ROSH HA’AYIN, Israel--(BUSINESS WIRE)--Partner Communications Company Ltd. (“Partner” or the “Company”) (NASDAQ:PTNR) (TASE:PTNR), a leading Israeli communications provider, announced today its results for the quarter ended June 30, 2016.
Commenting on the second quarter 2016 results, Mr. Isaac Benbenisti, CEO of Partner, noted:
“During the second quarter we continued with the implementation of the Company's vision to transform into a comprehensive communications company. We are currently unifying the systems of 012 Smile and Partner, a process that includes the gradual transfer of all our fixed-line customers to the Partner brand.
We announced our intention to promote the deployment of an independent fixed-line infrastructure using fiber optics, and we began a field test around a month ago in which we connected the first residential internet customers to Partner's fiber network at a speed of up to one Gigabit per second (Gbps). Over the last few weeks we have been promoting this issue with the Ministry of Communications and we expect to receive the support of the regulator to establish an advanced fixed-line infrastructure that will both open the market to competition and narrow the gap in internet speeds and available technologies for the Israeli communications consumer, compared to the rest of the world.
In parallel, we are working towards entry into the television broadcast market while taking into account the changing needs of the consumer in the digital era. We await the implementation of the Filber Committee recommendations with respect to the ‘must sell’ requirement for sports content and linear broadcast channels over the internet. The implementation of these steps, along with other steps, will enable the opening of the television market to competition and lead to lower prices for consumers.
In the second quarter we continued to successfully expand our cellular Post-Paid customer base, marking the fourth consecutive quarter of growth in the cellular post-paid subscriber base. This positive trend can be attributed, among others, to the significant steps we are taking in our customer service, including the expansion of available platforms for digital support and customer service, with an emphasis on the social networking platforms.”
Mr. Ziv Leitman, Partner's Chief Financial Officer, commented on the second quarter results of 2016 as compared to the first quarter results of 2016:
“During the second quarter of 2016, the competition in the cellular market continued to erode service revenues, however, to a lesser extent than in previous quarters.
The churn rate for cellular subscribers stood at 9.8% in the second quarter of 2016 compared to 11.2% in the previous quarter and 10.9% in the second quarter of 2015. We continue to see a decrease in Post-Paid subscriber churn which reached the lowest level since mid-2013.
Cellular ARPU in the second quarter of 2016 totaled NIS 65, a decline of NIS 2 from the first quarter of 2016, mainly reflecting the decline in revenues related to the network Right of Use Agreement with Hot Mobile, which was partially offset by an increase in seasonal roaming revenues as well as one-time service revenue items.
Revenues and gross profit from equipment sales in the second quarter of 2016 decreased by NIS 62 million and NIS 14 million respectively, compared to the previous quarter. The decreases were primarily due to a decline in the amount of sales, largely resulting from tightening of the Company's customer credit policy.
Operating expenses (OPEX)3 decreased by NIS 40 million compared with the previous quarter, primarily reflecting the decline in sales and marketing expenses and the impact of the network sharing agreement, which began in the second quarter of 2016, initiating the implementation of the cost sharing mechanism between the Company and Hot Mobile.
Adjusted EBITDA3 in the second quarter of 2016 increased by NIS 6 million (3%), compared with the previous quarter. The increase mainly reflected the decline in operating expenses, which was partially offset by the decline in service revenues and the decline in gross profit from equipment sales.
Finance costs, net, totaled NIS 28 million in the reported quarter, an increase of NIS 4 million compared to the previous quarter, reflecting higher linkage costs resulting from the increase in CPI, partially offset by lower early debt repayment costs and higher gains from foreign exchange movements.
Profit for the second quarter of 2016 totaled NIS 26 million compared with NIS 14 million in the previous quarter. The increase largely reflected the increase in operating profit.
Cash capital expenditures (CAPEX payments)3 in the second quarter of 2016 totaled NIS 57 million compared to NIS 48 million in the previous quarter, an increase of 19%.
Free cash flow (before interest payments)3 in the reported quarter totaled NIS 160 million, compared with NIS 114 million in the previous quarter. The increase in free cash flow primarily reflected the first installment, in an amount of NIS 35 million, of the lump sum of NIS 250 million under the Network Sharing Agreement with Hot Mobile, which is expected to be paid fully during 2016, as well as a decrease in other operating working capital items.
As of June 30, 2016, net debt3 amounted to approximately NIS 1.96 billion (total short and long term debt and current maturities of NIS 2.88 billion less cash and cash equivalents of NIS 0.92 billion).
In April 2016 the Company repurchased part of its Series C Notes in the amount of approximately NIS 62 million, this being the final purchase under the October 2015 buy-back plan.”
