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May 11, 2015 / 07:38

Agora Group's financial results for 1Q2015

Press release

Record high cinema attendance, revenues from film activity as well as faster than the market growth of ad revenues in the Internet and Radio segments contributed to over 11% increase of Agora Group's revenues in 1Q2015. As a result, the Group significantly improved its operating results and noted net profit.

-In 1Q2015 the Group was able to maintain a double-digit increase in revenue. What is more important, the Group also noted improvement of operating results on all levels as well as net profit. This success is without any doubt the result of record high attendance in Helios cinemas and the dynamically developing film production and distribution within the Movies and Books Segment. I am also glad that in yet another quarter the Company is able to increase it revenues from copy sales as well as advertising - says Bartosz Hojka, President of the Management Board of Agora.

Financial results and market performance of the Agora Group in 1Q2015 (yoy comparison):

Revenues of the Group amounted to PLN 282.8 million and were higher by 11.3%. Agora Group noted growth of most of the categories of revenues. The Group's growth of revenues was most impacted by higher than the market attendance in Helios cinemas, which in turn resulted in higher by 22.7% revenues from ticket sales, amounting to PLN 50.9 million. Additionally, the Group's film activity had a positive impact on its revenues, with PLN 8.4 million revenue of its own. Together with revenues from concessions it was able to boost up other sales to PLN 39.7 million. Revenues from ad sales were higher by 4.1% and amounted to PLN 115.5 million. Revenues from copy sales went up by 13.6% to PLN 37.6 million, whereas revenues from sales of printing services for external clients amounted to PLN 39.1 million and were slightly lower.

The net operating cost of Agora Group increased by 6.3% to the amount of PLN 280.3 million. The growth was impacted by higher by 11.3% costs of external services related to Agora's film activity, payments for film copies and advertising brokerage. Staff costs increased by 4.9% due to the implementation of development projects within the Group. Advertising and promotion costs went up by 43.2% to the amount of PLN 18.9 million, which was directly influenced by extensive advertising activity in the Movies and Books, Press and Internet Segments. The costs of raw materials, energy and consumables decreased by 6.7%, mainly as a result of lower yoy cost of production materials and lower yoy volume of orders for printing services in coldset technology.

Due to dynamic growth of revenues, the Group's EBITDA increased to PLN 25.9 million. The Group's operating result at the EBIT level improved significantly, amounting to PLN 2.5 million, whereas the net profit amounted to PLN 1.3 million.

ADDITIONAL INFORMATION

Financial results and market performance of Agora's major lines of business in 1Q2015 (yoy comparison):

PRESS - increase of revenue from the copy sales and new initiatives

The results of the Press Segment were under pressure of reduction in the press advertising expenditure as well as lower yoy copy sales and investments in digital developement.

Advertising revenues^1,2 in Gazeta Wyborcza decreased by 10.1%, and the decrease in the advertising revenues in Metro amounted to 12.8%. It is worth mentioning that the magazines published by Agora maintained the flat level of advertising revenues.

The revenues from the copy sales increased by 5.1% to PLN 33.0 million, despite the continuing downward trend in sales of paper copy sales. The increase is the result of revenues from digital copy sales as well as the increase of cover price of Gazeta Wyborcza.

In 1Q2015 Gazeta Wyborcza launched a mobile application for Windows Phone devices. What is more, readers of Duży Format , can now enjoy Gazeta Wyborcza's Thursday's weekly in a special application for mobile devices with Android and iOS.

At the same time, Agora Custom Publishing prepared a digital version of duty-free onboard catalogue for LOT Polish Airlines as well as Nasze Zdrowie Active magazine.

MOVIES AND BOOKS³ - increase of revenues of the Segment and improvement of the operating result

Revenues of the Movies and Books Segment increased by 36.0% to PLN 96.4 million. This was mainly the result of growing cinema attendance, which in turn resulted in growth of revenues from ticket sales by 22.9% to PLN 51.0 million. Growth of the Segment's revenues was positively influenced by the Group's film activity which brought PLN 8.4 million. The Segment noted higher by 31.8% revenues from concession sales (PLN 17.4 million) and higher by 50.8% revenues from the activity of Agora's Publishing House which amounted to PLN 9.8 million. Revenues from advertising brokerage in cinemas was also higher, amounting to PLN 6.2 million.

