Teracom Boxer Group Interim Report January March 2014

Transcription

1 Teracom Boxer Group Interim Report January March 2014 January March 2014 in summary Income SEK 967 million (979) EBITDA SEK 242 million (280) EBITDA margin 25% (29%) Operating profit SEK 139 million (177) Operating margin 14% (18%) Net income SEK 105 million (151) Return on equity 26% (20%)

2 Comments by the President and CEO of Teracom Boxer Group Media-related political decisions affect us, but the terrestrial network's strength remains During the first quarter, the Government announced its intention to release the 700 MHz band for use other than digital TV starting on 1 April This decision was relatively unexpected since clearing the band requires frequency coordination with neighboring countries. The rest of Europe is not planning a transition until after PTS has therefore been tasked by the Government to implement the frequency coordination. Despite its nature, we welcome the decision in the matter. We will now shift forward planned investments in new and more efficient broadcasting techniques. We will do our utmost to ensure that the technological transition is smooth. Our customers must not be affected regardless of whether they are private individuals or companies using our services. This accelerated transition, however, will entail significant costs. We currently assess these costs to be around SEK 300 million. A total of 85 channels applied to the Swedish Broadcasting Authority (MRTV) for new broadcasting licences for the terrestrial network. On the 31st of March, the authority announced that a total of 51 national and 6 regional channels received licences, which is approximately the same number of TV channels as today. Aftonbladet TV and Al Jazeera were two of the channels granted broadcasting licences. Of the national channels, eleven were granted the ability to send in high-definition, which almost doubles the HDTV selection in the terrestrial network. The licences are valid from 1 April 2014 to 31 March Some very good news is that the Swedish Civil Contingencies Agency selected Teracom as the new supplier for its Rakel network (the national communication network for coordination and management in the event of crisis management). The agreement covers operation, maintenance and customer support. It has a term of 7 years with an option for a 3-year extension. Operating profit for the quarter was down by SEK 38 million compared to the corresponding quarter in and totaled SEK 139 million. Of this decrease SEK 17 million is attributable to one-off items, which primarily relate to impairment of assets for cancelled products and for our expanded investment in product development. Profit was also strengthened in the previous year by the sale of the Hörby station. In Denmark, Boxer has now been able to commence sales of subscriptions to apartment residents in Copenhagen since Teracom Denmark has enhanced the indoor coverage in the area. It will be exciting to follow the developments since this opens up a whole new market for us. Boxer's customer service was also named the best in Denmark. These are important steps for becoming the most customer-oriented media operator in the Nordic region. Åsa Sundberg President and CEO Teracom Boxer Group 2(17) Interim Report January March 2014

3 Significant events January March 2014 The Swedish Civil Contingencies Agency selected Teracom as the new supplier for its Rakel network (the national communication network for coordination and management in the event of crisis management). The agreement covers operation, maintenance and customer support. It has a term of 7 years with an option for a 3-year extension. The Government made a decision that as of 1 April 2017 the 700 Mhz band can be made available for use other than terrestrial TV. The Swedish Broadcasting Authority announced on the 31st of March that a total of 51 national and 6 regional channels had received six-year licenses in the terrestrial network. During the period, Boxer Denmark launched the Flex(n) package, which increases the number of choices for customers and enables them to create individual packages. The launch of Flex(n) was an important step for showing the market that Boxer wants to give customers more freedom in their TV viewing. Boxer is the first provider in Denmark to be able to offer its customers such a service. Boxer also introduced an indoor antennae in Copenhagen, which enables apartment residents to subscribe to Boxer. This was made possible by enhancements by Teracom Denmark to the indoor coverage in the Copenhagen area. Boxer's customer service in Denmark, which to a large extent consists of in-house personnel, won the prestigious competition, "Denmark's Best Customer Service 2014", which included all types of industries. This victory is the result of hard, focused work with a clear goal to have Denmark's most satisfied customers. During its "Tell Us Campaign", which lasted three weeks, Boxer's campaign site had 60,000 visitors in Sweden. In addition, 3,690 comments were submitted about how people want to watch TV, which showed a considerable amount of involvement from customers. Andrea Gisle Joosen has resigned as President of Boxer Sweden. Gunilla Berg, CFO and Executive Vice President of the Group, will serve as Acting President during the hiring process. Significant events after the end of the period Teracom Group AB is changing its name to Teracom Boxer Group AB to clarify its operations and strategic focus. The decision regarding the name change was made at the Annual General Meeting on the 23rd of April. On the 15th of April, an agreement was signed with the Swedish Civil Contingencies Agency for operation, maintenance and customer support for Rakel, the national communication network. Financial overview Q1 Q1 Total Jan-Dec SEK million 2014 change % Income , Operating profit ,5 638 Operating margin 14% 18% 16% Profit after financial items Equity ratio 45% 36% 45% Cash flow for the period Return on equity (rolling 12-month basis) 26% 20% 29% Teracom Boxer Group 3(17) Interim Report January March 2014

