The epidemic surprised Agora at the moment when it was just beginning to reap the fruits of long restructuring and many investments. According to our estimates, the company did not generate approximately PLN 430 million EBITDA in 2020- 2022. We believe that Agora should return to the pre-pandemic scale of operations and cash generation quite quickly. Next year will still not be easy, but the effects of investments in digitization and new areas will start to bring profits.
The segment particularly affected by the epidemic was Helios cinemas, which basically lost a year of operation and are only now returning to normal. Although cinemas are already operating without restrictions, they are struggling with the effects of stagnant film production during the epidemic. Without good films, there are no viewers in cinemas, and in addition, two epidemic years allowed streaming platforms to consolidate their position, which raised doubts about the future of the big screen. However, the company presents analysis that contradict the thesis that viewers turn away from cinemas and when the expected title appears on the screens, there are no fewer people willing to watch it in cinemas than before the epidemic. The long-awaited sequel to Avatar is hitting theaters now, so this will be a good sampler. The studios are also announcing more movies for next year than this year.
The epidemic also affected Agora's other key pillar, i.e. the AMS outdoor advertising network. This year there is a clear improvement and there is a good chance that, despite the economic slowdown, next year will be equal to the times before the epidemic. The attractiveness of this segment has recently gained a new dimension, which is related to another important segment of Agora, which is the Internet. Namely, it is entering a phase of perturbation due to the approaching end of a tool called cookies.
This segment of Agora, like the entire online advertising market, benefited from the limited mobility of people and the transfer of activities to the Internet. However, this year his performance has deteriorated for the first time in years. The company decided in advance to change the nature of its product and service to prepare in advance for the new realities of online advertising. Next year, the first positive effects should be visible, and in 2024. the company is already promising a clearly positive impact of these changes. Importantly, this part of Agora's business related to YieldBird is global, and development opportunities go beyond the domestic market.
We see the main source of improvement in Agora's results in the following years mainly in the three business segments mentioned above. A separate topic is the ongoing takeover of Eurozet, which should take Agora to a higher business level by leaps and bounds, and the delay in this process is more a political than economic issue.
When discussing the factors affecting future results, it is worth mentioning an important and currently missing element of the Agora Group's revenues and profits. It's about the lack of advertising/revenues from the state administration and SP companies, on which it loses tens of millions a year. Possible changes on the political scene may change this unfavorable situation for the company.
Analyst: Adam Zajler
GPW’s Analytical Coverage Support Programme 3.0
