07.08.2015
Moscow, Russia – August 7, 2015 – CTC Media, Inc. (“CTC Media” or the “Company”) (NASDAQ: CTCM), Russia’s leading independent media company, today announced its unaudited consolidated financial results for the second quarter and six months ended June 30, 2015.
H1 2015 FINANCIAL HIGHLIGHTS
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Third-party reports have estimated that the total Russian TV advertising market was down by 21% in ruble terms in the first half of 2015
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Total CTC Media revenues of $171.4 million ( RUR 9.8 billion), down year-on-year by 54% in USD terms and 25% in ruble terms, reflecting the contraction of the overall Russian television advertising market
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Advertising revenues of $167.3 million (RUR 9.5 billion), down year-on-year by 54% in USD terms and 26% in ruble terms
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Significant cost cutting measures implemented in light of the current market environment:
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Programming expenses down 45% in USD terms and 11% in ruble terms year-on-year to $90 million(RUR 5.1 billion)
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Total operating expenses down 44% in USD terms and 8% in ruble terms year-on-year to $160 million (RUR 9.1 billion)
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OIBDA1 of $19.0 million (RUR 1.1 billion) with OIBDA margin2 of 11.1%, despite the decline in the overall TV ad market and challenging macroeconomic environment
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Net cash position of $103.0 million at the end of the period
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Fully diluted earnings per share of $0.03 (Q2 2014: $0.17)
Q2 2015 FINANCIAL HIGHLIGHTS
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Third-party reports have estimated that the total Russian TV advertising market was down by 21% in ruble terms in the second quarter of 2015
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Total revenues up 17% quarter-on-quarter in USD terms and down 1% in ruble terms; total revenues down 50% year-on-year in USD terms and 25% in ruble terms, at $92.3 million (RUR 4.8 billion)
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Advertising revenues up 16% quarter-on-quarter in USD terms and down 2% in ruble terms; advertising revenues down 51% year-on-year in USD terms and 26% in ruble terms, at $89.9 million (RUR 4.7 billion)
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OIBDA1 of $10.6 million (RUR 0.6 billion), with OIBDA margin2 of 11.5%
CORPORATE UPDATE AND OUTLOOK
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In the context of amendments to the Russian Mass Media Law that will impose further restrictions on non-Russian ownership of television broadcasters, the Company announced the receipt of a non-binding offer from UTH to acquire 75% of the Company’s operating businesses for $200 million in cash, the formation of Special Committee of the Board to consider the offer, and the Board’s intention to return value to the Company’s non-sanctioned stockholders if a transaction is successfully concluded
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The Board has decided not to declare a dividend in the third quarter to preserve the financial and strategic flexibility of the Company in the current market, operational and corporate circumstances
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In light of the continued limited visibility for 2015, the Company is not providing full year guidance at this time
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Third-party reports have estimated that total Russian TV advertising spending may decline by 15-17% in the second half of 2015 and by 19-20% in ruble terms for the full year 2015
Yuliana Slashcheva, Chief Executive Officer of CTC Media: “The first half of 2015 has been a challenging period for CTC Media as a result of regulatory, macroeconomic and commercial developments. We are continuing to work towards an appropriate response to new restrictions on foreign ownership of television in Russia that will become effective in 2016, and as previously announced our Board of Directors and its Special Committee are currently considering a non-binding offer we have received from UTH for the acquisition of a controlling interest in our operating business.
Meanwhile, our management team continues to focus on the business. In the second quarter, CTC Media remained profitable thanks to the strict cost control measures that we have imposed. Programming expenses decreased by 18% in rubles and 45% in U.S. dollars compared with the prior year. Overall, CTC Media’s expenses declined by 12% in rubles and 41% in U.S. dollars compared to the second quarter of 2014. Results as reported in USD were materially affected by the significant decline in the value of the ruble in the reporting period.
Thanks to the effectiveness of Everest, our in-house advertising sales agency, we maximized sales on CTC Media’s channels, with a sell-out rate of about 95% in the second quarter, despite the decline in the overall market. At the same time we managed to keep our power ratio at last year’s high level. All our smaller channels outperformed the market thanks to the excellent performance of the teams. In the second quarter, we presented the new season of CTC to advertisers, and we aim to effectively monetize our programming grid in the third and fourth quarters of 2015. At this time all sponsorships have been sold for all of CTC channel’s new programs.
