Financial results presentation Q2 2010

Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 1

Modern Times Group

Q2 2010 Financial Results

20 July 2010


Record Sales with Increased Operating Margin


Highlights

Group

• Record sales – 13% y/y sales growth at constant

exchange rates in Q2 & 12% in H1

• Record operating income – up 26% y/y in Q2 & up 30% in

H1 when excluding associated company income

• Pre-tax profit up 23% y/y in Q2 & up 53% in H1

• Net income up 20% y/y & up 41% in H1

• Net debt to EBITDA ratio of 1.2x and SEK 3.5 bn of

available liquid funds

• SEK 363 mn dividend paid to shareholders in Q2

Operations

• Free-TV Scandinavia: 18% sales growth y/y in Q2 at

constant exchange rates with increased 27% operating

margin following growth in all three countries

• Pay-TV Nordic: 8% sales growth y/y at constant

exchange rates & 20% operating margin with premium

DTH ARPU up 5% y/y at constant exchange rates +

continued IPTV subscriber uptake

• Free-TV Emerging Markets: 4% sales growth y/y at

constant exchange rates with operating income up 29%

• Pay-TV Emerging Markets: 12% sales growth y/y at

constant exchange rates & 16% operating margin

following subscriber growth + full consolidation of Viasat

Ukraine platform

• Online: 30% sales growth y/y at constant exchange rates

& CDON Group sales up 34% y/y in Q2 at constant

exchange rates with stable operating margin

All Broadcasting Businesses Report Growth at Constant FX


Second Quarter 2010

• Record sales of SEK 3,870 (3,584) mn – up 13% y/y at

constant exchange rates

• Free-TV Scandinavia sales of SEK 1,116 (984) mn – up

18% y/y at constant exchange rates

• Record operating income of SEK 603 (478) mn - up 26%

y/y

– Increased operating margin of 16% (13%) when

excluding associated company income

• Total operating income up 23% y/y to SEK 726 (588) mn

– Including SEK 123 (111) mn of associated

company income

• Pre-tax profit up 23% y/y to SEK 697 (566) mn

• Net income up 20% y/y to SEK 522 (436) mn

• Basic earnings per share up 17% y/y to SEK 7.58 (6.45)

• Dividend of SEK 363 mn (SEK 5.50 per share) paid to

shareholders in May for full year 2009

0%

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Q2 2009 Q2 2010

Sales EBIT* EBIT Margin*

13% Sales Growth at Constant FX & EBIT up 26% y/y ex Associates

* Excluding SEK 123 (111) mn of associated income


First Half Year 2010

• Net sales of SEK 7,394 (6,920) mn – up 12% y/y at


• Free-TV Scandinavia net sales of SEK 2,096 (1,870) mn

– up 17% y/y at constant exchange rates

• Operating income up 30% y/y to SEK 1,018 (784) mn

– Increased operating margin of 14% (11%) when excluding associated company income

• Total operating income up 52% y/y to SEK 1,248

(822) mn

– Including SEK 229 (38) mn of associated company income

• Pre-tax profit up 53% y/y to SEK 1,165 (760) mn

• Net income up 41% y/y to SEK 822 (582) mn

• Basic earnings per share up 41% y/y to SEK 12.18

(8.65)0%

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H1 2009 H2 2010

Sales EBIT* EBIT Margin*

12% Sales Growth at Constant FX & EBIT up 30% y/y ex Associates

* Excluding SEK 229 (38) mn of associated income


• Operating Review

Operating Review


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Q2 2009 Q2 2010 H1 2009 H1 2010

Revenue EBIT EBIT Margin

• Q2 sales of SEK 1,116 (984) mn & H1 sales of 2,096 (1,870) mn – up 18% in Q2 & 17% in H1 at constant exchange rates

– Advertising market growth in all three countries

– Sales growth in all three countries

• OPEX up 7% y/y in Q2 & up 9% in H1

– Higher programming investments in all three countries + impact of launch of TV3 PULS in Denmark at end of Q1 2009

• Operating income up 38% y/y to SEK 297 (216) mn in Q2 & up 22% to 513 (419) mn in H1

• Increased operating margins of 27% (22%) in Q2 & 24% (22%) in H1 with incremental margins of approximately 50%

• Ongoing market outperformance due to ’triple-play effect’ of increasing penetration, rising audience shares & enhanced pricing power

Free-TV Scandinavia

Financial Highlights

(SEK mn )


Sweden

• Commercial target group audience share up 0.8 pp y/y

– Significant target CSOV gains for TV6 & TV8 with stable development for TV3

• Announced launch of new free-TV sports channel TV10 in

Sweden with initial reach of >50% of Swedish TV

households

Denmark

• Commercial target group audience share up 0.3 pp y/y

– Successful spring schedules with strong OP’s, acquired content & sports

Norway

• Commercial target group audience share stable y/y

– High rating own productions, selected FIFA World Cup 2010 matches & increasing penetration for Viasat4 channel

