UPDATE 3-Broadcaster CME Q1 revenue lags, sees tougher ad market

Wed May 5, 2010 11:40am EDT

* Q1 revenue $143.6 mln vs $148.5 mln in Reuters poll

* EBITDA $800,000 vs forecast $18.6 mln

* Shifts ad market outlook lower, sees revenue up

* Shares close more than 11 pct down in Prague

(Adds guidance, more company comment)

By Jason Hovet

PRAGUE, May 5 (Reuters) - Central European Media Enterprises (CME) expects revenue to rise at least 10 percent and core profit to double in a flat ad market in 2010, it said after falling short of expectations on first-quarter earnings.

The broadcaster said on Wednesday revenue rose 5 percent to $143.6 million in the first quarter, the first increase in more than a year but below an average forecast of $148.5 million in a Reuters poll as advertising spending continued to fall.

Shares closed 11.5 percent in Prague and were more than 13 percent down on the Nasdaq, swept up in a wider sell-off as contagion fears over Greece's debt struggles hammered markets.

The television broadcaster said a year-long decline in TV advertising demand would bottom out in the second quarter in its six central and eastern European markets before showing single-digit growth in the second half.

Overall, CME expects the television ad market to be flat this year, a more subdued view of the market then before.

"Investors should see this relatively negatively," Atlantik FT analyst Patrick Vyroubal said. "The economic recession will still have its impact on the advertising market and the current year will be weak as seen in the guidance."

CME said it expected to earn $790 million to $820 million in revenue in 2010, up from $714 million last year. Earnings before interest, tax and depreciation should reach up to a $140 million to $160 million, from $75 million in 2009, assuming local currency exchange rates stay stable.

EBITDA, hurt by higher programming costs, fell to $800,000 in the first quarter, well below $27.75 million the previous year and the $18.6 million consensus in the Reuters poll.

CME said prices bottomed in the quarter, and that its leading position in markets will boost revenue and operating margins this year.

"We have a history of outperforming the markets," Chief Executive Adrian Sarbu said. "As market leaders, our revenues outperformed TV ad spending growth, converting our operating leverage into high margins."

CME, partly owned by Time Warner (TWX.N) and U.S. investor Ronal Lauder, has battled declining spending on TV ads since the financial crisis swept through its once booming markets.

The company had previously forecast 2 to 6 percent ad spend growth this year after around a 30 percent drop in 2009. It said markets would not return to 2008 levels for another two years.

CME exited loss-making Ukraine operations this year.

Last month, the company closed the $413 million acquisition of Bulgaria's bTV from News Corporation (NWSA.O).

CME said it expected EBITDA to show a profit in the fourth quarter in that market, and ad spending should grow by around a fifth annually between 2011-2014 after a dip this year.

CME's quarterly results included production and distribution firm MediaPro Entertainment, acquired in December 2009. (Editing by David Holmes, Mike Nesbit)

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