Agora Group report for 4Q 2009
23-02-2010
Press release
| PLN milion | 4 q 2009 | 4 q 2008 | yoy % change | 1-4 q 2009 | 1-4 q 2008 | yoy % change |
| Revenue | 291.1 | 335.9 | (13.3%) | 1 110.1 | 1 277.7 | (13.1%) |
| Net profit / loss: | 14.9 | (30.6) | - | 37.3 | 23.3 | 60.1% |
| Attributable to Equity holders of the parent | 14.9 | (30.7) | - | 38.3 | 23.4 | 63.7% |
| EBIT (1) | 19.5 | (25.4) | - | 52.9 | 44.6 | 18.6% |
| EBIT margin (1) | 6.7% | (7.6%) | 14.3 pp | 4.8% | 3.5% | 1.3 pp |
| EBITDA(1) | 39.5 | (2.8) | - | 133.7 | 127.8 | 4.6% |
| Operating EBITDA(1, 2) | 42.6 | 0.8 | 5 225% | 143.9 | 155 | (7.2%) |
| Operating EBITDA margin(1, 2) | 14.6% | 0.2% | 14.4 pp | 13% | 12.1% | 0.9 pp |
| Net cash from operating activities | 65.9 | 42.1 | 56.5% | 152.7 | 189.6 | (19.5%) |
Figures for 1-4q 2009 (yoy comparison):
• According to Agora's estimates, advertising spending for all media amounted to PLN 7.11 billion (down almost 13%).
• Despite the slowdown on the advertising market Agora Group increased its net profit attributable to the equity holders of the parent to PLN 38.3 million (up 63.7%) and improved profitability, increasing operating EBITDA margin(1,2) to 13% (up 0.9pp). Such a good performance was based on adjusting the cost base of the Group to the level of its revenues.
• Revenues of the Group amounted to PLN 1,110.1 billion (down 13.1%). Advertising sales reached PLN 732.2 million (down 20.1%), revenues from copy sales PLN 193.4 million (down 3.4%) and Special Projects, including book sales, brought PLN 79.8 million (up 26.3%).
• Total net operating cost of the Group in 2009 declined to PLN 1,057.2 million (down 14.3%) while in 4q09 it dropped by 24.8% to PLN 271.6 million. The decrease of operating cost in 2009 effected, inter alia, from the operating efficiency improvement plan implemented since December 2008, which included, inter alia, reduction of marketing expense (down 31.2%), reduction of staff costs (down 10.2%, excluding non-cash expense relating to share-based payments) and decrease in cost of printing services.
• In line with the operating efficiency improvement plan announced in December 2008, the Group on the daily basis undertook cost curtailment measures, which include, inter alia, staff reduction. 393 employees received dismissal notices in 2009 and the headcount of the Group as of December 31, 2009 amounted to 3 143 FTEs (down 530 FTEs as compared to December 31, 2008).
• 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 to the level of 24.7%. Gazeta's advertising sales reached PLN 342.8 million (down 29.4%) and its copy sales generated PLN 150.4 million (down 1%). Gazeta sold 370 thou. copies on average and its share in total newspaper advertising expenditure reached over 38% (down 2.5pp). Once the influence of the drop in the recruitment ads is factored out, Gazeta's share in ad expenditure in dailies in 1-4q09 remains on the same level as in 1-4q08.
• Metro daily increased its share in advertising expenditure in dailies to almost 4%. Ad revenues of Metro amounted to PLN 32.2 million and declined by 13.9% while total ad spend in dailies dropped by 25%.
• Revenues from the Group's Internet operations grew to PLN 84.9 million (up 10.1%), including revenues from the display ad sales(3), which grew by 15.3%, while total ad spend in display ads and e-mail marketing dropped by 2%. In November 2009, total reach of online services from Gazeta.pl Group reached 62.6%.(4)
• AMS increased its share in outdoor advertising expenditure by 1.3pp to 26.8%. Revenues of AMS amounted to PLN 168 million - down by 11.4%, while the advertising expenditure in outdoor dropped by 14%.
• Magazines improved its operating EBITDA margin1,2 to the level of 19.6% (up 2.1pp). Revenues of Magazines reached PLN 92.3 million and decreased by 15.9%.
