LONDON -- Please replace the release with the following corrected version due to multiple revisions to the comments from Martin Lea.
The corrected release reads:
INVITEL HOLDINGS A/S ANNOUNCES FINANCIAL RESULTS OF MAGYAR TELECOM B.V. FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2011 AND INVESTOR CALL
Invitel Holdings A/S ("Invitel Holdings") announced today the financial results of Magyar Telecom B.V. for the quarter and six months ended June 30, 2011.
SECOND QUARTER 2011 RESULTS
The results for the quarter ended June 30, 2011 reflect the consolidated financial results of Magyar Telecom B.V. and its subsidiaries (collectively, the "Company").
The reporting currency is euro, however the functional currency of continued operations is the Hungarian forint, being the currency of the primary economic environment in which the Company operates.
When comparing the financial results for the quarter ended June 30, 2011 to the financial results for the quarter ended June 30, 2010, the reported results in euro have been affected by the difference between the average EUR/HUF exchange rates. The Hungarian forint appreciated against the euro by 3% with an average EUR/HUF exchange rate of 266.33 during the quarter ended June 30, 2011 compared to the average EUR/HUF exchange rate of 274.38 during the quarter ended June 30, 2010. This change in exchange rates had an impact on Hungarian forint denominated earnings when converted into euro.
The Company's revenue from continued operations was EUR 51.7 million for the quarter ended June 30, 2011 which represents an 11% increase compared to the quarter ended June 30, 2010. Segment gross margin increased by 9% from EUR 39.0 million for the quarter ended June 30, 2010 to EUR 42.6 million for the quarter ended June 30, 2011. Operating expenses increased by 25% from EUR 9.9 million for the quarter ended June 30, 2010 to EUR 12.4 million for the quarter ended June 30, 2011. Income from continued operations decreased by 42% to EUR 4.5 million for the quarter ended June 30, 2011 from EUR 7.8 million for the quarter ended June 30, 2010. Net income/loss of continued operations was loss of EUR 5.9 million for the quarter ended June 30, 2011 compared to loss of EUR 17.6 million for the quarter ended June 30, 2010.
Residential Voice - Residential Voice segment gross margin was EUR 11.8 million for the quarter ended June 30, 2011, representing a decrease of 19% compared to the quarter ended June 30, 2010. The decrease was mainly due to a decrease in the number of subscribers inside our historical concession areas, as well as a decrease in the number of lower margin carrier select customers and traffic outside our historical concession areas. In functional currency terms, ResidentialVoice segment gross margin decreased by 21%.
Residential Internet - Residential Internet segment gross margin was EUR 7.2 million for the quarter ended June 30, 2011, representing an increase of 11% compared to the quarter ended June 30, 2010. The increase was primarily due to the increase in IPTV gross margin. In functional currency terms, Residential Internet segment gross margin for the quarter ended June 30, 2011 increased by 7% compared to the prior year.
Corporate - Corporate segment gross margin was EUR 12.8 million for quarter ended June 30, 2011, representing a decrease of 2% compared to the quarter ended June 30, 2010. The decrease was mainly due to the reduction in the traditional voice business and price erosion due to competition. In functional currency terms, Corporate segment gross margin decreased by 4%.
Wholesale - Wholesale segment gross margin was EUR 6.8 million for the quarter ended June 30, 2011, representing an increase of 36% compared to the quarter ended June 30, 2010.
Cable - Our Cable gross margin was [euro]4.0 million for the three months ended June 30, 2011. Cable segment was introduced as at March 1, 2011 and relates to the revenue generated by FiberNet.
Segment gross margin is a non-GAAP financial measure, which is used by management to evaluate the performance of the business segments. The following table represents the reconciliation of segment gross margin to income from continued operations:
| Quarter ended June 30, | ||||||||||||
| (euro in millions) | 2011 | 2010 | ||||||||||
| Residential Voice | 11.8 | 14.5 | ||||||||||
| Residential Internet | 7.2 | 6.5 | ||||||||||
| Corporate | 12.8 | 13.0 | ||||||||||
| Domestic Wholesale | 6.8 | 5.0 | ||||||||||
| Cable | 4.0 | - | ||||||||||
| Segment Gross Margin | 42.6 | 39.0 | ||||||||||
| Network operating expenses | (5.5) | (4.9) | ||||||||||
| Direct personnel expenses | (3.0) | (3.1) | ||||||||||
| Operating expenses | (12.4) | (9.9) | ||||||||||
| Depreciation and amortization | (15.2) | (13.0) | ||||||||||
| Cost of restructuring | (2.0) | (0.3) | ||||||||||
| Income from operations | 4.5 | 7.8 | ||||||||||
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2011
The results for the six months ended June 30, 2011 reflect the consolidated financial results of Magyar Telecom B.V. and its subsidiaries (collectively, the "Company").
The reporting currency is euro, however the functional currency of continued operations is the Hungarian forint, being the currency of the primary economic environment in which the Company operates.
