Teracom Boxer Group Year-end Report

Transcription

1 Teracom Boxer Group Year-end Report October December 2014 in summary Income SEK 960 million (968) EBITDA SEK 198 million (228) EBITDA margin 21% (24%) Operating profit SEK 89 million (124) Operating margin 9% (13%) Net profit for the period SEK 38 million (92) January December 2014 in summary Income SEK 3,849 million (3,875) EBITDA SEK 967 million (1,051) EBITDA margin 25% (27%) Operating profit SEK 542 million (638) Operating margin 14% (16%) Net profit for the period SEK 393 million (586) Return on equity 17% (29%) Emissions 3,929 (4,047) tons of CO 2 equivalents Percentage of female employees 24% (24%)

2 Comments by the President and CEO Digital media consumption is increasing and creates demands The digital trend is accelerating at an increasing speed. This is now placing greater demands on the companies active in the market to offer relevant communications solutions and media services. At the same time, society is becoming more and more dependent on a safe, robust infrastructure to ensure work and fun. Given this difficult situation in terms of competition, Teracom Boxer Group has been successful at continuing to deliver TV and radio to everyone, everywhere. We are doing this by continuously develop our existing products and services while at the same time quickly launching new services on the market. Boxer Play is a good example of how we are continuing to meet our customers' increasingly individualized and digitalized media consumption. During the reporting period, Boxer continued to hold its position as a distribution neutral supplier in Sweden. Customers can now supplement their regular pay-tv subscription that they have with Boxer with broadband and telephony via their fibre connection. We highly value our ability to handle operationally stable and robust network services, and this continuously attracts more and more business for the entire Group. Our service team is also continuing to improve its efficiency by optimising working hours and transports between facilities. We achieved a symbolically important step and confirmation of our hard work during 2014 when the Swedish Civil Contingencies Agency selected Teracom for the operation, maintenance and customer support for Rakel, the national radio communication network. I am particularly happy about and proud of this achievement. In December, the Government's digital radio coordinator presented her investigation into digital radio broadcasts in the terrestrial network. The report proposes that the FM broadcasts be shut down during and that digital radio be extended to cover the entire country. Analogue broadcasts entail unnecessarily high costs when there are digital alternatives. During the autumn, Teracom signed a multi-year agreement with the telecommunications company, Huawei, for field service of a fixed telephony network in northern Sweden. Teracom has already been taking care of Huawei's mobile network in large parts of the country. The expansion of our partnership is a confirmation that we are delivering a really good result. The operating profit was SEK 96 million lower than last year, in part due to cancelled products in the network companies but also due to costs related to reorganisation and increased investments in product development. The forced evacuation of the 700 MHz band also affects operating profit. Toward the end of 2014, we conducted an analysis of the sustainability issues our stakeholders consider to be the most important for Teracom Boxer Group. The results of this analysis are integrated in our strategic work and influence our goals for coming years. The Group is increasingly working in a more organized manner and is constantly finding new opportunities for positioning both Boxer and Teracom in our digital presence. In 2015 there will be even more services and products as well as important business that will continue to create opportunities for us to deliver work and pleasure for everyone. Åsa Sundberg President and CEO Teracom Boxer Group 2(17) /Year-end Report 2014

3 Significant events January December 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, which refers to operation, maintenance and customer support, has a term of seven years with an option for a three-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, which entailed a shift forward in the evacuation of the bandwidth. Teracom Denmark won a transmission order valued at more than DKK 20 million over a period of five years. The agreement is with DR and DIGI-TV and includes redundant transfer. The order is an extension of an existing one-year agreement. The Swedish Broadcasting Authority distributes broadcasting licences for digital commercial radio broadcasting in the terrestrial network in Sweden. In total, 25 channels, of which 21 national channels and four regional channels, received licences to broadcast commercial digital radio in the terrestrial network. Teracom signed a multi-year agreement with the international telecommunications company, Huawei, for field service of a fixed telephony network in northern Sweden. Teracom Denmark's President stepped down during the fourth quarter of Boxer launched broadband and telephony services via the open fibre network. An agreement was signed with Alltele for delivery to end customers. Strategic agreements were signed with Telia, Zitius and IP-Only for broadband distribution via fibre in Sweden. Boxer signed a long-term distribution agreement with SBS Discovery in Sweden. The Danish Government is announcing its ambitions to release the 700 MHz band for use other than digital TV. Denmark is proposing 2020 for the schedule, which is more in line with the European frequency planning. The Swedish Government's digital radio coordinator is presenting its investigation into digital radio broadcasts in the terrestrial network. The report proposes that the FM broadcasts be shut down during and that digital radio be extended to cover the entire country. Significant events after the end of the period Ulf Lund takes over as the new President of Boxer Denmark on 1 August He comes from the TDC Group, where he has been the Media Director. Key ratios Oct-Dec Oct-Dec Δ Jan-Dec Jan-Dec Δ SEK million % % Income ,849 3, Operating profit Operating margin 9% 13% 14% 16% Profit after financial items Equity ratio 45% 45% 45% 45% Cash flow for the period Return on equity 17% 29% 17% 29% Emissions, ton CO 2 quivalents 1) 1,057 1, ,929 4, Percentage of female employees 24% 24% 24% 24% 1) Emissions estimations for 2013 were changed to include commuting (+23) to correspond to the calculation method used in 2014 Teracom Boxer Group 3(17) /Year-end Report 2014

