B Communications Reports Financial Results for

August 5, 2013

B Communications Reports Financial Results for the Second Quarter of 2013

 

–          3rd consecutive quarter of significant net income, totaling NIS 34M  ($9M)   – 

 

 

Ramat Gan, Israel – August 5, 2013 – B Communications Ltd. (NASDAQ Global Market and TASE: BCOM) today reported its financial results for the second quarter ended June 30, 2013.

Bezeq’s Results: For the second quarter of 2013, the Bezeq Group reported revenues of NIS 2.4 billion ($ 650 million) and operating profit of NIS 744 million ($ 206 million). Bezeq’s EBITDA for the second quarter totaled NIS 1.1 billion ($ 296 million), representing an EBITDA margin of 46%. Net income for the period attributable to the shareholders of Bezeq totaled NIS 473 million ($ 131 million). Bezeq’s cash flow from operating activities during the period totaled NIS 1.1 billion ($ 305 million).

Cash Position: As of June 30, 2013, B Communications’ unconsolidated cash and cash equivalents totaled NIS 745 million ($ 206 million), its unconsolidated total debt was NIS 3.8 billion ($ 1.1 billion), and its net debt totaled NIS 3.1 billion ($ 857 million).

B Communications’ Unconsolidated Balance Sheet Data*

 

In millions    Convenience     
    translation into     
    U.S. dollars     
    (Note A)     
  June 30, June 30, June 30, December 31,
  2013  2013 2012 2012
  NIS US$ NIS NIS  
Short term liabilities 560 155 431 587  
Long term liabilities 3,284 908 3,689 3,511  
Total liabilities 3,844 1,063 4,120 4,098  
Cash and cash equivalents 745 206 400 694  
Total net debt 3,099 857 3,720 3,404  
           
             

 

* Does not include the balance sheet of Bezeq.

Dividend from Bezeq: On May 13, 2013, B Communications received two dividend payments from Bezeq which together totaled NIS 421 million ($ 116 million). These dividend payments included a current dividend of NIS 266 million ($ 73 million), representing B Communications’ share of Bezeq’s net profit for the second half of 2012, and a special dividend of NIS 155 million ($ 43 million), representing B Communications’ share of the fifth installment of six special dividend payments declared by Bezeq and approved by its shareholders in 2011.

B Communications’ Second Quarter Financial Results

 

B Communications’ consolidated revenues for the second quarter of 2013 were NIS 2.4 billion ($ 650 million), a 9.4% decrease compared with NIS 2.6 billion reported in the second quarter of 2012. For both the current and the prior-year periods, B Communications’ consolidated revenues consisted entirely of Bezeq’s revenues.

During the second quarter of 2013, B Communications recorded net amortization expenses related to its Bezeq purchase price allocation (“Bezeq PPA”) of NIS 157 million ($ 43 million) in its consolidated financial statements. From April 14, 2010, the date of the acquisition of its interest in Bezeq, until June 30, 2013, B Communications has amortized approximately 55% of the total Bezeq PPA. The Bezeq PPA amortization expense is a non-cash expense that is subject to adjustment. If, for any reason, B Communications finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to its audited financial reports, as well as to future financial statements.

B Communications’ financial expenses, net: B Communications’ unconsolidated net financial expenses for the second quarter of 2013 totaled NIS 62 million ($ 17 million). These expenses consisted primarily of NIS 56 million ($ 15 million) of interest and CPI linkage expenses on the long-term loans incurred to finance the Bezeq acquisition and expenses of NIS 13 million ($ 4 million) related to its publicly-traded debentures. These expenses were offset in part by financial income of NIS 7 million ($ 2 million) generated by short term investments.

Unconsolidated net financial expenses in the second quarter of 2013 decreased by 42.6% compared with the second quarter of 2012. The decrease is primarily attributable to lower interest and CPI linkage expenses due to the reduction in the amount of the outstanding bank debt that was incurred to purchase the Company’s controlling interest in Bezeq. In addition, lower inflation levels and floating interest rates in the second quarter of 2013 compared to the second quarter of 2012 contributed to the decrease in interest and CPI linkage expenses.

