B Communications Ltd : B Communications Reports Fourth Quarter 2011 Financial Results
03/15/2012| 05:55am US/Eastern
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Progress Continues In Line With Business Plan
Bezeq Delivers Another Strong Quarter
B Communications Ltd. (NASDAQ Global Market: BCOM)(TASE: BCOM) today
reported its financial results for the fourth quarter ended December 31,
2011.
The financial results presented in this press release are preliminary
un-audited financial results. The final and complete results for the
fourth quarter and for the year ended December 31, 2011 will be
published when the Company publishes its audited financial reports for
2011 and its annual report on Form 20-F for 2011.
Bezeq - On-Track Performance: The Bezeq Group reported another
stable quarter, delivering revenues of NIS 2.7 billion (US$ 694 million)
and operating profit of NIS 698 million (US$ 183 million) for the
period. Bezeq's EBITDA for the fourth quarter totaled NIS 1.1 billion
(US$ 276 million), representing an EBITDA margin of 39.7%. Net income
for the period totaled NIS 521 million (US$ 136 million).
Dividend from Bezeq: On October 5, 2011, B Communications
received a dividend from Bezeq totaling NIS 464 million (US$ 121
million). The Company used this dividend for two purposes: (1) payment
of NIS 238 million (US$ 62 million) of its current loan repayment
commitment; and (2) pre-payment of an additional NIS 226 million (US$ 59
million) of debt to banks, thereby reducing the size of the final
"bullet" repayment due in November 2016 and saving related future
interest expenses.
Successful Placement of NIS 126 Million in Debentures: During
January 2012, B Communications completed a private placement of
additional Series B debentures with a total par value of NIS 126 million
(US $33 million) to a number of Israeli institutional investors. The
placement increased the total outstanding balance of the Series B
debentures, which were first issued in September 2010, to par value NIS
526 million (US $138 million).
Cash Position: As of December 31, 2011,the Company's
unconsolidated cash and cash equivalents totaled NIS 354 million (US$ 93
million) and its unconsolidated total debt was NIS 4.4 billion (US$ 1.2
billion) and its net debt totaled NIS 4.0 billion (US$ 1.1 billion).
B Communications' Unconsolidated Balance Sheet Data*
As of December 31, 2011
(NIS millions)
(US$ millions)
Short term liabilities
526
138
Long term liabilities
3,874
1,014
Total liabilities
4,400
1,152
Cash and cash equivalents
354
93
Total net debt
4,046
1,059
* Does not include the balance sheet of Bezeq
B Communications' Fourth Quarter Consolidated Financial Results
B Communications' revenues for the fourth quarter were NIS 2,650 million
(US$ 694 million), a 13.3% decrease compared with NIS 3,058 million (US$
800 million) reported in the fourth quarter of 2010. For both the
current and the prior-year periods, B Communications' revenues consisted
entirely of its share of Bezeq's revenues.
B Communications' net loss attributable to shareholders of the company
for the fourth quarter totaled NIS 102 million (US$ 27 million), a
decrease of 39% compared with NIS 166 million (US$ 43 million) reported
in the fourth quarter of 2010. This net loss reflects the impact of
three significant expenses:
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Amortization of tangible and identifiable intangible assets
resulting from the Bezeq acquisition: According to the rules
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 as
determined by an analysis performed by an independent valuation
firm. B Communications is amortizing certain of the acquired
identifiable intangible assets in accordance with the economic
benefit expected from such assets using an accelerated method of
amortization.
During the fourth quarter of 2011, B Communications recorded NIS 86
million (US$ 23 million) net, in amortization expenses related to
the Bezeq purchase price allocation ("Bezeq PPA"). During 2010 and
2011 the Company amortized approximately 38% of the total Bezeq PPA
and expects to amortize an additional 15% in 2012.
The Company's Bezeq PPA amortization expense is a non-cash
expense which is subject to adjustment. If, for any reason, the
Company finds it necessary or appropriate to make adjustments to
amounts already expensed, it may result in significant changes to
future financial statements.
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Financial expenses: B Communications' financial expenses
for the fourth quarter of 2011 totaled NIS 84 million (US$ 22
million). These expenses consisted primarily of interest on the
long-term loans incurred to finance the Bezeq acquisition, which
totaled NIS 70 million (US$ 19 million), and expenses related to
the Company's debentures, which totaled NIS 10 million (US$ 3
million).
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One-time tax adjustment related to the Bezeq PPA: During
the fourth quarter of 2011, the Company recognized a one-time
adjustment in the amount of NIS 92 million (US$ 24 million)
related to the deferred taxes that it allocated with respect to
the Bezeq PPA. This adjustment was required because of changes in
the Israeli tax rate enacted on December 5, 2011, including the
cancellation of tax reductions that had been provided in the
Economic Efficiency Law, resulting in the increase in the company
tax rate in Israel to 25% beginning in 2012. Current taxes for the
periods reported in these financial statements are calculated
according to the tax rates specified in the Economic Efficiency
Law, but deferred taxes were recalculated based on the higher
future tax rate.
