Q2 2015 Interim report January−June

Q2 2015 Interim report January−June

July 21, 2015
07.30 CEST

Record Q2 sales, digital acquisitions & ongoing transformation

Q2 2015 Highlights

  • Sales of SEK 4,155m (4,109), and operating income before non-recurring items of SEK 452m (473) including M&A transaction costs and adverse currency effects
  • Net income from continuing operations of SEK 360m (227) and basic earnings per share of SEK 4.98 (3.02)
  • CTC Media received USD 200m non-binding cash offer for 75% of business operations. MTG holding in CTC Media reclassified as ‘discontinued operation’ and MTG reports net income from discontinued operations of SEK -418m including SEK 416m impairment charge
  • Total net income of SEK -58m (307) and total basic earnings per share of SEK -1.30 (4.21)
  • Cash flow from continuing operations of SEK 373m (420), with net debt of SEK 913m (987) equivalent to 0.6x trailing 12 month recurring EBITDA
  • Strategic investments of approximately SEK 1.2bn after the end of the quarter in three digital businesses - Turtle Entertainment, Splay and Zoomin.TV

Financial Overview

(SEKm) 2015 Apr-Jun 2014 Apr-Jun 2015 Jan-Jun 2014 Jan-Jun 2014 Jan-Dec
Net sales 4,155 4,109 7,855 7,706 15,746
Growth at constant FX 0% 13% 1% 13% 11%
Organic growth at constant FX 0% 3% 0% 4% 4%
EBIT before non-recurring items 452 473 594 591 1,290
Margin before non-recurring items 10.9% 11.5% 7.6% 7.7% 8.1%
Non-recurring items (NRI)* - -155 77 -155 -155
Total EBIT 452 318 672 437 1,135
Net income, continuing operations 360 227 524 273 816
Basic earnings per share, continuing operations (SEK) 4.98 3.02 7.59 3.74 11.75
Net income, discontinued operations ** -418 80 -264 193 357
Total net income -58 307 260 466 1,172
Total basic earnings per share (SEK) -1.30 4.21 3.63 6.64 17.10
Net debt 913 987 913 987 362
Cash flow from operations, continuing operations 373 420 484 546 1,040

 * Comprising in 2015 the SEK 77m capital gain from the sale of Swedish cable TV company Sappa. Comprising in 2014 the SEK 159m non-cash net impairment charge related to MTG’s interest in the Ukrainian satellite pay-TV platform; SEK 70m of organisational restructuring charges and other costs; and the SEK 76m capital gain from the sale of Zitius in Sweden.** CTC Media has been reclassified from an ‘equity participation’ to a ‘discontinued operation’ as MTG’s shareholding in CTC Media is for sale. Comparable figures for prior periods of 2014 and 2015 have been provided accordingly on www.mtg.com.

President & CEO’s comments

Healthy underlying performanceSales and profits were up for our broadcasting businesses despite the ongoing adverse currency effects on our content costs. We increased our advertising market shares in almost all markets and grew our subscriber bases through Viaplay across the Nordic region and Trace in the international markets. Our operating profit before non-recurring items was stable when excluding M&A transaction costs of SEK 20m, and would have been up when excluding the negative currency effects.

The transformation continuesWe have taken a number of important steps during the quarter along our path of strategic transformation. Firstly, we are moving from a product to a country based organisation, in order to accelerate decision making and bring us even closer to our customers. Secondly, we are working to optimise our structure, in order to capitalise on the fast moving changes in consumer behaviour and offset the ongoing adverse currency effects. And, thirdly, we have announced that we have invested in three complementary digital businesses that give us global scale and confirm our position as a leading player in two very exciting verticals.

Update on RussiaAs announced, CTC Media has received a non-binding offer for the purchase of 75% of its business operations. The offer is now being evaluated by a special committee appointed by the CTC Media Board. If the transaction is consummated, CTC Media’s Board currently anticipates that the funds available pro rata to its public stockholders and MTG would represent a modest premium to the closing price on 2 July. We continue to explore a range of options regarding our own Russian operations in order to best protect shareholder value.

OutlookThe rate of decline in linear viewing in Scandinavia did slow in the quarter, while our audience shares and advertising prices have continued to rise in almost all markets. Our total digital sales grew by over 30% and we are now rolling out our new programmatic automated ad buying platform across our territories. Viaplay is set for further growth following new partnerships with the likes of Apple TV, Nextgentel and 3, and we have also now secured a number of long term multi-platform content deals for the likes of NHL ice hockey in the Nordics and Champions League football in the Baltics and Finland. Thanks to our healthy financial position and cash generative operating model, we will continue to expand our digital operations and consolidate our market positions, but also balance this with ongoing actions to mitigate the adverse currency effects that we continue to face.

Jørgen Madsen LindemannPresident & Chief Executive Officer“We have taken a number of important steps during the quarter along our path of strategic transformation. We have changed the shape of the organisation, expanded our exciting digital portfolio, and secured several key rights. The underlying business continues to perform well and we are taking actions to mitigate the ongoing FX headwinds.”   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 5065 3936UK: +44 (0) 20 3427 1916US: +1 646 254 3366

The access pin code for the call is 5983200. To listen to the conference call online and for further information, please visit www.mtg.com.

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Any questions?www.mtg.comFacebook: facebook.com/MTGABTwitter: @mtgabpress@mtg.com (or Per Lorentz +46 73 699 27 09)investors@mtg.com (or Stefan Lycke +46 73 699 27 14)

Stockholm, 21 July 2015Jørgen Madsen Lindemann, President & Chief Executive OfficerModern Times Group MTG ABSkeppsbron 18P.O. Box 2094SE-103 13 Stockholm, SwedenRegistration number: 556309-9158

MTG (Modern Times Group MTG AB (publ.)) is an international entertainment group. Our operations span six continents and include TV channels and platforms, online services, content production businesses and radio stations. We are also the largest shareholder in CTC Media, which is Russia’s leading independent media company. Our shares are listed on Nasdaq Stockholm (‘MTGA’ and ‘MTGB’).

The information in this announcement is that which MTG is required to disclose according to the Securities Market Act and/or the Financial Instruments Trading Act, and was released at 07:30 CET on 21 July 2015.

This report has not been reviewed by the Group’s auditors.

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