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Modern Times Group A — Earnings Release 2017
Oct 19, 2017
3079_10-q_2017-10-19_72cc8be3-50c8-48a9-ba06-e04c2c8d4fff.pdf
Earnings Release
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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
Financial Overview
| (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 comments
7% 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 operations
Nordic 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 continues
We 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 Lindemann President & 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."
Significant Events during and after the quarter
24 July & 5 October – MTG completes acquisition of Kongregate
MTG completed the previously announced acquisition of 100% of Kongregate Inc, the San Francisco based games publisher and developer, for an Enterprise Value of USD 55m from previous owner GameStop Corp. Kongregate is expected to generate net sales of at least USD 50m in 2017, with an EBITDA margin of approximately 10%. Kongregate then acquired 100% of Chicago based Synapse Games on October 5.
13 September – MTG included in 2017 Dow Jones Sustainability World Index
MTG was included in the Dow Jones Sustainability World Index for the sixth consecutive year. The index is an industry standard for corporate sustainability and was the first global index to track the world's leading sustainability-driven companies. A total of 72 media companies around the world were assessed for this year's Dow Jones Sustainability World Index. Only six of these companies, including MTG, were included.
18 October – MTG completes the sale of its Baltic broadcasting businesses
MTG announced that it has completed the sale of its Baltic broadcasting businesses to Providence Equity Partners for a total cash consideration of EUR 100m (approximately SEK 960m). The transaction is based on an Enterprise Value of EUR 115m. The sale will result in a preliminary net capital gain, realized in the Q4 results, of approximately SEK 580m. All items related to the Baltic broadcasting businesses are reported as discontinued operations in MTG's financial statements.
A full list of MTG announcements can be found at www.mtg.com.
Group performance
Net sales
Net sales were up 17% on a reported basis to SEK 4,280m (3,657). The organic growth of 7% included growth for all four business segments. Acquisitions and divestments contributed a further 10% and primarily comprised the consolidation of InnoGames from 1 May. The FX impact was immaterial in the quarter.
Operating expenditure
Operating expenditure was up 14% at constant FX and driven primarily by ongoing investment in MTG's digital expansion and the consolidation of InnoGames. Depreciation and amortisation charges increased to SEK 87m (55), and mainly reflected the inclusion of amortisation charges relating to the purchase price allocation for InnoGames.
Operating profit and items affecting comparability
Operating profit was up 83% to SEK 257m (141), with an operating margin of 6.0% (3.8). The increase was primarily driven by the performance of the Nordic Entertainment business and the consolidation of InnoGames from May. There were no items affecting comparability in the quarter or in the corresponding period of last year.
1 Quarterly fluctuations reflect the seasonality of advertising markets. Please refer to page 22 for Alternative Performance Measures
Net financials and Net income
Net interest and other financial items totalled SEK -14m (-17) and mainly comprised the non-cash discounting of option and earn-out liabilities at fair value. Net income from continuing operations amounted to SEK 189m (83), and basic earnings per share totalled SEK 2.49 (1.17).
Discontinued operations
In Q3, discontinued operations comprised the Baltic and African operations (excluding Trace). Net income from discontinued operations amounted to SEK-11m (10). The sale of the Baltic operations was completed after the end of the quarter, while the sale of the Tanzanian business is yet to close. Total basic earnings per share amounted to SEK 2.31 (1.30).
$6(28)$
Segmental performance
Nordic Entertainment
Sales & profits up
| (SEKm) | Q3 2017 | Q3 2016 | Nine months 2017 |
Nine months 2016 |
Full year 2016 |
|---|---|---|---|---|---|
| Net sales | 2,819 | 2,734 | 8,733 | 8,026 | 11,139 |
| of which Free-TV & Radio | 1,134 | 1,147 | 3,656 | 3,458 | 4,866 |
| of which Pay-TV | 1,685 | 1,587 | 5,076 | 4,568 | 6,272 |
| Costs | $-2,518$ | $-2,515$ | $-7,668$ | $-7,156$ | $-9,768$ |
| Operating income | 301 | 218 | 1,064 | 870 | 1,370 |
| Operating margin | 10.7% | 8.0% | 12.2% | 10.8% | 12.3% |
| Net sales growth $y$ -o-y | |||||
| Organic growth | 3.2% | 11.0% | 7.4% | 5.2% | 6.2% |
| Acquisitions/divestments | 0.0% | 0.0% | 0.0% | $0.0\%$ | $0.0\%$ |
| Changes in FX rates | $-0.1%$ | 0.4% | 1.4% | $-1.1%$ | $0.0\%$ |
| Reported growth | 3.1% | 11.4% | 8.8% | 4.1% | 6.2% |
Sales were up 3% on an organic basis despite the fact that last year's growth was boosted by the Swedish coverage of the Summer Olympics and ice hockey World Cup. Viaplay continues to be the main driver of the organic growth.
Operating costs were stable compared to last year as continued investments into the expansion of Viaplay were offset by not having the Summer Olympics this year. Operating income amounted to SEK 301m (218), with an operating margin of 10.7% (8.0).
Free-TV and radio sales were down 1% on a reported basis, with higher sales in Denmark and Norway more than offset by lower sales in Sweden. The Danish TV advertising market is estimated to have grown, while the Swedish and the Norwegian markets are estimated to have declined. The Danish TV audience share was up y-o-y, while the Swedish and Norwegian shares were down. The decline in Sweden primarily reflected the popularity of last year's coverage of the Olympics and the World Cup. The Swedish radio listening share was up y-o-y while the Norwegian share was down.
Pay-TV sales were up 6% on a reported basis following continued Viaplay subscriber intake, previously introduced price rises and higher pay-per-view revenues. When excluding Viaplay, the subscriber base was down q-o-q but the average revenue per satellite user was up y-o-y.
International Entertainment
Sales & profits up
| (SEKm) | Q3 2017 | Q3 2016 | Nine months 2017 |
Nine months 2016 |
Full year 2016 |
|---|---|---|---|---|---|
| Net sales | 246 | 221 | 817 | 752 | 1,102 |
| Costs | $-216$ | $-202$ | $-717$ | -660 | -954 |
| Operating income Operating margin |
29 11.9% |
19 8.5% |
100 12.3% |
92 12.2% |
148 13.4% |
| Net sales growth $y$ -o-y | |||||
| Organic growth | 12.0% | 4.8% | 7.3% | 14.1% | 15.4% |
| Acquisitions/divestments | $-1.0%$ | -49.2% | $-1.1%$ | -52.6% | -47.2% |
| Changes in FX rates | 0.3% | 0.6% | 2.4% | $-0.1%$ | 0.7% |
| Reported growth | 11.2% | $-43.9%$ | 8.6% | -38.6% | $-31.0\%$ |
Sales were up 12% on an organic basis. The Bulgarian operations continues to perform well and reported double-digit percentage point sales and profit growth. The Bulgarian audience share was stable y-o-y and the TV advertising market is estimated to have been stable. Trace also grew its sales. Operating income amounted to SEK 29m (19) with an operating margin of 11.9% (8.5).
