Advertisement

Darkening ad outlook, rising costs weigh on Italy's MFE

By Elvira Pollina

MILAN (Reuters) - Italy's top commercial broadcaster MediaForEurope (MFE) on Wednesday posted a sharp profit drop, painting an uncertain picture for its ad-led business on the back of slowing economic growth and rising inflation this year.

Owned by the family of former Italian Prime Minister Silvio Berlusconi and previously known as Mediaset, MFE reported a 44% fall in first-half group's operating profit to 112 million euros.

Advertising sales in its core domestic market were broadly flat in the first half at 976.4 million euros, suggesting a deterioration after the post-pandemic rebound.

"Results were weak as expected, showing the first signs of the ongoing macro slowdown after a resilient first quarter," Intesa Sanpaolo analyst Antonella Frongillo noted in a research report.

Shares in the Milan-listed company fell as much as 7.7% on Wednesday, hit by the darker advertising outlook. The stock has lost two-thirds of its value this year.

"Market deterioration is something that each country is experiencing in Europe," said Matteo Cardani, managing director at the company's advertising unit Publitalia.

MFE owns TV operations in Spain and holds nearly a quarter of German media company Prosiebensat.1..

It is pursuing a strategy of cross-border expansion to tackle sluggish growth at home and increasing competition from global streaming platforms such as Netflix.

COSTS RISE

Chief Financial Officer Marco Giordani told analysts the company will stick to its 1.8 billion euro costs guidance for its Italian operations in the full year after a 10% spike in the first half, partly linked to rising energy costs as well as one-off items.

The executive pledged to adjust costs as much as possible in case of a deterioration of the advertising trend in its main market. MFE now targets a 2% drop in the advertising sales in Italy for the whole of 2022.

He declined to comment on reports about a joint cash bid with French billionaire Xavier Niel for a controlling stake in Paris-listed TV company M6.

"We will be on any dossier helping us to scale up the size of our business, not only in the countries, like Italy and Spain, where we already operate. All opportunities will be evaluated," he said.

(Reporting by Elvira Pollina, additional reporting by Federico Maccioni; editing by Agnieszka Flak and Keith Weir)