Invitel Holdings A/S (NYSE Amex U.S.: IHO) announced today its
financial results for the quarter and nine months ended September
30, 2009.
The results for the quarter and nine months (as successor) ended
September 30, 2009 reflect the results of Invitel Holdings A/S and
its subsidiaries. The results for the quarter and nine months ended
September 30, 2008 are the results of Invitel Holdings’
predecessor, Hungarian Telephone and Cable Corp.
The reporting currency has changed from U.S. dollars to euro.
Following the reorganization as a Danish company in February 2009,
Invitel Holdings, as a foreign registrant with the SEC, is
permitted to report its results in euro. Reporting results in euro
is more relevant given that the primary markets of Invitel
Holdings’ businesses are in Europe and its debt is primarily euro
denominated.
THIRD QUARTER 2009 RESULTS
Please note that when comparing the financial results for the
quarter ended September 30, 2009 to the financial results for the
quarter ended September 30, 2008, the reported results in euros
have been affected by the difference between the average EUR/HUF
exchange rates. The Hungarian forint (“HUF”) depreciated against
the euro (“EUR”) by 15% with an average EUR/HUF exchange rate of
271.36 during the quarter ended September 30, 2009 compared to the
average EUR/HUF exchange rate of 236.11 during the quarter ended
September 30, 2008. This change in exchange rates had a negative
impact on our Hungarian forint denominated earnings when converted
into euro.
Invitel Holdings’ revenue was EUR 80.7 million for the quarter
ended September 30, 2009, which represents a 21% decrease compared
to the quarter ended September 30, 2008. Segment gross margin
decreased by 16% from EUR 72.8 million for the quarter ended
September 30, 2008 to EUR 60.8 million for the quarter ended
September 30, 2009. Segment selling, general and administrative
expenses decreased by 26% from EUR 31.3 million for the quarter
ended September 30, 2008 to EUR 23.3 million for the quarter ended
September 30, 2009. Income from operations decreased slightly by 2%
to EUR 18.5 million for the quarter ended September 30, 2009
Invitel Holdings’ net loss attributable to ordinary shareholders
for the quarter ended September 30, 2009 was EUR 0.7 million, or
EUR 0.04 per ordinary share, compared to a net loss attributable to
common shareholders of EUR 13.4 million, or EUR 0.82 per common
share for the quarter ended September 30, 2008.
This decrease in net loss was principally due to EUR 1.9 million
of foreign exchange gains recorded during the quarter ended
September 30, 2009 while EUR 7.4 million of foreign exchange losses
were recorded in the third quarter of 2008, and a decrease in
income tax expense of EUR 12.3 million offset by an increase in
loss on derivatives of EUR 10.0 million.
Mass Market Voice – Invitel Holdings’ Mass Market Voice segment
gross margin was EUR 16.2 million for the quarter ended September
30, 2009, representing a decrease of 27% compared to the quarter
ended September 30, 2008. The decrease was mainly due to the
devaluation of the Hungarian forint against the euro and a 7%
decrease in the number of subscribers inside the historical
concession areas, as well as a 27% decrease in the number of low
margin carrier select customers outside the historical concession
areas. In functional currency terms, Mass Market Voice segment
gross margin decreased by 16%.
Mass Market Internet – Invitel Holdings’ Mass Market Internet
segment gross margin was EUR 6.8 million for the quarter ended
September 30, 2009, representing a decrease of 17% compared to the
quarter ended September 30, 2008. The decrease was primarily due to
the devaluation of the Hungarian forint against the euro during the
period. In functional currency terms, Mass Market Internet segment
gross margin for the quarter ended September 30, 2009 decreased by
5%, which was due to the overall slow down of subscriber growth in
the fixed line broadband market.
Business – Invitel Holdings’ Business segment gross margin was
EUR 16.4 million for the quarter ended September 30, 2009,
representing a decrease of 21% compared to the quarter ended
September 30, 2008. The decrease was principally attributable to
the devaluation of the Hungarian forint against the euro and the
renegotiation and retention of a certain major contract. In
functional currency terms, Business segment gross margin decreased
by 9%.