The sale of the Baltic operation was completed after the end of the quarter while the sale of the Tanzanian business is yet to close.
MTG Studios
Sales & profits up
| (SEKm) | Q3 2017 | Q3 2016 | Nine months 2017 |
Nine months 2016 |
Full year 2016 |
|---|---|---|---|---|---|
| Net sales | 529 | 458 | 1,315 | 1,245 | 1,777 |
| Costs | $-486$ | $-422$ | $-1,270$ | $-1,186$ | $-1,696$ |
| Operating income | 43 | 37 | 45 | 58 | 81 |
| Operating margin | 8.1% | 8.0% | 3.5% | 4.7% | 4.6% |
| Net sales growth $y$ -o-y | |||||
| Organic growth | 14.8% | $-5.8\%$ | 4.5% | 0.0% | 2.2% |
| Acquisitions/divestments | 0.7% | 0.0% | 0.3% | 0.0% | 0.0% |
| Changes in FX rates | 0.0% | $-2.9%$ | 1.0% | $-3.8%$ | $-2.4%$ |
| Reported growth | 15.5% | $-8.7%$ | 5.7% | -3.7% | $-0.1%$ |
Sales were up 15% on an organic basis following continued high demand for scripted drama formats and branded content. MTG also sharpened its original content and scriptwriting capabilities with the acquisition of Matador Film. Operating income amounted to SEK 43m (37) with an operating margin of 8.1% (8.0).
MTGx
Sales up & lower losses
| (SEKm) | Q3 2017 | Q3 2016 | Nine months 2017 |
Nine months 2016 |
Full year 2016 |
|---|---|---|---|---|---|
| Net sales | 798 | 321 | 1,699 | 929 | 1,326 |
| Costs | $-836$ | $-390$ | $-1,878$ | $-1,096$ | $-1,577$ |
| Operating income | $-38$ | $-69$ | $-179$ | $-167$ | $-251$ |
| Operating margin | $-4.8%$ | $-21.6%$ | $-10.5%$ | $-18.0%$ | $-18.9%$ |
| Net sales growth $y$ -o-y | |||||
| Organic growth | 39.3% | - | 22.1% | ||
| Acquisitions/divestments | 117.5% | - | 72.2% | ||
| Changes in FX rates | 1.0% | $\qquad \qquad \blacksquare$ | 4.2% | ||
| Change in presentation of prize money | $-9.2%$ | - | $-15.6%$ | ||
| Reported growth | 148.5% | - | 82.9% | 194.3% |
Sales were up 149% on a reported basis, which primarily reflected the full consolidation of InnoGames from 1 May. No figures have been included from Kongregate pending conversion to MTG accounting policies but its results for the period from August to December will be included in the Q4 results.
InnoGames reported 17% sales growth, 54% operating income growth and a 21% operating margin in Q3 (when excluding the effects of purchase price allocation). Please see page 21 for detailed InnoGames figures as if MTG had fully consolidated the company since the beginning of the year.
Segment organic growth of 39% reflected the higher number of esports events in the quarter when compared to last year, as well as the signing of a number of new commercial agreements. As in Q1 and Q2, the reported growth rate also reflected the exclusion of prize money for third party events from the sales and costs lines. Historical figures have not been restated but Q3 2016 and Full Year 2016 sales would have been SEK 11m and SEK 98m lower, respectively, if presented on this basis. Splay reported further sales growth in Q3, while Zoomin's sales are stabilising as the company refocuses on branded entertainment and international content agreements.
Segment operating income of SEK-38m (-69) included a SEK 57m positive contribution from InnoGames, as well as SEK 6m of M&A costs mainly related to the acquisition of Kongregate. The increase in organic losses (excluding InnoGames) reflected the further scaling of the esports operations in particular.
Turtle is currently in discussion with distribution partners regarding receivables relating to 2016. A share of the bad debt has been impaired during 2017. If the remaining share is not recovered before the end of the year, it could give rise to a further non-cash write down of up to SEK 35 million in the Q4 results.
Financial Review
Cash flow from continuing operations
Cash flow from operations
Cash flow from operations before changes in working capital amounted to SEK 273m (161). Depreciation and amortisation charges totalled SEK 87m (55). The Group reported a SEK -776m (-354) change in working capital due to the normal seasonality pattern, advance payments relating to new and prolonged sports contracts, prepayments made due to the change in accounting systems and the timing of receivables. Net cash flow from operations totalled SEK-503m (-193).
Investing activities
Group capital expenditure on tangible and intangible assets totalled SEK 115m (68). Investments in shares amounted to SEK 518m (10) and mainly related to the acquisition of 100% of Kongregate (please see note on page 21). Total cash flow relating to investing activities amounted to SEK -679m $(-112)$ .
Financing activities
Cash flow from financing activities amounted to SEK -582m (-286), and total borrowings decreased in the quarter by SEK 597m (256) to SEK 3,992m (2,603).
The net change in cash and cash equivalents therefore amounted to SEK -1,764m (-590). The Group had cash and cash equivalents of SEK 395m (310) at the end of the period.
Net debt
The Group's net debt position, which is defined as the sum of short and long-term interest bearing liabilities less total cash and interest bearing assets, amounted to SEK 3,309m (2,100) at the end of the period and included net cash in assets held for sale.
Related party transactions
Related party transactions are of the same character and of similar amounts as the transactions described in the 2016 Annual Report.
Parent Company
Modern Times Group MTG AB is the Group's parent company and is responsible for Group-wide management, administration and financing.
| (SEKm) | Q3 2017 | Q3 2016 | Nine months 2017 |
Nine months 2016 |
Full year 2016 |
|---|---|---|---|---|---|
| Net sales | 10 | 9 | 30 | 34 | 45 |
| Net interest and other financial terms | 50 | 53 | 198 | 168 | 234 |
| Income before tax and appropriations | -6 | 39 | 4 |
Net interest and other financial items in the quarter were at the same level as last year. The parent company had cash and cash equivalents of SEK 33m (288) at the end of the period. SEK 5,820m (5,871) of the SEK 5,820m total available credit facilities was unutilised at the end of the period.
The total number of shares outstanding at the end of the period was 66,725,249 (66,664,861) and excluded the 865,000 Class C shares and 56,875 Class B shares held by MTG in treasury. The total number of issued shares did not change during the period.
Other Information
Corporate Responsibility
MTG has been included in the 2017 Dow Jones Sustainability World Index, an industry standard for corporate sustainability and the first global index to track the world's leading sustainability-driven companies. Out of a total of 72 media companies part of the DSJI universe, only 6 media/entertainment companies were included in the world index, and MTG is one of them for the sixth consecutive year. The index includes a detailed assessment of companies' corporate economic, environmental and social performance, assessing issues such as corporate governance, climate strategy, environmental policy and management systems, risk management, supply chain standards and labour practices. Viaplay Original "The Great Escape" won the Swedish Kristallen TV award in the Best Kids and Youth Programme category in September, which illustrates MTG's ongoing focus on the production of quality content for younger viewers.
