Agora Group financial results for 2Q 2010
12-08-2010
Press release
| PLN milion | 2Q 2010 | 2Q 2009 | yoy change | 1H 2010 | 1H 2009 | yoy change |
| Revenue | 281.3 | 297.8 | (5.5%) | 529.4 | 572.2 | (7.5%) |
| Cost | 257.2 | 282.9 | (9.1%) | 488.6 | 551.6 | (11.4%) |
| Net profit attributable to the equity holders of the parent | 20.2 | 12.2 | 65.6% | 41.9 | 13.3 | 215% |
| EBIT | 24.1 | 14.9 | 61.7% | 40.8 | 20.6 | 98.1% |
| EBIT margin | 8.6% | 5% | 3.6pp | 7.7% | 3.6% | 4.1pp |
| EBITDA | 43.5 | 35.2 | 23.6% | 79.9 | 60.9 | 31.2% |
| Operating EBITDA(1,2) | 46.3 | 38.7 | 19.6% | 85.8 | 68 | 26.2% |
| Operating EBITDA margin(1,2) | 16.5% | 13% | 3.5pp | 16.2% | 11.9% | 4.3pp |
Figures for 1h10 (yoy comparison):
• According to Agora's estimates, advertising spending for all media amounted to PLN 3.7 billion (up 3.5%).
• Agora Group improved its EBIT by 98.1%, despite the one-off PLN 7.7 million write off of the outlays connected with the software licenses in 2q10. The Group increased its net profit attributable to the equity holders of the parent to PLN 41.9 million (up 215%) and improved profitability, increasing operating EBITDA margin(1) to 16.2% (up 4.3pp).
• Revenues of the Group amounted to PLN 529.4 million (down 7.5%). Advertising sales reached PLN 355 million (down 5.1%), revenues from copy sales PLN 104.9 million (down 20.9%) and other sales brought PLN 69.5 million (up 6.3%).
• Total net operating cost of the Group reached PLN 488.6 million and decreased by 11.4% yoy. The decrease in operating cost results, inter alia, from the reductions in marketing expense (down 21.5%) and in the cost of raw materials, energy and consumables (down 22.8%) as the effect of lower cost of paper consumption and launching less expensive book collections within Special Projects. Moreover, lower by 1.1% staff cost (excluding non-cash expense relating to share-based payments) contributed to the decrease in total net operating cost.
• The Group's headcount at the end of 2q10 was 3.118 employees and decreased by 199 FTEs versus the end of 2q09. It was possible due to execution of one of the components of the operating efficiency improvement plan, which entailed delivering 393 dismissal notices to employees till the end of October 2009.
• Operating EBITDA margin(1,2) of the Newspapers segment (including Gazeta Wyborcza , Metro , Special Projects, Agora's Printing Department and Agora Poligrafia Sp. z o.o.) grew by 7.2pp to the level of 30%. Gazeta's advertising sales reached PLN 158.8 million (down 9.2%) and its copy sales generated PLN 73.5 million (down 2.5%). Gazeta sold 343 thou. copies on average and increased its share in the display advertising in dailies by almost 1pp to 39.5% yoy.
• Metro increased its share in advertising expenditure in dailies to ca. 4%. Ad revenues of Metro amounted to PLN 16 million and declined only by 1.8%, while total ad spend in dailies dropped by 12.4%.
• Internet segment(3) of Agora noted a positive EBIT of PLN 1.4 million as a result of the dynamic growth of the ad revenues4 which grew by 46.3%. In May 2010, total reach of online services from Gazeta.pl Group reached 65.8%.
• AMS Group(5) improved its operating EBITDA(1,6) by 1.8% and increased its operating EBITDA margin by 1.3pp. Revenues of AMS Group amounted to PLN 79.9 million (down 7.5%), including PLN 78.8 million from ad sales7 (down 7%). Its share in outdoor advertising expenditure stood at the level of 26.2%.
• Magazines improved its operating EBITDA margin(1,2) to the level of 19.6% (up 0.9pp). Revenues of Magazines reached PLN 43.3 million and decreased by 9%.
• Radio segment of Agora noted a positive EBIT of PLN 0.6 million, improved its operating EBITDA by 64.3% to PLN 2.3 million and increased its operating EBITDA margin by 2.9pp to 6.4%. Revenues of Agora's radio stations amounted to PLN 36.2 million (down 10.4%).
2q10 market performance and financial results of Agora's major lines of business (yoy comparison):
NEWSPAPER MARKET / GAZETA WYBORCZA
Operating EBITDA margin(1,2) of the Newspapers segment (including Gazeta Wyborcza , Metro , Special Projects, Agora's Printing Department and Agora Poligrafia Sp. z o.o.) grew by 7.1pp and reached 29.8%. Gazeta Wyborcza maintained its leadership position among quality newspapers with paid circulation of 347 thou. copies on average (down 8.5%). In the same period copy sales of Rzeczpospolita reached 145 thou. copies, Fakt sold 466 thou. copies, Super Express sold 192 thou. copies and Dziennik Gazeta Prawna sold 101 thou. copies on average. Gazeta Wyborcza was the most read quality daily and reached 4.3 million readers (14.1% reach, CCS - weekly readership index). Gazeta's advertising revenues(8) amounted to PLN 85.6 million (down 3.5%). The title increased its share in dailies display ad expenditure (by 1.5pp to 39.5%) as well as its share in ad expenditure in national dailies (up 3.5pp). Gazeta's share in ad spend in Warsaw newspapers grew by almost 2pp.
