Magyar Telecom B.V. Investor Presentation for the year ended December 31, 2013 and for the quarter ended March 31, 2014 May 16, 2014
Safe Harbor Statement 2 This presentation of Magyar Telecom B.V. (the Company ) contains forward-looking statements. These and all forward-looking statements are only predictions or statements of current plans that are constantly under review by the Company. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These forward-looking statements are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties. Actual results could differ materially from those expressed in the forward-looking statements for a variety of reasons, including but not limited to: fluctuation in foreign exchange rates and interest rates; changes in Hungarian and Central and Eastern European economic conditions and consumer and business spending; the amount that the Company invests in new business opportunities and the timing of those investments; the mix of services sold; competition; management of growth and expansion; future integration of acquired businesses; the performance of IT Systems; technological changes; the Company's indebtedness; and government regulation. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the Company's financial reports, which are available on the Company s website, www.invitel.hu. Accordingly, investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. The Company does not undertake to update such statements to reflect the impact of circumstances or events that arise after the date the statements are made.
Overview 3 Restructuring successfully completed in December 2013 New bundling strategies bearing fruit Residential TV margin up year-on-year by 55% in 2013 and 106% in Q1 2014 Corporate Hosting & IT Services margin up 28% in 2013 and 45% in Q1 2014 Stabilization in other business lines Cable margin has grown for the past 4 quarters Internet in-concession subscriber numbers have increased for the past 9 quarters Corporate Data & Internet (ex Hosting & IT) margin increased in 2 of last 4 quarters Disciplined cost and capex management Operating expenses excluding policy impacts down 7% in 2013 Fixed capex down 18% in 2013 Residential variable spend increased at only half the rate of new sales 2013 full-year results better than target
Macroeconomic Background 4 The Hungarian Forint experienced weakening in Q1 2014, trading in the 297-314 HUF/EUR range, but has subsequently strengthened to levels below the Q1 average rate of 307.90 HUF/EUR. Continued policy rate reductions (to 2.5% in April 2014), Fed tapering and the Ukrainian political unrest has contributed to the Forint s decline. Versus prior year, Q1 2014 annual inflation (0.1% vs. 2.2%) and unemployment (8.3% vs. 11.8%) have improved. The inflation figures have been held low by the mandated utility rate cuts and unemployment figures helped by public work schemes. 320 310 300 290 280 270 260 250 HUF/EUR Historical Movement Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 Real GDP GDP grew 1.1% in 2013 and is expected to grow by around 2.1% this year. The 2.2% government budget deficit for 2013 was at the low end of expectations, and is expected to be about 2.5% for 2014. Elections in March delivered a renewed 2/3 parliamentary majority for the incumbent government, which has signaled continuity in economic policy. 104 102 100 98 96 94 92 101,0 101,6 100,0 98,1 96,4 96,4 96,1 95,2 2006 2007 2008 2009 2010 2011 2012 2013
Financial Highlights for the year ended December 31, 2013 5 The functional currency of Magyar Telecom B.V. and its subsidiaries (the Group ) is the Hungarian forint ( HUF ). The Hungarian forint depreciated against the EUR by 3% during the year ended December 31, 2013 compared to the average Hungarian forint/euro exchange rate for the year ended December 31, 2012. Revenue in EUR decreased by 6% for the year ended December 31, 2013 compared to the prior year. In HUF terms, revenue decreased by 4% for the year ended December 31, 2013 compared to the prior year. In Q4 2013, the Company's accounting treatment of subscriber sign-up discounts resulted in a positive non-cash impact of 172m HUF, a consequence of 2013 s strong sales performance. Segment gross margin in EUR decreased by 10% for the year ended December 31, 2013 compared to the prior year. In HUF terms, segment gross margin decreased by 7% for the year ended December 31, 2013 compared to the prior year. Segment gross margin percentage was 77% and 81% for the years ended December 31, 2013 and 2012, respectively. Adjusted operating expenses* in EUR increased by 6% for the year ended December 31, 2013 compared to the prior year. In HUF terms, adjusted operating expenses increased by 9% for the year ended December 31, 2012 compared to the prior year. Adjusted EBITDA** in EUR decreased by 26% to EUR 50.8 million for the year ended December 31, 2013 compared to the prior year. Adjusted EBITDA** in HUF decreased by 24% to HUF 15.1 billion for the year ended December 31, 2013 compared to the prior year. Adjusted EBITDA** margin was 31% and 40% for the year ended December 31, 2013 and 2012, respectively. * Adjusted operating expenses are operating expenses adjusted for non-recurring items. See slide 7. **Adjusted EBITDA is a non-ifrs financial measure. See the reconciliation to net income on slide 8.
