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Polsat Earns, TVN Grows and TVP?? Broadcasters Reveal Their Q1 Performance(Polish News Bulletin Via Thomson Dialog NewsEdge)The consolidated Q1 financial performance of three largest broadcasters is surprising. Mainly due to Polsat, owned by Zygmunt Solorz-Zak. His television recorded net profit of ZL53.4m, while at the consolidated level it reached as much as ZL71.1m. It is almost by one third more than its largest commercial rival ? TVN, though less than the TVP public television. - TV Service Fee Helps High profit of the public broadcaster ? ZL86m ? is almost as much as TVP earned in the whole 2005. But the high result is an illusion. In the whole 2006 TVP wants to earn ZL37.4m. Why? Because in the first quarter TVP collects a relatively large amount of subscription fees (this year they worked out at ZL184m), which artificially overstates performance in the period. Looking at revenue of TV stations, you can see a significant advantage of TVP. The public television collected ZL472.5m and outperformed TVN, which gathered Z:236m. But the situation does not look that well, when you deduct the subscription fees as then it proves that TVP's income amounted to around ZL250m, which is only a little higher than TVN's. Polsat is at the far end of the statistics with consolidated income of ZL186.2m and ZL155.6m collected solely by its TV station. TVN, which has recently outplayed Polsat, will soon begin pressurizing TVP's leadership position. Table. Financial performance of broadcasters in Q1 (million zloty) TVP TVN Polsat Income 472.5 236.0 186.2 Gross profit 103.3 67.7 86.7 Net profit 86.0 48.9 71.1 Net profitability 18 21 38 (percent) source: Puls Biznesu- Record Profitability Thanks to high profits, Polsat enjoys the best profitability ratio ? it amounts to 38 percent, while in case of TVN the relation works out at 21 percent. TVP's is even worse ? merely 18 percent. "The increase in profitability and profits results from the method of managing company finances and from the search for cost effectiveness," said Eryk Walkiewicz, board member at Polsat, responsible for financial issues. But there is also another side of the coin. Analysts accuse Polsat of too little investment in its programme, which results in a rather static, or even slightly decreasing share in sweeps. It is no surprise that Polsat, which used to be the largest commercial broadcaster, has lost its top position to the benefit of TVN. Table. Profitability indices of broadcasters in Q1 TVP TVN Polsat Employment 4,771 607 525 (permanent only) Income per employee (thousand zloty) 99 389 355 Viewing figures* (percent) 45.46 16.44 16.35 Employees per 1 % market share 68** 37 32 * - daily sweeps; in case of TVP it is a sum of TVP1 and TVP2 viewers ** - only 3,100 employees working at TVP headquarters were included in the reckoning source: Puls Biznesu- Small, Therefore Profitable Polsat shines if we consider profitability ratio, taking into account the number of employees. Solorz-Zak's television employs the least people of all three broadcasters, though it must be indicated that the statistics do not fully reveal the true image, because they do not include people hired on temporary labour agreements. Polsat requires only 32 people to acquire 1 percent of the market (taking sweeps into account). TVN needs five more men. The public television must employ as many as 68 people to achieve the same market share. TVP's over-employment is no mystery ? it employs 4,800 people, of which 3,200 work in its headquarters, while 1,600 in regional branches. Another profitability ratio shows what kind of income was generated by one employee. Here TVN is in the lead. One employee of Piotr Walter's television earned ZL389,000 in Q1. In Polsat the ration works out at ZL355,000. From this point of view, TVP is again far behind with only ZL99,000 of income per employee. - There Is Only One Winner, Say Experts Wlodzimierz Giller, DB Securities analyst: "The first thing that catches the eye is the high profitability of Polsat, which probably results from the fact that the TV has not incurred any debts. If TVN had not debts too, it could soon reach a similar profitability ratio. On the other hand, TVN invests a lot, contrary to Solorz-Zak's television. Polsat recently tried to counterattack TVN, but it seems it did not work out. TVP still holds first place on the market, but we must remember that it has subscription fees, which partly neutralise high costs. It seems that TVP and Polsat are not developing their positions on the advertising market, so TVN is the only winner at the moment." Piotr Pietka, sales director at Starcom: "TVN enjoyed the largest success in the first quarter. After the introduction of the autumn programme framework it recorded the highest increase in viewing figures, which contributed to higher advertising revenue. The state-owned television is facing huge challenges, which was losing viewers in Q1, despite transmissions of sports events. The recent staff revolution is not an advantage either. I am afraid that the TVP does not have people, who are able to assure such programme framework that would guarantee a large share in sweeps. Polsat is tossing and turning between the search for a new concept and lack of concept. It has rises and falls. Despite the better packaging, it is hard to compete with TVN. It can only be explained by the fact TVN invests the earned money in its programmes, while Polsat most likely invests somewhere else." Dorota Puchlew, analist at BDM PKO BP brokerage: "The market is developing and it is clear that TVN is the growth's largest beneficiary. The prospects are promising for the rest of the year ? analysts are mentioning a 10-11 percent growth. TVP might take advantage of this growth as it still has a lot of time freeing its programme that can be sold to companies that want to advertise themselves. But the sweeps are the most influential element in growing or falling advertising revenue, therefore it can be expected that TVN will earn the most. Mainly due to the fact that it introduces hit programmes, such as "Taniec z gwiazdami" ("Dancing with stars")." - TVN Takes Over Onet.pl ? But Why? TVN recently announced that it will buy 82.35 percent shares in the Grupa Onet.pl from ITI for ZL1.1bn. In July it will begin to buy Onet's shares from the market and, in effect, Onet.pl will be withdrawn from the stock exchange. TVN is paying 18 percent more than Onet was worth on the stock exchange on Monday. TVN and Onet.pl are part of the same capital group ? ITI. A similar situation occurs in the US: the ABC television and the Go.com portal belong to the Walt Disney corporation. Nut ABC has not bought Go.com. Why is TVN doing it? "Today we are able to realise one project with Onet.pl from time to time, because each entity is concentrated on its own business. We want our two companies to intermingle," explains Piotr Walter, TVN's CEO. "We are buying Onet to gain access to e-advertising, which is currently expanding at a rate of 50 percent annually. It is nearly four times as fast as the TV advertising market. And I do not want Lukasz Wejchert (CEO at Onet.pl) to take over TVN in two or three years," joked Walter. Wejchert explains that his company wants to broaden its distribution channels, find and put forward new forms of reaching viewers and Internet users. "We hope that now employees will want to think in the category of one company, that is, for example, how to adjust a TV material to a PC format. I am convinced that we will get knew motivation." |