Tuning in to the TV shares showdown
The country's two biggest private stations, TVN and Polsat, are planning to generate millions of złoty with issues in December and late next year, respectively.
The releases are set to add some zest to the otherwise tranquil media sector of the exchange, which has traditionally been dominated by Agora, publishers of Gazeta Wyborcza, radio group Broker FM and Internet concerns Onet, Interia and Hoga.
TVN's third quarter figures, released on the same day as its shares prospectus, show it performing at a blistering pace. The broadcaster's chief financial officer Karen Burgess says: "TVN achieved a record EBITDA for the first three quarters of the year, with a 34 percent increase on last year, making it one of the most profitable channels in Europe."
Burgess went on to add that TVN's net profits in the third quarter of 2004 increased by 1,000 percent to zł.23 million from zł.2.4 million a year earlier. Net profits for Q1 to Q3 this year increased by 136 percent in 2003. The company's seven TV stations (TVN, TVN 7, TVN 24, TVN Meteo, TVN Turbo, TVN Style and ITVN) now all operate at a profit.
"We have achieved this by three means: maintaining growth in revenue, keeping costs under control and benefiting from better Euro exchange rates," she explains.
One step away
With such strong results the station's CEO, Piotr Walter, was very upbeat about the forthcoming IPO, which he hopes will see TVN enter the WIG20. "TVN is one step away from the Warsaw Stock Exchange. We are proud of our accomplishments, and our great financial situation. The third quarter results are, as we predicted, excellent. They prove our ability to provide our audience with a great variety of choices to watch and our investors with a place to grow and make profit," he said.
Last week's launch is a very different story to the bungled attempt to float two years ago. ITI, which owns TVN, was forced to abandon its stock exchange move as the economy dipped and the business invested in Multikino and the Onet group. This time though, the company's owners can expect to raise between zł.300-450 million between November and December with the sale of 18 million 'A' series shares-roughly 27 percent of the company's capital.
The forthcoming issue has prompted a similar move from the station's main private rival, Polsat. Launched in 1992, five years before TVN took to the air, Polsat is now following its competitor's market initiative.
Polsat's founder and owner Zygmunt Solorz-Żak says he is not excluding the possibility of selling a stake to a sector investor. He intends to give up around 20 to 30 percent of the company and maintain majority control. New shares would be issued to generate further investment funds for Polsat.
Research shows that 99 percent of the country's 13 million households own a television set and of the six biggest European countries Poles sit comfortably in the middle of viewing figures (see table), watching an average of 232 minutes of telly a day.
Advertising power
Excluding Russia, Poland has the single largest advertising market in Central and Eastern Europe with a gross advertising expenditure last year of zł.11.3 billion. Data from the Expert Monitor advertising research group shows total gross expenditure for all Polish media has grown over the last seven years at an average rate of 25 percent a year.
And it is here that motivation behind the TV stations' move to the markets can be found. Television is still the dominant advertising medium in Poland, accounting for nearly 60 percent of the total gross advertising expenditure. Last year, spending on TV ads totaled around zł.6.6 billion.
TVN's Burgess says: "Most of the market forecasts I have seen for the advertising industry run at levels of 10 percent growth per year for the next five years."
Starcom media house's Piotr Piętka agrees that the future is looking rosy. "A lot of factors influence the growth of each medium and the key elements are how strong the medium is, how effective it is and how efficient it is.
"In Poland's case it is important to consider whether we can maintain such strong GDP growth in 2005. Unfortunately, the first symptoms of a slowdown in the economy are visible in this last quarter of 2004.
"However, in our estimation the advertising market will grow at a rate of around eight percent next year. Specifically, TV will contribute to this growth the most at around 10 percent."
Piętka is keen to emphasize how popular TV advertising is. "TV still works. It is an effective medium and costs per rating point are lower than in 1998. This means that the entry barrier for smaller advertisers is low.
Meanwhile, in the publishing world...
While Starcom estimates radio advertising will grow at five percent, the company's analysts predict newspapers will be sluggish. "Newspaper readership is showing a more horizontal trend, with some indications of a decreasing trend. This is largely because of the growing popularity of the Internet as an information and news vehicle."
Such a downbeat assessment of the print media will be of particular interest to Agora, which has been tipped as one of the parties interested in diversifying into television.
Millennium Brokerage House's Michał Hulboj says this year Agora has been concentrating on two big issues. "One of Agora's considerations is that it is involved in a very big circulation battle with Fakt, and secondly, it is involved in a major restructing program, which will see 12 percent of the workforce lose their jobs.
"This will result in big payments for the workers and we will not see the financial consequences of this restructuring until the figures for 2005 are published," says Hulboj.
Indeed while sales for June increased 11 percent year-on-year Agora was still trailing the German Axel Springer publication by 57,000 before the holiday period. And although the group's net profit for the second quarter of 2004 stood at zł.21.1 million-62.3 percent higher than last year-some believe a bite from the lucrative television cherry might be very tempting for Agora.
However, Deutsche Bank Securities' Włodzimierz Giller says: "The shares from TVN and Polsat will probably be taken up by pensions or financial investors attracted by the advertising predictions.
"The activity we are expecting will make the media sector on the Warsaw Stock Exchange a more exciting place for investors and it will also increase the profile of the exchange."
Millennium's Hulboj notes though, that all this activity could have a less than beneficial effect on other players in the sector.
