MILAN (Reuters) – Italy’s largest commercial broadcaster Mediaset, which is controlled by former Prime Minister Silvio Berlusconi, posted its first ever annual net loss on Tuesday as companies cut advertising spending because of an economic downturn.
Mediaset proposed paying no dividend and said the drop in advertising sales in the first months of 2013 was in line with the last quarter of 2012. In January, Italian advertising sales fell 14.5 percent.
Writedowns on sport rights and lay-off costs drove Mediaset into a 2012 net loss of 287 million euros ($369 million), against a profit of 225 million euros in 2011. Total revenues fell 12.5 percent to 3.72 billion euros due to the economic crisis.
Although it was not possible to make a prediction for the year, Mediaset said clients in its two main Italian and Spanish markets were anticipating a possible stabilization of the advertising market in the second half of the year.
“We have had very strong demand, at the higher level of our inventory, for the two central weeks (of April)… it seems that something is changing,” Luigi Colombo, head of the group’s Italian advertising arm Publitalia said in a conference call.
However Italy’s uncertain political situation could still weigh because advertisers postpone spending decisions after last month’s inconclusive election results.
“Uncertainty about the new government and the possibility that new elections could be held is reducing the confidence of the advertising market. We would like to have a government as soon as possible,” said CFO Marco Giordani during the call.
To face the prolonged crisis, Mediaset is undergoing cost-cutting for 450 million euros by 2014.
The focus on cost cuts generated a cash flow of 287 million euros in 2012, which helped it cut net debt to 1.713 billion euros at the end of 2012 from 1.891 billion euros a year before.
Mediaset confirmed the cost cutting objective in spite of beating its target last year, when it achieved cash savings in Italy of 307.2 million euros, against the targeted 250 million euros.
Shares in Mediaset ended broadly flat at 1.55 euros on Tuesday before the release of the results, which came in slightly short of analyst expectations.
“Excluding one-off charges the results are slightly below expectations. In addition the weakness of the advertising market was confirmed in the first quarter,” an analyst said.
($1 = 0.7777 euros)
(Reporting By Danilo Masoni and Claudia Cristoferi- editing by Andrew Hay)