LATTELEKOM INTERIM REPORT 2002

Transcription

1 LATTELEKOM INTERIM REPORT 2002

2 Introduction During the first half of 2002 Lattelekom maintained its position as the largest provider in Latvia of the telecommunications services in terms of turnover and number of customers. Lattelekom provides basic telecommunications services, data transmission, leased line, Internet, as well as IT services. Till January 1, 2003 Lattelekom will have a monopoly for provision of basic telecommunications services in Latvia, while in the area of data, Internet and IT services Lattelekom is already operating in competitive environment. Lattelekom employs 4,282 people. Lattelekom subsidiary SIA Lattelekom Sakaru Sistēmas offers wide range of telecommunications and IT equipment to the Latvian market. Lattelekom services 713 thousand telephone lines throughout Latvia out of which 72.7% have been connected to the digital network. Lattelekom provides several services under separate brand names. Lattelekom uses the brand of Verdi Information Systems and Consulting for provision of IT services, Apollo for Internet services, and the brand of 118 Directory Inquiry Service for directory inquiries. The Republic of Latvia owns 51% of Lattelekom s share capital, and 49% are owned by the international telecommunications consortium TILTS Communications, which belongs to the Finnish company Sonera Holdings B.V. Over LVL 428 million have been invested in modernization of the telecommunications network since the establishment of the Company. 1

3 Highlights of the 1 st half of 2002 Radio DSL solution for data transmission services Upgrade of ADSL and ISDN services Home DSL service updated with a Service Selection Gateway The number of lines connected to the digital network has exceeded half a million The number of DSL users has exceeded 5,000 DSL services are available to over two thirds of Lattelekom customers Key figures 2002 Jan - Jun Jan - Jun Full year Revenue (LVL 000) 71,509 72, ,638 EBITDA (LVL 000) 33,389 34,505 68,595 EBITDA margin 47% 47% 47% Operating profit (LVL 000) 10,082 11,163 21,961 Operating profit margin 14% 15% 15% Net profit (LVL 000) 12,117 11,109 24,717 Capital expenditure (LVL 000) 22,801 19,154 54,215 Digitalization rate 72.7% 55.2% 68.6% Number of telephone lines (thousands of lines) Headcount as at June 30, ,282 4,423 4,375 2

4 Financial results Lattelekom has assessed operational performance of the group during the first half of 2002 according to the consolidated un-audited interim financial statements of the group, which are based on International Accounting Standards. In comparison with the same period of the previous year, total revenue has decreased by 0.7 % to LVL 71.5 million. Revenue from international telephone services decreased by 10.6% to LVL 12.0 million, while revenue from domestic telephone services was LVL 47.2 million being essentially the same as during the first six months of the previous year. During the first half of 2002 the volume of traffic to domestic mobile networks grew by 35% and Internet dial-up traffic increased by 22% while volume of local and international traffic decreased. REVENUE HISTORY (million LVL) Revenue from other telecommunication services increased by 11% to LVL 12.3 million. Within this figure the fastest growth was achieved in Internet and data services and sales of customer telecommunications equipment. EBITDA (earnings before tax, interest, depreciation and losses from disposal of assets) was LVL 33.4 million resulting in EBITDA profitability ratio of 47% being essentially the same as during the first six months of the previous year. Further increase of EBITDA profitability ratio was limited by increase of costs by LVL 0.9 million which is partially made up of costs of equipment sold and administration costs related to a number of development and reorganization programmes aimed at preparation of the group for competition in the free market. 3

5 EBITDA (million LVL) Net financial income of the group was LVL 3.9 million (versus LVL 0.6 million in the first half of ). This includes income from Lattelekom s ownership share in Latvijas Mobilais Telefons (LMT) and LVL 1.4 million gain from depreciation of US dollar against Latvian lat (LVL 1.1 million loss in the same period of ). Year 2002 is the first year when full corporate income tax rate of 22% is applied to taxable profits of Lattelekom (versus the reduced tax rate of 12.5% applied in ), hence the increase in tax charge by LVL 1.2 million. In comparison with the same period of the previous year, net profit of the group for the six months period to 30 June 2002 has grown up by 9% to LVL 12.1 million. NET PROFIT (million LVL) Consolidated net cash flow from operating activities increased by LVL 0.9 million or 3.4% compared to the same period last year. Lattelekom was able to finance internally all capital expenditure projects during the period under review. During the first half of 2002 the company for the first time in its history paid out dividends of LVL 11.3 million to its shareholders. 4