4 Earnings trend - Teracom Boxer Group Financial overview SEK M Q Q Q1 Q Operating Profit/Loss Operating Margin % 25% 20% 15% 10% 5% 0% Income and profits First Quarter 2014 Group income for the first quarter amounted to SEK 967 million (979). The decrease compared to the previous year is attributable to Teracom Sweden and can primarily be explained by the sale during the first quarter of of the Hörby station (SEK 11m) and the termination of the Radio Newspapers product. Operating profit was down by SEK 38 million to SEK 139 million (177) compared to the corresponding quarter in. Of this decrease SEK 17 million is attributable to oneoff items, which primarily refer to write-down of assets for cancelled products and for our expanded investment in product development. Profit was also strengthened in the previous year by the sale of the Hörby station. Net financial expenses for the first quarter of 2014 amounted to SEK -7 million (6). The poorer outcome stemmed from the inclusion in the first quarter of of major unrealized exchange gains. Profit after financial items was SEK 132 million (183). In the first quarter of the previous year, profit from discountinued operations was SEK 6 million. Net profit for the period was SEK 105 million (151). Teracom Boxer Group 4(17) Interim Report January March 2014

5 Market overview Sweden Due to the emergence of new providers with online distribution platforms, the Swedish Pay TV market has become more competitive in recent years. Older providers, including Boxer, are trying to meet the competition by developing new online and other services. The radio market is relatively stable. Digitalisation of radio is around the corner in accordance with a bill that the Government submitted in June. As passed by Parliament in November, the bill specifies terms and guidelines for public service companies during the licensing period. The Government will review digitalisation issues again in 2014 based on the scenario that FM broadcasts will end in Denmark The conversion of TV2, the most popular Danish TV channel, to Pay TV in 2012 substantially expanded the market and increased competition. The entrance of new providers also made the market more competitive. Digital radio has been up and running for several years. A decision has been made to revise the broadcasting standard for digital radio in preparation for the shut-down of the FM network. External income per segment - Q Performance by segment The Teracom Boxer Group monitors operations in four segments. Teracom Sweden and Teracom Denmark run network operations in the areas of terrestrial TV, radio and transmission. Boxer Sweden and Boxer Denmark run the Pay TV operations based on terrestrial TV. The geographic market ranges across Sweden and Denmark. External income by Activity - Q Teracom Boxer Group 5(17) Interim Report January March 2014