Free-TV Scandinavia

Commercial Share of Viewing (15-49)

Operating Highlights

10

15

20

25

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40

45

50

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Q2 2010

Sweden: TV3, TV6, TV8, ZTV

Denmark: TV3, TV3+, TV3 PULS

Norway: TV3, Viasat4

(%)


Pay-TV Nordic

• Sales of 1,115 (1,074) mn in Q2 & H1 sales of SEK

2,207(2,143) mn – up of 8% in Q2 & 7% in H1 at constant

exchange rates

• OPEX stable y/y at SEK 894 (895) mn in Q2 & SEK 1,794

(1,790) mn in H2

– Underlying local currency costs up y/y in Q2 & H1 following addition of 5 new Viasat channels since begininng of 2009 & addition or extension of various key sports rights contracts

– SAC down y/y to SEK 135 (151) mn in Q2

• Operating income up 24% to SEK 221(179) mn in Q2 &

up17% to SEK 413 (353) mn in H1, with increased

operating margins of 20% (17%) and 19% (16%)

,respectively


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Q2 2009 Q2 2010 H1 2009 H1 2010


(SEK mn )


• Q/Q net addition of 11,000 net new premium IPTV subscribers & y/y addition of 55,000 new new IPTV subscribers

• Stable premium DTH subscriber base & continued growth of multi-room, ViasatPlus and HDTV subscriptions

• Premium DTH ARPU up y/y to SEK 4,446 (4,397) in Q2 – up 5% y/y at constant exchange rates

– Reflected price increases & ongoing uptake of value-added products and services

• Viasat now only Scandinavian operator to offer coverage of Premier League in all 3 countries following acquisition of three

year exclusive Swedish broadcasting rights in Q1 & carriage agreements with TV 2 in Norway in June and TV 2 in Denmark

in July &

Pay-TV Nordic

Premium Subscribers DTH Value-added Services


200

400

600

800

1000

Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

Premium IPTV Premium DTH

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50

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200

250

Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

ViasatPlus subscriptions Multi-room subscriptions

HDTV subscribers

(Thousa

nds)

(Thousa

nds)


Free-TV Emerging Markets

• Sales of SEK 582 (612) mn in Q2 & SEK 1,016 (1,076)

mn in H1 – up 4% in Q2 y/y & 2% in H1 at constant

exchange rates

– Continued ad market share gains for all free-TV businesses

– Markets gradually improving but almost all markets still down y/y in Q2

• Operating costs down 7% y/y to SEK 541 (580) mn in Q2

& down 7% to SEK1,040 (1,118) mn in H1

– Reflected cost reduction initiatives, ongoing selective programming investments and favourable y/y currency exchange rate movements

• Operating profit up 29% y/y to SEK 42 (32) mn in Q2 with

operating margin of 7% (5%) & significantly reduced

operating loss of SEK -24 (-42) mn in H1


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Revenue EBIT

(SEK mn)


Baltics

• Sales of SEK 131 (149) mn in Q2 & SEK 215 (245) mn in H1 – down 2% in Q2 & 3% in H1 at constant exchange rates

• Pan-Baltic CSOV up y/y to 39.3% (37.4%)

• Estonian and Latvian analogue switch-off in Q2 & Lithuania scheduled for 2012 – expected to drive penetration of secondary channels

• Operating profit up 66% y/y to SEK 17 (10) mn in Q2 with an operating margin of 13% (7%) & reduced operating loss of SEK -2 (-3) mn in H1

Czech

• Sales of SEK 250 (254) mn in Q2 & SEK 440 (463) mn in H1 – up 5% y/y in Q2 & stable in H1 at constant exchange rates

• CSOV up y/y to 22.3% (21.0%) reflecting significantly improved performance of own-produced prime-time content & continued success of Prima COOL

• Operating profit up 44% y/y to SEK 35 (24) mn in Q2 & up 7% to SEK 28 (27) mn in H1 with operating margins of 14% (10%) in Q2 & 6% (6%) in H1

Bulgaria

• Sales of SEK 129 (142) mn in Q2 & SEK 233 (248) mn in H1 – up 1% y/y in Q2 & up 4% in H1 at constant exchange rates

• CSOV of 28.0% (36.1%) due to FIFA World Cup coverage on competing channels & exceptional ratings of Big Brother show on Nova in Q2 2009

• Operating profit of SEK 11 (12) mn in Q2 with operating margin of 9% (9%) & 0 (-1) mn in H1