Financial Information for the year ended December 31, 2013 6 For the year ended December 31, For the year Change Change ended December 31, Change Change 2013 2012 (1) % 2013 2012 (1) % (in millions of HUF) Revenue 163,815 174,175 (10,360) (6%) 48,641 50,409 (1,768) (4%) Segment Cost of Sales (37,157) (33,782) (3,375) (10%) (11,033) (9,777) (1,256) (13%) Segment Gross Margin 126,658 140,393 (13,735) (10%) 37,608 40,632 (3,024) (7%) Gross Margin % 77% 81% 77% 81% Adjusted Operating Expenses (2) ex Government Policy (3) (75,786) (71,447) (4,339) (6%) (22,503) (20,678) (1,825) (9%) (62,857) (69,530) 6,673 10% (18,664) (20,123) 1,459 7% Adjusted EBITDA (4) 50,872 68,946 (18,074) (26%) 15,105 19,954 (4,849) (24%) Adjusted EBITDA Margin % (5) 31% 40% 31% 40% Adjusted EBITDA Margin % ex Policy 39% 41% 39% 41% Non-recurring Items (2,547) (14,014) 11,467 82% (756) (4,056) 3,300 81% EBITDA (3) 48,325 54,932 (6,607) (12%) 14,349 15,898 (1,549) (10%) EBITDA Margin % (5) 29% 32% 29% 32% The average HUF/EUR exchange rates were 289.42 HUF/EUR in 2012 and 296.92 HUF/EUR in 2013. (1) 2012 figures are proforma giving effect to certain reporting changes (see Appendix). (2) Adjusted operating expenses do not include non-recurring items presented below Adjusted EBITDA. See slide 7. (3) 2013 Government policy impact: utility tax (2,136m HUF), telco tax (1,107m HUF), yellow check recharge ban (556m HUF), bank transaction fees (40m HUF). 2012 Government policy impact: telco tax (476m HUF), yellow check recharge ban (79m HUF). (4) EBITDA and Adjusted EBITDA are non-ifrs financial measures. See the reconciliation to net income on slide 8. (5) EBITDA Margin % and Adjusted EBITDA Margin % are EBITDA and Adjusted EBITDA as a percentage of Revenue.
Non-recurring Items for the year ended December 31, 2013 7 For the year ended December 31, 2012 2013 Restated For the year Change Change ended December 31, Change Change % 2013 2012 Restated % (in millions of HUF) Cost of operational restructuring (1,300) (3,151) 1,851 59% (386) (912) 526 58% Crisis tax - (9,379) 9,379 100% - (2,714) 2,714 100% Management fees 413 (1,030) 1,443 140% 123 (298) 421 141% Strategic projects (1,506) (60) (1,446) (2,410%) (447) (17) (430) (2,529%) Other items (154) (394) 240 61% (46) (115) 69 60% Total non-recurring items (2,547) (14,014) 11,467 82% (756) (4,056) 3,300 81% Cost of operational restructuring is related to reorganizations undertaken by the Group and mainly includes severance expenses. Cost related to the Restructuring are included in the Gain on extinguishment of debt for the year ended December 31, 2013. Crisis tax was introduced by the Hungarian government in 2010 until the end of 2012. Management fees include costs charged by our trustee as well as accrued management fees to Mid Europa. In connection with the Restructuring all accrued Mid Europa management fees, including third and fourth quarter 2012 fees were reversed in Q2 2013. The reversed amount was 1.0 million from which 0.5 million related to 2012. Strategic projects include legal and financial fees of our advisers. For the year ended December 31, 2013 these costs are mainly related to management retention expenses. Other items mainly include non-cash vacation accruals. In addition, other items for the year ended December 31, 2012 include expenses relating to the liquidation of Invitel Holdings A/S and HTCC HoldCo I. B.V., former holding companies of the Group.
