"Financial results of the Agora Group both, in the second quarter and in the first half of 2017, show  systematic improvement of profitability. This is the effect of consistent execution of ambitious development plan and simultaneously implemented restructuring measures. Owing to that, the Press segment improves its results, the profitability of Outdoor business grows and revenues as well as financial results of Movies and Books segment increase," says Bartosz Hojka, CEO of Agora S.A. "We will continue investment in both: cinema network development and modern outdoor advertising panels; in the areas of content creation we will concentrate on acceleration of revenue growth", he adds.

The financial performance and results achieved by Agora Group’s businesses in Q2 2017 (YoY comparison):

The Group’s revenue amounted to PLN 282.7 million. The highest increase in revenue – by 39.7% yoy to PLN 43.6 million – was recorded for the sales of cinema tickets. In the analysed period, the number of tickets sold in the Helios cinemas amounted to over 2.3 million, which meant an increase of 35.0% yoy. In the same period, the overall number of cinema tickets sold in Poland amounted to nearly 11.2 million and increased by 33.4% yoy [1]. A signicant increase by 36.7% to PLN 17.5 million was observed in concession sales. This was caused by higher cinema attendance and a yoy increase in average prices at cinema bars.

Revenue from copy sales were higher yoy and amounted to PLN 34.4 million. This was achieved mainly owing to a yoy increase in revenue from products sold by Agora Publishing House (including  books Sztuka kochania and Tu byłem. Tony Halik), special editions of Gazeta Wyborcza’s magazines and subscriptions of content on Wyborcza.pl.

Lower yoy revenue from other sales at the amount of PLN 14.7 million seriously affected the level of the Agora Group revenues. In the corresponding period of 2016, revenue associated with the game The Witcher 3: Wild Hunt and its extensions, amounting to PLN 6.9 million. The second factor that contributed to the decrease in the Group’s revenue was a 5.9%  decline in revenue from the sales of advertising services which amounted to PLN 141.6 million. They accounted for 50.1% of total revenue earned by the Group. The decline in this category of revenue was recorded in the Press, Internet, Radio and Outdoor segments. It is noteworthy, that in the case of the Press segment, the sales dynamics of advertising services, apart from being affected by market trends, was also impacted by the discontinuation of selected press titles, including notably the free daily Metrocafe.pl. An increase in sales of advertising services was recorded in the Movies and Books segment.

Another factor affecting the level of the Group’s revenue was the revenue from the sales of printing services amounting to PLN 30.9 million. The decline in this revenue by 22.0% resulted primarily from a lower volume of orders and a higher share of print on customer-provided paper.

Agora Group’s operating costs decreased by 7.2% and amounted to PLN 276.0 million. They were reduced to the highest extent in the Press and Print segments. They were also lower in most of the Group’s other segments. An increase in this item was recorded only in the Movies and Books segment and was related to the growth in the number of cinemas (from 37 to 42) and dynamic growth in cinema attendance.

Costs of external services, which decreased by 5.7% to PLN 99.5 million, were the largest cost item. The comparability of that item to the second quarter of 2016 was influenced by the settlement made at the time with the producer of the game The Witcher 3: Wild Hunt related to sales of the game and its extensions. Costs of external services were also lower in the Radio segment, which was chiefly associated with lower revenue from the sales of advertising in third party radio stations and lower costs of marketing research. This cost items was also reduced in the Print, Press and Outdoor segments. However, in the same period, increased costs of external services were visible in the Movies and Books segment and Internet segments, which was associated with higher costs of film copy purchase, the expansion of the Helios cinema network and higher costs of ad space purchase.

The second most significant category of costs were staff costs which decreased by 0.9% to PLN 80.5 million. This resulted from reducing this cost item in most of the Group’s operating segments. An increase in staff costs only took place in the Movies and Books segment, which was associated with the change of the minimum hourly wage introduced at the beginning of 2017 and increased number of employees in the Helios network as a result of opening new cinemas.

The decrease in the cost of materials and energy consumed, and goods and materials sold results mainly from a lower volume of main press titles published by Agora Group as well as from a lower volume of orders and a higher share of print on customer-provided paper in the Print segment.  

Promotion and marketing costs declined by 29.5% to PLN 15.5 million. The sharpest decrease in this item was recorded in the Press and Movies and Books segments. It was also lower in the Internet and Radio segments. However, a slight increase was recorded in the Outdoor segment.

As a result, the Group’s EBITDA increased by 37.1% to PLN 31.4 million and the operating profit (EBIT) amounted to PLN 6.7 million. The Group recorded a net profit of PLN 0.7 million, while the net profit attributable to the equity holders of the parent company amounted to PLN 0.4 million.