• Radio operations of Agora showed better ad revenues dynamics than the radio ad market rate - ad revenues of Agora's radio stations amounted to PLN 73.2 million (down 14.8%) while the radio ad market dropped by 17%.
• At the end of December 2009, the Group's cash and short-term monetary assets amounted to PLN 278.7 million, out of which PLN 124.2 million in cash and cash equivalents and PLN 154.5 million in secure short-term securities. The Group's debt amounted to PLN 94.8 million (the Company paid four installments of the credit line used in the previous years) and the accessible credit line for further drawing down was PLN 200 million.
4q2009 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 4.6pp and reached 27.1%. Gazeta Wyborcza maintained its leadership position among quality newspapers. It sold 354 thou. copies on average (down 15.3%) and increased copy sales revenues by 2.2% to PLN 37.4 million. Paid circulation of Rzeczpospolita in 4q09 reached 140 thou. copies (down 8.8%), Fakt sold 461 thou. copies (down 3.9%) and Super Express decreased paid circulation by 6% to 188 thou. copies. Dziennik Gazeta Prawna sold 111 thou. copies on average. 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 The Times brand cost from PLN 1.5 to PLN 2. Gazeta sells for PLN 2 on weekdays and PLN 2.5 on Fridays and Saturdays. In kiosk subscription Gazeta costs PLN 1.6. In 4q09 Gazeta Wyborcza was the most read quality daily and reached 4.2 million readers (14% reach, CCS - weekly readership index). Gazeta's advertising revenues(5) amounted to PLN 90.5 million (down 21.7%), while the title's share in dailies ad expenditure reached nearly 37.5% (down 0.5pp in comparison to 4q08). 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 increase its share in dailies' advertising expenditure in 4q09. Share of Fakt in total newspaper advertising spending in 4q09 stood at ca 9%.
INTERNET(6)
Revenues from Agora's Internet operations grew by 10.9% to PLN 26.4 million, including increase of the revenues from display ad sales3 by 37.5% to PLN 18.7 million while total ad spend in display ads and e-mail marketing grew by 5%. The operating cost decrease of Agora's Internet segment (down 44.7%) in 4q09 stems from the results of the operating efficiency improvement plan introduced by the whole Group and from a high one-off cost incurred in 4q08. In November 2009, the reach of online services from Gazeta.pl Group among Polish users amounted to 62.6%, and positioned Gazeta.pl Group as the third player among Internet portals, after Onet.pl Group and Wirtualna Polska Group. The number of users reached 10.8 million (up 50%)(4). In 4q09 GazetaPraca.pl started cooperation with the community portal Nasza-Klasa.pl and started publishing its recruitment ads in that portal. Agora's online business services were included in the offer of Business Ad Network founded by Money.pl Group and Trader.com (Polska) launched a new online service with luxury product ads - Goldo.pl.
METRO
In 4q09 Metro reported a positive operating EBITDA1,2 of PLN 1.1 million, which grew by PLN 0.6 million yoy. The title increased its share in total display ad spend on dailies to almost 4% (up 0.5pp). Total ad revenues of Metro amounted to PLN 8.8 million and decreased by 9.3% while total ad spend in dailies dropped by slightly over 22%. Metro's share in Warsaw dailies ad market grew by over 3pp to almost 11.5% positioning Metro the second title (after Gazeta Wyborcza) as far as the share in display ads in dailies in Warsaw is concerned. In 4q09 Metro posted very good readership results and reached over 2.15 million readers (7.1% reach, CCS index - weekly readership). In October 2009, Metro was awarded a distinction by Media & Marketing Polska magazine for the unique title quality, dynamic development of Metro's sales offer and its social activities in the Internet.
SPECIAL PROJECTS
Operating result1 of Special Projects amounted to PLN 1.6 million in 4q09 and total revenues reached PLN 15.2 million (down 34.5%). Agora ran 4 collections and 21 one-off projects. The Company sold ca 1.4 million books and books with DVDs and CDs, inter alia, books with DVDs from the movie series Woody Allen and books with CDs from music series Wielcy kompozytorzy (Great Movie Composers) and Fryderyk Chopin.
