First-quarter revenues rose by two per cent to SEK 546 million.

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1 First Quarter 23 First-quarter revenues rose by two per cent to SEK 546 million. First-quarter profit was SEK 9 million, compared with a loss of SEK 39 million the previous year, an improvement of SEK 48 million. Not including an extraordinary item (franchise fee) last year, earnings improved by SEK million. TV4's revenues and earnings have now improved four quarters in a row. First-quarter costs were SEK 9 million lower than the same period last year, not including extraordinary items and new channels. TV4 plus started broadcasting on 9th March. Just over half of all households are able to receive the channel. Revenues and costs in the initial months are in line with expectations. The government report on TV4's future franchise fee will be presented in May. The government's proposal to close down the analogue terrestrial network in October 27 will be put before parliament in late May. Advertising revenues in April and May are expected to be just over five per cent higher than the previous year. TV4 chose to start its season late so as to be able to offer a strong range of programmes in late April and May, when advertising demand is high. The late start meant that the channel lost audience share in the first quarter. The viewing figures are now back at normal levels. 4 SEK millions First quarter 23 Jan Dec /- April 22- March 23 Revenues ,274 2,285 Pre-franchise fee profit Franchise fee Profit before extraordinary items Extraordinary items Profit/loss after net financial income/expense Interim report for January March 23 TV4 AB (publ) 25th April 23

2 Continued improvement in first-quarter earnings First-quarter earnings in 23 were up on the same period last year. TV4's advertising revenues rose by 2.9 per cent during the quarter. The improvement is from a low level, but is at any rate a sign that the advertising market has stabilised. Last year's rationalisation has yielded cost savings. TV4's advertising revenues and earnings have risen over the last four quarters. The new local TV organisation has cut costs and is now focusing on increasing revenues. Regional TV advertising in 22 accounted for a mere 2.5 per cent of local advertising spending, which was an increase on the previous year. The aim is to increase this share by greater coordination with national advertising sales and a modified advertising product to be launched in early autumn 23. The profitability of TV4 Interaktiv, with network operations and text TV continues to improve. Network services are doing well. Text TV revenues have fallen, however. Operations were relocated from Gothenburg to Stockholm late last year so as to improve coordination with Internet operations and to work more closely with the TV4 TV channel. Increasing text TV revenues is a high priority. TV4 plus, which was launched on 9th March, can be seen by just over half of all households. A survey conducted by Mediavision has revealed that sixty per cent of these have already tuned in to the channel, which is a good result compared with other new channel start-ups. The same survey showed that 9 per cent of the population know about the new channel. Its programmes have been well received and sales and costs are in line with projections. The launch of TV4 plus is an important first step towards TV4's goal of becoming a multi-channel company. TV4 pays the highest franchise fee in Europe. The county administrative court has ruled in favour of TV4 in a dispute over the franchise fee on digital revenues. Finland has decided to halve the franchise fee and to exempt revenues derived from digital distribution from the fee altogether. The findings of the commission appointed by parliament to review the franchise fee will be important to TV4 and developments in the field of digital television. Under its original terms of reference, the commission was to present its report in January 23. It has been allowed more time to complete its deliberations, however, and the report is now expected in May. 2

3 Programme operations Total TV viewing was unchanged on the previous year. On average, Swedish viewers watched 2 hours 53 minutes of television a day during the first quarter. 39 minutes of this were spent watching TV4, which is 2 minutes down on the previous year. Expressed in terms of audience share, TV4's share fell from 23.9 to 22.5 per cent. The pattern for the 2 59 year age group, which is the segment of viewers on which TV4 bases its pricing of commercials, was the same as that across the population as a whole. TV4 lost a somewhat smaller share (-. percentage points), but the same amount of viewing time (-2 minutes). The trend in the first three months of 23 has been that TV3, Kanal 5 and particularly "other channels" have taken market share, whereas SVT and TV4 have lost ground. The successes recorded by TV3 and Kanal 5 resulted partly because both those channels began their major campaigns in January. SVT was unable to match its ratings successes of last year. TV4 chose to start its season late so as to be able to offer a strong range of programmes in late April and May, when advertising demand is high. The late start meant that the channel lost audience share in the first quarter. The viewing figures are now back at normal levels. TV channel shares (per cent) and viewing time per day (minutes) during January- March 23 and 22 for the entire population SVT SVT2 TV3 TV4 Kanal 5 Other All 23 share share minutes minutes TV channel shares (per cent) and viewing time per day (minutes) during January-March 23 and 22 for viewers in the 2 59 year target group SVT SVT2 TV3 TV4 Kanal 5 Other All 23 share share minutes 22 minutes Source: MMS - (Hot Time detalj) The decline in TV4's share can largely be explained by lower ratings on Fridays and Saturdays. The new light entertainment show Time out faced fierce competition from Så ska det låta on SVT, but has attracted a larger audience in recent weeks. The Friday final of the Camp Molloy docusoap, Nyheterna (evening news) and Sen kväll med Luuk (talk show) have faced competition from the Friday film on SVT, and have not managed to attract as many viewers as last year, when TV4's programme schedule also included Vem vill bli miljonär. 3