ADDITIONAL NOTES – RESULTS OF AGORA’S SEGMENTS IN THE SECOND QUARTER OF 2017 (YoY comparison)

MOVIES AND BOOKS [2] — higher revenue and improved operating result

Revenue of the Movies and Books segment increased by 11.6% to PLN 78.9 million. This is mainly a result of dynamically growing cinema attendance which, combined with a higher average ticket price, translated into a considerably higher revenue from ticket sales and concession sales — they amounted to PLN 43.5 million and PLN 17.5 million, respectively. In the second quarter of 2017, NEXT FILM did not release new pictures for cinema distribution, therefore revenue from film co-production and distribution, amounting to PLN 1.4 million, was lower than in the corresponding period of 2016 and was earned from the distribution and co-production of films premiered in previous periods. Revenue from the Agora’s Publishing House business amounted to PLN 8.3 million and was lower than in the second quarter of 2016, when it was affected by the sales of the game The Witcher 3: Wild Hunt and its extensions, and revenue from, among others, the event entitled Titanic, the Exhibition.

The segment’s operating costs were lower by 5.2% and amounted to PLN 80.5 million. The increase in these costs resulted mainly from higher costs of external services (up by 22.8%) associated with higher costs of film copy purchase due to higher cinema attendance in Helios cinemas. Higher rent costs for the Helios cinema network are a consequence of its expansion – in the second quarter of 2017 there were five more cinemas than in the corresponding period of 2016.

The promotion and marketing costs decreased to PLN 4.4 million due to a decline in activity in the film distribution business. There was also a significant increase in staff costs, which were reported at PLN 12.2 million. This was mainly due to the increased minimum hourly wage and higher headcount due to a higher number of Helios network cinemas.

In the second quarter of 2017, the Movies and Books segment improved its operating result at the EBIT and EBITDA levels. EBITDA in the segment increased to PLN 6.2 and the operating loss at the EBIT level decreased to PLN 1.6 million.

The attendance figures for the Helios cinema network in the second quarter of 2017 were reported at 2.3 million, a year-on-year increase of 35.0%.

At present, the Helios cinema network comprises a total of 42 cinemas, which makes it the largest multiplex operator in Poland. Another two cinemas will be opened this year – in Krosno and Stalowa Wola.

In the second quarter of 2017, Agora’s Publishing House issued 13 book publications, 7 music albums and 4 film publications. As a result, during the analysed period, Agora sold approximately 0.3 million books and books with CDs/DVDs. One of the best-selling titles in the book publishing section was the reissue of Sztuka Kochania by Michalina Wisłocka.

PRESS — significant improvement of the operating result at the EBIT and EBITDA levels

Total revenue of the Press segment amounted to PLN 64.0 million, a year-on-year decrease. This was primarily the result of lower revenue from ad sales in the Gazeta Wyborcza daily [3,4] and the decision to discontinue the publication of the Metrocafe.pl free daily and the Pogoda na życie monthly. It should be noted that, at the same time, revenue from advertising sales in Agora’s magazines increased to PLN 7.1 million — this results primarily from the development of e-commerce activities in this area.

The segment’s revenue from copy sales declined and amounted to PLN 29.5 million. This was mainly due to reduced levels of copy sales of printed press. At the same time, the segment recorded higher revenue from special editions of the Gazeta Wyborcza magazines and digital subscriptions to content on Wyborcza.pl.

A significant, 17.6% decline was reported for the segment’s operating costs which amounted to PLN 58.5 million. Major contributing factors included lower costs of materials, energy, printing goods and services due to lower printing volumes of the Gazeta Wyborcza daily and the discontinuation of selected press titles in 2016. Additionally, promotion and marketing costs were lower for both the Gazeta Wyborcza daily and Agora’s magazines. This was accompanied by reduced staff costs, mainly as a result of collective redundancies in the segment in the fourth quarter of 2016.

Due to significantly lower operating costs, the segment has improved its operating result at the EBIT and EBITDA levels. This was mainly the positive effect of the restructuring process which the segment underwent in 2016, including changes to the publishing formula, collective redundancies, reductions in press title volumes and discontinuation of selected titles.

In the analysed period, the Gazeta Wyborcza’s team diversified the segment’s revenue structure, e.g. by preparing successful special editions of the Psychologia Extra, Tylko Zdrowie Extra, Duży Format and Wysokie Obcasy – IT Girls magazines. Moreover, a special edition of the Ale Historia magazine came out, devoted to Zbigniew Brzeziński. Revenue from the sales of these titles contributed to increased revenue from copy sales and advertising sales for the Press segment.

Moreover, in May 2017 the team of Wyborcza.pl prepared a new version of its application which allows users to customize contents and save selected articles for later, among other features.

Also in May 2017, the second edition of the European VR Congress took place at the Copernicus Science Centre in Warsaw. The event, organised by Agora, provides the biggest platform in Poland for sharing knowledge about the virtual reality technology.

In June 2017, Co Jest Grane 24 Festival took place in the Ujazdowski Castle Centre for Contemporary Art – a city culture festival organised by the editorial team of Co Jest Grane 24. It was the second ticketed edition of the festival.

