Agora Group report for 1Q 2009
14-05-2009
Press release
| PLN million | 1Q 2009 | 1Q 2008 | yoy % change |
| Revenue | 274.4 | 313.4 | (12.4%) |
| Net profit | 1 | 18.5 | (94.6%) |
| Operating EBITDA (1) | 29.3 | 54.2 | (45.9%) |
| Net cash from operating activities | 39.7 | 53.8 | (26.2%) |
Figures for 1Q 2009 (yoy comparison)
• According to Agora's estimates, advertising spending for all media declined to PLN 1.6 billion (down 7%).
• Revenues of the Group amounted to PLN 274.4 million (down 12.4%). Advertising sales reached PLN 178.8 million (down 16.3%), revenues from copy sales PLN 49.5 million (down 7.1%) and Special Projects, including book sales, brought PLN 22.9 million (up 2.2%).
• Gazeta's advertising sales reached PLN 86.1 million (down 30.7%) and its copy sales generated PLN 38.3 million (down 6.6%). Gazeta sold 396 thou. copies on average and its share in total newspaper advertising expenditure reached ca. 39.5% (down 4pp%, but up 1.5pp in comparison to 1q2008 and 4q2008, respectively).
• Free daily Metro decreased its ad revenues to PLN 8.4 million (down 3.4%) while its revenues from display ads decreased by 6%. The lower than the market rate dynamics of advertising revenue decrease in Metro resulted in the increase of the title's share in advertising expenditure in dailies by almost 1pp.
• Advertising revenues from the Group's Internet operations (2) grew to PLN 10.4 million (up 16.9%) and ad sales of classified vortals (3) amounted to PLN 5.9 million (up 28.3%). In February 2009 total reach of all Agora Internet brands increased to 47.4%.
• Revenues of AMS amounted to PLN 38.5 million (down 3.8% while the advertising expenditure in outdoor dropped by 8%). The company increased its share in outdoor advertising expenditure to 27.8% (up 2.4%).
• Revenues of magazines reached PLN 23.4 million (down 10.3%) and the segment's operating EBITDA (1) stood at PLN 3.1 million.
• Radio stations grew revenues to PLN 18.6 million (up 3.3%) and posted positive operating EBITDA (1) of PLN 1.6 million.
• Total net operating cost of the Group declined to PLN 268.7 million (down 7.6%). This was caused by, i.a. the implementation of the operating efficiency improvement plan in December 2008, reduction of marketing expense (down by 28.3% in comparison to 1q 2008) and materials and energy expense (down by 3.6% in comparison to 1q 2008) as well as decrease in raw materials and consumables (down 22.1%). The staff costs grew (by 9.7%) due to salary regulations in 2q 2008 and the increase of employment, including headcount increase related to consolidation of the subsidiary Trader.com (Polska). Employment in the Group at the end of 1q2009 declined to 3.505 FTEs (down 168 FTEs in comparison to 4q 2009).
• In line with the operating efficiency improvement plan announced in December 2008, the Group, on a daily basis, undertakes cost curtailment measures. Total number of people who already received dismissal notices in 1q 2009 amounts to 238, and as of May 7, 2009 the number increased to 282. The employment reduction process carried out in the Group since January 1, 2009 was prolonged and shall be executed till October 31, 2009 and shall concern about 400 people (which constitute about 10.4% of employees in the Group as at November 30, 2008). The process includes the group lay-offs in the Company.
• Operating EBITDA (1) of the Group stood at PLN 29.3 million (down 45.9%), while its operating EBITDA margin reached 10.7%. Group's net profit amounted to PLN 1 million.
• At the end of March 2009, the Group's cash and short-term monetary assets amounted to PLN 256.8 million, out of which PLN 196.4 million in cash and cash equivalents and PLN 60.4 million in secure short -term securities. The Group's debt amounted to PLN 143.7 million and accessible credit line for further drawing down was PLN 200 million.
