3q 2006 conference call presentation november 9, 2006
TRANSCRIPT
3Q 2006Conference Call Presentation November 9, 2006
2
Safe Harbor Statement
This presentation contains forward-looking statements including statements regarding the impact of the impact of legal proceedings in Ukraine, the renewal of our broadcasting license in Ukraine, the effect of additional investment in Croatia, the impact of rationalization of our operations in the Czech Republic and the Slovak Republic, our ability to attract advertisers in the Czech Republic, our ability to develop and implement multi-channel strategies generally, the growth of television advertising within our markets, the future economic conditions in our markets, future investments in television broadcast operations, and other business strategies and commitments. For these statements and all other forward-looking statements we claim the protection of the safe harbour for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy or otherwise beyond our control and some of which might not even be anticipated. Future events and actual results, affecting our strategic plan as well as our financial position, results of operations and cash flows, could differ materially from those described in or contemplated by the forward-looking statements. Important factors that contribute to such risks include, but are not limited to, the general regulatory environments where we operate and application of relevant laws and regulations, the renewals of broadcasting licenses, the rate of development of advertising markets in countries where we operate, our ability to acquire necessary programming and the ability to obtain additional frequencies and licenses, and general market and economic conditions in these countries as well as in the United States and Western Europe. These forward looking statements speak only as of the date of this presentation, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in events, conditions or circumstances on which any such statement is based.
Our presentation also contains non-GAAP financial measures, as defined in Regulation G, adopted by the SEC. We provide a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure in our quarterly earnings releases, which can be found on our website at www.cme-net.com and in the Appendix at the end of these slides.
3
Agenda
Michael Garin, CEO
Wallace Macmillan, CFO
1. Highlights
2. Results of Operations
3. Summary
4. Questions and answers
Romana Tomasova, Director of Corporate Communications
Daniel Penn, General Counsel
Marina Williams, Executive VP
Marijan Jurenec, Regional Director
Adrian Sarbu, Regional Director
4
Operational Highlights
2006 Guidance reaffirmed
Implementation of CME regional management model
Excellent results in quarter three
• Outstanding quarter in Romania with EBITDA growing 50%
• Restructuring in the Czech Republic delivers outstanding ratings and strong financial results
• Significant increase in ratings and audience share in Slovakia
• Prime time audience share in Croatia above 20%
• On air and online success in Slovenia led by the Bar reality show
• Strong ratings in Studio 1+1; Q3 revenues restricted by political uncertainty; new government now in place
