Magyar Telekom result for the fourth quarter of 2018

Magyar Telekom result for the fourth quarter of 2018

Budapest, February 20, 2019 18:00

Magyar Telekom today reported its consolidated financial results for the fourth quarter and full year of 2018, in accordance with International Financial Reporting Standards (IFRS).

Total revenues (excluding the impact of IFRS 15 adoption) increased by 7.8% year-on-year to HUF 174.0 billion in Q4 2018 and by 7.2% year-on-year to HUF 655.1 billion in FY 2018.Revenue growth continued to be primarily driven by a strong increase in SI/IT revenues, along with higher equipment sales and mobile data usage.

Mobile revenues (excluding IFRS 15 impacts) increased by 8.7% year-on-year to HUF 90.5 billion in Q4 2018 and by 6.0% year-on-year to HUF 342.1 billion in FY 2018, primarily driven by the growth in equipment sales and a continued increase in mobile data revenues.

Fixed line revenues (excluding IFRS 15 impacts) rose by 4.6% year-on-year to HUF 53.9 billion in Q4 2018 and by 5.0% to HUF 205.9 billion in FY 2018. This growth was attributable to rising equipment sales as well as higher TV and broadband retail service revenues.

System Integration (SI) and IT revenues grew by 12.2% year-on-year to HUF 29.6 billionin Q4 2018 , resulting in year-on-year annual revenue growth of 22.4% in FY 2018. Growth continued to be primarily driven by public sector projects, while deliveries of instant payment solutions to the banking sector also contributed to the increase in Hungary in Q4 2018. In Macedonia, the growth in SI/IT revenues was fuelled by a higher volume of customized solutions projects.

Energy Services were discontinued as of November 1, 2017, following the exit from the residential segment of the electricity market.

Direct costs (excluding IFRS 9 and 15 impacts) increased by 13.2% year-on-year, to HUF 81.6 billion in Q4 2018 and by 15.9% year-on-year to HUF 284.9 billion in FY 2018. This wasdriven by higher SI/IT and equipment costs, in line with the growth delivered in related revenue lines, coupled with higher bad debt expenses.

Interconnect costs increased by 5.7% year-on-year to HUF 5.2 billion in Q4 2018, reflecting increased mobile traffic in both countries that led to higher payments to domestic mobile operators.

SI/IT service related costs increased by 8.2% year-on-year to HUF 20.2 billion in Q4 2018, driven by a higher volume of related projects.

Bad debt expenses deteriorated by HUF 2.2 billion year-on-year to HUF 3.2 billion in Q4 2018. This was driven primarily by higher bad debt expense in Hungary. This resulted from the strong growth in revenues, as well as the absence of the positive one-off impact recorded in 2017 that stemmed from the application of lower impairment rates. In Macedonia, bad debt expense (excluding the impact of IFRS adoption) declined thanks to lower impairment levels related to mobile sales.

Telecom tax declined slightly by 3.1% year-on-year to HUF 6.3 billion in Q4 2018, as lower residential fixed voice usage outweighed the increase in mobile traffic in Hungary. Telecom tax for the full year rose by a moderate 1.6% year-on-year to HUF 25.5 billion, reflecting higher mobile traffic in Hungary, both in the retail and business segments.

Other direct costs increased by 15.8% year-on-year, to HUF 46.7 billion in Q4 2018, primarily due to an increase in the cost of equipment sales, in line with higher sales and an increase in TV outpayments.

Gross profit (excluding IFRS 9 and 15 impacts) increased by 3.4% year-on-year to HUF 92.4 billion in Q4 2018 and by 1.4% to HUF 370.2 billion in FY 2018, as the strong increase in revenues outweighed the impact of the increasing weight of lower margin services in the sales mix.

Indirect costs (excluding IFRS 9 and 15 impacts) improved by 2.0% year-on-yearto HUF 46.2 billionin Q4 2018 , as higher other operating income fully offset higher employee related and other operating expenses. Indirect costs for the full year declined by1.1% year-on-year to HUF 177.4 billion, as higher other operating income, coupled with savings in other operating expenses outweighed the rise in employee related expenses.

Employee-related expenses rose by 4.3% year-on-year to HUF 23.0 billion in Q4 2018 as a combined result of changed trainee employment form in Hungary, a 5% average wage increase at the Company and higher severance-related expenses in Macedonia.

Other operating expenses were 6.6% higher year-on-year at HUF 29.3 billion in Q4 2018, driven by higher marketing expenses and an increase in rental fees in relation to the new headquarters. Other operating expenses for the full year improved by 1.8% year-on-year to HUF 96.7 billion as lower HR-related, IT maintenance and energy costs more than offset increased rental fees and maintenance costs in Hungary. Other operating expenses in Macedonia improved moderately thanks to lower marketing and maintenance expenses.

Other operating income rose by HUF 3.7 billion year-on-year to HUF 6.2 billion in Q4 2018, reflecting the one-off profits realized from the sale of the old headquarters in Hungary.

EBITDA (excluding IFRS 9 and 15 impacts) increased by 9.4% year-on-year to HUF 46.2 billion in Q4 2018 reflecting the combined impact of higher gross profit and higher other operating income in Hungary, which fully offset the temporary EBITDA decline in Macedonia. EBITDA for the full year improved by 3.8% year-on-year to HUF 192.8 billion thanks to the combined impact of improvements in gross profit and indirect costs.

Depreciation and amortization (D&A) expenses increased by 6.8% year-on-year to HUF 29.7 billion in Q4 2018 and by 6.8% to HUF 115.5 billion in FY 2018, driven by the shortening of the useful lives of certain network equipment related to customer connections.

Profit for the period from continuing operations (excluding IFRS 9 and 15 impacts) increased by 40.2% year-

LINK:	https://www.telekom.hu/about_us/press_room/press_releases/2019/februar...
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