Q3 2013 Interim report January – September

Q3 2013 Interim report January – September

October 22, 2013
13.00 CEST
Investment plan on track with healthy sales growth

Q3 2013 Highlights

  • Net sales up 9% y-o-y (year-on-year) at constant FX & up 5% on an organic basis
  • Free-TV Scandinavia sales growing again at constant FX with rising investments
  • Pay-TV Nordic sales up 7% y-o-y at constant FX with an operating margin of 11.9%
  • Free-TV Emerging Markets sales up 21% at constant FX with ongoing investments
  • Continued growth in Pay-TV Emerging markets and profitability in line with expectations
  • Acquisition of Nice Entertainment Group – Nordic´s largest independent group of production companies – expected to close this month
  • Operating income (EBIT) of SEK 162m (288), excl. associated company income of SEK 127m (134)
  • Net income of SEK 196m (308) and a basic earnings per share of SEK 3.00 (4.65)
  • Cash flow from operations of SEK 210m (237) and net debt position of SEK 373m (634)

Financial Overview

(SEKm) 2013 Jul-Sep 2012 Jul-Sep 2013 Jan-Sep 2012 Jan-Sep 2012 Jan-Dec
Net sales 3,204 2,940 10,047 9,716 13,336
Growth at constant FX 9% -1% 5% 0% 1%
Organic growth at constant FX 5% 2% 4% 2% 2%
EBIT before associated company income 162 288 845 1,181 1,695
Margin before associated company income 5.0% 9.8% 8.4% 12.2% 12.7%
Associated company income * 127 134 476 467 429
Total EBIT 289 422 1,321 1,648 2,124
Total EBIT margin 9.0% 14.4% 13.1% 17.0% 15.9%
Net Income 196 308 907 1,216 1,594
Basic Earnings per Share (SEK) 3.00 4.65 12.72 17.68 22.93
Cash flow from operations 210 237 948 1,072 1,655

* Including MTG’s USD 20.5m Q4 2012 participation in USD 82.5m of non-recurring charges incurred by associated company CTC Media (‘CTC Media’) in Q3 2012, and USD 4.6m Q1 2012 participation in USD 89.5m of non-recurring charges incurred by CTC Media in Q4 2011.

Forward ExpectationsThe Group expects its Nordic pay-TV business revenues to grow at constant exchange rates in 2013, and to report an EBIT margin of between 11 and 12% for the full year 2013, and a higher margin in 2014. MTG’s exclusive coverage in Sweden of the February 2014 Sochi Winter Olympics will boost sales and adversely impact Q1 2014 profits for both the Nordic pay-TV and Scandinavian free-TV businesses.

The Group expects its Emerging Markets pay-TV business to achieve a better than breakeven full year 2013 EBIT result, with rising profitability levels in 2014.

President and CEO’s comments

Sales growth across the boardThe third quarter is the seasonally smallest advertising sales period but our sales growth has now improved for the fourth consecutive quarter. All five of our business segments reported local currency sales growth on a quarterly basis for the first time since Q1 2011.

Our Scandinavian free-TV operations are growing on a combined basis again and the Fall schedules have established further positive traction. Our free-TV media houses have continued to take advertising market share in almost all of our emerging market territories, but will now begin to face significantly tougher comps in markets that remain soft. Viaplay is rapidly growing its subscriber base in the Nordic region and our satellite business is generating higher ARPU levels, while our emerging market mini-pay HD channels are now even more broadly available. The pay-TV markets are becoming more and more competitive, but we have strong consumer offerings and have early mover advantage in the online space. Our MTG Studios content production and distribution business is also expanding quickly, and MTGx is providing the digital acceleration platform for the group.

Investing in momentumThe performance so far in 2013 clearly demonstrates that our investments in our three key areas – content, digital and geographical expansion - are having the desired effect and ensuring that our customer offerings are stronger than ever. As an entertainment group committed to shaping the future of entertainment, our primary objective is to create local, relevant and digital experiences that engage and excite consumers. We are therefore constantly adding new products such as new channels, more relevant content and innovative digital services, all of which we are making available on as many distribution platforms as possible. The upcoming launch of new free-TV channels in Norway and Tanzania, and the preparations we are now making for our exclusive coverage of the Sochi Winter Olympics in Sweden and the Baltics are clear evidence of this drive. We are also waiting to complete the acquisition of the Nordic´s region’s largest independent group of production companies - Nice Entertainment. This is a significant milestone for us and follows hot on the heels of the acquisitions of DRG and Novemberfilm. This is a key strategic focus area for us as we build MTG Studios into a scale industry player and story teller.

We will continue to invest in this momentum, and MTGx will provide the acceleration to ensure that our value for money products and services are available as simply and widely as possible. These investments do impact short-term profitability but are the building blocks of our future growth and cash generation.

Cash generative & asset lightWe continue to convert a high proportion of our earnings into cash flow due to our ever present focus on operational excellence and financial efficiency. We ended the quarter with a net debt to trailing twelve month EBITDA ratio of just 0.2 times, so we have the flexibility and firepower to continue to invest organically and through M&A in the future growth of the business while, at the same time, yielding healthy shareholder returns.

Jørgen Madsen LindemannPresident and Chief Executive Officer

“All five of our business segments are growing and we are continuing to invest as planned to ensure that this growth continues, and that our customer offerings are stronger than ever!”  

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Conference Call

The company will host a conference call today at 15.00 Stockholm local time, 14.00 London local time and 09.00 New York local time. To participate in the conference call, please dial:

Sweden:                  +46(0)8 5033 6538UK:                         +44(0)20 3427 1910US:                         +1646 254 3361

The access pin code for the call is 2199968. To listen to the conference call online and for further information please visit www.mtg.se

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For further information, please visit www.mtg.se, or contact:

Jørgen Madsen Lindemann, President & Chief Executive OfficerMathias Hermansson, Chief Financial OfficerTel:                      +46 (0) 8 562 000 50

Investors & AnalystsTel:                      +46 (0) 73 699 2714Email:                  investor.relations@mtg.se

JournalistsTel:                      +46 (0) 73 699 2709Email:                  press@mtg.se

   Stockholm, 22 October 2013

Jørgen Madsen Lindemann, President & Chief Executive Officer

Modern Times Group MTG ABSkeppsbron 18P.O. Box 2094SE-103 13 Stockholm, SwedenRegistration number: 556309-9158

Modern Times Group (MTG) is an international entertainment group with operations that span four continents and include free-TV, pay-TV, radio and content production businesses. MTG’s Viasat Broadcasting operates free-TV and pay-TV channels, which are available on Viasat’s own satellite platforms and third party networks, and also distributes TV content over the internet. MTG is also the largest shareholder in CTC Media, which is Russia’s leading independent television broadcaster.

Modern Times Group is a growth company and generated net sales of SEK 13.3 billion in 2012. MTG’s Class A and B shares are listed on Nasdaq OMX Stockholm’s Large Cap index under the symbols ‘MTGA’ and ‘MTGB’.

The information in this Full Year report is that which Modern Times Group MTG AB is required to disclose under the Securities Market Act and/or the Financial Instruments Trading Act. It was released for publication at 13.00 CET on 22 October 2013.

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