22nd Jul 2005 10:30
Cesky Telecom A.S.22 July 2005 > PRESS RELEASE - 22. 7. 2005 > 2005 FIRST HALF FINANCIAL RESULTS CESKY TELECOM, a.s., is pleased to announce its unaudited financial results forthe first half of 2005 prepared in accordance with International FinancialReporting Standards (IFRS). The results include the full consolidation ofEurotel, a 100% owned mobile subsidiary and are fully comparable on year-on-yearbasis. CESKY TELECOM's Group Highlights Revenues of CZK 30.0 billion (-3.6%)Operating costs (excl. D&A) of CZK 16.5 billion (+ 3.5%)EBITDA of CZK 13.5 billion (- 11.1%),EBITDA margin 45%EBIT of CZK 4.3 billion (- 9.6%)Net Income of CZK 2.6 billion (- 23.2%)Net gearing at 17%Capex of CZK 2.0 billionCapex to Revenues 6.6%Free Cash Flow of CZK 9.1 billion (- 6.7%)Group Headcount 10,470 (- 12%) "Presented results of CESKY TELECOM Group reflect gradual shift from voicecentered fixed line services to broadband and data related offerings, highpenetration of mobile segment, and continuous competitive pressures in both,fixed and mobile segment. Results were also influenced by several one-off costitems recognized in the second quarter 2005", said Juraj Sedivy, CFO and 1stVice-Chairman of the Board of Directors. Consolidated Financial Statements Revenues, costs and EBITDA Total consolidated revenues of CESKY TELECOM Group in the first half of 2005amounted to CZK 30 billion, down by 3.6% yoy. Total consolidated operating costs(excluding depreciation and amortization) reached CZK 16.5 billion, wereinfluenced by one-time charges related to contingency reserves, extraordinarycompensation and severance payments and resulted in consolidated EBITDA of CZK13.5 billion, down by 11.1% yoy. Despite the impact of several one-off costitems posted in the second quarter 2005 on EBITDA, achieved 45% EBITDA marginranks CESKY TELECOM Group above the industry peers average. Depreciation and Amortization Consolidated depreciation and amortization in the first half of 2005 amounted toCZK 9.2 billion, down by 12% yoy. The significant decrease is a result of lowerCAPEX and changes in goodwill and certain intangible assets amortization,reported earlier this year. EBIT, EBT and Net Income Given the decrease of the consolidated EBITDA, consolidated earnings beforeinterest and tax (EBIT) and consolidated earnings before tax (EBT) went down by10% yoy and reached CZK 4.3 billion and CZK 3.9 billion respectively in thefirst half of 2005. Net income amounted to CZK 2.6 billion, down by 23% yoy. Debt levels CESKY TELECOM Group's consolidated debts amounted to CZK 16.5 billion at 30 June2005, down by 47% compared to the same period last year. This number representsgross leverage of 18% and net leverage of 17%. Significant cash flows generatedby both CESKY TELECOM and Eurotel enabled the reduction of consolidated debt byCZK 14.6 billion. A substantial part of this was repayment of syndicated loanfacility used for acquisition of the remaining 49% stake of Eurotel in November2003 and general corporate purposes of the Group. Capex The CESKY TELECOM Group strategy has been continuously focused on maintainingcapex efficiency. Total consolidated capex for the first half of 2005 amountedto CZK 2 billion, down by 13% yoy. Out of the total capex, CZK 1 billion wasspent in the fixed line technology segment and CZK 1 billion in Eurotel. TheCapex to revenues ratio of 6.6% reflects the timing of capex spending and issubstantially below the indicated full year 12% level. Free Cash Flow The total amount of free cash flows generated by the CESKY TELECOM Group reached CZK 9.1 billion, down by 7% yoy, as a result of decrease inEBITDA and cash payment of income tax. Regulatory framework During the first half of 2005, the Czech Telecommunication Office (CTO) issuedseveral price decisions, which will impact on future results of CESKY TELECOMGroup and the telecommunication market in general. The most important decisionon rebalancing allowed CESKY TELECOM to adjust its access related tariffs closertowards their cost base. While CTO marginally decreased the price of basicresidential package, low end residential package (Mini), and basic businesspackages, it at the same time ruled to remove the free call credit from thepackage, allowing thus partial rebalancing of the residential tariffs andeffectively full rebalancing of business tariffs. The decision further reducedper-minute rates mainly for long distance calls. The other decisions of CTO related to ADSL wholesale charges, LLU prices,dial-up Internet interconnection charges and termination charges for calls toboth fixed and mobile networks. In view of CESKY TELECOM Group, these decisionswill have positive impact on telecommunication market in the Czech Republic. Privatization and subsequent events The process of privatization of 51.1% stake in CESKY TELECOM held by theNational Property Fund of the Czech Republic was concluded on 16 June 2005.Telefonica SA paid the purchase price of CZK 82.6 billion (CZK 502 per share)and became the majority shareholder of the company. Annual general meeting ofCESKY TELECOM took place on 23 June 2005. The general meeting recalled themembers of the Supervisory board except for those elected