Saudi Telecom Co. — Interim / Quarterly Report 2014

Jan 19, 2015

Saudi Telecom announces the interim consolidated financial results for the period ending on 31-12-2014 (Twelve Months)

7010 · 19/01/2015 16:33:20 · Announcement #36752 · View on Saudi Exchange

Saudi Telecom announces the interim consolidated financial results for the period ending on 31-12-2014 (Twelve Months)

Element	Current quarter	Similar quarter for previous year	% Change current	Previous quarter	% Change previous
Net profit (loss)	2,442	3,623	-	3,372	-
Gross profit (loss)	7,301	6,992	4.42	7,621	-
Operational profit (loss)	2,384	2,852	-	3,540	-
All figures are in (Millions) Saudi Arabia, Riyals

Element	Current period	Similar period for previous year	% Change
Net profit (loss)	11,008	9,897	11.23
Gross profit (loss)	28,156	27,413	2.71
Operational profit (loss)	11,551	10,989	5.11
Earning or loss per share, Riyals	5.5	4.95	-
All figures are in (Millions) Saudi Arabia, Riyals

Element	EXPLAINATION
Reasons of increase (decrease) for quarter compared with same quarter last year	The net profit for the 4th quarter decreased SR 1,180m (32.6%) compared to the comparable quarter in the previous year, despite the SR 309m increase in gross profit (4.4%) compared to the comparable period in the previous year, is attributed to the following: (1) The SR 776m increase in operating expenses (19%) during the 4th quarter compared to the comparable quarter in the previous year, mainly due to the following: - The booking of a one-time, non-recurring and non-cash charge of SR 399 million provisions from impairment related to STC investments in Oger tel ltd. Resulting from Cell C (one of Oger tel ltd. Subsidiaries). - The SR 164m (10%) increase in depreciation and amortization during the 4th quarter compared to the same period last year. - The SR 161m (19.5%) increase in general & administrative expenses during the 4th quarter compared to the same period last year. (2) During the 4th quarter, and despite the booking of SR 595m gains resulting from the compensation for the company land and buildings erected thereon which is located in Al Faisaliah area in Riyadh, (Other income and expenses, net) decreased by SR 645m (66%) compared to the same period last year, and the main reason is attributed to the booking of SR 164m (Losses from investments accounted for under equity method) compared to Gains of SR 754m in the comparable period last year as a result of STC group not consolidating its investment in Aircel Group using the equity method effective from the second quarter 2013, Which resulted in STC group reversing its share of losses from Aircel Group for the period from 1 April 2013 to 30 September 2013 amounting to SR 795m during the 4th quarter 2013. (3) The SR 110m (178%) increase in the provision for Zakat & Tax during the 4th quarter compared to the same period last year.
Reasons of increase (decrease) for period compared with same period last year	The Net Profit for the 12 months period increased by SR 1,111 (11.2%) compared to the previous year, this increase is attributed to the following: (1) The SR 743m increase in gross profit (2.7%) compared to the previous year, as a result to the 1% increase in revenues from services and the 1.3% decrease in cost of services compared to the previous year. (2) The SR 180m increase in operating expenses (1%) during the 12 months period compared to the previous year, the details as follow: - The decrease in selling & marketing expenses during the year by SR 164m (2.7%) compared to the previous year. - The increase in general & administrative expenses during the year by SR 398m (13.6%) compared to last year. - The increase in depreciation and amortization during year by SR 652m (10%) compared to last year. - The booking of a one-time, non-recurring and non-cash charge of SR 399 million provisions from impairment related to STC investments in Oger tel ltd. Resulting from Cell C (one of Oger tel ltd. Subsidiaries). The comparable numbers for the 12 months period of 2013 includes, a non-cash, non-recurring charge of SR 1,104m resulting from fair valuation of STC investments in Asia - Aircel of SR 500m and the reclassification of Axis as assets held for sale during Q2, 2013, the group re-measured the net assets related to the investment at fair value. In Q2 2013, we had booked a non-cash charge of SR 604m from losses resulting from assets held for sale related to Axis, Indonesia (3) The SR 1,210m increase in (Other income and expenses, net) compared to the previous year, and the main reasons are attributed to: - The SR 682m (73%) decrease in (Losses from investments accounted for under equity method) compared to the previous year, as a result of STC group not consolidating its investment in Aircel Group using the equity method effective from the second quarter 2013, Which resulted in STC group reversing its share of losses from Aircel Group for the period from 1 April 2013 to 30 September 2013 amounting to SR 795m during the 4th quarter 2013. - The booking of SR 595m gains resulting from the compensation for the company land and buildings erected thereon which is located in Al Faisaliah area in Riyadh, which was booked during the 4th quarter. (4) The SR 545m increase in the provision for Zakat & Tax during the year compared to the previous year.