OUTDOOR
An estimated share of AMS in spending on outdoor advertising increased to 27.3%. Ad revenues(7) of AMS amounted to PLN 45.3 million and decreased by 15.8%, while total outdoor advertising market declined by over 17%. AMS decreased its operating cost to PLN 47.7 million (down 10.8%) in 4q09; the largest decline was noted in campaign execution cost (down 32.2%).
MAGAZINES(8)
Magazines reported increase of the operating EBITDA margin(1,2), which grew by 16.2pp to 19.3%. Revenues of Magazines amounted to PLN 22.3 million (down 13.9%) while the operating cost of the segment was reduced to PLN 18.3 million (down 28%). The decline of ad revenues(9) (by 18.5% to PLN 11.9 million) and copy sales revenues (by 7.1% to PLN 10.4 million) reflects general market slowdown and the reduction of marketing budgets of advertisers. Paid circulation of Agora's monthlies declined by 14.4%. Agora's magazines kept its last year's 6.6% share in national magazine ad spend and increased its share in ad spend for monthlies to 12.2% (11.9% share in 4q08, based on rate card data).
RADIO(10)
EBIT margin(1) of Radio segment remained on 4q08 level and reached 7.2% while operating EBITDA margin(1,2) grew to 11.5% (up 0.9pp). Ad revenues of radio stations(11) of Agora amounted to PLN 20.3 million (down 21.6%, similar to the whole radio advertising market). The drop in operating cost of the segment (down 20.8% to PLN 19.4 million) stems from the reduction of the staff costs (down 12.7%, excluding non-cash expense relating to share-based payments) and marketing expenditure (down 35.3%).
Prospects
ADVERTISING MARKET IN 2010
Ad market performance in 2010 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 2009, no signs of significant improvement on the Polish ad market can be observed in 2010.
COST IN 2010
The operating efficiency improvement plan and cost control (including new FTEs) is continued in the Group to adjust it to the advertising market conditions.
The level of staff cost depends, inter alia, on the variable element of the staff remuneration which is strictly related to achievement of sales budgets for a given year. Additionally, the Group executes development projects, including those building competencies in electronic media.
Estimated total cost related to incentive plans to be charged to the Group's 2010 profit and loss account will be ca PLN 9.8 million. This amount includes estimated cost of execution of incentive plan, but the Company does not in fact know the number of certificates to be purchased by employees pursuant to the future plan, or the stock price of Agora's shares at that accounting period. The share-based compensation cost will be charged unevenly throughout the year. In 1h2010 the Group's P&L will be affected by about PLN 6.2 million of non-cash incentive compensation. The cost of new incentive plan of ca PLN 3.6 million will be reflected in the Group's P&L in 4q2010.
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 and projects of the Group's competitors.
Cost of raw materials and energy depends on cost of materials per unit (incl. newsprint cost), EUR/PLN exchange rate, the production volume and energy prices. The Group intends to continue cost control policy also in relation to this cost category.
MAIN OBJECTIVES 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 in the Group;
• ensuring wide distribution and monetization of content created within the Group;
• taking advantage of the market context to enrich the Group's portfolio of assets.
NOTICE: The above financial data comes from Management Discussion and Analysis of the Group's results for 4q 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) 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) excluding non-cash cost of share-based payment.
(3) 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. From 2009, e-commerce ad sales (performance advertising) are presented as display ad sales, not in other revenues; the comparable data were restated thereupon.
(4) 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.
(5) 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 print edition of Gazeta.
(6) 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.
(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 Magazines segment presents the pro-forma consolidated financials of Agora's Magazines and Agora Press Ltd. (Ukraine).
(9) 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.
(10) 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.
(11) 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. 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. Internet figures for 2009 and the previous periods are based on Starlink media house estimates and do not include sponsorships and teleshopping ads. Internet ad spend estimates include display, search engines (Search Engine Marketing) and since 1q09 e-mail marketing and classifieds. The media house Starlink has not adjusted the historical data concerning the estimates for Internet ad market after the change of measurement methodology; therefore the historical data is not fully comparable. 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 4q 2009: n=12 047,
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. 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.
Outdoor: the data based on the 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, Żak and Heardz. 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 128 titles in 4q08 and 123 titles in 4q09.
