Saudi Telecom Co. — Interim / Quarterly Report 2016

Jul 26, 2016

Saudi Telecom Co. announces the interim consolidated financial results for the period ending on 30-06-2016 (Six Months)

7010 · 26/07/2016 15:46:27 · Announcement #43309 · View on Saudi Exchange

Saudi Telecom Co. announces the interim consolidated financial results for the period ending on 30-06-2016 (Six Months)

Element	Current quarter	Similar quarter for previous year	% Change current	Previous quarter	% Change previous
Net profit (loss)	1,865	2,558	-	2,375	-
Gross profit (loss)	7,360	7,164	2.74	7,221	1.92
Operational profit (loss)	2,597	2,963	-	3,004	-
All figures are in (Millions) Saudi Arabia, Riyals

Element	Current period	Similar period for previous year	% Change
Net profit (loss)	4,241	5,062	-
Gross profit (loss)	14,582	14,708	-
Operational profit (loss)	5,601	6,343	-
Earning or loss per share, Riyals	2.12	2.53	-
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 2nd quarter decreased by SR 693m compared to the comparable quarter in the previous year (despite the SR 196m increase in gross profit during the quarter as a result to the revenue increase from services compared to the comparable period last year) mainly due to the following:1-The SR 563m increase in operating expenses during the 2nd quarter compared to the comparable quarter in the previous year, mainly due to the following:a. The SR 141m increase in selling & marketing expenses during the 2nd quarter compared to the same period last year.b. The SR 202m increase in general & administrative expenses during the 2nd quarter compared to the same period last year.c.The SR 219m increase in depreciation and amortization during the 2nd quarter compared to the same period last year.2- The SR 446m increase in (Other income and expenses) during the 2nd quarter compared to the comparable period last year, mainly due to the following:a. The SR 46m increase in the early retirement program cost during the 2nd quarter compared to the same period last year.b. The booking SR 278m losses from investments accounted for under equity method during the 2nd quarter compared to gains of SR 7m for the same period last year.c. The SR 75m increase in commissions during the 2nd quarter compared to the same period last year. d. The SR 202m increase in (Other expenses and Income; other, net) compared to the same period last year as a result to the SR 43m decrease in miscellaneous revenues, the booking of SR 6m (Gains from sale/disposal of property, plant and equipment) compared to losses of SR 55m during the same period last year and the SR 221m increase in miscellaneous expenses during the 2nd quarter compared to the same period last year 3- The SR 30m decrease in the provision for Zakat & Tax during the 2nd 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 1st half decreased by SR 821m compared to the same period in the previous year mainly due to the following:1- The SR 126m decrease in gross profit during the 1st half (despite the 6.6% increase in revenues from services compared to the comparable period last year) as a result to the increase in cost of services during the period 2- The SR 616m increase in operating expenses during the 1st half compared to the same period in the previous year, mainly due to the following:a. The SR 138m decrease in selling & marketing expenses compared to the same period last year.b. The SR 357m increase in general & administrative expenses compared to the same period last year.C. The SR 397m increase in depreciation and amortization compared to the same period last year.3- The SR 254m increase in (Other income and expenses) during the 1st half compared to the same period last year, mainly due to the following:a. The SR 85m increase in the early retirement program cost compared to the same period last year.b. The SR 112m increase in (Losses from investments accounted for under equity method) compared to the same period last year.c. The SR 143m increase in commissions compared to the same period last year. d. The SR 220m increase in (Other expenses and income; other, net) compared to the same period last year, and the main reason is attributed to the following:(1) The SR 137m decrease in miscellaneous revenues compared to the same period last year. (2) The SR 119m decrease in (Losses from sale/disposal of property, plant and equipment) during the 1st half compared to the same period last year(3) The SR 202m increase in miscellaneous expenses compared to the same period last year. The comparable figures for the 1st half of 2015 includes an amount of SR 395m two-months' salary expenses (one-off) which was made as a gesture to follow the initiative of the Honorable Royal Decree (as previously announced)
