Letter from the Chairman of the Supervisory Board
During the 2017 financial year the Supervisory Board was involved in all decisions of fundamental significance for Orange Polska. We monitored the Management Board’s governance in managing the business to ensure that these activities were lawful and compliant with legal provisions and internal standards and policies as well as appropriate and efficient. We also provided advice on important projects and plans.
The frequency of the Supervisory Board and its committees’ meetings mean that we are in close contact with the Management. In 2017, six Supervisory Board meetings, a one-day off-site Orange innovation conference, and 18 meetings of the Supervisory Board’s committees took place. The overall average participation rate was 94%. Written votes were used where resolutions were required between the meetings (six times).
On February 7, 2017 the Supervisory Board reappointed Mariusz Gaca, the Vice-President of the Management Board in charge of Consumer Market, Maciej Nowohoński, the Board Member in charge of Finance and Jacek Kowalski, the Board Member in charge of Human Resources, for the next terms of office. In accordance with best practice, the renewals were made more than two months before the expiration of their terms of office. On November 24, 2017 Piotr Muszyński, Vice-President of the Management Board of Orange Polska in charge of Strategy and Transformation, resigned from his position with immediate effect for personal reasons. The Supervisory Board would like to thank him for his successful work at Orange Polska.
In 2017 Orange Polska made significant changes to its commercial approach and announced a new strategic plan called Orange.one, which sets targets and actions till 2020. Thanks to the focus on value, financial performance was improved while still delivering very solid commercial results.
In February Orange presented its customers with a new approach to convergence, launching the Orange Love offer, which was very well received with almost 600,000 customers signed up by the end of the year. Total convergent customer base increased by 56%, exceeding 1.3 million customers as at the end of the year. Half of the company’s residential Internet customers also use mobile services rendered by Orange Polska. This ratio rose from 35% at the end of 2016.
In September, a new strategic plan for 2017–2020 called Orange.one was announced. The Group’s vision is to become Poland’s first choice telecommunications operator CORPORATE GOVERNANCE Orange Polska Integrated Report 2017 87 for consumers and businesses, while creating a business model that will generate sustainable growth in both sales and profits. These objectives will be achieved by developing services and products of the highest quality, supported by the development of our fibre network and digital capabilities, and by significantly increasing our operational efficiency. Orange.one reaffirms the key priorities of the strategy announced at the beginning of 2016, while giving them a new momentum.
2017 saw the continuation of significant investments in fibre network rollout and in the mobile LTE network. The fibre network covered close to 2.5 million households as at the end of 2017. Investments in fibre combined with an attractive convergent offer delivered a spectacular rebound in fixed broadband. Revenue was up 4.5% year-on-year, after many years of decline. This was a result of rapid expansion in the customer base, which grew by almost 11%, the highest annual increase in a decade. In 2018 the Supervisory Board will review fibre investment plans for the years 2019-2020.
In 2017 the customer was at the centre of everything the Group did. As a result, its Net Promoter Score (NPS) put the Group at number two in the market at the end of 2017, up from number three a year earlier.
Financial results were in line with expectations. Revenues totalled PLN 11,381 million in 2017, down 1.4% or PLN 157 million year-on-year. 2017 adjusted EBITDA came in at PLN 3,011 million and was PLN 152 million down versus 2016, or -4.8% which was much lower than 10.1% a year ago. The Group’s net loss of PLN -60 million resulted from the PLN 204 million impact of the Social Agreement for the years 2018–2019 and the final settlement of the Social Agreement for the years 2016–2017. Adjusted organic cash flow for 2017 came in at PLN 111 million, down versus PLN 620 million in 2016 due to lower EBITDA and much higher year-on-year working capital requirements.
In 2017 the Supervisory Board supported the Management’s recommendation not to pay out dividends in 2017, taking into consideration challenging business outlook, the decision to maximise cash allocation to strategic investment projects, and the potential payment of an EC fine.
The Supervisory Board thanks members of the Management Board and members of the Supervisory Board’s committees as well as all employees for their achievements in the year under review.
Chairman of the Supervisory Boar
Role of shareholders
Orange Polska encourages shareholders to play an active role in the Company’s corporate governance. Shareholder consent is required for key decisions, including: the review and approval of the financial statements and Management Board Report on Activities; the review and approval of the Management Board’s recommendations on dividend payments or coverage of losses; the review and approval of the Supervisory Board Assessment of the Group’s situation; the election of the members of the Supervisory Board (and, if necessary, their dismissal); amendments to the Company’s Articles of Association; increase and reduction of the share capital; and the buy-back of shares.
At the Company’s General Meetings, each share in Orange Polska entitles its owner to one vote. In addition to their participation in General Meetings, members of the Company’s Management Board and senior executives engage in active dialogue with the Company’s shareholders. To ensure that investors receive a balanced view of the Company’s performance, Management Board members – led by the President of the Management Board and the Chief Financial Officer – also make regular presentations to institutional investors and representatives of the domestic and international financial community.
