Agora Group report for 3Q 2009
10-11-2009
Press release
| PLN milion | 3Q 2009 | 3Q 2008 | yoy % change | 1-3Q 2009 | 1-3Q 2008 | yoy % change |
| Revenue | 246.8 | 284.7 | (13.3%) | 819 | 941.8 | (13%) |
| Net profit | 9.6 | 13.7 | (29.9%) | 22.4 | 53.9 | (58.4%) |
| Operating EBITDA (1) | 33.3 | 37.9 | (12.1%) | 101.3 | 154.2 | (34.3%) |
| Net cash from operating activities | 21 | 65.3 | (67.8%) | 86.8 | 147.5 | (41.2%) |
Figures for 1-3q 2009 (yoy comparison):
• According to Agora's estimates, advertising spending for all media amounted to PLN 4.96 billion (down 13%).
• Revenues of the Group amounted to PLN 819 million (down 13%). Advertising sales reached PLN 533.8 million (down 21.3%), revenues from copy sales PLN 145.2 million (down 4.3%) and Special Projects, including book sales, brought PLN 64.6 million (up 61.5%).
• Gazeta's advertising sales reached PLN 252.3 million (down 31.8%) and its copy sales generated PLN 113 million (down 2%). Gazeta sold 376 thou. copies on average and its share in total newspaper advertising expenditure reached ca 38.5% (down 3pp). Once the influence of the drop in the recruitment ads is factored out, Gazeta's share in ad expenditure in dailies in 1-3q 2009 remains on the same level as in 1-3q08.
• Ad revenues of free daily Metro amounted to PLN 23.4 million (down 15.5%). The lower than the market rate (down 26%) dynamics of advertising revenue decrease in Metro resulted in the increase of the title's share in advertising expenditure in dailies by 0.5 pp to almost 4%.
• Revenues from the Group's Internet operations grew to PLN 58.5 million (up 9.8%), including PLN 12.3 million from the operations of Trader.com (Polska) for external clients. In August 2009 total reach of online services from Gazeta.pl Group reached 58%. (2)
• Revenues of AMS amounted to PLN 122.2 million (down 9.2% while the advertising expenditure in outdoor dropped by 13%). The company increased its share in outdoor advertising expenditure to 26.6% (up 2%).
• Revenues of Magazines reached PLN 70 million (down 16.5%) and segment's operating EBITDA1 stood at PLN 13.8 million.
• Revenues of Radio stations amounted to PLN 54.2 million (down 11.3%). Segment posted positive operating EBITDA (1) of PLN 2.3 million.
• Total net operating cost of the Group in 1-3q09 declined to PLN 785.6 million (down 9.9%) while in 3q09 it dropped by 12.5% to PLN 234 million. The decrease of operating costs in 1-3q09 effected from the operating efficiency improvement plan implemented since December 2008, which included, inter alia, reduction of marketing expense (down 31.7%), reduction of staff costs (down 7.7%, excluding non-cash expense relating to share-based payments) and decrease in cost of printing services (by 11.1%).
• In line with the operating efficiency improvement plan announced in December 2008, the Group on the daily basis undertakes cost curtailment measures. On 31 October 2009, the process of group lay-offs in the Company was finalized. By the end of September 2009, 377 employees received dismissal notices and by the end of October 2009, the number grew to 393. The headcount of the Group as of September 30, 2009 amounted to 3 200 FTEs (down 473 FTEs as compared to December 31, 2008). The full effects of the plan should be visible in the Company's financial results in 2010.
• Operating EBITDA (1) of the Group stood at PLN 101.3 million (down 34.3%) while its operating EBITDA margin reached 12.4%. The Group's net profit attributable to the equity holders of the parent amounted in 1-3q 2009 to PLN 23.4 million.
• At the end of September 2009, the Group's cash and short-term monetary assets amounted to PLN 247.8 million, out of which PLN 125 million in cash and cash equivalents and PLN 122.8 million in secure short-term securities. The Group's debt amounted to PLN 119.6 million as the Company paid three installments of the credit line used in the previous years. The accessible credit line for further drawing down was PLN 200 million.
