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Investor News

Magyar Telekom second quarter 2020 results

Budapest, August 5, 2020 17:30

Magyar Telekom (Reuters: MTEL.BU and Bloomberg: MTELEKOM HB, hereinafter the “Company”), the leading Hungarian telecommunications service provider, today reported its consolidated financial results for the second quarter and first half of 2020, in accordance with International Financial Reporting Standards (IFRS) as adopted by EU.

Financial highlights:


  • Revenues declined by HUF 3.6 billion, or 2.2% year-on-year, to HUF 157.2 billion in Q2 2020, driven by lower contribution from the SI/IT business segment
  • Gross profit declined by HUF 2.5 billion, or 2.7% year-on-year, to HUF 90.1 billion in Q2 2020, attributable to the fall in SI/IT contribution and the impact of COVID-19 on the profitability of mobile and fixed line services
  • Indirect cost saving efforts, mainly from headcount reduction partly mitigated by the decline in gross profit. As a result, EBITDA AL edged down by HUF 1.3 billion, or 2.5% year-on-year, to HUF 50.2 billion in Q2 2020, while H1 2020 EBITDA AL amounted to HUF 91.0 billion
  • CAPEX AL (excluding spectrum license fees) grew substantially to HUF 27.1 billion in Q2 2020 and amounted to HUF 48.5 billion in H1 2020, an increase of HUF 14.8 billion year-on-year, mainly due to increased investments into the fiber network. A further HUF 91.6 billion was capitalized consisting of a HUF 54.2 billion cash outflow and a HUF 37.3 billion non-cash item representing the present value of frequency fees related to the previously announced 5G auction in Q2 2020
  • Free cash flow (excluding spectrum license fees) amounted to HUF 3.4 billion in H1 2020 mainly influenced by the above mentioned EBITDA and Capex trends
  • Net debt grew to HUF 471.6 billion at June 30, 2020, corresponding to a net debt to total capital ratio of 43.2% driven by the spectrum and dividend outpayments and sharebuyback transaction during Q2 2020

Operational highlights

  • The gigabit capable network reached over 2.2 million access points in Hungary by the end of Q2 2020
  • Following the launch of 5G services in early April 2020, Magyar Telekom is now able to offer significantly higher bandwidth, lower latency and seamless connectivity. The service has been subsequently extended and now covers new areas in Hungary such as parts of the lake Balaton
  • Magyar Telekom signed a supplier agreement with Ericsson to support the modernization of the mobile network and the roll-out of 5G services

Tibor Rékasi, Magyar Telekom CEO commented:

“Magyar Telekom has been through an extremely challenging second quarter with COVID-19 impacting our operations in many ways. I am very proud that we supported families, communities as well as businesses allowing for enhanced digital cooperation during this extraordinary period. At the same time, we were equally successful in preserving the profitability of Magyar Telekom by delivering strong results in the second quarter despite fast-changing external conditions.

We have decided to fast-track the development of our fiber network to enhance broadband coverage, driving our 2020 investments higher than we anticipated earlier.  Early signs of changing customer behavior in light of COVID-19 proves that we are on the right track.We expect these investments to further reinforce our position as a trusted provider of seamless telecommunications services in both Hungary and North Macedonia, which will be key to leveraging favorable long-term trends accelerated by recent developments.

Looking ahead to the second half of 2020, we will focus on delivering our previously announced EBITDA AL target.”

 

Outlook

  2019 Actual  Public Guidance for 2020  Public Guidance for 2021 
Revenue  HUF 666.7 billion broadly stable
EBITDA  HUF 197.6 billion increasing at 1%-2% per annum
Capex 1   HUF 89.6billion increasing with ca. 10%* broadly stable vs 2019
FCF 2   HUF 65.1 billion broadly stable* broadly stable*

1) excluding spectrum license fees and CAPEX of right-of-use assets (i.e. the impact of IFRS 16)
2) excluding spectrum license fees

* modified


This investor news contains forward-looking statements. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore should not have undue reliance placed upon them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors are described in, among other things, our annual financial statements for the year ended December 31, 2019, available on our website at https://www.telekom.hu which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and adopted by the European Union.

In addition to figures prepared in accordance with IFRS, Magyar Telekom also presents non-GAAP financial performance measures, including, among others, EBITDA, EBITDA margin and net debt. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Non-GAAP financial performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways. For further information relevant to the interpretation of these terms, please refer to the chapter “Reconciliation of pro forma figures”, which is posted on Magyar Telekom’s Investor Relations webpage at www.telekom.hu/investor_relations.

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