
(6.2)
(0.4)
-
(6.6)
Accumulated amortization as at 31 December 2020
194.9
0.8
-
195.7
Carrying amounts
As at 1 January 2020
39.3
0.4
23.7
63.4
As at 31 December 2020
36.7
0.3
35.1
72.1
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 37
Software and licenses
Other
Under development
Total
Cost
Cost as at 1 January 2019
207.8
1.3
23.6
232.7
Additions
4.2
-
14.0
18.2
Transfer from intangible assets under development
13.7
0.2
(13.9)
-
Disposals
(4.5)
-
-
(4.5)
Cost as at 31 December 2019
221.2
1.5
23.7
246.4
Accumulated amortization
Accumulated amortization as at 1 January 2019
168.6
1.0
-
169.6
Additions
17.8
0.1
-
17.9
Disposals
(4.5)
-
-
(4.5)
Accumulated amortization as at 31 December 2019
181.9
1.1
-
183.0
Carrying amounts
As at 1 January 2019
39.2
0.3
23.6
63.1
As at 31 December 2019
39.3
0.4
23.7
63.4
18. Right-of-use assets
Vehicles
Points of sale
premises
Office space and other
premises
Total
Cost
Cost as at 1 January 2020
1.4
0.6
28.5
30.5
Additions
0.1
0.1
0.3
0.5
Disposals
(0.1)
(0.2)
-
(0.3)
Cost as at 31 December 2020
1.4
0.5
28.8
30.7
Accumulated amortization
Accumulated amortization as at 1 January 2020
0.4
0.2
3.5
4.1
Additions
0.2
0.1
3.5
3.8
Disposals
(0.1)
(0.1)
-
(0.2)
Accumulated amortization as at 31 December 2020
0.5
0.2
7.0
7.7
Carrying amount
As at 1 January 2020
1.0
0.4
25.0
26.4
As at 31 December 2020
0.9
0.3
21.8
23.0
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 38
Vehicles
Points of sale
premises
Office space and other
premises
Total
Cost
Cost as at 1 January 2019 (IAS 17 basis)
-
-
-
-
Right-of-use reclassification (transfer from property, plant and equipment)
1.4
-
-
1.4
Implementation of IFRS 16
-
0.4
28.2
28.6
Cost as at 1 January 2019 (IFRS 16 basis)
1.4
0.4
28.2
30.0
Additions
-
0.2
0.3
0.5
Cost as at 31 December 2019 (IFRS 16 basis)
1.4
0.6
28.5
30.5
Accumulated amortization
Accumulated amortization as at 1 January 2019 (IAS 17 basis)
-
-
-
-
Right-of-use reclassification (transfer from property, plant and equipment)
0.2
-
-
0.2
Accumulated amortization as at 1 January 2019 (IFRS 16 basis)
0.2
-
-
0.2
Additions
0.2
0.2
3.5
3.9
Accumulated amortization as at 31 December 2019 (IFRS 16 basis)
0.4
0.2
3.5
4.1
Carrying amount
As at 1 January 2019 (IAS 17 basis)
-
-
-
-
As at 1 January 2019 (IFRS 16 basis)
1.2
0.4
28.2
29.8
As at 31 December 2019 (IFRS 16 basis)
1.0
0.4
25.0
26.4
19. Investment property
2020
2019
Cost
Cost as at 1 January
47.5
47.4
Additions
-
0.1
Cost as at 31 December
47.5
47.5
Accumulated depreciation
Accumulated depreciation as at 1 January
9.0
6.9
Additions
2.1
2.1
Accumulated depreciation as at 31 December
11.1
9.0
Carrying amounts
As at 1 January
38.5
40.5
As at 31 December
36.4
38.5
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 39
20. Shares in subsidiaries and associates
Shares in subsidiaries and associates as at 31 December 2020
Company’s registered office
Activity
Voting rights percentage
Cost and carrying amount
Polkomtel Sp. z o.o.
Konstruktorska 4, Warsaw
telecommunication activities
100%
4,498.7
Telewizja Polsat Sp. z o.o.
Ostrobramska 77, Warsaw
broadcasting and television production
100%
3,899.0
Polkomtel Infrastruktura
Sp. z o.o.**
Konstruktorska 4, Warsaw
telecommunication activities
74.98%
2,293.1
Netia S.A.
Poleczki 13, Warsaw
telecommunication activities
65.98%
1,277.5
Asseco Poland S.A.*
Olchowa 14,
Rzeszów
software activities
22.95%
1,229.2
Interphone Service Sp. z o.o.**
Inwestorów 8,
Mielec
production of set-top boxes
99%
64.0
Orsen Holding Limited
Elia Zammit Street, St.
Julian’s STJ 3155, Malta
holding activities
100%
34.9
Vindix S.A.*
Rzymowskiego 53,
Warsaw
other financial services
46.27%
31.0
INFO-TV-FM Sp. z o.o.**
Łubinowa 4a,
Warsaw
radio and TV activities
73.5%
29.3
Polsat Media Biuro Reklamy Sp. z o.o. Sp.k.**
Ostrobramska 77, Warsaw
media
37.75%
25.2
Teleaudio Dwa Sp. z o.o. Sp.k.**
Al. Stanów Zjednoczonych 61, Warsaw
call center and premium rate services
99%
21.0
TVO Sp. z o.o.
Kielecka 5, Gdynia
retail sales
75.96%
8.4
BCAST Sp. z o.o.
Rakowiecka 41/21, 02-521 Warsaw
telecommunication activities
70.02%
7.5
Esoleo Sp. z o.o. (formerly: Alledo Sp. z o.o.)
Al. Wyścigowa 6, Warsaw
technical services
51.25%
6.9
Netshare Media Group Sp. z o.o.
Ostrobramska 77, Warsaw
advertising activities
100%
2.1
Karpacka Telewizja Kablowa Sp. z o.o.
Warszawska 220,
Radom
dormant
99%
0.9
Polskie Badania Internetu Sp. z o.o.
Al. Jerozolimskie 65/79, Warsaw
web portals activities
4.76%
0.1
Orsen Limited**
Elia Zammit Street, St.
Julian’s STJ 3155, Malta
holding activities
0.2%
0.0
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 40
* shares in associates include shares in Vindix S.A. and Asseco Poland S.A.
** the Company holds directly and indirectly 100% shares
31 December 2019
Additions
Decreases
31 December 2020
Polkomtel Sp. z o.o.
4,498.7
-
-
4,498.7
Telewizja Polsat Sp. z o.o.
3,899.0
-
-
3,899.0
Polkomtel Infrastruktura Sp. z o.o.
2,293.1
-
-
2,293.1
Netia S.A.
1,277.5
-
-
1,277.5
Asseco Poland S.A.
1,217.8
11.4 (a)
-
1,229.2
Interphone Service Sp. z o.o.
64.0
-
-
64.0
Orsen Holding Limited
34.9
-
-
34.9
Vindix S.A.
31.0
-
-
31.0
INFO-TV-FM Sp. z o.o.
29.3
-
-
29.3
Polsat Media Biuro Reklamy Sp. z o.o. Sp. k.
25.2
-
-
25.2
Teleaudio Dwa Sp. z o.o. Sp.k.
21.0
-
-
21.0
TVO Sp. z o.o.
8.4
-
-
8.4
BCAST Sp. z o.o.
-
7.5 (b)
-
7.5
Esoleo Sp. z o.o. (formerly: Alledo Sp. z o.o.)
-
6.9 (c)
-
6.9
Netshare Media Group Sp. z o.o.
2.1
-
-
2.1
Karpacka Telewizja Kablowa Sp. z o.o.
2.4
-
(1.5) (d)
0.9
Polskie Badania Internetu Sp. z o.o.
0.1
-
-
0.1
Orsen Limited
0.0
-
-
0.0
CPSPV1 Sp. z o.o.
0.0
-
-
0.0
CPSPV2 Sp. z o.o.
0.0
-
-
0.0
Mese Sp. z o.o.
0.0
-
-
0.0
Total
13,404.5
25.8
(1.5)
13,428.8
(a) On 31 July 2020 Cyfrowy Polsat purchased from Reddev Investments Limited 184,127 (not in millions) shares of Asseco Poland S.A. for the price of PLN 11.4. Following this transaction, the Company holds a total of 22.95% of Asseco shares.
Company’s registered office
Activity
Voting rights percentage
Cost and carrying amount
CPSPV1 Sp. z o.o.
Łubinowa 4a,
Warsaw
technical services
100%
0.0
CPSPV2 Sp. z o.o.
Łubinowa 4a,
Warsaw
technical services
100%
0.0
Mese Sp. z o.o.
Al.Stanów Zjednoczonych 61a, Warsaw
movie and TV production
100%
0.0
Total
13,428.8
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 41
(b) On 25 March 2020 the Cyfrowy Polsat acquired 69.13% shares in BCAST Sp. z o.o. for the purchase price of PLN 7.4. On 23 December 2020 the Cyfrowy Polsat acquired additional 0,89% shares in BCAST Sp. z o.o. for the purchase price of PLN 0.1. As at 31 December 2020 the Company holds a total of 70.02% of BCAST Sp. z o.o. shares.
(c) On 13 January 2020 the Cyfrowy Polsat acquired 51.25% shares in Alledo Sp. z o.o. for the purchase price of PLN 6.9. On 5 August 2020 the Company’s name was changed to Esoleo Sp. z o.o.
(d) The Company valued the shares at cost, taking into account their impairment.
No impairment on shares in subsidiaries and associates was recognized as at 31 December 2020 (except shares in Karpacka Telewizja Kablowa Sp. z o.o.).
31 December 2018
Additions
Decreases
31 December 2019
Polkomtel Sp. z o.o.
4,498.7
-
-
4,498.7
Telewizja Polsat Sp. z o.o.
3,899.0
-
-
3,899.0
Polkomtel Infrastruktura Sp. z o.o.
2,293.1
-
-
2,293.1
Netia S.A.
1,277.5
-
-
1,277.5
Asseco Poland S.A.
-
1,217.8 (a)
-
1,217.8
Interphone Service Sp. z o.o.
64.0
-
-
64.0
Orsen Holding Limited
34.9
-
-
34.9
Vindix S.A.
-
31.0 (b)
-
31.0
INFO-TV-FM Sp. z o.o.
29.3
-
-
29.3
Polsat Media Biuro Reklamy Sp. z o.o. Sp. k.
25.2
-
-
25.2
Teleaudio Dwa Sp. z o.o. Sp.k.