1Q2009 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 quality newspapers. It sold 396 thou. copies on average (down 7.8%) and decreased copy sales revenues by 6.6%. Copy sales of Dziennik declined by 9.4% to 148 thou. copies, Rzeczpospolita sold 150 thou. copies (down 6.8%) and Fakt sold 487 thou. copies (down 7.6%). Super Express decreased paid circulation by 3.9% to 206 thou. copies. The average paid circulation of all local dailies published by Polskapresse under Polska brand in 1q 2009 amounted to 323 thou. copies (down 4%). Publishers decided to increase copy prices of their newspapers. Due to price increases, Dziennik currently sells for PLN 2 on weekdays and for PLN 2.5 on Fridays and Saturdays. The titles published under Polska brand cost from PLN 1.4 to PLN 1.5 on weekdays, while Rzeczpospolita sells for PLN 3.4. Gazeta changed its price twice in 1q 2009. Since January 2, 2009 to April 9, 2009 Gazeta sold for PLN 1.8 on weekdays. Since April 10, 2009 Gazeta costs PLN 2 on weekdays and PLN 2.5 on Fridays and Saturdays. In kiosk subscription Gazeta sells for PLN 1.6. In 1q 2009 ca 41% of Dziennik's paid circulation and 15% of Rzeczpospolita's was sold through bartering or the like methods. "Other paid forms of distribution" constituted only ca. 6% of Gazeta's total copy sales. In 1q 2009 Gazeta Wyborcza was the most read quality daily and reached over 4.6 million readers (15.4% reach, CCS - weekly readership index), which is ca. 3.5 times more that the number of the readers of Rzeczpospolita or Dziennik. Gazeta's advertising revenues (4) amounted to PLN 86.1 million (down 30.7%) while the title's share in dailies ad expenditure reached ca. 39.5% (down 4 pp and up 1.5pp in comparison to 1q2008 and 4q2008, respectively). The decline of Gazeta's share in dailies ad expenditure resulted from decrease of the number of recruitment ads in which Gazeta holds a leader position. The share of Fakt in total newspaper advertising spending reached almost 7% while that of Dziennik stood at 5.5%.
INTERNET (5)
Internet ad revenues (2) of Agora grew by 16.9% to PLN 10.4 million, including PLN 0.5 million from Internet ad sales of Trader.com (Polska). Listing sales in classified vortals (3) increased by 28.3% to PLN 5.9 million, including PLN 2.4 million contributed by vortals of Trader.com (Polska). In February 2009 the reach of Agora's Internet brands among Polish users grew to 47.4%, while the number of users amounted to 7.63 million (up 22.5%). In 1q 2009 Agora launched a new audiovisual online project and presented the first episode of a new web-based video series N1ckola (n1ckola.pl) produced by Agora and A2 Multimedia. The project is based on the license of EQAL company, which produced popular online video series LonelyGirl15 and KateModern. The sponsors of 100-episode series are well-known companies. In 1q2009 Agora continued to enrich its offer for advertisers. The Company set up SearchLab agency responsible for marketing via web search engines, began cooperation with AdTaily - a creator of innovative network of non-invasive web ads placed in blogs and the Internet services, and expanded the reach of the Internet ad network for women Glossy Media.
METRO
Total revenues of Metro amounted to PLN 8.4 million (down 3.4%) while that of display ads decreased by 6% while the dailies ad market dropped by 24%. Agora's free daily increased its share in display advertising in dailies to 4.2% (up 1pp). In 1q 2009 Metro recorded a negative operating EBITDA (1) of PLN 0.3 million. In the described period Agora's free daily reached 1.35 million readers (4.5 reach, CPW index - daily readership), which is 2 times more that the number of readers of Rzeczpospolita and almost 2.5 times more that the number of the readers of Dziennik. In 1q 2009 the title introduced a new offer for advertisers - mTarget - which combines activities from the ambient media and BTL, and launched revamped, more interactive version of its website
eMetro.pl.
SPECIAL PROJECTS
Total revenues of Special Projects grew to PLN 22.9 million (up 2.2%). Agora ran 5 collections and 11 one-off projects. The Company sold ca. 1.1 million books and books with DVDs and CDs, i.a. books from 16-volume book series Dzieła Stanisława Lema (Stanisław Lem's Masterpieces), books with CDs from 24-volume music collection of Queen and books with CDs and DVDs from 20-volume collection Wielkie Opery (Great operas).
