CME reported 1H2005 net income of USD 19.6m vs. an expected loss of USD 3.0m. The difference was however caused by a currency gain of USD 29.4m. We believe that the currency gain arose from a debt issue of around USD 470m denominated in EUR. In 1H05 the EUR strengthened vs. the USD by 8.5%. CME issued the debt to finance the acquisition of TV Nova in the Czech Republic. Sales doubled from last year to USD 161m, 25% above our expectations, helped by TV Nova Czech Republic. Operating costs and programming costs increased by 119% yoy and 84% yoy respectively, affected by the acquisition of TV Nova; these were in line with expectations. As a result, operating profit decreased by 69% yoy and was 13% above our forecast. Based on the above, income jumped by 39% yoy, significantly helped by the currency gains of USD 29.4m. Excluding the currency gains, net income would be in line with our forecast.
US GAAP consolidated (USD 000s) 1H05A 1H04A change Patria est.
Sales 161,413 80,734 99.9% 128,767
Operating cots 29,402 13,409 119.3% 29,792
Costs of programming 54,403 29,563 84.0% 54,507
EBIT 4,610 14,793 -68.8% 4,099
Pre-tax 25,258 13,445 87.9% -96
Net income 19,554 11,248 73.8% -2,987
EPS annualized (fully diluted) 0.54 0.39 38.5% -0.23
Segment sales 1H05A 1H04A change Patria est.
Czech Republic 47,767 - n.m. 39,619
Croatia 12,607 - n.m. 10,246
Romania 45,648 32,787 39.2% 45,847
Slovakia 32,270 29,343 10.0% 32,933
Slovenia 23,853 23,408 1.9% 21,978
Ukraine 31,538 25,354 24.4% 32,337
Total 193,683 110,892 74.7% 182,960
Also, the Senate moved its debate on TV ads on state television to today. The possibility of a gradual ban on TV ads on public TV channels from 2008 should benefit TV Nova and TV Prima (the two private channels), which would stand to share part of the USD 40m per year currently spent on state TV ads, thereby increasing their respective market shares. This would raise our fair value of CME by USD 2 per share.