Accounting policies
This Interim report has been prepared according to 'IAS 34 Interim Financial Reporting' and 'The Annual Accounts Act'. The interim report for the parent company has been prepared according to the Annual Accounts Act - Chapter 9 'Interim Report'.
The Group's consolidated accounts and the parent company accounts have been prepared according to the same accounting policies and calculation methods as were applied in the preparation of the 2016 Annual Report.
IFRS 9 Financial instruments and IFRS 15 Revenue from Contracts with Customers are effective from 1 January 2018. The work with assessing the impact on the Group is ongoing, but so far it is judged to be without any significant effect on the Group's accounts.
The Czech, Baltic and African (excluding Trace) operations are reported as discontinued operations as a consequence of the completion of the divestments of the Czech (Prima) and Baltic operations and the agreement to sell the African operation (pending regulatory approval). Net income and net
change in cash from discontinued operations have been reported on separate line items in the consolidated income statement and the consolidated statement of cash flow respectively. The consideration received for the divestment of Prima is included in cash flow from continuing operations in the line Proceeds from sales of shares. Assets and liabilities related to the named operations are reported on the line items Assets held for sale and Liabilities related to assets held for sales in the consolidated balance sheet. 2016 and Q1 2017 has been fully restated. For information purposes also Net sales and Operating income have been restated for 2015. For details see financial fact sheet with restated numbers at www.mtg.com.
Risks & uncertainties
Significant risks and uncertainties exist for the Group and the parent company. These factors include the prevailing economic and business environments in some of the markets; commercial risks related to expansion into new territories; other political and legislative risks related to changes in rules and regulations in the various territories in which the Group operates; exposure to foreign exchange rate movements, and the US dollar and Euro linked currencies in particular; and the emergence of new technologies and competitors. The increasing shift towards online viewing and platforms could also potentially make the Group a target for cyber-attacks, intrusions, disruptions or denials of service. Risks and uncertainties are also described in more detail in the 2016 Annual Report, which is available at www.mtg.com.
Stockholm, 19 October 2017
Jørgen Madsen Lindemann President & CEO
Auditors' Review Report
Introduction
We have reviewed the summary interim financial information (interim report) of Modern Times Group MTG AB (publ.) as of 30 September 2017 and the nine month period then ended. The Board of Directors and the President & CEO are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing practices and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes to believe that the interim report is not prepared, in all material respects, for the Group in accordance with IAS 34 and the Annual Accounts Act, and for the Parent Company in accordance with the Annual Accounts Act.
Stockholm, 19 October 2017
KPMG AB
Joakim Thilstedt Authorised Public Accountant
Consolidated income statement
| (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 |
| Cost of goods and services | $-2,790$ | $-2,554$ | $-7,918$ | $-7,166$ | $-9,917$ |
| Gross income | 1,490 | 1,103 | 4,312 | 3,535 | 5,082 |
| Selling expenses | $-419$ | -261 | $-1,085$ | $-761$ | $-1,054$ |
| Administrative expenses | $-808$ | $-708$ | $-2,436$ | $-2,099$ | $-2,967$ |
| Other operating income | 20 | 11 | 53 | 27 | 58 |
| Other operating expenses | $-22$ | $-2$ | $-68$ | $-53$ | -56 |
| Share of earnings in associated companies and joint ventures | -4 | -1 | 10 | -7 | -3 |
| Items affecting comparability | $-23$ | ||||
| Operating income | 257 | 141 | 763 | 643 | 1,060 |
| Net interest | -7 | -4 | $-19$ | -13 | $-18$ |
| Other financial items | $-7$ | -13 | $-29$ | -52 | -63 |
| Income before tax | 243 | 123 | 715 | 578 | 980 |
| Tax | $-55$ | -40 | $-168$ | -140 | -236 |
| Net income for the period, continuing operations | 189 | 83 | 547 | 438 | 744 |
| Discontinued operations | |||||
| Prima, Baltics and Africa | $-11$ | 10 | 161 | 103 | 219 |
| CTC Media | $-1,072$ | -1,072 | |||
| Net income for the period, discontinued operations | $-11$ | 10 | 161 | -969 | -853 |
| Total net income for the period | 177 | 93 | 708 | $-531$ | $-109$ |
| Net income for the period, continuing operations | |||||
| attributable to: | |||||
| Equity holders of the parent | 166 | 78 | 508 | 428 | 733 |
| Non-controlling interest | 22 | 5 | 39 | 9 | 12 |
| Net income for the period | 189 | 83 | 547 | 438 | 744 |
| Total net income for the period attributable to: | |||||
| Equity holders of the parent | 154 | 86 | 625 | $-591$ | $-213$ |
| Non-controlling interest | 23 | 7 | 83 | 59 | 104 |
| Total net income for the period | 177 | 93 | 708 | $-531$ | -109 |
| Continuing operations | |||||
| Basic earnings per share (SEK) | 2.49 | 1.17 | 7.61 | 6.43 | 10.99 |
| Diluted earnings per share (SEK) | 2.47 | 1.16 | 7.56 | 6.41 | 10.96 |
| Total | |||||
| Basic earnings per share (SEK) | 2.31 | 1.30 | 9.37 | $-8.86$ | $-3.19$ |
| Diluted earnings per share (SEK) | 2.30 | 1.29 | 9.31 | $-8.84$ | $-3.19$ |
| Number of shares | |||||
| Shares outstanding at the end of the period Basic average number of shares outstanding |
66,725,249 66,664,861 66,725,040 66,664,861 |
66,725,249 66,693,404 |
66,664,861 66,653,008 |
66,663,816 66,655,996 |
|
| Diluted average number of shares outstanding | 67,128,138 66,810,326 | 67,125,274 | 66,796,788 66,826,825 | ||
Condensed consolidated statement of comprehensive income
| (SEKm) | Q3 2017 | Q3 2016 | Nine months 2017 |
Nine months 2016 |
Full year 2016 |
|---|---|---|---|---|---|
| Net income, continuing operations | 189 | 83 | 547 | 438 | 744 |
| Other comprehensive income | |||||
| Items that are or may be reclassified to profit or loss net of | |||||
| tax: | |||||
| Currency translation differences | -3 | 103 | $-39$ | 136 | 111 |
| Cash flow hedge | $-35$ | 13 | $-166$ | $-2$ | 32 |
| Other comprehensive income, continuing operations | $-37$ | 116 | $-205$ | 134 | 144 |
| Total comprehensive income, continuing operations | 151 | 198 | 342 | 572 | 888 |
| Net income, discontinued operations 1 | $-11$ | 10 | 161 | $-969$ | $-853$ |
| Other comprehensive income | |||||
| Items that are or may be reclassified to profit or loss net of | |||||
| tax: | |||||
| Currency translation differences | 5 | 28 | $-59$ | 1,073 | 1,069 |
| Total comprehensive income, discontinued operations | $-7$ | 39 | 102 | 104 | 216 |
| Total comprehensive income for the period | 145 | 237 | 444 | 676 | 1,104 |
| Total comprehensive income attributable to: | |||||
| Equity holders of the parent | 120 | 225 | 369 | 607 | 990 |
| Non-controlling interest | 25 | 12 | 75 | 69 | 113 |
| Total comprehensive income for the period | 145 | 237 | 444 | 676 | 1,104 |
1 The completion of the sale of CTC Media, Inc. gave rise to a total negative non-cash impact of SEK 1,072m in the 'net income from discontinued operations' line in Q3 2016. This was mainly due to the accumulated currency translation differences, which have previously been booked to comprehensive income, and the adjustment to the fair value of the holding when compared to the balance sheet as at 31 March 2016. The translation differences have been reclassified from other comprehensive income to net income from discontinued operations.