Ukraine license extended; successful appeal in ownership litigation
Launch of KINO channel in Ukraine
5
Financial Highlights
.
Segment Net Revenue up 34% Segment EBITDA growth of 39%
Segment EBITDA margin of 31% (2005: 30%)
Segment Net Revenues* Segment EBITDA*
For a reconciliation of non-GAAP financial measures (Segment Net Revenues and Segment EBITDA) to the most comparable GAAP financial measures, please see the reconciliation slide in the Appendix
61
13399
293
121157
391
113
0
50
100
150
200
250
300
350
400
450
Q1 Q2 Q3 Q3 YTD
US
$ m
2005 2006
10
59
19
88
33
63
26
122
0
20
40
60
80
100
120
140
Q1 Q2 Q3 Q3 YTD
US
$ m
2005 2006
Year to date vs. 2005 Year to date vs. 2005
* Does not include Czech Republic pre-acquisition results
6
Sales Development
Segment Net Revenues by Quarter
* Guidance for Quarter 4
020406080
100120140160180200220
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3Q4*
2002 2003 2004 2005 2006
US
$ m
Q4 Guidance
Czech Republic
Croatia
Original Stations
2002-2005 revenue including acquisitions CAGR³ 50%¹
2002-2005 revenue for original² stations CAGR 28%
¹ Includes Croatia from July 2004 and Czech Republic from May 2005
² Original stations comprise operations in Romania, Slovenia and Ukraine
³ CAGR: Compound Annual Growth Rate
Source: CME
Qu
arte
r 4 G
uid
an
ce
* Guidance for Quarter 4
For a reconciliation of non-GAAP financial measures (Segment Net Revenues and Segment EBITDA) to the most comparable GAAP financial measures, please see the reconciliation slide in the Appendix
7
Romania
Prime Time Audience Share Trends 18-49
US$ millions Three months ended 30 September Nine months ended 30 September
2006 2005Growth
(%) 2006 2005Growth
(%)
Net Revenues 29.3 21.1 39% 96.9 66.8 45%
EBITDA 11.7 7.8 50% 39.8 26.0 53%
EBITDA Margin % 40% 37% 41% 39%
05
1015202530354045
1 5 9 13 17 21 25 29 33 37 41 45 49 1 5 9 13 17 21 25 29 33 37 41
Weeks
Au
die
nce
Sh
are
%
051015202530354045
Au
die
nce
Sh
are
%
CME Total TVR 1 Antena 1+ Antena 3 TVR 2 Prima TV Realitatea TV TV Sport OTV Others30 Sept
200630 Sept
200531 Dec 2005
Source: Peoplemeters TNS-AGB-Intl
The percentage growth and EBITDA margin figures have been calculated on the underlying data in the 10-Q filed on November 9, 2006 For a reconciliation of non-GAAP financial measures (Segment Net Revenues and Segment EBITDA) to the most comparable GAAP financial measures, please see the reconciliation slide in
the Appendix
8
Slovak Republic – TV Markiza
Prime Time Audience Share Trends 12-49
US$ millionsThree months ended 30
September Nine months ended 30 September
2006 2005Growth
(%) 2006 2005Growth
(%)
Net Revenues 13.9 11.7 19% 45.2 44.0 3%
EBITDA 2.4 0.9 175% 9.3 11.0 (16)%
EBITDA Margin % 17% 7% 21% 25%
0
10
20
30
40
50
1 5 9 13 17 21 25 29 33 37 41 45 49 1 5 9 13 17 21 25 29 33 37 41
Weeks
Au
die
nce
Sh
are
%
0
10
20
30
40
50
Au
die
nce
Sh
are
%
TV Markiza STV1 TV JOJ STV2 Czech/ Hungarian TV Others30 Sept
200531 Dec 2005
30 Sept 2006
Source: PMT /TNS SK
The percentage growth and EBITDA margin figures have been calculated on the underlying data in the 10-Q filed on November 9, 2006 For a reconciliation of non-GAAP financial measures (Segment Net Revenues and Segment EBITDA) to the most comparable GAAP financial measures, please see the reconciliation slide in