4 Earnings trend Teracom Boxer Group SEK M Breakdown of emissions of CO 2 equivalents, 2014 Teracom Boxer Group tco 2 e 10% (14) 43% (42) Gender distribution, 31 Dec 2014 Teracom Boxer Group % 100% 80% 60% 40% 20% 0% 16% (12) Electricity 2012 Business Travel Operating Profit/Loss Operating Margin 76% (76) 24% (24) Total Female Fuel Other 31% (32) 69% (72) 31% (28) Management Male % 25% 20% 15% 10% 5% 0% Group Income and profits Fourth quarter 2014 Group income was SEK 960 million (968), which is somewhat lower than the same period last year. Operating profit was down by SEK 35 million to SEK 89 million (124) compared to the corresponding quarter last year. The fall in profit is primarily attributable to one-off costs for reorganisations within Teracom Sweden, the earlier recognition of costs within Boxer Sweden for the transfer of new broadcasting technology and lower profits from Boxer Denmark, which has higher marketing costs and a smaller customer base. Profit was also burdened in the short-term by increased costs for product development within Internetbased services. Net financial items for the fourth quarter amounted to SEK -12 million (-8). Profit after financial items was SEK 77 million (116). Net profit for continuing operations was SEK 38 million (91). Full-year 2014 The Group reported income of SEK 3,849 million (3,875). The change compared to the previous year is attributable to lower income in Teracom Sweden. The reduction in Teracom Sweden can be explained to a large extent by the sale during Q of the Hörby station, termination of the Radio Newspapers product and fewer co-locations since 3G equipment was dismantled by a customer. Operating profit was down by SEK 96 million to SEK 542 million (638) compared to last year. The decrease is attributable to lower income in Teracom Sweden, increased investment in product development and higher net one-off items of SEK -61 million (-13). One-off items refer primarily to earlier recognition of costs for the transfer of new broadcasting technology and reorganisation costs. Currency effects on the translation of the net profit in Denmark had a positive impact on Group profit by SEK 3 million (0). Net financial items were SEK -29 million (-31). Profit after financial items was SEK 513 million (607). Net profit for remaining operations was SEK 393 million (486). Corporate social responsibility During the fourth quarter, Teracom Boxer conducted an analysis of the sustainability aspects that have material impact on the Group's stakeholders. This analysis will form the basis for how the Group will approach its responsibility for its business in the long run. This responsibility will permeate all levels of the organisation and be a part of the strategic work for The Group has prioritised its work on the environment for a long time, particularly within the Group's network operations. The goal is to decrease its environmental impact (calculated as CO2 equivalents) by three per cent on an annual basis. The use of CO2 equivalents decreased by close to three per cent in During the fourth quarter, the Group enhanced its sustainability work by conducting additional assessments of suppliers' sustainability work. A review of diversity within the Group was conducted during the quarter and the results are currently being analyzed. The Group has a solid foundation for equality, but some areas of the Group have an uneven distribution of gender. The percentage of women in the Group at the end of the quarter was 24 per cent (24). Teracom Boxer Group 4(17) /Year-end Report 2014

