Patria.cz: In the last couple of years, managed to restructure its debt and to reach agreements with creditors about rollovers of outstanding loans. Do you consider the present gearing of the company to be satisfactory, or do you plan additional steps in that direction? And if so, what kind?
David J. Sach: It is true that we have successfully extended the maturity profile of our debt through a series of refinancing deals. Most recently we exchanged some of our 2008 Convertible notes which mature in 2013 for new convertible notes that mature in 2015. This, along with some of our earlier debt repurchases, has reduced our next major debt repayment in 2013 from $475 million to $182 million, which we consider to be a great success. In fact the deal was even recognised with an international industry excellence award. Right now we’re comfortable, but of course we’ll be reviewing opportunities that will further improve our maturity profile. Our medium-term target is to reach a Net Debt to OIBDA ratio of 3-4 times and we expect future OIBDA growth to play a key role in achieving this.
Patria.cz: At the end of March, surprised investors with the acquisition on the Czech market of Bontonfilm company, the price of which reached $12.5m. Do you expect any concrete positive contributions from this purchase already in this year´s results? Do you see a possibility that will take advantage of recent depressed prices and make other such acquisitions?
David J. Sach: Bontonfilm is a leading theatrical and home entertainment company in the Czech and Slovak Republics, so the acquisition has increased our ability to distribute content in these regions. Naturally, it also enhances the potential of our content and distribution division, Media Pro Entertainment, which is at the heart of our One Content, Multiple Distribution strategy. This strategy will help us to diversify from advertising to paid and subscription revenues. We believe that is the industry trend setter in our region in this regard, and we fully expect Bontonfilm to have a positive impact on our second half operating results.
In the short-term we are focused on developing our current assets and on deleveraging mainly through OIBDA growth. However, we always monitor investment opportunities in CEE and we would evaluate OIBDA positive and cash generative opportunities such as Bontonfilm.
Patria.cz: The end of MediaFax agency as a stand-alone unit was announced this year and its full integration into TV Nova´s news division is slated to finish before the end of the year. Could you outline your vision of the news broadcasting of the leading Czech TV channel for the next couple of years? And how do you see the channel´s future in general?
David J. Sach: Independent, locally produced news has been central to the success of all our broadcast operations since the company’s beginning, and remains so today. Having an in-house news-gathering agency enables TV Nova to deliver the most up to date news much more efficiently and supports both our TV broadcast and online news channels. TV Nova is the most popular channel for news in the Czech Republic and earlier this year we added an extra morning news show and late night bulletin to its schedule to meet viewer demand.
TV Nova’s main evening news program, for example, typically delivers audience shares of over 60% and alongside popular locally produced fiction such as The Street and Rose Garden Medical 2 and reality and entertainment shows such as Czech-Slovak Superstar, our Czech broadcast operations are delivering average prime time audience shares of 40% and above. Our focus is on maintaining and strengthening our audience and market share leadership in all our broadcast operations.
Patria.cz: It is not easy to come up with long-term outlook in the present market environment in which fundamentals seem to be adrift. Therefore, after announcing 2Q results, the CEO Adrian Sarbu merely stated that he was comfortable with the analysts' forecast for the CETV's earnings for the whole of 2011. Is that statement still valid?
David J. Sach: We cannot reiterate the guidance for the purpose of this interview as we would have to make a public filing with SEC if do that. We plan to provide investors with a market update and updated guidance on our 3Q earnings call at the end of October.
Patria.cz: Another question regarding the CEO: Market tends to react quite sensitively to frequent news about the CEO selling company shares, regarding them as a sort of no-confidence vote in his own company. However, the CFO David J. Sach started to buy stock in the last weeks in smaller tranches (twenty thousand shares). Could you comment on their motives and possibly dispel investors´ worries?
David J. Sach: I am a strong believer in the future of . We operate in markets which have huge convergence potential and the growth in the CEE region will outstrip that of Western Europe once the global market situation stabilizes. We also have some exciting new projects in the pipeline that will further develop the vertical integration of the business and open up new growth opportunities. I’m fortunate to work with a team of extremely talented and creative media professionals who are committed to delivering the long-term vision of . Adrian Sarbu has well over 2.6 million shares and is a committed long-term shareholder of .
Patria.cz: TV Nova filed for a license for a new channel with the TV and Radio Broadcasting Board (RRTV). Its working title is Kanál 5 and its target audience should be men. When do you expect the license to be granted and when approximately could the new channel be up and running? Are you planning to further extend your TV channel portfolio in the Czech Republic?
David J. Sach: It’s no secret that we want to expand our multichannel strategy in the Czech Republic and our other markets to replicate the model we have in Romania. The key for us is to launch the right channel at the right time. Earlier this year we launched Doma our female-oriented channel brand in Croatia because we felt the market there was ready for that product. Doma is achieving an audience share close to 5% which has helped us to strengthen our audience share leadership in Croatia. Audience and advertiser demand are the main factors we look at when deciding which type of channel to launch and when. The application for a license is a preliminary step in the potential launch of a new channel and, of course, I can’t comment any further than that at this stage.
Patria.cz: The Investor Day was initially scheduled for September 21. The event, however, does not appear on events list on your web pages anymore. Was the Investor Day postponed, or did the recent turmoil in the markets prompt you to decide otherwise?
David J. Sach: The recent volatility of markets globally and feedback from our investors, prompted us to reconsider our plans and reschedule our Investor Day. We feel it will be more productive for investors to meet CME's senior and station management face-to-face once capital markets have stabilized. Obviously we look forward to letting the investment community know the new date as soon as we can.