21.0
-
-
21.0
TVO Sp. z o.o.
4.5
3.9 (c)
-
8.4
Karpacka Telewizja Kablowa Sp. z o.o.
2.4
-
-
2.4
Netshare Media Group Sp. z o.o.
2.1
-
-
2.1
Polskie Badania Internetu Sp. z o.o.
0.1
-
-
0.1
Orsen Limited
0.0
-
-
0.0
CPSPV1 Sp. z o.o.
0.0
-
-
0.0
CPSPV2 Sp. z o.o.
0.0
-
-
0.0
Mese Sp. z o.o.
-
0.0 (d)
-
0.0
Total
12,151.8
1,252.7
-
13,404.5
(a) On 30 December 2019 the Company acquired a significant stake in Asseco Poland S.A. – directly after that transaction the Company held 22.73% of shares.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 42
(b) On 13 June 2019 the Company acquired 40.76% shares in Vindix S.A. for the purchase price of PLN 14.7. On 1 July 2019 share capital increase in Vindix S.A. was registered by the court thus increasing the number of shares held by the Company to 46.27%.
(c) On 30 May 2019 the Company acquired additional 12 shares in TVO Sp. z o.o. for the purchase price of PLN 0.6 thus increasing the number of shares held to 104 shares (i.e. 50.98%). On 9 August 2019 share capital increase in TVO Sp. z o.o. was registered by the court thus increasing the number of shares held by the Company to 51.22%. On 10 February 2020 share capital increase in TVO Sp. z o.o. was registered by the court thus increasing the number of shares held by the Company to 75.96%.
(d) On 24 October 2019 the Company acquired 100% of shares in Mese Sp. z o.o.
No impairment on shares in subsidiaries and associates was recognized as at 31 December 2019.
21. Deferred distribution fees
31 December 2020
31 December 2019
Deferred distribution fees
90.7
98.4
Of which:
Current
64.2
66.0
Non-current
26.5
32.4
Deferred distribution fees include commissions for distributors for contracts effectively concluded with subscribers. These costs are expensed by the Company to profit or loss over the minimum base period of the subscription contracts.
As at 31 December 2020, the balance of distribution fees relating to agreements whose basic period as at the date of signing was more than 12 months amounted to PLN 90.7 (as at 31 December 2019: 98.3 PLN).
22. Other non-current assets
31 December 2020
31 December 2019
Non-current trade receivables*
10.1
14.9
Non-current loans granted
76.6
5.2
Other deferred costs
0.4
1.1
Derivative instruments (IRS) assets (see note 35)
-
0.3
Total
87.1
21.5
*Long-term receivables are denominated in PLN.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 43
23. Inventories
Types of inventories
31 December 2020
31 December 2019
Set-top boxes and disc drives
26.4
44.9
Mobile phones, modems, tablets and laptops
6.9
9.8
Other inventories
13.4
25.8
Total net value
46.7
80.5
Write-downs of inventories
2020
2019
Opening balance
6.2
6.9
Increase
2.6
0.3
Utilisation
(0.5)
(0.8)
Reversal
(0.1)
(0.2)
Closing balance
8.2
6.2
24. Trade and other receivables
31 December 2020
31 December 2019
Trade receivables from related entities
27.5
29.9
Trade receivables from non-related entities
47.4
66.3
Tax and social security receivables
4.5
15.7
Other receivables
39.3
25.1
includes loans granted
18.6
5.7
Total
118.7
137.0
Trade receivables from non-related entities include receivables from individual clients, distributors and others.
Trade receivables by currency
Currency
31 December 2020
31 December 2019
PLN
53.5
81.4
EUR
20.0
14.2
USD
1.4
0.6
Total
74.9
96.2
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 44
Movements in bad debt allowance – short-term and log-term
2020
2019
Opening balance as at 1 January
39.3
36.9
Increase
7.3
9.0
Reversal
(4.7)
-
Utilisation
(20.2)
(6.6)
Closing balance as at 31 December
21.7
39.3
Of which:
Short-term
21.2
38.7
Long-term
0.5
0.6
25. Other current assets
31 December 2020
31 December 2019
Other deferred costs
2.0
93.2
Unbilled revenue
12.5
9.6
Derivative instruments (IRS) assets (see note 35)
-
0.1
Other
1.6
0.5
Total
16.1
103.4
Other deferred costs as at 31 December 2019 comprise mainly deferred costs related to the agreement with Polkomtel Sp. z o.o. for the data transfer services.
26. Cash and cash equivalents
31 December 2020
31 December 2019
Current accounts
343,4
18.0
Deposits*
492,0
124.1
Total
835.4
142.1
* with maturity of up to 3 months from the date of establishing the deposit
The Company places its cash and cash equivalents in banks and financial institutions with reliability proven by ratings awarded by universally recognized agencies Standard & Poor's, Moody's or Fitch, as required by the loan agreement and policies adopted therein. As at 31 December 2020, the largest concentration of funds in one bank was 39%.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 45
Currency
31 December 2020
31 December 2019
PLN
834.9
135.6
EUR
0.3
5.7
USD
0.1
0.7
CHF
0.1
0.1
Total
835.4
142.1
As the Company cooperates with well-established Polish and international banks, the risks relating to deposited cash are considerably limited.
27. Equity
(i) Share capital
Presented below is the structure of the Company’s share capital as at 31 December 2020 and 31 December 2019:
Share series
Number of shares
Nominal value of shares
Type
A
2,500,000
0.1
preference shares (2 voting rights)
B
2,500,000
0.1
preference shares (2 voting rights)
C
7,500,000
0.3
preference shares (2 voting rights)
D
166,917,501
6.7
preference shares (2 voting rights)
D
8,082,499
0.3
ordinary bearer shares
E
75,000,000
3.0
ordinary bearer shares
F
5,825,000
0.2
ordinary bearer shares
H
80,027,836
3.2
ordinary bearer shares
I
47,260,690
1.9
ordinary bearer shares
J
243,932,490
9.8
ordinary bearer shares
Total
639,546,016
25.6
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 46
The shareholders’ structure as at 31 December 2020 and 31 December 2019 was as follows:
Number of shares
Nominal value of shares
% of share capital held
Number of votes
% of voting rights
TiVi Foundation 2 , including through:
298,080,297
11.9
46.61%
457,797,808
55.90%
Reddev Investments Ltd. 1
298,080,287
11.9
46.61%
457,797,788
55.90%
Embud 2 Sp. z o.o. S.K.A. 2
64,011,733
2.6
10.01%
64,011,733
7.82%
Tipeca Consulting Limited 2,3
2,152,388
0.1
0.34%
2,152,388
0.26%
Others
275,301,598
11.0
43.05%
295,001,588
36.02%
Total
639,546,016
25.6
100%
818,963,517
10 0%
1 Reddev Investments Ltd. is an indirect subsidiary of Mr. Zygmunt Solorz.
2 Entity is controlled by Mr. Zygmunt Solorz.
3 the Company under the presumption of the existence of an agreement referred to in Art. 87 Section 1 Item 5 of the Public Offering Act
(ii) Share premium
Share premium includes the excess of issue value over the nominal value of shares issued decreased by share issuance-related consulting costs .
(iii) Retained earnings
On 23 June 2020 the Annual General Meeting of the Company adopted a resolution on the distribution of the Company’s net profit for the financial year 2019 and a part of the profits earned in the previous years for a dividend payout. In accordance with the provisions of the resolution, the dividend amounted to PLN 639.5. The dividend day was scheduled for 15 October 2020 and the dividend payout was made in two tranches as follows:
1) Tranche I: PLN 223.8 on 22 October 2020
2) Tranche II: PLN 415.7 on 11 January 2021.
28. Hedge valuation reserve
On 19 August 2019 the Company concluded interest rate swap transaction with Santander Bank Polska S.A. The transaction exchanges interest payments based on a floating rate WIBOR 3M into interest payments based on a fixed interests rate amounting to 1.3520%.
The transaction was concluded for the period from 30 September 2020 to 30 September 2021. The transaction protects the nominal amount of a bank loan in the amount of PLN 125.
On 11 February 2020 the Company concluded interest rate swap transaction with PKO Bank Polski S.A. The transaction exchanges interest payments based on a floating rate WIBOR 3M into interest payments based on a fixed interests rate amounting to 1.6170%.
The transaction was concluded for the period from 31 December 2020 to 31 March 2023. The transaction protects the nominal amount of a bank loan in the amount of PLN 125.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 47
On 28 February 2020 the Company concluded interest rate swap transaction with BNP Paribas. The transaction exchanges interest payments based on a floating rate WIBOR 3M into interest payments based on a fixed interests rate amounting to 1.1600%.
The transaction was concluded for the period from 30 September 2020 to 31 March 2023. The transaction protects the nominal amount of a bank loan in the amount of PLN 125.
On 6 March 2020 the Company concluded interest rate swap transaction with Santander Bank Polska S.A. The transaction exchanges interest payments based on a floating rate WIBOR 3M into interest payments based on a fixed interests rate amounting to 1.0625%.
The transaction was concluded for the period from 30 September 2020 to 31 March 2023. The transaction protects the nominal amount of a bank loan in the amount of PLN 125.
Impact of hedging instruments valuation on assets and liabilities as at 31 December 2020
IRS
Liabilities
Long-term
(4.7)
Short-term
(5.5)
Total
(10.2)
Impact of hedging instruments valuation on assets and liabilities as at 31 December 2019
IRS
Assets
Long-term
0.3
Short-term
0.1
Liabilities
Short-term
(0.2)
Total
0.2
Impact of hedging instruments valuation on hedge valuation reserve
2020
2019
Balance as at 1 January
(0.2)
(0.6)
Valuation of cash flow hedges
(10.0)
0.5
Deferred tax
1.9
(0.1)
Change for the period
(8.1)
0.4
Balance as at 31 December
(8.3)
(0.2)
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 48
29. Loans and borrowings
Loans and borrowings
31 December 2020
31 December 2019
Short-term liabilities
140.9
662.9
Long-term liabilities
1,387.1
1,330.4
Total
1,528.0
1,993.3
Change in loans and borrowings liabilities
2020
2019
Loans and borrowings as at 1 January
1,993.3
958.6
Term facility loan
-
1,000.0
Revolving facility loan
-
780.0
Repayment of capital
(54.4)
(217.6)
Repayment of revolving facility loan
(400.0)
(530.0)
Repayment of interest and commissions
(45.2)
(31.9)
Cumulative catch-up
(7.4)
-
Interest accrued
41.7
34.2
Loans and borrowings as at 31 December
1,528.0
1,993.3
Amendment and restatement deeds to the Group’s Senior Facilities Agreement
On 27 April 2020, the Company, acting as the agent for the Obligors, and UniCredit Bank AG, London Branch, acting as the agent for the Finance Parties, entered into the Third Amendment and Restatement Deed (the “Third Amendment and Restatement Deed”) to the Senior Facilities Agreement dated 21 September 2015, as amended and restated by the Amendment, Restatement and Consolidation Deed dated 21 September 2015 and the Second Amendment and Restatement Deed dated 2 March 2018, originally entered into between the Company, Polkomtel Sp. z o.o. and selected companies from the Cyfrowy Polsat Group and a consortium of Polish and foreign financial institutions (the “Senior Facilities Agreement”). The Senior Facilities Agreement provided a term facility loan (the “Term Facility Loan”) of up to the maximum amount of PLN 11,500,000,000 (not in million) and a revolving facility loan (the “Revolving Facility Loan”) of up to the maximum amount of PLN 1,000,000,000 (not in million).
