HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. OTE GROUP REPORTS 2016 SECOND QUARTER RESULTS UNDER IFRS
Data, Broadband and TV drive continued recovery of Greek operations
Sharp increase in Greek Fixed Revenues, up over 4%; resilient Group Revenues, up 0.1% Strong EBITDA from Greek Fixed Operations, up more than 12%, with margin up 300bp Romanian business under pressure, turnaround initiatives underway Adj. FCF at €125mn in Q2'16, up 18.1% yoy Net Debt at €736mn or 0.6x EBITDA ATHENS, Greece - August 11 2016 - Hellenic Telecommunications Organization SA (ASE: HTO; OTC MARKET: HLTOY), the Greek full-service telecommunications provider, today announced consolidated results (prepared under IFRS and reviewed by the auditors) for the quarter ended June 30, 2016.(€ mn) | Q2 '16 | Q2 '15 | Change | 6M '16 | 6M '15 | Change |
Revenues | 954.7 | 953.5 | +0.1% | 1,883.2 | 1,894.3 | -0.6% |
EBITDA | 305.1 | 235.2 | +29.7% | 610.5 | 555.2 | +10.0% |
Pro Forma EBITDA* | 310.9 | 318.4 | -2.4% | 620.2 | 644.4 | -3.8% |
Pro Forma EBITDA margin (%) | 32.6% | 33.4% | -0.8pp | 32.9% | 34.0% | -1.1pp |
Net Income/(loss) | 33.6 | (3.6) | - | 67.5 | 36.8 | +83.4% |
Basic EPS (€) | 0.0687 | (0.0074) | - | 0.1381 | 0.0753 | +83.4% |
Adj. Net Operating Cash Flow ** | 263.4 | 237.3 | +11.0% | 452.4 | 450.1 | +0.5% |
Adj. CapEx ** | 138.1 | 131.2 | +5.3% | 302.8 | 291.0 | +4.1% |
Adj. Free Cash Flow** | 125.3 | 106.1 | +18.1% | 149.6 | 159.1 | -6.0% |
Cash & Other financial assets | 1,042.8 | 1,092.3 | -4.5% | 1,042.8 | 1,092.3 | -4.5% |
Net Debt (Underlying) | 736.4 | 1,055.8 | -30.3% | 736.4 | 1,055.8 | -30.3% |
Greek Fixed Line (OTE SA) | Q2 '16 | Q2 '15 | Change | 6M '16 | 6M '15 | Change |
Revenues | 389.5 | 374.2 | +4.1% | 768.4 | 746.6 | +2.9% |
Pro Forma EBITDA* | 161.8 | 144.0 | +12.4% | 322.9 | 293.1 | +10.2% |
Pro Forma EBITDA*margin (%) | 41.5% | 38.5% | +3.0pp | 42.0% | 39.3% | +2.7pp |
* Excluding the impact of Voluntary Retirement Programs and Restructuring Plans
** Cash Flow includes interest received but excludes Spectrum, Voluntary Exit Programs and One-off litigation/Restructuring payments
Commenting on OTE's results for the second quarter of 2016, Michael Tsamaz, Chairman & CEO, noted: "Our technological edge, brand superiority and early investments in the services that our customers prefer enabled us once again this quarter to deliver a strong performance in Greece, despite economic challenges and obstacles to consumer spending. Continuing demand for fast broadband connections, reliable mobile data, and exciting TV programming fueled our home market revenues and EBITDA. In Romania, an intense competitive environment is hindering the recovery of our operations, but we are confident that our initiatives will pay off."
Mr. Tsamaz added: "As we have repeatedly stated, the control of our cost base is a top priority for this management team. In late June, we announced a new voluntary retirement scheme for more than 300 employees that should reduce our operating expenses by some €13mn on an annual basis, without any burden to the Greek State. We are continuously working on initiatives aimed at strengthening OTE's profitability and future prospects."
OutlookFor the balance of 2016, OTE expects a persistence of the trends that shaped the performance in the first half of the year. In Greece, OTE is leveraging its capabilities and resources to mitigate the impact from continuing challenging economic conditions, intensifying competition, as well as pressures on consumer and business spending. Recently implemented incremental taxation on the Company's offerings, notably a pay-TV sector tax introduced in Greece in June, as well as planned additional taxes and levies, are estimated to impact demand. In its international operations, the Group expects competition in Romania to remain heated and is taking steps to reverse revenue and profitability erosion in the medium term, given ongoing efforts in the technological, commercial, cost-containment and network monetization fronts.
OTE's total Capex should again in 2016 be in the vicinity of €0.55bn, excluding spectrum. OTE also expects free cash flow (excluding VES, one off charges and spectrum payments) for full year 2016 to amount to approximately €0.5bn.
