By Elvira Pollina
MILAN (Reuters) -Italy's MediaForEurope (MFE), which is seeking to establish itself as a counterweight to U.S. streaming giants, confirmed its 2022 guidance despite the impact of higher costs from content such as sports rights on its first quarter profit.
The TV group, controlled by the family of former Italian Prime Minister Silvio Berlusconi, still expects "positive economic results and a positive free cash flow" despite risks posed the Ukraine war and inflationary pressures.
The country's top commercial broadcaster expects advertising revenues in Italy, its main market, to rise 1% this year and will have costs of 1.8 billion euros ($1.9 billion), Chief Financial Officer Marco Giordani said in a post-results call.
No clients had cancelled any of their planned campaigns, said Matteo Cardani head of the company's Italian advertising operations.
Previously known as Mediaset, MFE makes the bulk of its turnover in Italy by selling advertising space on its free-to-air channels such as Canale 5. It is facing stiffer competition from online giants and streaming service platforms.
As part a European expansion strategy seen as its response to such challenges, MFE has built a stake of more than 25% in German media group ProSiebenSat.1.
The group also expects later this year to launch a bid to buy the stake it does not already own in its Spanish subsidiary Mediaset Espana.
PROFIT FALLS
In the first quarter it reported gross domestic advertising sales of 460.9 million euros, versus 452 million euros the year before.
"We think that management's guidance could still be realistic, assuming a worsening of the advertising trend in the next quarters and the phasing of operating costs," Intesa Sanpaolo (BIT:ISP) analysts wrote.
Their counterparts at JP Morgan have a more cautious stance on the company's advertising trend in its domestic market as they see a full year decline of 1%.
Giordani said that in a scenario of a weaker revenue trend in its key domestic market, MFE would be able to reduce its cost base by up to 3% in Italy.
Listed in Milan but registered in the Netherlands, MFE posted a first-quarter group operating profit of 15.3 million euros compared with 67.9 million euros in the same period last year.
Total costs rose to 639 million euros from 566.3 million.
MFE A and B shares were down 0.3% and 1% by 1055 GMT after they dropped as much as 1.9% and 4.2%, respectively. ($1 = 0.9355 euros)