B Communications Reports Financial Results for the Second Quarter of 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--(BUSINESS WIRE)-- 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,
2013201320122012
NISUS$NISNIS
Short term liabilities560155431587
Long term liabilities3,2849083,6893,511
Total liabilities3,8441,0634,1204,098
Cash and cash equivalents745206400694
Total net debt3,0998573,7203,404

* 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-monthThree-monthThree-month
period endedperiod endedperiod endedYear ended
June 30,June 30,June 30,December 31,
2013 2013 2012 2012 
NISUS$NISNIS
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 income147 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.

Bezeq Group (consolidated)   Q2 2013 Q2 2012 % change 
(NIS millions)
Revenues2,3512,595-9.4%
Operating profit744746-0.3%
EBITDA1,0701,104-3.1%
EBITDA margin45.5%42.5%
Net profit attributable to Company shareholders47341514.0%
Diluted EPS (NIS)   0.17  0.15  13.3%
Cash flow from operating activities1,10299011.3%
Payments for investments, net178360-50.6%
Free cash flow 1   924  630  46.7%
Net debt/EBITDA (end of period) 21.831.69
Net debt/shareholders' equity (end of period)   

3.09

  

3.07

   
 
1 Free cash flow is defined as cash flow from operating activities less net payments for investments.
2 EBITDA in this calculation refers to the trailing twelve months.

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:

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.

 

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:

www.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.

 

B Communications Ltd.

Condensed Consolidated Statements of Financial Position as at

(In millions)

    Convenience  
translation into
U.S. dollars
(Note A)
June 30June 30June 30December 31
2013201320122012
NISUS$NISNIS
Assets
Cash and cash equivalents646179634757

Investments, including derivative financial instruments

2,1055829961,484
Trade receivables, net2,8637913,1152,927
Other receivables33994347330
Inventory14239206123
Assets classified as held-for-sale24167163164
 
Total current assets6,3361,7525,4615,785
 

Investments, including derivative financial instruments

89259590
Long-term trade and other receivables8172261,3241,074
Property, plant and equipment6,6261,8316,9666,911
Intangible assets6,9371,9177,4877,252
Deferred and other expenses394108409384

Investment in equity-accounted investee (mainly loans)

1,0152811,0191,005
Deferred tax assets6618*172*128
 
Total non-current assets15,9444,40617,47216,844
 
Total assets22,2806,15822,93322,629
 

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

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B Communications Ltd.

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

(In millions)

 
    Convenience  
translation into
U.S. dollars
(Note A)
June 30June 30June 30December 31
2013201320122012
NISUS$NISNIS
Liabilities
Short-term bank credit, current maturities
of long-term liabilities and debentures1,4974141,0601,582
Trade payables686190901