Financial results of the Telekom Slovenije Group

The Telekom Slovenije Group’s net profit of EUR 1.6 million (compared with planned net profit of EUR 63 million) was impacted by one-off events, the postponement of certain activities from 2014 until 2015 (consolidation of the Macedonian market) and the creation of provisions in Slovenia.

Highlights in 2014

  1. The Telekom Slovenije Group’s net sales revenue amounted to EUR 756.5 million, down 3% on 2013, primarily as a reflection of the cutting of prices of electronic communication services across the European market.
  2. Net profit amounted to EUR 1.6 million.

Key financial performance indicators of the Telekom Slovenije Group25

in EUR thousand 2014 2013* Ind.
14/13
Revenue 756,454 779,360 97
Other operating income 8,442 19,819 43
Operating revenues 764,896 799,179 96
EBITDA 170,051 239,868 71
EBITDA margin 22.5% 30.8% 73
EBIT 11,412 71,540 16
Return on sales: ROS (EBIT/net sales revenue) 1.5% 9.2% 16
Net profit 1,594 51,057 3
Assets 1,343,421 1,391,869 97
Equity 693,901 758,582 91
Return on assets (ROA) 0.1% 3.5% 3
Return on equity (ROE) 0.2% 6.8% 3
Equity ratio 51.7% 54.5% 95
Net financial debt 344,057 341,807 101
NFD / EBITDA 2.0 1.4 142
Investment in property, plant and equipment (CAPEX) 176,481 113,289 156
EBITDA – CAPEX -6,430 126,579 -
Delež EBITDA – CAPEX v EBITDA (Cash Margin) -3.8% 52.8% -
Number of employees as at 4,431 4,586 97
Investments as a proportion of operating revenues 23.1% 14.2% 163

* Pursuant to the requirements of IAS 1 and IAS 8, the financial statements for the comparative period, as presented in all tables below, have been adjusted for a change to an accounting policy. More information can be found in the Financial Report on page 140.

 

The operating results of the Telekom Slovenije Group in 2014 marked the following one-off events that had a current effect on the Group’s operating results for 2014 but, for the most part, otherwise represent a solid foundation for future operations:

  • Slovenia was hit by an ice storm at the beginning of the year and by floods in the middle of the year. The ice storm resulted in numerous power outages and severe damage to Telekom Slovenije’s cable network, which was also damaged by the floods. The Company repaired the cable network at a cost of EUR 6.2 million.
  • At April’s auction of frequencies for the provision of public mobile communication services organised by the AKOS, Telekom Slovenije secured an appropriate number of the relevant frequency bands that will be used in the future to offer users the most state-of-the-art services and the best coverage in a superior network. The Company paid EUR 64.5 million for the aforementioned frequencies.
  • At the 25th General Meeting of Shareholders held in May, shareholders supported the counter proposal on the use of distributable profit for 2013, and adopted a resolution that the full amount of distributable profits of EUR 65.1 million be earmarked for the payment of dividends in the gross amount of EUR 10.00 per share.
  • In October Telekom Slovenije and the Telekom Austria Group agreed to merge operators on the Macedonian market. Due to the complex procedures involved and the time required to obtain the consent of the Macedonian regulatory body, the planned consolidation of operations in Macedonia was postponed from the final quarter of 2014 until 2015.
  • In July Blicnet in Bosnia and Herzegovina signed an agreement on the purchase of a 100% participating interest in Telrad Net, d. o. o. The procedure, however, is still ongoing. The planned acquisition represents the further strengthening of Blicnet’s position on the Bosnian market.
  • In accordance with its adopted Strategic Business Plan for the period 2014 to 2018, Telekom Slovenije signed an agreement with the government of Gibraltar in November on the sale of its 50% participating interest in Gibtelecom Limited. The transaction was completed in full in December.
  • Telekom Slovenije and Simobil signed an agreement in December on mutual relations by which the two companies set in order open issues regarding mutual relations and laid down the conditions for future business cooperation. The signing of the agreement represents an important step aimed at mitigating risks associated with lawsuits, which further enhances the Company’s value for owners.
  • Provisions of EUR 43.6 million were created.

Income statement analysis26

The Telekom Slovenije Group’s operating revenues totalled EUR 764.9 million, down 4% on those achieved in 2013.

