CETV

Central European Media Enterprises Ltd. (CETV)

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Central European Media Enterprises Ltd (CETV)

Q2 2009 Earnings Call Transcript

July 29, 2009 9:00 am ET

Executives

Romana Tomasova - VP, Corporate Communications

Adrian Sarbu - President and COO

Charles Frank - Interim CFO

Anthony Choi [ph] - Vice President for Strategy and Operations

Analysts

John Charles [ph] - J.P. Morgan

Ben Mogil - Thomas Weisel Partners

Matthew Walker – Nomura

Mitch Resnick – Fortis Investment

Maria Levinskaya [ph] – Bank of America/Merrill Lynch

David Kestenbaum - Morgan Joseph

Merry Erington [ph] – Janco Partners

Peter Harvey – Cazenove Capital

Demetri Zuke [ph] – Citigroup

Puria Jennert [ph] – KCB [ph]

Presentation

Operator

Good morning my name is Sara. I will be your conference operator today. At this time, I would like to welcome everyone to the Central European Media Enterprises second quarter 2009 earnings conference call. All lines have been place on mute to prevent any background noise.

After the speaker’s remarks there will be question-and-answer period. (Operator instructions) As a reminder this conference call is being recorded today July 29, 2009. It is now my pleasure to turn the floor over to Romana Tomasova, Vice President of Corporate Communications. Ms. Tomasova you may begin your conference.

Romana Tomasova

Good morning or good afternoon to each of you, and welcome to CME's second quarter 2009 investor conference call. During this call, we will refer to presentation slides, which you can download from our website www.cetv-net.com. You can find them on our homepage at the bottom left corner.

The participants of today's call will be Adrian Sarbu and Charles Frank who will give you the formal presentation. We are also joined today by our General Counsel, Daniel Penn and Vice President Anthony Choi [ph], Peter Wildok [ph], Marijan Jurenec, and Mark Wyllie who will be available to answer questions.

Before I turn to Adrian, let me read the usual Safe Harbor statement. Our presentation today will contain forward-looking statements. For these statements, we claim the protection of the Safe Harbor contained in the US Private Securities Litigation Reform Act of 1995, and refer you to the forward-looking statements section in our Form 10-Q filed with the Securities and Exchange Commission earlier today for a list of such statements and the factors, which could cause future results to differ from those presented in this call.

During this call, we will refer to our segment financial information. Certain of these numbers presented in local currencies are not US GAAP numbers. We do not provide reconciliation to these numbers in this presentation as the US GAAP amounts are expressed in US dollars in our financial statements.

Additional information on our segment data is provided in note 17 to our financial statements on page 40 of our 10-Q. And now, over to Adrian.

Adrian Sarbu

Good afternoon or good morning. 2009 has been a very tough year.

I invite you to turn to page four of our presentation. In quarter two, our core markets declined in line with quarter one, which is between 15% and 30%. The drop in TV ad spending followed the deterioration of GDP.

Inevitably our quarter two results reflect these downturn, but we expect to reach the bottom in the third quarter. In such a turbulent environment, we focused on preserving of leadership and brands in our core markets by maintaining or increasing audience and market shares. In the first half, we improved our liquidity position, resolved funding in Ukraine, stimulated ad spending with our stations, reduced operating costs and CapEx, and restructured corporate functions.

In 2009, our core advertising markets will reset at the level of 2007, with a stronger and larger portfolio of assets, we foresee the opportunity for growth. We are prepared for a recovery in 2010. By 2011, we expect TV ad expanding to return to the level of 2008.

Looking day by day to improve our operation performance, we are building on the lessons from the crisis. The integration of MediaPro Entertainment into a new content division of CME will give the other two operations segments broadcasting an Internet an unbeatable competitive advantage.

The diversification of our revenues from advertising to subscription, content sales, Internet sales, and management services is the goal of our new operation model. As a vertically integrated media company, CME will grow faster and more efficiently in the post-crisis environment with Internet as a new frontier. We believe we have the vision and the strategy that will create long-term value for our shareholders.

Let's move to slide five. In the second quarter, our core operations were profitable and delivered positive operating cash flow. Market conditions meant that our results were below last year. We delivered EBITDA of $69 million and a respectable EBITDA margin of 38%.

We maintained audience share leadership and importantly, we increased our market share in our core operations by up to 5%. Our Croatian operations performed stunningly and we sold EBITDA growth of 58% in local currency in the second quarter. Yesterday, we announced the acquisition of MediaPro Entertainment, which will strengthen our position as a vertically integrated media company, combining content, Internet, and broadcasting.

Let us look at slide six. In the Czech Republic, we increased our year-on-year market share to over 70%. TV Nova had an outstanding prime time audience share of 40% driven by successful local production such as Rose Garden Medical and the increase in audience share of Nova Cinema.

In Romania, our advertising market share increased to 55% from 51% year-on-year. The PRO TV group also maintained leadership with a 32% prime time audience share driven by Blockbuster series Regina on Acasa. Then news on PRO TV continued to deliver excellent audience share results.

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