BUDAPEST, Hungary--(BUSINESS WIRE)--Invitel Zrt. (“Invitel”) announced today the financial results of Magyar Telecom B.V. for the quarter and nine months ended September 30, 2011.
THIRD QUARTER 2011 RESULTS
The results for the quarter ended September 30, 2011 reflect the consolidated financial results of Magyar Telecom B.V. and its subsidiaries (collectively, the “Company”).
The reporting currency is euro; however, the functional currency of continued operations is the Hungarian forint, being the currency of the primary economic environment in which the Company operates.
When comparing the financial results for the quarter ended September 30, 2011 to the financial results for the quarter ended September 30, 2010, the reported results in euro have been affected by the difference between the average EUR/HUF exchange rates. The Hungarian forint appreciated against the euro by 5% with an average EUR/HUF exchange rate of 270.04 during the quarter ended September 30, 2011 compared to the average EUR/HUF exchange rate of 282.46 during the quarter ended September 30, 2010. This change in exchange rates had an impact on Hungarian forint denominated earnings when converted into euro.
The Company’s revenue from continued operations was EUR 49.1 million for the quarter ended September 30, 2011, which represents an 8% increase compared to the quarter ended September 30, 2010. Segment gross margin increased by 7% from EUR 37.8 million for the quarter ended September 30, 2010 to EUR 40.3 million for the quarter ended September 30, 2011. Operating expenses increased by 35% from EUR 8.4 million for the quarter ended September 30, 2010 to EUR 11.3 million for the quarter ended September 30, 2011. Income from continued operations decreased by 57% to EUR 4.0 million for the quarter ended September 30, 2011 from EUR 9.4 million for the quarter ended September 30, 2010. Net income/loss of continued operations was loss of EUR 3.0 million for the quarter ended September 30, 2011 compared to income of EUR 4.9 million for the quarter ended September 30, 2010.
Residential Voice – Residential Voice segment gross margin was EUR 11.1 million for the quarter ended September 30, 2011, representing a decrease of 17% compared to the quarter ended September 30, 2010. The decrease was mainly due to a decrease in the number of subscribers inside our historical concession areas, as well as a decrease in the number of lower margin carrier select customers and traffic outside our historical concession areas. In functional currency terms, Residential Voice segment gross margin decreased by 19%.
Residential Internet – Residential Internet segment gross margin was EUR 6.9 million for the quarter ended September 30, 2011, representing an increase of 10% compared to the quarter ended September 30, 2010. In functional currency terms, Residential Internet segment gross margin for the quarter ended September 30, 2011 increased by 7% compared to the prior year.
Corporate – Corporate segment gross margin was EUR 12.3 million for quarter ended September 30, 2011, representing an increase of 1% compared to the quarter ended September 30, 2010; however, in functional currency terms, Corporate segment gross margin decreased by 2%. The decrease was mainly due to the reduction in the traditional voice business and price erosion due to competition.
Wholesale – Wholesale segment gross margin was EUR 6.1 million for the quarter ended September 30, 2011, representing an increase of 1% compared to the quarter ended September 30, 2010; however, in functional currency terms, Wholesale segment gross margin decreased by 3%.
Cable – Our Cable gross margin was EUR 3.9 million for the three months ended September 30, 2011. Cable segment was introduced as at March 1, 2011 and relates to the revenue generated by FiberNet.
Segment gross margin is a non-GAAP financial measure, which is used by management to evaluate the performance of the business segments. The following table represents the reconciliation of segment gross margin to income from continued operations:
| Quarter ended September 30, | |||||||
| (euro in millions) | 2011 | 2010 | |||||
| Residential Voice | 11.1 | 13.3 | |||||
| Residential Internet | 6.9 | 6.3 | |||||
| Corporate | 12.3 | 12.2 | |||||
| Domestic Wholesale | 6.1 | 6.0 | |||||
| Cable | 3.9 | - | |||||
| Segment Gross Margin | 40.3 | 37.8 | |||||
| Network operating expenses | (5.2 | ) | (4.6 | ) | |||
| Direct personnel expenses | (3.1 | ) | (2.6 | ) | |||
| Operating expenses | (11.3 | ) | (8.4 | ) | |||
| Depreciation and amortization | (15.1 | ) | (12.5 | ) | |||
| Cost of restructuring | (1.6 | ) | (0.3 | ) | |||
| Income from operations | 4.0 | 9.4 | |||||
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
The results for the nine months ended September 30, 2011 reflect the consolidated financial results of Magyar Telecom B.V. and its subsidiaries (collectively, the “Company”).
The reporting currency is euro; however, the functional currency of continued operations is the Hungarian forint, being the currency of the primary economic environment in which the Company operates.
When comparing the financial results for the nine months ended September 30, 2011 to the financial results for the nine months ended September 30, 2010, the reported results in euro have been affected by the difference between the average EUR/HUF exchange rates. The Hungarian forint appreciated against the euro by 1% with an average EUR/HUF exchange rate of 271.28 during the nine months ended September 30, 2011 compared to the average EUR/HUF exchange rate of 275.25 during the nine months ended September 30, 2010. This change in exchange rates had an impact on Hungarian forint denominated earnings when converted into euro.