Net sales revenue amounted to EUR 756.5 million, down 3% on 2013. Other operating revenues were also down, by EUR 11.4 million. Telekom Slovenije’s net sales revenue was down relative to 2013 primarily due to lower revenues from traditional voice telephony, which is in line with the declining number of traditional connections and their replacement by IP and mobile telephony. Lower revenues in the mobile segment were the result of lower revenues from calls due to the rising proportion of subscriber packages that include higher quantities of services, and due to lower revenues from roaming (lower prices of calls in the EU and Croatia’s entry to the EU). The reason in the fixed segment lies in stiff competition on the broadband connection market and more affordable packages aimed at maintaining the level of users.

Net sales revenue at Slovenian companies was up 4% relative to 2013, primarily on account of GVO, which recorded a rise in revenues as the result of an increase in the scope of work due to the elimination of errors in Telekom Slovenije’s network caused by an ice storm. Higher net sales revenue was also achieved by companies outside of Slovenia, but the increase was not enough to offset the drop in revenues on the domestic market.

At EUR 757.5 million, the Group’s operating expenses were 3% higher than the previous year, as the result of an increase in other operating expenses of EUR 30 million. The latter were up primarily due to the correction and write-off of the value of claims at the parent company and the settlement with Simobil. We continued to consolidate operations, and re-engineer and optimise processes within the Telekom Slovenije Group. The majority of costs were down relative to 2013. Only the historical cost of goods and materials sold and the costs of services were higher, by 9% and 2% respectively. Amortisation and depreciation costs were also lower, by 6%, as were labour costs, by 2%.

Earnings before interest, taxes, amortisation and depreciation (EBITDA) totalled EUR 170.1 million, or 22.5% of net sales revenue. Excluding one-off effects, a comparable EBITDA of EUR 215 million would have been achieved in 2014.

Return on sales amounted to 1.5%.

Earnings before interest and taxes (EBIT) was EUR 11.4 million.

Finance income totalled EUR 17.1 million, which is EUR 12.1 million or 2.5 times higher than the finance income recorded the previous year. Finance costs in the amount of EUR 20.5 million were down 10% or 2.2 million.

Following the calculation of income tax in the amount of EUR 1.0 million, the Telekom Slovenije Group generated a net profit of EUR 1.6 million in 2014.

Balance sheet analysis

Total assets stood at EUR 1,343.4 million as at 31 December 2014, down 3% or EUR 48.4 million on the previous year.

Non-current assets totalled EUR 1,009.8 million, a decrease of 8%. The decrease in non-current assets was primarily the result of the reclassification of non-current assets of One and Digi Plus to assets for disposal (current assets) in the amount of EUR 63.6 million. Investments in associates and joint ventures were also down, by EUR 44.4 million, due to the sale of the investment in Gibtelecom. As a result, the proportion of Company’s total assets accounted for by non-current assets was down 3.8 percentage points to stand at 75.2%.

Current assets totalled EUR 333.7 million, an increase of 14% relative to the last day of the previous year, primarily as the result of the recording of assets for disposal in the amount of EUR 90.9 million by One and Digi Plus. EUR 63.6 million of the aforementioned amount was accounted for by the reclassified non-current assets of the aforementioned companies.

Equity and reserves totalled EUR 693.9 million, representing 51.7% of total assets.

Non-current liabilities in the amount of EUR 444.6 million represented 33.1% of total assets and were up 3% on the previous year primarily due to an increase in provisions in the amount of EUR 37.9 million.

Current liabilities in the amount of EUR 204.9 million were 2% higher than the previous year and represented 15.3% of total assets.

Segment reporting

The operating segments by which the Group reports are Slovenia, Macedonia, Kosovo and other countries, where the criterion for segment reporting is the registered office where an activity is performed by an individual company.

The disclosure of operations by segment is based on the financial statements of Telekom Slovenije Group companies. Sales between segments are carried out at market value.

More detailed information is provided in Section 3.2.2 Notes to the consolidated financial statements and summary of significant accounting policies of Telekom Slovenije Group, in point 4 Segment reporting.

25 GRI G4-EC1
26 More information can be found in the Financial Report on page 140.