MODERN TIMES GROUP MTG AB INTERIM REPORT FOR THE THIRD QUARTER OF 2000 Modern Times Group MTG AB (OM Stockholmsbörsen: MTGA, MTGB; Nasdaq: MTGNY) today announced its interim results for the first nine months ended 30 September 2000 which are compared to the same period in 1999. @ SALES UP 23%, TO SEK 3.8 BILLION, INCLUDING THE ACQUISITION OF TV1000. @ OPERATING INCOME AFTER DEPRECIATION AND AMORTIZATION UP 358%, TO SEK 238 MILLION INCLUDING CAPITAL GAINS. @ INCOME AFTER FINANCIAL ITEMS UP 505 % TO SEK 236 MILLION. @ CONVERSION TO DIGITAL TELEVISION PROCEEDING AS PLANNED. @ ALL SHARES IN METRO INTERNATIONAL DISTRIBUTED TO MTG'S SHAREHOLDERS. @ 'BAREN' INTERACTIVE WEB/TV PROGRAM FORMAT SOLD TO RTL AND PEARSON; ACQUISTION OF LIBRARY OF FILM RIGHTS. FINANCIAL SUMMARY (SEK MILLION) Jan-Sept Jan-Sept 2000 1999 Net sales 3,775 3,077 Gross income 1,469 810 Operating income before depreciation and amortization 507 196 Operating income after depreciation and amortization 238 52 Income from operations no longer consolidated 33 - Income after financial revenue and expense 236 39 OPERATIONS Organization The operations in the Metro International business area and the Swedish and Finnish Metro operations in the Publishing business area were spun off in a separate company distributed to shareholders on August 15, 2000. The figures in this report exclude Metro International, in figures for the nine months January-September 2000 and in comparative figures for 1999. At year-end 1999, the former business area Media Services was divided into two areas: SDI Media and Modern Studios. SDI Media brings together the Group's operations in subtitling and dubbing for movies and television programs, DVDs, the Internet, and various applications for the hearing- impaired. Modern Studios consists of the companies that produce various kinds of content: Strix Television, Sonet Film, Freeport, Nordic Artist, Modern Television, and Modern Entertainment. The Modern Interactive business area (formerly Electronic Retailing) consists of operations in traditional home shopping (TV-Shop), logistics and fulfillment (eCommerce Logistics), other interactive businesses in text TV and the Internet (MTG Internet Retailing), and the web production company NoName4Us. As a result, the MTG Internet, Interactive Television, and Webad businesses have been transferred from the former Media Services business area to Modern Interactive. Finally, MTG's share of earnings in Everyday are reported in this business area. The figures provided for comparison in this report have been restated to reflect these changes. To highlight the significance of subscription revenue, starting this year revenue from cable television is reported in net sales instead of in other operating revenues, as previously. The comparative figures have been restated in accordance with this principle. New businesses After the close of the period, the TV3 concept was launched in Hungary as Viasat3. FINANCIAL RESULTS Consolidated Earnings for the First Nine Months of 2000 The third quarter is a seasonally weak period for several of MTG's businesses, chiefly as a result of slow advertising sales in the summer. Net sales rose 23%, to SEK 3,775 million. Operating income before depreciation and amortization surged, to SEK 507 (196) million. Operating income after depreciation and amortization increased, to SEK 238 (52) million. The Group's net share of earnings in associated companies was SEK 26 (7) million. Net interest and other financial items ended at SEK -35 (-13) million, including SEK -19 (-2) million in net exchange rate gains and losses on the translation of financial receivables and liabilities denominated in foreign currencies. Income from operations no longer consolidated amounted to SEK 33 (-) million. Income after financial items increased, to SEK 236 (39) million. Income after tax improved, to SEK 131 (-30) million. Earnings per share amounted to SEK 2.00 (-0.19). MTG's total assets at September 30, 2000, were SEK 5,560 (3,663) million. REVIEW OF OPERATIONS Viasat Broadcasting Net sales: SEK 2,681 (2,145) million Operating income after depreciation and amortization: SEK 343 (119) million Operating income included SEK 106 million in capital gains on the divestment of shares in TV4. MTG retains 20.1% of TV4, which exceeds the 20% limit on voting rights stipulated in the consortium agreement. The business area's sales and result for the first nine months of 2000 include TV1000, which was acquired during the year. The deployment of digital television began during the period. Until the end of the first quarter of 2001, all customers subscribing to Viasat's Gold package will receive a free digital decoder. This investment makes possible ample savings on satellite distribution costs. The television advertising market in Scandinavia experienced healthy growth during the period, and markets in the Baltic states continued to recover, leading to increased sales by MTG's channels. The Swedish market was particularly robust. In Norway, sales slowed following