The Company’s revenue from continued operations increased by 2% from EUR 145.3 million for the nine months ended September 30, 2010 to EUR 148.5 million for the nine months ended September 30, 2011. Segment gross margin was EUR 122.0 million for the nine months ended September 30, 2011 which represents a 0% change compared to the nine months ended September 30, 2010. Operating expenses increased by 33% from EUR 27.1 million for the nine months ended September 30, 2010 to EUR 36.1 million for the nine months ended September 30, 2011. Income from continued operations decreased by 61% to EUR 12.6 million for the nine months ended September 30, 2011 from EUR 31.9 million for the nine months ended September 30, 2010. Net income/loss of continued operations was income of EUR 15.9 million for the nine months ended September 30, 2011 compared to loss of EUR 13.1 million for the nine months ended September 30, 2010.
Residential Voice – Residential Voice segment gross margin was EUR 35.0 million for the nine months ended September 30, 2011, representing a decrease of 18% compared to the nine months ended September 30, 2010. The decrease was mainly due to a decrease in the number of subscribers inside our historical concession areas, as well as a decrease in the number of lower margin carrier select customers and traffic outside our historical concession areas. In functional currency terms, Residential Voice segment gross margin decreased by 19%.
Residential Internet – Residential Internet segment gross margin was EUR 21.1 million for the nine months ended September 30, 2011, representing an increase of 8% compared to the nine months ended September 30, 2010. In functional currency terms, Residential Internet segment gross margin for the nine months ended September 30, 2011 increased by 6% compared to the prior year.
Corporate – Corporate segment gross margin was EUR 37.5 million for nine months ended September 30, 2011, representing a decrease of 3% compared to the nine months ended September 30, 2010. The decrease was mainly due to the reduction in the traditional voice business and price erosion due to competition. In functional currency terms, Corporate segment gross margin decreased by 4%.
Wholesale –Wholesale segment gross margin was EUR 19.0 million for the nine months ended September 30, 2011, representing a decrease of 10% compared to the nine months ended September 30, 2010. In functional currency terms, Wholesale segment gross margin decreased by 11%.
Cable – Our Cable gross margin was EUR 9.4 million for the nine months ended September 30, 2011. Cable segment was introduced as at March 1, 2011 and relates to the revenue generated by FiberNet.
Segment gross margin is a non-GAAP financial measure, which is used by management to evaluate the performance of the business segments. The following table represents the reconciliation of segment gross margin to income from continued operations:
| Nine months ended September 30, | |||||||
| (euro in millions) | 2011 | 2010 | |||||
| Residential Voice | 35.0 | 42.5 | |||||
| Residential Internet | 21.1 | 19.6 | |||||
| Corporate | 37.5 | 38.6 | |||||
| Domestic Wholesale | 19.0 | 21.1 | |||||
| Cable | 9.4 | - | |||||
| Segment Gross Margin | 122.0 | 121.8 | |||||
| Network operating expenses | (15.8 | ) | (14.6 | ) | |||
| Direct personnel expenses | (9.2 | ) | (8.4 | ) | |||
| Operating expenses | (36.1 | ) | (27.1 | ) | |||
| Depreciation and amortization | (43.7 | ) | (38.9 | ) | |||
| Cost of restructuring | (4.6 | ) | (0.9 | ) | |||
| Income from operations | 12.6 | 31.9 | |||||
Net cash provided by continued operations, which includes interest paid but excludes capital expenditure and debt repayments, was EUR 33.8 million for the nine months ended September 30, 2011.
COMMENTS FROM MARTIN LEA
Commenting on the financial results, Invitel President and CEO Martin Lea said, “We have clearly still not seen any material improvement in the economic or general trading conditions with GDP growth slowing in Q2 and Q3 relative to the first quarter. Having said that, the third quarter did provide some encouragement with the year on year segment gross margin performance in both the residential and corporate segments showing improvement relative to earlier quarters. In residential we saw continued growth in Internet, and a slightly lower rate of decline in the in-concession voice business. In corporate we saw stronger growth in data and a reduced level of decline in corporate voice. In addition to that our Wholesale business, which by its nature can be rather spiky, continues to perform well."
Mr. Lea went on to say, ‘’Overall we have achieved good stability in both the corporate and wholesale segments with new customer acquisition and up-selling compensating for competitive pricing pressure. In the residential segment we still have significant decline, the rate of which we believe can be further reduced over time. The integration of the FiberNet business continues to progress well and is in line with our plans and expectations.”
CONFERENCE CALL
On November 22, 2011 (at 14:00 UK time, 15:00 CET, 9:00 AM ET), the CEO and CFO of Invitel will host a conference call to discuss the third quarter 2011 financial results of Magyar Telecom B.V.