3q2009 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 353 thou. copies on average (down 10%) and increased copy sales revenues by 4.2% to PLN 37.6 million. As a result of an agreement between Axel Springer Polska Sp. z o.o., publisher of Dziennik Polska Europa Swiat, and INFOR PL SA, publisher of Gazeta Prawna, the company INFOR Biznes Sp. z o.o. became the publisher of Dziennik Polska Europa Swiat. On September 14, 2009, from the blend of the two titles a new daily entitled Dziennik Gazeta Prawna appeared on the market. Dziennik Gazeta Prawna, according to the publisher's declaration, sold on average 126 thou. copies in the period from September 14 till September 30, 2009. Dziennik Polska Europa Świat sold on average 79.1 thou. copies in the period from July 1 till August 31, 2009 (the publisher did not submit copy sales declaration for September). Gazeta Prawna sold on average 62.1 thou. copies in the period from July 1 till September 11, 2009. Paid circulation of Rzeczpospolita in 3q09 reached 137 thou. copies (down 10.2%), Fakt sold 455 thou. copies (down 6.1%) and Super Express decreased paid circulation by 7.7 % to 186 thou. copies. The average copy sales of titles under Polska brand (since March 2009 the number of the titles was reduced from 18 to 9) in 3q09 amounted to 290 thou. copies (3). As a result of cover price changes Dziennik Gazeta Prawna costs PLN 2.6 for Monday-Thursday edition and PLN 2.9 for Friday edition (the title has no Saturday edition). Rzeczpospolita sells for PLN 3.4 while the titles published under Polska brand cost from PLN 1.5 to PLN 1.7. Gazeta sells for PLN 2 on weekdays and PLN 2.5 on Fridays and Saturdays. In kiosk subscription Gazeta costs PLN 1.6. In 3q09 Gazeta Wyborcza was the most read quality daily and reached 4.2 million readers (14% reach, CCS - weekly readership index). Gazeta's advertising revenues (4) amounted to PLN 77.5 million (down 27.2%), while the title's share in dailies ad expenditure reached nearly 38% (down ca 2pp in comparison to 3q08). The decline of Gazeta's share in dailies ad expenditure resulted mainly from the significant decrease of the number of recruitment ads in which Gazeta holds a leader position. If recruitment ads were excluded, Gazeta would slightly increased its share in dailies' advertising expenditure in 3q09. Shares of Fakt and Dziennik in total newspaper advertising spending stood 7-8% and 4,5%, respectively.
INTERNET (5)
Agora's Internet ad revenues (6) grew by 32.2% to PLN 11.9 million while listings sales in classified vortals (7) reached PLN 5.4 million (down 18.2%). The fall of ad sales in verticals resulted from lower allocation of advertising sales from dual media offers (print and online). In August 2009, the reach of online services from Gazeta.pl Group among Polish users amounted to 58%, while the number of users reached 9.7 million (up 38.6%) (2). In 3q09 Agora introduced a new home page of
Gazeta.pl portal and a new home page of the Polish version of Microsoft's portal
Msn.gazeta.pl , which is maintained and developed by Gazeta.pl Group.
METRO
Total ad revenues of Metro amounted to PLN 7.1 million (down 24.5%) and its revenues from display ads decreased with a market rate by 23%. Metro maintained its ca 4% share in total display ad spend on dailies. Its share in Warsaw dailies ad market grew by almost 3pp. The title went up to the second position (after Gazeta Wyborcza) as far as the share in display ads in dailies in Warsaw is concerned. In 3q09 Metro reached nearly 1.9 million readers (6.5 reach, CCS index - weekly readership). The title recorded a negative operating EBITDA1 of PLN 0.4 million. In 3q09 Agora's free daily developed its Metro+ ad offer which combines advertising activities in Metro and other media from Agora Group. The offer includes, inter alia, ad packages with Gazeta Wyborcza, Agora's Internet services, radio stations and AMS.
SPECIAL PROJECTS
Total revenues of Special Projects from external clients grew to PLN 12.5 million (up 86.6%). Agora ran 4 collections and 7 one-off projects. The Company sold ca 0.6 million books and books with DVDs and CDs, inter alia, books from series of travel guides Miasta marzeń (Cities of Dreams) and from collection Religie Świata (World Religions), as well as books with DVDs from the film series Woody Allen.
OUTDOOR
Ad revenues (8) of AMS amounted to PLN 35.8 million and decreased by 11.9%, while the total outdoor advertising market declined by 21%. As a result, an estimated share of AMS in spending on outdoor advertising increased to 26% (up 3pp). Better than the market's dynamics of the AMS's revenues stems mainly from the sale of ad panels from the Premium segment. The operating cost of AMS group remained flat yoy (small decline by 0,3%); D&A was the only cost item that increased during that period, due to the large scope of investment in previous years.
MAGAZINES (9)
Operating EBITDA (1) of Magazines reached PLN 4.9 million, while segment's revenues amounted to PLN 22.4 million (down 17.3%). The decline of ad revenues(10) (by 18.4% to PLN 12 million) and copy sales revenues (by 14% to PLN 10.4 million) reflects general market slowdown and in case of ad sales - the reduction of marketing budgets in construction and appliances categories. Paid circulation of Agora's monthlies declined by 14.4%. Agora's magazines occupied 6.9% share of advertising expenditure in national magazines and 12% share of advertising spending in monthlies (according to rate card data). Operating costs of the segment dropped by 19.6%.