4 Bingolotto, which also faced tough competition from the regional heats for Sweden's Eurovision entry on SVT, lost viewers on Saturdays. The Bio4 film showcase, which followed on from Bingolotto, also struggled to attract viewers. Sundays, which featured Veterinärerna, Sporten and Parlamentet, were successful and captured approximately the same audience share as the previous year. Camp Molloy, a major new docusoap, has attracted an audience of about 675, early on weekday evenings. TV4 has taken prime time audience share on every weekday except Wednesday, which remains unchanged. We have also scored daytime successes, thanks in large part to the success of Dr Phil. The TV advertising market The advertising market is heavily dependent on the strength of the economy as a whole. Total spending on advertising fell by six per cent in 22, according to the Institute for Advertising and Media Statistics (IRM). The TV advertising market contracted by two per cent. TV4's revenues rose by 2 per cent. The advertising market stabilised during the year, however, and has continued to do so in the first quarter of 23. IRM estimates that advertising spending fell by.4 per cent in January and February. TV advertising is estimated to have increased by 3.9 per cent. IRM's figures for March were not available at time of press. TV4's market share is thought to have remained largely unchanged during the first quarter. First-quarter advertising revenues for TV4, including local TV and TV4 plus, were SEK 54.6 million (49.4), of which sponsorship revenues accounted for SEK 5.4 million (5.8). Advertising revenues thus rose by 2.9 per cent. The TV4 TV channel's advertising revenues totalled SEK million (428.9), of which sponsorship income accounted for SEK 47. million (47.). Sales and earnings Group net sales rose by 2. per cent, totalling SEK million (535.4). Operating expenses, not including the franchise fee, fell by.7 per cent and totalled SEK million (446.8). Pre-franchise fee profit was SEK 5. million (53.3). Profit after financial items was SEK 9.3 million (-39.4). Earnings for the previous year included a negative item affecting comparability of SEK 36.7 million. Profit by division Net sales by the TV4 TV channel rose by SEK 8.7 million (.9 per cent) to SEK 463. million (454.5). Operating expenses fell by SEK 6. million (-.4 per cent) to SEK 42.5 million (427.6). The franchise fee was SEK 72.8 million (7.2). Not including the franchise fee, costs fell by SEK 8.6 million, ie, by 2.4 per cent. Programme costs, which represent the largest single cost item, totalled SEK 28. million (28.6). Profit after franchise fee improved by SEK 6. million to SEK 44.4 million. Licensing revenues rose to SEK 5.5 million (3.5). New channels A new TV channel, TV4 plus, was launched on Sunday, 9th March 23. TV4 plus offers a broad range of programmes in three segments: leisure, entertainment (ranging from quiz shows to films), sports and gaming. 4

5 TV4 plus broadcasts are digital as well as analogue. In its first year, the channel will reach just over fifty per cent of Swedish households (ie, about 2.2 million homes), and will be distributed by com hem, Complus, Canal Digital, UPC, Boxer, SPA, Sweden On Line, Telenor Vision and others. According to a survey conducted by Mediavision, 6 per cent of households had tuned in to the channel a month after its launch, which is a very good result. Ninety per cent of the population know about the new channel. The new channel makes use of TV4's organisation, its technical and human resources and its programme stock. It is estimated that annual operating and programme costs will total some SEK 3 million, including depreciation of investments in technology and a new studio totalling around SEK 5 million. The new channel is expected to report a small loss this year and to reach break-even next year. The ice-hockey play-offs, motor sport programmes and the weekly shooting and fishing programme have been particularly popular. Advertising revenues in the initial months have gone according to plan. The channel is well placed to compete with the satellite channels. A survey of audience response will be made in early autumn 23. Sales in March were SEK 5.4 million; operating expenses for the quarter were SEK 3.6 million. TV4 mediteve is a chat site, distributed on one of the three channels allocated to TV4 on the digital terrestrial network, Canal Digital and to com hem's digital customers. The site uses interactive SMS text messages and its public appeal has been noted, particularly when the site is open during intermissions in broadcasting on the analogue TV4 channel. Starting in May, TV4 mediteve will feature unique programme content. Mediteve generated revenues of SEK. million during the first quarter; operating expenses costs totalled SEK 2.2 million. Local TV Fourteen of the sixteen local TV stations now operate under five wholly-owned companies; TV4 has no stake in the other two stations. Cost savings have been made following a rationalisation programme last year. Net sales by local TV companies were SEK 62. million (65.), down 4.5 per cent. The franchise fee was SEK 22.8 million (22.5). After deduction of the franchise fee, a loss of SEK million by the local TV companies was charged to TV4 Group profit (-27.). Advertising revenues rose sharply during the first two months of the year, but fell in March, partly because Easter is in April this year. First-quarter advertising revenues are on a par with last year. Advertising revenues in April and May are expected to rise. A modified product designed to achieve best reach during the part of the week coinciding with peak demand for local retail advertising will be launched in summer 23. Coordination with the national advertising sales organisation will be improved. TV4 Interaktiv comprises Allt om Stockholm, TV4 Text-TV and TV4.se. These operations have been gathered under a single corporate umbrella, enabling cost savings to be made. Operations will focus on areas offering definite commercial potential. TV4 Interaktiv sales fell by 2.5 per cent to SEK 8.6 million (23.4). The loss was SEK -.3 million (-4.2). The decline in sales was due to text-tv. Priority is now being given to increasing text TV sales. 5