Condensed consolidated balance sheet
| (SEKm) | 30 Sep 2017 |
30 Sep 2016 |
31 Dec 2016 |
|---|---|---|---|
| Non-current assets | |||
| Goodwill | 6,964 | 4,689 | 4,584 |
| Other intangible assets | 2,446 | 1,644 | 1,662 |
| Total intangible assets | 9,410 | 6,333 | 6,246 |
| Total tangible assets | 264 | 411 | 255 |
| Shares and participations in associated companies | 80 | 68 | 616 |
| Interest-bearing financial receivables | 13 | 7 | 6 |
| Other financial receivables | 382 | 153 | 308 |
| Total non-current financial assets | 474 | 228 | 931 |
| Total non-current assets | 10,148 | 6,972 | 7,431 |
| Current assets | |||
| Total inventory | 2,263 | 1,857 | 1,680 |
| Interest-bearing current receivables | 69 | 14 | 9 |
| Other current receivables | 5,606 | 5,164 | 5,354 |
| Cash, cash equivalents and short-term investments | 395 | 310 | 666 |
| Assets held for sale $^{\rm 1}$ | 774 | 2,472 | 2,559 |
| Total current assets | 9,106 | 9,817 | 10,268 |
| Total assets | 19,254 | 16,789 | 17,699 |
| Equity | |||
| Shareholders' equity | 4,433 | 4,415 | 4,809 |
| Non-controlling interest | 1,339 | 164 | 207 |
| Total equity | 5,772 | 4,579 | 5,016 |
| Non-current liabilities | |||
| Long-term borrowings | 499 | 1,000 | 1,500 |
| Other non-current interest-bearing liabilities | 83 | 41 | 58 |
| Total non-current interest-bearing liabilities | 582 | 1,041 | 1,558 |
| Provisions | 1,099 | 933 | 919 |
| Non-current liabilities at fair value | 1,209 | 1,226 | 1,208 |
| Other non-interest-bearing liabilities | 59 | 22 | 23 |
| Total non-current non-interest-bearing liabilities | 2,368 | 2,181 | 2,150 |
| Total non-current liabilities | 2,950 | 3,222 | 3,707 |
| Current liabilities | |||
| Current liabilities at fair value | 154 | 218 | 134 |
| Short-term loans | 3,408 | 1,560 | 1,435 |
| Other current interest-bearing liabilities | 1 | 1 | 1 |
| Other current non-interest-bearing liabilities | 6,741 | 6,465 | 6,660 |
| Liabilities related to assets held for sales 1 | 228 | 743 | 746 |
| Total current liabilities | 10,533 | 8,988 | 8,976 |
| Total liabilities | 13,482 | 12,210 | 12,683 |
| Total shareholders' equity and liabilities | 19,254 | 16,789 | 17,699 |
1 Relates to Prima, Baltic and African companies and CTC Media.
The carrying amounts are considered to be reasonable approximations of fair value for all financial assets and financial liabilities.
Condensed consolidated statement of cash flows
| (SEKm) | Q3 2017 | Q3 2016 | Nine months 2017 |
Nine months 2016 |
Full year 2016 |
|---|---|---|---|---|---|
| Cash flow from operations | 273 | 161 | 772 | 449 | 674 |
| Changes in working capital | $-776$ | $-354$ | $-976$ | $-350$ | $-204$ |
| Net cash flow to/from operations | $-503$ | $-193$ | $-204$ | 100 | 470 |
| Proceeds from sales of shares | 1,108 | 102 | |||
| Acquisitions of subsidiaries and associates | $-518$ | $-10$ | $-1,114$ | $-58$ | $-606$ |
| Investments in other non-current assets | $-115$ | -68 | $-258$ | $-214$ | $-308$ |
| Other cash flow from investing activities | $-47$ | -34 | $-41$ | $-26$ | 17 |
| Cash flow used in/from investing activities | $-679$ | $-112$ | $-305$ | $-297$ | $-796$ |
| Net change in loans | $-597$ | $-256$ | 998 | 36 | 427 |
| Dividends to shareholders | $-800$ | $-767$ | $-767$ | ||
| Other cash flow from/to financing activities | 15 | -31 | 36 | $-114$ | $-70$ |
| Cash flow from/used in financing activities | $-582$ | $-286$ | 234 | $-845$ | $-410$ |
| Net change in cash, continuing operations | $-1,764$ | $-590$ | $-274$ | $-1,042$ | $-736$ |
| Net change in cash, discontinued operations | $-1$ | 28 | 28 | 1,123 | 1,160 |
| Total net change in cash and cash equivalents | $-1,765$ | $-563$ | $-246$ | 81 | 425 |
| Cash and cash equivalents at the beginning of the period | 2,167 | 887 | 666 | 410 | 410 |
| Translation differences in cash and cash equivalents | -1 | 0 | $-1$ | -3 | 10 |
| Changes in cash and cash equivalents in assets held for sale | -4 | -13 | $-24$ | $-177$ | $-179$ |
| Cash and cash equivalents at end of the period | 395 | 310 | 395 | 310 | 666 |
Condensed consolidated statement of changes in equity
| (SEKm) | 30 Sep | 30 Sep | 31 Dec |
|---|---|---|---|
| 2017 | 2016 | 2016 | |
| Opening balance | 5,016 | 4,768 | 4,768 |
| Net loss/income for the period | 708 | $-531$ | $-109$ |
| Other comprehensive income for the period | $-264$ | 1.208 | 1,213 |
| Total comprehensive income for the period | 444 | 676 | 1,104 |
| Effect of employee share programmes | 55 | 18 | 29 |
| Change in non-controlling interests | 1,061 | 2 | 2 |
| Dividends to shareholders | $-800$ | $-767$ | $-767$ |
| Dividends to non-controlling interests | $-4$ | $-118$ | $-120$ |
| Closing balance | 5,772 | 4,579 | 5,016 |
Parent company condensed income statement