OUTDOOR
Ad revenues of AMS amounted to PLN 37.8 million and decreased by 3.7% while total spending on outdoor advertising decreased by 8%. Estimated share of AMS in outdoor ad spend grew to 27.8% (up by 2.4pp). Better than the market's dynamics of the AMS's revenues mainly stems from the sale of Premium segment panels. The decline in revenues of AMS results from decreasing client spending on transit advertisement and the significant decrease in poster printing services. The increase of operating cost by 6.1% mainly reflects higher system maintenance cost related to expanded offer of Premium and Superpremium segment panels and the investment in a new advertising channel in the Warsaw subway system, CityINFOtv.
MAGAZINES (6)
Operating EBITDA of magazines (1) reached PLN 3.1 million, while segment's revenues amounted to PLN 23.4 million (down 10.3%). The decline of revenues from ad sales (by 10.7% to PLN 12.5 million) and copy sales (by 10.8% to PLN 10.7 million) reflects general market slowdown. Paid circulation of magazines declined by 7%. In 1q2009 Agora's magazines occupied 6% share of advertising expenditure in national magazines and 11% share of advertising spending in monthlies (according to rate card data). Operating costs of the segment dropped by 8.4%, including costs of Agora Press Ltd.
RADIO (7)
Radio stations of Agora reported positive operating EBITDA (1) of PLN 1.6 million (up PLN 0.2 million) and increased ad revenues (8) to PLN 18.1 million (up 2.3% while total spending for radio advertising dropped by 7%). Agora's music radio stations the audience share reached 7.2% (down 1.4pp%) while in Warsaw and in Silesia Agglomeration - two most important markets for advertisers - the audience share of music radio stations grew to 6.9% (by 0.5pp). In 1q 2009, Radio TOK FM reached 6.2% share of the Warsaw radio audience (in its target group) as compared to 7.4% reach in 1q 2008 while in all cities of broadcasting the station's audience ratings reached 4.4% (4.5% in 1q 2008).
PROSPECTS
COSTS IN 2009
Due to additional employment reductions in the Group as compared to those announced in December 2008, the Company shall create additional provision for the cost of lay-offs execution in the amount of about PLN 2.3 million, which will in full affect Group's consolidated financial result for 1h 2009.
The level of promotion and marketing expense depends on the growth dynamics of particular businesses as well as the market activities and projects of the competition.
Cost of raw materials and energy is, by and large, dependent on EUR/PLN exchange rate and the production volume.
ADVERTISING MARKET IN 2009
According to Agora's estimates, advertising spending for all media declined to PLN 1.6 billion (down 7%).
The Company does not sustain its estimates relating to ad market and GDP growth forecast for 2009 presented in the financial report for 4q 2008. Due to volatile market conditions and inconsistent opinions of market specialists, the Company cannot estimate the GDP and the value of ad market for 2009 in a competent way. Bearing in mind the sensitivity of ad market performance to GDP changes, as well as the change in relation between the two and unpredictability of that change, any estimates of the ad spend market value would represent a significant margin of error. In Company's view the dynamics of ad expenditure decline shall deepen in 2q 2009 compared to 1q 2009.
NOTICE: The above financial data comes from Management Discussion and Analysis of the Group's results for the first quarter of 2009. As IFRS 8 Operating segments has become effective, the Group has adjusted its operating segments presentation in MD&A and financial statements to the requirements of this standard. Due to this change, the amounts concerning major business lines presented in the quarterly reports for previous reporting periods may not be comparable in full with the present data prepared under the management approach.
Notes:
(1) Operating EBITDA = EBITDA + non-cash expenses relating to share-based payments.
