Nordic Entertainment Group (NENT) has reported a rise in fourth quarter net sales, driven by its Viaplay streaming service, which expanded its subscriber base by over 25 percent in 2019. Write-downs, restructuring and redundancy costs left the company with an operating and net loss. Nevertheless, the board is proposing a higher dividend.
NENT net sales in the fourth quarter of 2019 rose to SEK 4.17 billion from SEK 3.96 billion a year earlier. Business segment operating income rose to SEK 593 million from SEK 557 million in Q4 2018. Items affecting comparability (IAC) dented this income to the tune of SEK 731 million. This reflected SEK 190 million in restructuring and redundancy costs as well as write-downs of SEK 541 million relating to free-to-air television content and other assets with limited remaining value.
The IAC and SEK 11 million in advisory costs for the merger of Viasat Consumer with Canal Digital left NENT with an operating loss of SEK 217 million. This was compared with an operating profit of SEK 516 million a year earlier. It ended the quarter with a net loss of SEK 159 million compared with SEK 477 million net profit in Q4 2018. This is a basic loss per share of SEK 2.36 compared with positive basic EPS of SEK 7.12 a year earlier.
Even so, the board proposes a dividend of SEK 7.00 per share in two equal tranches, up from SEK 6.50 per share the previous year. The total proposed ordinary cash dividend payment would amount to approximately SEK 471 million, up from SEK 438 million for 2018. Shareholders at the 19 May AGM will also vote on a motion to carry forward the rest of NENT’s retained earnings.
Net debt at year-end was SEK 4.14 billion, including net lease liabilities of SEK 598 million, equivalent to 2.2 times twelve-month trailing EBITDA before IAC. This was an increase in net debt from SEK 3.94 billion a year earlier.
NENT’s streaming service, Viaplay, gained 310,000 subscribers compared with Q4 18 and gained 110,000 compared with the third quarter of 2019, leaving it with 1.57 million subscribers on 31 December. Viaplay now represents 62 percent of the group’s total subscriber base.
President and CEO Anders Jensen said scaling Viaplay remains its top priority as the best way to drive sustainable long-term value. Viaplay was the main force behind the fourth quarter organic growth in sales of 4 percent. Broadcasting and Streaming delivered continued profitable growth, and the combined profits for its business segments increased despite ongoing content investments, US dollar headwinds, and falling linear viewing.
Jense said NENT has built a strong foundation to capture the opportunity it sees in the streaming sector while fulfilling its commitment to profitable growth.
Net sales in the Broadcasting and Streaming segment rose to SEK 3.69 billion from SEK 3.40 billion in the fourth quarter of 2018, of which advertising revenue was SEK 1.16 billion (SEK 1.7 bln) and subscriptions generated SEK 2.53 billion (SEK 2.23 billion). Operating expenses climbed to SEK 3.13 billion from SEK 2.87 billion, reflecting investments in content and the depreciation of the Swedish krona. Operating income in Broadcasting and Streaming improved to SEK 560 million from SEK 532 million.
The other division, NENT Studios, suffered a drop in sales to SEK 540 million from SEK 603 million a year earlier, mainly because of differences in the production schedule, with several projects being postponed to 2020. Operating expenses fell to SEK 507 million from SEK 577 million at NENT Studios.
