CETV

Central European Media Enterprises Ltd. (CETV)

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Exchange: NASDAQ
Industry: Consumer Services
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Central European Media Enterprises (CETV)

Q4 2011 Earnings Call

February 22, 2012 9:00 am ET

Executives

Romana Wyllie - Vice President of Corporate Communications

Adrian Sarbu - Chief Executive Officer, President and Director

David Sach - Chief Financial Officer and Executive Vice President

Anthony Chhoy - Executive Vice President of Strategic Planning and Operations

Daniel Penn - Executive Vice President, Secretary and General Counsel

Analysts

Vivek Khanna - Deutsche Bank AG, Research Division

Ajay Agrawal - Nomura Securities Co. Ltd., Research Division

Daria Fomina - Goldman Sachs Group Inc., Research Division

Andrzej Knigawka - ING Groep N.V., Research Division

Tim Hamby - Janco Partners, Inc., Research Division

Unknown Analyst

Ankur Agarwal

Pavel Ryska - J & T Banka, A.S., Research Division

Presentation

Operator

Hello. My name is Lindy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Central European Media Enterprises Fourth Quarter and Full Year 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, February 22, 2012.

It is now my pleasure to turn the floor over to Romana Wyllie, Vice President of Corporate Communications. Ms. Wyllie, you may begin your conference.

Romana Wyllie

Thank you, Lindy. Good morning, good afternoon or [Foreign Language] to each of you, and welcome to CME's Fourth Quarter and Full Year 2011 Investor Conference Call. We are broadcasting our earnings call via a video webcast to enable you to see the management team in action. You can join us via the link on our homepage, www.cme.net. There, you can also download the presentation slides, which we will refer to during this call. You can find them on our homepage in the bottom-left corner. The participants of today's call will be CME's President and Chief Executive Officer, Adrian Sarbu.

Adrian Sarbu

Good afternoon, and [Foreign Language].

Romana Wyllie

Chief Financial Officer, David Sach.

David Sach

[Foreign Language]

Romana Wyllie

Anthony Chhoy, Executive Vice President, Strategic Planning and Operations.

Anthony Chhoy

Good afternoon.

Romana Wyllie

And our General Counsel, Daniel Penn.

Daniel Penn

Greetings.

Romana Wyllie

Before I turn to Adrian, let me read the usual Safe Harbor statement. Our presentation today will contain forward-looking statements. Actual results may vary material from those expressed or implied due to various factors. These factors are discussed in detail in our SEC filings, including the Form 10-K filed earlier today and posted on our website. During this call, we will refer to certain financial information that is not in U.S. GAAP. Please see the Appendix to the presentation and Note 18 to our financial statements in our Form 10-K for a reconciliation to U.S. GAAP financial measures.

And now please turn to Page 4 of our presentation, and I will pass you over to Adrian.

Adrian Sarbu

Thank you, Romana, and good morning and good afternoon, everyone. In 2011, we outperformed the markets. Our revenues grew by 17% and OIBDA increased by 56%. Our OIBDA margin improved by 4 percentage points to 19%, and our overall market share grew by 1 percentage point. This happened in a challenging year when our TV ad markets remained stressed. We proved again that we have a strong management team that are building powerful brands.

Please turn to Slide 5. We have a history of outperforming the markets, and 2011 was not an exception. Following the successful implementation of our new business model, One Content, Multiple Distribution, we are expanding from a single revenue source to multiple revenue engines. In 2011, we strengthened our leadership across the market, and even if 2012 may not be an easy year, we are confident that we'll successfully face the challenges ahead of us. We built a culture of outperforming.

David?

David Sach

Thank you, Adrian. Please turn to Slide 6. In aggregate, our markets experienced growth in real GDP of 2% during 2011, with increases in all countries. This growth was largely driven by export demand. Consumer confidence in our markets was impacted by concerns about the European sovereign debt situation. And as a result, real private consumption continued to lay GDP growth for much of the year, but has now turned positive. Despite aggregate television advertising spending fluctuating from down 3% to up 2% on a quarterly basis during 2011, spending ended flat for the full year in line with private consumption.

Moving to Slide 7. Our consolidated net revenues increased by 17% to $865 million for the full year, equivalent to an increase of 10% in constant currencies. All 3 segments contributed to this increase. Costs increased by 5% in constant currency terms, but this included the full year impact that the acquisition of bTV in Bulgaria, the acquisition of Bontonfilm and investments in new channels in Croatia and Slovenia. Excluding the impact of these acquisitions and investments, a total like-for-like cost decreased 1%. Central costs were 6% lower. Consolidated OIBDA increased by 56% to $167 million or 40% in constant currencies, with our OIBDA margin increasing from 15% to 19%.

Due to the impact of the current economic environment, we recorded an impairment charge of $69 million in respect to the Bulgarian broadcast reporting unit and the Media Pro Entertainment production services reporting unit following our annual impairment review.

Adrian will now present the full year highlights for our broadcast division.

Adrian Sarbu

I invite you to turn to Slide 8 of our presentation, highlighting the achievements of the broadcast division. In 2011, we strengthened our overall primetime audience leadership with lower costs. The drivers of this audience increase were Slovakia and Croatia. Our competitive advantage, built over many years, enables us to generate the majority of the advertising inventory in each country, with more than 60% in the Czech Republic, Slovakia, Bulgaria and Slovenia. We also strengthened our overall market share leadership with increases in Slovakia, Bulgaria, Croatia and Slovenia of between 1 and 7 percentage points. Following our expansion to pay windows, we increased subscription revenues in Slovenia, Romania, Bulgaria and Czech Republic.

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