B Communications' Unconsolidated Financial Results
Q4 2011
(NIS millions)
(US$ millions)
Revenues
-
-
Financial expenses
(84)
(22)
Other expenses
(2)
(1)
PPA amortization, net
(86)
(23)
PPA onetime tax adjustment
(92)
(24)
Interest in Bezeq's net income
162
43
Net loss
(102)
(27)
Comments of Management Commenting on the results, Mr. Doron
Turgeman, the CEO of B Communications, said, "2011 was another good year
characterized by accelerated loan repayments and improved financial
strength and liquidity. After the end of the quarter, we took advantage
of favorable market conditions to further strengthen our balance sheet,
raising NIS 126 million in debt from institutional investors at a low
interest rate. As we move into 2012, we remain pleased with our
investment in Bezeq and we are continuing to seek out ways to further
increase value for our shareholders."
Bezeq Group's Q4 and Full Year Financial Results
Revenues of the Bezeq Group in 2011 amounted to NIS 11.37 billion
compared with NIS 12.0 billion in 2010, a decrease of 5.1%. Most of the
erosion in the Bezeq Group's revenues is explained by a sharp reduction
in cellular interconnect tariffs, which was partially offset by
increased sales of cellular terminal equipment and by continuing growth
in Internet and data.
The Bezeq Group's revenues in the fourth quarter of 2011 amounted to NIS
2.65 billion, a decrease of 13.3% compared with NIS 3.06 billion in the
fourth quarter of 2010. The decrease stems from the lower interconnect
fees mentioned above and from intensifying competition in the markets in
which the Bezeq Group operates.
The Bezeq Group's operating profit, net profit and EBITDA for 2011
were adversely affected by a provision of NIS 361.5 million made for
employee retirement expenses (of which NIS 80 million was recorded in
the fourth quarter of 2011) and by a net expense of NIS 116 million in
respect of employee stock options.
Operating profit in the Bezeq Group amounted to NIS 3.24 billion in 2011
compared with NIS 3.74 billion in 2010, a decrease of 13.4%.
EBITDA in 2011 was NIS 4.64 billion (EBITDA margin of 40.8%), compared
with NIS 5.15 billion in 2010 (EBITDA margin of 43.0%), a decline of
10.0%.
Net profit attributable to Bezeq shareholders fell by 15.4% and amounted
to NIS 2.07 billion in 2011 compared with NIS 2.44 billion in 2010.
Cash flow from operating activities in 2011 decreased by 13.8%
and amounted to NIS 3.19 billion compared with NIS 3.70 billion in 2010.
The decrease stems mainly from increased payments to suppliers and an
increase in customer balances as a result of the sharp growth in the
sale of higher priced smartphones.
Gross capital expenditures (CAPEX) amounted to NIS 1.94 billion
in 2011 compared with NIS 1.65 billion in 2010, an increase of 17.9%.
The increase is attributable to the Bezeq Group's ongoing investment in
the deployment of the NGN in fixed-line operations and Bezeq
International's laying of a submarine cable. The capex to sales ratio in
2011 was 17.0%, compared with 13.7% in 2010.
As a result of the erosion of cash flow from operating activities and
the increase in capex, free cash flow decreased by 29.8% and
amounted to NIS 1.55 billion in 2011, compared with NIS 2.20 billion in
2010.
On December 31, 2011, the total financial debt of the Bezeq Group
was NIS 9.58 billion, compared with NIS 5.72 billion on December 31,
2010. The increase compared with the prior year is attributable to the
incurrence of NIS 4.64 billion of new debt while repaying NIS 835
million of debt.
Bezeq Group (consolidated)
Q4 2011
Q4 2010
Change
2011
2010
Change
(NIS millions)
Revenues
2,650
3,058
-13.3%
11,373
11,987
-5.1%
Operating profit
698
901
-22.5%
3,242
3,744
-13.4%
EBITDA
1,053
1,269
-17.0%
4,637
5,153
-10.0%
EBITDA margin
39.7%
41.5%
40.8%
43.0%
Net profit attributable to Company shareholders
524
575
-8.9%
2,066
2,443
-15.4%
Diluted EPS (NIS)
0.20
0.20
0.2%
0.76
0.90
-15.6%
Cash flow from operating activities
744
748
-0.5%
3,186
3,696
-13.8%
Capex payments, net 1
429
437
-1.8%
1,637
1,489
9.9%
Free cash flow 2
315
311
1.3%
1,549
2,207
-29.8%
Net debt/EBITDA (end of period) 3
1.57
1.04
1.57
1.04
Net debt/shareholders' equity (end of period)
2.75
1.00
2.75
1.00
1 Capex data reflects payments related to capex and are based
on the cash flow statements. 2 Free cash flow is defined
as cash flows from operating activities less net capex payments. 3
EBITDA in this calculation refers to the trailing twelve months.
