B COMM : B Communications Reports Second Quarter 2011 Financial Results
08/02/2011| 06:15am US/Eastern
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B Communications Ltd. (NASDAQ Global Select Market and TASE: BCOM) today
reported its financial results for the quarter ended June 30, 2011 and
its cash position and loan repayment status as of June 30, 2011.
Bezeq Delivers Another Strong Quarter
The Bezeq Group reported another strong, stable quarter, delivering
revenues of NIS 2.9 billion (US$ 849 million) and operating profit of
NIS 935 million (US$ 274 million) in the second quarter. Bezeq's EBITDA
for the second quarter of 2011 totaled NIS 1.3 billion (US$ 381
million), representing an EBITDA margin of 44.35%, and cash flow from
operating activities reached NIS 670 million (US$ 196 million).
Debt Repayment Plan Continues to Progress Ahead-of-Schedule
As of June 30, 2011, B Communications had exceeded its original plan for
the repayment of the bank debt it incurred to fund its April 2010
acquisition of the controlling interest (approximately 30%) in Bezeq -
The Israel Telecommunication Corp., Ltd. ("Bezeq"). From April 14, 2010
through June 30, 2011, B Communications repaid approximately NIS 1.5
billion (US$ 439 million) of its bank debt, including NIS 1,307 million
(US$ 383 million) of principal and NIS 223 million (US$ 65 million) of
interest and CPI-linked expenses.
Dividends Received from Bezeq
On May 19, 2011, B Communications received two dividends from Bezeq
totaling NIS 520 million (US$ 152 million) that consisted of:
Current dividend totaling NIS 363 million (US$ 106 million),
representing B Communications' share of Bezeq's net profit for the
second half of 2010; and
Special dividend totaling NIS 157 million (US$ 46 million), the
first of six equal special dividends to be paid with no interest or
index adjustments on a semi-annual basis through 2013, totaling
approximately NIS 3 billion (US$ 878 million) over a three year
period, as declared by Bezeq's Board of Directors and approved by the
Israeli Court.
B Communications' Cash Position
As of June 30, 2011,B Communications' unconsolidated cash and
cash equivalents totaled NIS 394 million (US$ 115 million), and its
unconsolidated gross debt was NIS 4.7 billion (US$ 1.4 billion). Having
increased its ownership interest in Bezeq during the first quarter, B
Communications now owns 31.23% of the outstanding shares of Bezeq.
B Communications' Unconsolidated Balance Sheet Data*
As of June 30, 2011
(NIS millions)
(US$ millions)
Short term liabilities
478
140
Long term liabilities
4,242
1,242
Total liabilities
4,720
1,382
Cash and cash equivalents
394
115
Total net debt
4,326
1,267
* Does not include the balance sheet of Bezeq.
B Communications' Second Quarter Financial Results
B Communications' revenues for the second quarter were NIS 2,893 million
(US$ 847 million), an increase of 12.7% compared with NIS 2,566 million
(US$ 751 million) reported in the second quarter of 2010. For both the
current and the prior-year periods, B Communications' revenues consisted
entirely of its share of Bezeq's revenues. However, for the second
quarter of 2011, B Communications' revenues included its share of
Bezeq's revenues for the entire quarter, while during the second quarter
of 2010, B Communications began to consolidate its share of Bezeq's
revenues commencing April 14, 2010, the date of its acquisition of the
controlling interest in Bezeq.
B Communications' net loss for the second quarter totaled NIS 12 million
(US$ 3 million) compared with a net loss of NIS 40 million (US$ 12
million) in the second quarter of 2010. This net loss reflected the
impact of two significant expenses:
Amortization of tangible and identifiable intangible assets
resulting from the Bezeq acquisition: According to the standards
of business combination accounting, the total purchase price of Bezeq
was allocated to Bezeq's tangible and identifiable intangible assets
based on their estimated fair values. During the second quarter of
2011, B Communications recorded amortization expenses of NIS 310
million (US$ 91 million) related to the Bezeq purchase price
allocation ("Bezeq PPA").B Communications is amortizing
certain of the acquired identifiable intangible assets in accordance
with the future economic benefits expected from such assets using an
accelerated method of amortization under which approximately 16% of
the acquired identifiable intangible assets were amortized during 2010
and an additional 17% will be amortized during 2011.
Financial expenses: B Communications' financial expenses for
the second quarter totaled NIS 98 million (US$ 29 million). These
expenses consisted primarily of interest on the long-term loans
incurred to finance the Bezeq acquisition, which totaled NIS 86
million (US$ 25 million), and expenses related to our debentures,
which totaled NIS 14 million (US$ 4 million).