 

B Communications’ net income attributable to shareholders for the second quarter of 2013 totaled NIS 34 million ($ 9 million), compared to a net loss of NIS 79 million in the second quarter of 2012.  

B Communications’ Unconsolidated Financial Results

 

In millions   Convenience    
    translation into    
    U.S. dollars    
    (Note A)    
  Three-month Three-month Three-month  
  period ended period ended period ended Year ended
  June 30, June 30, June 30, December 31,
  2013 2013 2012 2012
  NIS US$ NIS NIS
Revenues
Financing expenses, net (62) (17) (108) (239)
Other and income tax expenses (2) (1) (48)
PPA amortization, net (49) (14) (100) (234)
Interest in Bezeq’s net income 147  41  129  567
Net income (loss) 34 9 (79) 46

 


 

Comments of Management

 

Commenting on the results, Doron Turgeman, CEO of B Communications’ said, “The first half of 2013 was another stable period for Bezeq and continued strong operating results. With the continued on-schedule receipt of dividends from Bezeq, we have continued building our cash reserves and have recorded a third consecutive quarter of significant net income. We are currently examining a number of offers for re-structuring some of our outstanding loans as a key to improving our financial position while improving our repayment schedule and financial flexibility.”

 

Bezeq Group Results (Consolidated) 

To provide further insight into its results, the Company is providing the following summary of the consolidated financial report of the Bezeq Group for the second quarter ended June 30, 2013. For a full discussion of Bezeq’s results for the second quarter of 2013, please refer to its website: http://ir.bezeq.co.il.

 

 

Revenues of the Bezeq Group in the second quarter of 2013 amounted to NIS 2.35 billion ($ 650 million) compared with NIS 2.60 billion in the corresponding quarter of 2012, a decrease of 9.4%. The reduction in the Bezeq Group revenues was primarily due to a decrease in revenues from the cellular segment revenues.

The Bezeq Group’s focused policy of initiating streamlining and efficiency measures in all segments, both in salaries and in general operating expenses moderated the decline in EBITDA.  The decrease in depreciation expenses and the reduction in financing expenses contributed to the stability of operating profit and the increase in net profit.

Operating profit of the Bezeq Group in the second quarter of 2013 amounted to NIS 744 million ($ 206 million) compared with NIS 746 million in the corresponding quarter of 2012, a decrease of 0.3%.

Earnings before interest, taxes, depreciation and amortization (EBITDA) of the Bezeq Group in the second quarter of 2013 amounted to NIS 1.07 billion ($ 296 million) (EBITDA margin of 45.5%) compared with NIS 1.10 billion (EBITDA margin of 42.5%) in the corresponding quarter of 2012, a decrease of 3.1%.

Net profit attributable to Bezeq shareholders amounted to NIS 473 million ($ 131 million) compared with NIS 415 million in the corresponding quarter of 2012, an increase of 14.0%.

The second quarter results again show record levels of free cash flow. Cash flow from operating activities of the Bezeq Group in the second quarter of 2013 amounted to NIS 1.10 billion ($ 305 million) compared with NIS 990 million in the corresponding quarter of 2012, an increase of 11.3%. Free cash flow in the second quarter of 2013 amounted to NIS 924 million ($ 255 million) compared with NIS 630 million in the corresponding quarter of 2012, an increase of 46.7%.  The increase in free cash flow was due to increased income from the sale of real estate and copper together with stabilization of lower levels of capital expenditures compared with the previous five years during which Bezeq completed the NGN and submarine cable projects.

Net financial debt of the Bezeq Group was NIS 7.93 billion ($ 2.2 billion) at June 30, 2013 compared with NIS 7.90 billion as of June 30, 2012.