Free-TV Emerging Markets

Commercial Share of Viewing


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Pan-Baltic (15-49)

Czech Republic (15-54)

Bulgaria (18-49)

Hungary (18-49)

Slovenia (18-49)

Q2 2009 Q2 2010

(%)


Pay-TV Emerging Markets

• Sales of SEK 225 (219) mn in Q2 & SEK 443 (439) mn in

H1 – up 12% in Q2 & up 13% in H1 at constant exchange

rates

– Reflected consolidation of Russian DTH satellite platform, full consolidation and growth of Ukrainian DTH satellite platform & continued growth in number of mini-pay subscriptions

• OPEX up 2% y/y in Q2 & up 1% in H1

– Reflected launch of 5 new channels since the beginning of 2009, subscriber acquisition campaigns in Ukraine, consolidation of Raduga TV in Russia & full consolidation of Viasat Ukraine

• Operating profit up 6% y/y to SEK 36 (34) mn in Q2 & up

3% to SEK 76 (75) mn in H1

• Stable operating margins of 16% (16%) in Q2 & 17%

(17%) in H1


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Q2 2009 Q2 2010 H1 2009 H1 2010


(SEK mn )


• 20,000 net net premium subscribers added y/y on Baltic and Ukrainian DTH satellite platforms

• Russian DTH satellite platform Raduga TV had 93,000 basic subscribers at end of Q2

• Full consolidation of Viasat Ukraine from June following acquisition of additional 35% shareholding

• Acquisition and consolidation of 50% of Raduga TV satellite DTH platform in Russia in February 2010

• New pay-TV channel Nova Sport launched in Bulgaria at end of April

– Broadcasts premium sport content including Premier League, UEFA Champions League, IAAF Diamond League athletics and IIHF World Championship ice hockey

• Viasat Nature East pay-tv channel launched in 25 countries in Central and Eastern Europe at beginning of May

Pay-TV Emerging Markets

DTH Subscribers

Mini-pay Subscriptions


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Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

Premium Basic

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Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

(Thousands)

(million)


Online

• Segment sales of 615 (490) mn in Q2 & SEK 1,239 (1,010) mn in H1 – up 30% in Q2 & up 27% in H1 at constant exchange rates

• CDON Group – sales up 34% y/y in Q2 & up 28% in H1 at constant exchange rates

– Entertainment business reported 15% y/y sales growth in Q2 at constant exchange rates – driven by increased home electronics sales & summer promotion campaigns

– Sports & Health business reported 36% y/y sales growth at constant exchange rates – driven by increased no. of visitors & higher conversion rates

– Fashion business reported 112% sales growth in Q2 at constant exchange rates – driven by successful magazine, TV and radio promotion campaigns

– Swedish Online toy retailer Lekmer.se acquired and consolidated in Q2

• Operating income up 20% to SEK 29 (24) mn y/y & more than doubled to SEK 76 (29) mn in H1, with stable operating margin of 5% (5%) in Q2 & increased margin of 6% (3%) in H1

– CDON Group operating income up 28% y/y in Q2 to SEK 28 (22) mn & up 55% to SEK 66 (43) mn in H1 with stable operating margin of 6% (6%) in Q2 & increased margin of 7% (6%) in H1

• Continuing work towards demerger & spin-off in Q4 2010

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CDON Group sales CDON Group EBIT

EBIT margin

Financial & Operating Highlights

(SEK mn) (SEK mn)

60%15%

25%

Entertainment Sports & Health Fashion

CDON Group

Q2 Revenue per CDON Group Division


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Q2 2009 Q2 2010 H1 2009 H1 2010

Sales EBIT EBIT margin

Other Businesses

Radio Radio

Modern Studios

• Sales of SEK 113 (134) mn in Q2 & SEK 189

(237) mn in H1 following lower y/y production

levels

• Increased operating profits of SEK 5 (3) mn in Q2

& SEK 9 (7) mn in H1

Financial & Operating Highlights

• Sales of SEK 211 (188) mn in Q2 & SEK 393

(348) mn in H1 – up 13% y/y in Q2 & in H1 at


– Reflected growth for P4 Radio in Norway & Swedish operations, as well as contribution from newly launched P5 local station network in Norway

• Operating costs up 9% y/y in Q2 & up 6% in H1

– Reflected increased royalty and sales comissions in Norway & launch of new local station network in Norway, offset by lower y/y costs in Sweden and positive currency exchange rate movements

• Operating income up 31% y/y to SEK 36 (28) mn

in Q2 & up more than doubled to SEK 48 (23) mn

in H1

• Increased operating margins of 17% (15%) in Q2

& 12% (7%) in H1


Financial Review


Income Statement

• Associated company income primarily comprised SEK 115

(103) mn of income from 38.9% shareholding in CTC

Media in Q2 & SEK 219 (28) mn in H1

• Depreciation & amortisation charges of SEK 56(60) mn in

Q2 & 111 (118) mn in H1

• Net interest reduced y/y to SEK -19 (-33) mn in Q2 &

-37 (-70) mn in H1

• Other financial items of SEK -11 (10) mn in Q2 & SEK -46

(9) mn in H1 reflected FX differences, amortisation of

costs arising from arrangement of new loan facility in 2009

& financial non-cash accounting loss arising from issue of

new shares by CTC Media.

