Q3 2016 Interim Report January−September

Q3 2016 Interim Report January−September

October 20, 2016
07.30 CEST
Record Q3 sales Highest organic growth in 5 years Continued digital innovation Maintained outlook for the full year

Q3 2016 Highlights

  • Record Q3 sales of SEK 4,126m (3,819) with 7% organic growth
  • Operating income before items affecting comparability of SEK 162m (240) reflecting investments in content, expansion of MTGx, adverse FX effects and disposal of profitable businesses
  • Operating income of SEK 162m (-412) including IAC amounting to SEK 0m (-652)
  • Reiteration of full year 2016 outlook for accelerated sales growth and higher profits
  • Total net income of SEK 93m (-384) and total basic earnings per share of SEK 1.30 (-5.71), including net income from discontinued operations of SEK 0m (-18)
  • Cash flow from continuing operations of SEK 172m (278)
  • Net debt of SEK 2,100m (2,134) equivalent to 1.4x trailing 12 month EBITDA before IAC

Financial Overview 

(SEKm) Q3 2016 Q3 2015 Nine months 2016 Nine months 2015 Full year 2015
Continuing operations
Net sales 4,126 3,819 12,280 11,674 16,218
Change in reported net sales 8.0% 4.1% 5.2% 2.6% 3.0%
   Organic growth 7.4% 2.6% 4.3% 1.0% 0.7%
   Acquisitions/divestments 0.5% 2.4% 2.0% 1.0% 1.9%
   Changes in FX rates 0.1% -0.9% -1.1% 0.6% 0.4%
Operating income before items affecting comparability 162 240 793 835 1,268
Margin before items affecting comparability 3.9% 6.3% 6.5% 7.2% 7.8%
Items affecting comparability (IAC) - -652 - -575 -512
Operating income 162 -412 793 260 756
Net income 93 -365 541 158 533
Basic earnings per share (SEK) 1.30 -5.44 7.22 2.15 7.45
Cash flow from operations 172 278 556 762 1,051
Discontinued operations
Net income (1) - -18 -1,072 -282 -282
Total operations
Net income 93 -384 -531 -124 251
Basic earnings per share (SEK) 1.30 -5.71 -8.86 -2.08 3.22
Net debt 2,100 2,134 2,100 2,134 2,124

(1) Comprises MTG’s interest in CTC Media, Inc, which has been divested and gave rise to a non-cash charge due to the reclassification of accumulated currency translation differences.  

Alternative performance measures used in this report are explained and reconciled on pages 23-26.

President & CEO’s commentsRecord Q3 sales and 7% organic growth, the highest since Q2 2011, indicate the benefits and potential of the investments that we have made in our products over the past year. They are more relevant, more available, more popular and more valued than ever before.

Our strongest ever content offering boosted viewing levels, advertising market shares, subscriber pricing and intake, and accelerated revenues. We are also premiering a number of new original dramas on Viaplay and have a pipeline of exciting new projects to come, a number of which are being produced by our own in-house studios.

Nordic Entertainment revenues were up 11%, which is the highest growth rate since Q4 2010. The investments in content, including the Olympics in Sweden, as well as the adverse currency effects, did impact profitability in the quarter as expected, but are also the foundation for profitable growth moving forward.

The international entertainment business continued to perform well on an underlying basis. Organic sales were up 8%, with a margin of 6%. Both the Czech Republic and Bulgaria delivered double digit growth and higher profits.

Our MTG Studios profits were up 68% with an 8% margin, and we have continued to invest in the expansion of MTGx and our esports businesses in particular.

As a result, we are maintaining our guidance for accelerated sales growth and higher profits for the full year, which implies a strong fourth quarter performance.

Our announcement last week of the acquisition of 35% of InnoGames, a well-established online gaming company, completes the circle for us by creating a third digital vertical, which fits perfectly with our other gaming related digital businesses and communities. This is yet another important step in our strategic transformation from a traditional broadcaster into a leading digital entertainment company. We are leading the way by embracing changing consumer trends and taking the initiative. Linear viewing has continued to fall, but on demand streaming services like Viaplay and Viafree, as well as esports and MPNs, are attracting more and more viewers and customers.

Businesses like InnoGames, ESL, Splay, Nice and Zoomin are also all about us generating IP – about owning content that we can monetise on our own platforms and through 3rd party distributors around the world.

Video consumption is shifting online, on mobile and on demand, and we have a clear and focused strategy to capitalise on this global change. We therefore continue to actively review our portfolio of operations to ensure that we concentrate our resources on those products and businesses that offer the greatest potential for the future. Financially, we are in good shape with considerable operating leverage as a result of the cost transformation that we have made.

Jørgen Madsen LindemannPresident & Chief Executive Officer               

“We are on track with our strategic transformation and leading the way in capitalising on changes in consumer behaviour. We are investing in the products and businesses that will drive future growth and profits.” 

Financial calendarMTG’s financial results for the fourth quarter and full year 2016 will be published on 2 February 2017.

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 5664 2793UK:               +44 (0) 20 3043 2025US:               +1 719 325 4746

The access pin code for the call is 3363971. To listen to the conference call online and for further information, please visit www.mtg.com.

Any questions?mtg.comfacebook.com/MTGAB@mtgabpress@mtg.com (or Tobias Gyhlenius +46 73 699 27 09)investors@mtg.com (or Stefan Lycke +46 73 699 27 14)

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 popular entertainment brands span Content Production, TV, Radio and esports, and are available around the world. Born in Sweden, our shares are listed on Nasdaq Stockholm (‘MTGA’ and ‘MTGB’). This information has been published in accordance with the EU Market Abuse Regulation and/or the Securities Markets Act or the Financial Instruments Trading Act. The information was submitted for publication, through the agency of the contact person set out above, at 07.30 CET on 20 October 2016.

Stockholm 20 October 2016

Jørgen Madsen Lindemann, President & Chief Executive Officer

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

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