6 Earnings trend - Teracom Sweden SEK M % 40% 30% Teracom Sweden SEK million Q Q1 Full Yr Income incl. internal sales Operating profit/loss Operating margin 28% 34% 30% 50 0 Q1 Q Q1 Q Q1 Q3 Q Operating Profit/Loss Operating Margin 20% 10% 0% At the end of the first quarter, it was announced that Teracom Sweden had won the tender by the Swedish Civil Contingencies Agency for its communication network, Rakel. The agreement goes into effect on 1 April 2015 and includes a responsibility for the operation, maintenance and customer support for the network throughout all of Sweden. In general, orders were good during the quarter and the signed agreements include a large order for co-locations with Telia Sonera Mobile Networks. Income for the period was lower than in the same period the previous year due to the termination of the Radio Newspapers product and the positive impact in the previous year from the sale of the Hörby station. Operating profit for the period is lower compared to the previous year. This decrease is due to lower income, higher personnel expenses and higher consulting costs for certain projects. Earnings trend - Teracom Denmark SEK M Q1 Q Q1 Q Q1 Q3 Q Operating Profit/Loss Operating Margin % 35% 30% 25% 20% 15% 10% 5% 0% Teracom Denmark SEK million Q Q1 Full Yr Income incl. internal sales Operating profit/loss Operating margin 22% 24% 23% During the first quarter Teracom Denmark continued its efforts to optimise its existing activities to the new organisation following a restructuring at the end of. Income for the first quarter was lower than in the same period the previous year. The company had fewer maintenance projects and lost a transmission customer. The accumulated operating profit was at the same level as the previous year. Lower costs for personnel as an effect of the restruturing at the end of last year offset the lower sales. Teracom Boxer Group 6(17) Interim Report January March 2014

7 Earnings trend - Boxer Sweden SEK M % 20% 15% 10% Boxer Sweden SEK million Q Q1 Full Yr Income incl. internal sales Operating profit/loss Operating margin 13% 14% 13% Number of subscr. (thous.) Q1 Q Earnings trend - Boxer Denmark 5% 0% Q1 Q3 Q1 Q3 Q Operating Profit/Loss Operating Margin During the first quarter, Boxer ran its Tell Us campaign with the theme "TV as you want it". The campaign was successful and is an important component for being able to further increase customer satisaction and strengthen Boxer's position on the market. Boxer Sweden reported a slight increase in its customer base during the first quarter, primarily due to strong sales leading up to the Olympics. Income was lower than in the same period the previous year partly due to a smaller average customer base and partly due to the dismantling of the broadband business during the period. Operating profit decreased slightly compared to the same period the previous year. This is mainly due to the smaller customer base but also because Boxer had a large presence on the market, which resulted in higher marketing expenses. Boxer Denmark SEK M Q Q4 Q3 Q2 Q Operating Profit/Loss Operating Margin 50% 0% % -50% -100% -150% -200% SEK million Q Q1 Full Yr Income incl. internal sales Operating profit/loss Operating margin 0% -9% 0% Number of subscr. (thous) During the quarter Boxer Denmark's customer service was named the best customer service in Denmark by Dansk Industri in cooperation with Wilke, an analysis firm. This award was won in competition with companies in a large number of other industries. During the period, Boxer Denmark launched the Flex(n) package, which increases the number of choices for customers and enables them to create individual packages. The launch of Flex(n) was an important step for showing the market that Boxer wants to give customers more freedom in their TV viewing. The customer base decreased during the quarter in part due to a decision by Boxer Denmark to terminate its MATV business (TV via a central antennae) as well as competition on the Danish market. Income in the first quarter increased by 15 per cent compared to the same period the previous year due to an increase in average income per customer. As a result of the fact that income was higher and selling expenses associated with rapid growth in 2012 had been fully charged to earnings, the operating profit for the quarter was slightly positive. At the same time, profit/loss was burdened by higher marketing costs due to a high presence in the market in conjunction with various product launches. Teracom Boxer Group 7(17) Interim Report January March 2014

