Agora's 2001 earnings sink due to recession on ad market

Media group Agora's consolidated earnings report for 2001 revealed that the publisher of market-leading national daily Gazeta Wyborcza was hard hit by the recession on the advertising market. Agora's earnings before interest, taxes, depreciation and amortization (EBITDA) fell by 17.2% last year compared to 2000, the company said last week after the report's release. The publisher also posted a 4.2% drop in sales, from zł. 810.7 million ($197 million) in 2000 to zł. 777.1 million ($189 million) last year. Wanda Rapaczynski, Agora's president, said that despite the plunge in ad revenue the company managed to retain its share of the market. "If one considers the size of the slowdown on the ad market, a 4.2% drop in sales is a relatively good result," she said. According to Agora estimates, total ad revenue in Poland last year fell by 6% compared to 2000. In the case of daily publications, the drop was even more severe - 10.9%. "We managed to maintain our EBITDA on a fairly good level," Rapaczynski added. Agora logged its worst results in the fourth quarter, losing zł. 3.5 million ($853,000), compared to a zł. 45 million ($10.9 million) profit in the same period of 2000. Analysts, however, had predicted the group would make a profit zł. 20.5 million ($5 million) in the fourth quarter. Rapaczynski explained that from October to December Agora made a zł. 64 million ($15.6 million) provision for real estate and equipment write-offs and severance packages. Rough finish The fourth quarter was tough for all publishers as print-market ad revenue sunk by more than 15%. For Gazeta Wyborcza, the newspaper's share of the ad market increased by 0.6% to 47% though its revenue fell by 9.3%. The entire market decreased by 10.9%. "We simply did better than the market and we also adapted to the situation," Rapaczynski said. Last year Agora introduced a cost-cutting program that included pay freezes for all staff through 2002 and 170 layoffs. Rapaczynski said this year's forecast is equally gloomy. "It's going to again be a year of recession on the ad market," she said. "The market isn't at its lowest level yet, but when it reaches the bottom there will be no immediate improvement, rather a year of stagnation until the end of 2002." Rapaczynski added that Agora's revenue may decline further. "By a one-digit figure, though," she said. At the same time, though, the company still plans to pursue its expansion strategy. "We have zł. 1.5 billion ($365 million) to spend but that doesn't mean we'll spend it all this year," she said. According to industry sources, Agora may be interested in acquiring a stake in private TV broadcaster Polsat, though Rapaczynski declined to comment on the group's plans. "Could we afford Polsat? I answered this question by stating how much we can spend," she said. "As for a potential acquisition of a stake in terrestrial television, we will buy a minority stake if it buys us influence on a company's operations, which means that we may buy not 10% but 40% with a chance to increase our stake." Rapaczynski said. Agora might participate in a new tender called by Treasury Minister Wiesław Kaczmarek to buy School and Educational Publishing Houses (WSiP), a textbook publisher. "But this is only my opinion," she said. "The board will decide about it within one or two weeks. The timing of the decision will depend on Kaczmarek's schedule." Kaczmarek will likely cancel a September 2001 tender for a stake in the book publisher as its winner, consortium Polskie Towarzystwo Edukacyjne, declined to pay for an 85% stake in WSiP. Agora is also looking to the Central European market for additional purchases. "We're talking about medium investments of up to zł. 30 million ($7.31 million), possibly in the Czech Republic, Hungary, the former Yugoslavia or Romania," Rapaczynski said. "I would personally be disappointed if the next acquisitions didn't happen in the first quarter of this year. I think it will happen on the Polish market, though."