A copy of the presentation materials will also be published on Invitel’s website at http://english.invitel.hu/ under “Investor Relations” prior to the call.
You can participate in the conference call by dialing 800-4626-6666 (UK toll free), +1-201-689-8049 (International) or +1-877-407-9210 (U.S. toll free) and referencing “Invitel.”
A webcast of the call and the presentation materials will be available on Invitel’s website at http://english.invitel.hu/ under “Investor Relations.” The webcast will be archived for 30 days. In addition, a replay of the call will be available two hours after the call has ended and through December 6, 2011 at 11:59 PM ET. To access the replay of the call, please dial +1-201-612-7415 (International) or +1-877-660-6853 (U.S. toll free) and enter account (286) followed by the replay access code (380451).
ABOUT INVITEL
Invitel is the number one alternative and the second-largest fixed line telecommunications and broadband Internet Services Provider in the Republic of Hungary, delivering voice, data and Internet services to residential and business customers.
Forward-Looking Statements and Legal Information
The information above includes forward-looking statements about Invitel and its affiliates. These and all forward-looking statements are only predictions of current plans that are constantly under review by Invitel. Such statements are qualified by important factors that may cause actual results to differ from those contemplated, including those risk factors detailed in Invitel’s SEC filings, which may not be exhaustive. For a discussion of such risk factors, see Invitel’ filings with the SEC including but not limited to, its 2009 Annual Report on Form 20-F. Invitel operates in a continually changing business environment, and new risk factors emerge from time to time. Invitel cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on its business or events described in any forward-looking statements. Invitel has no obligation to publicly update or revise any forward-looking statements to reflect the occurrence of future events or circumstances. In addition, because the Company has deregistered its common stock and is no longer subject to certain reporting obligations with the SEC, the Company no longer intends to file or furnish any updates with the SEC.
| Magyar Telecom B.V. | ||||||||
| Financial Highlights | ||||||||
|
(in millions of euro) |
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| Statements of Operations | ||||||||
| Quarter ended | Quarter ended | |||||||
| September 30, | September 30, | |||||||
| 2011 | 2010 | |||||||
| Residential Voice | 12.5 | 15.3 | ||||||
| Residential Internet | 8.5 | 7.9 | ||||||
| Corporate | 15.5 | 15.8 | ||||||
| Domestic Wholesale | 7.6 | 6.5 | ||||||
| Cable | 5.0 | 0.0 | ||||||
| Total Revenue | 49.1 | 45.5 | ||||||
| Segment Cost of Sales | 8.8 | 7.7 | ||||||
| Income (loss) from Operations | 4.0 | 9.4 | ||||||
| Interest Expense | 9.9 | 10.8 | ||||||
| Foreign exchange gains (losses), net | (0.3 | ) | 9.8 | |||||
| Gains (losses) on derivative financial instruments | 3.3 | 7.4 | ||||||
| Net income (loss) from Continued Operations | (3.0 | ) | 4.9 | |||||
| Net income (loss) from Discontinued Operations | 0.0 | 6.7 | ||||||
| Magyar Telecom B.V. | |||||||||
| Financial Highlights | |||||||||
|
(in millions of euro) |
|||||||||
| Statements of Operations | |||||||||
| Nine months ended | Nine months ended | ||||||||
| September 30, | September 30, | ||||||||
| 2011 | 2010 | ||||||||
| Residential Voice | 39.6 | 49.0 | |||||||
| Residential Internet | 25.9 | 24.4 | |||||||
| Corporate | 47.8 | 49.7 | |||||||
| Domestic Wholesale | 23.3 | 22.2 | |||||||
| Cable | 11.9 | 0.0 | |||||||
| Total Revenue | 148.5 | 145.3 | |||||||
| Segment Cost of Sales | 26.5 | 23.5 | |||||||
| Income (loss) from Continued Operations | 12.6 | 31.9 | |||||||
| Interest Expense | 29.3 | 33.1 | |||||||
| Foreign exchange gains (losses), net | (2.1 | ) | (4.8 | ) | |||||
| Gains (losses) on derivative financial instruments | 3.2 | 2.4 | |||||||
| Net income (loss) from Continued Operations | 15.9 | (13.1 | ) | ||||||
| Net income (loss) from Discontinued Operations | 0.0 | 26.3 | |||||||
| Magyar Telecom B.V. | |||||||
| Financial Highlights | |||||||
|
(in millions of euro) |
|||||||
| Balance Sheets | |||||||
| September 30, | December 31, | ||||||
| 2011 | 2010 | ||||||
| Current Assets | 102.5 | 140.0 | |||||
| Property, Plant and Equipment, net | 313.9 | 303.0 | |||||
| Total Assets | 469.4 | 485.9 | |||||
| Total Current Liabilities | 48.1 | 39.7 | |||||
| Long Term Debt | 333.7 | 351.0 | |||||
| Total Shareholders Equity | 72.2 | 78.1 | |||||
| Total Liabilities and Shareholders Equity | 469.4 | 485.9 | |||||