Wholesale – Invitel Holdings’ Wholesale segment gross margin was
EUR 21.4 million for the quarter ended September 30, 2009,
representing a decrease of 1% compared to the quarter ended
September 30, 2008. This segment was not as affected by the
exchange rate fluctuations between the Hungarian forint and the
euro since most of the Wholesale business is in euro.
Segment gross margin is a non-GAAP financial measure, which is
used by management to evaluate the performance of the business
segments. The following table represents the reconciliation of
segment gross margin to income from operations:
Three Months Ended September 30, (euros
in millions)
2009 2008 Mass Market
Voice 16.2 22.3 Business 16.4 20.7 Mass Market Internet 6.8 8.2
Wholesale 21.4 21.6 Segment Gross Margin 60.8 72.8
Backbone rental expenses (3.3 ) (4.2 ) Network operating expenses
(4.8 ) (4.3 ) Direct personnel expenses (3.3 ) (3.7 ) Selling,
general and administrative (11.8 ) (19.1 ) Depreciation and
amortization (19.1 ) (22.7 ) Income from operations 18.5 18.8
Invitel Holdings’ net cash provided by operations, which
includes interest paid but excludes capital expenditure and debt
repayments, was EUR 25.1 million for the quarter ended September
30, 2009.
RESULTS FOR NINE MONTHS
The results for the nine months ended September 30, 2009 reflect
the inclusion of the results attributable to the Memorex
acquisition for the full nine months compared to the nine months
ended September 30, 2008, which only included the results from the
Memorex acquisition for seven months.
Please note that when comparing the financial results for the
nine months ended September 30, 2009 to the financial results for
the nine months ended September 30, 2008, the reported results in
euro have been affected by the difference between the average
EUR/HUF exchange rates. The Hungarian forint depreciated against
the euro by 15% with an average EUR/HUF exchange rate of 283.82
during the nine months ended September 30, 2009 compared to the
average EUR/HUF exchange rate of 247.69 during the nine months
ended September 30, 2008. This change in exchange rates had an
impact on Hungarian forint denominated earnings when converted into
euro.
Invitel Holdings’ revenue was EUR 242.7 million for the nine
months ended September 30, 2009, which represents a 15% decrease
compared to the nine months ended September 30, 2008. Segment gross
margin decreased by 10% from EUR 201.9 million for the nine months
ended September 30, 2008 to EUR 181.9 million for the nine months
ended September 30, 2009. Segment selling, general and
administrative expenses decreased by 14% from EUR 93.2 million for
the nine months ended September 30, 2008 to EUR 80.1 million for
the nine months ended September 30, 2009. Income from operations
decreased by 2% compared to the nine months ended September 30,
2008 and was EUR 46.5 million for the nine months ended September
30, 2009. Invitel Holdings’ net loss attributable to ordinary
shareholders for the nine months ended September 30, 2009 was EUR
41.6 million, or EUR 2.50 per ordinary share, compared to a net
loss attributable to common shareholders of EUR 28.9 million, or
EUR 1.76 per common share for the nine months ended September 30,
2008. This increase in net loss was principally due to foreign
exchange losses of EUR 14.3 million during the nine months ended
September 30, 2009 compared to foreign exchange gains of EUR 14.9
million during the nine months ended September 30, 2008, and an
increase in interest expense of EUR 7.5 million. These changes
being offset by a decrease in loss on derivatives of EUR 6.4
million and a decrease in income tax expense of EUR 17.6
million.
Mass Market Voice – Invitel Holdings’ Mass Market Voice segment
gross margin was EUR 48.4 million for the nine months ended
September 30, 2009, representing a decrease of 27% compared to the
nine months ended September 30, 2008. The decrease was mainly due
to the devaluation of the Hungarian forint against the euro and a
7% decrease in the number of subscribers inside the historical
concession areas, as well as a 27% decrease in the number of low
margin carrier select customers outside the historical concession
areas. In functional currency terms, Mass Market Voice segment
gross margin decreased by 16%.
