Press release
| PLN million | 1-2Q 2008 | 1- 2Q 2007 | yoy % change |
| Revenue | 657.1 | 635.9 | 3.3% |
| Net profit | 40.2 | 47.1 | (14.6%) |
| Operating EBITDA | 116.3 | 117 | (0.6%) |
| Net cash from operating activities | 82.2 | 81.3 | 1.1% |
Figures for 1-2q 2008 (yoy comparison)
• Revenues of the Group amounted to PLN 657.1 million (up 3.3%). Advertising sales reached PLN 473.3 million (up 14.7%), revenues from copy sales PLN 102.8 million (up 1.7%) and book sales PLN 33.3 million (down 58.8%).
• According to Agora's estimates advertising spending for all media grew by nearly 17%. Internet grew the fastest, at 39% rate. Spending on TV reached 18%, on outdoor 14% and on radio 15%. Dailies grew 8% and magazines nearly 10%.
• Gazeta's advertising sales reached PLN 271.3 million (up 9.4%) and its copy sales generated PLN 79.2 million in revenues (up 1.5%). Gazeta sold 418 thou. copies on average, while its share in total newspaper advertising spending reached nearly 43%. Free daily Metro increased its advertising revenues by 36.6% and reached positive operating EBITDA of PLN 0.5 million.
• AMS grew revenues to PLN 93.5 million (up 10.8%) and delivered 19.5% operating EBITDA margin.
• Revenues of magazines reached PLN 56.7 million (up 7.6%) and the segment's operating EBITDA increased by 15.9%.
• Radio stations grew revenues to PLN 41.6 million (up 25.3%) and posted positive operating EBITDA of PLN 4.3 million.
• Advertising revenues from the Group's Internet operations grew to PLN 22.2 million (1) (up 113.5% or PLN 11.8 million), more than market growth. In May 2008 total reach of all Agora's brands stood at 45.1%. At the end of June Agora's online offer included 65 Internet brands.
• Total operating expense of the Group reached PLN 604.3 million (up 4.7%). This was caused by previously announced salary regulations, higher promotion and marketing expense, as well as headcount increase in the Internet division. Staff costs reached PLN 144.4 million (up 13.6%).
• Operating EBITDA of the Group stood at PLN 116.3 million (down 0.6%), while its operating EBITDA margin reached 17.7%. The Group's net profit attributable to the equity holders of the parent amounted to PLN 40.2 million.
• In the second quarter of 2008 Agora purchased 100% shares of Trader.com (Polska) Sp. z o.o. The acquisition of Trader.com (Polska) is in line with the Group's strategy and constitutes a long-term investment that will allow Agora to expand in the fastest growing segments of the advertising market and will secure its core revenues from classifieds in key categories.
Marek Sowa, President of the Management Board said:
The second quarter results were affected by two major factors which increased the Group's cost base: salary regulations we announced a few months ago and continued growth of our Internet and outdoor operations. Though cost intensive at the beginning, we believe they are necessary to strengthen the company's long-term position in the competitive media landscape. We are pleased to report good market performance and solid profitability ratios of all our major business areas and the outstanding position of "Gazeta" against its competitors. It is further proof that smart investments translate into strong business fundamentals and sustained growth .
2q2008 market performance and financial results of Agora's major lines of business (yoy comparison)
NEWSPAPER MARKET / GAZETA WYBORCZA
Gazeta Wyborcza maintained its leadership position among the opinion-making newspapers. It sold 406 thou. copies on average (down 8.2%) and it's copy sales revenues grew by 0.5%. Copy sales of Dziennik declined to 146 thou. copies (down 25.5%) and in June reached the ever lowest level of 131 thou. copies. In May its publisher decided to rise copy price of Dziennik: for PLN 1.8 on weekdays and for PLN 2.0 on Saturdays (PLN 1.5 before) and in July decided to give up on gadgets as its major promotional strategy. Rzeczpospolita sold 163 thou. copies (up 0.1%), Super Express 202 thou. copies (up 5.2%) and Fakt 490 thou. copies (down 2.3%). Polskapresse's local dailies under the nationwide title Polska recorded the following copy sales figures for "old titles": Polska Dziennik Baltycki (52.8 thou.), Polska Dziennik Lodzki (48.6 thou.), Polska Dziennik Zachodni (86.5 thou.), Polska Gazeta Krakowska (32.3 thou.), Polska Glos Wielkopolski (53.2 thou.), Polska Gazeta Wroclawska (36.2 thou.), and for "new titles": Polska Bialystok (0.9 thou.), Polska Gazeta Opolska (2.3 thou.), Polska Kielce (1.1 thou.), Polska Koszalin (0.8 thou.), Polska Kujawy (1.7 thou.), Polska Lubuskie (1.7 thou.), Polska Mazowsze (3 thou.), Polska Metropolia Warszawska (14.6 thou.), Polska Olsztyn (0.9 thou.), Polska Rzeszow (1.6 thou.), Polska Szczecin (1.4 thou.). Total number of copies sold of the 11 "new titles" of Polskapresse constitiutes less than 9% of total copy sales of all titles under the national title Polska. Gazeta Wyborcza posted good readership results, reaching 5.2 million readers (17.4%, CCS, weekly readership index) and was the most widely read national daily during the week. Gazeta's net advertising revenues amounted to PLN 143.3 million (up 7.7%) while its share in total newspaper advertising spending reached nearly 43% and remained flat yoy.