Key Financial Results
| NIS Million (except EPS) | Q2'16 | Q2'15 | % Change | |||
| Revenues | 897 | 1,044 | -14% | |||
| Cost of revenues | 730 | 848 | -14% | |||
| Gross profit | 167 | 196 | -15% | |||
| Operating profit | 67 | 67 | 0% | |||
| Profit for the period | 26 | 9 | +189% | |||
| Earnings per share (basic, NIS) | 0.17 | 0.06 | +183% | |||
| Free cash flow (before interest payments) | 160 | 24 | +567% |
Key Operating Indicators
| Q2'16 | Q2'15 | Change | |
| Adjusted EBITDA (NIS million) |
228 |
236 |
-3% |
| Adjusted EBITDA (as a % of total revenues) |
25% |
23% |
+2 |
| Cellular Subscribers (end of period, thousands) |
2,700 |
2,747 |
-47 |
| Quarterly Cellular Churn Rate (%) |
9.8% |
10.9% |
-1.1 |
| Monthly Average Revenue per Cellular User (ARPU) (NIS) |
65 |
70 |
-5 |
Partner Consolidated Results
| Cellular Segment | Fixed-Line Segment | Elimination | Consolidated | |||||||||||||||||||
| NIS Million | Q2'16 | Q2'15 | Change % | Q2'16 | Q2'15 | Change % | Q2'16 | Q2'15 | Q2'16 | Q2'15 | Change % | |||||||||||
| Total Revenues |
715 |
852 |
-16% |
236 |
242 |
-2% |
(54) |
(50) |
897 |
1,044 |
-14% |
|||||||||||
| Service Revenues |
527 |
581 |
-9% |
219 |
226 |
-3% |
(54) |
(50) |
692 |
757 |
-9% |
|||||||||||
| Equipment Revenues |
188 |
271 |
-31% |
17 |
16 |
+6% |
- | - |
205 |
287 |
-29% |
|||||||||||
| Operating Profit |
31 |
26 |
+19% |
36 |
41 |
-12% |
- | - |
67 |
67 |
0% |
|||||||||||
| Adjusted EBITDA |
155 |
160 |
-3% |
73 |
76 |
-4% |
- |
- |
228 |
236 |
-3% |
|||||||||||
Financial Review
In Q2 2016, total revenues were NIS 897 million (US$ 233 million), a decrease of 14% from NIS 1,044 million in Q2 2015.
Service revenues in Q2 2016 totaled NIS 692 million (US$ 180 million), a decrease of 9% from NIS 757 million in Q2 2015.
Service revenues for the cellular segment in Q2 2016 were NIS 527 million (US$ 137 million), a decrease of 9% from NIS 581 million in Q2 2015. The decrease was mainly the result of the decline in revenues related to the ending of the network Right of Use Agreement with Hot Mobile as well as the continued price erosion of Post-Paid and Pre-Paid cellular services due to the competitive market conditions, partially offset by one-time service revenue items.
Service revenues for the fixed-line segment in Q2 2016 totaled NIS 219 million (US$ 57 million), a decrease of 3% from NIS 226 million in Q2 2015. The decrease mainly reflected lower revenues from international calls services.
Equipment revenues in Q2 2016 totaled NIS 205 million (US$ 53 million), a decrease of 29% from NIS 287 million in Q2 2015. The decrease largely reflected a decline in the amounts of cellular and other devices and accessories sold.
Gross profit from equipment sales in Q2 2016 was NIS 42 million (US$ 11 million), compared with NIS 67 million in Q2 2015, a decrease of 37%, again largely reflecting the reduction in the amount of sales.
Operating expenses (OPEX) totaled NIS 572 million (US$ 149 million) in Q2 2016, a decrease of 5% or NIS 29 million from Q2 2015. The decrease largely reflected the decline in payroll and related expenses, as well as a decline in cellular network-related operating expenses following the implementation of the cost sharing mechanism under the Network Sharing Agreement with Hot Mobile, and lower expenses related to payments to other communications providers, partially offset by higher advertising and marketing expenses and expenses related to bad debts and doubtful accounts. Operating expenses including depreciation and amortization expenses in Q2 2016 increased by 5% compared with Q2 2015.
In Q2 2016 the Company continued to record income with respect to the settlement agreement with Orange in an amount of NIS 54 million (US$ 14 million). The income resulted from advance payments received from Orange during 2015 in a total amount of €90 million. As set forth in the settlement agreement, the advance payments are to be recognized and reconciled evenly on a quarterly basis over a period until the second quarter of 2017, against contingent marketing, sales, customer services and other expenses to be incurred over this period.
Adjusted EBITDA in Q2 2016 totaled NIS 228 million (US$ 59 million), a decrease of 3% from NIS 236 million in Q2 2015.
Adjusted EBITDA for the cellular segment was NIS 155 million (US$ 40 million) in Q2 2016, a decrease of 3% from NIS 160 million in Q2 2015. The decrease principally reflected the decreases in service revenues and in gross profit from equipment sales, which were partially offset by the income with respect to the settlement agreement with Orange and by the decrease in operating expenses. As a percentage of total cellular revenues, Adjusted EBITDA margin for the cellular segment in Q2 2016 was 22%, compared with 19% in Q2 2015.
Adjusted EBITDA for the fixed-line segment was NIS 73 million (US$ 19 million) in Q2 2016, a decrease of 4% from NIS 76 million in Q2 2015. The decrease also mainly reflected the decreases in service revenues and in gross profit from equipment sales, which were partially offset by the decrease in operating expenses. As a percentage of total fixed-line revenues, Adjusted EBITDA margin for the fixed line segment in Q2 2016 was 31%, no change from Q2 2015.
Operating profit for Q2 2016 was NIS 67 million (US$ 17 million), no change from Q2 2015.
Finance costs, net in Q2 2016 were NIS 28 million (US$ 7 million), a decrease of 39%, compared with NIS 46 million in Q2 2015. The decrease was mainly due to lower CPI (Consumer Price Index) linkage expenses as a result of the smaller increase in the CPI level, as well as higher gains from foreign exchange movements in Q2 2016.
Income tax expenses for Q2 2016 were NIS 13 million (US$ 3 million), an increase of 8% compared with NIS 12 million in Q2 2015, reflecting the increase in profit before tax.
Profit in Q2 2016 totaled NIS 26 million (US$ 7 million), an increase of 189% compared with NIS 9 million in Q2 2015.