Bezeq Group Dividend Announcement

In accordance with the Bezeq Group dividend policy, its Board of Directors recommended the distribution of 100% of profits for the first half of 2013 as a cash dividend to shareholders of NIS 969 million ($268 million). Together with the aforementioned semi-annual dividend, the Bezeq Group will make the sixth and final payment of the special dividend of NIS 500 million ($138 million). The total dividend to be distributed will be NIS 1.469 billion ($406 million) (approximately NIS 0.54 per share).  The semi-annual dividend, which is subject to shareholder approval, would be payable together with the special dividend on September 15, 2013.  The ex-dividend date is September 3, 2013.

 

Notes:

 

  1. A.      Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of June 30, 2013 have been presented in millions of U.S. dollars, translated at the representative rate of exchange as of June 30, 2013 (NIS 3.618 = U.S. Dollar 1.00). The U.S. dollar ($) amounts presented should not be construed as representing amounts receivable or payable in U.S. dollars or convertible into U.S. dollars, unless otherwise indicated.

 

  1. B.       Use of non-IFRS Measurements: We and the Bezeq Group’s management regularly use supplemental non-IFRS financial measures internally to understand, manage and evaluate our business and make operating decisions. We believe these non-IFRS financial measures provide consistent and comparable measures to help investors understand the Bezeq Group’s current and future operating cash flow performance.

 

These non-IFRS financial measures may differ materially from the non-IFRS financial measures used by other companies.

 

EBITDA is a non-IFRS financial measure generally defined as earnings before interest, taxes, depreciation and amortization. The Bezeq Group defines EBITDA as net income before financial income (expenses), net, impairment and other charges, expenses recorded for stock compensation in accordance with IFRS 2, income tax expenses and depreciation and amortization. We present the Bezeq Group’s EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structure, tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age of, and depreciation expenses associated with, fixed assets (affecting relative depreciation expense).
 
EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations or cash flow data prepared in accordance with IFRS as a measure of profitability or liquidity. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this press release, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.
 
Reconciliation between the Bezeq Group’s results on an IFRS and non-IFRS basis is provided in a table immediately following the Company's consolidated results. Non-IFRS financial measures consist of IFRS financial measures adjusted to exclude amortization of acquired intangible assets, as well as certain business combination accounting entries. The purpose of such adjustments is to give an indication of the Bezeq Group’s performance exclusive of non-cash charges and other items that are considered by management to be outside of its core operating results. The Bezeq Group’s non-IFRS financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures, and should be read only in conjunction with its consolidated financial statements prepared in accordance with IFRS.
 

About B Communications Ltd.

B Communications is a telecommunications-oriented holding company and its primary holding is its controlling interest in Bezeq, The Israel Telecommunication Corp., Israel’s largest telecommunications provider (TASE: BZEQ). B Communications shares are traded on NASDAQ and the TASE under the symbol BCOM For more information please visit the following Internet sites:

bcommunications.co.il

www.ir.bezeq.co.il

www.eurocom.co.il

www.igld.com

 

Forward-Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties.  Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, general business conditions in the industry, changes in the regulatory and legal compliance environments, the failure to manage growth and other risks detailed from time to time in B Communications’ filings with the Securities Exchange Commission.  These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.  Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.  We undertake no obligation to update publicly or revise any forward-looking statement.

For further information, please contact:

Idit Cohen – IR Manager

idit@igld.com / Tel: +972-3-924-0000

 

Investor relations contacts:

Mor Dagan – Investor Relations

mor@km-ir.co.il / Tel: +972-3-516-7620

 

 

 


 

B Communications Ltd.

