15th Aug 2006 07:00
Telecom Egypt S.A.E15 August 2006 Telecom Egypt Announces HY 2006 Results Cairo, 15 August, 2006: Telecom Egypt (TE) (Ticker: ETEL.CA; TEEG.LN), todayannounced its standalone financial results for the six months ended 30 June,2006. Financial Statements have been prepared in accordance with EgyptianAccounting Standards. First half 2006 highlights include: • 10.63 million fixed-line subscribers, up 9 percent on HY 2005 • Fixed line penetration reached 14.8% • Substantial growth in number of ADSL subscribers - from 16k in June 2005 to 48k in June 2006 • Revenues up 9% on HY 2005, reaching EGP 4.4 billion • HY 2006 EBITDA increased by 6% year-on-year to reach EGP 2.5 billion • 56 percent EBITDA margin remains one of the industry's highest • Net Profit before Tax up 3% on HY 2005 to reach at EGP 1.4 billion • HY 2006 Net Profit after Tax up 7 percent year-on-year to EGP 1.1 billion • Capex related cash flows reduced by 38 percent year-on-year to EGP 920 million • Earnings per Share (EPS) increased by 7 percent to EGP 0.65 compared to EGP 0.60 in 2005 • Monthly ARPU1 stable at EGP 55.8 for six months ended June 2006 1 ARPU calculation has been changed effective from Q1 2006 to only include recurring revenues driven by TE's subscriber base. Monthly ARPU = (Subscription + Local + Long Distance + Fixed to International +Fixed to Mobile + Prepaid Calling Cards2+ Mobile to Fixed Interconnection +Incoming International Calls Revenues) / average number of subscribers duringthe period 2 Prepaid Calling Cards revenue included in others under Retail Services Chairman's statement Commenting on Telecom Egypt's first half 2006 results, Akil Beshir, Chairman ofTelecom Egypt, said: "During the first six months of 2006 we continued to experience steady operatingconditions in the domestic market. Our subscriber base has expanded, albeit asexpected at a more moderate pace, reaching 10.6 million fixed line subscribersin the first six months of 2006. This means that over twelve months betweenJune 2005 and June 2006 we added more than 834 thousand subscribers and retainour position as the largest fixed line telecommunications provider in the MENAregion. The emphasis of our activities will now begin to shift to subscribersegments where demand for additional telecommunications services isintensifying. These are segments that we believe will ultimately be moreprofitable. "Once again, we have delivered stable revenue growth of 9 percent year-on-yearand have successfully maintained a very healthy EBITDA margin, which continuesto be one of the highest in the sector. "The strategy to ease back investment in our extensive network as managementtargets for coverage and capacity are attained, has resulted in substantialreductions in Capex related cash flows. We believe that the stability of oursubscriber base and the technical scope of our infrastructure positions us wellto embrace the growing demand among existing customers for a greater variety oftelecommunications services and convergent technology, which is ultimately ourfocus for the future. "We continue to capitalize on the rapid growth in demand for Internet accessthrough our retail Internet business, TE Data, which has again performedexceptionally well. TE Data's broadband market share has already increased to38.5%, with subscriber numbers growing by almost a quarter since my last reporton the first quarter of 2006. We fully expect a similar rate of organic growthto continue during the remainder of 2006. "Our investment in Vodafone Egypt has again delivered a strong financial resultfor our company as the mobile market continues to develop strongly, providingfurther support for our decision to be firm on price in respect of the auctionfor the third mobile license in Egypt. We are already collaborating withVodafone to ensure maximum benefit is derived from this strategic stake.Commercial sensitivities aside, I look forward to updating you on this worktowards the end of the year." Financial Review Revenues Total operating revenues for the six months ended 30 June 2006 rose 9 percent toEGP 4.4 billion, compared to EGP 4.0 billion for the first half 2005. Retail Services During the first half of 2006, 70 percent of TE's total operating revenues werederived from retail services, consisting of access and voice. While accessrevenues from connections and subscriptions reduced slightly year-on-year, totalvoice revenue, including local, long distance, fixed to international and fixedto mobile interconnection, made strong progress increasing by 15 percentyear-on-year to EGP 1.8 million. Local call revenues have increased 27 percent year-on-year as a result of higherbillable voice traffic and tariff rebalancing. Revenue from fixed tointernational calls rose 26 percent to end the half year at EGP 198 