EBITDA Reconciliation to Net Income for the year ended December 31, 2013 For the year ended December 31, 2012 2013 Restated For the year Change Change ended December 31, Change Change % 2013 2012 Restated % 8 (in millions of HUF) Proforma EBITDA (1) - 54,932 (54,932) (100%) - 15,898 (15,898) (100%) Proforma EBITDA Margin % (2) - 32% - 32% Proforma adjustmens (3) - 1,539 (1,539) (100%) - 445 (445) (100%) EBITDA (1) 48,325 56,472 (8,147) (14%) 14,349 16,343 (1,994) (12%) EBITDA Margin % (2) 29% 33% 29% 33% Depreciation and amortization (48,608) (83,931) 35,323 42% (14,433) (24,291) 9,858 41% Financing expenses, net (24,886) (36,030) 11,144 31% (7,389) (10,428) 3,039 29% Gain on extinguishment of debt 81,110-81,110 n/a 24,083-24,083 n/a Foreign exchange gains (losses), net 408 (1,797) 2,205 123% 121 (520) 641 123% Gains (losses) on derivatives 575 (1,090) 1,665 153% 171 (315) 486 154% Other financing expenses (85) (4,859) 4,774 98% (25) (1,406) 1,381 98% Taxes on net income (2,871) (3,679) 808 22% (853) (1,065) 212 20% Net profit / (loss) for the period 53,968 (74,914) 128,882 172% 16,024 (21,682) 37,706 174% Headcount 1,173 1,196 (23) (2%) Financing expenses include interest income, interest expense, amortization of bond discount, amortization of deferred borrowing costs and other financial expenses. Gain on extinguishment of debt is in connection with the Refinancing and includes: (i) the gain of EUR 88,563 arising from the notes to equity conversion, (ii) the write-off of accrued interest on the 2009 Notes relating to the period until June 15, 2013 in the amount of EUR 15,625 thousand, reduced by (iii) the write-off of transaction costs and bond discount relating to the 2009 Notes in the amount of EUR 8,907 thousand and (iv) refinancing costs in the amount of EUR 14,171 thousand. Foreign exchange gains (losses) mainly include unrealized losses relating to the revaluation of our EUR denominated assets and liabilities at period end and realized losses on our EUR denominated assets and receivables during the year. Gains (losses) on derivatives include realized losses on deals closed and unrealized gains related to the revaluation of our open positions at period end. Other financing expenses in 2012 relate to the waiving of intercompany receivables and liabilities in connection with the liquidation of HTCC HoldCo I. B.V. and Matel Holdings N.V., former holding companies of Magyar Telecom B.V. Taxes on net income include local business tax. (1) EBITDA and Proforma EBITDA are non-ifrs financial measures. See the reconciliation to net income on slide 8. (2) EBITDA Margin % and Proforma EBITDA Margin % are EBITDA and Proforma EBITDA as a percentage of Revenue. (3) Proforma adjustments are detailed in the Appendix.
Segment Gross Margin for the year ended December 31, 2013 9 For the year For the year ended December 31, Change Change ended December 31, Change Change 2013 2012 (1) % 2013 2012 (1) % (in millions of HUF) Residential Voice In 25,414 28,613 (3,199) (11%) 7,546 8,281 (735) (9%) Residential Voice Out 2,666 4,141 (1,475) (36%) 791 1,198 (407) (34%) Residential Internet & TV 23,612 25,703 (2,091) (8%) 7,011 7,439 (428) (6%) Cable 12,798 12,625 173 1% 3,800 3,654 146 4% Corporate Voice 16,380 17,413 (1,033) (6%) 4,864 5,040 (176) (3%) Corporate Data 27,104 28,023 (919) (3%) 8,048 8,110 (62) (1%) Wholesale 18,684 23,875 (5,191) (22%) 5,548 6,910 (1,362) (20%) Total Segment Gross Margin 126,658 140,393 (13,735) (10%) 37,608 40,632 (3,024) (7%) Residential Voice In: decrease in gross margin is mainly due to lower traffic revenue as a result of a shift towards lower cost minutes as well as lower acquisition ARPUs for new customers. Residential Voice Out: decrease in gross margin is due to a reduction in the number of customers and a reduction in traffic driven in part by very aggressive pricing from competitors. Residential Internet & TV: overall decrease in gross margin is due to decreasing ADSL ARPU, which can not be compensated by an increasing TV customer base. Cable: increase in gross margin is due to the increase in our customer base, higher VOIP and Internet penetration. Corporate Voice: gross margin is mainly impacted by a reduction in the traditional voice business and price erosion due to competition. Corporate Data: decrease in gross margin is mainly due to declining connectivity revenues, offset by growth in the Hosting and IT services business. Wholesale: gross margin is impacted mainly by the decreasing revenue from wholesale small bandwidth leased lines and decreasing data revenue. (1) 2012 figures are proforma giving effect to certain reporting changes (see Appendix).