Based on the weighted average number of shares outstanding during Q2 2016, basic earnings per share or ADS, was NIS 0.17 (US$ 0.04), compared to NIS 0.06 in Q2 2015.
Cellular Segment Operational Review
At the end of the second quarter of 2016, the Company's cellular subscriber base (including mobile data and 012 Mobile subscribers) was approximately 2.7 million, including approximately 2.19 million Post-Paid subscribers or 81% of the base, and approximately 509 thousand Pre-Paid subscribers, or 19% of the subscriber base.
During the second quarter of 2016, the cellular subscriber base increased by approximately 8 thousand subscribers. The Post-Paid subscriber base increased by approximately 17 thousand subscribers, while the Pre-Paid subscriber base declined by approximately 9 thousand subscribers.
The quarterly churn rate for cellular subscribers in Q2 2016 was 9.8%, compared with 10.9% in Q2 2015, reflecting a decrease in the churn of Post-Paid subscribers, which was partially offset by an increase in the churn of Pre-Paid subscribers.
Total cellular market share (based on the number of subscribers) at the end of Q2 2016 was estimated to be approximately 27%, unchanged from Q2 2015.
The monthly Average Revenue per User (“ARPU”) for cellular subscribers in Q2 2016 was NIS 65 (US$ 17), a decrease of 7% from NIS 70 in Q2 2015. The decrease in ARPU mainly reflected the decline in revenues related to the network Right of Use Agreement with Hot Mobile as well as the continued price erosion of Post-Paid and Pre-Paid cellular services due to the competitive market conditions, partially offset by one-time service revenue items.
Funding and Investing Review
In Q2 2016, cash flow generated from operating activities before interest payments (NIS 217 million), net of cash flow used for investing activities (NIS 57 million) (‘Free Cash Flow (before interest)’), totaled NIS 160 million (US$ 42 million), an increase of 567% from NIS 24 million in Q2 2015, reflecting both an increase in cash generated from operations and a decrease in CAPEX payments.
Cash generated from operations increased by 61% to NIS 217 million (US$ 57 million) in Q2 2016 from NIS 135 million in Q2 2015. The increase in cash generated from operations reflected both the first installment, in an amount of NIS 35 million, of the lump sum of NIS 250 million under the Network Sharing Agreement with Hot Mobile (which is expected to be paid fully during 2016), and the decrease in operating assets, which was mainly explained by the decrease in equipment sales under installment payment plans.
Cash capital expenditures (CAPEX payments) totaled NIS 57 million (US$ 15 million) in Q2 2016, a decrease of 49% from NIS 111 million in Q2 2015.
Net debt at the end of Q2 2016 amounted to NIS 1,964 million (US$ 511 million), compared with NIS 2,626 million at the end of Q2 2015, a decrease of NIS 662 million.
Conference Call Details
Partner will hold a conference call on Wednesday, August 17, 2016 at
10.00AM Eastern Time / 5.00PM Israel Time.
To join the call,
please dial the following numbers (at least 10 minutes before the
scheduled time):
International: +972.3.918.0664
North America
toll-free: +1.888.668.9141
A live webcast of the call will also be
available on Partner's Investors Relations website at: www.partner.co.il/en/Investors-Relations/lobby/
If
you are unavailable to join live, the replay of the call will be
available from August 17, 2016 until August 24, 2016, at the
following numbers:
International: +972.3.925.5937
North
America toll-free: +1.877.456.0009
In addition, the archived
webcast of the call will be available on Partner's Investor Relations
website at the above address for approximately three months.
Forward-Looking Statements
This
press release includes forward-looking statements within the meaning of
Section 27A of the US Securities Act of 1933, as amended, Section 21E of
the US Securities Exchange Act of 1934, as amended, and the safe harbor
provisions of the US Private Securities Litigation Reform Act of 1995.
Words such as “estimate”, “believe”, “anticipate”, “expect”, “intend”,
“seek”, “will”, “plan”, “could”, “may”, “project”, “goal”, “target” and
similar expressions often identify forward-looking statements but are
not the only way we identify these statements. Specific statements have
been made regarding (i) the unification of the Group's systems and a
gradual transfer of the Company's fixed-line customers to the Partner
brand; (ii) the Company's intention to promote the deployment of an
independent fixed-line infrastructure using fiber optics, and the
Company's expectation to receive the regulator's support to establish
the said infrastructure and insofar as the Company's expectation will
not be realized, this may have an adverse effect on the Company's
business, the results of operations and on the market competition;(iii)
the Company's intention to enter into the television broadcast market
and the expectation for the implementation of the Filber Committee
conclusions and recommendations regarding the regulation of the
broadcast market, including with respect to the ‘must sell’ requirement
for sport content and liner broadcast channels over the internet and
insofar as these events will not occur, this might have an adverse
effect on the Company's entrance into the television broadcast market
and its ability to open the market for competition and reduce prices for
consumers, and (iv) anticipated future cash payments from Hot
Mobile. In addition, all statements other than statements of historical
fact included in this press release regarding our future performance are
forward-looking statements.