When comparing the financial results for the six months ended June 30, 2011 to the financial results for the six months ended June 30, 2010, the reported results in euro have been affected by the difference between the average EUR/HUF exchange rates. The Hungarian forint appreciated against the euro by 1% with an average EUR/HUF exchange rate of 269.38 during the six months ended June 30, 2011 compared to the average EUR/HUF exchange rate of 271.5 during the six months ended June 30, 2010. This change in exchange rates had an impact on Hungarian forint denominated earnings when converted into euro.
The Company's revenue from continued operations was EUR 99.4 million for the six months ended June 30, 2011 which represents a 0% change compared to the six months ended June 30, 2010. Segment gross margin decreased by 3% from EUR 84.0 million for the six months ended June 30, 2010 to EUR 81.8 million for the six months ended June 30, 2011. Operating expenses increased by 33% from EUR 18.7 million for the six months ended June 30, 2010 to EUR 24.8 million for the six months ended June 30, 2011. Income from continued operations decreased by 62% to EUR 8.6 million for the six months ended June 30, 2011 from EUR 22.5 million for the six months ended June 30, 2010. Net income/loss of continued operations was income of EUR 18.9 million for the six months ended June 30, 2011 compared to loss of EUR 18.1 million for the six months ended June 30, 2010.
Residential Voice - Residential Voice segment gross margin was EUR 23.9 million for the six months ended June 30, 2011, representing a decrease of 18% compared to the six months ended June 30, 2010. The decrease was mainly due to a decrease in the number of subscribers inside our historical concession areas, as well as a decrease in the number of lower margin carrier select customers and traffic outside our historical concession areas. In functional currency terms, ResidentialVoice segment gross margin decreased by 19%.
Residential Internet - Residential Internet segment gross margin was EUR 14.2 million for the six months ended June 30, 2011, representing an increase of 6% compared to the six months ended June 30, 2010. The increase was primarily due to the increase in IPTV gross margin. In functional currency terms, Residential Internet segment gross margin for the six months ended June 30, 2011 increased by 5% compared to the prior year.
Corporate - Corporate segment gross margin was EUR 25.2 million for six months ended June 30, 2011, representing a decrease of 5% compared to the six months ended June 30, 2010. The decrease was mainly due to the reduction in the traditional voice business and price erosion due to competition. In functional currency terms, Corporate segment gross margin decreased by 5%.
Wholesale -Wholesale segment gross margin was EUR 13.0 million for the six months ended June 30, 2011, representing a decrease of 13% compared to the six months ended June 30, 2010.
Cable - Our Cable gross margin was [euro]5.5 million for the six months ended June 30, 2011. Cable segment was introduced as at March 1, 2011 and relates to the revenue generated by FiberNet.
Segment gross margin is a non-GAAP financial measure, which is used by management to evaluate the performance of the business segments. The following table represents the reconciliation of segment gross margin to income from continued operations:
| Six months ended June 30, | ||||||||||||
| (euro in millions) | 2011 | 2010 | ||||||||||
| Residential Voice | 23.9 | 29.2 | ||||||||||
| Residential Internet | 14.2 | 13.4 | ||||||||||
| Corporate | 25.2 | 26.4 | ||||||||||
| Domestic Wholesale | 13.0 | 15.0 | ||||||||||
| Cable | 5.5 | - | ||||||||||
| Segment Gross Margin | 81.8 | 84.0 | ||||||||||
| Network operating expenses | (10.6) | (10.0) | ||||||||||
| Direct personnel expenses | (6.2) | (5.8) | ||||||||||
| Operating expenses | (24.8) | (18.7) | ||||||||||
| Depreciation and amortization | (28.6) | (26.4) | ||||||||||
| Cost of restructuring | (3.0) | (0.6) | ||||||||||
| Income from operations | 8.6 | 22.5 | ||||||||||
Net cash provided by continued operations, which includes interest paid but excludes capital expenditure and debt repayments, was EUR 16.0 million for the six months ended June 30, 2011.
COMMENTS FROM MARTIN LEA
Commenting on the financial results, Invitel Holdings' President and CEO Martin Lea said, "We have still not seen any material improvement in the economic or general trading conditions during the second quarter. The traditional residential voice business has continued to decline, however we are very pleased to have seen an increased level of growth in the residential Internet segment during Q2. In the corporate market in Q2 we have seen a slight reduction in the rate of decline in the traditional voice business and at the same time an encouraging small level of growth in the data business, as new customer acquisition and service development has off-set competitive price erosion. In addition to this, our underlying Wholesale data business has continued to perform very well during the course of the quarter."
Mr. Lea went on to say, "The integration of the FiberNet business is progressing well and is in line with our plans and expectations."
CONFERENCE CALL
On August 2, 2011 (at 14:00 UK time, 15:00 CET, 9:00 AM ET), the CEO and CFO of Invitel Holdings will host a conference call to discuss the second quarter 2011 financial results of Magyar Telecom B.V.
