Profit goes wide of EM.TV's net

Third-quarter revenue grows 25% for gain of $128,000

German media group EM.TV continues to pump up revenue, but profits remain somewhat elusive.

In its third-quarter financial report released Tuesday, the company, which operates German sports channel DSF and holds one of the world's largest libraries of children's programming, said it boosted revenue about 25% to €57.5 million ($73.7 million).

But in the bottom-line column, EM.TV managed only a slim €100,000 ($128,000) profit. That was better than the €4.6 million it lost in the third-quarter last year but still a disappointment for shareholders.

EM.TV shares fell 2.1% on Tuesday to €3.70 ($4.74).

"Our hopes for EM.TV have not been fulfilled," said Wolfgang Hagl, an analyst with investment publication Boerse Online. "Despite holding the merchandising rights to the 2006 World Cup, EM.TV has made little progress in terms of profits. On the positive side, the company is sticking with its long-term restructuring strategy."

That strategy includes a shift from the low-profit kids video business, previously EM.TV's core, to the bigger upside potential offered by sports rights and merchandising. But while EM.TV has scored notable successes — including an exclusive deal to produce broadcasts of the first and second division German Soccer League matches for pay TV group Arena — sports so far has failed to be a golden goal.

EM.TV is hoping that will change in 2007. The company is counting on a loosening of Germany's state monopoly on sports betting to be a money-spinner for sports channel DSF and online group Sport1.

EM.TV CEO Werner Klatten said the company's sports business was "on the path to growth" and downplayed any risk involved with the sports-betting operation.

EM.TV received a vote of confidence last week from one of its main shareholders. Swiss media group Highlight bought 5.7 million EM.TV shares, increasing its stake in the company to 13% (HR 11/17).

The move could spur more cooperation between the companies. Highlight is a leading player in the sports-rights business and also controls German production-distribution giant Constantin Film.

For full-year 2006, EM.TV said Tuesday that it is holding to its previous forecast, reiterating revenue growth of about 19% to about €250 million ($321 million) and a 40% jump in earnings before interest and tax to €8 million-€10 million ($10 million-$13 million).
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