6 CAPITAL EXPENDITURE (million LVL) On 23 July 2002 Lattelekom signed a four-year USD 45 million Multicurrency Revolving Credit Facility arranged by A/S Vereinsbank Riga and Nordea Bank Finland Plc. Service Development During the first half of 2002 Lattelekom continued the upgrade of ADSL services. The Home DSL service was updated with a Service Selection Gateway. Service Selection Gateway is a control panel on the screen with the help of which the client can conveniently choose the preferred Internet access parameters and content movies, video clips, games, and other services. Moreover, by using a password, the Service Selection Gateway provides additional security against unauthorized Internet access. In June the number of ADSL users exceeded 5,000, and ADSL service is available to more than 70% of Lattelekom customers throughout Latvia. In January 2002 a new wireless technology Radio DSL was introduced in places where use of ADSL technology is not rational, ensuring equal data services with data transmission speeds up to 2 Mbps. During the first half of 2002 Lattelekom carried out upgrade of the Internet infrastructure, as a result of which international Internet data transmission capacity was significantly increased. This benefited those clients of Latvian Internet Service Providers who use international Internet resources. The international Internet capacity of Lattelekom s Internet service provider Apollo, on turn, was increase to 34 Mbps. During the report period Lattelekom launched a special Internet Tariff Plan for those customers who use 900-series Internet dial-up access. Network Development In the first half of 2002 Lattelekom continued with modernization of the telecommunications network and improvement of the quality of communications. 5

7 In February of this year the number of telephone lines connected to the digital network reached half a million, and the share of digitalized lines at the end of the report period reached 72.7%. At the end of the digitalization rate was 68.6%. The plans are to reach 80% digitalization rate by the end of the year. During the last one and a half years the number of telephone lines connected to the digital network grew by 20%. During the first half of 2002 major telecommunications network modernization works were performed in 14 districts in Latvia (Balvi, Limbazi, Aizkraukle, Valka, Liepaja, Saldus, Dobele, Jelgava, Tukums, Jekabpils, Ogre, Daugavpils, Bauska and Valmiera), and in Riga. Construction works of optical fiber cable lines Ventspils Kuldiga Broceni and Gulbene Madona Jekabpils were continued. Reconstruction and improvement of the cable network was continued during the report period so that subscribers can have a possibility to use modern telecommunications services, e.g., Ultra DSL, Home DSL and others. Building of Information Society Lattelekom continues its active participation in implementation of national information society projects, e.g., Unified Municipal Information Systems. In February 2002 infrastructure needed for building of information society was completed in Saldus district. The infrastructure is envisaged not only for operational needs of local governments, as now any entrepreneur, investor or stakeholder in Saldus district has a possibility to use and the Internet. Lattelekom Continues Implementation of the New Billing System During the first half of 2002 Lattelekom continued work to implement a new billing system Unicorn and a new carrier billing system InterconnectT. Changes in Membership of Lattelekom Board of Directors In order to avoid the potential conflict of interest situation arising out of the Republic of Latvia Law On Prevention of Conflict of Interest in the Activities of State Officials, and according to the letters of resignation submitted by the Board members nominated by the Republic of Latvia Viktors Kulbergs un Valdis Lokenbahs, Lattelekom SIA Extraordinary Shareholders meeting on 5 July 2002 decided to accept their resignations. Janis Grevinš and Karlis Kreslinš were elected as Lattelekom SIA Board members nominated by the Republic of Latvia for a three-year term effective 6 July

