Hi-Media Reports First Half 2008 Earnings and Confirms Development Plan

PARIS, Aug. 28 /PRNewswire-FirstCall/ -- The Hi-Media Internet media group (ISIN Code FR0000075988 - HIM, HIM.PA), one of Europe's leaders in interactive advertising and electronic micro-payments, today announced results for the first six months ended June 30, 2008.

                    Key consolidated financial highlights

    in millions of Euros                H1 2007       H1 2008      2008/2007
                                                                   Change (%)
    Turnover                              49.0          60.8            24 %
    Gross profit                          19.6          24.3            24 %
    Gross margin percentage               40 %          40 %
    Operating profit                       7.0           5.0
    (before stock based compensation)                                  -29 %
    Net profit of consolidated companies   5.8           1.0           -83 %

The consolidated income statement, statement of cash flows and balance sheet can be downloaded from the Company's website at www.hi-media.com.

Cyril Zimmermann, founder and Chief Executive Officer of Hi-Media, said: "While profits for the first half of the year may not be in line with our expectations for the year as a whole, they validate the strategy adopted more than two years ago. Thanks to our diversified revenue streams, we continue to grow and are demonstrating our resilience in uncertain advertising markets. Our performance also reflects the quality of our business model, which allows us to finance our medium-term plans. We have created new sites, enhanced our global footprint and acquired strategic stakes, while investing in the development of our organization into an integrated Internet media group. These achievements as well as these investments should bring profitability in line from the second half of 2008 onwards".

Results in Line With Development Plan

Increase in proprietary website audience

In two years, the audience of the Group's websites has increased almost six-fold, to 30 millions unique users, of which 16 million users are in Europe.

Hi-Media is emphasizing audience in its three priority themes (women, entertainment, news), continuing to implement this strategy by:

    -- launching several websites: contrefeux.com, monsondage.com,
       dastvprogramm.de, as well as the Belgian version of actustar.com.
    -- taking stakes in websites with high growth potential: sport.fr,
       vivat.be and rue89.com
    -- acquiring Magicrpm.com, a French directory and online resource for
       online rock and independent electronic music.

Since Hi-Media acquired the social networking site Fotolog one year ago, membership has doubled to 20 million users. Revenues have increased significantly, particularly sales of graphic advertising and paid subscriptions. Fotolog's performance demonstrates the synergies generated since its integration with the Group. With consolidated revenues from all websites at 9.6% in the first half year, Hi-Media is well set to meet its 2008 objective of increasing total revenues from all sites by 10%.

Strong Growth Driven by Diversification of Revenue Streams

The Group's advertising offering has been further strengthened: with 65 million unique users across the world, it is now positioned among the leaders in online advertising. Revenue from this activity has increased by 17% in a difficult business environment.

With 32% growth in the first half, Hi-Media's micro-payment business is benefiting from technology investments of the past year and the volume of commercial wins recorded since the beginning of the year. Robust micro-payments performance is expected to generate the bulk of the increase in the Group's profit in the second half of this fiscal year.

    Gross Profit Maintained at the High Level of 40%
    The consolidated gross profit has been maintained at 40% thanks to:
    -- Gross profit of micro-payments at an average level of 25% (with
       significant improvement toward the end of the first half).
    -- improving gross profits in the advertising business to 55%, a 6-point
       gain year-on-year that reflects  a key component of the Group's
       vertical integration strategy -- increasing contributions from
       propriety sites with 100% gross profit margins.

Profit Profile Consistent With a Year of Investment

Good commercial performance, diversified revenue streams and created synergies have resulted in an operating profit of 5 million Euros, before valuation of stock options and grants. In line with Hi-Media's strategic roadmap, operating profit takes into account increases in operating charges relating to the following:

    -- integration of Fotolog, the social networking site acquired in November
       2007 which has now reached break-even;
    -- acquisition of Mobile Trend, a leader in the mobile internet and
       micro-payment by SMS in France, which was finalised in June 2008;
    -- new business activities (local network in France, advertising business
       in Spain);
    -- implementation of the 5 million Euro, 2008 development plan to build a
       proprietary audience  (by launching new sites, improving existing ones)
       and of an electronic wallet.