INTERNET
Advertising revenues of Agora's Internet offer grew to PLN 13.4 million 1 (up 112.7%). In May 2008 reach of Agora's Internet brands among Polish users grew to a 45.1%, while the number of users amounted to 6.7 million (up 21.8%). At the end of June Agora's online offer included 65 Internet brands. In the described quarter, the Company launched 13 services, i.e.
Lula.pl and
Zczuba.tv . Due to the acquisition of Trader.com (Polska) Sp. z o.o., 5 new Internet brands enriched Agora's online offer:
Domiporta.pl ,
Autotrader.pl ,
Tabor24.pl and
KupSprzedaj.pl and a community service
Autofoto.pl .
GazetaPraca.pl launched new recruitment services in cooperation with IDG and Bankier.pl and revamped
Pracownicy.it service. Agora extended its cooperation with Microsoft and became an exclusive broker for
MSN.pl advertising space and provides content for mobile services by Era and Orange.
METRO
Metro reported a positive operating EBITDA of PLN 0.4 million (up PLN 1.6 million). Its total advertising revenues grew by 31.6%, while that of display ads increased by almost 30%. The newspaper's share in the national and local newspaper display advertising spending grew to over 3%. Metro daily was the third most read newspaper in Poland with the average daily readership rate of 4.1% (CPW index). In April 2008 Agora's free daily rolled out it's recruitment supplement
MetroPraca.pl to 7 more large Polish cities.
COLLECTIONS
Revenues from collections amounted to PLN 10.9 million. In second quarter Agora run 4 collections and 14 one-off project which sold 0.7 million books and books with DVDs and CDs. These included: books series Dzieła Wybrane Ryszarda Kapuścińskiego, series of books with DVD Rodzina Soprano, books with CD Afterparty by Cool Kids of Death or Songs of glory - Piesni chwały by Trebunie Tutki and Twinkle Brothers as well as books Ksiazka kucharska Rodziny Soprano (The Cook Book of the Sopranos) or Wolyn 1943-2008. Pojednanie.
OUTDOOR
AMS grew revenues to PLN 53.5 million (up over 7%) and increased advertising revenues which grew in line with the market rate. The Company's substantial increase in revenues reflects its strategy to enhance its portfolio with Premium and Superpremium panels and to promote multiformat campaigns among advertisers. Operating costs of AMS grew by 17.5% primarily due to the increase of campaign execution expense and maintenance costs related to expanding the Company's portfolio. Estimated share of AMS in the outdoor advertising market stood at 24.7% (excluding transit advertising and the costs of cross-promotion of Agora's other media on AMS panels if such promotion was executed without prior reservation).
MAGAZINES
Agora's magazines posted PLN 8.3 million EBITDA (up PLN 1 million) and grew revenues to over PLN 30 million (up almost 5%). Advertising revenues amounted to PLN 19.6 million (up 14%) and grew above the market growth rate. The Agora's magazines reached 7.9% share in all magazine advertising market (up ca 0.4pp). The average paid circulation of Agora's magazines grew by almost 2% and the decline of revenues from copy sales in the second quarter of 2008 resulted from the decrease in average net yield per a single copy sold. In April of 2008 Agora launched a new shopping magazine Galeria (The Gallery) which presents interior design products and equipment.
RADIO
Agora's local radio stations reported positive operating EBITDA of PLN 2.9 million (up PLN 1.2 million) and increased revenues to PLN 24 million (up over 31%), growing above the market growth rate. These results reflect a very high dynamics of ad sales connected with prosperity on the radio ad market. Radio TOK FM continued to grow audience share and increased its sales (up 58%). The station reduced its operating loss.