To provide further insight into its results, the Company has provided
the following summary of the consolidated financial report of the Bezeq
Group's quarter ended December 31, 2011. For a full discussion of
Bezeq's results for the quarter, please refer to http://ir.bezeq.co.il.
Notes:
A.
Convenience Translation to Dollars: For the convenience of
the reader, certain of the reported NIS figures of December 31,
2011 have been presented in millions of U.S. dollars, translated
at the representative rate of exchange as of December 31, 2011
(NIS 3.821 = 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 the Bezeq Group's
management regularly use supplemental non-IFRS financial measures
internally to understand, manage and evaluate its business and
make operating decisions. We believe these non-IFRS financial
measures provide consistent and comparable measures to help
investors understand the Bezeq Group'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. The Bezeq
Group 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 the Bezeq Group'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.
Reconciliation between the Bezeq Group's results on an IFRS and
non-IFRS basis is provided in a table immediately following the
Bezeq Group's consolidated results. Non-IFRS financial measures
consist of IFRS financial measures adjusted to exclude amortization
of acquired intangible assets, as well as certain business
combination accounting entries. The purpose of such adjustments is
to give an indication of the Bezeq Group's performance exclusive of
non-cash charges and other items that are considered by management
to be outside of its core operating results. The Bezeq Group's
non-IFRS financial measures are not meant to be considered in
isolation or as a substitute for comparable IFRS measures, and
should be read only in conjunction with its consolidated financial
statements prepared in accordance with IFRS.
About B Communications Ltd.
B Communications is a telecommunications-oriented holding company and
its primary holding is its controlling interest in Bezeq, The Israel
Telecommunication Corp., Israel's largest telecommunications provider
(TASE: BZEQ). B Communications shares are traded on NASDAQ and the TASE
under the symbol BCOM. For more information, please visit the following
Internet sites:
Forward-Looking Statements 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' 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 Statements of Financial Position as at
Convenience translation into U.S.
dollars
$1 = NIS 3.821
December 31
December 31
2010
2011
2011
NIS millions
$ millions
Assets
Cash and cash equivalents
383
1,369
358
Investments including derivatives
789
1,284
336
Trade receivables
2,701
3,059
801
Other receivables
231
295
78
Inventory
177
204
53
Assets classified as held-for-sale
194
124
32
Total current assets
4,475
6,335
1,658
Investments including derivatives
129
119
31
Long-term trade and other receivables
1,114
1,499
392
Property, plant and equipment
7,392
7,308
1,913
Intangible assets
9,163
8,099
2,120
Deferred and other expenses
423
394
103
Investment in equity - accounted investees (mainly loans)
1,084
1,059
277
Deferred tax assets
254
223
58
Total non-current assets
19,559
18,701
4,894
Total assets
24,034
25,036
6,552
B Communications Ltd.
Consolidated Statements of Financial Position as at
Convenience translation into U.S.
dollars
$1 = NIS 3.821
December 31
December 31
2010
2011
2011
NIS millions
$ millions
Liabilities
Short term bank credit, current maturities of long-term
liabilities and debentures
1,380
1,185
310
Trade payables
1,061
890
233
Other payables including derivatives
816
836
219
Dividend payable
-
669
175
Current tax liabilities
346
486
127
Deferred income
34
56
15
Provisions
251
186
49
Employee benefits
269
389
102
Total current liabilities
4,157
4,697
1,230
Debentures
2,776
5,403
1,414
Bank loans
6,138
6,753
1,767
Loans from institutions and others
541
544
142
Dividend payable
-
636
166
Employee benefits
305
229
60
Other liabilities
150
186
49
Provisions
69
69
18
Deferred tax liabilities
1,555
1,459
382
Total non-current liabilities
11,534
15,279
3,998
Total liabilities
15,691
19,976
5,228
Equity
Total equity attributable to Company's shareholders
1,212
812
212
Non controlling interest
7,131
4,248
1,112
Total equity
8,343
5,060
1,324
Total liabilities and equity
24,034
25,036
6,552
B Communications Ltd.
Consolidated Statements of income for the year ended December 31
Convenience translation into U.S.
dollars
$1 = NIS 3.821
2010
2011
2011
NIS millions
$ millions
Revenues
8,657
11,373
2,976
Cost and expenses
Depreciation and amortization
2,294
2,794
731
Salaries
1,488
2,114
553
General and operating expenses
3,640
4,499
1,177
Other operating expenses, net
5
386
101
7,427
9,793
2,562
Operating income
1,230
1,580
414
Finance expenses, net
287
511
134
Income after financing expenses, net
943
1,069
280
Share in losses of equity - accounted investees
235
216
57
Income before income tax
708
853
223
Income tax
385
673
176
Net income for the year
323
180
47
Income (loss) attributable to:
Owners of the Company
(140)
(200)
(52)
Non-controlling interest
463
380
99
Net income for the year
323
180
47
Loss per share, basic
(4.83)
(6.71)
(1.76)
Loss per share, diluted
(4.93)
(6.76)
(1.77)
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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