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Modern Times Group Q3 2016 Financial Results

Key insights

6 takeaways

01
MTG achieved record Q3 2016 sales of SEK 4,126 million, marking a 7% organic growth rate, the highest since Q2 2011.See it on page 8
02
Reported EBIT fell to SEK 162 million from SEK 240 million in the prior-year period, primarily due to strategic investments in content, digital expansion, and currency headwinds.See it on page 5
03
The MTGx digital division grew pro forma sales by 35%, driven by esports, though it incurred increased EBIT losses from infrastructure spending and the acquisition of a 35% stake in InnoGames.See it on page 8
04
Nordic Entertainment delivered 11% organic sales growth supported by Viaplay subscriptions, while International Entertainment saw an 8% organic sales increase with improved operating margins.See it on page 5
05
The company is executing a cost transformation program targeting SEK 600 million in savings by 2017, having already realized SEK 110 million in Q3.See it on page 10
06
Management maintains its full-year 2016 outlook, projecting accelerated sales growth and higher operating profits based on anticipated Q4 performance and cost efficiencies.See it on page 12

Summary

Modern Times Group’s third-quarter 2016 financial results demonstrate a strategic pivot from a traditional broadcaster toward a digital video entertainment provider. The company achieved record quarterly sales of SEK 4,126 million, representing a 7% organic growth rate, the highest level recorded since the second quarter of 2011. While top-line performance remains strong, reported EBIT declined to SEK 162 million from SEK 240 million in the prior-year period. This contraction was anticipated, driven by deliberate investments in content and the MTGx digital division, unfavorable foreign exchange impacts, and the disposal of previously profitable business units.

Performance across business segments was mixed. Nordic Entertainment saw 11% organic sales growth fueled by Viaplay subscriptions and premium sports content, though EBIT was pressured by content investments and currency headwinds. International Entertainment reported an 8% organic sales increase and improved operating margins, while MTG Studios experienced a 6% decline in organic sales due to production schedule timing. The MTGx division continued to scale, recording a 35% pro forma sales increase led by esports, though it incurred higher EBIT losses due to ongoing infrastructure investment and acquisition costs related to the purchase of a 35% stake in InnoGames.

The company remains on track with its cost transformation program, targeting total savings of approximately SEK 600 million by 2017. With SEK 110 million in savings realized during the third quarter, management maintains its full-year 2016 outlook, anticipating accelerated sales growth and higher operating profits. This projection relies on strong fourth-quarter performance, supported by operating leverage and the realization of cost efficiencies, despite the continued impact of strategic investments and market volatility.