INVESTMENTS AND GROWTH
On 20 June 2008 the Annual General Meeting of Shareholders (AGM) adopted the resolution concerning the assignment of PLN 27.5 million from the net profit for the fiscal year 2007 for the purpose of the dividend in the amount of PLN 0.5 per share and also concerning the assignment of PLN 90 million for the buy-back program. The program started on 14 July 2008 and shall be executed till 30 October 2008, or until the funds allocated for the execution of the program upon resolution No. 19 of the Annual General Meeting of Shareholders dated 20 June 2008, are depleted.
In the opinion of the Management Board the dividend and the buy-back program in the aforementioned amounts will generate short-term profits for shareholders, while it will not significantly limit the Company's financial capacity to fund its ambitious growth plan which remains the priority for its Management Board.
Agora's strategy assumes growth in the fastest growing advertising segments. Executing on growth objectives should ensure the change of the Company's topline structure in a way that in three years a majority of revenues will come from activities other than paid newspapers. Agora will be implementing greenfield and acquisition projects in order to maintain the Company's mid and long-term position in the advertising market, dynamic transformation and changes in the makeup of the media market notwithstanding. The Company will be closely monitoring all consolidation processes in the Polish media market and will be participating in such transactions which will, according to the Management Board, build long-term shareholder value. These may either include new business areas (e.g. Internet), scale increase in faster growing traditional media or investments in new media in order to secure the Company's current position in its key business areas (e.g. real-estate classifieds).
The Management Board would like to point out that the execution of the growth strategy is key to expand Agora's scope of operations and to change its revenue structure within the next three years but above all it will ensure its long-term growth perspective in the competitive media market. The Management Board unanimously adopted the development strategy of the Company and they are convinced that its execution is crucial in the process of building long-term shareholder value.
ADVERTISING MARKET - PERSPECTIVES
Agora decided to slightly verify its expectations concerning ad market growth in 2008 as a result of a different than expected growth dynamics of the particular segments of the advertising market in the first half of 2008. According to the Company's most recent estimates, total ad spend growth in 2008 will reach ca 12%. Spending on TV will grow by 13-14%, on magazines by 6-7% and on radio by 11-12%, and will be higher than expected. The remaining segments will grow according to Agora's previous expectations, i.e.: the Internet by ca 35-40%, dailies by 4-5% and outdoor by 10%.
(1) Advertising revenues of Agora's internet offer do not include ad sales of verticals: GazetaPraca.pl, GazetaDom.pl and Komunikaty.pl and other sales such as: paid content (including mobile content) and e-commerce advertising.
Sources:
Advertising market: The estimates refer to advertising expenditures in five media (print, radio, TV, outdoor, internet). Agora updated the data regarding ad market and ad market growth in 2007 and previous years. Print and radio advertising market data referred to herein are based on Agora's estimates adjusted for average discount rate and are stated in current prices. In case of print the data do not include classifieds, inserts and obituaries. The estimates are based on rate card data obtained from the following sources: Expert Monitor monitoring, Agora SA monitoring. Presented TV and internet figures for 2008 and the previous years are based on Starlink media house estimates and do not include sponsorships and teleshopping ads. To start with this report, Internet estimates include display, search engines (SEM) and vertical advertising and have been adjusted for the previous reporting periods. Outdoor advertising figures are based on Izba Gospodarcza Reklamy Zewnetrznej estimates.
Copy sales of dailies: The data on the number of copies sold of daily newspapers is derived from the National Circulation Audit Office (ZKDP). The term "copy sales" used in this MD&A is consistent with the sales declarations of publishers to the National Circulation Audit Office.
Readership of dailies: Data on dailies readership are based on PBC General, research carried out by MillwardBrown SMG/KRC on a random, nationwide sample of Poles over 15 years of age. The following indices were used: CCS index (weekly readership index) - percentage of respondents reading at least one edition of the title within 7 days of the week and CPW index (average issue readership index). Size of the sample: nationwide PBC General for April - June 2007r., n = 11 508, April - June 2008r., n = 11 689.
Internet offer reach: Portal reach, real users, page views and spent time on the basis of Megapanel PBI/Gemius and cover internet users age 7 years and above, connecting to internets from the territory of Poland. Real users data of Agora's internet services are audited by Gemius SA.
Outdoor: Report on sales of outdoor companies prepared by Izba Gospodarcza Reklamy Zewnetrznej (IGRZ) which include: AMS SA., Cityboard Media, Clear Channel Poland, Stroeer Out of Home Media, News Outdoor Poland, Gigaboard Polska, Mini Media/Publiprox, Business Consulting, CAM Media and Defi Poland. The report is prepared on the basis of financial data provided by member companies of IGRZ.
Copy sales of magazines: Average paid circulation of monthlies is based on the Agora's own data.
Radio audience: Audience market data referred herein are based on Radio Track surveys, carried out by MillwardBrown SMG/KRC (all places, all days and all quarters of an hour of listening).
