Viaplay Helps Lift MTG Q2 Performance

July 21, 2015 World Screen Top Stories
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STOCKHOLM: The Viaplay on-demand offering and IPTV growth helped to offset declines across the cable and satellite base at Modern Times Group (MTG) in the second quarter.

Operating profit, before non-recurring items, fell to SEK 452 million ($52.9 million) from a year-ago SEK 473 million ($55.4 million). Sales of SEK 4.16 billion ($487 million) were up from the prior year's Q2 of SEK 4.11 billion ($481 million).

President and CEO Jørgen Madsen Lindemann said that sales and profits were up for the broadcasting businesses, despite the ongoing adverse currency effects on its content costs. MTG increased its advertising market shares in nearly all markets and grew our subscriber bases through Viaplay across the Nordic region and Trace in the international markets. The group's operating profit before non-recurring items was stable when excluding M&A transaction costs of SEK 20 million ($2.3 million), and would have been up when excluding the negative currency effects.

Free-TV Scandinavia saw its sales stable at a constant rate, reflecting the combination of lower sales in Sweden and higher sales in Denmark and Norway. The Swedish TV advertising market is estimated to have declined, while the Norwegian and the Danish markets are estimated to have grown.

Pay-TV Nordic reported sales growth, thanks to the expansion of Viaplay. The increase in operating costs reflected the ongoing investments in content and technology, as well as the adverse impact of the appreciation of the U.S. dollar. Profits were stable for the quarter.

Free-TV Emerging Markets delivered sales growth in nearly all countries. Operating costs were up, with higher programming investments across the region. Profits for the quarter were up as well. In the pay-TV segment for the region, there was 17 percent sales growth, with profits up. The wholesale channel business offset lower sales for the Ukrainian satellite platform.

Nice Entertainment reported lower sales, which primarily reflected significantly lower sales in events production. This was only partly offset by ongoing investments in MTGx and M&A costs primarily related to the recently announced acquisition of Turtle Entertainment.

As for Russia's CTC Media, it recently received a $200 million non-binding cash offer for 75 percent of business operations. MTG has reclassified its holding in the company as "discontinued operation." Lindemann said that the offer is now being evaluated by a special committee appointed by the CTC Media board. If the transaction is approved, CTC Media’s board currently anticipates that the funds available pro rata to its public stockholders and MTG would represent a modest premium to the closing price on July 2. He added that MTG is continuing to explore a range of options regarding its Russian operations "in order to best protect shareholder value."

Lindemann commented: "The rate of decline in linear viewing in Scandinavia did slow in the quarter, while our audience shares and advertising prices have continued to rise in almost all markets. Our total digital sales grew by over 30 percent and we are now rolling out our new programmatic automated ad buying platform across our territories. Viaplay is set for further growth following new partnerships with the likes of Apple TV, Nextgentel and 3, and we have also now secured a number of long-term multiplatform content deals for the likes of NHL ice hockey in the Nordics and Champions League football in the Baltics and Finland. Thanks to our healthy financial position and cash generative operating model, we will continue to expand our digital operations and consolidate our market positions, but also balance this with ongoing actions to mitigate the adverse currency effects that we continue to face."