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August 14, 2014 / 08:10

Agora Group financial results for 2Q 2014

Press release

Due to higher yoy market advertising expenditure, majority of the Agora Group business segments noted revenue increase in 2Q2014. As a result, the Group reported a positive operating result, nevertheless burdened by the drop in press advertising expenditure and investment in development projects.

Financial results and market performance of Agora's major lines of business in 2Q2014 (yoy comparison):

Revenues of the Group were at the comparable level yoy and amounted to PLN 270.8 million (down by 0.4%). The result was influenced by growing revenues from other sales (up by 17.9%) to PLN 26.3 million, comprising mainly revenues from distribution of the film "Powstanie Warszawskie" and higher revenues from concession sales. Advertising revenues dropped by only 1.3% and amounted to PLN 146.3 million, whereas copy sales revenues decreased by 2.7% to PLN 32.5 million. The Group also noted lower revenues from ticket sales which amounted to PLN 24.6 million (down by 7.2%). Revenues from sales of printing services to external clients went down slightly.

The total net operating cost of the Group increased by 1.2% to PLN 270.8 million. It was mainly the result of higher staff cost (up by 7.4%) which was the result of execution of development projects within the Group. Highest growth was noted in the Press, Internet, Movies and Books segments. The cost of raw materials, energy and consumables related to lower volume of orders for printing services for external clients went down by 4.2%.

As a result, the Group's EBITDA amounted to PLN 24.1 million (down by 14.5%), and the operating result EBIT was at the level of PLN 0.0 million. Net loss of the Group stood at PLN 1.5 million, and net loss attributable to the equity holders of the parent amounted to PLN 1.0 million.

PRESS: growth of revenues from copy sales

Results of the Press segment were marked by the reduction in market advertising expenditure. This trend was mostly visible in Gazeta Wyborcza whose advertising revenues^1,2decreased by 20.8%. The drop in advertising revenues was lower in Metro³ and the Groups' magazines and amounted to 1.7% and 6.8%, respectively.

Despite the continuous downward market trend in copy sales, total revenues of the segment were positively affected by growing revenues from copy sales (up by 0.3%). This growth was the result of cover price increase of Agora's magazines and Gazeta Wyborcza.

What is more, the publishing cycle of Wysokie Obcasy Extra was changed - since February, 2014 the magazine is published as a monthly.

In February 2014 Gazeta Wyborcza implemented metered paywall and new digital subscription offer. As a result Wyborcza had 15.1 thou. active subscriptions as of June 30, 2014 and growing number of users paying for digital content. The daily builds its digital offer consistently and in May, 2014 the paper expanded its range of products by new digital advertising packages.

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

Revenues of the Movies and Books segment grew by 4.4% to PLN 54.3 million. It was the result of higher revenues from advertising sales (up by 25.0%) as well as higher revenues from concession sales (up by 12.0%). Due to this fact, the segment significantly improved its operating result on the EBITDA⁵ level which amounted to PLN 4.1 million.

Helios cinema admissions reached 1.5 million and grew by almost 1.0%. In the same time, the number of tickets sold in Poland decreased by 2.1%.

In 2Q2014, the level of segment's revenue was influenced by the distribution of the film "Powstanie Warszawskie". During this time, Agora Group was not involved in any co-production projects.

In 2Q2014, the Special Projects division offered 24 new publishing projects and continued on with one publishing series. As a result, Agora sold 0.2 million books and books with CDs, and revenues of the whole division amounted to PLN 6.8 million. The operating result EBIT of the division amounted to PLN 0.3 million and improved yoy.

OUTDOOR⁶ - increase of revenues and improvement of operating result

In 2Q2014 the dynamics of AMS advertising sales revenue⁶ growth outperformed the dynamics of the total outdoor advertising expenditure, thanks to AMS' leading position in the citylight segment as well as significant presence in advertising on public means of transport. Thus, the Company strengthened its leading position on the outdoor advertising market with share as big as nearly 35.0%. Total revenues of the segment increased by 1.9%, and due to operating cost reduction by 3.1% the segment closed 2Q2014 with a positive EBITDA result of PLN 9.7 million.