6 The period was excellent in audience terms. TV4 Text-TV achieved a record of.9 million daily viewers in February (MMS), compared with.8 million the previous year. tv4.se continues to be a hit with the public, with visitor numbers up 25 per cent up on the same period last year. A golf site was launched during the quarter, and the Mat och Dryck and Äntligen hemma sites have been relaunched. The Spelbolaget site was launched when TV4 plus came on air. Allt om Stockholm, Allt om Göteborg and Allt om Malmö are leading city guides on the Internet. Visitor numbers continue to rise and additional features have been added to the sites. The loss for the period was SEK -.4 million (-2.2). Revenues fell to SEK 3. million (3.9). tv4.se's sales were SEK 5.2 million (5.2). Earnings were SEK -.4 million (-3.7). Text- TV's sales were SEK.3 million, down 28. per cent on last year's figure of SEK 4.3 million. Earnings were SEK.5 million, compared with SEK.6 million the previous year. Investments and financial position Investments totalling SEK 3.4 million were made during the period (29.8). This figure includes financial investments of SEK million (2.2). TV4 plus accounted for SEK 7 million of the investments made during the period. Investment in new equipment for the new channel is thus complete and totals SEK 32 million. Depreciation during the period totalled SEK.3 million (.6). Group liquid assets totalled SEK 65.3 million at the end of the period, compared with SEK 34.5 at the same time last year. Outstanding franchise fee totalled SEK 8.2 million at the end of the period (78.). Programme stock totalled SEK million (56.2), of which repeats accounted for SEK 67.7 million (77.7). Other stock totals SEK 6.3 million (.3). The equity/assets ratio as at 3st March 23 was 64.9 per cent, compared with 66. per cent at the same time last year. The parent company Net sales by the parent company totalled SEK 47. million (455.3). Profit after financial items was SEK 6. million (-6.6). The parent company had liquid assets totalling SEK 28.5 million at the end of the period (-2.5). Franchise fee The Radio and TV Authority decided last year that TV4 must also pay franchise fee on advertising revenues from digital broadcasts. The decision is based on the authority's interpretation of the law as it applied to the second half of 2 and the first half of 22. TV4 excluded these revenues from the base for its franchise fee in its annual accounts for 2. The fee for the second half of 2 would be SEK 36.7 million higher than TV4's appraisal. As a precautionary measure, this expense was charged to profit for 22 and was reported as an item affecting comparability. Pending judgment by the court of final instance, TV4 has elected to calculate the ongoing franchise fee in accordance with the authority's decision. The franchise fee for the second half of 22 included SEK 43 million for digital distribution. In a judgment delivered in December 22 the county administrative court found in TV4's favour, accepting all its arguments. The court held that the Radio and TV Authority should repay SEK 8 million to TV4. The judgment has been appealed to the Administrative Court of Appeal, which has not yet decided whether to grant leave to appeal. 6

