In H1 2022, organic revenue increased by 0.5% and amounted to HRK 3.5bn, mainly driven by the strong mobile revenue, driven by higher mobile service and mobile non-service revenue, which offset the lower fixed non-service and System Solution revenue. Organic results refer to the exclusion of Optima Telekom’s (OT) contribution from the results, to show a more accurate picture. Reported revenue decreased by -3.5% YoY, driven by decreases in HT Group in Croatia (-4%) or HRK -135m, which was slightly offset by CT’s growth (+3.6% or HRK 9m). Excluding OT’s contribution in 2021 from the results, revenues were up HRK 6m or 0.2% in Croatia, and HRK 10m or 3.7% in CT. Mobile service revenue was up 5.3% or HRK 63m, supported by strong postpaid and visitors and roaming, which offset the lower prepaid income. Mobile non-service revenue increased by 8.5% (or HRK 40m), on the back of better handset sales. Fixed service revenue remained roughly the same (+0.2% or HRK 2m), while fixed non-service revenue decreased by 12.2% (or HRK 35m), as a result of lower Wholesale mostly from lower transit revenue. System Solution revenue decreased by HRK 54m (or 16.7%), mainly driven by HT in Croatia (-16.6% or HRK -51m), due to the structural shift to more profitable projects.
OPEX decreased by HRK 21m (or 1%) YoY, driven by a reduction by HT in Croatia (HRK -32m or -1.6%). The decrease is mostly due to lower material expenses (-2.9%), employee benefits expenses (-1.6%), and write-down of assets (-24.7%), which was partly offset by higher other costs (+5.4%). This resulted in an Organic adjusted EBITDA AL of HRK 1,314m, an increase of 3.4% YoY. If we were to include the OT contribution, however, this would result in a decrease of -1.5% YoY. Finally, net profit after MI amounted to HRK 301m, an increase of 82.8% YoY, mainly driven by positive EBITDA development but also lower depreciation (-17.2% YoY). CAPEX AL increased to HRK 773m (+6.5% YoY), mainly coming from higher TV content capitalization.
HT also commented on their 2022 revised outlook, according to which, they expect revenue of HRK 7.3bn, at stable levels compared to 2021, EBITDA AL of HRK 2.8bn, to remain at stable levels, and a CAPEX AL of HRK 1.7bn, which is a single-digit decrease compared to the previous outlook. It should be noted that these revisions were made as there is a significant impact expected from higher inflation and especially energy and material costs to HT, as these costs were mostly fixed until the end of H1 2022 and should be impacted by market dynamics going forward. Higher employee costs are also expected, as higher salaries must be offered due to inflation.
Overall, the H1 2022 results of HT are in line with the current trends in the industry. HT continues to maintain its market position in Croatia and is improving its profitability and optimizing costs. In particular, mobile revenue continues its growth trajectory, and should support future revenue growth. The share buyback program is ongoing, with 963,530 shares bought in H1 2022, which combined with the paid-out dividend of HRK 8 DPS, is bringing solid returns for investors. However, the cost inflation, especially in terms of energy and material costs could harm profitability. Even so, we maintain our current view that HT has been executing its strategy well and mitigating the risks as much as possible, and as such, continues to be a solid pick as a store of value for investors.