OREANDA-NEWS. November 05, 2014. CTC Media, Inc. (“CTC Media” or “the Company”) (NASDAQ: CTCM), Russia’s leading independent media company, announced its unaudited consolidated financial results for the third quarter and nine months ended September 30, 2014.

Q3 2014 FINANCIAL HIGHLIGHTS

Total revenues up 3% year-on-year in ruble terms to USD158.6 million

Advertising revenues up 4% year-on-year in ruble terms

Combined Russian national inventory was fully sold-out for Q3

OIBDA up 9% year-on-year in ruble terms to USD 50.6 million, with an OIBDA margin of 31.9%

Fully diluted earnings per share of USD 0.20 (Q3 2013: USD0.30)

Net cash position of USD 149.0 million at the end of the period

Payment of cash dividends of USD 0.175 per share

Board of Directors has declared a cash dividend of USD 0.175 per share (or approximately USD27.3 million in the aggregate) to be paid on or about December 26, 2014 to shareholders of record as of December 1, 2014.

Yuliana Slashcheva, Chief Executive Officer of CTC Media, commented:

“I am pleased to report that CTC Media has delivered another set of strong operational results in Q3 2014.

Our Everest sales house successfully sold out the inventory of our primary channels, and our Russian TV advertising revenue continued to grow, with an increase of 4.3% in the third quarter YoY. We outperformed the Russian TV advertising market in both Q3 and the nine months ended September 30, 2014. However, our operating revenue grows more slowly due to weakening content sales in Ukraine.

We reconfirm our full year outlook for OIBDA margin at around 30%. Devaluation of the ruble, which lost 15% against the dollar during the third quarter, significantly affected our third-quarter performance. The ruble declined 17% year-on-year.

However, a comprehensive set of cost management initiatives undertaken by the management team is helping CTC Media to ensure efficient cost control. We expect that our full-year programming expenses will increase more slowly than our revenues. This will help us to keep high margins in extremely challenging macroeconomic conditions.

The core audience of our flagship CTC Channel are young adults aged between 25 and 35 who are responsible for their families and the success of their employers. This audience generates exceptional demand for news and accurate information about what is going on in the world and their country in times of political turbulence. As a result, we experienced strong pressure from news channels throughout the third quarter.

However, all new launches on CTC Channel enjoyed higher-than-average audience shares including “The 80s”, “Angelika” and “Family Business”.

There have been changes in the demand for content generated by the audience enjoying entertainment shows. The demand is shifting from humor and sitcoms to drama and happy-ending dramedy shows. We took this trend into consideration for content production, and CTC Media came up with a series of new projects in these genres that we are expecting to launch across our channels in the coming months.

The updated programming and content policy of Domashny is attracting significantly younger audiences to this channel. The share of women aged 50-59 in the audience of Domashny fell to 2% compared to 8% in the first quarter. Following this trend, we are evaluating whether to switch from women aged 25-59 to women aged 25-50, which is a more attractive demographic from an advertising standpoint, starting from 2016. We are also considering whether to increase our Domashny advertising prices faster than the market average starting from 2015, and we are consulting with our advertising partners on this matter. We are also evaluating a potential transformation of PERETZ, which took the hardest hit from the news channels.

(2) Net cash position is defined as cash, cash equivalents and short-term investments less interest bearing liabilities

СТС Love became a part of the TNS measurement panel in September and became a Top 20 TV Channel in its target audience with 0.8% share during the first month. Positive trends across CTC Media channels resulted in our September share of the all 10-45 audience reaching its highest level since January 2014.

Our transmedia business is growing fast. We signed a partnership agreement with a leading social network in Russia, Odnoklassniki, which helped us to increase traffic on all CTC Media resources and open up new monetization opportunities. We are preparing to launch seven large-scale transmedia projects in 2014 that we expect will generate 124 million rubles of revenue. I would like to highlight that one of them has been launched on CTC Love channel that has generated income not only from the sale of TV-advertising, but also in digital projects. Overall, CTC Media has consolidated its position as a technology leader on the market. The revenue of the transmedia unit increased by 55% on a year-over-year basis for the first nine months of 2014.
We see potential benefits in the proposed new structure of Video International ("Vi"), the leading TV advertising seller. To be co-owned by four TV holdings and the management team, Vi will consolidate a significant part of all TV advertising sales. We think this consolidation is a positive factor, as it will put advertising sellers in a stronger position overall, which is especially important given the slow down in the advertising market. CTC Media did not participate in this transaction because we believe our own Everest sales house generates sustainable shareholder value.

In Q3, our sales house has exceeded the average market growth rate of 3.5% (according to preliminary estimate), achieving Russian TV Ad revenue growth YoY totaling 4.3% YoY, notwithstanding our advertising inventory decreasing by 6% in the third quarter. In other words, the efficiency of Everest was around seven percentage points higher than the market average.
We will keep using the consulting services of Video International. We will also continue reviewing the opportunities of further cooperation with "New Vi" which could potentially increase value for our shareholders”.

Yuliana Slashcheva, Chief Executive Officer of CTC Media, also commented the amendments to the Russian law “On Mass Media”:

“A bill establishing a 20% cap on the foreign ownership of Russian mass media businesses was submitted to the State Duma at the end of the third quarter. This bill was approved by the State Duma and the Federation Council, signed by the President and enacted within less than a month.
The executive team of CTC Media is working closely on these matters with the State Duma, the Government of Russia and other industry participants.

At this time, we understand that the law may have significant implications for the ownership structure of our operating business by our U.S. incorporated parent company and its non-Russian stockholders. We are focused on analyzing and establishing the most effective response to these developments, and are therefore reviewing all of our options to protect the interests of our stockholders.

The Board of CTC Media has established an advisory committee consisting of non-executive directors, which is in the process of appointing financial and legal advisers, and evaluating the potential actions that the Company may take moving forward in order to comply with the amended law. These actions may include corporate restructuring, franchising and licensing structures, capital reorganization or divestments.

The law does not create direct implications for CTC media current operations”.