We have based these forward-looking statements on our current
knowledge and our present beliefs and expectations regarding possible
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions, including, as regards in particular the
statements identified above, (i) the current lack of visibility as to
the implementation of the Filber Committee conclusions and
recommendations regarding the regulation of the broadcast market; (ii)
any unanticipated technological, technical or other difficulty which
might arise in connection with the Group's systems unification and the
transfer to the Partner brand,(iii) operational, regulatory, financial
or other unanticipated difficulties, which could prevent the Company
from promoting the deployment of an independent fixed-line
infrastructure using fiber optics, and (iv) the risk of non-compliance
by Hot Mobile, for financial or other reasons, with its contractual
obligations to Partner to make the anticipated cash payments. Future
results may differ materially from those anticipated herein. For further
information regarding risks, uncertainties and assumptions about
Partner, trends in the Israeli telecommunications industry in general,
the impact of current global economic conditions and possible regulatory
and legal developments, and other risks we face, see “Item 3. Key
Information - 3D. Risk Factors”, “Item 4. Information on
the Company”, “Item 5. Operating and Financial
Review and Prospects”, “Item 8 Financial Information -
8A. Consolidated Financial Statements and Other Financial Information -
8A.1 Legal and Administrative Proceedings” and “Item 11. Quantitative
and Qualitative Disclosures about Market Risk” in the Company’s Annual
Reports on Form 20-F filed with the SEC, as well as its immediate
reports on Form 6-K furnished to the SEC. We undertake no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
The
quarterly financial results presented in this press release are
unaudited financial results.
The results were prepared in
accordance with IFRS, other than the non-GAAP financial measures
presented below.
The financial information is presented in
NIS millions (unless otherwise stated) and the figures presented are
rounded accordingly.
The convenience translations of the New Israeli Shekel (NIS) figures into US Dollars were made at the rate of exchange prevailing at June 30, 2016: US $1.00 equals NIS 3.846. The translations were made purely for the convenience of the reader.
Use of Non-GAAP Financial Measures
‘Adjusted
EBITDA’ represents earnings before interest (finance costs, net), taxes,
depreciation, amortization (including amortization of intangible assets,
deferred expenses-right of use, and amortization of share based
compensation) and impairment charges, as a measure of operating profit.
Adjusted EBITDA is not a financial measure under IFRS and may not be
comparable to other similarly titled measures provided by other
companies. Adjusted EBITDA may not be indicative of the Company’s
historic operating results nor is it meant to be predictive of potential
future results. Adjusted EBITDA is presented solely to enhance the
understanding of our operating results. We use the term “Adjusted
EBITDA” to highlight the fact that amortization includes amortization of
deferred expenses – right of use and employee share-based compensation
expenses, but Adjusted EBITDA is fully comparable to EBITDA information
which has been previously provided by Partner for prior periods.
'Cash
capital expenditures' or 'CAPEX payments' represent cash flows used in
acquisition of property and equipment and acquisition of intangible
assets.
'Capital Expenditures (additions)' represents
additions to property and equipment and intangible assets.
'Net
Debt' represents notes payable and borrowings form banks and others
including current maturities less cash and cash equivalents.
'Free
Cash Flow (before interest)' represents cash flows from operating
activities before interest payments, net of cash flows used for
investment activities.
'Free Cash Flow (after interest)'
represents cash flows from operating activities before interest
payments, net of cash flows used for investment activities and net of
interest paid.
'Operating Expenses (OPEX)' represents cost
of service revenues, selling, marketing and administrative expenses net
of depreciation, amortization, impairment charges and other expenses
(mainly employee share based compensation expenses).
About Partner Communications
Partner Communications Company Ltd. is a leading Israeli provider of
communications services (cellular, fixed-line telephony and internet
services) under the Partner brand and the 012 Smile brand. Partner’s
ADSs are quoted on the NASDAQ Global Select Market™ and its shares are
traded on the Tel Aviv Stock Exchange (NASDAQ and TASE: PTNR).
For
more information about Partner, see: http://www.partner.co.il/en/Investors-Relations/lobby
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
|
Convenience |
||||||
| June 30, | December 31, | June 30, | |||||