A copy of the presentation materials will also be published on Invitel's website at http://english.invitel.hu/ under "Investor Relations" prior to the call.
You can participate in the conference call by dialing 800-4626-6666 (UK toll free), +1-201-689-8049 (International) or +1-877-407-9210 (U.S. toll free) and referencing "Invitel Holdings".
A webcast of the call and the presentation materials will be available on Invitel's website at http://english.invitel.hu/ under "Investor Relations". The webcast will be archived for 30 days. In addition, a replay of the call will be available two hours after the call has ended and through August 16, 2011 at 11:59 PM ET. To access the replay of the call, please dial +1-877-660-6853 (U.S. toll free) or internationally dial +1-201-612-7415 and enter account (286) followed by the replay access code (375520).
ABOUT INVITEL HOLDINGS A/S
Invitel Holdings A/S is the number one alternative and the second-largest fixed line telecommunications and broadband Internet Services Provider in the Republic of Hungary, delivering voice, data and Internet services to residential and business customers.
Forward-Looking Statements and Legal Information
The information above includes forward-looking statements about Invitel Holdings A/S and its subsidiaries. These and all forward-looking statements are only predictions of current plans that are constantly under review by Invitel Holdings. Such statements are qualified by important factors that may cause actual results to differ from those contemplated, including those risk factors detailed in Invitel Holdings' SEC filings, which may not be exhaustive. For a discussion of such risk factors, see Invitel Holdings' filings with the SEC including but not limited to, its 2009 Annual Report on Form 20-F. Invitel Holdings operates in a continually changing business environment, and new risk factors emerge from time to time. Invitel Holdings cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on its business or events described in any forward-looking statements. Invitel Holdings has no obligation to publicly update or revise any forward-looking statements to reflect the occurrence of future events or circumstances. In addition, because the Company has deregistered its common stock and is no longer subject to certain reporting obligations with the SEC, the Company no longer intends to file or furnish any updates with the SEC.
| Magyar Telecom B.V. | ||||||||||
| Financial Highlights | ||||||||||
| (in millions of euro) | ||||||||||
| Statements of Operations | ||||||||||
| Quarter ended June 30, 2011 | Quarter ended June 30, 2010 | |||||||||
| Residential Voice | 13.4 | 16.4 | ||||||||
| Residential Internet | 8.8 | 8.1 | ||||||||
| Corporate | 16.4 | 16.6 | ||||||||
| Domestic Wholesale | 7.9 | 5.3 | ||||||||
| Cable | 5.2 | 0.0 | ||||||||
| Total Revenue | 51.7 | 46.4 | ||||||||
| Segment Cost of Sales | 9.1 | 7.4 | ||||||||
| Income (loss) from Operations | 4.5 | 7.8 | ||||||||
| Interest Expense | 9.8 | 10.6 | ||||||||
| Foreign exchange gains (losses), net | (0.0) | (20.6) | ||||||||
| Gains (losses) on derivative financial instruments | (0.4) | 2.5 | ||||||||
| Net income (loss) from Continued Operations | (5.9) | (17.6) | ||||||||
| Net income (loss) from Discontinued Operations | (0.5) | 10.9 | ||||||||
| Magyar Telecom B.V. | ||||||||||
| Financial Highlights | ||||||||||
| (in millions of euro) | ||||||||||
| Statements of Operations | ||||||||||
| Six months ended June 30, 2011 | Six months ended June 30, 2010 | |||||||||
| Residential Voice | 27.1 | 33.7 | ||||||||
| Residential Internet | 17.4 | 16.5 | ||||||||
| Corporate | 32.3 | 33.9 | ||||||||
| Domestic Wholesale | 15.7 | 15.7 | ||||||||
| Cable | 6.9 | 0.0 | ||||||||
| Total Revenue | 99.4 | 99.8 | ||||||||
| Segment Cost of Sales | 34.4 | 31.6 | ||||||||
| Income (loss) from Continued Operations | 8.6 | 22.5 | ||||||||
| Interest Expense | 19.4 | 22.3 | ||||||||
| Foreign exchange gains (losses), net | (1.7) | (14.6) | ||||||||
| Gains (losses) on derivative financial instruments | (0.4) | (5.0) | ||||||||
| Net income (loss) from Continued Operations | 18.9 | (18.1) | ||||||||
| Net income (loss) from Discontinued Operations | 0.0 | 19.6 | ||||||||
| Magyar Telecom B.V. | ||||||||
| Financial Highlights | ||||||||
| (in millions of euro) | ||||||||
| Balance Sheets | ||||||||
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| Current Assets | 94.5 | 140.0 | ||||||
| Property, Plant and Equipment, net | 349.8 | 303.0 | ||||||
| Total Assets | 503.9 | 485.9 | ||||||
| Total Current Liabilities | 44.9 | 39.7 | ||||||
| Long Term Debt | 327.3 | 351.0 | ||||||
| Total Shareholders Equity | 114.8 | 78.1 | ||||||
| Total Liabilities and Shareholders Equity | 503.9 | 485.9 |
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