Mass Market Internet – Invitel Holdings’ Mass Market Internet
segment gross margin was EUR 20.0 million for the nine months ended
September 30, 2009, representing a decrease of 15% compared to the
nine months ended September 30, 2008. The decrease was primarily
due to the devaluation of the Hungarian forint against the euro
during the period. In functional currency terms, Mass Market
Internet segment gross margin for the nine months ended September
30, 2009 decreased by 2%. The lower growth reflects the overall
slow down in the fixed line broadband market.
Business – Invitel Holdings’ Business segment gross margin was
EUR 47.7 million for the nine months ended September 30, 2009,
representing a decrease of 19% compared to the nine months ended
September 30, 2008. The decrease was attributable to the
devaluation of the Hungarian forint against the euro and the
renegotiation and retention of a certain major contract. In
functional currency terms, Business segment gross margin decreased
by 7%.
Wholesale – Invitel Holdings’ Wholesale segment gross margin was
EUR 65.8 million for the nine months ended September 30, 2009,
representing an increase of 23% compared to the nine months ended
September 30, 2008. The increase was primarily due to the inclusion
of the operations attributable to the Memorex Acquisition, which
had an impact of EUR 10.3 million. This segment was not as affected
by the exchange rate fluctuations between the Hungarian forint and
the euro since most of the Wholesale business is in euro.
Segment gross margin is a non-GAAP financial measure, which is
used by management to evaluate the performance of the business
segments. The following table represents the reconciliation of
segment gross margin to income from operations:
Nine Months Ended September 30, (euros
in millions)
2009 2008 Mass Market
Voice 48.4 66.4 Business 47.7 58.6 Mass Market Internet 20.0 23.5
Wholesale 65.8 53.4 Segment Gross Margin 181.9 201.9
Backbone rental expenses (10.1 ) (11.2 ) Network operating expenses
(13.3 ) (12.5 ) Direct personnel expenses (9.9 ) (10.3 ) Selling,
general and administrative (46.8 ) (59.2 ) Depreciation and
amortization (55.3 ) (61.1 ) Income from operations 46.5 47.6
Invitel Holdings’ net cash provided by operations, which
includes interest paid but excludes capital expenditure and debt
repayments, was EUR 57.1 million for the nine months ended
September 30, 2009.
COMMENTS FROM MARTIN LEA
Commenting on the financial results, Invitel Holdings’ President
and CEO Martin Lea said, “We continue to face challenging
conditions in our Hungarian domestic market as a result of the
macroeconomic conditions highlighted by a year on year reduction in
GDP of (7.2%) in the third quarter and unemployment rising to
10.4%. This, in particular, is impacting our Mass Market business.
We are experiencing a higher rate of reduction in our Mass Market
Voice revenue, and we have also seen virtually all the growth go
out of the fixed line broadband market in Hungary. We are, however,
pleased to note that although the overall fixed line broadband
market has stopped growing, as a result of the recession, we at
Invitel are continuing to grow our subscriber base. The Business
segment has also clearly been impacted by the recession, however
notwithstanding that, we are very encouraged that we have been able
to maintain consistent gross margin from this activity over the
course of the year and that we continue to increase our market
share. We are also pleased with the increasing demand for our
outsourced server hosting services. Our international Wholesale
business has continued to perform well in large part driven by the
continuing increase in demand for capacity across the region.
Management continues to focus on managing our operating costs base
and capital expenditures during this more challenging trading
period and this is reflected in the significant year on year
reduction in capital expenditure as well as the reduction in
operating expenses, contributing to stability in our overall income
from operations. Even though the conditions are tough, we believe
that the company is performing well relative to the market, and is
well positioned to take advantage of the enhanced growth
opportunities once we start to see economic recovery.”
CONFERENCE CALL
On November 30, 2009 (at 14:00 UK time, 15:00 CET, 9:00 AM ET)
the CEO and CFO of Invitel Holdings will host a conference call to
discuss Invitel Holdings’ third quarter and nine months 2009
financial results. You can participate in the conference call by
dialling 800-224-62666 (UK toll free), +1-201-689-8567
(International) or +1-877-407-0782 (U.S. toll free) and referencing
“Invitel Holdings”.
