Financial

Annual Report 2019: Shaping the Future

1 January 2019103 pages49,929 words

Summary

Modern Times Group (MTG) used 2019 to reposition itself as a pure‑play esports and gaming company, executing a split that created a dedicated esports business and preparing a subsequent separation into two listed entities. The strategic review outlined a seven‑point plan focused on organic growth, partnership scaling, ecosystem dominance, long‑term game‑as‑a‑service models, cross‑portfolio synergies, continuous innovation and disciplined capital allocation. This transformation was financed by the sale of Nova for SEK 1.8 billion, the divestment of Zoomin, and the capital gain generated by distributing shares of the newly listed Nordic Entertainment Group. Financially, the year marked a dramatic turnaround. Net sales rose 10 % overall, with esports sales increasing 13 %, while net income surged to SEK 2,285 million from SEK 471 million the prior year. Shareholders’ equity climbed to SEK 5.565 billion, and the group eliminated all external borrowings, reducing debt from SEK 3.68 billion to zero. Asset levels contracted sharply, with equipment falling from SEK 859 million to SEK 212 million, and the net financial position shifted to a SEK ‑28 million deficit after a previous surplus. The board adopted a zero‑dividend policy and reinforced a “buy‑and‑build” approach, taking majority stakes in esports firms while retaining founders as minority shareholders. Corporate governance remained robust, with full compliance to Swedish legislation and Nasdaq Stockholm rules. The board, composed of five re‑elected non‑executive directors, met twelve times and oversaw the split, the gaming review and risk management through dedicated committees and a GRC function. Executive remuneration was benchmarked against independent advisors, capped at 125 % of base salary for short‑term incentives and 200 % for long‑term incentives, and incorporated claw‑back provisions and ESG metrics. Overall, the 2019 period reflects MTG’s decisive shift toward an esports‑centric model, underpinned by strong financial performance, disciplined capital management, and rigorous governance.

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Annual Report 2018: Shaping the Future of Entertainment

In 2018 MTG delivered a robust financial rebound while executing a decisive strategic shift toward esports and digital‑video assets. Net sales rose 12‑13 % to SEK 19.7 billion and operating income increased 24 % to SEK 1.57 billion, lifting the operating margin to roughly 8 %. Net profit from continuing operations reached SEK 1.17 billion, yet net debt grew to SEK 2.58 billion (1.3 × EBITDA) and the board elected not to pay a dividend, resulting in a 15 % fall in B‑share price and an overall –11 % total shareholder return. Balance‑sheet strength improved, with total assets climbing to SEK 20.3 billion and equity to SEK 7.0 billion, while retained earnings stood at SEK 3.0 billion. The year culminated in the separation of MTG from Nordic Entertainment Group (NENT), whose shares were listed on Nasdaq Stockholm in March 2019. Post‑split, MTG accelerated its pivot into the esports ecosystem, acquiring ESL, DreamHack, InnoGames and Kongregate, and divesting non‑core holdings such as Trace Partners. These moves positioned the company to capture growth in online gaming and competitive entertainment. Corporate governance adhered to Swedish law and the Swedish Corporate Governance Code. The board, composed of six non‑executive directors, met 14 times and operated through remuneration, audit and risk committees. Executive remuneration remained tied to pre‑determined short‑term and long‑term performance targets, with STI capped at 100 % of fixed salary. Internal‑control and risk‑management frameworks were deemed effective and compliant with IFRS and Nasdaq requirements. Accounting practices followed IFRS, recognising goodwill on acquisitions, applying the equity method for joint ventures, and translating foreign subsidiaries into SEK. A widening deferred‑tax deficit and a tax‑loss carry‑forward of SEK 111 million were disclosed. Capital was underpinned by a SEK 4 billion syndicated facility, of which only SEK 200 million was drawn. Overall, the 2018 results illustrate MTG’s financial resilience, a clear strategic reorientation toward esports, and solid governance and risk controls across its European‑centric media operations.

