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CME plans to double revenue as ad sales, prices rise, CEO says

Central European Media Enterprises Ltd., owner of television networks in six east European countries, aims to double revenue within five years by tapping growth in advertising as post-communist economies burgeon.

„We are fortunate to be located in the region where advertising revenues are growing faster than anywhere else in the world,” Michael Garin, CEO of the company, known as CME, said in February 5 interview in his London office. The company, which is majority owned by cosmetics heir Ronald Lauder, has TV networks in the Czech Republic, Romania, Ukraine, Croatia, Slovenia and Slovakia and reaches 91 million viewers. Economies in those countries are growing at an annual rate of at least 4.5% and CME is raising prices and looking at broadcasting in other countries, such as Hungary and Bulgaria.

CME's revenue, which comes mainly from advertising, advanced 56% to $388.8 million in the first nine months of 2006. In the Czech Republic, the company's biggest market, sales rose 55% to $137 million. Garin said CME remains „comfortable” with its 2007 sales guidance of $230 million for the country. Full-year earnings are due March 1. Garin also said that the company aims to double earnings before interest, taxes, depreciation and amortization. „Advertising is growing in line with the growth of economies,” Garin said. „That's a more regular situation and that too will be the case of the Czech Republic as broadcasters catch up to what we consider a fair level of pricing.”

The company aims to increase its ownership stakes in countries such as Ukraine, while looking at acquisitions in Russia, Hungary, Poland, Bulgaria and the Balkans. „It's really a question of when they're ready to sell, we are ready to buy,” Garin said. „We are ready today, the question is when they're ready.” He would not say whether the company is in talks at present. Garin said the company would use cash for the expansion and is not planning to start paying out dividends. As „long as we can provide rapid growth, our investors are looking for us to deploy our capital in growing our businesses,” Garin said in the interview. The company, whose headquarters is in Bermuda, wants to focus on the Internet in coming years by developing portals, he said. Shares of CME have risen 31% over the past year and value the company at about 65 billion koruna ($3 billion). Of the 12 analysts that cover the company and are tracked by Bloomberg, nine recommend investors buy the stock. (Bloomberg)