B Communications' Unconsolidated Financial Results
Q2 2011
(NIS millions)
(US$ millions)
Revenues
-
-
Financial expenses
(98
)
(29
)
Tax and other expenses
(1
)
-
PPA amortization, net
(96
)
(28
)
Interest in Bezeq's net income
183
54
Net loss
(12
)
(3
)
Comments of Management
Commenting on the results, Mr. Eli Holtzman, CEO of B Communications,
said, "The second quarter was another period of progress during which we
continued to accelerate our debt repayment plan, due primarily to the
significant current and special dividends that we received on May 19
from Bezeq. We are very pleased with developments at Bezeq, and continue
to focus on the smooth execution of our loan repayment plan."
Consolidation of Bezeq Results
Bezeq results consolidated for entire second quarter of 2011: B
Communications' results for the second quarter of 2011 reflect the
consolidation of the operations of Bezeq for the entire three-month
period. However, B Communications's results for the comparative period
of 2010 include Bezeq's results commencing April 14, 2010, the date of
the acquisition.
Supplemental unconsolidated results table: To provide
investors with transparent insight into its business, B Communications
has also provided its results on an unconsolidated basis. B
Communications' interest in Bezeq's net income is presented as a
single line item in the unconsolidated table, (see above, "B
Communications' Unconsolidated Q2 Financial Results").
Bezeq Group's Q2 Financial Results
To provide further insight into its results, we have provided the
following summary of the Bezeq Group's consolidated financial report for
the quarter ended June 30, 2011. For a full discussion of Bezeq's
results for the quarter, please refer to http://ir.bezeq.co.il.
Bezeq Group's revenues for the second quarter of 2011 amounted to
NIS 2.9 billion (US$ 849 million), a decrease of 3.0% compared to the
second quarter of 2010. Bezeq Fixed-Line revenues and Pelephone revenues
were negatively affected by the reduction in mobile termination rates
that came into effect on January 1, 2011. The decrease in revenues was
moderated by growth in Pelephone's revenues from equipment sales and by
the consolidation of Walla! (commencing April 25, 2010).
Bezeq Group's operating profit in the second quarter of 2011
amounted to NIS 935 million (US$ 274 million), a decrease of 5.6%
compared with the second quarter of 2010. Net profit attributable
to the owners of Bezeq in the second quarter amounted to NIS 585 million
(US$ 171 million), a decrease of 8.3% compared with the corresponding
quarter. EBITDA for the second quarter amounted to NIS 1.28
billion (US$ 375 million) (EBITDA margin of 44.3%), a decrease of 4.1%
compared with the corresponding quarter, (EBITDA margin of 44.9%). In
the second quarter of 2010, a one-time gain of NIS 57 million (US$ 17
million) was recorded as a result of the consolidation of Walla's
operations by Bezeq International. After adjustment for the one-time
gain, growth was recorded in each of the above parameters.
Cash flow from operating activities in the second quarter of 2011
was down 31.4% compared with the corresponding quarter in 2010, and
amounted to NIS 670 million (US$ 196 million), mainly due to the sharp
rise in sales of smartphones and the significant increase in supplier
payments whereas subscriber payments for those handsets are made in 36
installments.
Gross investments (CAPEX) in the second quarter of 2011 amounted
to NIS 495 million (US$ 145 million), an increase of 15.9% compared with
the corresponding quarter in 2010. The increase stemmed, among other
things, from the investment in a submarine cable by Bezeq International.
The CAPEX to sales ratio was 17.1% in the second quarter of 2011,
compared with 14.3% in the second quarter of 2010.
As a result of the decrease in cash flow from operating activities and
the increase in CAPEX, free cash flow in the second quarter of
2011 amounted to NIS 264 million (US$ 77 million), compared with NIS 606
million (US$ 177 million) in the corresponding quarter in 2010, a
decrease of 56.4%.
As of June 30, 2011, the net financial debt of the Bezeq Group was NIS
6.5 billion (US$ 1.9 billion), compared with NIS 5.0 billion (US$ 1.5
billion) on June 30, 2010. The increase was attributable to issuance of
NIS 2.8 billion (US$ 820 million) of debt, of which NIS 2 billion (US$
586 million) was issued in the second quarter of 2011. In contrast, NIS
1.4 billion (US$ 410 million) of debt was repaid. At the end of June
2011, the ratio of the Bezeq Group's net debt to EBITDA was 1.33,
compared with 1.07 at the end of June 2010. We note that an issue of NIS
2.7 billion (US$ 791 million) of debentures at the end of June 2011 is
not included in the Group's balance sheet since the consideration was
received after the balance sheet date.