Capital Expenditure for the year ended December 31, 2013 10 For the year ended December 31, 2012 2013 Restated For the year Change Change ended December 31, Change Change % 2013 2012 Restated % (in millions of HUF) Variable Capex 23,140 21,483 1,657 8% 6,871 6,218 653 11% Network fixed Capex 2,685 2,674 11 0% 797 774 23 3% IT Capex 1,145 1,657 (512) (31%) 340 480 (140) (29%) Facilities & other 56 260 (204) (78%) 17 75 (58) (77%) Capitalised labour 3,142 4,240 (1,098) (26%) 933 1,227 (294) (24%) Fixed Capex 7,028 8,831 (1,803) (20%) 2,087 2,556 (469) (18%) FTTx build (3) 7,166 (7,169) (100%) (1) 2,074 (2,075) (100%) Cable upgrades 101 1,201 (1,100) (92%) 30 348 (318) (91%) Fibernet integration - 210 (210) (100%) - 61 (61) (100%) Trafficom IRU purchase - 451 (451) (100%) - 130 (130) (100%) Project Capex 98 9,028 (8,930) (99%) 29 2,613 (2,584) (99%) Total Capex 30,266 39,342 (9,076) (23%) 8,987 11,387 (2,400) (21%) Capex to Revenue % 18% 23% 18% 23%
Financial Information as of and for the year ended December 31, 2013 11 Financial Information As of and for the year ended December 31, 2013 Balance Sheet Data (at period end): Cash and cash equivalents 21,702 Third party debt (1) 151,552 Other Proforma Financial Data: Adjusted EBITDA (2) 50,872 Net third party debt (3) 129,850 Ratio of Net third party debt to Adjusted EBITDA 2.6x (1) Third party debt as of December 31, 2013 includes long term debt from the 2013 Notes but excludes liabilities relating to finance leases and liabilities relating to derivative financial instruments. (2) See slide 8 for a reconciliation of Adjusted EBITDA to Net Income. (3) Net third party debt equals third party debt less cash and cash equivalents.
Balance Sheet as of December 31, 2013 12 Balance Sheet As of December 31, As of December 31, 2013 2012 Restated Non-Current Assets Intangible Assets 26,386 29,277 Property, Plant and Equipment 215,285 235,903 Other Non-Current Assets 90 91 241,761 265,271 Current Assets Cash and Cash Equivalents 21,702 13,928 Trade and Other Receivables 25,936 32,034 Other Current Assets 1,122 2,760 48,760 48,722 Total Assets 290,521 313,993 Equity Share Capital 297,148 92,201 Reserves 137,848 242,993 Cumulative Translation Reserve (70,829) (65,877) Accumulated Losses (280,462) (334,426) Non-Controlling Interest 15 11 83,720 (65,098) Non-Current Liabilities Borrowings 151,552 317,246 Other Non-Current Liabilities 11,126 13,101 162,678 330,347 Current Liabilities Trade and Other Payables 23,506 25,786 Other Current Liabilities 20,617 22,958 44,123 48,744 Total Equity and Liabilities 290,521 313,993
Cash Flow Statement for the year ended December 31, 2013 13 Cash Flow Statement For the year ended December 31, 2012 2013 Restated Net cash provided by operating activities excluding interest paid 47,681 50,999 Purchase of property, plant and equipment and intangible assets (32,020) (41,105) Proceeds from sale of property, plant and equipment and intangible assets 1,377 3,680 Net cash used in investing activities (30,643) (37,425) Cash flow available for debt service 17,038 13,574 Proceeds from issuance of Sponsor debt 10,000 - Sponsor paid-in capital 15,000 - Refinancing costs (14,171) - Repurchase