• Increase in number of total outstanding shares to

65,935,207 at end of period following issue of shares in

connection with 2005 incentive programme during the

quarter

(SEK mn)Q2

2010Q2

2009H1

2010H1

2009

Net sales3,870 3,584 7,394 6,920

Operating income before associated company income & non-recurring items

603 478 1,018 784

Associated company income*

123 111 229 38

Total operating income (EBIT)

726 588 1,248 822

Net interest & other financial items

-30 -23 -83 -61

Income before tax 697 566 1,165 760

Net income 522 436 822 582

Basic EPS 7.58 6.45 12.18 8.65


Cash Flow

• SEK -345 (270) mn change in working capital in Q2 and

SEK -608 (-27) mn change in working capital in H1

included the first and largest payment for three year

Swedish broadcasting rights to the Premier League, as

well as payments for other sports rights & also reflected

the low working capital balances at beginning of Q2

• Investments in shares of SEK 136 (1) mn in Q2 & SEK

273 (142) mn in H1 primarily comprised payment for

35% of Viasat Ukraine in Q2 & payment for 90% of

MTG’s 50% stake in Russian DTH platform Raduga TV,

with payment for the remaining 10% made in Q2

• CAPEX of SEK 22 (34) mn in Q2 & SEK 70 (52) mn in

H1 represents less than 1% of Group sales for both

periods

• Cash flow to financing activities primarily reflected SEK

363 mn dividend payment to MTG shareholders in Q2

• SEK 514 (1,084) mn of cash & cash equivalents at end

of Q2

(SEK million) Q2 2010 Q2 2009 H1 2010 H1 2009

Cash flow from operations 570 425 910 593

Changes in working capital

-345 270 -608 -27

Net cash flow fromoperations

225 695 302 566

Cash flow to/from investing activities

-158 -35 -342 -194

Cash flow to/fromfinancing activities*

-372 -287 -133 -262

Net change in cash & cash equivalents

-305 374 -173 110

* Including SEK 363 (329) in cash dividend paid to shareholders in Q2


Financial Position

• Total borrowings of SEK 3.7 billion

– Comprises SEK 3.0 billion facility due in 2012 & SEK 650 mn drawn SEK 3.5 billion facility (due 2011)

• SEK 3,464 (2,966) mn of available liquid funds (cash &

undrawn facilities) of Q1

• SEK 3,185 (3,603) billion of net debt, equivalent to

1.2x LTM EBITDA

• SEK 2.1 billion book value of 38.9% CTC Media stake of

at end of Q2, compared to public equity market value of

SEK 6.7 billion (USD 867 mn) = surplus of SEK 4.6 bn

(SEK mn) 30 Jun 2010 30 Jun 2009 31 Dec 2009

Non-current assets9,164 12,470 9,026

Current assets6,382 6,414 5,625

Total assets15,546 18,883 14,651

Shareholders’ equity5,986 8,559 5,680

Long-term liabilities4,353 5,388 4,175

Current liabilities5,207 4,936 4,796

Total equity & liabilities15,546 18,883 14,651


Summary


Summary

• Record Q2 sales & operating profits, with increased operating margin

• Continued audience, subscriber and advertising market share gains

• Scandinavian free-TV operations grew in all countries with healthy incremental margins

• Premium Nordic IPTV Subscriber & DTH ARPU growth with increased operating margin + now only broadcaster with English Premier League & Champions League coverage across Scandinavia

• Emerging Markets free-TV business returned to growth following ad market gains in all territories, with increased operating margin

• Growth in Emerging Markets pay-TV subscriber base with stable operating margin

• Ongoing process to demerge and distribute fast growing CDON Group to shareholders in Q4

• Financial position as strong as ever with net debt to LTM EBITDA of 1.2x and SEK 3.5 bn of available liquid funds

Set to Continue to Outperform


For Further Information, please visit www.mtg.se or contact:

MTG Investor Relations

Tel: +44 7768 440 414 / +44 779 113 84 86

Email: [email protected]

Financial results presentation Q2 2010

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Transcript of Financial results presentation Q2 2010