| 2016 |
|
2015 | 2016 | ||||
| (Unaudited) | (Audited) | (Unaudited) | |||||
| In millions | |||||||
| CURRENT ASSETS | |||||||
| Cash and cash equivalents | 916 | 926 | 238 | ||||
| Trade receivables | 1,088 | 1,057 | 283 | ||||
| Other receivables and prepaid expenses | 40 | 47 | 10 | ||||
| Deferred expenses – right of use | 33 | 33 | 9 | ||||
| Inventories | 82 | 120 | 21 | ||||
| Income tax receivable | 2 |
|
|||||
| 2,159 | 2,185 | 561 | |||||
| NON CURRENT ASSETS | |||||||
| Trade Receivables | 434 | 492 | 113 | ||||
| Deferred expenses – right of use | 37 | 20 | 10 | ||||
| Property and equipment | 1,291 | 1,414 | 336 | ||||
| Licenses and other intangible assets | 863 | 956 | 224 | ||||
| Goodwill | 407 | 407 | 106 | ||||
| Deferred income tax asset | 40 | 49 | 10 | ||||
| Prepaid expenses and other | 3 | 3 | 1 | ||||
| 3,075 | 3,341 | 800 | |||||
| TOTAL ASSETS | 5,234 | 5,526 | 1,361 | ||||
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
|
Convenience |
|||||
| June 30, | December 31, | June 30, | ||||
| 2016 | 2015 | 2016 | ||||
| (Unaudited) | (Audited) | (Unaudited) | ||||
| In millions | ||||||
| CURRENT LIABILITIES | ||||||
|
Current maturities of notes payable and borrowings |
||||||
|
and current borrowings |
447 | 554 | 116 | |||
| Trade payables | 674 | 715 | 175 | |||
| Payables in respect of employees | 76 | 77 | 20 | |||
| Other payables (mainly institutions) | 28 | 45 | 8 | |||
| Income tax payable | 55 | 52 | 14 | |||
| Deferred income with respect to settlement | ||||||
|
agreement with Orange |
217 | 217 | 56 | |||
| Deferred revenues from HOT mobile | 27 | 7 | ||||
| Other deferred revenues | 28 | 28 | 8 | |||
| Provisions | 81 | 77 | 21 | |||
| 1,633 | 1,765 | 425 | ||||
| NON CURRENT LIABILITIES | ||||||
| Notes payable | 1,085 | 1,190 | 282 | |||
| Borrowings from banks and others | 1,348 | 1,357 | 350 | |||
| Liability for employee rights upon retirement, net | 31 | 34 | 8 | |||
| Dismantling and restoring sites obligation | 35 | 36 | 9 | |||
| Deferred income with respect to settlement | ||||||
|
agreement with Orange |
108 | |||||
| Other non-current liabilities | 15 | 16 | 4 | |||
| Deferred income tax liability | 3 | 1 | ||||
| 2,517 | 2,741 | 654 | ||||
| TOTAL LIABILITIES | 4,150 | 4,506 | 1,079 | |||
| EQUITY | ||||||
| Share capital – ordinary shares of NIS 0.01 | ||||||
|
par value: authorized – December 31, 2015 |
||||||
|
and June 2016 – 235,000,000 shares; |
||||||
| issued and outstanding - | 2 | 2 | 1 | |||
|
December 31, 2015 – *156,087,456 shares |
||||||
|
June 30, 2016 – *156,096,891 shares |
||||||
| Capital surplus | 1,102 | 1,102 | 286 | |||
| Accumulated retained earnings | 331 | 267 | 86 | |||
| Treasury shares, at cost | ||||||
|
December 31, 2015 – **4,461,975 shares |
||||||
|
June 30, 2016 –** 4,460,939 shares |
(351) |
(351) |
(91) |
|||
| TOTAL EQUITY | 1,084 | 1,020 | 282 | |||
| TOTAL LIABILITIES AND EQUITY | 5,234 | 5,526 | 1,361 | |||
* Net of treasury shares.
** Including restricted shares in
amount of 2,887,798 and 2,911,806 as of June 30, 2016 and December 31,
2015 respectively held by trustee under the Company's Equity Incentive
Plan, such shares will become outstanding upon completion of vesting
conditions.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
| New Israeli shekels |
Convenience translation into U.S. |
|||||||||||
|
6 month |
3 month |
6 month |
3 month |
|||||||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2016 | |||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||
| In millions (except per share data) | ||||||||||||
| Revenues, net | 1,874 | 2,098 | 897 | 1,044 | 487 | 233 | ||||||
| Cost of revenues | 1,527 | 1,717 | 730 | 848 | 397 | 190 | ||||||
| Gross profit | 347 | 381 | 167 | 196 | 90 | 43 | ||||||
|
Selling and marketing |
232 | 193 | 105 | 96 | 60 | 27 | ||||||
|
General and administrative |
128 | 91 | 61 | 46 | 33 | 16 | ||||||
|
Income with respect to settlement |
|
|||||||||||
|
agreement with Orange |
108 |
54 |
28 |
14 |
||||||||
| Other income, net | 26 | 26 | 12 | 13 | 7 | 3 | ||||||
| Operating profit | 121 | 123 | 67 | 67 | 32 | 17 | ||||||
| Finance income | 14 | 7 | 6 | 3 | 3 | 2 | ||||||
| Finance expenses | 66 | 71 | 34 | 49 | 17 | 9 | ||||||
| Finance costs, net | 52 | 64 | 28 | 46 | 14 | 7 | ||||||
| Profit before income tax | 69 | 59 | 39 | 21 | 18 | 10 | ||||||
| Income tax expenses | 29 | 25 | 13 | 12 | 8 | 3 | ||||||
| Profit for the period | 40 | 34 | 26 | 9 | 10 | 7 | ||||||
| Earnings per share | ||||||||||||
| Basic | 0.26 | 0.22 | 0.17 | 0.06 | 0.06 | 0.04 | ||||||
| Diluted | 0.26 | 0.22 | 0.17 | 0.06 | 0.06 | 0.04 | ||||||
|
Weighted average number |
||||||||||||
| Basic | 156,091 | 156,077 | 156,092 | 156,077 | 156,091 | 156,092 | ||||||
| Diluted | 157,605 | 156,082 | 157,669 | 156,079 | 157,605 | 157,669 | ||||||
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
| New Israeli shekels |
Convenience translation |
|||||||||||
|
6 month period ended June 30, |