The Third Amendment and Restatement Deed, among others, introduced the following amendments:
(i) a change in the final repayment date of the Term Facility Loan and the Revolving Facility Loan (other than any Additional Term Facility Loan and any Additional Revolving Facility Loan) to 30 September 2024;
(ii) a change in the repayment schedule of the Term Facility Loan, so that the repayments originally scheduled for 30 June 2020, 30 September 2020, 31 December 2020 and 31 March 2021 be withheld, and commencing on 30 June 2021 until 30 June 2024, the Company and Polkomtel Sp. z o.o. jointly shall make quarterly repayments of equal amounts, amounting to PLN 200,000,000 (not in million) each;
(iii) amendments relating to the implementation of IFRS 16, in particular an appropriate increase in the level of specified financial covenants by 0.3:1 (e.g. for the purposes of setting the limit for the distribution of dividends, financial covenant levels in the margin grid while maintaining the nominal margin levels, or the obligation to create security interests) and adjustment of the relevant definitions for the purposes of calculating the financial covenants.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 49
In order to reflect the amendments to the Senior Facilities Agreement set forth in the draft Third Amendment and Restatement Deed, on 27 April 2020, the Company, acting as the agent for the obligors and UniCredit Bank AG, London Branch, acting as the agent for the Finance Parties, entered into the First Amendment and Restatement Deed to the deed of accession to the Senior Facilities Agreement (the Additional Facility Accession Deed) concerning an additional term facility, concluded on 27 November 2019 (the “Accession Deed”), which, among others, provides for the following amendments:
(i) amendment of the final repayment date of the additional term facility loan granted in the Accession Deed (the “Additional Term Facility Loan”) to 31 March 2025; and
(ii) in connection with the implementation of IFRS 16, a change in the Total Leverage on which the Margin on the Additional Term Facility Loan depends.
The Company recognized an amendment to the conditions of the loan agreements as a modification of a financial liability which does not result in derecognition. The Company recognized an adjustment to the carrying amount of the financial liability in the amount of PLN 7.4 as at the date of the modification.
30. Issued bonds
31 December 2020
31 December 2019
Short-term liabilities
38.7
34.8
Long-term liabilities
1,959.2
969.2
Total
1,997.9
1,004.0
Change in issued bonds payable
2020
2019
Issued bonds liabilities as at 1 January
1,004.0
1,018.3
Bonds issue (Series C Bonds)
1,000.0
-
Bonds issue (Series B Bonds)
-
1,000.0
Bonds redemption (Series A Bonds)
-
(1,000.0)
Repayment of interest and commission
(49.1)
(55.3)
Interest accrued
43.0
41.0
Issued bonds liabilities as at 31 December
1,997.9
1,004.0
Issuance of bonds
On 29 January 2020 the Supervisory Board of the Company adopted a resolution to approve the issuance of the Series C Bonds, including the incurring of the financial indebtedness by the Company by issuing the Series C Bonds.
On 31 January 2020 the Management Board of the Company decided to allot 1,000,000 (not in million) Series C Bonds with a nominal value of PLN 1,000 (not in million) each and an aggregated nominal value of PLN 1,000,000,000 (not in million). The Series C Bonds were allotted to a total of 69 investors.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 50
The issue of Series C Bonds was completed on 14 February 2020. Planned redemption date of the Series C Bonds falls on 12 February 2027. The amounts of interest are payable in arrears, every six months, with the first interest payment made on 14 August 2020.
The Series C Bonds were introduced in the Alternative Trading System operated by the Warsaw Stock Exchange within the Catalyst market on 24 February 2020.
31. Lease liabilities
31 December 2020
31 December 2019
Short-term liabilities
3.7
3.8
Long-term liabilities
19.9
22.8
Total
23.6
26.6
Change in lease liabilities:
2020
2019
Lease liabilities as at 1 January
26.6
1.2
Implementation of IFRS 16 (as at 1 January 2019)
-
28.6
Change in the period
0.5
0.4
Interest accrued
1.2
0.7
Repayment of capital and interest
(4.7)
(4.3)
Lease liabilities as at 31 December
23.6
26.6
32. Company as a lessor
Company as a lessor
Operating leases
The Company entered into contracts with third parties, which are classified as operating leases due to their economic substance . The contracts relate to rental of digital satellite reception equipment, lease of TV production studio and garage. Assets connected with such contracts are presented as property, plant and equipment.
Lease contracts for set-top boxes are concluded for a basic contractual period ranging from 12 to 36 months. After the basic period, the contracts are converted into contracts with indefinite terms, unless terminated by subscribers or new contracts are signed.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 51
Future minimum lease payments under operating lease are as follows:
31 December 2020
31 December 2019
within 1 year
192.9
176.2
between 1 and 5 years
104.7
114.9
in more than 5 years
1.7
7.4
Total
299.3
298.5
In 2020 the Company generated revenues from operating lease agreements in the amount of PLN 238.9.
33. Other non-current liabilities and provisions
31 December 2020
31 December 2019
Other provisions
1.6
1.3
Derivative instruments (IRS) liabilities (see note 35)
4.7
-
Total
6.3
1.3
34. Trade and other payables
31 December 2020
31 December 2019
Trade payables to related parties
71.0
85.3
Trade payables to non-related parties
53.0
64.0
Taxation and social security payables
11.6
10.6
Payables relating to purchases of non-current assets
0.9
6.2
Accruals
179.2
197.0
Short-term provisions
18.3
14.8
Derivative instruments (IRS) liabilities (see note 35)
5.5
0.2
Other
13.8
6.3
Total
353.3
384.4
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 52
Accruals
31 December 2020
31 December 2019
Salaries
26.2
24.8
Licence fees and royalties for copyright management organizations
84.4
103.3
Distribution costs
11.2
12.4
Marketing costs
21.4
25.4
Other
36.0
31.1
Total
179.2
197.0
Short-term and long-term provisions
2020
2019
Opening balance as at 1 January
16.1
15.3
Increases
3.8
0.8
Closing balance as at 31 December
19.9
16.1
Of which:
Short-term
18.3
14.8
Long-term
1.6
1.3
Provisions comprise mainly of provisions for license fees, litigation and disputes.
Trade payables and payables relating to purchases of non-current assets by currency
Currency
31 December 2020
31 December 2019
PLN
104.0
123.5
EUR
3.7
26.2
USD
17.2
5.8
Total
124.9
155.5
Accruals by currency
Currency
31 December 2020
31 December 2019
PLN
158.2
174.8
EUR
15.1
19.3
USD
5.1
2.9
GBP
0.8
-
Total
179.2
197.0
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 53
Other notes
35. Financial instruments
Overview
Cyfrowy Polsat S.A. is exposed to the following financial risks:
- credit risk,
- liquidity risk,
- market risk:
a. currency risk,
b. interest rate risk.
The Company’s risk management policies are designed to reduce the impact of adverse conditions on the Company’s results.
The Management Board is responsible for oversight and management of each of the risks faced by the Company. Therefore, the Management Board has established an overall risk management framework as well as risk management policies on market, credit and liquidity risks.
This note presents information about the Company’s exposure to each of the above risks and the Company’s objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are also included throughout these financial statements.
Bank loans, bonds, cash, interest rate swaps and short-term bank deposits are the main financial instruments used by the Company , with the intention of securing the financing for the Company’s activities. The Company also holds other financial instruments including trade receivables and payables and payables relating to purchases of tangible and intangible assets which arise in the course of its business activities.
Financial assets
Carrying amount
31 December 2020
31 December 2019
Financial assets measured at amortized cost, including:
1.036.3
283.4
Loans granted
95.2
10.9
Trade and other receivables from related parties
27.8
30.3
Trade and other receivables from non-related parties
58.4
81.9
Share in the profits of partnerships receivables
19.5
18.2
Cash and cash equivalents
835.4
142.1
Hedging derivative instruments:
-
0.4
Interest rate swaps
-
0.4
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 54
Financial liabilities
Carrying amount
31 December 2020
31 December 2019
Financial liabilities measured at amortised cost, including:
4,286.4
3,385.8
Loans and borrowings
1,528.0
1,993.3
Issued bonds
1,997.9
1,004.0
Lease liabilities
23.6
26.6
Trade payables and other payables to third parties and deposits
70.4
79.3
Trade and other payables to related parties
71.6
85.6
Liabilities to shareholders related to dividend for 2019
415.7
-
Accruals
179.2
197.0
Hedging derivative instruments:
10.2
0.2
Interest rate swaps
10.2
0.2
Credit risk
Credit risk is defined as the risk that counterparties of the Company will not be able to meet their contractual obligations. Exposure to credit risk is related to three main areas:
- the creditworthiness of the customers with whom physical sale transactions are undertaken,
- the creditworthiness of the financial institutions (banks/brokers) with whom, or through whom, hedging or other derivative transactions are undertaken,
- the creditworthiness of the entities in which investments are made, or whose securities are purchased.
Credit risk arises mainly on trade receivables and contract assets . In the financial year ended 31 December 2020, the Company was not materially exposed to credit risk arising from sales on credit. The Company’s customer base includes a large number of individual subscribers dispersed geographically over the country who prepay subscription fees. Receivables from subscribers are constantly monitored and recovery actions are taken, including blocking of the signal transferred to subscribers or termination of services to Internet client.
The Company pursues a credit policy under which credit risk exposure is constantly monitored.