Orange Polska Investor Relations
Orange Polska’s activity in the area of investor relations focuses primarily on ensuring transparent and proactive communication with capital markets through active co-operation with investors and analysts as well as performance of disclosure obligations under the existing legal framework.
Orange Polska’s Investor Relations together with Company’s representatives regularly meet with investors and analysts in Poland and abroad and participate in the majority of regional and telecom industry investor conferences.
Orange Polska Group’s financial results are presented quarterly during conferences which are also available via a live webcast. In 2017, the Company held four results presentations, as well as a strategy presentation in September. During the year, the Company had around 200 meetings with investors and analysts in Poland and a number of other countries.
Orange Polska’s activity and performance are monitored by analysts representing both Polish and international financial institutions on a current basis. As at the end of 2017, 17 financial analysts covered Orange Polska stock and published their reports and recommendations concerning the Company. The up-to-date list of analysts is available on our website:http://orange-ir.pl/shares/analyst-coverage
On March 7, 2017, the CFO of Orange Polska answered retail investors’ questions during an investor chat held by the Association of Individual Investors (SII). Around 20 individual investors asked their questions during the chat.
The key purpose of all Orange Polska’s Investor Relations efforts is to enable investors to make a reliable assessment of the Company’s financial standing, its market position and the effectiveness of its business model, taking into account the company’s strategic development priorities in the context of the telecom market and the Polish and international macroeconomic environment.
Orange Polska provides a website dedicated to investors and analysts at www.orange-ir.pl.
Orange Polska’s commitment to excel in corporate governance
Corporate Governance in Orange Polska is designed to provide responsible company management and supervision in order to achieve the company’s strategic goals and enhance its value. We have created a credible corporate governance framework which consists of mechanisms that help achieve growth. Those mechanisms consist of structures, processes and controls which enable the company to operate more efficiently and mitigate risk. The ability of the company to create value is ensured by having capable governing bodies with a proper division of duties and optimal representation of experience, skills and education. The sustainability of the company is secured by the ability to allocate fairly and sustainably the created value which is necessary to the company’s long-term success.
The Management Board provides the leadership necessary to steer the company to its strategic goals. It introduces policies and rules for maintaining the internal cohesiveness of the organisation. All members of the Management Board act as executives, while the members of the Supervisory Board play an oversight role. These two roles are separable and strictly assigned to these governing bodies. The Supervisory Board consists of shareholders’ representatives, elected by the General Meeting. In order to exercise its obligations the Supervisory Board may at any time examine any documents of the company, may demand from the Management Board and employees any reports and explanations and may check the financial standing of the company. When necessary the Supervisory Board may oblige the Management Board to commission advisory services to draw up an expert opinion for its use if a matter requires specialised knowledge or qualifications.
In order to ensure quality decision-making, the Supervisory Board uses its committees as advisory bodies. The members of each committee are experts in their field of expertise who provide the Supervisory Board with advice on issues requiring more detailed analysis. The Audit Committee provides the Supervisory Board with wide expertise on finance, accounting and audit. The Remuneration Committee deals with general remuneration policy and recommends appoCORPORATE GOVERNANCE Orange Polska Integrated Report 2017 89 intments of Management Board members. The Strategy Committee is responsible for delivering recommendations on strategic plans and planning processes set up by the Management Board.
The aim of the corporate governance model described above is to properly distribute responsibilities within the company and establish the roles of the key governing bodies, which in turn enhance the decision making process. Its structural elements and the relationships between them, guarantee the transparency of key management decisions.
Orange Polska is fully accountable to its stakeholders and is committed to communicating its progress towards its business goals and the fulfilment of its responsibilities. We do this to increase confidence about our company among investors, customers, employees and the general public. We have paid the utmost attention to constructing a corporate governance system which promotes ethical, responsible and transparent practices. By introducing these rules we are demonstrating the company’s commitment to the highest standards of governance and ensuring that these standards will continue to stand up to scrutiny by internal and external stakeholders.
Compliance with Warsaw Stock Exchange Best Practice
Orange Polska S.A., as an issuer of securities listed on the Warsaw Stock Exchange, is obliged to follow the “comply or explain” rule stipulated in the “Best Practice for WSE Listed Companies 2016”.
In 2017, the company complied with this corporate governance best practice. However, referring to the Recommendation IV.R.2 of the Best Practice guidelines, the company provides a live broadcast of the General Meeting but it provides neither real-time bilateral communication nor the possibility to exercise the right to vote for shareholders taking part in a Meeting from a location other than the General Meeting, due to the legal risks involved in providing such electronic means of communication.
The full text of our Statement on the company’s compliance with the corporate governance recommendations and principles contained in Best Practice for GPW Listed Companies 2016 is available at http://www.orange-ir.pl/corporate- -governance/best-practices
Governing bodies diversity
We are convinced that diversity of a company’s governing bodies is beneficial to the company’s development. That is why we make sure that our Supervisory Board and the Management Board consists of people who are diverse in terms of age, sex, education and professional experience. Because they come from different environments and have a diversity of knowledge and skills, they can look from different perspectives at the management of the company and its efficient functioning in its markets.