Also, we are pleased that the Company, uniquely among our largest competitors, we believe, has remained profitable despite the significant market challenges we continue to face. In the second quarter, our OIBDA margin remained in the double digits at 11.5%. This is a slight increase from the first quarter of 2015, when the OIBDA margin stood at 10.6%. The first and second quarters were extremely difficult for the Company’s operating business. However, there were signs of stabilization of the CTC channel audience share in the second quarter, and we saw improvement at the beginning of the third quarter.
In the second quarter, the CTC channel's audience share declined quarter-on-quarter as was expected due to the decrease of program expenses in the first half of the year and transfer of the key premiers to the third and fourth quarters. The CTC audience share settled into the 7.3-7.7% range in its target audience aged 10 to 45. In July, when we started preparing for the new season by broadcasting the reruns of our popular series such as “Kukhnya” (Kitchen) and “Voroniny” the audience share rose to 8.1% and we expect it to go up further in Q3. The audience shares of the Domashny and Peretz channels also kept growing in July and reached 3.8% and 2.4%, respectively.
In September, we will begin a new season on CTC with a record line-up of 20 premieres, our highest season total to date. First, audience favorites such as “Molodezhka,” “Kukhnya,” “Voroniny” and “The Eighties” will continue. Results for previous quarters have shown that the season premieres of these series can generate an above-average share for the channel. Second, we will introduce promising new products, including “Londongrad,” “How I Became Russian,” “Top of the World” and “Mommies.” Finally, CTC will launch several shows aimed at strengthening its positions in the daytime and Sunday slots.
Our smaller channels also saw an increase in viewership in the second quarter, thanks to efficient management as well as our marketing and public relations efforts. The share of Domashny in its target audience increased in the second quarter from 3.3% in 2014 to 3.7% in 2015. At the same time, the share of younger women aged 25-50 among its viewers continued to increase. The success of the channel lies in efficient programming combined with the launch of a large number of programs produced specifically for the channel, as well as an extremely fast response to important social events and trends. Besides Domashny’s traditional shows and series aimed primarily at a female audience, the channel recently began broadcasting a new program called “Crisis Manager,” which is highly relevant in the current state of the economy and appeals to a much broader audience demographic. The program moderator gives practical advice to families on how to save money and manage their budgets. Documentaries dedicated to the hot topic of the day such as “Djuna” and “Zhanna,” as well as the new Turkish series “1001 Nights,” also gained higher audience shares than the channel’s average.
Peretz continues to make gradual changes in its programming concept that have had a positive impact on its audience share. The channel’s share stood at 2.2%, compared to 1.9% in the second quarter of 2014. In addition, we are pleased with a number of positive developments such as an increase of more than 10% in the average viewing time and a qualitative change in the audience. The channel also was able to reduce costs significantly.
CTC Love is still increasing its audience share. In the second quarter, the channel’s share in its target audience increased to 1.1% from 0.8% in the prior quarter. The channel has been very successful using content from the CTC library, which attracts a larger audience than foreign series. The channel has also introduced new programs. A casting call for the new program “One Day with MBand” drew more than 500 applicants per role. During an online chat with members of MBand to promote the program, more than 120,000 questions were received within an hour.
Our assets outside the Russian Federation remain a stable source of revenue. Channel 31 has secured the second place in the Kazakh market, despite increased competition from cable channels. The channel was able to maintain high margins by effectively procuring content. Our International channels’ operating revenue increased by 98% in ruble terms in the second quarter compared to the second quarter of last year, and by 116% in the first half of 2015, due to the effect of foreign exchange rates as well as expanding distribution.
Digital and transmedia revenue increased by 37% in ruble terms in the second quarter and by 23% in the first half of 2015. In June we launched advertising sales on web portals in Kazakhstan. To consolidate our leadership in digital and transmedia, we will unveil several breakthrough technological solutions as the new season starts on CTC.”
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