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Modern Times Group Q2 2016 Interim Report

Key insights

6 takeaways

01
MTG reported Q2 2016 net sales of SEK 4,328 million and operating income of SEK 472 million, driven by a 2.5-fold increase in digital sales.See it on page 9
02
The company is aggressively expanding into esports through the launch of a 24/7 channel and the establishment of industry organizations like WESA.See it on page 9
03
The net debt-to-EBITDA ratio increased to 1.2 from 0.6 in the prior year, reflecting the capital-intensive nature of the group's digital transformation and expansion strategy.See it on page 24
04
Return on Capital Employed (ROCE) declined from 30% to 23% as the company prioritized long-term digital infrastructure and premium sports rights investments.See it on page 25
05
MTG divested its interest in CTC Media and exited traditional broadcasting in the CIS region to focus on core Nordic and international entertainment segments.See it on page 3
06
MTG Studios improved operating income during the period by implementing cost-efficiency programs and capitalizing on increased demand for scripted content.See it on page 9

Summary

Modern Times Group achieved a period of profitable growth during the second quarter of 2016, reporting net sales of SEK 4,328 million and operating income of SEK 472 million. This performance underscores a successful strategic pivot toward digital transformation, evidenced by a 2.5-fold increase in digital sales and a concerted expansion into the esports sector. By launching a dedicated 24/7 esports channel and establishing industry-standard organizations like WESA, the company is positioning itself as a leader in digital video entertainment. These efforts are complemented by the strong performance of MTG Studios, which realized significant gains in operating income through enhanced cost-efficiency programs and heightened demand for scripted content.

The company’s financial structure underwent notable shifts during this period, largely influenced by the divestment of its interest in CTC Media and the finalization of purchase price allocations for 2015 acquisitions. While the sale of the CTC Media stake provided a vital cash inflow that helped manage net debt, the company’s broader financial metrics reflect the costs of its aggressive expansion strategy. The net debt-to-EBITDA ratio rose to 1.2 from 0.6 in the prior year, and the Return on Capital Employed declined from 30% to 23%. These figures highlight the capital-intensive nature of the group’s transition, which involves balancing ongoing investments in premium sports rights and digital infrastructure against the challenges of content cost inflation and currency volatility.

Geographically, the organization has streamlined its operations by exiting traditional broadcasting in the CIS region to focus on its core Nordic and international entertainment segments. Despite reporting a net loss for the first half of 2016, the underlying operating income remains robust. The current trajectory emphasizes a long-term commitment to digital video expansion, prioritizing market share and content development over short-term liquidity, as the group navigates the complexities of a rapidly evolving global media landscape.