7 Following a statutory amendment, the franchise fee is payable on advertising revenues from digital distribution as of July 22. TV4 is thus the only digitally distributed channel subject to a franchise fee. In conjunction with its accounts for the second half of 22, TV4 has questioned whether the new law is consistent with the constitutional requirement that laws should have general application and not apply solely to specific persons. In March 22 the government appointed a commission to review the franchise fee in the light of changes in the TV market. The commission's findings were due to be presented in January 23. Publication of the report has now been postponed until May so that account can be taken of its findings in the government digital television bill. Finland decided in June to halve its franchise fee from July 22 and to exclude revenues from digital broadcasts from the fee base. Digital revenues are also excluded in this way in the United Kingdom. The Digital Television Bill The government has presented a bill proposing that analogue broadcasts on the terrestrial network should cease on st October 27. It is proposed that the digital terrestrial network be expanded so that just over 98 per cent of the population can receive the transmissions on two of the networks (multiplexers). These networks will have to offer a broad range of programmes, and the government intends that Swedish advertising regulations should apply. The bill is now at the committee stage and is due to be enacted in late May. TV4's current broadcasting licence applies until the end of 25. Accounting principles This report has been prepared in accordance with the Swedish Financial Accounting Standards Council recommendation on interim reports (RR2). New recommendations issued by the council, taking effect in 23, have been taken into consideration. The accounting principles used are the same in all other respects as those used in the latest annual report. Prospects for 23 The economic outlook remains uncertain and it is therefore difficult to predict the advertising market trend. Forecasts for growth in the gross national product and consumer spending have been repeatedly revised downwards. IRM has predicted that the TV advertising market will grow by 3 per cent in 23. The situation stabilised in 22 and TV4's advertising revenues have risen four quarters in a row. Revenues in April and May will be just over 5 per cent higher than during the equivalent period last year. Costs for the TV4 TV channel, not including the franchise fee, are expected to be on a par with the previous year. Steps have been taken to reduce internal production costs for news, current affairs and sport by SEK 2 million by 24. TV4 lokal-tv and TV4 Interaktiv costs will be lower this year than in 22. As previously announced, TV4 plus will report a loss. 7

8 Forthcoming reports TV4's interim report for the second quarter of 23 will be issued on th August 23. The third-quarter report will be issued on 3rd November 23. Stockholm, 25th April 23 TV4 AB (publ) Jan Scherman Managing Director This interim report has not been subject to special examination by TV4 s auditors. For further information please contact Jan Scherman, Managing Director, tel , Erik Haegerstrand, Financial Director, tel , or Johan Winlund, Information Officer, tel Tel. switchboard This interim report and other financial information is also available on the Internet at 8

9 TV4 Group Profit and loss account January March SEK millions Change Jan-Dec 22 Net sales ,273.7 Broadcasting costs ,74.2 Selling expenses Administrative expenses Items affecting comparability Operating profit Net interest income Profit after net interest income Minority holdings Tax on profit for the year Profit/loss for the period Earnings per share (after tax) Number of shares at date of report, millions Figures for return and earnings per share are based on a rolling 2-month period Balance sheet SEK millions 3 March 23 3 March 22 Change 3 Dec 22 Fixed assets Stock Other current assets Liquid assets Total assets,38.2, ,446.4 Equity Allocations Long-term liabilities Current liabilities Total equity and liabilities,38.2, ,446.4 Equity at 3 March 23 SEK Millions Share Restricted Non-restricted Total capital reserves reserves Opening equity according to adopted balance sheet Profit for the period Closing balance

10 Key figures SEK millions Return on equity,% (after tax) Return on capital employed, % Equity/assets ratio, % EPS, (after tax) Equity per share Number of shares at date of report, millions Figures for return and earnings per share are based on a rolling 2-month period. The equity/assets ratio and equity per share figures are as at the end of the accounting period. Cash flow statement, January - March SEK millions Jan-Mar 22 Profit after net interest income/expense Depreciation Minority and other items not affecting liquidity Tax paid Total funds generated by the business Changes in working capital Including change in franchise fee due Cash flow from day-to-day operations Net investments Financing Including dividend paid Cash flow for the period Liquid assets, opening balance Cash flow for the period Liquid assets, closing balance Net cash flow

11 TV4 Group Sales and earnings by division, January March SEK millions Change TV4 TV channel Advertising revenues Sponsorship Other Total income Including intra-group revenues Operating expenses Net interest income/expense 3 2 Profit after net interest income/expense Assets Equity and Liabilities Investments Depreciation,33 -, ,278 -,278-7 Local TV Advertising revenues Sponsorship 4 4 Other Total income Including intra-group revenues Operating expenses Net interest income/expense Loss after net interest income/expense Assets Equity and Liabilities Investments Depreciation Interaktiv Advertising revenues Sponsorship Other Total income Including intra-group revenues Operating expenses Net interest income/expense Loss after net interest income/expense Assets Equity and Liabilities Investments Depreciation New channels Advertising revenues 3 3 Sponsorship Other 3 3 Total income Including intra-group revenues 6 6 Operating expenses -6-6 Net interest income/expense Loss after net interest income/expense -9-9 Assets Liabilities Investments Depreciation The Group* Advertising revenues Sponsorship 52 5 Other Total income Including intra-group revenues Operating expenses Net interest income/expense 2 Profit/loss 9-2 Extraordinary items Profit/loss after extraordinary items Assets Equity and Liabilities Investments Depreciation,38 -, * The figures given for the Group are after elimination of intra-group transactions,328 -,

Modern Times Group's Interim Report for the first nine months of 1997

Modern Times Group's Interim Report for the first nine months of 1997 OPERATIONS Group structure On May 23, 1997, the annual general meeting of Industriförvaltnings AB Kinnevik voted to distribute the