Due to diversification of risk in terms of the nature of individual entities, their geographical location and cooperation with highly- rated financial institutions, also taking into consideration the fair value of liabilities arising from derivative transactions, the Company is not materially exposed to credit risk as a result of derivative transactions entered into.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 55
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as at the reporting date was as follows:
Maximum exposure to credit risk
Carrying amount
31 December 2020
31 December 2019
Loans granted
95.2
10.9
Trade and other receivables from related parties
27.8
30.3
Trade and other receivables from non-related parties
58.4
81.9
Share in the profits of partnerships receivables
19.5
18.2
Contract assets
160.2
200.8
Cash and cash equivalents
835.4
142.1
Total
1,196.5
484.2
The maximum exposure to credit risk for trade and other receivables and assets related to contracts, by type of customer, was:
Carrying amount
31 December 2020
31 December 2019
Receivables from subscribers
193.0
250.6
Receivables from distributors
0.9
1.5
Receivables from media companies
20.9
23.3
Receivables and loans granted to related parties, including s hare in the profits of partnerships receivables
141.7
59.2
Other receivables and loans granted to non-related parties
4.6
7.5
Total
361.1
342.1
The ageing of trade and other receivables and assets related to contracts at the reporting date was:
31 December 2020
31 December 2019
Gross
Impairment
Net
Gross
Impairment
Net
Not past due
79.4
6.2
73.2
86.8
7.1
79.7
Past due 0-30 days
10.4
0.5
9.9
23.2
0.4
22.8
Past due 31-60 days
6.3
0.6
5.7
4.2
0.5
3.7
Past due more than 60 days
28.0
11.1
16.9
41.7
17.5
24.2
Total
124.1
18.4
105.7
155.9
25.5
130.4
Assets related to contracts
163.5
3.3
160.2
204.1
3.3
200.8
Total
287.6
21.7
265.9
360.0
28.8
331.2
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 56
To estimate impairment due to expected loss model the Company performed analysis using a provision matrix. Bad debt allowance is recognized for trade and other receivables in the amount of expected credit losses in instrument’s life cycle.
Liquidity risk
The Company’s objective in liquidity management is to ensure that it always has sufficient funds to meet its liabilities when due. Surplus cash is invested in bank deposits.
The Company prepares, on an ongoing basis, analyses and forecasts of cash requirements based on projected cash flows.
The following are the contractual maturities of the Company’s financial liabilities.
31 December 2020
Carrying amount
Contractual cash flows
6 months and less
6-12 months
1-2 years
2-5 years
more than 5 years
Loans and borrowings
1,528.0
1,641.9
52.4
91.4
180.6
1,317.5
-
Issued bonds
1,997.9
2,233.8
19.7
19.4
39.0
117.2
2,038.5
Lease liabilities
23.6
28.4
2.3
2.3
4.4
7.9
11.5
Trade and other payables to non- related parties and deposits
70.4
70.4
70.4
-
-
-
-
Trade and other payables to related parties
71.6
71.6
71.6
-
-
-
-
Liabilities to shareholders related to dividend for 2019
415.7
415.7
415.7
Accruals
179.2
179.2
179.2
-
-
-
Hedging derivative instruments:
IRS*
10.2
10.3
2.9
2.7
3.9
0.8
-
4,296.6
4,651.3
814.2
115.8
227.9
1,443.4
2,050.0
* pursuant to the agreements settlements shall be on a net basis
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 57
31 December 2019
Carrying amount
Contractual cash flows
6 months and less
6-12 months
1-2 years
2-5 years
more than 5 years
Loans and borrowings
1,993.3
2,134.6
536.4
132.6
259.5
1,206.1
-
Issued bonds
1,004.0
1,230.4
17.8
17.8
35.4
106.3
1,053.1
Lease liabilities
26.6
31.4
2.0
2.2
4.1
9.7
13.4
Trade and other payables to non- related parties and deposits
79.3
79.3
79.3
-
-
-
-
Trade and other payables to related parties
85.6
85.6
85.6
-
-
-
-
Accruals
197.0
197.0
197.0
-
-
-
-
Hedging derivative instruments:
IRS*
0.2
0.3
(0.2)
0.1
0.4
-
-
3,386.0
3,758.6
917.9
152.7
299.4
1,322.1
1,066.5
* pursuant to the agreements settlements shall be on a net basis
The Company may utilize revolving facility line of credit up to the amount of PLN 1.000. As at 31 December 2020 the final maturity date was set on 30 September 2024. As at 31 December 2019 the revolving facility was partially utilized.
Market risk
The Company has an active approach to managing its market risk exposure. The objectives of market risk management are:
- to limit fluctuations in profit/loss before tax,
- to increase the probability of meeting budget assumptions,
- to maintain the healthy financial condition, and
- to support the process of undertaking strategic decisions relating to investing activity, with attention to sources of capital for this activity.
All the market risk management objectives should be considered as a whole, while their realisation is dependant primarily upon the internal situation and market conditions.
The Company applies an integrated approach to market risk management. This means a comprehensive approach to the whole spectrum of identified market risks, rather than to each of them individually. The primary technique for market risk management is the use in the Company of hedging strategies involving derivatives. Apart from this, natural hedging is also used to the extent available.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 58
All of the potential hedging strategies and the selection of those preferred reflect the following factors: the nature of identified market risk exposures of the Company, the suitability of instruments to be applied and the cost of hedging, current and forecasted market conditions. In order to mitigate market risk, derivatives are primarily used. The Company transacts only those derivatives for which it has the ability to assess their value internally, using standard pricing models appropriate for a particular type of derivative, and also these which can be traded without significant loss of value with a counterparty other than the one with whom the transaction was initially entered into. In evaluating the market value of a given instrument, the Company relies on information obtained from particular market leading banks, brokers and information services.
It is permitted to use the following types of instruments:
- Swaps (IRS/CIRS),
- Forwards and futures,
- Options.
Currency risk
One of the main risks to which the Company is exposed is currency risk related to fluctuations in the exchange rate between the Polish zloty and other currencies. The revenues generated by the Company are denominated mainly in Polish zloty, however, a portion of operating costs and capital expenditures are incurred in foreign currencies. The Company’s currency risk is related to royalties for TV and radio broadcasters (USD and EUR), transponder capacity agreements (EUR), fees for conditional access system (EUR and USD) and purchases of reception equipment and accessories for reception equipment (USD and EUR).
In respect of licence fees and transponder capacity agreements, the Company partly reduces its currency risk exposure by means of an economic hedge as it denominates receivables from signal broadcast and marketing services in foreign currencies.
The Company’s exposure to foreign currency was as follows based on currency amounts:
31 December 2020
31 December 2019
EUR
USD
GBP
EUR
USD
Trade receivables
4.3
0.4
-
3.3
0.2
Cash and cash equivalents
0.1
-
-
1.3
0.2
Lease liabilities
-
-
-
(0.1)
-
Trade payables
(0.8)
(4.6)
-
(6.2)
(1.5)
Accruals
(3.3)
(1.4)
(0.2)
(4.5)
(0.8)
Gross balance sheet exposure
0.3
(5.6)
(0.2)
(6.2)
(1.9)
Net exposure
0.3
(5.6)
(0.2)
(6.2)
(1.9)
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 59
Following foreign exchange rates were applied in the presented periods:
Average rate
Rates at the balance sheet date
(in PLN)
2020
2019
31 December 2020
31 December 2019
1 EUR
4.4448
4.2980
4.6148
4.2585
1 USD
3.8993
3.8395
3.7584
3.7977
1 GBP
5.0003
4.8995
5.1327
4.9971
1 CHF
4.1532
3.8634
4.2641
3.9213
For the purposes of exchange rate volatility sensitivity analysis as at 31 December 2020 and 31 December 2019 it was assumed that probable volatility will be in the +/- 5% band. This analysis assumes that all other variables, in particular interest rates, remain constant.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 60
2020
2019
As at 31 December 2020
As at 31 December 2019
in currency
in PLN
Estimated change in exchange rate in %
Estimated change in profit
in PLN
Estimated change in other comprehensive income
in PLN
in currency
in PLN
Estimated change in exchange rate in %
Estimated change in profit
in PLN
Estimated change in other comprehensive income
in PLN
Trade receivables
EUR
4.3
20.0
5%
0.8
-
3.3
14.2
5%
0.6
-
USD
0.4
1.4
5%
0.2
-
0.2
0.6
5%
0.2
-
Cash and cash equivalents
EUR
0.1
0.3
5%
0.2
-
1.3
5.7
5%
0.1
-
USD
0.0
0.1
5%
-
-
0.2
0.7
5%
0.1
-
CHF
0.0
0.1
5%
-
-
0.0
0.1
5%
-
-
Lease liabilities
EUR
0.0
(0.2)
5%
-
-
(0.1)
(0.4)
5%
-
-
Trade payables
EUR
(0.8)
(3.7)
5%
(0.2)
-
(6.2)
(26.2)
5%
(1.5)
-
USD
(4.6)
(17.2)
5%
(1.0)
-
(1.5)
(5.8)
5%
(0.2)
-
Accruals
EUR
(3.3)
(15.1)
5%
(0.9)
-
(4.5)
(19.3)
5%
(0.8)
-
USD
(1.4)
(5.1)
5%
(0.4)
-
(0.8)
(2.9)
5%
(0.3)
-
GBP
(0.2)
(0.8)
5%
(0.3)
-
-
-
5%
-
-
Change in operating profit
(1.6)
-
(1.8)
-
Income tax
0.3
-
0.3
-
Change in net profit
(1.3)
-
(1.5)
-
2019
2018
As at
31 December 2019
As at
31 December 2018
in currency
in PLN
Estimated
change in
exchange
rate
in %
Estimated
change in
profit
in PLN
Estimated
change in other
comprehensive
income
in PLN
in currency
in PLN
Estimate
d change
in
exchang
e rate
in %
Estimated
change in
profit
in PLN
Estimated
change in other
comprehensive
income
in PLN
Trade receivables
EUR
3.3
14.2
5%
0.7
-
3.4
14.8
5%
0.7
-
USD
0.2
0.6
5%
-
-
0.2
0.6
5%
-
-
Cash and cash equivalents
EUR
1.3
5.7
5%
0.3
-
1.2
5.0
5%
0.3
-
USD
0.2
0.7
5%
-
-
3.3
12.3
5%
0.6
-
CHF
0.0
0.1
5%
-
-
-
-
5%
-
-
Lease liabilities
EUR
(0.1)
(0.4)
5%
-
-
-
-
5%
-
-
Trade payables
EUR
(96. 2)
(26.2)
5%
(1.3)
-
(4.0)
(17.0)
5%
(0.9)
-
USD
(1.5)
(5.8)
5%
(0.3)
-
(2.4)
(8.9)
5%
(0.4)
-
Change in operating profit
(0.6)
-
0.3
-
Income tax
0.1
-
-
-
-
Change in net profit