of 2013 Notes (14,949) - Interest paid (5,733) (33,744) Settlement of derivative financial instruments 192 (1,515) Net cash used in financing activities (9,661) (35,259) Effect of exchange rate changes on cash and cash equivalents 397 (63) Cash flow after debt service 7,774 (21,748) Cash and cash equivalents at beginning of year 13,928 35,676 Cash and cash equivalents at end of year 21,702 13,928 Net increase / (decrease) in cash and cash equivalents 7,774 (21,748)
Financial Information for the period ended March 31, 2014 14 For the period For the period ended March 31, Change Change ended March 31, Change Change 2014 2013 % 2014 2013 % (in millions of HUF) Revenue 36,963 39,714 (2,751) (7%) 11,381 11,772 (391) (3%) Segment Cost of Sales (7,654) (8,218) 565 7% (2,357) (2,436) 80 3% Segment Gross Margin 29,309 31,496 (2,187) (7%) 9,024 9,336 (312) (3%) Gross Margin % 79% 79% 79% 79% Adjusted Operating Expenses (1) (21,893) (24,130) 2,238 9% (6,741) (7,153) 412 6% ex Government Policy (2) (13,676) (15,643) 1,967 13% (4,211) (4,637) 426 9% Adjusted EBITDA (3) 7,416 7,365 51 1% 2,283 2,183 100 5% Adjusted EBITDA Margin % (4) 20% 19% 20% 19% Adjusted EBITDA Margin % ex Policy 42% 40% 42% 40% Non-recurring Items (1,335) (2,382) 1,046 44% (411) (706) 295 42% EBITDA (3) 6,081 4,984 1,097 22% 1,872 1,477 395 27% EBITDA Margin % (4) 16% 13% 16% 13% The average HUF/EUR exchange rates were 296.42 HUF/EUR in YTD Q1 2013 and 307.90 HUF/EUR in YTD Q1 2014. (1) Adjusted operating expenses do not include non-recurring items presented below Adjusted EBITDA. See slide 15. (2) 2013 Government policy impact: telco tax (272 mhuf), yellow check recharge ban (138 mhuf), utility tax (2,106 mhuf). 2014 Government policy impact: telco tax (300 mhuf), yellow check recharge ban (146 mhuf), utility tax (2,084 mhuf). (3) EBITDA and Adjusted EBITDA are non-ifrs financial measures. See the reconciliation on slide 16. (4) EBITDA Margin % and Adjusted EBITDA Margin % are EBITDA and Adjusted EBITDA as a percentage of Revenue.
Non-recurring Items for the period ended March 31, 2014 15 For the period For the period ended March 31, Change Change ended March 31, Change Change 2014 2013 % 2014 2013 % (in millions of HUF) Cost of operational restructuring (139) (238) 99 42% (43) (71) 28 39% Management fees (9) (277) 268 97% (3) (82) 79 96% Strategic projects (624) (1,249) 625 50% (192) (370) 178 48% Other items (563) (570) 7 1% (173) (169) (4) (2%) Total non-recurring items (1,335) (2,334) 999 43% (411) (692) 281 41% Cost of operational restructuring is related to reorganizations undertaken by the Group and mainly includes severance expenses. Management fees include costs charged by our trustee as well as accrued management fees to Mid Europa. In connection with the Restructuring all accrued Mid Europa management fees, including third and fourth quarter 2012 fees have been reversed in Q2 2013. The reversed amount was 1.0 million from which 0.5 million related to 2012. Strategic projects mainly include non-recurring financial and legal consulting expenses. In 2013 it mainly includes management retention expenses. Other items mainly include non-cash vacation accrual.
