Earnings Report /
Croatia

Hrvatski Telekom: Solid results supported by stable organic growth

  • In 9M 2022, HT’s organic revenue increased by 2.8% to HRK 5.5bn, driven by growth in core fixed and mobile services.

  • Organic adjusted EBITDA AL amounted to HRK 2.15bn, which is an increase of HRK 22m or 1.1%.

  • Organic net profit to majority amounted to HRK 525m, an increase of 19.7%.

Tea Pevec
Tea Pevec

Head of Research

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InterCapital
10 November 2022
Published byInterCapital

In 9M 2022, HT’s organic revenue increased by 2.8% to HRK 5.5bn, driven by continued growth in core fixed and mobile services, both in Croatia and Montenegro. Organic results refer to the exclusion of Optima Telekom’s (OT) contribution impact, as they are no longer part of HT. Reported revenue increased by 0.2% YoY, and the lower growth came from OT’s contribution. In Croatia, revenue increased by HRK 130m (or 2.6%), while in Montenegro it grew by HRK 20m (or 4.8%). Excluding OT’s contribution, Mobile service revenue grew by HRK 68m or 3.4%, supported by strong postpaid and visitors, which offset a contraction in the prepaid segment. Mobile non-service revenue increased by HRK 99m or 14.0%, supported by stronger handset sales. Fixed service revenue increased by HRK 2m or 0.1%, while Fixed non-service revenue increased by HRK 2m or 0.4%. Finally, System Solutions revenue decreased by HRK 22m or 4.9%, mostly driven by HT Group in Croatia (HRK 19m or 4.3%) due to a structural shift to more profitable projects.

OPEX increased by HRK 123m or 3.9% YoY, driven by an increase in Croatia (HRK 99m or 3.4%) and Montenegro (HRK 24m or 9.9%). The increase came mostly due to higher material (HRK 149m or 9.6%), and lower work performed by the Group (HRK 11m or 20.4%), which was partly offset by lower other costs (HRK 18m or 2.4%), employee benefits expenses (HRK 14m or 1.6%) and write down of assets (HRK 6m or 12.2%). This would mean that the organic adjusted EBITDA AL amounted to HRK 2.15bn, which is an increase of HRK 22m or 1.1%. This was supported by the solid development of service revenues which compensated for higher OPEX, especially in Q3. If we were to include OT’s contribution, adjusted EBITDA AL amounted to HRK 2.15bn, but in this case, it represents a decrease of 1.8% YoY. This would mean that the adjusted EBITDA AL margin amounted to 38.9%. Finally, the organic net profit to majority amounted to HRK 525m, an increase of 19.7%. The increase is mostly a result of lower depreciation and better EBITDA, which compensated for higher taxation. If we were to include OT’s contribution, the net profit growth would amount to 14.1%. This would imply a net profit margin of 9.5%, an increase of 1.2 p.p. YoY.

HT also maintained its 2022 outlook, with revenue expected at HRK 7.3bn, at stable levels YoY. EBITDA AL should amount to HRK 2.8bn, also at stable levels YoY. CAPEX AL should amount to HRK 1.7bn, a mid-single-digit decrease YoY. Finally, HT is monitoring and evaluating the potential M&A opportunities in the region.

All in all, HT reported post quite stable and positive results in 9M 2022. Despite the current macroeconomic environment where a lot of companies are struggling, HT is not only managing to retain its leadership position in its business segments, but also continuing to invest and switch to more profitable projects, which is offsetting the inflationary pressure on OPEX. The Company’s financials are solid, and they continue to bring value to investors through dividend payments, and their share buyback program. HT purchased 974,376 shares in 9M 2022, for an equivalent value of HRK 179.5m, an increase of 106% YoY. Continued investments and share buybacks, as well as dividend payments, are expected. In the current environment, HT continues to prove they can not only maintain but create new value, which can be quite attractive to all investors.