"With big interests like TVN and Polsat entering the market, other, smaller players might find themselves losing out."
The releases are set to add some zest to the otherwise tranquil media sector of the exchange, which has traditionally been dominated by Agora, publishers of Gazeta Wyborcza, radio group Broker FM and Internet concerns Onet, Interia and Hoga.
TVN's third quarter figures, released on the same day as its shares prospectus, show it performing at a blistering pace. The broadcaster's chief financial officer Karen Burgess says: "TVN achieved a record EBITDA for the first three quarters of the year, with a 34 percent increase on last year, making it one of the most profitable channels in Europe."
Burgess went on to add that TVN's net profits in the third quarter of 2004 increased by 1,000 percent to zł.23 million from zł.2.4 million a year earlier. Net profits for Q1 to Q3 this year increased by 136 percent in 2003. The company's seven TV stations (TVN, TVN 7, TVN 24, TVN Meteo, TVN Turbo, TVN Style and ITVN) now all operate at a profit.
"We have achieved this by three means: maintaining growth in revenue, keeping costs under control and benefiting from better Euro exchange rates," she explains.
One step away
With such strong results the station's CEO, Piotr Walter, was very upbeat about the forthcoming IPO, which he hopes will see TVN enter the WIG20. "TVN is one step away from the Warsaw Stock Exchange. We are proud of our accomplishments, and our great financial situation. The third quarter results are, as we predicted, excellent. They prove our ability to provide our audience with a great variety of choices to watch and our investors with a place to grow and make profit," he said.
Last week's launch is a very different story to the bungled attempt to float two years ago. ITI, which owns TVN, was forced to abandon its stock exchange move as the economy dipped and the business invested in Multikino and the Onet group. This time though, the company's owners can expect to raise between zł.300-450 million between November and December with the sale of 18 million 'A' series shares-roughly 27 percent of the company's capital.
The forthcoming issue has prompted a similar move from the station's main private rival, Polsat. Launched in 1992, five years before TVN took to the air, Polsat is now following its competitor's market initiative.
Polsat's founder and owner Zygmunt Solorz-Żak says he is not excluding the possibility of selling a stake to a sector investor. He intends to give up around 20 to 30 percent of the company and maintain majority control. New shares would be issued to generate further investment funds for Polsat.
Research shows that 99 percent of the country's 13 million households own a television set and of the six biggest European countries Poles sit comfortably in the middle of viewing figures (see table), watching an average of 232 minutes of telly a day.
Advertising power
Excluding Russia, Poland has the single largest advertising market in Central and Eastern Europe with a gross advertising expenditure last year of zł.11.3 billion. Data from the Expert Monitor advertising research group shows total gross expenditure for all Polish media has grown over the last seven years at an average rate of 25 percent a year.
And it is here that motivation behind the TV stations' move to the markets can be found. Television is still the dominant advertising medium in Poland, accounting for nearly 60 percent of the total gross advertising expenditure. Last year, spending on TV ads totaled around zł.6.6 billion.
TVN's Burgess says: "Most of the market forecasts I have seen for the advertising industry run at levels of 10 percent growth per year for the next five years."
Starcom media house's Piotr Piętka agrees that the future is looking rosy. "A lot of factors influence the growth of each medium and the key elements are how strong the medium is, how effective it is and how efficient it is.
"In Poland's case it is important to consider whether we can maintain such strong GDP growth in 2005. Unfortunately, the first symptoms of a slowdown in the economy are visible in this last quarter of 2004.
"However, in our estimation the advertising market will grow at a rate of around eight percent next year. Specifically, TV will contribute to this growth the most at around 10 percent."
Piętka is keen to emphasize how popular TV advertising is. "TV still works. It is an effective medium and costs per rating point are lower than in 1998. This means that the entry barrier for smaller advertisers is low.
Meanwhile, in the publishing world...
While Starcom estimates radio advertising will grow at five percent, the company's analysts predict newspapers will be sluggish. "Newspaper readership is showing a more horizontal trend, with some indications of a decreasing trend. This is largely because of the growing popularity of the Internet as an information and news vehicle."
Such a downbeat assessment of the print media will be of particular interest to Agora, which has been tipped as one of the parties interested in diversifying into television.
Millennium Brokerage House's Michał Hulboj says this year Agora has been concentrating on two big issues. "One of Agora's considerations is that it is involved in a very big circulation battle with Fakt, and secondly, it is involved in a major restructing program, which will see 12 percent of the workforce lose their jobs.
"This will result in big payments for the workers and we will not see the financial consequences of this restructuring until the figures for 2005 are published," says Hulboj.
Indeed while sales for June increased 11 percent year-on-year Agora was still trailing the German Axel Springer publication by 57,000 before the holiday period. And although the group's net profit for the second quarter of 2004 stood at zł.21.1 million-62.3 percent higher than last year-some believe a bite from the lucrative television cherry might be very tempting for Agora.
However, Deutsche Bank Securities' Włodzimierz Giller says: "The shares from TVN and Polsat will probably be taken up by pensions or financial investors attracted by the advertising predictions.
"The activity we are expecting will make the media sector on the Warsaw Stock Exchange a more exciting place for investors and it will also increase the profile of the exchange."
Millennium's Hulboj notes though, that all this activity could have a less than beneficial effect on other players in the sector.
"With big interests like TVN and Polsat entering the market, other, smaller players might find themselves losing out."