BREAKDOWN OF GROUP REVENUES(€ mn) | Q2 '16 | Q2 '15 | Change | 6M '16 | 6M '15 | Change |
Fixed Line Operations, Greece | 389.5 | 374.2 | +4.1% | 768.4 | 746.6 | +2.9% |
Mobile Operations, Greece | 291.2 | 303.1 | -3.9% | 568.1 | 596.8 | -4.8% |
Fixed Line Operations, Romania | 149.5 | 150.5 | -0.7% | 286.6 | 299.2 | -4.2% |
Mobile Operations, Romania | 110.1 | 105.0 | +4.9% | 223.1 | 208.2 | +7.2% |
Mobile Operations, Albania | 20.1 | 17.3 | +16.2% | 40.6 | 33.6 | +20.8% |
Others | 110.8 | 110.3 | +0.5% | 216.5 | 229.0 | -5.5% |
Eliminations (Mobile & Group) | (116.5) | (106.9) | +9.0% | (220.1) | (219.1) | +0.5% |
TOTAL | 954.7 | 953.5 | +0.1% | 1,883.2 | 1,894.3 | -0.6% |
Other Income | 7.4 | 9.3 | -20.4% | 16.1 | 25.4 | -36.6% |
(€ mn) | Q2 '16 | Q2 '15 | Change | 6M '16 | 6M '15 | Change |
Fixed Line Operations, Greece | 161.8 | 144.0 | +12.4% | 322.9 | 293.1 | +10.2% |
Margin | 41.5% | 38.5% | +3pp | 42.0% | 39.3% | +2.7pp |
Mobile Operations, Greece | 97.0 | 109.9 | -11.7% | 188.9 | 210.3 | -10.2% |
Margin | 33.3% | 36.3% | -3pp | 33.3% | 35.2% | -1.9pp |
Fixed Line Operations, Romania | 15.2 | 26.1 | -41.8% | 35.7 | 58.9 | -39.4% |
Margin | 10.2% | 17.3% | -7.1pp | 12.5% | 19.7% | -7.2pp |
Mobile Operations, Romania | 21.8 | 22.9 | -4.8% | 40.1 | 45.3 | -11.5% |
Margin | 19.8% | 21.8% | -2pp | 18.0% | 21.8% | -3.8pp |
Mobile Operations, Albania | 5.3 | 2.7 | +96.3% | 9.5 | 6.3 | +50.8% |
Margin | 26.4% | 15.6% | +10.8pp | 23.4% | 18.8% | +4.6pp |
Others | 11.9 | 13.1 | -9.2% | 25.2 | 30.8 | -18.2% |
Margin | 10.7% | 11.9% | -1.2pp | 11.6% | 13.4% | -1.8pp |
Eliminations (Mobile & Group) | (2.1) | (0.3) | - | (2.1) | (0.3) | - |
OTE Group | 310.9 | 318.4 | -2.4% | 620.2 | 644.4 | -3.8% |
Margin | 32.6% | 33.4% | -0.8pp | 32.9% | 34.0% | -1.1pp |
OTE Group's consolidated revenues stood at €954.7mn in Q2'16, up 0.1% compared to Q2'15, driven by a solid increase in Greek fixed-line revenues in a context that remains tense and highly competitive across all Group markets.
Total Operating Expenses, excluding depreciation, amortization, impairments and charges related to voluntary retirement programs and restructuring costs, amounted to €651.2mn in Q2'16, up 1.1% compared to Q2'15. This increase is mainly due to higher interconnection costs, reflecting increased wholesale traffic and revenues in the Greek and Romanian fixed business. Personnel expenses were 3.1% lower, partly attributable to the headcount reduction in Greek fixed line implemented in the second half of 2015. The recently announced 2016 voluntary exit scheme will favorably impact OTE's cost base from Q3 onwards.
By country, combined Greek fixed and mobile Pro Forma EBITDA was up 0.7% in the second quarter, yielding a Pro Forma EBITDA margin of 38.5% on roughly stable revenues. This was more than offset by the deterioration of the performance in Romania, while Albania recorded a healthy increase in revenues and EBITDA.
Below the EBITDA line, interest expenses were down 1.7% in the quarter to €35.4mn, while the Group's Income Tax expense stood at €40.4mn in Q2'16, up 56.6%, reflecting higher Earnings Before Taxes (Q2'15 Earnings Before Taxes were burdened by €81.7mn charges related to early retirement programs). The Group's high effective tax rate primarily reflects losses recorded in Romania, whose accounting treatments do not give rise to deferred tax assets.
Group Net Income stood at €33.6mn in Q2'16, as compared to a net loss of €3.6mn in Q2'15, since last year's net result was burdened by the voluntary exit scheme charges mentioned above. In the first six months of the year, Group Net Income was up 83.4% to €67.5mn.
Capital Expenditures (excluding spectrum payments) amounted to €138.1mn in Q2'16, up 5.3%. Capex in Greek and Romanian fixed-line amounted to €50.9m and €18.7mn, respectively. In mobile operations, Capex stood at €63.6mn (Greece: €47.1mn, Romania: €12.6mn, Albania: €3.9mn).
In Q2'16, the Group's adjusted Free Cash Flow generation (including interest paid/received and excluding VRS, spectrum, and one-off litigation and restructuring-related payments) stood at €125.3mn, a significant increase over Q2'15. As a result, adjusted Free Cash Flow in H1'16 totaled €149.6mn, down just 6% from H1'15, sharply reducing the gap recorded in Q1'16, which in turn was largely due to the delayed impact of the Summer 2015 capital controls.
