Q3 2018 Interim report January−September

Stockholm
October 23, 2018
07.30 AM CEST

Record Q3 sales & increased profits

Stockholm
October 23, 2018
07.30 AM CEST
Q3 2018 highlights
  • Record Q3 sales of SEK 4,683m (4,280) with 3% organic growth
  • Operating income before IAC of SEK 328m (257) including transaction costs related to the proposed split of MTG of SEK 7m [1]
  • Total operating income of SEK 340m (257) including items affecting comparability of SEK 12m [2]
  • Total net income of SEK 192m (177) including net income from discontinued operations of SEK -2m (-11) and total basic earnings per share of SEK 2.32 (2.31)
  • Net debt of SEK 3,085m (3,309) equivalent to 1.6x trailing EBITDA before IAC

Financial overview

(SEKm) Q3 2018 Q3 2017 Nine months 2018 Nine months 2017 Full year 2017
Continuing operations
Net sales 4,683 4,280 14,367 12,230 17,537
Organic growth 3.2% 7.0% 7.1% 6.9% 7.7%
Acquisitions/divestments 1.0% 10.0% 6.7% 5.7% 8.3%
Changes in FX rates 5.3% 0.1% 3.6% 1.7% 1.0%
Change in reported net sales 9.4% 17.0% 17.5% 14.3% 16.9%
Operating income before IAC 328 257 1,004 785 1,264
Operating margin before IAC 7.0% 6.0% 7.0% 6.4% 7.2%
Items affecting comparability 12 - -18 -23 -340
Operating income 340 257 986 763 923
Net income 194 189 693 547 612
Basic earnings per share (SEK) 2.35 2.49 8.96 7.61 8.19
Cash flow from operations 251 273 1,028 772 1,311
Discontinued operations [3]
Net income -2 -11 -11 161 748
Total operations
Net income 192 177 682 708 1,360
Basic earnings per share (SEK) 2.32 2.31 8.80 9.37 18.73
Net debt 3,085 3,309 3,085 3,309 1,812

[1] Comprises costs relating to the proposed split of MTG and the previously announced merger agreement to combine MTG Nordics and TDC Group, which was terminated on 19 June 2018[2] Q3 2018 IAC primarily comprise a non-cash revaluation gain of SEK 172m relating to Turtle Entertainment and a non-cash cost of SEK 164m relating to Zoomin.TV asset write-downs. See page 25 for a comprehensive list of items affecting comparability[3] Comprises results of businesses in Tanzania in Q3 2018, and results of businesses in the Czech Republic and the Baltics in 2017. The full year 2017 results include a SEK 593m capital gain from the divestment of the Baltic operations

Alternative performance measures used in this report are explained and reconciled on pages 23-27

President & CEO’s comments

Profitable growthThis was another quarter of top and bottom line growth. Our continued organic sales growth was complemented by a 28% increase in operating profits, even when including SEK 7m of transaction costs related to the proposed split of MTG.

Solid performanceNordic Entertainment delivered its eighth consecutive quarter of higher sales and profits. The growth continues to be driven by our streaming services in general, and Viaplay in particular. Free-TV sales were down at constant FX but our Swedish Radio business again delivered double digit sales growth after the launch of the new radio licenses from August, and our Viafree streaming service continues to grow rapidly. Studios sales and profits were down but we have a healthy forward pipeline of contracted productions. Overall, we have continued to invest in original local dramas and premium sports, in order to drive up subscription and consumption levels further.

Nova Bulgaria continued to report double digit profitable growth, and we have now appealed the local competition authority ruling regarding the sale of Nova.

MTGx generated double digit organic sales growth, and we converted an EBIT loss last year into a profit this year following significant improvements at both InnoGames and ESL. This was the fifth consecutive quarter of EBITDA profits for MTGx. InnoGames delivered an exceptional quarter following a number of game updates and successful marketing campaigns. We are now ramping up the marketing of Warlords of Aternum, which has had a promising commercial launch.

Esports sales were up and losses were down. Healthy revenue growth in our owned and operated businesses was offset by lower work for hire volumes as we continue to strategically transform the business. We now expect esport sales to be down in Q4 before growing again in 2019, and we expect a significant improvement in the profitability of the esports operations.

Split set for Q1 2019Our former shareholder Kinnevik completed the distribution of all of its MTG shares in August, in order to facilitate the EU approval of the Tele2 / ComHem merger. Following this process, we have now continued our work towards the split of MTG and separate listing of NENT Group, including the appointment of three new NENT board members, securing a five year credit facility and increasing our ownership in ESL. Subject to shareholder approval, we intend to list NENT in March 2019. Jørgen Madsen LindemannPresident & Chief Executive Officer

“This was yet another quarter of profitable growth, and we are on track with the planned split. I would like to welcome Kinnevik’s shareholders as direct owners of MTG now.”

Shareholder information

2019 Annual General MeetingThe 2019 Annual General Meeting will be held on Tuesday 21 May 2019 in Stockholm. Shareholders wishing to have matters considered at the meeting should submit their proposals in writing to agm@mtg.com or to the Company Secretary, Modern Times Group MTG AB, Box 2094, SE-103 13 Stockholm, Sweden, at least seven weeks before the meeting in order for that such proposals may be included in the notices to the meeting. Further details of when and how to register will be published in advance of the meeting.

In accordance with the resolution of the 2018 Annual General Meeting, the then largest shareholder in MTG, Kinnevik AB, convened a Nomination Committee to prepare proposals for the 2019 Annual General Meeting. Due to the distribution by Kinnevik AB of its shareholding in MTG to its shareholders and the resignation by its representative from the Nomination Committee, the Nomination Committee currently consists of Joachim Spetz, appointed by Swedbank Robur Funds; John Hernander, appointed by Nordea Funds; and Jimmy Bengtsson, appointed by Skandia Liv. The three shareholders which have appointed representatives to the Nomination Committee hold approximately 21 percent of the total voting rights in MTG. The members of the Nomination Committee appointed Joachim Spetz as Committee Chairman at their first meeting.

Please see www.mtg.com/governance/#nomination-committee for information about the work of the Nomination Committee.

Financial calendar

Q4 and full year 2018 report 5 February 2019

Questions?press@mtg.com (or Tobias Gyhlénius, Head of Public Relations; +46 73 699 27 09) investors@mtg.com (or Stefan Lycke, Head of Investor Relations; +46 73 699 27 14)

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Conference callThe company will host a conference call today at 09.00 Stockholm local time, 08.00 London local time and 03.00 New York local time. To participate in the conference call, please dial:

Sweden: +46 (0)8 5033 6574
UK: +44 (0)330 336 9105
US: +1 323-794-2093

The access pin code for the call is 4428237. To listen to the conference call online and for further information, please visit www.mtg.com.

Modern Times Group MTG AB (Publ.) - Reg no: 556309-9158 – Phone +46 8 562 000 50 – mtg.com

MTG (Modern Times Group MTG AB (publ.)) is a leading international digital entertainment group and we are shaping the future of entertainment by connecting consumers with the content that they love in as many ways as possible. Our brands span TV, radio and next generation entertainment experiences in esports, digital video content and online gaming. Born in Sweden, our shares are listed on Nasdaq Stockholm (‘MTGA’ and ‘MTGB’). This information is information that MTG (Modern Times Group MTG AB (publ.)) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 07:30 CET on 23 October, 2018.

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