5 Market overview Sweden The pay-tv market is changing rapidly, and, in addition to traditional scheduled pay-tv, TV services that are streamed online have firmly established themselves. Pay-TV companies that offer scheduled TV are developing new services, some of which are offered online, in addition to their TV services. One example is Boxer Play. Consumers' behavior and requirements are changing quickly. It is estimated that one-third of the age group use streaming services. The radio market is relatively stable, but radio is facing digitalisation via the bill that was approved by Parliament in November that specifies the terms and guidelines for the operations of public service companies during the licensing period. The Swedish Broadcasting Authority awarded licenses for digital commercial radio during the third quarter of An investigation, which was ordered by the Government and presented on the 1st of December, recommends that digital broadcasts should start in As of this date the broadcasts should cover 70 per cent of the population and then increase to 99.8 per cent in 2020, which is one of several conditions for shutting down FM radio. The proposal has now been submitted for consultation to 153 authorities, companies and organisations, and answers must be submitted to the Swedish Ministry of Culture by 23 March External income per segment, Q Teracom Boxer Group 4% (4%) 20% (18%) 51% (51%) Teracom Sweden Teracom Denmark 25% (26%) Boxer Sweden Boxer Denmark Denmark Competition on the Danish pay-tv market increased sharply when TV2 converted from free-to-air to pay-tv. Competition for customers in the industry has now increased even more since companies from alternative distribution platforms have begun to establish themselves. Almost 40 per cent of Danes between the ages of 18 and 65 say that they subscribe to a streaming service. The market contains a mix of independent suppliers and suppliers associated with TV companies or mobile telephone operators. Netflix is largest, but other companies include, for example, HBO, Boxer Play, YouSee Play and Telmore. Digital radio has been up and running for several years in Denmark. The decision has been made to change the technical broadcasting standard for digital radio before the FM network is shut down in the future. Performance by segment External income per type of operations, Q Teracom Boxer Group 29% (31%) 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 conduct pay-tv operations that use terrestrial TV and the Internet as distribution platforms. The geographic market ranges across Sweden and Denmark. 71% (69%) Network Pay-tv Teracom Boxer Group 5(17) /Year-end Report 2014

6 Earnings trend - Teracom Sweden SEK M Operating Profit/Loss Operating Margin % 40% 30% 20% 10% 0% Teracom Sweden Income incl. internal sales ,491 1,517 Operating profit/loss Operating margin 27% 27% 29% 30% Orders during the fourth quarter were good with a number of co-location and connection agreements. Teracom also expanded its operations by signing an agreement with Huawei for the operation of Telenor's fixed network in northern Sweden. Work continued during the quarter to prepare for the April 2015 takeover of the operation, maintenance and customer support for the national communication network, Rakel. During the fourth quarter, Teracom continued to deliver good network quality. Income for the fourth quarter was at the same level as last year. Income for the full year was lower, primarily due to the fact that the previous year included the sale of the Hörby station, the Radio Newspapers product was terminated and the volume of the Colocations product decreased slightly due to the dismantling of 3G equipment by customers. Operating profit for the quarter was just above the same period last year. During the fourth quarter, Teracom Sweden continued to adapt the organisation and its costs to the new market conditions. However, for the full year profit was lower than the corresponding period last year, primarily due to lower income. Earnings trend - Teracom Denmark SEK M % 40% 30% 20% Teracom Denmark Income incl. internal sales Operating profit/loss Operating margin 20% 23% 24% 23% Operating Profit/Loss Operating Margin 10% 0% During the fourth quarter, Teracom Denmark continued to look for a way to expand its operations while at the same time focusing on continued optimisation of existing operations. Income for the fourth quarter was just below the corresponding period last year. Income fell due to the smaller scope of business following the TV2 conversion, but this was offset to some extent by more broadcasts of high definition TV. The rise in income for full-year 2014 was primarily caused by positive currency effects. Operating profit for the fourth quarter was slightly lower than in the corresponding period last year. However, profit for the full year increased compared to the previous year. This is attributable to more efficient working methods and positive currency effects. The delivered quality in the broadcasting networks has continuously held a high level for both the fourth quarter and the full year. Teracom Denmark's focus on streamlining continued during the fourth quarter. Teracom Boxer Group 6(17) /Year-end Report 2014