EBITDA Reconciliation to Net Income for the period ended March 31, 2014 16 For the period For the period ended March 31, Change Change ended March 31, Change Change 2014 2013 % 2014 2013 % (in millions of HUF) EBITDA (1) 6,081 4,984 1,097 22% 1,872 1,477 395 27% EBITDA Margin % (2) 16% 13% 16% 13% Depreciation and amortization (10,584) (11,694) 1,109 9% (3,259) (3,466) 207 6% Financing expenses, net (3,512) (8,641) 5,129 59% (1,081) (2,562) 1,480 58% Foreign exchange gains (losses), net (434) 40 (474) n/a (134) 12 (146) n/a Gains (losses) on derivatives (80) (261) 182 69% (25) (77) 53 68% Taxes on net income (646) (631) (15) (2%) (199) (187) (12) (6%) Net profit / (loss) for the period (9,175) (16,203) 7,028 43% (2,825) (4,803) 1,978 41% Headcount 1,182 1,171 11 1% The decrease in financing expenses, net is mainly due to the decrease in third party interest expense paid on the 2013 Notes after the Restructuring. Foreign exchange gains (losses), net mainly include unrealized losses relating to the revaluation of our EUR denominated assets and liabilities at period end and realized losses on our EUR denominated assets and receivables during the period. Gains (losses) on derivatives include unrealized losses related to the mark-to-market revaluation of our open positions at period end. Taxes on net income include local business tax. (1) EBITDA is a non-ifrs financial measure. (2) EBITDA Margin % is EBITDA as a percentage of Revenue.
Segment Gross Margin for the period ended March 31, 2014 17 For the period ended March 31, Change Change For the period ended March 31, Change Change 2014 2013 % 2014 2013 % (in millions of HUF) Residential Voice In 5,612 6,652 (1,040) (16%) 1,728 1,972 (244) (12%) Residential Voice Out 503 750 (248) (33%) 155 222 (68) (30%) Residential Internet & TV 5,721 5,806 (85) (1%) 1,761 1,721 41 2% Cable 3,237 3,042 194 6% 997 902 95 11% Corporate Voice 3,626 4,137 (512) (12%) 1,116 1,226 (110) (9%) Corporate Data 6,900 6,728 172 3% 2,125 1,994 130 7% Wholesale 3,711 4,380 (669) (15%) 1,143 1,298 (156) (12%) Total Segment Gross Margin 29,309 31,496 (2,187) (7%) 9,024 9,336 (312) (3%) Residential Voice In: decrease in gross margin is mainly due to lower acquisition ARPUs for new customers. Residential Voice Out: decrease in gross margin is due to a reduction in the number of customers and a reduction in traffic driven in part by very aggressive pricing from competitors. Residential Internet & TV: in HUF terms gross margin has increased is due to our growing TV customer base. Cable: remains stable with increase in gross margin year-on-year as a result of increasing customer base. Corporate Voice: gross margin is mainly impacted by a reduction in the traditional voice business and price erosion due to competition on contract renewals. Corporate Data: increase in gross margin is driven by our ICT business. Wholesale: gross margin is impacted mainly by the decreasing revenue from wholesale small bandwidth leased lines and decreasing data revenue.
