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November 7, 2014 / 07:55

Agora Group financial results in 3Q 2014

The Agora Group efficiently took advantage of the advertising market condition improvement in 3Q 2014. The majority of the business segments noted growth of revenue, which, in turn, translated into higher sales of the Agora Group (up by 1.7%) and improvement of the EBITDA (up by 23.9%).

Financial results and market performance of Agora's major lines of business in 3Q2014 (yoy comparison):

Revenue of the Group increased by 1.7% and amounted to PLN 243.9 million. Agora Group noted growth of all revenue categories apart from advertising revenue. Revenue from other sales grew up by 9.5% to PLN 25.3 million, which was mainly the result of higher concession revenue in cinemas. Revenue from copy sales increased by 2.2% to PLN 32.6 million. The Group also noted higher by 6.7% revenue from ticket sales which amounted to PLN 30.2 million, as well as from printing services to external clients which grew by 0.5% to PLN 38.1 million. Advertising revenue dropped by only 0.8% and amounted to PLN 117.7 million,

The total net operating cost of the Group increased slightly by 0.8% to PLN 253.7 million. It was mainly the result of higher promotion and marketing cost (up by 13.4%) related to intense promotional activities in Press, Movies and Books and Internet segments. The external services grew by 1.3% yoy mainly as a result of higher cost of sales brokerage and film copy purchase. The staff cost grew slightly (up by 2.0%) due to development projects executed by the Group. The cost of raw materials, energy and consumables related to lower volume of orders for printing services for external clients went down by 3.3% yoy.

As a result, the Group's EBITDA increased by 23.9% and amounted to PLN 14.0 million. The Group limited its operating loss to PLN 9.8 million. Net loss of the Group stood at PLN 10.2 million, and net loss attributable to the equity holders of the parent amounted to PLN 10.1 million.

PRESS: growth of revenue from copy sales and new initiatives

Results of the Press segment were marked by the reduction in market advertising expenditure. This trend was mostly visible in Gazeta Wyborcza whose advertising revenue^1,2decreased by 21.2%. The growth of advertising revenue1 in Metro³ and the Groups' magazines of 6.8% and 3.8%, respectively is a positive sign.

Despite the continuous downward market trend in copy sales, the segment's copy sales revenue grew by 3.9%. This growth was the result of the change in publishing cycle of Wysokie Obcasy Extra (since February, 2014 the magazine is published as a monthly) cover price increase of Gazeta Wyborcza and revenue from digital distribution of the daily.

There is a growing number of people purchasing digital subscription of Gazeta Wyborcza thanks to implementation of a new offering of digital subscriptions packages. As a result, Wyborcza had 21.2 thou. active subscriptions as on September 30, 2014 and a growing number of users paying for its digital content.

In September 2014 Gazeta Wyborcza launched BIQData.pl - the first Polish data journalism website prepared by media editorial team. BIQdata.pl offers new way of presenting data and it is the first exclusively online brand of Gazeta Wyborcza available only for the subscribers of Wyborcza's digital content. The segment prepared also an advertising package Prestiż comprising 5 magazines: Wysokie Obcasy Extra, Avanti, Dom&Wnętrze, Logo and Kuchnia. The package allows advertisers to reach attractive and diversified group of readers.

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

Revenue of the Movies and Books segment grew by 8.1% to PLN 57.5 million. It was the result of growing number of admissions in Helios cinemas, which translated into higher by 6.7% revenue from ticket sales which grew to PLN 30.2 million and higher by 5.7% concession sales which amounted to PLN 11.1 million. The revenue from advertising sales grew to PLN 5.8 million. Due to this fact, the segment achieved a positive EBIT⁵ result and significantly improved its result on the EBITDA⁵ level which amounted to PLN 6.4 million.

Helios cinema admissions reached 1.8 million and grew by 1.6%. In the same time, the number of tickets sold in Poland decreased by 1.1%.

In 3Q2014, Agora Group was not involved in any co-production projects and the revenue from film distribution were negligible.