Bezeq Group (Consolidated) 1
Q2 2011
Q2 2010
Change
(NIS millions)
Revenues
2,893
2,981
-3.0
%
Operating profit
935
990
-5.6
%
EBITDA
1,283
1,338
-4.1
%
EBITDA margin
44.3
%
44.9
%
Net profit attributable to Company shareholders
585
638
-8.3
%
Diluted EPS (NIS)
0.21
0.24
-12.5
%
Cash flow from operating activities
670
976
-31.4
%
Capex payments, net 2
406
370
9.7
%
Free cash flow 3
264
606
-56.4
%
Net debt/EBITDA (end of period) 4
1.33
1.07
Net debt/shareholders' equity (end of period)
2.66
0.92
1 Bezeq Group results reflect the consolidation of
Walla! as of April 25, 2010.
2 Capex data reflects payments related to capex and are
based on the cash flow statements.
3 Free cash flow is defined as cash flow from operating
activities less net capex payments.
4 EBITDA in this calculation refers to the trailing
twelve months.
Notes:
A.
Convenience Translation to Dollars: For the convenience of
the reader, certain of the reported NIS figures of June 30, 2011
and for the periods then ended, and for the comparative periods
have been presented in millions of U.S. dollars, translated at the
representative rate of exchange as of June 30, 2011 (NIS 3.415 =
U.S. Dollar 1.00). The U.S. Dollar ($) amounts presented should
not be construed as representing amounts receivable or payable in
U.S. Dollars or convertible into U.S. Dollars, unless otherwise
indicated.
B.
Use of non-IFRS Measurements: We and Bezeq's management
regularly internally use supplemental non-IFRS financial
measures to understand, manage and evaluate our business and make
operating decisions. We believe these non-IFRS financial measures
provide consistent and comparable measures to help investors
understand Bezeq's current and future operating cash flow
performance. These non-IFRS financial measures may differ
materially from the non-IFRS financial measures used by other
companies.
EBITDA is a non-IFRS financial measure generally defined as earnings
before interest, taxes, depreciation and amortization. Bezeq defines
EBITDA as net income before financial income (expenses), net,
impairment and other charges, expenses recorded for stock
compensation in accordance with IFRS 2, income tax expenses and
depreciation and amortization. We present Bezeq's EBITDA as a
supplemental performance measure because we believe that it
facilitates operating performance comparisons from period to period
and company to company by backing out potential differences caused
by variations in capital structure, tax positions (such as the
impact of changes in effective tax rates or net operating losses)
and the age of, and depreciation expenses associated with, fixed
assets (affecting relative depreciation expense).
EBITDA should not be considered in isolation or as a substitute for
net income or other statement of operations or cash flow data
prepared in accordance with IFRS as a measure of profitability or
liquidity. EBITDA does not take into account our debt service
requirements and other commitments, including capital expenditures,
and, accordingly, is not necessarily indicative of amounts that may
be available for discretionary uses. In addition, EBITDA, as
presented in this press release, may not be comparable to similarly
titled measures reported by other companies due to differences in
the way that these measures are calculated.
About B Communications Ltd.
B Communications Ltd. (NASDAQ Global Select Market and TASE: BCOM) is a
holding company with a single asset: the controlling interest
(approximately 31.23%) in Bezeq (www.bezeq.co.il),
Israel's incumbent telecommunications provider. Bezeq is the leading
player in the majority of Israel's telecommunications markets, including
its fixed-line and mobile voice and data, broadband, international long
distance, multichannel pay TV and other sectors. B Communications is a
subsidiary of Internet Gold (approximately 78.11%-owned) (NASDAQ Global
Select Market and TASE: IGLD) and is part of the Eurocom Group. For more
information, please visit the following Internet sites:
This press release contains forward-looking statements that are subject
to risks and uncertainties. Factors that could cause actual results to
differ materially from these forward-looking statements include, but are
not limited to, general business conditions in the industry, changes in
the regulatory and legal compliance environments, the failure to manage
growth and other risks detailed from time to time in B Communications's
filings with the Securities Exchange Commission. These documents contain
and identify other important factors that could cause actual results to
differ materially from those contained in our projections or
forward-looking statements. Stockholders and other readers are cautioned
not to place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made. We undertake no
obligation to update publicly or revise any forward-looking statement.