by the employees andelected ten new members. Annual general meeting decided not to distribute thedividend for 2004. Following the general meeting, Mr. Jaime Smith was appointed CEO and chairman ofthe Board of Directors of CESKY TELECOM, where he replaced Gabriel Berdar. Mr.Salvador Anglada replaced Michal Heoman in the positions of CEO and statutoryrepresentative of Eurotel and a member of the Board of Directors of CESKYTELECOM. Fixed Line Technology Business Overview* The results of the fixed line technology business in the first half of 2005showed continuous high demand for broadband Internet, data and other value addedservices among the customers and influenced positively the structure of fixedline revenues. The share of Internet, data services, value added services andother services amounted to 14% in the first half of 2005, compared to the 10%share in the same period of the previous year. This underlines CESKY TELECOM'seffort to diversify its revenues structure and to offset the decline in revenuesfrom the traditional voice services. Revenues in the fixed line technology segment declined by 8% yoy to CZK 16.1billion in the first half of 2005. This is in line with the trends in precedingperiods, driven mainly by a decline in revenues from traditional voice serviceswhich have not been fully compensated by the increase in revenues from Internet,data and value added services. Based on and in compliance with the decision of CTO concerning to therebalancing of the tariffs, CESKY TELECOM introduced for its residentialcustomers two new basic tariffs Telefon Mini and Telefon Standard. To compensatethe removal of the free credit from the package, CESKY TELECOM offers lowerper-minute charges. These tariffs are being offered from 1 May 2005. On top ofthat the customers can choose from three tariffs (Telefon Start, Telefon Volnoand Telefon Volno Plus), which include flat fee and free off peak and weekendcalls to the fixed networks. Further they represent lower per-minute effectivecharges compared to the basic tariffs and Broadband Internet users can ordervoice tariffs with further decreased per-minute charges. Revenues fromcommunications voice services declined by 25% yoy to CZK 4.1 billion. Revenuesfrom monthly subscriptions and connection charges decreased by 7% to CZK 5.7billion. The overall number CESKY TELECOM's fixed lines amounted to 3,249thousand at the end of June 2005, down by 4% compared to the end of 2004. PSTNlines recorded a 3% decrease and reached 2.8 million, while number of ISDNchannels went down by 5% yoy to 466 thousand in this period. For its residential broadband Internet customers, CESKY TELECOM introduced itsproduct under the name of Internet Expres Doma (Internet Expres Home), whichincludes four offers with a speed from 128 kb/s to 2,048 kb/s. The monthly feefor these services range from CZK 399 to CZK 1,399. Total revenues fromInternet, data, value added and other services increased by 26% yoy to CZK 2.2billion. The increase of this revenues category was driven mainly by revenuesfrom the broadband services, which amounted to CZK 611 million, up by 262% yoy.CESKY TELECOM generated 62 thousand net adds to ADSL connections in the firsthalf of 2005 and its market share on new adds increased to 81% in the first halfof 2005 from 60% in the same period of 2004. The total number of ADSLconnections reached 163 thousand at 30 June 2005, up by 61% compared to the endof 2004. Out of the total connections, CESKY TELECOM's retail customersrepresented about 80%. Internet Expres services are now available in 1,094locations in the Czech Republic representing potential coverage of more than 90%of fixed lines operated by CESKY TELECOM. Revenues from data network servicesincreased by 11% yoy to CZK 873 million while revenues from Internet (ISPsubscription and fixed internet connectivity) went down by 9% yoy to CZK 266million. Revenues from other network operators grew in total by 23% yoy to CZK 2.2billion during the first half of 2005. This was mainly due to a 50% yoy increasein revenues from international operators which reached CZK 1.2 billion. Revenuesfrom domestic network operators stood at CZK 1 billion. Revenues from leasedcircuits declined moderately by 3% yoy to CZK 1.4 billion. Other revenues, including equipment sales and sales of material amounted to CZK539 million in the first half of 2005 and represent a 41% decrease compared tothe same period in 2004. Compared to the first half of 2004, there were noone-off items included in the revenues in the first six months of 2005. The fixed line operating costs in the first half of 2005 stood at the level ofthe same period in 2004 and amounted to CZK 9.4 billion. The substantial proportion of the total operating costs were staff costs at CZK3 billion, down by 4% yoy, including severance payments of CZK 186 million. Thenumber of fixed line technology business employees was reduced by 10% in thefirst half of 2005 compared to 2004 year end and reached 7,970 at the end of theperiod. The continuous headcount reduction helped to improve the operationalefficiency measured by number of fixed lines per employee, which increased by11% yoy to 409 lines. Out of the other controllable