The media dynamo

Zbigniew Bak is one of the first ACCA graduates in Poland. Now a Deputy President of Central & Eastern Europe�s biggest media group, he tells Colette Steckel what it�s like to do business in Poland

With the hottest international fashion and beauty brands increasingly taking up retail space in the shopping malls and commercial streets of Poland�s big cities, it was only a matter of time before a dedicated shopping magazine became the �must have� item of Poland�s fashion followers. Avanti - a glossy monthly pitched at designer-savvy women in the 18 to 30 age range - hit news stands in March this year. Word is, the 150-page manuals are being snapped up. �Avanti is a huge step for us,� says Zbigniew Bak, Deputy President of the management board of Agora SA, the most influential media group in Poland.

He has a point. Although shopping magazines are no longer uncharted territory in the publishing world, Avanti is a novel concept in Poland and it�s the first women�s magazine launch for Agora. All of which means that there is a lot riding on the monthly�s success. Zbigniew, however, is upbeat. The first issue sold 200,000 copies and subsequent issues have fared well. �We�re making good progress,� he says.

Avanti�s initial signs of success bodes well for Agora�s decision to invest in magazines. The group started its spending spree on a suite of magazine titles in in 2001 with an investment in niche publication, City Magazine, a free monthly leisure and entertainment title. Thirteen magazines have since joined the fold, ranging from a flower-arranging glossy to a motorcycling monthly. As the portfolio has grown, three titles have closed, including City Magazine. As Zbigniew puts it: launching new titles and closing those nearing the end of their life cycle, or ones that haven�t gone to plan post-launch, is part of managing a magazine business.

Avanti and Auto + - a guide for potential buyers of new cars, launched in 2003 - are the only two home grown titles. For now. �When Agora looked into getting into magazines, the best way to go about it was to acquire businesses that were already branded. We needed a platform from which to expand. If we started from scratch, it would have taken too long to become established,� remarks Zbigniew.

Building brand value in a media business is tough, not least because there are so few acquisition opportunities around, so when titles come onto the market, it�s often worth the investment even if the products aren�t up to scratch. �With the exception of a few titles, these acquired magazines aren�t the most exciting in the world, but they were necessary for Agora�s long term strategy,� he says candidly. �With Avanti, Auto + and other new titles to follow, we can start building value for our shareholders.�

Zbigniew joined Agora in 2000 and heads the group�s new business division, which has been actively pursuing investments in related markets including magazines and, lately, outdoor advertising. He is responsible for the operational supervision of both. �Here the rule is, if you buy it you run it, which is a pretty good rule in my opinion. If you know you�ll be running the business after you buy it, you think twice about steaming ahead. I would only buy a business if I felt we could restructure it,� notes Zbigniew. Most of the acquisitions he�s made at Agora were businesses in financial distress requiring complete overhauls.

Agora�s decision to branch out into new businesses came at a critical juncture in the group�s history, which is tightly bound with Gazeta Wyborcza, the leading newspaper daily. Founded on the eve of Poland�s parliamentary elections in 1989 by a group of journalists and activists of the underground democratic opposition press, Gazeta became the first independent newspaper in Poland. Its success helped Agora, its parent, grow into one of the most profitable media companies in Central & Eastern Europe. In 2003, the group announced revenue of PLN853.5m (US$233.2m) and earnings before interest, tax, depreciation and amortisation (EBITDA) of PLN 139.1m (US$38m).

Back in 1999, the group�s management needed to raise funds to finance the expansion of a printing base and new premises to accommodate the burgeoning number of staff (the editorial team currently numbers 750 journalists and five foreign correspondents). A listing on stock exchanges in Warsaw and London raised so much interest that the IPO generated a $93m war chest.

Now faced with shareholders to keep happy and a flagship business that, although it is still key to the group, no longer offers tremendous growth opportunities, Agora recruited a mergers & acquisitions expert to lead the business expansion. Which is where Zbigniew comes in. By 2000, he was running the corporate finance division he nurtured at Arthur Andersen where he was also a partner.

His experience made him an obvious choice for Agora although he admits that his decision to leave public practice proved a culture shock. �One of the biggest achievements in my career is making the transition from being a pure finance professional to running a large business with such a different environment to the one I was used to.�

Zbigniew explains that, as an outsider, he had to work hard to persuade management to transform the group into a more corporation-like and dynamic business. �Because Gazeta and Agora had become such tremendous successes, everyone thought they knew everything there was to know about business,� says Zbigniew, joking about the fact that he works with highly opinionated intellectuals. �The staff learnt on the job but there comes a point when you can�t go any further, which is when you bring in professionals,� he continues.

A new strategy

His expertise has helped transform Agora into a slick multimedia company that intends to keep growing, although Zbigniew admits that further development may prove tricky. �There are so few acquisition opportunities in the Polish market, so we�re going to have to think about a new growth strategy,� he says. Although Zbigniew admits that Avanti�s initial success could pave the way for organic growth in the magazine division, he doesn�t speculate on what that new strategy could be. �It�ll be a big challenge,� is all he�ll say.

Zbigniew fell into an accounting career by chance. He graduated from the Foreign Trade Department of the Warsaw School of Economics in the summer that communism collapsed. A stint working for the Polish Agency for Foreign Investment lasted only two months. He quit out of frustration when his suggestion to set up a database of investment opportunities in Poland was turned down by the agency head because of lack of funds. Ironically there was enough budget to pay for over a dozen Persian carpets.

A job at newly-established accounting firm Moore Stephens followed. And, within a year, he was headhunted by the managing partner of Arthur Andersen who met Zbigniew at a social function. �I was lucky. When communism collapsed, there was a very big demand for graduates who understood Western economics. We were in the minority.�

In the 15 years since communism collapsed, the business environment has changed beyond recognition and, some would argue, more change will come. Poland�s accession to the European Union on 1 May this year will bring new challenges although Zbigniew is ruling out any significant difference to the way Poles do business. �Because of Poland�s pre-accession treaty, all customs duty and trade barriers disappeared long before we joined the EU, so, in terms of doing business, there is not such a big difference between then and now,� begins Zbigniew.

But he warns that with frontiers flung wide open, competition will hot up. �Where once Poland was invisible, membership of the EU has now made it visible. More entrants will start looking to enter the market, and that can only make business tougher.� As for the conversion to IFRS for all listed companies in Europe from 1 January 2005, Zbigniew counters the West�s argument that the new EU accession countries aren�t ready. �Large listed companies in Poland have been preparing financial statements using IFRS for some time because they have international investors, so the whole conversion issue is not a big deal,� he reasons. Agora is a case in point: its accounts and comparatives are prepared according to IFRS.

Zbigniew adds that local GAAP is now so close to international accounting standards that, for example in the case of Agora, there are no real discernible differences between the two. Where no local regulation exists on particular accounting treatments, Polish accounting law recommends applying IFRS. But he concedes that Polish standard setters are still getting to grips with IAS 32 and 39; the two controversial standards on financial instruments. �There is still a lack of understanding among the finance community about sophisticated accounting standards. But it will come,� he says assuredly, perhaps in memory of his own involvement in educating Polish standard setters on the delights of deferred tax. �At the beginning of the 1990s, I had a conversation about deferred tax with officials at the Ministry of Finance. They couldn�t get their heads around the whole notion, no matter how hard I tried. But now, everyone gets it,� says Zbigniew. �We made a long journey, I�d say.� Time, perhaps, for him to embark on another? �Let�s see what happens over the next couple of years,� he retorts, with a grin.