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MTel profit plunges in fourth quarter

Telco

Magyar Telekomʼs fourth-quarter after-tax profit dropped 75% year-on-year to HUF 5.2 billion, hit by higher costs and the effect of a tax rebate in the base period, an earnings report released late Wednesday shows, cited by state news agency MTI.

Revenues rose 6% to HUF 161.4 bln, but direct cost of sales jumped 15% to HUF 72.1 bln, leaving gross profit practically flat at HUF 89.3 bln. MTel attributed the higher costs mainly to increased system integration/IT and equipment sales.

MTel booked a HUF 4.7 bln corporate profit tax expense in Q4, after booking a HUF 16.9 bln rebate in the base period. The company explained that because of the reduction in Hungaryʼs corporate tax rate from 19% to 9% from January 1, 2017, its deferred tax position was recognized as a one-off tax gain in Q4 2016.

MTelʼs profit for the full year of 2017 fell 13% to HUF 49.8 bln, also because of higher costs and the tax rebate in the base period.

Revenues rose 6% to HUF 610.9 bln over the year, while direct costs climbed 16% to HUF 245.8 bln. Again, MTel put the higher costs down to higher SI/IT and equipment sales, boosted by improved absorption of European Union funding.

Gross profit edged up 1% to HUF 365.1 bln in 2017. Pre-tax profit increased 14% to HUF 56.2 bln, but MTel booked a HUF 16.0 bln corporate income tax expense for the year, compared to a HUF 4.9 bln rebate in 2016.

MTel had total assets of HUF 1,109.7 bln at the end of the year, down 6% from twelve months earlier. Shareholders equity rose 2% to HUF 547.2 bln.

Total non-current liabilities dropped 4% to HUF 303.0 bln, and MTel noted that its net debt ratio fell from 39.3% to 34.8%.

Cautious guidance for 2018

In its guidance for 2018, MTel put revenues at around HUF 600 bln, down slightly from 2017 because of the companyʼs exit from the energy business and lower equipment sales revenue. But it projected EBITDA would rise to around HUF 190 bln in 2018, from HUF 186 bln in 2017, because of planned efficiency improvements across the group.

The guidance also shows capex of around HUF 90 bln for 2018, up slightly from HUF 86 bln in 2017.

Earlier in the day, Magyar Telekom said its board will propose to shareholders payment of a HUF 25 dividend per share on 2017 earnings at its annual general meeting on April 10.

MTelʼs dividend policy seeks to maintain its net debt ratio (net debt to total capital) within the 30-40% range, while also taking into account the groupʼs future financial position, the company said on the Budapest Stock Exchange. 

The board proposes May 15, 2018, as the record date of the dividend payment. Magyar Telekom paid a HUF 25 per-share dividend on 2016 earnings.

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