Q3 2017 Interim report January-September

Q3 2017 Interim report January-September

October 19, 2017
07.30 CEST
Organic sales up 7%, profits up 83%, continued digital investments

Q3 2017 Highlights

  • Sales of SEK 4,280m (3,657) with 7% organic growth
  • Operating income up 83% to SEK 257m (141)
  • Net income from continuing operations of SEK 189m (83) and basic earnings per share of SEK 2.49 (1.17)
  • Total net income of SEK 177m (93) including net income from discontinued operations of SEK -11m (10), and total basic earnings per share of SEK 2.31 (1.30)
  • Net debt of SEK 3,309m (2,100) equivalent to 2.2x trailing 12 month EBITDA before IAC
(SEKm) Q3 2017 Q3 2016 Nine months 2017 Nine months 2016 Full year 2016
Continuing operations
Net sales 4,280 3,657 12,230 10,702 14,999
Organic growth 7.0% 7.2% 6.9% 4.4% 5.8%
Acquisitions/divestments 10.0% 0.8% 5.7% 2.5% 1.4%
Changes in FX rates 0.1% 0.0% 1.7% -1.4% -0.2%
Change in reported net sales 17.0% 8.0% 14.3% 5.5% 7.0%
Operating income before IAC 257 141 785 643 1,060
Operating margin before IAC 6.0% 3.8% 6.4% 6.0% 7.1%
Items affecting comparability - - -23 - -
Operating income 257 141 763 643 1,060
Net income 189 83 547 438 744
Basic earnings per share (SEK) 2.49 1.17 7.61 6.43 10.99
Cash flow from operations 273 161 772 449 674
Discontinued operations
Net income[1] -11 10 161 -969 -853
Total operations
Net income 177 93 708 -531 -109
Basic earnings per share (SEK) 2.31 1.30 9.37 -8.86 -3.19
Net debt 3,309 2,100 3,309 2,100 2,186

[1] Discontinued operations comprise MTG’s businesses in the Czech Republic, the Baltics, Africa (excluding Trace) and, for 2016, MTG’s interest in CTC Media, Inc.

The figures for continuing operations have been restated - please see page 10 for further information. Alternative performance measures used in this report are explained and reconciled on pages 22-25.

President & CEO’s comments7% organic sales growth for continuing operations We have now delivered a fifth consecutive quarter of more than 5% organic sales growth. Our 7% organic sales growth in Q3 was driven by higher sales for all four of our business segments, while our 17% total reported growth included the full contribution from InnoGames. The organic sales development reflected 39% growth for the MTGx businesses, including 49% organic esports sales growth, and double digit percentage point organic growth for both the International Entertainment and Studios operations. Nordic Entertainment generated 3% organic growth against tough comparisons, as we had exclusive coverage of the Rio Olympics and the Ice Hockey World Cup last year in Sweden, but we continued to benefit from higher advertising and subscription prices with further usage and revenue expansion for both Viaplay and Viafree.

83% profit growth for continuing operationsNordic Entertainment, International Entertainment and MTG Studios all reported higher profits and margins. The contribution from InnoGames ensured that MTGx as a whole recorded lower losses on a sequential and year on year basis, while losses for MTGx’s esports operations did increase as we further scaled our market presence. We are investing in new products because of the exponential growth in the viewing numbers for each esports event, and publishers’ greater than ever focus on esports to drive community engagement. This is attracting more and more interest but the high margin sponsorship and distribution sales have been slower to materialise than anticipated.

Our objective remains to deliver profitable full year growth for the Group’s continuing operations, as well as for the Nordic Entertainment segment. Following the investments that we have made, we have adjusted our expectations for MTGx’s full year results. It remains our ambition to deliver a first quarterly profit for MTGx in the fourth quarter of this year, but at a lower level than previously anticipated. This excludes the potential non-cash write-down of up to SEK 35m described in the MTGx segmental review on page 8 of this report.

The transformation continuesWe completed the acquisition of Kongregate, our second gaming company, during the quarter, and have completed the sale of our Baltic operations after the end of the quarter. This active portfolio management and focused capital allocation is key to our transformation, which is all about capitalising on the shift in consumer video consumption to on demand and mobile entertainment products like Viaplay, Viafree, Splay, ESL and InnoGames.

We have added more sports content to our streaming and traditional products in the Nordics, and premiered a number of original scripted productions that are not only attracting large local audiences, but also ever increasing interest from the international markets. We see continuing high demand for both our TV and radio products, which provide great value for money, and we are constantly looking at ways to enhance our on and offline offerings. Our integrated entertainment offering is now better positioned than ever in markets that are at the very forefront of the industry’s transformation.

Jørgen Madsen LindemannPresident & Chief Executive Officer 

“7% organic sales growth and 83% profit growth. Our offering is better positioned than ever in markets that are at the very forefront of the industry’s transformation.”              

Financial calendar

Capital Markets Seminar   29 November
Q4 and full year 2017 report         1 February

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) Download high-resolution photos: Flickr Follow us: mtg.com / Facebook / Twitter / LinkedIn / Instagram / YouTube 

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 3942
UK:   +44 (0) 330 336 9411
US: +1 719 457 1036

The access pin code for the call is 7485842. 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 +46 562 000 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 networks 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 19 October, 2017. 

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