| (SEKm) | Q3 2017 | Q3 2016 | Nine months 2017 |
Nine months 2016 |
Full year 2016 |
|---|---|---|---|---|---|
| Net sales | 10 | 9 | 30 | 34 | 45 |
| Gross income | 10 10 | 9 | 30 | 34 | 45 |
| Administrative expenses | $-59$ | -68 | $-188$ | $-200$ | $-275$ |
| Operating income | $-49$ | -58 | $-158$ | $-166$ | $-231$ |
| Net interest and other financial items | 50 | 53 | 198 | 168 | 234 |
| Income before tax and appropriations | -6 | 39 | $\mathbf{2}$ | 4 | |
| Appropriations | 162 | ||||
| Tax | $-1$ | 9 | 15 | $-27$ | |
| Net income for the period | $\mathbf 0$ | 3 | 40 | 17 | 139 |
Parent company condensed statement of comprehensive income
| (SEKm) | Q3 2017 | Q3 2016 | Nine months 2017 |
Nine months 2016 |
Full year 2016 |
|---|---|---|---|---|---|
| Net income for the period | $\Omega$ | 3 | 40 | 17 | 139 |
| Other comprehensive income | |||||
| Items that are or may be reclassified to profit or loss net of | |||||
| tax: | |||||
| Revaluation of shares at market value | |||||
| Other comprehensive income for the period | |||||
| Total comprehensive income for the period | O | 3 | 40 | 17 | 139 |
Parent company condensed balance sheet
| (SEKm) | 30 Sep 2017 |
30 Sep 2016 |
31 Dec 2016 |
|---|---|---|---|
| Non-current assets | |||
| Capitalised expenditure | $\circ$ | 1 | 1 |
| Machinery and equipment | $\Omega$ | 1 | O |
| Shares and participations | 6,340 | 6,340 | 6,340 |
| Other financial receivables | 10,043 | 9,645 | 10,049 |
| Total non-current assets | 16,384 | 15,987 | 16,390 |
| Current assets | |||
| Current receivables | 263 | 290 | 707 |
| Cash, cash equivalents and short-term investments | 33 | 288 | 606 |
| Total current assets | 296 | 578 | 1,313 |
| Total assets | 16,680 | 16,565 | 17,703 |
| Shareholders' equity | |||
| Restricted equity | 338 | 338 | 338 |
| Non-restricted equity | 5,154 | 5,780 | 5,914 |
| Total equity | 5,492 | 6,118 | 6,252 |
| Non-current liabilities | |||
| Interest-bearing liabilities | 500 | 1,000 | 1,500 |
| Provisions | $\overline{2}$ | 2 | $\overline{2}$ |
| Non-interest-bearing liabilities | 39 | 12 | 32 |
| Total non-current liabilities | 540 | 1,014 | 1,534 |
| Current liabilities | |||
| Other interest-bearing liabilities | 10,459 | 9,261 | 9,440 |
| Non-interest-bearing liabilities | 188 | 171 | 478 |
| Total current liabilities | 10,647 | 9,432 | 9,917 |
| Total shareholders' equity and liabilities | 16,680 | 16,565 | 17,703 |
Net Sales by business segments
| (SEKm) | Q1 2016 |
Q2 2016 |
Q3 2016 |
Q4 2016 |
Full year 2016 |
Q 1 2017 |
Q 2 2017 |
Q 3 2017 |
|---|---|---|---|---|---|---|---|---|
| Nordic Entertainment | 2,577 | 2,715 | 2,734 | 3,113 | 11,139 | 2,911 | 3,003 | 2,819 |
| of which Free-TV & Radio | 1.108 | 1,202 | 1,147 | 1,409 | 4,866 | 1,204 | 1,319 | 1,134 |
| of which Pay-TV | 1.469 | 1,513 | 1,587 | 1,704 | 6,272 | 1.706 | 1,684 | 1,685 |
| International Entertainment | 248 | 284 | 221 | 350 | 1,102 | 264 | 308 | 246 |
| MTG Studios | 338 | 448 | 458 | 532 | 1.777 | 323 | 463 | 529 |
| MTGx | 248 | 360 | 321 | 397 | 1,326 | 292 | 610 | 798 |
| Central operations | 54 | 43 | 43 | 46 | 185 | 46 | 47 | 45 |
| Eliminations | $-139$ | -131 | $-119$ | $-141$ | $-530$ | $-130$ | $-184$ | $-156$ |
| Total net sales | 3,327 | 3,718 | 3,657 | 4,297 | 14,999 | 3,704 | 4,246 | 4,280 |
Net sales - External & Internal
| (SEKm) | Q1 2016 |
Q2 2016 |
Q3 2016 |
Q4 2016 |
Full year 2016 |
Q1 2017 |
Q 2 2017 |
Q3 2017 |
|---|---|---|---|---|---|---|---|---|
| Sales external customers | ||||||||
| Nordic Entertainment | 2,539 | 2,678 | 2,695 | 3,074 | 10,986 | 2,875 | 2,967 | 2,778 |
| International Entertainment | 248 | 284 | 221 | 350 | 1,102 | 264 | 304 | 246 |
| MTG Studios | 292 | 399 | 426 | 479 | 1,597 | 276 | 369 | 461 |
| MTGx | 247 | 357 | 315 | 393 | 1,312 | 290 | 605 | 795 |
| Central operations | o | O | o | O | O | 0 | $\Omega$ | |
| Total | 3,327 | 3,718 | 3,657 | 4,297 | 14,999 | 3,704 | 4,246 | 4,280 |
| Sales between segments | ||||||||
| Nordic Entertainment | 38 | 37 | 39 | 39 | 153 | 36 | 36 | 41 |
| International Entertainment | $\circ$ | O | $\Omega$ | O | $\circ$ | 4 | $\Omega$ | |
| MTG Studios | 46 | 49 | 32 | 52 | 179 | 47 | 94 | 68 |
| MTGx | 2 | 6 | 4 | 14 | 2 | 4 | 3 | |
| Central operations | 54 | 43 | 42 | 46 | 184 | 45 | 47 | 44 |
| Total | 139 | 131 | 119 | 141 | 530 | 130 | 184 | 156 |
Operating income by business segments
| (SEKm) | Q1 2016 |
Q 2 2016 |
Q3 2016 |
Q4 2016 |
Full year 2016 |
Q 1 2017 |
Q 2 2017 |
Q 3 2017 |
|---|---|---|---|---|---|---|---|---|
| Nordic Entertainment | 245 | 406 | 218 | 501 | 1,370 | 299 | 465 | 301 |
| International Entertainment | 19 | 55 | 19 | 56 | 148 | 21 | 50 | 29 |
| MTG Studios | $-13$ | 35 | 37 | 23 | 81 | -16 | 19 | 43 |
