Q2 2018 Interim report January−June
Record Q2 sales, 9% organic growth & increased profits
Q2 2018 highlights
- Record Q2 sales of SEK 5,010m (4,246) with 9% organic growth
- Operating income before IAC of SEK 439m (391) including transaction costs of SEK 32m[1]
- Total operating income of SEK 426m (369) including SEK -13m (-23) of items affecting comparability
- Total net income of SEK 348m (413) including net income from discontinued operations of SEK -5m (138) and total basic earnings per share of SEK 4.83 (5.62)
- Net debt of SEK 2,287m (2,212) equivalent to 1.3x trailing EBITDA before IAC
Financial overview
| (SEKm) | Q2 2018 | Q2 2017 | H1 2018 | H1 2017 | Full year 2017 |
| Continuing operations | |||||
| Net sales | 5,010 | 4,246 | 9,684 | 7,951 | 17,537 |
| Organic growth | 9.3% | 5.0% | 9.2% | 6.8% | 7.7% |
| Acquisitions/divestments | 5.1% | 6.4% | 9.9% | 3.6% | 8.3% |
| Changes in FX rates | 3.6% | 2.8% | 2.7% | 2.6% | 1.0% |
| Change in reported net sales | 18.0% | 14.2% | 21.8% | 12.9% | 16.9% |
| Operating income before IAC | 439 | 391 | 675 | 528 | 1,264 |
| Operating margin before IAC | 8.8% | 9.2% | 7.0% | 6.6% | 7.2% |
| Items affecting comparability | -13 | -23 | -30 | -23 | -340 |
| Operating income | 426 | 369 | 645 | 506 | 923 |
| Net income | 353 | 275 | 498 | 359 | 612 |
| Basic earnings per share (SEK) | 4.90 | 3.90 | 6.59 | 5.12 | 8.19 |
| Cash flow from operations | 458 | 355 | 778 | 499 | 1,311 |
| Discontinued operations [2] | |||||
| Net income | -5 | 138 | -9 | 172 | 748 |
| Total operations | |||||
| Net income | 348 | 413 | 490 | 531 | 1,360 |
| Basic earnings per share (SEK) | 4.83 | 5.62 | 6.45 | 7.06 | 18.73 |
| Net debt | 2,287 | 2,212 | 2,287 | 2,212 | 1,812 |
[1] Costs relating to the proposed split of MTG and the previously announced merger agreement to combine MTG Nordics and TDC Group, which was terminated on June 19 2018.
[2] Discontinued operations comprise MTG’s businesses in Tanzania in the second quarter of 2018 and also MTG’s businesses in the Czech Republic and the Baltics in 2017. The full year 2017 results include a capital gain of SEK 593m from the divestment of the Baltic operations.
Alternative performance measures used in this report are explained and reconciled on pages 24-28.
President & CEO’s comments
Profitable growth
This was the eighth consecutive quarter of more than 5% organic sales growth and another quarter of profitable growth. We delivered 9% organic sales growth, with digital sales up 76% to represent 36% of total sales, and operating profits up 12% despite SEK 32m of transaction costs related to the proposed TDC merger and the ongoing split process.
Operating momentum
Nordic Entertainment delivered yet another quarter of higher sales and profits. The positive impact of our exclusive coverage of the Ice Hockey World Championship and the continued growth of our Viaplay and Viafree streaming services more than offset the coverage of the FIFA World Cup on rival channels and lower TV viewing levels. We have recently secured several key sports rights for the coming years, including English Premier League football, Formula 1® and the World Handball Championships, which have reinforced our position as the undisputed home of premium sports content in the Nordic region. And we have also continued to launch new Viaplay original productions, with over 30 now available or in production.
MTGx sales were up 63% on a reported basis and 25% on an organic basis, and we delivered our third consecutive quarter of EBITDA profits. We turned a loss a year ago into an EBITDA profit of SEK 34m this quarter, due to the contribution from InnoGames in particular. We also acquired the remaining shares in Zoomin.TV and Splay Networks and merged Splay into our Studios business to create a new branded entertainment powerhouse. ESL is more and more about owned and operated events and so we continue to restructure, streamline and focus our resources on events where we can scale our media and sponsorship deals in order to maintain our market leadership and build an sports megabrand. Esports revenue growth will be limited in H2 but losses will be reduced.
Strategic transformation
We have made further significant steps towards splitting MTG into two separate companies, with Nordic Entertainment Group operating as a separate company from 1 July with a new brand, Board and management team. We are now awaiting our largest shareholder Kinnevik’s distribution of its MTG shares to its own shareholders before moving forward with the listing process. There are of course costs associated with the reorganisation ahead of the split, which are impacting both items affecting comparability and central costs. Our ongoing strategic transformation has continued during Q2 with the completion of the sale of Trace and we now await regulatory approval for the sale of Nova in Bulgaria. We have paid out our record high dividend and continue to look for M&A investment and consolidation opportunities.
“Continued sales and profit growth, while making further progress towards the split of MTG, reflect a clear vision, a differentiated strategy, and an exceptional team. We remain focused on building shareholder value through our strategic transformation and unique product offerings.”
Jørgen Madsen Lindemann
President & Chief Executive Officer
2018 Annual General Meeting
The Annual General Meeting resolved to re-elect Board members Joakim Andersson, David Chance, Simon Duffy, Donata Hopfen, John Lagerling and Natalie Tydeman and elect Gerhard Florin as new member of the Board. The Annual General Meeting also re-elected David Chance as Chairman of the Board. The Meeting approved the payment of an annual ordinary dividend of SEK 12.50 per share to shareholders at the record date of Thursday 24 May 2018. The Meeting also approved a new mandate to the Board to repurchase Class A and/or Class B shares. The Meeting further resolved to amend the provision in the Articles of Association regarding the auditor’s term of office, as well as editorial adjustments of the Articles of Association due to changed legislation, and re-elected KPMG as auditor until the close of the 2019 Annual General Meeting. Joakim Thilstedt will continue as auditor-in-charge.
Financial calendar
Q3 results announcement 23 October
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)
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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: +1 323 994 2093
The access pin code for the call is 6225661. 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 content 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, 2018.
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