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LONDON – Central European Media Enterprises, a broadcaster in Central and Eastern Europe in which Time Warner owns a big stake, on Wednesday reported an improved second-quarter profit despite a decline in other financials.
Earnings rose from $1 million in the year-ago period to $4 million, even though revenue of $211.2 million was down from $249.7 million in the year-ago period.
Operating profit of $23.7 million was down from $39.5 million.
But the advertising market remains challenging for the firm, which said its ad revenue declined 7 percent in the first six months of 2012.
In recent weeks, CME completed debt deals with Time Warner and fellow major shareholder Ronald Lauder, which reduced its debt by $185 million and raised TW’s stake in the company to 49.9 percent.
Said CEO Adrian Sarbu: “Despite a 7 percent decline in advertising spending for the first half, our revenues year-on-year were flat in constant currencies.” He added: “In the second half of the year, we will continue to focus on deleveraging, maintaining our leading audience and market shares, expanding non-advertising revenues, and delivering positive free cash flow.”
Jefferies analyst Will Smith said the results were “in line with forecasts, but [earnings were] well ahead of expectations.”
He also shared his take on the company’s future. “While trading remains tough, CME’s future will likely be determined by Time Warner’s willingness to address debt concerns,” Smith said. “The shares will likely trade on Time Warner’s willingness to step in…Time Warner looks to be acting as a bridge for CME to keep the group going until the economic recovery in peripheral Europe kicks in.”
CME is one of TW’s biggest bets on Europe. Analysts have projected growth for Eastern Europe, but continued economic weakness and financial challenges in European countries have made the investment somewhat of a rough ride.
Lauder has the right to vote TW’s stake until May 2013. Until then, a standstill agreement blocking the entertainment conglomerate from acquiring more than 50 percent is in place.
CME operates TV businesses in six Central and Eastern European markets, the biggest of which is the Czech Republic.
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