INTERNET
The Internet segment of Agora(3) noted a positive EBIT(2) of PLN 1.5 million and its operating EBITDA margin(1,2) grew by 20.4pp to the level of 13.1%. Revenues of the segment grew by 35.6% to PLN 25.9 million, including increase of revenues from display ad sales(4) by 63.6% to PLN 18 million (while total ad spend in display ads and e-mail marketing grew by 28%) and growth of revenues from ad sales in verticals(9) by 7.4% to PLN 5.8 million. In May 2010 total reach of online services from Gazeta.pl Group reached 65.8% and the number of its users reached 11.5 million (up 16.2%). In 2q10 Agora acquired shares in Business Ad Network Sp. z o.o. - an online advertising network offering ad space in services featuring quality content covering e.g. economics and business, and became Poland's first commercial YouTube partner entitled to a share in the ad revenues from ads displayed in Agora's content presented in its YouTube thematic channels.
METRO
Metro noted operating EBITDA(1,2) of PLN 1.3 million. Total ad revenues of Metro increased by 10.1% to PLN 8.7 million while total ad spend in dailies dropped by 9%.The title grew its share in ad spend on dailies by almost 0.5pp to ca. 4% and its share in ad spend in Warsaw newspapers increased by 1.5pp to 13%. Metro posted good readership results and reached almost 2 million readers (6.5% reach, CCS index - weekly readership). In 2q10 Metro won the first prize in the Marketing Solutions for Advertisers category of prestigious INMA Awards 2010 for its project Metro dla Berlinczykow (Metro for Berliners). The title was also awarded with the distinction Media Trendy 2010 , in the CSR category of the competition devoted to the Innovation in the Media for its campaign Adoptuj Zwierzaka (Adopt a Pet).
SPECIAL PROJECTS
Revenues of Special Project amounted to PLN 15.9 million. Agora ran 6 collections and 13 one-off projects and sold ca 0.7 million books and books with DVDs and CDs, inter alia, from the movie series Lektury szkolne (School Readings), from music series Giganci Jazzu (Jazz Giants) and Polskie Dzieci Kwiaty (Polish Flower Power) and from book collections Wielcy Filozofowie (Great Philosophers) and Książki Wybrane Tadeusza Konwickiego (Selected Works of Tadeusz Konwicki).
OUTDOOR
AMS Group(5) noted a positive EBIT of PLN 4.8 million (up 158.1%), increased its operating EBITDA(1,6) by 31.3% and grew its operating EBITDA margin by 6.7pp. Ad revenues(7) of AMS Group amounted to PLN 44.3 million (down 5.5%). Its cost was reduced to PLN 40.1 million (down 13%) with the largest decline in the campaign execution cost (down 25%) and reduction of the maintenance cost (down 9.5%) which reflected optimization measures undertaken by AMS Group.
MAGAZINES
Operating EBITDA margin(1,2) of the Magazines segment(10) reached 20.6%. Revenues of Magazines amounted to PLN 22.8 million (down 5.8%), including ad revenues11 of PLN 13.5 million and copy sales revenues of PLN 9.2 million. Operating cost of the segment was reduced to PLN 18.3 million. Paid circulation of Agora's monthlies declined by 5.4% yoy.
RADIO
The Radio segment(12) grew its operating EBITDA margin(1) to 2% (up 2.9pp). Ad revenues of radio stations(11,13) amounted to PLN 19.8 million (down 6.6%). The drop in operating cost of the segment (down 10.4%) stems from, inter alia, the reduction of the staff costs (down 7.7%, excluding non-cash expense relating to share-based payments) and decline in marketing expenditure (down 17.4%)(11).
Prospects
ADVERTISING MARKET IN 2010
It seems that a week long break in emission and publication of advertisements in some media, in 2q10, did not stop the first signs of stabilization on advertising market.
Ad market performance in the consecutive quarters of 2010 depends, by and large, on the condition of the Polish economy, especially on the level of investment, individual consumption and the inflow scale of funds from European Union.
Advertising market in the next quarters of 2010 can also be influenced by the further developments in European macroeconomic situation as well as structural changes in media and consolidation processes taking place on advertising market.
COST IN 2010
The Group continues cost control policy (including new FTEs) to adjust it to ad market conditions.
The level of staff cost depends on the variable element of staff remuneration which is strictly related to achievement rate of the budgetary objectives. Additionally, the Group executes development projects, including those building competencies in electronic media.
