Nordic Entertainment Group (NENT) reported a decline in second quarter sales but said the number paying subscribers for its Viaplay streaming service grew by 206,000 during the period. Non-sports streamed minutes were up 42 percent year on year in Q2 and NENT now plans to expand Viaplay to another fifteen or more markets in the next five years or so.
NENT reported that sales in the second quarter fell by 13 percent on an organic basis to SEK 2.62 billion from SEK 3.57 billion because of the effect of Covid-19.
However, the number of Viaplay paying subscribers grew by 206,000 since the first quarter and by 605,000 from Q2 2019 to 2.72 million, with high intake and low churns. Last month, NENT raised its full-year intake target for Viaplay to 600,000 from 400,000.
Viaplay sales fell by 4 percent after NENT temporarily reduced its sports package prices to reflect event cancellations. Most sports have now resumed, prices are back to normal, and Viaplay is performing "very well", NENT said.
At Viaplay, streamed minutes excluding sports were up 42 percent year on year in the second quarter, and streamed minutes of sport were up 10 percent in June and 116 percent so far in July.
Other subscription revenues were down 34 percent because of the deconsolidation of Viasat Consumer, as well as the temporary sports package price cuts by third party distribution partners.
NENT reported a decline in second quarter operating income to SEK 156 million from SEK 432 million before associated company income and items affecting comparability (IAC). Associated company income was reported at SEK 54 million, compared with SEK 2 million last year, as it includes NENT’s 50 percent share of net income from its Allente joint venture with Telenor since the beginning of May. Allente's net income for the period was SEK 102 million.
Allente’s revenues for the two months of Q2 since the merger with Telenor's Canal Digital in May were SEK 1.13 billion, with an operating income of SEK 121 million when including the SEK 31 million of integration costs that were reported as IAC. The Allente subscriber base is down by 47,000 since the end of 2019 and finished at 1.18 million on 30 June.
Allente’s EBITDA before IAC amounted to SEK 166 million for the two-month period. Allente’s net cash position was SEK 751 million at the end of the quarter. Since 30 June, Allente has secured loans of SEK 2.5 billion, which will be drawn down in Q4 in order to pay out an extraordinary dividend to shareholders. Allente then plans to pay quarterly dividends in future.
Allente is focused on delivering SEK 650 million of cost synergies, as well as upselling of Viaplay to the Canal Digital subscriber base.
NENT’s operating income before IAC was SEK 210 million (SEK 434 mln) when excluding a SEK 2.38 billion non-cash capital gain arising from Viasat Consumer’s merger with Canal Digital to form Allente.
Adjusted net income for continuing operations decreased to SEK 148 million from SEK 333 million and adjusted EPS dropped to SEK 2.20 from SEK 4.94.
Advertising sales were down 30 percent but NENT has seen a substantial improvement in July and it expects advertising sales to be down substantially less in Q3 than in Q2.
NENT said the process to sell the non-core part of its Studios business is going to plan. Revenues for the continuing studios businesses, which will primarily provide content for Viaplay, were down 57 percent as all large-scale productions were postponed to H2 or early 2021. NENT still expects to premiere approximately 30 Viaplay originals in 2020, and up to 40 in 2021, if the gradual return to full production capacity continues.
The company said it has taken the remaining costs for the current football seasons that have restarted, but costs for other sports events that had not resumed in Q2 will be taken from Q3. The savings from the 2019 transformation and 2020 Covid-19 initiatives amounted to SEK 300 million in the second quarter, and NENT still expects savings of over SEK 900 million for the full year.
NENT CEO Anders Jensen said the group’s overall performance in Q2 has demonstrated the resilience of its products and staff, and the relevance of its streaming strategy. The effect of the pandemic is not over but its priority is to provide the best possible customer service, and its content is more popular than ever. Its technology platform has proven its agility in this volatile period. After its successful launch in Iceland and plans to expand to the Baltic region, NENT now intends to extend Viaplay to another fifteen or more markets in the next five years or so.