In 3Q2014, the Special Projects division offered 8 new publishing projects. As a result, Agora sold 0.1 million books and books with CDs, and revenue of the whole division amounted to PLN 6.8 million. The division suffered operating loss on the EBIT level which amounted to PLN 1.1 million.

In September 2014, Special Projects division organized Olsztyn Green Festival. The event turned out to be a great success with more than 10,000 visitors.

The film Bogowie directed by Lukasz Palkowski was recognized as the best film production during the 39th Gdynia Film Festival. The film was awarded in 5 categories, including the most important - the Golden Lions and Best Performance by an Actor in a Leading Role. Agora is the co-producer of the film and Next Film Sp z.o.o. is its distributor. Bogowie entered Polish cinemas on the 10th of October.

OUTDOOR⁶ - decrease in operating cost

In 3Q 2014 AMS advertising sales revenue⁶ amounted to PLN 32.1 million. At the same time, due to optimization measures undertaken in the segment, the operating cost decreased by 4.0%, which, in turn, led to decrease in the operating loss on the EBIT level. The Company's position on the outdoor advertising market is strong and its share in total outdoor advertising expenditure amounts to 33.5%.

In 3Q 2014, the segment prepared a special campaign presenting new functionalities of bus shelters. Passengers using public transport in Wroclaw could charge mobile phones in a bus shelter.

On October 27th, 2014 the first Warsaw bus shelter constructed within the project "Public Transport Shelter" was unveiled. In this way, AMS initiated execution of the largest Polish investment in city furniture.

INTERNET⁷ - increase of revenue and improvement of operating result

In 3Q 2014 the Internet segment noted increase of revenue ^8,9to PLN 29.7 million (by 12.1%), mainly as a consequence of increasing revenue from Internet advertising sales. Despite the increase of operating cost to PLN 25.3 million, the operating result EBIT⁵ of the segment grew to PLN 4.4 million, whereas the EBITDA⁵ - to PLN 5.7 million.

The Internet segment continues developing its products. In 3Q2014 it refreshed Foch.pl and Polskabiega.pl services. The segment prepared also new application Moja ciąża for devices with Android system, in cooperation with the e-Dziecko service.

RADIO - increase of revenue and improvement of operating result

Revenue of the radio segment^10,11grew by 8.0% and amounted to PLN 17.5 million. The segment decreased its operating cost by 11.5%, mainly as a result of lower yoy promotion and marketing expenditure. As a result, the operating result EBIT of the segment was positive and amounted to PLN 0.6 million, whereas EBITDA amounted to PLN 1.3 million.

Agora Group's radio stations achieved good audience share results: - music radio stations 3.8% (drop by 0.2pp), and TOK FM Radio 1.3% (up by 0.2pp).

The segment develops its activities and competes for new licences. In 3Q 2014, the mobile applications for Android and iOS systems were made available in freemium model, that is, with the opportunity to purchase the subscription allowing to block advertisements in the application. Moreover, the segment was granted a license to broadcast the program of Zlote Przeboje in Jedrzejow and TOK FM program in Czestochowa and Bialystok.

PRINT¹² - increase of revenue and improvement of operating result

Segment's revenue from sales of printing services to external clients amounted to PLN 38.1 million and went up by 0.5%. The segment noted a positive EBITDA result⁵ which amounted to PLN 4.4 million and a profit on the EBIT⁵ level of PLN 0.3 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:

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 Metro's display advertising, classifieds and inserts as well as from mTarget services and Metro's special activities.

⁴the 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, 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.

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: 21 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 16 metropolitan areas.

¹¹advertising 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 the numbers for TV and Internet advertising market in the third quarter of 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+, July-September for 2013: N=21 037, for 2014: n=21 096.

Advertising in monthlies: rate card data on magazines obtained from Kantar Media monitoring; commercial brand advertising, excluding specialized monthlies; accounted for 114 monthlies and 71 magazines - total of 185 magazines for the period of July-September 2014.

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Agora Group financial results in 3Q 2014

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