Pressing ahead

After a dramatic 74.3-percent fall in net profits and a decrease in revenues by 5.7 percent last year, in 2007 Agora has its eyes set on returning to its previous dynamic growth. Wanda Rapaczyńska, Agora's CEO, says the company's earnings and sales should rise this year, but ruled out net profit returning to 2005 levels.

"I don't think that a return to triple-digit net profit is possible this year. The company makes constant investments. The first target is to return to the road of an increase in revenues and profit, to show at least a small growth of the figures," she says.

Agora already seems to be on that road. The company posted higher-than-expected Q4 2006 net profit after it cut spending on a newspaper war and increased sales of Gazeta Wyborcza. Its profit jumped by 78 percent to zł.15.3 million in October-December, compared with the same period of 2005 when one-off costs hit its bottom line.

Profit drop

For the whole of 2006, however, Agora's net profit fell to zł.32.6 million from zł.126.7 million due to a costly battle in the local-newspaper market with German media group Axel Springer, which resulted in the close of Agora's nascent Nowy Dzień daily.

Analysts say that despite a tough market, Agora was doing well to defend its lead over the new daily Dziennik, launched by Springer in April and targeted directly at Wyborcza.

Rapaczyńska says Gazeta has survived the difficult trial by fire and has now become stronger. "I think we have proven how important our flagship is. Now we will focus on expansion and an improvement of growth results," says Rapaczyńska.

Internet focus

Last November's Megapanel PBI/Gemius survey shows that Gazeta.pl is visited by some 38 percent of adult Polish web users per month and that the number of unique users is close to five million. This shows a growth of some 41 percent compared to 2005. In 2006 Agora's revenues from the internet amounted to some zł.15 million. Within the next two years the company wants to be among the three internet leaders in terms of hits and revenues.

Remigiusz Sopel, an analyst from IDMSA, says that the growth in that sector has been fast.

"Agora's profits from the paper sector comprise a smaller share. The internet sector will grow instead. I believe the company should reach a triple-digit profit within the next three years at the latest," says Sopel.

The firm assumes that the total spending on advertising in Poland will rise by 10 percent this year with internet advertising expected to post the highest growth, at some 40 percent. Due to this, the share of the internet in Agora's total spending on advertising will grow by five percent.

Ad-ing up

Gazeta Wyborcza's share of the advertising market in dailies in 2006 amounted to 41 percent. Advertising revenues generated by Gazeta Wyborcza account for around 70 percent of the company's total revenue. Agora says the newspaper-advertising sector is expected to grow by three percent this year.

Agora's marketing and promotional expenses in the newspaper segment rose by 17 percent to zł.160 million in 2006. As a result, Gazeta Wyborcza's circulation averaged 450,000 per day in the fourth quarter, up seven percent year-on-year. Dziennik sold 215,000 copies a day on average in the first seven months of its operations.

New competition

Analysts said that while Wyborcza has so far managed to defend its top spot in the Polish press-advertising market, 2007 was likely to test its clout further as growth remains weak and competition rises.

The company is considering increasing spending on promotion and ads. This will happen if a true competitor to Gazeta Wyborcza appears.

"If a new title enters the market, such expenses will remain high," says Rapaczyńska. Last month Polskapresse announced that a new daily would definitely debut on the market this year.

Sopel says the competition should not have a huge impact on Gazeta Wyborcza. "It hasn't lost the potential for growth and still has a wide group of readers and ad providers," he adds.

Free-paper profitability

Agora assumes that Metro, its free daily, which became the most frequently read free newspaper in Poland in Q4 2006, will achieve profitability in 2008. Rapaczyńska says the paper will introduce innovative forms of ads and new supplements.

According to Jarosław Szaliński, a board member and the financial director, the company will designate amount of money a comparable to investments made last year, when such spending reached zł.42.2 million. More will be spent on outdoor advertising. Within the next couple of years Agora wants to increase investments in the development of the AMS outdoor-advertising network.

Small buys

Rapaczyńska says that currently the company will concentrate on smaller and medium acquisitions rather than large ones, and will engage in partnerships.

The company could acquire firms from the internet sector. "These, as such, are not yet expensive. Hence, smaller takeovers will take place. In general, Polish media are so attractive now that it's not the right time for selling. Let's look at Polsat. Only 25 percent of its stake has been sold to Axel Springer. Partnerships will be more frequent now in light of the convergence between different media," Sopel says.

In the radio segment, the company wants to achieve profitability in the group of local radio stations and significantly increase the revenues of Radio TokFM.

"There are signs of more changes in the newspaper market in 2007," Agora said in a statement. "If they occur, they may impact the group's 2007 financials." (Reuters)

Agora

CEO:   Wanda Rapaczyńska

Strengths:

- Most popular newspaper

- Various media within the group

Weaknesses:

- Strong competition, with a new daily to enter the market this year

- Yet to recover from Nowy Dzień closure