CME management criticises firm’s ‘unacceptable’ performance

CME co-CEO Michael Del Nin

The co-chief executive officer of Central European Media Enterprises (CME), Michael Del Nin, has slammed the firm’s Q3 performance as “unacceptable” as its revenues narrowed and it reported an operating loss of US$45 million (€32.7 million).

The weak results came as CME warned that if it is unable to secure additional financing, “we will be unable to meet our debt service obligations and generally fund our operations sometime within the next twelve months.”

Commenting on the results, co-CEO Christoph Mainusch said that the firm was now focused on “improving the monetisation of our audiences” and that improving the performance of its Czech operations is “the top priority.”

“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,” said Del Nin. The co-CEOs took charge of CME following the departure of former CEO Adrian Sarbu in August.

Though CME’s net loss for the three months ended September 30, 2013 was better than in Q3 2012, coming in at a loss of US$23.3 million compared to a loss of US$32.6 last year, revenues dipped to US$135.8 million – down year-on-year from US$140.1 million.

The firm’s operating loss of US$45.0 million was also worse than its US$18.4 million loss last year. Meanwhile, operating income before depreciation and amortisation (OIBDA), a measure of the profitability of ongoing business activities, came in at a loss of US$32.4 million compared to positive US$ 3.5 million last year.

CME cited a US$15.1 million increase in content costs, US$ 4.2 million of restructuring charges, US$ 6.4 million of severance costs, and approximately US$ 5.0 million of operating and other costs, as well as a weaker dollar, for the steep decline in OBIDA.

CME said that it no longer believes it will see a previously expected rebound in its Czech ad performance during the fall season, based on a combination of the current level of commitments, the continued weakness in demand from advertisers during October and on-going feedback received from advertisers and agencies.

The firm revised down its full-year outlook to reflect “lower expectations for our operations in the Czech Republic and the Slovak Republic,” higher than expected restructuring charges, unanticipated severance costs, non-cash accelerated amortisation of programming, and the timing of carriage fee increases primarily in Romania and the Czech Republic.

The results cap a difficult few months for CME, which has seen the departure of a number of top executives since Sarbu’s exit – including CFO David Sach, executive VP, strategic planning and operations Anthony Chhoy and the general director of CME’s Czech commercial TV station TV Nova, Jan Andrusko.