B. Communications Ltd.
Consolidated Statement of Financial Position
Convenience
translation into
U.S. dollars
June 30
June 30
June 30
December 31
2011
2011
2010
2010
(Unaudited)
(Unaudited)
(Unaudited)
(Audited)
NIS millions
US$ millions
NIS millions
NIS millions
Assets
Cash and cash equivalents
496
145
312
383
Investments including derivatives
385
113
319
789
Trade receivables
2,855
836
2,678
2,701
Other receivables
237
69
277
228
Inventory
277
81
169
177
Current tax assets
2
1
-
3
Assets classified as held-for-sale
137
40
38
194
Total current assets
4,389
1,285
3,793
4,475
Investments including derivatives
112
33
138
129
Long-term trade and other receivables
1,474
432
940
1,114
Property, plant and equipment
7,487
2,192
5,513
7,392
Intangible assets
8,643
2,531
14,923
9,163
Deferred and other expenses
396
116
687
423
Investments in equity-accounted investee
(mainly loans)
1,050
307
1,136
1,084
Deferred tax assets
259
76
336
254
Total non-current assets
19,421
5,687
23,673
19,559
Total assets
23,810
6,972
27,466
24,034
B. Communications Ltd.
Consolidated Statement of Financial Position (cont'd)
Convenience
translation into
U.S. dollars
June 30
June 30
June 30
December 31
2011
2011
2010
2010
(Unaudited)
(Unaudited)
(Unaudited)
(Audited)
NIS millions
US$ millions
NIS millions
NIS millions
Liabilities
Short-term bank credit, current maturities of
long-term liabilities and debentures
1,666
488
1,982
1,380
Trade payables
1,005
294
1,032
1,061
Other payables including derivatives
891
261
752
816
Dividend payable
668
196
-
-
Current tax liabilities
398
116
254
346
Deferred income
39
11
33
34
Provisions
253
74
371
251
Employee benefits
488
143
454
269
Total current liabilities
5,408
1,583
4,878
4,157
Debentures
2,770
811
2,113
2,776
Bank loans
6,651
1,948
5,869
6,138
Loans from institutions and others
546
160
-
541
Dividend payable
941
276
-
-
Employee benefits
267
78
295
305
Other liabilities
155
45
5
150
Provisions
70
20
73
69
Deferred tax liabilities
1,361
399
2,474
1,555
Total non-current liabilities
12,761
3,737
10,829
11,534
Total liabilities
18,169
5,320
15,707
15,691
Equity
Total equity attributable to Company's
shareholders
945
277
1,356
1,212
Non-controlling interest
4,696
1,375
10,403
7,131
Total equity
5,641
1,652
11,759
8,343
Total liabilities and equity
23,810
6,972
27,466
24,034
B. Communications Ltd.
Consolidated Statements of Operations
(In millions, except share data)
Six months period ended
Three months period ended
Year ended
June 30,
June 30,
December 31,
Convenience
Convenience
translation
translation
into
into
U.S. dollars
U.S. dollars
2011
2011
2010
2011
2011
2010
2010
NIS millions
US$ millions
NIS millions
NIS millions
US$ millions
NIS millions
NIS millions
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Audited)
Revenues
5,806
1,700
2,566
2,893
847
2,566
8,657
Cost and expenses
Depreciation and amortization
1,398
409
484
698
204
484
2,294
Salaries
1,073
314
433
540
158
433
1,488
General and operating expenses
2,264
663
1,055
1,132
332
1,042
3,640
Other operating expenses
(income), net
282
83
(52)
32
9
7
5
5,017
1,469
1,920
2,402
703
1,966
7,427
Operating income
789
231
646
491
144
600
1,230
Finance expenses, net
239
70
124
127
37
123
287
Income after financing
expenses, net
550
161
522
364
107
477
943
Share in losses of
equity-accounted investee
137
40
83
72
21
83
235
Income before income tax
413
121
439
292
86
394
708
Income tax
204
60
168
116
34
148
385
Net income
209
61
271
176
52
246
323
Attributable to:
Owners of the Company
(67)
(20)
(15)
(12)
(3)
(40)
(140)
Non-controlling interest
276
81
286
188
55
286
463
Net income
209
61
271
176
52
246
323
Income (loss) per share, basic
Net income (loss) per share
(2.29)
(0.67)
(0.55)
(0.45)
(0.13)
(0.37)
(4.83)
Income (loss) per share, diluted
Net income (loss) per share
(2.33)
(0.68)
(0.55)
(0.48)
(0.14)
(0.37)
(4.93)
B Communications Ltd. Idit Cohen ? IR Manager +972-3-924-0000 idit@igld.com or Investor
relations contacts: Mor Dagan - Investor Relations +972-3-516-7620 mor@km-ir.co.il
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