OREANDA-NEWS. On 30 July 2008 was announced, that CTC Media reported second quarter 2008 financial results.

Financial Highlights

• Consolidated revenues increased 54% to USD 172.8 million in the second quarter and 43% to USD 309.5 million in the first six months of 2008

• OIBDA increased 43% to USD 73.4 million in the second quarter and increased 34% to USD 128.7 million in the first six months of 2008

• Net income increased 59% to USD 48.8 million in the second quarter and increased 54% to USD 90.5 million in the first six months of 2008

• USD 0.31 and USD 0.57 fully diluted earnings per share for the three- and six-month periods ended June 30, 2008

Corporate Highlights

• Closed syndicated loan facility for USD 135 million and used proceeds to repay the remaining debt to MTG associated with the DTV acquisition

• Anton Kudryashov appointed Chief Executive Officer effective August 4, 2008

• Vladimir Kartashkov appointed General Director of DTV

Alexander Rodnyansky, Chief Executive Officer and President, stated, “It is with great pleasure that we announce the results of the second quarter - results which demonstrate that our company continues to build on its foundation of success. In the past six years, CTC Media has grown from a private company, operating a single free-to-air channel, to a diversified vertically integrated public media holding with five channels in three countries and in-house production capabilities. We are proud of these achievements, and we are even more proud that the growth of CTC Media has continued. In fact, in the second quarter, we grew faster than the overall Russian advertising market. These results speak to the ability of our management teams to outperform the market and deliver outstanding financial results.”

“Our results for the quarter include the financial and operating performance of all recently acquired businesses and reflect the successful execution of our growth strategy in Russia and the CIS. In the second quarter, our flagship CTC channel once again proved its ability to connect with Russian viewers in the highly competitive environment of the Russian television market. CTC increased its target demographic audience share which was effectively monetized in the quarter. As we approach the fall season, we expect to benefit from CTC's competitive programming schedule which is anchored by our established formats and brands. The season's premiers will include new and proven formats, with more than 25% of CTC's fall programming line up being produced in-house through our production companies. We have high expectations for the sequels of sitcoms and series, such as My Fair Nanny , The Cadets , Ranetki and Daddy's Girls , which have garnered high ratings with CTC's target demographic.”

Target Audience Shares for the Three Months and Six Months Ended June 30, 2007, and June 30, 2008

Recent Acquisitions

CTC Media acquired its interest in the Channel 31 Group on February 29, 2008 and acquired the DTV Group on April 16, 2008. As a result, total operating results for the three and six months ended June 30, 2008 include the operations of the Channel 31 Group for four months and the operations of the DTV Group for three months. Total operating results for the three and six months ended June 30, 2008 also include the operations of two Russian production companies, Costafilm and Soho Media, acquired in April 2008.

CTC Media's total operating revenues for the three months ended June 30, 2008 increased 54.1% to USD 172.8 million from USD 112.1 million for the three months ended June 30, 2007. The increase in revenues reflects the continued growth of the Russian television advertising market and higher advertising rates, as well as the impact of acquisitions, primarily of the DTV Group in the second quarter of 2008 and several regional stations acquired in the third and fourth quarters of 2007. Increases in the price of television advertising were driven in part by a decrease in the amount of advertising permitted to be broadcast under Russian law effective January 1, 2008. The company estimates that the appreciation of the Russian ruble against the US dollar resulted in an approximate 9.5% increase in total operating revenues when comparing the three-month periods.

CTC Media's organic operating revenues, which include combined operating revenues of CTC Network, Domashny Network, CTC Television Station Group and Domashny Television Station Group, increased 39.8% to USD 156.8 million in the first quarter 2008 from USD 112.1 million in the first quarter of 2007.

CTC Media’s non-organic revenues, which include combined operating revenues from the DTV Group, the CIS Group, and its Soho Media and Costafilm production companies, was USD 16.0 million in the second quarter of 2008. Out of these revenues, the DTV Group contributed USD 14.1 million and the Channel 31 Group contributed USD 1.7 million. Revenues generated by the production companies were eliminated in consolidation.

Consolidated total operating expenses in the second quarter of 2008 increased 53.7% and amounted to USD 102.7 million compared to USD 66.9 million in the second quarter of 2007. The main drivers were:

Direct operating expenses in the quarter increased from USD 4.6 million to USD 8.6 million primarily due to the acquisition of the DTV Group (USD 2.1 million) and increased transmission and maintenance costs at our Domashny and CTC owned-and-operated stations.

Selling, general and administrative expenses in the quarter increased from USD 17.0 million to USD 24.5 million primarily due to annual increases in salaries and benefits and increases in headcount, as well as the acquisitions of the DTV Group (USD 1.9 million), its interest in the Channel 31 Group (USD 1.4 million) and two production companies, Costafilm and Soho Media (USD 1.6 million).

Amortization of programming rights expense in the quarter increased 64.4% from USD 37.6 million to USD 61.8 million. The increase was primarily driven by:

•  higher programming costs at CTC and Domashny (particularly for foreign movies and Russian-produced series and shows);

•  the acquisition of the DTV Group (USD 4.1 million) and an interest in the Channel 31 Group (USD 1.3 million);

•  increased impairment charges (USD 4.0 million in the second quarter of 2008 up from USD 1.1 million in the same period last year), primarily due to the relative underperformance of a Russian-produced series, Heartbreakers, launched in the second quarter of 2008;

•  the change in programming rights amortization rates for Russian-produced series with twenty or more episodes.

