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MTel earns profit in Q4 2013 on non-core activity

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Magyar Telekom (MTel) was in the black in the fourth quarter of 2013 as costs fell and non-core activities lifted revenue, the company’s consolidated IFRS report published this morning indicates. In the base period, MTel took a loss of HUF 1.6 billion.

Earnings were under the HUF 660 million estimate predicted in a poll of analysts taken by local business news outlet Portfolio.hu.

Earnings per share for the fourth quarter came to HUF 0.24.

MTel revenue edged up 0.5% to HUF 165.7 billion. Mobile revenue fell 1.2% to HUF 78.8 billion, fixed line revenue slipped 0.2% to HUF 54.9 billion and IT and systems integration revenue was down 3.7% at HUF 18.2 billion, but revenue from energy services rose 23.6% to HUF 13.9 billion. MTel acknowledged in the report that a particular bright area were “Our non-core areas, such as energy, e-health, finance and insurance services, support customer retention and new revenue streams.”

Operating expenses fell 2.0% to HUF 155.5 billion, raising operating profit 46.1% to HUF 11.7 billion.

For the full year, MTel’s net income dropped 36.4% to HUF 23.5 billion as margins narrowed.
Revenue in 2013 rose 5.0% year-on-year to HUF 637.5 billion, but operating expenses climbed 6.9% to HUF 566.0 billion. Operating profit dropped 15.0% y.o.y. to HUF 74.7 billion.

Full-year revenue was supported by an 85.0% rise in energy services turnover to HUF 47.1 billion. Systems integration and IT revenue also climbed, by 18.1% to HUF 64.0 billion.
MTel’s balance sheet shows total assets of HUF 1.0912 trillion at the end of 2013, up 3.2% y.o.y. Net assets fell 6.2% to HUF 489.6 billion. The company’s net debt rose 40% to HUF 381.2 billion, putting its gearing ratio at 43.8%. The increase was attributed to reverse-factored vendor contracts and future annual frequency fees.

CAPEX, excluding spectrum acquisitions and annual frequency fee capitalizations, fell 5% to HUF 87.5 billion, “as planned.”

In a note on guidance in the report, Magyar Telekom CEO Christopher Mattheisen said 2014 revenue was expected to fall “up to 3%” on a slower rise in retail energy and equipment sales. EBITDA is set to decline 3% to 6% as revenue shifts to lower-margin services, he added.
Mattheisen put CAPEX this year at “around HUF 87 billion.”

In addition, the report noted that “We are continuously seeking further value-creating acquisitions and investment targets.”

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