Q2 2017 Interim report April−June
Sales up, profits up, transformation accelerated
Q2 2017 Highlights
- Sales of SEK 4,246m (3,718) with 5% organic growth
- Operating income up 9% to SEK 391m (360) before SEK -23m (0) of items affecting comparability
- Total operating income of SEK 369m (360)
- Net income from continuing operations of SEK 275m (244) and basic earnings per share of SEK 3.90 (3.61)
- Total net income of SEK 413m (-674) including net income from discontinued operations of SEK 138m (-918), and total basic earnings per share of SEK 5.62 (-10.70)
- Net debt of SEK 2,212m (1,796) equivalent to 1.7 trailing 12 month EBITDA before IAC
Financial Overview
| (SEKm) | Q2 2017 | Q2 2016 | H1 2017 | H1 2016 | Full year 2016 |
| Continuing operations | |||||
| Net sales | 4,246 | 3,718 | 7,951 | 7,045 | 14,999 |
| Organic growth | 5.0% | 2.5% | 6.8% | 3.0% | 5.8% |
| Acquisitions/divestments | 6.4% | 4.4% | 3.6% | 3.3% | 0.4% |
| Changes in FX rates | 2.8% | -2.1% | 2.6% | -2.0% | -0.2% |
| Change in reported net sales | 14.2% | 4.8% | 12.9% | 4.3% | 7.0% |
| Operating income before IAC | 391 | 360 | 528 | 502 | 1,060 |
| Operating margin before IAC | 9.2% | 9.7% | 6.6% | 7.1% | 7.1% |
| Items affecting comparability | -23 | - | -23 | - | - |
| Operating income | 369 | 360 | 506 | 502 | 1,060 |
| Net income | 275 | 244 | 359 | 355 | 744 |
| Basic earnings per share (SEK) | 3.90 | 3.61 | 5.12 | 5.26 | 10.99 |
| Cash flow from operations | 355 | 222 | 499 | 288 | 674 |
| Discontinued operations | |||||
| Net income[1] | 138 | -918 | 172 | -979 | -853 |
| Total operations | |||||
| Net income | 413 | -674 | 531 | -624 | -109 |
| Basic earnings per share (SEK) | 5.62 | -10.70 | 7.06 | -10.16 | -3.19 |
| Net debt | 2,212 | 1,796 | 2,212 | 1,796 | 2,186 |
[1] Discontinued operations consist of 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 11 for further information. Alternative performance measures used in this report are explained and reconciled on pages 21-24.
President & CEO’s comments
5% organic sales growth for continuing operations
This was the fourth consecutive quarter of at least 5% organic sales growth, and the first without the discontinued Czech, Baltic and African businesses. The 14% reported growth for our continuing operations also included two months of InnoGames sales after we increased our shareholding to 51% from May. Our organic sales growth was driven by another stand-out performance by our Nordic Entertainment business – up 8% - with higher advertising and subscription prices, the further development of both Viaplay and Viafree, and the positive impact of partnership agreements with both content owners and distributors. We expect more than 40% organic esports sales growth in the second half of the year, given the significant weighting of the esports events calendar to the coming six month period and the signing of new commercial agreements. MTGx’s organic growth in Q2 reflected the different events calendar this year.
9% profit growth for continuing operations
The increase in profits was primarily driven by healthy incremental margins for our Nordic business – profits up 15% - and the positive contribution from InnoGames. Our objective is to deliver profitable full year growth for the Nordic Entertainment segment and for the Group’s continuing operations, and we now expect to deliver a first quarterly profit for MTGx in the fourth quarter of this year.
The transformation continues
The shift in consumer video consumption towards on demand and online entertainment products, such as streaming services, esports and gaming, has continued at a rapid pace. We remain very well positioned to benefit from this trend to digital and mobile consumption with our Nordic streaming services, such as Viaplay and Viafree, and our global esports and gaming operations, such as Turtle and InnoGames. At the same time, our linear TV and radio products continue to offer very attractive returns on investment for advertisers, and the unique consumer content offering provided by our linear pay-TV channels is more broadly available than ever. We are one of the few entertainment companies to have integrated on and offline, linear and on demand, fixed and mobile products.
We have also continued to execute on our strategic transformation by completing the divestment of our Czech operation, stepping up our shareholding in InnoGames, and announcing the acquisition of Kongregate, which will give even greater scale to our high growth and profitable online gaming vertical. We have also continued to invest into original drama production, key sports rights such as the Champions League and Ice Hockey World Championship, new virtual reality app Viareal, and as a founding shareholder in the World Boxing Super Series. In addition, our capital allocation included paying out our highest ever cash dividend in Q2. Our markets are at the forefront of the industry transformation, and our products are better positioned than ever to shape the future of entertainment.
Jørgen Madsen Lindemann
President & Chief Executive Officer
“Another quarter of organic sales growth and higher profits. We are delivering on our strategic transformation and our products are better positioned than ever to benefit from the changes in consumer behaviour.”
2017 Financial calendar
Q3 2017 interim report 19 October
Questions?
press@mtg.com (or Jessica Sjöberg, VP Corporate Communications; +46 76 494 09 13)
investors@mtg.com (or Stefan Lycke, Head of Investor Relations; +46 73 699 27 14)
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Conference call
The 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 1170917. 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 18 July, 2017.
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