Agora results show profit despite industry slowdown
The consolidated third-quarter results of media group Agora, publisher of leading daily Gazeta Wyborcza, show that the company is likely to improve on its 1999 figures despite a slowdown in this year's ad sector.
"The (ad) market has been doing worse than we expected this year," said Andrzej Kasperek, an analyst with Centrum Operacji Kapitalowych (COK) Banku Handlowego. "Taking that into account, Agora's results are not bad. The market was slow, but the company was growing much faster than the market."
The results, released last Friday, showed net profit of zl. 127.4 million ($27.6 million), 32.2% higher than Agora's 1999 results. The company's operating profit for the past nine months was zl. 160.5 million ($34.9 million), 12.1% higher than last year. Gazeta Wyborcza has seen a 19.6% growth in advertising revenue at a time when the ad market for the daily press has grown by 17.1% and the overall advertising market by 10.8%.
"Our net profit by the end of the year should meet analyst expectations and should reach zl. 165 million-zl. 170 million ($35.8 million-$40 million)," Wanda Rapaczynski, president of Agora, told the Polish News Agency (PAP) last Friday. Last year, Agora's consolidated net profit reached zl. 132.6 million ($28.8 million).
But that goal could be difficult to achieve, according to COK's Kasperek. "We predicted Agora's net profit at zl. 161 million ($35 million) (unconsolidated results) and over the past nine months the company has made 65% of our forecasts, so it would have to reach sales of zl. 320 million ($70 million) in the last quarter. We might have slightly overrated it," he said. "On the other hand, the last three months of the year are the best for (such) a company. It's harvest time, it's Christmas time when ad campaigns start."
Agora's earnings before interest, tax, depreciation and amortization (EBITDA) margin dropped from 34.9% last year to 34.2% this year, according to last week's financial statement. "Those results are worse than last year," said Anna Hess, an analyst at CDM Pekao Securities. "If not for the internet project they could have been nicer."
But the company needs to diversify its activities if it hopes to continue to grow, according to Hess. "Wyborcza is already a mature product so it would be difficult to continue a two-digit growth rate," she said. "That's why the company is looking for new directions for expansion. You can't blame it for that."
Agora, listed on the Warsaw Stock Exchange and in London, generates the majority of its revenue from Gazeta Wyborcza. According to last Friday's financial statement, Wyborcza's ad revenue and revenue from sales of the paper account for 95.1% of Agora's total revenue.
In January this year Agora announced it would develop local and national portal sites to augment its existing Wyborcza site (http://www.gazeta.pl). The company said it intended to spend zl. 14 million ($3 million) in 2000 on staff and equipment for its internet project and as much as zl. 40 million ($8.6 million) by 2002. According to last week's report, Agora spent zl. 5.8 million ($1.2 million) in operational costs for the internet project and is likely to spend another zl. 6.2 million ($1.3 million) in the last quarter.
"But it's still mainly Gazeta Wyborcza that is generating revenue for Agora," Hess said. According to last week's results, ad revenue from the internet project has grown by more than 400%. "If you count from zero, the figures are always impressive so it doesn't prove anything," she said. "It's better to provide real figures and not growth rates, especially at the beginning of a project."
COK's Kasperek was not disappointed by the pace of the internet project's development. "This kind of business provides returns in four to five years, so we are in an investing phase," he said. "You can't see it now, but this project guarantees that in future it won't only be Wyborcza that generates revenue for Agora."