7 Earnings trend Boxer Sweden SEK M % 20% 15% 10% 5% Boxer Sweden Income incl. internal sales ,970 1,978 Operating profit/loss Operating margin 13% 11% 13% 13% Number of subscr, excl. pre-paid cards (thous) Operating Profit/Loss Operating Margin 0% During the fourth quarter, Boxer Sweden launched its "Triple Play" services in the fibre network. Boxer's customers can now purchase broadband and IP telephony in a bundle together with terrestrial TV. Boxer can offer services in the fibre networks owned by the operators Telia, Zitius, ITUX and IP-Only. During the fourth quarter, sales of TV subscriptions were slightly lower than the same quarter last year, but higher than earlier quarters during the year, with the exception of the first quarter, which reported strong sales in conjunction with the Olympics. Sales for full-year 2014 were just above the sales for full-year Income for the fourth quarter was SEK 9 million lower than the corresponding quarter last year, which resulted in a decrease in the full-year outcome by a corresponding amount. Operating profit for the fourth quarter was higher than the corresponding period last year, and the full-year profit for 2014 exceeded the results for Despite a smaller customer base and higher costs for marketing, it was possible to maintain the same level of profit thanks to strong sales during the Olympics, rebundling of customer offers and streamlining measures. Earnings trend Boxer Denmark SEK M % 20% 0% -20% -40% -60% Boxer Denmark Income incl. internal sales Operating profit/loss Operating margin -3% 4% 0% 0% Number of subscr. excl. pre-paid cards (thous.) Operating Profit/Loss Operating Margin -80% During the fourth quarter, sales of TV subscriptions decreased compared to previous quarters during the year and compared to the fourth quarter last year. One explanation is the increase in prices that was announced earlier in the autumn. However, existing customers continued to upgrade to expanded subscriptions. Many customers transferred from TV2 Solo to Flex-subscriptions during the year. Income for the fourth quarter was higher than the corresponding quarter last year, and income for the full year increased by SEK 42 million compared to the same period last year. Average income per customer increased since more customers chose larger subscriptions. Positive currency effects also contributed to the increase in income. An operating loss was reported for the quarter due to extra costs for rights, but an operating profit was reported for the full year. The results during the year were affected by a high presence on the market in conjunction with various launches and higher transmission costs since transmitting network number six for high definition TV is now operational. Profit for full-year 2014 was just under the profit for full-year Teracom Boxer Group 7(17) /Year-end Report 2014

8 Cash flow Cash flow from operating activities for the full year was SEK 1,043 million (854). The positive cash flow is primarily due to improved working capital by reducing accounts receivables and lower bond in stock compared to last year. Group investments in property, plant and equipment and intangible assets totaled SEK 284 million (348) for the year. The investments are related to planned initiatives. Cash flow for the year from financing activities was SEK 379 million (552). A dividend of SEK 290 million (125) was paid in the second quarter and loans were amortized by SEK 89 million (427). Financial position The Group's interest-bearing liabilities were SEK 1,274 million (1,286). Cash and cash equivalents and current investments were SEK 712 million (341). Net debt/net equity at the end of the year was 0.24 (0.42). The liquidity reserve was SEK 1,312 million (541). Net debt/equity ratio SEK million 31 Dec Dec 2013 Interest-bearing liabilities 1,274 1,286 Less: Cash and cash equivalents and current investments Other interest-bearing assets -2-0 Net liability Equity 2,329 2,259 Net debt/equity ratio Total assets increased by SEK 109 million to SEK 5,169 million (5,060). The Group's equity/assets ratio was 45 per cent (45). Risks and uncertainties Please see the Teracom Boxer Group's Annual Report 2013 for a description of risks and risk management practices. Risks and uncertainty factors, driven by changed viewer behavior, were accentuated during the period. Parent Company The Parent Company's operations consist of Group-wide functions, which include product development for the pay-tv operations. Parent Company income for 2014 was SEK 108 million (113) and referred to sales to Group companies. Operating loss was SEK -172 million (-144) and the reduction is attributable to higher costs for product development. Profit after financial items was SEK 254 million (150), of which dividends from subsidiaries was SEK 457 million (393). Net profit for the year was SEK 456 million (336). The Parent Company's investments in intangible assets totaled SEK 46 million (54). Cash and cash equivalents and current investments at the end of the year were SEK 712 million (341). Cash flow for the year was SEK 380 million (348). The Parent Company's income statement and balance sheet are reported on page 13. Teracom Boxer Group 8(17) /Year-end Report 2014

9 Consolidated Income Statement SEK million Not e Continuing operations Net sales ,824 3,837 Other income Total income ,849 3,875 Work performed by the company for its own use and capitalized Operating expenses Material costs Employee benefit costs Depreciation/amortisation and impairment Other expenses ,035-2,096 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 profit for the period from discontinued operations Net profit for the period Consolidated Statement of Comprehensive Income SEK million Not e Net profit/loss for the period Other comprehensive income Items that will not be reclassified to the income statement Remeasurement of the 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 for 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) /Year-end Report 2014

10 Consolidated Balance sheet 31 Dec 31 Dec SEK million Note ASSETS Fixed assets Property, plant and equipment 2,725 2,804 Intangible assets 1,056 1,053 Other long-term receivables Total fixed assets 3,893 3,964 Current assets Inventories Current receivables Cash and cash equivalents Total current assets 1,276 1,096 TOTAL ASSETS 5,169 5,060 EQUITY AND LIABILITIES Equity 2,329 2,259 Liabilities Liabilities to credit institutions 3 1,274 1,286 Long-term liabilities and provisions Current liabilities and provisions 3 1,057 1,035 Total liabilities 2,840 2,801 TOTAL EQUITY AND LIABILITIES 5,169 5,060 Pledged assets 0 0 Contingent liabilities 0 0 Teracom Boxer Group 10(17) /Year-end Report 2014

