Swedish media group MTG (Modern Times Group) has posted Q3 operating earnings slightly above market forecasts, but said it had cut its profit expectations for the remainder of the year for its digital arm MTGx, an important growth sector for the firm.
Q3 sales rise to SEK4,280 millionn (€444.5m), with 7 per cent organic growth, versus SEK3,657 million year on year. Q3 operating income was up 83 per cent to SEK 257 million.
In a statement, President & CEO Jørgen Madsen Lindemann offered the following comments:
7% organic sales growth for continuing operations
“We have now delivered a fifth consecutive quarter of more than 5% organic sales growth. Our 7% organic sales growth in Q3 was driven by higher sales for all four of our business segments, while our 17% total reported growth included the full contribution from InnoGames. The organic sales development reflected 39% growth for the MTGx businesses, including 49% organic esports sales growth, and double digit percentage point organic growth for both the International Entertainment and Studios operations. Nordic Entertainment generated 3% organic growth against tough comparisons, as we had exclusive coverage of the Rio Olympics and the Ice Hockey World Cup last year in Sweden, but we continued to benefit from higher advertising and subscription prices with further usage and revenue expansion for both Viaplay and Viafree.
83% profit growth for continuing operations
Nordic Entertainment, International Entertainment and MTG Studios all reported higher profits and margins. The contribution from InnoGames ensured that MTGx as a whole recorded lower losses on a sequential and year on year basis, while losses for MTGx’s esports operations did increase as we further scaled our market presence. We are investing in new products because of the exponential growth in the viewing numbers for each esports event, and publishers’ greater than ever focus on esports to drive community engagement. This is attracting more and more interest but the high margin sponsorship and distribution sales have been slower to materialise than anticipated.
Our objective remains to deliver profitable full year growth for the Group’s continuing operations, as well as for the Nordic Entertainment segment. Following the investments that we have made, we have adjusted our expectations for MTGx’s full year results. It remains our ambition to deliver a first quarterly profit for MTGx in the fourth quarter of this year, but at a lower level than previously anticipated. This excludes the potential non-cash write-down of up to SEK 35m described in the MTGx segmental review on page 8 of this report.
The transformation continues
We completed the acquisition of Kongregate, our second gaming company, during the quarter, and have completed the sale of our Baltic operations after the end of the quarter. This active portfolio management and focused capital allocation is key to our transformation, which is all about capitalising on the shift in consumer video consumption to on demand and mobile entertainment products like Viaplay, Viafree, Splay, ESL and InnoGames.
We have added more sports content to our streaming and traditional products in the Nordics, and premiered a number of original scripted productions that are not only attracting large local audiences, but also ever increasing interest from the international markets. We see continuing high demand for both our TV and radio products, which provide great value for money, and we are constantly looking at ways to enhance our on and offline offerings. Our integrated entertainment offering is now better positioned than ever in markets that are at the very forefront of the industry’s transformation.”