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November 9, 2015 / 07:22

Agora Group's financial results for 3Q2015

Press release

Systematic improvement of profitability noted in most businesses as well as stabilization of revenues and higher operating result of the Press segment were the reasons for Agora Group's significant improvement of operating result in 3Q2015. High rate of revenue growth was mainly the result of revenues from ad sales of the Internet, Radio, Outdoor, Movies and Books segments which grew faster than the market.

- 3Q2015 is yet another quarter of growth of revenues for Agora Group, and this clearly shows that it continues improvement of profitability. A clear development plan for all of our business segments and a diversified portfolio of media projects ensure not only improvement of Agora Group's results but - what is equally important - also means to increase the scale of the operation by entering into new business areas. We look optimistically into the future seeing a range of development directions for Agora - says Bartosz Hojka, President of the Management Board of Agora.

Financial results and market performance of the Agora Group in 3Q2015 (yoy comparison):

Revenues of the Group amounted to PLN 259.8 million and were higher by 6.5%. This was mainly influenced by higher by 6.5% revenues from ad sales which amounted to PLN 125.3 million and were the result of higher than market growth dynamics in ad revenues of the Internet, Radio, Outdoor as well as Movies and Books business segments. Revenues from other sales were higher by 29.2% and amounted to PLN 32.7 million, being positively influenced by higher revenues from the Group's film activity and from the Agora's Publishing House operations. Revenues from copy sales went up by 4.0% to PLN 33.9 million, mainly due to higher revenues from book sales of Agora's Publishing House and from Gazeta Wyborcza's copy sales. The Group noted comparable yoy level of admission revenues (PLN 30.0 million) and from sales of printing services to external clients (PLN 37.9 million).

The net operating cost of Agora Group increased by 4.1% to PLN 264.2 million. The growth was mainly the result of higher external services costs related to Agora's Publishing House operations. Factors that contributed also to the growth of external services cost include higher costs of advertising brokerage and Agora's film activity. Advertising and promotion cost went up by 22.5% to the amount of PLN 20.7 million, which was influenced by extensive advertising activity in most of the business segments. Staff costs increased by 3.4% due to the implementation of development projects within the Group. The costs of raw materials, energy and consumables decreased by 3.1%.

Due to the growth of revenues the Group's EBITDA went up to PLN 19.8 million. The EBIT loss has significantly diminished to PLN 4.4 million, whereas the net loss amounted to PLN 6.7 million.

Financial results and market performance of Agora's major lines of business in 3Q2015 (yoy comparison):

PRESS - stabilization of revenues and improvement of operating result

The results of the Press segment were under pressure of reduction in the press advertising expenditure as well as lower yoy copy sales.

Advertising revenues of the segment amounted to PLN 37.9 million and were only slightly lower yoy. Advertising revenues^1,2 amounted to PLN 23.7 million in Gazeta Wyborcza and to PLN 4.6 million in Metrocafe.pl³ remaining at the comparable level yoy. Advertising revenues in Agora's magazines amounted to PLN 5.3 million.

Revenues from copy sales of the segment amounted to PLN 31.4 million, which was the result of higher revenues from copy sales of Gazeta Wyborcza. This, in turn, was the result greater number of double-priced issues of the daily as well last year's increase of its cover price. Revenues from digital subscriptions of the daily were higher, whereas revenues from copy sales of magazines were lower.

The segment continued investment in digital development. Gazeta Wyborcza's digital team introduced new digital advertising offer, and a new digital subscription of Gazeta Wyborcza and Radio TOK FM combined was introduced. Logo24.pl and Swiatmotocykli.pl internet services also gained a new layout.

In September, 2015, following the change of the Metrocafe.pl service, the free daily Metro also changed into Metrocafe.pl.

MOVIES AND BOOKS⁴ - increase of revenues and improvement of operating result

Revenues of the Movies and Books segment increased by 14.1% and amounted to PLN 65.6 million. This was mainly due to higher revenues from Agora's film activity as well as revenues of Agora Publishing House. Higher revenues from film activity are mainly the result of execution of more film projects in 3Q2015 as well as revenues from sales of copy rights to films from previous quarters in new distribution channels. Growth of sales in the Publishing House includes revenues from distribution of the game Witcher 3: Wild Hunt as well as higher revenues from book, film and music sales. The segments revenues were also positively influenced by higher concession sales and selling ads in cinemas. Revenues from ticket sales in Helios cinemas amounted to PLN 30.0 million.

Operating costs of the segment increased by 13.0% to PLN 65.0 million, mainly as a result of higher costs of promotion and marketing related to marketing of new film productions and higher costs of the Publishing House related to the settlement with the producer of Witcher 3: Wild Hunt. Increase of staff costs, raw materials, energy and consumables is mainly the result of development of Helios cinemas network.

Due to higher revenue growth dynamics the segment improved its operating result on the level of EBIT⁵amounting to PLN 0.6 million, whereas the segment's EBITDA⁵ grew to PLN 8.4 million.

Helios cinema attendance in 3Q2015 amounted to 1.8 million viewers.

In 3Q2015, Helios opened a new cinema in Łódź, Central Poland. In October, 2015, Helios opened yet another cinema in Białystok, Eastern Poland - it is the 36^th modern cinema in Helios' portfolio.