Operating EBITDA of Magazines is calculated on the basis of cost directly attributable to the appropriate operating segment of the Agora Group and excludes allocations of all Company's overheads (such as: cost of Agora's Management Board and a majority of cost of the supporting divisions), which are included in matching positions,
(2) the data do not include revenues from cross-promotion of Agora's different media if such promotion is executed without prior reservation, as well as inter-company sales between Agora's Internet Department, LLC Agora Ukraine and Trader.com (Polska) Sp. z o.o. From 2009, e-commerce ad sales (performance advertising) are presented as display ad sales not in other revenues; the comparable data were restated thereupon,
(3) the data includes, among others, allocated revenues from the dual media offer (i.e. published both in Gazeta Wyborcza, as well as on GazetaPraca.pl, GazetaDom.pl and Komunikaty.pl verticals); from 2009 ad sales defined as Power Page advertising (ads published within standing fees) in Trader.com (Polska) Sp. z o.o. are presented in ad sales of verticals, not in display ad sale;
(4) the data refers to only a portion of total revenues from the dual media offers (published both in Gazeta Wyborcza, as well as on GazetaPraca.pl, GazetaDom.pl and Komunikaty.pl verticals), which are allocated to print edition of Gazeta.
(5) the Internet segment includes the pro-forma consolidated financials of Agora's Internet Department, LLC Agora Ukraine and Trader.com (Polska) Sp. z o.o. The comparable data for the first quarter of 2008 do not include financials of Trader.com (Polska) Sp. z o.o., because the company was incorporated into the Agora Group in June 2008.
(6) as of 4q2008 results of Magazines segment include results of Agora Press Ltd. (Ukraine)
(7) the Radio segment includes the pro-forma consolidated financials of Agora's Radio Department, all local radiostations and a super-regional radio TOK FM, being parts of the Agora Group. This includes: 18 Golden Oldies (Zlote Przeboje) radio stations, 7 local radio stations (Radio Roxy FM), a super-regional news radio TOK FM broadcasting in nine cities and one AC format (Adult Contemporary) local station.
(8) advertising revenues include revenues from brokerage services of the proprietary and the third-party air time. The data do not include revenues of cross-promotion of Agora's different media if such a promotion was executed without prior reservation.
Sources:
Advertising market: the data refer to advertising expenditures in five media (print, radio, TV, outdoor, Internet). In this press release Agora has corrected the advertising figures for 2008 and the 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. Given the discount pressure and advertising time and space sell-offs, these figures may not be fully reliable and will be adjusted in the consecutive reporting periods. 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. 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 are 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. Average number of copies sold of dailies associated under a common title Polska = a sum of all copies sold of the dailies /number of days of publishing.
Readership of dailies: the 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 1q 2009: n = 12.447.
Internet offer reach: portal reach and real users on the basis of Megapanel PBI/Gemius, cover Internet users age 7 years and above, connecting to Internet from the territory of Poland and include only Internet domains registered by Agora SA. 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, Defi Poland and from 2009 also BP Media and Warexpo. The report is prepared on the basis of the financials provided by member companies of IGRZ. From the beginning of 2009, the reports for the outdoor market (defined by IGRZ as 'the out-of-home market'), include immovable (traditional), mobile and digital outdoor advertising. Market data in this MD&A are based on a new IGRZ definition of the outdoor market.
Copy sales of magazines: average paid circulation of monthlies is based on the Agora's own data. Rate card data on magazines obtained from Expert Monitor monitoring; commercial brand advertising, excluding specialized monthlies; accounted for 125 titles.
Radio audience: audience market data are based on Radio Track surveys, carried out by MillwardBrown SMG/KRC (all places, all days and all quarters). For local radiostations: in cities of broadcasting of Agora'a radiostations, the age group 15+, 1q 2008: n=11.422, 1q 2009: n=11.410; 4q 2008: n=11,362; in Warsaw and in Silesia Agglomeration, the age group 15+, 1q 2008: n=3.016, 1q 2009: n=2.937). For TOK FM: in Warsaw, the age group 15+, 1q 2008: n=1.509; 1q 2009: n=1.432; 4q 2008: n=1.462); in cities of broadcasting, the age group 15+, 1q 2008: n=8.104, 1q 2009: n=8.035, 4q 2008: n=8.046.