8 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Accounting policies The consolidated interim financial statements of Lattelekom Group are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. The accounting policies used in the preparation of the interim financial statements are consistent with those used in the annual financial statements for the year ended 31 December. These interim financial statements should be read in conjunction with the annual financial statements available at www. lattelekom. lv. Condensed Consolidated Income Statement January June 2002 January June Full year LVL 000 LVL 000 LVL 000 Revenue 71,509 72, ,638 Other operating income 1, ,141 Payments to other telecommunications operators (9,763) (9,624) (19,788) Employee costs (12,295) (12,432) (24,549) Depreciation and amortisation (23,146) (23,272) (46,361) Management and technology transfer fees (936) (929) (1,836) Other operating expenses (16,403) (15,499) (32,011) Losses on disposal of assets (161) (70) (273) Total operating expenses (62,704) (61,826) (124,818) Operating profit 10,082 11,163 21,961 Net financial income including share of result of associates 3, ,375 Profit before tax 13,958 11,794 25,336 Income tax (1) (1,841) (685) (619) Net profit 12,117 11,109 24,717 Earnings per share (in LVL) (1) The year 2002 is the first year when full tax rate of 22% is applied calculating corporate income tax (reduced tax rate of 12.5% was applied in ). For the first six months period corporate income tax charge was LVL million and deferred tax income of LVL million was calculated for decrease in deferred tax liabilities. 7

9 Breakdown of Revenue by Service January June January June Full year 2002 LVL 000 LVL 000 LVL 000 Revenue from international telephone services 12,047 13,337 25,884 Revenue from domestic telephone services 47,175 47,507 95,269 Revenue from other telecommunications services 12,287 11,173 23,485 Total 71,509 72, ,638 Condensed Consolidated Balance Sheet 30 June June 31 December LVL 000 LVL 000 LVL 000 ASSETS Non-current assets 253, , ,291 Current assets Inventories 2,793 3,753 2,225 Receivables and prepayments 24,674 22,297 22,423 Cash and cash equivalents 4,796 12,461 7,179 32,263 38,511 31,827 Total assets 285, , ,118 EQUITY AND LIABILITIES Capital and reserves Ordinary share capital 146, , ,079 Reserves 10,679 7,818 7,818 Retained earnings 28,275 16,691 30, , , ,196 Non-current liabilities 73,482 72,156 67,674 Current liabilities Trade and other payables 23,851 20,093 23,748 Borrowings 3,250 15,500 11,500 27,101 35,593 35,248 Total equity and liabilities 285, , ,118 8

10 Condensed Consolidated Statement of Changes in Equity Share capital Reserves Retained earnings Total LVL 000 LVL 000 LVL 000 LVL 000 Balance at 1 January 146,079 3,910 9, ,479 Transfer to reserves - 3,908 (3,908) - Net profit for the period ,109 11,109 Balance at 30 June 146,079 7,818 16, ,588 Balance at 1 January ,079 7,818 30, ,196 Transfer to reserves (2) - 2,861 (2,861) - Dividends (2) - (11,280) (11,280) Net profit for the period ,117 12,117 Balance at 30 June ,079 10,679 28, ,033 (2) On May 10, 2002 the Extraordinary General Meeting of Lattelekom shareholders approved allocation of profit. It was decided to transfer LVL million into legal un-distributable reserves in accordance with the law On the Annual Accounts of Companies and On Limited Liability Companies and to distribute LVL million as ordinary dividends. The dividends were paid on 13 June,

11 Condensed Consolidated Cash Flow Statement January June January June Full year 2002 LVL 000 LVL 000 LVL 000 Cash flow from operating activities Operating profit 10,082 11,163 21,961 Adjustments for: depreciation and amortisation 23,146 23,272 46,361 loss on disposal of assets foreign exchange difference 113 (63) 88 Operating profit before working capital changes 33,384 34,405 68,464 Changes in working capital (4,502) (5,307) 798 Net cash interest income / (expenses) including dividends received 1,743 (18) (1,067) Tax paid (3,242) (2,607) (4,690) Net cash from operating activities 27,383 26,473 63,505 Net cash used in investing activities (20,236) (23,219) (58,283) Net cash used in financing activities (9,530) (1,250) (8,500) Net (decrease) / increase in cash and cash equivalents (2,383) 2,004 (3,278) Cash and cash equivalents at beginning of period 7,179 10,457 10,457 Cash and cash equivalents at end of period 4,796 12,461 7,179 10