Reasons of increase (decrease) for quarter compared with previous quarter	The Net Profit for the 4th quarter decreased by SR 929m (27.6%) compared to the immediate prior quarter due to: (1) During the 4th quarter, and despite the SR 94m (1%) increase in revenues compared to the immediate prior quarter, gross profit decreased SR 320m (4%) compared to the previous quarter. This is attributed mainly to the SR 414m (10%) increase in cost of services compared to the immediate prior quarter. (2) The SR 836m increase in operating expenses (20.5%) during the 4th quarter compared to the previous quarter, mainly due to the following: - The booking of a one-time, non-recurring and non-cash charge of SR 399 million provisions from impairment related to STC investments in Oger tel ltd. Resulting from Cell C (one of Oger tel ltd. Subsidiaries). - The increase in selling & marketing expenses during the 4th quarter by SR 276m (19%) compared to the previous quarter. - The increase in general & administrative expenses during the 4th quarter by SR 214m (28%) compared to the previous quarter. (3) During the 4th quarter, and despite the booking of SR 595m gains resulting from the compensation for the company land and buildings erected thereon which is located in Al Faisaliah area in Riyadh, (Other income and expenses, net) increased only by SR 191m compared to the previous quarter, and the main reason is attributed to the increase of SR 137m in (Losses from investments accounted for under equity method) compared to the previous quarter. (4) The SR 35m decrease in the provision for Zakat & Tax during the 4th quarter compared to the previous quarter.
Reclassifications in quarterly financial results	Certain comparatives figures for the period ending at 31 December 2013 have been reclassified to conform with the presentation used for the period ending at 31 December 2014.
Other notes	Revenue from services for the 4th quarter amounted to SR 11,848 million compared to SR 11,268 million for the corresponding period last year, an increase of 5.2 %, and for the 12 months revenues amounted to SR 46,108 million compared to SR 45,605 million compared to the previous year, an increase of 1.1 %. Earnings before interest, taxes, zakat, depreciation and amortization (EBITDA) for the 4th quarter amounted to SR 4,201 million compared to SR 4,505 million for the corresponding quarter last year, a decrease of 6.7%, and for the 12 months EBITDA amounted to SR 18,581 million compared to SR 17,367 million for the corresponding period last year, an increase of 7%. Commenting on the results, STC Group chairman and managing director, Mr. Abdulaziz Alsugair, stated: (The financial results for the full year 2014 were good, as net profit increased 11.2% compared to the previous year. These financial results achieved reflects the efforts being made to constantly evolve, improve and develop the company strategy and operations both domestically and internationally. The company will continue to maintain an acute focus on reinforcing our presence in our home market. We will continue with our ongoing efforts to remain customer-centric, which is clearly delivering results. This is a position we intend to maintain, by striving to lead through investing in technology and innovative solutions across fixed, mobile and data products, and exceed our customers expectations. At the same time, we continue to rationalize STC international portfolio, and evaluate options for some of these investments in order to take appropriate actions in the best interest of the shareholders.) With regards to international operations, the 12 months period witnessed revenue growth of 17% in the controlled international subsidiaries compared to same period last year. This is mainly attributed to the continuous growth in subsidiaries customer base and market shares during 2014. Domestically, STC continues with the introduction of innovative services and customized offers with the appropriate smart phones that encourages mobile usage for both post-paid and pre-paid (SAWA) customers. As a result, wireless broadband customers increased 6% during the 4th quarter compared to same period last year. Also, The 4th quarter witnessed continuous growth in data traffic over the 4G network. This is mainly attributed to the company continuous deployment of the 4G network and the availability of the smart phones that support 4G technology. STC continues with the deployment of the fiber optic network for both business and residential. Fixed broadband revenues increased 2% during the 4th quarter compared to the same period last year. This is attributed mainly to the (FTTH) customers base increase of 2% during the 4th quarter compared to the same period last year. Enterprise business unit overall revenues increased 12% during the 12 months period compared to the previous year, driven mainly by the 26% increase in Business sector data services revenues, and 3% increase in the fixed line revenues compared to the previous year.

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