The cost of 2.2 million Euros relating to share grants and stock options is equivalent, under IFRS accounting standards, to recognizing as an expense shares allocated over the past three years under policies adopted at the 2005 Shareholders' Meeting and the Fotolog profit sharing plan which was in place at acquisition.

The financial profit (-717,000 Euros) mainly reflects interest on bank loan to finance acquisitions completed during the half.

Lastly, significant improvement in profits over the last fiscal years has, for the first time, generated income taxes of 1.1 million Euros which weighed on net profit for the first half of the year (1 million Euros).

Robust Financial Structure

Long-term debt (30.7 million Euros) remains very contained in comparison to shareholders' equity (117 million Euros). Cash and cash equivalents amount to more than 19 million Euros, compared to 9.4 million Euros as of December 31, 2007.

Full Year Objectives and Medium-Term Development Plan Confirmed

Net Rebound in Profitability Expected During Second Half of 2008

Publishing profitability will benefit from strategic development of Hi-Media's audiences, particularly proprietary audiences. While tight advertising market conditions are likely to prevail in the second half, strongly-accelerating growth in micro-payments is expected to help meet Hi-Media's revenue (turnover) objective of over 140 million Euros, with an operating profit in the 17-18 million Euros range before the cost of share grants.

Hi Media Confirms Medium Term Strategic Outlook

Following 2007, which demonstrated the powerful leverage of the Hi-Media model, 2008 will be a transition year. The investment program should accelerate Hi-Media's ongoing transformation into an integrated Internet media group: developing the proprietary audience, strengthening micro-payments by launching the electronic wallet and acquiring Mobile Trend represent significant progress toward the profit objective (expressed in current operating profit before cost of share grants) of 20% by 2012.

Financial calendar

Revenue and quarterly information for the third quarter of 2008 will be published on November 6, 2008.

The financial report relating to the period ended on 30 June 2008 is available on the company's website at www.hi-media.com, under the section Corporate Information / Financial Communication.

This press release does not constitute an offer to sell, or a solicitation of an offer to buy Hi-Media shares. If you wish to obtain further information about Hi-Media, please refer to our website www.hi-media.com.

This press release may contain some forward-looking statements. Although Hi-Media considers that these statements are based on reasonable hypotheses at the date of publication of this release, they are by their nature subject to risks and uncertainties which could cause actual results to differ materially from those indicated or projected in these statements.

Hi-Media operates in a continually changing environment and new risks emerge continually. Hi-Media does not undertake and expressly disclaims any obligation to update or revise any of these forward-looking statements, whether to reflect new information, future events or circumstances or otherwise.

About Hi-Media:

Hi-Media now ranks among the world's biggest Internet publishers, with 30 million unique users ranking Hi-Media among the world's 100 leading Internet media groups (comScore). The Hi-Media audience is monetized by the Group's integrated advertising network and micro-payment platform, which also provide such services for third parties with more than 200,000 partner sites. Hi-Media is among Europe's leaders in interactive advertising and electronic micro-payments. The Group operates in 9 countries. Hi-Media is listed on the Euronext Paris Eurolist B and belongs to the SBF 250, CAC IT, and CAC Small 90 indices.

    ISIN Code: FR0000075988
    Site: www.hi-media.com

    Investor contact
    Cyril Zimmermann
    Chief Executive Officer

    David Bernard
    Executive Director General
    Tel: (33) 1 73 03 89 00
    Fax: (33) 1 73 03 89 54
    Email: infofin@hi-media.com
    Website: www.hi-media.com

    US Contact
    Andrei Bogolubov
    + 1 917-849-9300
    Andrei,Bogolubov@newprgroup.com