(0.5)
-
0.3
-
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 61
2020
2019
As at 31 December 2020
As at 31 December 2019
in currency
in PLN
Estimated change in exchange rate in %
Estimated change in profit
in PLN
Estimated change in other comprehensive income
in PLN
in currency
in PLN
Estimated change in exchange rate in %
Estimated change in profit
in PLN
Estimated change in other comprehensive income
in PLN
Trade receivables
EUR
4.3
20.0
-5%
(0.8)
-
3.3
14.2
-5%
(0.6)
-
USD
0.4
1.4
-5%
(0.2)
-
0.2
0.6
-5%
(0.2)
-
Cash and cash equivalents
EUR
0.1
0.3
-5%
(0.2)
-
1.3
5.7
-5%
(0.1)
-
USD
0.0
0.1
-5%
-
-
0.2
0.7
-5%
(0.1)
-
CHF
0.0
0.1
-5%
-
-
0.0
0.1
-5%
-
-
Lease liabilities
EUR
0.0
(0.2)
-5%
-
-
(0.1)
(0.4)
-5%
-
-
Trade payables
EUR
(0.8)
(3.7)
-5%
0.2
-
(6.2)
(26.2)
-5%
1.5
-
USD
(4.6)
(17.2)
-5%
1.0
-
(1.5)
(5.8)
-5%
0.2
-
Accruals
EUR
(3.3)
(15.1)
-5%
0.9
-
(4.5)
(19.3)
-5%
0.8
-
USD
(1.4)
(5.1)
-5%
0.4
-
(0.8)
(2.9)
-5%
0.3
-
GBP
(0.2)
(0.8)
-5%
0.3
-
-
-
-5%
-
-
Change in operating profit
1.6
-
1.8
-
Income tax
(0.3)
-
(0.3)
-
Change in net profit
1.3
-
1.5
-
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 62
2020
2019
Estimated change in profit
in PLN
Estimated change in other comprehensive income
in PLN
Estimated change in profit
in PLN
Estimated change in other comprehensive income
in PLN
Estimated change in exchange rate by 5 %
EUR
(0.1)
-
(1.3)
-
USD
(1.0)
-
(0.2)
-
GBP
(0.2)
-
-
-
Estimated change in exchange rate by -5 %
EUR
0.1
-
1.3
-
USD
1.0
-
0.2
-
GBP
0.2
-
-
-
Had the Polish zloty strengthened 5% against the basket of currencies as at 31 December 2020, the Company’s net profit would have decreased by PLN 1.3 and other comprehensive income would have been unchanged in 2020. Had the Polish zloty appreciated 5%, the Company’s net profit would have been increased by PLN 1.3 in 2020 and other comprehensive income would have been unchanged in 2020. Had the Polish zloty strengthened 5% against the basket of currencies as at 31 December 2019, the Company’s net profit would have decreased by PLN 1.5 and other comprehensive income would have been unchanged in 2019. Had the Polish zloty appreciated 5%, the Company’s net profit would have increased by PLN 1.5 in 2019 and other comprehensive income would have been unchanged in 2019, assuming that all other variables remain constant. Estimated future revenue and costs denominated in foreign currencies are not taken into account.
Interest rate risk
Changes in market interest rates have no direct effect on the Company’s revenues, however, they do have an effect on net cash from operating activities due to interest earned on overnight bank deposits and current accounts, and on net cash from financing activities due to interest charged on bank loans and bonds.
The Company regularly analyses its level of interest rate risk exposure, including refinancing and risk minimising scenarios. Based on these analyses, the Company estimates the effects of changes in interest rates on its profit and loss.
In order to reduce interest rate risk exposure resulting from interest payments on floating rate senior facility, the Company stipulated interest rate swaps.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 63
At the reporting date, the interest rate risk profile of interest-bearing financial instruments was:
Carrying amount
31 December 2020
31 December 2019
Fixed rate instruments
Financial assets*
82.8
10.7
Variable rate instruments
Financial assets*
847.8
142.3
Financial liabilities*
(3,572.4)
(3,029.8)
Net interest exposure
(2,724.6)
(2,887.5)
* nominal values
The Company’s management classifies loan liabilities as variable rate instruments. Changes in the interest rate components do not result in a change in the carrying amount of the loan liability. The changes are reflected prospectively in the interest expense on loans and borrowings.
Cash flow sensitivity analysis for variable rate instruments (pre-tax effect):
Income statement
Other comprehensive income
Equity
Increase by 100 bp
Decrease by 100 bp
Increase by 100 bp
Decrease by 100 bp
Increase by 100 bp
Decrease by 100 bp
31 December 2020
Variable rate instruments*
(27.2)
27.2
9.3
(9.3)
(17.9)
17.9
Cash flow sensitivity (net)
(27.2)
27.2
9.3
(9.3)
(17.9)
17.9
31 December 2019
Variable rate instruments*
(28.9)
28.9
2.2
(2.2)
(26.7)
26.7
Cash flow sensitivity (net)
(28.9)
28.9
2.2
(2.2)
(26.7)
26.7
* include sensitivity in fair value changes of derivative instruments (interest rate swaps) due to changes in interest rate
The Company applies cash flow hedge model under IAS 39 for interest rate exposure from floating rate interest payments in PLN by interest rate swap .
Fair value vs. carrying amount
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 64
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data
Presented below are fair values and carrying amounts of financial assets and liabilities not measured in fair value.
31 December 2020
31 December 2019
Category according to IFRS 9
Level of the fair value hierarchy
Fair value
Carrying amount
Fair value
Carrying amount
Loans granted
A
2
95.9
95.2
10.9
10.9
Trade and other receivables
A
*
105.7
105.7
130.4
130.4
Cash and cash equivalents
A
*
835.4
835.4
142.1
142.1
Loans and borrowings
B
2
(1,542.9)
(1,528.0)
(1,994.7)
(1,993.3)
Issued bonds
B
1
(2,023.1)
(1,997.9)
(1,025.7)
(1,004.0)
Lease liability
B
2
(23.6)
(23.6)
(26.6)
(26.6)
Accruals
B
*
(179.2)
(179.2)
(197.0)
(197.0)
Liabilities to shareholders related to dividend for 2019
B
2
(415.7)
(415.7)
-
-
Trade and other payables and deposits
B
*
(142.0)
(142.0)
(164.9)
(164.9)
Total
(3,289.5)
(3,250.1)
(3,125.5)
(3,102.4)
Unrecognized gain/(loss)
(39.4)
(23.1)
A – assets subsequently measured at amortised cost
B – liabilities subsequently measured at amortised cost
* it is assumed that the fair value of these financial assets and liabilities is equal to their nominal value, therefore no evaluation methods were used in order to calculate their fair value
When determining the fair value of loans granted, forecasted cash flows from the reporting date to assumed dates of repayments of the loans were analyzed. The discount rate for each payment was calculated as an applicable WIBOR or EURIBOR interest rate plus a margin regarding the credit risk.
Trade and other receivables, accruals and trade and other payables and deposits comprise mainly receivables and payables which will be settled no later than at the end of the first month after the reporting date. It was therefore assumed that the effect of their valuation, taking the effect of time value of money into account, would approximately be equal to their nominal value.
As at 31 December 2020 loans and borrowings comprised term facility loan. As at 31 December 2019 loans and borrowings comprised term facility loan and revolving facility loan. The discount rate for each payment was calculated as a sum of implied WIBOR interest rate and a margin regarding the Company’s credit risk. When determining the fair value of senior facility as at 31 December 2020, forecasted cash flows from the reporting date to 30 September 2024 (assumed date of repayment of the loan obtained in 2015, changed in 2018 and changed in 2020) and to 31 March 2025 (assumed date of repayment of the additional loan obtained in 2019 and changed in 2020). When determining the fair value of senior facility as at 31 December 2019,
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 65
forecasted cash flows from the reporting date to 30 September 2022 (assumed date of repayment of the loan obtained in 2015 and changed in 2018 as at 31 December 2019) and to 31 March 2023 (assumed date of repayment of the additional loan obtained in 2019 as at 31 December 2019).
The fair value of bonds as at 31 December 2020 and 31 December 2019 is calculated based on the last bid price as at the balance sheet date as quoted on the Catalyst market.
As at 31 December 2020, the Company held the following financial instruments carried at fair value on the statement of financial position:
Liabilities measured at fair value
31 December 2020
Level 1
Level 2
Level 3
IRS
-
(10.2)
-
Total
-
(10.2)
-
The fair value of interest rate swaps is determined using financial instruments valuation models, based on generally published interest rates. Fair value of derivatives is determined based on the discounted future cash flows from transactions, calculated based on the difference between the forward price and the transaction price.
As at 31 December 2019, the Company held the following financial instruments carried at fair value on the statement of financial position:
Assets measured at fair value
31 December 2019
Level 1
Level 2
Level 3
IRS
-
0.4
-
Total
-
0.4
-
Liabilities measured at fair value
31 December 2019
Level 1
Level 2
Level 3
IRS
-
(0.2)
-
Total
-
(0.2)
-
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 66
Items of income, costs, profit and losses recognized in profit or loss generated by loans and issued bonds (including hedging transactions)
For the period from 1 January 2020
to 31 December 2020
Loans and borrowings
Issued bonds
Hedging
instruments
Total
Interest expense on loans and borrowings
(34.3)
-
(1.8)
(36.1)
Interest expense on issued bonds
-
(44.0)
-
(44.0)
Total finance costs
(34.3)
(44.0)
(1.8)
(80.1)
Total gross profit/(loss)
(34.3)
(44.0)
(1.8)
(80.1)
Hedge valuation reserve
-
-
(10.0)
(10.0)
For the period from 1 January 2019
to 31 December 2019
Loans and borrowings
Issued bonds
Hedging
instruments
Total
Interest expense on loans and borrowings
(34.2)
-
(0.6)
(34.8)
Interest expense on issued bonds
-
(41.0)
-
(41.0)
Total finance costs
(34.2)
(41.0)
(0.6)
(75.8)
Total gross profit/(loss)
(34.2)
(41.0)
(0.6)
(75.8)
Hedge valuation reserve
-
-
0.5
0.5
Hedge accounting and derivatives
Cash Flow Hedge of interest rate risk of interest payments
At 31 December 2020, the Company held a number of interest rate swaps, designated as hedges of floating interest payments on senior facility denominated in PLN. The interest rate swaps are being used to hedge the interest rate risk of the Company’s floating rate financing in PLN.
