Q4 2017 Full year report January-December

Record sales following 10% organic growth & profits up 14%

Q4 2017 highlights

  • Sales of SEK 5,307m (4,297) with 10% organic growth
  • Operating income before IAC of SEK 478m (418) including transaction costs of SEK 43m (21)
  • Total operating income of SEK 161m (418) including SEK -318m (0) of items affecting comparability primarily relating to the impairment of Zoomin.TV and revaluation of option and earn-out liabilities
  • MTGx reported its first quarterly profit as well as positive EBITDA for the full year
  • Total net income of SEK 652m (422) including net income from discontinued operations of SEK 587m (116) and total basic earnings per share of SEK 9.36 (5.67)
  • MTG today announced an agreement to combine Nordic Entertainment and MTG Studios with TDC Group. Please read all about it at www.mtg.com
  • Board of Directors to propose a dividend of SEK 12.50 (12.00) per share, representing pay-out ratio of 95% (93) of net income from continuing operations before IAC

Financial overview

(SEKm) Q4 2017 Q4 2016 Full year 2017 Full year 2016
Continuing operations 
Net sales 5,307 4,297 17,537 14,999
Organic growth 9.7% 9.3% 7.7% 5.8%
Acquisitions/divestments 14.7% -1.4% 8.3% 1.4%
Changes in FX rates -0.9% 3.0% 1.0% -0.2%
Change in reported net sales 23.5% 10.9% 16.9% 7.0%
Operating income before IAC 478 418 1,264 1,060
Operating margin before IAC 9.0% 9.7% 7.2% 7.1%
Items affecting comparability -318 - -340 -
Operating income 161 418 923 1,060
Net income 65 306 612 744
Basic earnings per share (SEK) 0.57 4.56 8.19 10.99
Cash flow from operations 539 225 1,311 674
Discontinued operations
Net income [1] 587 116 748 -853
Total operations
Net income 652 422 1,360 -109
Basic earnings per share (SEK) 9.36 5.67 18.73 -3.19
Net debt 1,812 2,186 1,812 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. Q4 2017 includes a capital gain amounting to SEK 593m from the divestment of the Baltic operations.

Alternative performance measures used in this report are explained and reconciled on pages 22-25.

President & CEO’s comments

2017 was the best year yet for MTG
Our high performance level in the first three quarters of the year continued into Q4. Organic sales were up 8% for the year and 10% in Q4, which again demonstrates that our products and services are more relevant and more popular than ever. Our operating income was up 19% for the year and 14% in Q4, despite the continued content and digital investments that we are making and the additional SEK 103m of M&A costs and write-downs we made in the quarter. These results have been made possible by a clear strategy and an empowered culture, which have also been reflected in a 33% total shareholder return over the year.

Our Nordic and International Entertainment businesses were up against tough comparisons from last year but both reported higher sales and profits, while MTGx delivered 71% organic sales growth and its first ever quarterly operating profit. This is a major milestone for MTGx, which also was EBITDA profitable for the whole year.

MTG’s transformation takes a major leap forward
We have been strategically transforming MTG from a traditional broadcaster into a global digital entertainer for more than 3 years now. This has included significant organic investments, as well as very active portfolio management. 2017 was no exception as we acquired stakes in InnoGames and Kongregate to form our third digital vertical, and disposed of our Czech and Baltic businesses.

The pace of transformation has now accelerated into 2018 with the disposal of Trace and the announcement today of the merger of our Nordic businesses (Nordic Entertainment + MTG Studios) with TDC Group. Strategic partnerships have always been key for us and this combination creates a scale player ready to take the next step in shaping the future of Nordic entertainment with best-in-class integrated offerings. Please read all about it at www.mtg.com.

The new MTG will be a pure play digital entertainment company. Our key focus areas today are esports, online gaming and digital video content, but we also have a number of other media holdings. We will continue to buy and build a portfolio of digital operations, and will be even more agile and flexible when it comes to investment horizons, structures, sizes and realisations. The new MTG will be well funded, and we will also review our current organisation to make sure that we are right sized and skilled for what lies ahead.

Jørgen Madsen Lindeman
President & Chief Executive Officer  
 
2017 was a great year for MTG with 8% organic sales growth, 19% profit growth and a 33% shareholder return. We are now taking the next step by splitting the company to create a convergent Nordic Champion and a pure play Digital Entertainer.                    

2018 Annual General Meeting
The 2018 Annual General Meeting has previously been communicated to be held on 22 May 2018 in Stockholm. However, due to the proposed transaction with TDC Group, it is currently not possible to decide a date for the AGM. The date for the AGM will be communicated as soon as possible and is expected to take place in the second quarter of 2018. 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, not later than seven weeks before the Meeting, in order 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.

The Board of Directors will propose the payment of an annual ordinary cash dividend of SEK 12.50 (12.00) per share to the Annual General Meeting of shareholders. The total proposed ordinary cash dividend payment would therefore amount to approximately SEK 837m (800), based on the maximum potential number of outstanding ordinary shares. The Board of Directors will propose that the remainder of the Group’s retained earnings for the year ended 31 December 2017, to the extent not used through the distribution of the subsidiary MTG Nordics A/S, be carried forward into the accounts for 2018.

Financial calendar

Q1 results announcement 23 April
Q2 results announcement
18 July

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

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Conference call
MTG will co-host a conference call with TDC Group today at 09.00 Stockholm local time, 08.00 London local time and 03.00 New York local time. The conference call will present the proposed combination of MTG Nordics and TDC Group, and will include a Q&A session.

To listen to the conference call online, please visit the live webcast.

To ask questions during the Q&A session, please register here to receive personal dial-in details.

To ensure that you are connected to the conference call, please register your attendance a few minutes before the start of the call. For further information, please visit www.mtg.com.

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About Us

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’).

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