RADIO (11)
Ad revenues of radio stations (12) of Agora amounted to PLN 13.6 million (down 26.1% while total spending for radio advertising dropped by 20%). The decline in revenues resulted from the drop in revenues from brokerage services of the proprietary and the third-party air time and from the reduced number of promotion campaigns settled in barters. The decrease in operating cost of the segment (down 26.1%) stems from the reduction of the staff costs (down 30.6%) and marketing expenditures (down 41.4%). In 3q09 the segment reported positive operating EBITDA (1) of PLN 0.9 million.
Prospects
COSTS IN 2009
The operating efficiency improvement plan and strict cost control (including new FTEs) will be continued in the Group to adjust it to worse market conditions. The Group intends to continue its cost control policy also in relation to marketing and promotion expenditure. However, it should be remembered that the level of marketing and promotion expense depends on the dynamics of particular media development, as well as the market activities (taking into account seasonality of marketing expenditure in the fourth quarter) and projects of the Group's competitors. Cost of raw materials and energy is, by and large, dependent on EUR/PLN exchange rate, the production volume and cost of energy. In 4q09, this cost position will be affected by, inter alia, EUR/PLN exchange rate and higher than in a previous year energy prices.
ADVERTISING MARKET IN 2009
Ad market performance in 4q09 depends, by and large, on the condition of the Polish economy, especially on the level of investment, individual consumption and the scale of European Union funds inflow. In Company's view, taking into consideration the above mentioned indices for the first three quarters of 2009, no significant signs of improvement on the Polish ad market can be observed.
NOTICE: The above financial data comes from Management Discussion and Analysis of the Group's results for 3q 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. EBIT, EBITDA, operating EBITDA of Newspapers, Internet and Magazines are 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 Gazeta.pl Group include online services (including partnership services), which domains are subscribed by Agora. Data regarding real users is based on Megapanel PBI/Gemius, which covers Internet users age 7 years and above, connecting to Internet from the territory of Poland and include only Internet domains registered on Agora SA. Real users data of Gazeta.pl Group services are audited by Gemius SA. The research methodology of Megapanel PBI/Gemius has changed from May 2009, which has caused an increase by several percentage points as for range and number of users of online services and websites in the Polish Internet.
(3) 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.
(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, Domipotrta.pl, Komunikaty.pl and Nekrologi.Wyborcza.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, Trader.com (Polska) Sp. z o.o. and AdTaily Sp. z o.o. Incorporation of Trader.com (Polska) Sp. z o.o. is reflected in financial performance of the Internet segment from 3q08 and incorporation of AdTaily Sp. z o.o. is reflected in financial performance of the Internet segment from 3q09.
(6) the data do not include total 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. and AdTaily 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.
(7) 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, Domiporta.pl, Komunikaty.pl and Nekrologi.Wyborcza.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.
(8) the amounts do not include revenues from cross-promotion of Agora's other media on AMS panels if such promotion was executed without prior reservation;
(9) the Magazines segment presents the pro-forma consolidated financials of Agora's Magazines and Agora Press Ltd. (Ukraine).
(10) the data do not include revenues from cross-promotion of Agora's different media (only direct variable cost of campaigns carried out on advertising panels) if such promotion is executed without prior reservation.
(11) the Radio segment includes the pro-forma consolidated financials of Agora's Radio Department, all local radio stations and a superregional radio TOK FM, being parts of the Agora Group. This includes: 18 Golden Oldies (Zlote Przeboje) radio stations, 7 local radio stations (Roxy FM), a superregional news radio TOK FM broadcasting in 9 cities and 1 AC format (Adult Contemporary) local station.
(12) advertising revenues include revenues from brokerage services of the proprietary and the third-party air time. The data do not include revenues from cross-promotion of Agora's different media (only direct variable cost of campaigns carried out on advertising panels) 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. TV and Internet figures for the 1-3q09 and the previous periods are based on Starlink media house estimates. 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. The estimates are based on rate card data obtained from the following sources: Expert Monitor monitoring, Agora SA monitoring. 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. 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 press release is consistent with the sales declarations of publishers to the National Circulation Audit Office.
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 3q 2009: n=12 100,
Internet offer reach: data on real users based on Megapanel PBI/Gemius, which covers Internet users age 7 years and above, connecting to Internet from the territory of Poland and include only Internet domains registered on Agora SA. Real users data of Gazeta.pl Group 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, Warexpo and Żak. 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 press release 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 122 titles.