| MTGx | -50 | -48 | -69 | -84 | $-251$ | -88 | -53 | $-38$ |
| Central operations & eliminations | $-58$ | -88 | -64 | $-78$ | $-288$ | $-78$ | -90 | $-78$ |
| Total operating income before | ||||||||
| IAC | 143 | 360 | 141 | 418 | 1,060 | 137 | 391 | 257 |
| Items affecting comparability | $\overline{\phantom{0}}$ | $\overline{\phantom{a}}$ | -23 | |||||
| Total operating income | 143 | 360 | 141 | 418 | 1.060 | 137 | 369 | 257 |
Group & segment performance data
| Q1 | Q2 | Q 3 | Q4 Full year | Q 1 | Q2 | Q 3 | ||
|---|---|---|---|---|---|---|---|---|
| 2016 | 2016 | 2016 | 2016 | 2016 | 2017 | 2017 | 2017 | |
| GROUP | ||||||||
| Organic sales growth (%) | 3.5 | 2.5 | 7.2 | 9.3 | 5.8 | 8.7 | 5.0 | 7.0 |
| Operating margin (%) 1 | 4.3 | 9.7 | 3.8 | 9.7 | 7.1 | 3.7 | 9.2 | 6.0 |
| ROCE, continuing operations (%) | 29 | 27 | 22 | 22 | 20 | 19 | 18 | |
| Net debt (SEKm) | 2,689 | 1,796 | 2,100 | 2,186 | 2,439 | 2,212 | 3,309 | |
| Net debt/EBITDA | 2.1 | 1.4 | 1.8 | 1.7 | 1.9 | 1.7 | 2.2 | |
| NORDIC ENTERTAINMENT | ||||||||
| Organic sales growth (%) | 2.8 | 2.4 | 11.0 | 9.0 | 6.2 | 10.7 | 8.4 | 3.2 |
| Operating margin $(\%)$ 1 | 9.5 | 14.9 | 8.0 | 16.1 | 12.3 | 10.3 | 15.5 | 10.7 |
| CSOV Sweden (15-49) | 28.9 | 26.2 | 34.5 | 25.9 | 28.7 | 25.4 | 24.1 | 24.6 |
| CSOV Norway (15-49) | 17.8 | 18.0 | 16.0 | 18.1 | 17.5 | 14.1 | 17.6 | 15.3 |
| CSOV Denmark (15-49) | 20.9 | 23.7 | 21.6 | 23.6 | 22.4 | 22.8 | 24.6 | 23.1 |
| Nordic subscriber base excl Viaplay ('000s) | 1,007 | 983 | 992 | 1,001 | 981 | 956 | 939 | |
| - of which, satellite | 491 | 480 | 470 | 456 | 442 | 432 | 422 | |
| - of which, 3rd party networks | 516 | 503 | 522 | 544 | 539 | 525 | 517 | |
| Satellite ARPU (SEK) | 5,090 | 5,265 | 5,369 | 5,508 | 5,429 | 5,532 | 5,503 | |
| INTERNATIONAL ENTERTAINMENT | ||||||||
| Organic sales growth (%) | 15.4 | 20.9 | 4.8 | 18.5 | 15.4 | 4.8 | 5.1 | 12.0 |
| Operating margin $(\%)$ 1 | 7.5 | 19.2 | 8.5 | 16.1 | 13.4 | 7.8 | 16.4 | 11.9 |
| CSOV Bulgaria (18-49) | 43.4 | 43.0 | 42.0 | 43.3 | 42.9 | 42.6 | 42.4 | 41.9 |
| MTG STUDIOS | ||||||||
| Organic sales growth (%) | 9.1 | 0.0 | $-5.8$ | 8.1 | 2.2 | $-5.4$ | 1.4 | 14.8 |
| Operating margin $(\%)$ 1 | $-4.0$ | 7.8 | 8.0 | 4.3 | 4.6 | $-5.0$ | 4.1 | 8.1 |
| MTGx | ||||||||
| Organic sales growth (%) | 27.4 | 2.8 | 39.3 | |||||
| Operating margin $(\%)$ 1 | $-20.0$ | $-13.4$ | $-21.6$ | $-21.1$ | $-18.9$ | $-30.0$ | $-8.7$ | $-4.8$ |
Adjusted for Items affecting comparability
$\mathbf{I}$
Acquisitions
| Recognised values (SEKm) | InnoGames |
|---|---|
| Total assets | 1,181 |
| Total liabilities | $-495$ |
| Goodwill | 1,953 |
| Non-controlling interests (49%) | $-1,293$ |
| Total consideration | 1,346 |
| Cash and cash equivalents in acquired businesses | $-213$ |
| Fair value previous participation (20.6%) | $-545$ |
| Cash flow from acquisition, net payment | 588 |
| Contributions from acquisitions (SEKm) | Sales Q3 income Q3 | Operating | Sales YTD | Operating income YTD |
|---|---|---|---|---|
| InnoGames | 364 | 57 | 600 | 96 |
| Total MTGx segment | 364 | 57 | 600 | 96 |
| Contributions from acquisitions if the acquisition had occurred 1 January | Sales | Operating income |
|---|---|---|
| InnoGames | 1.127 | 140 |
| Total MTGx segment | 1.127 | 140 |
The Group acquired 30% of the shares in InnoGames on 30 April 2017, and holds thereby 51% of the shares. The results are reported within the Group's MTGx business segment. The purchase price allocations are preliminary as the work is still in progress. Preliminary intangible surplus values, net of deferred tax liability, were SEK 2,393m, of which goodwill was SEK 1,953m. InnoGames is now fully consolidated from 1 May 2017. Total transaction costs amount to SEK 30m. The result for the quarter included amortisations of surplus value of SEK 20m, which would have amounted to SEK 60m if the acquisition had occurred on 1 January. The transaction gave rise to a revaluation of SEK 23m, mainly due to capitalised transaction costs of SEK 18m. The revaluation is reported as IAC.
The Group acquired 100% of the shares in Kongregate Inc. on 21 July 2017 and Matador Film AB on 25 August 2017. On 5 October 2017, Kongregate acquired Synapse Games Inc. and Chinzilla Inc. The purchase price for Kongregate and Matador Film was SEK 518m. The agreements include deferred conditional payments and earn-out considerations. Kongregate is reported in the MTGx segment and Matador Film in MTG Studios. The work on the purchase price allocations has started but is in its early stages. Therefore, MTG has recognised a preliminary surplus value for Kongregate as goodwill at SEK 455m. The sales and results from Kongregate was not included in Q3 pending conversion to MTG's accounting policies.