The level of marketing and promotion expense depends on the dynamics of particular media development, as well as the number of projects launched in a given quarter, including book series published by Special Projects and the market activities and projects of the Group's competitors.
In 1h10, the cost of materials and energy was influenced, by and large, by cost of materials (including newsprint cost), EUR/PLN exchange rate and the production volume. The cost of materials and energy in the coming quarters will be dependent on the volume of production and EUR/PLN exchange rate.
MAIN OBJECTIVES IN 2010
• cost control enabling adjustment of the Group's operations to volatile market conditions;
• development of existing businesses and strengthening the effect of internal synergies to take advantage of Group's multimedia resources and competencies;
• development and creation of new multimedia competence centers within the Group;
• ensuring wide distribution and monetization of content created within the Group;
• taking advantage of the media market context to enrich the Group's portfolio of assets.
The Group, on the daily basis, controls its costs, which in 1h10 were reduced by 11.4%. Due to the systematic monitoring of costs the Group adapted its operations to dynamic advertising market and improved its profitability despite reduced revenues.
The Group is engaged in number of internal processes aiming at development of competencies within the Group and strenghthening the internal synergies between particular media in the Group's portfolio. The processes will lead to effective utilization of the multimedia resources in both current operations as well as in the Group's development projects.
Moreover, the Group, on the daily basis, works on better monetization of the content created withing the Group by searching for new forms and channels of its distribution.
On March 30, 2010 the Company signed a preliminary agreement to purchase 84% of shares of Centrum Filmowe Helios S.A. as an execution of the objective to enrich the Group's portfolio of assets. Signing of the closing agreement is dependent, inter alia, on the fulfillment of certain conditions precedent typical for this type of transactions, including obtaining the consent for the transaction from the President of the Competition and Consumer Protection Office. On July 14, 2010 such a consent was granted. Currently, the Company proceeds with further actions to sign the final agreement to acquire shares of Centrum Filmowe Helios S.A.
NOTICE: The above financial data comes from the Management Discussion and Analysis of the Group's results for 2q 2010. All data presented herein represent the period of January-June 2010 or April-June 2010, while comparisons refer to the same periods of 2009.
Notes:
(1) excluding non-cash cost of share-based payment.
(2) 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.
(3) 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 AdTaily Sp. z o.o. is reflected in financial performance of the Internet segment from 3q09.
(4) the data do not include total 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, as well as inter-company sales between Agora's Internet Department, LLC Agora Ukraine, Trader.com (Polska) Sp. z o.o. and AdTaily Sp. z o.o.
(5) the Outdoor segment consists of the pro-forma consolidated data of companies constituting the AMS Group (AMS SA, Adpol Sp. z o.o.).
(6) the data include a reclassification adjustment of D&A, resulting from financing sources of fixed assets owned by AMS Group.
(7) the data do not include revenues from cross-promotion of Agora's other media on AMS panels if such promotion was executed without prior reservation.
(8) 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, Domiporta.pl, Komunikaty.pl and Nekrologi.Wyborcza.pl verticals), which are allocated to the print edition of Gazeta.
(9) the data includes, inter alia, allocated revenues from the dual media offers (published both in Gazeta Wyborcza, as well as on GazetaPraca.pl, GazetaDom.pl, Domiporta.pl, Komunikaty.pl and Nekrologi.Wyborcza.pl verticals).
(10) the Magazines segment presents the pro-forma consolidated financials of Agora's Magazines and Agora Press Ltd. (Ukraine).
(11) the data do not include revenues from cross-promotion of Agora Group's different media (only direct variable cost of campaigns carried out on advertising panels) if such promotion is executed without prior reservation.
(12) 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), one AC format (Adult Contemporary) local station and a superregional news radio TOK FM broadcasting in 9 cities.
(13) advertising revenues include revenues from brokerage services of the proprietary and the third-party air time.
Sources:
Advertising market: the data refer to advertising expenditures in five media (print, radio, TV, outdoor, Internet). Agora has corrected the advertising figures for 1q and 2q of 2009. Unless explicitly stated otherwise, 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. TV and Internet figures for 2010 and the previous periods are based on Starlink media house. Internet ad spend estimates include display, search engines (Search Engine Marketing), e-mail marketing and affiliated marketing. 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 based on PBC General, research carried out by MillwardBrown SMG/KRC on a random, nationwide sample of Poles over 15 years of age. The CCS index (weekly readership index) was used, which indicates percentage of respondents reading at least one edition of the title within 7 days of the week. Size of the sample: nationwide PBC General for 2q10: n=12 034.
Internet offer reach: the Gazeta.pl Group includes 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.
Outdoor: the data based on the report on sales of outdoor 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, BP Media, Warexpo, Żak and Heardz. The report for the outdoor market (defined by IGRZ as 'the out-of-home market'), is prepared on the basis of the financials provided by member companies of IGRZ and includes immovable (traditional), mobile and digital outdoor advertising.
Copy sales of magazines: average paid circulation of monthlies is based on the Agora's own data.
