Hi-Media Posts Strong 2007 Sales and Profit Growth with All Objectives Met

Sales Up 45% to Over 100 Million Euros
Operating Profits* Up 109% to Over 15 Million Euros
Net Income Up 50% with Excellent Prospects Ahead

Paris, 11 March 2008:  Hi-Media (ISIN Code FR0000075988 - HIM, HIM.PA), a leading integrated online media company in Europe, today announced results for the full year ended 31 December 2007.

Summary of Consolidated Results

Pro forma data reflect the consolidation of Allopass, Medianet, and Jeux-Video.com on 1-1-2006 but exclude integration of Fotolog effective since December1, 2007

(See appendix for consolidated statements of income, sources and uses of funds and balance sheet)

Commenting on 2007 earnings, Hi-Media Founder and CEO Cyril Zimmermann said: «Not only did we exceed our first financial objective with revenues of 104 million euros in this past year, but we are also pleased to report that we have met our second target too, with operating income above 15 million euros*. This demonstrates that we have successfully executed on our strategy and effectively generated strong profit levers. Today, we are one of the world’s top 100 publishers, thanks to the websites that we have acquired, created and developed. We are determined to continue to maintain Hi-Media’s growth momentum above that of our markets. Our unique development model, which combines online monetization service and proprietary audience, should enable us to substantially improve our operating margin to above 20% within the next five years”.

* Operating income before stock-based compensation

Massive International Audience

Since December 2006, Hi-Media Group has grown the Company’s website audiences by more than 55%, primarily in France. The acquisition of Fotolog.com, a social media network that is the world’s 14th most-trafficked website (Alexa), further expanded the Group’s international audience.  Since the acquisition was announced in August 2007, Fotolog’s membership has grown from 10 to 15 million while revenues increased significantly due to synergies with Hi-Media’s sales force, advertising and micro-payment networks across Europe.


Strong Growth Across Hi-Media’s Core Sources of Revenue

With year-on-year revenues up 45%, Hi-Media has passed the 100 million euro mark for the first time in its history.
Hi-Media Group’s advertising network expanded across Europe in 2007, reaching 47 million unique users.  The Group’s advertising business outperformed the European advertising market as a whole, posting a 48% increase year over year (34% pro forma).
Allopass, Hi-Media’s micro-payment platform, enjoyed a 44% revenue increase (31% pro forma) driven by new partner sites (192,000 at end-2007) as the Company continued to expand its geographic footprint to 40 countries.

Solid Gross Margin Amid High Growth

Good execution of its vertical integration strategy helped Hi-Media improve its gross margin from 38% to more than 40% on the strength of greater share of revenues from the company’s proprietary websites.

Operating Expenses Under Control

The 6% increase in personnel costs can be primarily attributed to the following two elements:

1. integration of newly acquired companies over the past two years
2. in-sourcing of previously outsourced activities, in order to build growth from a stronger operating and functional organization. The Group can now leverage the expertise of a 371-strong staff (339 in the scope of consolidation), of which 109 in its website publishing business.

Sharply Higher Earnings

Hi-Media’s robust revenue performance and disciplined cost management drove operating profits (before stock-based compensation) to above 15 million euros.
In accordance with IFRS accounting standards, the cost of 4 million euros for stock options and free shares corresponds to the expensing of performance shares granted to 110 Hi-Media managers in 2005, 2006 and 2007 as approved by the 2005 General Shareholders’ Meeting.

The credit facility signed for the acquisition of Fotolog resulted in higher 2007 financial costs over 2006 and negative financial income of 0.6 million euros.  Income taxes reflect taxes of 2.3 million euros compensated by the change in used tax losses carried-forward of 1.7 million euros.
All in all, net income after taxes was 10.0 million euros, an increase of more than 50% over 2006. 

Strong Balance Sheet

With almost 120 million euros in shareholders’ equity, 15 million euros in long-term financial debt and a currently untapped credit line of 22.5 million euros, Hi-Media enjoys a strong balance sheet.

2008: Transitioning to an Integrated Internet Media Group

With the consolidation of Fotolog, Hi-Media is successfully transforming the Company into an integrated online media group. The Group recently announced that it will launch six new websites and introduce an electronic wallet in 2008. Total costs for these projects are estimated at 5 millions euros to be fully incurred in 2008.

Hi-Media is targeting revenues of 140 million euros for 2008 with more than 10% of the total coming from websites owned by the Group, compared to 5.7% in 2007.  As a result, Hi-Media owned websites should generate more than 20% of the Group’s consolidated gross profits. The Group expects to be able to boost operating profit before the cost of free shares to between 17 and 18 million euros in 2008, while intensifying its development.

Given the significant business developments planned for the current fiscal year, the Board of Directors has determined not to pay a dividend for 2007. Indeed, the Group believes that the strength of its financial structure should be primarily dedicated to potential investments in growth opportunities.

Operating Margin to Exceed 20% Within the Next 5 Years

Hi-Media projects continued growth over the next five years based on the strength of the Group’s business model.  Looking ahead to 2012, management expects its operating margin (expressed before stock-based compensation) to exceed 20%.

Hi-Media’s growth will be powered of the Group’s advertising and micro-payment networks, which in turn will be driven by robust growth in online advertising and paid content markets n the next few years, as well as by:

- a significant presence in the mobile Internet
- leading positions in three key online publishing markets: France, Germany and Spain.

These developments could entail additional acquisitions, providing they are consistent with Hi-Media’s profitability targets.

Next financial news schedule (all announcements released after markets close):

April 23, 2008: Q1 sales for period ending March 31, 2008.

Appendices

Consolidated income statement
Consolidated statement of source and application of funds
Consolidated balance sheet