the introduction of a new system for measuring viewing audiences in the Norwegian market. All in all, MTG's channels TV3, ZTV, 3+, Viasat Plus, and TV8 reported advertising sales totaling SEK 1,402 (1,263) million, up 11%. Subscription revenue totaled SEK 1,058 (922) million. Preparations for the launch of digital TV continued during the period, with successful trials. As expected, sales of new subscriptions leveled off as customers waited for digital TV. The total number of card subscribers increased only slightly, but more subscribers have Viasat Gold packages now. TV1000 had 377,000 (344,000) subscribers at the end of the period. The number of subscribers in the direct-to-home (DTH) market was as follows. Viasat Gold Cardholders September 1999 September 2000 September 1999 September 2000 Total for 255,000 297,000 1,065,000 1,067,000 Viasat Operating income for the entire business area was SEK 343 million. MTG's share of TV4's operating income is included in the business area in the share of earnings in associated companies along with the Group's share of earnings from channels in Estonia and Latvia. Radio Net sales: SEK 97 (79) million Operating income after depreciation and amortization: SEK 2 (11) million The market for radio advertising grew apace during the period, although prices remained at an unsatisfactory level. However, P4 Radio Hele Norge achieved satisfactory earnings. Publishing Net sales: SEK 144 (72) million Operating income after depreciation and amortization: SEK -4 (-11) million In the first nine months of 2000, Finanstidningen boosted revenues to SEK 113 million, thanks to improvements in the product paired with excellent growth in subscriptions and cumulative audience. Other products in the business area continued to perform weakly. Modern Interactive Net sales: SEK 457 (456) million Operating income after depreciation and amortization: SEK -22 (-18) million Sales for TV-Shop declined during the period, to SEK 344 million for the first nine months, as a result of termination of unprofitable distribution agreements. MTG plans to write off in the fourth quarter some balance sheet items related to restructuring of the business area. The expense is estimated at SEK 20 million. The logistics company e-CommerceLogistics (eCL) reported healthy growth in sales for the period, thanks partly to work for clients outside MTG. Interactive business via text TV and the Internet generated revenues totaling SEK 56 million. SDI Media Net sales: SEK 235 (163) million Operating income after depreciation and amortization: SEK 10 (9) million MTG formed SDI Media to define more sharply and make more transparent its businesses in subtitling and dubbing for cinemas, television, and DVDs as well as translations for the Internet and applications for TV viewers who are hearing-impaired. The business area, currently the world leader in its field, has completed its launch phase and is focusing on growth and profitability. The sales growth so far this year derives both from organic growth and acquired businesses. Modern Studios Net sales: SEK 340 (258) million Operating income after depreciation and amortization: SEK -2 (4) million Strix reported stronger growth for the period, and several program formats, such as Baren, were sold to new markets. Business activity in Nordic Artist will be cut back owing to the poor performance of the company. During the period, the acquisition of Modern Entertainment was completed. Income from divested operations Operating income after depreciation and amortization: SEK 33 (-) million For several reasons including adverse tax effects, MTG did not include in the spin-off of Metro its Swedish sales company, which is also a holding company for assets such as the Group's shares in Finanstidningen. Instead, the sales activities in this company were transferred to a new company in the Metro group, effective June 1, 2000. Earnings from this business for the first five months of 2000 have been consolidated in MTG's accounts but are not included in the pro forma comparative figures for 1999, and are therefore reported on a separate line. MTG's remaining interest in Metro consists of a convertible debenture loan totaling USD 23.5 million and a commercial loan of USD 23.5 million. FINANCIAL POSITION Equity/assets ratio Consolidated shareholders' equity has increased in 2000 as a result of holders of a convertible debenture loan converting the entire loan into shares and new shares being issued to a company in the Kinnevik group in connection with the acquisition of TV1000. The Group's equity/assets ratio (defined as consolidated shareholders' equity including minority interests and the convertible debenture loan, divided by total assets) was 43% (36%) at the end of the period. This calculation does not take into account the shareholdings or convertible debenture loan in TV4, P4, or Metro, all of which are reported as long-term financial assets. Their total market value at the end of the period was SEK 3,760 million. Their total book value was SEK 441 