Operating cost of the Segment went up by 23.9% to PLN 81.5 million, mainly due to higher cost of external services. This, in turn, was the result of higher costs of settlements with film producers related with film distribution activity of NEXT FILM, higher costs of film copies in Helios cinemas related to higher attendance as well as higher cost of products for concession sales. Growth of advertising and promotion costs of the Segment is mainly related to the promotion of films distributed by NEXT FILM, whereas the staff cost is mainly the result of expanding the Helios cinema network by three new localizations in 2014.

As a result, the Segment significantly improved its operating result - on the EBIT⁴ level it grew to PLN 14.9 million, whereas on the level of EBITDA⁴ - to PLN 22.3 million.

Attendance in Helios cinemas in 1Q2015 reached the level of 2.9 million, which is a growth by 20.9%. At the same time, the number of tickets sold in Poland went up by 16.5%.

In 1Q2015, three new film productions were introduced by NEXT FILM: Ziarno prawdy, Polskie gowno and Disco Polo. Agora co-produced two of them: Ziarno prawdy and Disco Polo. In the discussed period, Agora also acquired an external partner for its first own production, the film Krol zycia which will enter the cinemas in September 2015.

In 1Q2015, Agora's Publishing House, a part of Special Projects division provided its readers with 13 new publications. As a result, Agora sold 0.3 million of books and books with CDs/DVDs, and the revenues amounted to PLN 9.8 million.

OUTDOOR⁵ - increase of revenue and improvement of operating result

In 1Q2015, revenues from the advertising sales⁵ in AMS amounted to PLN 31.2 million. Additionally, thanks to consistent optimisation measures, the segment reduced its operating cost by 9.8% and improved its operating result at the level of EBIT to PLN 0.5 million, and on the level of EBITDA - to PLN 3.4 million. The position of the company on the outdoor advertising market is strong and its share in the expenses for outdoor advertising is now over 36%.

In 1Q2015, AMS continued working on building bus shelters in Warsaw. At the end of April, 2015, together with the city authorities, AMS' representatives presented the 200^th bus shelter built. It was also the first serial bus shelter.

INTERNET⁶ - faster than market revenue increase

In 1Q2015, the segment noted increase in revenues^7,8 to the amount of PLN 31.8 million (up by 19.1%), mainly due to the increasing advertising sales. Due to the significant increase of the operating cost to PLN 28.8 million, the operating result of the Segment on the EBIT⁴ level amounted to PLN 3.0 million, whereas EBITDA⁴ stood at PLN 4.3 million.

The Internet segment of Agora continues to develop new products. In 1Q2015, a new version of the home site and graphic layout of Gazeta.pl as well as new version of Plotek.pl website with the accompanying Plotek.pl Buzz application for Android OS were presented. The segment enriched also video offer of the Sport.pl website.

RADIO - increase of revenue and improvement of operating result

Revenues of the Radio segment^9,10 amounted to PLN 21.5 million (up by 18.8%). The operating cost of the segment grew by 16.4%, mainly due to higher external costs (including advertising brokerage in other broadcasting stations). Thanks to the dynamic increase of revenues, including advertising brokerage, the EBIT operating result of the Radio segment improved and amounted to PLN 0.2 million, whereas EBITDA - to PLN 0.9 million.

The radio stations of Agora Group obtained good audience share ratio: the music radio stations - 4.0% (down by 0.4pp), and Radio TOK FM - 1.3% (up by 0.1pp).

The Segment continues to develop its current activity and pursues new frequencies. In April 2015 Agora's Radio Group acquired KRK FM, a Cracow-based radio broadcasting on the frequency 102.4 FM.

PRINT¹¹ - improvement of operating result

Revenues from sales of printing services to external clients amounted to PLN 39.1 million. Due to the reduction of operating cost, the segment noted improvement of operating results. EBITDA⁴ significantly improved and amounted to PLN 5.6 million. The segment also noted profit on the level of EBIT⁴ in the amount of PLN 1.4 million.

Notes:

¹ the amounts do not include revenues and total cost of cross-promotion of Agora's different media (only direct variable cost of outdoor panels) if such promotion is executed without prior reservation between segments of the Agora Group.

² the amounts refer only to a portion of total revenues from dual media offers (published both in Gazeta Wyborcza, as well as on GazetaPraca.pl, Domiporta.pl, Komunikaty.pl verticals and Nekrologi.Wyborcza.pl website), which is allocated to the print edition of Gazeta Wyborcza.

³ the Movies and Books segment includes the pro-forma consolidated financials of Helios S.A. and NEXT FILM Sp. z o.o., which form the Helios group and Agora's Special Projects division.

⁴ EBIT and EBITDA of Press, Movies and Films, Internet as well as Print segments 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 Company`s supporting divisions), which are included in reconciling positions.