Capital Expenditure for the period ended March 31, 2014 18 For the period For the period ended March 31, Change Change ended March 31, Change Change 2014 2013 % 2014 2013 % (in millions of HUF) Variable Capex 4,016 4,751 (735) (15%) 1,236 1,408 (172) (12%) Network fixed Capex 583 225 358 159% 180 66 114 173% IT Capex 37 145 (108) (74%) 11 43 (32) (74%) Facilities & other 13-13 n/a 4-4 n/a Capitalised labour 826 849 (23) (3%) 254 252 2 1% Fixed Capex 1,459 1,219 240 20% 449 361 88 24% Project Capex - 9 (9) (100%) - 3 (3) (100%) Total Capex 5,475 5,979 (504) (8%) 1,685 1,772 (87) (5%) Capex to Revenue % 15% 15% 15% 15%
Cash Flow Statement for the period ended March 31, 2014 19 Cash Flow Statement For the period ended March 31, 2014 2013 Net cash provided by operating activities excluding interest paid 5,991 9,793 Purchase of property, plant and equipment and intangible assets (8,999) (10,488) Proceeds from sale of property, plant and equipment and intangible assets 665 107 Net cash used in investing activities (8,334) (10,381) Cash flow available for debt service (2,343) (588) Interest paid (119) (124) Net cash used in financing activities (119) (124) Effect of exchange rate changes on cash and cash equivalents 397 380 Cash flow after debt service (2,065) (332) Cash and cash equivalents at beginning of period 21,702 13,928 Cash and cash equivalents at end of period 19,637 13,596 Net increase / (decrease) in cash and cash equivalents (2,065) (332)
Appendix 20
Proforma Adjustments to 2012 21 2012 as reported Restatements 2012 Restated Proforma Adjustments 2012 Proforma 2012 Q1 Proforma 2012 Q2 Proforma 2012 Q3 Proforma 2012 Q4 Proforma Revenue 173,493-173,493 682 174,175 42,810 42,369 42,745 46,251 Segment Cost of Sales (31,056) -1,207 (32,263) -1,519 (33,782) (8,142) (7,878) (7,872) (9,891) Segment Gross Margin 142,437-1,207 141,230-837 140,393 34,668 34,491 34,874 36,361 Gross Margin % 82% 81% 81% 81% 81% 82% 79% Adjusted Operating Expenses (70,470) -275 (70,745) -702 (71,447) (16,505) (17,181) (18,690) (19,072) Adjusted EBITDA 71,967-1,482 70,485-1,539 68,946 18,163 17,310 16,184 17,289 Adjusted EBITDA Margin % 41% 41% 40% 42% 41% 38% 37% Capex 42,364 275 42,639-3,296 39,343 7,787 10,626 10,561 10,369 Capex to Revenue % 24% 25% 23% 18% 25% 25% 22% Restatements: (1) Corporate sales commissions relating to portfolio value management, not new customer acquisitions driven (decrease Capex, increase cost of sales: 1,207 keur) due to accounting policy change (2) Certain IT support fees are recorded as IT costs in operating expense for support fees, rather than Capex (decrease Capex, increase Opex: 275 keur) due to correction of prior year error Proforma adjustments: (1) Network maintenance expense are recorded as network operating expense for quality improvement, rather than Capex (decrease Capex, increase Opex: 1,815 keur) (2) ICT services delivery costs are recorded as cost of sales and not operating expense (increase cost of sales, decrease Opex: 1,296 keur) (3) IT services to Pantel International is treated as revenue not as an offset to IT operating expenses (increase revenue, increase Opex: 459 keur)
Appendix 22 Non-IFRS Financial Measures Magyar Telecom B.V. has included certain non-ifrs financial measures in this presentation, including EBITDA and Adjusted EBITDA. Reconciliations of the differences between EBITDA and Adjusted EBITDA and the most directly comparable financial measure calculated and presented in accordance with IFRS is included in this presentation. The non-ifrs financial measures presented are by definition not a measure of financial performance or financial condition under IFRS and are not alternatives to operating income or net income/loss reflected in the income statement and statement of comprehensive income (loss) and are not necessarily indicative of cash available to fund all cash flow needs. These non-ifrs financial measures used may not be comparable to similarly titled measures of other companies. Management uses these non-ifrs financial measures for various purposes including: measuring and evaluating the Company s financial and operational performance and its financial condition; making compensation decisions; planning and budgeting decisions; and financial planning purposes. Magyar Telecom B.V. believes that presentation of these non-ifrs financial measures is useful to investors because it (i) reflects management s view of core operations and cash flow generation and financial condition upon which management bases financial, operational, compensation and planning decisions and (ii) presents a measurement that equity and debt investors and lending banks have indicated to management is important in assessing the Company's financial performance and financial condition. While Magyar Telecom B.V. utilizes these non-ifrs financial measures in managing its business and believes that they are useful to management and to investors for the reasons described above, these non-ifrs financial measures have certain shortcomings. In particular, these EBITDA and Adjusted EBITDA measurements do not take into account changes in working capital and financial statement items below income from operations, and the resultant effect of these items on the Company s cash flows. Management compensates for the shortcomings of these measures by utilizing them in conjunction with their comparable IFRS financial measures. The information in this presentation should be read in conjunction with the financial statements and footnotes contained in the Company's financial reports.