Starting from the second quarter of 2008, CTC Media has changed its previous programming rights amortization policy for Russian-produced series with twenty or more episodes. The company's previous policy was to amortize 60% after the first run, 30% after the second run and 10% after the third run when the license provides for three or more runs. After introduction of the new programming rights amortization policy, series with twenty or more episodes are amortized 75% after the first run and 25% after the second run, which is reflective of the company's anticipated programming schedule. The effect of the change in amortization policy amounted to an additional USD 5.7 million of amortization of programming rights expense in the three months ended June 30, 2008, or 15.1% of the related expense increase in the quarter.

Amortization of sublicensing rights expense increased from USD 1.5 million to USD 4.4 million when comparing the three months ended June 30, 2007 and 2008, principally due to an increase in sales of Russian series in Ukraine.

Depreciation and amortization expense decreased from USD 6.1 million to USD 3.4 million when comparing the three months ended June 30, 2007 and 2008, principally due to a change in the way in which the company accounts for its broadcasting licenses. As of January 1, 2008, CTC Media no longer amortizes broadcasting licenses over a 5-year useful life but treats them as intangible assets with an indefinite life and tests them annually for impairment.

Consolidated OIBDA increased 42.8% to USD 73.4 million for the second quarter of 2008 compared to USD 51.4 million in the second quarter of 2007. The consolidated OIBDA margin for the quarter was 42.5% compared to 45.9% in the corresponding quarter of 2007. Organic OIBDA for the three months ended June 30, 2008 was USD 70.2 million (up 36.5% from the same period last year), corresponding to a 44.8% organic OIBDA margin.

Consolidated net income increased 59.1% to USD 48.8 million for the three months ended June 30, 2008 from USD 30.7 million for the three months ended June 30, 2007. Organic net income for the quarter was USD 48.3 million, up 57.4% from the same period last year.

Fully diluted income per share was USD 0.31 for the three months ended June 30, 2008, compared to USD 0.19 for the three months ended June 30, 2007.

CTC Media's total operating revenues for the six months ended June 30, 2008 increased 43.1% to USD 309.5 million from USD 216.3 million for the six months ended June 30, 2007. The increase in revenues reflects the continued growth of the Russian television advertising market resulting in higher advertising rates, and the impact of acquisitions, primarily of the DTV Group acquired in the second quarter of 2008, and several regional stations acquired in the third and fourth quarters of 2007. The company estimates that the appreciation of the Russian ruble against the US dollar resulted in an approximate 9.1% increase in total operating revenues when comparing the six-month periods.

CTC Media's organic operating revenues, which include the combined operating revenues of CTC Network, Domashny Network, CTC Television Station Group and Domashny Television Station Group, increased 35.4% to USD 292.9 million in the first six months of 2008 from USD 216.3 million in the first six months of 2007.

CTC Media's non-organic revenues, which include the combined operating revenues from the DTV Group, the CIS Group, and its Soho Media and Costafilm production companies, were USD 16.6 million in the first six months of 2008. Out of these revenues, the DTV Group contributed USD 14.1 million, and the Channel 31 Group contributed USD 2.4 million. Revenues generated by the production companies were eliminated in consolidation.

Consolidated total operating expenses for the six months ended June 30, 2008 increased 40.8% to USD 186.4 million from USD 132.4 million for the six months ended June 30, 2007. In absolute terms, total operating expenses went up primarily due to increased direct operating expenses mainly associated with transmission and maintenance; increased selling, general and administrative expenses primarily associated with the DTV Group and the CIS Group; and increased programming rights amortization expense, which was driven by higher programming costs, introduction of a new, more accelerated programming rights amortization policy for certain types of Russian-produced series starting in the second quarter of 2008, and increased impairment charges.

Impairment charges increased from USD 1.8 million to USD 9.1 million when comparing the six months ended June 30, 2007 and 2008. The increase in impairment charges was mainly due to the relative underperformance of two Russian series launched in the first quarter of 2008 and one Russian series launched in the second quarter of 2008.

Increase in total operating expenses was partially offset by a decrease in depreciation and amortization expense from USD 11.9 million in the first six months of 2007 to USD 5.6 million in the first six months of 2008, principally caused by a change in the way in which the company accounts for its broadcasting licenses starting January 1, 2008.

Consolidated OIBDA increased 34.4% to USD 128.7 million for the first six months of 2008 compared to USD 95.7 million for first six months of 2007. The consolidated OIBDA margin for the six month period was 41.6% compared to 44.3% in the same period last year. Organic OIBDA for the six months ended June 30, 2008, was USD 125.6 million (up 31.2% from the same period last year), corresponding to a 42.9% organic OIBDA margin.

Consolidated net income increased 53.9% to USD 90.5 million for the six months ended June 30, 2008 from USD 58.8 for the six months ended June 30, 2007. Organic net income for the quarter was USD 90.3 million, up 53.5% from the same period last year.

Fully diluted income per share was USD 0.57 for the six months ended June 30, 2008, compared to USD 0.37 for the six months ended June 30, 2007.

Guidance

For the full year ending December 31, 2008, the company currently expects to generate consolidated total operating revenues in the range of USD 650 to USD 700 million, with a consolidated OIBDA margin in the range of 42-46%. This updated guidance range includes expected revenues and OIBDA contribution from its CIS operations in Kazakhstan and Uzbekistan, the DTV Group and its production companies, all of which were acquired or launched earlier this year.

Organic Guidance

For the full year ending December 31, 2008, the company reconfirms its guidance for organic total operating revenues in the range of USD 600 to USD 650 million, with an organic OIBDA margin in the range of 45-48%. This guidance range does not include expected revenues and OIBDA contribution from its CIS operations in Kazakhstan and Uzbekistan, the DTV Group and its production companies.