PRAGUE: Central European Media Enterprises (CME) continued its revenue slide in the third quarter of 2013, but an overhaul of top management in the past two months has seen a new bluntness and determination to address the gap between its leading place on the TV market and its financial freefall.
The stock market reacted with shock, as CME shares fell 57% within an hour of the opening of the NASDAQ market, hitting a ten-year low of 2.65 USD.
Net revenues were down year-on-year for Q3, 138.5m USD in 2013 from 140.1 USD in 2012, and on a nine-month basis at 453.1m USD in 2013 from 518.7m USD in 2012. But the most stinging results were in OBIDA and operating losses. OBIDA was in the minus column, at (32.4)m USD for Q3 and (46.1)m USD for 2013 nine months, compared to profit column results in 2012 of 3.5m USD for Q3 and 64.7m USD for the first nine months of 2012. Operating results were also worse, at (45)m USD for Q3 and (85.6)m USD for the first nine months of 2013 compared with (18.4)m USD for Q3 and (5.1)m USD for the first nine months of 2012.
Net loss showed a smaller decline in Q3 at (23.3)m USD, but worse overall results for the nine months ending on 30 September 2013 at (173.3)m USD compared to (43.3)m USD in 2012.
Rising content cost, amortization of rights and a weak US dollar were to blame for the higher OBIDA losses. Severance costs and weaker projections for the Czech and Slovak ad market have revised forecasts for the 2013 year downward.
Across CME’s six country territory, increased revenues in Romania and (to a lesser extent) in Bulgaria and Croatia were overshadowed by heavy losses in the Czech Republic (down 26%) followed by losses in Slovakia (down 29%) and Slovenia.
In statements released with the CME earnings report, Christoph Mainusch, co-Chief Executive Officer, said: "Our leading audience shares give us a strong advantage over our competition, and we intend to capitalize on this by concentrating our efforts on improving the monetization of our audiences. Improving the performance of our Czech operations is the top priority. We believe that rebuilding our relationships with agencies and clients while protecting price increases achieved during the year is an essential step to improving our competitive position in that market."
Michael Del Nin, co-Chief Executive Officer, commented: "Christoph and I find this level of performance unacceptable and have directed all of our energy since starting with CME a few weeks ago to addressing the major reasons for these financial results and making changes to improve them going forward."
The company warned that without an injection of capital it will be unable to meet its debt obligations and fund operations “sometime within the next twelve months.” CME said it is “in preliminary discussions with Time Warner regarding a possible capital transaction.” The company is also undergoing reductions in its operations and costs, including deferring programming commitments and cancelling or delaying development projects and is considering the sale of assets.
Moving forward, top management told investors at its investor’s teleconference that it will have eliminated 1,000 jobs over the course of 2013, estimated to bring a cost savings or 30m USD. CME will focus on its core business. In 2011, CME purchased distributor Bontonfilm, which was at the time the leading distribution company on the Czech market. Since the departure of its key executive who took contacts to nearly all the Hollywood major studios, Bontonfilm has become an also-ran art house and domestic film distributor.
CME trades on NASDAQ and the Prague Stock Exchange as CETV.