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February 18, 2016 / 07:38

The financial results of Agora Group in the fourth quarter of 2015

Press release

Agora Group closed the fourth quarter of 2015 with improved operating results. The Group's revenues grew rapidly owing to record-high cinema attendance and a higher growth rate of advertising revenues in the Radio, Internet and Outdoor segments than that recorded by the market. Most businesses of Agora Group, including its press business, are also systematically improving their profitability.

- The fourth quarter of 2015 brought not only record-high revenues in the Radio, Internet and Movies and Books segments, but also a series of development activities on the radio and Internet markets, which have recently demonstrated the highest growth potential. I am convinced that systematic work on the implementation of Agora Group's strategic objectives and the diversity of our new initiatives will allow us to further diversify our media portfolio. One of the initiatives undertaken to achieve this goal will be the launch of Agora's own TV channel yet in 2016 - comments Bartosz Hojka, President of the Management Board of Agora.

The financial performance and results achieved by Agora Group's businesses in the fourth quarter of 2015 (yoy comparison):

The Group's revenues amounted to PLN 353.9 million (up by 6.1% yoy). This increase was materially affected by advertising revenues of PLN 170.1 million (up by 7.6% yoy) associated with a more dynamic growth of revenues in the Radio, Internet and Outdoor segments than that recorded by the market. Other sales revenues increased by 7.6% yoy and amounted to PLN 49.7 million. This item was positively affected mainly by higher revenues generated by Agora's Publishing House. Revenues from tickets sold in cinemas increased by 18.2% yoy and amounted to PLN 55.2 million. Revenues from copy sales increased to the amount of PLN 37.4 million, mainly owing to higher revenues from sales of publications by Agora's Publishing House and from copy sales of Gazeta Wyborcza. Revenues from sales of printing services amounted to PLN 41.5 million.

Agora Group's net operating costs increased by 1.3% yoy and amounted to PLN 336.9 million. The increase in this item was mainly affected by higher costs of external services generated by Agora's Publishing House. In addition, higher costs of advertising brokerage services and costs associated with film copy purchase to the increase in this item. Costs of promotion and marketing increased by 9.7% to PLN 27.2 million, mainly due to the dual-price offer of Gazeta Wyborcza. Staff costs grew by 7.2% yoy as new development projects were launched by the Group. However, a decrease (by 4.9% yoy) was recorded in the costs of raw materials, energy and consumables.

Owing to an increase in Agora Group's revenues the result at the EBITDA level went up to PLN 41.3 million, the operating profit at the EBIT level stood at to PLN 17.0 million, while the net profit amounted to PLN 17.2 million. It should be noted, however, that in the fourth quarter of 2014, both the operating costs of the Group and its operating result were affected by revaluation write-downs amounting to PLN 15.1 million, concerning two monthlies published by the Magazines and Free Press division.

ADDITIONAL INFORMATION - RESULTS OF AGORA'S SEGMENTS IN THE FOURTH QUARTER OF 2015 (yoy comparison)

PRESS - reduced costs and improved operating result

The results of the Press segment were under pressure from lower spending on press advertising and lower copy sales than in the previous year.

The segment's advertising revenues amounted to PLN 45.8 million (down by 10.2% yoy). Advertising revenues ^1,2 from Gazeta Wyborcza amounted to PLN 28.7 million, from Metrocafe.pl ³ - to PLN 6.1 million, while in the case of magazines they amounted to PLN 5.6 million.

The segment's revenues from copy sales amounted to PLN 33.5 million. They mainly comprised higher revenues from copy sales of Gazeta Wyborcza. The increase is a result of a higher number of issues of the daily in the dual-price offer. Digital distribution of Gazeta Wyborcza also generated higher revenues. However, magazine sales were lower.

The segment continued to invest in digital development. As at the end of December 2015, the number of paid subscriptions of Gazeta Wyborcza exceeded 77 thousand - this means that the daily's target result was achieved one year ahead of the schedule. The new, adjusted target for the end of 2016 is 90 thousand paid subscriptions of Gazeta Wyborcza.

MOVIES AND BOOKS ⁴ - higher revenues and improved operating result

The revenues of the Movies and Books segment increased by 11.8% and amounted to PLN 112.0 million. The main factor to influence this increase was the growth of revenues from tickets sold in Helios cinemas and revenues generated by Agora's Publishing House. Higher sales revenues of the Publishing House were associated with additional inflows from the distribution of the game The Witcher 3: Wild Hunt and higher sales of books as well as film and musical publications. The value of the segment's revenues was also positively affected by higher concession sales and cinema advertising sales. Film activity generated revenues of PLN 3.9 million. In the fourth quarter of 2015, NEXT FILM released 1 new film production in cinemas.

The segment's operating costs increased by 11.5% and amounted to PLN 99.8 million. This increase was mainly due to higher costs generated by Agora's Publishing House, associated with the settlement made with the producer of the game The Witcher 3: Wild Hunt. Due to the expansion of the Helios cinema network, an increase was recorded in the costs of raw materials, energy and consumables, as well as staff costs. Owing to a rapid growth of its revenues, the segment improved its operating result at the EBIT ⁵ level, which amounted to PLN 12.2 million, while EBITDA ⁵ reached the amount of PLN 20.0 million.