operating costs (operating costs excluding costsof sales) in the first half of 2005, the reduction is reported in all itemsexcept for marketing and sales, which increased by 16% yoy to CZK 277 millionand consultancy costs, which went up by 44% to CZK 161 million, mainly due toconsultancy services related to the transformation process. Material and energyconsumption went down by 6% yoy to CZK 459 million, repairs and maintenance by5% yoy to CZK 861 million and operating lease payments and building expenses by7% yoy to CZK 269 million. Other operating costs went up by 6% yoy to CZK 1.4billion, mainly as a result of one-off items related to contingency reserves. Payments to other network operators amounted to CZK 2.6 billion, up by 7% yoy.While the payments to international operators increased by 41% yoy to CZK 1.1billion, payments to domestic network operators declined by 11% to CZK 1.4billion. Equipment and material cost of sales declined by 44% yoy to CZK 176 million andcommissions and subcontractors related costs went up by 9% to CZK 203 million. EBITDA in the fixed line technology business amounted to CZK 6.7 billion,representing an EBITDA margin of 42%. Mobile Technology Business Overview* Eurotel continued to maintain a solid financial and operational performance inthe first half of 2005. Similarly to the fixed line technology business, trendsin the mobile market also underlined the continuous high popularity of data,Internet and value added services including content. For the first half of 2005,total Eurotel revenues stood at the level of the same period in 2004 andamounted to CZK 14.6 billion. Eurotel's communication traffic revenues decreased by 4% yoy to CZK 5.6 billion,while the total traffic increased by 5% yoy in the first half of 2005. By theend of June 2005, 322 thousand of postpaid customers subscribed for the newvoice tariffs, which Eurotel introduced on 1 February 2005. Out of this totalnumber, 61 thousand represented new customers of Eurotel, 93 thousand wereoriginally pre-paid customers and 168 thousand were existing postpaid customersmigrating from other tariffs. Despite the fact that SIM card penetrationexceeded 107% of the population at the end of the first quarter of 2005,Eurotel's postpaid net additions during the first half of 2005 amounted to 192thousand compared to 79 thousand for the same period last year. Total number ofpostpaid customers amounted to 1,197 thousand at the end of June 2005, whichrepresents a 19% increase compared to the end of 2004. As of 30 June 2005,Eurotel changed its methodology of prepaid customers calculation, under whichEurotel now reports only those prepaid customers who recharged within the last13 months. Nevertheless we believe that customer counts in the prepaid segmentare of limited value as the nominal penetration of more than 100% is exceedingthe number of individual subscribers due to multiple SIM cards users, usage ofSIM cards in machine to machine communication etc. Total number of prepaidcustomers under this methodology amounts to 3,141 thousand at the end of June2005, which shows a 6% decrease compared to the end of 2004. This is mainly aresult of significant migrations of customers from prepaid to postpaid segment.The total number of Eurotel's customers at the end of the first half of 2005under the new methodology amounted to 4,420 thousand, which represents a 1%increase compared to the end of 2004. In addition, in order to be in line with the prevailing industry standards,Eurotel decided to report also a complementary information on number of prepaidcustomers. Under this methodology, which defines a prepaid customer as customergenerating revenue in the last 3 months, the number of Eurotel's prepaidcustomers amounted to 2,830 thousand as of 30 June 2005. Multiple SIM card users, lower ARPU generated by new customers and the tariffinitiatives had an impact on the average usage and the total ARPU. In the firsthalf of 2005, ARPU was CZK 503 compared to CZK 528 in the same period last yearand CZK 484 in the first quarter of 2005. Average MOU per subscriber was 88minutes in the first half of 2005, down from 89 minutes in the same period ofthe previous year. These reported average MOU and ARPU are already based on themethodology, which is in line with rest of the Czech mobile market. Connectionand subscription charges increased in total by 10% yoy to CZK 2.9 billion. At the beginning of the second quarter of 2005, Eurotel introduced four newofferings for Internet access. The aim of these plans is to offer bothresidential and business customers an opportunity to select their Internetconnectivity based on each customer's location, budget, desired speed andmobility requirements. At the end of June 2005, the total number of Eurotel DataExpres customers amounted to 49 thousand and total number of Eurotel DataNonstop customers was 65 thousand. Eurotel customers sent and received in total1,201 million SMS in the first half of 2005. The total revenue from SMS, MMS,Internet, data and VAS increased by 18% yoy to CZK 2.2 billion. Lower number of sold handsets (11% yoy decrease) led to a 6% yoy decrease in theequipment sales and sales of materials to CZK 679 million. Revenues