In 2Q2014 AMS expanded its offer introducing panels of Urban System of Paid Information located in Warsaw enabling to present a Company's logo, information on the distance from the company's seat, a service outlet or shopping mall.

INTERNET⁷ - increase of revenues and improvement of operating result

In 2Q2014 the Internet segment noted increase of revenues^8,9 to PLN 34.0 million (by 14.1%), mainly as a consequence of increasing revenues from Internet advertising sales. Despite increase of operating cost to PLN 27.6 million, the operating result EBIT5 of the segment grew to PLN 6.4 million, whereas the EBITDA⁵ - to PLN 7.7 million.

The Internet segment continues developing its products, with particular focus on mobile applications. In April, 2014 a Sport.pl LIVE mobile application was launched for Win8 devices. Since June, 2014 users of Win8 devices can download free VOD Kinoplex.pl mobile application.

RADIO - increase in the audience share

Revenues of the radio segment^10,11 grew by 2.2% and amounted to PLN 23.2 million. Increase of operating costs of the segment is the result of marketing activities for Rock Radio and Radio Zlote Przeboje. Despite growing operating cost, the operating result EBIT of the segment was positive and amounted to PLN 3.3 million, whereas EBITDA amounted to PLN 3.9 million.

Agora Group's radio stations increased their audience share - music radio stations by 0.6pp to 4.3%, and TOK FM Radio by 0.2pp to 1.2%.

Before elections to European Parliament in April 2014, TOK FM Radio launched a new internet service wyborywtoku.pl which published the polls of the support for political parties, electoral committees and individual candidates before the forthcoming election. The service also showes changes in the long-term support for political groups according to research polls.

PRINT - stable level of revenues

Segment's revenue from the sales of printing services to external clients amounted to PLN 41.1 million and went down slightly yoy. The segment noted a positive EBITDA result⁵ which amounted to PLN 3.5 million and a loss on the EBIT⁵ level of PLN 0.4 million.

NOTICE: Since the first quarter of 2014, as a result of organizational changes, Agora Group ("The Group") has changed the reporting method of selected operating segments. The most important changes concern separating printing services from hitherto Daily Press segment and turning it into an independent business line. The second change relates to including magazine publishing activities in a new Press segment and transferring hitherto Special Projects division into a new Movies and Books segment (hitherto Cinema segment). Detailed description of changes in the reporting of particular business lines of the Agora Group can be found in respective sections of the Management discussion and analysis of the Group's results. The comparable data for 2013 were restated adequately. The Management Board would like to point out that 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 current management approach.

Notes:

¹the 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;

³ the amounts refer to total revenues of the Free Press, including revenues from Metro's display advertising, classifieds and inserts as well as from mTarget services and Metro'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.

⁶the 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, LLC Agora Ukraine, 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 include inter-company sales between Agora's Internet Department, LLC Agora Ukraine, Trader.com (Polska) Sp. z o.o., AdTaily Sp. z o.o., Sport4People Sp. z o.o. and Sir Local Sp. z o.o.;

⁹including, 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: 21 Golden Hits (Zlote Przeboje) local radio stations, 7 local radio stations (Rock Radio since January 31, 2014), one CHR format (Contemporary Hit Radio) local station and a super-regional news radio TOK FM broadcasting in 16 metropolitan areas.

¹¹ advertising revenues include revenues from brokerage services of proprietary and third-party air time;

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). Agora has corrected advertising market figures for TV, cinema and the Internet in 1q 2013. 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 (previously: Expert Monitor) 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, Liftboards, Mini Media, Ströer Out of home and Warexpo. 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.

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 (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+, April-June for 2013: N=21 035, for 2014: n=21 057.

Advertising in monthlies: rate card data on magazines obtained from Kantar Media monitoring; commercial brand advertising, excluding specialized monthlies; accounted for 116 monthlies and 69 magazines - total of 185 magazines for the period of April-June 2014.

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Agora Group financial results for 2Q 2014

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