million. The option to acquire shares in Millicom was transferred to Metro in connection with the spin-off. Taking into account the surplus values in publicly quoted shares held, adjusted for tax, the equity/assets ratio would be 60% (44%). Liquidity The Group's liquidity, including unutilized credit facilities, was SEK 167 (367) million at the end of the period. Net borrowings The Group's net borrowings (defined as interest-bearing liabilities, excluding the convertible debenture loan, less interest-bearing assets) totaled SEK 240 (169) million at the end of the period. Investment During the period, the Group invested a total of SEK 377 (142) million. Depreciation and amortization Group depreciation and amortization equaled SEK 272 (144) million. Earnings per share Earnings per share after full tax were SEK 2.00 (-0.19). OTHER INFORMATION Earnings announcement for 2000 MTG will announce its earnings for the full year 2000 in February 2001. Additional financial information is published on the Internet at www.mtg.se. Stockholm, November 6, 2000 Hans Holger Albrecht President and CEO This interim report has not been subject to a review by the Company's auditors. For additional information, please contact: Hans Holger Albrecht, telephone +46 8 5620-0050 President and CEO, Modern Times Group MTG AB Johan Lindgren, telephone +46 8 5620-0050 Chief Financial Officer, Modern Times Group MTG AB CONSOLIDATED INCOME STATEMENT (SEK 1999 1999 2000 million) Full year 1 Jan-30 Sept 1 Jan-30 Sept Pro forma pro forma Net sales 4 491 3 077 3 775 Cost of goods and services -3 182 -2 272 -2 306 Gross income 1 309 805 1 469 Selling, administrative, resarch and development expenses -932 -587 -1 197 Income from corporate development -3 -3 - Income from sales of securities - - 108 Expensed option premium for TV1000 -68 -58 - Other operating revenues 17 10 30 Other operating expenses -164 -122 -165 Share of earnings in associated 43 7 26 companies Operating income (EBIT) 202 52 271 Net financial revenue and expense -24 -13 -35 Income after financial revenue and 178 39 236 expense excluding interest on convertible debentures Interest on convertible debentures -30 -25 -3 Income before tax 148 14 233 Taxes -84 -47 -101 Minority interests 1 3 -1 Net income for the period 65 -30 131 REVIEW OF THE GROUP (SEK million) 1999 1999 2000 Full year 1 Jan-30 Sept 1 Jan-30 Sept Pro forma pro forma Net sales by business area Viasat Broadcasting 3 114 2 145 2 681 Radio 110 79 97 Publishing 128 72 144 Modern Interactive 582 456 457 Modern Studios 419 258 340 SDI Media 256 163 235 Parent company and other companies 91 56 76 Eliminations -209 -152 -255 4 491 3 077 3 775 Operating income/loss by business area Viasat Broadcasting 314 119 343 Radio 16 11 2 Publishing -16 -11 -4 Modern Interactive -27 -18 -22 Modern Studios 18 4 -2 SDI Media 15 9 10 Parent company and other companies -105 -52 -79 Metro Sweden sales company January-- - 33 May 2000 Eliminations -13 -10 -10 202 52 271 CONSOLIDATED BALANCE SHEET (SEK million)1999-12-31 1999-09-30 2000-09-30 Pro forma pro forma Fixed assets Capitalized development expenses 347 228 409 Beneficial rights 112 102 288 Goodwill 286 294 1 165 Machinery and equipment 247 199 302 Shares and participations 272 236 241 Long-term receivables 501 328 528 1 765 1 387 2 933 Current assets Inventories 746 605 1 155 Current receivables 1 436 1 464 1 322 Cash, cash equivalents and short-term 324 207 150 investments 2 506 2 276 2 627 Total assets 4 271 3 663 5 560 Shareholders' equity Restricted equity 397 308 1 672 Non-restricted equity 721 601 681 1 118 909 2 353 Minority interests in equity 23 18 15 Provisions 125 115 122 Long-term liabilities Convertible debenture loan 1997/2000 - 401 - Other interest-bearing liabilities 687 698 825 Non-interest-bearing liabilities 0 4 22 687 1 103 847 Current liabilities Convertible debenture loan 1997/2000 407 - - Other interest-bearing liabilities 109 11 100 Non-interest-bearing liabilities 1 802 1 507 2 123 2 318 1 518 2 223 Total shareholders' equity and 4 271 3 663 5 560 liabilities CONSOLIDATED STATEMENT OF CASH 1999 1999 2000 FLOWS (SEK million) Full year 1 Jan-30 Sept 1 Jan-30 Sept Pro forma pro forma Net income for the period 65 -30 131 Adjustments to reconcile net income/loss to net cash provided by operations 228 182 188 Changes in working capital 152 -84 26 Net cash flow from operations 445 68 345 Acquisition of TV1000 - - -900 Issue of shares to finance TV1000 - - 900 aquisitions Other investment in shares -56 -32 -128 Investment in other fixed assets -407 -142 -377 Other cash flow from investing 45 43 160 activities Cash flow to investing activities -418 -131 -345 Financing of Metro International SA-347 -221 -174 Other cash flow from/to financing 308 158 0 activities Cash flow to financing activities -39 -63 -174 Net change in cash and cash -12 -126 -174 equivalents for the period ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/11/06/20001106BIT00710/bit0001.doc http://www.bit.se/bitonline/2000/11/06/20001106BIT00710/bit0002.pdf