A webcast of the call and the presentation materials will be
available on the Invitel Holdings web site at www.invitel.hu under
“Investor Relations”. The webcast will be archived for 30 days.
In addition, a replay of the call will be available two hours
after the call has ended and through December 14, 2009. To access
the replay of the call, please dial +1-877-660-6853 (U.S. toll
free) or internationally dial +1-201-612-7415 and enter the account
(286) followed by the replay access code (338575).
A copy of the presentation materials will also be filed with the
U.S. Securities and Exchange Commission prior to the call.
ABOUT INVITEL HOLDINGS A/S
Invitel Holdings A/S is the number one alternative and the
third-largest fixed line telecommunications and broadband Internet
Services Provider in the Republic of Hungary. In addition to
delivering voice, data and Internet services in Hungary, it is also
a leading player in the Central and Eastern European wholesale
telecommunications market.
Forward-Looking Statements
The information above includes forward-looking statements about
Invitel Holdings and its subsidiaries. These and all
forward-looking statements are only predictions of current plans
that are constantly under review by Invitel Holdings. Such
statements are qualified by important factors that may cause actual
results to differ from those contemplated, including those risk
factors detailed from time to time in Invitel Holdings Securities
and Exchange Commission (“SEC”) filings, which may not be
exhaustive. For a discussion of such risk factors, see Invitel
Holdings filings with the SEC including, but not limited to, its
2008 Annual Report on Form 20-F. Invitel Holdings operates in a
continually changing business environment, and new risk factors
emerge from time to time. Invitel Holdings cannot predict such new
risk factors, nor can it assess the impact, if any, of such new
risk factors on its business or events described in any
forward-looking statements. Invitel Holdings has no obligation to
publicly update or revise any forward-looking statements to reflect
the occurrence of future events or circumstances.
Invitel Holdings
A/SFinancial Highlights(in millions of euro, except per
share data)
Statements of
Operations
Nine Months EndedSeptember 30,
2009(unaudited)
Nine Months EndedSeptember 30,
2008(unaudited)
Mass Market Voice 58.3 83.8 Business 61.8 76.8 Mass Market
Internet 24.5 28.4 Wholesale 98.1 95.4 Total Revenue 242.7 284.4
Segment Cost of Sales (60.9 ) (82.4 ) Income (loss)
from Operations 46.5 47.6 Interest Expense (65.2 ) (57.7 )
Foreign exchange gains (losses), net (14.3 ) 14.9
Gains (losses) on derivative financial instruments (14.2 ) (20.6 )
Net income (loss) attributable to shareholders (41.6 ) (28.9
) Net income (loss) per share (2.50 ) (1.76 )
Invitel Holdings
A/SFinancial Highlights(in millions of euro, except per
share data)
Statements of
Operations
Three Months EndedSeptember 30,
2009(unaudited)
Three Months EndedSeptember 30,
2008(unaudited)
Mass Market Voice 19.4 27.8 Business 21.2 26.9 Mass Market
Internet 8.3 10.0 Wholesale 31.8 37.1 Total Revenue 80.7 101.8
Segment Cost of Sales (19.9 ) (28.9 ) Income (loss)
from Operations 18.5 18.8 Interest Expense (18.2 ) (19.8 )
Foreign exchange gains (losses), net 1.9 (7.4 ) Gains
(losses) on derivative financial instruments (6.0 ) 4.0 Net
income (loss) attributable to shareholders (0.7 ) (13.4 )
Net income (loss) per share (0.04 ) (0.82 )
Invitel Holdings
A/SFinancial Highlights(in millions of EUR, except per
share data)
Balance Sheets
September 30, December 31, 2009 2008
(unaudited) Current Assets 82.6 100.3 Property, Plant and
Equipment, net 523.9 547.7 Total Assets 827.2 890.6 Total
Current Liabilities 159.6 181.2 Long Term Debt 678.7 665.3 Total
Shareholders Equity (84.6 ) (39.7 ) Total Liabilities and
Shareholders Equity 827.2 890.6
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