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Modern Times Group’s 2009 annual report presents a year of contrasting outcomes, combining modest revenue growth with a substantial net loss driven primarily by non‑recurring impairments. Net sales rose to SEK 14.2 billion, up from SEK 13.2 billion the prior year, while operating income before exceptional items reached SEK 1.65 billion. A goodwill and asset‑impairment charge of roughly SEK 3.35 billion turned operating results negative, producing a consolidated net loss of SEK 2.0 billion and a loss per share of SEK 30.97. Despite the loss, the group generated SEK 1.5 billion of net operating cash flow, reduced net debt to SEK 2.7 billion (1.1 × EBITDA), and retained SEK 3.8 billion in liquid funds, supporting a proposed dividend of SEK 5.50 per share and authorization to repurchase up to 10 % of outstanding shares. The report underscores a strategic shift toward emerging‑markets pay‑TV, where revenue grew 33 % to SEK 875 million and operating profit increased 59 % to SEK 168 million, while subscriber numbers expanded across premium, basic and mini‑pay services. Digital retail sales also rose 26 %, reflecting diversification beyond traditional broadcasting. Governance is highlighted through a board of eight non‑executive directors, active remuneration and audit committees, and a Modern Responsibility framework that integrates employee development, carbon‑footprint auditing, ISO 14001 certification and green‑building standards. Approximately 86 % of staff completed performance surveys and 61 % of permanent employees received training, indicating strong internal engagement. Financial risk management remains a priority, with the group maintaining sufficient credit facilities, modest exposure to transaction‑level hedges, and an unhedged translation risk profile. IFRS updates slated for 2010 are expected to affect disclosures but not the core financial position. Overall, the 2009 performance reflects a resilient cash position and growth in high‑margin emerging markets, offset by significant impairment charges and a need for continued debt discipline.

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The 2015 annual review presents Modern Times Group’s (MTG) financial performance, corporate governance, and strategic direction for the fiscal year ending 2015. It underscores a central thesis that, despite active board oversight and a continued emphasis on digital‑transformation initiatives, the Group faced a pronounced contraction in profitability and equity while maintaining a high dividend payout. Financial results reveal a sharp decline in net income from SEK 1.17 billion in 2014 to SEK 251 million in 2015, with operating income falling from SEK 1.14 billion to SEK 756 million and basic earnings per share dropping from SEK 11.75 to SEK 3.22. Total assets modestly increased to SEK 16.5 billion, yet liabilities surged to SEK 11.7 billion, compressing equity to SEK 4.8 billion. The Board proposed an ordinary dividend of SEK 11.50 per share—approximately 86 % of net income—while the share‑buy‑back mandate remained unused. Provisions rose to SEK 737 million and impairment losses climbed to SEK 23 million, driven largely by cost‑of‑goods‑services and administrative expenses; depreciation stayed steady at SEK 108 million. Governance activities included 11 board meetings, oversight by Audit and Risk Committees, and adherence to auditor independence policies with KPMG as external auditor since 1997. Executive remuneration featured three share‑based long‑term incentive plans, though board members did not participate. The board comprised 11 directors with disclosed shareholdings, and senior‑management appointments added new executive vice‑presidents. Operationally, MTG reported activity across five segments—Free‑TV Scandinavia, Pay‑TV Nordic, Free‑TV Emerging Markets, Pay‑TV Emerging Markets, and a combined Nice Entertainment/MTGx/Radio unit—reflecting a geographic scope that spans the Nordic region and selected emerging markets. The report also defines key television consumption categories, such as direct‑to‑home

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Modern Times Group’s 2016 annual report presents a comprehensive overview of the company’s transition toward a digital‑entertainment model and its financial outcomes for the fiscal year. The narrative emphasizes a strategic shift driven by aggressive acquisitions in esports and online video, which underpinned a 7 % increase in total net sales to SEK 17.3 billion and a rise in operating profit to SEK 1.35 billion, despite a modest decline in traditional profitability metrics such as return on equity, which fell to –2 %. Key performance highlights include a 194 % surge in net sales for the MTGx digital‑video unit after acquiring Turtle Entertainment, Zoomin.TV, Splay and DreamHack, lifting its operating margin from 0.2 % to 4.4 %. Organic growth turned positive at +2.2 % following a –14.2 % contraction the prior year, driven by rapid expansion of esports events and leagues. The company recorded a SEK 95 million goodwill impairment on Zoomin.TV, while intangible assets grew by SEK 111 million. Credit‑risk exposure stood at SEK 3.1 billion, with all counterparties holding at least an S&P A rating and 85‑100 % of foreign‑currency programme cash flows hedged. Governance disclosures detail a four‑member, unpaid Nomination Committee and a six‑member Board, alongside an Audit Committee that reviews all accounting estimates annually. Senior‑executive remuneration rose to SEK 84.5 billion, and the Board proposed a dividend of SEK 12.00 per share, representing 93 % of net income. Auditors affirmed that the consolidated statements present a fair view under IFRS, noting significant goodwill and intangible‑asset balances but no material uncertainties regarding the group’s ability to continue as a going concern. The report covers MTG’s global operations, primarily in TV/radio advertising, pay‑TV subscriptions, cable fees, merchandise, and programme‑rights licensing, for the 2016 calendar year.

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Annual Report 2019: Shaping the Future

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