the Appendix
9
Slovenia – POP TV & KANAL A
Prime Time Audience Share Trends 12-49
US$ millionsThree months ended 30
September Nine months ended 30 September
2006 2005Growth
(%) 2006 2005Growth
(%)
Net Revenues 9.1 7.7 19% 34.9 31.5 11%
EBITDA 1.2 1.0 19% 10.7 10.2 5%
EBITDA Margin % 13% 13% 31% 32%
2005 200630 Sept
200630 Sept
2005
0
10
20
30
40
50
60
1 5 9 13 17 21 25 29 33 37 41 45 49 1 5 9 13 17 21 25 29 33 37
Weeks
Au
die
nce
Sh
are
%
0
10
20
30
40
50
60
Au
die
nce
Sh
are
%
Total CME SLO1 SLO2 Prva tv Others30 Sept
200531 Dec 2005
30 Sept 2006
Source: Peoplemeters AGB Nielsen Media Research
The percentage growth and EBITDA margin figures have been calculated on the underlying data in the 10-Q filed on November 9, 2006 For a reconciliation of non-GAAP financial measures (Segment Net Revenues and Segment EBITDA) to the most comparable GAAP financial measures, please see the reconciliation slide in
the Appendix
10
Ukraine – Studio 1+1
Prime Time Audience Share Trends 14-49
US$ millionsThree months ended 30
SeptemberNine months ended 30
September
2006 2005Growth
(%) 2006 2005Growth
(%)
Net Revenues 15.6 13.2 18% 62.1 44.7 39%
EBITDA (0.8) 2.5 (134)% 16.1 9.8 64%
EBITDA Margin % (5)% 19% 26% 22%
05
1015202530354045
1 5 9 13 17 21 25 29 33 37 41 45 49 1 5 9 13 17 21 25 29 33 37 41
Weeks
Au
die
nce
Sh
are
%
051015202530354045
Au
die
nce
Sh
are
%
Studio 1+1 INTER ICTV Novy Kanal STB Others30 Sept
200531 Dec 2005
30 Sept 2006
Source: Peoplemeters GFK USM
The percentage growth and EBITDA margin figures have been calculated on the underlying data in the 10-Q filed on November 9, 2006 For a reconciliation of non-GAAP financial measures (Segment Net Revenues and Segment EBITDA) to the most comparable GAAP financial measures, please see the reconciliation slide in
the Appendix
11
Ukraine – Kiev - KINO
Prime Time Audience Share Trends 18-49 for Kino and Selected Competitors
Selected competitors only with an affinity index to Target Audience (TA) Kiev 18-49 of more than 100%. Does not include major national channels. The population of TA Kiev 18-49 is 1,276,431.
US$ millionsThree months ended 30
September Nine months ended 30 September
2006 2005Growth(%
) 2006 2005Growth
(%)
Net Revenues 0.2 - - 0.8 - -
EBITDA (1.2) - - (1.7) - -
EBITDA Margin % (653)% - (230)% -
0
1
2
3
4
5
6
7
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41
Weeks
Au
die
nce
Sh
are
%
0
1
2
3
4
5
6
7
Au
die
nce
Sh
are
%
KINO ENTER FILM TET TONIS NTN30 Sept
20061 July 2006
Launch
Source: Peoplemeters GFK USM
The percentage growth and EBITDA margin figures have been calculated on the underlying data in the 10-Q filed on November 9, 2006 For a reconciliation of non-GAAP financial measures (Segment Net Revenues and Segment EBITDA) to the most comparable GAAP financial measures, please see the reconciliation slide in
the Appendix
12
Czech Republic – TV Nova
Prime Time Audience Share Trends 15-54
US$ millions As Reported As ReportedIncluding 2005 Pre-
acquisition*
Three months ended 30
SeptemberNine months ended 30
SeptemberNine months ended 30
September
2006 2005Growth