Websites of Agora’s magazines establish their more and more visible presence in the digital area. According to the latest study of Gemius/PBI (conducted in June 2017), Logo24 is the most popular magazine website for men. Logo24 is ranked third in the overall classification of men’s websites, and second among smartphone users.

OUTDOOR ADVERTISING [5] — lower costs and improved operating result

In the second quarter of 2017, the revenue from AMS media ad sales [6] was similar to that recorded for the second quarter of 2016 and amounted to PLN 44.5 million. The dynamics of the advertising sales generated by AMS was impacted by the decision to discontinue advertising in Warsaw metro cars, previously reported as transit advertising, while boosting revenues from so-called traditional media.

At the same time, the segment’s operating costs decreased by 5.4% – to PLN 33.1 million. This results from, among other factors, the termination of cooperation with the Warsaw metro operator with regard to advertising on the panels installed in trains, as well as changes in the structure of the media portfolio.

Owing to the reduction of operating costs, the segment’s operating result at the EBIT level increased by 13.1% to PLN 12.1 million. The segment also improved the result at the EBITDA level, and the EBITDA margin increased to 36.1%.

In the second quarter of 2017, AMS continued to work on bus/tram shelters as part of the project “1580 shelters for Warsaw”. Currently, there are 1,469 bus/tram shelters on Warsaw’s streets, of which 1,392 are now available to advertisers. 

AMS also prolonged the contract for the operation of 250 bus/tram shelters in Wrocław for a further 3-year period. The project involves no additional capital expenditure.

In addition, AMS also continued to use Premium Citylight pannels in innovative ways, e.g. in campaigns involving MP3 players for music labels and manufacturers of luxury products.

INTERNET [7] — reduction of operating costs

The Internet segment’s total revenue [8,9] decreased by 5.7% to PLN 41.0 million in the second quarter of 2017. The decline in total revenue of the segment resulted mainly from lower revenue from advertising sales in Gazeta.pl websites. It should be noted that the decrease in the Internet segment’s revenue was significantly reduced by growing revenues from online advertising generated by the Yieldbird company and affiliated networks, and by revenue from online ads generated by Goldenline.

During that period, the operating costs of the Internet segment decreased by 3.6% to PLN 34.4 million. The level of operating costs was largely driven by higher spending on external services (including rental costs of advertising space and costs of marketing services), as well as a 40.0% decline in spending on promotion and marketing.

Higher rental costs of advertising space, including in the Yieldbird advertising network, the affiliate networks and Trader.com (Polska) Sp. z o.o., were a major factor behind the increase in costs of external services. However, it should be noted that the cost increase was offset by higher revenue from the sales of advertising services at the third party websites and on-line ad sales. Apart from higher lease costs of advertising space, the Internet segment also recorded an increase in costs of other external services – mainly costs of marketing services in the Gazeta.pl portal.

In the second quarter of 2017, following the successful introduction of social video formats on cooking (Haps) and with smart DIY ideas (Myk!), Gazeta.pl launched Ach!, a format that presents tutorials on beauty, produced in collaboration with youtubers who deal with such topics. Moreover, during the reporting period Gazeta.pl launched a daily advertising service that reaches Facebook users. It is the first service of such type operating in the Polish Internet. The Social Home Page format servers as an additional channel for advertisers who want to reach the social platform’s users via a special version of an article page displayed to users who go on to Gazeta.pl from Facebook.

As a result of the consistent building of Agora Internet services’ position on Facebook, these services are now a part of the Facebook Audience Network. The network’s advertisements are published on Gazeta.pl and Wyborcza.pl mobile pages, following the same targeting, measurement and display rules as those applicable to Facebook. 

RADIO — reduction of operating costs

In the second quarter of 2017, revenue earned by the Radio segment [10,11] were lower by 5.7% and amounted to PLN 27.9 million. The decrease in revenue resulted mainly from lower inflows from brokerage of advertising services in third-party radio stations as well as barter transactions. In the reporting period, revenue from video production and from the sales of brokerage service provided to Helios cinemas were also lower. However, there was an increase in revenues from advertising sales in Agora Radio Group’s own radio stations.

The segment’s operating costs decreased by 4.9% as a result of staff costs reduction and decline in costs of external services owing to lower costs of air time purchase in third-party radio stations and lower marketing research costs. However, costs related to the sales of brokerage services for Helios cinemas, reported under external services, were higher.

The stations that belong to Agora Radio Group have gained popularity and increased technical coverage, leading to a steady increase in audience share.

At the beginning of July 2017, a new TOK FM radio station started broadcasting in Tarnowskie Góry. At present, the station operates in 23 urban areas in total.

PRINT [12] — improved operating performance at the EBITDA level

Total revenue of the Print segment decreased to PLN 32.9 million, mainly due to a lower volume of orders for printing services and printing on customer-provided paper. This was also reflected in the segment’s operating costs which declined by 21.8% and amounted to PLN 34.1 million. As a result, the segment’s operating profit at the EBITDA level increased by 10.5% to PLN 4.2 million. The segment has significantly reduced the amount of loss at the EBIT level.

Notes