A MODERN GROUP for MODERN TIMES Annual REPORT 2011
Total Page：16
File Type：pdf, Size：1020Kb
A MODERN GROUP MTG ANNUAL REPOR ANNUAL MTG T 2011 HARDER BETTER ANNUAL report 2011 FASTER STRONGER FOR MODERN TIMES ContentsContent CEO’s Review CFO’s Review Five Year Summary Modern Responsibility Directors’ Report The MTG Share Corporate Governance Report Board of Directors Executive Management Consolidated Financial Statements Parent Company Financial Statements Notes to the Accounts Audit Report Definitions Glossary Cover: ‘Tron Legacy’ (© Walt Disney Pictures), ‘Pirates of the Caribbean: On Stranger Tides’ (© Walt Disney Pictures), ‘Avatar’ (© 20th Century Fox) and ‘Salt’ (© Sony Pictures Entertainment) are all showing on Viasat Film and Viaplay in 2012. Modern Times Group MTG AB Annual Report 2011 CEO’sCEO’s reviewreview 2011 was another rollercoaster ride with the Eurozone financial crisis adding to the already uncertain global economic outlook. It was a year in which we saw shifts in the industry begin to take shape and in which we adjusted our structure to meet these challenges and create new opportunities…but more about that later because 2011 was also the year in which MTG generated record full year sales! MTG is one of the fastest growing broadcast media companies in the world precisely because we have a balanced mix of cyclical free-TV advertising revenues and non-cyclical pay-TV subscription fees, and because we operate across so many territories these days. MTG is Made To Grow and that is exactly what we have continued to do, whilst at the same time delivering best in class margins for our developed operations. Our Nordic pay-TV business had over 1 million premium subscribers by the end of the year, whilst our satellite platforms in the Baltics, Ukraine and Russia had more than 500,000 subscribers. Furthermore, our 19 pay-TV channels that are made available on thousands of third party networks in 30 countries had in excess of 64 million subscriptions. The Nordic pay-TV business delivered a 20% operating margin and the emerging market operations were profitable despite the investments we have been making. Our free-TV operations were impacted by the differing developments in the local TV advertising markets, but we did increase our combined advertising market shares in the majority of territories in which we operate. Our advertising sales were up across Scandinavia and the MTG ‘media house’ of multiple channels that are sold on a bundled basis to advertisers is now well established in each country. We do have work to do to increase our audience shares so that we can continue to erode the dominance of the incumbents over time, which is why our schedules feature an ever increasing proportion of locally produced and live television content. The Scandinavian operations generated a combined 25% operating margin for the year. The picture is somewhat different in the emerging markets where the recovery in Eastern Europe has lagged that in Western Europe, with low or no growth in TV advertising spending and the incumbents maintaining pricing pressure. We did take viewing and audience shares across almost all markets and ended the year in a stronger position than we started it, with more channels, higher sales and a return to full year profitability for the combined businesses. It is a matter of ‘when’ rather than ‘if’ these markets return to high growth levels, and the investments that we have been making position us well to benefit from the recovery when it comes. The prevailing environment in Eastern Europe led us to take two decisions at the end of the year. Firstly, we wrote down the remaining value of our Bulgarian broadcasting assets. While it is clear that the price paid for the Nova asset in 2008 has not been supported by the subsequent market development, we remain committed to the market and have enhanced our position by investing in our multi-channel ‘media house’ through the downturn. The other decision was to withdraw from Slovenia because the market is simply too small, too heavily dominated by a single player and not open for competition. We have performed well operationally and lobbied hard for change, but must now focus our attention and resources on markets where we can build long term and sustainable value. Modern Times Group MTG AB Annual Report 2011 1 CEO’sCEO’s review review A notable exception in every case is Ghana, where TV advertising spending is estimated to have grown by approximately 20% in 2011, and we have already secured a near 20% audience share following the launch of our Viasat1 free-TV channel in late 2008. The fact that our 29 free-TV channels and 38 pay-TV channels are now available in a total of 35 countries spanning four continents puts our development into perspective. At the end of this year, we will celebrate the 25th anniversary of the launch of our first TV channel – TV3 – in Scandinavia, and we will also celebrate the 21st anniversary of the launch of our Viasat satellite pay-TV platform, and the 15th anniversary of the listing of our shares on the Stockholm stock exchange. MTG has changed beyond all recognition, as has the industry, but the global media industry is now changing faster and more fundamentally than it has for many years. Those companies that are asleep at the moment will quite simply not be around to reflect on these changes in the coming years. The change is being brought about by the proliferation of digital content delivered over the internet to consumer devices of all types and sizes. This is nothing new for us given our origins in markets with amongst the highest broadband penetration rates and speeds in the world. New challengers are emerging all the time and it is more important than ever that we observe the outside and maximize our own efforts. The rumours of the death of linear TV and the wholesale flight of the advertising dollar to the internet are much exaggerated! Linear free-TV will remain a force for many years to come - people are watching more TV today than ever before, and advertisers are dedicating more of their marketing spend to reach these viewers than ever before. Similarly, the emergence of ‘Over The Top’ or internet-based on-demand pay-TV services does not change the paradigm. What is important here is the change in consumer behaviour and in the way that TV content is watched and paid for. This is why we were the first broadcaster to launch a fully-fledged online TV offering more than a year ago, and why we are offering both advertising funded catch-up services and on-demand pay-TV offerings over the open internet. We already have a broad based portfolio of digital broadcast content rights so we can not only offer viewers their favourite free-TV channels over the internet, but also thousands of movies, live sports coverage and a wide range of popular TV shows. This is ‘Viaplay’ and this is the future. The changes in the competitive environment and our own evolution have made it necessary to change our management and operating structure so that we can continue to succeed. Time as always is the most valuable commodity we have, so we have adapted our structure to make MTG more nimble, and enable us to share and use information and ideas more effectively across the organisation. We have therefore simplified our reporting lines, broken down country management structures and adopted regional management roles and responsibilities, so that we can plan, decide, act and learn more quickly. Our investments moving forward in 2012 and beyond are focused on 3 key areas – technology, content and territories. Not only are we investing in the development of Viaplay, but also in additional HD and 3D TV services, as well as the re-branding of our premium pay-TV channel offering. 11 thematically differentiated standard and high definition Viasat Film channels are being introduced across the Nordic region in one of the largest ever rebranding exercises of its kind. We have continued to launch new free and pay-TV channels, and we will also develop our presence in the international content 2 Modern Times Group MTG AB Annual Report 2011 CEO’sCEO’s review review production markets over time by expanding our own Modern Studios operations and selectively acquiring new businesses. Finally, our expansion in Africa is gathering pace following the launch of our pay channels in four new countries in 2011, and we are constantly searching for opportunities to consolidate and extend our existing market positions in Europe. Overall then, we grew our sales and continued to invest throughout 2011. We ended the year with a net loss due to the write downs, but with higher underlying operating profits and increased net cash flow from operations. This enabled us to reduce our borrowing levels and propose a 20% higher annual dividend to shareholders. MTG is a growth company and we will continue to invest in the development of our existing businesses and new businesses, but our asset light business model also enables us to consistently combine growth with cash flow generation, so that we can both invest and return cash to shareholders. This is why we have now adopted a dividend policy for the first time. Our Modern Responsibility has also taken significant steps forward over the past year as we have implemented a number of group wide policies and increased our investment in our corporate responsibility programmes. This saw us included in the FTSE4good Index Series and ranked best media company by Ecodesk for energy intensity and utilisation per employee. Our MTG United for Peace foundation is now in its third year and we held the second international football tournament finals in Oslo in October to coincide with the annual announcement of the Nobel Peace Prize winner.