BREAKDOWN PER COUNTRY (After Eliminations)Revenues (€ mn) | Q2 '16 | Q2 '15 | Change | 6M '16 | 6M '15 | Change |
Greece | 697.3 | 698.9 | -0.2% | 1,376.5 | 1,385.6 | -0.7% |
Romania | 241.8 | 240.3 | +0.6% | 475.2 | 480.9 | -1.2% |
Albania | 15.6 | 14.3 | +9.1% | 31.5 | 27.8 | +13.3% |
OTE Group | 954.7 | 953.5 | +0.1% | 1,883.2 | 1,894.3 | -0.6% |
Pro Forma EBITDA (€ mn) | Q2 '16 | Q2 '15 | Change | 6M '16 | 6M '15 | Change |
Greece | 268.6 | 266.7 | +0.7% | 534.9 | 533.9 | +0.2% |
margin | 38.5% | 38.2% | +0.4pp | 38.9% | 38.5% | +0.3pp |
Romania | 37.0 | 49.0 | -24.5% | 75.8 | 104.2 | -27.3% |
margin | 15.3% | 20.4% | -5.1pp | 16.0% | 21.7% | -5.7pp |
Albania | 5.3 | 2.7 | +96.3% | 9.5 | 6.3 | +50.8% |
margin | 34.0% | 18.9% | +15.1pp | 30.2% | 22.7% | +7.5pp |
OTE Group | 310.9 | 318.4 | -2.4% | 620.2 | 644.4 | -3.8% |
margin | 32.6% | 33.4% | -0.8pp | 32.9% | 34.0% | -1.1pp |
Total Debt (€ mn): | 1,779.2 | ||
Bonds (€ mn) | ISIN XS0885718782 | ISIN XS1327539976 | ISIN XS1086785182 |
Maturity | February 2018 | December 2019 | July 2020 |
Coupon (%) | 7.875% | 4.375% | 3.5% |
Nominal Amount | 650 | 350 | 700 |
The Group's Underlying Net Debt was €0.7bn at June 30, 2016, down 30.3% compared to June 30, 2015. The Group's ratio of Underlying Net Debt to 12-month trailing Pro Forma EBITDA stood at 0.6x.
1. GREECE FIXED-LINE OPERATIONS, GREECE ACCESS LINESJun 30, 2016 | Jun 30, 2015 | Change | |
PSTN connections | 2,091,833 | 2,369,831 | -11.7% |
ISDN connections (BRA & PRA) | 285,701 | 322,027 | -11.3% |
Other (MSAN & VoB) | 304,426 | 20,400 | 15x |
OTE access line connections (incl. WLR) | 2,681,960 | 2,712,258 | -1.1% |
OTE Retail access line connections (excl. WLR) | 2,670,364 | 2,690,112 | -0.7% |
Total OTE Broadband active subscribers | 1,613,389 | 1,449,371 | +11.3% |
OTE Broadband active retail subscribers | 1,575,383 | 1,428,560 | +10.3% |
of which OTE retail VDSL connections | 186,208 | 121,748 | +52.9% |
OTE TV Subscribers (IPTV & Satellite) | 458,920 | 377,548 | +21.6% |
Unbundled local loops (active) | 2,055,936 | 2,040,721 | +0.7% |
In Q2'16, the total Greek access market (OTE active retail lines, Wholesale line rental connections and full LLU subscribers) lost 9k lines. OTE fixed-line operations in Greece posted a net loss of 10k access lines.
In Q2'16, OTE achieved net additions of 32k retail broadband customers, or 60% of total market net additions, bringing the total number of OTE retail broadband subscribers to 1,575k. OTE's high-speed VDSL broadband service continues its significant success, with net additions of 18k in the quarter. At quarter end, approximately 186k subscribers, or 12% of OTE's total retail broadband base, had adopted its VDSL solution. With nearly 550 local exchanges and around 5.4k cabinets already upgraded to VDSL and continuously expanding coverage, OTE is well positioned to convert a significant part of its customer base to higher broadband speeds and improved services, thereby supporting ARPU. The continuing take up of the service, in a challenging period for consumers, underscores the strong appetite for the premium VDSL service in which OTE has been investing substantially. OTE's wholesale VDSL offering also gained further traction in Q2'16. OTE continues to expand the reach of its VDSL network, given customer demand.
OTE achieved another quarter of growth in its TV offering. As at June 30, 2016, total TV subscribers amounted to 459k, a year-on-year increase of 22%. Together with the rise in subscriber numbers, higher ARPU enabled OTE's pay-TV operations to continue posting strong growth in the quarter. OTE continued to monetize the significant investments it is making in quality content, notably in popular sporting events, including the European football UEFA Champions League, UEFA Europa League, UK Premier League and Greek Cup. A recently introduced additional tax on pay-TV services has had an unfavorable impact on new additions in the Pay-TV market, already evident in Q2.
OTE - Hellenic Telecommunications Organization SA published this content on 11 August 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 25 August 2016 17:09:05 UTC.
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