Russia’s CTC Media reports 74% plunge in net income

CTC Media’s net income plummeted 74% year-on-year in the second quarter with the firm blaming a “challenging” first half on regulatory, macroeconomic and commercial developments.

Announcing its Q2 results, the Russian broadcast group reported net income of RUB241.5 million (€3.46 million), down from RUB940.9 million a year earlier. In dollar terms the profit drop was 82% year-on-year to US$4.7 million (€4.3 million).

Operating revenues were down 25% year-on-year in ruble terms and down 50% in dollars to RUB4.85 billion and US$92.3 million respectively.

CTC said it remained profitable in the quarter thanks to “strict control measures”. Year-on-year, its overall expenses declined by 12% in rubles and 41% in US dollars, while programming expenses decreasing 18% in rubles and 45% in US dollars.

CTC also noted that results reported in US dollars were affected by a “significant decline in the value of the ruble” in the reporting period, and that third-party reports have estimated that the total Russian TV ad market was down by 21% in ruble terms in Q2.

Commenting on the results, CTC Media CEO, Yuliana Slashcheva, said: “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.”

Last month Russian broadcast group UTH made a formal offer to buy 75% of CTC Media for US$200 million (€180 million). If approved, the deal will see CTC will fall in line with new legislation that will require media companies in Russia to be 80% Russian-owned from next year onwards.

CTC said in its Q2 results that the discussions with UTH are at a “relatively early stage” and there can be “no assurance” that terms will be agreed and the deal will close.

“If the board and its special committee are not able to conclude a satisfactory transaction with UTH, or if the company’s stockholders do not approve such transaction, the company may not be able to consummate another sale transaction, or implement an alternative transaction, before the end of 2015, and may therefore not achieve compliance with the foreign ownership and control restrictions of the amended Russian Mass Media Law by the stated deadline,” warned CTC.

“Such failure would materially adversely affect the group’s business and the market value of the Company’s common stock.”

CTC said that it is not providing a full year profit and revenue outlook due to “limited visibility regarding 2015.”

As of March 31, 2015 the shareholder structure of CTC Media was: 39% owned by Modern Times Group; 25% held by Telcrest Investments – a Cyprus-based investment vehicle controlled by Rossiya Bank; with the remaining 36% free float following CTC’s IPO on the NASDAQ in 2006.