(%) 2006 2005Growth
(%) 2006 2005Growth
(%)
Net Revenues 40.1 40.9 (2)% 137.0 88.7 55% 137.0 169.7 (19)%
EBITDA 17.2 11.9 44% 59.5 40.2 48% 59.5 79.5 (25)%
EBITDA Margin % 43% 29% 43% 45% 43% 47%
0
10
20
30
40
50
60
1 5 9 13 17 21 25 29 33 37 41 45 49 1 5 9 13 17 21 25 29 33 37 41
Weeks
Au
die
nce
Sh
are
%
0
10
20
30
40
50
60
Au
die
nce
Sh
are
%
TV NOVA ČT 1 ČT 2 Prima Others
* Including pre-acquisition data, based on management estimates
30 Sept 2006
30 Sept 2005
31 Dec 2005
Source: ATO – Mediaresearch
The percentage growth and EBITDA margin figures have been calculated on the underlying data in the 10-Q filed on November 9, 2006 For a reconciliation of non-GAAP financial measures (Segment Net Revenues and Segment EBITDA) to the most comparable GAAP financial measures, please see the reconciliation slide in
the Appendix
13
Croatia – Nova TV
Prime Time Audience Share Trends 18-49
US$ millionsThree months ended 30
SeptemberNine months ended 30
September
2006 2005Growth
(%) 2006 2005Growth
(%)
Net Revenues 4.3 4.2 3% 13.7 16.8 (18)%
EBITDA (4.5) (4.8) 5% (11.6) (9.6) (22)%
EBITDA Margin % (106)% (114)% (85)% (57)%
2005 2006
0
10
20
30
40
50
60
1 5 9 13 17 21 25 29 33 37 41 45 49 1 5 9 13 17 21 25 29 33 37 41
Weeks
Au
die
nce
Sh
are
%
0
10
20
30
40
50
60
Au
die
nce
Sh
are
%
Nova TV RTL HTV 1 HTV 2 Others30 Sept
200531 Dec 2005
30 Sept 2006
Source: AGB Nielsen Media Research
The percentage growth and EBITDA margin figures have been calculated on the underlying data in the 10-Q filed on November 9, 2006 For a reconciliation of non-GAAP financial measures (Segment Net Revenues and Segment EBITDA) to the most comparable GAAP financial measures, please see the reconciliation slide in
the Appendix
14
Segment Results for the Quarter
Q3 Segment Analysis – Net Revenues and EBITDA** (US$ millions)
Three months ended 30 September
Segment Net Revenues Segment EBITDA
2006 2005Growth
(%)
LFC* Growth
(%) 2006 2005Growth
(%)
LFC* Growth
(%)
Romania 29.3 21.1 39% 39% 11.7 7.8 50% 50%
Slovak Republic 13.9 11.7 19% 10% 2.4 0.9 175% 92%
Slovenia 9.1 7.7 19% 13% 1.2 1.1 19% 0%
Ukraine (STUDIO 1+1) 15.6 13.2 18% 18% (0.8) 2.5 (134)% (134)%
Total Original Stations 67.9 53.7 26% 14.5 12.3 19%
Original Stations Segment EBITDA Margin 21% 23%
Czech Republic 40.1 40.9 (2)% (10)% 17.2 11.9 44% 32%
Ukraine (KINO) 0.2 - - - (1.2) - - -
Croatia 4.3 4.2 3% (3)% (4.5) (4.8) 5% 6%
Total 112.5 98.8 14% 26.0 19.4 35%
Total Segment EBITDA Margin 23% 20% * Local Functional Currency ** Does not include Czech Republic pre-acquisition results
¹ Ratio of Total Original Stations Segment EBITDA to Total Original Stations Segment Net Revenues² Ratio of Total Segment EBITDA to Total Segment Net Revenues
The percentage growth and EBITDA margin figures have been calculated on the underlying data in the 10-Q filed on November 9, 2006 For a reconciliation of non-GAAP financial measures (Segment Net Revenues and Segment EBITDA) to the most comparable GAAP financial measures, please see the reconciliation slide in
the Appendix
15
Segment Results Year-to-Date
YTD Segment Analysis – Net Revenues and EBITDA** (US$ millions)
Nine months ended 30 September
Segment Net Revenues Segment EBITDA