In the fourth quarter of 2015, attendance at Helios cinemas reached the level of 3.1 million viewers and exceeded last year's attendance by 14.4%.

In the fourth quarter of 2015, the Helios network opened 2 new cinemas, in Białystok and Wrocław. In total, the network now has 37 modern cinemas in various cities across Poland.

In the fourth quarter of 2015, Agora's Publishing House offered 24 new publishing projects to its readers. As a result, Agora sold 0.3 million books and books with CDs.

OUTDOOR ⁶ - higher revenues and improved operating result

In the fourth quarter of 2015, revenues from advertising sales6 on AMS panels increased by 6.3% and amounted to PLN 45.7 million. Operating costs of the segment increased to PLN 40.6 million, mainly due to the renovation of selected groups of panels. As a result, the operating result at the EBIT level went up to PLN 5.8 million and EBITDA reached the amount of PLN 9.5 million. A more dynamic growth of the segment's advertising revenue than the one recorded by the market resulted mainly from higher revenues generated by Premium panels.

In the fourth quarter of 2015, AMS continued work intensively on the construction of new bus/tram shelters in Warsaw. At the end of 2015 there are 895 new shelters on the capital's streets. A large portion of those, equipped with Warsaw Premium Citylight panels, have been incorporated into the AMS sales network.

INTERNET ⁷ - more dynamic revenue growth than on the market and improved operating result

In the fourth quarter of 2015, the revenues ^8,9 of the segment increased by 23.7% yoy and amounted to PLN 45.4 million, mainly due to increasing sales of display advertising. Revenues from advertising brokerage services also increased. As a result of a dynamic growth of inflows, the segment improved its operating result, which at the EBIT ⁵ level amounted to PLN 8.5 million and at the EBITDA ⁵ level reached the amount of PLN 9.9 million.

The Internet segment is constantly developing its products and services. In the fourth quarter of 2015, the Sport.pl portal introduced new functionalities and types of content, i.a. videos of goals and highlights from sporting events. In this way Sport.pl strengthens its leading position in the mobile space in Polish sport, boldly promoting innovative solutions, e.g. with the use of applications such as Snapchat, and intensively preparing itself for the best possible coverage of major sporting events that will take place in 2016. In December 2015, the sales forces of the AdPlayer video advertising network and the Glossy Media female advertising network were combined and a joint structure was created. As of 1 December 2015, both networks' teams have been implementing a sales offer that combines non-standard solutions with video and display advertising, and since January 2016 they have been operating under the common name of AdPlayer Group.

In January 2016, Agora S.A. acquired a majority stake in GoldenLine Sp. z o.o. With this transaction, the Internet segment will consolidate its position on the recruitment services market, thus creating the only offer on the Polish market, addressed to employers and candidates, to be this comprehensive.

RADIO - more dynamic revenue growth than on the market and improved operating result

Revenues of the Radio ^10,11 segment increased by 27.3% and amounted to PLN 36.4 million. The segment's operating costs went up by 17.2%, mainly due to a higher cost of external services, including the costs of advertising brokerage in third-party radio stations. The operating result at the EBIT level amounted to PLN 9.2 million and EBITDA reached the amount of PLN 9.9 million.

The segment is developing its current business activity. In November 2015, the portfolio of Tandem Media, Agora's radio and cinema advertising broker, was enhanced by a new sales offer which includes advertising in the stations broadcasting under the Radio Pogoda brand.

In January 2016, the National Broadcasting Council agreed to the change of the names of three radio stations owned by Agora's Radio Group (in Bydgoszcz, Wroclaw and the Silesian Agglomeration), previously broadcasting under the Rock Radio brand, to Radio Pogoda. Rock Radio will continue to broadcast in four Polish cities (Warsaw, Poznan, Opole, Krakow).

PRINT ¹² - stable revenues

The segment's total revenues amounted to PLN 43.7 million. The operating costs decreased, amounting to PLN 43.0 million. The segment's operating result at the EBIT ⁵ level was positive and amounted to PLN 0.7 million, while its EBITDA ⁵ reached the amount of PLN 4.4 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 amounts refer to total revenues of the Free Press including revenues from Metrocafe. pl's (former Metro) 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 radio TOK FM, which are parts of the Agora Group. These include: 23 Golden Hits (Zlote Przeboje) local radio stations, 7 local radio stations Rock Radio (since January 31, 2014), 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 19 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 (press, radio, TV, outdoor, Internet, cinema). In MD&A for the 4Q2015 Agora has corrected the numbers: for cinema advertising market in the third quarter of 2014 and for the first nine months of 2015, for TV advertising market in the third quarter of 2015 and for the Internet advertising market in the second quarter of 2015.

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 prepared in cooperation with Starlink company.

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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The financial results of Agora Group in the fourth quarter of 2015

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