The terms of the interest rate swaps have been negotiated to match the terms of the floating rate financing in PLN. There were no highly probable transactions for which hedge accounting has been claimed that have not occurred and no element of hedge ineffectiveness requiring recognition in the income statement.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 67
Table below presents the basic parameters of IRS designated as hedging instruments, including the periods in which cash flows occur due to cash flow hedges, periods they will affect the financial results and fair value in PLN of hedging instruments as at the balance sheet date.
31 December 2020
31 December 2019
Type of instrument
Interest rate swap
Interest rate swap
Exposure
Floating rate interest payments in PLN
Floating rate interest payments in PLN
Hedged risk
Interest rate risk
Interest rate risk
Notional value of hedging instrument (PLN)
500.0
250.0
Fair value of hedging instruments
(10.2)
0.2
Hedge accounting approach
Cash Flow Hedge
Cash Flow Hedge
Expected period the hedge item affect income statement
Until 31 March 2023
Until 30 September 2021
Change in fair value of cash flow hedges recognized in equity is presented below (pre-tax):
2020
2019
Opening Balance
0.2
(0.8)
Effective part of gains or losses on the hedging instrument
(12.2)
0.5
Amounts recognized in equity transferred to the profit and loss statement, of which:
1.8
0.5
- adjustment of interest costs
1.8
0.5
Closing Balance
(10.2)
0.2
36. Capital management
This note presents information about the Company’s management of capital. Further quantitative disclosures are also included throughout these financial statements.
The goal of capital management is to maintain the Company’s ability to operate as a going concern in order to provide the shareholders return on investment as well as benefits for other stakeholders. The Company might issue shares, increase debt or sell assets in order to maintain or improve the equity structure.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 68
The Company monitors capital on the basis of leverage ratio, which is calculated as a ratio of net debt to sum of equity and net debt. Net debt represents interest-bearing loans and borrowings and issued bonds less cash and cash equivalents (including restricted cash).
Carrying amount
31 December 2020
31 December 2019
Loans and borrowings
1,528.0
1,993.3
Issued bonds
1,997.9
1,004.0
Cash and cash equivalents
( 835.4 )
( 142.1 )
Net debt
2,690.5
2,855.2
Equity
10,910.7
11,153.5
Equity and net debt
13,601.2
14,008.7
Leverage ratio
0.20
0.20
37. Barter transactions
The Company is a party to barter transactions. The table below presents revenues and costs of barter transactions executed on an arm’s-length basis. Revenue comprise revenue from services, goods and materials sold, costs comprise costs of sales.
for the year ended
31 December 2020
31 December 2019
Revenues from barter transactions
7.5
7.2
Cost of barter transactions
8.0
7.5
31 December 2020
31 December 2019
Barter receivables
1.5
2.0
Barter payables
-
-
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 69
38. Transactions with related parties
Receivables
31 December 2020
31 December 2019
Subsidiaries
46.5
46.8
Joint ventures and associates
0.3
1.0
Entities controlled by a person (or a close member of that person's family) who has control, joint control or significant influence over Cyfrowy Polsat S.A.
0.5
0.9
Total
47.3
48.7
A significant portion of receivables is represented by receivables from share of the profits of partnerships and receivables related to sale of Polkomtel Sp. z o.o. (‘Polkomtel’) services.
Other assets
31 December 2020
31 December 2019
Subsidiaries
8.5
98.4
Entities controlled by a person (or a close member of that person's family) who has control, joint control or significant influence over Cyfrowy Polsat S.A.
0.6
0.1
Total
9.1
98.5
Other current assets comprise mainly unbilled revenue from InterPhone Service (sale of set-top box design) and deferred costs related to the agreement with Polkomtel for the provision of data transfer services.
Liabilities
31 December 2020
31 December 2019
Subsidiaries
97.0
109.2
Joint ventures and associates
1.4
3.3
Entities controlled by a person (or a close member of that person's family) who has control, joint control or significant influence over Cyfrowy Polsat S.A.
255.6
22.9
Total
354.0
135.4
A significant portion of liabilities is represented by programming licence fees, Polkomtel services and lease liabilities.
Loans granted
31 December 2020
31 December 2019
Subsidiaries
94.4
10.7
Total
94.4
10.7
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 70
Revenu es
for the year ended
31 December 2020
31 December 2019
Subsidiaries
143.9
113.4
Joint ventures and associates
2.2
1.5
Entities controlled by a person (or a close member of that person's family) who has control, joint control or significant influence over Cyfrowy Polsat S.A.
2.6
1.2
Total
148.7
116.1
The most significant transactions include revenues from subsidiaries from accounting services, signal broadcast, advertising, programming fees, property rental services.
Expenses
for the year ended
31 December 2020
31 December 2019
Subsidiaries
711.7
745.6
Joint ventures and associates
5.0
0.1
Entities controlled by a person (or a close member of that person's family) who has control, joint control or significant influence over Cyfrowy Polsat S.A.
22.4
18.6
Total
739.1
764.3
The most significant transactions include data transfer services.
The Company also pays license fees for broadcasting Telewizja Polsat’s programs, commissions on sales, and incurs expenses for IT services, rental of properties, telecommunication services with respect to the Company’s customer call center and advertising production.
Gains/(loss) on investment activities, net
for the year ended
31 December 2020
31 December 2019
Subsidiaries
74.5
365.2
Joint ventures and associates
57.2
-
Entities controlled by a person (or a close member of that person's family) who has control, joint control or significant influence over Cyfrowy Polsat S.A.
(2.3)
(0.5)
Total
129.4
364.7
Gains and losses on investment activities comprises mostly of dividends, income from share of the profits of partnerships and guarantees granted by the Company in respect to Polkomtel’s and Netia’s term facilities.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 71
Finance costs
for the year ended
31 December 2020
31 December 2019
Subsidiaries
8.2
5.0
Total
8.2
5.0
Finance costs comprise mostly of guarantee fees in respect to the term facilities.
39. Litigations
Management believes that the provisions for litigations as at 31 December 2020 are sufficient to cover potential future outflows and the adverse outcome of the disputes will not have a significant negative impact on the Company’s financial situation. Information regarding the amount of provisions was not separately disclosed, as in the opinion of the Company's Management, such disclosure could prejudice the outcome of the pending cases.
Proceedings before the Office of Competition and Consumer (“UOKiK”)
On 30 December 2016 the President of UOKiK issued a decision stating that the Company’s operations were allegedly infringing collective consumer interests by presenting advertising slogans, which in the opinion of the authorities were misleading and suggested that the LTE data transmission will not be limited. Pursuant to the decision of the President of UOKiK the Company was charged with a penalty in the amount of PLN 5.3. The Company appealed to SOKiK against the decision. On 7 August 2019 the court dismissed the appeal of the Company. The Company appealed against the decision. Pursuant to the Court of Appeals verdict from 11 March 2021, the Company is required to pay a penalty of PLN 5.3. The Company examines the possibility of bringing a cassation appeal.
On 30 December 2016 the President of UOKiK issued a decision stating that the Company’s operations were allegedly infringing collective consumer interests by presenting sale offers, which in the opinion of the authorities were impossible to conclude. Pursuant to the decision of the President of UOKiK the Company was charged with a penalty in the amount of PLN 4.4. The Company appealed to SOKiK against the decision. On 14 October 2019 SOKiK dismissed the appeal. The Company appealed against the decision. On 31 December 2020 the Company’s appeal was dismissed. On 14 January 2021 the Company paid the penalty. The Company examines the possibility of bringing a cassation appeal.
On 19 December 2019 the President of UOKiK issued a decision stating that the operations of the Company were allegedly infringing collective consumer interests by hindering access to ZDF and Das Erste channels during the Euro 2016 championship by removing these channels and incomplete and unreliable information to consumers in response to reports regarding unavailability of the above programs. Pursuant to the decision of the President of UOKiK the Company was charged with a penalty in the amount of PLN 34.9. The Company appealed to SOKiK against the decision.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 72
Other proceedings
On 28 April 2017, Association of Polish Stage Artists (“ZASP”) filed a lawsuit against Cyfrowy Polsat for payment of PLN 20.3. The Company issued an objection in the writ-of-payment proceedings and filed for its dismissal entirely. On 10 January 2018 the Court issued a decision to refer the case to mediation proceedings. Mediation ended without a settlement. The last hearing took place on 8 May 2019. Both parties have submitted an application for re-referral to the mediation proceedings for a period of three months. The court approved application and postponed the hearing without a deadline. Mediation ended without a settlement. On 6 May 2020, the Company received a letter from the Court, included the mediator's position summarizing the course of mediation, with a request to refer to its content. On 25 May 2020, the Company submitted a response informing the Court about the settlement being impossible to reach by the parties.
By lawsuit, delivered to the Company on 16 December 2019, the Association of Performing Artists (SAWP) filed two claims against the Company: information claim and claim for payment. The information claim relates to television programs rebroadcasted by the Company in the period from 20 August 2009 to 20 August 2019. In the claim for payment, SAWP claims PLN 153.3 for the alleged violation of related rights to artistic performances of musical and verbal - musical works through their non-contractual cable rebroadcast. The Company filed for the dismissal entirely. The date of next hearing is scheduled for 28 June 2021.
40. Other disclosures
Security relating to loans and borrowings
Establishment of collateral for loan facilities
The Company entered into a series of agreements establishing collateral under the facilities agreement. Detailed information in respect to the agreements is presented in the Management Report in note 4.4.5.
Other securities
The Company provided guarantees and surety to its subsidiaries in respect to purchase contracts. Information regarding the amounts of guarantees provided was not separately disclosed, as in the opinion of the Company’s Management, such disclosure could have a negative impact on the relations with the third parties.
Contractual liabilities related to purchases of non-current assets
Total amount of capital commitments resulting from agreements for property construction and improvements was PLN 0.2 as at 31 December 2020 ( PLN 1.2 as at 31 December 2019 ). Additionally the amount of deliveries and services committed to under agreements for the purchases of licences and software was PLN 0.3 as at 31 December 2020 (PLN 0.3 as at 31 December 2019) .