Condensed Consolidated Statements of Financial Position as at

(In millions)

      Convenience    
      translation into    
      U.S. dollars    
      (Note A)    
    June 30 June 30 June 30 December 31
    2013 2013 2012 2012
    NIS US$ NIS NIS

 

Assets          
Cash and cash equivalents   646 179 634  757
Investments, including derivative financial          
 instruments   2,105 582        996  1,484
Trade receivables, net   2,863 791     3,115  2,927
Other receivables   339 94        347  330
Inventory   142 39        206  123
Assets classified as held-for-sale   241 67        163 164
           
Total current assets   6,336 1,752 5,461 5,785
           
Investments, including derivative financial          
 instruments   89 25  95  90
Long-term trade and other receivables   817 226  1,324  1,074
Property, plant and equipment   6,626 1,831  6,966  6,911
Intangible assets   6,937 1,917  7,487  7,252
Deferred and other expenses   394 108  409  384
Investment in equity-accounted investee          
 (mainly loans)   1,015 281  1,019 1,005
Deferred tax assets   66 18  *172 *128
           
Total non-current assets   15,944 4,406 17,472 16,844
           
Total assets   22,280 6,158 22,933 22,629

 

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

B Communications Ltd.

 

Condensed Consolidated Statements of Financial Position as at (cont’d)

 

(In millions)

 

 

 

 

Convenience

 

 

 

 

 

translation into

 

 

 

 

 

U.S. dollars

 

 

 

 

 

(Note A)

 

 

 

 

June 30

June 30

June 30

December 31

 

 

2013

2013

2012

2012

 

 

NIS

US$

NIS

NIS

 

Liabilities

 

 

 

 

 

Short-term bank credit, current maturities

 

 

 

 

 

 of long-term liabilities and debentures

 

 1,497

414

1,060

 1,582

Trade payables

 

 686

190

901

 792

Other payables, including derivative

 

 

 

 

 

 financial instruments

 

669

185

719

 734

Dividend payable

 

338

93

669

 669

Current tax liabilities

 

732

202

572

 588

Provisions

 

124

34

174

 145

Employee benefits

 

273

75

*318

* 251

Total current liabilities

 

4,319

1,193

4,413

4,761

 

 

 

 

 

 

Debentures

 

 5,420

1,498

 5,105

 5,018

Bank loans

 

 6,227

1,721

 6,515

 6,422

Loans from institutions and others

 

 542

150

 545

 540

Dividend payable

 

 322

 –  

Employee benefits

 

 256

71

 *246

 *260

Other liabilities

 

 86

24

 83

 67

Provisions

 

 67

19

 70

 66

Deferred tax liabilities

 

 1,056

292

 1,210

 1,159

Total non-current liabilities

 

13,654

3,775

14,096

13,532

 

 

 

 

 

 

Total liabilities

 

17,973

4,968

18,509

18,293

 

 

 

 

 

 

Equity

 

 

 

 

 

Total equity attributable to equity holders

 

 

 

 

 

 of the Company

 

1,052

290

*886

*960

Non-controlling interests

 

3,255

900

*3,538

*3,376

 

 

 

 

 

 

Total equity

 

4,307

1,190

4,424

4,336

 

 

 

 

 

 

Total liabilities and equity

 

22,280

6,158

22,933

22,629

 

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 


 

B Communications Ltd.

 

Condensed Consolidated Statements of Income for the

 

(In millions, except per share data)

 

 

 

Six months period ended

Three months period ended

Year ended

 

June 30

June 30

December 31

 

 

Convenience

 

 

Convenience

 

 

 

 

translation

 

 

translation

 

 

 

 

into

 

 

into

 

 

 

 

U.S. dollars

 

 

U.S. dollars

 

 

 

2013

2013

2012

2013

2013

2012

2012

 

NIS

US$

NIS

NIS

US$

NIS

NIS

 

Revenues

4,756

1,315

5,335

2,351

650

2,595

10,278

 

 

 

 

 

 

 

 

Cost and expenses

 

 

 

 

 

 

 

Depreciation and amortization

1,008

279

1,510

516

143

785

2,367

Salaries

969

268

1,017

469

130

505

*1,978

General and operating expenses

1,720

475

2,051

831

230

969

3,995

Other operating (income)

