2009 is likely to go down as one of the most eventful in CME’s 15-year history in the CEE region for both the right and wrong reasons.
Its latest results are certainly nothing to write home about. There is no doubt that the company has been particularly hard hit by the global economic crisis and resulting slump in TV ad revenue in all its seven markets.
In the Czech Republic, by far and away CME’s most important market, net revenues in Q2 were only around two-thirds of what they were in the same quarter in 2008. Its operating income was meanwhile only a half of that a year earlier.
Much more worrying was its performance in other countries. In Romania, CME’s second most lucrative market to date, its operating profit in Q2 was only a third of that in the same quarter in 2008. Losses were meanwhile posted in both Bulgaria and Ukraine.
This led Adrian Sarbu, CME’s president and now also its CEO, to comment that “advertising markets have reset to a level around that of 2006”. He also conceded that, “this has been a painful process for us and our shareholders.”
While he then went on to add that the company is “now looking forward to recovery”, few can doubt that this will be a long and painful process.
On the credit side, CME cannot be accused of being inactive and allowing events, many of which have been out of their control, to take their course.
The landmark Time Warner deal earlier this year has now been followed by the acquisition of MediaPro Entertainment, one of the region’s leading production and distribution basis. The former deal has given them a strong strategic investor, and both will allow them to become, as Sarbu has already pointed out, a “highly profitable vertically integrated media company.”
CME has also given itself an exit strategy from Ukraine, a market that looks increasingly fragile in the current economic climate. Its new partner Igor Kolomoisky will effectively hold a 49% stake in CME’s local interests once the deal closes sometime this quarter, with an option to buy them outright.
Similar deals with local partners in other markets, especially those that are becoming significantly less profitable than before, may soon also be on the cards.