3 month period ended June 30, |
6 month period ended June 30, |
3 month period ended June 30, |
|||||||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2016 | |||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||
| In millions | ||||||||||||
|
Profit for the period |
40 | 34 | 26 | 9 | 10 | 7 | ||||||
| Other comprehensive income | ||||||||||||
|
for the period, net of income tax |
- |
- |
- |
- |
- |
- |
||||||
|
TOTAL COMPREHENSIVE |
40 |
34 |
26 | 9 | 10 | 7 | ||||||
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
SEGMENT
INFORMATION & Adjusted EBITDA reconciliation
| New Israeli Shekels |
|
New Israeli Shekels |
|||||||||||||||
| Six months ended June 30, 2016 |
|
Six months ended June 30, 2015 |
|||||||||||||||
| In millions (Unaudited) |
|
In millions (Unaudited) |
|||||||||||||||
|
Cellular |
Fixed line segment |
Reconciliation
for consolidation |
Consolidated |
Cellular
segment |
Fixed line segment |
Reconciliation
for consolidation |
Consolidated |
||||||||||
| Segment revenue - Services |
1,060 |
342 |
1,402 |
1,149 |
367 |
1,516 |
|||||||||||
| Inter-segment revenue - Services |
10 |
99 |
(109) |
11 |
91 | (102) | |||||||||||
| Segment revenue - Equipment |
432 |
40 |
472 |
548 |
34 |
582 |
|||||||||||
| Total revenues |
1,502 |
481 |
(109) |
1,874 |
1,708 |
492 |
(102) |
2,098 |
|||||||||
| Segment cost of revenues – Services |
851 |
302 |
1,153 |
942 |
319 |
1,261 |
|||||||||||
| Inter-segment cost of revenues- Services |
98 |
11 |
(109) |
90 |
12 |
(102) |
|||||||||||
| Segment cost of revenues - Equipment |
342 |
32 |
374 |
433 |
23 |
456 |
|||||||||||
| Cost of revenues |
1,291 |
345 |
(109) |
1,527 |
1,465 |
354 |
(102) |
1,717 | |||||||||
| Gross profit |
211 |
136 |
347 |
243 |
138 |
381 |
|||||||||||
| Operating expenses |
301 |
59 |
360 |
228 |
56 |
284 |
|||||||||||
|
Income with respect to settlement |
|||||||||||||||||
|
agreement with Orange |
108 | 108 | |||||||||||||||
| Other income, net |
24 |
2 |
26 |
25 |
1 |
26 |
|||||||||||
| Operating profit |
42 |
79 |
121 |
40 |
83 |
123 |
|||||||||||
|
Adjustments to presentation of Adjusted |
|||||||||||||||||
|
EBITDA |
|||||||||||||||||
| –Depreciation and amortization |
230 |
75 |
305 |
260 |
72 |
332 |
|||||||||||
| –Other (1) |
25 |
(1) |
24 |
8 |
8 |
||||||||||||
| Adjusted EBITDA (2) |
297 |
153 |
450 |
308 |
155 |
463 |
|||||||||||
|
Reconciliation of Adjusted EBITDA to |
|||||||||||||||||
|
profit for the period |
|||||||||||||||||
| - Depreciation and amortization |
|
305 |
332 |
||||||||||||||
| - Finance costs, net |
52 |
64 |
|||||||||||||||
| - Income tax expenses |
29 |
25 |
|||||||||||||||
|
- Other (1) |
24 |
8 |
|||||||||||||||
| Profit for the period |
40 |
34 |
|||||||||||||||
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
SEGMENT
INFORMATION & Adjusted EBITDA reconciliation
| New Israeli Shekels | New Israeli Shekels | ||||||||||||||||
| Three months ended June 30, 2016 | Three months ended June 30, 2015 | ||||||||||||||||
| In millions (Unaudited) | In millions (Unaudited) | ||||||||||||||||
| Cellular segment | Fixed line segment |
Reconciliation for
consolidation |
Consolidated |
Cellular
segment |
Fixed line
segment |
Reconciliation for
consolidation |
Consolidated | ||||||||||
| Segment revenue - Services | 521 | 171 | 692 |
576 |
181 |
757 |
|||||||||||
| Inter-segment revenue - Services | 6 | 48 | (54) |
5 |
45 |
(50) |
|||||||||||
| Segment revenue - Equipment | 188 | 17 | 205 |
271 |
16 |
287 |
|||||||||||
| Total revenues | 715 | 236 | (54) | 897 |
852 |
242 |
(50) |
1,044 |
|||||||||
| Segment cost of revenues – Services | 415 | 152 | 567 |
472 |
156 |
628 |
|||||||||||
| Inter-segment cost of revenues- Services | 48 | 6 | (54) |
44 |
6 |
(50) |
|||||||||||
| Segment cost of revenues - Equipment | 149 | 14 | 163 |
209 |
11 |
220 |
|||||||||||
| Cost of revenues | 612 | 172 | (54) | 730 |
725 |
173 |
(50) |
848 |
|||||||||
| Gross profit | 103 | 64 | 167 |
127 |
69 |
196 |
|||||||||||
| Operating expenses | 137 | 29 | 166 |
114 |
28 |
142 |
|||||||||||
|
Income with respect to settlement |
|||||||||||||||||
|
agreement with Orange |
54 | 54 | |||||||||||||||
| Other income, net | 11 | 1 |
|
12 |
|
13 |
13 |
||||||||||
| Operating profit | 31 | 36 |
67 |
26 |
41 |
67 |
|||||||||||
|
Adjustments to presentation of Adjusted EBITDA |
|||||||||||||||||
| –Depreciation and amortization | 113 | 37 | 150 |
131 |
35 |
166 |
|||||||||||
| –Other (1) | 11 |
* |
11 |
3 |
* |
|
3 |
||||||||||
| Adjusted EBITDA (2) | 155 | 73 | 228 |
160 |
76 |
|
236 |
||||||||||
|
Reconciliation of Adjusted EBITDA to |
|||||||||||||||||
|
profit for the period |
|||||||||||||||||
| - Depreciation and amortization | 150 |
166 |
|||||||||||||||
| - Finance costs, net | 28 |
46 |
|||||||||||||||
| - Income tax expenses | 13 |
12 |
|||||||||||||||
| - Other (1) | 11 |
3 |
|||||||||||||||
| Profit for the period | 26 |
9 |
|||||||||||||||
* Representing an amount of less than 1 million.
(1) Mainly
amortization of employee share based compensation.