 

 

 

 

 

 

 

expenses, net

(29)

(8)

33

12

3

33

(11)

 

 

 

 

 

 

 

 

 

3,668

1,014

4,611

1,828

506

2,292

8,329

 

 

 

 

 

 

 

 

Operating income

1,088

301

724

523

144

303

1,949

 

 

 

 

 

 

 

 

Financing expenses, net

144

40

180

79

22

172

*355

 

 

 

 

 

 

 

 

Income after financing

 

 

 

 

 

 

 

 expenses, net

944

261

544

444

122

131

1,594

 

 

 

 

 

 

 

 

Share in losses of

 

 

 

 

 

 

 

equity-accounted investee

107

30

141

67

18

83

245

 

 

 

 

 

 

 

 

Income before income tax

837

231

403

377

104

48

1,349

 

 

 

 

 

 

 

 

Income tax

279

77

204

126

35

67

*556

 

 

 

 

 

 

 

 

Net income (loss) for the period

558

154

199

251

69

(19)

793

 

 

 

 

 

 

 

 

Income (loss) attributable to:

 

 

 

 

 

 

 

  Owners of the Company

95

26

(50)

34

9

(79)

*46

  Non-controlling interests

463

128

249

217

60

60

*747

 

 

 

 

 

 

 

 

Net income (loss) for the period

558

154

199

251

69

(19)

793

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss), basic

3.16

0.87

(1.69)

1.12

0.31

(2.66)

1.52

 

 

 

 

 

 

 

 

Net income (loss), diluted

3.16

0.87

(1.70)

1.11

0.30

(2.66)

1.49

 

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

 

 

 

 

 

 

 

B Communications Ltd.

 

Reconciliation for NON-IFRS Measures

 

EBITDA

 

The following is a reconciliation of the Bezeq Group’s operating income to EBITDA:

 

In millions

 

 

Six months period ended

Three months period ended

Year ended

 

June 30

June 30

December 31

 

 

Convenience

 

 

Convenience

 

 

 

 

translation

 

 

translation

 

 

 

 

into

 

 

into

 

 

 

 

U.S. dollars

 

 

U.S. dollars

 

 

 

 

(Note A)

 

 

(Note A)

 

 

 

2013

2013

2012

2013

2013

2012

2012

 

NIS

US$

NIS

NIS

US$

NIS

NIS

 

 

 

 

 

 

 

 

Operating income

1,505

416

1,596

744

206

746

*3,041

Depreciation and amortization

654

181

716

326

90

358

1,436

 

 

 

 

 

 

 

 

EBITDA

2,159

597

2,312

1,070

296

1,104

4,471

 

 

 

 

 

 

 

 

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

 

Free Cash Flow

 

The following table shows the calculation of the Bezeq Group’s free cash flow:

 

In millions

 

 

Six months period ended

Three months period ended

Year ended

 

June 30

June 30

December 31

 

 

Convenience

 

 

Convenience

 

 

 

 

translation

 

 

translation

 

 

 

 

into

 

 

into

 

 

 

 

U.S. dollars

 

 

U.S. dollars

 

 

 

 

(Note A)

 

 

(Note A)

 

 

 

2013

2013

2012

2013

2013

2012

2012

 

NIS

US$

NIS

NIS

US$

NIS

NIS

 

 

 

 

 

 

 

 

Cash flow from operating activities

2,074

573

1,988

1,102

305

990

4,014

Purchase of property, plant and equipment

(497)

(137)

(700)

(252)

(70)

(315)

(1,271)

Investment in intangible assets and deferred expenses

(93)

(26)

(142)

(49)

(14)

(67)

(269)

Proceeds from the sale of property, plant and equipment

166

46

69

123

34

22

305

 

 

 

 

 

 

 

 

Free cash flow

1,650

456

1,215

924

255

630

2,779