8 Cash flow Cash flow includes discontinued operations for the comparative quarter in. Cash flow from operating activities for the first quarter was SEK 418 million (234). The positive cash flow is mainly due to Boxer Sweden's accounts receivables with due dates at the end of the month that were received before the end of the month. Group investments in tangible and intangible fixed assets for the first quarter were SEK 52 million (47). The investments are related to planned initiatives. Cash flow for the period from financing activities was SEK 15 million (119) and relates to the amortisation of debt. Financial position The Group's interest-bearing liabilities were SEK 1,270 million (1,563). Cash and cash equivalents, current investments and unutilised bank credit were SEK 1,292 million (1,090). Net debt/net equity at the end of the period was 0.25 (0.78). Net debt/equity ratio SEK million Dec 31, Dec 31, Interest-bearing liabilities Less: Cash and cash equivalents Other interest-bearing assets Net liability Equity Net debt/equity ratio 0,25 0,78 Total assets increased by SEK 18 million to SEK 4,073 million (3,906). The Group's equity/assets ratio was 45 per cent (36). Risks and uncertainties Please see the Teracom Goup's Annual Report for a description of risks and risk management practices. No additional risks or uncertainties were identified during the period. Teracom Boxer Group 8(17) Interim Report January March 2014

9 Consolidated Profit and Loss Statement Jan-Mar 2014 Jan-Mar Jan-Dec SEK million Note Continuing operations Operating income Net sales Other income Total income Work performed by the company for its own use and capitalized Operating expenses Material costs Employee benefit costs Depreciation/amortization and impairment Other expenses Operating profit Net financial income/expense Profit after financial items Tax on net profit for the period Net profit for the period from continuing operations Net loss for the period from discontinued operations Net profit for the period Consolidated Statement of Comprehensive Income Jan-Mar Jan-Mar Jan-Dec SEK million Note 2014 Net profit/loss for the period Other comprehensive income: Items that will not be reclassified to profit or loss Remeasurement of net pension obligation Tax related to the net pension obligation Items that may be reclassified to profit or loss Cash flow hedges Hedging of net investment Translation differences from continuing operations Translation differences from discontinued operations Income tax related to Other comprehensive income Other comprehensive income, net after tax Total comprehensive income for the period Teracom Boxer Group 9(17) Interim Report January March 2014

10 Consolidated Statement of Financial Position SEK million Note Mar 31, 2014 Mar 31, Dec 31, ASSETS Fixed assets Property, plant and equipment Intangible assets Other long-term receivables Total fixed assets Current assets Inventories Current receivables Cash and cash equivalents Total current assets TOTAL ASSETS EQUITY AND LIABILITIES Equity Liabilities Liabilities to credit institutions Long-term liabilities and provisions Current liabilities and provisions Total liabilities TOTAL EQUITY AND LIABILITIES Pledged assets Contingent liabilities Teracom Boxer Group 10(17) Interim Report January March 2014

11 Consolidated Statement of Changes in Equity Attributable to the Parent Company's shareholders Other Share contributed Earned SEK million capital capital Reserves profits Total equity Opening balance January 1, Comprehensive income for the period Closing balance March 31, Attributable to the Parent Company's shareholders Other Share contributed Earned SEK million capital capital Reserves profits Total equity Opening balance January 1, Comprehensive income for the period Closing balance March 31, Teracom Boxer Group 11(17) Interim Report January March 2014

12 Consolidated Statement of Cash Flows Jan-Mar Jan-Mar Jan-Dec SEK million Note 2014 Operating profit Adjustments for non-cash items Paid financial income and expenses Income tax paid Cash flow before changes in working capital Change in working capital Cash flow from operating activities 1) Investment in tangible and intangible assets Subsidiaries sold Cash flow from investing activities 2) Cash flow before financing activities Dividends Amortization/New loans Cash flow from financing activities 3) Cash flow for the period Cash and cash equivalents, opening balance Exchange rate differences on cash equivalents Less opening balance in subsidiaries sold Cash and cash equivalents, closing balance 4) Whereof discontinued operations 1) Cash flow from operating activities ) Cash flow from investing activities ) Cash flow from financing activities ) Cash and cash equivalents, closing balance Teracom Boxer Group 12(17) Interim Report January March 2014