from other network operators decreased by 7% to CZK 3.2 billion givenmainly by the decision of CTO decreasing mobile termination rates. Revenues fromdomestic operators went down by 7% to CZK 2.4 billion and revenues frominternational operators decreased by 6% and reached CZK 757 million. Operating costs (excluding depreciation and amortization) of Eurotel increasedby 6% yoy to CZK 7.9 billion. Payments to other network operators went down moderately by 1% and amounted toCZK 2.8 billion in the first half of 2005. Equipment and material cost of salesdecreased by 5% yoy to CZK 1.3 billion. Commissions and subcontractors relatedcosts grew by 49% yoy to CZK 254 million. The number of Eurotel's employees as of 30 June 2005 amounted to 2,500, by 1%higher than at the end of 2004. The staff costs increased by 49% yoy to CZK 1.2billion. Repairs and maintenance increased by 20% yoy to CZK 494 million,marketing and sales decreased by 6% to CZK 532 million, material and energyconsumed decreased by 15% to CZK 259 million and consultancy costs decreased by10% yoy to CZK 79 million. Other operating costs including operating leasepayments and other costs increased in total by 12% to CZK 907 million. EBITDA of Eurotel reached CZK 6.7 billion in the first half of 2005, whichrepresents a 7% yoy decrease with a high EBITDA margin reaching 46%. Outlook for the second half of 2005 The CESKY TELECOM Group will continue to actively pursue the opportunities ingrowth areas and address changes and trends in the telecommunication industry,specifically in the areas of broadband, Internet, data and value added serviceswith the primary goal to best meet its customer needs. The CESKY TELECOM Groupwill continue to concentrate on revenue stimulation in voice and traditionaldata services areas. With a support and market knowledge of the new majority shareholder TelefonicaSA, the key strategic effort of the management is to maintain its leadingposition in the Czech telecommunication market. The main aspects of financialmanagement of the CESKY TELECOM Group will remain focused on above averageEBITDA margins, efficient CAPEX levels and strong free cash flows. Attachment: The consolidated balance sheet and income statement of CESKY TELECOM Group wereprepared in accordance with International Financial Reporting Standards. For further information please contact: VLASTIMIL SRSEN tel: (+420) 2 7146 3359 fax: (+420) 2 7146 9896 e-mail: [email protected] CESKY TELECOM, a. s., is the leading telecommunications company in the CzechRepublic. Through its subsidiary company Eurotel Praha, spol. s r.o., it alsohas a significant presence in the Czech mobile services market. Furtherinformation about the firm and the services it offers is available atwww.telecom.cz, which was rated as BestWeb 2003 in the WebTop100 survey. Signum Temporis has consistently awarded CESKY TELECOM for being one of thedomestic capital market's most transparent firms in terms of providinginformation. Based on an open vote of specialists, members of the press and anine-member committee, CESKY TELECOM placed first in 2003, just as it did in2001. CESKY TELECOM ranks among the most prominent firms on the Czech capital marketin terms of capitalization and trading volumes. Its shares are also traded onthe London Stock Exchange in the form of GDRs. CESKY TELECOM's credit rating isthe highest a Czech corporation can receive from top international ratingagencies. Attachment: Consolidated balance sheet and income statement of CESKY TELECOM underInternational Financial Reporting Standards. Consolidated financial statementsare based on full consolidation of Eurotel. All figures in CZK million. BALANCE SHEET 30.6.2005 31.12.2004 Fixed Assets 116,663 123,874 - Property, plant and equipment 92,710 98,835 - Intangible fixed assets 10,533 11,617 - Goodwill 13,320 13,320 - Available-for-sale and held-to-maturity investments 89 90 - Investments 11 12 Current Assets 11,183 10,329 - Inventories 596 843 - Receivables and prepayments 9,551 8,811 - Cash and cash equivalents 1) 1,036 675 Total Assets 127,846 134,203Total Equity 92,789 90,199Equity 92,789 90,193 - Share capital 32,209 32,209 - Reserves 60,580 57,984Minority interest 0 6 Liabilities 35,057 44,004 - Loans and overdrafts 16,531 25,482 - Creditors 8,730 9,523 - Provisions 9,796 8,999 Total Equity and Liabilities 127,846 134,203 INCOME STATEMENT 30.6.2005 30.6.2004 Revenues 30,019 31,143Operating costs excl. depreciation and amortization (16,531) (15,965)EBITDA 13,488 15,178 Depreciation and amortization (9,205) (10,441) EBIT 4,283 4,737 Interest expense (456) (678)Interest income 20 49Other financial charges (37) (139)Net foreign exchange gains/(losses) 2) 108 378Profit/Loss Before Tax 3,918 4,347 Income Tax (1,362) (1,018)Group profit/loss before minority interest 2,556 3,329 Minority interest 1 2Net Profit/Loss after Tax 2,557 3,331 1) Including available-for-sale and held-to-maturity investments 2) Including fair-value gains/(losses) on financial instruments -------------------------- * before consolidation adjustments * before consolidation adjustments This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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