(2) Adjusted
EBITDA as reviewed by the CODM represents Earnings Before Interest
(finance costs, net), Taxes, Depreciation and Amortization (including
amortization of intangible assets, deferred expenses-right of use,
amortization of share based compensation and impairment charges), as a
measure of operating profit. Adjusted EBITDA is not a financial measure
under IFRS and may not be comparable to other similarly titled measures
for other companies. Adjusted EBITDA may not be indicative of the
Group's historic operating results nor is it meant to be predictive of
potential future results. The usage of the term "Adjusted EBITDA" is to
highlight the fact that the Amortization includes amortization of
deferred expenses – right of use and amortization of employee share
based compensation and impairment charges.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Convenience |
||||||||
|
6 months ended June 30, |
|||||||||
| 2016 | 2015 | 2016 | |||||||
| (Unaudited) | (Unaudited) | (Unaudited) | |||||||
| In millions | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
| Cash generated from operations (Appendix) | 391 | 311 | 101 | ||||||
| Income tax paid | (12) | (27) | (3) | ||||||
| Net cash provided by operating activities | 379 | 284 | 98 | ||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||||||
| Acquisition of property and equipment | (71) | (137) | (18) | ||||||
| Acquisition of intangible assets | (34) | (102) | (9) | ||||||
| Interest received | * | 1 | * | ||||||
|
Proceeds from (repayment of) derivative financial |
* | (1) | * | ||||||
| Net cash used in investing activities | (105) | (239) | (27) | ||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||||||
| Interest paid | (66) | (65) | (17) | ||||||
| Current borrowings received | 24 | 6 | |||||||
| Non-current borrowings received | 475 | ||||||||
| Repayment of non-current borrowings | (7) | (177) | (2) | ||||||
| Repayment of notes payable | (235) | (61) | |||||||
| Net cash provided by (used in) financing activities | (284) | 233 | (74) | ||||||
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
(10) | 278 | (3) | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF | |||||||||
|
PERIOD |
926 | 663 | 241 | ||||||
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
916 | 941 | 238 | ||||||
* Representing an amount of less than 1 million.
PARTNER COMMUNICATIONS COMPANY LTD.
(An Israeli Corporation)
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Appendix - Cash
generated from operations and supplemental information
|
|
Convenience |
|||||||
|
6 months ended |
||||||||
| 2016 | 2015 | 2016 | ||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||
| In millions | ||||||||
| Cash generated from operations: | ||||||||
| Profit for the period | 40 | 34 | 10 | |||||
| Adjustments for: | ||||||||
| Depreciation and amortization | 290 | 314 | 75 | |||||
| Amortization of deferred expenses - Right of use | 14 | 18 | 4 | |||||
| Employee share based compensation expenses | 24 | 8 | 6 | |||||
| Liability for employee rights upon retirement, net | (3) | (1) | (1) | |||||
| Finance costs, net | (2) | (5) | (1) | |||||
| Change in fair value of derivative financial instruments | * | (2) | * | |||||
| Interest paid | 66 | 65 | 17 | |||||
| Interest received | * | (1) | * | |||||
| Deferred income taxes | 11 | * | 3 | |||||
| Income tax paid | 12 | 27 | 3 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (increase) in accounts receivable: | ||||||||
| Trade | 27 | (145) | 7 | |||||
| Other | 7 | (7) | 2 | |||||
| Increase (decrease) in accounts payable and accruals: | ||||||||
| Trade | (9) | 24 | (2) | |||||
| Other payables | (21) | (23) | (6) | |||||
| Provisions | 4 | (3) | 1 | |||||
|
Deferred income with respect to settlement
agreement with Orange |
(108) | (28) | ||||||
| Deferred revenues from HOT Mobile | 27 | 7 | ||||||
| Other deferred revenues | * | (8) | * | |||||
| Increase in deferred expenses - Right of use | (31) | (14) | (8) | |||||
| Current income tax liability | 6 | 2 | 2 | |||||
| Decrease (increase) in inventories | 37 | 28 | 10 | |||||
| Cash generated from operations | 391 | 311 | 101 | |||||
* Representing an amount of less than 1 million.
At June 30, 2016 and 2015, trade and other payables include NIS 95
million ($25 million) and NIS 109 million, respectively, in respect of
acquisition of intangible assets and property and equipment; payments in
respect thereof are presented in cash flows from investing activities.
These
balances are recognized in the cash flow statements upon payment.
Reconciliation of Non-GAAP Measures:
Free Cash Flow before and after interest paid
|
New Israeli Shekels |
Convenience |
||||||
|
3 months ended June 30, |
|||||||
| 2016 | 2015 | 2016 | |||||
| (Unaudited) | (Unaudited) | (Unaudited) | |||||
| In millions | |||||||
| Net cash provided by operating activities | 217 | 135 | 57 | ||||
| Net cash used in investing activities | (57) | (111) | (15) | ||||
| Free Cash Flow (before interest) | 160 | 24 | 42 | ||||
| Interest paid | (41) | (52) | (11) | ||||
| Free Cash Flow (after interest) | 119 | (28) | 31 | ||||
|
Operating Expenses (OPEX) |
New Israeli Shekels |
Convenience |
|||||
|
3 months ended June 30, |
|||||||
| 2016 | 2015 | 2016 | |||||
| (Unaudited) | (Unaudited) | (Unaudited) | |||||
| In millions | |||||||
| Cost of revenues – Services | 567 | 628 | 148 | ||||
| Selling and marketing expenses | 105 | 96 | 27 | ||||
| General and administrative expenses | 61 | 46 | 16 | ||||
| Depreciation and amortization | (150) | (166) | (39) | ||||
| Other (1) | (11) | (3) | (3) | ||||
|
OPEX |
572 | 601 | 149 | ||||
(1) Mainly amortization of employee share based compensation.