11 Consolidated Statement of Changes in Equity Attributable to the Parent Company's shareholders Other SEK million Share capital contributed capital Reserves Earned profits Total equity Opening balance 1/1/ , ,259 Dividends Comprehensive income for the period Closing balance 12/31/ , ,329 Attributable to the Parent Company's shareholders Other SEK million Share capital contributed capital Reserves Earned profits Total equity Opening balance 1/1/ , ,728 Dividends Comprehensive income for the period Closing balance 12/31/ , ,259 Teracom Boxer Group 11(17) /Year-end Report 2014

12 Consolidated Cash Flow statement Operating profit/loss 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 , Investments in tangible and intangible assets Sold subsidiaries Cash flow from investing activities Dividends Amortisation/New loans Cash flow from financing activities Cash flow for the period Cash and cash equivalents and current investments at the beginning of the period Exchange rate differences on cash and cash equivalents Less opening balance of cash in sold subsidiaries Cash and cash equivalents and current investments at the end of the period Teracom Boxer Group 12(17) /Year-end Report 2014

13 Summary Income Statement for the Parent Company SEK million Not e Operating income Net sales Operating expenses Material costs Other external expenses Personnel costs Depreciation/amortisation Operating loss Net financial income/expense Profit/loss after financial items 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 31 Dec 31 Dec Not e ASSETS Fixed assets 5,458 5,453 Current assets TOTAL ASSETS 6,383 5,994 EQUITY AND LIABILITIES Equity 3,402 3,236 Liabilities Long-term liabilities 1,075 1,210 Current liabilities 1,906 1,548 Total liabilities 2,981 2,758 TOTAL EQUITY AND LIABILITIES 6,383 5,994 Pledged assets 0 0 Contingent liabilities 0 0 Teracom Boxer Group 13(17) /Year-end Report 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. The Parent Company with Group-wide functions is reported on the line "Other". Operating income per segment and quarter Teracom Sweden ,491 1,517 Boxer Sweden ,970 1,978 Teracom Denmark Boxer Denmark Other One-off effects Adjustments made upon consolidation Total ,849 3,875 Operating profit/loss per segment and quarter Teracom Sweden Boxer Sweden Teracom Denmark Boxer Denmark Other One-off effects Adjustments made upon consolidation Total Teracom Boxer Group 14(17) /Year-end Report 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 Dec 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 - 1,265-1,265 Derivative instruments where hedge accounting is applied Financial liabilities valued at fair value via the income statement Financial liabilities, total 5 1,274-1,279 Dec 31, 2013 SEK million Level 1 Level 2 Level 3 Total Derivative instruments where hedge accounting is applied Financial assets, total Liability to credit institutions - 1,274-1,274 Derivative instruments where hedge accounting is applied Financial liabilities valued at fair value via the income statement Financial liabilities, total 9 1,286-1,295 Teracom Boxer Group 15(17) /Year-end Report 2014

16 Note 4 Discontinued operations PlusTV in Finland was sold to DNA Ltd in the third quarter of 2013 following approval by the Finnish Competition and Consumer Authority. Gains/losses from discontinued operations/operations being discontinued Net sales Operating loss Net financial income/expense Loss after financial items Tax on net profit for the period Net profit for the period from operations being discontinued Gains from discontinued operations Net profit for the period from discontinued operations including gains Note 5 Impairment losses Impairment losses Total No impairment losses were made in Impairment losses in the corresponding period last year, SEK 1 million, were for property, plant and equipment in the Teracom Sweden segment. Teracom Boxer Group 16(17) /Year-end Report 2014

17 Upcoming financial reports Annual Report 27 March 2015 Interim Report 1 January 31 March April 2015 Interim Report 1 January 30 June August 2015 The Board of Directors and CEO hereby declare that this interim report provides a true and fair view of the Parent Company's and the Group's business activities, financial position and performance. The significant risks and uncertainty factors facing the company and its subsidiaries have also been described. On behalf of the Board of Directors Stockholm, 13 February 2015 Åsa Sundberg President and CEO REVIEW REPORT The Company's auditors have not reviewed this report. For more information, please contact: Åsa Sundberg, President and CEO Teracom Boxer Group, Helena Nathhorst, CFO Teracom Boxer Group, Teracom Boxer Group AB Tel: Box Stockholm CIN: Teracom Boxer Group 17(17) /Year-end Report 2014