Alternative performance measures
The purpose of Alternative Performance Measures (APMs) is to facilitate the analysis of business performance and industry trends that cannot be directly derived from financial statements. MTG is using the following APMs:
- Operating income & margin before IAC $\bullet$
- Change in net sales from Organic growth, Acquisitions/divestments and Changes in FX $\bullet$ rates
- Net debt and Net debt/EBITDA
- Capital employed and Return on Capital Employed (ROCE) $\bullet$
Reconciliation of sales growth
Since the Group generates the majority of its sales in currencies other than in the reporting currency (i.e. SEK, Swedish Krona) and currency rates have proven to be rather volatile, and due to the fact that the Group has historically made several acquisitions and divestments, the Company's sales trends and performance are analysed as changes in organic sales growth. This presents the increase or decrease in the overall SEK net sales on a comparable basis, allowing separate discussions of the impact of acquisitions/divestments and exchange rates. The following tables present changes in organic sales growth as reconciled to the change in the total reported net sales.
Sales growth
| Group (SEKm) | Q3 2017 |
% | Q3 2016 |
$\%$ | Nine months 2017 |
% | Nine months 2016 |
% FY 2016 | $\%$ | |
|---|---|---|---|---|---|---|---|---|---|---|
| Nordic Entertainment | ||||||||||
| Organic growth | 87 | 3.2% | 269 | 11.0% | 591 | 7.4% | 404 | 5.2% | 654 | 6.2% |
| Acquisitions/divestments | $\circ$ | 0.0% | 0 | 0.0% | $\circ$ | 0.0% | 0 | 0.0% | 0 | 0.0% |
| Changes in FX rates | $-2$ | $-0.1%$ | 11 | 0.4% | 115 | 1.4% | $-84$ | $-1.1%$ | $-2$ | 0.0% |
| Reported growth | 85 | 3.1% | 280 | 11.4% | 707 | 8.8% | 319 | 4.1% | 651 | 6.2% |
| International Entertainment | ||||||||||
| Organic growth | 26 | 12.0% | 10 | 4.8% | 54 | 7.3% | 91 | 14.1% | 143 | 15.4% |
| Acquisitions/divestments | $-2$ | $-1.0%$ | $-184$ | $-49.2%$ | -8 | $-1.1%$ | $-563$ | $-52.6%$ | $-650$ | $-47.2%$ |
| Changes in FX rates | $\mathbf{1}$ | 0.3% | 2 | 0.6% | 18 | 2.4% | $-1$ | $-0.1%$ | 12 | 0.7% |
| Reported growth | 25 | 11.2% | $-173$ | $-43.9%$ | 65 | 8.6% | $-473$ | $-38.6%$ | $-496$ | $-31.0%$ |
| MTG Studios | ||||||||||
| Organic growth | 68 | 14.8% | $-29$ | $-5.8%$ | 56 | 4.5% | 0 | 0.0% | 39 | 2.2% |
| Acquisitions/divestments | 3 | 0.7% | o | 0.0% | 3 | 0.3% | O | 0.0% | O | 0.0% |
| Changes in FX rates | $\Omega$ | 0.0% | $-15$ | $-2.9%$ | 12 | 1.0% | $-49$ | $-3.8%$ | $-42$ | $-2.4%$ |
| Reported growth | 71 | 15.5% | $-44$ | $-8.7%$ | 71 | 5.7% | $-49$ | $-3.7%$ | -3 | $-0.1%$ |
| MTGx | ||||||||||
| Organic growth | 122 | 39.3% | $\overline{\phantom{a}}$ | 189 | 22.1% | |||||
| Acquisitions/divestments | 364 | 117.5% | $\overline{\phantom{a}}$ | 618 | 72.2% | |||||
| Changes in FX rates | 3 | 1.0% | $\overline{\phantom{a}}$ | 36 | 4.2% | |||||
| Change in presentation of prize money |
$-11$ | $-9.2%$ | $\overline{a}$ | $\overline{\phantom{a}}$ | $-73$ | $-15.6%$ | ||||
| Reported growth | 477 | 148.5% | $\overline{\phantom{a}}$ | $\overline{\phantom{a}}$ | 771 | 82.9% | $\overline{\phantom{a}}$ | $\qquad \qquad -$ | 876 | 194.3% |
| Total operations | ||||||||||
| Organic growth | 256 | 7.0% | 229 | 7.2% | 734 | 6.9% | 419 | 4.4% | 768 | 5.8% |
| Acquisitions/divestments | 365 | 10.0% | 41 | 0.8% | 614 | 5.7% | 276 | 2.5% | 230 | 1.4% |
| Changes in FX rates | $\overline{c}$ | 0.1% | 0 | 0.0% | 180 | 1.7% | $-138$ | $-1.4%$ | $-20$ | $-0.2%$ |
| Reported growth | 623 | 17.0% | 270 | 8.0% | 1,529 | 14.3% | 557 | 5.5% | 979 | 7.0% |
Reconciliation of operating income before IAC
Operating income before items affecting comparability refers to operating income after the reversal of material items and events related to changes in the Group's structure or lines of business, which are relevant for understanding the Group's development on a like-for-like basis. This measure is used by management to follow and analyse the underlying profits and to offer more comparable figures between periods.
Operating income before and after IAC
| Nine | Nine | ||||
|---|---|---|---|---|---|
| Q 3 | Q3 | months | months | ||
| Group (SEKm) | 2017 | 2016 | 2017 | 2016 | FY 2016 |
| Operating income | 257 | 141 | 763 | 643 | 1.060 |
| Items affecting comparability | 23 | ||||
| Operating income before items affecting comparability | 257 | 141 | 785 | 643 | 1.060 |
Items affecting comparability comprise the revaluation of the holdings in InnoGames due to the transformation from associated company to a subsidiary, and is mainly due to previously capitalised transaction costs.
Reconciliation of net debt and net debt/EBITDA ratio
Net debt refers to the net of interest bearing liabilities less total cash and interest bearing assets. Net debt is used by management to track the debt evolvement of the Group and to analyse the leverage and refinancing need of the Group. The net debt to EBITDA ratio provides a KPI for net debt in relation to cash profits generated by the business, i.e. an indication of a business' ability to pay off all its debts. This measure is commonly used by financial institutions to rate credit worthiness.