million. Wholesale services Total wholesale services revenues, both domestic and international, increased 17percent in the first half of 2006 compared with the same period in 2005. Totaldomestic wholesale revenues rose 25 percent year-on-year to reach EGP 220million at the end of June 2006. Total wholesale revenues were also boosted by15 percent year-on-year increase in incoming international call revenue as wellas 16 percent year-on-year increase in mobile to international revenue. EBITDA/EBIT EBITDA for the first half of 2006 reached EGP 2.5 billion, a 6 percent increaseon the same period in 2005. TE's continued financial control allowed it tomaintain one of the highest EBITDA margins in the telecommunications market, at56 percent for the six months ended 30 June 2006. EBIT for the six months ended 30 June 2006 was slightly down on the previousyear, reaching EGP 1.5 billion. This slight decline in EBIT was mainly driven byFX losses of EGP 83mn in the first six months in 2006 versus an FX gain of 301million for the comparative period in 2005. EBIT performance was however 3percent up on the first quarter of 2006. Income from Investments The Egyptian mobile market continues to grow strongly and our investment in themobile segment is delivering significant benefit to the company. Compared withthe first half of 2005, dividend income increased by 154 percent to EGP 350million, mainly driven by the increase in the dividend income from VodafoneEgypt.. Net profit Net profit increased by 7 percent to EGP 1.1 billion for the six months ended 30June 2006 compared to EGP 1.0 billion for the first half 2005. Net profitmargin for the six months ended June 2006 was 25.3%. When taken in isolation net profit in the second quarter 2006 rose 6% reachingEGP 568 million in 2Q 2006 versus EGP 536 million in 1Q 2006. Investments in infrastructure TE's strategy to ease back its investment in the company's extensive networkgradually as its targets for coverage and capacity are attained, resulted inCapex related cash flows reducing by 38 percent to EGP 920 million from EGP 1.5billion for the same period in 2005. Debt Net debt has been reduced by EGP 1.3 billion during the twelve months between 30June 2005 and 30 June 2006, standing at EGP 3.3 billion at the end of the firsthalf 2006. Operational Highlights 6 Months Period Ending June Previous Quarter Comparison June 2006 June 2005 % Change Q2 2006 Q1 2006 % ChangeNumber of Fixed Line Subscribers 10,628,349 9,793,845 9% 10,628,349 10,485,586 1.4% ARPU (EGP/Month) 55.8 55.6 0.3% 56.8 54.8 3.7% Number of ADSL Subscribers 47,740 16,193 195% 47,740 38,799 23.0%Retail ADSL Market Share 38.5% 28.4% 36% 38.5% 35.2% 9% Financial Highlights 6 Months Period Ending June Previous Quarter ComparisonIn EGP 000's (Except Per Share Data) June 2006 June 2005 % Change Q2 2006 Q1 2006 % ChangeSales Revenue 4,368,868 4,026,591 9% 2,241,888 2,126,980 5% EBITDA 2,458,768 2,324,025 6% 1,224,642 1,234,126 -1%EBITDA Margin 56.3% 57.7% 54.6% 58.0% EBIT 1,490,135 1,527,235 -2% 754,385 735,750 3%EBIT Margin 34.1% 37.9% 33.6% 34.6% Profit Before Taxes 1,365,863 1,325,007 3% 697,805 668,058 4% Net Profit 1,104,385 1,029,703 7% 568,172 536,213 6%Net Profit Margin 25.3% 25.6% 25.3% 25.2% EPS (EGP) 0.65 0.60 7% 0.33 0.31 6% The accompanying notes to these financial statements can be accessed via thefollowing link. http://www.rns-pdf.londonstockexchange.com/rns/6451h_-2006-8-14.pdf Please copy and paste this link into your web browser. - Ends - For further information: Investor Relations Contacts Tarek Tantawy, CFADirector of Investment, Treasury & Investor RelationsTelephone: +202 5788111Fax: +202 5789314 Eman AnisInvestor Relations ManagerTelephone: +202 5788787Fax: +202 5789314 E-mail: [email protected] Notes to Editors: Within this statement, we may make forward-looking statements regarding futureevents or the future performance of the Company. By their very nature,forward-looking statements involve inherent risks and uncertainties, bothgeneral and specific, and risks exist that the predictions, forecasts,projections and other forward-looking statements will not be achieved. You should be aware that a number of important factors could causeactual results to differ materially from the plans, objectives, expectations,estimates and intentions expressed in such forward-looking statements. Whenrelying on forward-looking statements, you should carefully consider thepolitical, economic, social and legal environment in which Telecom Egyptoperates. Such forward-looking statements speak only as of the time of thisrelease today. Accordingly, Telecom Egypt does not undertake any obligation toupdate or revise any of them, whether as a result of new information, futureevents or otherwise other than as required by applicable laws, the Listing Rulesor Prospectus