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 73
Future contractual obligations
As at 31 December 2020 the Company had future liabilities due to transponder capacity agreements. The table below presents future payments (in total):
31 December 2020
31 December 2019
within one year
122.5
102.4
between 1 to 5 years
489.9
452.1
more than 5 years
-
113.0
Total
612.4
667.5
41. Remuneration of the Management Board
The table below presents the remuneration of the Management Board members of the Company in 2020 and 2019.
Name
Function
2020
2019
Mirosław Błaszczyk
President of the Management Board
0.5
0.4
Tobias Solorz
President of the Management Board (to 31 March 2019)
-
0.1
Maciej Stec
Vice-President/ Member of the Management Board
0.4
0.3
Dariusz Działkowski
Member of the Management Board (to 31 March 2019)
-
0.2
Jacek Felczykowski
Member of the Management Board
0.2
0.2
Tomasz Gillner-Gorywoda
Member of the Management Board (to 31 March 2019)
-
0.2
Aneta Jaskólska
Member of the Management Board
0.6
0.6
Agnieszka Odorowicz
Member of the Management Board
0.6
0.6
Katarzyna Ostap-Tomann
Member of the Management Board
0.5
0.5
Total
2.8
3.1
The bonuses payable to each member of the Management Board of the Company for years 2020 and 2019 from the Company and subsidiaries are presented below:
Name
Function
2020
2019
Mirosław Błaszczyk
President of the Management Board
2.5
2.0
Maciej Stec
Vice-President/ Member of the Management Board
2.5
2.0
Jacek Felczykowski
Member of the Management Board
1.5
1.4
Aneta Jaskólska
Member of the Management Board
1.7
1.5
Agnieszka Odorowicz
Member of the Management Board
0.8
0.8
Katarzyna Ostap-Tomann
Member of the Management Board
2.0
1.8
Total
11.0
9.5
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 74
The table below presents the remuneration of the Management Board of Cyfrowy Polsat S.A. in 2020 and 2019 from other related companies:
Name
Function
2020
2019
Mirosław Błaszczyk
President of the Management Board
0.5
0.6
Tobias Solorz
President of the Management Board (to 31 March 2019)
-
0.3
Maciej Stec
Vice-President/ Member of the Management Board
0.4
0.6
Jacek Felczykowski
Member of the Management Board
0.8
0.8
Tomasz Gillner-Gorywoda
Member of the Management Board (to 31 March 2019)
-
0.1
Aneta Jaskólska
Member of the Management Board
0.3
0.3
Katarzyna Ostap-Tomann
Member of the Management Board
0.5
0.5
Total
2.5
3.2
42. The Supervisory Board remuneration
The Supervisory Board receives remuneration based on the resolution of the Extraordinary General Shareholders’ Meeting of Cyfrowy Polsat S.A. dated 5 September 2007. On 29 June 2016 the Annual General Meeting adopted the resolution concerning changes in remuneration of members of the Supervisory Board.
The table below presents the total remuneration payable to the Supervisory Board members in 2020 and 2019:
Name
Function
2020
2019
Marek Kapuściński
President of the Supervisory Board
0.24
0.24
Józef Birka
Member of the Supervisory Board
0.18
0.18
Marek Grzybowski
Independent Member of the Supervisory Board (from 23 July 2020)
0.08
-
Robert Gwiazdowski
Member of the Supervisory Board
0.18
0.18
Aleksander Myszka
Member of the Supervisory Board
0.18
0.18
Leszek Reksa
Member of the Supervisory Board
0.18
0.18
Tomasz Szeląg
Member of the Supervisory Board
0.18
0.18
Paweł Ziółkowski
Member of the Supervisory Board (from 23 July 2020)
0.08
-
Piotr Żak
Member of the Supervisory Board
0.18
0.18
Total
1.48
1.32
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 75
43. Important agreements and events
Decision of the Head of the Małopolska Tax Office in Cracow
On 15 February 2018 the Head of the Małopolska Tax Office in Cracow (“Tax Office”) issued the decision assessing the tax liability from uncollected withholding corporate income tax in 2012 in the amount of PLN 24.2 increased by interest on tax arrears.
In the issued decision the Tax Office contested the Company’s right to an exemption from the obligation to withhold income tax on certain interest payments in 2012. The Company appealed against the decision of the Tax Authority on the basis of acquired opinions issued by renowned entities. The Company has not created any provisions encumbering its financial results.
On 10 July 2018 the Tax Office upheld the previous decision dated 15 February 2018. The Company does not agree with the decision of the Tax Office in question and appealed against it to the Voivodship Administrative Court in Cracow. The Voivodship Administrative Court in Cracow dismissed the complaint in the ruling as of 21 February 2019. The Company does not agree with this decision and filled a cassation complaint to the Supreme Administrative Court in Warsaw. The date of the hearing has not been set.
The Tax Office control activities in the aforesaid matter were in progress in relation to 2013 and 2014.
The Head of the Małopolska Tax Office in Cracow issued a decision on 19 July 2019 in respect to the year 2013. The decision assessed the Company’s tax liability from uncollected withholding corporate income tax in 2013 in the amount of PLN 25.1 increased by interest on tax arrears. The Company appealed against the decision, but on 14 February 2020 the Tax Authority maintained its position. The Company filed a complaint against the decision to the Administrative Court. On 15 October 2020, the Voivodship Administrative Court in Cracow dismissed the complaint. The Company, based on the opinions of reputable advisers, does not agree with the court's decision and filed a cassation appeal to the Supreme Administrative Court in Warsaw. The date of the hearing has not been set. The Company has not created any provisions encumbering its financial results.
The Head of the Tax Office in Cracow issued a decision on 20 September 2019 in respect to the year 2014. The decision assessed the Company’s tax liability from uncollected withholding corporate income tax in 2014 in the amount of PLN 1.7 increased by interest on tax arrears. The Company appealed against the decision of the Tax Authority. In a second instance decision issued on 8 June 2020, the Tax Authority fully maintained its position. The Company filed a complaint against the decision to the Administrative Court. On 20 October 2020, the Voivodship Administrative Court in Cracow dismissed the complaint. The Company, based on the opinions of reputable advisers, does not agree with the court's decision and filed a cassation appeal to the Supreme Administrative Court in Warsaw. The date of the hearing has not been set. The Company has not created any provisions encumbering its financial results.
The initiation by the European Commission of the procedure based on Art. 108 sec. 2 of the European Union Treaty
In the beginning of October 2020, Cyfrowy Polsat S.A. and Sferia S.A. (Sferia), a company owned by the Cyfrowy Polsat Group in 51% since 29 February 2016, received from the Ministry of Digital Affairs a copy of the European Commission’s decision dated 21 September 2020 regarding the initiation of the formal investigation procedure against the Republic of Poland concerning the
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 76
alleged illegal state aid provided to Sferia. The alleged illegal state aid relates to granting in 2013 to Sferia the right to use a frequency block of 800 MHz range in place of the frequency 850 MHz range previously held by Sferia. According to the decision, the European Commission intends to investigate, whether the state aid was granted, and if so, whether it can be considered compatible with the internal market.
The Management Boards of Cyfrowy Polsat and Sferia believe that the company has acted in accordance with the regulations, and thus there cannot be any consideration of an illegal state aid. Additional information will be provided in the course of further proceedings.
Estimated impact of COVID-19 coronavirus disease pandemic on the operations and financial prospects of the Group
Immediately upon the introduction by the Polish government of the state of emergency due to an epidemics, in effect from 13 March 2020, Cyfrowy Polsat Group took actions to assure business continuity and reduce the negative impact of the pandemic on its operations. The priorities mainly included ensuring safety of the employees as well as guaranteeing high quality of services provided to the customers of the Group’s companies.
In the Management Board’s view, the Company and Group’s core business is relatively resistant to the adverse impact of the pandemic, maintains a high level of liquidity and generates positive cash flows. Accordingly, no factors indicating impairment of the Company’s assets were identified. More information in respect to the estimated impact is presented in the Management Report in note 3.1 and 5.9.1.
The ultimate impact that the COVID-19 coronavirus pandemic may have on the Company’s, as well as the entire Cyfrowy Polsat Group’s operations and financial situation is impossible to foresee at present and depends on numerous factors which are beyond the Group’s control and which include, among others, the duration of the pandemic and its further development as well as further potential measures that the Polish government may adopt.
A tender offer for shares in Netia S.A.
On 23 December 2020, the Company announced a tender offer for 114,173,459 (not in million) shares issued by Netia S.A., entitling to 114,173,459 (not in million) votes at Netia's general meeting, representing ca. 34.02% of Netia's share capital and ca. 34.02% of the total number of votes at Netia's general meeting. The share price in the tender offer was set at PLN 4.80 (not in million) per Netia’s share.
As the share price in the tender offer was below the market price of Netia’s shares as at 31 December 2020, the Company estimated the probability of acquiring Netia’s shares under tender offer as low as at balance sheet date and did not recognize any liability in this respect.
As a result of the tender offer, on 8 March 2021 the Company acquired 84,868 (not in millions) Netia’s shares representing ca. 0.0253% of its share capital and carrying the right to ca. 0.0253% of total votes at Netia’s general meeting and held, as at that date, in total 221,489,753 (not in million) Netia’s shares representing ca. 66.0024% of its share capital and carrying the right to ca. 66.0024% of total votes at Netia’s general meeting.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 77
The tender offer was secured with a bank guarantee granted up to PLN 548.
44. Events subsequent to the reporting date
Execution of a conditional sale agreement for shares in subsidiary
On 26 February 2021 Company and its Subsidiary Polkomtel Sp. z o. o. (together “Sellers”) concluded a conditional sale agreement (“Sale Agreement”) of shares in Polkomtel Infrastruktura Sp. z o. o. (“Polkomtel Infrastruktura”). According to the Sale Agreement, Company agreed to sell all shares held representing 74.98% of the share capital of Polkomtel Infrastruktura for the price of PLN 5,302.1, while Polkomtel Sp. z o. o. agreed to sell shares representing 25.01% of the share capital for the price of PLN 1,768.2. The completion of the Transaction is conditional on the fulfillment of the following conditions precedent: the buyer must obtain consent of the President of the Office of Competition and Consumer Protection for the and the Sellers must obtain consents required under the financing documentation of the Sellers, as well as conditional or unconditional release of security interests encumbering the Shares. The Sale Agreement will terminate, if the conditions precedent are not fulfilled on or before 31 October 2021. This deadline may be postponed until 31 December 2021 by way of a unilateral declaration of will by any of the parties. In connection with the Sale Agreement of shares in Polkomtel Infrastruktura, the Company is not able to control the reversal of the temporary differences related to this investment as of 26 February 2021, and from that date it became probable that these differences will reverse in the foreseeable future. As a result of the above, unless the circumstances affecting the assessment of meeting the conditions of the above-mentioned Sale Agreement change, the Company will not be able to apply the exemption from recognition of deferred income tax liability in 2021.
