MTel Q1 profit down one-third on financial losses, depreciation and amortization

Telco

Magyar Telekomʼs first-quarter after-tax profit fell 33% to HUF 3.3 bln as higher financial losses, depreciation and amortization weighed on results, an earnings report published late yesterday reveals, according to Hungarian news agency MTI.

Earnings per share came to HUF 2.4.

MTelʼs revenue was up 3% at HUF 157.0 bln and direct costs fell 7% to HUF 57.8 bln, lifting the gross margin 1% to HUF 99.2 bln.

EBITDA was up almost 5% at HUF 42.5 bln, but depreciation and amortization increased 13% to HUF 27.7 bln, causing operating profit to fall 8% to HUF 14.8 bln.

MTel said the higher amortization was related to the new frequency usage rights acquired in October 2014 and the higher depreciation stemming from the write-off of certain network assets.

A financial loss of HUF 8.6 bln, 42.5% greater than in the base period, also weighed on the bottom line.

MTel attributed the bigger loss to losses on foreign exchange translation and the fair valuation of derivatives, driven by a 5.3% strengthening of the forint against the euro during the period.

In a breakdown of revenue, MTel said mobile turnover rose almost 5% to HUF 76.9 bln, while fixed line revenue fell 2% to HUF 50.6 bln. System integration and IT revenue was down 5% at HUF 12.6 bln, but revenue from MTelʼs non-core energy services business was up 24% at HUF 16.8 bln.

MTel announced at the same time as the release of the earnings report that it would exit the retail gas market from July 31, 2015 and stop signing new contracts immediately. As a result of the exit, MTel said 2015 revenue is now expected to remain flat compared to last yearʼs HUF 626.4 bln. Earlier, guidance was for a 0-3% increase in revenue.

MTel kept guidance for this yearʼs EBITDA unchanged at a decline of 0-3%.

MTel had total assets of HUF 1.169 trillion at the end of Q1. Net assets reached HUF 521 bln.

Net debt rose 17% to HUF 446.2 bln, and the companyʼs gearing ratio edged up to 46.2%.

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