2006 2005Growth
(%)
LFC* Growth
(%) 2006 2005Growth
(%)
LFC* Growth
(%)
Romania 96.9 66.8 45% 45% 39.8 26.0 53% 53%
Slovak Republic 45.2 44.0 3% 1% 9.3 11.0 (16)% (17)%
Slovenia 34.9 31.5 11% 13% 10.7 10.2 5% 7%
Ukraine (STUDIO 1+1) 62.1 44.7 39% 39% 16.1 9.8 64% 64%
Total Original Stations 239.1 187.0 28% 75.9 57.0 33%
Original Stations Segment EBITDA Margin¹ 32% 30%
Czech Republic 137.0 88.7 55% 46% 59.5 40.2 48% 40%
Ukraine (KINO) 0.8 - - - (1.7) - - -
Croatia 13.7 16.8 (18)% (18)% (11.6) (9.6) (22)% (22)%
Total 390.6 292.5 34% 122.1 87.6 39%
Total Segment EBITDA Margin 31% 30% * Local Functional Currency ** Does not include Czech Republic pre-acquisition results
¹ Ratio of Total Original Stations Segment EBITDA to Total Original Stations Segment Net Revenues² Ratio of Total Segment EBITDA to Total Segment Net Revenues
The percentage growth and EBITDA margin figures have been calculated on the underlying data in the 10-Q filed on November 9, 2006 For a reconciliation of non-GAAP financial measures (Segment Net Revenues and Segment EBITDA) to the most comparable GAAP financial measures, please see the reconciliation slide in
the Appendix
16
Summary Financial Results (1)
Summary Consolidated Income Statement (US$ millions)
Three months ended 30
SeptemberNine months ended 30
September
2006 2005
(as restated)¹ 2006 2005
(as restated)¹
Net Revenues 112.5 87.1 388.8 248.5
Station Costs and Depreciation (97.6) (77.5)(297.3
)(187.8
)
Corporate Costs (8.3) (4.8) (24.0) (16.1)
Impairment Charge - - (0.7) (35.3)
Operating Income 6.6 4.8 66.8 9.3
Net Interest Income / (Expenses) (9.5) (9.9) (28.1) (15.0)
Foreign Currency Gain / (Loss) 6.0 0.9 (25.5) 30.3
Provision for Income Taxes (1.2) (2.2) (8.8) (8.1)
Non-Operating Income / (Expenses) 4.9 (0.8) 2.6 (4.5)
Minority Interest in (Income) / Loss of Consolidated Subsidiaries (0.5) 1.0 (7.2) (3.6)
Equity in Income / (Loss) of Unconsolidated Affiliates - (0.1) (0.7) 4.8
Net Income / (Loss) from Continuing Operations 6.3 (6.3) (0.9) 13.2
Net Income / (Loss) 3.9 (9.7) (5.8) 7.8
Total Comprehensive Income / (Loss) 7.4 1.6 74.9 (26.0
)Please refer to forms 10-Q filed November 9, 2006 and 10-K and 10-K/A filed March 2, 2006, April 1, 2005, respectively, for the full financial statements and related notes and
disclosures.¹ Please refer to form 10-Q filed November 9, 2006 note 2 for reasons for restatement
17
Summary Financial Results (2)
Summary Consolidated Balance Sheets (US$ millions)
As at 30 September 2006 As at 31 December 2005
(as restated)¹
Current assets 377.1 287.0
Non-Current Assets 1,293.5 1,101.9
Total Assets 1,670.6 1,388.9
Current Liabilities 180.0 207.0
Non-Current Liabilities 540.3 488.1
Total Liabilities 720.3 695.1
Minority Interests in Consolidated Subsidiaries 20.3 13.2
Shareholders' Equity 930.0 680.6
Total Liabilities & Shareholders' Equity 1,670.6 1,388.9
Cash & Cash Equivalents 164.5 71.7
Total Credit Facilities and Obligations under Capital Leases & Senior Notes (486.0) (484.7)
Net Debt (321.5) (413.0)
Please refer to forms 10-Q filed November 9, 2006 and 10-K and 10-K/A filed March 2, 2006, April 1, 2005, respectively, for the full financial statements and related notes and disclosures.