Net debt
| Group (SEKm) | 31 Mar 2016 |
30 Jun 2016 |
30 Sep 2016 |
31 Dec 2016 |
31 Mar 2017 |
30 Jun 2017 |
30 Sep 2017 |
|---|---|---|---|---|---|---|---|
| Short-term loans | 1,977 | 1,818 | 1,560 | 1,435 | 1,551 | 2,999 | 2,408 |
| Current part of long term borrowings | 1,000 | 1,000 | 1,000 | ||||
| Short-term borrowings | 1,977 | 1,818 | 1,560 | 1,435 | 2,551 | 3,999 | 3,408 |
| Other short-term interest-bearing liabilities | 1 | $12 \overline{ }$ | 1 | ||||
| Total short-term borrowings | 1,979 | 1,818 | 1,562 | 1,436 | 2,553 | 4,011 | 3,410 |
| Long-term borrowings | 1,000 | 1,000 | 1,000 | 1,500 | 500 | 500 | 499 |
| Other long-term interest-bearing liabilities | 24 | 41 | 41 | 58 | 73 | 79 | 83 |
| Total long-term borrowings | 1,024 | 1,041 | 1,041 | 1,558 | 573 | 579 | 582 |
| Total borrowings | 3,003 | 2,859 | 2,603 | 2,993 | 3,125 | 4,589 | 3,992 |
| Cash and cash equivalents | 122 | 887 | 310 | 666 | 481 | 2,167 | 395 |
| Long- and short-term interest bearing assets | 17 | 17 | 21 | 15 | 14 | 14 | 81 |
| Total cash and interest bearing assets | 140 | 904 | 331 | 682 | 495 | 2,180 | 477 |
| Net debt excluding assets held for sale | 2,863 | 1,956 | 2,272 | 2,312 | 2,630 | 2,409 | 3,515 |
| Net debt related to assets held for sale | $-174$ | -160 | $-171$ | $-126$ | $-191$ | $-197$ | $-206$ |
| Total net debt | 2,689 | 1,796 | 2,100 | 2,186 | 2,439 | 2,212 | 3,309 |
Net debt/EBITDA (before IAC) ratio 12 months trailing
| Group (SEKm) | Q1 2016 |
Q2 2016 |
Q3 2016 |
Q4 2016 |
Q1 2017 |
Q2 2017 |
Q3 2017 |
|---|---|---|---|---|---|---|---|
| Operating income before IAC | 1.096 | 1.102 | 980 | 1.060 | 1.055 | 1.087 | 1,203 |
| Depreciation and amortisation | 177 | 188 | 200 | 207 | 215 | 240 | 272 |
| EBITDA last 12 months | 1.273 | 1.290 | 1.180 | .268 | 1.270 | 1.327 | 1.476 |
| Total net debt/EBITDA ratio 12 months trailing | 2.1 | 1.4 | 1.8 | 1.7 | 1.9 | 1.7 | 2.2 |
EBITDA relates to continuing operations.
Reconciliation of Return On Capital Employed (ROCE),
continuing operations
Return on capital employed is a performance measure whereby operating income before items affecting comparability is put in relation to the capital employed within the operations. Operating income before items affecting comparability is the main profit level that operations are responsible for and comprise results before interest and tax. Capital employed is the sum of current and noncurrent assets less current and non-current liabilities, provisions and liabilities at fair value. All items are non-interest bearing. Capital employed thus equals the sum of equity and net debt.
| Q 1 | Q2 | Q3 | Q4 | Q 1 | Q2 | Q 3 | |
|---|---|---|---|---|---|---|---|
| Group (SEKm) | |||||||
| 2016 | 2016 | 2016 | 2016 | 2017 | 2017 | 2017 | |
| Operating income before IAC 12 months trailing |
1,096 | 1,102 | 980 | 1,060 | 1,055 | 1,087 | 1,203 |
| Total inventory | 1,727 | 1,864 | 1,857 | 1,680 | 2,140 | 2,273 | 2,263 |
| Other current receivables | 4,414 | 5,423 | 5,164 | 5,354 | 4,907 | 5,622 | 5,606 |
| Intangibles assets | 5,735 | 6,123 | 6,333 | 6,246 | 6,228 | 8,910 | 9,410 |
| Tangible assets | 388 | 405 | 411 | 255 | 244 | 281 | 264 |
| Shares and participations | 42 | 74 | 68 | 616 | 630 | 83 | 80 |
| Other financial assets | 110 | 138 | 153 | 308 | 306 | 334 | 382 |
| Total non-current non-interest-bearing liabilities | $-2,007$ | $-2,310$ | $-2,181$ | $-2,150$ | $-2,112$ | $-2,363$ | $-2,368$ |
| Total current non-interest-bearing liabilities | $-5,606$ | $-7,115$ | -6,465 | $-6,660$ | $-6,297$ | -7,526 | $-6,741$ |
| Current liabilities at fair value | -4 | $-4$ | $-218$ | $-134$ | $-158$ | $-151$ | $-154$ |
| Capital Employed | 4,798 | 4,598 | 5,122 | 5,514 | 5,890 | 7,463 | 8,741 |
| Average Capital Employed (5 quarters) | 3,777 | 4,103 | 4,530 | 4,851 | 5,184 | 5,717 | 6,546 |
| ROCE % | 29% | 27% | 22% | 22% | 20% | 19% | 18% |
Definitions
Capital employed
Capital employed is the sum of current and non-current assets less current and non-current liabilities, provisions and liabilities at fair value. All items are non-interest bearing.
Cash flow from operations
Cash flow from operations comprises operating cash flow before financial items and tax payments, taking into account other financial cash flow.
Earnings per share
Earnings per share is expressed as net income attributable to equity holders of the parent divided by the average number of shares.
EBITDA
EBITDA is read Earnings Before Interest, Tax, Depreciation and Amortisation.
Items Affecting Comparability
Items Affecting Comparability refers to material items and events related to changes in the Group's structure or lines of business, which are relevant for understanding the Group's development on a like-for-like basis
Net debt
Net debt is the sum of short- and long-term interest bearing liabilities less total cash and interest bearing assets.
Operating income
Operating income comprise results before interest and tax. A synonym for operating income is EBIT (Earnings Before Interest and Tax).
Organic growth
Change in net sales compared to the same period of the previous year excluding acquisitions and divestments and adjusted for currency effects.
Return on capital employed (ROCE) %
Return on capital employed is calculated as operating income as a percentage of average capital employed.
Shareholders information
2018 Annual General Meeting
The 2018 Annual General Meeting will be held on Tuesday 22 May 2018 in Stockholm. Shareholders wishing to have matters considered at the Meeting should submit their proposals in writing to [email protected] or to The Company Secretary, Modern Times Group MTG AB, Box 2094, SE-103 13 Stockholm, Sweden, at least 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. In accordance with the resolution of the 2017 Annual General Meeting of MTG shareholders, the Chairman of the MTG Board of Directors has convened a Nomination Committee to prepare proposals for the 2018 Annual General Meeting.
The Nomination Committee comprises David Chance, Chairman of the MTG Board of Directors; Cristina Stenbeck, appointed by Kinnevik AB; Erik Durhan, appointed by Nordea Funds; and Yvonne Sörberg, appointed by Handelsbanken Funds. The three shareholders who have appointed representatives to the Nomination Committee hold approximately 55 percent of the total voting rights in MTG. The members of the Nomination Committee will appoint a Committee Chairman at their first meeting.
Please see www.mtg.com/governance/#nomination-committee for information about the work of the Nomination Committee. Shareholders wishing to propose candidates for election to the MTG Board of Directors should submit their proposals in writing to [email protected] or to The Company Secretary, Modern Times Group MTG AB, Box 2094, SE-103 13, Stockholm, Sweden.
Financial calendar
Capital Markets Seminar Q4 and full year 2017 report 29 November 1 February
Questions?
[email protected] (or Tobias Gyhlénius, Head of Public Relations; +46 73 699 27 09) [email protected] (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 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: | +1719 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.