Key Financial and Operating Indicators (unaudited)*
| NIS M unless otherwise stated | Q2' 14 | Q3' 14 | Q4' 14 | Q1' 15 | Q2' 15 | Q3' 15 | Q4' 15 | Q1' 16 | Q2' 16 | 2014 | 2015 | |||||||||||||
| Cellular Segment Service Revenues | 667 | 658 | 613 | 579 | 581 | 587 | 550 | 543 | 527 | 2,618 | 2,297 | |||||||||||||
| Cellular Segment Equipment Revenues | 218 | 218 | 282 | 277 | 271 | 234 | 269 | 244 | 188 | 938 | 1,051 | |||||||||||||
| Fixed-Line Segment Service Revenues | 248 | 259 | 250 | 232 | 226 | 225 | 223 | 222 | 219 | 1,004 | 906 | |||||||||||||
| Fixed-Line Segment Equipment Revenues | 7 | 22 | 18 | 18 | 16 | 12 | 22 | 23 | 17 | 54 | 68 | |||||||||||||
| Reconciliation for consolidation | (53) | (55) | (55) | (52) | (50) | (52) | (57) | (55) | (54) | (214) | (211) | |||||||||||||
| Total Revenues | 1,087 | 1,102 | 1,108 | 1,054 | 1,044 | 1,006 | 1,007 | 977 | 897 | 4,400 | 4,111 | |||||||||||||
| Gross Profit from Equipment Sales | 58 | 64 | 61 | 59 | 67 | 52 | 61 | 56 | 42 | 228 | 239 | |||||||||||||
| Operating Profit (Loss) | 118 | 110 | 73 | 56 | 67 | 32 | (48) | 54 | 67 | 400 | 107 | |||||||||||||
| Cellular Segment Adjusted EBITDA | 211 | 191 | 161 | 148 | 160 | 137 | 152 | 142 | 155 | 762 | 597 | |||||||||||||
| Fixed-Line Segment Adjusted EBITDA | 80 | 91 | 88 | 79 | 76 | 59 | 65 | 80 | 73 | 334 | 279 | |||||||||||||
| Total Adjusted EBITDA | 291 | 282 | 249 | 227 | 236 | 196 | 217 | 222 | 228 | 1,096 | 876 | |||||||||||||
| Adjusted EBITDA Margin (%) | 27% | 26% | 22% | 22% | 23% | 19% | 22% | 23% | 25% | 25% | 21% | |||||||||||||
| OPEX | 642 | 657 | 630 | 604 | 601 | 650 | 608 | 612 | 572 | 2,590 | 2,463 | |||||||||||||
| Impairment charges on operating profit | 98 | 98 | ||||||||||||||||||||||
|
Income with respect to settlement agreement |
||||||||||||||||||||||||
| with Orange | 23 | 38 | 54 | 54 | 61 | |||||||||||||||||||
| Finance costs, net | 49 | 50 | 36 | 18 | 46 | 40 | 39 | 24 | 28 | 159 | 143 | |||||||||||||
| Profit (loss) | 46 | 40 | 24 | 25 | 9 | (9) | (65) | 14 | 26 | 162 | (40) | |||||||||||||
| Capital Expenditures (cash) | 99 | 129 | 90 | 128 | 111 | 64 | 56 | 48 | 57 | 432 | 359 | |||||||||||||
| Capital Expenditures (additions) | 93 | 118 | 145 | 50 | 84 | 51 | 86 | 34 | 40 | 434 | 271 | |||||||||||||
| Free Cash Flow Before Interest | 192 | 112 | 71 | 21 | 24 | 291 | 230 | 114 | 160 | 520 | 566 | |||||||||||||
| Free Cash Flow After Interest | 123 | 106 | 21 | 8 | (28) | 277 | 172 | 89 | 119 | 389 | 429 | |||||||||||||
| Net Debt | 2,735 | 2,637 | 2,612 | 2,581 | 2,626 | 2,355 | 2,175 | 2,079 | 1,964 | 2,612 | 2,175 | |||||||||||||
| Cellular Subscriber Base (Thousands) | 2,914 | 2,894 | 2,837 | 2,774 | 2,747 | 2,739 | 2,718 | 2,692 | 2,700 | 2,837 | 2,718 | |||||||||||||
| Post-Paid Subscriber Base (Thousands) | 2,138 | 2,145 | 2,132 | 2,112 | 2,112 | 2,136 | 2,156 | 2,174 | 2,191 | 2,132 | 2,156 | |||||||||||||
| Pre-Paid Subscriber Base (Thousands) | 776 | 749 | 705 | 662 | 635 | 603 | 562 | 518 | 509 | 705 | 562 | |||||||||||||
| Cellular ARPU (NIS) | 76 | 76 | 71 | 69 | 70 | 71 | 67 | 67 | 65 | 75 | 69 | |||||||||||||
| Cellular Churn Rate (%) | 11.4% | 12.0% | 11.5% | 12.7% | 10.9% | 10.8% | 11.1% | 11.2% | 9.8% | 47% | 46% | |||||||||||||
| Number of Employees (FTE) | 3,736 |
3,683 |
3,575 | 3,535 | 3,354 | 3,017 | 2,882 | 2,827 | 2,740 | 3,575 | 2,882 |
* See footnote 2 regarding use of non-GAAP measures.
1 The quarterly financial results are unaudited.
2
For the definition of this and other Non-GAAP financial measures, see
“Use of Non-GAAP Financial Measures”.
3 See
footnote 2.
