Annual Report 2011 - T-Hrvatski Telekom

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Group Financial Performance
Financial Review 2011
Financial Result of the T-HT Group
Revenue
Throughout 2011, Group revenue was again
impacted by the recession and special taxation
measures that were adopted in response to it. Despite
growth in the ICT business (classified as other service
revenue), total revenue fell 3.6% to HRK 8,067 million
(2010: HRK 8,372 million).
This revenue decline was primarily driven by lower
voice revenue due to a highly competitive market,
downward pricing pressure, a challenging economic
environment and a tightening of the regulatory
regime. The fall was offset to a degree by an increase
in non-voice (data and broadband segment) and
other service revenue (ICT segment).
Operating Expenses
Overall operating expenses fell 4.1%, or HRK
201 million, to HRK 4,749 million (2010: HRK
4,950 million), as a result of tight cost controls and
lower costs related to lower usage and reduced
interconnection fees.
Material expenses decreased by 6.4% to HRK 2,175
million, on a slight decline in Merchandise costs,
down 0.9% to HRK 1,034 million, and a reduction in
Services costs by 10.9% to HRK 1,141 million, mostly
as a result of lower telecommunication services costs.
At the same time, copyright fees rose as a result of
growth in the Group’s pay-TV subscriber base.
Total employee benefits increased by 8.2% to
HRK 1,296 million as a result of higher redundancy
provisions booked in 2011 (HRK 162 million vs HRK
31 million in 2010). Excluding redundancy costs, total
employee costs fell by 2.9%, mainly due to a reduced
number of employees resulting from the Group’s
ongoing program to rationalize business processes
and drive efficiency improvements.
Other costs fell by 8.9% to HRK 1,292 million, primarily
due to lower maintenance and advertising expenses.
The write-down of assets decreased significantly, by
41.4% to HRK 67 million, owing to better collection
of unpaid bills supported by improved dunning
procedures and legislation, while depreciation and
amortization remained level with 2010 at HRK 1,414
million.
T-HT Group Profitability
While revenue fell 3.6%, EBITDA rose by 2.4%
to HRK 3,782 million, before exceptional items of
HRK 162 million, to give a 46.9% EBITDA margin
(2010: HRK 3,694 million, 44.1%) on the back of a
rise in other operating income and lower operating
expenses. Operating profit (EBIT) fell 1.8% to HRK
2,205 million (2010: HRK 2,246 million), as a result of
higher redundancy costs.
Net profit for 2011 was HRK 1,811 million, down
1.1% (2010: HRK 1,831 million), mainly as a result of
higher redundancy expenses.
Balance Sheet
T-HT’s balance sheet remains strong with total assets
of HRK 13,136 million, down 2.9% (2010: HRK
13,529 million), mainly as a result of lower network
investments.
Total non-current assets decreased to HRK 7,461
million at 31 December 2011 from HRK 8,008 million
at 31 December 2010, due to lower investment in
broadband access and core infrastructure.
An increase in total current assets to HRK 5,675
million at 31 December 2011from HRK 5,521 million
at 31 December 2010 was due largely to a stronger
cash position as a result of a lower dividend payment
compared with 2010.
Total issued capital and reserves decreased to HRK
11,019 million (2010: HRK 11,054 million), due to
lower net profit in 2011. At 31 December 2011, cash
and cash equivalents stood at HRK 3,704 million,
compared with HRK 3,282 million at 31 December
2010.
Cash Flow
Cash flow from operating activities is T-HT’s principal
source of funds, enabling the Group to finance capital
investments and dividend distributions. Cash flow
from operations decreased by 8.5% to HRK 2,988
million (2010: HRK 3,266 million), mostly as a result
of lower current liabilities driven by a reduced volume
of purchases and lower capex realization.