13 Summary Profit and Loss Statement for the Parent Company SEK million Note Jan-Mar 2014 Jan-Mar Jan-Dec Operating income Net sales Operating expenses Material costs Other external expenses Personnel costs Depreciation/amortization and impairment Operating profit/loss Net financial income/expenses Profit after financial income Appropriations Tax on net profit for the period Net profit for the period Other comprehensive income Comprehensive income for the period Summary Balance Sheet for the Parent Company SEK million NoteMar 31, 2014 Mar 31, Dec 31, ASSETS Fixed assets Current assets TOTAL ASSETS EQUITY AND LIABILITIES Equity Liabilities Long-term liabilities Current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES Pledged assets Contingent liabilities Teracom Boxer Group 13(17) Interim Report January March 2014

14 Notes Note 1 Accounting principles The Group reports in accordance with the Government Ownership Policy and the guidelines for external reporting that apply to government-owned companies. Accordingly, the interim report for the Group was prepared in accordance with IAS 34, Interim Financial Reporting, and the Swedish Annual Accounts Act, and for the Parent Company in accordance with the Swedish Annual Accounts Act. The Group applies the same accounting principles as those described in Annual Report. New and revised IFRS standards that must be applied as of 2014 have not affected Teracom Boxer Group's financial statements by significant amounts. Note 2 Segment information The segments are reported in accordance with the same accounting principles that are applied by the Group. Sales between segments occur at prices that are fair estimates of current market prices. Operating profit is used to assess the performance of each segment. Financial expenses, financial income and income tax are addressed at the Group level. Operating income per segment and quarter SEK million Q Q1 Full year Teracom Sweden Boxer Sweden Teracom Denmark Boxer Denmark Other One-off effects Adjustments made upon consolidation Total Operating profit/loss per segment and quarter SEK million Q Q1 Full year Teracom Sweden Boxer Sweden Teracom Denmark Boxer Denmark Other One-off effects Adjustments made upon consolidation Total Teracom Boxer Group 14(17) Interim Report January March 2014

15 Note 3. Financial instruments The table below shows financial instruments measured at fair value, based on how classification in the fair value hierarchy has been performed. The various levels have been defined as follows: Level 1 quoted prices (unadjusted) on active markets for identical assets or liabilities Level 2 Observable market inputs for assets or liabilities other than Level 1 inputs such data may be observable either directly (i.e., as quotations) or indirectly (i.e., derived from quotations) Level 3 inputs for assets or liabilities that are not based on observable market data (i.e., non-observable data) Fair value hierarchy Mar 31, 2014 SEK million Level 1 Level 2 Level 3 Total Derivative instruments where hedge accounting is applied Financial assets, total Liability to credit institutions Derivative instruments where hedge accounting is applied Financial assets valued at fair value via the income statement Financial liabilities, total Mar 31, SEK million Level 1 Level 2 Level 3 Total Derivative instruments where hedge accounting is applied income statement Financial assets, total Liability to credit institutions Derivative instruments where hedge accounting is applied Financial liabilities valued at fair vale via the income statement Financial liabilities, total Teracom Boxer Group 15(17) Interim Report January March 2014

16 Note 4 Discontinued operations PlusTV in Finland was sold to DNA Ltd in the third quarter of following approval by the Finnish Competition and Consumer Authority. SEK million Jan-Mar 2014 Jan-Mar Jan-Dec Net sales Operating profit Net financial income/expense Profit after financial items Tax on net profit for the period Net loss for the period from discontinued operations Capital gain on disposal Net loss for the period from discontinued operations including capital gain Teracom Boxer Group 16(17) Interim Report January March 2014

17 Upcoming financial reports Interim report 1 January 30 June August 2014 Interim report 1 January 30 September October 2014 Q4/Year-End Report 1 January 31 December February 2015 On behalf of the Board of Directors Stockholm, Wednesday, 23 April 2014 Åsa Sundberg REVIEW REPORT The Company's auditors have not reviewed this report. For more information, please contact: Åsa Sundberg, President and CEO Teracom Boxer Group, Gunilla Berg, Executive Vice President and CFO, Teracom Boxer Group, Teracom Group AB Tel: (ongoing name change to Teracom Boxer Group AB) Box Stockholm CIN: Teracom Boxer Group 17(17) Interim Report January March 2014