¹ Please refer to form 10-Q filed November 9, 2006 note 2 for reasons for restatement
18
Summary Financial Results (3)
Cash Flow (US$ millions)
Nine months ended 30 September 2006
Nine months ended 30 September 2005
(as restated)¹
Net cash from continuing operating activities 67.9 44.5
Net cash used in continuing investing activities (100.8) (285.1)
Net cash received from financing activities 132.2 197.8
Net cash used in discontinued operations (1.7) (2.0)
Impact of exchange rate fluctuations (4.8) (7.4)
Net increase / (decrease) in cash and cash equivalents 92.8 (52.2) Please refer to forms 10-Q filed November 9, 2006 and 10-K and 10-K/A filed March 2, 2006, April 1, 2005, respectively, for the full financial statements and related notes and
disclosures.¹ Please refer to form 10-Q filed November 9, 2006 note 2 for reasons for restatement
19
2006 Guidance Unchanged
Segment Results (US$ millions)
Other Guidance (US$ millions)
Capital Investment 55
Corporate Overheads (excluding stock-based compensation) 28
Total Segment Net Revenues 585
Total Segment EBITDA 204
Total Segment EBITDA Margin 35%
20
Closing Remarks
Guidance maintained
Great start to fall season
Czech restructuring delivers as promised
New Media highlights
Appendix
22
US GAAP Reconciliation
Segment Net Revenues Reconciliation (US$ millions)
Three months ended
30 September 2006
Three months ended
30 Septem
ber 2005
Nine months ended
30 Septem
ber 2006
Nine months ended
30 Septem
ber 2005
Full Year 2006
Guidance
Station Segment:
Czech Republic (TV NOVA, GALAXIE SPORT) 40.1 40.9
137.0 88.7
Romania (1) 29.3
21.1
96.9 66.8
Slovak Republic (MARKIZA TV) 13.9
11.7
45.2 44.0
Slovenia (POP TV, KANAL A) 9.1
7.7
34.9 31.5
Ukraine (STUDIO 1+1, KINO) 15.8
13.2
62.9 44.7
Croatia (NOVA TV) 4.3
4.2
13.7 16.8
Total Combined Segment Net Revenues
112.5
98.8
390.6 292.5
585.0
Reconciliation to Consolidated Statement of Operations:
Consolidated Net Revenues 112.5
87.1
388.8 248.5 583.0
Unconsolidated Equity Affiliates -
11.7
1.8 44.0
2.0
Total Combined Segment Net Revenues
112.5
98.8
390.6 292.5
585.0
(1) Romanian networks are PRO TV, PRO CINEMA, ACASA and PRO TV INTERNATIONAL
23
US GAAP Reconciliation
Segment EBITDA Reconciliation (US$ millions)
* We do not present a reconciliation of anticipated segment EBITDA to the US GAAP result for the year ended December 31, 2006 because we have a significant amount of debt that is denominated in Euros, and consequently our net earnings are subject to inherently unpredictable and potentially material foreign currency gains and losses
Three months ended
30 September 2006
Three months ended
30 September 2005
Nine months ended
30 September 2006
Nine months ended
30 September 2005
Full Year 2006
Guidance*
Station Segment:
Czech Republic (TV NOVA, GALAXIE SPORT) 17.2 11.9 59.5 40.2
Romania (1) 11.7 7.8 39.8 26.0
Slovak Republic (MARKIZA TV) 2.4 0.9 9.3 11.0
Slovenia (POP TV, KANAL A) 1.2 1.1 10.7 10.2
Ukraine (STUDIO 1+1, KINO) (2.0) 2.5 14.4 9.8
Croatia (NOVA TV) (4.5) (4.8) (11.6) (9.6)
Segment EBITDA 26.0 19.4 122.1 87.6 204.0
Reconciliation to Consolidated Statement of Operations:
Income/(loss) before provision for income taxes, minority interest and discontinued operations 1.8 (5.1) 9.6 20.2
Unconsolidated Equity Affiliates - 0.9 (1.3) 11.0
Depreciation/Impairment/Interest/Gain/ (loss on investments, minority interests, foreign exchange, corporate expenses) 24.2 23.6 113.8 56.4
Segment EBITDA 26.0 19.4 122.1 87.6
(1) Romanian networks are PRO TV, PRO CINEMA, ACASA and PRO TV INTERNATIONAL