MILAN (Reuters) -MFE-MediaForEurope on Thursday reported a drop in operating profit, hit by weak advertising sales and lower margins in its Spanish market, while debt soared following the takeover of
MFE Reports Profit Beat Despite Challenges in Spain
By Elvira Pollina
MILAN (Reuters) -MFE-MediaForEurope on Thursday reported higher-than-expected operating profit for the first nine months of the year, helped by its Italian TV business and cost control which partly offset weakness in Spain.
Controlled by Italy's Berlusconi family, MFE reaffirmed expectations for "strongly positive" profit and cash flow this year on a like-for-like basis after it completed a takeover of German broadcaster ProSiebenSat.1 in September.
Earnings before interest and taxes (EBIT) fell to 61.3 million euros ($70.6 million) in the first nine months, about half the level of the previous year, but still well above a company-compiled analyst consensus of 43 million euros.
Earlier this month, ProSieben trimmed its profit forecast for the year, with rival European broadcasters RTL and TF1 also cutting their outlook, underscoring the pressure on traditional broadcasters as audiences and advertising budgets shift online.
Shares in MFE were up 3% in early trade, with analysts citing solid cash generation and overall earnings slightly above market expectations. Free cash flow rose by 9.4% to 348 million euros in the period.
"Despite the TV market in Spain remaining very challenging and the impact from ProSiebenSat.1 - which we have only just started working on - MFE continues to grow, beating forecasts," said Chief Executive Pier Silvio Berlusconi.
BUILDING SCALE TO WITHSTAND STREAMERS
Gross advertising sales rose by 1.4% to 1.43 billion euros in Italy, but fell 8% to 494 million euros in Spain.
MFE sees European expansion as key to gain scale and compete with stiff competition from U.S. video streaming giants like Netflix and Google's YouTube.
The Milan-listed company expects to add about 300 million euros to its operating profit within four years stemming from ProSieben, Chief Financial Officer Marco Giordani told analysts in September.
The TV group is also in talks to buy a stake of up to 33% in Portuguese media company Impresa.
Giordani, who has been appointed CEO at ProSieben, will now focus on a turnaround of the German media company and sales of its e-commerce and online dating ventures.
Net debt jumped to 2.85 billion euros from 692 million euros a year earlier, reflecting the addition of ProSiebenSat.1's assets to MFE’s balance sheet. It stood at 565 million euros on a like-for-like basis.
The company will start fully consolidating ProSieben’s income statement from the fourth quarter.
($1 = 0.8677 euros)
(Reporting by Elvira PollinaEditing by Sonia Cheema and Keith Weir)