⁵ the Outdoor segment consists of the pro-forma consolidated data of companies constituting the AMS group (AMS S.A., Adpol Sp. z o.o.).

⁶ the Internet segment includes the pro-forma consolidated financials of Agora's Internet Department, Trader.com (Polska) Sp. z o.o., AdTaily Sp. z o.o. and Sport4People Sp. z o.o. and Sir Local Sp. z o.o.

⁷ data include inter-company sales between Agora's Internet Department, Trader.com (Polska) Sp. z o.o., AdTaily Sp. z o.o., Sport4People Sp. z o.o. and Sir Local Sp. z o.o.

⁸ including, among others, allocated revenues from the dual media offer (i.e. published both in Gazeta Wyborcza, as well as on GazetaPraca.pl, Domiporta.pl, Komunikaty.pl verticals and Nekrologi.Wyborcza.pl website).

⁹ the Radio segment includes the pro-forma consolidated financials of Agora's Radio Department, all local radio stations and a super-regional TOK FM Radio, being parts of the Agora Group. This includes: 24 Golden Hits (Zlote Przeboje) local radio stations, 7 Rock Radio local radio stations, one CHR format (Contemporary Hit Radio) local station and a super-regional news radio TOK FM broadcasting in 17 metropolitan areas.

¹⁰ advertising revenues include revenues from brokerage services of proprietary and third-party air time and brokerage services in cinemas.

¹¹ The Print segment includes the pro-forma financials of Agora's Print division and Agora Poligrafia Sp. z o.o.

Sources:

Advertising market: the data refer to advertising expenditures in six media (print, radio, TV, outdoor, Internet, cinema). Agora has corrected the numbers for TV and Internet advertising market in the first quarter of 2014.

Unless explicitly stated otherwise, print and radio advertising market data 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. The data for print exclude classifieds, inserts and obituaries. The estimates are based on rate card data obtained from Kantar Media monitoring and Agora S.A. monitoring. TV, Internet and cinema figures are based on Starlink media house estimates. TV estimates include regular ad emissions and sponsoring, but exclude teleshopping, product placement and other advertising forms. Internet ad spend estimates include display, search engines (Search Engine Marketing), e-mail marketing and video (since 1Q2012). Outdoor advertising figures are based on Izba Gospodarcza Reklamy Zewnetrznej (IGRZ) estimates.

Outdoor: the data based on the report on sales of outdoor prepared by IGRZ, which include: AMS S.A., Business Consulting, Cityboard Media, Clear Channel Poland, Defi Poland, Gigaboard Polska, JETline, Megaboard, Mini Media, Ströer Out of home and Warexpo. The report is prepared on the basis of the financials provided by those companies to IGRZ. The reports for the outdoor market (defined by IGRZ as 'the out-of-home market') include immovable, mobile and digital outdoor advertising.

The Internet offer reach: data regarding real users, page views and mobile page views 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 S.A. in Gemius S.A. Registry of Service Providers. Real users data of the Gazeta.pl group services are audited by Gemius SA. From April 2013 new rules apply combining sites in a group of publishers. According to the new rules Gazeta.pl Group covers only websites assigned to Agora S.A. by the Gemius S.A. in the Registry of Service Providers and thus the results are not comparable with previous periods. From April 2013 changed the method of calculating the rate of users (real users) - the cookies from the mobile devices have been deducted from the basis of estimation. New User Index (real users) correspond to new page views indicators and new spent time indicators (from non-mobile devices), not found in the study prior to April 2013.

Cinema tickets sales: the data on ticket sales in the cinemas comprising Helios group come from the accounting data of Helios reported in accordance with full calendar periods. The data on cinema ticket sales are estimates of Helios group prepared on the basis of data received from Boxoffice.pl (based on reports submitted by distributors of film copies). Cinema ticket sales are reported for periods, which do not cover a calendar month, quarter or year. The number of tickets sold in the given period is calculated from the first Friday of a given month, quarter or year until the first Thursday of the next reporting month, quarter or year.

Radio audience share: the data based on Radio Track surveys carried out by MillwardBrown SMG/KRC (all places, all days and all quarters): for Agora Group music radio stations: in cities of broadcasting of Agora's radio stations and in the age group of 15+, from January to March (sample for 2014: 21,058; sample for 2015: 20,907).

Advertising in monthlies: rate card data on magazines obtained from Kantar Media monitoring; commercial brand advertising, excluding specialized monthlies; accounted 117 monthlies and 79 other magazines; in total 196 magazines for the period of January - March 2015.

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