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August 10, 2018 / 07:20

THE FINANCIAL RESULTS OF THE AGORA GROUP IN 2Q 2018

In 2Q 2018, the results of the Agora Group were influenced by negative market trends, in particular a decline in cinema attendance. Despite this, the Agora Group recorded an increase in advertising revenues in all non-press businesses and closed the quarter with a net profit, which, without a write-off of receivables, would amount to PLN 12.8 million.

The total revenues of the Agora Group in 2Q 2018 amounted to PLN 258.3 million and decreased by 8.6%. The revenues from advertising and the Group's film business were higher, with lower income from printing services, revenues of cinemas from ticket sales and concession sales, as well as income from copy sales.

The development of the offer for the Group's clients ensured increase in advertising revenues - by 2.8% compared to the same period of 2017, up to PLN 146.8 million. The ad revenues were higher in most of Agora's business segments, growing for the next quarter in a row in the Internet¹ and Radio² segments. The largest increase in advertising revenue³ - by 16.7% - was recorded in the Internet segment thanks to the dynamic development of the Yieldbird company. Higher than the market increase in advertising revenues⁴ occurred in the Outdoor.⁵ This segment has been executing more and more modern advertising campaigns on the Premium Citylight, Digital and City Transport panels. The only segment with a decrease in ad revenues was the Press⁶, mainly due to the discontinuation of selected magazines and the market situation. Thanks to the higher inflows from the Group's film business, conducted by NEXT FILM, Agora’s revenues from other sales also increased.

Negative market trends reduced the Group's revenues in other categories, which ultimately resulted in a decrease in Agora's total revenues compared to the previous year. A significant reduction in revenues from the sales of printing services resulted from a decrease in the number of orders, especially in coldset technology. The decline in cinema attendance in the 2Q 2018, which was fueled by uncommonly sunny weather, ban on Sunday trading and football worldcup, due to which selected titles entered the cinemas later, negatively influenced revenues from cinema tickets sales and concession sales, amounting to PLN 35.0 million and PLN 13.8 million, respectively. In the discussed period, nearly 1.9 million tickets were purchased in Helios cinemas, which is 21.0% less than in the same period of 2017, while the market attendance declined by 15.7%.⁷ The lower proceeds from the copy sales - related mainly to the discontinuation of selected press titles, as well as reduced number of dual-priced issues and volumes of printed publications - were only partly compensated by higher revenues from the sales of digital subscriptions of Gazeta Wyborcza and of Agora’s Publishing House.

Operating costs of the Agora Group in 2Q 2018 increased slightly - by 1.8% to PLN 281.1 million. This was determined by: a write-off of receivables burdened with the risk of being uncollectible from one of the Company’s business partners in the amount of PLN 15.6 million, and a restructuring provision in the Press segment in the amount of PLN 2.2 million. The increase of costs was visible in the Press, Internet, Outdoor, and Radio, while the Print⁸, and Movies and Books⁹ segments recorded a decline. The Group allocated the most - PLN 100.9 million, which means an increase of 1.4% - for external services, significantly increasing, in particular, expenditure on the lease of advertising space by Yieldbird in the Internet segment. A slight increase was recorded by the Radio, while expenses on external services in the Movies and Books segment were reduced due to the lower costs of film copy purchase related to lower cinema attendance. Staff costs, as well as promotion and marketing costs of the Group were similar to those recorded a year ago. However, the costs of materials and energy consumed, and the value of goods and materials sold decreased.

As a result, in 2Q 2018, the loss of the Agora Group at the EBITDA level amounted to PLN 2.4 million, and the operating loss at the EBIT level amounted to PLN 22.8 million, while the net profit stood at PLN 0.2 million. Net profit attributable to the equity holders of the parent company amounted to PLN 0.3 million. The Group's results were adversely affected by the write-off of receivables burdened with the risk of being uncollectible from one of the Company’s business partners, and the net result was positively impacted by the profit from the transaction of sale of shares in Stopklatka S.A. - gain on sales amounted to PLN 26.7 million, while the impact on the net result stood at PLN 22.6 million.

If the impact of the write-off of receivables was eliminated, the operating costs of the Agora Group would be lower than in 2Q 2017, and the operating loss at the EBIT level would significantly decrease amounting to PLN 7.2 million. The Group would also report a positive result of PLN 13.2 million at the EBITDA level, and net profit would be noticeably higher reaching PLN 12.8 million.

In June 2018, the management board of Agora announced the Group's business strategy for 2018-2022¹⁰. The implementation of the goals set out therein is underway, including those in the area of development of Agora’s current projects related to premium content offer and premium OOH solutions. In July this year an innovative project by Gazeta Wyborcza called Harmony. Smarter reader's journey has won funding from the Google DNI fund. Thanks to the support granted in the 5th round of the Digital News Initiative program, the daily’s team will accelerate further digital development of Gazeta Wyborcza through an innovative tool allowing Polish publishers to combine advertising and subscription business models. This solution will also provide more effective personalization of the reader's path, improving the experience of Wyborcza.pl user. At the same time, AMS continues investment activities in the premium segment - also in July 2018, Adpol from the AMS group won the concession procedure for the construction of bus / tram shelters in Krakow. In 2019 it will build the first of 107 different types of shelters, which will include a total of over 300 advertising panels.

Simultaneously with building long-term value for shareholders, the Company – in accordance with the dividend policy – paid out a dividend of PLN 0.5 per share on 2 August 2018. The total payment amount is over PLN 23 million.

Notes 2Q2018 eng

PRESENTATION - FINANCIAL AND MARKET PERFORMANCE OF AGORA GROUP IN 2Q2018

Data source: consolidated financial statements according to IFRS, 1H2018.

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THE FINANCIAL RESULTS OF THE AGORA GROUP IN 2Q 2018

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