Looking back, 2009 was a truly dramatic year for the European media sector. We entered the year having just delivered our strongest ever performance in 2008, but began to feel the first effects of the declining markets and the challenging operating environment early in the year. As 2009 progressed, European TV advertising markets declined by double digit percentage points, and as much as 50 per cent in some of our markets. Our full year results, with increased revenues, underlying profitability and healthy cash flows all help our performance stand out compared to other companies in our industry.
Our performance, and our ability to deal with the challenging operational environment during the past year is not only a result of strong operational execution combined with a structural tailwind and market share gains. It can also be attributed to our Group’s strategic approach to managing costs, cash flow and our balance sheet.
Firstly, we have been focused on the strict control of the development of the Group’s operational expenses. Our aim in the past year has been to reduce or eliminate all non-essential or embedded costs, and to cut back on any non-core projects. Simultaneously, we have strived to balance this cost control approach with continued selective operational investments in programming and channel launches, in order to capitalise on our strong structural momentum, and to continue to drive our market shares.
The balancing of core and non-core costs was illustrated by the Group’s cost development in 2009. Total Group costs increased by 3 per cent, but our selling, general and administrative expenses decreased by 3 per cent in the year at constant exchange rates and on a like for like basis. The cost development also reflected the consolidation of Nova Televizia in Bulgaria, the launch or relaunch of free-TV-channels, the addition of new pay-TV-channels as well as marketing investments to drive pay-TV subscriber intake.
Secondly, we have been taking measures to manage the Group in a capital efficient way. The Group continuously up-streams cash from the operations, and both working capital and capital expenses have been kept at low levels, allowing us to generate a high level of cash conversion. In total, the Group reported strong net cash flows of SEK 1.5 billion in 2009, which demonstrates the stability of our operations despite the prevailing unfavourable market conditions during the year. As a result, the strong cash flows and a high level of cash conversion have allowed our Board of Directors to propose an increased ordinary dividend of SEK 5.50 per share.
The third area of focus for the financial management of the Group has been the strengthening of our financial position. The Group’s existing SEK 3.0 billion loan facility was refinanced in 2009 and we have now no debt maturities until 2011. The high level of cash conversion has also allowed us to make a down payment of SEK 862 million of our loans during the fourth quarter of 2009. All in all, this left us with a strong and flexible financial position, with substantially reduced net debt of SEK 2.7 billion at year end, which was equivalent to 1.1 times EBITDA for 2009, and with available liquid funds of SEK 3.8 billion.
2009 was not only a year of record sales for MTG, but our free-TV and pay-TV businesses in the Nordic region, our Emerging Markets Pay-TV business and our Online business all delivered healthy profitability levels despite the recessionary market environment. Operating profit for the Group when excluding non-recurring items and associated company income amounted to SEK 1,654 million for the full year, with an operating margin of 12 per cent.
The adverse changes in our operating environment during the year negatively impacted advertising buying and asset pricing, and have delayed the anticipated development of some of the Group’s businesses. The Group’s full year results therefore included SEK 3,352 million of non-recurring items in 2009, primarily related to an impairment of the goodwill arising from the acquisition of Nova Televizia, which was made during the second half of 2008, before the full impact of the global economic recession. The Group therefore ended the year with a reported loss of SEK 2,008 million for the year and earnings per share of SEK -31. The Group’s return on equity was 17 per cent for the full year 2009, and the return on capital employed was 15 per cent.
MTG is entering 2010 in a stronger financial position than the one we found ourselves in at the beginning of 2008 and an even stronger state than we ourselves expected. A significant proportion of this success can be attributed to our dedicated efforts to balance strict cost control with selective investments, to reduce working capital and increase cash conversion, and to reinforce the Group’s financial position. All in all, we have thereby used a year of recession to position the group even stronger from an operational, as well as financial standpoint, and we will continue to capitalise on this position going forward.
Mathias Hermansson
Chief Financial Officer