MTG turns in solid result despite Russian reversal

Jørgen Madsen Lindemann, MTG president and CEO.

Modern Times Group has delivered fourth quarter profits in line with analyst forecasts after a tough year that has seen the forced sale of its stake in Russian broadcaster CTC Media and the sale of its Russian and central and eastern European pay TV businesses.

MTG posted net sales of SEK4.54 billion (€487 million) for the fourth quarter, up 4% at constant exchange rates. EBIT before non-recurring items was SEK434 million, down from SEK478 million, while net income was SEK375 million, down from SEK471 million.

CTC, the sale of which has still to be finalised, was classified as a discontinued operation by the group with a net income of zero for the quarter. MTG said that the ‘fair value’ of its 38% holding in the company, the sale of its stake in which was forced by Russia’s new media laws severely restricting foreign ownership, was SEK1 billion as of December 31, reflecting its completed sale of a 75% to UTV Management for US$200 million.

MTG said that the sale or termination of its holding in the group would result in a non-cash charge to net income of SEK1 billion.

MTG’s emerging markets pay TV business saw fourth quarter sales drop by 40% to SEK212 million following the sale and deconsolidation of the Russian and international pay TV channel business in November. MTG said it “a solution is currently being finalized” regarding the future of its troubled Ukrainian pay TV platform, while youth-oriented channel business Trace saw sales grow in the quarter.

MTG’s Nordic pay TV business saw sales rise by 3% at constant exchange rates to SEK1.5 billion, while EBIT fell from SEK184 million to SEK173 million. The total premium subscriber base grew by 24,000 quarter-on-quarter excluding the Viaplay subscription video-on-demand service.

Nordic free TV activities saw sales rise at constant exchange rates thanks to a strong performance in Denmark and Norway. In emerging markets, Bulgaria the Baltic states and the Czech Republic all reported higher sales, while MTG’s Hungarian operations were deconsolidated in November.

The relatively strong performance enabled the group to propose an increased dividend of SEK11.50 a share.

“Our aim is to accelerate our sales growth and increase our operating profits in 2016, due to the positive effects of the transformation process; the high level of operational gearing in our emerging market free-TV operations; and the positive sales impact of the content investments that we have made. These benefits will gradually compensate during the year for the anticipated SEK250m of incremental adverse FX effects, and the additional costs for the new or extended sports rights that we have acquired,” said Jørgen Madsen Lindemann, president and CEO.