Reasons of increase (decrease) for quarter compared with previous quarter	The net profit for the 2nd quarter decreased by SR 510m compared to the immediate prior quarter (despite the SR 139m decrease in gross profit during the 2nd quarter compared to the immediate prior quarter) mainly due to the following:1- The SR 547m increase in operating expenses compared to the immediate prior quarter, mainly due to the following:a. The SR 205m increase in selling & marketing expenses during the 2nd quarter compared to the immediate prior quarter.b. The SR 250m increase in general & administrative expenses during the 2nd quarter compared to the immediate prior quarterc. The SR 92m increase in depreciation and amortization during the 2nd quarter compared to the immediate prior quarter2- The SR 179m increase in (Other expenses and income) during the 2nd quarter compared to the immediate prior quarter, mainly due to the following:a. The SR 119m increase in the early retirement program cost during the 2nd quarter compared to the immediate prior quarter.b. The booking SR 278m losses from investments accounted for under equity method during the 2nd quarter compared to gains of SR 28m for the immediate prior quarter. c. The SR 30m increase in commissions compared to the immediate prior quarter. d. The SR 208m decrease in (Other expenses and Income; other, net) compared to the immediate prior quarter as a result to the SR 56m decrease in miscellaneous revenues, the booking of SR 6m (Gains from sale/disposal of property, plant and equipment) compared to losses of SR 79m during immediate prior quarter and the SR 178m decrease in miscellaneous expenses during the 2nd quarter compared to the immediate prior quarter3- The SR 50m decrease in the provision for Zakat & Tax during the 2nd quarter compared to the immediate prior quarter
Reclassifications in quarterly financial results	Certain comparatives figures for the period ending at 30 June 2015 have been reclassified to conform with the presentation used for the period ending at 30 June 2016.
Other notes	Revenue from services for the 1st half amounted to SR 26,335 m compared to SR 24,696 m for the corresponding period last year, an increase of 6.6 %, and for the 2nd quarter revenue from services reached 13,576m, an increase of 11% compared to same period last year. Earnings before interest, taxes, zakat, depreciation and amortization (EBITDA) for the 2nd quarter amounted to SR 4,646 m compared to SR 4,793 m for the corresponding period last year, a decrease of 3%, and for the 1st half, EBITDA amounted to SR 9,608 m compared to SR 9,953 m for the corresponding period last year, a decrease of 3.5%.Commenting on the results, STC Group CEO, Dr. Khaled H. Biyari, stated: (STC's revenues from services for the 2nd quarter increased 11% and gross profit for the same period increased 3% compared to the comparable period last year. Therefore, we assure that STC will continue to expand its fixed & mobile networks and will continue to invest in its infrastructure to introduce new technologies for our individual, residential and business customers in order to reach the highest levels of customer satisfaction and enrich our customer's experience. These investments will support STC strategic role in achieving sustainable growth, enabling government institutions and private sector transformation to the digital economy in connection with the recently announced major national transformation program and Saudi Vision 2030 which will bring about important developmental changes in all vital sectors of our beloved country. One such change is the technological empowerment of the State through the digitalization of all government services with the aim of facilitating citizens' daily transactions, providing them with faster, easier services, and creating an advanced infrastructure that will enhance the efficiency of the private sector.)With regards to international operations, the 1st half 0f 2016 witnessed revenue growth of 3.1% in the controlled international subsidiaries compared to same period last year, and this is attributed mainly to the continued growth in controlled subsidiaries customer base and market shares. Domestically, the 1st half witnessed revenue growth of 5% from domestic operations compared to same period last year. As 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.STC's continues with the deployment of the fiber optic network for both business and residential. During the 2nd quarter, FTTH Customer base during the 2nd quarter increased 35% compared to the same period last year, and 5% compared to the immediate previous quarter. In addition, Fixed broadband customer base increased 9% compared to the same period last year.Enterprise business unit overall revenues increased approximately 17% during the 2nd quarter compared to the same period last year, driven by the 30% increase in Business sector data services revenues compared to same period last year.

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