Nordic Entertainment Group (NENT) has announced changes to its financial reporting structure from the second quarter and has raised its Viaplay subscriber intake target for 2020 to 600,000. It will report four net sales categories, namely Viaplay, Other Subscription, Advertising, Studios & Other. NENT added that all the remaining rights costs for the restarted football league seasons will be expensed in the second quarter.
The new financial reporting structure follows the deconsolidation of the Viasat Consumer business after its merger with Canal Digital as Allente. Viaplay revenues and the total number of paying Viaplay subscribers will be reported on a quarterly basis, too. The group will report the results for the part of its Studios businesses that are for sale as discontinued operations.
All of the remaining rights costs for the current seasons of football leagues that have now restarted will be expensed in the Q2 results, including the 2019/2020 seasons of the Premier League, Bundesliga and Superliga. Costs for certain other sports events that are yet to restart will be taken from Q3.
The restart of the football leagues has attracted unprecedented interest on Viaplay, with streamed minutes for the first twelve Premier League matches played up by 23 percent compared with the season average before the pause due to COVID-19.
From the second quarter, NENT Group will stop reporting sales and profits by segment, but will rather provide four net sales categories and a single operating income (EBIT) line. The Viaplay category comprises chargeable streaming; Other Subscription comprises wholesale channel, carriage and other subscriptions; Advertising comprises sponsorship and sponsorship revenues; and Studios & Other primarily comprises external revenues from content production and distribution.
NENT said it had over 2.27 million paying Viaplay subscribers at the end of 2019 and it aims to raise this by 600,000 in 2020. Earlier, it had said it was targeting 400,000. In the twelve months to 31 March 2020, the number of Viaplay subscribers grew by 23 percent to 2.51 million .
The combination of Viasat Consumer with Telenor’s Canal Digital was completed on 05 May and will yield a non-cash capital gain that will be reported in NENT’s Q2 results in Items Affecting Comparability. NENT will report its 50 percent share of net income from the new joint venture, Allente, as income from associated companies in terms of operating income (EBIT)
This will include the amortisation of Allente’s purchase price allocation. The combination is expected to generate annual cost synergies of approximately SEK 650 million with full effect from 2022, as well as substantial sales synergies. Integration and other related costs are expected to total approximately SEK 900 million in 2020 and 2021. Allente will take on external debt and is expected to pay an extraordinary dividend in due course and, thereafter, quarterly dividends.
NENT CEO Anders Jensen said the new reporting structure is in line with its strategy to focus on the development of Viaplay, and follows the recent completion of the merger to create the Allente pay-TV business. He said the upgraded target for full year Viaplay subscriber intake reflects the strong momentum that NENT have seen in recent months. The ongoing decline in advertising and production revenues caused by Covid-19 is in line with its expectations.