NEXT FILM introduced to Polish cinemas two new film productions. Król życia ("The King Of Life") premiered on September 25^th, 2015, being Agora's first film production in the role of leading producer. Earlier, the film Karbala appeared in cinemas, and it was Agora's co-production.

During the 40^th Gdynia Film Festival NEXT FILM was awarded by Polski Instytut Sztuki Filmowej for the Best 2014 Distribution of A Polish Film (Bogowie by Łukasz Palkowski and Powstanie Warszawskie by Jan Komasa). Both films had almost 3 million viewers, and Bogowie was the most watched film in 2014.

In 3Q2015, Agora's Publishing House introduced 14 new publishing projects. As a result Agora sold 0.2 million books and books with CDs/DVDs.

OUTDOOR⁶ - growth of revenues and improvement of the operating result

In 3Q2015, revenues from advertising sales⁶ in AMS amounted to PLN 35.0 million. At the same time, thanks to consistent optimization measures, the segment reduced its operating costs, which, in turn, resulted in significant improvement of operating result on the level of EBIT to PLN 1.9 million, and on the level of EBITDA to PLN 5.4 million. Higher than the market growth dynamics of advertising revenues of the segment is the result of growing revenues from the Premium panels.

In 3Q2015, AMS continued working on building bus shelters in Warsaw. As at the beginning of November, 2015, 735 new bus shelters can been seen in the streets of Warsaw. Majority of them, together with the Warsaw Premium Citylight panel, is included into AMS sales.

INTERNET⁷ - faster than market revenue increase

In 3Q2015, the segment noted increase of revenues^8,9 to the amount of PLN 33.4 million (up by 12.5%), mainly due to increasing advertising sales. Growth could be also observed in revenues from advertising sales brokerage. Due to the dynamic growth of revenues the segment improved its operating result which on the level of EBIT⁵ amounted to PLN 5.0 million, and on the level of EBITDA⁵ amounted to PLN 6.3 million.

Agora's Internet segment continues to develop its products and services. In 3Q2015 it launched a new parenting application called Moje Dziecko.

RADIO - faster than the market growth of revenues

Revenues of the Radio segment^10,11amounted to PLN 22.6 million (up by 29.1%). Its operating costs grew by 34.9%, mainly due to higher promotion and marketing cost as well as cost of external services, including advertising brokerage in third party radio stations. Due to higher operating costs related to marketing campaign of Radio Złote Przeboje, the segment noted a loss on the level of EBIT of PLN 0.2 million (in 2014 the campaign was executed in 1Q). The Segment's EBITDA was positive and amounted to PLN 0.5 million.

The segment develops its current activity and pursues new frequencies. In June, 2015, Agora's Radio Group launched Radio Pogoda in three cities: Kraków, Poznań and Opole. At the beginning of July, 2015 Agora's portfolio has been expanded by the fourth Radio Pogoda station in Warsaw.

In August, 2015, Radio TOK FM launched its station in Białystok and Częstochowa, which makes 19 stations total.

In September, 2015, Radio TOK FM in cooperation with Gazeta Wyborcza prepared a digital subscription offer for the daily's articles and the radio's programmes.

PRINT¹² - stabile revenues

Total revenues of the segment amounted to PLN 39.9 million. Operating costs slightly grew to PLN 39.9 million, which resulted in lower, yet positive, operating result on the level EBIT⁵. EBITDA⁵ of the segment amounted to PLN 4.0 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 amounts refer to total revenues of the Free Press including revenues from Metrocafe.pl's display advertising, classifieds and inserts as well as from metroBTL services and Metrocafe.pl's special activities.

⁴ 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.

⁵ 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.

⁶ the Outdoor segment consists of the pro-forma consolidated data of companies constituting the AMS group (AMS S.A., Adpol Sp. z o.o.).

⁷ 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.

⁸ data do not 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.

⁹ 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).

¹⁰ 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: 23 Golden Hits (Zlote Przeboje) local radio stations, 7 local radio stations broadcasting under the brand Rock Radio, 4 local stations broadcasting under the brand Radio Pogoda (three of them broadcasting since June 12, 2015 and the fourth one since July 31, 2015) and a super-regional news radio TOK FM broadcasting in 18 metropolitan areas.

¹¹ advertising revenues include revenues from brokerage services of proprietary and third-party air time and brokerage services in cinemas.

¹² 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). In this MD&A Agora has corrected the numbers for TV and cinema advertising market in the third quarter of 2014. Unless explicitly stated otherwise, press 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 as well as 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 press, the data include only display advertising, excluding classifieds, inserts and obituaries. The estimates are based on rate card data obtained from the following sources: Kantar Media monitoring, Agora S.A. monitoring.

Presented TV, Internet and cinema figures are based on Starlink media house estimates; TV estimates include regular ad broadcast and sponsoring with product placement, exclude teleshopping and other advertising forms. Internet ad spend estimates include display, search engines (Search Engine Marketing), e-mail marketing and video advertising. Outdoor advertising figures are based on Izba Gospodarcza Reklamy Zewnetrznej estimates

Cinema ticket 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.

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Agora Group's financial results for 3Q2015

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