Rules of the United Kingdom Listing Authority, the EgyptianCapital Markets Authority or the Cairo and Alexandria Stock Exchange. Thedocuments filed from time to time with these authorities may identify importantfactors that could cause actual results to differ materially from thosecontained in any forward-looking statements. About Telecom Egypt Telecom Egypt (TE), Egypt's incumbent telecommunications operator, started itsoperations in 1854 with the first telegraph line in Egypt. Then it wascorporatized in 1998 to replace the former Arab Republic of Egypt NationalTelecommunication Organization (ARENTO). The Company is the largest provider offixed-line services in the Middle East and Africa with 10.6 million subscribersas at the end of June 2006 representing a teledensity of 14.8 percent. TE provides retail telecommunication services including access, local, longdistance and international voice, Internet and data, and other services. Thecompany also provides wholesale services including bandwidth capacity leasing toISPs, and national and international interconnection services. Telecom Egypt'sservices also include the provision of narrowband and broadband internet accessthrough its subsidiary TE Data. TE Data has current operations in Egypt, Jordan,and Dubai and has ambitious plans in other parts of the MENA region. TE currently participates in the mobile segment in Egypt by providing mobileinterconnectivity and though its current 25.5 percent holding in Vodafone Egypt,one of the two Egyptian mobile operators. TE's shares and GDRs (Ticker: ETEL.CA; TEEG.LN) are traded on the Cairo andAlexandria Stock Exchanges and the London Stock Exchange. Auditor's Limited Review Report To The Board of Directors Of Telecom Egypt Company We have performed a limited review on the accompanying balance sheet of TelecomEgypt Company - an Egyptian joint stock company - as of June 30, 2006 and therelated statements of income, cash flows and changes in equity for the financialperiod then ended. These financial statements are the responsibility of thecompany's management. Our responsibility is to issue a report on these financialstatements based on our review. Our review was made in accordance with the Egyptian Standards on Auditingrelating to the limited review. This standard requires that we plan and performthe review to obtain reasonable assurance that the financial statements are freeof material misstatement. Our review work is limited to obtaining the requiredinformation from company's personnel and analytical procedures applied forfinancial data and thus provide less assurance than the audit procedures appliedaccording to the Egyptian Standards on Auditing for the purpose of issuing anopinion on the financial statements and accordingly, we do not express thisopinion. Based on our limited review for the financial statements of Telecom EgyptCompany for the period ended June 30, 2006 nothing has come to our attentionthat causes us to believe that the accompanying financial statements are notpresented fairly in all material respects in accordance with Egyptian AccountingStandards. KPMG Hazem Hassan Public Accountants & Consultants Cairo, August 6, 2006 Telecom Egypt Company (An Egyptian Joint Stock Company) Financial Position As of June 30, 2006 Note 30/6/2006 31/12/2005 No. LE(000) LE(000)Long Term AssetsFixed assets (net) (4) 20 967 022 21 763 811Projects in progress (5) 1 248 941 1 139 739Investments in subsidiaries & (6-1) 1 646 379 1 429 494affiliatesAvailable for sale investments (6-2) 96 635 95 197Other debit balances - long term (7) 1 085 123 1 512 901Other assets (8) 87 053 99 799Total Long Term Assets 25 131 153 26 040 941 Current AssetsInventories (9) 458 629 486 523Trade receivables (10) 2 725 357 2 521 199Debtors and other debit accounts (11) 2 699 115 2 149 120Cash at banks and on hand (12) 1 082 471 698 463Total Current Assets 6 965 572 5 855 305 Current LiabilitiesLoans installments and facilities due within one year (13) 391 670 476 487 Banks - credit accounts 323 663 419 061Banks overdraft 86 274 157 349Suppliers (14) 47 051 94 287Dividends payable 655 702 36 586Creditors and other credit accounts (15) 2 785 807 2 900 105Provisions (16) 1 258 580 1 255 074Total Current Liabilities 5 548 747 5 338 949Working Capital 1 416 825 516 356Total investments 26 547 978 26 557 297 Financed as follows:-Shareholders' Equity & Long -Term LiabiltiesShareholders' EquityPaid up capital (18) 17 070 716 17 070 716Reserves (19) 4 157 085 3 415 291Retained earnings 527 842 384 638Net profit for the period / year 1 104 385 1 835 871Total Shareholders' Equity 22 860 028 22 706 516 Long Term LiabilitiesLoans and credit facilities (13) 1 565 948 1 734 821Bonds loan (20) 2 000 000 2 000 000Creditors and other credit balances (15) 54 704 54 704Deferred tax liabilities (3-21) , (21) 67 298 61 256Total Long Term Liabilities 3 687 950 3 850 781Total Shareholders' Equity and Long Term Liabilities 26 547 978 26 557 297 The accompanying notes from No. (1) to No. (38) form an integral part of these financial statements. Chairman Deputy chairman for Head of the Financial & Commercial financial sector Eng./Akil Beshir Acc./Ali Salama Acc./Ali Barakat Date : August 3, 2006 Auditor's Limited Review Report "attached" Telecom Egypt Company (An Egyptian Joint Stock Company) Income Statement For The Financial Period From January 1, 2006 to June 30, 2006 For the For the Financial Period Financial Period From 1/1/2006 From 1/1/2005 Note To 30/6/2006 To 30/6/2005 No. LE(000) LE(000)Operating RevenuesSales of services (22) 4 325 385 3 957 061Sales of telephone sets & directories 43 483 69 530 4 368 868 4 026 591Operating ExpensesInterconnection fees (23) 636 412 583 570Fuel 27 096 24 052Spare parts 63 716 55 151Maintenance 34 868 40 558Satellite subscriptions 11 327 8 242Depreciation & Amortization 1 309 963 1 253 320Cost of telephone sets & directories sold 54 226 65 154Other operating costs (24) 548 918 455 362 2 686 526 2 485 409Gross Operating Profit 1 682 342 1 541 182 Administrative expenseGeneral & administrative expenses (25) 456 860 395 757Selling & distribution expenses (26) 102 537 61 401Provisions (16) 10 872 40 316Impairment loss on trade and other receivables (17) 35 097 37 636 605 366 535 110Net Operating Profit 1 076 976 1 006 072 Other Income / (Expenses)Interest income 21 533 9 916Income from investments 349 600 137 883Interest expenses ( 141 706) ( 200 181)Other revenues (27) 140 110 51 159Reverse of impairment loss on long term investments 1 437Impairment loss on long-term investments ( 3 006)Gain on sale on long-term investments 20 941Gain on sale of fixed assets 1 359 758Foreign exchange ( loss) gain ( 83 446) 301 464 288 887 318 934Net profit for the period before tax 1 365 863 1 325 006Current tax expense 255 436 295 304Deferred tax expense 6 042Net profit for the period after tax 1 104 385 1 029 702Earnings per share (LE / Share) (30) 0.65 0.60 The accompanying notes from No. (1) to No. (38) form an integral part of these financial statements. Telecom Egypt Company (An Egyptian Joint Stock Company) Statement of Cash Flows For The Financial Period From January 1, 2006 to June 30, 2006 For the For the Financial Period Financial Period From 1/1/2006 From 1/1/2005 Note To 30/6/2006 To 30/6/2005 No. LE(000) LE(000)Cash flows from operating activitiesCash receipts from trade receivables 3 557 447 3 594 475Sales tax collected from receivables 243 153 205 244Stamp tax and fees collected (from third party) 71 153 67 408Deposits received from receivables 25 753 28 039Cash paid to suppliers ( 294 438) ( 255 543)Cash paid to employees ( 489 459) ( 447 298)Cash paid on behalf of employees ( 164 192) ( 137 308)Dividends paid to shareholders & employees ( 267 645) ( 467 432)Cash generated from operating activities 2 681 772 2 587 585 Interest paid ( 164 462) ( 262 861)Payments to Tax Authority ( 472 904) ( 286 862)Payments to sales Tax Authority ( 438 444) ( 365 588)Other proceeds /(payments) net ( 78 827) 212 020Net cash provided by operating activities 1 527 135 1 884 294 Cash flows from investing activitiesPayment for purchase of property, plant and equipment ( 705 491) (1 035 782)and projects in progressProceeds from sale of fixed 21 444 1 986Payments for purchase of investments ( 216 885) ( 699 435)Proceeds from sale of investments 88 294Interest received 18 356 6 505Dividends received 166 108 27 130Net cash used in investing activities ( 716 468) (1 611 302) Cash flows from financing activitiesRepayment of borrowings & facilities relating to ( 214 970) ( 454 607) acquisition of property, plant and equipment, projects in progress and other assetsRepayment of borrowings & facilities relating to others ( 23 148) (1 506 116)Payment of banks credit accounts ( 95 397) ( 998 228)Proceeds from long - term loans 29 531Proceeds from long - term bonds issued 2 000 000Payment of financial lease obligations ( 22 069) ( 13 194)Net cash used in financing activities ( 355 584) ( 942 614) Net Increase (Decrease) in cash and cash equivalent 455 083 ( 669 622)Cash and cash equivalent at the beginning of the period (31) 541 114 1 041 107Cash and cash equivalent at the end of the period (31) 996 197 371 485 The accompanying notes from No.(1) to No. (37) form an integral part of these financial statements. The accompanying notes to these financial statements can be accessed via thefollowing link. http://www.rns-pdf.londonstockexchange.com/rns/6451h_-2006-8-14.pdf Please copy and paste this link into your web browser. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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