Entry into exclusive negotiations regarding potential acquisition
On 11 March 2021 Management Board of the Company decided to enter into exclusive negotiations regarding potential acquisition of 10% shares of eobuwie.pl S.A. from CCC S.A. within the scope of pre-IPO investment for a consideration of PLN 500 for the shares.
45. Judgments, financial estimates and assumptions
The preparation of financial statements in conformity with IFRS EU requires the Management Board to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and costs. Estimates and underlying assumptions are based on historical data and other factors considered as reliable under the circumstances, and their results provide grounds for an assessment of the carrying amounts of assets and liabilities which cannot be based directly on any other sources. Actual results may differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 78
The most significant estimates and assumptions made primarily related to the following:
• Classification of lease agreements
In the case of contracts where the Company acts as a lessor, the Company classifies leasing agreements as operating or financial based on the assessment as to what extent the risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee. The assessment is based on the economical substance of each transaction. The Company concludes agreements for the rental of reception equipment (set-top boxes, modems and routers) to its customers in the course of its business operations. These lease agreements are classified as operating leases as the Company holds substantially all the risks and rewards incidental to ownership of the reception equipment. For more information see note 32.
• Lease term
For agreements which meet the lease definition, the Company determines the lease term as the non-cancellable period of a lease, together with both: periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. While determining the lease term, the Company considers all relevant facts and circumstances, which could indicate that the Company will exercise the option to extend the lease. A lessee has to reassess an extension option upon the occurrence of either a significant event or significant change in the circumstances that are within the control of the lessee. In terms of contracts with an indefinite period, the lease term is determined based on a professional judgment regarding the contract term. The Company estimates lease term to be 2 years for point of sale agreements with indefinite periods.
• Discount rate used by the lessee
Discount rate is understood as the interest rate implicit in the lease (if that rate can be readily determined) or the incremental borrowing rate of the Company, determined as the cost of interest on the loan, which the Company would have to incur when taking a loan to purchase a given asset with adequate security. The incremental borrowing rate can be defined as the sum of the risk free rate and the Company’s credit risk premium. Discount rates applied by the Company take into account the maturity and the currency of lease contracts.
• Depreciation rates of property, plant and equipment and intangible assets with definite useful lives
Depreciation rates are based on the expected economic useful lives of property, plant and equipment (including reception equipment provided to customers under lease agreements) and intangible assets. The expected economic useful lives are reviewed on an annual basis based on the experience of the entity.
The economic useful lives of the set-top boxes rented to customers under operating lease agreements are estimated for 5 years, modems and routers 3 years. For information on the useful lives of property, plant and equipment, programming assets and other intangible assets with definite useful lives see notes 5i and 5j. For information on the depreciation charge for the period by the category of property, plant and equipment and intangible assets with definite useful lives and right-of-use assets see notes 15, 17 and 18.
• The impairment of goodwill
The Company performed impairment test on goodwill arising on the acquisition of M.Punkt Holdings and Redefine . The impairment test was based on the value-in-use calculations of the “B2C and B2B Services” cash-generating unit to which the goodwill has been allocated on the initial recognition. The value-in-use calculations included estimation of discounted cash flows
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 79
for the given cash-generating unit and the relevant discount rate. The value of goodwill tested at each cash-generating unit, the key assumptions used in the value-in-used calculations for each cash-generating unit, impairment test results and sensitivity analysis of reasonably possible changes in the key assumptions are presented in note 16.
• The impairment of investment in subsidiaries
The Company analyzed whether any indicators of potential impairment of investments in subsidiaries exist as at the balance sheet date. The analysis did not indicate such impairment indicators (with the exception of recognised impairment loss of shares in Karpacka Telewizja Kablowa Sp. z o.o.) therefore the Company did not perform an impairment test for these assets. Impairment value of shares in Karpacka Telewizja Kablowa Sp. z o.o. are presented in note 20.
• The impairment of non-financial non-current assets
As at the reporting date the Company has assessed whether there are any indications that intangible and tangible assets with definite useful lives may be impaired. The impairment loss recognised equals the difference between net book value and recoverable amount. The impairment values are presented in notes 15 and 17.
• Impairment of receivables
The value of receivables is updated taking into account the expected credit losses for trade receivables and contract assets in the amount corresponding to the expected credit losses throughout the life of the instrument. The amount of expected losses is calculated on the basis of historical data regarding the repayment of receivables and the effectiveness of debt collection, taking into account current expectations regarding the future development of these parameters. For more information see notes 5n, 24 and 35.
• Provisions for pending litigation
During the normal course of its operations the Company participates in several court proceedings, usually typical and repeatable and which, on an individual basis, are not material for the Company, its financial standing and operations. The provisions are estimated based on the court documentation and the expertise of the Company’s lawyers who participate in the current litigations and who estimate Company’s possible future obligations taking the progress of litigation proceedings into account. The Company also recognizes provisions for potential unreported claims resulting from past events, should the Management Board find that the resulting outflow of economic benefits is likely. Provisions regarding probable claims are recognized as a result of Management Board’s estimates based on accessible information regarding market rates for similar claims. Management believes that the provisions as at 31 December 2020 are sufficient to cover potential future outflows and the adverse outcome of the disputes will not have a significant negative impact on the Company’s financial situation.
• Deferred tax
Deferred taxes are recognised for all temporary differences, as well as for unused tax losses, except for the cases excluding recognition in accordance with IAS 12 and taking into account the possibility of deferred tax asset realization. The key assumption in relation to deferred tax accounting is the assessment of the expected timing and manner of realization or settlement of the carrying amounts of assets and liabilities held at the reporting date. In particular, assessment is required of whether it is probable that there will be suitable future taxable profits against which any deductible temporary differences can be utilized. At the end of the reporting period unrecognised deferred tax assets are re-assessed. A previously unrecognised deferred tax asset is recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. For further details refer to notes 5w and 12.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 80
• Deferred tax related to investment in Polkomtel Infrastruktura Sp. z o.o.
Management believes that taking into account facts and circumstances existing as at 31 December 2020 the Company was still able to control the timing of the reversal of the temporary differences related to investment in Polkomtel Infrastruktura Sp. z o.o. and it was probable that the temporary differences will not reverse in the foreseeable future. Therefore, in line with accounting policy presented in note 5w, the Company did not recognized deferred tax liability for temporary differences related to investment in Polkomtel Infrastruktura Sp. z o.o.
• Fair value of financial instruments
Fair value of financial instruments for which there is no active market is estimated using appropriate techniques of measurements. The techniques are chosen based on the professional judgment. For more information about the method of establishing the fair value of financial instruments and key assumption made see note 5g.
• Loan liabilities measured at amortised cost
The Term Facility and the Revolving Facility bear interest at a variable rate equal to WIBOR for the relevant interest period plus margin. The margin on the Term Facility and the Revolving Facility depends on the ratio of net consolidated indebtedness to consolidated EBITDA. Accordingly, the Company’s management classifies loan liabilities as variable rate instruments.
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 81
Financial results for the 3 months ended 31 December 2020 and 31 December 2019
46. Income Statement
for the 3 months ended
31 December 2020 unaudited
31 December 2019 unaudited
Revenue
628.9
603.3
Operating costs
(514.4)
(504.0)
Other operating income, net
10.3
1.7
Profit from operating activities
124.8
101.0
Gain on investment activities, net
25.2
20.4
Finance costs, net
(22.4)
(22.1)
Gross profit for the period
127.6
99.3
Income tax
(27.8)
(20.1)
Net profit for the period
99.8
79.2
Basic and diluted earnings per share (in PLN)
0.16
0.13
47. Statement of Comprehensive Income
for the 3 months ended
31 December 2020 unaudited
31 December 2019 unaudited
Net profit for the period
99.8
79.2
Items that may not be reclassified subsequently to profit or loss:
(0.2)
-
Actuarial gain/(loss)
(0.2)
-
Items that may be reclassified subsequently to profit or loss:
0.8
-
Valuation of hedging instruments
1.0
-
Income tax relating to hedge valuation
(0.2)
-
Other comprehensive income, net of tax
0.6
-
Total comprehensive income for the period
100.4
79.2
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 82
48. Revenue
for the 3 months ended
31 December 2020 unaudited
31 December 2019 unaudited
Retail revenue
564.7
552.0
Wholesale revenue
37.1
28.5
Sale of equipment
7.9
5.6
Other revenue
19.2
17.2
Total
628.9
603.3
49. Operating costs
for the 3 months ended
Note
31 December 2020 unaudited
31 December 2019 unaudited
Content costs
202.6
192.7
Technical costs and costs of settlements with telecommunication operators
106.3
100.6
Distribution, marketing, customer relation management and retention costs
84.7
103.8
Depreciation, amortization, impairment and liquidation
44.9
43.7
Salaries and employee-related costs
a
38.5
37.7
Cost of equipment sold
6.8
5.5
Cost of debt collection services and bad debt allowance and receivables written off
1.2
3.4
Other costs
29.4
16.6
Total
514.4
504.0
a) Salaries and employee-related costs
for the 3 months ended
31 December 2020 unaudited
31 December 2019 unaudited
Salaries
33.3
32.8
Social security contributions
3.8
3.5
Other employee-related costs
1.4
1.4
Total
38.5
37.7
Cyfrowy Polsat S.A.
Notes to the Financial Statements for the year ended 31 December 2020
(all cash amounts presented in text are in million with currency specification, all amounts are in PLN million, except where otherwise stated)
F 83
50. Gain on investment activities, net
for the 3 months ended
31 December 2020 unaudited
31 December 2019 unaudited
Share in the profits of partnerships
21.5
18.1
Other
3.7
2.3
Total
25.2
20.4
51. Finance costs, net
for the 3 months ended
31 December 2020 unaudited
31 December 2019 unaudited
Interest expense on loans and borrowings
8.6
11.1
Interest expense on issued bonds
10.4
9.0
Valuation and realization of hedging instruments
1.0
0.1
Guarantee fees
2.0
1.6
Bank and other charges
0.4
0.3
Total
22.4
22.1